ADOBE SYSTEMS INDIA PVT. LTD.,NOIDA vs. DCIT, NOIDA

O R D E R

PER S.K. YADAV, JUDICIAL MEMBER

“On the facts and circumstances of the case and in law, the learned Deputy Commissioner of Income-tax, Circle-1, Noida ("AO") has erred in passing the assessment order under Section 143(3) of the Income-tax Act, 1961 ("the Act") after considering the adjustments proposed by the Additional Director of Income-tax, Transfer Pricing, Noida ("TPO") in his order passed under Section 92CA(3) of the Act and subsequently confirmed by the Hon'ble Dispute Resolution Panel ("DRP"). Each of the ground is referred to separately, which may kindly be considered independent of each other and without prejudice to each other. That on the facts and circumstances of the case and in law, Transfer Pricing grounds: 1. The learned AO/TPO/DRP have erred in making an addition of INR 334,238,459 to the total income of the Appellant on account of adjustment in the arm's length price ("ALP") of the international transactions related to software development services entered into by the Appellant with its associated enterprises ("AEs").

2. The learned AO/TPO/DRP have erred by not accepting the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Income Tax Rules, 1962 ("the Rules").

4. The learned AO/TPO/DRP have erred by rejecting certain comparable companies identified by the assessee for having different accounting year (i.e. having accounting year other than March 31 or companies whose financial statements were for a period other than 12 months).

5. The learned AO / TPO / DRP have erred in : a. Using single year data instead of multiple year data, b. Determining the arm's length margins / prices using data pertaining only to FY 2009-10 which was not available to the Appellant at the time of complying with the Transfer Pricing ("TP") documentation requirements.

6. The learned AO/TPO/DRP have erred in rejecting certain comparables companies identified by the Appellant using employee cost greater than 25 percent of the total cost as a comparability criterion.

7. The learned AO/TPO/DRP have erred in selecting certain companies (which are earning super normal profits) as comparable to the Appellant.

10. The learned AO/TPO/DRP have erred in rejecting certain comparable companies identified by the Appellant using "Export earnings less than 75 percent of operating revenues" as a comparability criterion for software development segment.

11. The learned AO/TPO/DRP have erred in rejecting certain companies which are comparable to the Appellant and adding certain functionally dissimilar companies to the final set of comparable companies.

Corporate Tax ground : 14. The learned AO/DRP have erred in disallowing payment made by the Appellant to Adobe USA on account of connectivity charges for delivery of computer software outside India, under the provisions of section 40(a)(i) of the Income Tax Act, 1961. The Appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal. The Appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case.”

2. Ground nos. 1 to 11 relate to the determination of Arm’s Length Price (ALP) of the international transactions entered by the assessee. The facts culled out from the record in this regard are that the assessee company is engaged in development of software in various stages like engineering, research, development, debugging, coding, quality control checks, testing application, designing and programming and is exporting its services to M/s Adobe Systems Inc., USA and to M/s Adobe Systems Software, Ireland.

3. On examination it was noticed that the assessee has entered into international transactions and during the year has made transactions with its Associated Enterprise (A.E.). The total transactions have been declared at Rs.3,35,31,95,993/-. The Assessing Officer (A.O.) accordingly made a reference to the Transfer Pricing Officer (TPO) and the T.P.O. having taken 21 comparables determined the ALP. The order of the TPO was challenged before the Dispute Resolution Panel (DRP) and the DRP rejected the objections raised by the assessee and confirmed the ALP as determined by the TPO. The A.O. accordingly framed the assessment consequent to the directions of the DRP. Now the assessee is before us assailing the order of the A.O., T.P.O., and D.R.P. on various grounds.

