TMI Blog2020 (11) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... owed under section 90/91? - HELD THAT:- As decided in own case [ 2019 (11) TMI 408 - ITAT MUMBAI] taxes levied overseas which are not eligible for relief either under section 90 or 91 of the Act, would not come within the purview of section 40(a)(ii) of the Act. It is the specific plea of the assessee that the State tax is not covered either under Indo US or Indo Canada tax treaty, hence, not eligible for any relief under section 90 of the Act. Pertinently, unlike section 91 read with Explanation (iv), section 90 does not provide for inclusion of tax levied by any State/ local authority of that country within the expression income tax . In view of the aforesaid, we direct the Assessing Officer to verify whether the State taxes paid by the assessee overseas are eligible for any relief under section 90 of the Act and if it is not found to be so, assessee s claim of deduction should be allowed. Advertisement Expenses disallowance - assessee submits that expenses incurred in respect of advertisement in newspaper/ Magazine in respect Experience Certainty Campaign which is routinely incurred for the ongoing business and not in the nature of Brand Building - HELD THAT:- As relyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the assessee - HELD THAT:- No reason as to why the AO is not satisfied with the working of the assessee except recording that the expenses are very meager. The ld CIT(A) after considering the submissions and the material placed before him directed to delete the disallowance including the disallowance of Rule 8D(iii). The ld DR for the revenue failed to bring any material in our notice to take the other view, no contrary decision is also brought to our notice. Thus, we affirm the order of ld CIT(A). In the result this ground of appeal is dismissed. Expenses on advertisement in news paper / magazine for marketing of its product and is routinely incurred for its business and not in brand building. No enduring benefit is occurred by such expenses, which is revenue in nature. TDS u/s 195 - payment to non resident agents - HELD THAT:- As decided in own case [ 2019 (11) TMI 408 - ITAT MUMBAI] non resident agents have rendered the services in their respective countries and do not have either any business connection in India or any PE in India has not been controverted by the Revenue. Further, the nature of payment viz. commission has also not been disputed by the Revenue. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relief to the assessee correctly has followed the decision of Vodafone India Services (P) ltd [ 2014 (10) TMI 278 - BOMBAY HIGH COURT] wherein it was held that share subscription is a capital subscription is a capital account transaction, therefore, no transfer pricing adjustment is warranted on such transactions. Disallowance of Interest paid in overseas countries - HELD THAT:- General principle of allowability that the expenditure cannot be overlooked and that the accepted principle is that only those expenditure can be allowed which are attributable to the business activity as well as laid out wholly and exclusively for the purposes of the business - we direct the AO to allow the interest on delayed payment of State tax or Federal Taxes being compensatory in nature. In the result these grounds of appeal are allowed. Computation of deduction u/s 10A - HELD THAT:- Total turnover for the purpose of section 10 of the Act cannot be understood as defined for the purpose of section 80 HHE. It was further held that thus the expenses which are to be excluded from the export turnover, would also have to be excluded for the purpose of computing total turnover. Charging of gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tainly campaign amounting to ₹ 1,36,46,187 crore as an intangible asset instead of treating it as revenue expenditure. 3. Foreign tax credit (Double Tax Relief) as per the provisions of section 90(1)(a)(ii) of the Act 3.1 On facts and in circumstances of the case and in law, the Id. CIT (A) erred in not considering the additional ground for allowing foreign tax credit (Double Tax Relief) as per the provisions of section 90(1)(a)(ii) of the Act read with provisions of the applicable Double Tax Avoidance Agreements, for income taxes paid in overseas jurisdictions in relation to income eligible for section IOAI IOAA deduction in India. Grounds related to Transfer Pricing: 4. Transfer pricing adjustments / additions / variations. 4.1 The assessment of income made by the learned Assessing Officer (`- the Id. A.O.') in relation to the transfer pricing adjustments/additions/variations based on the transfer pricing order is bad in law and illegal as the transfer pricing order is passed by the Additional Commissioner of Income Tax, without the authority of law as prescribed by the provisions of section 92CA of the Act. 4.2 The Id. CIT (A) erred in l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the AE(s). 5.3 Rejection of the functional and economic analysis carried out by the Appellant The Id. CIT(A) erred in law and on facts, in rejecting the functional and economic analysis carried out by the Appellant and in considering the AEs as the least complex entity. 5.4 Disregarding the benchmarking analysis The Id. CIT (A) erred in law and on facts, in disregarding benchmarking analysis undertaken by the Appellant in Transfer Pricing Documentation report. 