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TMI Blog2020 (8) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... re, it cannot be held that services rendered by assessee, does not fall under software development service segment. So, to allege that, assessee was providing miscellaneous services, is like blowing hot and cold at the same time. Revenue has not been able to prove anything contrary by way of documentary evidences on this aspect before us. Therefore, this objection raised by revenue does not hold good in eyes of law and is rejected. No evidence of data transmission and export of software outside India - Coordinate bench of this Tribunal for assessment year 2008-09 [ 2013 (12) TMI 1539 - ITAT BANGLORE] has already taken a view that declaration on STPI forms should be held to be sufficient in this regard. Further, we agree with Ld.Counsel that, for purpose of eligibility of claim under section 10AA of the Act, this objection does not have any relevance. Therefore, respectfully following the same, this objection raised by authorities below is rejected at the threshold. Non submission of accounting invoices to STPI/SEZ authorities, Non approval of units by SEZ authority - In the present facts of the case assessee placed on record approvals obtained by SEZ authorities which has not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books of account and the same cannot be insisted upon. AO held that assessee continued existing business through SEZ units - Satisfaction of conditions in section 10AA(4) are required to be satisfied in the year of formation, we hold, this objection raised by Ld.AO does not hold good for the year under consideration. Exports proceeds declared by assessee in SOFTEX forms, has not been considered by authorities below - Assessee is directed to file all requsite information, as far as possible, mentioned in paragraph D..6.9.4, hereinabove. Ld.AO is directed to verify these documents and allow deduction to assessee relatable to sale proceeds from export of software development services. Eligibility of assessee to claim deduction under section 10AA - AO did not accept claim of assessee for enhanced deduction on additional income for purposes of computing deduction under section 10AA of the Act, though there was sufficient time to pass respective orders as per section 92CD(5)(b) - HELD THAT:- Assessee is eligible to claim deduction under section 10AA, on incremental income arisen pursuant to APA dated 29/12/2016. We direct DRP to grant deduction under section 10AA of the Act, to the ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opportunity of being heard in accordance with law. Assessee is directed to file invoices raised in support of payments made by assessee to relevant parties. Assessee is at liberty to file all relevant details/evidences to substantiate its claim. DRP is then directed to verify nature of payment in the light of invoices filed by assessee. DRP is also directed to analyse payment made to non-residents on which tax has not been deducted at source in light of Explanation 2 to section 195. DRP shall grant proper opportunity of being heard to assessee. Disallowance of depreciation on leased assets - HELD THAT:- We note that this being a recurring issue a consistent approach has to be taken in this regard. Admittedly assessee has capitalised these assets. On one hand, Ld.AO accepts lease rentals received by assessee to be business income, and on the other hand disallowed depreciation. In our view, assessee is eligible for depreciation on leased assets, however the same has to be computed in accordance with law having regard to schedule of assets. In the interest of Justice, we remit this issue too Ld.AO for proper verification of all details filed by assessee and to consider claim in accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stments for AY 2013-14 2.1. The learned ACIT and the Hon'ble Dispute Resolution Panel ('DRP') have erred in law and on facts by placing reliance on the DAO of AY 2009-10. Specifically, the learned ACIT and Hon'ble DRP have erred: a) In not following the settled legal principle of res judicata not applying to incometax proceedings; b) In not appreciating the fact that the order on which the learned ACIT had placed reliance was a draft assessment order; C) In not appreciating the fact that the erstwhile DAO passed by the erstwhile Assessing Officer has been quashed by the Hon'ble Karnataka High Court vide its order dated July 18, 2016. ; and d) In placing reliance on the DAO of AY 2009-10 without application of mind and without taking cognizance of the submissions/ arguments put forth during the assessment proceedings of AY 2013-14. 3. Denial of relief under section IOAA of the Act 3.1. The learned ACIT and the Hon'ble DRP have erred in law and on facts in denying the relief claimed by the Appellant under section 10AA of the Act of INR 303,16,58,824. The learned ACIT has also erred in law and on fact in denying the relief claimed by the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs for the subject AY. 3.10. The Hon'ble DRP has erred in fact by concluding that the Appellant failed to produce invoices for verification without taking cognizance of the submissions made by the Appellant during the assessment proceedings for the subject AY. 4. Disallowance of amounts under section 37(1) which have been disallowed suo moto by the Appellant under section 40(a) of the Act 4.1. The learned ACIT has erred in facts and in law in holding that a sum of INR 3,456,564,364 disallowed by the Appellant under section 40(a) of the Act should be disallowed under section 37(1) of the Act 4.2. The learned ACIT has erred in law and on facts by not appreciating that the basis of year-end provisions, as furnished by the Appellant, demonstrate that the same are for abilities which have arisen/been incurred, and therefore, the same cannot be disallowed by under section 37(1) of the Act. 4.3. The learned ACIT has erred in law and on facts by concluding that based on the documents submitted by the Appellant, it is very clear that the amounts under dispute are not an allowable expenditure. 4.4. The learned ACIT has erred in facts and in law in concluding that the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliable 5.2. The learned ACIT has erred in facts in disallowing the foreign payments made during the year on which tax is not deducted by not considering the evidence submitted by the Appellant. 5.3. The learned ACIT has erred in fact and in law in not appreciating that certain sums are mere reimbursements and hence cannot be considered as "income". 5.4. The learned ACIT has erred in law and on facts in placing reliance on the sworn statement which does not pertain to the current year, in holding that the certificates issued by the CA are not reliable and disallowing the amount for the current year. 5.5. The learned ACIT and the Hon'ble DRP have erred in law in disallowing the payment made to IBM Singapore Pte Ltd given that the amendment to definition of royalty related provisions under section 9(1)(vi) of the Act is not relevant to determine disallowance for non-deduction of tax at source as the corresponding amendment has not been made under section 40(a)(i) of the Act. 5.6. The Honble DRP has erred in law in directing the learned ACIT to carry out further verification which is not permissible in view of section 144C(8) of the Act which clearly stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing the judicial precedents. 