KPIT Cummins Infosystems Ltd., Pune V. ACIT, Circle 11(1), Pune

ITA 247/PUN/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2676 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 04-01-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 24-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K RASTOGI
• Keywords: Business income; Depreciation; Transfer pricing; Opportunity of being heard; International transaction; Bad and doubtful debts; Reason to believe; Unabsorbed depreciation; Reassessment proceedings
• Section: 143(3); 14A; 115JB; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , A M . / ITA NO. 247 /PN/201 3 / ASSESSMENT YEAR : 20 0 8 - 0 9 M/S. KPIT CUMMINS INFOSYSTEMS LTD., PLOT NO.35 / 36, RAJIV GANDHI INFOTECH PARK, PHASE I, MIDC , HINJEWADI PHASE 1 RD, PUNE 411057 . / APPELLANT PAN: AA A CK 7308N VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 11(1) , PUNE . / RESPONDENT . / ITA NO. 526 /PN/201 4 . / ITA NO. 526 /PN/201 4 / ASSESSMENT YEAR : 20 0 9 - 1 0 M/S. KPIT CUMMINS INFOSYSTEMS LTD., PLOT NO.35/36, RAJIV GANDHI INFOTECH PARK, PHASE I, MIDC, HINJEWADI PHASE 1 RD, PUNE 411057 . / APPELLANT PAN: AAACK7308N VS. THE DY . COMMISSIONER OF INCOME TAX, CIRCLE - 11(1), PUNE . / RESPONDENT / APPELLANT BY : SHRI KISHORE PHADKE / RESPONDENT BY : S HRI S.K. RASTOGI / DATE OF HEARING : 04 . 0 1 .201 6 / DATE OF PRONOUNCEMENT: 24 . 02 .201 6 ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 2 / ORDER PER SUSHMA CHOWLA, JM: BOTH THE APPEAL S FILED BY THE ASSESSEE ARE AGAINST SEPAR ATE ORDER S OF A CIT , CIRCLE 11(1) , PUNE , DATED 1 6 . 1 1 .201 2 AND DCIT, CIRCLE 11(1), PUNE DATED 03.01.2014 RELATING TO ASSESSMENT YEAR S 200 8 - 0 9 AND 2009 - 10 PASSED U NDER SECTION S 143(3) R.W.S. 144C AND 143(3) R.W.S. 144C(13), RESPECTIVELY, OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . BOTH THE APPEALS RELATING TO THE SAME ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE IN ITA NO.247/PN/2013 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ALL THE GROUNDS OF APPEALS ARE INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER 1. THE LEARNED A O AND DRP ERRED IN LAW IN HOLDING THAT ELIGIBLE DEDUCTION U / S 10 A OF THE ITA, 1961 SHOULD BE RS. 65,04,43,280 / - INSTEAD OF RS.65,27,96,069 / - AS CLAIM ED BY THE APPELLANT. 2. THE LEARNED A O AND DRP ERRED IN LAW IN HOLDING THAT THE ELIGIBLE DEDUCTION U / S 10 A SHOULD BE ALLOWED AFTER SET - OFF OF LOSSES OF OTHER BUSINESS UNITS I UNDERTAKINGS. 3. THE LEARNED AO AND DRP ERRED IN LAW AND ON FACTS IN NOT ALLO WING SET OFF OF UNABSORBED DEPRECIATION LOSS OF AY 05 - 06 OF RS.1,41,20,049 WHILE COMPUTING TOTAL INCOME. 4. THE LEARNED AO, TP O & THE DRP ERRED IN LAW AND ON FACTS IN MAKING ADDITION OF RS . 32,99,487 / - TO THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIO N RELATED TO INTEREST RECEIVED I RECEIVABLE ON LOANS EXTENDED TO AE COMPANY. 5. THE LEARNED A O AND LEARNED DRP ERRED IN LAW AND ON FACTS M MAKING AN DISALLOWANCE OF RS.1,66,653 U / S 14A WHILE COMPUTING INCOME UNDER NORMAL PROVISION OF THE INCOME TAX ACT 1 961. 6. THE LEARNED A O AND LEARNED DRP ERRED IN LAW AND ON FACTS IN MAKING AN ADDITION OF RS . 1,66,653 / - (DISALLOWANCE U/S 14A) WHILE COMPUTING TAXABLE BOOK PROFIT U / S 115JB OF THE INCOME TAX ACT 1961. ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 3 7. THE LEARNED A O AND LEARNED DRP ERRED IN LAW AND ON FACTS IN MAKING AN ADDITION OF RS . 56,21,030 (PROVISION FOR BAD DEBTS DEBITED TO P&L ACCOUNT) WHILE COMPUTING TAXABLE BOOK PROFIT U / S 115JB OF THE INCOME TAX ACT 1961. 8. THE TPO, AO & DRP ERRED IN LAW AND ON FACTS IN NOT GRANTING BENEFIT OF PROVISO TO SECTION 92C(2) OF THE ITA, 1961 THOUGH SPECIFICALLY REQUESTED DURING THE COURSE OF HEARING. 9. THE APPELLANT CRAVES LEAVE TO ADD, MODIFY, ALTER, AMEND, OR WITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL HEREIN AND TO SUBMIT SUCH STATEMENTS, DOCUMENTS AND PAP ERS AS MAY BE CONSIDERED NECESSARY EITHER AT OR BEFORE THE APPEAL HEARING. 4 . THE ISSUE IN GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE ASSESSEE IS IN RELATION TO THE COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE ACT. 5 . THE LEARNED AUTHORIZED REPRES ENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE IDENTICAL ISSUE AROSE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEARS 2005 - 06 AND 2006 - 07 AND THE ISSUE IS SQUARELY COVERED. 6 . BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT CENTERS AT VARIOUS LOCATIONS IN INDIA. THE ASSESSEE HAD 10 SOFTWARE TECHNOLOGY PARKS AT VARIOUS CENTER S IN PUNE AND BANGALORE, WHICH IN TURN, WERE REGISTERED WITH SOFTWARE TECHNOLOGY PARKS OF INDIA. THE ASSESSING OFFICER NOTED THAT FOUR OF THE UNITS HAD ALREADY COMPLETED THEIR TAX HOLIDAY PERIOD UNDER SECTION 10A OF THE ACT AND IN RESPECT OF BALANCE UNITS, THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 10A OF THE ACT AT RS. 65,27,96,069/ - . THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE HAD CLAIMED THE AFORESAID DEDUCTION AGAINST THE ELIGIBLE PROFITS OF THE UNITS, WITHOUT FIRST SETTING OFF OF THE CURRENT YEAR LOSSES OF RS. 5,14,85,104/ - OF THE OTHER UNITS. THE ASSESSING OFFICER UNDER PARA 6 AT PAGE 6 OF THE ASSESSMENT ORDER HAS TABULATED THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 10A OF THE ACT IN RESPECT OF VARIOUS UNITS AT RS. 65.27 CRORES. THE PERUSAL OF THE AFORESAID DETAILS ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 4 REFLECT S THAT THE ASSESSEE HAD SHOWN LOSSES AGA INST TWO UNITS I.E. HINJEWADI II AND VLSI . THE DEDUCTION UNDER SECTION 10A WAS CLAIMED AGAINST THE UNITS SHOWING PROFITS. IN RESPECT OF THREE OF THE UNITS, NO DEDUCTION UNDER SECTION 10A OF THE ACT WAS CLAIMED. AFTER CONSIDERING ELABORATE SUBMISSIONS MA DE BY THE ASSESSEE, WHICH ARE REPRODUCED AT PAGES 7 TO 1 3 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER OBSERVED THAT THE DEDUCTION UNDER SECTION 10A OF THE ACT WOULD BE ALLOWED ONLY AGAINST THE PROFITS REMAINING AFTER INTRA - HEAD SET OFF OF LOSSES AS PER PROVISIONS OF SECTION 70(1) OF THE ACT AND IN VIEW THEREOF, THE COMPUTED AVAILABLE PROFITS FROM ELIGIBLE BUSINESS AT RS. 65,04,43,280/ - AND THE DEDUCTION UNDER SECTION 10A OF THE ACT TO THE EXTENT OF RS. 23,52,789/ - WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 7 . THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF ASSESSING OFFICER PASSED UNDER SECTION 143(3) R.W.S. 144C OF THE ACT . 