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2020 (3) TMI 338 - AT - Income TaxTP Adjustment - comparable selection - HELD THAT:- Assessee company is carrying out all IT enabled services and no marketing is done by the assessee, no sale of IT products are done by the assessee - assessee is performing only development services relating to software, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Bigger sized company is in the position to undertake more risks in the business as compared to the smaller size companies - Companies with huge difference of turnover with the assessee need to be deselected. Telecommunication Expenses u/s.10A & 10AA - HELD THAT:- Any amount reduced from ‘Export turnover’ should also be reduced from the amount of ‘Total turnover’ in the computation of deduction u/s.10A of the Act. Following the same, we allow the assessee’s ground and dismiss that of the Revenue. Exclusion of expenditure on providing technical services abroad from the turnover while computing deduction u/s.10A/10AA - HELD THAT:- AR fairly agreed that the full amount of foreign currency expenses has been rightly held to be excludible from the amount of ‘Export turnover’. It was, however, prayed that the same amount may also be excluded from the amount of ‘Total turnover’ - we hold that the amount of Foreign currency expenses to the tune of ₹ 107.63 crore be excluded from the ‘Export turnover’ as well as ‘Total turnover’.” Disallowance u/s.14A r.w.r.8D - HELD THAT:- When interest free funds in the form of share capitaland reserves etc. are more than the amount of investment, then no disallowance of interest can be made u/s 14A. Respectfully following the precedents, we order to delete the disallowance under Rule 8D(2)(ii) whereas, in respect of disallowance u/s.8D(2)(iii) hat only those investments should be considered for computing average value of investments which yield exempt income during the year. In view of the afore referred precedents, we set aside the impugned order to this extent and remit the matterto the file of Assessing Officer for re-computing the disallowance under Rule 8D(2)(iii) by considering only such investments in calculating the average value of investments, which have yielded exempt income during the year. The assessee will be allowed hearing opportunity in the fresh proceedings. Deputation of Technical Manpower (DTP) - HELD THAT:- In assessee’s own case for assessment year 2007-08 decided that there is no gainsaying that `profits of the business of the undertaking' are not only the profits derived from the export of computer software but also those which are attributable to the business of undertaking. So long as there exists a direct link between the eligible undertaking and some income, the same is profit of the business of undertaking, even if may not be derived from the export of computer software etc. Without accepting, even if we presume the contention of the ld. DR as correct that income from DTM and onsite software services rendered abroad cannot be considered as derived from the export of computer software, it, in any case, will have to be regarded as `profits of the business of the undertaking'. In view of the foregoing discussion, we uphold the impugned order on this score. Foreign exchange fluctuation gain directly credited to the reserves - HELD THAT:- As given considerable thought to the findings of the First Appellate Authority wherein at the very outset, the Ld. CIT(Appeals) observed that Assessing Officer has not examined as to how much fluctuation gain is on the capital account and how much is on the revenue account. Therefore, in the interest of justice, we set aside the order of the Ld. CIT(Appeals) and restore the matter to the file of the AO/TPO for proper verification and adjudication after complying with the principles of natural justice. Thus, Ground of the assessee’s appeal is allowed for statistical purposes.
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