TMI Blog2023 (9) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... .AO/TPO to compute interest on such outstanding receivables that exceeded 30 days credit period, by applying LIBOR rate + 200 basis points. In the event, the receivables get subsumed while computing the net margin of assessee, the same shall stand excluded - We therefore remand this issue to the Ld.AO to compute the disallowance if any in accordance with law. Disallowance of deduction claimed u/s. 80G - donations made in pursuance of the CSR policy - HELD THAT:- As decided in assessee s own case for A.Y. 2016-17 [ 2022 (11) TMI 1320 - ITAT BANGALORE ] , wherein, this Tribunal followed the decision of First American (India) Pvt. Ltd. [ 2020 (5) TMI 187 - ITAT BANGALORE ] authorities below have erred in denying claim of assessee under section 80G of the Act. We also note that authorities below have not verified nature of payments qualifying exemption under section 80G of the Act and quantum of eligibility as per section 80G(1) of the Act. Under such circumstances, we are remitting the issue back to Ld.AO for verifying conditions necessary to claim deduction under section 80G of the Act. Assessee is directed to file all requisite details in order to substantiate its cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The TPO erred in considering the delayed receipts as unsecured loans advanced to the Associated Enterprises ( AEs ) and thereby erred in imputing interest on the same. 4. The DRP/ AO/TPO erred in treating the delayed receivables as a separate international transaction, although the same does not fall within the purview of capital financing in terms of Section 92B of the Income- tax Act, 1961 ( the Act ). 5. The DRP/AO/TPO ought to have appreciated that the receivables emanating out of the principal transaction of rendering services, the same ought to, if at all, be benchmarked in an aggregate manner with the said services. 6. The DRP/AO/TPO erred in imputing interest on the outstanding receivables from AEs, without appreciating that the Appellant followed the same policy of not charging any interest on the receivables from non-AEs. 7. The DRP/AO/TPO erred in not appreciating the fact that the Act provides for taxing only real income whether received or accrued under the regular provisions and does not provide for taxing notional income. 8. The DRP/AO/TPO erred in not appreciating the fact that TP adjustment cannot be made on hypothetical and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. For year under consideration, the assessee filed the return of income on 30.03.2018, declaring total income of Rs. 39,82,64,080/-. The case was selected for scrutiny under CASS and statutory notices u/s. 143(2) and 143(1) were issued and served on the assessee. 2.2 The Ld.AO noted that, the assessee had international transaction exceeding Rs. 15 crores and therefore reference was made to the Ld.TPO for computing the arms length price of such international transactions. The Ld.TPO upon receipt of the reference, called for the economic analysis in respect of the international transactions in form 3 CEB. It was noted that, the assessee had undertaken following international transactions: International Transactions Amount As per Form No. 3CEB (Amount in INR) Provision of Software Development Support services 2,45,87,45,842 Provision of technical call centre services (ITES) 29,75,29,568 Provision of marketing support services (MSS) 10,40,06,090 Deemed International transaction 1,59,10,672 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order, the assessee filed objections before the DRP. 4.1 The DRP accepted most of the contentions of the assessee in respect of comparables under the SWD and ITeS segment. 4.2 However in respect of the interest on outstanding receivables, he modified the directions of the Ld. TPO by adopting SBI short term interest rate and directed to recompute the adjustment by applying credit period of 30 days as per the agreement or invoices. 4.3 In respect of the disallowances made by the Ld. AO u/s. 80G and section 40A(7), the DRP upheld the addition proposed in the draft assessment order. 5. On receipt of the DRP directions, the Ld.AO passed the final assessment order by making following additions in the hands of the assessee. Total income as per ITR Rs. 39,82,64,080/- Add: TP addition u/s 92CA Rs. 7,87,77,217/- Add: Disallowance u/s 80G Rs. 5,50,000/- Add: Disallowance u/s 40A(7) Rs. 1,84,63,980/- Rs. 9,77,91,197/- Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce with law. Needless to say that proper opportunity of being heard must be granted to assessee. Accordingly, these grounds 2-12 raised by assessee stands allowed for statistical purposes. 7. Ground no. 13 is with regard to the disallowance of deduction claimed u/s. 80G of the act in respect of donations made in pursuance of the CSR policy. 7.1 It is submitted that the assessee incurred Rs. 11 Lakhs on account of CSR in line with the guidelines issued under the Companies Act, 2013. The Ld.AO noted that, the assessee claimed deduction to the extent of Rs. 5,50,000/- under the 80G that was denied to the assessee. 7.2 The Ld.AR at the outset submitted that, this issue stands covered by the decision of Coordinate Bench of this Tribunal in assessee s own case for A.Y. 2016-17 in IT(TP)A No. 268/Bang/2021 by order dated 28/11/2022 , wherein, this Tribunal followed the decision of Coordinate Bench of this Tribunal in case of First American (India) Pvt. Ltd. vs. ACIT in ITA No. 1762/Bang/2019 by order dated 29.04.2020 . In assessee s own case, this Tribunal has observed and held as under: 68. The learned AR submitted that the amount of donation made ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Act. Therefore, in order to provide certainty on this issue, it is proposed to clarify that for the purposes of section 37(1) any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and, hence, shall not be allowed as deduction under section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed deduction under those sections subject to fulfilment of conditions, if any, specified therein. 14. From the above it is clear that under Income tax Act, certain provisions explicitly state that deductions for expenditure would be allowed while computing income under the head, `Income from Business and Profession to those, who pursue corporate social responsibility projects under following sections. Section 30 provides deduction on repairs, municipal tax and insurance premiums. Section 31, provides deduction on repairs and insurance of plant, machinery and furniture Section 32 provides for depreciation on tangible asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under above sections to be exempt, as long as it satisfies necessary conditions under section 30 to 36 of the Act, for computing income under the head, Income from Business and Profession . 17. For claiming benefit under section 80G, deductions are considered at the stage of computing Total taxable income . Even if any payments under section 80G forms part of CSR payments (keeping in mind ineligible deduction expressly provided u/s. 80G), the same would already stand excluded while computing, Income under the head, Income form Business and Profession . The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing Total Taxable Income cannot be denied to assessee, subject to fulfillment of necessary conditions therein. 18. We therefore do not agree with arguments advanced by Ld.Sr.DR. 19. In present facts of case, Ld.AR submitted that all payments forming part of CSR does not form part of profit and loss account for computing Income under the head, Income from Business and Profession . It has been submitted that some payments forming part of CSR were claimed as deduction unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Referring to the return of income placed at page 874 of the paper book, the Ld.AR submitted that coln. 26 will not apply to assessee as the payment has been made during the year and therefore the same was kept blank. 8.3 The Ld.DR on the other hand submitted that the issue needs to be verified as assessee has stated that the contribution was made towards unapproved gratuity fund. We have perused the submissions advanced by both sides in the light of records placed before us. 8.4 We note that the assessee has not provided satisfactory explanation with reference to documentary evidence to substantiate its claim of gratuity having paid during the year under consideration. It is also an admitted position that the contributions made by assessee was towards unapproved gratuity fund and therefore the disclosure of the actual payment of gratuity to the employees would not be reported in coln. 26 of form 3CED. However, the deduction in respect of gratuity is to be allowed either in the year in which the gratuity is actually paid on retirement / termination or in the year in which the contributions are made to a gratuity fund which may be approved or unapproved. In support, we tak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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