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Issues Involved:
1. Computation of deduction u/s 10A. 2. Validity of revised return filed by the assessee. 3. Allowance of deduction u/s 10A on transfer pricing adjustment. Summary: 1. Computation of Deduction u/s 10A: The primary issue raised by both the revenue and the assessee pertains to the computation of deduction u/s 10A. The revenue contested the CIT(A)'s direction to recompute the deduction allowable u/s 10A after reducing certain expenditures from both export turnover and total turnover. The revenue argued that there is no provision in section 10A requiring such expenses to be reduced from total turnover. The assessee argued that the expenditures should not be reduced from export turnover as they were not incurred in providing technical services outside India. The Tribunal held that the expenses referred to cannot be said to be incurred outside India for rendering technical services, following the decision in the assessee's own case for previous years. Consequently, the Tribunal upheld the CIT(A)'s order, directing the AO to exclude the link charges and other expenses from both export turnover and total turnover, following the decision of the Hon'ble High Court of Karnataka in Tata Elxsi Ltd. (349 ITR 98). 2. Validity of Revised Return: The assessee filed a revised return declaring a loss, which was not accepted by the AO on the grounds that it was filed beyond the time limit prescribed u/s 139(3). The CIT(A) upheld the AO's decision, declaring the revised return invalid. However, the Tribunal held that the revised return filed within the time permitted u/s 139(5) is valid, following the Tribunal's own decision in the assessee's case for A.Y. 2004-05 and the decision of the ITAT Mumbai in Mr. Ramesh R. Shah v. ACIT. The Tribunal concluded that the revised return is valid and the assessee is entitled to the benefit of carry forward of loss declared in the revised return. 3. Deduction u/s 10A on Transfer Pricing Adjustment: The revenue challenged the CIT(A)'s direction to recompute the deduction u/s 10A after including the transfer price adjustment in the business income. The AO had denied the deduction on the grounds of the first proviso to section 92C(4), which prohibits deductions u/s 10A in respect of income enhanced after computation of income under this subsection. The Tribunal, following its own decision in the assessee's case for previous years, held that deduction u/s 10A is allowable on the transfer pricing adjustment, provided it does not enhance the returned income. Therefore, the Tribunal dismissed the revenue's grounds on this issue. Conclusion: The appeal by the assessee was partly allowed, while the appeal by the revenue was dismissed. The Tribunal upheld the CIT(A)'s directions on the computation of deduction u/s 10A and the validity of the revised return. Additionally, the Tribunal confirmed that deduction u/s 10A is allowable on transfer pricing adjustments, provided it does not enhance the returned income.
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