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2018 (2) TMI 40 - AT - Income TaxComputation of deduction u/s 10A - exclude the reimbursement of communication expenses both from the export turnover as well as from total turnover - Held that:- The issue of expenditure incurred towards communication charges in foreign currency is reduced from export turnover an equal amount should also be reduced from total turnover while computing the deduction under section 10A of the Act, is covered in favour of the assessee by the decision of the Hon’ble Karnataka High Court in the case of CIT Vs. Tata Elxsi Ltd.(2011 (8) TMI 782 - KARNATAKA HIGH COURT). Exclusion of certain companies as functionally dissimilar with that of assessee company as pure software service provider Adjustment on account of interest on ECB - assessee has taken external commercial borrowing from the AE and paid interest at LIBOR + 3% which is equivalent to 7.22% per annum - TPO has applied the arm’s length interest rate at LIBOR + 138 basis points which is equivalent to 6.08% - Held that:- The assessee has not produced any material to show that the interest paid to AE @LIBOR +3% is arm’s length interest. We further note that this Tribunal has taken a consistent view that in the case of interest on ECB, LIBOR +1.5% can be taken as arm’s length interest therefore, the TPO applied the arm’s length interest at LIBOR +1.38% is within the justified range and we do not find any reason to interfere with the orders of the authorities below on this issue. The revenue’s appeal and C.O. of the assessee are partly allowed.
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