5.5 Erroneous selection of transfer pricing method and Profit Level Indicator (PLI) Without prejudice, the Id. CIT (A) erred in law and on facts in not selecting the PLI as OP/Sales even if the AEs are treated as tested parties. 5.6 Selection of the comparable companies Without prejudice to the above, the Ld. CIT (A) erred in law and on facts of the case in not accepting the appellant's fresh bench making considering the AEs as a tested party and gross profit / sales as a the appropriate PLI. 6. Provision of loans to AEs 6.1 The Ld. CIT (A) erred in law and facts of the case in disregarding the fact that the loans given by the Appellant are in substance quasiequity in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the IT Rules clearly demands the inclusion of an amount equal to 0.5% of the average investments made towards earning exempt income while calculating aggregate disallowance u/s 14A r.w.r. 8D of the Act. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in observing that the reasons recorded as meager by the AO are not sufficient to invoke section 14A of the Act when the assessee itself disallowed only expenditure directly relating to income which does not form part of total income. 4. On the fact and in the circumstances of the case, the Ld. CIT(A) erred in treating expenditure incurred for brand building as revenue expenditure disregarding the fact that the same will have long term benefit to the assessee. 5. On the fact and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the commission paid overseas for getting business outside India of STS/SEZ units of assessee is not liable to tax in India and hence assessee is not liable to deduct tax u/s 40(a)(ia) of the Act. 6. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that the assessee had claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in directing to charge guarantee commission @ 1.14% on lease guarantee in place of 3% charged by TPO on performance guarantee. 15. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in following the decision of AY 2009-10 and in directing to charge guarantee commission @ 1.14% on lease guarantee in place of 3% charged by TPO. 16. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in following the decision of A.Y 2009-10 and in directing to charge guarantee commission @0.77% on financial guarantee in place of 3% charged by TPO. 17. On the facts and in circumstances of the case and in law, the ld. CIT(A) has erred in directing to delete adjustment made on account of interest free loans to AE being excessive valuation paid for shares of AE. 18. The appellant prays that the order of the Ld. CIT(A) on the above ground be set aside and that of the AO restored. 19. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 4. Brief facts of the case are that the assessee is a company engaged in the business of computer software and management consultancy servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as stated that the grounds of appeal raised by assessee is purely legal issue and do not require production/appraisal of fresh/details facts. The additional ground has inadvertently not been raised before the Tribunal at the time of filing of appeal. The assessee has raised additional ground in the light of decision of Hon ble Rajasthan High Court in case of Chambal Fertilizers and Chemicals Ltd. vs. JCIT in ITA No. 52/2018 and the decision of Delhi Tribunal in Tata Steel vs. ACIT in ITA No. 5616/Mum/2012. The assessee further stated that failure to raise this ground was neither deliberate nor intentional. And in view of the decision of Hon ble Supreme Court in NTPC Ltd. (229 ITR 383), the additional ground of appeal may be admitted and adjudicated on merit. The ld. AR of the assessee. The ld. AR of the assessee made his submission on similar lines. The ld. AR of the assessee also relied upon the decision of Hon ble Bombay High Court in Sesa Goa vs. JCIT [(2020) 117 taxman.com 96 (Bom)]. 6. On the other hand, the ld. DR for the revenue strongly objected for admission of additional ground of appeal. The ld. DR for the revenue further submits that Education Cess is not expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held by Bombay High Court in CIT vs. Lata Mangeshkar Medical Foundation, Notice of Motion Nos. 1779, 1783 of 2017. The Hon ble Bombay High Court also held that it is not open for lower court, disregard the decision of higher Court. While explaining the claim of deduction of cess, the ld. AR of the assessee, as an example referred the provision of Chapter-II (rate of taxes) of Finance Act, 2020 and submits that for the assessment year commencing from 1st April 2020, the income tax shall be charged at the rate specified in Part-I of First Schedule and such tax shall be increased by surcharge for the purpose of Union, calculated in each case in the manner provided therein. Education Cess is not included either as a rate or surcharge in Part-I. The legislature has consciously used the word cess while introduced Education Cess. Under the First Schedule as mentioned, the Act applies to total income; the word cess does not come in proviso to subsection (2). It comes in Sub-section (11) (12) and to be calculated @ 4% of Income-Tax and surcharge. This is levied on total income and not on profit and gains of business. A person would be liable to pay cess even if the person only ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , calculated in each case in the manner provided therein. Education Cess is not included either as a rate or surcharge in Part-I. The objections raised by ld DR for the revenue that the decision of Bombay High Court is per-incurium , is not tenable as the decision of Hon ble Supreme Court in Smith Kline French (India) Ltd. (supra) has also been specifically considered by Hon ble Rajasthan High Court in Chambal Fertilizer (supra). In the result, this ground of appeal is allowed for statistical purpose. 