TMI Blog2019 (3) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... Hyderabad may be treated as expansion of the existing unit at Pune, from where the employees were transferred. The Tribunal thus, directed the Assessing Officer to allow the said deduction under section 10A of the Act to Hyderabad unit being expansion of Pune unit, for the remaining period as eligible to the Pune unit. New undertaking established in Gandhi Nagar - In order to avail the deduction under section 10A of the Act, requirement for the assessee was to fulfill the conditions laid down by the CBDT vis-à-vis employees transferred from existing undertaking. However, no such condition is imposed under the Act, but the CBDT had prescribed that where more than 50% employees are transferred, then it is case of splitting up or re-construction of business already in existence. During the year under consideration, the assessee had established new unit at Gandhi Nagar, wherein it made investment in the fixed assets to the tune of ₹ 4.23 crores. Further, the assessee had also filed list of employees, wherein the employees to the extent of 15% were transferred from old unit to Gandhi Nagar unit. Since it had fulfilled the conditions laid down by CBDT, then it cannot be said to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal had already decided this issue in assessee’s own case in assessment year 2010-11 no merit in revenue appeal Disallowance on account of FBT paid in Australia - TDS liability u/s 195 - income accrued in India - HELD THAT:- Under clause (ic) of section 40(a) of the Act, it is provided that fringe benefit tax paid under Chapter XIIH is not to be allowed as deduction while computing income under the head ‘Profits & gains or profession’. In other words, FBT paid in India under the provisions of the Act is not to be allowed as deduction but there is no such embargo in respect of FBT paid in Australia. We uphold the findings of DRP in this regard that FBT paid in Australia is not covered by clause (ic) of section 40(a) of the Act. See ACIT VERSUS SHIPPING CORPORATION OF INDIA [2010 (12) TMI 1311 - ITAT MUMBAI] Disallowance u/s 40(a)(ia) in respect of overseas payments - non deduction of tds - default under section 201(1) / 201(1A) - Data link charges - HELD THAT:- Data link charges had held that the assessee was not required to deduct tax at source on payment of data link charges and hence, the assessee had not defaulted in not deducting tax at source on the payments made. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs established in earlier years. The Assessing Officer ought to have appreciated that the eligibility conditions in respect of splitting up of business already in existence is required to be complied with in the year of formation of the undertaking. e. In relying on various observations and conclusions recorded in the assessment order for earlier years and thereby not allowing deduction u/s 10A/10AA in respect of such eligible undertakings. f. In holding and concluding that new unit at Gandhinagar SEZ is no exception to the stand taken by the Department and is clearly formed by the splitting up and the reconstruction of the existing business as provided in Section 10AA of the Act on the basis that some of the employees have been transferred to this unit and new unit is also carrying on the same business of software development services. 2. In not considering the unit at TTC BPO as a separate and independent undertaking for the purpose of section 10A and holding that the unit at TTC BPO is formed by splitting up and reconstruction of the existing BPO business of the assessee which is being carried on at NDA 58 unit and thereby netting the profits of the TTC, BPO busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Revenue are linked and in respect of deduction claimed under section 10A/10AA of the Act in respect of certain eligible undertakings of the company. The assessee had established different undertakings in different assessment years and had claimed them to be independent new units / undertakings. However, the case of Revenue was that the new units / undertakings were formed by splitting of business already in existence since 1980 and hence the profits and gains of the said units / undertakings subsequently set up by the assessee company were not eligible for deduction under section 10A/10AA of the Act. As part of ground of appeal No.1 raised by assessee vide clause (f), the assessee is aggrieved in not allowing the aforesaid claim of deduction in respect of new unit at Gandhi Nagar SEZ, set up during the year under consideration. The grievance of Revenue on the other hand, is against order of DRP in allowing deduction under section 10A of the Act in respect of six units including two units at Akurti and Millennium Business Park. The learned Authorized Representative for the assessee has taken us through the issue decided by Tribunal in assessee s own case for assessment year 2010- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abad. Following the parity of reasoning as in the earlier years, we direct the Assessing Officer to allow the deduction u/s. 10A of the Act in respect of various undertakings established by the assessee from year to year, except new undertaking at Hyderabad which we shall decide separately. As per the undertakings claimed as TTC (BPO) the same was established in assessment year 2009-10 and the Tribunal has in ITA No. 282/PN/2014 vide paras 90 and 91 held that since, the assessee satisfies the employee condition as per the CBDT Circular No. 14/2004 dated 08.10.2014 held that there was no justification in denial of deduction u/s. 10A of the Act. The assessee has raised the issue of denial of deduction u/s. 10A in respect of TTC (BPO) by way of ground of appeal No. 3 and hence, the same is allowed. 