9. Restriction of depreciation on computer software from 60 per cent to 25 per cent 9.1. The learned ACIT and the Hon'ble DRP have erred in law and on facts in restricting depreciation claim to a lower rate of 25% as against the Appellant's claim for depreciation on computer software at 60% under section 32 of the Act, resulting in disallowance of INR 24,44,33,932. 9.2. The learned ACIT and the Hon'ble DRP have erred in law in concluding that only software purchased along with the computer is eligible for depreciation at the rate of 60%. 9.3. The learned ACIT and the Hon'ble DRP have erred in facts and in law in not taking into cognizance the submissions including judicial precedents made by the Appellant during the assessment proceedings of the subject AY 10. Initiation of Penalty Proceedings 10.1. The learned ACIT has erred in initiating penalty proceedings under section 271 of the Act. 11. Other grounds 11.1. The learned ACIT has erred in law and on facts in levying interest of INR 409,68,25,501 under section 234B of the Act. 11.2. The learned ACIT has erred in law and on facts in not granting credit for f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inary issue in respect of validity of draft assessment order dated 29/12/2016 passed by Ld.AO. 4.1 Before DRP, similar arguments were raised by assessee. It was submitted that, said order was set-aside, since it was passed without application of mind, and without taking cognizance of submissions/arguments put forth during assessment proceedings for year under consideration. 4.2 DRP, while dealing with this issue, observed that, similar objection was raised by assessee before DRP for assessment years 2010-11 2011-12 and 2012-13 which was rejected by observing as under: "………..We are of the view that the evidences gathered during the proceedings for earlier assessment years can be used for proceedings for subsequent assessment years, if such evidence is a relevant to the issue in assessment year under consideration. It is also noticed by is that assessing officer before arriving on the conclusions in respect of relevant issues for assessment year has independently examined the issues by issues of various notices and hearing the assessee and only thereafter, use materials gathered during the proceedings for assessment year including the material available on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering similar issue for assessment years 2006-07. This Tribunal set aside claim u/s.10AA to Ld.AO for fresh decision, following its order for AY:2008-09 in IBM India (P) Ltd vs JCIT reported in (2014) 46 Taxmann.com 129. It is noted that, for asst. year 2008-09, this Tribunal dismissed various objections raised by Ld. AO to deny claim u/s.10AA and directed Ld.AO to verify, whether convertible foreign exchange was brought into India and that, they represented consideration received for export of computer software. 4.4.5 We note that, this Tribunal for assessment year 2008- 09(supra), dealt with all objections raised by authorities below, which are common for year under consideration to deny deduction u/s.10AA. Ld.AO for year under consideration, has referred to final assessment order passed for AY:2008-09. Therefore, in our view, it will be a futile exercise to set aside the issue to Ld.AO for fresh decision as suggested by both sides, when the issue stands squarely covered order of this Tribunal in great detail, for AY:2008- 09(supra). Accordingly this objection raised by assessee stands rejected. 5. Ground No.3 is raised against denial of claim under section 10AA of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from eligible units. * Ld.AO was of the opinion that the MSA and ICA (Inter Company Agreements) revealed fact that undertaking commenced its activity after 2004-05 and were not new undertaking that began to manufacture or produce computer software and rather all such undertakings have continued the business, already in existence, which was in violation of section 10A(2). * Ld.AO was also of the opinion that assessee did not submit invoices corresponding to SOFTEX to SEZ authority, and therefore it was impossible to match accounting invoices. Ld.AO also observed that the inter-company agreements were not registered with SEZ authority, and therefore were not reliable. He was of the opinion that, intercompany agreements furnished before Ld.AO, referred to miscellaneous services and not to software development services, against which income was received that was subjected to claim under section 10 AA of the Act; * Ld.AO was of the opinion that, purpose of remittance mentioned in FIRC, was software consultancy, technical fee, system maintenance etc being miscellaneous services and not software development services; * Ld.AO was of the opinion that, unit wise P&L account was not r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins to manufacture or produce such articles or things or provide services, as the case may be, and fifty per cent of such profits and gains for further five assessment years and thereafter; (ii) for the next five consecutive assessment years, so much of the amount not exceeding fifty per cent of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account (to be called the "Special Economic Zone Re-investment Reserve Account") to be created and utilized for the purposes of the business of the assessee in the manner laid down in sub-section (2). 22[Explanation.-For the removal of doubts, it is hereby declared that the amount of deduction under this section shall be allowed from the total income of the assessee computed in accordance with the provisions of this Act, before giving effect to the provisions of this section and the deduction under this section shall not exceed such total income of the assessee.] (2) The deduction under clause (ii) of sub-section (1) shall be allowed only if the following conditions are fulfilled, namely :- (a) the amount credited to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall not be eligible for deduction from income under this section : Provided further that where a Unit initially located in any free trade zone or export processing zone is subsequently located in a Special Economic Zone by reason of conversion of such free trade zone or export processing zone into a Special Economic Zone, the period of ten consecutive assessment years referred to above shall be reckoned from the assessment year relevant to the previous year in which the Unit began to manufacture, or produce or process such articles or things or services in such free trade zone or export processing zone: Provided also that where a Unit initially located in any free trade zone or export processing zone is subsequently located in a Special Economic Zone by reason of conversion of such free trade zone or export processing zone into a Special Economic Zone and has completed the period of ten consecutive assessment years referred to above, it shall not be eligible for deduction from income as provided in clause (ii) of sub-section (1) with effect from the 1st day of April, 2006. (4) This section applies to any undertaking, being the Unit, which fulfils all the following conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Finance (No. 2) Act, 2009 (33 of 2009)] shall have effect for the assessment year beginning on the 1st day of April, 2006 and subsequent assessment years. (8) The provisions of sub-sections (5) and (6) of section 10A shall apply to the articles or things or services referred to in sub-section (1) as if- (a) for the figures, letters and word "1st April, 2001", the figures, letters and word "1st April, 2006" had been substituted; (b) for the word "undertaking", the words "undertaking, being the Unit" had been substituted. (9) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, apply