TMI Blog2021 (7) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... lude them from the list of comparables and determine the ALP. As discussed earlier in the order, in course of hearing, learned senior counsel for the assessee has specifically submitted before us that with the exclusion of Acropetal Technologies Ltd and eClerx Services Ltd, the arithmetic mean of the rest of the comparables will work out to 13.91% as against the margin shown by the assessee of 14.9%, requiring no further adjustment. Disallowance of deduction claimed under section 10A in respect of interest income and foreign exchange gain - HELD THAT:- Undisputedly, the assessee has earned the interest income from the deposit made towards bank guarantee and temporary parking of surplus funds. It is evident, the assessee has no other activity of earning income except export of ITES through its 10A unit. Thus, it can be safely concluded that the deposits on which the assessee had earned interest income were on account of its business activity. There cannot be any doubt that deposits made towards bank guarantee is purely in connection with its business activity. As far as the interest on fixed deposit is concerned, it is an accepted factual position that the surplus fund availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f business or profession . Additional ground is allowed. - I.T.A. No. 766/Mum/2016 - - - Dated:- 30-6-2021 - SHRI PRAMOD KUMAR ( VICE PRESIDENT ) AND SHRI SAKTIJIT DEY ( JUDICIAL MEMBER ) Appellant by : Shri J. D. Mistri , Senior Counsel Respondent by : Shri Vatsalya Saxena , CIT ( DR ) ORDER Per Saktijit Dey ( JM ) : This is an appeal by the assessee assailing the assessment order dated 29- 01-2016 passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 for the assessment year 2011-12, in pursuance to the directions of learned Dispute Resolution Panel (DRP), Mumbai. 2. Ground 1 is general in nature; hence, does not require specific adjudication. 3. In grounds 2 to 11 assessee has raised various issues relating to addition made on account of transfer pricing adjustment. However, at the very outset, Shri J.D. Mistri, learned Senior Counsel appearing for the assessee submitted, in case assessee s pleading in relation to ground 7 is accepted, all other grounds relating to transfer pricing issue would become infructuous. Narrowing down the issue further, he submitted, in case, two of the comparables selected by the Transfer Pricing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eClerx Services Ltd 69.7 Infosys BPO Ltd 17.73 e4e Healthcare Business Services Private Limited 13.82 Informed Technologies India Ltd 9.24 NIIT SmatServe Ltd 14.83 Average 27.50 6. Applying the arithmetic mean of the selected comparables, the TPO determined the ALP of the transactions with the AE at R.102,42,52,000/- and proposed an adjustment of ₹ 95,59,64,000/-. Based on the adjustment proposed by the TPO, the assessing officer framed the draft assessment order. Against the draft assessment order, assessee raised objections before learned DRP. However, learned DRP more or less concurred with the decision of the TPO. 7. Learned senior counsel for the assessee submitted, both, eClerx Services Ltd and Acropetal Technologies Ltd are not comparable to the assessee for varied reasons. He submitted, being convinced with the aforesaid factual position, the Tribunal in assessee s own case in Assessment Year 2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Vodafone India Services Pvt. Ltd by learned TPO and learned DRP in their case had directed to exclude following seven comparables:- 1. Acropetal Technologies (Seg.) 2. Coral Hubs Ltd (Formerly Vishal Information Technologies Ltd) 3. Genesys International Corporation Ltd 4. Crossdomain Solutions Ltd 5. Datamatics Financil Services Ltd (Seg.) 6. Eclerx Services Ltd 7. Mold-Tek Technologies Ltd Aggrieved by this order, we find that the assessee preferred n appeal before this Tribunal and the Tribunal further directed to exclude following two comparables vide its order in ITA No.7514/Mum/2013 dated 10.12.2014: 1. Mold-Tex Technologies Ltd 2. Cosmic Global Ltd 8. Now, we are left with remaining eight comparables. Learned AR placed a chart before us stating that margin of these eight comparables would as under:- Sr. No. Name of Company OP/TC 1 Aditya Birla Minacs Worldwide Ltd 2.20% 2 E4e Healthcare Solutions Ltd 16.72% 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d submissions of learned senior counsel, the other grounds raised by the assessee relating to transfer pricing adjustment being grounds 2 to 6 and grounds 8 to 11 having become infrctuous, are dismissed. Whereas, ground 7 is allowed to the extent indicated above. 11. In ground 12, the assessee has challenged the disallowance of deduction claimed under section 10A of the Act in respect of interest income of ₹ 1,44,03,437/- and foreign exchange gain of ₹ 4,86,061. Of course, in ground 13, the assessee has made an alternative claim to the effect that in case it is held that foreign exchange gain is not eligible for deduction under section 10A of the Act, then, deduction under section 10A of the Act ought to be calculated after reducing the foreign exchange loss. 12. Briefly the facts are, in course of assessment proceedings, the assessing officer noticed that assessee has included interest earned on bank guarantee and fixed deposit amounting to ₹ 1,44,03,437/- in the profits of business and has claimed deduction under section 10A of the Act thereon. Being of the view that interest income being assessable under the head Income from other sources ; hence, cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lted in gain of ₹ 4,86,061/-. Whereas, on reinstatement of debtors, EEFC bank account and on dollar sale, assessee incurred loss of ₹ 9,80,67,531/-. He submitted, since the foreign exchange gain on revaluation of creditors balance is intrinsically connected to the export activity, it is eligible for deduction under section 10A of the Act. Further, he submitted, section 10A of the Act uses the words profits of business and not profits of business and profession . Since, the assessee has no other activity except its section 10A unit; the interest income earned has to be regarded as profits of business. Further, he submitted, in assessee s own case for Assessment Year 2010-11, the DRP has directed the assessing officer to treat foreign exchange gain as Income from business for computing deduction under section 10A of the Act. As regards the decision of the Hon ble jurisdictional High Court in case of CIT vs Shah Original (2010) 327 ITR 19 (Bom) relied upon by the TPO and learned DRP, learned senior counsel submitted, the said decision of the Hon ble jurisdictional High Court was rendered in the context of deduction claimed under section 80HHC of the Act. Whereas, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 271(1)(c) of the Act due to disallowance of deduction claimed under section 10B of the Act; however, the Hon ble Court, following the decision of the Hon ble Karnataka High Court in case of CIT vs Hewlett Packard Global Soft Ltd (supra) has given a categorical finding that benefit of deduction under section 10B of the Act would be available on the interest income. Keeping in view the ratio laid down in the aforesaid decisions, we hold that the assessee is eligible to claim deduction under section 10A of the Act in respect of the interest income. 17. As regards deduction claimed in respect of foreign exchange gain, it is noticed that both the assessing officer and learned DRP have disallowed assessee s claim relying upon the decision of the Hon ble jurisdictional High Court in the case of CIT vs Shah Originals (supra). However, on a careful reading of the said judgement, it is noticed that the decision of the Hon ble jurisdictional High Court was rendered in the context of deduction claimed under section 80HHC of the Act. Whereas, in the present case, assessee has claimed deduction under section 10A of the Act. On going through the relevant statutory provisions, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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