M/s. A.T. Kearney India Pvt. Ltd., Gurgaon V. Addl. CIT, New Delhi

ITA 348/DEL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7433 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 20-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 18-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PEEYUSH JAIN; YOGESH K V ERMA CIT DRS
• Assessee Lawyers: VIKAS JAIN ADVS
• Keywords: Depreciation; Transfer pricing; Residential status; International transaction; Unabsorbed depreciation
• Section: 115JB; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I, NEW DELHI BEFORE SH. R. S. SYAL, AM AND SH. GEORGE GEORGE K. , JM ITA NO. 348/DEL/2013 : ASSTT. YEAR : 2009-10 M/S A. T. KEARNEY INDIA PVT. LTD., 14 TH FLOOR, TOWER D, GLOBAL BUSINESS PARK, GURGAON-122002(HARYANA) VS ADDITIONAL COMMISSIONER OF INCOME-TAX, RANGE-1, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AADCA1436G ASSESSEE BY : SH. SALIL KAPOOR & VIKAS JAIN, ADVS. REVENUE BY : SH.PEEYUSH JAIN & YOG ESH K. VERMA, CIT DRS DATE OF HEARING : 20.8.2014 DATE OF PRONOUNCEMENT : 26.8.2014 ORDER PER R. S. SYAL, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 6.12.2012 IN RELATION TO THE ASSESSME NT YEAR 2009-10. 2. THE ASSESSEE HAS FILED CONCISE GROUNDS. GROUND N O. 1, 2 & 5 ARE NOT PRESSED. THESE, THEREFORE, STAND DISMISSED. ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 2 3. THE MAJOR ISSUE ARGUED ON BEHALF OF THE ASS ESSEE IS THE SUBJECT MATTER OF GROUND NO. 3 BY WHICH CHALLENGE HAS BEEN MADE TO THE REDUCTION IN THE AMOUNT OF DEDUCTION U/S 10A OF TH E INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED THE ACT) BY A SUM O F RS. 5,58,86,784/-. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THA T THE ASSESSEE FILED ITS RETURN DECLARING INCOME OF RS. 31.14 LAC. AS THE TA X PAYABLE U/S 115JB OF THE ACT WAS MORE THAN AS PER THE NORMAL PROVISIO N, THE TAX WAS PAID U/S 115JB. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE CLAIMED DEDUCTION U/S 10A OF THE ACT TO THE TUNE OF RS. 8,22,78,165/ - IN RESPECT OF REVENUE ARISING FROM ITS OVERSEES ASSOCIATED ENTERPRISES (A ES). THE ASSESSEE WAS CALLED UPON TO FILE THE TRANSFER PRICING STUDY REPORT, WHICH WAS DULY FILED. ON THE PERUSAL OF THE SAID TRANSFER PRICING STUDY REPORT, THE A.O OBSERVED THAT THE ASSESSEE HAD SHOWN ITS MARGIN OF PROFIT FROM THE ELIGIBLE BUSINESS AT MANY TIMES HIGHER THAN THAT SH OWN BY THE COMPARABLES. IT WAS SEEN THAT THE ARITHMETIC MEAN O F THE MARGIN OF COMPARABLES AS PER THE TP STUDY REPORT WAS 16.22% A S AGAINST THE ASSESSEES MARGIN OF PROFIT AT WHOPPING 101.19%. IT WAS THUS OPINED THAT THE PROVISIONS OF SEC. 10A(7) R.W.S 80IA(10) WERE APPLICABLE. THE ASSESSEES OBJECTIONS DID NOT PERSUADE THE ASSESSIN G OFFICER TO HOLD THAT SEC.10A(7) WAS NOT APPLICABLE. IT WAS EVENTUALLY R ULED THAT THE ASSESSEE AND ITS AES, OWING TO THEIR CLOSE CONNECTION, HAD S O ARRANGED THE COURSE OF BUSINESS AMONGST THEMSELVES SO THAT THE BUSINES S TRANSACTED BETWEEN ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 3 THEM PRODUCED TO THE ASSESSEE MORE THAN THE ORDINAR Y PROFITS. INVOKING THE PROVISIONS OF SEC. 10A(7) R.W.S 80IA(10) AND OB SERVING THAT THE ARITHMETIC MEAN OF THE OPERATING MARGIN OF THE COMP ARABLES AS PER THE TP STUDY REPORT WAS 16.22%, THE AO CONSIDERED PROFI T RATE OF 20% OF THE OPERATING COST AS REASONABLE. SINCE THE ASSESSE E HAD SHOWN OPERATING PROFIT AT 101.19% OF THE OPERATING COSTS, THE ASSES SING OFFICER REDUCED THE ELIGIBLE AMOUNT OF DEDUCTION U/S 10A TO RS. 2.6 3 CRORE BY APPLYING 20% AS THE REASONABLE PROFIT. THIS LED TO THE REDUC TION IN THE AMOUNT OF DEDUCTION U/S 10A BY RS. 5.58 CRORE. THE ASSESSEE F AILED TO CONVINCE THE LD. CIT(A) TO ITS LINE OF REASONING, WHO ECHOED THE ASSESSMENT ORDER ON THIS POINT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE REVENUE HAS MADE OUT A CASE THAT REDUCTION IN THE AMOUNT OF DEDUCTION U/S 10A WAS JUSTIFIED BECAU SE OF THE OPERATION OF THE PROVISIONS OF SUB-SECTION (10) OF SECTION 80 IA. SUB-SEC. (7) OF SEC. 10A PROVIDES THAT: THE PROVISIONS OF SUB-SEC. (8) AND