in relation to the undertaking referred to in this section as they apply for the purposes of the undertaking referred to in section 80-IA. (10) Where a deduction under this section is claimed and allowed in respect of profits of any of the specified business, referred to in clause (c) of sub-section (8) of section 35AD, for any assessment year, no deduction shall be allowed under the provisions of section 35AD in relation to such specified business for the same or any other assessment year.] Explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set Ld.Counsel submitted that, authorities below also referred to section 10A of the Act, as the term 'computer software' for purposes of section 10 AA, has been defined in Explanation 2 to Section 10A(8). He submitted that authorities below have looked into deduction claimed by assessee under section 10AA, having regard to various conditions stipulated under section 10A/10AA jointly. At the outset, he submitted that, some of the conditions are not required to be fulfilled by assessee, for eligibility of claim under section 10AA, vis-a-vis section 10A of the Act. 5.3.4 Submissions advanced by both sides regarding objections raised by authorities below for year under consideration to deny claim under section 10AA, are dealt with as under: A. MSA does not reveal any specific details regarding software development activity: A.1. At the outset, Ld.Counsel submitted that, Section10A/10AA of the Act, does not require DOU's to be registered with SEZ authorities. He submitted that non-registration of DOU's with SEZ authorities, does not have any bearing on the claim under section10A/10AA of the Act. However, he submitted that, copies of MSA and DOU's have been submitted before authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admittedly. Referring to Circular No.1 dated 17/01/2013 he submitted that issues relating to export of computer software have been clarified by CBDT in this circular, wherein particular attention was drawn to the requirement of establishing direct nexus with development of software done abroad, with eligible unit, set up in India, pursuant to a contract between AE client and eligible unit of assessee. He submitted that as per Section 2(j) of SEZ Act 2005, assessee has to establish that manufacture/ produce of articles or things or provide any services commenced on or after 1.04.2006. He submitted that assessee has continued the business already in existence without having any new contract/agreement of alleged exports of computer software. A.4. He submitted that in present facts of the case, assessee failed to submit any such details of work order issued to assessee in connection with any work assigned, and that, no evidence has been produced by assessee of any nature like communications made, manual or otherwise, where assessee has been instructed to carry out software development work or for that matter any other work. Ld.Standing Counsel submitted that, onus of proving that, wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for each SOW. The SOW would normally prevail over MSA in determining the eligibility for tax benefits unless the assessing officer is able to establish that there has been splitting up or reconstruction of an existing business or non-fulfilment of any other prescribed condition." From the above, it is clear that, benefit under section 10A,10AA and 10 B cannot be denied as separate and specific MSA does not exist for each SOW. Be that as it may, from SOFTEX forms placed in paper book at page 536 onwards, columns 7 specifically reveals, export contract/purchase order, being filed with SEZ. We also note that, each form consist enclosures, like copies of export contract, royalty agreement, communication from foreign customers. Submissions by Ld.Standing Counsel for revenue is thus found to be contrary to SEZ approvals placed at page 782 onwards of paper book volume 3. Ld.Standing Counsel for revenue also placed reliance on Circular no.1/2013 dated 17/01/2013 issued by CBDT, which addresses various requirements for being eligible to claim deduction under section 10AA of the Act, but did not bring to our notice, anything contrary except for saying that assessee did not file separate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... global Multi-Protocol Switched Shared Backbone, that provides foundation for the logical, any to any IP connectivity, among all IBM sites, that are connected to the Mighty Protocol Switched backbone, in the AP region. He further submitted that in terms of global connectivity, each geographical area is a self-contained network with a high-speed backbone and carrier aggregation of individual sites and subnetworks. This enables assessee to transmit data to its group companies across the globe through multiprotocol switched shared backbone. However, Ld.Counsel also emphasized that, this is not a requirement to be satisfied for being eligible to claim deduction under section 10AA of the Act. B.3. On the contrary, Ld.Standing Counsel appearing for revenue submitted that, replies filed by assessee with SEZ Authority regarding details of service provider who rendered services for transmission of data exported by assessee is inconsistent with submissions made by assessee for year under consideration. He vehemently supported observations of authorities below. B.4. In rejoinder, Ld.Counsel for assessee submitted that, authorities below have relied on replies filed by assessee, relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he work contract received from group entities, are executed through STPI unit's and finished work are exported there from, as evidenced in SOFTEX Forms. Referring to page 536 of paper book Volume 2, being SOFTES Form Ld.Counsel submitted that in Column-9, under 'Type of software exported', assessee selected, 'Software development'. Referring to page 539 being part of SOFTEX form. C.2. Ld.Counsel at this juncture, took us through written submission dated 7/12/2016, filed in paper book at page 416 of paper book, to demonstrate that, invoices raised could not be corelated with work carried out for a particular overseas client by assessee. Extract of procedure adopted by assessee as submitted in written submission dated 7/12/2016 are reproduced as under: * Ld.Counsel submitted that, IBM group entities across the globe, procure businesses from various end customers. Part of the contractual commitments of IBM group entity is sub contracted to assessee on need basis. Services rendered by assessee based on nature of work assigned, could be carried either from offshore or on-site. He submitted that IBM overseas entities sub-contracts work in a composite form and assessee determines the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d revenues for both offshore and on-site services. It is also submitted that, such invoice would also include reimbursement of project specific cost if any. C.4. Ld.Counsel submitted that, SOFTEX forms are required to be submitted for each STPI/SEZ locations separately, but is not applicable for on-site revenues. In view of composite nature of system generated accounting invoices, a split in composite invoices into offshore/on-site raised on STPI/SEZ location for filing of SOFTEX forms are carried out. Ld.Counsel thus submitted that SOFTEX invoices are separate and derived as a subsection of accounting invoices, but separately maintained for filing with STPI/SEZ authorities, with respect to offshore services only. On the basis of above complex procedure for invoicing, Ld.Counsel submitted that, it would not be possible to identify each invoices qua services rendered