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2017 (12) TMI 301 - AT - Income TaxALP determination being the interest on loan given to AE - Held that:- The present case, the assessee has remitted the funds as loan and later on decided to convert the same as equity. It is not clear from the records that the purpose for which the loan was given. The assessee claims that it is for the business exigencies (quasi capital) and then it was converted as equity. The assessee has submitted that the parent company has allotted the shares in the FY 2011-12 but it is not clear, when the decision was made to convert the loan into equity. Considering the above facts and issues relating to this transaction, in our considered view, this matter needs further verification at the AO/TPO level to find out the purpose of loan, whether for business exigencies. If it is for the business exigencies and particularly it comes under definition of international transaction, the same has to be considered as financial transaction. Provision for gratuity added to profit u/s 115JB - Held that:- The approval of the fund is only the procedural aspect, which can be cured. But it is not clear from the record submitted before us that these funds were actually deposited. We refuse to entertain the claim of the assessee that this can be claimed as expenditure. The same is the case with the treatment in the calculation of 115JB. In case the funds are deposited in the separate fund based on actuary valuation, this cannot be added back in the calculation of 115JB to determine the book profit. We direct the AO to allow the increase in profit consequent to disallowance of provision for gratuity as deduction u/s 10A. Accordingly, ground raised by the assessee is allowed in this regard and the other grounds relating to claim of gratuity as expenditure are dismissed. Deduction u/s 10A - Held that:- When the assessee seeks permission from the RBI through the authorized dealers for the delayed remittance and the same are ratified by RBI, such realizations are eligible to claim deduction u/s 10A. As per provision of section 10A(3), the realization should be brought to India within 6 months or as approved by proper authority, in the given case, it is RBI, which is the approved authority. Hence, assessee is eligible to claim deduction u/s 10A. Therefore, we direct the AO to allow the assessee’s claim of exemption u/s 10A. Accordingly, this ground is allowed. Export receivable converted into equity - deduction u/s 10A - Held that:- As the issue under dispute is squarely covered by the decision of the coordinate bench of this Tribunal in the case of Sankhya Infotech Ltd. (2011 (4) TMI 793 - ITAT, HYDERABAD) and the assessee has received approval for the investment, such investments were out of sale proceeds. The authorized dealer has adjusted against such investment and issues FIRC’s to the assessee, then, it amounts to realization of export proceeds within the meaning of actual receipts for the purpose of section 10A. Since, the assessee has not submitted any document in support of approval granted by RBI and FIRC certificates, we remit this issue to the file of the AO to examine the FIRC’s and approval from RBI, in case it is in order, the assessee is eligible for deduction u/s 10A on such sum. Accordingly, ground raised by the assessee is allowed for statistical purpose. Direct the AO to allow the assessee’s claim of exemption u/s 10A by excluding the branch turnover from both export turnover and total turnover. TPO has not followed the directions of DRP in pit & substance by overlooking the directions of the DRP to consider the margin in case of assessee as well as comparables after excluding depreciation. Since AO/TPO has arrived ALP adjustment without excluding depreciation, in our considered view the ALP adjustment arrived at by the TPO is not as per the directions of DRP. Hence, we remit this issue back to the AO/TPO to calculate the TP adjustment excluding depreciation. Considering the fact that section 10A allows assessee to bring the foreign exchange within 6 months to claim benefit under this section. In our considered view, the same can also be extended to assessee as the reasonable period outstanding. Accordingly, we direct the AO/TPO to charge interest of LIBOR + 200 bps on the outstanding amount beyond 6 months. In order to determine the period and computation of interest, the issue is remitted back to AO/TPO. Accordingly, ground raised by the assessee is allowed for statistical purposes. Addition of towards asset written off and towards depreciation claimed on the above asset - Held that:- In the present case, assessee has purchased this software to improve the business by linking the transaction of different countries. It is not always end up with good decision, it is part of business decisions. It is not always relevant how much revenue it has generated or improved the business. It is not sometimes quantifiable. It is enough to prove that the purchase transaction and relevant payment is proper. AO is expected to verify only the legality and genuineness of the transaction and not the rationale of such transaction, it should be the domain of the management. Accordingly, we direct the Assessee to submit the relevant information relating to purchase and payment of ERP software. The assessee has to submit the copy of bills and payment vouchers with bank statement in which such payments were cleared. We note that assessee has not submitted such information even before AO/DRP even though opportunity was extended. Now, ld. AR has submitted that all the information is available, accordingly, we remit this issue back to the file of the AO with a direction to verify the transaction as per due procedure only for the genuineness of purchase and payment. Assessee may be given proper opportunity of being heard. This ground of appeal is allowed for statistical purposes.
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