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TMI Blog2020 (6) TMI 699X X X X Extracts X X X X X X X X Extracts X X X X ..... ical question in the context of determination of ALP under the Advance Pricing Arrangement [APA] in the case of Dar Al Handasah Consultants (Shair Partners) India Private Limited [ 2019 (12) TMI 153 - ITAT PUNE] and took the view that deduction u/s. 10A of the Act on additional income offered as per APA would be eligible to claim deduction u/s. 10AA. The proviso to section 92CA(4) of the Act will apply only to adjustment to transfer pricing made by the AO which is enumerated in Sl.No.(ii) above and not to any other modes of determination of ALP. The decision of the Pune Bench of ITAT in the case of Dar Al Handasah Consultants (Shair Partners) India Private Limited (supra) will be clearly applicable to the facts of the present case. Whether non-receipt of foreign exchange within the period required u/s. 10A of the Act would be a bar to allow the deduction in AY 2007-08? - As already observed that similar to provisions of section 92CC of the Act, the provisions of the DTAA r.w.s. 90(2) of the Act provide to the contrary in matters where issues are settled under the MAP. Following the decision of the Tribunal referred to above, we hold that the assessee should be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee before the Tribunal. 6. As far as the issue before the Tribunal is concerned, the dispute is only with regard to the addition made to the total income on account of determination of ALP in respect of international transaction of rendering SWD services. As far as rendering of SWD services are concerned, the assessee received a consideration of ₹ 332,95,71,655 for rendering SWD services to its AE. In support of its claim that the price received in the international transaction was at arm s length, the assessee filed a TP study in which it adopted Transactional Net Margin Method [TNMM] as the Most Appropriate Method [MAM] for determining the ALP. The Profit Level Indicator [PLI] chosen for the purpose of comparing the assessee s margin with that of the comparable companies was Operating Profit to Total Cost [OP/TC]. The assessee s OP/TC was as follows:- Operating Income ₹ 3,32,95,71,655/- Operating Expenses ₹ 2,86,74,80,979/- Operating Profit (Op. Income Op. Expenses) ₹ 46,20,90,676/- Operating/Net margin (OP/TC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mediasoft Solutions Ltd. 3.66 2.41 16. Megasoft Ltd. 60.23 52.47 17. Mindtree Ltd. 16.90 16.28 18. Persistent Systems Ltd. 24.52 24.40 19. Quintegra Solutions Ltd. 12.56 10.11 20. R S Software (India) Ltd 13.47 14.04 21. R Systems International Ltd. (Seg) 15.07 14.16 22. Sasken Communication Ltd. (Seg) 22.16 22.04 23. SIP Technologies Exports Ltd. 13.90 11.60 24. Tata Elxsi Ltd. (Seg) 26.51 27.17 25. Thirdware Solutions Ltd. 25.12 22.48 26. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) are one and the same. This fact would be clear from the fact that the very same 26 companies were chosen as comparable in the case of the Assessee as well as in the case of First Advantage Offshore Services Pvt.Ltd.(supra). In coming to the aforesaid conclusion, the Tribunal in the case of First Advantage Offshore Services Pvt.Ltd.(supra) followed the decision rendered in the case of Trilogy E-Business Software India Pvt. Ltd. Vs. DCIT ITA No.1064/Bang/2011 for AY 07-08 order dated 23.11.2012. The following were the relevant observations in the case of First Advantage Offshore Services Pvt.Ltd.(supra): 18. As regards the group 2 companies which are to be excluded as functionally different based on the Tribunal s order in the case of Trilogy E-Business Software India Pvt.Ltd., we find that these companies are- 1) Accel Transmatic 2) Avani Cimcon Technologies Ltd. 3) Celestial Labs Ltd. 4) KALS Information Systems Ltd. 19. The Tribunal in the case of Trilogy E-Business Software India Pvt.Ltd., while considering the issue of improper selection of comparables has held as under:- (b) Avani Cimcon Technologies Ltd. 39. As far as this company is concerned, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.55% 52.59% 25.62% - 9.87% 40. It was submitted that this company has made unusually high profit during the financial year 06-07. The operating revenues increased 63.03% which indicates that it was an extraordinary year for this company. Even the growth of software industry for the previous year as per NASSCOM was 32%. The growth rate of this company was double the industry average. In view of the above, it was argued that this company ought to have been rejected as a comparable. 41. We have given a careful consideration to the submissions made on behalf of the Assessee and are of the view that the same deserves to be accepted. The reasons given by the Assessee for excluding this company as comparable are found to be acceptable. The decision of ITAT (Mumbai) in the case of Telcordia Technologies Pvt. Ltd. v. ACIT (supra) also supports the plea of the assessee. We therefore accept the plea of the Assessee to reject this company as a comparable. (c) Celestial Labs Ltd. 42. As far as this company is concerned, the stand of the assessee is that it is absolutely a research development company. In this regard, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture and market initially two Enzymes, Alpha Amylase and Alkaline Protease in India and overseas. The company is planning to set up a biotechnology facility to manufacture industrial enzymes. This facility would also