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2014 (8) TMI 64 - AT - Income TaxTransfer Pricing Adjustment – Income from international transactions – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee was justified in undertaking internal bench marking analysis on standalone basis by placing on record working of operating profit margin from international transactions with AEs and transactions with unrelated parties undertaken in similar functional and economic scenario, and the same should be the basis for determination of arm’s length price in respect of international transactions undertaken with the associated enterprise - the matter is remitted back to the AO for fresh adjudication and for the purpose of determining the arm’s length price in respect of the international transactions undertaken with the associated enterprise by making internal comparison of profitability form the international transactions with associated enterprise and profitability from the international transactions with unrelated parties after allocating respective revenues and expenses to both the segments – Decided in favour of Assessee. GE-GDC different unit or the extension of existing STP – Held that:- Assessee company is engaged in the activities of software development and related services - The software related business is being carried out from the STP Unit and the exemption u/s 10A has been claimed - new STP Unit was treated by the assessee to be an independent unit for the purpose of exemption claimed u/s 10A of the Act – AO has not accepted the claim of the assessee by holding that the new unit is nothing but an extension of the existing unit and not entitled to separate deduction of exemption u/s 10A - as decided in assessee’s own case for the earlier assessment year, it has been held that the new unit cannot be treated to be as one and same unit with the existing unit for the purpose of computing deduction u/s 10A of the Act – Decided in favour of Assessee. Miscellaneous income part of business or income from other sources – Held that:- The notice period pay was to be considered as income derived by the eligible undertaking and as such notice period pay would go to reduce the expenses on account of salary and the real nature of the transaction will not have any affect on the income derived by the assessee from the eligible undertaking - because the assessee instead of crediting the notice period pay to the salary account and reducing the salary expenses, had shown the amount separately in the profit & loss account, that book-entry by itself would not change the real nature of transaction and it was accordingly held that the recovery of notice pay represents income derived from the industrial undertaking – thus, the amount received by the assessee towards notice period is to be treated as income derived from the eligible undertaking and deduction u/s 10A shall be allowed – Decided in favour of Assessee. Ad-hoc disallowance of interest expenses - Interest paid on short term loans which are invested in acquisition of fixed assets shall be capitalized along with fixed assets or not – Held that:- The interest expenditure on the utilization of borrowed funds for the acquisition of new assets, from the date of its acquisition till the date when the asset is put to use, is to be disallowed - the interest paid on the capital borrowed for acquisition of an asset for extension of existing business, shall not be allowed as deduction, from the date on which the capital was borrowed for acquisition of the asset till the date on which the asset was first put to use - no efforts has been done by the AO to find out the date on which the assessee borrowed the fund for acquisition of asset in the relevant AY and we also find that no attempt has been made by the AO to find out on which date the asset thus procured with the said borrowed fund have been put to use - Only after the dates has been found out then only one can compute the disallowance as prescribed by the proviso to section 36(1)(ii) of the Act – thus, the matter is remitted back to the AO with a direction to AO to find out the date on which the assessee borrowed the fund for acquisition of asset and also to find out on which date the asset for extension of business thus procured has been put to use – Decided partly in favour of Assessee.
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