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2014 (5) TMI 882 - AT - Income TaxExemption u/s 10B - abnormal increase in profit - allegation of showing access profit to claim exemption / deduction - Restriction on deduction invoking the provisions of section 80IA(10) - Held that:- In the returns of income filed for all the three years, deduction u/s 10B of the Act was claimed by the assessee in respect of the profits derived from the eligible export business, the turnover of which was entirely made by the assessee company to APAG, Germany, one of the joint venture partners in the assessee company - the assessee is entitled to deduction u/s 10B of the Act in respect of the profits of the eligible business - The claim of the assessee for deduction u/s 10B of the Act was restricted by the AO for all the three years by invoking the provisions of section 80IA(10) of the Act which are made applicable in relation to the deduction u/s 10B as per section 10B(vii) of the Act. The increase in gross profit rate for the years as compared to that of A.Y. 2002-03 which was taken by the AO as the year of ordinary profits thus was properly explained by the assessee and keeping in view the explanation which was based on the relevant facts and figures - the CIT(A) was fully justified in holding that the profits of the assessee company from its eligible business for the years could not be regarded as more than the ordinary profits which are expected to rise in such eligible business so as to attract the provisions of section 80IA(10) of the Act - the AO was not justified in invoking the provisions of section 80IA(10) of the Act to restrict the deduction claimed by the assessee u/s 10B of the Act – Decided against Revenue. Transfer pricing adjustment – Held that:- Following ITO v. Zydus Altana Healthcare (P.) Ltd. [2010 (4) TMI 883 - ITAT MUMBAI] - it was an organization which was mainly doing the clinical research activity - when the TPO was adopting it as a basis for comparing the assessee's transaction then as per Rule 10B (1)(a)(ii), she was required to adjust in regard to differences . As per sub-clause (iii) of clause (c) of Rule 108, when cost method is adopted, the normal gross profit is required to be adjusted to take into account the functional and other differences, if any, between the international transaction and the comparable uncontrolled transactions - the assessee was solely dependent on the data provided by the doctors in various hospitals - The main function of the assessee was to collate the data and transmit the same to Byk Gulden for which it was suitably reimbursed by Byk by mark up of 5% over the cost - The assessee's functions were more like coordinator/facilitator rather than performing the function itself - the assessee has also pointed out that the profits by the AEs have been subjected to tax in the respective overseas jurisdiction - there is no necessity for the assessee to transfer the profits in any overseas jurisdiction – thus, there was no infirmity in the order of the CIT(A) setting aside the additions made by the AO on account of TP adjustment – Decided against Revenue.
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