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2015 (7) TMI 725 - ITAT MUMBAI

2015 (7) TMI 725 - ITAT MUMBAI - TMI - Computation of deduction u/s 10A - Held that:- In the instant case the assessee has not generated any foreign exchange out of the suo-motu disallowance made by it. In fact, the assessee has actually spent money on reimbursements and hence there is no question of generating any income out of suo-motu disallowance of the expenditure incurred. Hence, in the absence of any income, it would not be possible to say that the suo-motu disallowance of any expenditure .....

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hat the Tribunal, while disposing of the identical issue in AY 2006-07, has taken into account the decision rendered by the Bangalore bench of Tribunal in the case of I Gate Global Solutions (2007 (11) TMI 444 - ITAT BANGALORE ). Hence, for the additional reasons discussed supra and also by following the decision rendered by the Tribunal in AY 2006-07 on identical issue, we are of the view that the Ld CIT(A) was justified in confirming the order of the AO in rejecting the claim for deduction u/s .....

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against assessee. - I.T.A. No.157/Mum/2012 - Dated:- 15-7-2015 - S/Shri B.R.Baskaran and Amit Shukla, JJ. For the Petitioner : S/Shri Madhur Agrawal And Ketan Ved For the Respondent : S/Shri N K Chand and Premanand J ORDER PER B.R. BASKARAN (AM) The appeal filed by the assessee is directed against the order dated 9.12.2011 passed by Ld CIT(A)-5, Mumbai and it relates to the assessment year 2007-08. Following two issues are contested before us:- (a) Computation of deduction u/s 10A of the Act. ( .....

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the said reimbursement was an International Transaction entered with its AE and the same required Transfer pricing (T.P.) study. However, while computing the total income, the assessee disallowed the above said amount of ₹ 4.83 crores, i.e., while arriving the total income the above said amount was not claimed as deduction. Accordingly, the assessee contended that it had not claimed the above said amount of ₹ 4.83 crores and hence no T.P. adjustment/study is required in respect of th .....

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of the Act. Accordingly, by following the decision taken in that year, the AO held that the assessee is not entitled for deduction under section 10A of the Act in respect of the suo-motu disallowance of reimbursement of expenses made by the assessee. 4. The AO also noticed that the assessee has received a dividend income of ₹ 1.65 crores and claimed the same as exempt u/s 10(34) of the Act. However, the assessee did not make any disallowance u/s 14A of the Act on the ground that it did no .....

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the Revenue has filed this appeal before us. 6. The ld. Counsel appearing for the assessee fairly admitted that the issue relating to denial of deduction u/s 10A of the Act in respect of suomotu disallowance of expenditure was considered by the Tribunal in the immediately preceding year, i.e. AY 2006-07, and the same decided against the assessee by the Mumbai Bench of the Tribunal reported as Deloitte Consulting India (P) Ltd. vs. Dy. CIT (2012) 150 TTJ 824 (Mum.) (Trib.). He further submitted .....

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he case of CIT Vs. Gem Plus Jewellery India Ltd (2011) 330 ITR 175(Bom). He submitted that the Tribunal, in AY 2006-07, did not have occasion to consider the decision rendered by the Hon ble Bombay High Court referred above. Accordingly, the ld. AR submitted that the deduction u/s 10A of the Act should be allowed on the suo motu disallowance made by the assessee. 7. He further submitted that the suo-motu disallowance made by the assessee would not fall in the category of enhancement of income st .....

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wherein the Tribunal has held that the amount disallowed by the assessee on its own after ascertaining Arm s Length Price (ALP) cannot be considered to be a case of enhancement of income within the meaning of proviso to Section 92C(4) of the Act and hence the assessee would be entitled to exempt u/s 10A of the Act in respect of income declared in the return of income. The ld. AR further submitted that the TPO has also not suggested any adjustment and hence proviso to section 92C(4) will not appl .....

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ed by the Jurisdictional High Court in the case of Gem Plus Jewellery India Ltd (supra) cannot be applied to the facts of the present case, since the disallowance made in that case under the provisions of section 36(1)(iv) of the Act. He submitted that the disallowance u/s 36(1)(iv) of the Act is required to be made due to the legal fiction created in the statute, whereas in the instant case, the assessee itself has disallowed the expenditure, which otherwise is allowable at ALP after carrying o .....

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h case, the disallowance that is required to be made would not be eligible for deduction u/s 10A of the Act as per the proviso to section 92C(4) of the Act. 9. The ld. DR placed reliance on the decision of Mumbai Bench of the Tribunal in the case of M/s Agilisys IT Services India Pvt Ltd V/s ITO in ITA No.2113/Mum/2011 (AY-2003-04) dated 29.4.2015, wherein suo motu disallowance made by the assessee was held to be not eligible for deduction u/s 10B of the Act. 10. In the rejoinder, the ld. AR sub .....

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ign exchange, the Tribunal held that the deduction u/s 10B of the Act would not be available in respect of Transfer Pricing Adjustment suo motu made by the assessee. He submitted that, in the instant case, the disallowance made by the assessee does not relate to sales and hence the question of bringing the foreign exchange into India does not arise. 11. With regard to the disallowance made u/s 14A of the Act, the Ld A.R reiterated the submissions that the assessee did not incur any expenditure i .....

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llowance made by the assessee does not bear the character of income having nexus with the software development activity carried on by the assessee. The Tribunal has further noticed that the finding of the Ld CIT(A) that the income arising out of the adjustment is not derived by the undertaking from the Export has not been controverted by the assessee. The Tribunal has further noticed that the assessee has not complied with the provisions of sec. 10A in respect of the suo-motu disallowance made b .....

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e of M/s Agilisys IT services India Pvt Ltd pertained to suo-motu disallowance made in respect of sale receipts, the Tribunal has confirmed the rejection of deduction u/s 10B of the Act only on the reasoning that the conditions prescribed under that section has not been complied with in respect of addition made suo-motu in respect of sale receipts. In the above said case, the assessee s sale price was seen under priced while making Transfer pricing study and accordingly the income was enhanced. .....

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price its sale with associated enterprises and thereafter suo moto enhance the sale price by making transfer pricing adjustment and claiming the deduction u/s 10B of the Act, stating that under price sales originally declared by the assessee in its books of account have been brought in India in convertible foreign exchange thereby keeping a certain portion of the sale abroad. 16. In our considered opinion and understanding of the law and the understanding of the legislative intention, we cannot .....

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opinion, the assessee is not entitled for deduction u/s 10B of the Act in respect of the addition of ₹ 4,09,54,804/- suo moto made by the assessee as per Form 3CEB. The cases relied upon by the assessee have not considered the relevant provisions of the Act with legislative intent and are therefore distinguished from peculiar facts and modus operandi of the case in hand… In the instant case, the assessee has determined the reimbursements at ALP in form no. 3CEB, whereas in M/s Agil .....

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