8 . WE FIND THAT IDENTICAL ISSUE OF COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE ACT, WHERE THE ASSESSEE HAD SEVERAL UNITS, OUT OF WHICH SOME OF THE UNITS HAD DECLARED POSITIVE PROFITS AND THE BALANCE UNITS HAD DECLARED LOSSES FOR THE RESPECTIVE UNITS AND THE ISSUE WAS THE COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE ACT AND WHETHER THE SAME HAD TO BE CO MPUTED AFTER ADJUSTING THE LOSSES OF THE UNITS AGAINST THE PROFITS SHOWN BY THE ASSESSEE IN THE RESPECTIVE UNITS AND ON THE BALANCE PROFITS, WHETHER THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 10A OF THE ACT OR THE ASSESSEE WAS ELIGIBLE FOR THE A FORESAID DEDUCTION ON THE CUMULATIVE PROFITS SHOWN BY THE UNITS, IGNORING THE LOSSES SHOWN BY THE RESPECTIVE UNITS. THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO S . 1508 & 1509 /PN/201 1 , RELATING TO ASSESSMENT YEAR S 200 5 - 0 6 AND 2006 - 07 , VIDE ORDER DATED 30.1 1.2015 HELD AS UNDER: - ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 5 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN EXPORT OF SOFTWARE AND IT ENABLED SERVICES. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE WAS RUNNING EIGHT UNITS AT DIFFERENT PLACES A ND FIVE OF WHICH UNITS HAD DECLARED POSITIVE PROFITS AND THE BALANCE THREE UNITS DECLARED LOSSES FOR THE CAPTIONED ASSESSMENT YEAR. THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION U/S. 10A OF THE ACT IN RESPECT OF EXPORT OF SOFTWARE. THE ASSESSEE COMPUTED T HE DEDUCTION U/S. 10A OF THE ACT BY TREATING EACH OF THE UNIT AS SEPARATE UNIT/UNDERTAKING AND CLAIMED THE DEDUCTION AT RS.24,55,53,914/ - . THE LOSSES FROM THREE UNITS AGGREGATING RS.4,55,31,667/ - WAS CARRIED FORWARD TO BE ADJUSTED IN THE SUCCEEDING YEARS. ON THE OTHER HAND THE REVENUE AUTHORITIES WERE OF THE VIEW THAT THE LOSSES EARNED BY THE ASSESSEE FROM SEPARATE UNIT HAVE TO BE ADJUSTED AGAINST THE PROFITS EARNED BY THE ASSESSEE IN SEPARATE UNITS AND AFTER MAKING THIS INTRA - HEAD SET OFF, THE DEDUCTION UNDER SECTION 10A OF THE ACT WERE TO BE ALLOWED TO THE ASSESSEE. IN THIS EXERCISE THE DEDUCTION UNDER SECTION 10A OF THE ACT WAS REDUCED TO RS.20,68,49,064/ - AND THERE WERE NIL CARRY FORWARD LOSS IN THE HANDS OF THE ASSESSEE. THE REASON FOR THE SAID ADJU STMENT BY THE ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS) WAS ON THE SURMISE THAT THE AMENDMENT BROUGHT TO SECTION 10A OF THE ACT W.E.F. 1 ST APRIL, 2001 UNDER WHICH DEDUCTION FROM INCOME WAS TO BE ALLOWED TO THE ASSESSEE AND NOT ANY EXEMPTIO N. FURTHER, THE ASSESSING OFFICER REFERRED TO THE PROVISIONS OF SECTION 70(1) AND OBSERVED THAT THE INTRA - HEAD ADJUSTMENT HAD TO BE MADE BEFORE CLAIMING THE DEDUCTION U/S. 10A OF THE ACT. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ORDER OF ASSESSING OFFI CER, WHICH HAS BEEN UPHELD BY THE COMMISSIONER OF INCOME TAX (APPEALS). 13. UNDOUBTEDLY, AFTER THE AMENDMENT W.E.F. 1 ST APRIL, 2001 UNDER THE PROVISIONS OF SECTION 10A OF THE ACT, THE ASSESSEE IS NOW ENTITLED TO DEDUCTION. PRIOR TO THE AMENDMENT THE AS SESSEE WAS ENTITLED TO EXEMPTION OF THE SAID INCOME. IN OTHER WORDS THE SAID INCOME DID NOT FORM PART OF THE TOTAL INCOME AND WAS EXCLUDED AT THE ENTITY LEVEL ITSELF. THE QUESTION WHICH ARISES FOR AND WAS EXCLUDED AT THE ENTITY LEVEL ITSELF. THE QUESTION WHICH ARISES FOR ADJUDICATION IS WHETHER IN VIEW OF THE AMENDED PROVISIONS OF SECTION 10A OF THE ACT, UNDER WHICH DEDUCTION CAN BE CLAIMED BY AN ENTERPRISES, WHETHER THE INTRA HEAD ADJUSTMENT OF LOSSES OF CERTAIN UNITS IS TO BE MADE AGAINST THE PROFITS OF OTHER UNITS OF THE SAME ASSESSEE, BEFORE COMPUTING THE DEDUCTION UNDER SEC TION 10A OF THE ACT. 14. THE HON'BLE BOMBAY HIGH COURT IN HINDUSTAN UNILEVER LTD. VS. DCIT & ANR. (SUPRA) IN AN APPEAL RELATING TO ASSESSMENT YEAR 2004 - 05 WHERE REASSESSMENT PROCEEDINGS WERE INITIATED UNDER SECTION 147/148 OF THE ACT ON SEVERAL ISSUES, CONSIDERED THE REASON TO BELIEVE RECORDED BY THE ASSESSING OFFICER WITH REGARD TO SET OFF OF LOSS INCURRED BY UNIT ELIGIBLE FOR DEDUCTION U/S. 10B OF THE ACT. THE ASSESSING OFFICER HAD REOPENED THE ASSESSMENT ON THE SURMISE THAT SINCE THE INCOME OF THE CR AB STICK UNIT WAS EXEMPTED FROM TAX UNDER SECTION 10B, THE LOSS OF THAT UNIT WAS WRONGLY SET OFF AGAINST THE NORMAL BUSINESS INCOME. THE HON'BLE HIGH COURT NOTED THAT AFTER THE SUBSTITUTION OF SECTION 10B OF THE ACT BY THE FINANCE ACT OF 2000, THE PROVISI ONS PROVIDED FOR DEDUCTION OF SUCH PROFIT OR GAINS AS WERE DERIVED BY 100% EOU FOR THE PERIOD PRESCRIBED UNDER THAT SECTION. THE HON'BLE HIGH COURT THUS HELD THAT THE BASIS ON WHICH THE ASSESSMENT WAS SOUGHT TO BE REOPENED WAS BELIED BY A PLAIN READING OF THE PROVISIONS AND THE ASSESSING OFFICER WAS IN ERROR IN PROCEEDING ON THE BASIS THAT BECAUSE THE INCOME WAS EXEMPTED, THE LOSS WAS NOT ALLOWABLE. THE HON'BLE HIGH COURT FURTHER CONSIDERED THAT ALL THE FOUR UNITS OF THE ASSESSEE WERE ELIGIBLE UNDER SECTI ON 10B, OUT OF WHICH THREE UNITS HAD RETURNED PROFITS DURING THE COURSE OF THE ASSESSMENT YEAR, WHILE THE CRAB STICK UNIT HAD RETURNED A LOSS. THE HIGH COURT FURTHER HELD THAT THE ASSESSEE WAS ENTITLED TO A DEDUCTION IN RESPECT OF THE PROFITS OF THE THRE E ELIGIBLE UNITS WHILE THE LOSS SUSTAINED BY THE FOURTH UNIT COULD BE SET OFF AGAINST THE NORMAL BUSINESS INCOME. IN THESE CIRCUMSTANCES, THE HON'BLE HIGH COURT HELD THAT THE BASIS ON ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 6 WHICH THE ASSESSMENT WAS SOUGHT TO BE REOPENED WAS CONTRARY TO THE PLA IN LANGUAGE OF SECTION 10B. 15. THE HON'BLE BOMBAY HIGH COURT IN CIT VS. BLACK & VEATCH CONSULTING PVT. LTD. (SUPRA) ALSO OBSERVED THAT SECTION 10A WAS A PROVISION WHICH WAS IN THE NATURE OF A DEDUCTION AND NOT AN EXEMPTION. THE HON'BLE HIGH C OURT FURTHER HELD THAT THE DEDUCTION UNDER SECTION 10A, IN OUR VIEW, WAS TO BE GIVEN EFFECT TO AT THE STAGE OF COMPUTING THE PROFITS AND GAINS OF BUSINESS. THIS IS ANTERIOR TO THE APPLICATION OF THE PROVISIONS OF SECTION 72 WHICH DEALS WITH THE CARRY FORW ARD AND SET OFF OF BUSINESS LOSSES. THE HON'BLE HIGH COURT HELD THAT THE DEDUCTION UNDER SECTION 10A HAS TO BE GIVEN AT THE STAGE WHEN THE PROFITS AND GAINS OF BUSINESS ARE COMPUTED IN THE FIRST INSTANCE. THE ISSUE BEFORE THE HON'BLE HIGH COURT WAS WITH REGARD TO THE ADJUSTMENT OF BROUGHT FORWARD UNABSORBED DEPRECIATION AND LOSS OF THE UNIT, WHICH WERE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 10A OF THE ACT AND IT WAS HELD THAT THE SAME COULD NOT BE SET OFF AGAINST THE CURRENT PROFIT OF THE ELIGIBLE UNITS WHILE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT. 16. THE CASE OF THE