by assessee. C.5. On the contrary, Ld.Standing Counsel for revenue, submitted that, there may be no denying of fact that, whatever work assessee carried out, may have been done at various units, but, the main question still remains is, whether, such work was software development work or other works. He also contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down by Hon'ble Supreme Court is in the context of section 80 IB, which is a separate code in itself. Further Hon'ble Supreme Court upheld denial of exemption for the reason that, section 80 IB is available to an undertaking that remains a small scale industry for the period when deduction is claimed and assessee therein ceased to be a small scale industry. It was for this violation that the claim u/s 80IB was denied. C.8.3 In the present facts of the case assessee placed on record approvals obtained by SEZ authorities which has not been rejected. It is noticed that nothing has been brought on record by Ld.Standing Counsel to show that alleged units ceases to be an eligible unit registered with SEZ authority. Further we refer to the decision relied upon by Ld.Counsel in case of CIT vs Nippon Electronics (supra) by Hon'ble Karnataka High Court and CIT vs Tata Communications Internet services Ltd (supra) by Hon'ble Delhi High Court. C.8.4. Respectfully following aforestated decision we agree with submissions of Ld.Counsel that, in absence of any adverse action by SEZ Authorities, no presumption could be drawn that assessee violated any requirements under the scheme. We refer to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 10A, to the extent that, it is brought into India in convertible foreign exchange as per section 10A(3)(i) of the Act. D.4. However, Ld.Counsel submitted that, vide letters dated 24/08/2012 and 04/01/2013, RBI granted permission to assessee, to hold and maintain foreign currency account outside India, which was placed before authorities below. D.5. It is submitted that assessee received part of export proceeds from sale of computer software into foreign currency account maintained outside India with approval of RBI and accordingly company is eligible to claim tax holiday as per section 10A of the Act. It has been also submitted that amount of export proceeds from sale of computer software received into foreign currency account maintained outside India, being HSBC (USA), is to be treated as sale proceeds deemed to have been received in India. Ld.Counsel submitted that authorities below do not dispute satisfaction of conditions laid down in section 10 A (1) and (2) of the Act. It is also been submitted that, Ld.AO do not dispute that assessee derived profits from export of computer software and that, export turnover in respect of such activity has also not been disputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the exporter from 2001 to 2012; b. Contract wise matching of repatriation of 30% onsite revenue for the period till February 2007) / profit (February 2007 onwards); and C. Certify that the actions of the Company are in accordance with FEMA and relevant guidelines issued by Reserve Bank of India. Oct 2013 DB submitted DHS audit report (copy enclosed as Annexure 8) to RBI on the process review, sample testing, transaction audit and FEMA guidelines review. Dec 2013 DB submitted a letter to RBI stating, inter-alia, that IBM has largely complied with the provisions of FEMA and other guidelines issued by RBI in this regard (copy enclosed as Annexure 15). 28 Feb 2014 Letter from RBI stating, inter-alia, that after a careful analysis of the audit report submitted by DHS and subsequent clarifications, the FCA facility has been restored (copy enclosed as Annexure 9). D.6. Ld.Counsel submitted that Ld.AO did not agree with submissions by observing as under: "…….. The submissions made by assessee have been considered. It is seen from the submission that the DB had submitted a letter to RBI stating that IBM has largely complied with the provisions of FEMA and oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertible foreign exchange brought into India, represents consideration received towards export of computer software. D.9.3. We note that, Hon'ble Bench of this Tribunal in assessee's own case for AY:2008-09 dealt with this objection in light of identical argument raised by Ld.Counsel therein as under: "3.84. We now take up the question with regard to the absence of an RBI approved bank account in which the export sale proceeds have to be deposited outside India. On this aspect, we find that the assessee has been depositing the export proceeds in HSBC account in New York. It was also seen that this bank account had approval only for the period up to 2001, Thereafter, the approval was required to be renewed, but had not been renewed by the assessee. We have also seen that if there had been a RBI approved bank account in which the export proceeds were deposited outside the country, than under Exptanation-2 to -section 10A(3) of the Act the assessee would satisfy the requirements of section 10A(3) of the Act viz., bringing into India the sale proceeds of computer software exported out of India In convertible foreign exchange. 3.85 We have also seen that even before the AO, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e DRP will be at liberty to examine as to whether the convertible foreign exchange was brought Into India and that they represent consideration received for export of computer software. The AO in the set aside proceedings before the DRP will be at liberty to rebut such claim of the assessee including the claim that the foreign exchange brought in does not represent safe proceeds of computer software exported out of India. As mentioned in para 3.56 of this order, the assessee should produce before the AO all documents referred to in the letter dated 12.07.2012 of Deutsche Bank to RBI. We give liberty to the assesses to file such documents as may be necessary to establish its claim for deduction u/s. 10A/10AA of the Act Thus, ground Nos. 3 1 to 3.4 raised by the assessee are treated as allowed for statistical purposes." D.9.4. Respectfully following the same, we remand this issue to DRP to verify receipts if sale proceeds of computer software exported out of India, being brought into India in convertible foreign exchange. DRP is at liberty to examine whether, convertible foreign exchange brought into India represents consideration received for export of computer software. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is issue has already been concluded by ITAT Bangalore bench in assessee's own case for assessment year 2000-01 in ITA No. 3464/Bang/2004 by order dated 31/10/2007. One of the issues dealt with by the Tribunal in the aforesaid decision was as to whether there was requirement of assessee in maintaining separate books of account with regard to each STPI unit. This Tribunal after elaborate discussion on the issue held that, there was no requirement of maintenance accepted separate books of account for various STPI units. At page 23 of Tribunal's order revenue has accepted the identification of sales turnover of various STPI unit was possible. This decision of Tribunal has been followed in assessee's own case for assessment year 2002-03 in ITA No. 1151/B Angel/2009 by order dated 24/06/2011. …………. 