5. The T.P.O. has taken the following 21 comparables in order to determine the ALP with regard to international transactions. i. E-Infochips Bangalore Ltd. ii. Infinite Data Systems Pvt.Ltd. iii. Thirdware Solution Limited iv. Sonata Software v. Wipro Technologies Services Ltd. vi. Akshay Software Tech Ltd. vii. CAT Technologies Ltd. viii. Evoke Tech. ix. Goldstone Technologies Ltd. x. L&T Infotech Ltd. xi. LGS Global Ltd. xii. Maveric Systems Ltd. xiii. MindTree Ltd. (Segment) xiv. Persistent System & Solutions Ltd. xv. Persistent System Ltd. xvi. RS Software (India) Ltd. xvii. Sasken Communicjation Tech. Ltd. xviii. Saven Technologies Ltd. (Consolidated) xix. Tata Elxsi Ltd. xx. Thinksoft Global Services Ltd. xxi. Zylog Systems Ltd. 5.1. Out of these comparables the Ld.Counsel for the assessee has sought the exclusion of E-Infochips Bangalore Ltd., Infinite Data Systems Pvt.Ltd., Thirdware Solution Ltd. on the ground that these comparables are functionally different, therefore, they cannot be called to be good comparables to compute the ALP. It was further submitted that the profile of these comparables was examined by the Tribunal in the case of Sun Life India Service Centre Pvt. Ltd. vs. DCIT in ITA 750/Del/2015 where the Tribunal has concluded that these three comparable companies are functionally different and they cannot be called to be good comparables for computing the ALP for international transactions. Accordingly the Tribunal directed the AO/TPO to exclude these comparables from the list of comparables. It has also been brought to our notice that Sun Life India Service Centre Pvt.Ltd. was set up to provide software development and maintenance support services and back office support services, to its Sun Life Information Service Ireland Ltd. the A.E. for assisting in their projects.

5.2. The method selected was also TMM method as was done in the instant case. A copy of the order of the Tribunal is also placed on record. The Ld.D.R. placed heavy reliance upon the order of the lower authorities with the submission that profile of the assessee and Sun Life India Service Centre Pvt.Ltd. is not same, therefore, the order in this case will not apply to present case.

5.3. Having heard the rival submissions and from a careful perusal of the order of The Tribunal we find that the assessment year involved in that case is 2010-11 and that the profile of Sun Life Service Centre Pvt.Ltd. and assessee are almost similar. Having examined the profile and data available with respect to the comparables the Tribunal directed the AO/TPO to exclude these companies from the final list of comparables. The relevant observation of the Tribunal is extracted hereunder for ready reference.

“Software development segment : E-Infochips Bangalore Ltd. 10.1. It has been submitted by the ld.AR that this comparable was selected by ld.TPO (page33- 35 of TPO order) even though assessee objected to the same. The assessee had objected that the company is functionally different and is having two different segments that there is IT and ITeS and that it has earned supernormal profits due to this similar nature of services. It was further contended that this company is engaged in hard designing, product re-engineering, product life cycle management enterprise IT consulting and IT enabled services. Ld.TPO did not accept the contentions of the assessee and retained this company as a comparable. It was further submitted that this company was not selected by TPO either in earlier year or in later years. The ld.AR submitted that segmental information was not available in respect of this comparable. The counsel has relied on the order passed by the TPO for assessment year 2009-10.

10.2. Ld.DR, however, refer to the extracts made by the ld.TPO in the order to submit that E-Infochips Bangalore Ltd is a comparable company with that of assessee.

10.3. After considering the rival contentions and pursuing the annual reports placed on record, we are of the opinion that this company cannot be selected as comparable for TP analysis, because it is engaged in both software development as well as ITeS. Assessee being characterised as a routine service provider, the above company cannot be considered as comparable on functional basis.

10.4. As this company is functionally different from assessee and in absence of segmental information we direct the AO/TPO to exclude this company from the final list of comparables.

Infinite Data Systems private limited

10.6. This company was selected by ld.TPO (page 36-38 of TPO order) even though assessee objected to the same. The assessee had objected that the company is functionally different as during the said year the company has earned supernormal profits and the profitability of the company has increased by 1496% as compared to financial year 2008-09. Ld.AR further contended that this company is engaged in technical consulting, systems integration, infrastructure management services. He also submitted that this company is exposed to significant customer address due to sole customer being Fujitsu services Ltd. Ld.TPO did not accept the contentions of the assessee and retained this company as a comparable. It was further submitted that this company was not selected by ld.TPO, either in earlier year or in later years. The ld.AR submitted that insufficient segmental information was available in respect of this comparable. The counsel has relied on the order passed by ld.TPO for assessment year 2009-10.

10.7. Ld. DR, however, referred to the extracts from the order of ld.TPO, and submitted that Infinite Data Systems Pvt Ltd is a comparable company with that of assessee.

