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2019 (3) TMI 1135 - AT - Income TaxDeduction u/s 10A/10AA - eligible undertakings established after A.Y. 2005-06 - HELD THAT - The assessee is entitled to the claim of deduction under section 10A of the Act in respect of various undertakings which were established by the assessee from year to year except the new undertaking at Hyderabad. Further, the Tribunal also held that BPO unit is entitled to the claim of deduction under section 10A of the Act. So, the assessee is thus, held to be eligible to claim the deduction in respect of BPO undertaking and out of 11 undertakings in respect of 10 undertakings, the said claim is allowed. Deduction in respect of eleventh undertaking i.e. unit at Hyderabad. The Tribunal vide paras 16 and 17 held that the claim of assessee is not correct and the assessee is not entitled to the claim of deduction under section 10A of the Act. However, vide para 18, the alternate plea raised by the assessee on without prejudice was allowed that the undertaking at Hyderabad may be treated as expansion of the existing unit at Pune, from where the employees were transferred. The Tribunal thus, directed the Assessing Officer to allow the said deduction under section 10A of the Act to Hyderabad unit being expansion of Pune unit, for the remaining period as eligible to the Pune unit. New undertaking established in Gandhi Nagar - In order to avail the deduction under section 10A of the Act, requirement for the assessee was to fulfill the conditions laid down by the CBDT vis- -vis employees transferred from existing undertaking. However, no such condition is imposed under the Act, but the CBDT had prescribed that where more than 50% employees are transferred, then it is case of splitting up or re-construction of business already in existence. During the year under consideration, the assessee had established new unit at Gandhi Nagar, wherein it made investment in the fixed assets to the tune of ₹ 4.23 crores. Further, the assessee had also filed list of employees, wherein the employees to the extent of 15% were transferred from old unit to Gandhi Nagar unit. Since it had fulfilled the conditions laid down by CBDT, then it cannot be said to be formed by splitting up or re-construction of business already in existence. Consequently, we hold that the assessee had established new undertaking at Gandhi Nagar, for which the assessee is entitled to claim the deduction under section 10A of the Act independently. - Decided in favour of assessee Entitlement to claim the benefit u/s 10A - whether TTC BPO being separate and independent undertaking, entitled to claim the benefit under section 10A? - HELD THAT - The said issue has also been decided by the Tribunal in assessment year 2010-11 and following the same parity of reasoning, we allow the claim of assessee vis- -vis TTC BPO unit. Disallowance made under section 14A of the Act read with Rule 8D - HELD THAT - The requirement of section 14(2) of the Act is that the Assessing Officer is to record as to why the disallowance made by the assessee i.e. ₹ 50 lakhs under section 14A of the Act is not correct. The Assessing Officer takes note of the disallowance, considers the explanation of assessee and holds that the contention of assessee cannot be accepted. The preliminary satisfaction to be recorded by Assessing Officer, before making disallowance under section 14A of the Act read with Rule 8D of the Rules, is missing in the case; in the absence of the same, there is no merit in the disallowance made by the Assessing Officer. See GODREJ & BOYCE MANUFACTURING COMPANY LIMITED VERSUS DY. COMMISSIONER OF INCOME-TAX & ANR. 2017 (5) TMI 403 - SUPREME COURT OF INDIA Disallowance made of ESOP cost - HELD THAT - the assessee pointed out that the said issue has also been decided by the Tribunal in assessee s own case and the claim has been allowed in entirety. The Tribunal had remitted the issue back to the file of Assessing Officer to follow the directions of Tribunal in assessment year 2009-10 and decide the issue accordingly. Applying the same, we remit this issue also back to the file of Assessing Officer to decide the same in line with directions of Tribunal in assessment year 2009-10. The ground of appeal No.3 raised by Revenue is thus, dismissed. Disallowance made u/s 10A(7) r.w.s. 80IA(10) - AO noted that net profit margins earned by assessee were 31.77% - HELD THAT - in the absence of any arrangement made between the parties, there was no merit in disallowing any part of profits under section 10A(7) r.w.s. 80IA(10) of the Act. The Tribunal had already decided this issue in assessee s own case in assessment year 2010-11 no merit in revenue appeal Disallowance on account of FBT paid in Australia - TDS liability u/s 195 - income accrued in India - HELD THAT - Under clause (ic) of section 40(a) of the Act, it is provided that fringe benefit tax paid under Chapter XIIH is not to be allowed as deduction while computing income under the head Profits & gains or profession . In other words, FBT paid in India under the provisions of the Act is not to be allowed as deduction but there is no such embargo in respect of FBT paid in Australia. We uphold the findings of DRP in this regard that FBT paid in Australia is not covered by clause (ic) of section 40(a) of the Act. See ACIT VERSUS SHIPPING CORPORATION OF INDIA 2010 (12) TMI 1311 - ITAT MUMBAI Disallowance u/s 40(a)(ia) in respect of overseas payments - non deduction of tds - default under section 201(1) / 201(1A) - Data link charges - HELD THAT - Data link charges had held that the assessee was not required to deduct tax at source on payment of data link charges and hence, the assessee had not defaulted in not deducting tax at source on the payments made. In view of the issue being settled in respect of data link charges by the Tribunal in assessee s own case 2018 (3) TMI 540 - ITAT PUNE , we find no merit in the submissions of Revenue in this regard. Scope of amendment to act - No liability to deduct tax could be fastened on the assessee to deduct tax at source on the basis of subsequent amendments made in the Act in relation to payments made to non residents - The assessee was not obliged to deduct tax out of aforesaid payments made to associated enterprises and hence, has not defaulted in not deducting tax at source. Consequently, the assessee is entitled to the said claim and no disallowance is to be made under section 40(a)(ia) of the Act.