3.81. Another basis given by the AO in para 3.4 of his order is that there is no system of identifying expenses and revenues and that books of accounts are written without primary documents being in existence. On the various books of account maintained by the assessee, we have already elaborated as to how the assessee has explained before the AO its method of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puted by revenue. Further, it is also a matter of fact, that, authorities below have not disputed sale proceeds claimed by assessee against each SEZ units, and therefore, we have to proceed on the footing that bifurcations of profits of various SEZ units as given by assessee are correct. E.4.4. In view of the above, respectfully following observations by this Tribunal in asst. year 2008-09, we are of the view that there is no requirement for maintaining separate books of account for claiming deduction under section 10A/10AA of the Act, and books of account maintained by assessee is sufficient to enable computation of profits of various SEZ units. Further the circular issued by CBDT dated 17/01/2013 (supra) also clarifies that there is no requirement in law to maintain separate books of account and the same cannot be insisted upon. We therefore do not find any merit in this objection raised by Ld.AO. F. AO held that assessee continued existing business through SEZ units F.1. Ld.Counsel submitted that, authorities below relied upon draft assessment order for AY:2009-10, in which, one of the reason recorded for denial of deduction claimed was that, assessee merged with IBM Global ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of alleged export of computer software, and hence, claim of assessee under section 10AA of the Act was rightly denied. F.5. We have perused submissions advanced by both sides in light of records before us. F.5.1. It is submitted by by assessee that, there was only a change in name of assessee. Ld.AO has not been able to establish by way of any material evidences that such change in name, resulted in formation of a new undertaking for denial of exemption, otherwise entitled to assessee. In present case, Assessee started claiming exemption under section 10A from assessment year 2000-01. Ld.Counsel placed reliance upon decision of Hon'ble Delhi High Court in case of CIT vs Tata communication Internet services Ltd (supra), wherein, Hon'ble Court upheld the view taken by thins Tribunal that, conditions mentioned in section 80IA(3) of the Act, which is pari materia to section 10 AA (4) of the Act, cannot be considered for every year of the claim of deduction under section 80 IA of the Act, but can be considered only in the year of formation of business. This preposition has been accepted by DRP in assessment year 2011-12 in assessee's own case. It is also noted that the amalgamation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eds declared by assessee in SOFTEX forms, has not been considered by authorities below, though, assessee filed voluminous details. We are of the view that, Ld.AO failed to verify whether, revenue received by assessee was on account of computer software exported out of India. Coordinate bench of this Tribunal in assessee's own case for assessment year 2008-09 (supra), in this context observed as under: 3.86 As rightly submitted by the ld. counsel for the assessee, the AO as well as the DRP rejected the claim of the assessee far deduction u/s 10A of the Act only on the ground that there was no RBI approved bank account outside India in which the sale proceeds of computer software exported out of India were deposited. This would be material only for taking the benefit of Explanation to section 10A(3) of the Act The assessee is not barred from claiming deduction under the main provisions of section 10A(3) of the Act, whereby it can satisfy the AO about the receipt of sale proceeds of computer software exported out of India being brought into India in convertible foreign exchange within the period stipulated in the provisions u/s 10A(3) of the Act. As rightly submitted on behalf of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al transaction entered into by assessee with its associated enterprises. Ld.AO accordingly, referred the case to transfer pricing officer on 24/08/2015 to determine arm's length price of such international transactions. 6.1. Upon receipt of reference, Ld.TPO called for economic details of international transactions, entered into by assessee with its associated enterprises. Ld.TPO observed that assessee categorised itself to be software development service provider. It is recorded in TP documentation that, export of service segment by assessee was as a global delivery Centre on service request from its associated enterprises globally. TP documentation also refers to distribution segment, wherein, assessee offers broad range of products from entry level, mid-range to high end servers and mainframes to support e-business infrastructure requirements. Ld.TPO noted that assessee selected 7 comparables in respect of software development services, with average of 11.90% margin. Ld.TPO disagreed with comparables selected by assessee and shortlisted final set of comparables consisting certain comparables also selected by assessee having total average margin of 20.90%. 6.2. Ld.TPO proposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 7,74,21,28,914/-, thereby, increasing income in the hands of assessee by ₹ 23,73,23,41,974/-(being sum of net profit before taxes as per profit and loss account, ₹ 15,99,02,13,060/- {page 323 of paper book} that gave rise to incremental income of ₹ 7,74,21,28,914/-). Assessee modified its return of income on 22/03/2017, and it was intimated to DRP vide letters dated 17/03/2017 and 13/09/2017. Copies of said letters are placed at paged 1223 and 1225 respectively in paper book volume 4. 6.7. Ld.Counsel submitted that, DRP/Ld.AO did not accept claim of assessee for enhanced deduction on additional income for purposes of computing deduction under section 10AA of the Act, though there was sufficient time to pass respective orders as per section 92CD(5)(b). We note that, Ld.AO in impugned order failed to consider incremental income pursuant to APA dated 29/12/2016 for purposes of deduction under section 10AA. 6.8. Ld.Standing Cousel for revenue, placed reliance on observations of Ld.AO. 6.9. We have heard rival submissions by both sides in this regard. Admittedly, assessee originally claimed deduction u/s.10AA, based on transfer pricing adjustment. In precedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellip;'. Sub-section (2) gives the manner of determination of the ALP referred to in sub-section ) by stating that it: `may include the methods referred to in subsection (1) of section 92C or any other method, with such adjustments or variations, as may be necessary or expedient so to do.' Sub-section (3), which starts with the non obstante clause qua sections 92C/92CA, states that the ALP of any international transaction in respect of which the APA has been entered into: `shall be determined in accordance with the advance pricing agreement so entered.' The crux of the above referred provisions dealing with the advance pricing agreement is that the arm's length margin or price is settled as per the terms of the APA; the manner of determination of such ALP may be by any of the methods referred to in section 92C(1) or any method de hors the prescription of section 92C(1); and the provisions of section 92C (Computation of ALP) and section 92CA (Reference to the TPO) shall not apply in respect of the determination of the ALP under the APA. 6. Section 92CD deals with giving ` Effect to the advance pricing agreement'. Sub-section (1) requires filing of the modified return by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2CD? 8. The case of the AO is that the assessee cannot be allowed deduction u/s 10A in respect of the incremental income offered in the modified