QX KPO Services Pvt. Ltd., Ahmedabad V. The Income Tax Officer, Ward-5(2), Ahmedabad

ITA 2043/AHD/2014

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9710 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 08-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Assessee Lawyers: TUSHAR P SHAH
• Keywords: Depreciation; Transfer pricing; International transaction; Services rendered outside India; Question of law
• Section: 271(1)(c); 92C; 234B; 10B; 6; 92

Judgement Text

, MH* MH*MH* MH* IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD L LL LK KK KOZJH OZJH OZJH OZJH OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN] YS[KK LNL; ,OA ] YS[KK LNL; ,OA ] YS[KK LNL; ,OA ] YS[KK LNL; ,OA EK/KQFERK JKW; EK/KQFERK JKW; EK/KQFERK JKW; EK/KQFERK JKW;] U;KF;D LNL; ] U;KF;D LNL; ] U;KF;D LNL; ] U;KF;D LNL; DS LE{KA DS LE{KA DS LE{KA DS LE{KA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SMT MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 2043/AHD/2014 ( / ASSESSMENT YEAR : 2010-11) QX KPO SERVICES PVT. LTD., 401/404, GNFC INFO TOWER, S.G. HIGHWAY, BODAKDEV, AHMEDABAD 380 054. / VS. ITO, WARD 5(2), AHMEDABAD. ./ ./ PAN/GIR NO. : AAACQ 1087 G ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI TUSHAR P. SHAH, A.R. / RESPONDENT BY : SHRI LALIT P. JAIN, SR. D.R. / DATE OF HEARING 08/10/2018 !'# / DATE OF PRONOUNCEMENT 03/12/2018 $% / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)XI, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)-X I/77/WD-5(2)/13- 14 DATED 05.05.2014 ARISING IN THE MATTER OF ASSESS MENT ORDER PASSED UNDER S.143(3) OF THE INCOME TAX ACT, 1961(HERE-IN- AFTER REFERRED TO AS 'THE ACT') DATED11.03.2013 RELEVANT TO ASSESSMENT Y EAR (AY) 2010-11. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE A RE AS UNDER:- ITA NO.2043/AHD/2014 QX KPO SERVICES PVT. LTD. VS ITO A.Y. 2010-11 - 2 - 1. LEARNED CIT (A) ERRED IN LAW AND ON FACTS IN CO NFIRMING ACTION OF AO IN RESTRICTING THE CLAIM OF DEDUCTION U/S 10B OF THE ACT TO RS. 24,98,330/- INSTEAD OF RS. 82,55,275/- AS CLA IMED BY THE APPELLANT. LD.. CIT (A) FAILED TO APPRECIATE THAT P ROFIT ENHANCED DUE TO VOLUNTARY ADJUSTMENT TO ALP OF EXPORT OF SER VICES MADE TO AE IS ELIGIBLE FOR DEDUCTION. LD.. CIT (A) OUGHT TO HAVE ALLOWED DEDUCTION AS CLAIMED BY THE APPELLANT. IT BE SO HEL D NOW. 2. LD.. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRMING ACTION OF AO IN NOT ALLOWING DEDUCTION U/S 10B ON ADJUSTMENT TO ARM'S LENGTH PRICE (ALP) OF EXPORT OF SERVICES TO AE SINCE NO CO NVERTIBLE FOREIGN EXCHANGE RELATING TO INCREASED PROFIT IS BR OUGHT TO INDIA. LD.. CIT (A) OUGHT TO HAVE APPRECIATED THAT THE DED UCTION U/S 10B WAS CORRECTLY WORKED OUT IN THE RATIO OF EXPORT TURNOVER TO TOTAL TURNOVER AS PROVIDED IN THE ACT IN COMPLIANCE WITH THE PROVISIONS OF SEC. 10B (3) OF THE ACT. IT BE SO HEL D NOW. 3. LD.. CIT (A) ERRED IN LAW AND ON FACTS CO NFIRMING RELIANCE PLACED BY AO ON PROVISO TO SEC. 92C (4) FOR REJECTING DEDU CTION CLAIMED U/S 10B OF THE ACT. BOTH THE LOWER AUTHORITIES ERRE D IN NOT APPRECIATING THE LEGAL POSITION THAT PROVISO TO SEC . 92C (4) IS APPLICABLE ONLY WHERE INCOME IS ENHANCED BY AO DETE RMINING ALP AND NOT TO VOLUNTARY ADJUSTMENT MADE BY THE APP ELLANT. LD.. CIT (A) OUGHT TO HAVE DELETED DISALLOWANCE. IT BE S O HELD NOW. 4. LD.. CIT (A) ERRED IN LAW AND ON FACTS IN WRONGL Y DISTINGUISHING RATIO OF DECISION OF HON'BLE BANGALORE TRIBUNAL SQU ARELY APPLICABLE TO THE FACTS OF THE CASE. LD.. CIT (A) OUGHT TO HAVE ALLOWED DEDUCTION AS CLAIMED BY THE APPELLANT FOLLO WING DECISION OF HIGHER JUDICIAL AUTHORITY ON IDENTICAL FACTS. IT BE SO HELD NOW. 5. LEVY OF INTEREST U/S 234B & 234/C OF THE A CT IS NOT JUSTIFIED. 6. INITIATION OF PENALTY U/S 271(1)(C) OF THE ACT IS NOT JUSTIFIED. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, ED IT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT THE T IME OF OR BEFORE THE HEARING OF THE APPEAL. 3. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THIS AP PEAL IS THAT LD. CIT(A) ERRED IN RESTRICTING THE DEDUCTION U/S 10B O F THE ACT TO RS. 24,98,330/- FROM RS. 82,55,275/-. ITA NO.2043/AHD/2014 QX KPO SERVICES PVT. LTD. VS ITO A.Y. 2010-11 - 3 - 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE ACTIVITY OF PROVIDING AC COUNTANCY OUTSOURCING AND I.T. INFRASTRUCTURE MANAGEMENT SERV ICES. 4.1 THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HA S CLAIMED DEDUCTION U/S 10B OF THE ACT AMOUNTING TO RS. 82,55 ,275/- AND FURNISHED THE WORKING FOR THE SAME IN FORM NO. 56G AS SPECIFI ED IN RULE 16E OF THE INCOME TAX RULE. THE NECESSARY WORKING FOR THE DEDU CTION CLAIMED BY THE ASSESSEE U/S 10B OF THE ACT IS EXTRACTED AS UND ER: PROFIT AS PER PROFIT & LOSS A/C RS. 42,00,663/- LESS: INCOME CONSIDERED SEPARATELY A. INTEREST INCOME RS. 10,31,533 RS. 10,31,533/- RS. 31,69,130/- ADD: DEPRECIATION DEBITED TO P&L A/C INCLUDED ABOVE RS. 37,77,940/- RS. 69,47,070/- LESS: DEPRECIATION ALLOWABLE U/S 32(1)(I) RS. 47, 08,740/- RS. 22,38,330/- A. DONATION RS. 2,60,000 RS. 2,60,000/- ADD: DISALLOWABLE/CONSIDERED SEPARATELY A. VOLUNTARY ADJUSTMENT RS. 63,14,578 