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TMI Blog2017 (1) TMI 1556X X X X Extracts X X X X X X X X Extracts X X X X ..... e excluded from final list. - ITA No.1921/PUN/2014 - - - Dated:- 25-1-2017 - Ms. Sushma Chowla, JM And Shri Anil Chaturvedi, AM Appellant by : Shri Sunil M. Lala Respondent by : Shri P.L. Kureel ORDER Sushma Chowla, JM: This appeal filed by the assessee is against the order of CIT(A)-IT/TP, Pune, dated 19.08.2014 relating to assessment year 2010-11 against order passed under section 143(3) of the Income-tax Act, 1961 (in short the Act ). 2. The assessee has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case and in law, the learned ( ld ) CIT(A) has erred in upholding certain disallowances made by the ld. Assessing Officer ( AO ). 2. Disallowance of deduction under section 10B of the Act The ld. CIT(A) has erred in concluding that the Appellant is not eligible to claim deduction under section 10B of the Act of INR 1,60,90,049 since it s approval from the Software Technology Park of India ( STPI ) is not ratified by the Board of Approval constituted under section 14 of the Industrial Development Regulation Act. 3. Rejection of alternate claim of deduction under section 10A of the Act WITHOUT PREJED ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited. 7. Unjust selection of new comparables On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in upholding the action of the ld. AO in introducing additional companies as comparables although, companies introduced differ in functions undertaken and/or assets employed and/or risks assumed as compared to the Appellant. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in upholding the action of the ld. AO by including KALS Information System Ltd ( KALS ) as comparable company in the final set of comparable companies, inspite of KALS being rejected by ld. CIT(A) in Appellant s own case in AY 2009 - 10 and by various Appellate Tribunal decisions. 8. Unjust rejection of comparables selected in the TP study for FY 2009-10 On the facts and in the circumstances of the case and in law, the ld. Commissioner of Income Tax(A) has erred in confirming the action of the ld. AO in rejecting functionally comparable companies undertaking development of software, chosen by the Appellant without providing inadequate/sufficient reasons. 9. Unjust inclusion of High/super profit making companies in final set of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d March 2009 available at the time of assessment, although such information was not available at the time when the Appellant complied with the Indian TP regulations as per the Act. 16. No motive, circumstances, intention of tax evasion by the Appellant On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that the Appellant had no motive for to shift profits since it entitled to benefit u/s 10B of the Act. 17. Incorrect levy of interest under section 234B of the Act On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in confirming levy of interest under section 234B of the Act. 18. Incorrect levy of interest under section 234C of the Act On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in confirming levy of interest under section 234C of the Act. 19. Initiation of Penalty Proceedings On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in dismissing our ground of appeal for non-initiation of penalty proceedings under section 271(1)(c) of the Act. The Appellant prays for appropriate relief based on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment services. The PLI of the assessee was arrived at 11.27% and average PLI of comparables selected by the assessee was 11.88%. Since the price charged in the international transactions was higher than arithmetic mean price of the comparables, the price charged by the assessee in the international transactions in this segment was treated to be at arm's length price by the assessee. However, the Assessing Officer noted certain defects in benchmarking and the PLI margins of comparable companies were worked out at 33.92% as against PLI of the assessee at 11.27%. Similarly, deduction claimed under section 10B of the Act was found to be not admissible since the necessary approval was not received from the Development Commissioner as prescribed by the Ministry of Commerce and Industries. The Assessing Officer thus, issued show cause notice in this regard to the assessee, which is incorporated under para 4.2 of the assessment order. The assessee objected to the rejection of filters used by the assessee and also comparables selected as per the TP study report. The assessee also made other objections to the propositions made by the Assessing Officer. However, the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /PN/2013 and ITA No.1803/PN/2013, relating to assessment year 2009-10, order dated 13.01.2015. He pointed out that though the Tribunal held that the assessee was not entitled to the claim of benefit under section 10B of the Act but the assessee was held to be eligible for claiming the deduction under section 10A of the Act for which, the matter was restored back to the file of Assessing Officer. 7. The learned Departmental Representative for the Revenue placed reliance on the order of CIT(A). 