11. Now turning the various grounds of appeal raised by the assessee in its appeal and by revenue in its cross appeal. At the outset the ld. AR for the assessee submits that all the grounds of the appeal raised by the assessee as well as by revenue are covered by the decision of Tribunal in assessee s case and by the decisions of superior Courts. The ld DR for the revenue submits that he has already furnished the detailed written submissions on all the issues and he also rely on the orders of the TPO/AO or the ld CIT(A) as the case may be. 12. Ground No.1 of assessee s appeal relates to state taxes paid in overseas countries. The ld. AR of the assessee submits that as per sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, as it only refers to tax paid under the provisions of the Act. It is also worth mentioning, the State taxes paid by the assessee in DTAA countries are not eligible for relief under section 90 of the Act. Therefore, the issue which arises is, whether it can be allowed as deduction under section 37 of the Act. No doubt, in assessee s own case in assessment year 2005 06, the Tribunal in the order referred to above following its own decision in DCIT v/s Tata Sons Ltd., [2011] 43 SOT 27 (Mum.), has held that the State taxes paid overseas cannot be allowed as deduction in view of the provisions of section 40(a)(ii) of the Act. However, the aforesaid legal position has substantially changed after the decision of the Hon'ble Jurisdictional High Court in Reliance Infrastructure Ltd. (supra). While interpreting the provisions of section 2(43) of the Act, vis a vis section 40(a)(ii) of the Act, the Hon ble Court held that the tax which has been paid abroad would not be covered within the meaning of section 40(a)(ii) of the Act, since, the meaning of the word tax as defined under section 2(43) of the Act would mean only the tax chargeable under the Act. Thus, as per the aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be noted, before the Departmental Authorities the assessee had demonstrated that in no way it is connected with development of Tata brand. The details of expenditure incurred clearly demonstrate that they were basically for the purpose of advertising assessee s products in print media or through seminar, conferences, etc. As rightly observed by learned Commissioner (Appeals), the Assessing Officer has brought no material on record to establish that the expenditure is for brand building. As observed earlier, the expenditure relates to advertisement in newspaper, magazine, events, seminars, conferences, exhibitions, etc. Thus, the nature of expenditure incurred by the assessee clearly indicates that it was for promoting its own business. Further, considering the turnover of the assessee, the expenditure incurred on advertisement does not appear to be unusually high. That being the case, the expenditure incurred on advertisement cannot be treated to be in the nature of capital expenditure and amortized over a period of five years. To that extent, we agree with the decision of learned Commissioner (Appeals) on the issue. However, as regards experience certainty expenditure amounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the revenue further submits that the ld DR in his written submissions has wrongly submitted that the judgment of Karnataka High Court in Wipro Limited (382 ITR 179) is followed by the Tribunal in AY 2009-10, and that the decision of Wipro has been overruled by Supreme Court. The contention of the ld. DR is factually incorrect and wrong. In para 48 of Wipro s case Karnataka High Court considered the decision of Yokogava India Ltd (2012) 341 ITR 385. The revenue went in appeal before Supreme Court, wherein it was held that section 10A is deduction provision (391 ITR 274 SC). Thus the submissions of the ld DR that the decision of Karnataka High Court is contrary to the decision of Supreme Court in Yokogava India is misplaced and wrong. 21. On the other hand, the ld. DR for the revenue supported the order of lower authorities. The ld DR for the revenue in his written submissions after referring the decision of Karnataka High Court in Wipro Ltd (supra) submitted that the decisions on which decision was rendered is stand overruled by Supreme Court. 