2013 (4) TMI 995 - AT - Income Tax

Summary

Issues Involved:
1. Deduction u/s 10A on foreign exchange fluctuation gain.
2. Disallowance u/s 40(a)(ia) for payments made to parties outside India.
3. Disallowance of 20% of recruitment and training charges.
4. Addition u/s 92CA(3) by TPO on account of software services, human resources management service, and excess credit period granted to AES.

Summary:

1. Deduction u/s 10A on Foreign Exchange Fluctuation Gain:
The A.O. disallowed the deduction u/s 10A on foreign exchange fluctuation gain, considering it not derived from export business. The CIT(A) allowed the deduction, relying on the Tribunal's decision in the assessee's own case for earlier years, which held that exchange fluctuation gain is incidental to business operations and eligible for deduction u/s 10A. The Tribunal upheld the CIT(A)'s decision, noting that the issue was identical to earlier years and no contrary evidence was presented by the Revenue.

2. Disallowance u/s 40(a)(ia) for Payments Made to Parties Outside India:
The A.O. disallowed payments made to the UK branch without TDS, considering them liable for tax deduction. The CIT(A) deleted the disallowance, stating that the payments were not chargeable to tax in India as the entities did not have a PE in India, and thus, Section 195 was not applicable. The Tribunal upheld the CIT(A)'s decision, noting that the facts were identical to earlier years and no new evidence was presented by the Revenue.

3. Disallowance of 20% of Recruitment and Training Charges:
The A.O. disallowed 20% of recruitment and training expenses, assuming they were not wholly for business purposes. The CIT(A) deleted the disallowance, stating that the expenses were a business necessity and there was no evidence to suggest otherwise. The Tribunal upheld the CIT(A)'s decision, noting that the facts were identical to earlier years and no contrary evidence was presented by the Revenue.

4. Addition u/s 92CA(3) by TPO on Account of Software Services, Human Resources Management Service, and Excess Credit Period Granted to AES:
The TPO made adjustments for international transactions, which the CIT(A) deleted, stating that the facts were identical to earlier years and the assessee's operations were correctly characterized as a distributor. The Tribunal upheld the CIT(A)'s decision, noting that the facts were identical to earlier years and no new evidence was presented by the Revenue.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all grounds.