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2011 (6) TMI 500 - ITAT PUNEDisallowance and adding back of losses of 10A units while computing income - Held that:- Subsequent to the amendment w.e.f. 1.4.2001, the provision provides for a deduction of such profits and gains as are derived by an undertaking from the export of articles or thing or computer software duly established in free trade zones, etc. Consequently, provision, as applicable for the AY 02-03, under consideration, is not in the nature of an exemption. Therefore, the assessee was entitled to set-off of losses sustained by the 10A eligible units against the normal business income - Decided in favor of the assessee Disallowance of interest under Transfer Pricing - determination of arm's length price with respect to interest relatable to the extended credit period allowed to the Associated Enterprises - Held that:- As relying on Nimbus Communications [2011 (1) TMI 68 - ITAT MUMBAI] extension of credit to the Associated Enterprises beyond the stipulated credit period cannot be construed as an "international transaction" for the purposes of section 92B(1) so as to require adjustment for ascertaining the ALP. Therefore, the consequential addition by the AO is untenable - Decided in favor of the assessee. Disallowance of consultancy expenses under Transfer Pricing - Held that:- There is nothing to suggest that the assignments by McKinsey & Co. were carried out on the basis of any arrangement or agreement between the assessee and the Associated Enterprises. There is also no material to show that any tangible and concrete benefit has accrued to the Associated Enterprises as a result of the expenditure incurred by the assessee in obtaining consultancy from McKinsey & Co. Assertion by the TPO appears to be based on a mere presumption. Adjustment set aside - Decided in favor of the assessee Manner of computation of deduction under section 80HHE - AO made certain changes which inter-alia included inclusion of the turnover of the Japan and Australia branches as a part of the 'total turnover' - Held that:- As decided in ITO v. Servion Global Solutions Ltd. [2007 (6) TMI 273 - ITAT MADRAS-C] Definitions of "export turnover" and "total turnover" contained in section 80HHE and explained that the same provided that what is excluded from the export turnover is also liable to be excluded from the total turnover. If the turnover of Japan and Australia branches has been reduced from the "export turnover" by the Revenue, the same is also excludible from the figure of "total turnover" for the purposes of computing deduction u/s 80HHE of the Act - Decided in favor of the assessee. Computation of book profits for the purposes of section 115JB and adjustments made thereunder - Held that:- CIT(Appeals) erred in not adjudicating the Ground, inasmuch as to ensure completeness and finality of proceedings it is imperative that the stated Grounds raised by the assessee ought to have been adjudicated on merits also. Therefore set aside the order of the CIT (Appeals) on this aspect and restore the matter back to his file to adjudicate the Grounds raised by the assessee regarding computation of book profits u/s 115JB and adjustments made thereunder - assessee succeeds for statistical purposes. Deduction u/s 10A - assessee contended that three units at Chinchwad, Akruti and Millennium Business Park were new Units and not expansion of the existing units and, therefore, the period of eligibility of deduction u/s 10A is liable to be considered from the year of setting up of such units and not from the point of time when the original unit were set up - Held that:- There is no prohibition that an expansion in the same line of business achieved by setting up a new independent unit would lead to denial of deduction u/s 10A. CIT (Appeals) rightly held that the three units are separate and independent production units and the same cannot be treated as mere expansions of the existing undertakings. Therefore, the mere fact that the requisite permissions from STPI refer them as expansions of the existing units, would not dis-entitle the assessee from the claim of deduction u/s 10A - Decided in favor of the assessee. Assessee is eligible for considering 10% of the profit of the business of the undertakings covered u/s 10A as eligible for the claim of deduction u/s 80HHE - Decided in favor of assessee. Charging interest under section 234B - assessee contested that interest has been charged without allowing credit available under DTAA of taxes paid in USA, Australia and New Zealand - Held that:- Insertion of Explanation 1 below section 234B(1) by the Finance Act, 2006 with effect from 1.4.2007 is relevant to adjudicate the claim of the assessee. As per the amended provisions, states that credit is allowable in relation to the taxes paid in country outside India while computing "assessed tax" for the purposes of section 234B(1). Case of CIT v. Apar Industries Ltd. [2010 (4) TMI 151 - BOMBAY HIGH COURT] has interpreted the said amendment as clarificatory in nature so as to have a retrospective application even for assessment years prior to 1.4.2007 - remit this aspect to AO to re-compute the interest in accordance with aforesaid discussion and as per law - assessee succeeds for statistical purposes.
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