22. We have considered the submission of both the parties and perused the order of lower authority and the decision of Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of that income which is taxed in USA. In similar context, the Court also referred to the tax treaty with Canada where the provisions does not allow credit for tax paid in Canada if the income is not subjected to tax in India. With regard to country s with which India does not have any agreement for avoidance of double taxation, the Court observed that as per section 91 of the Act, the assessee would be eligible to avail tax credit. Thus, on a careful reading of the aforesaid judgment of the Hon ble Karnataka High Court, it becomes clear that where the respective tax treaty provides for benefit for foreign tax paid even in respect of income on which the assessee has not paid tax in India, still, it would be eligible for tax credit under section 90 of the Act. Like Article 25 of the Indo USA treaty, treaties with various other countries such as Indo Denmark, Indo Hungary, Indo Norway, Indo Oman, Indo US, Indo Saudi Arabia, Indo Taiwan also have similar provision providing for benefit of foreign tax credit even in respect of income not subjected to tax in India. However, Indo Canada and Indo Finland treaties do not provide for such benefit unless the income is subjected to tax in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as capital in nature and depreciation has been allowed by the Departmental Authorities. Insofar as software products acquired for re sale / trading purpose, the assessee s claim of deduction in respect of expenditure incurred thereon as revenue in nature has been disallowed on the ground that the payment made being in the nature of royalty, the assessee was required to deduct tax at source under section 195 of the Act. Insofar as the expenditure incurred on the software products acquired in internal use, we, on a perusal of the facts on record are of the view that by incurring such expenditure, the assessee has acquired assets of enduring benefit. Therefore, the expenditure incurred is capital in nature and the assessee would be entitled for depreciation on the cost of such assets. The Tribunal while deciding identical issue in assessee s own case for the assessment year 2005 06 in ITA no.7513/Mum./2010, dated 4th November 2015, the Tribunal has expressed similar view. Thus, following the aforesaid view of the Tribunal in assessee s own case, we uphold the decision of learned Commissioner (Appeals) on the issue. Insofar as the disallowance of expenditure incurred on acquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h retrospective effect from 1st June 1976, wherein, it was clarified that the transfer of all or any rights in respect of any right, property or information includes and has always included transfer of all or any right for use or right to use a computer software including granting of a license irrespective of the medium through which such right is transferred. It is the contention of the assessee that the software acquired by the assessee for the purpose of trading is a copyrighted article and the assessee has sold it to the customers as it is. It has been submitted that while re selling / trading the software products, there is neither any transfer of right in copyright in favour of the assessee nor the assessee has transferred any right in the copyright. However, the learned Commissioner (Appeals) has recorded a categorical finding that the software products acquired by the assessee cannot be sold independently and can be sold by utilising in the package developed by it. In the aforesaid factual context, it requires examination whether the software products acquired by the assessee for trading purpose was sold as a chattel qua chattel or the assessee has made some value addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Tribunal as mentioned above. In the result this ground of appeal raised by the revenue is allowed for statistical purpose. 28. Ground No. 2 3 in revenues appeal relates to disallowance under section 14A. The ld DR for the revenue submits that the assessee has earned dividend income of ₹ 15,99,27,954/-, which is claimed exempted under section 10(34). No suo moto disallowances was offered by the assessee. During the assessment the assessee submitted a computation of ₹ 53,18,829/- incurred for earning such exempt income. The assessing officer was not satisfied with the working of the assessee and worked out the disallowances as per Rule 8D. The AO computed disallowance @.5% of average value of investment as well as interest expenses attributable to such exempt income. The AO made total disallowances of ₹ 13,59,59,116/- in additions to suo moto disallowance offered by the assessee. The ld DR further submits that the revenue is not aggrieved by the deletion of interest expenses as the assessee before ld CIT(A) claimed that its own funds are in far excess to the investment. The ld. DR submits that 0.5% of average value of investment is as per law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal ₹ 32,52,13,873/- and amount of ₹ 26,68,29,174/- was treated as expenditure of enduring in nature by AO and treated it capital in nature and allowed depreciation. The ld CIT(A) allowed relief by following earlier year order without verifying the facts of the year under consideration. 32. On the contrary the ld AR for the assessee submits that expenditure were incurred in respect of advertisement in news paper / magazine for marketing of its product and is routinely incurred for its business and not in brand building. No enduring benefit is occurred by such expenses, which is revenue in nature. 33. We have considered the submissions of both the parties. We have already while discussing the cross appeal of assessee on similar ground of appeal and upheld the order of ld CIT(A), therefore this ground of appeal is disposed of accordingly. 