REVENUE BEFORE US ON THE OTHER HAND IS THAT RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN SYNCO INDUSTRIES LTD. VS. ASSESSING OFFICER, INCOME TAX, MUMBAI (SUPRA) IS TO BE APPLIED WHILE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT. IN THE FACTS OF THE CASE BEFORE HON'BLE SUPREME COURT THE ASSESSEE HAD CLAIMED DEDUCTION FROM THE PROFITS AND GAINS OF THE BUSINESS UNDER SECTION 80HH R.W.S. 80 - I AND 80B OF THE ACT. TH E HON'BLE SUPREME COURT HELD THAT WHILE WORKING OUT GROSS TOTAL INCOME OF THE ASSESSEE, LOSSES SUFFERED BY IT IN EARLIER YEARS HAVE TO BE ADJUSTED AND IF GROSS TOTAL INCOME OF ASSESSEE IS NIL THEN THE ASSESSEE WOULD NOT BE ENTITLED TO DEDUCTION UNDER CHAPT ER VI - A. 17. THE AUTHORITIES BELOW HAVE FURTHER PLACED RELIANCE ON THE PROVISIONS OF SECTION 70(1) FOR THE PROPOSITION OF SET OFF OF LOSS FROM ONE SOURCE AGAINST SECTION 70(1) FOR THE PROPOSITION OF SET OFF OF LOSS FROM ONE SOURCE AGAINST INCOME FROM ANOTHER SOURCE UNDER THE SAME HEAD OF INCOME. THE PROVISIONS OF SECTION 10A AN D 10B OF THE ACT ARE PARA MATERIA. IN SUCH A SITUATION THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN HINDUSTAN UNILEVER LTD. VS. DCIT & ANR. (SUPRA) ARE TO BE APPLIED. THE HON'BLE HIGH COURT HAD HELD THAT WHERE THREE UNITS OF THE ASSESSEE HAD R ETURNED PROFIT DURING THE COURSE OF ASSESSMENT YEAR AND ONE UNIT HAD RETURNED THE LOSS, THE ASSESSEE WAS ENTITLED TO DEDUCTION IN RESPECT OF THE PROFITS OF THREE ELIGIBLE UNITS, WHILE THE LOSS SUSTAINED BY THE FOURTH UNIT COULD BE SET OFF AGAINST NORMAL BU SINESS INCOME. APPLYING THE SAID RATIO TO THE FACTS OF THE PRESENT CASE WE ARE OF THE VIEW THAT THE DEDUCTION U/S. 10A AND 10B ARE UNITS SPECIFIC IN CONTRADICTION TO BE ASSESSEE SPECIFIC. THE ASSESSEE WHILE CLAIMING THE DEDUCTION U/S. 10A OF THE ACT IN R ESPECT OF EACH OF ITS UNIT HAS TO SATISFY THE CONDITIONS VIZ - A - VIZ EACH UNIT/UNDERTAKING. EVEN THE QUANTIFICATION OF AMOUNT OF DEDUCTION HAS TO BE WORKED OUT INDEPENDENTLY IN EACH UNIT. THE ASSESSEE BEFORE US HAS FURNISHED ON RECORD THE AUDIT REPORT IN F ORM NO. 56F IN RESPECT OF EACH OF THE UNIT AGAINST WHICH IT HAS CLAIMED THE DEDUCTION UNDER SECTION 10A OF THE ACT. THE QUANTIFICATION OF THE DEDUCTION UNDER SECTION 10A OF THE ACT IS TO BE WORKED OUT INDEPENDENTLY FOR EACH ELIGIBLE UNIT AND IN CASE AFTER THE DEDUCTION SO CLAIMED UNDER SECTION 10A OF THE ACT, THERE ARE PROFITS IN THE HANDS OF THE ASSESSEE FOR SUCH UNIT THEN THE SAME CAN BE SET OFF AGAINST THE LOSSES, IF ANY, INCURRED BY THE ASSESSEE IN ANY OTHER UNIT. THERE IS NO MERIT IN FIRST AGGREGATIN G THE PROFITS OF EACH OF THE ELIGIBLE UNIT AND SETTING OF THE LOSSES OF OTHER UNITS AND ON THE NET PROFITS, IF ANY, THE DEDUCTION UNDER SECTION 10A OF THE ACT TO BE COMPUTED. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN CIT VS. BLACK & VEATCH CONSULTING PVT. LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT THE DEDUCTION UNDER SECTION 10A OF THE ACT HAS TO BE GIVEN AT THE STAGE WHEN THE PROFITS AND GAINS OF THE BUSINESS ARE COMPUTED IN THE FIRST INSTANCE. IN VIEW THEREOF WE REVERS E THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN THIS REGARD. ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 7 18. NOW COMING TO THE RELIANCE PLACED BY THE LD. DR FOR THE REVENUE OF THE HON'BLE SUPREME COURT IN SYNCO INDUSTRIES LTD. VS. ASSESSING OFFICER, INCOME TAX, MUMBAI (SUPRA) WHEREIN THE H ON'BLE SUPREME COURT HAD CONSIDERED THE PROVISIONS OF SECTION 80HH R.W.S. 80 - I AND 80B OF THE ACT. IN VIEW OF THE SPECIFIC PROVISIONS OF 80B(5) PROVIDED UNDER CHAPTER VIA THEN THE DEDUCTION UNDER SECTION 80HH HAS TO BE COMPUTED IN LINE THEREOF. HOWEVER I N THE ABSENCE OF ANY SUCH PROVISION BEING PROVIDED IN SECTION 10A OF THE ACT, WE FIND NO MERIT IN THE SAID RELIANCE PLACED UPON BY THE LD. DR FOR THE REVENUE. SECTION 10A OF THE ACT ENTITLED THE UNDERTAKINGS FOR DEDUCTION FROM ITS PROFITS IN CASE THE CONDI TIONS ARE FULFILLED. WE REITERATE THAT THE SAID DEDUCTION UNDER SECTION 10A OF THE ACT IS TO BE COMPUTED UNIT/UNDERTAKING WISE AND NOT FOR THE ASSESSEE IN TOTALITY. REVERSING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), WE ALLOW THE GROUNDS OF APPEAL NO. 3 RAISED BY THE ASSESSEE IN BOTH THE ASSESSMENT YEARS 2005 - 06 AND 2006 - 07. 9 . FOLLOWING THE ABOVE SAID PARITY OF REASONING AND IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. BLACK & VEATCH CONSULTING PVT. LTD., ITA NO. 1237 OF 2011 (BOM.) , WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE DEDUCTION UNDER SECTION 10A OF THE ACT AT THE STAGE WHEN THE PROFITS AND GAINS OF EACH OF THE UNITS ARE COMPUTED AND THERE IS NO MERIT IN ADJUSTING THE LOSSES, IF ANY, INCURRED BY THE AS SESSEE IN ANY OTHER UNIT, FOR COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT. THE GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 1 0 . THE ISSUE RAISED VIDE GROUND OF APPEAL NO.3 IS AGAINST THE ORDER OF ASSESSING OFFICER AND D ISPUTE RESOLUTION PANEL (DRP) IN NOT ALLOWING SET OFF OF UNABSORBED DEPRECIATION AND LOSSES FOR ASSESSMENT YEAR 2005 - 06 OF RS. 1,4 1 ,20,049/ - , WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE. 1 1 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINT ED OUT THAT THIS ISSUE WAS ALSO CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1736/PN/2012, RELATING TO ASSESSMENT YEAR 2007 - 08, ORDER DATED 30.11.2015 . 1 2 . THE ISSUE ARISING VIDE GROUND OF APPEAL NO.3 IS WITH REGARD TO THE COMPUTATION OF DE DUCTION UNDER SECTION 10A OF THE ACT AND WHETHER THE SAME IS ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 8 TO BE COMPUTED BEFORE SET OFF OF BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION RELAT ING TO EARLIER YEARS. IDENTICAL ISSUE AROSE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESS MENT YEAR 2007 - 08. THE TRIBUNAL WHILE ADJUDICATING THE SAID ISSUE, IN TURN, RELIED ON THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN M/S. VISHAY COMPONENTS INDIA PVT. LTD., VS. ADDL.CIT IN ITA NO.551/PN/2014 AND CROSS APPEAL IN I TA NO.736/PN/2014, O RDER DATED 08.10.2015 . THE TRIBUNAL HELD AS UNDER: - 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO THE COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE ACT, WHETHER THE SAME IS T O BE COMPUTED BEFORE SET OFF OF BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION RELATING TO EARLIER YEARS. THE ASSESSEE HAD CLAIMED 100% DEDUCTION UNDER SECTION 10A OF THE ACT FOR THE YEAR UNDER CONSIDERATION BEFORE SETTING OFF OF THE AFORESAID BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION. THE ASSESSEE HAD DECLARED BUSINESS INCOME AT RS.7.35 CRORES, AGAINST WHICH IT HAD CLAIMED DEDUCTION UNDER SECTION 10A OF THE ACT AT RS.7.09 CRORES AND AGAINST BALANCE INCOME OF RS.26,40,767/ - , BROUGHT FORWARD L OSSES WERE ADJUSTED AND THE INCOME WAS DECLARED AT RS.NIL. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE DEDUCTION UNDER SECTION 10A OF THE ACT WAS PERMISSIBLE OUT OF TOTAL INCOME WHICH COULD BE COMPUTED ONLY AFTER APPLYING ALL THE PROVISIONS OF THE ACT, INCLUDING SET OFF OF BROUGHT FORWARD LOSSES. IN VIEW THEREOF, THE DEDUCTION CLAIMED BY THE OF BROUGHT FORWARD LOSSES. IN VIEW THEREOF, THE DEDUCTION CLAIMED BY THE ASSESSEE ONLY OUT OF PROFITS AND GAINS OF THE BUSINESS WITHOUT FIRST SETTING OFF OF BROUGHT FORWARD LOSSES, WAS HELD TO BE NOT ALLOWABLE AND THE TOTAL INCOME OF TH E ASSESSEE WAS THUS, RE - COMPUTED. THE CIT(A) VIDE PARA 3.3 ONWARDS CONSIDERED THE ISSUE AT LENGTH AND OBSERVED THAT THE ASSESSEE ADMITTEDLY, WAS HAVING ONLY ONE UNIT / UNDERTAKING, ON WHICH DEDUCTION UNDER SECTION 10A OF THE ACT WAS ALLOWABLE AND BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION ALSO RELATED TO THE SAME UNDERTAKING. THE CIT(A) WAS OF THE VIEW THAT BEFORE COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT, BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION HAD TO BE SET OFF AND ONLY ON THE BALANCE INCOME, IF ANY, THE DEDUCTION UNDER SECTION 10A OF THE ACT WAS TO BE COMPUTED. 5. WE FIND THAT IDENTICAL ISSUE OF SEQUENCES OF ALLOWING THE BENEFIT OF DEDUCTION UNDER SECTION 10B OF THE ACT AND THE ADJUSTMENT OF BROUGHT FORWARD LOSSES / UNABSORB ED DEPRECIATION, AROSE BEFORE PUNE BENCH OF TRIBUNAL IN M/S. VISHAY COMPONENTS INDIA PVT. LTD. VS. ADDL.CIT & ANR. (SUPRA). THE TRIBUNAL AFTER CONSIDERING THE FACTS OF THE CASE, WHICH ARE IDENTICAL TO THE FACTS BEFORE US, OBSERVED AS UNDER: - 27. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING VIDE GROUND OF APPEAL NO.3 IS IN RELATION TO THE COMPUTATION OF DEDUCTION UNDER SECTION 10B OF THE ACT AFTER THE AMENDMENT TO SECTION W.E.F. 01.04.2001. THE PERSONS INVOKING THE SAID PROVISIONS ARE ENTITLED TO A DEDUCTION UNDER THE ACT, AS COMPARED TO THE PRE - AMENDED PROVISIONS OF THE SECTION, UNDER WHICH THE INCOME ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 9 COMPRISING UNDER THE SAID SECTION WAS EXEMPT FROM THE TOTAL INCOME. THE ISSUE ARISING BEFORE US IS WHETHER WHILE COMPUTI NG DEDUCTION UNDER SECTION 10B OF THE ACT, IN CASES WHERE THE ASSESSEE HAS UNABSORBED LOSSES OR DEPRECIATION, BROUGHT FORWARD FROM EARLIER YEARS, THEN WHETHER THE SAID UNABSORBED BUSINESS LOSSES / DEPRECIATION ARE TO BE ADJUSTED FROM THE GROSS TOTAL INCOME BEFORE ALLOWING THE DEDUCTION UNDER SECTION 10B OF THE ACT OR THE SAID LOSSES OR THE DEDUCTION UNDER SECTION 10B OF THE ACT IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE WITHOUT CONSIDERING THE BROUGHT FORWARD UNABSORBED LOSSES / DEPRECIATION, WHICH CAN B E SET OFF AGAINST THE OTHER INCOME OF ASSESSEE. BOTH THE AUTHORITIES BELOW HAD DENIED THE CLAIM TO THE ASSESSEE, IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN HIMASINGKA SEIDE LTD. VS. CIT (SUPRA). THE PERUSAL OF THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE SAID CASE REFLECTS THAT THE YEARS UNDER APPEAL RELATED TO ASSESSMENT YEARS 1988 - 89 TO 1990 - 91 I.E. THE YEARS WHERE THE BENEFIT UNDER SECTION 10B OF THE ACT WAS FOR BEING EXEMPT FROM TOTAL INCOME. HOWEVER, THE YEAR UNDER APPEAL BEFORE US IS ASSESSMENT YEAR 2005 - 06, WHEREIN THE SAID SECTION HAS BEEN AMENDED AND THE DEDUCTION NOW IS ALLOWABLE TO THE ASSESSEE AS AGAINST THE SAID INCOME BEING EXEMPT IN THE EARLIER YEARS. THE ISSUE IS SETTLED BY THE HONBLE BOMBAY HIGH COURT IN CIT V S. BLACK & VEATCH CONSULTING PVT. LTD. (2012) 348 ITR 72 (BOM), WHEREIN IT WAS HELD AS UNDER: - THE DEDUCTION UNDER S. 10A, HAS TO BE GIVEN EFFECT TO AT THE STAGE OF COMPUTING THE PROFITS AND GAINS OF BUSINESS. THIS IS ANTERIOR TO THE APPLICATION OF THE PROVISIONS OF S.72 WHICH DEALS WITH THE CARRY FORWARD AND SET OFF OF BUSINESS LOSSES. A DISTINCTION HAS BEEN MADE BY THE LEGISLATURE WHILE INCORPORATING THE PROVISIONS OF CHAPTER VI - A. SECTION 80A(1) STIPULATES THAT IN COMPUTING THE TOTAL INCOME OF AN AS SESSEE, THERE SHALL BE ALLOWED FROM HIS GROSS TOTAL INCOME, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THE CHAPTER, THE DEDUCTIONS SPECIFIED SUBJECT TO THE PROVISIONS OF THE CHAPTER, THE DEDUCTIONS SPECIFIED IN SS.80C TO 80U. S.80B(5) DEFINES FOR THE PURPOSE OF CHAPTER VI - A GROSS TOTAL INCOME TO MEAN THE TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, BEFORE MAKING ANY DEDUCTION UNDER THE CHAPTER. WHAT THE REVENUE IN ESSENCE SEEKS TO ATTAIN IS TO TELESCOPE THE PROVISIONS OF CHAPTER VI - A IN THE CONTENT OF THE DEDUCTION WHICH IS ALLOWABLE UNDE R S.10A, WHICH WOULD NOT BE PERMISSIBLE UNLESS A SPECIFIC STATUTORY PROVISION TO THAT EFFECT WERE TO BE MADE. IN THE ABSENCE THEREOF, SUCH AN APPROACH CANNOT BE ACCEPTED. THUS ITAT WAS CORRECT IN HOLDING THAT THE BROUGHT FORWARD UNABSORBED DEPRECIATION A ND LOSSES OF THE UNIT THE INCOME WHICH IS NOT ELIGIBLE FOR DEDUCTION UNDER S.10A OF THE ACT CANNOT BE SET OFF AGAINST THE CURRENT PROFIT OF THE ELIGIBLE UNIT FOR COMPUTING THE DEDUCTION UNDER S.10A OF THE IT ACT. 28. THE SAID PROPOSITION OF LAW HAS FURTH ER BEEN APPLIED BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. M/S. GANESH POLYCHEM LTD. IN INCOME TAX APPEAL NO.2083 OF 2012, ORDER DATED 25.02.2013 AND IN CIT VS. SCHMETZ INDIA PVT. LTD. (2012) 79 DTR (BOM) 356 AND ALSO BY THE HONBLE HIGH COURT OF GUJARAT IN CIT VS. ACE SOFTWARE EXPORTS LTD. IN TAX APPEAL NO.687 OF 2012, ORDER DATED 18.02.2013. THE MUMBAI BENCH OF TRIBUNAL HAS ALSO APPLIED THE SAID PROPOSITION IN VARIOUS CASES. 29. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN SYNCO INDUSTRIES LTD. VS. AO, (2008) 299 ITR 444 (SC), WHEREIN THE ISSUE WAS WHETHER WHILE COMPUTING THE QUANTUM OF DEDUCTION UNDER SECTION 80I(6) OF THE ACT, THE ASSESSING OFFICER HAS TO ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 10 TREAT THE PROFITS DERIVED FROM AN INDUSTRIAL UNDERTAKING AS ONLY SOURCE OF INCOME IN ORDER TO ARRIVE AT DEDUCTION UNDER CHAPTER VI - A. THE HONBLE SUPREME COURT HELD THAT THE GROSS TOTAL INCOME UNDER SECTION 80B(5) OF THE ACT, WHICH IS ALSO REFERRED TO IN SECTION 80I(1) OF THE ACT, WAS REQUIRED TO BE COMPUTED IN MANNER PROVIDED UNDER THE ACT, WHICH PRE - SUPPOSES THAT GROSS TOTAL INCOME SHALL BE ARRIVED AT AFTER ADJUSTING LOSSES OF OTHER DIVISION AGAINST PROFITS DERIVED FROM AN INDUSTRIAL UNDERTAKING. TH E ISSUE BEFORE THE HONBLE SUPREME COURT IS AT VARIANCE WITH THE ISSUE BEFORE US AND THE SAID RATIO IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE ISSUE IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH C OURT IN CIT VS. BLACK & VEATCH CONSULTING PVT. LTD. (SUPRA), WHEREIN DEDUCTION UNDER SECTION 10A OF THE ACT WAS TO BE COMPUTED IN THE HANDS OF ASSESSEE AND THE SAME WAS WHETHER THE BROUGHT FORWARD LOSSES HAD TO BE ADJUSTED BEFORE COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT. IT MAY BE POINTED OUT THAT THE PROVISIONS OF SECTION 10A AND 10B OF THE ACT ARE AT PARAMETRIA. FOLLOWING THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT, WE HOLD THAT THE DEDUCTION UNDER SECTION 10B OF THE ACT IS TO BE COMPUT ED IN THE HANDS OF THE ASSESSEE BEFORE ADJUSTING BROUGHT FORWARD UNABSORBED LOSSES / DEPRECIATION. THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 6. THE SAID RATIO LAID DOWN BY THE TRIBUNAL WAS LATER APPLIED WHILE DECIDING SIMILAR IS SUE IN PRECISION CAMSHAFTS LIMITED VS. ACIT (SUPRA). THE TRIBUNAL VIDE ORDER DATED 10.11.2015 AFTER CONSIDERING THE RATIO LAID DOWN BY THE TRIBUNAL IN M/S. VISHAY COMPONENTS INDIA PVT. LTD. VS. ADDL.CIT & ANR. (SUPRA), OBSERVED AS UNDER: - 17. THE TRIBUN AL RELYING ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. BLACK & VEATCH CONSULTING PVT. LTD. (2012) 348 ITR 72 (BOM) AND OTHER DECISIONS OF THE HONBLE BOMBAY (2012) 348 ITR 72 (BOM) AND OTHER DECISIONS OF THE HONBLE BOMBAY HIGH COURT, HELD THAT THE DEDUCTION UNDER SECTION 10B OF THE ACT WAS TO BE C OMPUTED BEFORE ADJUSTING BROUGHT FORWARD UNABSORBED LOSSES / DEPRECIATION. THE FACTS ARISING IN THE PRESENT CASE ARE SIMILAR TO THE FACTS BEFORE THE TRIBUNAL IN VISHAY COMPONENTS INDIA PVT. LTD. VS. ADDL.CIT & ANR. (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT THE DEDUCTION UNDER SECTION 10B OF THE ACT WOULD BE ALLOWED TO THE ASSESSEE IN THE FIRST INSTANCE BEFORE ALLOWING THE ADJUSTMENT ON ACCOUNT OF BROUGHT FORWARD DEPRECIATION LOSSES, THE DEDUCTION UNDER SECTION 10B OF THE ACT IS TO BE FIRST ALLOWED AGAINST THE ELIGIBLE PROFITS AND IN CASE THERE ARE ANY LEFTOVER PROFITS, THEN THE SAME ARE TO BE ADJUSTED AGAINST BROUGHT FORWARD UNABSORBED DEPRECIATION / LOSS AS CLAIMED BY THE ASSESSEE IN ITS RETURN OF INCOME. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO RE - COMPUTE THE DEDUCTION UNDER SECTION 10B OF THE ACT IN THE HANDS OF THE ASSESSEE. THE ADDITIONAL GROUND OF APPEAL NOS.1 AND 2 RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 7. THE ISSUE ARISING BEFORE US IS IN RELATION TO THE COMPUTATI ON OF DEDUCTION UNDER SECTION 10A OF THE ACT, WHICH ADMITTEDLY IS PARAMATRIA TO SECTION 10B OF THE ACT AND HENCE, THE RATIO LAID DOWN BY THE TRIBUNAL IN M/S. VISHAY COMPONENTS INDIA PVT. LTD., VS. ADDL.CIT (SUPRA) AND PRECISION CAMSHAFTS LIMITED VS. ACIT ( SUPRA), IS SQUARELY APPLICABLE. 8. ANOTHER ASPECT TO BE CONSIDERED IN THE PRESENT CASE IS THE ARGUMENTS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE THAT THE RATIO IS COVERED BY THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CIT VS. HIMAT SINGKA SEIDA LTD. (SUPRA), APPEAL AGAINST WHICH, HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT. BEFORE THE HONBLE ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 11 KARNATAKA HIGH COURT, THE YEARS INVOLVED WERE ASSESSMENT YEARS 1988 - 89 TO 1990 - 91 I.E. THE YEAR, WHERE THE BENEFIT UNDER SECTION 10B OF TH E ACT WAS EXEMPT. THE TRIBUNAL WHILE DECIDING THE ISSUE IN M/S. VISHAY COMPONENTS INDIA PVT. LTD., VS. ADDL.CIT (SUPRA) HAD TAKEN NOTE OF THE DECISION OF THE HONBLE SUPREME COURT AND THE HONBLE KARNATAKA HIGH COURT IN HIMATSINGKA SEIDA LTD. (SUPRA) IN P ARA 27 OF THE ORDER AND THEREAFTER, APPLIED THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. BLACK & VEATCH CONSULTING PVT. LTD. (SUPRA) AND PARA 27 OF THE ORDER HAS ALREADY BEEN REPRODUCED HEREINABOVE. IN THE TOTALITY OF THE ABOVE SAID FAC TS AND CIRCUMSTANCES, WE FIND NO MERIT IN THE OBJECTIONS RAISED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. FOLLOWING THE RATIO LAID DOWN BY THE TRIBUNAL IN M/S. VISHAY COMPONENTS INDIA PVT. LTD., VS. ADDL.CIT (SUPRA) AND PRECISION CAMSHAF TS LIMITED VS. ACIT (SUPRA), WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT BEFORE SETTING UP OF BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION. THE DEDUCTION UNDER SECTION 10A OF THE ACT IS FIRST ALLOWED AGAINST THE ELIGIBLE PROFITS AND IN CASE THERE ARE CERTAIN LEFT OVER PROFITS FOR THE YEAR UNDER APPEAL, THEN THE SAME ARE TO BE ADJUSTED AGAINST THE BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION / LOSS AS CLAIMED BY THE ASSESSEE IN RETURN OF INCOME. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO RE - COMPUTE THE DEDUCTION UNDER SECTION 10A OF THE ACT. THE GROUNDS OF APPEAL NOS.1 AND 7 RAISED BY THE ASSESSEE ARE THUS, ALLOWED AND BALANCE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE DISMISSED BEING ARGU MENTATIVE. 1 3 . THE ISSUE ARISING VIDE GROUND OF APPEAL NO.3 IS IDENTICAL TO THE ISSUE BEFORE THE TRIBUNAL (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE DIRECT BEFORE THE TRIBUNAL (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE DIRECT THE ASSESSING OFFICER TO RE - COMPUTE THE DEDUCTION UNDER SECTION 10A OF THE ACT IN LINE WITH THE DIRECTIONS OF TRIBUNAL IN PARA 8. THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 1 4 . THE ISSUE IN GROUND OF APPEAL NO.4 IS WITH REGARD TO TRANSFER PRICING ADJUSTMENT MADE BY THE ASSESSING OFFICER AS PER THE DIRECTIONS OF DRP AND TPO WITH REGARD TO THE INTEREST ON LOANS TO ASSOCIATE ENTERPRISES. 