include the research laboratories for carrying out further R D activities to develop new candidates drug molecules and license them to Interested Pharma and Bio Companies across the GLOBE. The proposed Facility will be set up in Genome Valley at Hyderabad in Andhra Pradesh. According to the learned D.R. celestial labs is also in the field of research in pharmaceutical products and should be considered as comparable. As rightly submitted by the learned counsel for the Assessee, the discovery is in relation to a software discovery of new drugs. Moreover the company also is owner of the IPR. There is however a reference to development of a molecule to treat cancer using bio-informatics tools for which patenting process was also being pursued. As explained earlier it is a diversified company and therefore cannot be considered as comparable functionally with that of the Assessee. There has been no attempt made to identify and eliminate and make adjustment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above there is no other detail in the TPO s order as to the nature of software development services performed by the Assessee. Celestial labs had come out with a public issue of shares and in that connection issued Draft Red Herring Prospectus (DRHP) in which the business of this company was explained as to clinical research. The TPO wanted to know as to whether the primary business of this company is software development services as indicated in the annual report for FY 06-07 or clinical research and manufacture of bio products and other products as stated in the DRHP. There is no reference to any reply by Celestial labs to the above clarification of the TPO. The TPO without any basis has however concluded that the business mentioned in the DRHP are the services or businesses that would be started by utilizing the funds garnered though the Initial Public Offer (IPO) and thus in no way connected with business operations of the company during FY 06-07. We are of the view that in the light of the submissions made by the Assessee and the fact that this company was basically/admittedly in clinical research and manufacture of bio products and other products, there is no clear basis on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in public domain could not have been used by the TPO, when the same is contrary to the annual report of this company as highlighted by the Assessee in its letter dated 21.6.2010 to the TPO. We also find that in the decision referred to by the learned counsel for the Assessee, the Mumbai Bench of ITAT has held that this company was developing software products and not purely or mainly software development service provider. We therefore accept the plea of the Assessee that this company is not comparable. (e) Accel Transmatic Ltd. 48. With regard to this company, the complaint of the assessee is that this company is not a pure software development company. It is further submitted that in a Mumbai Tribunal Decision of Capegemini India (P) Ltd. v. Ad.CIT 12 Taxman.com 51, the DRP accepted the contention of the assessee that Accel Transmatic should be rejected as comparable. The relevant observations of DRP as extracted by the ITAT in its order are as follows: In regard to Accel Transmatics Ltd. the assessee submitted the company profile and its annual report for financial year 2005-06 from which the DRP noted that the business activities of the company were as under. (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal list of comparable companies for the purpose of determining ALP. 20. As far as comparable companies listed at Sl.No.11 14 of the final list of comparable companies chosen by the TPO viz., M/S.Ishir Infotech Ltd. And Lucid Software Ltd., is concerned, this Tribunal in the case of First Advantage Offshore Services Pvt.Ltd. Vs. DCIT IT (TP) No.1086/Bang/2011 for AY 07-08 held that the aforesaid companies are not comparable companies in the case of software development services provider. The nature of services rendered by the Assessee in this appeal and the Assessee in the case of First Advantage Offshore Services Pvt.Ltd.(supra) are one and the same. This fact would be clear from the fact that the very same 26 companies were chosen as comparable in the case of the Assessee as well as in the case of First Advantage Offshore Services Pvt.Ltd.(supra). The following were the relevant observations in the case of First Advantage Offshore Services Pvt.Ltd.(supra):- 22. The learned counsel for the assessee submitted that these two companies are also to be excluded from the list of comparables on the basis of the finding of this Tribunal in the case of Mercedes Benz Research De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed the decision rendered in the case of Trilogy E-Business Software India Pvt.Ltd. Vs. DCIT ITA No.1064/Bang/2011 for AY 07-08 order dated 23.11.2012. The following were the relevant observations in the case of First Advantage Offshore Services Pvt.Ltd.