10.8. After considering the rival contentions and pursuing the annual reports placed on record, we are of the opinion that this company cannot be selected as comparable for TP analysis. A perusal of the annual report of this company for assessment year 2010-11, suggests that it is a full-fledged IT consulting organisation and provides services in the nature of technical consulting, design and development of software, maintenance, system irrigation, implementation, testing and infrastructure management services. Further this company as a sole customer, Fujitsu services Ltd, and accordingly is exposed to significant single customer risk. The above company cannot be considered as comparable on functional basis.

10.9. As this company is functionally different from assessee and in absence of segmental information we direct the AO/TPO to exclude this company from the final list of comparables.

10.10. This company was selected by ld.TPO (page 43- 44 of TPO order) even though assessee objected to the same. The assessee had objected that the company is functionally different as during the said year the company was engaged in providing software product development implementation and consulting based on ERP and business intelligences.

10.11. Ld.DR, however, refer to the extracts made by the ld.TPO in the order to submit that Thirdware Solutions Ltd is a comparable company with that of assessee.

10.12. After considering the rival contentions and pursuing the annual reports placed on record, we are of the opinion that this company cannot be selected as comparable for TP analysis. Here it is pertinent to mention that this company was considered by the ld.TPO as a comparable in the immediately preceding year in for assessment year 2009-10 as well. The Tribunal by aforenoted order has held it to be incomparable. Since no distinguishing features of the functional profile of this company and the assessee for the current year vis-a-vis the preceding year have been brought out to our notice, following the preceding, we direct the TPO/AO for removal of this company from the list of comparables.”

5.4. Since the Tribunal has examined the profile of these comparable companies in the case of Sun Life India Service Centre Ltd. which is quite similar to the assessee’s profile, we find no justification to take a contrary view in this appeal. Accordingly following the same we hold that these comparables are functionally different, therefore, we direct the TPO/AO to exclude these comparables from the final list of comparables.

5.5. The Ld.Counsel for the assessee further sought the exclusion of Sonata Software and Wipro Technology Services Ltd. from the list of comparables. The Ld.Counsel for the assessee further contended that the Sonata Software fails on RPT filter as related party transactions in this case was 55.95%, where as Wipro Technology Services Ltd. are functionally different from the assesseees, as is engaged in information technology, software solution/maintenance and technology infrastructure support service. It was further contended that there was no separate segment for software services. The Ld.Counsel for the assessee further contended that both these comparables were examined by the Tribunal in the case of Equant Solutions India Pvt. Ltd. in ITA 1202/Del/2015 A.Y. 2010-11, wherein the Tribunal has held that if the RPT is in excess of 25% which is the filter set by the TPO himself, then this comparable fails and therefore to be excluded and for verification the matter was restored to the TPO. With regard to Wipro Technology Services Ltd. the Tribunal held relying upon the other judgements of the Coordinate Bench in the case of Agnity Technology Pvt. Ltd. that this Wipro Technology Services Ltd. is not a good comparable. The relevant observations of the Tribunal in this regard are as under. a. The TPO has included Sonata Software Ltd, which has a margin of 35.87%. As per TPO's RPT/ sales ratio is 11.93% and therefore to be included as comparable. Ld DRP also held that this comparable is accepted. Before us, the Id. AR of the assessee submitted that AO has wrongly calculated related party transaction of this company wherein for the purpose of calculation TPO has only taken profit and loss account items and not balance sheet items such as receivables and payables. It was submitted that this company has huge transaction during the year from its related party i.e. Sonata Software Ltd., or the America Incorporation. It was further submitted that this company's transaction includes, receivables, living allowances payables, travelling expenses, assets purchase and others with related party, which has been ignored, by TPO and DRP both. He submitted a detailed chart extracted from the balance sheet of this company to substantiate his claim. According to working given before us and before DRP the RTP by sales percentage in this company is 59.35% as compared to 11.93 % computed by TPO. He further submitted that this company has volatile margin of profit and to cement his argument he submitted the Op/TC margins of the company showing 4.80 % in one year swinging up to 37% in a comparison chart for four years. Therefore this comparable should be excluded as per his submission. b. Ld. DR relied on the order of TPO and DRP. He further submitted that RPT percentage as submitted by the assessee were not raised before the TPO/DRP and therefore for correctness of this figures the issue relating to this comparable should be set aside to the file of TPO for verification. c. We have heard both parties, perused material on record. We find that if the RPT is in excess of 25 % which is the filter set by TPO himself then this comparable fails that filter and therefore to be excluded. It is established principle that higher the RPT more vulnerable the Comparable is for exclusion. However, this contention was not raised before the TPO, as we did not find the same in order of TPO while discussing this comparable. Therefore, in the interest of justice we set aside the issue of this comparable to the file of TPO to verify the contention of assessee that RPT in the case of this comparable is wrongly calculated. We order accordingly.

