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2022 (1) TMI 1374 - AT - Income TaxDeduction u/s 10A - deduction u/s. 10A for Bangalore BPO Unit was restricted to total income (under the head business) after set off of losses from other units (10A and non-10A units) - While the DRP accepted the objection of the assessee, the AO in the final assessment order for the first time excluded the loss/profit of section 10A units eligible for deduction at the source level itself, while no such direction was given by the DRP. According to the ld. AR, the action of the AO in the final assessment order is against the mandate of the provisions of section 144C(10) r.w.s. 144C(13) - HELD THAT:- As submitted that the provisions of section 10A are deduction in nature and in the absence of provisions similar to section 80A(2), the entire deduction to be restricted to total income in all the loss/profit of 10A units to be excluded at source level. For this purpose, he relied on the order of Yokogawa India Ltd [2016 (12) TMI 881 - SUPREME COURT] wherein it was held that though section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV and not at the stage of computation of the total income under Chapter VI. Being so, the issue is remitted to the AO to pass consequential order in compliance of the decision above. Disallowance of provision for litigation under normal provisions of the Act as well as upward adjustment to net profit while computing book profit u/s. 115JB - DR submitted that there is no basis for this provision towards legal fees or out of pocket expenses and the lump sum provision is made without specific production of details of litigation pending at various courts - HELD THAT:- As before us, the ld. AR could not establish that this provision has been made on a scientific basis relating to particular cases pending before various courts and due to particular counsel. As such, we decline to entertain this ground and the same is rejected. MAT computation - AR submitted that as per Explanation 2(i) to section 115JB of the Act, any reversal out of provision created in earlier year, if the book profit of such year has been increased by those provisions, be reduced from net profit while computing book profit in the year of reversal, if such amount is credited to Profit & Loss account. - HELD THAT:- If the book profit is increased by provision created in that year and on reversal of that provision in the present assessment year, net profit of this assessment year to be reduced so as to compute the correct book profit. With these observations, we remit the issue to the AO for fresh consideration. Addition u/s. 201(1) & 201(1A) for not withholding tax on payments towards bandwidth and leased line charges - The issue has been settled by the assessee by availing VSVS, 2020 scheme - HELD THAT:- At the time of passing the DRP order, the certificate under VSVS, 2020 was not made available before the lower authorities. Since the issue raised before us is directly related to the issue in the appeal in.[2020 (12) TMI 1375 - ITAT BANGALORE] if the issue was settled by the assessee by availing VSVS, 2020, the assessee is entitled for consequential relief. Accordingly this issue is set aside to the file of AO to consider the VSVS, 2020 scheme availed by the assessee and decide the issue accordingly. Computing deduction u/s. 10A - HELD THAT:- We are of the opinion that this issue has been decided in favour of the assessee by the judgment of Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT] holding that for the purpose of computing deduction u/s. 10A if the export turnover in the numerator is to be arrived at after excluding the communication expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator. This has been confirmed by the Hon’ble Supreme Court in the case of HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT]. TP Adjustment - comparable selection - HELD THAT:- Remit this issue in respect of selected comparables to the file of DRP for adjudication of this issue after considering the submissions and case laws cited by the assessee. Only companies functionally similar to the assessee need to be selected. Corporate guarantee transaction treated as an international transaction and applying arbitrary rate of 3% as guarantee fee - HELD THAT:- We set aside this issue to the record of the A.O./TPO to recompute the ALP by considering the arm's length guarantee fees at 0.5% and further by providing appropriate adjustment for corporate guarantee received by the assessee from its arm's length. Reimbursement transactions - TPO proposed to apply CUP method and treat the payment towards the Re-imbursement as NIL and made adjustment in the intragroup payment made by the assessee - HELD THAT:- Before the lower authorities, the assessee has not placed the necessary evidence, as such this issue was decided against the assessee. Before us, it was pleaded that the assessee is in a position to place the evidence to support its claim. Accordingly, the issue is remitted to the AO/TPO to consider the same and decide the issue afresh.
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