(supra): 27. As far as adoption of Mega Soft Ltd., as one of comparables, the learned counsel for the assessee submitted that there is an error in computing its net margin. He has drawn our attention to the order of the Tribunal in the case of Trilogy E-Business Software India Pvt.Ltd., at para 24 to 27 at page 18, wherein the error in computing the net margin of this company has been taken note of and it has been directed as under: (a) Megasoft Ltd. : 24. This company was chosen as a comparable by the TPO. The objection of the assessee is that there are two segments in this company viz., (i) software development segment, and (ii) software product segment. The Assessee is a pure software services provider and not a software product developer. According to the Assessee there is no break up of revenue between software products and software services business on a standalone basis of this comparable. The TPO relied on inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 383 of the PB-I). It was further submitted that Megasoft Limited has provided segmental breakup between the software services segment and software product segment (page 68 of PB-II), which was also adopted by the TPO in his show cause notice (Page 84 of PB-I). The segmental results i.e., results pertaining to software services segment of this company was: Segmental Operating Revenues ₹ 63,71,32,544 Segmental Operating Expenses ₹ 51,75,13,211 Operating Profit ₹ 11,96,19,333 OP/TC (PLI) 23.11% 26. It was reiterated that in the given circumstances only PLI of software service segment viz., 23.11% ought to have been selected for comparison. 27. It was further submitted that the learned TPO in case of other comparable, similarly placed, had adopted the margins of only the software service segment for comparability purposes. Consistent with such stand, it was submitted that the margins of the software segment only should be adopted in the case of Megasoft also, in contrast to the entity level margins. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue sharing agreement towards acquisition of IPR in AUTOLAY, a commercial software product used in designing high performance structural systems. (v) The assessee also placed reliance on the following judicial decisions :- (a) ITAT, Delhi Bench decision in the case of Agnity India Technologies India Pvt. Ltd. (ITA No.3856/Del/2010) and (b)Trilogy E-Business Software India Pvt. Ltd. (ITA No.1054/Bang/2011) 12.3 Per contra, opposing the contentions of the assessee, the learned Departmental Representative submitted that comparability cannot be decided merely on the basis of scale of operations and the operating margins of this company have not been extraordinary. In view of this, the learned Departmental Representative supported the decision of the TPO to include this company in the list of comparable companies. 12.4 We have heard the rival submissions and perused and carefully considered the material on record. We find that the assessee has brought on record sufficient evidence to establish that this company is functionally dis-similar and different from the assessee and hence is not comparable and the finding rendered in the case of Trilogy E-Business Software In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand alone financials of the assessee; which is not an appropriate comparison. 13.4.2 We also find that this company owns intellectual property in the form of registered patents and several pending applications for grant of patents. In this regard, the co-ordinate bench of this Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. (ITA No.227/Bang/2010) has held that a company owning intangibles cannot be compared to a low risk captive service provider who does not own any such intangible and hence does not have an additional advantage in the market. As the assessee in the case on hand does not own any intangibles, following the aforesaid decision of the co-ordinate bench of the Tribunal i.e. 24/7 Customer.Com Pvt. Ltd. (supra), we hold that this company cannot be considered as a comparable to the assessee. We, therefore, direct the Assessing Officer/TPO to omit this company from the set of comparable companies in the case on hand for the year under consideration. 14.0 (6) Tata Elxsi Ltd. 14.1 This company was a comparable selected by the TPO. Before the TPO, the assessee had objected to the inclusion of this company in the set of comparables on several counts like, functio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparable portion. As can be seen from the extracts of the Annual Report of this company produced before us, the facts pertaining to Tata Elxsi have not changed from Assessment Year 2007-08 to Assessment Year 2008-09. We, therefore, hold that this company is not to be considered for inclusion in the set of comparables in the case on hand. It is ordered accordingly. 25. Respectfully following the decision of the Tribunal referred to above, we direct the AO/TPO to exclude the aforesaid companies from the final list of comparable companies for the purpose of determining ALP. 26. As far as comparable companies at Sl.No.5, 18, 19 and 25 of the final list of comparable companies chosen by the TPO are concerned, viz., M/S. E-Zest Solutions Ltd., Persistent Systems Ltd., Quintegra Solutions Limited and Third ware Solutions Ltd., this Tribunal in the case of 3DPLM Software Solutions Ltd. I.T (T.P) A. No.1303/Bang/2012 (Assessment Year : 2008-09) order dated 28.11.2013 was pleased to hold that the aforesaid companies are not comparable with a company engaged in Software Development Services such as the Assessee. The following were the relevant observations of the Tribunal:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny in the list of comparables only on the basis of the statement made by the company in its reply to the notice under section 133(6) of the Act. It appears that the TPO has not examined the services rendered by the company to give a finding whether the services performed by this company are similar to the software development services performed by the assessee. From the details on record, we find that while the assessee is into software development services, this company i.e. e-Zest Solutions Ltd., is rendering product development services and high end technical services which come under the category of KPO services. It has been held by the co-ordinate bench of this Tribunal in the case of Capital I-Q Information Systems (India) (P) Ltd. Supra) that KPO services are not comparable to software development services and are therefore not comparable. Following the aforesaid decision of the co-ordinate bench of the Hyderabad Tribunal in the aforesaid case, we hold that this company, i.e. e-Zest Solutions Ltd. be omitted from the set of comparables for the period under consideration in the case on hand. The A.O. /TPO is accordingly directed. 