1 5 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, REFERENCE UNDER SECTION 92CA(1) OF THE ACT WAS MADE, FOR DETERMINATION OF ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTION. THE ASSE SSEE HAD ADVANCED LOANS TO ITS SUBSIDIAR IES KPIT INFOSYSTEMS CENTRAL EUROPE S P . Z.O.O., POLAND , KPIT INFOSYSTEMS LTD., UK AND KPIT INFOSYSTEMS, FRANCE, SAS . THE TPO PROPOSED AN ADJUSTMENT IN THE ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 12 AFORESAID INTERNATIONAL TRANSACTION AS THE ASSESSEE HAD ADVA NCED THE SAID LOANS AT A RAT E WHICH WAS LESS THAN BASE CHARGE. THE ASSESSEE HAD ON ITS OWN MOTION MADE AN ADJUSTMENT OF RS. 20,41,738/ - . THE TPO PROPOSED AN ADJUSTMENT OF RS. 32,99,487/ - ON ACCOUNT OF DIFFERENCE BETWEEN THE RATE CHARGED BY THE ASSESSEE I.E . EITHER LIBOR OR WIBOR AS AGAINST THE BANK PRIME LENDING RATES OF SBI AT 12.25%. THE ADJUSTMENT WAS PROPOSED BY THE TPO ON ACCOUNT OF DIFFERENCE BETWEEN BPLR RATES OF 12.25% AND THE RATE CHARGED BY THE ASSESSEE UNDER WIBOR / LIBOR. THE CASE OF THE ASSES SING OFFICER WAS THAT SINCE LOAN WAS GIVEN TO THE ASSOCIATE ENTERPRISES IN THE CURRENCY OF THAT COUNTRY, DOES NOT MEAN THAT THE LOAN WAS IN FOREIGN CURRENCY FOR THE ASSOCIATE ENTERPRISES . AFTER CONSIDERING THE OBJECTIONS OF THE ASSESSEE, THE TPO PROPOSED THE AFORESAID ADJUSTMENT, WHICH WAS UPHELD BY THE DRP. 1 6 . WE FIND THAT SIMILAR ISSUE OF ADJUSTMENT ON ACCOUNT OF ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS IN RELATION TO INTEREST CHARGED BY THE LENDER TO ITS OF INTERNATIONAL TRANSACTIONS IN RELATION TO INTEREST CHARGED BY THE LENDER TO ITS ASSO CIATE ENTERPRISES, AROSE BEFORE THE TRIBUNAL IN VARROC ENGINEERING PVT. LTD. VS. ACIT IN ITA NO.2482/PN/2012, RELATING TO ASSESSMENT YEAR 2008 - 09 , ORDER DATED 30.12.2014 . THE TRIBUNAL HELD AS UNDER: - 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST ISSUE RAISED I N THE PRESENT APPEAL IS AGAINST THE TRANSFER PRICING ADJUSTMENT MADE IN THE HANDS OF THE ASSESSEE. THE ASSESSEE WAS ENGAGED IN THE MANUFACTURE OF POLYMER ENGINEERING AND ELECTRIC GOODS AND WIND POWER GENERATION. THE ASSESSEE WAS A PART OF VARROC GROUP, C ATERED TO THE NEEDS OF INDIAN AUTO COMPONENT INDUSTRY. DURING THE FINANCIAL YEAR, THE ASSESSEE HAD UNDERTAKEN THE FOLLOWING INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES: - SR NO. NATURE OF TRANSACTIONS AMOUNT OF TRANSACTIONS METHOD ADOPTED 1. DISBURSEMENT OF LOAN 7,66,740 CUP 2. REPAYMENT OF LOAN 2,79,10,000 CUP 3. INTEREST RECEIVABLE 2,91,82,060 CUP 4. PART CONVERSION OF CAPITAL INTO LOAN 57,24,00,000 CUP TOTAL 63,02,58,800 12. THE ASSESSEE HAD PARTLY CONVERTED ITS CAPITAL INVESTED IN THE ASSOCIATED ENTERPRISES INTO LOAN TRANSACTIONS AND THE SOURCE OF THE SAID CAPITAL WAS LOAN ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 13 OBTAINED FROM CITI BANK. THE TPO NOTED THAT THE ASSESSEE HAD DIVERTED PART OF THE LOAN RAISED FROM CITI BANK TO ITS ASSOCIATED ENTERPRISES, FOR RAISING THE L OAN CHARGE HAD BEEN CREATED AGAINST THE ASSETS OF THE ASSESSEE COMPANY. AS PER TPO, THE INDIAN BANKS WERE LENDING THE MONEY AT BPLR RATES PREVAILING IN INDIA ON THE SECURITY OF THE ASSETS OF THE COMPANY, WHEREAS THE ASSESSEE HAD CHARGED INTEREST RATE OF 4 .75% TO ITS ASSOCIATED ENTERPRISES ON SUCH LOAN DISBURSEMENT. 13. DURING THE YEAR UNDER CONSIDERATION, INTEREST OF RS.2,91,82,060/ - HAD ACCRUED AS INTEREST ON LOAN GRANTED TO ITS ASSOCIATED ENTERPRISES. THE ASSESSEE HAD GRANTED LOAN TO M/S. VARROC EUROPE AN HOLDING BV NETHERLANDS EURO 1,00,00,000 AND REPAYMENT OF LOAN OF EURO 5,00,000, HENCE DURING THE YEAR, THE EFFECTIVE LOAN AMOUNTED TO EURO 96,30,000 WHICH WAS EQUIVALENT TO RS.55,21,57,400/ - . THE ASSESSEE HAD CHARGED INTEREST @ 4.75% PER ANNUM. AS PER THE TPO, THE RATE PREVAILING AS PER LIBOR +, FOR THE YEAR ENDING 31.03.2008 WAS 6.79%. THE TPO TABULATED THE TRANSACTIONS OF GRANTING OF LOAN AND THE INTEREST CHARGED BY THE ASSESSEE AND COMPUTED THE PROPOSED ADJUSTMENT AS UNDER: - (AMT. IN RS.) DESC RIPTION VARROC EUROPEAN HOLDING BV NETHERLANDS [A] LOAN ADVANCED / BALANCE OF LOAN AT THE YEAR ENDING 31.03.2008 RS.59.43 CRS. (FIGURES AS PER THE FINANCIALS) [B] BASE CHARGE ADOPTED BY THE ASSESSEE LIBOR [C] BASE CHARGE ADOPTED BY THE ASSESSEE TO BENCH MARK THE TRANSACTION HOWEVER, RATE CHARGED BY THE ASSESSEE = 4.75% [D] BANK PRIME LENDING RATE (BPLR) OF SBI AS ON 31.03.2008 12.25% [E] RATE CHARGED BY THE ASSESSEE 4.75% ASSESSEE [F] INTEREST CHARGED BY THE ASSESSEE RS.2,86,27,089 [G] THE RATE PREVAILING AS P ER 6 MONTHS LIBOR FOR THE YEAR ENDED 31.03.2008 WAS 6.79% RS.4,03,52,970 [H] INTEREST @ 12.25% AS PER BPLR OF SBI RS.7,28,00,000 [I] DIFFERENCE IN BPLR AND ASSESSEES AMOUNT RS.4,41,74,661 [J] PROPOSED ADJUSTMENT RS.4,41,74,661 14. THE ASSESSEE HAD B ENCHMARKED ITS INTERNATIONAL TRANSACTIONS TAKING THE INTEREST RATE CHARGED AT INTERNATIONAL RATES OF THE DISBURSING BANK I.E. CITI BANK. HOWEVER, THE TPO WAS OF THE VIEW THAT LOAN GIVEN TO THE ASSOCIATED ENTERPRISES IN THE CURRENCY OF THAT COUNTRY WAS NOT A FOREIGN CURRENCY DEPOSIT WITH ASSOCIATED ENTERPRISES. ON THE OTHER HAND, THE ASSESSEE HAD BORROWED THE MONEY ON BANKING PRIME LENDING RATES AND WAS SHOW CAUSED BY THE TPO AS TO WHY LENDING RATE FOR THE PURPOSE OF COMPARABILITY FOLLOWING CUP METHOD SHOU LD NOT BE TAKEN. THE TPO IN VIEW OF THE RELATED DISCUSSION FOUND THAT THE ARM'S LENGTH PRICE COMPUTED BY THE ASSESSEE IN RESPECT OF THE INTERNATIONAL TRANSACTIONS RELATING TO PROVISION OF INTEREST, WAS NOT ACCEPTABLE. THE VIEW OF THE TPO WAS THAT IN NORM AL CIRCUMSTANCES WHERE ANY ADVANCE HAD TO BE GIVEN TO ANY UNRELATED ENTITY, THEN THE RATE OF INTEREST CHARGEABLE WOULD BE HIGHER THAN THE BPLR. SINCE THE HIGHER RATE OF INTEREST MORE THAN BPLR WAS NEITHER ASCERTAINABLE NOR DETERMINABLE, THE TPO CONSIDERED IT SUITABLE TO BENCHMARK THE INTERNATIONAL TRANSACTIONS WITH BENCHMARK OF INTEREST TAKEN AS BPLR. ACCORDINGLY, RATE OF 12.25% I.E. THE BPLR OF THE SBI WAS TAKEN AS BENCHMARK RATE AND THE DIFFERENTIAL QUANTUM OF INTEREST ON THE LOAN ADVANCED TO THE ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 14 SUBSID IARIES, AMOUNTING TO RS.4,41,74,661/ - WAS ADDED TO THE VALUE OF INTERNATIONAL TRANSACTIONS TO ARRIVE AT THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS. THE TPO DIS - REGARDED THE LIBOR+ RATE OF 6.75% AS NOT THE BENCHMARK APPLIED BY THE ASSESSEE AS ACCORDING TO THAT RATE, THE INTEREST SHOULD HAVE BEEN CHARGED AT RS.4,03,52,970/ - WHEREAS IT HAD ONLY CHARGED RS.2,86,27,089/ - . IN VIEW THEREOF, AN ADJUSTMENT OF RS.4,41,74,661/ - WAS MADE IN THE HANDS OF THE ASSESSEE. THE SAID ORDER OF TPO HAS BEEN UPHE LD BY DRP. 15. IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD ADVANCED MONEY IN THE FORM OF SHARE APPLICATION MONEY WHICH WERE LATER CONVERTED INTO LOAN ON THE ADVICE OF EUROPEAN CONSULTANTS. ON SUCH ADVANCE MADE TO ITS ASSOCIATED ENTERPRISES, THE AS SESSEE HAD CHARGED INTEREST @ 4.75%. WHILE BENCHMARKING THE INTERNATIONAL TRANSACTIONS WHAT HAS TO BE SEEN IS THE COMPARISON BETWEEN RELATED TRANSACTIONS I.E. WHERE THE ASSESSEE HAS ADVANCED MONEY TO ITS ASSOCIATED ENTERPRISES AND CHARGED INTEREST THEN TH E SAID TRANSACTION IS TO BE COMPARED WITH A TRANSACTION AS TO WHAT RATE THE ASSESSEE WOULD HAVE CHARGED, IF IT HAD EXTENDED THE LOAN TO THE THIRD PARTY IN FOREIGN