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2017 (8) TMI 1499 - AT - Income TaxTP Adjustment consequent to determination of Arm's Length Price (ALP) on the basis of the set of comparables selected by the TPO - Held that:- The assessee is engaged in providing software development services to its Associated Enterprises (AEs), thus companies functionally dissimilar with that of assessee need to be deselected from final list. 15% of tolerance range of RPT is proper and reasonable in the case of the assessee. Though this is not a standard parameter as we have discussed in the foregoing part of this order and it depends on the facts of the case and availability of the comparable companies to apply the tolerance range from 5% to 25%. Therefore 15% is otherwise the medium of the two extremes of 5% to 25% and hence in normal circumstances it has to be taken as a proper tolerance range. Reducing telecommunication expenses from export turnover as well as total turnover while computing the deduction under Section 10A - Held that:- We find that the issue of expenditure incurred towards telecommunication charges in foreign currency is reduced from export turnover an equal amount should also be reduced from total turnover while computing the deduction under section 10A of the Act, is covered in favour of the assessee by the decision in the case of CIT v. Tata Elxsi Ltd.[2011 (8) TMI 782 - KARNATAKA HIGH COURT] - decided in favour of assessee Setting off of the business losses pertaining to non-STPI against the profits of STPI units prior to allowing the deduction under Section 10A - Held that:- As relying on M/S YOKOGAWA INDIA LTD. case [2016 (12) TMI 881 - SUPREME COURT] we decide this issue in favour of the assessee and direct the Assessing Officer to allow the deduction under Section 10A of the Act prior to setting off of losses pertaining to non-STPI units against the profits of STPI units. Disallowance under Section 14A - Held that:- As regards the claim of the assessee that the assessee has not used any borrowed fund for the purpose of investment of ₹ 103,43,87,000 we find that this aspect of the matter has not been properly examined by the authorities below therefore, in the absence of proper examination of the fact of availability of the non-interest bearing fund with the assessee, no concluding finding can be given at this stage. The second contention that since the assessee has not earned any exempt income during the year under consideration therefore the provisions of Section 14A cannot be applied. Though the language of Section 14A does not contemplate actual earning of income and expenditure incurred for earning of the income but it provides that no deduction can be allowed in respect of the expenditure incurred by the assessee in relation to income which does not form part of total income. On principle, we do agree with the contention of the CIT (DR) that income includes positive as well as negative income and therefore even in case there is loss it will be considered as income for the purpose of IT Act. As relying on case of Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT] we decide this issue in favour of the assessee and delete the disallowance made by the Assessing Officer under Section 14A. Non deduction of tds - provision created for royalty to be paid to ABB Technology Ltd. by applying the provisions of Section 40(a)(ia) - Held that:- AR has submitted that the assessee itself has reversed the provision in the subsequent year and offered the amount of tax for the Assessment Year 2009-10. Accordingly, in the facts and circumstances of the case, we direct the Assessing Officer to verify the matter on the point as to whether this amount has been taxed twice for the year under consideration as well as in the Assessment Year 2009-10. In case this amount has been taxed again for the Assessment Year 2009-10, then necessary remedial action to be taken by the Assessing Officer to avoid double taxation of the same amount.
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