return, which as per the AO, is eloquently proscribed by the proviso to sub-section (4) of sections 92C/92CA of the Act. In this regard, it is seen that section 92C deals with the computation of ALP by the AO. Sub-section (4) provides that where an ALP is determined by the AO 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". Proviso to this sub-section, which is the bedrock for the denial of the assessee's claim, states that ".... no deduction u/s.10A . . . . . . shall be allowed in respect of the amount of income by which the total income of the assessee is enhanced after computation of income under this sub-section". Section 92CA, through which a reference is made by the AO to the TPO for determination of the ALP and thereafter the assessment is completed by the AO in terms of the TPO's order, provides through sub-section (4) that on receipt of order from the TPO, `the Assessing Officer shall proceed to compute the total income of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition made by the AO but the additional transfer pricing income offered by the assessee in consonance with the APA with the CBDT. 10. The second component for magnetizing the proviso is that the `total income of the assessee is enhanced'. An enhancement of income in this context pre-supposes some action of the authorities after the filing of the return of income by the assessee, which has the consequence of increasing the total income from the one declared by the assessee. Filing of the modified return u/s 92CD of the Act with the income as agreed between the assessee and the CBDT under the APA is an act of the assessee in offering the additional income and not an act of the AO in making the enhancement of the total income. 11. Instantly, we are dealing with a situation in which the assessee itself has filed a modified return of income at the mutually agreed rate of 17% under the APA. As such, there cannot be any question of the AO making any enhancement in the income as a result of transfer pricing adjustment so as to attract the proviso to section 92C(4) of the Act. 12. Thus the first sub-question is answered by holding that proviso to section 92C(4) does not per se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or within such further period as the competent authority may allow in this behalf". A perusal of subsection (3) of section 10A transpires that the condition for bringing into India the requisite convertible foreign exchange within a period of six months from the end of the previous year is not be all end all of the issue. It also extends to "such further period as the competent authority may allow in this 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 . . . . . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia convertible foreign exchange for the additional amount of invoice within one month's period. There can be no other reason for mandating in the APA for bringing into India convertible foreign exchange within one month following the month in which the APA is signed except for the granting the consequential benefits of such realization, even though subsection (1) of section 92CD gives time of three months for filing the modified return. The sequitur is that the APA has made it mandatory for the assessee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges, interest, commission, advertisement, recruitment expenses, royalty etc., that attracted provisions of TDS. It was observed that sum of ₹ 345,65,64,364/- was quantified and then disallowed under section 40(a)(ia) of the Act, by assessee in computation for year under consideration. Ld.AO also noted that, provisions created, were reversed on 1st April of subsequent year. Ld.AO called for details in respect of expenses and TDS compliances vide notice dated 21.11.2016 and called upon assessee, to show cause as to why, the amounts disallowed under section 40(a) of the Act, should not be disallowed under section 37(1) of the Act, for year under consideration, on account of the fact that, provisions were reversed as on 1st April. 7.2. Assessee submitted that year-end provision are created for various types of expenses, like rent, professional charges, sub contract charges, interest, commission, advertisement, recruitment expenses, royalty etc., based on estimation. Assessee submitted that, such provisions are created taking into account information from various personnel, which include inter alia, financial analyst for project specified accruals, department heads and accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 2012-13 by the then DRP. 7.7. Before us, both parties submitted as under: 7.7.1. Ld.Counsel submitted that vide notice dated 21/11/2016, Ld.AO called upon assessee to show cause, as to why, amounts disallowed under section 40(a) suo moto by assessee, should not be disallowed under section 37(1) of the Act, on account of the fact that, year-end provisions are reversed in subsequent year. It was submitted that, provisions are business liabilities arisen/been incurred in current year, and therefore, the same cannot be disallowed under section 37(1) of the Act. He submitted that, subsequent reversal in immediate subsequent year (2014-15), does not mean that, liability has not accrued to assessee in current year. 7.7.2. Ld.Counsel submitted that, assessee follows mercantile system of accounting and as per AS-1 on disclosure of accounting policies, and that concept of 'accrual' is a fundamental concept that, is to be followed by companies. Ld.Counsel submitted that, amount has been suo moto disallowed u/s.40(a) by assessee for year under consideration. Assessee has also furnished receipts of invoice to prove that expenses were genuine business expenses. 7.8 Ground No.6 is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt cannot be again disallowed on reversal in the year under consideration. Assessee must be given benefit in respect of payments on which TDS has been deducted and deposited with Government. 7.10.1. On the contrary, Ld.Standing Counsel for revenue, in resprct of both issues submitted that, procedure followed by assessee was contrary to accounting policy, because, once expenditure was booked in profit and loss account, it could not be reversed. Assessee had to deduct tax on the provision so created in the books of account. However, the assessee could not produce the details of payment of TDS. Alternatively, he suggested that the issues may be remanded for verification. 7.11. We have perused submissions advanced by both sides on these issues, in light of records placed before us. 7.11.1. The claim of assessee is that, it created provision in books of account on estimation in current year(issue raised in ground no.4). Authorities below concluded that, assessee has full knowledge of what is due to its vendors, sub-contractors, commission agents etc., therefore there was no necessity to create provision and disallowance was justified in facts and circumstances of the instant case. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided, in the event the learned AO does not agree with the submissions was made. 26 December 2016 (Exhibit 6) .,_..,_ 7.11.4. It is noted that, following were the provisions suo moto disallowed by assessee in A.Y:2012-13 under section 40(a), which were reversed as on 01/04/2012,(financial year relevant to assessment year under consideration) and claimed as allowance in computation for year under consideration: SI. No. Particulars of Payment Amount disallowed u/s 40 (a)(i)/(ia) (Amount in INR) 1 Professional Fees 56,047,434 2 Amounts payable to contractors /sub- contractors 2,972,548,455 3 Commission 379,565,554 4 Foreign 4,619,777 3,936,182 35,747,826 5 Rent 846,472,807 Total 4,298,938,035 7.11.5. It was submitted that, reversal is an accounting entry, passed to offset invoices received in subsequent year, to ensure matching principle is followed. Ld.Counsel submitted that, any provision in excess has been offered to tax in subsequent year. He placed reliance on computation of total income placed at page 322- 324, in support of this submission. Ld.Counsel placed reliance on decision of Hon'ble Supreme Court in case of Metal Box Co. of India Ltd., vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate earned/vacation leave, subject to ceiling limit of 240/ 126 days as was applicable. Having accumulated leave in a particular year, in the succeeding year the employee may either avail the leave or apply for its encashment. If the employee avails the leave, then additional provision for encashment is not made in the reserve account. However, if he does not avail the leave and instead chooses to en-cash his entitlement, he becomes entitled to an additional number of days. Hon'ble Court observed that, Whether the amount is paid as salary by drawing upon from the current year's profit and loss account or from the reserve, it would not make any difference in practice, as there would be no double payment and, hence, no double claim for deduction. In either case the liability is certain though the period in which the liability would be incurred is not certain, in as much as, the leave encashment can be sought for, by the employee either during the years of service or at the end of the service. Subject to the ceiling every employee would either avail the leave or seek encashment and, therefore, the liability is a certainty; it cannot be called a contingent liability. On these fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly following similar procedure of accounting even in preceding assessment years. In support, assessee placed before us order passed by this Tribunal in assessee's own case for assessment year 2006-07 to 2009-10, reported in (2015) 59 Taxmann.com 107, passed in context to section 201(1) and 201(1A). On perusal of the order passed Hon'ble Bench, we note that this Tribunal directed assessee to file various details before Income tax officer for verification. 7.14.1. From written submissions filed by assessee, we note that provisions in the books of account for assessment years 2012-13 and 2013-14 are towards sub contracting charges, commission, professional charges, contractor's charges, advertise meant and marketing expenses, recruitment expenses, repair and maintenance expenses, general expenditures, rent and others. It cannot be doubted that these are not related to day-to-day running of business of assessee. Thus, we are of the opinion that, these expenses cannot be disallowed under section 37 (1) of the Act. Assessee, suo moto disallowed these provision accounts under section 40(a) of the Act for non-deduction of TDS during the relevant year. All these aspects requires proper ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reversed as on 01/04/2012. 7.14.6.DRP shall then verify the detaild filed by assessee, in respect of disallowances made under section 40 (a) for non-deduction of TDS: I. DRP shall verify the nature of provisions created by assessee in preceding year (AY:2012-13), and year under consideration that is disallowed under section 40 (a) of the Act. II. DRP shall verify if, TDS applies on amounts mentioned in provision account vis-a-vis the vendor invoice, and that, if, TDS has been complied with in accordance with the relevant provision in the year under consideration; III. DRP shall verify if any vendor have provided for a 'NIL' withholding/lower withholding certificate from the Department as per section 197 of the Act. IV. DRP shall verify there is any vendor invoice on which TDS provision doesn't apply. 7.15. Base on above discussions and observation for relevant year, respectfully following the view taken by Hon'ble Bench for AY:2008- 09, we set aside for these issue to DRP for fresh consideration. Needless to say that, proper opportunity of being heard must be granted to assessee and these issues must be decided having regard to evidences/documents filed by assessee, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable issued by the same CA's. 8.3.2. In regards to payment made by assessee to IBM Singapore, Ld.AO noted that, for assessment years 2006-07 to 2011-12 payment made to IBM Singapore constituted royalty under both section 9(1)(vi) and under DTAA between India and Singapore. Ld.AO referred to disallowance made on identical issue for assessment year 2009-10, wherein statements of chartered accountants who, issued certificate under section 195 to assessee, were recorded. Ld.AO disallowed, sum of ₹ 981,37,37,374/- under section 40(a) the details of which are as under: AE(other than IBM Singapore) ₹ 5,246,403,860 IBM Singapore ₹ 4,604,970,453 Third Party non-residents ₹ 62,363,061 8.4. Aggrieved by proposed addition in draft assessment order, assessee raised objection before DRP. 8.4.1. DRP upheld disallowance of payments made by assessee to non-resident amounting to ₹ 981,37,37,374/- under section 40(a) of the Act, by following decision of Hon'able Karnataka High Court in assessee's own case for assessment year 2012-13 in ITA No. 540/2008, wherein, Hon'able High Court followed ratio laid down by coordinate bench in case of CIT vs. Samsung Electr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,558,065/- is included under others category made by assessee to non-resident insurance providers that also do not attract provisions of TDS. 8.7.3. It was submitted that, copies of sample invoices and corresponding Form 15CB, for amounts on which, tax has not been deducted at source, were furnished by assessee, to authorities below. 8.7.4. Further sum of ₹ 4,604,970,453 has been made to IBM Singapore based on Software Free-Marketers Agreement. From written submission placed in paper book Volume 2, it is noted that during relevant financial year, assessee made payment to IBM Singapore, for purchase of software, which was the nature of distributed software, and consisted primarily of middle software, on which, no tax at source was deducted. 8.7.5. In our opinion, we agree with submissions advanced by Ld.Standing Counsel for revenue that all these payments needs to be verified having regard evidences placed on record by in accordance with law. Similar observation was recorded by DRP. DRP directed Ld.AO to verify payments and to disallow such payment, where assessee fails to furnish information's and details required for verification. 8.7.6. Ld.Counsel, however submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. Ld.AO observed that, in assessment year 2009-10 identical contention raised by assessee was rejected, following decision of Mumbai Special Bench in case of IndusInd Bank reported in 135 ITD 165. Ld.AO while passing draft assessment order therein, distinguished decision of Hon'ble Supreme Court in case of ICDS Ltd vs CIT (supra) on the basis that, decision by Hon'ble Supreme Court pertains to motor vehicles leased under finance lease and not equipments/computers sold under finance lease. Ld.AO for year under consideration, placed reliance on enquiries conducted under section 133(6) of the Act, during assessment year 2009-10, wherein erstwhile assessing officer observed that, lessees have capitalised the assets in their books and claimed depreciation. 