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2017 (11) TMI 1933 - AT - Income TaxDenial of claim of deduction u/s 10AA - assessee has earned excess profits from the units eligible for deduction u/s 10AA by invoking the provisions of Sec.80IA(10) - HELD THAT:- AO shall have to examine the fulfillment of the 3 conditions namely, “close connection”, “arrangement” and “more than ordinary profits” in the course of business while examining assessee’s claim of deduction u/s 10AA of the Act and satisfaction of all the aforesaid 3 conditions are mandatory before invocation of Sec.80IB(10) of the Act. In the present case, the close connection between the assessee and its A.Es is an undisputed fact. However no material has been brought on record to indicate that the course of business was so arranged so as to inflate the profit so as to indicate the inflation of profits with the intention of abusing tax concessions u/s 10AA of the Act. We further find that AO has proceeded on the basis of presumptions to conclude that there is inflation of profits. As relying on COGNIZANT TECHNOLOGY SOLUTIONS INDIA PVT. LTD.[2017 (10) TMI 1554 - ITAT PUNE] after relying on M/S HONEYWELL AUTOMATION INDIA LIMITED [2015 (3) TMI 494 - ITAT PUNE] held AO was not justified in working out the excess profit on the basis of presumptions and reducing the claim of deduction of assessee u/s 10AA of the Act. We therefore set aside the action of the AO. Thus, the ground of the assessee is allowed and the Revenue is dismissed. Deduction u/s 10AA allowed before setting off brought forward losses and unabsorbed depreciation and the deduction u/s 10AA should be granted from the profits for the year of the eligible unit of the assessee - We find that identical issue of the setting off of brought forward of losses and unabsorbed depreciation was before the Co-ordinate Bench of the Tribunal in assessee’s own case in A.Y. 2007-08 [2016 (5) TMI 107 - ITAT PUNE]. In view of the aforesaid facts and for the same reasoning and relying on the aforesaid decisions of Co-ordinate Bench of the Tribunal, we are of the view that the deduction u/s 10AA has to be computed in the hands of the assessee before adjusting the brought forward losses and unabsorbed depreciation. Thus, the ground of the assessee is allowed. Levy of interest u/s 234A and 234B - This ground being consequential in nature requires no adjudication
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