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2017 (10) TMI 1384 - AT - Income TaxCurtailment of deduction claimed under section 10A - Deduction claimed u/s 10A by invoking the provisions of section 10A(7) r.w.s. 80IA(10) - assessee was providing high end Design Engineering Services to its associated enterprises and was being remunerated on Man Hourly rate basis, which has been computed applying the CUP methodology - Held that:- The assessee in its Engineering Design Development Services which was STPI unit shown net profit margin of 68.02%. The international transactions undertaken by the assessee with its associated enterprises in which PLI was 205% by taking OP/OC was accepted by the TPO to be at arm's length and no adjustment was made in the hands of assessee with regard to said division. AO however, was of the view that the assessee had earned more than ordinary profits in the Engineering Design Services division and consequently, curtailed the deduction claimed under section 10A of the Act. Where the Department has failed to prove that there existed an arrangement between assessee and its associated enterprises to earn more than ordinary, there is no merit in the aforesaid curtailment of deduction under section 10A of the Act. In this regard, we place reliance on the ratio laid down by the Hon’ble Bombay High Court CIT Vs. Schmetz India Pvt. Ltd.[2015 (6) TMI 1044 - BOMBAY HIGH COURT] where the SLP filed has been rejected by the Hon'ble Supreme Court. We also place reliance on the ratio laid down in Honeywell Automation India Ltd. Vs. DCIT [2017 (3) TMI 1533 - ITAT PUNE] and in assessee’s own case relating to assessment year 2006-07. Hence, grounds of appeal Nos.3 to 8 are allowed. Transfer pricing adjustment made by the Assessing Officer with respect to provision of Customer Support Services - comparable selection - Held that:- Where the concern is providing KPO services, then the same is not comparable to the assessee, which is engaged in ITES services. Concerns operating in different business model than the assessee in the year under consideration, the same needs to be excluded from the final set of comparables
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