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2016 (5) TMI 1627 - AT - Income TaxTP Adjustment - MAP on remaining 4% transactions of the assessee as well viz. transactions pertaining to non-US entities - HELD THAT - It has been brought to our notice that margin of the assessee @ 16.63% has been found to be at Arm s Length Price and no adjustment has been suggested under MAP. It is further noted by us that the TPO/AO have treated all of the transactions as one by combining the total turnover of the assessee whether related to US based entities or others. Even before us no distinction has been made out by the CIT-DR between the turnover made by the assessee with US based entities and others. In view of these facts and respectfully following orders of earlier years we direct the AO/TPO to apply the order of MAP on the remaining 4.02% transactions also and delete the addition. Unabsorbed depreciation emanated from exempt unit and accordingly exemption u/s. 10A should be computed after setting off the amount of unabsorbed deprecation - HELD THAT -As respectfully following the order of the earlier years we direct the AO to allow the deduction u/s. 10A before setting off of the brought forward unabsorbed depreciation. Treating the interest income on deposits with banks and other receipts as chargeable to income-tax under the head Income from other Sources - assessee s claim that such interest income and other receipts are chargeable to tax under the head Profit and Gains of Business or Profession and eligible for deduction u/s 10A of the Act - HELD THAT - As relying on assessee own case or A.Ys. 2006-07 2007-08 2015 (12) TMI 296 - ITAT MUMBAI this issue is decided in favour of the assessee and interest income is directed to be held as assessable under the head income from business. Computation of deduction of 10A - HELD THAT - A careful reading of provisions of section 10A suggest that nothing has been excluded from the definition of profit of the business of the undertaking and deduction has been stipulated to be allowable on the amount of the profits of the business of the undertaking in the proportion of the export turnover to total turnover of the business carried on by the undertaking. If an interpretation is adopted as is suggested by the assessee that no receipt of the nature of interest shall form part of total turnover then clearly it will not only be irrational but apparently such an interpretation shall given rise to absurd results by allowing the benefit of section 10A even in those receipts which were not intended to be covered u/s. 10A by the legislature. Provision of section 10A does not permit the assessee to avail 100% deduction on the amount of interest income earned by it on deposits with bank and other sources in India. Thus we direct the AO to grant the benefit of deduction u/s. 10A on proportionate basis by including the amount of interest in total turnover as provided by Sub-section (4) of section 10A. This ground may be treated as partly allowed. Restricting the amount of tax deducted at source - Assessee requested for appropriate directions to the AO for verification of facts and granting the credit accordingly - HELD THAT - We find it appropriate to send this issue back to the file of the AO and direct him to give adequate opportunity to the assessee to submit details and requisite documents and after verification of requisite facts an appropriate amount of credit allowable to the assessee should be granted. This ground may be treated as partly allowed for statistical purposes.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in the judgment include:
ISSUE-WISE DETAILED ANALYSIS Issue 1: Addition of Rs. 13,09,31,171 to Income The Tribunal considered whether the appellant was correctly characterized as a KPO rather than an ITES provider. The MAP concluded that 95.98% of the total TP addition was at arm's length, leaving a 4.02% addition unresolved. The Tribunal found that the issue was covered by previous orders, directing the AO/TPO to apply the MAP decision to the remaining transactions and delete the addition. Issue 2: Validity of Reference to Additional CIT Transfer Pricing The Tribunal dismissed these grounds as infructuous, indicating that they were not relevant for the decision. Issue 3: Treatment of Unabsorbed Depreciation The Tribunal noted that this issue had been settled in favor of the assessee in previous years. The Tribunal directed the AO to allow the deduction under section 10A before setting off the unabsorbed depreciation, following the precedent set in earlier cases. Issue 4: Classification of Interest Income The Tribunal examined whether interest income should be classified as business income or income from other sources. Citing previous rulings, the Tribunal held that interest income should be assessed as business income, eligible for deduction under section 10A. However, the deduction should be calculated proportionately as per section 10A(4), not at 100% of the interest income. Issue 5: Tax Credit Allowance The Tribunal remanded the issue to the AO for verification of facts, directing the AO to grant the correct amount of tax credit after allowing the assessee to submit necessary details. Issue 6 and 7: Imposition of Interest and Penalty Proceedings The Tribunal dismissed these grounds as consequential and did not require further deliberation. SIGNIFICANT HOLDINGS The Tribunal's significant holdings include:
The Tribunal's decision reflects adherence to precedent and a detailed application of the legal framework to the facts presented, ensuring consistency with prior rulings in the appellant's case. The judgment underscores the importance of precise classification and treatment of income and deductions under the Income Tax Act, 1961.
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