b. Ld. DR Relied on the order of TPO and DRP for the reason given for selection of this comparable. c. We carefully considered the rival contention regarding exclusion of this comparable. This company had agreed an agreement with CITI Technology Services Ltd, which is 100% subsidiary of Wipro Technology Ltd. The entire revenue during the year is covered by a master service agreement entered into by Wipro with CITI Group

Services. Further, this company is also a subsidiary of Wipro Ltd., which company has a considerable brand name, therefore benefit accruing to this company from the brand name of Wipro cannot be denied. Therefore relying on the decision of the Coordinate Bench in the case of Agnity Technology Pvt.Ltd. in for A.Y. 2010-11, wherein the Infosys owns of its brand name was held to be incomparable on the same analogy, brand value of ‘Wipro’ does help this comparable. Hence, we direct TPO to exclude this comparable, it is ordered accordingly.”

Ld.D.R. on the other hand placed reliance upon the order of TPO/DRP.

5.6. Having heard the rival submissions and from perusal of record, we find that since both the comparables have been examined by the Tribunal in the aforesaid order, we find no justification to take a contrary view in this appeal. Accordingly following the same we restore the issue to the file of the TPO/AO to reexamine these comparables in terms of the order of the Tribunal in the case of Equant Solutions India Pvt.Ltd. Accordingly the Wipro Technology Services Ltd. is directed to be excluded from the list of comparables and the Sonata Software Ltd. be examined in the light of related party transactions. If it is in excess of 25%, the same may be excluded from the final list of comparables.

5.7. The Ld.Counsel for the assessee further contended that the following comparables be included in the list of comparables.

4. CG VAK software & Exports Ltd.

5.9. The Ld.D.R. on the other hand has submitted that the TPO has not taken into account these comparables as they are functionally different from the profile of the assessee.

5.10. Having carefully examined the orders of lower authorities and orders of the Tribunal in the case of Sun Life India Service Centre (supra) we find that the Tribunal has examined these comparables in the light of assessee’s contentions and was of the view that these comparables be included in the final list of comparables. The relevant observations of the Tribunal is extracted hereunder for the sake of ready reference.

“Software Development Segment CG-VAK Software and Exports Ltd (Seg.)

10.36. The ld.TPO excluded this company from the list of comparables by holding that this company does not satisfy the employee cost filter.

10.37 We find that the Ld. TPO has accepted the submissions of assessee which is as under:

"38.2 In its reply, the assessee has stated that the employee cost to total cost of the company is 68.22%, and it satisfies all the filters applied by the TPO and being functionally comparable to the assessee, this company should be accepted as a comparable"

10.38. However, the Ld. TPO rejected this comparable as it did not satisfy the turnover filter. The Ld. A.O. has not brought on record any material / documents contrary to the above submissions of the assessee. The Ld. TPO has also not been able to bring out any instance of functional dissimilarity of this comparable with that of assessee. The Ld. D.R. placed his reliance on the findings of the authorities below.

10.36. We have perused the orders passed by authorities below, and arguments advanced by both the parties. It has been observed that the assessee in its TP study has objected to the adoption of the turnover filter applied by the TPO. It has been submitted that turnover filter could be deployed if the tested party is a risk bearing entrepreneur. However, to the facts of the present case, the assessee does not assume any risk and is remunerated at cost plus basis. Ld. A.R. has placed reliance in the case of Willis Processing Services Pvt. Ltd. in I.T.A.No. 4547/Mum/2012 wherein the Co-ordinate bench of this Tribunal has held as under:

"The turnover is not a criteria as prescribed under the Rule 10B(2) for selecting the comparables. It is settled proposition that the decisive factor for determining inclusion or exclusion of any case as a comparable are prescribed under Rule 10B(2) which does not specify any such factor of turnover on the basis of which a particular case can be included or excluded in the list of comparables."

