The Bangalore Bench of Income Tax Appellate Tribunal(ITAT) upheld the decision of the CIT(A) allowing a deduction under section 10AA of Income Tax Act,1961 on voluntary Transfer Pricing (TP) adjustments made under an Advance Pricing Agreement (APA).
The Revenue-appellant appealed against the order dated 14.6.2024 passed by CIT(A) for the Assessment Year(AY) 2017-18. In this case,EYGBS (India) Private Limited, respondent-assessee filed its income tax return on 30.10.2017, reporting a total income of Rs. 100,26,18,189. It claimed deductions of Rs. 44,89,19,404 under section 10AA and Rs. 11,92,067 under Chapter VIA.
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During scrutiny, the assessee had claimed the section 10AA deduction after a voluntary TP adjustment of Rs. 9,50,00,000 made under an APA signed on 16.03.2016. This resulted in an eligible income of Rs. 62,57,52,277 for the deduction under section 10AA of the Act.
The assessee argued that the TP adjustment was an agreed-upon price under the APA, not an adjustment by the Transfer Pricing Officer (TPO), and therefore section 92C(4) did not apply. However, the Assessing Officer (AO) disagreed and disallowed an excess deduction of Rs. 6,20,73,761 in the assessment order dated 24.12.2019.
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The assessee appealed to the ld. CIT(A), who relied on CBDT Circular No. 14 of 2006 and ruled that disallowance under section 10AA could only be made if the income was enhanced by the AO or TPO. The CIT(A) also referred to a similar case for AY 2014-15, where the claim was allowed. As a result, the disallowance under section 10AA was deleted in the appellate order dated 14.06.2024.
The Revenue aggrieved by the order of the CIT(A) appealed before the tribunal.
The tribunal noted that the revenue’s 9-day delay in filing the appeal was due to administrative reasons, including the annual general transfer and delay in obtaining necessary approvals. The delay was considered justified, and the appeal was admitted.
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The two member bench comprising Prashant Maharishi(Vice President) and Keshav Dubey(Judicial Member) also referred to a similar case for AY 2014-15, where the coordinate bench had ruled in the assessee’s favor, stating that voluntary TP adjustments made under an APA were eligible for deduction under section 10AA. The Tribunal explained that the proviso to section 92C(4) applies only to adjustments made by the TPO, not voluntary adjustments.
Based on this, the appellate tribunal upheld the CIT(A)’s decision to allow the deduction under section 10AA for the voluntary TP adjustment.
In short,the appeal filed by the revenue was dismissed.
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