15. Thirdware Solutions Ltd. (Segment) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct that this company be omitted from the list of comparables for the period under consideration in the case on hand. 17. Persistent Systems Ltd. 17.1.1 This company was selected by the TPO as a comparable. The assessee objected to the inclusion of this company as a comparable for the reasons that this company being engaged in software product designing and analytic services, it is functionally different and further that segmental results are not available. The TPO rejected the assessee's objections on the ground that as per the Annual Report for the company for Financial Year 2007-08, it is mainly a software development company and as per the details furnished in reply to the notice under section 133(6) of the Act, software development constitutes 96% of its revenues. In this view of the matter, the Assessing Officer included this company i.e. Persistent Systems Ltd., in the list of comparables as it qualified the functionality criterion. 17.1.2 Before us, the assessee objected to the inclusion of this company as a comparable submitting that this company is functionally different and also that there are several other factors on which this company cannot be taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find that the said company has been held to be not comparable with a software service provider like the Assessee by the ITAT Pune Bench in the case of PTC Software (India)Pvt.Ltd. ITA.No.1605/PN/2011 (Asstt. Year : 2007-08) order dated 30.4.2013. The following were the relevant observations of the Tribunal:- 16. The next point made out by the assessee is with regard to the inclusion of items at (9) and (11) namely Helios Matheson Information Technology Ltd., and KALS Information Solutions Ltd. (Seg). The primary plea raised by the assessee to assail the inclusion of the aforesaid two companies from the list of comparables is to be effect that they are functionally incomparable and therefore, are liable to be excluded. In sum and substance, the plea set up by the assessee is that both the aforesaid concerns are engaged in development and sale of software products which is functionally different from the services undertaken by the assessee in its IT-services segment. 17. As per the discussion in para 6.3.2. of the order of the TPO, the reason advanced for including KALS Information Systems Ltd., is to the effect that the said concern s application software segment is eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier A.Y. 2006-07 and therefore, there was no justification for the TPO to consider the said concern as functionally comparable in the instant assessment year. 19. In our considered opinion, the point raised by the assessee is potent in as much as it is quite evident that the said concern has not been found to be functionally comparable with the assessee in the immediately preceding assessment year and in the present year also, on the basis of the Annual Report, referred to in the written submissions addressed to the lower authorities, the assessee has correctly asserted out that the said concern was inter alia engaged in sale of software products, which was quite distinct from the activity undertaken by the assessee in the IT Services segment. At the time of hearing, neither is there any argument put forth by the Revenue and nor is there any discussion emerging from the orders of the lower authorities as to in what manner the functional profile of the said concern has undergone a change from that in the immediately preceding year. Therefore, having regard to the factual aspects brought out by the assessee, it is correctly asserted that the application software segment of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he development of software which can be considered as comparable to the assessee company. The said concern is engaged in two segments namely application software segment and Training. As per the TPO, the application software segment is functionally comparable to the assessee as the said concern is engaged in software services. The stand of the assessee is that a perusal of the Annual Report of the said concern for F.Y. 2006-07 reveals that the application software segment is engaged in the business of sale of software products and software services. The assessee pointed out this to the TPO in its written submissions, copy of which is placed in the Paper book at page 420.3 to 420.4. The assessee further pointed out that there was no bifurcation available between the business of sale of software products and the business of software services, and therefore, it was not appropriate to adopt the application software segment of the said concern for the purposes of comparability with the assessee s IT-Services Segment. The TPO however, noticed that though the application software segment of the said concern may be engaged in selling of some of the software products which are developed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is not comparable to the assessee s segment of IT services. 