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2017 (7) TMI 363 - AT - Income TaxTPA - price/cost of international transactions compared with the uncontrolled independent price - CIT (Appeals) proceeded to consider the AE of the assessee as tested party to compare the margin with the comparable price - Held that:- TP Analysis of the assessee as well as the CIT (Appeals) are not in accordance with the provisions of Transfer Pricing and therefore, the impugned order of the CIT (Appeals) is set aside and the TP issue is remitted to the record of the TPO for deciding the matter afresh by comparing the margins of the international transactions with the uncontrolled comparable price. Needless to say the assessee be given an appropriate opportunity of hearing. Reduction of deduction under Section 10B in respect of expenditure incurred in foreign currency - Held that:- Identical issue has been decided by the Hon'ble jurisdictional High Court in assessee's own case for the Assessment Year 2003-04 decided issue in favour of assessee wherein held that the software Engineers deputed abroad who among other things have to do testing, installation and monitoring of software supplied to the client. Though the said services are technical in nature it does not fall within clause (ii) of subsection (1) of section 80HHE of the Act of providing technical services outside India in connection with the development or production of computer software. It falls under sub-clause (1) of sub-section (1) of Section 80 HHE of the Act. Therefore, the said expenditure cannot be excluded in computing export turn over. In that view of the matter we do not see any merit in this appeal. Disallowance of deduction under Section 10B in respect of on site development work subcontracted to and income derived by the AE - Held that:- This issue is covered in favour of the assessee however, to verify certain facts regarding quantum of work subcontracted to the AE and whether the assessee was having total supervision and control over the work executed by the AE this issue is remitted to the record of TPO / A.O. The Assessing Officer is directed to examine the relevant fact and then decide this issue. Deduction under Section 10B in respect of interest income and profit on sale of assets - Held that:- We find that the interest income from the deposits in the bank has no direct first degree nexus with the business activity of the undertaking therefore the same is not eligible for deduction under Section 10B of the Act. Similarly the profit on sale of asset is not an income derived from the business activity of the assessee-undertaking. Hence we do not find any error or illegality in the order of the Assessing Officer in denying the claim of deduction under Section 10B in respect of interest income and profit o sale of asset. Disallowance u/s 40(a)(i) - non deduction of tds on Fees for Technical Services - Held that:- We are of the view that the disallowance of expenditure under Section 40(a)(i) would result enhancement of the income of the assessee. Since the income of the assessee is eligible for deduction under Section 10B therefore, the said disallowance made under Section 40(a)(i) is also eligible for deduction under Section 10B of the Act. Accordingly, the alternate plea of the assessee is allowed. Reduction of the expenditure incurred in foreign currency from export turnover as well as total turnover while computing the deduction under Section 10B - Held that:- The issue of expenditure incurred towards telecommunication charges in foreign currency attributable to the delivery of computer software abroad is reduced from export turnover an equal amount should also be reduced from total turnover while computing the deduction under section 10B of the Act, is covered in favour of the assessee by the decision of the Hon’ble Karnataka High Court in the case of CIT Vs. Tata Elxsi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT). - Decided in favour of assessee.
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