8. We have heard the rival contentions and perused the record. The first issue of claim of deduction under section 10B/10A of the Act arose before the Tribunal in assessee s own case in assessment year 2009-10. The Tribunal observed that the assessee was 100% EOU registered with STPI and was claiming deduction under section 10B of the Act from assessment year 2003-04 onwards and the same was being granted to the assessee. The deduction under section 10B of the Act was denied to the assessee as it had obtained approval from the Director and Chief Executive of the STPI and not from the Development Commissioner. The Assessing Officer also rejected the alternate claim of deduction under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternate claim of the assessee that in case deduction u/s.10B is not allowed then he should be allowed the deduction u/s.10A, the Ld.CIT(A) rejected the same also holding that the unit of the assessee will not meet the fundamental condition of having been located in free trade zone for claiming the deduction u/s.10A. Further, according to him, the availability of the deduction from one section to another cannot be switched so easily because otherwise the legislature would not have provided 2 different sections in the first place. He accordingly rejected the claim of the assessee. 11.2 We find a somewhat similar issue had come up before the Hon ble Madras High Court in the case of CIT Vs. Heartland KG Information Ltd.(Supra). In that case, the assessee was an industrial undertaking engaged in Medical Transcription business. There was another undertaking K which got approval as 100% EOU from STPI and started its new business of medical transcription during F.Y. 1999 -2000. It also had another undertaking engaged in the business of development of software exported outside India. In respect of business income earned from export the said undertaking claimed exemption u/s.10A of the I. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, we find no reason as to why such benefit should be denied to the assessee. After all these are incentive provisions and are to be liberally construed. If the assesses otherwise fulfils all the legal requirements for claiming the deduction u/s.10A of the Act but inadvertently claimed the same u/s.10B of the Act which was granted to it in the past, we find no reason as to why the alternate claim of the assessee should not be accepted. 11.4 However, since the lower authorities have not thoroughly examined the allowability of deduction u/s.10A of the Act and merely rejected the claim on the ground that the same was not claimed in the original return filed, therefore, we in the interest of justice deem it proper to restore the issue to the file of the AO with a direction to give an opportunity to the assessee to substantiate its eligibility for deduction u/s.10A of the I.T. Act. We hold and direct 22 accordingly. Since we are restoring the issue to the file of the AO for deciding the alternate claim of the assessee for deduction/s.10A, therefore, we refrain ourselves from adjudicating the allowability of deduction u/s.10B of the I.T. Act. The grounds raised by the assessee are ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elected the said concerns KALS Information System Ltd. and Thirdware Solution Ltd. as being comparable to the assessee. 11. We find that the Tribunal noted that the TPO had selected KALS Information System Ltd. and Thirdware Solution Ltd. as being comparable, whereas the case of assessee was that both the said concerns were functionally different. With regard to KALS Information System Ltd., it was pointed out that the said company was earning income from sale of application software and segmental information with respect to software services were available. In respect of Thirdware Solution Ltd., it was pointed out that the said concern was engaged in software development, trading of software licences and training implementation activities apart from software development. Another contention was raised that Thirdware Solution Ltd. was super profit earning company and was also engaged in the business of software licences and trading of implementation activities. The Tribunal taking note of the Special Bench decision in the case of Maersk Global Centres (India) Pvt. Ltd. Vs. ACIT vide ITA No.7466/M/2012 in respect of super profits and inclusion of concern Thirdware Solution Ltd., h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished by the assessee that the assessee is a software developer whereas Thirdware Solutions Ltd. is engaged in the business of sale-cum-licence of software which is available from the audited accounts, the details of which are as under : Schedule : Sales As on 31-03-2009 As on 31-03-2008 Sale of Licence 22,237,588 3,916,427 Software Services 89,177,023 76,724,371 Export from SEZ unit 478,572,420 263,971,033 Export from STPI unit 162,900,630 168,863,049 Revenue from Subscription 16,433,714 9,293,874 770,321,376 522,768,754 Apart from the above the company is also having dividend income, interest income and profit on sale of investment as well as premium of software contract totalling to ₹ 2,30,48,603/- which is as per Schedule- 13 other sources . From the various decisions relied on by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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