20. With regard to the inclusion of Helios Matheson Information Technology Ltd., the assessee has raised similar arguments as in the case of KALS Information Solutions Ltd. (Seg). We have perused the relevant para of the order of the TPO i.e., 6.3.21, in terms of which the said concern has been included as a comparable concern. The assessee pointed out that as in the case of KALS Information Solutions Ltd. (Seg), in the instant case also for A.Y. 2006-07 the said concern was found functionally incomparable by the assessee in its Transfer pricing study and the said position was not disturbed by the TPO. The relevant portion of the Transfer pricing study, placed at page 432 of the Paper book has been pointed out in support. Considered in the aforesaid light, on the basis of the discussion in relation to KALS Information Solutions Ltd. (Seg), in the instant case also we find that the said concern is liable to be excluded from the list of comparables. 29. Respectfully following the decision of the Tribunal referred to above, we direct the AO/TPO to exclude the aforesaid companies from the final list of comparable co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as ITES. 18. As regards the ITES segment, the TPO found that there was a shortfall in the price received by the assessee from AE and the shortfall was added to the total income of the assessee as an adjustment u/s. 92 of the Act. Against the aforesaid addition, the assessee preferred an appeal before the CIT(Appeals). 19. As stated above, during the pendency of the Assessee s appeal before the CIT(A), the Assessee s AE in the USA had approached the Competent Authority under Article 27 of the Double Taxation Avoidance Agreement ( DTAA ) between India and the USA seeking resolution as per Mutual Agreement Procedure [MAP] for determining the Arm s Length Price in relation to the transaction between the Company and its Associated Enterprises in USA. The competent authorities of the USA and India mutually arrived at terms with respect to the mark up on cost to be earned by the Assessee for the ITE services rendered to US tax residents. 20. As per the resolution dated 28.10.2015, the export income of the Assessee was enhanced by ₹ 31,05,17,297/-. In terms of the agreement, the AO passed an order under Rule 44H (4) of the Rules dated 25.01.2016 giving effect to the MAP r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessee. The additional income determined as per the MAP resolution and is not a Transfer Pricing adjustment made by the AO as referred to in section 92C(4) of the Act. The proviso to Section 92C(4) would be attracted only when the arm s length price is determined by the AO under sub-section (3) of the Section 92C. 23. It was submitted that a TP adjustment as referred to in section 92C(4) of the Act intends to enhance the taxable income so that tax is paid by the assessee on the additions made, whereas a MAP resolution requires that the Assessee make additional billings and receive payment from the US AE and such payment should be recorded in the books of account in the year in which it receives the payment from the AE. It was pointed out that the Assessee, on accepting the MAP resolution, has done additional billing for export of services as required under the MAP resolution. The invoice copies of the additional billings done were submitted before the CIT(A) during the appellate proceedings. 24. It was further submitted that initially, the Assessee had determined the ALP based on the Transfer Pricing study conducted by it, considering all the procedures, which were ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of money Along with an increase in taxable income, the same is also subsequently invoiced and realized and thereby results into an inflow of foreign exchange in India. Implications to the AE The ALP determined by the TPO may not be accepted by the AE s country As this is based on resolution between the competent authorities, the same ALP would be considered by both the countries. 26. The learned counsel for the Assessee submitted that under Advance Pricing Agreement (APA) which is an agreement between the CBDT and any person, ALP is determined in advance or the manner of determination is specified in a particular manner in relation to an international transaction. Under the Act a legal framework has been created for providing for a legally binding agreement between the taxpayer and the CBDT. The Finance Act, 2012, inserted sections 92CC and 92 CD in the ITA to provide the legal basis for APA in India. These statutory provisions, effective from 1 July 2012, empowered the CBDT to enter an agreement with any person, with the approval of Central Government, determining the ALP or specifying the manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been arrived at based on the resolution arrived at under MAP and offered to tax by the assessee. 