34. Ground No. 5 6 of revenue s appeal relates to deleting the disallowance of commission to non-resident, for the want of TDS, under section 40(a)(i). The ld. DR for the revenue supported the order of the AO. The ld DR further submitted that the assessee was either liable to make TDS or to obtain certificate under section 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders of earlier years without discussing and verifying the relevant facts to this year. The ld DR for the revenue prayed for restoring the order of the AO. 39. On the contrary the ld AR for the assessee relied on the order of the ld CIT(A). The ld AR for the assessee submits that the first appellate authority while granting relief to the assessee followed the order for AY 2005-06, whereby the Tribunal followed the order of Bombay High Court in CIT Vs HCL Technology ltd (404 ITR 719 Bom). The High Court in HCL Technology held that the expenses which are to be excluded from the turnover would also be excluded for the purpose of computing the total turnover. The ld AR for the assessee also relied on the decision of Bombay High Court in Tata Infotech Ltd in ITA No. 3474 of 2020. 40. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities. We have also deliberated on the case law referred by the ld. AR for the assessee. We have noted that in appeal for AY 2009-10 on identical ground of appeal the Tribunal passed the following order 8. We have considered rival submissions and perused the material on record. Notably, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doing so the TPO held that the cost incurred by the AEs on the payment of price to assessee are in the nature of past through cost. The TPO held that the PLI to compute the margin would be operating profit/ value added expenditure (OP/VAE). The TPO after selecting some of the comparable proceeded to compute the adjustment and suggested adjustment of ₹ 1132.7 Crore. The ld CIT(A) allowed relief to the assessee by following the order of CIT(A) for AY2009-10 and also directed to accept the comparable selected in AY2009-10. The ld DR in his written submissions submits that the revenues ground of appeal are basically against the decision of ld CIT(A) on PLI to be applied, consideration of cost incurred by the AEs. Considering AEs in different geographical location as tested parties along with the comparable companies in those geographical locations. The ld DR for the revenue submits that OP/VAE is the most appropriate basis for PLI, considering the functions undertaken asset applied and the risk assumed (FAR) analysis of the assessee as well as AEs. 43. On the other hand the ld AR for the assessee supported the order of ld CIT(A). The ld AR for the assessee submits that ld DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distributors. It is well brought out by learned Commissioner (Appeals) in his order that the AEs are bearing credit risk and risk of default by client. In fact, the assessee through proper evidences has demonstrated instances where the credit risk with reference to part cancellation of contract has been borne by the AEs without compensation from the assessee. The documentary evidences in this regard furnished by the assessee were thoroughly examined not only by learned Commissioner (Appeals) but they were also produced before us. Thus, from the aforesaid facts, it becomes clear that significant marketing functions are being performed and distribution and marketing risk are being taken by the AEs. On examination of the financials of the subsidiaries it is revealed that some subsidiaries are still making loss at net level which signifies that some risk is being borne by the AEs. It has further been brought on record that the manpower base of AEs performed various functions relating to marketing as well as client co ordination. The AEs have developed sufficient competency to handle the marketing work independently. The entire contract related work is performed by the AEs, though, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shortlisted the final comparables to be considered for comparability analysis. No convincing argument or evidence has been brought on record by the learned Departmental Representative to persuade us to disturb the finding of learned Commissioner (Appeals) on these issues. In view of the aforesaid, we do not find any merit in the grounds raised by the Revenue on the issues. Accordingly, grounds are dismissed. 45. Considering the decision of Tribunal in appeal for AY 2009-10 on identical grounds of appeal, wherein all the contentions as raised by the ld DR for the revenue before us, has been considered by the Tribunal, while affirming the order of ld CIT(A). No variation in facts nor any contrary law is brought to our notice, hence, we uphold the order of ld CIT(A) on this ground of appeal. In the result this ground of appeals raised by revenue are dismissed. 