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2019 (9) TMI 1472 - AT - Income TaxTP Adjustment - Comparable selection - HELD THAT:- Assessee is primarily engaged in the provision of IT and ITES sector as per disclosure made in the Annual report of the assessee company. The ld. TPO observed that as per TP study report, the assessee is an ITES company. It is providing ITES services to M/s. Zenta Global Ltd. Barbados (ZGL). ZGL is a wholly owned subsidiary of M/s. Zenta Group (LLC), USA. The assessee company is owned by outsourcing Mauritius-1 Ltd., and outsourcing Mauritius-2 Ltd., in the ratio of 51:49. M/s. Excel Infoways Ltd. is functionally not comparable with that of the assessee company. Apart from this, we find that M/s. Excel Infoways Ltd. had earned super normal profit of 243.69% on which ground also, this comparable deserves to be excluded from the list of comparables with that of the assessee company. Disallowance of interest paid on delayed payment of TDS - HELD THAT:- AO merely states that such interest payment on delayed payment of TDS is inadmissible under statute and disallowed accordingly. This goes to prove that it was never the case of the ld. AO to have even remotely contemplated / categorizing the payment of interest to be penal in nature. Hence, there is no need in the instant case to look into the fact as to whether the said payment of interest of delayed payment of TDS could be penal in nature so as to be disallowed in the light of the provisions of Explanation to Section 37(1) of the Act. We find that the main crux of the argument of the ld. DR was that there is no penalty provision provided in the statement for delayed payment of TDS. In this regard, the ld. AR rightly clarified before us that the statute indeed provides for levy of penalty u/s.271C of the Act for such violation. Hence, the argument of the ld. DR deserves to be dismissed and accordingly, we do not find any infirmity in the order of the ld. DRP granting relief to the assessee in this regard. Accordingly, the ground No.2 raised by the revenue for A.Y.2009-10 is dismissed. Deduction u/s.10A - Foreign exchange gain earned as a result of hedging contracts, Octroi refund AND Income received on sale of old papers and cartons - in the opinion of the ld. AO, they are not linked or connected with the export activity of the assessee and hence, they are not eligible for deduction u/s.10A - HELD THAT:- It is not in dispute that the foreign exchange gain earned as a result of hedging contracts, Octroi refund and Income received on sale of old papers and cartons were earned by the assessee from this eligible undertaking eligible for deduction u/s.10A of the Act. Infact the ld. AR also submitted during the course of hearing that this is the only undertaking available with the assessee. Hence, as per the specific provisions of Section 10A(4) the entire profits of the business of the eligible undertaking shall be eligible for deduction in the proportion of export turnover to total turnover. We find that the ld. DRP had duly considered this aspect while granting relief to the assessee, which in our considered opinion, does not call for any interference. Addition of interest received from HDFC bank on the basis of information received in form 26AS - HELD THAT:- DRP had granted relief to the assessee by accepting its contentions and had also observed that it would be impossible for the assessee to prove that it had not received any interest from HDFC bank. We are inclined to accept to these observations of the ld. DRP in as much as the assessee cannot be directed to prove the negative. In the instant case, the assessee had categorically stated before the ld. AO itself that it had never earned any interest income from HDFC bank and had also adduced evidences in the form of its bank statements, books of accounts, balance sheet to demonstrate the same. This has not been rebutted by the ld. AO. The ld. AO had also not made any verification from HDFC bank to understand the real facts. Assessee had taken efforts by addressing the letter to HDFC bank asking them to revise their annual information return submitted to the Income Tax Department by removing the alleged interest transactions with corresponding TDS in the name of assessee. The assessee had adduced evidences in this regard before the lower authorities and hence, we find that the ld. DRP was right in deleting the addition made towards alleged interest from HDFC bank. Non granting deduction u/s.10A in respect of disallowance made u/s.40(a)(ia) and addition on account of advances written off - HELD THAT:- Once any disallowance is made in respect of eligible undertaking of the assessee, it would only go to increase the profits of such eligible undertaking, consequently it would be eligible for enhanced deduction u/s.10A of the Act thereby making the entire exercise revenue neutral. We find that the Central Board of Direct Taxes in its Circular No.37/2016 dated 02/11/2016 had duly clarified the same, which is not reiterated herein for the same of brevity. Accordingly, we hold that assessee is entitled for enhanced deduction u/s.10A in respect of aforesaid two additions / disallowances.
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