30. The ld. DR submitted that the addition agreed under the MAP will not be entitled to benefit of deduction u/s. 10A of the Act. His first submission was that the resolution of dispute under the MAP cannot be equated to determination of the price by the revenue authorities under the Advance Pricing Arrangement [APA]. According to him, the amount settled under the MAP is as good as an addition made by the TPO and therefore the first proviso to section 92CA(4) of the Act will be applicable and the assessee will not be entitled to the benefit of the amount of addition agreed on account of determination of ALP under the MAP. 31. We have given a very careful consideration to the rival submissions. As far as the provisions of the Act are concerned, the provisions of the section 92CA(4) reads as follows:- (4) Where an arm's length price is determined by the Assessing Officer under sub-section (3), the Assessing Officer may compute the total income of the assessee having regard to the arm's length price so determined : Provided that no deduction under section 10A or sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arising as to the interpretation or application of the Convention. They may also consult together for the elimination of double taxation in cases not provided for in the Convention. 4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs. The competent authorities, through consultations, shall develop appropriate bilateral procedures, conditions, methods and techniques for the implementation of the mutual agreement procedure provided for in this Article. In addition, a competent authority may devise appropriate unilateral procedures, conditions, methods and techniques to facilitate the abovementioned bilateral actions and the implementation of the mutual agreement procedure. 33. The provisions of Rule 44H of the Income Tax Rules, 1962 (Rules) provides the manner in which resolution of disputes under mutual agreement procedure are to be given effect to and it reads thus: 44H. Action by the Competent Authority of India and procedure for giving effect to the decision under the agreement.- (1) Where a reference has been received from the competent auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under MAP, was that the Assessee had to increase its taxable income and the sum agreed was to be subsequently invoiced and realized and thereby there was inflow of foreign exchange in India. Such features do not exist when the adjustment to ALP is suggested by a TPO which is subsequently incorporated in an order of assessment by the AO. 34. The Pune Bench of the ITAT had an occasion to deal with an identical question in the context of determination of ALP under the Advance Pricing Arrangement [APA] in the case of Dar Al Handasah Consultants (Shair Partners) India Private Limited (supra) and took the view that deduction u/s. 10A of the Act on additional income offered as per APA would be eligible to claim deduction u/s. 10AA. 35. As rightly pointed out by the learned counsel for the Assessee in the course of his argument, the addition on account of determination of ALP can be in a different manner (i) suo motu by the assessee in his return of income; (ii) by the Assessing Officer has been accepted by the assessee or to the extent confirmed by the appellate forums under the Act; (iii) determined by an advance pricing agreement (iv) is made as per the safe harbour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is behalf . In other words, if the competent authority has allowed further period for bringing into India the convertible foreign exchange, the assessee will be entitled to deduction u/s.10A. Explanation 1 to section 10A(3) states that: 'For the purposes of this sub-section, the expression competent authority means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange.' 15. Sub-section (1) of section 92CC provides that The Board, with the approval of the Central Government, may enter into an advance pricing agreement with any person . It is thus clear from the mandate of sub-section (1) of section 92CC that the CBDT enters into an APA with the approval of the Central Government. The APA is a package deal aimed at reducing litigation. If the APA contains some clause relaxing the rigor of any provision or to facilitate its workability, such a clause will prevail over the normal provisions of the Act. It is mandated by the legislature itself through sub-section (2) of section 92CD, which opens with a saving clause by providing: 'Save as otherwise provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee to bring in convertible foreign exchange in India within one month. But for granting the relevant deductions connected with the realization of convertible foreign exchange in India, there was no purpose to stipulate it in the APA. This stipulation is, thus, a direction to grant deduction u/s 10A only if the assessee succeeds in bringing in convertible foreign exchange in India within one month, bringing the case within the saving clause of sub-section (2) of section 92CD. As the assessee brought into India the convertible foreign exchange within the stipulated one month's period, it became entitled to deduction u/s 10A. 17. What is further pertinent to note from para 2 of the Clause 6 of the APA is that: The determination of ALP for Rollback years is subject to the condition that the ALP would get modified to the extent that it does not result in reducing the total income or increasing the total loss, as the case may be, of the applicant as already declared in the return of income of the said year . Reverting to facts of the extant case, it is seen that the assessee declared total income of ₹ 45,21,431/- in the original return. After the increase in the income due ..... 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