Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (7) TMI 192 - AT - Income TaxDeduction u/s 10A, 10B, 10AA - computation of export turnover for purposes of computing deduction under section 10A - HELD THAT:- Both sides submit that the issue raised by revenue is no more res integra by virtue of the decision of Hon'ble Supreme Court in case of CIT vs. HCL Technologies Ltd.,[2018 (5) TMI 357 - SUPREME COURT]. Hon'ble Supreme Court upheld the observations of Hon'ble Karnataka High Court in case of CIT vs. Tata Elxi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] wherein held that if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software under Section 10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice - Decided against revenue. Addition made on account of selling commission and networking charges - reason for making adjustment in the hands of assessee towards selling commission and networking charges is that, there is no basis for such cost allocation - disallowance of networking charges is on the basis that the agreement does not mention about the markup on cost - HELD THAT:- We note that this issue has not been decided by the DRP though objection was raised. Under such circumstance we direct DRP to consider this issue based on various evidences/details filed by assessee having regards to various judicial pronouncements passed by Hon'ble High Courts, in accordance with law. Needless to say that proper opportunity of being heard must be granted to assessee in accordance with law. Addition made on account of outstanding receivables - AR submitted that, as TNMM is used as most appropriate method, the outstanding receivables get subsumed in the working capital adjustment and therefore separate addition is not warranted - HELD THAT:- We note that, the Ld. AO has not looked into various aspects in the light of the evidences filed by assessee. The submission by Ld. AR that under TNMM the working capital adjustment subsumes the outstanding receivables, needs to be verified by the Ld. AO/TPO. Several factors need to be considered before coming to the conclusion that the receivables from AE needs to be separately benchmarked. Most importantly the impact this would have on working capital of assessee would have to be studied. In the event any receivables needs to be separately benchmarked, we direct Ld. AO/TPO to compute the interest in accordance with the ratio of Hon'ble Delhi High Court in case of CIT vs. Cotton Naturals India Pvt. Ltd. [2015 (3) TMI 1031 - DELHI HIGH COURT] - With the above directions we remand this issue back to the Ld. AO/TPO to reconsider the issue in accordance with law. Not granting deduction under section 10A/10AA/10B with respect to profits attributable towards on-site software development work being sub contractor to an performed by the AEs overseas - HELD THAT:- As relying on own case [2015 (10) TMI 2062 - KARNATAKA HIGH COURT] we direct the Ld. AO to verify the MSA having regard to the contract entered into by assessee with the foreign clients. In the event the services rendered by AE's under the total supervision of assessee and that the entire risk in respect of these contracts are owned by assessee then the expenditure deserves to be included for the purposes of computing deduction under section 10A/10AA/10B of the Act as they are attributable to rendering of services to foreign clients.
|