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2017 (10) TMI 1554 - AT - Income TaxDisallowance of deduction u/s. 10A and 10AA - average margin of comparables is less than the PLI - HELD THAT:- AO has come to the conclusion that there is a “close connection‟ between the assessee and its overseas AE as the assessee is wholly owned subsidiary of parent company i.e. AE - AO has failed to substantiate from documents on record that there is “arrangement‟ between the assessee and its overseas AE resulting in assessee having more than ordinary profits from units eligible for deduction u/s. 10A and 10AA. A perusal of assessment order shows that it is only presumption of Assessing Officer that there is arrangement between assessee and its AE. Merely because average margin of comparables is less than the PLI of assessee, no disallowance of deduction u/s. 10A and 10AA of the Act can be made. The Revenue has not placed on record any cogent evidence to indicate arrangement between assessee and its AE resulting in more than ordinary profits from eligible units. As decided in M/S HONEYWELL AUTOMATION INDIA LIMITED [2015 (3) TMI 494 - ITAT PUNE] under similar circumstances deleted the disallowance of deduction u/s. 10A - Decided against revenue.
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