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TMI Blog2013 (11) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... n facts and in law in deleting addition of Rs. 6,93,21,169/- made on account of Arm's Length Price." 3. Though it was the Revenue's appeal, at the outset, it was stated by the learned counsel for the assessee that the assessee derives income from the business of designing engineering projects. That during the year under consideration, the Transfer Pricing Officer (TPO) has considered the assessee to be in the business of IT/IT-enabled services and accordingly, the assessee's transactions with the AE were benchmarked for determining the arm's length price. That the learned CIT(A) accepted the assessee's contention that the assessee derives income from engineering, drawing and design services and accordingly, he accepted that the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.CIT(A) has erred on facts and in law in deleting disallowance of Rs. 11,95,737/- on account of deduction u/s 80HHE of the I.T.Act." 7. At the time of hearing before us, it was pointed out by the learned counsel for the assessee that the Assessing Officer recomputed the deduction permissible under Section 80HHE by increasing the total turnover - (i) by the amount of adjustment made by the TPO and (ii) reimbursement of the expenses. He submitted that the TPO has enhanced the value of international transactions by Rs. 6,93,21,169/-. Therefore, if at all it was to be considered, it should have been considered by increasing the assessee's income and the export turnover. The total turnover cannot be increased without increasing the export turn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below for ready reference:- "The deduction u/s 80HHE of the Act is recalculated as under. Export Turnover Rs.42,41,01,636 Total turnover as per Form 10CCAF 45,86,53,083 Add : Reimbursement of expenses 5,31,84,493 As per TPO order 6,93,21,169 Rs.58,11,58,745 Profit of the Business Rs. 1,77,44,371 Deduction u/s 80HHE of the Act - 30% of Rs.1,77,44,37 X -=Rs.58,11,58,745 = 30% of 1,32,54,313 = Rs.39,76,294." 10. From the above, it is evident that the Assessing Officer enhanced the total turnover by - (i) reimbursement of expenses and (ii) by the income enhanced by the TPO. The learned CIT(A) allowed the relief to the assessee, therefore, this appeal by the Revenue. 11. With regard to reimbursement of the expenses, we find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng which has nexus with sale proceeds and excludes everything which has no such nexus. It was further held that turnover should be restricted only to such receipts which have an element of profit in it. As the provisions of Section 80HHC relevant in this context are analogous to the provisions of Section 80HHE as pointed out by the learned counsel for the assessee, we are of the view that the ratio of the decision of the Hon'ble Bombay High Court in the case of Sudershan Chemical Industries Limited (supra) is equally applicable to the issue involved in the present appeal and supports the case of the assessee. Keeping in view the said decision as well as the other judicial pronouncements referred to hereinabove and considering all the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO's order. Despite the above specific provision, the Assessing Officer enhanced the total turnover by the addition made as per the TPO's order, which has the effect of reducing the deduction under Section 80HHE. However, the finding of the TPO is that the international transaction of the assessee is not at arm's length and, therefore, by determining the arm's length price of the international transaction, he proposed the addition of Rs. 6,93,21,169/-. Though while considering ground No.1 of the Revenue's appeal we have already set aside this matter to the file of the Assessing Officer, however, even if some addition is required to be made by determining the ALP, the question is whether the same will have the effect of enhancing the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to Rs. 4,58,56,978/- as against the addition of Rs. 9,36,70,152/- made on account of Arm's Length Price." 17. In its appeal, the assessee has challenged the addition sustained by the learned CIT(A) i.e. Rs. 4,58,56,978/-. At the time of hearing before us, both the parties agreed that the facts of the year under consideration are identical to AY 2004-05 and, therefore, whatever view is taken in AY 2004-05 would be squarely applicable for AY 2005- 06. 18. We have already considered the issue in AY 2004-05 in detail above and for the detailed discussion therein, we set aside the orders of the authorities below and restore the matter to the file of the Assessing Officer to be readjudicated as per our direction in AY 2004- 05. Needless to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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