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2020 (10) TMI 1200 - AT - Income TaxExemption u/s 10A - As per AO assessee has bifurcated the expenditure against the domestic income as well as export income AND profit from domestic sale does not qualify either adjustment of loss from export business u/s 10A - assessee explained that it has entered into a Master Outsourcing Agreement with C&S, USA to provide ITES and also entered into an agreement called Master Outsourcing Agreement with GHCL - CIT-A allowed deduction - HELD THAT:- Provisions of section 10A(4) of the Act have been explained elsewhere. In our understanding of the present facts and law, as both the export sales and domestic sales were done by the same undertaking, therefore, profit or loss of the undertaking needs to be calculated as a whole and profit from domestic sales cannot be charged separately to tax and adjusted against loss from export business in the present case. We, therefore, do not find any error or infirmity in the findings of the CIT(A). - Decided against revenue. Staff travel foreign expenses - assessee was required to give nexus between travelling expenses incurred and business receipts as a whole and the designation of the employees who made the travelling - HELD THAT:- As the company is in export of call centre services, setting up a successful international call centre requires up-to-date technology, quality assurance, data analysis and continuous training of employees, international level of communication, skills, continuous business development and for this purpose, the top management and the other related employees went abroad to gain knowledge of the call centres to have international standards. As mentioned elsewhere, this is the first year of the business. Therefore, it is more important for the appellant company to update its key employees with advanced technology. - Decided against revenue. Legal and Professional Expenses - AO formed a belief that the assessee has claimed expenditure under this head, which does not have any business nexus, and purpose for payment of legal and professional expenses are not justified - HELD THAT:- Assessing Officer fell into error in holding that the expenditure under this head does not have any business nexus. As mentioned in the earlier ground that the Assessing Officer should not decide which expenses are necessary for the purpose of carrying on the business and it is for the business-man to decide. Moreover, legal and professional expenses are paid to professionals for their legal and commercial advice which are necessary for carrying on business. As the genuineness of the expenses have not been questioned and the Assessing Officer has merely questioned the legitimacy of the expenses which, in our opinion, is not correct. It is for the business- man to decide which expenses are necessary to further its business.- Decided against revenue. TP Adjustment - unutilised capacity - alternative TP study done by the assessee - HELD THAT:- As total available man hours for calling during the year was 1,93,440 and total billed hours were 1,01,851/-. Thus, the idle hours of calls 91,589 which makes unutilised capacity at 47.35%. In the subsequent years, capacity utilisation has been increased from 50% to 100%. We, therefore, do not find any infirmity in deciding this issue on unutilised capacity by the CIT(A). Alternative TP study done by the assessee fulfils the requirements of TP regulations and is found to be correct. OP/TC with C&S USA is 11.20% which is more than the average OP/TP of the comparable companies at minus 6.89%. Assuming that the OP/TC of the comparable companies as per the TPO is correct, which is at 9.52%, the assessee’s OP/TC being 11.20%, we are of the considered view that the international transaction is at ALP and needs no further adjustment and accordingly, no interference is called for in the findings of the CIT(A) - Decided against revenue.
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