SUB-SEC. (10) OF SECTION 80IA SHALL, SO FAR AS MAY BE, APPLY IN REL ATION TO THE UNDERTAKING REFERRED TO IN THIS SECTION AS THEY APPLY FOR THE P URPOSES OF THE UNDERTAKING REFERRED TO IN SECTION 80IA. THE ESSE NCE OF THIS PROVISION IS THAT THE DISABLING PROVISIONS CONTAINED IN SUB-S ECS. (8) AND (10) OF SEC. 80IA HAVE FULL APPLICATION TO SEC. 10A AS WELL, WHE REVER APPLICABLE. THE ASSESSING OFFICER HAS APPLIED ONLY SUB-SEC. (10) OF SEC. 80IA TO RESTRICT ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 4 THE AMOUNT OF DEDUCTION U/S 10A TO THIS LEVEL. IT IS CLEAR FROM THE FACTS OF THE CASE NARRATED ABOVE THAT THE ASSESSEE IS OTH ERWISE ENTITLED TO DEDUCTION U/S 10A IN RESPECT OF EXPORT OF ELIGIBLE GOODS. THE FACT THAT THE ASSESSING OFFICER HIMSELF ALLOWED DEDUCTION U/S 10A @ 20% PROVES THAT ALL THE ELIGIBLE CONDITIONS SET OUT IN SEC. 10 A OF THE ACT WERE SATISFIED BY THE ASSESSEE. THE SOLE REASON ASSIGNE D BY THE AO FOR RESTRICTING THE AMOUNT OF BENEFIT U/S 10A IS THE AP PLICABILITY OF 80IA(10) IN TERMS OF WHICH THE ASSESSEE AND ITS FOREIGN AE A RRANGED THE COURSE OF BUSINESS IN SUCH A WAY SO AS TO PRODUCE MORE THAN O RDINARY PROFITS TO THE ASSESSEE CARRYING ON ELIGIBLE BUSINESS IN INDIA. 6. IN ORDER TO EVALUATE AND EXAMINE THE RIVAL CO NTENTIONS ON THE ACTION OF THE AUTHORITIES BELOW IN RESTRICTING THE AMOUNT OF DEDUCTION U/S 10A, IT WOULD BE APPOSITE TO CONSIDER THE MANDATE OF SUB-SE C. (10) OF SEC. 80IA AS APPLICABLE AT THE RELEVANT TIME, AS UNDER:- (10) WHERE IT APPEARS TO THE ASSESSING OFFICER THA T, OWING TO THE CLOSE CONNECTION BETWEEN THE ASSESSEE CARRYING ON T HE ELIGIBLE BUSINESS TO WHICH THIS SECTION APPLIES AND ANY OTHE R PERSON, OR FOR ANY OTHER REASON, THE COURSE OF BUSINESS BETWEEN TH EM IS SO ARRANGED THAT THE BUSINESS TRANSACTED BETWEEN THEM PRODUCES TO THE ASSESSEE MORE THAN THE ORDINARY PROFITS WHICH MIGHT BE EXPECTED TO ARISE IN SUCH ELIGIBLE BUSINESS, THE ASSESSING OFFI CER SHALL, IN COMPUTING THE PROFITS AND GAINS OF SUCH ELIGIBLE BU SINESS FOR THE PURPOSES OF THE DEDUCTION UNDER THIS SECTION, TAKE THE AMOUNT OF PROFITS AS MAY BE REASONABLY DEEMED TO HAVE BEEN DE RIVED THEREFROM: ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 5 WITH THIS BACKDROP, WE WILL DEAL WITH THE ISSUES TA KEN UP BEFORE US, ONE BY ONE. I. WHETHER SEC. 80IA(10) APPLIES WHEN THE SECOND PARTY TO THE TRANSACTION IS A NON-RESIDENT . 7.1. THE LD. AR VEHEMENTLY ARGUED THAT SUB-SEC (10) OF SEC. 80IA CANNOT BE APPLIED TO TRANSACTIONS BETWEEN TWO ENTER PRISES, ONE OF WHICH IS NOT A RESIDENT OF INDIA. IN SUPPORT OF THIS CONT ENTION, HE SOUGHT TO RELY ON CIRCULAR NO. 308 DATED 29.6.1981 EXPLAINING THE PROVISIONS OF SEC. 10A. REFERRING TO PARA 6.10 OF THE CIRCULAR, DEALI NG WITH THE APPLICABILITY OF SUB-SEC. (8) AND (9) OF SEC. 80I T O SEC. 10A, THE LD. AR ARGUED THAT ITS LAST LINE CLEARLY PROVIDES THAT TH IS PROVISION HAS BEEN MADE WITH A VIEW TO AVOID ABUSE OF THE TAX CONCESSI ON BY MANIPULATION OF PROFITS BETWEEN ASSOCIATE CONCERNS OR DIFFERENT UNITS OF THE SAME CONCERN. DRAWING STRENGTH FROM THESE LINES, THE LD. AR CANVASSED A VIEW THAT THE MANIPULATION OF PROFITS BETWEEN TWO ENTERP RISES CAN ONLY BE IN A SITUATION WHERE BOTH SUCH ENTERPRISES ARE RESIDENTS OF INDIA, SO THAT THE INCREASE IN PROFIT OF THE ELIGIBLE BUSINESS RESULTS IN A CORRESPONDING DECREASE IN THE PROFIT OF THE OTHER NON-ELIGIBLE BU SINESS. IF AN ASSESSEE HAVING ELIGIBLE ASSESSEE IS RESIDENT OF INDIA AND T HE OTHER PERSON HAVING NON-ELIGIBLE BUSINESS IS RESIDENT OF ANOTHER COUNTR Y, THERE CAN BE NO QUESTION OF MANIPULATION OF PROFIT, AS IN SUCH A SC ENARIO IT IS ONLY THE RESIDENT ASSESSEE WHOSE PROFITS ARE TAXABLE IN INDI A AND THERE CAN BE NO ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 6 CORRESPONDING DECREASE IN THE PROFITS OF THE ASSESS EE HAVING NON-ELIGIBLE BUSINESS. 