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TMI Blog2020 (9) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... uant to APA. Whether ALP adjustment pursuant to APA falls within the ambit of proviso to Section 92C(4) of the Act ? - HELD THAT:- ITAT Bangalore in case of IBM India Pvt Ltd [ 2020 (8) TMI 196 - ITAT BANGALORE] , following the decision of Pune Tribunal in case of DAR AL Handasah Consultants (Shair partners) India Pvt Ltd [ 2019 (12) TMI 153 - ITAT PUNE] has held that deduction under section 10AA of the Act has to be allowed on incremental income arisen pursuant to APA as per modified return filed under section 92CD of the Act as same is not hit by proviso to section 92C(4) We hold that the ALP adjustment made pursuant to APA by the assessee in respect of Gurqaon SEZ unit results in increase in profits of the business of the unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation Technology Enabled Services (ITES) to its Associated Enterprises ( AEs ). 4. The transaction of providing ITES to AE was an international transaction and the price received by the assessee from AE has to pass the test of arm s length price [ALP] as laid down in section 92 of the Income-tax Act, 1961 [the Act]. The assessee filed its original return of income on 27.11.2014 declaring income of ₹ 17,15,76,040 after claiming deduction under Chapter VI-A of ₹ 3,17,588 and deduction under section 10AA of ₹ 2,83,77.353 out of gross total income of ₹ 20,02,70,978. The assessee had declared voluntary transfer pricing adjustment of ₹ 7,15,00,000/- (₹ 1.54.00,000/- pertaining to the STPI unit and ₹ 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me in respect of TP adjustment voluntarily made of the SEZ Unit at Gurgaon which unit was eligible for deduction u/s. 10AA of the Act. The AO denied the revised claim of deduction u/s. 10AA. 9. The AO gave the following reasons for his action:- It appears that the assessee has declared voluntary transfer pricing adjustment only in anticipation of TP adjustments by the TPO and to avoid rigors of Section 92C(4) of the Act; Assessee has failed to substantiate and furnish as to how the amount of ₹ 8,66,80,000 being TP adjustment has arisen out of the eligible unit and to be treated as eligible unit: and that the claim of enhanced deduction on the basis of the APA is not arising out of the profits of the eligible unit: and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Voluntary Transfer Pricing adjustment and is therefore eligible for deduction under section 10AA of the Act, as section 10AA(1) read with 10AA(7) of the Act uses the expression Profits and gains derived from the export of the unit which is wide in nature and covers the increased profits of the Company after making the ALP adjustment pursuant to APA. 14. Section 10AA(1) of the Act provides for deduction of such profits and gains as are derived by a unit from exports. In this regard. Section 10AA(7) of the Act provides that for the purpose of Section 10AA(1), profits derived from export of articles or things or services (including computer software) shall be the amount which bears to the profits of the business of the undertaking. being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi Trib.) 16. We therefor hold that income offered to tax pursuant to voluntary Transfer Pricing adjustment should be regarded as profits of business for the purpose of computing deduction u/s. 10AA of the Act. 17. The next aspect which requires consideration is as to, whether ALP adjustment pursuant to APA falls within the ambit of proviso to Section 92C(4) of the Act. Provisions of Section 92C(4) reads as follows:- 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 section 10AA or section 10B or under Chapter V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 10AA in respect of Voluntary Transfer Pricing adjustment which stand on different footing as compared to the Transfer Pricing adjustment made by the TPO. It is held accordingly. 20. The aforesaid order of the CIT(Appeals) for AY 2013-14 on the said issue has been accepted by the department and no further appeal before the Tribunal has been filed by department. 21. Further, the ITAT Bangalore in assessee s own case for AY 2010-11 (ITA 199/Bang/2015) dated 20 May, 2020 relying on the decision of Hon'ble Karnataka High Court in case of I-Gate Global Solutions Ltd (supra) , Pune Tribunal decision in case of Apoorva Systems (P) Ltd (92 Taxmann.com 82) and Delhi Tribunal in case of AT Kearney India Private Limited (ITA N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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