Issues Involved:
1. Deduction under sections 10A/10AA for eligible undertakings. 2. Classification of TTC BPO as a separate and independent undertaking. 3. Charging of interest under section 234C. 4. Credit under DTAA for taxes paid in the USA and Japan. 5. Credit for TDS as per Form 26AS. 6. Disallowance under section 14A read with Rule 8D. 7. Disallowance of ESOP cost. 8. Disallowance under section 10A(7) read with section 80IA(10). 9. Deduction of Fringe Benefit Tax (FBT) paid in Australia. 10. Disallowance under section 40(a)(i) for non-deduction of TDS on overseas payments. Issue-wise Detailed Analysis: 1. Deduction under sections 10A/10AA for eligible undertakings: The assessee established various undertakings and claimed them as independent units eligible for deductions under sections 10A/10AA. The Revenue argued these units were formed by splitting an existing business, thus ineligible for deductions. The Tribunal, referencing earlier decisions, allowed deductions for all units except the Hyderabad unit, which was treated as an expansion of the Pune unit. The new unit at Gandhi Nagar was found to be independently established, fulfilling CBDT conditions, and thus eligible for deduction. 2. Classification of TTC BPO as a separate and independent undertaking: The Tribunal, following its previous decision, recognized TTC BPO as a separate and independent undertaking eligible for deduction under section 10A, as it satisfied the necessary conditions. 3. Charging of interest under section 234C: The assessee's grounds related to interest under section 234C were dismissed as not pressed, following rectification under section 154. 4. Credit under DTAA for taxes paid in the USA and Japan: This issue was also dismissed as not pressed, following rectification under section 154. 5. Credit for TDS as per Form 26AS: Similarly, this issue was dismissed as not pressed, following rectification under section 154. 6. Disallowance under section 14A read with Rule 8D: The Assessing Officer disallowed an amount under section 14A read with Rule 8D, which was deleted by the DRP due to lack of satisfaction. The Tribunal upheld this deletion, noting the absence of recorded satisfaction by the Assessing Officer, aligning with the Supreme Court's decision in Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT. 7. Disallowance of ESOP cost: The Tribunal remitted the issue back to the Assessing Officer to follow directions from an earlier order, where the ESOP cost was allowed, thus dismissing the Revenue's ground. 8. Disallowance under section 10A(7) read with section 80IA(10): The Tribunal found no merit in the Revenue's appeal, referencing previous decisions that in the absence of any arrangement for earning more than ordinary profits, the provisions of section 10A(7) read with section 80IA(10) were not applicable. 9. Deduction of Fringe Benefit Tax (FBT) paid in Australia: The Tribunal upheld the DRP's decision that FBT paid in Australia is not covered by section 40(a)(ic) and allowed the deduction, noting that FBT paid in Australia is not a tax on income. 10. Disallowance under section 40(a)(i) for non-deduction of TDS on overseas payments: The Tribunal dismissed the Revenue's appeal, holding that the assessee was not required to deduct tax at source on various payments, including data link charges, consultancy fees, and software licenses, as these were not covered under the amended definition of "royalty" and were protected under DTAA provisions. Conclusion: The appeal of the assessee was partly allowed, and the appeal of the Revenue was dismissed. The Tribunal's decision was pronounced on March 18, 2019.
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