TMI Blog2020 (1) TMI 969X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER PER ANIL CHATURVEDI, AM : 1. This appeal filed by the assessee is emanating out of the order of Commissioner of Income Tax (Appeals) 1, Pune dated 22.07.2019 for A.Y. 2011-12. 2. The relevant facts as culled out from the material on record are as under :- Assessee is a Company stated to be engaged in the field of IT enabled design engineering mainly for building and infrastructure development projects etc. Assessee electronically filed its return of income for A.Y. 2011-12 on 25.11.2011 declaring total income of ₹ 7,02,971/-. Assessment u/s 143(3) of the Act was completed on 19.02.2015 accepting the return of income filed by the assessee. AO has noted that assessee has thereafter entered into a unilateral Advanced Pricing Agreement ( APA agreement ) on 24.11.2015 with CBDT for A.Y. 2009-10 to 2017-18 and had filed the copies of the same to determine Arms Length Price (ALP) of international transactions. He has noted that APA agreement is applicable for F.Y s 2013-14 to F.Y. 2017-18 (APA years) and FY 2009-10 to 2012-13 (Rollback years). AO noted that as per the provisions of Sec.92CD(1) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case and in law, the Hon'ble CIT(A) failed to appreciate that impugned foreign exchange was brought in India in fifteen days of raising of invoice and thus conditions prescribed under section 10A(3) of the Act are virtually satisfied. Ground 5 On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) erred in holding that proviso to section 92C(4) is applicable without appreciating the fact that the incremental invoicing is pursuant to signing of an APA and not due to enhancement of the Arms Length Price (ALP) by the AO. The claim of deduction under section 10A of the Act is a direct consequence of modification to\ the arm's length price by virtue of APA and therefore, invoking proviso to section 92C(4) is contrary to the provisions of law. Ground 6. The learned AO erred in initiation of penalty proceedings under Sec.271(1)(c) of the Act. 3. All the grounds being inter-connected are considered together. 4. On perusing the computation of the income filed by the assessee, AO noted that incremental invoicing as per APA agreement of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the facts in the year under consideration are identical to assessee s own case for A.Y. 2010-11, therefore following the order of the Tribunal for A.Y. 2010-11 the issue be decided in assessee s favour. 7. Ld. D.R. on the other hand supported the order of AO and Ld.CIT(A). 8. I have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to the claim of further deduction claimed by the assessee u/s 10A of the Act in consonance with the APA Agreement entered by the assessee. I find that identical issue arose in assessee s own case for A.Y. 2010-11 wherein the Co-ordinate Bench of the Tribunal decided the issue in favour of the assessee by observing as under : 7. Having taken an overview of the relevant provisions of the APA, which are germane to the issue under consideration, let us proceed to examine the question as to whether the assessee, in the given facts and circumstances and as per law, is entitled to deduction u/s 10A in assessment u/s 92CD of the Act on the additional income offered in the modified return? The precise answer to the question can be found out by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed because of such computation, namely, by virtue of the transfer pricing adjustment. Thus, it is vivid that the proviso restricting the granting of deduction u/s.10A on enhanced income applies only where the computation of income is made under the sub-section (4) of sections 92C/92CA, which talks of making some transfer pricing addition by the AO. If the computation of income is neither u/s.92C nor 92CA, namely, no transfer pricing addition is made by the AO, then it is obvious that the proviso shall have no application and the fortiori is that there will not be any denial of deduction under the sections given in the proviso. 9. We have noted above the scheme of assessment u/s 92CD pursuant to the APA, under which the assessee is mandated to file modified returns in consonance with the APA. Thereafter, the assessment is made by the AO u/s. 92CD(3)/(4) in accordance with the APA. As the incremental income is offered by the assessee itself in the modified return in accordance with the APA, it cannot be equated with the computation of income u/ss. 92C/92CA of the Act, as the later provisions talks of making some transfer pricing addition by the AO. The suo motu off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 139 . A careful circumspection of sub-section (2) deciphers and delineates that in the computation of total income by the AO pursuant to the filing of the modified return by the assessee in terms of the APA, all other provisions of this Act shall apply accordingly. In other words, if an assessee is otherwise eligible for deduction under any other appropriate provision in respect of the income offered in the modified return, there cannot be any embargo on granting deduction under such relevant provision. The saving clause contained in sub-section (2), making all other provisions of the Act applicable in the assessment of the modified return, ostensibly includes the applicability of section 10A as well, of course, subject to the fulfillment of others conditions as set out in the section. It, therefore, follows that if an assessee is otherwise entitled to deduction u/s.10A, or for that matter under any other provision of the Act, in respect of the income offered in the modified return, the same cannot be denied. As such, the view of the authorities below that in the absence of any specific provision in section 92CD for granting of deduction u/s.10A, no deduction can be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act shall apply. Sub-section (1) of section 92CD provides that: ` . such a person shall furnish . a modified return in accordance with and limited to the agreement. A corollary which follows on a harmonious construction of sub-sections (1) and (2) of section 92CD is that if the APA contains a clause departing from the normal provisions, it is such clause which shall prevail upon the normal provision. 16. We have gone through the APA entered between the assessee and the CBDT. Clause 7 of the APA discusses the Critical assumptions . It provides that: `the critical assumptions (as referred to in the Rules) shall, for the purposes of this Agreement, be as specified in Appendix II. Clause 5 of the Appendix II deals with Invoicing and Credit terms . The material part of such a clause, which is relevant for the year under consideration, states that: ` the Applicant shall show the difference between the invoiced amount for the previous year/rollback years and the ALP as agreed, as tax adjustment in the modified tax returns for Assessment year 2010-11 to Assessment year 2014-15 and will also raise an invoice (and realise it) for the equivalent amount in the month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f deduction u/s.10A, the total income of the assessee as declared in the modified return remained at the same level. Thus, it is neither a case of reducing the total income nor increasing the total loss. Ex consequenti, it is held that the assessee has satisfied the condition of deduction u/s 10A(3) read with section 92CD(2) of the Act. 18. To sum up, we hold that the proviso to section 92C(4) does not debar deduction u/s 10A on additional income in assessment u/s 92CD; assessment u/s 92CD provides for granting deduction u/s 10A; and the assessee has satisfied the requirement of section 10A(3) read with section 92CD(2), thereby entitling it to deduction u/s.10A on the additional amount of ₹ 20,36,023/-. The impugned order is overturned and deduction is granted. 9. Before me, no material has been placed by Revenue to demonstrate that the order of Tribunal in assessee s own case for A.Y. 2010-11 (supra) has been set aside / stayed by higher Judicial Forum. Revenue has also not pointed out any distinguishing feature in the facts of the present case and in the case of assessee s own case in earlier year i.e., A.Y. 2010-11. I therefore, relyin ..... 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