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ITA 439/BANG/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5512 (ITAT-BANGALORE)
• Duration Of Justice: 6 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 27-03-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 19-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: T SURYANARAYANA
• Keywords: Depreciation; Transfer pricing; Double taxation relief; International transaction; Competent authority; Unabsorbed depreciation
• Section: 92C; 10B; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER IT(TP)A NO.439/BANG/2011 ASSESSMENT YEAR : 2005-06 CGI INFORMATION SYSTEM AND MANAGEMENT CONSULTANTS PVT. LTD., ELECTRONIC CITY TOWER 2, 95/1 AND 95/2, ELECTRONIC CITY PHASE I (WEST), BANGALORE 560 100. PAN: AAACI 1994C VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(2), BANGALORE. APPELLANT RESPONDENT IT(TP)A NO.452/BANG/2011 ASSESSMENT YEAR : 2005- 06 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(2), BANGALORE. VS. CGI INFORMATION SYSTEM AND MANAGEMENT CONSULTANTS PVT. LTD., BANGALORE 560 100. PAN: AAACI 1994C APPELLANT RESPONDENT APPELLANT BY : SHRI T. SURYANARAYANA, ADVOCATE RESPONDENT BY : SHRI SANJAY KUMAR, CIT(DR)(ITAT)-3 DATE OF HEARING : 28.03.2017 DATE OF PRONOUNCEMENT : 21.04.2017 IT(TP)A NOS.439 & 452/BANG/2011 PAGE 2 OF 15 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THESE CROSS APPEALS ARE PREFERRED BY THE ASSESS EE AND THE REVENUE AGAINST THE ORDER OF CIT(APPEALS) INTER ALIA ON THE FOLLOWING GROUNDS:- IT(TP)A 439/BANG/2011 (ASSESSEES APPEAL) 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) [HEREINAFTER REFERRED TO AS 'LEARNED CIT( A)'] RESULTING IN INCOME OF THE APPELLANT BEING SUBJECT TO TAX, IS BA D IN LAW, WITHOUT APPLICATION OF MIND AND LIABLE TO BE QUASHE D. 2. (A) THAT THE LEARNED CIT(A) ERRED IN CONFIRMIN G THE ORDER OF DEPUTY COMMISSIONER OF INCOME-TAX [HEREINAFTER REFERRED AS 'LEARNED AO'] IN DENYING THE DEDUCTION UNDER SECTION 10A OF THE ACT IN RELATION TO PROFITS OF TH E APPELLANT'S STP UNDERTAKING M BANGALORE. (B) THAT THE AUTHORITIES MENTIONED ABOVE ERRED IN RELYING UPON THE ASSESSMENT ORDERS PERTAINING TO DIFFERENT ASSESSMENT YEARS WHICH ARE PENDING ADJUDICATION BEF ORE THE HON'BLE INCOME TAX APPELLATE TRIBUNAL. 3. THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE ORDER OF LEARNED AO IN SETTING OFF THE BROUGHT FORWARD BUSINESS LOSS AMOUNTING TO RS 4,873,401 AND UNABSOR BED DEPRECIATION LOSS AMOUNTING TO RS 32,432 PERTAINING TO AY 1999-00 BEFORE COMPUTING DEDUCTION UNDER SECTION 10 A OF THE ACT IN RELATION TO THE APPELLANT'S STP UNDERTAK ING IN MUMBAI. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED CIT(A) ERRED IN MAKING ADJUSTMENT TO THE TRANSFER P RICE OF THE APPELLANT BY RS. 9,167,881/-. IT(TP)A NOS.439 & 452/BANG/2011 PAGE 3 OF 15 5. THAT THE LEARNED ADDITIONAL DIRECTOR OF INCOME T AX (TRANSFER PRICING - I), BANGALORE ('TRANSFER PRICING OFFICER' OR 'TPO') AND THE LEARNED CIT(A) ERRED IN NOT ALLOWING THE BE NEFIT OF RANGE OF +/- 5% AS PROVIDED IN PROVISO TO SECTION 9 2C(2) OF THE ACT, WHILE DETERMINING THE ARM'S LENGTH PRICE. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN DETERMINING THE ARM'S LENGT H MARK UP TO BE 21.41%. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN UPHOLDING THE REJECTION OF TRANSFER PRICING ('TP') DOCUMENTATION BY THE LEARNED TPO. 8. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE REJECTION OF COMPARABILITY ANALYSIS CARRIED IN THE TP DOCUMENTAT ION AND CONDUCTING A FRESH COMPARABILITY ANALYSIS FOR DETER MINING THE ARM'S LENGTH PRICE BY THE LEARNED TPO. 9. THAT THE LEARNED CIT(A) ERRED IN NOT GIVING REA SONABLE OPPORTUNITY TO THE APPELLANT OF REFUTING AND REBUTT ING THE BASIS ON WHICH ADJUSTMENT WAS PROPOSED BY THE LEARN ED CIT(A) AND IN NOT ADMITTING THE CONTENTIONS, ARGUME NTS, AND EVIDENTIARY DATA PUT FORWARD BY THE APPELLANT. 10. THAT THE LEARNED CIT(A) FAILED TO ADJUDICATE O N THE DISALLOWANCE OF THE MARKETING COMMISSION BY THE LEA RNED TPO. 11. THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/ OR TO ALTER, AMEND, RESCIND MODIFY THE GROUNDS HEREIN ABOVE OR P RODUCE FURTHER DOCUMENTS BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. IT(TP)A NO.452/B/11 (REVENUES APPEAL) 1. THE ORDER OF THE LEARNED CIT (APPEALS) , IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE , IS OPPOSED TO LAW AND THE FACTS AND C I RCUMSTANCES OF THE CASE . 2. THE LEARNED CIT (APPEALS) WAS NOT JUSTIFIED IN DIRECTING THE AO TO RECOMPUTE THE DEDUCTION ALLOWABLE U/S . 10A OF IT(TP)A NOS.439 & 452/BANG/2011 PAGE 4 OF 15 I.T.ACT , 1961 AFTER REDUCING THE TELECOMMUNICATION EXPENSES INCURRED OUTSIDE INDIA AMOUNTING TO RS . 27,55 , 849-00 BOTH FROM THE EXPORT TURNOVER AND THE TOTAL TURNOVER , WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE . 3. THE LEARNED CIT (APPEALS) HAS ERRED I N NOT APPRECIATING THAT THERE I S NO PROVISION IN SECTION 10A, WHICH REQUIRES THE TELECOMMUNICATION EXPENSES REDUCED FROM THE EXP ORT TURNOVER AS PER CLAUSE (IV) OF EXPLANATION 2 TO SEC TION 10A, TO BE REDUCED FROM THE TOTAL TURNOVER ALSO. 4. THE LEARNED CIT (APPEALS) WAS NOT JUSTIFIED IN ALLO WING RELIEF OF RS . 61,13 , 513/- OUT OF THE ADJUSTMENT OF RS.1 , 52,81,394/- MADE BY THE ASSESSING OFFICER U/S 92CA OF THE I.T. ACT , 1961 IN RESPECT OF THE INTERNATIONAL TRANSACTIONS WITH PARTIES LOCATED IN COUNTRIES OTHE R THAN THE USA , WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES UNDER WHICH THE ADJUSTMENT WAS MADE . 