RS. 63,14,578/ - LESS: DEDUCTION U/S 35AC AMOUNT DEBITED TO P& L A/C RS. 2,10,000 AMOUNT ALLOWABLE AS DEDUCTION RS. 2,10,000 0 RS. 88,12,908/- LESS: DEDUCTION U/S 10B A. DEDUCTION U/S 10B RS. 82,55,275 RS. 82,55,275/- RS. 5,57,633/- BOOK PROFIT AS PER COMPANIES A/C RS. 42,00,663/ ITA NO.2043/AHD/2014 QX KPO SERVICES PVT. LTD. VS ITO A.Y. 2010-11 - 4 - 4.2 THE ASSESSEE IN ITS INCOME TAX RETURN HAS ADJUS TED RS. 63,14,578/- VOLUNTARILY ON ACCOUNT OF TRANSACTION MADE WITH ITS ASSOCIATED ENTERPRISES BY THE PROVISIONS OF SECTION 92C OF THE ACT. HOWEVER, THE AO WAS OF THE VIEW THAT THE ASSESSEE C ANNOT CLAIM DEDUCTION U/S 10B OF THE ACT IN RESPECT OF ADJUSTME NT MADE IN THE INTERNATIONAL TRANSACTION BY THE ASSESSEE VOLUNTARI LY FOR RS. 63,14,578/-. ON CONFRONTATION TO THE ASSESSEE, IT WAS SUBMITTED THAT THE ADJUSTMENT WAS NOT MADE IN THE TRANSFER PRICING BY THE AO RATH ER IT WAS VOLUNTARILY MADE BY THE ASSESSEE. THEREFORE, THE PROVISIONS OF SECTION 92C(4) OF THE ACT CANNOT BE APPLIED WHILE WORKING OUT THE DEDUCTI ON U/S 10B OF THE ACT. THE ASSESSEE IN SUPPORT OF HIS CLAIM RELIED ON THE ORDER OF ITAT BANGLORE IN THE CASE OF I GATE GLOBAL SOLUTIONS LTD. VS. ACIT REPORTED IN 112 TTJ 1002. HOWEVER, THE AO DISAGREED WITH THE CONTENTION OF TH E ASSESSEE AND HELD THAT THE DECISION OF ITAT HAD NOT CONSIDERED THE LE GISLATURE INTENTION FOR CLAIMING THE DEDUCTION U/S 10B OF THE ACT. THE AO F URTHER OBSERVED THAT THE BILLS RAISED BY THE ASSESSEE TO ITS ASSOCIATED ENTERPRISES DO NOT TAKE INTO ACCOUNT VOLUNTARILY ADJUSTMENT MADE BY THE ASS ESSEE AS THERE WAS NO EXPORT OF THE SERVICES. SIMILARLY, THERE WAS NO FOR EIGN EXCHANGE RECEIVED IN INDIA. ACCORDINGLY, THE AO DISALLOWED THE EXEMPT ION CLAIMED BY THE ASSESSEE ON ACCOUNT OF SUCH VOLUNTARY ADJUSTMENT AN D RESTRICTED THE SAME ITA NO.2043/AHD/2014 QX KPO SERVICES PVT. LTD. VS ITO A.Y. 2010-11 - 5 - AT RS. 24,98,330/-. ACCORDINGLY, THE AO DISALLOWED THE EXCESS DEDUCTION OF RS. 57,56,945/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. C IT(A) WHO CONFIRMED THE ORDER OF THE AO. BEING AGGRIEVED BY T HE ORDER OF LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. AR BEFORE US SUBMITTED AS UNDER: THE ISSUE WHETHER VOLUNTARY ADJUSTMENT MADE BY THE ASSESSEE TO ARRIVE AT ARMS LENGTH PRICE U/S. 92C WAS NOT CONSIDERED WH ILE GRANTING DEDUCTION U/S. 10B OF THE ACT. THE SAID ISSUE IS DE CIDED IN FAVOUR OF THE ASSESSEE IN THE CASE OF I GATE GLOBAL SOLUTIONS LTD , VS. ACIT BY HON'BLE ITAT, BANGALORE 'B' BENCH IN ITA NOS. 24 8 & 249/BANG/2007. THE SAID JUDGEMENT OF THE TRIBUNAL HAS BEEN APPROVE D BY HON'BLE KARNATAKA HIGH COURT IN ITA NO. 452/2008. THE SAID DECISION OF THE HON'BLE HIGH COURT OF KARN ATAKA IN THE CASE OF I GATE GLOBAL SOLUTIONS LTD. AND THE DECISION OF TH E CO- ORDINATE BENCH IN THE SAME CASE REPORTED IN (2008) 24 SOT 3(BANG) HAS BEEN FOLLOWED BY HON'BLE ITAT BANGALORE BENCH 'A' I N THE CASE OF M/S. AUSTIN MEDICAL SOLUTIONS PVT. LTD. VS. ITO, BANGALO RE IN I.T. (T.P.) A. NO. 542/BANG/2012, THE SAID DECISION OF THE HON'BLE HIGH COURT OF KARN ATAKA IN THE CASE OF I GATE GLOBAL SOLUTIONS LTD. AND THE DECISION OF TH E CO- ORDINATE BENCH IN THE SAME CASE REPORTED IN (2008) 24 SOT 3(BANG) HAS BEEN FOLLOWED BY HON'BLE ITAT HYDERABAD BENCH 'B' I N THE CASE OF SUM TOTAL SYSTEMS INDIA (P.) LTD. VS. DCIT, HYDERABAD I N I.T. A. NO. 255(HYD) OF 2015. FOLLOWING SECTION 92CE SHALL BE INSERTED AFTER SECT ION 92CD BY THE FINANCE ACT, 2017, W.E.F.1-4-2018: ITA NO.2043/AHD/2014 QX KPO SERVICES PVT. LTD. VS ITO A.Y. 2010-11 - 6 - SECONDARY ADJUSTMENT IN CERTAIN CASES. 92CE .(1) WHERE A PRIMARY ADJUSTMENT TO TRANSFER PR ICE - I) HAS BEEN MADE SUO MOTU BY THE ASSESSEE IN HIS RETUR N OF INCOME ; II) MADE BY THE ASSESSING OFFICER HAS BEEN ACCEPTED BY THE ASSESSEE; III) IS DETERMINED BY AN ADVANCE PRICING AGREEMENT ENTER ED INTO BY THE ASSESSEE UNDER SECTION 92CC; IV) IS MADE AS PER THE SAFE HARBOUR RULES FRAMED U NDER SECTION 92CB;OR V) IS ARISING AS A RESULT OF RESOLUTION OF AN ASSE SSMENT BY WAY OF THE MUTUAL AGREEMENT PROCEDURE UNDER AN AGREEMENT ENTER ED INTO UNDER SECTION 90OR SECTION 90AFOR AVOIDANCE OF DOUB LE TAXATION, THE ASSESSEE SHALL MAKE A SECONDARY ADJUSTMENT PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY, IF,- I) THE AMOUNT OF PRIMARY ADJUSTMENT MADE IN ANY PREVIOUS YEAR DOES NOT EXCEED ONE CRORE RUPEES; AND II) THE PRIMARY ADJUSTMENT IS MADE IN RESPECT OF A N ASSESSMENT YEAR COMMENCING ON OR BEFORE THE 1 ST DAY OFAPRIL,2016 (2) WHERE, AS A RESULT OF PRIMARY ADJUSTMENT TO TH E TRANSFER PRICE, THERE IS AN INCREASE IN THE TOTAL INCOME OR REDUCTI ON IN THE LOSS, AS THE CASE MAY BE, OF THE ASSESSEE, THE EXCESS MONEY WHIC H IS AVAILABLE WITH ITS ASSOCIATED ENTERPRISE, IF NOT REPATRIATED TO IN DIA WITHIN THE TIME AS MAY BE PRESCRIBED, SHALL BE DEEMED TO BE AN ADVANCE MADE BY THE ASSESSEE TO SUCH ASSOCIATED ENTERPRISE AND THE INTE REST ON SUCH ADVANCE SHALL BE COMPUTED IN SUCH MANNER AS MAY BE PRESCRI BED (3) FOR THE PURPOSES OF THIS SECTION, - I) ''ASSOCIATED ENTERPRISE' SHALL HAVE THE MEANI NG ASSIGNED TO IT IN SUB-SECTION(1)AND SUB SECTION (2) OF SECTION 92A; II) 'ARM'S LENGTH PRICE' SHALL HAVE THE MEANING AS SIGNED TO IT IN CLAUSE (II)OF SECTION 92F; ITA NO.2043/AHD/2014 QX KPO SERVICES PVT. LTD. VS ITO A.Y. 2010-11 - 7 - III) 'EXCESS MONEY 'MEANS THE DIFFERENCE BETWEEN T HE ARM'S LENGTH PRICE DETERMINED IN PRIMARY ADJUSTMENT AND THE PRIC E AT WHICH THE INTERNATIONAL TRANSACTION HAS BEEN ACTUALLY UND ERTAKEN ; IV) ''PRIMARY ADJUSTMENT' TO A TRANSFER PRICE MEAN S THE DETERMINATION OF TRANSFER PRICE IN ACCORDANCE WITH THE ARM'S LENGTH PRINCIPLE RESULTING IN AN INCREASE IN THE TO TAL INCOME OR REDUCTION IN THE LOSS, AS THE CASE MAY BE, OF THE A SSESSEE; V) 'SECONDARY ADJUSTMENT' MEANS AN ADJUSTMENT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ITS ASSOCIATED ENTERPRI SE TO REFLECT THAT THE ACTUAL '' ALLOCATION OF PROFITS BETWEEN THE ASSESSEE AND ITS ASSOCIATED ENTERPRISE ARE CONSISTENT WITH THE T RANSFER PRICE DETERMINED AS A RESULT OF PRIMARY ADJUSTMENT, THERE BY REMOVING THE IMBALANCE BETWEEN CASH ACCOUNT AND ACTUAL PROFI T OF THE ASSESSEE. 6.1 THE LD. DR BEFORE US SUBMITTED AS UNDER: 2. IT IS RESPECTFULLY SUBMITTED THAT THIS OFFICE C OULD. NOT TRACE ANY TP ORDER FOR AY 2010-11. THE ALREADY SCARCE STAFF ATTA CHED WITH THIS OFFICE WAS DEPUTED FOR DAYS TO LOCATE THIS FILE BUT FAILED TO LOCATE THE FILE AND REPORTED THAT THE SAME IS UNAVAILABLE. 3.1 YOUR ABOVEMENTIONED LETTER HAS STATED THAT HON 'BLE MEMBERS HAVE SHOWN DISPLEASURE. THEREFORE, UNDERSIGNED TOOK THE ISSUE WITH HIGHEST SERIOUSNESS AND BROUGHT IT IN NOTICE OF HIG HER AUTHORITIES. 3.2 NJRS WEBSITE (HTTPS://NJRS-ITD.GOV.IN/NJRS/) W AS THOROUGHLY BROWSED TO ASCERTAIN CASE STATUS (COPY ENCLOSED). I T WAS FOUND THAT FOLLOWING GROUNDS OF APPEAL ARE MENTIONED BY THE AS SESSEE FOR AY 2010- 11: 1. LEARNED CIT {A} ERRED IN LAW AND ON FACTS IN CO NFIRMING ACTION OF AO IN RESTRICTING THE CLAIM OF DEDUCTION U/S 10B OF THE ACT TO RS. 24,98,330/- INSTEAD OF RS. 82,55,275/- AS CLAIMED BY THE APPELLANT, LD.. CIT(A) FAILED TO APPRECIATE THA T PROFIT ENHANCED DUE TO VOLUNTARY ADJUSTMENT TO ALP OF EXPO RT OF SERVICES MADE TO AE IS ELIGIBLE FUR DEDUCTION. LD.. CIT (A) OUGHT TO HAVE ALLOWED DEDUCTION AS CLAIMED BY THE APPELLA NT. IT BE SO HELD NOW. ITA NO.2043/AHD/2014 QX KPO SERVICES PVT. LTD. VS ITO A.Y. 2010-11 - 8 - 2. LD.. CIT (A) ERRED IN LOW AND ON/ACTS IN CONFIR MING ACTION OF AO IS NOT ALLOWING DEDUCTION U/S 10B ON ADJUSTME NT TO ARM'S LENGTH PRICE (ALP) OF EXPORT OF SERVICES TO AE SINC E NO CONVERTIBLE FOREIGN EXCHANGE RELATING TO INCREASED PROFIT IS BROUGHT TO INDIA, LD.. CIT (A) OUGHT TO HAVE APPRE CIATED THAT THE DEDUCTION U/S 108 WAS CORRECTLY WORKED OUT IN THE R ATIO OF EXPORT TURNOVER TO TOTAL TURNOVER AS PROVIDED IN THE ACT I N COMPLIANCE WITH THE PROVISIONS OF SEC. 10B (3) OF THE ACT. IT BE SO HELD NOW. 3. LD.. CIT (A) ERRED IN TAW AND ON FACTS CONFIRMIN G RELIANCE PLACED BY AO ON PROVISO TO SEC. 92C (4) FOR REJECTI NG DEDUCTION CLAIMED U/S10B, OF THE ACT. BOTH THE LOWER AUTHORIT IES ERRED IN NOT APPRECIATING THE LEGAL POSITION THAT PROVISO TO SEC. 92C(4) IS APPLICABLE ONLY WHERE INCOME IS ENHANCED BY AO DETE RMINING ALP AND NOT TO VOLUNTARY ADJUSTMENT MADE BY THE APP ELLANT. LD.. CIT (A) OUGHT TO HAVE DELETED DISALLOWANCE. IT BE S O HELD NOW. 4. LD.. CIT (A) ERRED IN LAW AND ON FACTS IN WRONGL Y DISTINGUISHING RATIO OF DECISION OF HON'BLE BANGALO RE TRIBUNAL SQUARELY APPLICABLE TO THE FACT OF THE CASE. LD..CI T (A) OUGHT TO HAVE ALLOWED DEDUCTION AS CLAIMED BY THE APPELLANT FOLLOWING DECISION OF HIGHER JUDICIAL AUTHORITY ON IDENTICAL FACTS. IT BE SO HELD NOW. 5. LEVY OF INTEREST U/S 234B & 234/C OF THE ACT IS NOT JUSTIFIED. 6. INITIATION OF PENALTY U/S 271(1)(C) OF THE ACT IS NOT JUSTIFIED. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, OTTER, ED IT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEA L AT THE TIME OF OR BEFORE THE HEARING OF THE APPEAL. 3.3 IT IS SEEN FROM THE GROUNDS OF APPEAL FOR AY 2 010-1 1 MENTIONED ABOVE THAT THERE WAS NO REFERENCE TO TPO'S ORDER. 3.4 MAKING FURTHER SINCERE EFFORTS, IN COLLABORATI ON WITH THE ASSESSING OFFICER OF THE ASSESSEE COMPANY, THE ASSE SSMENT ORDER WAS ITA NO.2043/AHD/2014 QX KPO SERVICES PVT. LTD. VS ITO A.Y. 2010-11 - 9 - PERUSED (ATTACHED AS ANNEXURE TO THIS LETTER). AGAI N, NO REFERENCE TO 1'PO COULD. BE TRACED IN THE SAID ORDER OF ASSESSIN G OFFICER FOR AY 2010-11. 4. IN SUCH CIRCUMSTANCES, YOUR GOOD-SELF IS KINDLY REQUESTED TO DIRECT SPECIFICALLY AS TO WHAT BRIEF ON WHICH SPECI FIC ISSUE IS DESIRED FROM THE TPO. SO THAT SAME MAY BE SUBMITTED TO YOUR GOOD-SELF WITHOUT FURTHER DELAY. 5. SUBMITTED FOR KIND CONSIDERATION, DIRECTIO NS IF ANY AND NECESSARY ACTION AS APPROPRIATE. YOURS FAITHFULLY. DY. COMMISSIONER OF INCOME TAX. TRANSFER PRICING OFFICER-1, AHMEDABAD 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE NOTE THAT TH E HONBLE ITAT, BANGALORE BENCH HAS DECIDED THE IDENTICAL ISSUE IN THE CASE OF I GATE GLOBAL SOLUTIONS LTD. (SUPRA) IN FAVOR OF THE ASSESSEE. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED AS UNDER: 23. FROM THE MEMO EXPLAINING THE PROVISIONS OF FINANCE BILL, 2006 AS WELL AS FROM THE LITERAL MEANING OF THE WORD 'ENHAN CED', IT IS CLEAR THAT IF INCOME INCREASED, AS A RESULT OF COMPUTATION OF AIM 'S LENGTH PRICE, THEN SUCH INCREASE IS NOT TO BE CONSIDERED FOR DEDUCTION UNDER SECTION 10A. IN THE INSTANT CASE, THE ASSESSEE HIMSELF HAS COMPU TED THE ARM'S LENGTH PRICES AND HAS DISCLOSED THE INCOME ON THE BASIS OF ARM'S LENGTH PRICES. IT IS NOT A CASE, WHERE THERE IS AN ENHANCEMENT OF INCOME DUE TO DETERMINATION OF ARM'S LENGTH PRICE. HENCE, IT IS H ELD THAT ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 10A IN RESPECT OF INCOME DECLARED IN THE RETURN OF INCOME ON THE BASIS OF COMPUTATION OF ARM'S LENGTH PRICE. ITA NO.2043/AHD/2014 QX KPO SERVICES PVT. LTD. VS ITO A.Y. 2010-11 - 10 - 7.1 THE VIEW TAKEN BY THE ITAT WAS SUBSEQUENTLY CON FIRMED BY THE HONBLE HIGH COURT OF KARNATAKA IN THE ABOVE CASE I .T.A. NO.452/2008 BY OBSERVING AS UNDER: 6. IN SO FAR AS SUBSTANTIAL QUESTION OF LAW NO.4 IS CONCERNED, THE ERROR COMMITTED BY THE AO WAS RELYING ON SECTION 92 (C)(4) TO A CASE WHERE ARMS LENGTH PRICE WAS DETERMINED BY THE ASSE SSEE, WHEREAS THE SAID PROVISION APPLIES TO A CASE WHERE ARMS LENGTH PRICE WAS DETERMINED BY THE AO, THAT MISTAKE HAS BEEN CORRECT ED BY THE TRIBUNAL, SET ASIDE THE ORDER PASSED BY THE COMMISSIONER AS W ELL AS THE ASSESSING AUTHORITY. 7.2 THE LD. DR BEFORE US HAS NOT BROUGHT ANYTHING C ONTRARY TO THE JUDGMENTS AS DISCUSSED ABOVE. THEREFORE, WE HAVE NO ALTERNATIVE EXCEPT TO REVERSE THE ORDER OF AUTHORITIES BELOW. AS THE I SSUE IN HAND IS IDENTICAL TO THE ISSUE RAISED BEFORE THE HONBLE KARNATAKA HI GH COURT WHICH HAS BEEN ADJUDICATED IN FAVOR OF THE ASSESSEE, THEREFOR E, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION MADE BY THE AO. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 03/12/2018 SD/- SD/- E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LNL; L; L; L; (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 03/12/2018 PRITI YADAV, SR.PS ITA NO.2043/AHD/2014 QX KPO SERVICES PVT. LTD. VS ITO A.Y. 2010-11 - 11 - !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-XI, AHMEDABAD. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD. 6. .34 5 / GUARD FILE. % & / BY ORDER, , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 25/10/2018 (PAGE-4) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER : .. 12/11/2018 3. OTHER MEMBER.. 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S15/11/2018 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT.. 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER 10. DATE OF DESPATCH OF THE ORDER