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2018 (3) TMI 540 - AT - Income TaxAdjustment made in the transfer pricing order u/s 92CA(3) - Adjustment made under the transfer pricing provision on account of interest on delayed recoveries of debtors’ balances from Associated Enterprises (AEs) - Held that:- Similar issue of charging of interest on delayed recoveries of debtors from AEs arose before the Tribunal in assessee’s own case for assessment years 2005-06 to 2009-10 [2016 (6) TMI 1286 - ITAT PUNE] as held that the transactions of interest due on amounts outstanding from its AEs is to be benchmarked at LIBOR plus 300 basis point. The AO/TPO was directed to determine the adjustment, if any, to be made in the hands of the assessee on account of interest chargeable on the amounts due from its AEs beyond the credit period of 25 days after allowing the benefit of interest recovered by the assessee form its AEs. The ground of appeal No.1 raised by the assessee is thus, allowed for statistical purpose. Denial of deduction u/s. 10A - Held that:- The only new undertaking which has been established in the current year is at Hyderabad. Following the parity of reasoning as in the earlier years, we direct the Assessing Officer to allow the deduction u/s. 10A of the Act in respect of various undertakings established by the assessee from year to year, except new undertaking at Hyderabad which we shall decide separately. As per the undertakings claimed as TTC (BPO) the same was established in assessment year 2009-10 and the Tribunal has in ITA No. 282/PN/2014 vide paras 90 and 91 held that since, the assessee satisfies the employee condition as per the CBDT Circular No. 14/2004 dated 08.10.2014 held that there was no justification in denial of deduction u/s. 10A of the Act. The assessee has raised the issue of denial of deduction u/s. 10A in respect of TTC (BPO) by way of ground of appeal No. 3 and hence, the same is allowed. Claim the deduction u/s. 10A - applicability of provisions of section 33B - Held that:- Section 10A(2)(ii) states that this section applies to any undertaking which fulfills the condition that it was not formed by the splitting up, or the reconstruction, of a business already in existence. The proviso laid down that this condition shall not apply in respect of any undertaking which is formed as a result of the reestablishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section. Section 33B of the Act talks of a business of any industrial undertaking carried on in India was discontinued in any previous year by reason of extensive damage to, or destruction of, any building, machinery, plant or furniture owned by the assessee because of natural calamities i.e. riot, civil disturbance, accidental fire, explosion; or action by an enemy or action taken in combating an enemy. The case of the assessee before us is that it had established the new undertaking in Hyderabad because of the fall out the concern Satyam Computers. It is not the case that the said concern Satyam Computers which had rehabilitated itself or revived itself. The assessee or its Director have no connection with Satyam Computers. The provisions of section 33B of the Act are not attracted. Thus, the claim of the assessee in this regard is rejected. Alternate plea raised by the assessee on without prejudice basis that the undertaking at Hyderabad may be treated as expansion of the existing unit at Pune, from where the employees were transferred. We find that the assessee had been held to be entitled to claim the deduction u/s. 10A of the Act in respect of Pune unit. Accordingly, we direct the Assessing Officer to allow the said deduction u/s. 10A of the Act to Hyderabad unit being expansion of Pune unit for the remaining period, as eligible to the Pune unit. Disallowance made u/s. 40(a)(ia) of the Act in respect of datalink charges - Held that:- The year under appeal before us is assessment year 2010-11 and the Tribunal in the appeal against the order passed u/s. 201(1)/201(1A) of the Act while deciding the stand of the Revenue that the assessee has defaulted in not deducting tax at source out of datalink charges paid, had held that the payments made for utilizing such services was not in the nature of technical services governed by section 194J of the Act. Once, the same have been held to be not in the nature of technical services, then there is no requirement for deduction of tax at source. Hence, the assessee is not liable for any disallowance u/s. 40(a)(ia) of the Act. Disallowance made u/s. 40(a)(i) in respect of overseas payment for purchase of software and related payments - Held that:- As decided in assessee's own case the assessee was not liable to deduct tax at source on such payments. Once, the assessee had been held not to deduct tax at source there is no merit in making any disallowance u/s. 40(a)(ia) of the Act. Disallowance u/s 10A(7) r.w.s 80IA(10) - the assessee has earned substantial excessive profits - Held that:- We find that the issue is squarely covered by the order of Tribunal in the case of M/s. Honeywell Automation India Ltd. Vs. DCIT (supra) and also in the case of assessee. The Assessing Officer has invoked the provisions of section 10A(7) of the Act while comparing margins shown by the assessee with mean margins of comparables. Admittedly, there is no arrangement of earning more than ordinary profits pointed out by the Assessing Officer and in the absence of such arrangement, the provisions of section 10A(7) of the Act, are not attracted. We find no merit in ground of appeal raised by the Revenue in this regard. We uphold the order of DRP in directing the Assessing Officer to delete the disallowance made under section 10A(7) r.w.s. 80IA(10) of the Act though on protective basis. The ground of appeal No.1 raised by the Revenue is thus, dismissed. Disallowance made on account of ESOP cost - Held that:- The said issue was also covered by earlier order of Tribunal for assessment years 2006-07 to 2009-10 [2016 (6) TMI 1286 - ITAT PUNE] as directed the Assessing Officer to verify the claim of assessee and in case ESOP cost has been allowed in succeeding year, then same may be allowed in the hands of assessee in assessment year 2009-10 also. The learned Authorized Representative for the assessee before us has pointed out that the issue is covered and following the same parity of reasoning, we remit this issue back to the file of Assessing Officer to follow the directions of Tribunal Additional disallowance under section 14A read with rule 8D - Held that:- The preliminary satisfaction to be recorded by Assessing Officer, before making disallowance u/s 14A read with Rule 8D of the Rules, is missing in the case; in the absence of the same, there is no merit in the disallowance made by the Assessing Officer. We find support from the ratio laid down by the Hon'ble Supreme Court in Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT & Anr. (2017 (5) TMI 403 - SUPREME COURT OF INDIA) Setting off of losses of 10A undertakings against other business income - Held that:- Tribunal in assessee’s own case and while deciding the appeal for assessment year 2006-07 [2013 (10) TMI 293 - BOMBAY HIGH COURT], the Tribunal held that the said issue stands covered by the decision of Hon’ble Bombay High Court in assessee’s own case, which had been followed by the Tribunal in assessment year 2005-06.
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