9.3.For year under consideration, Ld.AO observed that assessee failed to file certain specific details to substantiate its claim and did not produce sufficient documentary evidences. Ld.AO also inferred that, there is no change in accounting treatment of leased assets, as was in assessment year 2009-10, and therefore, depreciation claimed for year under consideration on leased assets was disallowed. 9.4. Ld.AO, noted that for asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets along with relevant supporting documents such as Master Lease Agreement(MLA), supplement to the master lease agreement, invoice for purchase of assets and leave rentals invoices on sample basis. 9.6.4. Ld.Counsel placed reliance on decision of Hon'able Supreme Court in case of ICDS Ltd vs CIT reported in (2013) 29 Taxmann.com 129 in support of his claim. It has been submitted that on identical facts and circumstances Hon'ble Supreme Court was of the opinion that as long as assessee has a right to retain legal title of the leased assets, it would be the owner of such assets. 9.6.5. Ld.Counsel drew our attention to various clauses of agreement placed at page 352 of paper book volume 2, wherein, clause 19 at page 356, clause 24 at page 357, clause 13 to read with 33 and clause 34 at page 360, reveals that ownership of assets are with assessee. He submitted that, ratio by Hon'ble Supreme Court in case of ICDS Ltd vs CIT (supra) on identical facts, squarely covers assessee's case. 9.7. On the contrary, Ld.Standing Council for revenue, submitted that, ratio by Hon'ble Supreme Court in case of ICDS Ltd vs CIT (supra) are not applicable to present facts of the case. Ld.Standing C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year assessee should have earned exempt income. 10.3. Before us, both sides submitted as under: 10.3.1. Ld.Counsel submitted that, assessee has not earned any exempt income during the year and therefore provisions of section 14 A read with Rule 8D, cannot be appliied. He placed reliance upon decision of Hon'able Delhi High Court in case of Cheminvest Ltd vs CIT reported in (2012) 317 ITR 33. 10.3.2. On the contrary, Ld.Standing Counsel for revenue placed reliance upon orders passed by it is below. 10.4. We have perused submissions advanced by both sides in light of records placed before us. 10.4.1. It is noted that admittedly there is no exempt income earned by assessee during the year under consideration. Therefore respectfully following Hon'able Delhi High Court in case of Cheminvest Ltd vs CIT, disallowance under section 14 A stands deleted. Accordingly this ground raised by assessee stands allowed. 11. Ground No.9 is in respect of depreciation on computer software been restricted from 60% to 25%. 11.1. Ld.AO observed that assessee made addition of ₹ 69,83,82,63 under the head computer software and claimed depreciation at 60% on the same. Ld.AO called upon asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer and CIT (Appeals). The authorities below have allowed depreciation at 25% on software expenses held to be capital in nature, for the reason that the software expenditure resulted in right to use software licenses is an 'intangible asset' and therefore eligible for depreciation at 25%. 9.2. Per contra, the learned Authorised Representative of the assessee contends that as per Part A of Depreciation Schedule to IT Rules, 1962. 'Computers including computer software" are eligible for depreciation @ 60 %. As per Note 7 to the said Depreciation Schedule' . 'Computer software' means any software program recorded on any disc, tape, perforated media or other information storage device. 9.3.1. We have heard the rival contentions, perused and carefully considered the material on record. We have restored the issue of allowability of software expenses as capital or revenue to the file of the Assessing Officer. If the software expenditure is treated as revenue expenditure, then the quantum of claiming depreciation would not arise. The issue of depreciation remains only if the software expenses are held to be capital expenditure. We find from a perusal of the order of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increase in the income is ₹ 7,74,21,28,914/- pursuant to APA on which interest under section 234B cannot be living. 13.2. Having said so, Ld.Counsel also admitted that 234B is a mandatory levy, by referring to decision of Hon'ble Supreme Court in case of CIT vs. Anjum.M.H.Ghaswala reported in (2001)119 Taxman352. However, he submitted that, interest under section 234B can't be casted, unless there is a default in making advance tax. And in the present case, there is an increase in the income of assessee, post APA. He placed reliance on decision of Hon'ble Bombay High Court in case of Prime Securities vs ACIT reported in (2012) 20 taxman.com 757, Hon'ble Gujrat High Court in case of CIT vs. Rainbow reported in 277 ITR 507 and decision of ITAT in case of JSW Steel Ltd 13.3. On the contrary, Ld.Standing Counsel for revenue, emphasised that, interest under section 234B is a mandatory levy, as the section defines levy of interest on the assessed tax. In the present facts of case, tax is assessed including incremental income due to APA and therefore the consequence should follow. 13.4. We have perused submissions advanced by both sides in light of records placed before us. Rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of determination of total income under sub-section (1) of section 143 or completion of a regular assessment, tax is paid by the assessee under section 140A or otherwise,- (i) interest shall be calculated in accordance with the foregoing provisions of this section up to the date on which the tax is so paid, and reduced by the interest, if any, paid under section 140A towards the interest chargeable under this section; (ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax so paid together with the advance tax paid falls short of the assessed tax. (3) Where, as a result of an order of reassessment or re-computation under section 147 or section 153A the amount on which interest was payable under sub-section (1) is increased, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period commencing on the day following the date of determination of total income under sub-section (1) of section 143 and where a regular assessment is made as is referred to in sub-section (1) following the date of such regular assessment and ending on the date of the reassessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen it was paid. On these facts, Hon'ble Court held that, at the time of making payment of Advance tax, it was not possible to anticipate events and make payment of advance tax on that basis. 13.7. In the present case, it is the case of the Revenue that there is default on part of the assessee in paying Advance tax on account of incremental income received during the year under consideration, pursuant to APA dated 29/12/2016. In our view, these decisions therefore do not recue assessee. 13.8. We refer to decision of Hon'ble Bombay High Court in case of E.Merk (India) Ltd vs CIT reported in (2017) 79 taxman.com21, wherein this decision has been dealt with as under: "(i) Moreover, both of the above decisions of Gujarat High Court completely ignore sub-section (4) of Section 215 of the Act, which provides for reduction or waiver of the interest payable by the assessee under Section 215 of the Act. Therefore, both the above decisions of the Gujarat High Court most respectfully in our view were rendered sub-silentio. It is this sub-section (4) of Section 215 which inter alia takes into account the circumstances beyond the control of the assessee for having paid less advance tax than ..... X X X X Extracts X X X X X X X X Extracts X X X X
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