7.2. WE DO NOT FIND ANY FORCE IN THIS CONTENTI ON MADE ON BEHALF OF THE ASSESSEE. A PLAIN READING OF SUB-SEC. (10) OF SEC. 80IA MAKES IT EXPLICIT THAT THE ASSESSING OFFICER OF THE ASSESSEE HAVING E LIGIBLE BUSINESS IS EMPOWERED TO SCALE DOWN THE PROFITS WHERE IT APPEA RS TO HIM THAT OWING TO THE CLOSE CONNECTION BETWEEN THE ASSESSEE CARRYI NG ON ELIGIBLE BUSINESS AND ANY OTHER PERSON , THE COURSE OF BUSINESS IS SO ARRANGED THAT THE BUSINESS TRANSACTED BETWEEN THEM PRODUCES TO THE ASSESSEE MORE THAN THE ORDINARY PROFITS, WHICH MIGHT BE EXPECTED TO ARISE IN SUCH ELIGIBLE BUSINESS. THE ESSENTIAL REQUIREMENT FOR I NVOKING SUB-SEC. (10) OF SEC. 80IA IS THAT THE COURSE OF BUSINESS BETWEEN THE ASSESSEE HAVING ELIGIBLE BUSINESS AND THE CLOSELY CONNECTED ANY OT HER PERSON SHOULD BE ARRANGED. THE EXPRESSION ` ANY OTHER PERSON HAS NOT BEEN QUALIFIED BY THE PHRASE `RESIDENT OF INDIA. IT HAS NO WHERE BE EN PROVIDED IN ANY PART OF THIS PROVISION THAT SUCH CONNECTED PERSON ALSO M UST BE A RESIDENT OF INDIA. THE ESSENCE OF THIS DISABLING PROVISION IS T HAT WHEN THE CLOSE CONNECTION BETWEEN TWO RELATED PERSONS ARTIFICIALLY PRODUCES MORE THAN ORDINARY PROFITS TO THE ASSESSEE HAVING ELIGIBLE BU SINESS, THEN THE SAME SHOULD BE SET RIGHT. IT DOES NOT MATTER THAT SUCH O THER RELATED PERSON ASSISTING IN ARTIFICIALLY INCREASING THE PROFITS OF THE ELIGIBLE ASSESSEE, IS RESIDENT OF INDIA OR OF ANY OTHER COUNTRY. FURTHER, WE ARE UNABLE TO ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 7 COMPREHEND FROM THE UNAMBIGUOUS LANGUAGE OF THE PRO VISION THAT THERE SHOULD BE SHIFTING OF PROFITS FROM ONE TAXABLE ENTI TY IN INDIA TO ANOTHER TAXABLE ENTITY IN INDIA, AS A PRE-CONDITION FOR INV OKING SUB-SECTION (10). THERE IS NO SUCH STIPULATION IN THE PROVISION THAT THE INCREASE IN THE PROFITS OF THE ASSESSEE HAVING ELIGIBLE BUSINESS MU ST CORRESPOND WITH THE DECREASE IN THE TAXABLE PROFITS IN INDIA OF THE PER SON CARRYING NON- ELIGIBLE BUSINESS. THIS PROVISION IS SIMPLY CONCERN ED WITH THE INCREASE IN THE PROFITS OF THE ASSESSEE HAVING ELIGIBLE BUSINES S. TO ARGUE THAT UNLESS THERE IS CORRESPONDING DECREASE IN THE PROFITS OF THE OTHER ASSESSEE, ALSO A RESIDENT OF INDIA, THE MANDATE OF SUB-SEC. (10) IS NOT ACTIVATED, IS AKIN TO READING MORE THAN THE ACTUAL CONTENT OF THE PROVISION, WHICH IS OBVIOUSLY IMPERMISSIBLE. WE, THEREFORE, HOLD THAT S ECTION 80IA(10) APPLIES NOTWITHSTANDING THE FACT THAT THE OTHER RE LATED PERSON IS RESIDENT OR NON-RESIDENT. THIS CONTENTION IS THUS REJECTED A S DEVOID OF ANY MERIT. II. IT SHOULD BE AN ARRANGED COURSE OF BUSINESS BET WEEN THE RELATED PERSONS TO PRODUCE MORE THAN ORDINARY PROFITS. 8.1. WE HAVE SET OUT SUB-SECTION (10) ABOVE AS W AS APPLICABLE AT THE MATERIAL TIME. AS THE AO HAS MADE OUT A CASE THAT OWING TO THE CLOSE CONNECTION BETWEEN THE ASSESSEE AND THE FOREIGN AE, THE COURSE OF BUSINESS BETWEEN THEM WAS SO ARRANGED AS TO PRODUC E MORE THAN ORDINARY PROFIT TO THE ASSESSEE, THUS, THE PART O F THE PROVISION STIPULATING -OR FOR ANY OTHER REASON-, IS NOT APPLICABLE TO THE FACTS OF THE INSTANT ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 8 CASE. THUS ON AN ANALYSIS OF THE PARTS OF SUB-SECT ION (10), AS ARE RELEVANT AND APPLICABLE TO THE FACTUAL MATRIX UNDER CONSIDER ATION, IT CAN BE SEEN THAT IT HAS THE FOLLOWING INGREDIENTS : - I. THERE SHOULD BE CLOSE CONNECTION BETWEEN THE ASSESS EE CARRYING ON THE ELIGIBLE BUSINESS AND ANY OTHER PERSON ; AND II. THE COURSE OF BUSINESS BETWEEN THE ASSESSEE AND SUC H OTHER CLOSELY CONNECTED PERSON SHOULD BE SO ARRANGED THAT THE BUS INESS TRANSACTED BETWEEN THEM PRODUCES MORE THAN THE ORDI NARY PROFITS TO THE ASSESSEE CARRYING ON ELIGIBLE BUSIN ESS. IF THE ABOVE I. AND II. ARE CUMULATIVELY SATISFIED , THEN III. THE ASSESSING OFFICER SHALL TAKE THE AMOUNT OF PRO FITS AS MAY BE REASONABLY DEEMED TO HAVE BEEN DERIVED FROM THE TRA NSACTIONS OF SUCH ARRANGED COURSE OF BUSINESS IN COMPUTING TH E PROFITS OF SUCH ELIGIBLE BUSINESS FOR THE PURPOSES OF THE DEDU CTION UNDER THIS SECTION. 8.2. THERE IS NO DISPUTE AS REGARDS THE APPLICAB ILITY OF I. ABOVE INASMUCH AS THERE IS A CLOSE CONNECTION BETWEEN THE ASSESSEE CARRYING ON THE ELIGIBLE BUSINESS IN INDIA AND ITS ASSOCIATED E NTERPRISE, BEING ANY OTHER PERSON, CARRYING ON BUSINESS OUTSIDE INDIA. 