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2020 (4) TMI 481 - AT - Income TaxDisallowance of deduction u/s 80JJA - assessee has claimed deduction u/s 10JA - AO disallowed the claim holding that employees working in software unit cannot be treated as workmen as envisaged under the Act and deduction u/s 80JJAA cannot be allowed in respect of additional wages paid to be employees who are working in 10A units, by virtue of provisions of section 80A(iv) - HELD THAT:-As per the decision rendered by the co-ordinate bench in the case of Manhattan Associates (India) Development Centre (P.) Ltd [2019 (10) TMI 1192 - ITAT BANGALORE] salary paid to software engineers are eligible for deduction u/s 80JJAA of the Act. Hence the first reasoning given by the AO shall fail. With regard to the second reasoning, as per the submission made by the learned AR, there appears to be some confusion with regard to facts relating to the deduction u/s 80JJAA of the Act claimed by the assessee. The assessee has also furnished certain additional evidences to substantiate its claim. Under the set of facts, we are of the view that this issue requires fresh examination at the end of the Assessing Officer. Accordingly, we set aside the order passed by the learned CIT(A) on this issue and restore the same to the file of the Assessing Officer for examining it afresh. Disallowance u/s 14A - HELD THAT:- We find force in the submission made by the learned AR. As per the decision rendered by Delhi Special Bench of the Tribunal in the case of Vireet Investments Ltd [2017 (6) TMI 1124 - ITAT DELHI] only those investments which have yielded exempt income should be considered for computing the average value of investment. In view of the above, we direct the A.O. to re-compute the disallowance u/s 14A of the Act by excluding the investments made in foreign subsidiaries while computing average value of investments. Disallowance of Provision made by valuing derivatives at the year end, i.e, marked to market rate of valuation of derivatives - AO by following the CBDT Circular No.3/2010 dated 23.03.2010, disallowed the claim of the assessee by holding that the loss arising on account of revaluation of foreign exchange derivatives on marked to market basis is a notional loss - CIT(A) also confirmed the same - HELD THAT:- When a specific query was put to the learned AR as to whether the assessee has revalued all foreign exchange derivatives, trade receivables and trade payables in respect of import and export activities, the learned AR submitted that the matter may be restored to the file of the Assessing Officer for examining the claim of the assessee afresh. It is pertinent to mention here that the assessee should have valued all trade payables and trade receivables and foreign exchange forward contract entered in foreign currencies, which are outstanding as at the year end, in order to avail the claim of deduction of net amount of loss, in any, arising on account of marked to market valuation of those items at the year end. Since this aspect has not been examined by the Assessing Officer, we deem it appropriate to restore the same to the file of the Assessing Officer for examining it afresh. The order of Ld CIT(A) passed on this issue is accordingly set aside.
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