46. Further considering the submissions of the ld AR for the assessee that in case the grounds raised by the revenue are dismissed, the ground of appeal raised by the assessee would need no adjudication. Accordingly, the discussion on the ground of appeal raised by assessee has become academic. In the result the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee further submitted that ground No. 13 of revenues appeal is similar to the ground No.11raised by revenue in appeal for 2009-10. The ground relates to the decision of CIT(A) in restricting the charge of guarantee commission only on 34% i.e. onsite portion of the contract which was performed by AEs. The Revenue has wrongly mentioned 48% in place of 34% which is correct percentage of onsite work in 2010-11 as against 48% in AY 2009-10. The CIT(A) followed the same approach as in AY 2009-10 and held that the assessee can t be charged by any guarantee commission on the portion of work performed by assessee itself. The said ground of revenue was dismissed in AY 2009-10. 49. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities. We have also deliberated on the decision of Tribunal in AY 2009-10. We have noted that as per para 13 of TPSR, the assessee not benchmarked the transactions of corporate guarantees commissions. The TPO after serving the show cause notice and considering the reply of the assessee concluded that the guarantee provided by the assessee on behalf of its AEs would fall within the meaning of internat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue s appeal and ground No. 6 in assessee s appeal relates to TP adjustment on account of interest free loans to AEs. The ld DR for the revenue submits that during the TP proceedings, the TPO noted that the assessee provided loan to its AEs without charging any interest. On show cause, the assessee contended that these are quasi capital. The TPO after considering the submissions of the assessee suggested adjustment on account of these loans by charging interest @11% per annum and suggested adjustment of ₹ 41.04 Crore. The ld CIT(A) granted partial relief to the assessee by reducing the rate of interest to LIBOR plus 300 bps by following the order for AY 2009-10. The Tribunal in AY 2009-10 restored the issue to the file of AO for de novo adjudication as per the ratio in case of DLF Hotels Holdings Ltd (ITA No. 6336/Delhi/2012 dated 30.06.206). The ld. DR for the revenue submits that following the order of Tribunal these issues may be restored to the file of AO with similar direction. 52. On the other hand the ld AR for the assessee submits that so far as issue related with TP adjustment on account of the interest free loans to AEs are concerned, the ld DR has not given an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals), the assessee has filed a detailed written submission on 27th March 2014, elaborately discussing the nature of advance made to the AEs and the purpose for which such advances were made. It was submitted by the assessee that the advances made to the AEs were as a part of business strategy and not simply to help the AEs with capital infusion. The assessee has advanced detailed argument stating that advances made to the AEs is a shareholder activity and not advancement of loan. In this context, the assessee has referred to OECD Transfer Pricing Guidelines as well as UK and Australian Regulations. It is evident from the impugned order of the learned Commissioner (Appeals), though, he sketchily referred to some of the submissions made by the assessee, however, he has not at all dealt with them in an effective manner. The learned Commissioner (Appeals), though, has observed that the loans advanced were not merely for downstream acquisition but for a variety of purpose including working capital requirement and other business uses, however, he has not elaborated as to for what other purpose loans were advanced. Without properly dealing with the factual aspect of the issue, learned Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of Bombay High Court. No contrary facts or law is brought to our notice to deviate from the order of ld CIT(A) is brought to our notice, hence, we affirm the order of ld CIT(A) on this issue. Resultantly the ground of appeal raised by the revenue is dismissed. 56. Last issue in assessee s appeal left for adjudication relates to legal issues with regard to reference to TPO without proper application of mind, no intention of shifting of profit etc that is ground No. 4. Considering the facts that all transfer pricing grounds of appeal are basically decided in favour of the assessee, thus, in our view the discussions on this (these) ground of appeal have become academic. 57. In the result, appeal of the assessee as well as revenue both are partly allowed. (Appeals for AY 2008-09 being ITA No. 3263/M/2017 by assessee ITA No. 3746/M/2017 by Revenue) 58. At the outset of hearing the ld. AR for the assessee submits that all the grounds of appeal raised by the assessee as well as by revenue are identical to the grounds of appeal raised by them in AY 2010-11. The ld. AR for the assessee filed his short written synopsis; however, the ld. DR adopted the similar submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that is Ground No. 1 in revenue s appeal relates to disallowance under section 40(a)(i) on account of non-deduction of TDS on expenditure on imported software. We have noted that this ground of appeal is identical to the ground No. 1 of appeal raised by revenue in AY 2010-11, which we have dismissed by following the order of Tribunal for AY 2009-10, therefore, following the principles of consistency this ground of appeal is dismissed with similar directions. In the result this ground of appeal is dismissed. 