8.3. NOW WE ESPOUSE II. ABOVE, WHICH IS CRUCIAL FOR OUR DECISION AND THE MAJOR THRUST OF ARGUMENTS HAS BEEN ON IT. THIS INGREDIENT PROVIDES ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 9 THAT THE COURSE OF BUSINESS BETWEEN THE ASSESSEE AN D SUCH OTHER CLOSELY CONNECTED PERSON SHOULD BE SO ARRANGED THAT IT PROD UCES MORE THAN THE ORDINARY PROFITS TO THE ASSESSEE CARRYING ON ELIGI BLE BUSINESS. A BARE READING OF THE RELEVANT PART OF THE PROVISION INDIC ATES THAT IN ORDER TO INVOKE THIS PROVISION, IT IS OF UTMOST IMPORTANCE O N THE PART OF THE AO TO FIRST DEMONSTRATE THAT THE TRANSACTIONS BETWEEN THE ASSESSEE AND THE OTHER RELATED PERSON WERE ` ARRANGED WITH A VIEW TO PRODUCE MORE PROFIT TO THE ASSESSEE CARRYING ON ELIGIBLE BUSINESS. 8.4. AT THIS JUNCTURE, IT IS OF SIGNIFICANT TO NOTE FROM III. ABOVE THAT SUB-SECTION (10) IS A FICTIONAL PROVISION, DEEMING REASONABLE PROFITS AS ACTUAL PROFITS FOR THE PURPOSES OF COMPUTING THE AM OUNT OF THE ELIGIBLE DEDUCTION U/S 10A IN CASE THE CONDITIONS UNDER I. AND II. ABOVE ARE SATISFIED. THE NOTEWORTHY POINT IS THAT INSTANTLY WE ARE DEALING WITH A DEEMING PROVISION. A DEEMING PROVISION OR A LEGAL FICTION IS ONE WHOSE MANDATE DOES NOT EXIST BUT FOR SUCH PROVISION. BEC AUSE OF SUCH DEEMING PROVISION ALONE, THE GIVEN IMAGINARY STATE OF AFFAI RS IS TAKEN AS REALITY NOTWITHSTANDING THE FACT THAT IT IS AT VARIANCE WIT H THE REALITY AND THE OTHER RELEVANT PROVISION OF THE ENACTMENT. IT HAS B EEN FAIRLY SETTLED THAT THE SCOPE OF A DEEMING PROVISION SHOULD BE RESTRICT ED TO WHAT IS EXPRESSLY STATED IN SUCH A PROVISION. THERE CAN BE NO INFERENCE OR INTENDMENT AS REGARDS SUCH A PROVISION. THE HONBLE SUPREME COURT IN CIT VS. AMARCHAND N. SHROFF (1963) 48 ITR 59 (SC) AND CIT VS. MOTHER INDIA REFRIGERATION INDUSTRIES P. LTD. (198 5) 155 ITR 711 (SC) ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 10 CONSIDERED THE AMBIT OF DEEMING PROVISIONS AND HEL D THAT THE FICTION CANNOT BE EXTENDED BEYOND THE OBJECT FOR WHICH THES E WERE ENACTED. THE HONBLE BOMBAY HIGH COURT IN CIT VS. ACE BUILDERS P. LTD. (2006) 281 ITR 210 (BOM.) HAS ALSO TAKEN SIMILAR VIEW. ON AN APPRAISAL OF THE ABOVE JUDGMENTS, THE POSITION WHICH EMERGES IS THAT WHENEVER A LEGAL FICTION IS CREATED BY WAY OF A DEEMING PROVIS ION, IT IS VITAL TO GO STRICTLY BY THE EXPRESS PRESCRIPTION OF THIS PROVI SION. SUCH A DEEMING PROVISION CANNOT BE EXTENDED BEYOND WHAT IS EXPRESS LY STATED THEREIN. IF CERTAIN CONSEQUENCES HAVE BEEN MADE TO FOLLOW ON TH E FULFILLMENT OF CERTAIN SET OUT CONDITIONS IN A DEEMING PROVISION, THEN UNLESS SUCH CONDITIONS ARE STRICTLY FULFILLED, THE CONSEQUENCES CANNOT BE DEDUCED. IN OTHER WORDS, A DEEMING PROVISION IS TO BE STRICTLY CONSTRUED. 8.5. WITH THIS BACKGROUND THAT SUB-SECTION (10 ) IS A DEEMING PROVISION AND IT MUST BE STRICTLY CONSTRUED, WE REV ERT TO THE POINT UNDER CONSIDERATION THAT THE ASSESSING OFFICER MUST SHOW AT THE FIRST INSTANCE THAT THE COURSE OF BUSINESS BETWEEN THESE CLOSELY C ONNECTED PERSONS WAS ARRANGED SO AS TO PRODUCE MORE THAN ORDINARY PROFIT S IN THE HANDS OF A PERSON CARRYING ON THE ELIGIBLE BUSINESS. SUCH A P OSITION HAS TO BE NECESSARILY PROVED. THERE CAN BE NO INFERENCE AS TO THE FULFILLMENT OF SUCH A CONDITION. THUS, IT IS VIVID THAT UNLESS SUC H ` ARRANGEMENT OR MANIPULATION IS SHOWN TO EXIST, THERE CAN BE NO QUE STION OF DISCARDING THE DECLARED ACTUAL PROFIT AND SUBSTITUTING IT WITH A REASONABLE PROFIT. IT IS MANIFEST THAT THERE ARE TWO COMPONENTS OF THIS. FIRST IS THE ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 11 `ARRANGEMENT BETWEEN THE RELATED PARTIES AND SECON D, SUCH ARRANGEMENT SHOULD LEAD TO HIGHER PROFIT. HIGH PROFIT MUST NECE SSARILY BE THE CONSEQUENCE OF SUCH AN ARRANGEMENT. TO PUT IT SIMP LY, IF SUCH AN `ARRANGEMENT IS A CAUSE, THE HIGHER PROFIT IS ITS `EFFECT. IT IS WELL KNOWN THAT HIGHER OR LOWER PROFIT OF A BUSINESS CAN BE AS A RESULT OF THE CUMULATIVE EFFECT OF SEVERAL FACTORS. TO CITE AN E XAMPLE, IF ONE PERSON SUCCEEDS IN CUTTING DOWN ITS COSTS WITHOUT AFFECTIN G THE QUALITY