Section 10AA Deduction Allowed as AO Failed to Prove Business Splitting: ITAT Pune

DCIT Vs Capegemini Technology Services India Ltd. (ITAT Pune)

No Section 14A Disallowance Because Assessee Earned No Exempt Income;  Goodwill Depreciation Upheld Because Earlier ITAT Order Governed the Issue;  Delisting Expense Disallowance Restored Because Assessee Produced No Supporting Evidence.

The Income Tax Appellate Tribunal (ITAT), Pune, decided cross-appeals filed by the Revenue and the assessee for Assessment Year (AY) 2014-15 arising from the order of the Commissioner of Income Tax (Appeals). The appeals involved issues relating to transfer pricing, deduction under Section 10AA, deputation of technical manpower, disallowance under Section 14A, depreciation on goodwill, foreign tax credit, book profit computation, prior-period expenses, and other tax claims.

In the Revenue’s appeal, the Tribunal first noted that the transfer pricing issue concerning Tata Elxsi Ltd. had become academic because the Assessing Officer (AO) had passed a rectification order on 25 April 2025, after which the assessee’s operating margin fell within the permissible range. Accordingly, that ground was dismissed.

On the issue of deduction under Section 10AA for three undertakings of the erstwhile iGATE Computer Systems Limited, the AO had disallowed the claim on the ground that the units were formed by splitting up or reconstruction of an existing business. The Tribunal observed that the AO had merely relied on earlier assessment orders without specifying how the units were formed by splitting up or reconstruction. Since the Commissioner (Appeals) had followed earlier ITAT decisions in the assessee’s own case and the Revenue failed to distinguish those decisions, the Tribunal upheld the deletion of the disallowance and dismissed the Revenue’s ground.