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2021 (5) TMI 792 - AT - Income TaxDeduction u/s 10A - computation of eligible profit for deduction u/s 10 A - allocation of expenditure to the eligible and non-eligible unit - HELD THAT:- As directed the learned assessing officer to compute the eligible profit for deduction u/s 10 A of the act. The assessee has submitted before us that if such a margin is also imputed for this year the common expenditure allocation. This would be over and above the allocation made by the assessee - As we find that order of the ld CIT (A) for subsequent year has reached at correct methodology of allocation of expenditure same can also be applied for the current year. DR did not raise any serious objection to this proposition. Therefore, we direct the learned assessing officer to recompute the allocation of expenditure to the eligible and noneligible unit for this year also by applying the margin of 16%. The AO may verify the working as placed by the assessee and then recalculate the addition on that basis. Thus the orders of lower authorities on this issue are set aside. Deductibility of the education cess under the provisions of Section 37 (1) - HELD THAT:- As the assessee has paid taxes including the education cess along with taxes and the same is claimed now as deduction u/s 37 (1) of the act. This issue is squarely covered in favour of the assessee by the decision of the honourable Rajasthan High Court in case of CIT versus Chambal fertilizers and chemicals Ltd [2018 (10) TMI 589 - RAJASTHAN HIGH COURT]as well as of the decision of Sesa Goa Ltd [2016 (2) TMI 308 - BOMBAY HIGH COURT]. In view of the above judicial precedents of the Honourable High Court’s we find that the education cess paid on income tax is allowable to the assessee as a deduction u/s 37 (1) of the act. We direct the learned assessing officer to examine the calculation of the education cess and grant assessee deduction accordingly. In view of this additional ground raised by the assessee is allowed. TP Adjustment - direction of the ld CIT (A) for exclusion of the comparable (1) TSR Darshaw Limited and (2) Aptico Limited - HELD THAT:- As in assessee’s own case the above two comparables have been excluded by the coordinate bench in different years. No reason has been shown to us to deviate from the same. No change in the functional analysis of the comparable vis-a-vis the assessee was shown with respect to those years. In view of this we respectfully following the decision of the coordinate bench in assessee’s own case for exclusion of the about two comparables, we uphold the order of the learned CIT – A and dismiss the solitary ground in the appeal of the learned assessing officer. Comparability - Exclusion of companies being functionally different with market support services segment of the assessee. Allocation of the expenditure in working out deduction u/s 10 A - HELD THAT:- CIT – A is correct in holding that the allocation should be made between the eligible and noneligible units for the purpose of working out deduction u/s 10 A of the income tax act - -CIT – A has asked the assessee to reconcile corporate results along with the transfer pricing transaction shown in form number 3CEB. He also verified the details of the breakup of the receipts of the corporate division which renders the business support services to international associated enterprise. The learned CIT – A in para Number 17.6 has further noted that when the assessee is charging a substantial markup for its international transactions there is no reason that why similar margin should not have been charged from its associated enterprise in India for the working out of deduction u/s 10 A of the act. Thus it takes care of the real profit of eligible and non eligible units. On careful perusal of order of the learned CIT – A we find that if the allocation of expenditure is made on the basis of the markup charged between the domestic associated enterprises as well as the foreign associated enterprise, in absence of any infirmity in the allocation of the expenditure made by the assessee and application of thumb rule of applying allocation key of turnover by the learned assessing officer, it will meet the end of the justice. In view of this ground number 4 of the appeal of the learned AO is dismissed. Transfer pricing Adjustment - determination of the arm’s-length price of the ITeS services of the assessee - comaparable selection - HELD THAT:- Accentia technologies Ltd be excluded from the set of comparables as it is engaged in providing knowledge process outsourcing services Infosys BPO Ltd and TCS E serve - Both these comparable companies have significantly higher turnover compared to the turnover of the assessee and both are enjoying the brand value of respective group companies, thus we direct the learned AO/TPO to exclude the above two comparable companies.
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