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2015 (7) TMI 769 - AT - Income TaxExemption under section 80IB(10) - whether he "duty drawback" and other investments as received by the appellant form part of the income derived from the industrial undertaking qualifying for exemption under section 80IB(10)? - Held that:- In the appeal of the assessee for assessment year 2009-2010 [2015 (7) TMI 770 - ITAT LUCKNOW] the issue regarding allowability of deduction u/s 80IB out of Duty Drawback has been decided by us against the assessee by following the judgment of Liberty India [2009 (8) TMI 63 - SUPREME COURT] after considering the arguments of the assessee i.e. regarding the judgment CIT vs. Dharam Pal Prem Chand Ltd. [2008 (11) TMI 231 - DELHI HIGH COURT] and Topman Exports vs. CIT [2012 (2) TMI 100 - SUPREME COURT OF INDIA] and therefore, in the present case also, this issue is decided against the assessee. Disallowance invoking the provisions of section 14A - Held that:- In assessment year 2009-2010, this issue was decided by us on the basis that the Assessing Officer should recompute the disallowance u/s 14A after excluding the investment in foreign subsidiaries because income from investment in foreign subsidiaries is taxable. In the present year also, there are some investments in foreign subsidiaries; for example, ₹ 1,62,645/- in Super Tannery U.K. (Ltd.). Hence, in the present year also, we decide this issue on similar line and restore the issue to the file of the Assessing Officer for recomputing the disallowance after excluding the investment in foreign subsidiary. - Decided in favour of assessee for statistical purposes. Transfer pricing adjustment - adoption of most appropriate method - selection of comparable - Held that:- CIT(A) has adopted the same comparables which were adopted by TPO in the next year and hence, the selection of comparables is proper. Regarding the exclusion of Duty Drawback from operating profit of the assessee company, this finding is given by learned CIT(A) that export entitlements are an integral part and parcel of the operating profits of a company and therefore, export entitlements are not an extraordinary item of income or an item of income which is unrelated to the ordinary activities of the assessee company. Apart from this, this is also very important that even if the export incentives entitlement is excluded from the operating income of the assessee company, such exclusion has to be made from the operating income of the comparables company also. Without excluding the export incentives entitlement from the operating income, the average PLI of the comparable company in the present case is 7% as compared to 3.67% of the assessee company which is within the tolerance range of 5% as stipulated in the Income Tax Act, 1961. Since this is not the case of the Assessing Officer or TPO that the operating income of the comparable companies is after reducing the export incentives entitlements, such exclusion of export incentives entitlement from the operating profit of the assessee company is not justified and hence, we find no infirmity in the order of learned CIT(A) on this issue. We, therefore, decline to interfere in the order of learned CIT(A). - Decided against revenue. Deleting the adjustment for "transfer pricing" under section 92CA(3) - Whether CIT(A)not have relegated the assessee/respondent to the stage of the Assessing Officer/Transfer Pricing Officer by observing tha the AO/TPO may reverify the above calculations and if found to be correct, give relief to the assessee as directed above? - Held that:- We find force in the contentions of Learned A.R. of the assessee that this direction of CIT(A) is amounting to restoring the matter back to the file of the Assessing Officer which is not permissible and even if he considered that some recalculations of calculations is necessary, he should have done so himself or he should have obtained remand report but after giving this finding that he himself has verified the calculations from the balance sheet of each of the comparables and they are part of the record and also in public domain, this direction of CIT(A) is uncalled for. We, therefore, hold that this unnecessary direction of CIT(A) is not proper particularly when there is no power available with the CIT(A) to remand the matter to Assessing Officer. We, therefore, modify the direction of CIT(A) by holding that since CIT(A) has already verified the calculations on the basis of material available on record and available in public domain, the Assessing Officer should give relief to the assessee as decided by CIT(A) of ₹ 1,00,47,451/- and there is no necessity of recalculation of the calculations. - Decided in favour of assessee.
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