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2012 (5) TMI 421 - AT - Income TaxTransfer pricing – adjustment to ALP - travelling cost of seconded persons to AEs - Held that:- When the assessee had segregated the off-shore and on-site activities, naturally all the revenues relating to on-site activity were earned by the AEs. Hence, all costs incurred for the purposes of on-site activities should be borne by the AEs. The purposes of travel of the secondees from India to the respective locations of AEs were to render on-site services, hence TPO was justified in making adjustment to ALP for such cost incurred and not recovered by assessee from its AEs – Decided in favor of Revenue. Dis-allowance of legal fees paid to Baker & Mckinsey – expenditure incurred in connection with incorporation of the subsidiary company in Belgium – Assessee submitted that it considered it as a genuine business expenditure and had not recovered the same from the AE – Held that:- In view of the aforesaid confession, it is held that TPO rightly made adjustment, contending the same is not a business expenditure and was in the nature of international transaction and a capital expenditure of the subsidiary company off-shore, therefore to be recovered from AE – Decided in favor of Revenue. Exemption u/s 10A – Held that:- It has been decided in assessee’s own case in earlier AYs that that it is not necessary that separate books of accounts should be maintained in respect of new unit, even if, new unit is formed for the expansion of assessee’s business, the same is eligible and unit established by the side of old unit is also eligible for exemption u/s 10A – Unit-107 eligible – Decided in favor of assessee Dis-allowance of loans and advance written off – Held that:- On similar issue, Tribunal had allowed such loss as trading loss u/s 28 in AY 01-02. Same view followed – Decided in favor of assessee. Foreign taxes – dis-allowance u/s 40(a)(ii) - Held that:- Under Section 40(a)(ii), Indian Income-tax which is a tax levied on the profits and gains chargeable under the Act is not deductible. On the other hand, all other taxes levied in foreign countries whether on profits or gains or otherwise are deductible under the provisions of s. 37 and payment of such taxes does not amount to application of income – Decided in favor of assessee. Compensation received for rendering human resource support services – CIT(A) deleted the addition made - Held that:- Secondee-provider is not akin to recruitment-service provider or that ‘secondment’ is different from ‘recruitment’. There was no legal basis for the impugned upward adjustment and deletion made is upheld – Decided in favor of assessee. Income from the building owned by the appellant and leased out on rent to group concern - Revenue contending the same to be business income - Held that:- CIT(A) was justified in treating lease rental income from the building owned by the appellant and leased out on rent to a group concern as income from ‘house property’ and entitling assessee for deduction permissible u/s 24 of the Act – Decided in favor of assessee. Re-computation of Deduction u/s 80HHE - Held that:- CIT(A) rightly held for re-computation of deduction u/s 80HHE on ground that profits of new units are eligible for exemption u/s 10A, the balance 10% profits in respect of same are eligible for computation of deduction u/s 80HHE. Interest expenses on advances to the employees – TPO had worked out the upward adjustment on account of interest cost not recovered from the AEs for settling advance given to the AEs.- Held that:- TPO rightly made adjustment on ground that it has been established that the persons seconded were being sent for the benefit of AEs, the advances given to such seconded persons carried an interest cost which should have been recovered from the AEs – Decided in favor of revenue Depreciation on a building given on lease to group concern – Held that:- CIT(A) rightly dis-allowed depreciation since the same is not used for assessee’s business or profession. Also, it is undisputed that assessee had let-out sizeable portion of its premises non-temporarily – Decided against the assessee. Adjustment to ALP towards interest on excess credit period granted to AE – CIT(A) deleted the addition made - Held that: Issue is covered in favor of assessee, hence deletion made is upheld. Matter related to exclusion of exchange fluctuation gain and other income for granting exemption u/s 10A and recalculating deduction u/s 80HHE, dis-allowance u/s 14A is remitted back to the file of the AO for fresh consideration.
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