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2023 (4) TMI 889 - AT - Income TaxAmortisation of Non-compete Fee - payments made to one Asia Logistics for non-competing for one year for procuring business in China - AO held that the non compete fee cannot be fully allowed as a deduction and needs to be amortised over the period of non competing - HELD THAT:- In assessee’s case, the agreement of non-competence is entered into for a period of one year and two years and the Assessee has incurred the liability towards the same in the year under consideration. Hence, respectfully following the decision of Taparia Tools (2015 (3) TMI 853 - SUPREME COURT]), we uphold the decision of the Ld.CIT(A) in deleting the disallowance of non-competence fees. This ground of the revenue is dismissed accordingly. Disallowance of Employee Stock Option Expenses (ESOP) - AO made addition reason that the no option has been exercised during the year and that the Assessee did not provide any plausible reason for claiming the expenses as a deduction - HELD THAT:- As relying on New Delhi Television Ltd case [2016 (7) TMI 1486 - DELHI HIGH COURT] we hold that the ESOP expenses be allowed as a deduction and therefore see no reason to interfere with the decision of the Ld.CIT(A). This ground is dismissed accordingly. Deduction u/s 80HHE after setting off earlier years brought forward business losses - assessee's contention for allowing deduction u/s 80HHE against income from Other Sources is not found tenable in view of the overriding effect of the provisions of section 80AB - HELD THAT:- We notice that sub-section (3) of section 80HHE which deals with the manner of computation of eligible deduction states that for the purpose of deduction “Profits derived from the business” shall be considered and that sub-section (1) of section 80A clearly states that in computing the total income of an assessee, there shall be allowed from his “gross total income”, the deductions specified in sections 80C to 80U. We are, therefore, of the considered view that the ratio laid down by the Hon’ble Supreme Court in Reliance Energy [2021 (4) TMI 1237 - SUPREME COURT] is clearly applicable to Assessee’s case also and accordingly the assessee has correctly claimed the deduction under section 80HHE from gross total income. Further, we notice that the co-ordinate bench in Assessee’s own case has allowed the issue in favour of the Assessee considering the decision of the Apex Court. Uphold the decision of the CIT(A) to allow the deduction under section 80HHE and this ground of the Revenue is dismissed. Depreciation on Software Expenses - Depreciation allocated on the basis of respective turnover of STPI and Non-STPI units - DR submitted that the depreciation claim for STPI & non-STPI should be segregated since the depreciation claimed in respect of STPI units was adjustable against the income exempt under section 10A and not against the profits of other units - HELD THAT:- We accordingly, remand the issue back to Assessing Officer with a direction to consider the above working and re-compute the exemption under section 10A considering the depreciation pertaining to STPI unit and allow the balance amount of Rs.2,57,910/- as a deduction while computing taxable income of the Assessee. This ground of the Revenue is allowed for statistical purposes. Depreciation claim for the purpose of Section 10A exemption - HELD THAT:- From the perusal of the above workings as submitted by the Assessee before the lower authorities, it is clear that the adjustment of difference in depreciation to the profits eligible for exemption under section 10A will not result in any addition to total income. This is so because any increase or decrease to the profit due to the depreciation adjustment, i.e. adding back book depreciation & deduction of depreciation as per section 32 will be exempt under section 10A since there is no dispute that the Assessee is entitled to claim exemption under section 10A. Accordingly when the adjusted profit is also eligible for exemption under section 10A there is no question of making any addition towards the adjustment made to depreciation. We accordingly uphold the view taken by the CIT(A) in deleting the addition made in this regard. This ground of the Revenue is dismissed. TP Adjustment - secondment of employees by Assessee to its AE - HELD THAT:- CIT(A) has recomputed the TP adjustment taking into account the Indian salary and after excluding 5 employees, who have left within 6 months or who have rejoined Assessee. Whether an adjustment is required, we are of the considered view that an adjustment is warranted for the benefit derived by the AE due to deployment of personnel for which the Assessee is required to be compensated. However, the benchmarking done by the TPO by applying the same rate of thirty party placement agency is not correct, since there are additional services/benefits provided by third-party agencies while providing Recruitment Services whereas in Assessee’s case, it is a pure deployment of personnel with regard to software services. Accordingly since there is need for an adjustment for the benefit derived we hold that the TP adjustment is to be revised to Rs.4,00,000/-. This ground of the Revenue is partly allowed.
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