OF OUTPUT, HE WILL NATURALLY EARN MORE PROFIT THAN OTH ERS IN THE SAME LINE OF BUSINESS. SIMILARLY, ECONOMIES OF SCALE ALSO AFFECT THE PROFIT. IN THE LIKE MANNER, THE EXTENT OF ADMINISTRATIVE, MARKETING AN D SELLING EXPENSES ALSO HAS A BEARING ON THE OVERALL PROFIT OF A BUSI NESS. OTHER FACTORS FOR THE INCREASE IN THE PROFITS MAY BE ECONOMICAL PURCH ASES OR COSTLY SALES. IF A BUSINESSMAN MANAGES TO MAKE ECONOMICAL PURCHAS ES FROM THE MARKET, HE WILL NATURALLY EARN MORE PROFIT. ON THE OTHER HAND, IF THE PURCHASES ARE NOT ACTUALLY ECONOMICAL, BUT BECAUSE OF THE CLOSE CONNECTION WITH THE SELLER, THE ARRANGEMENT IS SUCH SO AS TO SHOW LOW PURCHASE PRICE IN THE ACCOUNTS OF THE PERSON CARRYI NG ON ELIGIBLE BUSINESS, THE APPARENT PROFIT WILL STILL BE HIGH. T HOUGH IN BOTH SUCH CASES, THE PROFIT OF THE ELIGIBLE BUSINESS HAS SHO T UP, BUT IN THE FIRST INSTANCE, IT IS HIGHER DUE TO EFFICIENCIES AND IN THE SECOND, IT IS HIGHER DUE TO `ARRANGEMENT. SIMILARLY, IF A BUSINESSMAN MANAGES TO MAKE SALES IN THE MARKET AT A HIGHER PRICE BECAUSE OF IT S EFFECTIVE SELLING TECHNIQUES, HE WILL EARN MORE PROFIT. ON THE OTHER HAND, IF THE SALES ARE ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 12 NOT AT HIGH PRICE BECAUSE OF THE EFFECTIVE MARKETIN G STRATEGY, BUT BECAUSE OF THE CLOSE CONNECTION WITH THE BUYER, THE ARRANGEMENT IS SUCH SO AS TO SHOW HIGHER SALE PRICE IN THE ACCOUNTS OF THE PERSON CARRYING ON ELIGIBLE BUSINESS, THE PROFIT WILL STILL BE HIGH. T HOUGH IN BOTH THE CASES THE PROFIT OF THE ELIGIBLE BUSINESS WILL BE HIGHER , BUT IN THE FIRST INSTANCE IT WILL BE HIGHER DUE TO BETTER MARKETING STRATEGY AND IN THE SECOND, IT WILL BE HIGHER DUE TO `ARRANGEMENT. WHAT IS RELEV ANT FOR INVOKING SUB- SECTION (10) IS THE PREVALENCE OF THE SECOND SITUAT ION ABOVE WHERE THE HIGHER PROFIT HAS RESULTED DUE TO ARRANGEMENT BET WEEN THE ASSESSEE AND ITS CLOSELY CONNECTED PERSON AND NOT THE FIRST, WHE RE THE HIGHER PROFIT RESULTED DUE TO THE ASSESSEES EFFECTIVELY MANAGING THE BUSINESS. THUS IT IS EVIDENT THAT THOUGH IN BOTH THE SITUATIONS, THE PROFIT IS HIGHER, BUT RECOURSE TO SUB-SECTION (10) CAN BE TAKEN ONLY IN T HE CASE OF `ARRANGEMENT BETWEEN THE ASSESSEE AND THE CLOSELY CONNECTED PERSON. IN OTHER WORDS, THE MERE HIGHER PROFIT OF THE PERSO N CARRYING ON THE ELIGIBLE BUSINESS IS NO CRITERIA TO PRESS INTO SERV ICE THIS PROVISION, UNLESS THE `ARRANGEMENT IS PROVED IN THE FIRST INSTANCE. THE `ARRANGEMENT NEEDS TO BE SPECIFICALLY PROVED BY THE AO BY SHOW ING THAT THE ASSESSEE INTENTIONALLY MADE PURCHASES AT A RELATIVELY LOWER RATE FROM THE CLOSELY CONNECTED PERSON VIS--VIS THAT AVAILABLE IN THE MARKET FOR THE SAME PRODUCTS OR THE ASSESSEE MADE SALES TO THE CLOSELY CONNECTED PERSON AT A RELATIVELY HIGHER RATE VIS--VIS THE PREVAILING MARKET PRICE OF THE SIMILAR PRODUCTS ETC. OR THAT THE ASSESSEE HAVING ELIGIBLE INCOME BOOKED ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 13 RELATIVELY LESS EXPENSES OR SHOWED RELATIVELY MORE INCOME ON OTHER COUNTS IN TRANSACTIONS WITH CLOSELY CONNECTED PER SON. IT IS ONLY WHEN THE EXISTENCE OF` `ARRANGEMENT IS PROVED IN THIS M ANNER THAT THE PROVISIONS OF SUB-SECTION (10) CAN BE EMPLOYED TO R EDUCE THE EXTRAORDINARY PROFITS RESULTING FROM SUCH LOWER PAY MENTS OR EXCESS RECOVERIES TO/FROM THE RELATED PERSON. TO PUT IT S IMPLY, THE HIGHER PROFIT SHOWN BY THE ELIGIBLE ASSESSEE IS THE END POINT OF THE EXERCISE TO BE UNDERTAKEN BY THE AO IN THIS REGARD, STARTING WIT H EXPRESSLY SHOWING AS TO HOW THE TRANSACTIONS WERE SPECIFICALLY ARRANG ED TO PRODUCE MORE THAN ORDINARY PROFITS TO THE ASSESSEE CARRYING ON T HE ELIGIBLE BUSINESS. THE MERE HIGHER PROFIT EARNED BY SUCH ELIGIBLE ASSE SSEE CAN BE NO REASON TO CONCLUDE THAT THE ASSESSEE TRANSACTED IN SUCH AN `ARRANGED MANNER WITH ITS RELATED PERSONS SO AS TO PRODUCE MORE PROF ITS TO IT. AT THE COST OF REPETITION, WE REITERATE THAT THE HIGHER PROFIT SHO ULD BE THE `EFFECT OF SUCH AN `ARRANGEMENT AND CANNOT BE A SUBSTITUTE OF SUCH `ARRANGEMENT ITSELF, WHICH IS A `CAUSE, FOR INVOKING SUB-SECT ION (10) OF SECTION 80IA. 8.6. IT CAN BE SEEN FROM THE FACTS OF THE INS TANT CASE THAT THE AO HAS SIMPLY TREATED HIGH PROFIT EARNED BY THE ASSESSEE A S A REASON TO SUMMON SUB-SECTION (10), WITHOUT EVEN REMOTELY DEMONSTRATI NG THE EXISTENCE OF ANY `ARRANGEMENT BETWEEN THE ASSESSEE AND ITS AES AIMED AT PRODUCING EXTRA ORDINARY PROFITS IN THE HANDS OF THE ASSESSEE . THE CONCLUSION DRAWN BY THE AUTHORITIES BELOW IN SUCH CIRCUMSTANCE S CANNOT BE EX CONSEQUENTI SUSTAINED. ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 14 III. EFFECT OF INSERTION OF PROVISO TO SUB-SECTION (10) W.E.F. 1.4.2013 9.1. IT CAN BE SEEN THAT THE ASSESSING OFFICER SI MPLY TOOK SUPPORT OF THE TRANSFER PRICING STUDY REPORT FURNISHED BY THE ASSE SSEE FOR COMING TO THE CONCLUSION THAT THE A.ES. AND THE ASSESSEE COMPANY , OWING TO THEIR CLOSE CONNECTION, HAD SO ARRANGED THE COURSE OF BUS INESS AMONGST THEMSELVES SO THAT THE BUSINESS TRANSACTED BETWEEN THEM PRODUCED MORE THAN ORDINARY PROFITS TO THE ASSESSEE. NOW THE QUES TION ARISES AS TO WHETHER THE TP STUDY REPORT CAN BE CONSTRUED AS A S UFFICIENT EVIDENCE TO PROVE THAT THE COURSE OF BUSINESS WAS ARRANGED BETW EEN THE ASSESSEE AND ITS FOREIGN A.ES TO PRODUCE MORE PROFITS IN THE HAN DS OF THE ASSESSEE. THE LD. DR STRONGLY ARGUED THAT THE TRANSFER PRICIN G STUDY REPORT SUBMITTED BY THE ASSESSEE CLEARLY PROVED THAT THE A SSESSEE CHARGED HIGHER PROFIT FROM ITS ASSOCIATED ENTERPRISES. IN H IS OPINION, THE LOWER PROFITS EARNED BY THE OTHER COMPARABLE CASES IN SIM ILAR CIRCUMSTANCES WAS SUFFICIENTLY INDICATIVE OF THE FACT THAT THE A SSESSEE ARRANGED TRANSACTIONS WITH ITS RELATED PARTIES SO AS TO PROD UCE MORE PROFITS IN ITS ACCOUNTS. HE FORCEFULLY RELIED ON PROVISO TO SUB-SE CTION (10) OF SECTION 80IA, WHICH TALKS OF COMPUTING ORDINARY PROFITS HAV ING REGARD TO THE ARMS LENGTH PRICE. ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 15 9.2. IN ORDER TO SCRUTINIZE THIS CONTENTION, I T IS RELEVANT TO NOTE THE TEXT OF PROVISO TO SUB-SEC. (10) WHICH HAS BEEN INSERTED BY THE FINANCE ACT, 2012 W.E.F. 1.4.2013. THIS PROVISO READS AS UNDER: - `PROVIDED THAT IN CASE THE AFORESAID ARRANGEMENT INVOLVES A SPECIFIED DOMESTIC TRANSACTION REFERRED TO IN SECTI ON 92BA, THE AMOUNT OF PROFITS FROM SUCH TRANSACTION SHALL BE DETERMINED HAVING REGARD TO ARM'S LENGTH PRICE AS DEFINED IN CLAUSE (II) OF SECTION 92F. 9.3. A CLOSE SCRUTINY OF THE ABOVE PROVISO TRANS PIRES THAT IN CASE ` THE AFORESAID ARRANGEMENT (THAT IS, THE ARRANGEMENT REFERRED TO IN MAIN SUB-SECTION (10) BETWEEN THE ELIGIBLE ASSESSE E AND THE RELATED PERSON UNDER WHICH TRANSACTIONS ARE SO ARRANGED AS TO PRODUCE MORE THAN ORDINARY PROFITS TO THE ELIGIBLE ASSESSEE) INVOLVES A SPECIFIED DOMESTIC TRANSACTION, THEN THE AMOUNT OF REASONABLE PROFITS FROM SUCH TRANSACTIONS BETWEEN THE ELIGIBLE ASSESSEE AND THE RELATED PERSO N SHALL BE DETERMINED HAVING REGARD TO ARMS LENGTH PRICE OF SUCH TRANSAC TIONS. MEANING OF `SPECIFIED DOMESTIC TRANSACTION HAS BEEN GIVEN IN SECTION 92BA OF THE ACT AS ANY OF THE GIVEN FIVE SPECIFIC AND ONE GENER AL TRANSACTION, NOT BEING AN INTERNATIONAL TRANSACTION, INCLUDING, INTER ALIA, (IV) ANY BUSINESS TRANSACTED BETWEEN THE ASSESSEE AND OTHER PERSON AS REFERRED TO IN SUB-SECTION (10) OF SECTION 80-IA , WHERE THE AGGREGATE OF SUCH TRANSACTIONS ENTERED INTO BY THE ASSESSEE IN THE PR EVIOUS YEAR EXCEEDS A SUM OF FIVE CRORE RUPEES. WHEN WE READ THE PROVISO IN ENTIRETY, IT DIVULGES THE FOLLOWING COMPONENTS :- ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 16 I. THERE SHOULD BE ARRANGEMENT BETWEEN THE ELIGIBLE ASSESSEE AND THE OTHER RELATED PERSON UNDER WHICH TRANSACTIONS A RE SO RECORDED AS TO PRODUCE MORE THAN ORDINARY PROFITS IN THE HANDS OF THE ELIGIBLE ASSESSEE; AND II. SUCH ARRANGEMENT SHOULD INVOLVE A SPECIFIED DOM ESTIC TRANSACTION, THAT IS, THE AGGREGATE OF ALL THE SIX TYPES OF GIVEN TRANSACTIONS SHOULD EXCEED A SUM OF FIVE CRORE RUPE ES. III. IN SUCH A CASE, THE REASONABLE PROFITS TO BE SUBSTITUTED WITH THE DECLARED PROFITS, IS THE ONE DETERMINED HAVING REG ARD TO THE ALP. 9.4. IT IS