5. THE LEARNED CIT (APPEALS) HAS ERRED IN TAKING INTO CONSIDERATION THE PROFIT MARGIN OF 21.41% BEING THE AVERAGE OF THE PROFIT MARGIN OF 17.5% AS DETERMINED BY THE MAP AUTHORITIES IN RESPECT OF THE INTERNAT I ONA L TRANSACTIONS WITH THE US COMPANIES AND 25 . 32% ADOPTED BY THE TPO/AO , WITHOUT ANY BASIS . 2. GROUND NOS. 4 TO 10 IN THE ASSESSEES APPEAL AND GROUND NOS.4 & 5 OF REVENUES APPEAL RELATE TO THE TP ISSUES AND IN THIS REGARD THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE FACT THAT DURING THE PENDENCY OF THE APPEAL BEFORE THE CIT(APPEALS), THE ASSESSEES AE IN USA APPROACHED THE COMPETENT AUTHORITY IN USA FOR R ESOLUTION OF THE TP ADJUSTMENT ISSUE INSOFAR AS IT RELATED TO SOFTWARE DEVELOPMENT (SWD) PROVIDED BY THE ASSESSEE TO ITS AE LOCATED IN USA T HROUGH MUTUAL AGREEMENT PROCEDURE (MAP) PRESCRIBED UNDER INDO-US DOUBLE TAXATION IT(TP)A NOS.439 & 452/BANG/2011 PAGE 5 OF 15 AVOIDANCE AGREEMENT (DTAA). THEREAFTER, THE COMPET ENT AUTHORITY OF INDIA & USA ISSUED A MAP RESOLUTION DATED 21.05.201 0 RESOLVING THAT THE TP ADJUSTMENT ISSUE ARISING IN THE APPEAL AND SHORT LY THEREAFTER THE TERMS THEREOF WERE ACCEPTED BY THE ASSESSEE. THIS FACT W AS BROUGHT TO THE NOTICE OF CIT(APPEALS) BY THE ASSESSEE DURING THE P ROCEEDINGS BEFORE HIM AND THE ASSESSEE ACCORDINGLY WITHDREW ITS APPEAL BE FORE THE CIT(APPEALS) INSOFAR AS IT RELATE TO SOFTWARE DEVELOPMENT SERVIC ES PROVIDED BY THE ASSESSEE TO ITS AE IN USA. ACCORDINGLY THE APPEAL CAME TO BE PARTLY ALLOWED BY THE CIT(APPEALS) VIDE HIS ORDER DATED 17 .01.2011. 3. DURING THE PENDENCY OF THE ABOVE CROSS APPEALS B EFORE THE TRIBUNAL, THE ASSESSEES AE IN CANADA APPROACHED THE COMPETEN T AUTHORITY IN CANADA FOR RESOLUTION OF TP ADJUSTMENT ISSUES INSOF AR AS IT RELATED TO THE SOFTWARE DEVELOPMENT SERVICES PROVIDED BY ASSESSEE TO ITS AE IN CANADA THROUGH MAP PRESCRIBED UNDER INDO-CANADA DTAA. THE REAFTER, THE ASSESSEE WAS INFORMED VIDE ORDER DATED 01.12.2015 T HAT THE COMPETENT AUTHORITY OF INDIA & CANADA DTAA HAS RESOLVED THE T P ADJUSTMENT ARISING IN THE APPEAL INSOFAR AS IT RELATES TO CANADA. THE ASSESSEE THEREAFTER ACCEPTED THE TERMS OF MAP RESOLUTION AS PER RULE 44 H(4) OF THE I.T. RULES, 1962 AND WITHDREW ITS APPEAL BEFORE THIS TRIBUNAL I NSOFAR IT RELATES TO SOFTWARE DEVELOPMENT SERVICES PROVIDED BY ASSESSEE TO ITS AE IN CANADA VIDE ITS LETTER DATED 09.02.2016. IT(TP)A NOS.439 & 452/BANG/2011 PAGE 6 OF 15 4. IN VIEW OF THE ABOVE, THE CROSS APPEALS FILED BY THE ASSESSEE BEFORE THIS TRIBUNAL RELATE TO TP ADJUSTMENT MADE BY THE T PO SURVIVE ONLY TO THE EXTENT OF TRANSACTIONS PERTAINING TO SOFTWARE DEVEL OPMENT SERVICES PROVIDED BY THE ASSESSEE TO ITS AE LOCATED IN COUNTRIES OTHE R THAN USA & CANADA I.E., IN UK AND AUSTRALIA IN FY 2004-05. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OU R ATTENTION TO THE LETTER WRITTEN TO THE ASSESSEE WITH REGARD TO MAP P ROCEEDINGS WITH ITS AE IN CANADA ALONG WITH MAP PROCEEDINGS IN WHICH THE DETE RMINED MARGIN WAS AGREED AT 17.50%. SIMILARLY, OUR ATTENTION WAS AL SO INVITED TO THE OTHER LETTER DATED 16.01.2010 TO THE ASSESSEE WITH REGARD TO MAP PROCEEDINGS RELATING TO TRANSACTIONS WITH ITS AE IN USA IN WHIC H THE ALP FOR SERVICES WAS DETERMINED AT 117.5%. COPY OF THIS LETTER AND MAP PROCEEDINGS ARE AVAILABLE AT PAGE NOS.31 TO 33 OF THE COMPILATION. 6. OUR ATTENTION WAS FURTHER INVITED TO THE TOTAL I NTERNATIONAL TRANSACTIONS IN THIS REGARD WHICH IS AVAILABLE AT P AGES 621 OF COMPILATION IN WHICH IT IS CLEAR THAT THE MAXIMUM TRANSACTIONS WER E UNDERTAKEN BY THE ASSESSEE WITH ITS AE IN US & CANADA. ONLY TWO TRAN SACTIONS WERE UNDERTAKEN BY THE ASSESSEE WITH ITS AES IN UK AND A USTRALIA. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT THE ALP DETERMINED IN THE CASE OF AES OF US & CANADA BE ADOPTED IN THE CASE O F UK AND AUSTRALIA ALSO. THE LD. COUNSEL FURTHER PLACED REL IANCE UPON THE JUDGMENT IT(TP)A NOS.439 & 452/BANG/2011 PAGE 7 OF 15 OF THE TRIBUNAL IN THE CASE OF J P MORGAN SERVICES (P.) LTD. V. DCIT (2016) 70 TAXMANN.COM 228 (MUMBAI TRIB.) IN SUPPORT OF HIS CONTENTIONS THAT ONCE THE ASSESSEE HAS GONE IN MAP WITH RESPECT TO M AXIMUM INTERNATIONAL TRANSACTIONS, THE ALP DETERMINED THEREIN BE APPLIED TO OTHER TRANSACTIONS OF AES OF DIFFERENT COUNTRIES. 7. THE LD. DR, ON THE OTHER HAND, HAS OPPOSED THE C ONTENTIONS OF THE ASSESSEE WITH THE SUBMISSION THAT DETERMINATION OF ALP DEPENDS UPON DIFFERENT FACTS AND NOT ON THE DETERMINATION OF ALP IN ONE TRANSACTION. 8. HAVING CAREFULLY EXAMINED THE ORDERS OF AUTHORIT IES BELOW IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND THAT THE TPO HAS NOT DETERMINED THE ALP OF DIFFERENT TRANSACTIONS UNDERTAKEN WITH DIFFERENT AE S OF DIFFERENT COUNTRIES. HE HAS TAKEN THE ALP OF ALL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE WITH ITS AES OF DIFFERENT COUNTRIES. UNDISPUTEDLY, THE DISPUTE WITH REGARD TO INTERNATIONAL TRANSACTIONS WITH ITS AES OF USA & CA NADA WAS RESOLVED THROUGH MAP AND ALP WAS DETERMINED AT 117.5%. THE INTERNATIONAL TRANSACTIONS WITH ITS AES IN USA & CANADA ARE THE M AXIMUM AND THE INTERNATIONAL TRANSACTIONS WITH ITS AES OF UK & AUS TRALIA WAS MINIMAL. THE DETAILS OF TRANSACTIONS ARE AVAILABLE AT PAGE 621 O F THE COMPILATION AND THE SAME IS REPRODUCED AS UNDER:- IT(TP)A NOS.439 & 452/BANG/2011 PAGE 8 OF 15 IT(TP)A NOS.439 & 452/BANG/2011 PAGE 9 OF 15 9. WE HAVE ALSO CAREFULLY EXAMINED THE ORDER OF TRI BUNAL IN THE CASE OF J P MORGAN SERVICES (P.) LTD. V. DCIT (SUPRA) IN WHICH THE TRIBUNAL HAS HELD THAT WHATEVER MARGIN HAS BEEN APPLIED THROUGH MAP WITH RESPECT TO MAJOR INTERNATIONAL TRANSACTIONS, THE SAME SHOULD B E APPLIED FOR THE REMAINING TRANSACTIONS. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IS EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- 3.2. DURING THE COURSE OF HEARING, IT HAS BEEN SUBMITTED THAT THE ASSESSEE COMPANY IS PROVIDING IT ENABLED SERVIC ES TO ITS AES. THE ASSESSEE HAD SHOWN A MARGIN OF 12.26%. TH E AO HELD AND TREATED ITES BUSINESS AS ONE, AND APPLIED MAR K-UP @ 21.58%. IT IS FURTHER SUBMITTED THAT OUT OF THE TOT AL TRANSACTIONS DONE BY THE AES WORLD OVER, AROUND 96 TRANSACTIONS WERE DONE WITH THE ENTITIES BASED IN USA AND REMAINING 4% OF THE TRANSACTIONS DONE WITH OTHER AES LOCATED ELSEWHERE . THE LOWER AUTHORITIES DID NOT MAKE ANY DISTINCTION WHILE APPL YING MARK-UP AND THE ENTIRE TURNOVER WAS TREATED AS ONE AND AC CORDINGLY MARK UP WAS APPLIED. 3.3. IT HAS BEEN FURTHER SUBMITTED THAT OUT OF THE ORIGINAL TP ADDITION OF RS.39,30,43,000/- (BASED ON THE APPLIED MARK-UP OF 21.58%), MAP HAS BEEN CONCLUDED FOR RS.37,65,35,194 /- (95.80% OF THE TOTAL TP ADDITION ) AT ARMS LENGTH MARK-UP OF 14.38%. ACCORDINGLY, THE ABOVE GROUND HAS BEEN REVI SED TO COVER ONLY THE REMAINING ADDITION OF RS.1,65,07,806/- I.E . 4.20% OF THE TOTAL ADDITION. 3.4. BEFORE US, THE MAIN ARGUMENT OF THE LD. COUNS EL WAS THAT SINCE THE MARK-UP MAP HAS CONCLUDED THE ARMS LENGT H MARK- UP AT 14.38% FOR 96% OF THE TOTAL TRANSACTIONS DONE WITH THE AES, THEN WITHOUT PREJUDICE TO THE OTHER SUBMISSIO NS, FOR REMAINING TRANSACTIONS OF 4% ALSO SAME TREATMENT SH OULD BE GIVEN, SAME BENCH MARKING SHOULD BE DONE, AND ALP M ARK-UP OF 14.38% SHOULD BE APPLIED, MORE PARTICULARLY, BECAUS E OF THE FACT THAT THE AO OR DRP HAVE NOT MADE ANY DISTINCTION BE TWEEN THE US ENTITIES AND NON-US ENTITIES. IT WAS FURTHER SUBMITTED THAT ALTHOUGH THE ASSESSEE CAN VERY WELL CONTEST THESE A DDITIONS, BUT THIS CONCESSION HAS COME FROM THE ASSESSEES SIDE W ITH A VIEW TO IT(TP)A NOS.439 & 452/BANG/2011 PAGE 10 OF 15 BURY THE LITIGATION, NOTWITHSTANDING THE FACTS THAT NO ADDITION SHOULD HAVE BEEN MADE AS THE CASE OF THE ASSESSEE F ALLS WITHIN +/- 5% RANGE. IT WAS ALSO SUBMITTED THAT THE ASSESSEE R ESERVES ITS RIGHT TO CONTEST THE LEVY OF ANY KIND OF PENALTY, A S AND WHEN INITIATED, IF ANY. OUR ATTENTION HAS BEEN DRAWN TO THE ANNUAL ACCOUNTS OF THE COMPANY AND ORDERS OF THE LOWER AUT HORITIES TO SHOW THAT NO DISTINCTION HAS BEEN MADE BETWEEN THE 96% AND 4% TRANSACTIONS. 3.5. ON THE OTHER HAND, LD. CIT-DR, VEHEMENTLY OPP OSING THE ARGUMENTS OF THE LD. COUNSEL, SUBMITTED THAT THERE IS NO CONCEPT OF DETERMINATION OF ALP UNDER THE MUTUAL AGREEMENT PROCEDURE. THE RULES AND REGULATIONS OF TRANSFER PRICING AS PR ESCRIBED U/S. 92C CHAPTER X OF THE INCOME TAX ACT ARE NOT APPLICA BLE UNDER MAP, AND THEREFORE, NO ALP WAS DETERMINED UNDER MAP , AND THEREFORE, ASSESSEE CANNOT CLAIM TO TAKE ANY BENEFI T OF THE MARK- UP REACHED UNDER MAP I.E. @ OF 14.38%. ACCORDINGLY TO HIM, THE ALP SHOULD BE COMPUTED FRESHLY AND INDEPENDENTLY FO R THE REMAINING 4% TRANSACTIONS, AND FOR THIS PURPOSE THI S ISSUE CAN BE SENT BACK TO THE LOWER AUTHORITIES. 3.6 WE HAVE GONE THROUGH THE ARGUMENTS MADE BY BOT H THE SIDES AND ALSO THE MATERIAL PLACED BEFORE US FOR OU R CONSIDERATION. IT IS NOTED THAT LETTER DATED 9TH APRIL 2015 IN FNO .480/13/2010- FTD-1 HAS BEEN ISSUED IN THE CASE OF THE ASSESSEE C OMPANY UNDER MAP PROCEEDINGS FOR A.Y.2006-07 TO 2010-111 BY THE DCIT(OSD), APA-I ON BEHALF OF THE FOREIGN TAX AND T AX RESEARCH DIVISION -I, CENTRAL BOARD OF DIRECT TAXES , NEW DELHI WHEREIN IT HAS BEEN CONFIRMED THAT FOR A.Y.2006-07, FOR US RELATED TRANSACTIONS, THE MARGIN HAS BEEN DETERMINE D AT 14.38% AS AGAINST MARGIN OF 21.58%, AS WAS DETERMINED BY THE TRANSFER PRICING OFFICER (TPO). IT HAS BEEN FURTHER CLARIFIE D BY WAY OF NOTE IN THE SAID LETTER THAT APPORTIONMENT BETWEEN US AND NON-US ALP AND TP ADJUSTMENT HAD BEEN MARGINED OUT BY THE APA SECTION (OF FT AND TR DIVISION) ON THE BASIS OF US AND NON- US REVENUE. IT IS FURTHER NOTED FROM THE PERUSAL O F THE ANNUAL ACCOUNTS OF THE ASSESSEE COMPANY THAT AGGREGATE TUR NOVER HAS BEEN SHOWN AT RS.47,30,521/-, AND NO DISTINCTION HA S BEEN MADE BETWEEN THE US AND NON-US TRANSACTIONS. SIMILAR LY IN THE ORDERS PASSED BY THE LOWER AUTHORITIES ALSO NO SUCH DISTINCTION AS EVER BEEN MADE BY ANY OF THE AUTHORITIES. UNDER THE SE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, WHATEVER MAR GIN HAS BEEN DETERMINED FOR THE 96% OF THE TRANSACTIONS, SAME MA RGIN SHOULD IT(TP)A NOS.439 & 452/BANG/2011 PAGE 11 OF 15 BE DETERMINED FOR THE REMAINING 4% TRANSACTIONS AS WELL. IT IS WORTH NOTING THAT, EVEN BEFORE US, NO DISTINCTION I N FACTS OR NATURE OF TRANSACTIONS HAS BEEN BROUGHT OUT ON RECORD. THE REFORE, IN OUR CONSIDERATE VIEW, MARK-UP OF 14.38% SHOULD BE DETER MINED FOR THE REMAINING 4% TRANSACTIONS PERTAINING TO NON-US ENTITIES AS WELL. THE ASSESSEE GETS PART RELIEF ACCORDINGLY. 10. IN THE INSTANT CASE ALSO, THE MAXIMUM INTERNATI ONAL TRANSACTIONS WERE UNDERTAKEN BY THE ASSESSEE WITH ITS AES OF CAN ADA AS WELL AS USA AND ONLY TWO TRANSACTIONS WERE UNDERTAKEN WITH AES OF AUSTRALIA AND UK. THEREFORE THE SAME ALP OF 117.50% BE APPLIED WITH R ESPECT TO REMAINING TWO INTERNATIONAL TRANSACTIONS. ACCORDINGLY, WE SE T ASIDE THE ORDER OF CIT(APPEALS) AND DIRECT THE AO/TPO TO APPLY THE ALP OF 117.50% WITH RESPECT TO THE REMAINING TRANSACTIONS. 11. GROUND NO.2 IN ASSESSEES APPEAL RELATE TO DEDU CTION U/S. 10A OF THE ACT AND THIS ISSUE IS COVERED BY THE ORDER OF T HE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2001-02 & 2002-03. COPY OF THE TRIBUNALS ORDER IS PLACED ON RECORD AND IN PARA NO.8, THIS ISSUE WAS D ISCUSSED. FOR THE SAKE OF REFERENCE, WE EXTRACT THE RELEVANT PORTION OF TH E ORDER OF TRIBUNAL AS UNDER:- 8. FROM THE ABOVE PARAS OF THE ORDER OF THE LD. CI T(A) FOR THE ASSESSMENT YEAR 1998-99, IT IS SEEN THAT THE UNIT, FOR WHICH THE DEDUCTION IS BEING CLAIMED U/S. 10A OF THE ACT, WAS FIRST SET UP IN ASSESSMENT YEAR 1996-97 AND CATEGORICAL FINDING HAS BEEN GIVEN BY THE LD. CIT(A) THAT OF THE TOTAL VALUE OF THE PL ANT AND MACHINERY INSTALLED IN THE SAID UNIT, 80:80% COMPRI SED OF PLANT AND MACHINERY TRANSFERRED FROM ITS ERSTWHILE UNITS LOCATED AT MUMBAI AND TRIVANDRUM. HENCE IT IS SEEN THAT THE ASSESSEE HAS VIOLATED THE CONDITIONS PRESCRIBED IN CLAUSE (III) OF SUB-SEC.(2) OF SEC.10A OF THE IT ACT AND THEREFORE, THE ASSESSEE I S NOT ELIGIBLE IT(TP)A NOS.439 & 452/BANG/2011 PAGE 12 OF 15 FOR DEDUCTION U/S 10A OF THE IT ACT, 1961 IN RESPEC T OF THIS UNIT ATLEAST. AS PER JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF SAMI LABS LTD., (SUPRA) ON WHICH RELIANCE HAS BEEN PLACED BY THE LD. DR OF THE REVENUE, IT WA S HELD THAT CONDITIONS SHOULD BE SATISFIED IN INITIAL YEAR OF M ANUFACTURE OR PRODUCTION AND IF THE VALUE OF OLD MACHINERY AND PL ANT IN INITIAL YEAR OF MANUFACTURE IS MORE THAN 20% OF THE TOTAL V ALUE OF MACHINERY AND PLANT THEN EVEN IF SUCH PERCENTAGE IS REDUCED TO LESS THAN 20% BY MAKING PURCHASE OF NEW PLANT AND M ACHINERY IN A SUBSEQUENT YEAR, EVEN THEN THE ASSESSEE WILL NOT BE ENTITLED TO CLAIM EXEMPTION U/S. 10B OF THE IT ACT, 1961. THE REQUIREMENT OF SEC.10A AND 10B ARE SIMILAR AND THEREFORE, IN VI EW OF THIS CATEGORICAL FINDING OF THE LD. CIT(A) THAT IN THE I NITIAL YEAR, THE PERCENTAGE OF OLD AND USED PLANT AND MACHINERY WAS MORE THAN 20%, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S . 10A OF THE ACT, IN THE INITIAL YEAR AS WELL AS IN SUBSEQUENT Y EARS. THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF TH E LD. CIT(A) ON THIS ISSUE IN ANY OF THESE TWO YEARS WHICH ARE BEFO RE US BY RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF SAMI LABS LTD. ( SUPRA). HENCE, WE DECLINE TO INTERFERE WITH THE ORDER OF TH E LD. CIT(A) ON THIS ISSUE. 9. IN ITA NO.869(MUM)/2006, ALTHOUGH SOME OTHER GRO UNDS ARE ALSO RAISED AS PER GROUNDS OF APPEAL REPRODUCED ABOVE BUT NO ARGUMENT WAS ADVANCED BY THE LD. AR OF THE ASSESSEE ON ANY OF THESE GROUNDS AND HENCE, WE INFER THAT THE LEARNED AR OF THE ASSESSEE HAS NOTHING TO SAY ON THESE GROUNDS. IN T HE ABSENCE OF ANY CONTENTION OF THE LEARNED AR OF THE ASSESSEE, W E FIND NO REASON TO INTERFERE IN THE ORDER OF THE CIT(A) ON A NY SUCH ISSUE. 10. IN THE RESULT, BOTH THESE APPEALS OF THE ASSESS EE ARE DISMISSED. 12. SINCE THE IMPUGNED ISSUE IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER YEA RS, WE FIND NO JUSTIFICATION TO TAKE A CONTRARY VIEW IN THIS APPEA L. ACCORDINGLY, FOLLOWING IT(TP)A NOS.439 & 452/BANG/2011 PAGE 13 OF 15 THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE AND CONFIRM THE ORDER OF CIT(APPEALS). 13. WITH REGARD TO GROUND NO.3, LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THIS ISSUE IS COVERED BY THE JUDGMEN T OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. YOKOGAWA INDIA LTD., 341 ITR 385 (KAR) IN WHICH THEIR LORDSHIPS HAVE HELD THAT AS THE PRO FITS & GAINS U/S. 10A WERE NOT TO BE INCLUDED IN THE INCOME OF THE AS SESSEE AT ALL, THE QUESTION OF SETTING OFF OF LOSS OF THE ASSESSEE FRO M ANY BUSINESS AGAINST SUCH PROFITS & GAINS OF THE UNDERTAKING WOULD NOT A RISE. SIMILARLY, AS PER SECTION 72(2), UNABSORBED BUSINESS LOSS IS TO BE FI RST SET OFF AND THEREAFTER UNABSORBED DEPRECIATION U/S. 32(2) IS TO BE SET OFF AS DEDUCTION U/S. 10A HAS TO BE EXCLUDED FROM THE TOTAL INCOME OF ASSESSE E, THE QUESTION OF UNABSORBED BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFITS & GAINS OF UNDERTAKING WOULD NOT ARISE. THE JUDGMENT OF HON'B LE JURISDICTIONAL HIGH COURT WAS ALSO APPROVED BY THE HONBLE APEX COURT V IDE ITS JUDGMENT DATED 16.12.2016 REPORTED AT (2017) 77 TAXMANN.COM 41 (SC ). 14. SINCE THE IMPUGNED ISSUE IS SQUARELY COVERED BY THE AFORESAID JUDGMENT OF THE HONBLE APEX COURT, WE SET ASIDE TH E ORDER OF CIT(APPEALS) AND DIRECT THE AO TO RECOMPUTE THE DED UCTION U/S. 10A IN TERMS OF JUDGMENT OF HONBLE APEX COURT IN THE CASE OF CIT V. YOKOGAWA INDIA LTD. (SUPRA) . IT(TP)A NOS.439 & 452/BANG/2011 PAGE 14 OF 15 15. GROUND NOS. 2 & 3 IN THE REVENUES APPEAL I.E., ITA NO.45/BANG/2011 RELATE TO THE REDUCTION OF TELECOMM UNICATION EXPENSES FROM THE EXPORT TURNOVER. THIS ISSUE IS ALSO COVER ED BY THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI LTD., 341 ITR 98 (KAR) IN WHICH IT HAS BEEN HELD THAT IF CERTAIN EXPENSES ARE EXCLUDED FROM THE EXPORT TURNOVER, THE SAME SHOULD ALSO BE EXCLUD ED FROM THE TOTAL TURNOVER. SINCE THE CIT(APPEALS) HAS DECIDED THE I SSUE AS PER JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI LTD. (SUPRA) , WE FIND NO INFIRMITY IN THE ORDER OF CIT(APPEALS). AC CORDINGLY, THE ORDER OF CIT(APPEALS) IS CONFIRMED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE AS WE LL AS REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF APRIL, 2017. SD/- SD/- ( S. JAYARAMAN ) (SUNIL KUMAR YA DAV ) ACCOUNTANT MEMBER JUDIC IAL MEMBER BANGALORE, DATED, THE 21 ST APRIL, 2017. / D ESAI S MURTHY / IT(TP)A NOS.439 & 452/BANG/2011 PAGE 15 OF 15 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.