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2018 (7) TMI 2168 - AT - Income TaxDeduction u/s 10AA on foreign exchange and forward contract gain - forward contract gain and foreign exchange gain not considered as income from the business of the export which is eligible for deduction under section 10 AA - HELD THAT:- In the case of CIT v. Gem Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] has ruled that Gain from fluctuation of foreign exchange is directly related with the export activities and should be considered as income derived from export in the year in which the export took place for the purpose of deduction u/s 10A. Exchange rate fluctuation for claiming deduction U/s 10AA of the Act is income of the business as the exchange rate fluctuation are resultant from realization of export sale proceeds as per the export invoices and as per the definition of export turnover, the consideration received in respect of the exports, for example, total amount realized for sale invoices shall form part of export turnover. Therefore, the total turnover is denominator, which sale also includes the effect of foreign exchange fluctuation. Therefore, such inclusion of foreign exchange fluctuation in the profits shall qualify for deduction U/s 10AA of the Act. Telecommunication expenses also be reduced from the total turnover for the purpose of computing deduction under section 10 AA - CIT – A relying upon the decision of the Hon’ble Delhi High Court in the case of Gen pact India [2011 (11) TMI 119 - DELHI HIGH COURT] wherein it has been held that there should be Uniformity in the ingredients of both the numerator and denominator in the formula for computation of deduction under section 10 A of the income tax act. Therefore, he directed the AO to include the telecommunication expenses in the export turnover if it is included in the total turnover for computing deduction under section 10 AA of the act. As the Ld. CIT – A has decided the issue following the decision of the Hon’ble Delhi High Court we find no infirmity in his order. Further identical view has also been taken by the Hon’ble Karnataka High Court in in case of Dell international services India private limited [2012 (5) TMI 388 - KARNATAKA HIGH COURT] and Samsung electronics Co Ltd [2011 (11) TMI 429 - KARNATAKA HIGH COURT]- Revenue dismissed. Allowing migration/on the job training expenses from the total turnover for the purpose of computing deduction under section 10 AA - CIT-A rejected the finding of the Ld. assessing officer holding that the Hon’ble Delhi High Court in Karnataka High Court ..has taken a view that numerator and denominator should be same. The above view is the correct view otherwise the profit eligible for deduction will give a distorted picture. The detailed finding of been given by the Ld. CIT – A in para No. 6 of his order. We do not find any infirmity in the order of the Ld. CIT – A and therefore the ground No. 3 of the appeal of the revenue is dismissed. TP Adjustment - interest at the rate of LIBOR +1.5% instead of 16% rate of interest charged on the delayed payment from the associated enterprises - HELD THAT:- CIT appeal who reduced the addition holding that interest shall be chargeable at the rate of LIBOR +1.5% instead of 16% computed by the Ld. transfer pricing officer. The Ld. CIT – A while reducing the interest component has relied upon the decision of the coordinate bench [2013 (12) TMI 1535 - ITAT MUMBAI] for assessment year 2008 – 09 wherein the coordinate bench has held that notional interest at the rate of LIBOR +1.5% should be charged on the delayed payments the associated enterprise. As the Ld. CIT – A has followed the decision of the coordinate bench on the similar facts and circumstances where the interest component was computed on the delayed payment of charges by the associated enterprise. In view of this we do not find any infirmity in the order of the Ld. CIT – A and Ld. Departmental representative also could not show us that the interest computation mechanism directed by the Ld. CIT – A is not appropriate - Appeal of revenue dismissed.
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