7. The facts and issue arising in the present appeal are similar to the facts and issue in earlier years and following the same parity of reasoning, we hold that the assessee is entitled to the claim of deduction under section 10A of the Act in respect of various undertakings which were established by the assessee from year to year except the new undertaking at Hyderabad. Further, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is case of splitting up or re-construction of business already in existence. During the year under consideration, the assessee had established new unit at Gandhi Nagar, wherein it made investment in the fixed assets to the tune of ₹ 4.23 crores. Further, the assessee had also filed list of employees, wherein the employees to the extent of 15% were transferred from old unit to Gandhi Nagar unit. Since it had fulfilled the conditions laid down by CBDT, then it cannot be said to be formed by splitting up or re-construction of business already in existence. Consequently, we hold that the assessee had established new undertaking at Gandhi Nagar, for which the assessee is entitled to claim the deduction under section 10A of the Act independently. Accordingly, we hold so. The ground of appeal No.1 raised by assessee is allowed and ground of appeal No.1 raised by Revenue is dismissed. 13. Now, coming to the next claim of assessee vide ground of appeal No.2 in respect of TTC BPO being separate and independent undertaking, entitled to claim the benefit under section 10A of the Act. The said issue has also been decided by the Tribunal in assessment year 2010-11 and following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer before making aforesaid disallowance under section 14A of the Act, then there is no merit in the disallowance made by the Assessing Officer. Reliance in this regard was placed upon the ratio laid down by the Hon'ble Supreme Court in Godrej Boyce Manufacturing Co. Ltd. Vs. DCIT Anr. (2017) 394 ITR 449 (SC). The relevant findings of Tribunal are in paras 34 and 35 at pages 18 to 20 of the order of Tribunal, which read as under:- 34. We have heard the rival contentions and perused the record. The Assessing Officer while passing the assessment order in para 10 had observed that the assessee had earned significant amount of tax free dividends and in the computation of income, the assessee has disallowed sum of ₹ 50 lakhs under section 14A of the Act. Then, reference is made to the Note filed by the assessee on expenditure disallowable under section 14A of the Act. The Assessing Officer thereafter, takes note of the contents of said explanation and observed as under:- I have gone through the submissions made by the assessee. It is observed that apart from investments in the overseas subsidiaries (where there is no tax-free income since the dividend is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 14A(2) and (3) read with rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable. (underline provided by us for emphasis) 18. Following the same parity of reasoning and since the issue was also decided by the Assessing Officer on the basis that similar disallowance was made in earlier year, we allow the claim of assessee in entirety and dismiss the ground of appeal No.2 raised by Revenue. 19. The issue in ground of appeal No.3 raised by Revenue is against deletion of disallowance made of ESOP cost. The Assessing Officer had noted the fact that similar disallowance was made in earlier year. Though the DRP had allowed the said claim but since the Department had filed an appeal against the order of DRP, disallowance was made of ₹ 16,78,25,399/-. 20. The learned Authorized Representative for the assessee pointed out that the said issue has also been decided by the Tribunal in assessee s own case and the claim has been allowed in entirety. The Tribunal had remitted the issue back to the file of Assessing Officer to follow the directions of Tribunal in assessment year 2009-10 and decide the issue accordingly. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary profits. The Assessing Officer thus, computed disallowance of BPO business carried out from NDA-58, TTC BPO and also from Noida, SEZ and disallowance under section 10A(7) of the Act in respect of BPO business was made at ₹ 35,15,727/-. The Assessing Officer re-computed the deduction allowable under section 10A of the Act in respect of other undertakings. The DRP held that in the absence of any arrangement made between the parties, there was no merit in disallowing any part of profits under section 10A(7) r.w.s. 80IA(10) of the Act. 24. The Tribunal had already decided this issue in assessee s own case in assessment year 2010-11 vide paras 24 to 26 and applying the same ratio, we find no merit in ground of appeal No.4 raised by Revenue. 25. Now, coming to next issue which is in respect of disallowance made on account of FBT paid in Australia. 26. Brief facts relating to the issue are that the assessee had claimed sum of ₹ 48,17,580/- as deduction on account of Fringe Benefit Tax (FBT) paid in foreign country. The said amount was added back in the computation of income but note was attached to the computation of income stating that the amount was in the natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng with CO No.294/Mum/2007, relating to assessment year 2003-04, order dated 23.12.2010. Accordingly, the ground of appeal No.5 raised by Revenue is dismissed. 33. Now, coming to last issue raised by Revenue i.e. deletion of disallowance made under section 40(a)(ia) of the Act in respect of overseas payments. The issue raised by Revenue is in respect of non deduction of tax at source out of certain payments made by the assessee to its associated enterprises. The assessee had not deducted tax at source out of following payments:- a) AMC Charges ₹ 16,76,325 b) Consultancy Fees ₹ 81,54,754 c) Purchase of software licenses Rs.1,51,00,945 d) Data link charges Rs.8,75,36,820 e) Other payments ₹ 7,14,007 34. The Assessing Officer relying on the orders of earlier years had held the assessee liable to deduct tax at source out of aforesaid payments and for s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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