2018 (4) TMI 1588 - AT - Income Tax

Rejection of alternative claim of tax deduction u/s. 10A - claim was not granted by the AO on the reason that DRP was of the opinion that as per section 144C(2) the assessee can file its objections only in relation to such variation as referred to in sub-section (1) of sec. 144C - Held that - The alternative claim of the assessee is to be allowed as held by various judicial pronouncements if the assessee has satisfied the conditions required for claiming deduction u/s. 10A of the Act. Therefore AO must in all fairness consider the documents for the basis of the claim and ascertain whether they are proper and after verifying them pass appropriate order as to whether the benefit of section 10A should be granted - as the issue was not examined by the Assessing Officer and it was rejected at the threshold we remit this issue to the file of the Assessing Officer for his fresh consideration and for complying with the requirements of section 10A of the Act. Decided in favour of assessee for statistical purposes. Order passed by the ld. DRP as a non-speaking order - Held that - This Tribunal in many of such cases have restored the issue to the file of DRP for passing a speaking order on each of the objection of the assessee raised before it. It is a fit case where the entire matter should be restored back to the file of DRP to pass a detailed order stating all the objections of the assessee and disposing them by giving a cogent and germane reason for adjudication of the objections of the assessee. We direct accordingly. After receiving the order from DRP the Assessing Officer will again pass order u/s 144C(13) and the present assessment passed by the Assessing Officer is set aside as the DRP is directed to readjudicate the objections raised by the assessee as per directions give above. We direct accordingly. These grounds of appeal of the assessee are allowed for statistical purposes.

Summary

Issues:
1. Disallowance of tax holiday claimed under section 10B of the Act
2. Rejection of alternative claim of tax deduction u/s. 10A of the I.T. Act
3. Reference to TPO by the Assessing Officer
4. Transfer pricing adjustments related to software development services segment
5. Erroneous data used by the TPO
6. Providing appropriate adjustments to comparable companies
7. Variation of 5% from the arithmetic mean

Issue 1: Disallowance of tax holiday claimed under section 10B of the Act
The assessee did not press this ground of appeal, leading to its dismissal.

Issue 2: Rejection of alternative claim of tax deduction u/s. 10A of the I.T. Act
The Assessing Officer rejected the alternative claim of deduction u/s. 10A, stating that objections should relate to variations made by the Assessing Officer. The Tribunal found the claim valid based on judicial pronouncements and remitted the issue for fresh consideration by the Assessing Officer.

Issue 3: Reference to TPO by the Assessing Officer
The ground regarding reference to TPO was not pressed by the assessee and was dismissed.

Issue 4: Transfer pricing adjustments related to software development services segment
The DRP did not provide a speaking order on the objections raised by the assessee, leading to a non-speaking order. Citing a similar case, the Tribunal directed the matter to be restored to the DRP for a detailed order addressing all objections raised by the assessee.

Issue 5: Erroneous data used by the TPO
This issue was part of the transfer pricing adjustments and was addressed collectively with other related adjustments.

Issue 6: Providing appropriate adjustments to comparable companies
The Tribunal directed the matter to be restored to the DRP for a detailed order addressing all objections raised by the assessee regarding transfer pricing adjustments.

Issue 7: Variation of 5% from the arithmetic mean
This issue was part of the transfer pricing adjustments and was addressed collectively with other related adjustments.

In conclusion, the Tribunal partially allowed the appeal for statistical purposes and directed the matter to be reconsidered by the Assessing Officer and the DRP on various grounds related to tax deductions and transfer pricing adjustments. The Tribunal emphasized the importance of providing detailed, speaking orders on objections raised by the assessee for proper adjudication.