"In service industry, turnover does not play any significant role as far as the margins are concerned.... This reinforces the view that turnover does not play a significant role in service industry and there is no link between turnover and margins.... The turnover is not a relevant factor for choice of comparables has been confirmed in many decision, as listed below."

10.37 Further, the Ld. A.R. had submitted that the TPO had applied turnover filter of less than 1 crore for back office support segment as a criterion. It is observed that the Ld. TPO has not provided nay rational or logic for changing the said limits. Such an approach adopted by the TPO is not in accordance with law and against the principles of application of TP regulations. There ought to be a uniformity in treatment and consistency when the facts and circumstances are identical particularly in the case of same assessee. We accordingly direct the ld. TPO/AO to include this company to the list of comparables.

10.38. The ld.TPO has rejected the company on account of different financial year ending vis-a-vis the assessee. The ld.AR submitted that companies whose financial data was available for the relevant period, were considered in view of rule 10 D (4), which provides that information to be used must be contemporaneous. The ld. AR further submitted that though the Company has different financial year ending, were operating during the same period of time as the assessee, and were also facing similar business cycles, market and economic conditions as faced by assessee having financial year from April to March. He thus submitted that in absence of evidence available to the contrary that there has been a significant impact on the margins due to change in different reporting/accounting period, it is incorrect to disregard the comparable using this filter. Ld.DR, however, referred to the extracts made by the ld.TPO in his order to submit that R Systems International Ltd., should not be considered comparable with assessee.

10.39. After considering the rival submissions and pursuing the relevant material on record we find that the ld. TPO has not pointed out exact difference, the change of accounting year has made to the financial results of the comparable. The ld.TPO has further not pointed out whether it would not be possible to restate those financial results for a different accounting period without significant change in net profit margins or any other parameters considered relevant. Multinational companies generally operate in different geographical regions and different countries follow different accounting or financial years, functionally similar or even identical companies, cannot be held to be incomparable, only owing to differences in the date of ending of the financial year. As most of the business enterprises operate on the going concern concept, which is so fundamental to present the accounting, the PB at concept used in accounting is just an artificial means to reckon the operating results of business operation at a given point in time and nothing would turn up on changing the end of accounting period from 31st March to any other date within a short span of time. Assuming a situation where the tested party is following a different financial year ending (say 01/01/2010 to 31/12/2010), following the filter adopted by the ld.TPO, one would reject all the company with the financial year ending 31st of March 2010 and only consider companies with financial year ending 31/12/2010. The number of comparable companies available after using such a filter would be very limited and therefore, in such a case the net margin earned by the comparable companies would be different from the one that would be computed without using this filter. This view is supported by the coordinate bench of this Tribunal in the case of DCIT vs. McKinsey knowledge Centre India private limited in wherein it has been held that if a company is functionally comparable, it cannot be rejected merely on the ground that data for the entire financial year was unavailable, if the data can be reasonably extrapolated. Hon'ble tribunal further observed that rule 10 B (4) cannot be interpreted in such a rigid manner so as to defeat the basic objective of the rule. The relevant extract of the ruling are reproduced below:

" 23. ..... However, in our considered opinion, if a comparable is functionally same as that of the tested party then the same cannot be rejected merely on the ground that data for entire financial year is not available. If from the available data on record the results were financial year can be reasonably extrapolated, then the comparable cannot be excluded solely on this ground. The learn ADR as referred to rule 10 B (4) which only mandates that the data which is to be utilised for analysing the comparability of uncontrolled transactions with an international transaction, has to be financial year only in which the international transaction has been entered into. This rule is based on matching principle but this role cannot be interpreted in such a rigid manner so as to defeat the basic object of rule viz., selection of the comparable for determination of arms length price of an international transaction"

(emphasis supplied)

10.40. In any case the ld.TPO has not cited any instances of functional dissimilarity of this comparable company with that of assessee. We therefore direct the ld.AO/TPO to consider this company in the final list of comparable.

Calibra Point, Business Solutions Ltd, Helios & Matheson Information Technology Ltd. 10.41. These comparables have been rejected by the ld.TPO applying the same filter of having different financial year. The ld.TPO has not cited any instance of functional dissimilarity of these comparable companies with that of assessee. The submissions advanced by both the sides are identical with that as raised while dealing with R Systems International Ltd. As we have this filter at length while dealing with R Systems International Ltd, the same are not being repeated.

