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2017 (11) TMI 1832 - AT - Income TaxDeduction u/s 10A - direction of the DRP to delete the addition made by the AO reducing the implementation expenditure and internet connectivity charges from the export turnover only for the purpose of deduction u/s 10A - HELD THAT:- Both the parties agreed that this issue is covered in favour of the assessee by the decision Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT] wherein it has been held that if any expenditure is excluded from the export turnover, then the same should also be excluded from the total turnover while computing the deduction u/s 10A of the Act and the DRP has followed similar decisions to direct the AO to reduce the same from the total turnover as well. TP Adjustment - consider internal TNMM also for benchmarking of the assessee’s international transactions - HELD THAT:- In view of the decisions in the assessee’s own case. [2016 (10) TMI 1266 - ITAT HYDERABAD] , we direct the AO to consider only the segmental results of the AEs transactions and also consider the internal TNMM for the purpose of bench marking assessee’s transactions of software development services before arriving at the ALP. Reimbursement of expenses on cost to cost basis - HELD THAT:- In the earlier A.Y, the TPO had included the reimbursement of cost to the operating cost of the international transaction for arriving at the ALP, but in the relevant A.Y, the AO treated it as a separate international transaction and has added a markup of 10% to make the adjustment. We find that, before the TPO, the assessee has made detailed submissions that the reimbursement of the expenditure is done both by the assessee as well as its AEs without any in markup and therefore, there should not be any adjustment on such account. He submitted that this reimbursement of expenditure is mostly on the travel cost of the deputed employees both of the assessee as well as its AEs. In view of the decision of the Coordinate Bench in the assessee’s own case in the earlier A.Ys on similar set of facts, we hold that the reimbursement of expenditure cannot be treated as a separate international transaction with a markup on the same. Therefore, the adjustment on account of such transaction is deleted. Addition/adjustment made on account of corporate guarantee fee - HELD THAT:- We find that this issue is covered in favour of the assessee by the decision of the various Benches of the Tribunal and particularly in the case of Rain Cements [2017 (11) TMI 1750 - ITAT HYDERABAD] wherein it has been held that the amended provision is applicable only w.e.f. A.Y 2013-14 and not for the period prior thereto. Both of us i.e. A.M and JM are signatory to the said decision. Therefore, we allow this ground of appeal and delete the addition/adjustment made on account of corporate guarantee fee. Deduction u/s 10A - net income from sale of 3rd party licenses was credited to the P&L A/c. - AO observed that the profit derived from trading of 3rd party license is not the profit derived from the software development and export, the same is eligible for deduction u/s 10A and is therefore, to be excluded from the profit eligible for deduction u/s 10A - HELD THAT:- Except for relying on the contentions made before the AO, the learned Counsel for the assessee has not been able to demonstrate as to how it will be eligible for deduction u/s 10A or as to how it is derived from software development and export. Since the same has been excluded both from the export as well as from the total turnover, the net result is “Nil” and there is no prejudice caused to the assessee. In view of the same, we do not see any reason to interfere with the order of the AO on this issue and the assessee’s ground of appeal rejected.
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