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2016 (12) TMI 454 - ITAT AHMEDABADDeduction u/s 80IB disallowed for interest income on fixed deposit given as margin money towards loan/limit taken from the bank - Held that:- Assessee has not substantiated his claim along with necessary evidences in order to demonstrate that interest income earned on fixed deposit are with regard to margin money. We are, therefore, of the view that the issue needs to be restored to the file of Assessing Officer to carry out necessary verification with the support of documentary evidences to be provided by assessee in order to prove that fixed deposits on which interest income has been shown are linked with margin money in order to enjoy secured loan/credit limits from banks. Needless to mention that proper opportunity of being heard may be given to the assessee. Accordingly, this ground of assessee is allowed for statistical purposes. Section 80IB deduction computation - whether gross interest or net interest is to be excluded from the profits for the purpose of calculating deduction? - Held that:- Net amount is to be excluded from the profits for the purpose of computation of deduction u/s 80IB. See M/s ACG Associated Capsules Pvt. Ltd. [2012 (2) TMI 101 - SUPREME COURT OF INDIA ] Transfer pricing adjustment - ALP - applying operating profit margin being average of comparables selected - whetehr adjustment arising out of the Arm's Length Price (ALP) is to be restricted to only International Transactions with the Associated Enterprise instead of entire turnover of the assessee ? - Held that:- Differential operating profit margin is to be applied only on the international transaction entered and not the total sales turnover. See CIT vs. Ratilal Becharlal & Sons [2015 (11) TMI 1524 - BOMBAY HIGH COURT] We find that assessee has declared net operating profit margin of 3.73% during the course of assessment proceedings and thereafter has submitted a revised calculation of operating profit margin discussed above in para 28 and calculated at 4.51%. As against this ld. Assessing Officer made addition to the returned income of assessee by applying 7.27% operating profit margin being average of comparables selected by him which was sustained to 5.78% by ld. CIT(A). From going through these figures we find that the difference of operating profit margin at which the international transaction has actually been undertaken as against arm’s length price determined by Assessing Officer is within tolerance range of (±) 5% as provided in proviso to section 92C(2) of the Act. We are, therefore, of the view that in the given facts and circumstances, the price at which international transaction has actually been undertaken shall be deemed to be arm’s length price and we accordingly set aside the order of ld. CIT(A) sustaining addition of ₹ 15,28,582/-, delete the impugned addition and allow the ground of assessee. Disallowing Managing Directors remuneration - Held that:- The issue before us there has been no working on the part of Assessing Officer to justify the disallowance and to prove that remuneration paid to MD was excessive or unreasonable. We, therefore, set aside the order of ld. CIT(A) and allow the ground of assessee.
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