10.42. We accordingly direct the ld.TPO/AO to consider these companies in the final list of comparables.

Back office support and F&A support segments R Systems international Ltd 10.43. The ld.TPO has rejected this comparable by using the filter of different financial year ending. We have dealt with this comparable above. It is also observed that the ld.TPO has not cited any instance of functional dissimilarity of this comparable company with that of the assessee under the segment. Relying upon the discussions made hereinabove we direct the ld.AO/TPO to consider this company in the final list of comparables. CG-VAK Software and Exports Ltd, Informed technologies Ltd and Microgenetic systems Ltd 10.44. The ld.TPO has rejected this comparable using turnover filter. We have dealt with this comparable above. It is also observed that the ld.TPO has not cited any instance of functional dissimilarity of this comparable company with that of the assessee under the segment. Relying upon the discussions made hereinabove we direct the ld.AO/TPO to consider these companies in the final list of comparables.

5.11. Since the aforesaid comparables were not examined by the TPO while determining the ALP we direct the TPO to examine these comparables and if it is found to be similar with the profile of the assessee and are not to be excluded on any of the filters, the same may be considered as good comparables for determining the ALP on international transactions. While doing so the order of The Tribunal be also kept in mind.

6.1. In the light of aforesaid judgements of Jurisdictional High Court we hold that the rejection of Silver Line Technology Ltd. solely on the ground that it has different Financial Year ending, is not proper and we accordingly direct the AO/TPO to examine this comparable and if other data is available and the results of financial year can reasonably be extrapolated then this comparable may be included in the final list of comparables. Accordingly we direct the AO/TPO to redetermine the ALP in terms indicated above.

7.1. Similar observations were also made by the Tribunal in the assessee’s own case pertaining to the assessment year 2008-09 wherein it has been held that opening working capital employed and the closing working capital has to be taken into consideration for making any adjustment in the working capital deployed in the case of the comparable. For the sake of ready reference we extract the relevant portion of the order of the Tribunal in this regard. “18. Having gone through the above cited decisions, we find that in the case of Navsite India Pvt.Ltd. vs. ITO (supra), the ITAT after discussing the issue in detail has restored back the issue to the file of the ld.TPO for making the working capital adjustment to the profit margins of comparables after affording opportunity to demonstrate that there was difference in the levels of working capital employed, vis a vis the comparables. Following the same, we hold that the opening working capital deployed and the closing working capital deployed has to be taken into consideration for making any adjustment to the working capital deployed in the case of a comparable, of course, the assessee for availing the above benefit has to demonstrate that there was difference in the levels of working capital employed, vis a vis the comparables. We thus set aside the matter to the file of TPO to decide the issues accordingly after affording opportunity of being heard to the assessee. Ground no.8 is thus allowed for statistical purposes.” 7.2. Since the Tribunal have taken a consistent view in the assessee’s own case we direct the AO/TPO to allow suitable adjustment for working capital employed by the assessee.

8. Apropos ground number 14 it was contended that the assessee has made the reimbursement charges which are disallowed by the A.O. having treated it to be the payment on account of royalty. The Ld.Counsel for the assessee further contended at the outset that the assessee has claimed deduction u/s 10A and if any disallowance is made u/s 40A(ia) of the Act it would increase the deductions claimed by the assessee. Therefore, there would not be any tax implication. These aspects were not examined by the A.O. Therefore, in the interest of justice the matter may be restored back to the AO/TPO to readjudicate the issue in the light of the aspect that disallowance if any made, would increase the deductions claimed by the assessee u/s 10A of the Income Tax Act, 1961 (the Act) and there would not be any tax implication. It was also contended that in earlier year no such disallowance was ever made by the Revenue.

8.1. The Ld.D.R. however opposed these contentions.

9. Having carefully examined the order of lower authorities we find that the A.O. has disallowed the payment having treated the same as payment on account of royalty on non deduction of TDS. While adjudicating the issue the AO has not examined the aspect of increase in deduction claimed u./s 10A of the Act on disallowance of payment u/s 40(a)(ia) of the Act and therefore there would be no tax implication. Accordingly we set aside the order of A.O. in this regard and restore the matter to the A.O./T.P.O. to readjudicate the issue in terms indicated above. Accordingly the appeal is disposed of.