Tata Technologies Limited, Pune V. Deputy Commissioner of Income-Tax, Pune

ITA 723/PUN/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5845 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 29-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NANDITA KANCHAN
• Assessee Lawyers: DANESH BAFNA
• Keywords: Transfer pricing; Principle of natural justice; International transaction; Earning of tax free income; Revenue expenditure
• Section: 10AA; 234B; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E BEFORE SHRI R.S. SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY, JM / ITA NO. 723/PUN/2017 / ASSESSMENT YEAR : 2012-13 TATA TECHNOLOGIES LIMITED. PLOT NO.25, RAJIV GANDHI INFOTECH PARK, HINJAWADI, PUNE-411 057. PAN : AAACT3092N .... / APPELLANT / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-7, PUNE. / RESPONDENT ASSESSEE BY : SHRI DANESH BAFNA REVENUE BY : SMT. NANDITA KANCHAN / DATE OF HEARING : 30.01.2019 / DATE OF PRONOUNCEMENT : 01.02.2019 / ORDER PER PARTHA SARATHI CHAUDHURY, JM : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM TH E ORDER OF THE DISPUTE RESOLUTION PANEL-3 (WZ) ( IN SHORT DRP), MUMBAI DATE D 13.12.2016 FOR THE ASSESSMENT YEAR 2012-13 AS PER FOLLOWING GROUNDS OF APPEAL O N RECORD: THE GROUNDS STATED HEREUNDER ARE INDEPENDENT OF, AN D WITHOUT PREJUDICE TO ONE ANOTHER. TRANSFER PRICING GROUNDS GROUND NO.1 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HONORABLE DISPUTE RESOLUTION PANEL ('HON'BLE DRP'), AND THE LEARNED 2 ITA NO. 723/PUN/2017 A.Y.2012-13 ASSESSING OFFICER ('LD. AO') PURSUANT TO THE DIRECT IONS OF THE HON'BLE DRP, ERRED IN MAKING A TP ADJUSTMENT OF RS. 3,73,21 ,943 TO THE INCOME OF THE APPELLANT BY HOLDING THAT THE APPELLA NT'S INTERNATIONAL TRANSACTION PERTAINING TO PAYMENT OF COMMISSION DOE S NOT SATISFY THE ARM'S LENGTH PRINCIPLE ENVISAGED UNDER THE INCOME-T AX ACT, 1961 ('THE ACT'). THE APPELLANT PRAYS THAT THE ADDITION PERTAINING TO PAY MENT FOR COMMISSION OUGHT TO BE DELETED. GROUND NO.2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HON'BLE DRP/LD. AO, ERRED IN REJECTING THE ECONOMIC ANALYSIS CONDUCTED BY THE APPELLANT FOR DEMONSTRATING THE AR M'S LENGTH NATURE OF THE COMMISSION PAID TO ASSOCIATED ENTERPRISES (' AES'). THE APPELLANT PRAYS THAT THE ECONOMIC ANALYSIS COND UCTED BY THE APPELLANT OUGHT TO BE UPHELD. GROUND NO.3 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HON'BLE DRP/LD. AO, ERRED IN RE-COMPUTING THE ARM'S LENGTH PRICE ('ALP') OF THE APPELLANT'S INTERNATIONAL TRANSACTIO N PERTAINING TO PAYMENT OF COMMISSION TO AE AT 'NIL'. THE APPELLANT PRAYS THAT THE SAID RE-COMPUTATION OUGHT TO BE DELETED. GROUND NO.4 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HON'BLE DRP/LD.AO, ERRED IN CONTRAVENING THE PRINCI PLE OF CONSISTENCY IN CONNECTION WITH DETERMINING THE ALP OF THE APPEL LANT'S INTERNATIONAL TRANSACTION PERTAINING TO PAYMENT OF COMMISSION TO AE. THE APPELLANT PRAYS THAT THE PRINCIPLE OF CONSISTEN CY BE UPHELD AND THE ADJUSTMENT MADE BY THE HON'BLE DRP/LD. AO OUGHT TO BE DELETED. GROUND NO.5 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HON'BLE DRP/LD. AO, ERRED IN IGNORING THE COMPARABL E UNCONTROLLED DATA SUBMITTED BY THE APPELLANT TO DEMONSTRATE THE ALP OF INTERNATIONAL TRANSACTION PERTAINING TO PAYMENT OF COMMISSION TO AE. THE APPELLANT PRAYS THAT THE COMPARABLE DATA SUBMIT TED BY THE APPELLANT OUGHT TO BE ACCEPTED AND CONSEQUENTLY THE TRANSFER PRICING ADJUSTMENT MADE BE DELETED. GROUND NO.6 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HON'BLE DRP / LD. AO, ERRED IN CONCLUDING THAT THE PURCHASE OF SOFTWARE LICENSES AMOUNTING TO RS.1,20,337, MADE BY THE APPELLANT'S FROM DASSAULT SYSTEMES K.K. AND UNRELATED PARTIES, CONSTITUTES A DEEMED INTERNATIONAL TRANSACTION. 3 ITA NO. 723/PUN/2017 A.Y.2012-13 THE APPELLANT PRAYS THAT THE PURCHASE OF SOFTWARE L ICENSES BY THE APPELLANT'S FROM DASSAULT SYSTEMES K.K. SHOULD NOT BE TREATED AS A DEEMED INTERNATIONAL TRANSACTION. GROUND NO.7 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HON'BLE DRP / LD. AO, ERRED IN COMPUTING THE ALP OF APPELLANT'S PURCHASE OF SOFTWARE LICENSES FROM DASSAULT SYSTEME S K.K. AT 'NIL'. THE APPELLANT PRAYS THAT THE ADDITION PERTAINING TO PURCHASE OF SOFTWARE LICENSES FROM DASSAULT SYSTEMES K.K. OUGHT TO BE DELETED. GROUND NO.8 8. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE DRP /LD. AO HAS ERRED IN ADOPTING A CONTRADICTORY POSIT ION WHEREIN FIRST WHILE DECIDING ON THE ISSUE OF DEEMED INTERNA TIONAL TRANSACTION IT HAS BEEN CONCLUDED THAT THE AE HAS RENDERED SERVICE S IN CONNECTION WITH PURCHASES MADE FROM DASSAULT INDIA AND DASSAUL T SYSTEMES K.K., WHILE LATER THE ALP OF THE COMMISSION PAID BY THE APPELLANT TO AE, FOR THE PROCUREMENT AND MARKETING SUPPORT SERVI CES RECEIVED, HAS BEEN RECOMPUTED AT 'NIL' CITING THAT NO SERVICES HA VE BEEN RENDERED BY THE AE TO THE APPELLANT. THE APPELLANT PRAYS THAT THE ADDITION PERTAINING TO COMMISSION PAID TO AE SHOULD BE DELETED. CORPORATE TAX GROUNDS GROUND NO.9 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HON'BLE DRP/LD. AO, HAS ERRED IN DISALLOWING THE CL AIM OF THE APPELLANT IN RESPECT OF AMORTIZATION OF PREMIUM ON LEASEHOLD LAND AMOUNTING TO RS.4,30,886. THE APPELLANT PRAYS THAT THE ADDITION PERTAINING TO AMORTIZATION OF PREMIUM ON LEASEHOLD LAND OUGHT TO BE DELETED AND S HOULD BE ALLOWED AS REVENUE EXPENDITURE. GROUND NO. 10 10. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HON'BLE DRP/LD.AO, HAS ERRED IN DISALLOWING THE PRO VISION FOR EXPENDITURE OF RS. 38,93,287 IN RESPECT OF PROVISIO N UNDER BHAVISHYA KALYAN YOJANA (,BKY'), AN EMPLOYEE WELFARE SCHEME. THE APPELLANT PRAYS THAT DEDUCTION IN RESPECT OF TH E PROVISION MADE FOR BKY EXPENSES SHOULD BE ALLOWED AS AN ASCERTAINE D LIABILITY. GROUND NO. 11 11. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HON'BLE DRP / LD. AO, HAS ERRED IN INVOKING RULE 80 OF THE INCOME -TAX RULES,1962 AND THEREBY DISALLOWING EXPENSES AMOUNTI NG TO RS.86,73,524 UNDER SECTION 14A BY APPLYING RULE 80 OF THE ACT. 4 ITA NO. 723/PUN/2017 A.Y.2012-13 THE APPELLANT PRAYS THAT ADDITION MADE UNDER SECTIO N 14A OF THE ACT BY APPLYING RULE 80 SHOULD BE DELETED AS THE APPELL ANT HAS SUO-MOTO DISALLOWED EXPENSES OF RS 17,43,743 DIRECTLY ATTRIB UTABLE TO THE EXEMPT INCOME. GROUND NO. 12 12. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE HON'BLE DRP/LD. AO HAS ERRED IN RETAINING, THE REVE RSAL OF RS 3,60,976/-, BEING PROVISION WRITTEN BACK TO PROFIT AND LOSS ACCOUNT FOR MEDICARE EXPENSES. THE APPELLANT PRAYS THAT REVERSAL OF PROVISION OF R S 3,60,976 TO BE EXCLUDED WHILE CALCULATING THE TOTAL INCOME OF THE APPELLANT. GROUND NO. 13 13. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE HON'BLE DRP/LD. AO HAS ERRED IN NOT GRANTING ENHANC ED DEDUCTION UNDER SECTION 10A OF THE ACT BASED ON THE DISALLOWA NCES MADE IN THE ASSESSMENT ORDER. THE ASSESSEE PRAYS THAT ENHANCED DEDUCTION UNDER SE CTION 10A OF THE ACT ON THE DISALLOWANCES MADE BY THE LD. AO SHOULD BE GRANTED TO THE APPELLANT. COMMON GROUNDS GROUND NO. 14 14. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HAS ERRED IN CHARGING INTEREST UNDER SECTION 234 B OF THE ACT. THE APPELLANT PRAYS THAT THE CHARGE OF INTEREST UND ER SECTION 234B OF THE ACT SHOULD BE DELETED. GROUND NO. 15 15. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, TH E LD. AO HAS ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271 (1)(C) OF THE ACT. THE APPELLANT PRAYS THAT THE PENALTY PROCEEDINGS OU GHT TO BE DROPPED. YOUR APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, W ITHDRAW, MODIFY AND /OR SUBSTITUTE, AND TO WITHDRAW THE ABOVE GROUN DS OF APPEAL. 2. THE GROUNDS NO. 1 TO 5 AND 8 DEALS WITH THE TP ADJU STMENT FOR PAYMENT OF COMMISSION TO ASSOCIATE ENTERPRISES (AES). 3. THE BRIEF FACTS IN THIS CASE ARE THAT DURING THE ASSES SMENT YEAR 2012- 13, THE ASSESSEE HAD PAID RS.3,73,21,943/- TOWARDS COMMISS ION TO ITS SINGAPORE ENTITY ( HEREINAFTER REFERRED TO AS TTPL) ON T HE GROUND THAT AE IS 5 ITA NO. 723/PUN/2017 A.Y.2012-13 HELPING THE ASSESSEE IN GETTING DISCOUNTS FROM DASSAULT UK FROM WHOM THE ASSESSEE WAS PROCURING SOFTWARE LICENSES. THE BACKGROUND FACT OF THE CASE IS THAT THE ASSESSEE HAS ITS SINGAPORE ENTITY AS TTPL AND THE ASSESSEE IS PURCHASING SOFTWARE LICENSES FROM DASSAULT UK. TTPL WAS FAC ILITATING THE PURCHASE PROCESS ON BEHALF OF THE ASSESSEE SO TO GET D ISCOUNT FROM DASSAULT UK IN PURCHASE OF THOSE SOFTWARE LICENSES AND IN VIEW OF THOSE SERVICES RENDERED BY THE TTPL, COMMISSION WAS PAID BY THE ASSESS EE TO THE SAID SINGAPORE ENTITY I.E. TTPL. 4. THE ASSESSEE HAD FILED DETAILED SUBMISSIONS BEFORE THE TRANSFER PRICING OFFICER (TPO). THEREIN, THE ASSESSEE HAS STATED THAT TTPL IS ENGAGED IN THE BUSINESS OF PROVIDING PROCUREMENT AND MARKETING SUPPORT SERVICES. TTPL HAS ASSISTED THE ASSESSEE IN SECURING FAVOURABLE TERMS FROM DASSAULT SY STEMS U.K FOR PROCURING THE SOFTWARE, IN TERMS OF THE DISCOUNTS RE CEIVED FROM DASSAULT IS IN THE RANGE OF 20% TO 35%. IT IS NOT THAT THE TTPL IS O NLY PROCURING AND PROVIDING MARKETING SUPPORT SERVICES TO ASSESSEE BUT TO OTHER THIRD PARTY ALSO WHO ARE BASED OUTSIDE SINGAPORE AND FROM THEM TTPL IS C HARTING HIGHER RATE OF COMMISSION I.E. @15% OF THE SALES WHEREAS FROM THE ASSESS EE TTPL IS CHARGING @6% OF SALES AS COMMISSION. THE ASSESSEE IS ALSO PAYING CO MMISSION TO THIRD PARTIES @ 6.5% AND @7%. THE ASSESSEE HAS ENTE RED INTO COMMISSION AGREEMENT WITH TTPL WHICH OPERATES AS A CENTRALIZED ENT ITY FOR PROVISION OF PROCUREMENT AND MARKETING SUPPORT SERVICES TO TATA TE CHNOLOGIES GROUP FOR PROVISION OF PROCUREMENT AND MARKETING SUPPORT SERVICES . PURSUANT TO THE AGREEMENT, TTPL HAS RENDERED PROCUREMENT AND MARKETIN G SUPPORT SERVICES WHICH INCLUDED THE FOLLOWING ACTIVITIES: I) ASSISTANCE IN PROCURING SOFTWARE AT COMPETITIVE PRICES AN D MAINTENANCE OF VENDOR RELATIONSHIP. II) GLOBAL CUSTOMER RELATIONSHIP 6 ITA NO. 723/PUN/2017 A.Y.2012-13 III) LEAD GENERATION IV) AFTER SALES SUPPORT. THESE FUNCTIONS UNDERTAKEN BY THE TTPL ENABLE THE ASS ESSEE TO NOT ONLY SECURE FAVOURABLE TERMS FROM DASSAULT FOR PROCURING THE S OFTWARE BUT ALSO HELP THE ASSESSEE IN OBTAINING MORE BUSINESS. THESE ARE T HE SERVICES RENDERED BY TTPL FOR WHICH COMMISSION HAD BEEN PAID BY THE ASSES SEE @6% AS PER COMMISSION AGREEMENT WITH TTPL. 5. THE PRAYER OF THE ASSESSEE IS THAT WITH RESPECT TO ASSESSMENT YEAR 2010- 11, THE SAME ISSUE WAS RAISED AND THE TPO THEREIN WAS C ONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE AND HAS ACCEPTED THE SAME TRANSACTIONS TO BE AT ARMS LENGTH. THAT EVEN IN SUBSEQUENT ASSESSMENT YEAR 2011-12 AS WELL, THIS TRANSACTION WAS ACCEPTED TO BE AT ARMS LENGTH AND TH EREFORE, FOR ASSESSMENT YEAR 2012-13 ALSO, THE SAME CONSISTENCY SHOULD BE FOLLOWED . THE TPO HAS ANALYZED THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE AND TT PL IN DETAIL. TPO AS PER REASONS RECORDED IN HIS ORDER, HAS DECIDED THE A RMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF THE ASSESSEE TO BE CONSIDERE D AS NIL RESULTING IN TP ADJUSTMENT OF RS.3,73,21,943/-. IF WE LOOK INTO THE CRUX OF THE REASONS RECORDED BY TH E TPO, HE HAS NOT ACCEPTED THE INTERNATIONAL TRANSACTION OF THE ASSESSEE T O BE AT ARMS LENGTH. ACCORDING TO THE TPO, THE ASSESSEE WAS NOT ABLE TO DEM ONSTRATE THROUGH EVIDENCES THE BENEFIT RECEIVED BY IT IN TERMS OF DISCOUNT AND MORE EFFECTIVELY, AS TO WHAT SPECIFIC SERVICE WAS PROVIDED BY TTPL TO THE ASSESSEE IN ORDER THAT PAYMENT OF COMMISSION TO TTPL COULD BE JUSTIFIED. 7 ITA NO. 723/PUN/2017 A.Y.2012-13 6. THEREAFTER, THE MATTER TRAVELLED UP TO THE DRP. IT W AS OBSERVED THEREIN THAT THE ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCE IN SU PPORT OF RENDITION OR RECEIPT OF THE SERVICES AS PER AGREEMENT WITH TTPL. FURT HER, THE ASSESSEE HAS FAILED TO FURNISH ANY TANGIBLE EVIDENCE TO DEMONSTRATE THAT THE TTPL HAS PLAYED ANY ROLE WHATSOEVER IN ANY SALE OR ANY AMC CONTR ACT OF ANY SOFTWARE FOR THE ASSESSEE. THE DRP FURTHER OBSERVED THAT THERE WAS AGREEMENT BETWEEN TTPL AND THE ASSESSEE DATED 01.12.2007. HOWEVER, THE AS SESSEE HAS NOT FURNISHED ANY EVIDENCE TO DEMONSTRATE THAT THE TTPL HA S RENDERED ANY SERVICE OR THAT THE ASSESSEE HAS RECEIVED ANY SERVICE IN CONNE CTION WITH SALE OF ANY SOFTWARE OR ANY AMC CONTRACT. THEREBY, THE DRP CARRIED FORWARD THE OBSERVATIONS OF THE TPO AND WANTED MORE TANGIBLE EVIDEN CES IN ORDER TO JUSTIFY COMMISSION PAYMENT BY THE ASSESSEE TO TTPL. THE DRP, T HEREFORE, UPHELD THE OBSERVATION OF THE TPO THAT SINCE NO SERVICES HAS BEEN RECEIVED BY THE ASSESSEE AND THEREFORE, ARMS LENGTH COMMISSION PAID IS NIL. 7. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE FIRST AND FOREMOST INVITED OUR ATTENTION TO PAGE 236 OF THE PAPER BOOK WHE REIN THE COMMISSION AGREEMENT IS THERE BETWEEN THE ASSESSEE AND TTPL. THA T ON THE BASIS OF THE COMMISSION AGREEMENT, THE LD. AR DEMONSTRATED THAT THER E WAS AN IMPORTANCE OF SERVICE WHICH WAS REQUIRED BY THE TTPL TO BE RENDERED TO THE ASSESSEE IN ORDER TO FACILITATE PROCUREMENT OF SOFTWARE LICE NSES FROM DASSAULT UK IN SINGAPORE. THIS COMMISSION AGREEMENT DEMONSTRATED THAT TTPL HAS TO LOOK INTO OVER ALL TRANSACTION ESSENTIALLY MAINTENANCE OF CU STOMER RELATION WITH THE ASSESSEE AND DASSAULT UK AND ALSO TO PROVIDE D ISCOUNT FOR THE SAME PURCHASE FROM DASSAULT UK. THE ENTIRE PRICE NEGOTIATION A ND THE FINAL PRICE OF CHARGE AND EVERYTHING IS AS PER NEGOTIATION OF ASSESSEE AND DAS SAULT UK. TTPL IS ONLY HANDLING THE PROCEDURE SO THAT DISCOUNT COULD B E AVAILED FROM DASAULT 8 ITA NO. 723/PUN/2017 A.Y.2012-13 UK AND ALSO TO LOOK INTO SMOOTH FUNCTIONING OF THE TRANSAC TION. THERE ARE SPECIFIC ACTIVITIES WHICH THE TTPL HAS TO PERFORM WHICH IS GIV EN IN THE SAID AGREEMENT. THE COMMISSION WAS EARLIER FIXED @ 4.25% WHICH AT THE RELEVANT YEAR IS @6% AS IS EVIDENT AT PAGE 243 OF THE PAPER BOOK. 8. THE LD. AR OF THE ASSESSEE FURTHER APPRAISED THE BEN CH THAT THE ASSESSEE OBTAINED NO OBJECTION FROM DASSAULT UK AND ONL Y THEREAFTER, TTPL WAS APPOINTED AS COMMISSION AGENT FOR PROCURING THE PURC HASES OF SOFTWARE LICENSES. THIS NO OBJECTION RECEIPT FROM DASSAULT UK DATED 16.11.2007 IS PLACED AT PAGE 277 OF THE PAPER BOOK WHEREAS THE COMM ISSION AGREEMENT DATED 01.12.2007 BETWEEN THE ASSESSEE AND TTPL WHICH IS PLACED AT PAGE 236 OF THE PAPER BOOK. THEREFORE, IT IS ABSOLUTELY CLEAR THA T THE ASSESSEE FIRST OBTAINED NO OBJECTION DATED 16.11.2007 FROM DASSAULT UK A ND THEREAFTER ON 01.12.2007 ENTERED INTO THE COMMISSION AGREEMENT WITH TTP L. THIS NEGATES THE ARGUMENT OF THE TPO THAT THE ASSESSEE WAS ALREADY IN BUSINESS RELATION WITH DASSAULT UK AND THEREFORE, THERE WAS NO NEED FOR AN Y OTHER ENTITY TO STEP IN TOWARDS FACILITATING BUSINESS TRANSACTION. 8.1 THE LD. AR OF THE ASSESSEE ALSO DEMONSTRATED THAT THERE ARE VARIOUS EMAILS ANNEXED IN PAPER BOOK AT PAGE NO.281 TO 302 WHER EIN IT CAN BE FAIRLY SEEN THAT THERE ARE THREE PARTIES INVOLVED IN THE ENTIRE TRANSACTION VIZ. ASSESSEE, TTPL WHICH IS THE SINGAPORE ENTITY OF THE ASSES SEE AND DASSAULT UK SINGAPORE CONCERN FROM WHOM THE SOFTWARE LICENSES ARE P URCHASED BY THE ASSESSEE. THE LD. AR VEHEMENTLY ARGUED THAT THIS EVIDE NCE CLEARLY SHOWS THAT TTPL WAS INVOLVED AT EVERY STAGE TO FACILITATE BUSINESS T RANSACTION BETWEEN THE ASSESSEE AND THE DASSAULT UK. THE LD. AR SUBMITTED THAT THERE CANNOT BE ANYTHING ELSE OR MORE CIRCUMSTANTIAL EVIDENCE TO SUBSTAN TIATE THESE 9 ITA NO. 723/PUN/2017 A.Y.2012-13 TRANSACTIONS. THE LD. AR FURTHER STATED THAT THE ASSESS EE HAD PAID COMMISSION TO OTHER THIRD PARTIES @6.5% AND @7% AS IS EVID ENT FROM PAGES 314, 315 AND 320 OF THE PAPER BOOK. 9. THE LD. DR , PER CONTRA SUBMITTED THAT ALL THE EMAILS SUBMITTED BY THE ASSESSEE DO NOT REVEAL THE PAYMENT OF COMMISSION. THE LD . DR PLACING RELIANCE ON THE DIRECTIONS OF THE DRP CONTENDED THAT THE DRP EVALUATED THE FACTS THAT ASSESSEE DID NOT DEMONSTRATE THROUGH TANGIB LE EVIDENCES ANY SERVICE RECEIVED FOR WHICH THE PAYMENT OF COMMISSION WAS M ADE. THE LD. DR FURTHER STATED THAT THE COMPARABLES REGARDING PAYMENT OF COMMISSION RELIED ON BY THE ASSESSEE RELATES TO COMMISSION PAID ON SALE TR ANSACTION WHEREAS IN THE PRESENT CASE OF THE ASSESSEE, IT IS COMMISSION PAID WIT H REGARD TO DISCOUNTS AND OTHER SERVICES PROVIDED TO THE ASSESSEE BY TTPL WITH RESPECT TO PURCHASES MADE FROM DASSAULT UK. THEREFORE, COMPARABLES C OMMISSION DEMONSTRATED BY THE LD. AR OF THE ASSESSEE SHOULD NOT TO BE RELIED UP ON. 10. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS AND ANALYZED THE FACTS AND CIRCUMSTANCES IN THIS REGARD. THE FACTS ON RECORD SHOWS THAT THERE IS A COMMISSION AGREEMENT DATED 01.12. 2007 BETWEEN THE ASSESSEE AND TTPL. THAT ON EXAMINING THE CLAUSES CONTAIN ED THEREIN AND AFTER GIVING CONSIDERABLE THOUGHT ON THOSE CLAUSES, IT IS CRYSTAL CLEAR THAT TTPL WAS FACILITATING THE PURCHASES IN RESPECT OF THE ASSESSEE FROM DASSAULT UK. IT WAS THE RESPONSIBILITY OF TTPL TO UNDERTAKE MARKETING EFFORTS T HROUGH TELEMARKETING AND INBOUND INQUIRIES THROUGH ITS DEDICATED SUPPORT. TTPL ALSO WORKED TOWARDS MAINTENANCE OF RELATIONSHIP WITH THE KEY GLOBAL CUSTOMERS OF THE ASSESSEE. THE AGREEMENT ALSO SPECIFIES THAT THE SA ID SERVICE THROUGH TTPL WAS AT ARMS LENGTH COMMISSION @6%. 10 ITA NO. 723/PUN/2017 A.Y.2012-13 BEFORE US, IT IS DEMONSTRATED BY THE LD. AR THROUGH A S ERIES OF EMAILS EXCHANGES BETWEEN THE ASSESSEE, TTPL AND DASSAULT UK. THIS EVIDENCE DEMONSTRATES THAT PURCHASES OF SOFTWARE LICENSES WERE D ONE BY THE ASSESSEE FROM DASSAULT UK AND TTPL WAS FACILITATING THE ENTIRE PROCE SS AND ENSURING THE SMOOTH SELLING OF THE TRANSACTION. THESE ARE SUFFICIENT EVIDENCE TO DEMONSTRATE THE SERVICES RENDERED BY THE TTPL FOR WHIC H COMMISSION PAYMENT WAS MADE TO THE AE. TAKING THE PRACTICABILITY OF THE BUSIN ESS IN TO CONSIDERATION, THESE ARE THE TANGIBLE EVIDENCE THAT CAN B E PLACED ON RECORD WHICH THE ASSESSEE HAS DONE IN ORDER TO JUSTIFY THE CO MMISSION PAYMENT. THERE IS COPY OF COMMISSION AGREEMENT. THERE IS ALSO NO OB JECTION LETTER AND SERIES OF EMAILS EXCHANGED INVOLVING ALL THE CONCERNED PARTIES. 11. TAKING THE TOTALITY OF FACTS AND CIRCUMSTANCES ON REC ORD, WE ARE OF CONSIDERED VIEW THAT ARMS LENGTH COMMISSION @6% TO TTP L IS JUSTIFIED AND WE DIRECT THE TPO TO DETERMINE THE ARMS LENGTH COMMISSION OF THE INTERNATIONAL TRANSACTION ACCORDINGLY. THUS, GROUNDS OF APPEAL NO. 1 TO 5 AND 8 RAISED BY THE ASSESSEE ARE ALLOWED. 12. GROUNDS OF APPEAL NO. 6 AND 7 ARE NOT PRESSED BY T HE ASSESSEE. ACCORDINGLY, GROUND NO. 6 AND 7 ARE DISMISSED AS NOT PRESSED . 13. WITH REGARD TO GROUND NO.9, THE LD. AR OF THE ASSESS EE STATED THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE WITH ITS OWN CASE FOR ASSESSMENT YEAR 2001-02 & 2003-04 IN ITA NO.1345 & 1346/PUN/2011. 14. WE HAVE PERUSED THE ORDER OF ASSESSEES OWN CASE IN ITA NO. 1345 &1346/PUN/2011. WE FIND THAT THE ISSUE IS DECIDED AGAINST THE ASSESSEE. 11 ITA NO. 723/PUN/2017 A.Y.2012-13 HENCE, RESPECTFULLY FOLLOWING THE SAME DECISION, THIS GROUND O F APPEAL IS DISMISSED. THUS, GROUNDS OF APPEAL NO.9 RAISED BY THE ASSESSEE IS DISMISSED. 15. WITH REGARD TO GROUND NO.10, THE LD. AR OF THE ASSES SEE SUBMITTED THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE IN ITS OWN CAS E FOR ASSESSMENT YEAR 1998-99 & 2000-01 IN ITA NO. 86 & 1394/PUN/2003. 16. WE HAVE PERUSED THE ORDER OF ASSESSEES OWN CASE IN ITA NO. 86 & 1394/PUN/2003. WE FIND THAT THE ISSUE IS DECIDED AGAINST THE ASSESSEE. HENCE, RESPECTFULLY FOLLOWING THE SAME DECISION, THIS GROUND O F APPEAL IS DISMISSED. THUS, GROUNDS OF APPEAL NO.10 RAISED BY THE ASSESSEE IS DISMISSED. 17. GROUND NO.11 PERTAINS TO DISALLOWANCE U/S.14A R.W. RU LE 8D. THE FACTS WITH REGARD TO THE ISSUE AND SUBMISSIONS OF THE ASSESSEE ARE AS UN DER: 7.1 THE AO HAS NOTED THAT ASSESSEE IS HAVING EXEMPT INC OME OF RS, 33.2 CRORES INCLUDING DIVIDEND OF RS. 16.47 CRORES AND I NCOME CLAIMED EXEMPT U/S 10AA RS. 16.82CRORES. THE AO HAS ALSO RIOTED TH AT ASSESSEE HAS TOTAL INVESTMENT IN SUCH ASSETS YIELDING EXEMPT- INCOME IS R S. 147 CRORES, INTEREST EXPENDITURE OF RS. 1.54 CRORES AND THAT AS SESSEE HAS MADE SELF DISALLOWANCE OF RS. 17.44 LAKHS U/S 14A. ON THESE F ACTS, THE TPO HAS NOTED THAT SUO MOTO DISALLOWANCE MADE IN ADEQUATE AND THEREFORE, REQUESTED THE ASSESSEE TO EXPLAIN WHY DISALLOWANCE APPLY RULE 8D SHOULD NOT BE MADE. AFTER CONSIDERING THE SUBMISSIONS MADE , THE AO HAS APPLIED RULE 8D AND COMPUTED THE DISALLOWANCE U/S 14A RS.1, 04,17,267/-. 7.2 IT IS SUBMITTED THAT DURING THE YEAR UNDER CONS IDERATION, THE ASSESSEE HAS EARNED A DIVIDEND INCOME OF RS.16,47,19,200 FR OM VARIOUS MUTUAL FUNDS. THE SAME WAS EXEMPT AS PER PROVISION OF SECT ION 10(35) OF THE ACT. 7.2.1 THE ASSESSEE HAS MADE INVESTMENTS IN VARIOUS MUTUAL FUNDS UNITS OUT OF ITS OWN FUNDS I.E. THROUGH ITS INTERNAL ACCR UALS, AVAILABLE SURPLUS FUNDS & FUNDS AVAILABLE FROM INVESTMENT MADE BY PRIVATE EQU ITY INVESTORS BY PURCHASING EQUITY SHARES OF INR 141,05 ,99,720 ISSUED TO PRIVATE EQUITY INVESTORS DURING THE YEAR. IT HAS NO T BORROWED ANY FUNDS FOR THE PURPOSE OF MAKING THE ABOVE INVESTMENTS. FU RTHER, IT DID NOT INCUR ANY SPECIFIC EXPENDITURE TO EARN AFORESAID EXEMPT I NCOME. 12 ITA NO. 723/PUN/2017 A.Y.2012-13 7.2.2 THE ASSESSEE SUBMITS THAT IT HAS ON ITS OWN D ISALLOWED THE EXPENDITURE OF RS.17,43,743 TOWARDS INDIRECT EXPENS ES ('WITHOUT PREJUDICE' AS PER WORKING SUBMITTED DURING ASSESSME NT PROCEEDINGS) FOR THE MANAGEMENT OF THE INVESTMENTS IN THE MUTUAL FUN D UNITS AND FOR EARNING DIVIDEND INCOME FROM SAME. HENCE, THE QUEST ION OF COMPUTING DISALLOWANCE OF ANY EXPENSES INCURRED IN RELATION T O SUCH DIVIDEND INCOME UNDER SECTION 14A(1) OF THE ACT READ WITH RU LE 8D DOES NOT ARISE. 7.2.3 THE ASSESSEE SUBMITTED THAT THE PROVISION OF SECTION 14(2) AND (3) COULD BE APPLIED ONLY IF THE CONDITION PRESCRIBED I N THE PROVISIONS OF SECTION 14A(1) IS SATISFIED I.E. THERE SHOULD BE EX PENSES INCURRED IN RELATION TO EARNING OF THE EXEMPT INCOME FOR THE AO TO APPLY THE PROVISIONS OF SUB-SECTION (2) OR (3). THE AO CANNOT APPLY THE PROVISIONS OF SECTION 14A(2) WITHOUT SATISFYING THAT THERE EXIST EXPENSES IN RELATION TO EARNING OF EXEMPT INCOME ON THE BASIS OF MERE PRESUMPTION. 7.2.4 FURTHER, THE ASSESSEE SUBMITS THAT. IN VIEW O F THE CLEAR LANGUAGE OF SECTION 14A(2) OF THE ACT, RULE 8D OUGHT TO HAVE BE EN APPLIED ONLY IF THE LD. AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE SUBJECT CLAIM OF THE ASSESSEE I.E. NON-APPLICABILITY OF SECTION 14A(1) O F THE ACT, IN ITS CASE AND AFTER IT HAS ESTABLISHED A DIRECT NEXUS BETWEEN EXP ENSES INCURRED AND EXEMPT INCOME. THAT AFTER CONSIDERING THE FACTS OF THE CASE AND SUBMISS IONS OF THE ASSESSEE, THE DRP ON THIS ISSUE UPHELD THE ADDITION BY TH E ASSESSING OFFICER AS PER REASONS RECORDED IN THE ASSESSMENT ORDER. 18. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER CAN INVOKE SECTION 14A ONLY AFTER RECORD ING SATISFACTION WITH REGARDS TO ACCOUNTS OF THE ASSESSEE. WE HAVE LOOKED IN TO THIS LIMB OF ARGUMENTS AND FOUND SATISFACTION. THE SECOND LIMB OF ARGUME NTS ADVANCED BY THE LD. AR IS THAT THERE CANNOT BE ANY DISALLOWANCE FOR IN TEREST EXPENDITURE U/S.14A R.W. RULE 8D(II) WHEN INTEREST INCOME EARNED BY THE ASSESSEE IS MORE THAN ITS INTEREST EXPENDITURE. THE LD. AR FURTHER SUBMITTE D THAT WHERE THE ASSESSEES OWN SURPLUS FUNDS ARE MORE THAN ITS INVESTME NT, NO DISALLOWANCE TO BE MADE FOR INTEREST EXPENSES U/S.14A OF THE ACT. WITH RESPECT TO RULE 8D(2)(III), THE ARGUMENT OF THE LD. AR WAS THAT ONLY THOSE IN VESTMENTS WHICH YIELDED EXEMPT INCOME TO BE CONSIDERED WHILE CALCULATING DIS ALLOWANCE UNDER RULE 8D(2)(III). 13 ITA NO. 723/PUN/2017 A.Y.2012-13 19. WE HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND HEARD THE CONTENTIONS. HOWEVER, WITH REGARD TO THE INTER EST INCOME PART AS CONTEMPLATED UNDER RULE 8D(II) AND WITH REGARD TO THE IN VESTMENT WHICH YIELDED EXEMPT INCOME WHICH ARE TO BE CONSIDERED WHILE CALC ULATING DISALLOWANCE UNDER RULE 8D(2)(III). THESE ASPECTS HAVE TO BE VE RIFIED IN DETAILED. THEREFORE, WE ARE OF CONSIDERED VIEW THAT THIS ISSU E IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR VERIFICATION AND RE-ADJUDIC ATION OF THE SAME AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE A SSESSEE. ACCORDINGLY, GROUND NO.11 RAISED IN APPEAL BY THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES . 20. WITH REGARD TO GROUND NO.12, IT PERTAINS TO THE PROV ISION FOR WRITTEN BACK FOR MEDICLAIM INSURANCE SCHEME (MEDICARE) FOR EMPLOYEES NOT TO BE CONSIDERED AS TAXABLE INCOME. THE LD. DRP HAS HELD AS FOLLOWS: 8.1..IN TERMS OF THE SERVICE RULES OF THE ASSESSE E, THE EMPLOYEES ARE ENTITLED FOR MEDICLAIM INSURANCECOVERAGE. FOR HOSPI TALIZATION (UP TO PRESCRIBED LIMIT) AFTER RETIREMENT AND FOR REIMBURSE MENT OF MEDICAL EXPENSES UPTO RS 600 ANNUALLY AS DOMICILIARY MEDICA L EXPENSES. THE SCHEME EXTENDS THE BENEFIT TO ALL RETIRED EMPLOYEES AND THEIR SPOUSES TILL THE RETIRED EMPLOYEE ATTAINS THE AGE OF 70 YEARS. 8.1.1 AS REGARDS THE REVERSAL (NET OF PAYMENTS) OF RS 3,60,976/- DURING THE YEAR, THIS WAS OFFERED TO TAX BY THE ASSESSEE S INCE THE PROVISION MADE IN EARLIER ASSESSMENT YEARS WAS CLAIMED AS DEDUCTIB LE BY THE ASSESSEE IN THE RESPECTIVE EARLIER ASSESSMENT YEARS. IT IS AN U NDISPUTED POSITION OF THE LAW THAT REVERSAL OF A PROVISION IS LIABLE TO I NCOME-TAX ONLY WHERE A DEDUCTION WAS ALLOWED FOR THE UNDERLYING PROVISION IN THE EARLIER ASSESSMENT YEARS IN VIEW OF PROVISIONS OF SECTION 4 1(1). 8.1.2 NOTWITHSTANDING THE FACT THAT NO DEDUCTION OF PROVISION FOR MEDICARE EXPENSES WAS GRANTED TO THE ASSESSEE FOR EARLIER AS SESSMENT YEARS, THE LD. AO HAS CONCLUDED THE ASSESSMENT BY RETAINING, T HE REVERSAL (NET OF PAYMENTS) OF RS.3,60,976/- WHICH WAS CREDITED TO TH E PROFIT AND LOSS ACCOUNT. SUCH AMOUNT OF PROVISION FOR MEDICARE EXPE NSES FOR WHICH NO DEDUCTION WAS GRANTED IN EARLIER ASSESSMENT YEARS, OUGHT TO HAVE BEEN EXCLUDED FROM THE TAXABLE INCOME. IF IT IS NOT ALLO WED, THE ASSESSEE WOULD SUFFER TAXABILITY AT TWO POINTS I) WHEN PROVISION W AS DISALLOWED IN EARLIER YEARS AND II) WHEN PROVISION IS WRITTEN BACK TO THE PROFIT AND LOSS ACCOUNT. THIS IS OBVIOUSLY CONTRARY TO THE LAW. THE REFORE, IT IS SUBMITTED THAT, SUCH REVERSAL WHICH IS CREDITED TO THE PROFIT AND LOSS ACCOUNT NEEDS TO BE EXCLUDED. 14 ITA NO. 723/PUN/2017 A.Y.2012-13 8.1.3 THE ASSESSEE HAS ALSO SUBMITTED THAT THE PROV ISION MADE FOR MEDICARE EXPENSES HAS BEEN DISALLOWED IN THE EARLIE R ASSESSMENT YEARS WHEN IT WAS CREATED. IN THIS REGARDS THE APPEAL IS PENDING BEFORE THE HON'BLE HIGH COURT. 8.2 WE HAVE CONSIDERED THE FACTS AND THE SUBMISSION S MADE. WE DO NOT FIND ANY DISCUSSION IN THIS RESPECT IN THE DRAFT OR DER. THE ASSESSEE HAS ALSO NOT FURNISHED THE NECESSARY EVIDENCE IN SUPPOR T OF ITS CLAIM AND THAT THE AMOUNT REVERSED IN THE PROFIT AND LOSS ACCOUNT RS.3,60,976/- HAS ALREADY BEEN TAXED IN THE PAST. HOWEVER, THE ASSESS EE HAS SUBMITTED THAT DEDUCTION FOR PROVISION CREATED AS DISALLOWED AND SO UPHELD BY ITAT APPEAL HAS BEEN FILED BY THE ASSESSEE BEFORE HIGH C OURT AND THE MATTER IS SUB-JUDICE. CONSIDERING THE FACT THAT DEDUCTION HAS ALREADY BEEN CLAIMED IN THE PAST, NON-TAXATION OF REVERSAL OF SU CH DEDUCTION WOULD AMOUNT TO DOUBLE DEDUCTION OF THE SAME AMOUNT. IT I S NOT PERMITTED. SINCE THE ALLOWABILITY OF DEDUCTION IS SUB-JUDICE, REVERS AL OF SAME IS TAXABLE. ACCORDINGLY, THE ORDER IS UPHELD AND THE OBJECTION IN THIS RESPECT IS REJECTED. 21. THAT BEFORE US, AT THE TIME OF HEARING THE LD. AR OF THE ASSESSEE SUBMITTED THAT DURING THIS YEAR, PROVISION FOR MEDICARE EX PENSES IS WRITTEN BACK IN BOOKS OF ACCOUNT AND OFFERED TO TAX IN RETURN OF INCOME. IT IS HUMBLY SUBMITTED THAT THE SAME SHOULD NOT BE TAXED BY THE AS SESSING OFFICER AS IT WILL LEAD TO DOUBLE DISALLOWANCE IN VIEW OF THE FACT THAT WHEN SU CH PROVISION WAS CREATED IN EARLIER YEARS, THE SAME WAS DISALLOWED BY THE AO IN THOSE YEARS. 22. WE HAVE PERUSED THE CASE RECORDS IN THIS REGARD A ND HEARD THE RIVAL CONTENTIONS. WE FIND THAT IF IN THE EARLIER YEAR, THE ASSESSIN G OFFICER HAS ALREADY DISALLOWED SUCH PROVISION FOR THOSE YEARS, THEN IN T HE PRESENT YEAR WHEN THE ASSESSEE HAS SPECIFICALLY OFFERED THIS TO TAX IN R ETURN OF INCOME, THE SAME SHOULD NOT BE TAXED AGAIN BY THE ASSESSING OFFICER. T HEREFORE, THIS ISSUE NEEDS TO BE VERIFIED. ACCORDINGLY, THIS MATTER IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR VERIFICATION AND RE-ADJUDICATION AFTER FOLLO WING THE PRINCIPLES OF NATURAL JUSTICE. THE ASSESSING OFFICER SHALL GRAN T REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, GROUND NO.12 RAISED IN APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . 15 ITA NO. 723/PUN/2017 A.Y.2012-13 23. IN GROUND NO.13, THE ASSESSEE HAD CLAIMED ENHANCED DEDUCTION U/S.10A OF THE ACT. THE ASSESSEE HAS PLACED ITS RELIANCE ON THE D ECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GEM PLUS J EWELLERY INDIA PVT. LTD. REPORTED AS 330 ITR 175 AND ALSO THE DECISION OF C HENNAI TRIBUNAL IN THE CASE OF INAUTIX TECHNOLOGIES INDIA PRIVATE LIMITED (2016) 69 TAXMANN.COM 53 AND SUBMITTED THAT DEDUCTION U/S.10A SHOULD BE RECOMPUT ED ON THE BASIS OF ENHANCING GROSS TOTAL INCOME AFTER CONSIDERING VARIOUS DISALLOWANCES . 24. THE LD. DRP ON THIS ISSUE HAS HELD AS UNDER: 9.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND T HE SUBMISSIONS MADE. THE ASSESSEE HAS SUBMITTED THAT THE DEDUCTION UNDER SECTION 10A IS ADMISSIBLE ON THE PROFIT ENHANCED ON ACCOUNT OF DIS ALLOWANCES MADE. THE ASSESSEE HAS PLACED ITS RELIANCE ON THE DECISION OF THE HON'BLE JURISDICTIONAL BOMBAY HIGH COURT IN CASE OF GEM PLU S JEWELLERY INDIA PRIVATE LIMITED (2011) 330 ITR 175, WHEREIN THE HON' BLE HIGH COURT HELD THAT THE CONTENTION OF THE REVENUE THAT IN COMPUTIN G THE DEDUCTION UNDER SECTION 10A ON THE ADDITION MADE ON ACCOUNT OF THE DISALLOWANCE OF THE PROVIDENT FUND/ESIC PAYMENTS OUGHT TO BE IGNORED CO ULD NOT BE ACCEPTED. THEREFORE, THE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO GRANT THE EXEMPTION UNDER SECTION 10A ON THE ASSESS ED INCOME, WHICH WAS ENHANCED DUE TO DISALLOWANCE OF EMPLOYER'S AS W ELL AS EMPLOYEE'S CONTRIBUTION TOWARDS PF/ESIC. FURTHER THE DRP HAS A LSO PLACED ITS RELIANCE ON THE DECISION CHENNAI TRIBUNAL IN CASE I NAUTIX TECHNOLOGIES INDIA PRIVATE LIMITED (2016) 69 TAXMONN.COM 53, WHE RE IN ITAT HELD THAT AMOUNT OF DISALLOWANCE MADE UNDER SECTION 14A TO BE CONSIDERED AS PART OF BUSINESS PROFIT FOR COMPUTING DEDUCTION UNDER SE CTION 10A. 9.3 HOWEVER, RECENTLY THE CBDT CIRCULAR HAS ISSUED CIRCULAR 37 OF 2016 WHEREIN CBDT HAS ACCEPTED THE SETTLED POSITION THAT THE DEDUCTION UNDER CHAPTER IV-A OF THE ACT IS ADMISSIBLE ON THE ENHANC ED PROFIT ON ACCOUNT OF DISALLOWANCE MADE WHICH RELATED TO BUSINESS ACTIVIT Y AGAINST WHICH CHAPTER VI-A OF THE ACT DEDUCTION HAS BEEN CLAIMED. HOWEVER, THE CIRCULAR HAS NOT MENTIONED ABOUT DEDUCTION U/S.10A OF THE AC T. SECTION 10A IS NOT INCLUDED IN CHAPTER IV A OF THE ACT. HENCE, THIS SE CTION CANNOT BE HELD APPLICABLE IN THIS CASE. OTHERWISE, ALSO AS PER SEC TION 92C(4) OF THE ACT, TP ADJUSTMENT DOES NOT QUALIFY FOR ENHANCED DEDUCTI ON U/S.10A AS PER THE ACT. IN VIEW OF THE ABOVE, THE ORDER IS HEREBY UPHELD IN THIS RESPECT AND THE OBJECTIONS ARE REJECTED. IN VIEW OF THE MATTER, WE ARE INCLINED TO GO WITH THE VIEW OF THE DRP ON THIS ISSUE. WE OBSERVE THAT WITHIN THE PARAMETER OF INCOM E TAX ACT, 1961, AS PER SECTION 92C(4) OF THE ACT, TP ADDITION HAS TO BE SEPAR ATELY DONE, WHATEVER 16 ITA NO. 723/PUN/2017 A.Y.2012-13 MAY BE THE ADDITION IN RESPECT OF OTHER ASPECTS BUT THA T CANNOT BE BROUGHT TOGETHER WITH TP ADJUSTMENT OR ADDITION. THEREFORE, IT DO ES NOT QUALIFY FOR ENHANCED DEDUCTION U/S.10A OF THE ACT. ACCORDINGLY, GROUND NO.13 RAISED IN APPEAL BY THE ASSESSEE IS DISMISSED. 25. GROUNDS OF APPEAL NO. 14 AND 15 ARE CONSEQUENTIAL AN D HENCE, REQUIRE NO ADJUDICATION. 26. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 01 ST DAY OF FEBRUARY, 2019. SD/- SD/- R.S.SYAL P ARTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 01 ST FEBRUARY, 2019. SB !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-13, PUNE. 4. THE PR. CIT-5, PUNE. 5. '#$ %%&' , ( &' , )*+ , / DR, ITAT, B BENCH, PUNE. 6. $,- ./ / GUARD FILE. // TRUE COPY // (0 / BY ORDER, %1 &+ / PRIVATE SECRETARY ( &' , / ITAT, PUNE. 17 ITA NO. 723/PUN/2017 A.Y.2012-13 DATE 1 DRAFT DICTATED ON 30.01.2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 01 .0 2 .2019 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER 18 ITA NO. 723/PUN/2017 A.Y.2012-13