63. Next ground of appeal that is ground No. 2 in revenue s appeal relates to deduction under section10A in respect of units on which deduction under section 80HHC was allowed in past. The ld. DR for the revenue supported the order of the AO. 64. On the other hand the ld AR for the assessee submits that nothing in section 10A prohibits assessee from claiming deduction in respect of profits of an undertaking, where deduction under section 80 HHE has been claimed in past. The claim for deduction is claimed in respect of residual years remaining in the block 10 years and there is no attempt to extent the period of 10 years of tax holidays by exercising option to claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 10 A by taking view that commencement of unit (eligible for benefit of setion10A) is not available to the assessee. the AO also held that by opting out of 80HHE and claiming deduction under section 10A, the assessee is trying to claim which in not available to the unit in the light of phasing out of section 80HHE form AY 2001-02. The ld CIT(A) allowed relief to the assessee by noting that claim was to the assessee by CIT(A)in AY 2005-06, which has been upheld by Tribunal in ITA No. 6820/Mum/2010. We have noted that in appeal for AY 2009-10 the Tribunal allowed the similar deduction under section 10A by passing the following order; 53. We have considered rival submissions and perused the material on record. As noted, identical issue arising in assessee s own case for the assessment year 2005 06 came up for consideration before the Tribunal in ITA no.6820/Mum./2010 dated 4th November 2015. While deciding the issue, the Tribunal held that since both, section 80HHE and section 10A of the Act entitle the assessee for benefit, the assessee would legitimately be entitled to the benefit of that provision of law which enables a larger benefit being earned by him. It is also not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it would not be available to an industry which was already existing and engaged in such activity. However, the interpretation of the revenue would render the first proviso to subsection (1) of section 10A wholly redundant. This proviso reads as under:- 10A(1)Provided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to deduction referred to in this subsection only for the unexpired period of the aforesaid ten consecutive assessment years. As per this proviso, therefore, while computing total income of the undertaking for any assessment year, the profit and gain which had not been included prior to the introduction of Finance Act, 2000, such an undertaking would be entitled to deduction as per sub-section (1) only for the unexpired period of 10 consecutive assessment years. In plain terms, therefore, this proviso would apply to an industry which was already in existence, engaged in manufacturing and export of computer software when the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy these grounds of appeal are dismissed. 69. Next grounds of appeal in revenue s appeal i.e. ground No. 10 relates to disallowance of deduction under section 10A/ 10AA. The ld. DR for the revenue supported the order of AO. 70. On the other hand the ld. AR for the assessee submits that this ground of appeal is completely covered by the CBDT Circular No.1/2013 dated 17th January 2013 and the same has been accepted by the department in subsequent years. 71. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities. Considering the submissions of the ld AR for the assessee that the assessee was allowed deduction under section10A/10AA in subsequent years and that this issue is covered by the CBDT Circular No.1 /2013 date 17th January 2013, wherein it was clarified that the software developed abroad at a client s place would be eligible for benefits under the respective provisions, because these would amount to deemed export and tax benefits would not be denied merely on this ground. It was also clarified that the benefits under these provisions can be availed of only by the units or undertakings set up under specified s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be levied only for the balance 60% during the year under consideration. 76. We have considered the rival submissions of the parties and have gone through the order of the lower authorities. The TPO suggested the adjustment by taking view that provision of guarantee results in measurable and material credit enhancement for the borrower. The TPO noted that Allahabad Bank id charging guarantee fee at 2.4%, the TPO applied mark up of .6% to cover up risk and treated 3% for financial guarantee at arm s length. Before, ld CIT(A) the assessee made exhaustive written submissions as recorder by ld CIT(A). The ld CIT(A) granted relief to the assessee by holding that lease guarantee is similar to performance guarantee. The ld CIT(A) noted that 58% of the premises for which guarantee was given was occupied by the assessee and the fee if payable be restricted to remaining amount as the assessee has shown evidenced to that effect as no guarantee fee can be levied to the self occupied property. Before, us the ld. AR for the assessee vehemently submitted that if the performance guarantees is treated as chargeable services, the charges should be levied only on the component of services performed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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