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TMI Blog2020 (4) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... under which the present appeals arise for consideration are that the assessee is a company engaged in rendering software development services. An order of assessment u/s 143(3) of the Income Tax Act, 1961 (Act) was passed by the AO on 30-12-2010. The AO initiated proceedings u/s 154 of the IT Act by a notice dated 29-12-2014 proposing to amend the order of assessment dated 30-12-2010. One of the amendments proposed in the aforesaid notice u/s 154 of the Act was reduction of claim of deduction u/s 35D of the Act which was allowed by the AO in an order dated 27-01-2015. The AO reduced the claim of deduction u/s 35D of the Act by observing as follows; " Wrong claim of deduction u/s 35D On verification of the assessment records, it is reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his powers u/s 154 of the Act. Without prejudice to the aforesaid submissions, the assessee submitted that while allowing deduction at the rate of 5% on capital employed, the AO omitted to consider foreign currency convertible bonds (FCCBs) as also forming part of capital employed and he only took share value of GDRs of Rs. 11,72,87,280/- ignoring the FCCB of the value of Rs. 78,07,500,000/-. The assessee submitted, if the FCCB is also considered as part of capital employed then deduction the assessee would get is Rs. 39,62,39,365/- as against deduction allowed by the AO at Rs. 58,64,364/- u/s 35D of the Act. The assessee pointed out that the Tribunal in assessee's own case in ITA No.689(B)/2014 for assessment year 2008-09 has taken a view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treating the FCCB also as part of the capital employed. The revenue has filed appeal before the Tribunal. 7. Aggrieved by the order of CIT(A) in not adjudicating ground no.6 raised before the CIT(A) by the assessee and not given the relief thereon, the assessee is in appeal before the Tribunal. Though, in the assessee's appeal there were several grounds, but at the time of hearing the ld.counsel for the assessee prayed for adjudicating only one issue i.e..non-granting of relief on ground no.6 raised before the CIT(A) by the assessee. 8. We have heard the rival submissions. As far as the appeal of the revenue is concerned, we are of the view that there is no merit in the aforesaid appeal, because the Tribunal in assessee's own case for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of excluding securities premium and assessee is in appeal before the Hon'ble Karnataka High Court, the assessee submitted that the eligible amount based on the ITAT order in this regard as under- l No.. Particulars Amount (in 1NR) 1. GDR Face Value (as already allowed by AO) 1117,287,280 2. FCCBs (As per Tribunal's order at para 35 and 36) 7,807,500,000 3. Capital Employed 7,924,787,280 4. 5% of capital employed 396,239,365 5. 1 1/5Th of 5% of capital employed (claim allowable consequent to Tribunal's order) 79,247,872 * As against the claim of lNR 1,172,873 computed by the Id. AO. We direct the AO to examine the above and allow relief as in earlier years, since claim is arising in ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal has held that disallowance of business service-marketing charges will go to increase the profits of the business which is eligible for deduction u/s. 10AA of the Act and that deduction u/s. 10AA of the Act should be allowed on such enhanced profit consequent to disallowance u/s. 40(a)(i) of the Act. In this regard, we find that two High Courts viz., Hon'ble Bombay High Court in the case of CIT v. Gem Plus Jewellery India Ltd. (2010) 194 Taxman 192 (Born) and Hon'ble Gujarat High Court in the case of ITO vs. Kewal Construction, 354 ITR 13 (Gui) have taken the view that when disallowance u/s. 40(a)(ia) of the Act goes to enhance the profits that are eligible for deduction under Chapter VIA of the Act, the deduction under Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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