M/S YAHOO SOFTWARE DEVELOPMENT INDIA PRIVATE LIMITED,BANGALORE vs. DCIT, BANGALORE

When the appeals were taken up for hearing Ld. Counsel for the assessee submitted that in so far as its appeal for A. Y. 2007-08 was concerned, few of the grounds were on transfer pricing. As per the Ld. AR. assessee had filed an application with competent authority invoking Mutual Agreement Procedure (MAP) under Article 27 of the DTAA between India and USA. Further as per the Ld. AR the TP issues for A. Y. 2006-07 to A.

Y. 2009-10 stood resolved by order dt.19.10.2015 of the Department of Treasury, Internal Department of Washington, DC 20224. However according to the Ld. AR in assessee’s appeal for A. Y. 2007-08, apart from the issues relating to TP, assessee had also raised grounds on corporate tax issues appearing as grounds 7 to 13. In so far as appeal for A. Y. 2008-09 is concerned, Ld. AR submitted that grounds filed by the assessee were entirely on TP matters,and only other ground was on charge of interest u/s.234B and 234D of the Act.

Ld. DR fairly agreed to the above averments of the Ld. AR.

We have perused the orders and heard the rival submissions.

A reading of the above ground show that grounds 12, is on levy of interest u/s.234B and 234D of the Act, which is consequential in nature needing no specific adjudication and ground 13 is general in nature.

In relation to ground 7, we find that AO while computing the deduction available u/s.10A of the Act, had set off loss of Rs.15,955/- from a non-STPI unit. We find that by virtue of the judgment of Hon’ble jurisdictional High Court in the case of CIT (LTU) v. Yokogawa India Ltd [(2013) 341 ITR 0385], profits of the unit in which a claim u/s.10A is preferred by an assessee has to be worked out on a stand alone basis without setting of loss from non-10A units. Accordingly we are of the opinion that loss from non-STPI unit cannot be set off from the profits of 10A unit while computing the deduction under that section. Ordered accordingly. Ground.7 stands allowed.

Vide its grounds 8 and 9 grievance raised by assessee is on exclusion of data link charges of Rs.12,540,884/- and foreign travel expenses of Rs.3,83,94,157/- from export turnover while computing deduction u/s.10A of the Act. Alternatively in its ground 10 assessee states that such reduction if made from export turnover should also be reduced from total turnover while computing the deduction u/s.10A of the Act.

By virtue of definition of ‘export turnover’ given in Explanation (iv) to Section 10A of the Act, we are of the opinion that assessee cannot claim inclusion of data link charges, foreign travel expenses attributed to delivery of software products outside India from export turnover. However, with regard to its alternative pleading that such amounts which are reduced from export turnover should also be reduced from total turnover, we are inclined to agree, in view of judgment of Hon’ble jurisdictional High Court in the case of Tata Elxsi Ltd (supra). Accordingly we direct the AO to work out the deduction allowable by reducing such amounts from both export turnover and total turnover. Grounds 8 and 9 are dismissed, while ground.10 is allowed.

In its ground 11, issue raised by the assessee is with regard to rate of education cess levied at 3%. This matter can be verified by the AO if the cess charged on the assessee is not correct, it needs to be rectified. Ordered accordingly. Ground.11 is allowed for statistical purpose.

Coming to the appeal of the assessee for A. Y. 2008-09, there are no corporate tax issues except for a general ground regarding charge of interest u/ss.234B and 234C of the Act which being consequential in nature needs no specific adjudication.

Coming to the cross appeal of the Revenue for A. Y. 2008-09, grounds 1, 6 and 7 are general needing no specific adjudication.

Vide its grounds 2 and 3, Revenue is aggrieved on the direction of CIT (A) to exclude telecommunication expenditure from total turnover also while computing the deduction available to the assessee u/s.10A of the Act.

Grounds 4 and 5 are TP issues which stand resolved by virtue of MAP. Vide MAP closing letter dt.19.10.2015 of Department of Treasure Internal Revenue Service, Washington DC (supra), it is clear that mutual agreement has been reached by the said authority with the Indian competent authority with regard to the TP issues, for A. Ys. 2006-07, 2007- 08, 2008-09 and A. Y. 2009-10. Since the TP issues involved in all the appeals are resolved, the grounds raised by both the parties on such issues become infructuous. In the result, these grounds are dismissed as infructuous.

To summarise the results, appeal of assessee for A. Y. 2007-08 is treated as partly allowed for statistical purpose. That for A. Y. 2008-09 is dismissed. Departmental appeal for A. Y. 2008-09 is also dismissed.