ONLY WHEN I. AND II. ABOVE ARE COLLE CTIVELY SATISFIED THAT THE III. ABOVE IS SET IN MOTION SO AS TO DETERMINE THE AMOUNT OF REASONABLE PROFITS, AS DETERMINED HAVING REGARD TO THE ALP, TO BE SUBSTITUTED WITH THE DECLARED PROFIT OF THE ELIGIBLE ASSESSEE. IF THE AGGREGATE OF ALL THE GIVEN SIX TRANSACTIONS DOES NOT EXCEED A SUM OF FIV E CRORE RUPEES, THEN IT WOULD NOT BECOME SPECIFIED DOMESTIC TRANSACTIONS. B UT IN SUCH A CASE ALSO, WHEREVER THE RELEVANT PROVISIONS ARE APPLICAB LE, THOSE WILL HOLD THE FIELD. THE MANDATE OF THE MAIN PART OF SECTION 80I A(10) WILL ALSO CONTINUE TO APPLY IN CASE THE AGGREGATE OF SIX TRA NSACTIONS IS LESS THAN A SUM OF FIVE CRORE RUPEES, IN WHICH CASE THE AMOUNT OF REASONABLE PROFIT WILL STILL HAVE TO BE COMPUTED BY THE AO HIMSELF BU T WITHOUT TAKING RECOURSE TO THE ALP, WHICH IN ANY CASE WILL NOT BE AVAILABLE AS THE ASSESSEE WILL NOT BE REQUIRED IN THAT SITUATION TO MAKE ITS TRANSFER ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 17 PRICING STUDY REPORT. HOWEVER, THE IMPORTANT FACTO R, WHICH NEEDS TO BE HIGHLIGHTED HERE IS THAT IN A CASE OF SPECIFIED DOM ESTIC TRANSACTION, THAT IS, WHERE THE AGGREGATE OF SIX TRANSACTIONS EXCEEDS A SUM OF FIVE CRORE RUPEES, THE PROVISO SIMPLY PROVIDES A MECHANISM FOR THE COMPUTATION OF REASONABLE PROFIT TO BE DETERMINED HAVING REGARD TO THE ALP. THIS IS THE ONLY MANDATE OF THE PROVISO. EVEN IN THAT CASE ALSO , THE EXISTENCE OF THE ARRANGEMENT BETWEEN THE ASSESSEE AND ITS RELATED PARTY, AIMING TO INCREASE THE PROFITS OF THE ELIGIBLE ASSESSEE, IS A PRE-REQUISITE FOR RESORTING TO SUB-SECTION (10). NOTWITHSTANDING T HE FACT THAT THE PROFIT OF THE ELIGIBLE ASSESSEE IS HIGHER IN COMPARISON WITH THE PROFIT COMPUTED HAVING REGARD TO ALP OF THE SPECIFIED DOMESTIC TRAN SACTIONS, STILL THE SUBSTITUTION OF SUCH PROFITS WITH THAT COMPUTED HAV ING REGARD TO ALP, WILL BE POSSIBLE ONLY IF THE AO FIRSTLY DEMONSTRAT ES THE EXISTENCE OF SUCH `ARRANGEMENT. THE ONLY CHANGE WHICH HAS BEEN MADE BY THE INSERTION OF THIS PROVISO IS THAT IN CASE OF THE `A RRANGED SPECIFIED DOMESTIC TRANSACTION, THE AO NOW NEED NOT SEPARATEL Y FIND OUT AND ESTABLISH THE GENUINENESS OF THE `REASONABLE PROFIT S TO BE SUBSTITUTED FOR THE DECLARED PROFITS. IN SUCH A SCENARIO, THE PROF IT DETERMINED HAVING REGARD TO THE ALP SHALL BE AUTOMATICALLY CONSIDERED AS `REASONABLE PROFITS TO BE SUBSTITUTED WITH THE DECLARED PROFIT S BY THE ELIGIBLE ASSESSEE. TO CONTEND THAT THE PROVISO HAS DISPENSED WITH THE NEED ON THE PART OF THE AO TO ESTABLISH SUCH `ARRANGEMENT, IS NOT CORRECT. WHAT HAS BEEN DISPENSED WITH IS THE CALCULATION OF THE `REAS ONABLE PROFITS. THE ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 18 EXISTENCE OF SUCH AN `ARRANGEMENT IS STILL REQUIR ED TO BE PROVED BY THE AO. THE CRUX OF THE INSERTION OF THE PROVISO TO SUB-SEC. (10) IS THAT WHERE THE COURSE OF BUSINESS BETWEEN TWO CONNECTED RESIDENT ASSESSEES IS SO ARRANGED THAT THE BUSINESS TRANSACTED BETWEEN THEM PRODUCES MORE THAN THE ORDINARY PROFITS TO THE ASSESSEE CARRYING ON THE ELIGIBLE BUSINESS, THEN THE REASONABLENESS OF THE PROFITS SO CHARGED S HALL BE JUDGED WITH REFERENCE TO ALP OF SUCH TRANSACTION. 9.5. IT IS PARAMOUNT TO NOTE THAT PROVISO TO S UB-SEC. (10) HAS BEEN INSERTED W.E.F. 1.4.2013 SIMULTANEOUS WITH THE INCL USION OF `SPECIFIED DOMESTIC TRANSACTION WITHIN THE AMBIT OF TRANSFER PRICING PROVISION, WHEREAS CHAPTER-X DEALING WITH THE COMPUTATION OF I NCOME FROM INTERNATIONAL TRANSACTION HAVING REGARD TO ARMS LE NGTH PRICE WAS INSERTED BY THE FINANCE ACT, 2001 W.E.F. 1.4.2002. AT THAT TIME, SUB- SEC. (10) OF SEC. 80IA WAS VERY MUCH ON THE STATUTE . THE LEGISLATURE DID NOT CONSIDER IT EXPEDIENT TO DEEM PROFIT FROM INTER NATIONAL TRANSACTION HAVING REGARD TO ALP AS REASONABLE PROFIT IN THE COURSE OF THE ARRANGED COURSE OF BUSINESS BETWEEN THE INDIAN ASSESSEE CARR YING ON THE ELIGIBLE BUSINESS AND FOREIGN A.E. THE FACT THAT ONLY THE PR OFIT FROM SPECIFIED DOMESTIC TRANSACTION DETERMINED HAVING REGARD TO TH E ALP HAS BEEN CONSIDERED AS REASONABLE FOR THE PURPOSES OF