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2012 (9) TMI 89 - AT - Income TaxDeduction u/s 10B - 100% EOU – adjustment made u/s 10B(7) r.w.s 80-IA(10) on ground that business between the Appellant and associated enterprises has been so “arranged” for earning more than ordinary profits which might be expected to arise in such eligible business - no revision in the ALP recommended by the Transfer Pricing Officer, however his clarificatory order mentioned that the excess profit shown by the assessee had to be considered for taxation - Held that:- Provisions of S80-IA(10) do not give an arbitrary power to the A.O. to fix the profits of the assessee. The A.O. has to specify as to why he feels that the profits of the assessee are being shown at a higher figure. Hence, A.O. is directed to re-work the deduction u/s 10B considering the profits shown by the assessee in Form No.56G filed by it. Addition as TP adjustment, while at the same time denying deduction u/s 10B on said sum, considering it to be excess profit - Held that:- Where computation of income was done, considering the ALP for the international transactions then the computation that has to be considered is one done based on the entries made in the books in respect of such international transactions. Assessee here had profits which were in excess of the profits of the comparable cases. This addition, therefore, stands deleted. Period of limitation – assesse contended that there being no transfer pricing adjustment, order u/s 143(3) itself ought have been passed before 31.12.2010, hence draft assessment order and all proceedings subsequent thereto became invalid – final assessment order passed on 27.9.2011 – Held that:- Reference made to the TPO, the order passed by the TPO, the draft assessment order passed by the Assessing Officer and the directions issued by the DRP are all pre-assessment procedures of aid and guidance provided to the assessing authority by the statute. If any irregularity is committed by the Assessing Officer in following the above set of pre-assessment procedures, such irregularity does not make the assessment order illegal. At the best, it makes the order only irregular. Ground stands dismissed. Deduction u/s 10B – denial even in respect of certain sale proceeds which were brought into India within the time limit prescribed u/s 10(3) on ground that receipts were in names which did not exactly tally with the names of the clients – Held that:- Since assessee could establish receipt of Rs. 4,04,94,820/- out of total exclusion of Rs. 7,05,40,982/- , exclusion is limited to a sum of Rs. 3,00,46,162/- being difference between Rs. 7,05,40,982/- and Rs. 4,04,94,820/-. However in case of exclusion of sale proceeds which were not mentioned in the draft assessment order u/s 144C and were excluded only in the final assessment on direction of DRP of further verification, it was held that DRP had no powers to issue directions which gave scope for “further enquiry”. Departure from the draft assessment order in a substantial manner so as to include items which were not originally considered, cannot be done On grievance of the assessee that the amounts which have been excluded from export turnover on account of non-realization within the time specified u/s 10B(3) ought have been excluded from total turnover for computation of deduction u/s 10B it is held that if unrealized export proceeds were excluded both from export turnover and total turnover, insofar as an assessee which was having only export sales, the export profit deductible u/s 10B, will remain same. Moreover, “total turnover” include all items which are business receipts. Same cannot be excluded from total turnover – Decided against assessee Exclusion of expenses incurred in foreign exchange and telecommunication expenses incurred in Indian currency from export turnover – assesse contending non-exclusion on ground that such expenses were not included in the export turnover at all - Held that:- When the expenses were incurred for delivery of computer software outside India, even if the assessee had not invoiced such amounts specifically in its bills raised on its customers abroad, the amounts would have definitely been fixed. Just because the invoices raised did not specifically mention recovery of telecommunication charges, we cannot say that the billed amounts were exclusive of such telecommunication charges. Further, Special Bench in case of Sak Soft Ltd (2009 (3) TMI 243 - ITAT MADRAS-D ) gave a final ruling of exclusion of freight, telecommunication charges or insurance incurred in Indian currency as well. Condition regarding incurring of the expenses in foreign exchange was limited only to technical services outside India. Nevertheless, A.O. is directed to exclude such amounts both from export turnover as well as from total turnover - Decided partly in favor of assessee
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