COUNTRY. ONCE THERE IS A TRANSACTION BETWEEN THE ASSESSEE AND ITS ASSOCIATED ENTERPRISES IN FOREIGN CURRENCY, THEN THE TRANSACTION WOULD HAVE TO BE LOOKED UPON BY APPLYING THE COMMERCIAL PRINCIPLES WITH REGARD TO THE INTERNATIONAL TRANSACTIONS. IN THAT CASE, THE INTERNATIONAL RATES FIXED BEING LIBOR+ RATES WOULD HAVE AN APPLICATION AND THE DOMES TIC PRIME LENDING RATES WOULD NOT BE APPLICABLE. THE ASSESSEE HAS FURTHER EXPLAINED THAT IT HAD RAISED THE LOAN FROM CITI BANK ON INTERNATIONAL RATES FOR THE PURPOSE OF INVESTMENT IN THE SHARE APPLICATION MONEY OF ITS ASSOCIATED ENTERPRISES, WHICH IN TURN WAS PARTLY CONVERTED FROM CAPITAL INTO LOAN. WHERE THE ASSESSEE HAD A COMPARABLE OF BORROWING LOAN ON INTERNATIONAL RATES AND ADVANCING TO ITS ASSOCIATED ENTERPRISES, THEN THE SAID COMPARABLE WAS TO BE APPLIED FOR BENCHMARKING THE TRANSACTION OF ADVANCIN G THE LOAN ON INTEREST TO ITS ASSOCIATED ENTERPRISES. THE ASSESSEE HAD CHARGED INTEREST RATE OF 4.75% ON THE LOAN ADVANCED TO THE ASSOCIATED ENTERPRISES. THE ASSESSEE ON THE OTHER HAND, CLAIMS THAT IT HAD BORROWED THE MONEY ON LIBOR+ RATES I.E. INTERNATI ONAL HAND, CLAIMS THAT IT HAD BORROWED THE MONEY ON LIBOR+ RATES I.E. INTERNATI ONAL RATES, WHICH WERE JAPANES BASED LIBOR+ RATES WHICH WERE LOWER THAN THE US BASED LIBOR+ RATES. THE PLEA OF THE ASSESSEE BEFORE US WAS THAT IT HAD ADVANCED THE LOAN TO ITS ASSOCIATED ENTERPRISES ON LIBOR+ RATES I.E. 4.75%. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES WHERE THE ASSESSEE HAS THE INTERNAL CUP OF OPERATING AT INTERNATIONAL RATES AVAILABLE AND SINCE THE SAID LOAN RAISED BY THE ASSESSEE AT INTERNATIONAL RATES WAS ADVANCED TO ITS ASSOCIATED ENTERPRISES, WE FIND NO MERIT IN THE ORDER OF THE TPO IN APPLYING THE DOMESTIC LOAN RATES I.E. BPLR RATES FOR BENCHMARKING TRANSACTION OF CHARGING OF INTEREST ON THE LOANS ADVANCED TO THE ASSOCIATED ENTERPRISES BY THE ASSESSEE. WHERE THE ASSESSEE HAD MADE THE BORROWINGS ON LIBOR+ RATES AND ADVANCED THE S AME AT LIBOR+ RATES, THEN THE SAID TRANSACTION IS AT ARM'S LENGTH PRICE AND THERE IS NO MERIT IN ANY ADJUSTMENT TO BE MADE ON THIS ACCOUNT. 16. THE CHENNAI BENCH OF THE TRIBUNAL IN M/S. SIVA INDUSTRIES & HOLDINGS LIMITED VS. ACIT, CHENNAI (2012) 26 TAXMAN N.COM 96 (CHENNAI) HAD HELD AS UNDER: - THE ASSESSEE HAD GIVEN THE LOAN TO THE ASSOCIATED ENTERPRISES IN US DOLLARS, AND ASSESSEE WAS ALSO RECEIVING INTEREST FROM THE ASSOCIATED ENTERPRISES IN INDIAN RUPEES. ONCE THE TRANSACTION BETWEEN THE ASSESSEE AND THE ASSOCIATED ENTERPRISES WAS IN FOREIGN CURRENCY AND THE TRANSACTION WAS AN INTERNATIONAL TRANSACTIONS, THEN THE TRANSACTION WOULD HAVE TO BE LOOKED UPON THE APPLYING THE COMMERCIAL PRINCIPLES IN REGARD TO INTERNATIONAL TRANSACTIONS. IF THAT WAS SO, THE N THE DOMESTIC PRIME LENDING THE RATE WOULD HAVE NO APPLICABILITY AND THE INTERNATIONAL RATE FIXED BEING LIBOR WOULD COME INTO PLAY. IN THE CIRCUMSTANCES, THE VIEW THAT LIBOR RATE HAD TO BE CONSIDERED WHILE DETERMINING THE ARM'S LENGTH PRICE INTEREST RATE IN RESPECT OF THE TRANSACTION BETWEEN THE ASSESSEE AND THE ASSOCIATED ENTERPRISES WAS TO BE UPHELD. AS IT WAS NOTICED THAT ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 15 THE AVERAGE OF THE LIBOR RATE FOR 1 - 4 - 2005 TO 31 - 3 - 2006 IS 4.42 PER CENT AND THE ASSESSEE HAD CHARGED INTEREST AT 6 PER CENT WHICH WAS HIGHER THAN THE LIBOR RATE, NO ADDITION ON THIS ACCOUNT WAS LIABLE TO BE MADE IN THE HANDS OF THE ASSESSEE. IN THE CIRCUMSTANCES, THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS COUNT WAS DELETED. 17. THE MUMBAI BENCH OF THE TRIBUNAL IN DCIT VS. TECH MAHINDRA LTD. (2011) 12 TAXMANN.COM 132 (MUM.) HELD THAT WHERE THERE IS A CHOICE BETWEEN THE INTEREST RATE OF CURRENCY OTHER THAN THE CURRENCY IN WHICH TRANSACTION HAD TAKEN PLACE AND THE INTEREST RATE IN RESPECT OF THE CURRENCY IN WHICH TRANSACTION H AS TAKEN PLACE, THE LATTER SHOULD BE ADOPTED. WHERE THE TRANSACTION IS BETWEEN THE ASSESSEE AND ITS ASSOCIATED ENTERPRISES IN FOREIGN CURRENCY AND THE TRANSACTION IS INTERNATIONAL TRANSACTION, THEN THE TRANSACTION WOULD HAVE TO BE LOOKED UPON BY APPLYING COMMERCIAL PRINCIPLES IN REGARD TO INTERNATIONAL TRANSACTIONS. 18. SIMILAR PRINCIPLE HAS BEEN LAID DOWN BY THE MUMBAI BENCH OF THE TRIBUNAL IN HINDUJA GLOBAL SOLUTIONS LTD. VS. ACIT (2013) 35 TAXMANN.COM 348 (MUMBAI TRIB.). 19. IN THE ENTIRETY OF THE ABOVE FACTS AND CIRCUMSTANCES, WE HOLD THAT WHERE THE ASSESSEE HAD ENTERED INTO A TRANSACTION WITH ITS ASSOCIATED ENTERPRISES IN FOREIGN CURRENCY, AND THE TRANSACTIONS WERE INTERNATIONAL TRANSACTIONS, THEN THE SAME HAD TO BE LOOKED INTO BY APPLYING COMMER CIAL PRINCIPLE IN REGARD TO INTERNATIONAL TRANSACTIONS. IN THE FACTS OF PRESENT CASE, THE ASSESSEE HAD BORROWED THE LOAN FROM CITI BANK AND ADVANCED THE SAME ON LIBOR+ RATES TO ITS ASSOCIATED ENTERPRISES, THEN THE SAID TRANSACTION WITH ITS ASSOCIATED ENTE RPRISES IS WITHIN ARM'S LENGTH PRICE. THE TPO / AO THUS, DIRECTED TO RE - COMPUTE THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS. ANOTHER ASPECT TO BE KEPT IN MIND IS THE PLEA OF THE ASSESSEE WITH REGARD TO THE INTEREST RECEIVABLE. THE ASSESSEE HAD ALSO RAISED THE ISSUE THAT THE TPO HAD ADOPTED RECEIVABLE. THE ASSESSEE HAD ALSO RAISED THE ISSUE THAT THE TPO HAD ADOPTED THE INTEREST RECEIVABLE FROM ASSOCIATED ENTERPRISE COMPANY AT RS.2,86,27,089/ - INSTEAD OF RS.2,91,82,060/ - WHICH IS DISCLOSED IN THE AUDIT REPORT IN FORM NO.3CEB. THE ASSESSING OFFICER IS ALSO DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE IN THIS REGARD AND COMPUTE THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS. REASONABLE OPPORTUNITY OF BEING HEARD SHALL BE AFFORDED TO THE ASSESSEE BY THE ASSESSING OFFICER / TRANSFER PRICING OFFICER. THE GROUND S OF APPEAL NOS.1 AND 2 RAISED BY THE ASSESSEE ARE THUS, ALLOWED AS INDICATED ABOVE. 17. FURTHER, THE HONBLE BOMBAY HIGH COURT IN CIT VS. TATA AUTOCOMP SYSTEMS LTD. REPORTED IN 56 TAXMAN.COM 206 (BOM) HAD ALSO LAID DOWN SIMILAR PROPOSITION THAT THE ARM' S LENGTH PRICE IN THE CASE OF LOAN ADVANCED TO ASSOCIATE ENTERPRISES WOULD BE DETERMINED ON THE BASIS OF RATE OF INTEREST BEING CHARGED IN THE COUNTRY WHERE THE LOAN IS RECEIVED / CONSUMED. 