SEC. 1 0A W.E.F. 1.4.2013, GOES TO PROVE THAT THE LEGISLATURE DID NOT INTEND TO CONSIDER PROFIT FROM AN INTERNATIONAL TRANSACTION COMPUTED HAVING REGARD TO ALP, AS RELEVANT ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 19 FOR SUB-SEC. 10A FROM 1.4.2002. THE FURTHER FACT T HAT THE PROVISO TO SUB- SEC. (10) OF SEC. 80IA INSERTED BY THE FINANCE ACT, 2012 ENCOMPASSES ONLY THE SPECIFIED DOMESTIC TRANSACTION AND NOT THE INTERNATIONAL TRANSACTION, AS IS THE CASE UNDER CONSIDERATION, AM PLY PROVES THAT THE LEGISLATURE NEITHER INTENDED NOR INTENDS TO HAVE RE COURSE TO THE PROFITS FROM INTERNATIONAL TRANSACTION HAVING REGARD TO THE IR ALP AS A YARDSTICK OF `REASONABLE PROFITS TO BE SUBSTITUTED FOR THE DECLARED PROFITS AS PER SUB-SECTION (10) OF SECTION 80IA. 10. THE LD. AR HAS COMMENDED TO US THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN CIT VS SCHMETZ INDIA PVT. LTD. (2012) 254 CTR (BOM.) 504 IN WHICH IT HAS BEEN HELD THAT MERELY BECAUSE AN A SSESSEE MAKES EXTRA ORDINARY PROFIT, IT WOULD NOT LEAD TO T HE CONCLUSION THAT THE SAME WAS ORGANIZED/ARRANGED FOR THE PURPOSE OF CLAI MING HIGHER DEDUCTION U/S 10A OF THE ACT. OUR ATTENTION HAS ALS O BEEN DRAWN TOWARDS AN ORDER PASSED BY THE HYDERABAD BENCH OF THE TRIBU NAL IN ZAVATA INDIA PVT. LTD. VS ITO (ITA NO. 628/HYD./2008) AND ANOTHER PASSED BY THE CHENNAI BENCH OF THE TRIBUNAL IN M/S VISUAL GRAPHICS COMPUTING SERVICES (INDIA) PVT. LTD. VS ACIT (2073/MDS/2011) IN WHICH IT HAS BEEN HELD THAT THE TP STUDY REPORT CANNOT BE CONSIDERED FOR DETERMINING EXCESS PROFIT AND THEREBY DENYING/RESTRICTING THE A MOUNT OF DEDUCTION U/S 10A. NO CONTRARY PRECEDENT HAS BEEN BROUGHT TO OUR NOTICE BY THE LD. DR. ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 20 11. ADVERTING TO THE FACTS OF THE EXTANT CASE, WE FIND THAT THE AO SIMPLY RELIED ON THE TP STUDY REPORT SUBMITTED BY T HE ASSESSEE TO FORM A BEDROCK FOR THE DISALLOWANCE OF THE PART OF THE AM OUNT OF DEDUCTION U/S 10A, WITHOUT FIRSTLY SHOWING THAT THERE EXISTED AN Y ARRANGEMENT BETWEEN THE ASSESSEE AND ITS OVERSEAS RELATED PARTY , BY WHICH THE TRANSACTIONS WERE SO ARRANGED AS TO PRODUCE MORE TH AN THE ORDINARY PROFITS IN THE HANDS OF THE ASSESSEE. THE ASSESSME NT YEAR UNDER CONSIDERATION IS 2009-10. NEITHER THE PROVISO TO S UB-SECTION (10) EXISTED AT THAT TIME, NOR SUCH A PROVISO CAN BE APPLIED AS WE ARE DEALING WITH AN INTERNATIONAL TRANSACTION AND NOT SPECIFIED DOMESTI C TRANSACTION. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINI ON THAT THE IMPUGNED ORDER UPHOLDING THE INVOCATION OF SUB-SEC. (10) OF SEC. 80IA CANNOT BE COUNTENANCED TO THIS EXTENT. ERGO, IT IS HELD THAT THE LD. CIT(A) ERRED IN SUSTAINING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY RESTRICTING THE AMOUNT OF DEDUCTION U/S 10A OF THE ACT TO RS. 2.63 CRORE AS AGAINST RS. 8.22 CRORE CLAIMED BY THE ASSESSEE. THE IMPUGNED ORDER ON THIS ISSUE IS OVERTURNED AND IT IS DIRECTED TO A LLOW DEDUCTION AS CLAIMED. 12. THE ONLY OTHER GROUND WHICH SURVIVES FOR OUR CO NSIDERATION IS CHALLENGING NON-GRANT OF THE SET OFF OF BROUGHT FOR WARD UNABSORBED DEPRECIATION AMOUNTING TO RS. 10,73,780/- AS CLAIME D BY THE ASSESSEE IN ITS RETURN OF INCOME. THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER ON THIS ISSUE. THE LD. CIT(A) VIDE PARA 6.1 OF THE IMP UGNED ORDER HELD THAT ITA NO. 348/DEL/2013 A. T. KEARNEY INDIA PVT. LTD. 21 SINCE THE MATTER IS SUB JUDICE BEFORE THE TRIBUNAL FOR THE ASSESSMENT YEAR 2006-07 HENCE THE GROUND WAS LIABLE TO BE REJECTED . THE LD. AR WAS FAIR ENOUGH TO STATE THAT THE ASSESSING OFFICER MAY BE D IRECTED TO ALLOW THE RELIEF AS CLAIMED IN THE PRESENT GROUND, IF THE TRI BUNAL EVENTUALLY DECIDES THIS ISSUE IN ASSESSEES FAVOUR IN APPEAL F OR THE ASSESSMENT YEAR 2006-07. WE AGREE WITH THE CONTENTION OF THE LD. AR AND DIRECT THE ASSESSING OFFICER TO DO SO. 13. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/8/2014 . SD/- SD/- (GEORGE GEORGE K.) (R. S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26/8/2014 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR