M/S FIDELITY BUSINESS SERVICES INDIA PVT LTD,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-3(1)(1), BANGALORE

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ITA 2848/BANG/2017Status: DisposedITAT Bangalore08 September 2021AY 2013-143 pages
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What did the Tribunal hold?

The tribunal dismissed the transfer pricing grounds as not pressed due to resolution under MAP. For the Section 10AA issue, the tribunal followed High Court and Supreme Court precedents, holding that charges excluded from export turnover must also be excluded from total turnover.

What were the facts?

The assessee appealed against an assessment order related to transfer pricing and deduction under Section 10AA. The transfer pricing dispute was resolved through the Mutual Agreement Procedure (MAP). The remaining issue concerned the calculation of deduction under Section 10AA, specifically regarding the exclusion of certain charges from export and total turnover.

What were the issues?

Whether transfer pricing issues resolved under MAP should be dismissed, and whether freight, telecommunication, and insurance charges should be excluded from both export and total turnover for Section 10AA deduction.

Which sections of the Income-tax Act were involved?

Section 92,Section 10AA

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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE

Before: SHRI N.V. VASUDEVAN & SHRI B. R. BASKARAN

For Appellant: Shri. G. C. Srivastava, CA
For Respondent: Ms. Neera Malhotra, CIT(DR)(ITAT), Bengaluru
Hearing: 07.09.2021Pronounced: 08.09.2021

O R D E R

Per N.V. Vasudevan, Vice President This is an appeal by the assessee against the final Order of Assessment dated 25.10.2017 passed by the DCIT, Circle – 3(1)(1), Bengaluru, under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter called ‘the Act’), for Assessment Year 2013-14.

2.

Ground No.1 raised by the assessee is general in nature and requires no specific adjudication. Ground Nos. 2 to 18 raised by the assessee are in relation to the addition made consequent to determination of Arm’s Length Price (ALP) in respect of international transaction of rendering of software development services by the assessee to its Associated Enterprise (AE) in terms of section 92 of the Act. At the time of hearing, learned Counsel for the assessee made a submission that the assessee’s AE based in USA had applied for resolution of IT(TP)A No.2848/Bang/2017 Page 2 of 3 the dispute under the mutual agreement procedure (MAP) with the competent authorities of USA and Govt. of India. Consequent to the aforesaid request, the dispute has been resolved between the assessee and the Department. A copy of the letter of the CBDT dated 16.06.2021 is also filed before us. In the light of the resolution of disputes under MAP, the learned Counsel for the assessee prayed that grounds 2 to 18 may be dismissed as not pressed. Accordingly, these grounds are dismissed as not pressed.

3.

There are 2 other corporate issues that are raised by the assessee in the grounds of appeal

and these grounds reads as follows: Other than Transfer Pricing Related

1.

1. That the Ld. AO erred in not allowing deduction under section 10AA of the Act on the entire profits of the undertaking amounting to INR 14,02,24,771.

2. That the Ld. AO has erred in reduction of freight, telecommunication and insurance charges attributable to the delivery of computer software outside India of INR 1,35,84,668 from the Export Turnover (`ET') without corresponding reduction in Total turnover (TT) while computing deduction under section 10AA of the Act.

4. Ground No.1 was not pressed by the learned Counsel for the assessee. As far ground No.2 is concerned, the issue that needs to be decided is as to whether the freight, telecommunication and insurance charges incurred by the assessee has to be excluded both from the export turnover and the total turnover while computing deduction under section 10AA of the Act. On this issue, the Hon’ble Karnataka High Court in the case of Tata Elxsi Ltd, 349 ITR 98 has already held that whatever is to be excluded from the export turnover has to be excluded from the total turnover also. This view has since been confirmed by the Hon’ble Supreme Court in the case of CIT v. HCL Technologies Ltd. in Civil Appeal No.8489-98490 of 2013 & Ors. dated 24.04.2018. In view of the above, we are IT(TP)A No.2848/Bang/2017 Page 3 of 3 of the view that there is merit in ground No.2 raised by the assessee and accordingly the same is allowed.

5.

In the result appeal by the assessee is partly allowed.

Pronounced in the open court on the date mentioned on the caption page.

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