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2022 (9) TMI 288 - ITAT MUMBAITP Adjustment - most appropriate method - tested party - TPO disregarded the benchmarking of the appellant and held that with the first set of transaction stating that foreign AE cannot be taken as a tested party as Revenue has consistently over the past years having not accepted the stand of the assessee of benchmarking its international transactions using foreign Associated Enterprises as a tested parties - HELD THAT:- We find that with respect to the first set of transaction of provision of ITeS services where the assessee has adopted foreign AE as a tested party, same has been accepted by the coordinate bench in case of the assessee for assessment year 2004 – 05 to assessment year 2009 – 10 - In those orders the coordinate bench also held that both the set of transactions of provision of ITeS services should not be aggregated but should be benchmarked separately. The issue is squarely covered in favour of the assessee by the decision of the coordinate benches in case of assessee itself. Further, assessee has entered into advance transfer pricing agreement for FYs 2013–14 to 2017–18 where the Transfer Pricing approach of the assessee accepting the foreign AE as a tested party is also accepted. CIT – A has directed TPO to exclude e–clerx services limited and TCS e–serve international Limite - Clerx services limited has been excluded by the co–ordinate bench in assessee’s own case for A.Y. 2008–09. Further, for A.Y. 2009–10, the learned CIT(A) rejected and excluded the above company which is accepted by the learned Assessing Officer by not agitating before the Tribunal further, therefore, we do not find any reason to not to follow the order of the co–ordinate Bench in assessee’s own case for earlier years on this count. Independently, With respect to the exclusion of TCS e–clerk serve international limited, we find that the TCS e–serve international is part of Tata group, enjoys the goodwill and brand value of the group and company is paying in expenses towards Tata equity. In view of this, we do not find any infirmity in the order of the learned CIT(A) in excluding TCS e–serve international limited from the comparability analysis. No infirmity in the order of the learned CIT(A) in directing the assessee to adopt the foreign associated enterprise as tested party with respect to 1st set of transactions, not to aggregate the first set of transaction and second set of transactions for benchmarking, exclusion of e–clerk services limited and TCS e–serve international Limited for benchmarking second set of transactions. Disallowance of deduction u/s 10A - AO invoked the provision of Section 10A(9) of the Act and held that due to change in the shareholding the assessee is not entitled to the deduction - HELD THAT:- CIT(A) allowed the same following his own order for earlier years. We find that the identical issue arose in case of the assessee for A.Y. 2009–10 wherein the co–ordinate bench allowed the claim of the assessee - We also confirm the order of the learned CIT(A) in deleting the disallowance of deduction under Section 10A of the Act with respect to Pune Unit no.2. Disallowance of deprecation of intangible assets of contracts - assessee claims that these contracts are long term contracts and are intangible assets eligible for depreciation at the rate of 25% and accordingly, the claimed depreciation - HELD THAT:- This issue also arose in the case of assessee in all the years from A.Y. 2005–06 [2019 (1) TMI 1128 - ITAT MUMBAI] and 2012–13 [2020 (3) TMI 1418 - ITAT MUMBAI] - The co–ordinate bench for A.Y. 2005–06 to 2008–09 [2019 (1) TMI 1128 - ITAT MUMBAI] held that assessee is entitled to depreciation on these contracts as ‘intangible assets’. Therefore, respectfully following the same, we direct the learned Assessing Officer to delete disallowance of depreciation. Accordingly, ground is dismissed. Computing the deduction under Section 10A and 10AA of the Act without setting off of losses of eligible units against the profits of eligible units - Honourable Supreme Court in Commissioner of Income-tax vs YokogawaIndiaLtd. [2016 (12) TMI 881 - SUPREME COURT] held that From a reading of the relevant 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. The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the assessee. This is also more than clear from the contemporaneous Circular No. 794, dated 9-8-2000. In view of this we uphold the action of the learned CIT – A in directing the learned assessing officer to compute the deduction u/s 10 A of the act by including only the profits of eligible units ignoring the losses of another eligible units. Accordingly ground of the appeal is dismissed. Disallowance of depreciation - adjustment to the value of the transaction was made of the contract pursuant to which the disallowance of depreciation resulted in subsequent years - HELD THAT:- When the original addition itself is deleted, the consequential disallowance of depreciation in subsequent year cannot be sustained. On identical facts, coordinate bench for assessment year 2012 – 13 [2020 (3) TMI 1418 - ITAT MUMBAI] deleted the disallowance of depreciation, therefore, respectfully following the decision of coordinate bench in assessee’s own case, we direct the AO to delete the disallowance of depreciation on the acquisition of Master service agreement from foreign AE. Disallowance of depreciation on intangible asset representing acquisition of business contracts - HELD THAT:- When the transfer pricing addition made in the case of the assessee for assessment year 2011 – 12 is already deleted with respect to the transfer price of the amount of acquisition of the share and when in subsequent years it is held to be an intangible asset, there is no reason to uphold the action of the learned AO. Accordingly ground of the appeal is allowed. Disallowance u/s 14A r.w.r. 8D - Necessity of recording satisfaction - HELD THAT:- We find that according to the provisions of Section 14 A (2) the learned assessing officer before invoking application of rule 8D is required to satisfy about the correctness of the claim of the assessee in respect of expenditure incurred in relation to the exempt income having regard to the accounts of the assessee. We find that in the present case the learned assessing officer did not consider at all that why the disallowance offered by the assessee is incorrect. In view of absence of any satisfaction made by the learned assessing officer about the correctness of the claim of the assessee, he is not empowered to invoke the provisions of rule 8D of income tax rules. Therefore, the disallowance made by the learned assessing officer deserves to be deleted. MAT computation u/s 115JB - Any addition made by the learned assessing officer to normal computation of the total income is deleted. Similarly the disallowance of such expenses as computed as per the provisions of Section 14 A with rule 8D cannot also be imputed while working out the book profit of the assessee u/s 115 JB of the act for the simple reason that there is no provision u/s 115 JB of the act to make any such adjustment. Further it is not denied before us that the assessee has already made an adjustment with respect to the provision of that Section where there is profit is required to be increased by the expenditure related to exempt income. Accordingly the addition to the book profit is also required to be deleted. This issue is also similar to the issue involved in assessee’s own case for assessment year 2012 – 13 [2020 (3) TMI 1418 - ITAT MUMBAI] wherein identical view is taken. Ground of assessee allowed.
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