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2022 (8) TMI 35 - AT - Income TaxTP Adjustment - international transactions at Arm’s-length - as per CIT-A operating margin earned by the assessee company is higher than the arithmetic mean of the margins of the comparable company and therefore the international transactions are at Arm’s-length - HELD THAT:- CIT- A has categorically, after including/excluded certain comparables computed the arithmetic mean of the comparable companies at 18.30%, compared with the margin of the assessee as computed by the TPO at 20.34% and as the margin of the assessee is higher than the margin of the comparables, he deleted the transfer pricing adjustment. Here, the learned assessing officer is not aggrieved with any of the comparables included or excluded by the learned CIT – A. Therefore, we do not find any merit in any of the 2 grounds raised by AO, thus dismissed. Deduction u/s 10A - Whether loss of one eligible unit was required to be set off against the profit of the other eligible unit, and that the said loss could not be set off against the income computed under the head "Profits & Gains of Business or Profession"? - HELD THAT:- As decided in M/S YOKOGAWA INDIA LTD. [2016 (12) TMI 881 - SUPREME COURT] from reading provisions of section 10A it is more than clear that the deductions contemplated therein is qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the assessee. Thus, it was held that though section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV and not at the stage of computation of the total income under Chapter VI. - Decided in favour of assessee. Correct head of income - treatment of lease rent received - whether chargeable to tax as income from house property as per AO or under the head business profit as per assessee - HELD THAT:- As decided in the case of CIT Vs Shambu Investment Pvt. Ltd. [2001 (3) TMI 77 - CALCUTTA HIGH COURT] has held as under Where prime object of the assessee under the agreement was to let out the portion of the said property to various occupants by giving them additional right of using the furniture and fixtures and other common facilities for which rent was being paid month by month. Income derived from the said property is an income from property and should be assessed as such.. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- AO has disallowed under Section 14A of the Act invoking the provisions of rule 8D which is not in existence for A.Y. 2005-06. Therefore, disallowance cannot be upheld, hence deleted. However, though the disallowance as per Rule 8D of the Rules is deleted but section 14A cannot be ignored. In earlier years for A.Y. 2002-03, 2004-05 and 2006-07 in assessee‟s own case [2015 (3) TMI 933 - ITAT MUMBAI] the disallowance of ₹1 lacs upheld by the co-ordinate bench. Therefore, respectfully following the same, for this year also we uphold the disallowance of ₹1 lacs. Disallowance u/s 14A added while computing the book profit under Section 115JB - HELD THAT:- We find that there is no relation of disallowance under Section 14A of the Act while computing the book profit u/s 115 JB of the Act. The reason being that explanation (1) of Section 115JB of the Act adjustment is to be worked out as clause (f) where the amount of expenditure in relation to any exempt income other than specified income is required to be added to the book profit. Therefore, there is a separate mechanism provided for adjustment to the book profit of this kind of expenditure. Identical issue has been decided by Special bench in case of ACIT vs. Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] -Therefore, we hold that the lower authorities are not correct in adding notional expenditure as computed u/s 14A and increasing the book profit by that sum under Section 115JB of the Act. In the result, ground are allowed.
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