18. THE PUNE BENCH OF TRIBUNAL IN VARROC ENGINEERING PVT. LTD. VS . ACIT (SUPRA) HAD ALSO LAID DOWN SIMILAR PROPOSITION AND DIRECTED THE ASSESSING OFFICER/TPO TO VERIFY THE CLAIM OF THE ASSESSEE VIS - - VIS THE BORROWALS OF LOANS, ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 16 WHICH IN TURN, WERE ADVANCED AT LIBOR + RATE TO THE ASSOCIATE ENTERPRISES, IN CASE THE ADVANC EMENT OF LOAN TO THE ASSOCIATE ENTERPRISES IS ON LIBOR+ / WIBOR+ RATES, THEN THE SAID TRANSACTION WITH THE ASSOCIATE ENTERPRISES IS WITHIN ARM'S LENGTH PRICE, OTHERWISE, THE TPO MAY RE - COMPUTE THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS. FOLLOWIN G THE SAME PARITY OF REASONING, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE ADJUSTMENT, IF ANY, IN THE HANDS OF ASSESSEE, AFTER VERIFYING THE CLAIM OF THE ASSESSEE. THE GROUND OF APPEAL NO.4 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 19. THE ISSUE IN GR OUND OF APPEAL NO.5 IS AGAINST THE DISALLOWANCE UNDER SECTION 14A OF THE ACT, WHICH IS NOT PRESSED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AND HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 20. THE NEXT ISSUE VIDE GROUND OF APPEAL NO.6 IS WHETHER WHILE COMPUTING THE BOOK PROFITS UNDER SECTION 115JB OF THE ACT, DISALLOWANCE UNDER SECTION 14A IS TO BE ADDED BACK. 21. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE SAID ISSUE IS ALSO COVERED BY THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN VARROC ENGINEERING PVT. LTD. VS. ACIT (SUPRA) THAT WHILE COMPUTING BOOK PROFITS UNDER SECTION 115JB OF THE ACT, NO ADDITION IS TO BE MADE ON ACCOUNT OF DISALLOWANCE UNDER SECTION 14A OF THE ACT. IN VIEW OF THE DECISION OF PUNE BENCH OF TRIBUNAL, WE FIND NO MERIT IN THE RELIANCE PLACED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. THE TRIBUNAL WHILE DECIDING THE ISSUE IN PARA 42 HAD HELD AS UNDER: - 42. THE ISSUE BEFORE US IS IDENTICAL TO THE ISSUE BEFOR E THE CHANDIGARH BENCH OF THE TRIBUNAL IN NAHAR INDUSTRIAL ENTERPRISES LTD., VS. DCIT (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT, WHILE COMPUTING ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 17 THE BOOK PROFITS U/S 115JB OF THE ACT. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO RE - COMPUTE THE BOOK PROFITS UNDER SECTION 115JB OF THE ACT. THE GROUND OF APPEAL NO.5 IS THUS, ALLOWED. 22. IN RESPECT OF GROUND OF APPEAL NO.6, THE LEARNED DEPARTMENTAL REP RESENTATIVE FOR THE REVENUE POINTED OUT THAT THE ISSUE WAS DECIDED AGAINST THE ASSESSEE BY THE MUMBAI BENCH OF TRIBUNAL IN DABUR INDIA LTD. VS. ACIT (2013) 37 TAXMANN.COM 289 (MUMBAI TRIB ). HOWEVER, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF PUNE BENCH OF TRIBUNAL. 2 3 . ACCORDINGLY, WE HOLD THAT IN VIEW OF THE ISSUE BEING SQUARELY COVERED BY THE ORDERS OF PUNE BENCH OF TRIBUNAL, THE ASSESSING OFFICER IS DIRECTED TO EXCLUDE THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT, WHILE C OMPUTING BOOK PROFITS UNDER SECTION 115JB OF THE ACT. 2 4 . THE LAST ISSUE VIDE GROUND OF APPEAL NO.7 RAISED BY THE ASSESSEE IS AGAINST THE ADDITION MADE OF RS. 56,21,030/ - ON ACCOUNT OF DISALLOWANCE OF AGAINST THE ADDITION MADE OF RS. 56,21,030/ - ON ACCOUNT OF DISALLOWANCE OF PROVISION MADE FOR BAD AND DOUBTFUL DEBTS DEBITED TO TH E PROFIT & LOSS ACCOUNT WHILE COMPUTING THE BOOK PROFITS UNDER SECTION 115JB OF THE ACT. 2 5 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY POINTED OUT THAT THE ISSUE IS DECIDED AGAINST THE ASSESSEE SINCE THE LAW IN THIS REGARD WAS AMENDE D ON A LATER DATE THAN THE CLAIM OF THE ASSESSEE. IN VIEW OF THE CONCESSION OF THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE, THE GROUND OF APPEAL NO.7 RAISED BY THE ASSESSEE IS DISMISSED. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, P ARTLY ALLOWED. 2 6 . NOW, COMING TO THE APPEAL FILED BY THE ASSESSEE IN ITA NO.526/PN/2014 . ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 18 27 . THE ASSESSEE IN ITA NO.526/PN/2014 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ALL THE GROUNDS OF APPEALS ARE INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER 1. THE LEARNED AO AND TPO ERRED IN LAW AND ON FACTS IN PROPOSING AND HON'BLE DRP PUNE ERRED IN LAW AND ON FACTS IN ACCEPTING THE PROPOSAL FOR ADDITION OF RS.84,48,452/ - TO THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTION RELATED TO INTEREST RECEIVED / RECEIVABLE ON LOANS EXTENDED TO AE COMPANY. 2. THE LEARNED AO AND TPO ERRED IN LAW AND ON FACTS IN PROPOSING AND HON'BLE DRP PUNE ERRED IN LAW AND ON FACTS IN ACCEPTING THE BENCHMARKING OF THE FOREIGN CURRENCY LOANS GIVEN TO ITS AES FOR THE EXCLUSIVE B ENEFIT OF THE ASSESSEE BY BENCHMARKING WITH THE SBI INR DOMESTIC LENDING RATES AS AGAINST APPROPRIATE LIBOR BASED RATE APPLICABLE TO SUCH INTERNATIONAL TRANSACTIONS. 3. THE LEARNED AO ERRED IN LAW AND ON FACTS IN NOT GRANTING CREDIT FOR THE FULL TAXES PA ID BY THE COMPANY INCLUDING TAXES DEDUCTED AT SOURCE FROM THE PAYMENT RECEIVED BY THE COMPANY FROM ITS CUSTOMERS. 4. THE APPELLANT CRAVES LEAVES TO ADD, MODIFY, ALTER, AMEND, OR WITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL HEREIN AND TO SUBMIT SUCH STATE MENTS, DOCUMENTS AND PAPERS AS MAY BE CONSIDERED NECESSARY EITHER AT OR BEFORE THE APPEAL HEARING. 2 8 . THE ISSUE IN GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE ASSESSEE IS WITH 2 8 . THE ISSUE IN GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE ASSESSEE IS WITH REGARD TO ADDITION PROPOSED ON ACCOUNT OF ARM'S LENGTH PRICE OF INTERNATIONAL T RANSACTION RELATING TO INTEREST RECEIVED / RECEIVABLE ON LOANS EXTENDED TO THE ASSOCIATE ENTERPRISE COMPANIES. 2 9 . THE ISSUE RAISED IN GROUNDS OF APPEAL NO.1 AND 2 IS IDENTICAL TO THE ISSUE IN GROUND OF APPEAL NO.4 IN ASSESSMENT YEAR 2008 - 09 AND FOLLOWING THE SAME PARITY OF REASONING, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE STAND OF ASSESSEE AND NO ADDITION IS TO BE MADE ON ACCOUNT OF BPLR RATES, BUT IF THE INTEREST RATES CHARGED BY THE ASSESSEE ARE ON ACCOUNT OF LIBOR+ / WIBOR+, THEN THE SAME IS TO BE ACCEPTED AS AT ARM'S LENGTH. ACCORDINGLY, THE GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE ASSESSEE ARE ALLOWED. ITA NO. 247 /PN/201 3 ITA NO.526/PN/2014 KPIT CUMMINS INFOSYSTEMS LTD 19 30 . THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS NOT PRESSED, HENCE, THE SAME IS DISMISSED AS NOT PRESSED. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. 31 . IN THE RESULT, BOTH THE APPEAL S OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER P RONOUNCED ON THIS 24 TH DAY OF FEBRUARY , 201 6 . SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 24 TH FEBRUARY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT ; 1. 2. THE RESPONDENT; 3. THE DIT (INTL. TAXATION), PUNE ; 4. THE DRP, PUNE ; 5. THE DR A , ITAT, PUNE; 6. GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE