BA Continuum India Private Limited Vs DCIT (ITAT Hyderabad)
Cost Recovery Needs No Mark-up; Merger Deduction Survives the Fifth Year
Two disputes, one recurring theme: Consistency
The Hyderabad ITAT granted relief to BA Continuum India Private Limited on two issues: transfer pricing mark-up on reimbursement of seconded employees’ salary and travel costs, and the fifth-year deduction of amalgamation expenditure under section 35DD.
The Tribunal found that the employee-cost recoveries represented reimbursements on the facts before it. It also held that the amalgamation deduction could not be denied by counting the five-year period from an appointed date preceding the actual expenditure, particularly when the Department had accepted the deduction for the first four years.
The assessee, a non-banking subsidiary of Bank of America, provided IT and IT-enabled services. Its final assessment included a transfer pricing adjustment of approximately ₹169.06 crore and a section 35DD disallowance of ₹66.72 lakh. However, several transfer pricing grounds and the education cess ground were withdrawn. The substantive adjudication concerned the two issues discussed below.
Seconded employees: Reimbursement treated as a service
During FY 2015-16, the assessee recovered ₹5,68,37,202 from its associated enterprises towards salary and travel expenses of employees temporarily seconded to them.
The assessee explained that these expenses were incurred on behalf of the associated enterprises and recovered on a cost-to-cost basis. The transactions were routed through the balance sheet and did not enter the profit and loss account.
The TPO nevertheless treated the arrangement as provision of services and applied a 10% mark-up. The DRP reduced it to 5%, relying on the Hyderabad Tribunal’s decision in Kirby Building Systems India Limited v. ACIT.
The assessee challenged the remaining adjustment, contending that it had merely facilitated payments and that an ad hoc mark-up was unjustified.
ITAT: Temporary secondment did not justify an assumed margin
The Tribunal found that the employees were seconded for a temporary period. It rejected the TPO’s characterisation of the arrangement as a continuous service.
It also noted that the salary and travel costs had been recovered without any mark-up and that these facts were not disputed by the TPO. On the evidence before it, the receipts were reimbursement of expenses, and an adjustment based on the assumption that the assessee provided services and earned a margin was incorrect.
The Tribunal’s conclusion received further support from the Department’s treatment of similar transactions in AYs 2018-19, 2020-21 and 2022-23, when no adjustment had been made after examining the recoveries.
The bilateral APA reinforced the treatment
The assessee had also entered into a bilateral Advance Pricing Agreement with CBDT covering FYs 2021-22 to 2025-26. Under that agreement, salary and other employee-related costs concerning employees seconded to associated enterprises were recoverable on a cost-to-cost basis.
The Tribunal treated the APA as supporting the nature of the arrangement. It did not describe AY 2016-17 as falling within the APA’s stated coverage.
Relying also on Radhasoami Satsang v. CIT, the Tribunal emphasised consistency where the relevant facts remained unchanged. It directed the AO/TPO to delete the mark-up adjustment on the salary and travel cost reimbursements.
Amalgamation expenditure: The appointed date created the dispute
The second issue concerned amalgamation expenditure of ₹3,33,51,348, including stamp duty, incurred and paid during FY 2011-12 following High Court approvals obtained that year.
Although the amalgamation’s appointed date was 1 April 2009, the assessee began claiming one-fifth of the expenditure under section 35DD from AY 2012-13, continuing through AY 2016-17.
The Department allowed the deduction for AYs 2012-13 to 2015-16. In the fifth year, however, the AO held that the deduction period should have commenced in AY 2010-11, based on the appointed date. Consequently, the AY 2016-17 claim was treated as falling beyond five years.
ITAT: A deduction cannot precede the expenditure
The Tribunal rejected this reasoning. The expenditure had been incurred in FY 2011-12 following the High Court approvals, and the question of deduction could not arise before the expenditure itself existed.
Requiring the assessee to claim it from AY 2010-11 was, according to the Tribunal, contrary to the principle of impossibility of performance. It held that commencement of the deduction from AY 2012-13 was lawful on these facts.
The Tribunal further relied on Shasun Chemicals and Drugs Limited v. CIT and Coforge Limited v. ACIT. Having accepted the claim for four years, the AO could not reject the fifth-year instalment without a change in facts. The deduction under section 35DD was therefore directed to be allowed.
Author’s comments: Examine the facts before imposing a margin
The reimbursement ruling is valuable, but it should be applied with attention to the temporary secondment, actual cost recovery, departmental acceptance in other years and supporting APA terms. Merely describing a receipt as reimbursement does not reproduce all the facts supporting this decision.
The section 35DD ruling addresses a practical difficulty: a retrospective appointed date cannot, on these facts, require deduction of expenditure before it was incurred. The Department’s acceptance of the first four instalments further strengthened the fifth-year claim.
Both surviving substantive issues were decided in the assessee’s favour, and the appeal was partly allowed.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal filed by the assessee company is directed against the final assessment order passed by the Assessing Officer under section 143(3) r.w.s. 144C(13) r.w.s. 143(3A) and 143(3B) of the Income Tax Act, 1961 (in short “the Act”), dated 30.03.2021 in pursuant to the order of the Learned Transfer Pricing Officer (in short “Ld. TPO”) under section 92CA(3) of the Act, dated 31.10.2019 and the Ld. Dispute Resolution Panel (in short “Ld.DRP”) directions dated 19.02.2021 and pertains to the A.Y. 2016-17.
2. The grounds raised by the assessee read as under:
“A. Transfer Pricing Grounds:
1. Rejection of TP documentation and undertaking a fresh economic analysis for determining ALP.
Rejection of the transfer pricing documentation maintained by the Assessee in accordance with the provisions of the Act read with the Income Tax Rules, 1962 (“Rules”) and undertaking a fresh economic analysis during the course of assessment proceedings, thereby making an adjustment of Rs. 169,33,96,991/- to the international transactions.
2. Use of additional/modified filters:
Inter-alia use of the following additional/modified filters in undertaking the comparative analysis and rejecting comparable companies:
a. Use of relevant financial year data for comparability analysis;
b. Different financial year-end filter;
c. One-sided turnover filter;
d. Related party transaction filter;
e. Export service income filter;
f. Employee cost filter; and
g. Persistent loss filter.
3. Selection of uncomparable companies – Software Development/Information Technology Services:
Not undertaking objective comparative analysis and inter-alia selecting the following companies as comparable:
a. Inteq Software Private Limited;
b. Tata Elxsi Limited;
c. Nihilent Limited;
d. Persistent Systems Limited;
e. Aspire Systems (India) Private Limited;
f. Infosys Limited;
g. Thirdware Solution Limited;
h. Cybage Software Limited;
i. Larsen & Toubro Infotech Limited;
j. Infobeans Technologies Limited; and
k. RS Software (India) Limited.
4. Rejection of comparable companies – Software Development/Information Technology Services:
Not undertaking objective comparative analysis and inter-alia rejecting the following comparable companies:
a. Akshay Software Technologies Limited;
b. Sagarsoft India Limited;
c. Sasken Communication Technologies Limited;
d. Maveric Systems Limited;
e. Infomile Technologies Limited;
f. TVS Infotech Limited;
g. Celstream Technologies Limited;
h. Evoke Technologies Limited;
i. Harbinger Systems Private Limited; and
j. Isummation Technologies Private Limited.
5. Selection of incomparable companies – Information Technology enabled services:
Not undertaking objective comparative analysis and inter-alia selecting the following companies as comparable:
a. Infosys BPM Ltd. (Formerly Infosys BPO Limited);
b. SPI Technologies India Private Limited;
c. Eclerx Services Ltd.;
d. MPS Limited; and
e. Tech Mahindra Business Services Ltd.
6. Rejection of comparable companies – Information Technology enabled services:
Not undertaking objective comparative analysis and inter-alia rejecting the following comparable companies:
a. Informed Technologies India Limited;
b. Suprawin Technologies Limited;
c. One Touch Solutions India Private Limited;
d. Sundaram Business Services Limited;
e. Jindal Intellicom Private Limited;
f. Cyfuture India Private Limited;
g. ACE BPO Services Private Limited;
h. Allsec Technologies Limited; and
i. Cosmic Global Limited.
7. Considering CENVAT Credit/Service Tax refund as non- operating in nature:
Considering CENVAT Credit/Service Tax refund as non-operating in nature while computing the margins of BACI, whereas the said service tax amount was considered as an operating expense for the purpose of determining the inter-company cross charge in the previous years.
8. Determination of operating margins of comparable companies and BACI:
a. Passing an order which suffers from several computational errors and, consequently, erred in computing the amount of adjustment to be made in respect of the subject transactions.
b. Considering provision for bad & doubtful debts as non-operating in nature while computing the margin of companies proposed as comparables.
c. Considering portion of OR Expenditure as operating in nature while computing the margins of BACI.
9. Working capital adjustments:
Not adjusting the net margins of comparable companies for differences in working capital in accordance with the provisions of Rule 10B of the Rules.
10. Adjustments for risk differences:
Not adjusting the net margins of comparable companies for functional and risk differences in accordance with the provisions of Rule 10B(1) of the Rules.
11. Mark-up on recovery of salary cost and travel cost of seconded employees:
Proposing a mark-up of 5% on the reimbursements in the nature of salary and travel costs without appreciating that the same were recovered on a cost to cost basis.
a. Not appreciating that the Company has merely facilitated the payments on behalf of its AEs and did not provide any service in this respect.
b. Not undertaking any analysis to determine the ALP of the recovery transaction and marking up at the rate of 5% on an ad-hoc basis. Corporate Tax Grounds:
B. CORPORATE GROUNDS
12. Erred in disallowing the claim of Assessee under section 35DD of the Act, of one-fifth of the amalgamation expense incurred in AY 2012-13, pursuant to the approval sanctioned by the Hon’ble High Court.
Without prejudice to the above ground, assuming but not admitting the Ld. AO’s contention that the merger came into effect from 01.04.2009 (i.e. appointed date of merger), the Ld. AO ought to have allowed the deduction under section 35DD of the Act from the year of appointed date.
13. Ld. AO has erred in not allowing deduction of education cess liable for the subject AY under Section 37(1) of the Act while computing the total income, in view of the favourable decisions of the Hon’ble High Court of Rajasthan in the case of Chambal Fertilizers and Chemical Ltd. vs. JCIT (ITA No. 52/2018), Hon’ble Bombay High Court in the case of Sesa Goa Limited v. JCIT – [2020] 107 CCH 0376, Jurisdictional ITAT judgement in the case of Agro Tech Foods Limited vs. DCIT, Circle, Hyderabad, ITA No. 140/Hyd/2015 and other supporting decisions.
14. Erred in initiation of penalty proceedings under section 271(1)(c) of the Act.
15. Appellant craves leave to add, alter, amend, substitute and/or modify in any manner whatsoever all or any of the foregoing grounds of appeal at or before the hearing of the appeal.”
3. The brief facts of the case are that the assessee is a non- banking subsidiary of Bank of America and is engaged in the business of provision of IT services and IT-enabled services. The Assessee filed its return of income for the assessment year 2016- 17 on 30.09.2016, admitting income of Rs. 638,45,15,390/- under the normal provisions of the Act and book profit of Rs. 631,95,41,419/- under the provisions of Section 115JB of the Income-tax Act, 1961. The case was selected for scrutiny and during the course of assessment proceedings, a reference under Section 92CA(3) of the Act, dt. 31.10.2019 was made to the Ld. TPO for determination of arm’s length price of international transactions of the assessee.
4. During the TP proceedings, the Ld. TPO noticed that, as per the Form 3CEB filed by the assessee, the assessee has entered into various international transactions including software development services, IT-enabled services (ITeS) and recovery of salary and travel cost of seconded employees with its AE. The Ld. TPO, after considering relevant submissions of the assessee, has passed an order under Section 92CA(3) of the Act on 31.10.2019 and made TP adjustment of Rs. 169,33,96,991/- in respect of software development services and IT-enabled services (ITeS), and also recovery of salary and travel cost of seconded employees. Pursuant to the order of the Ld. TPO passed under Section 92CA(3), the AO passed draft assessment order under Section 144C(1) of the Act, on 16.12.2019 and proposed TP adjustment as suggested by the Ld. TPO. The AO had also made disallowance of amortization of expenditure under Section 35DD of the Act. The assessee has filed objections against the draft assessment order before the Hon’ble DRP and the DRP-1, Bangalore vide its order dated 19.02.2021 issued under Section 144C(5) of the Act, reduced the mark-up on recovery of salary and travel cost of seconded employees from 10% to 5% and accordingly reduced the TP adjustment. Thereafter, the AO has passed final assessment order under section 143(3) r.w.s. 144C(13) r.w.s. 143(3A) and 143(3B) of the Act, on 30.03.2021 and determined total income at Rs. 808,17,42,791/- by making TP adjustment of Rs. 169,05,55,131/- and also disallowance of amortization of expenses under Section 35DD of the Act, for Rs. 66,72,270/-.
5. Aggrieved by the final assessment order, the assessee is now in appeal before us.
6. The assessee has raised multiple grounds on TP adjustment made on account of IT and ITeS services, reimbursement of salary and travel cost of seconded employees, addition made on account of amortization of expenses under Section 35DD of the Act, and disallowance of cess under Section 40(a)(ii) of the Income-tax Act, 1961. The Ld. Counsel for the assessee at the time of hearing submitted that, the assessee has withdrawn ground nos. 2 to 10 relating to TP adjustment made on account of IT and ITeS services, vide letter dated 24.02.2026, and also ground no. 13 relating to deduction claimed towards cess, vide letter dated 19.05.2022. Therefore, ground nos. 2 to 10 and 13 of the assessee’s appeal are dismissed as withdrawn. The remaining grounds pending for adjudication in the present appeal filed by the assessee are ground no. 11 relating to TP adjustment made on account of reimbursement of salary and travel cost of seconded employees, and ground no. 12 relating to disallowance of amortization expenses under Section 35DD of the Income-tax Act, 1961.
7. The first issue that came up for our consideration from ground no. 11 of the assessee’s appeal is mark-up of recovery of salary and travel cost of seconded employees.
8. The Ld. Counsel for the assessee, Shri Hiten Takkar, Advocate and Shri Shyam Agarwal, C.A., referring to the orders of the Ld. TPO and Ld. DRP, submitted that, during the financial year 2015- 16, the assessee received reimbursement of expenses amounting to Rs. 5,68,37,202/- towards salary and travel cost of employees seconded to the associated enterprises. The aforesaid expenses were incurred on behalf of the AE and recovered on cost-to-cost basis without any mark-up. The aforesaid transactions undertaken by the assessee do not enter the profit and loss account and are routed through the balance sheet. However, the Ld. TPO made a TP adjustment of 10% mark-up on reimbursement of seconded employees’ cost on the ground that the assessee is providing service to its AE and the same needs to be benchmarked with appropriate mark-up. The Ld. DRP although reduced the mark-up to 5% on the basis of the order of ITAT, Hyderabad Bench in the case of Kirby Building Systems India Limited Vs. ACIT reported in (2014) 52 taxmann.com 409 (Hyderabad Trib.), but fact remains that the similar transactions were the subject matter of adjudication before the Ld. TPO for assessment years 2018-19 and 2020-21 and again in A.Y. 2022-23, where under identical payment received by the assessee company from its AE has been accepted without making any adjustment. Further, the assessee has entered into a bilateral Advance Pricing Agreement with CBDT covering financial years 2021-22 to 2025-26, wherein it has been specifically agreed that salary and other employee-related costs incurred by the assessee in respect of employees seconded to AEs are required to be recovered on a cost-to-cost basis. Since the assessee has recovered sarary and travel expenses of seconded employees on cost-to-cost basis without any mark-up, the Ld. TPO has erred in making a mark-up of 10% and the Ld. DRP was also erred in making a mark-up of 5% on the total cost reimbursed by the AE to the assessee. In this regard, he relied upon certain judicial precedents including the decision of Hon’ble Supreme Court in the case of Radhasoami Satsang v. CIT reported in [1992] 193 ITR 321 (SC).
9. The Ld. CIT-DR, on the other hand, supporting the order of TPO and DRP submitted that, the assessee is providing services to its AE in respect of seconded employees every year and claims that, it has recovered only cost of employees on cost-to-cost basis, but failed to substantiate the claim with relevant evidences. Since the assessee is providing services to its AE every year, suitable adjustment is required to be made in respect of various expenses incurred by the assessee, including direct and indirect expenses in relation to seconded employees, and therefore, the Ld. TPO and Ld. DRP, after considering the relevant facts, had rightly made TP adjustment and thus, the order of the Ld. TPO and Ld. DRP should be upheld.
10. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee has received Rs. 5,68,37,202/- towards reimbursement of salary and travel cost of employees which were seconded to the AE. The assessee claims that the aforesaid expenses were incurred primarily due to geographical proximity and administrative convenience, and since the employees were temporarily seconded to the AE, from the administrative perspective, the assessee has not recovered the cost with any mark-up. The Ld. TPO made TP adjustment @ 10% mark-up on reimbursement of salary and travel cost of employees seconded to the AE on the ground that the assessee is providing services to AE on year-to-year basis and the same should be benchmarked with suitable mark-up.
11. We find that, the services of employees seconded by the assessee to its AE are for a temporary period and it is not a continuous service as claimed by the Ld. TPO. Further, the assessee has recovered the cost of salary and travel expenses of employees seconded to AE without any mark-up. These facts are not disputed by the Ld. TPO. Since the assessee has recovered cost of salary and travel expenses of employees seconded to AE without any mark-up, in our considered view, the amount received by the assessee from its AE is in the nature of reimbursement of expenses without any mark-up, and therefore making a TP adjustment on the assumption that the assessee is providing services to AE and earns margin is totally incorrect. Similar amount was received by the assessee from AE for A.Ys. 2018-19, 2020-21 and 2022-23, where the payment received by assessee company from its AE towards reimbursement of salary cost and travel cost of seconded employees was the subject matter of adjudication by the Ld. TPO, and the Ld. TPO, after issuing show- cause notice and considering the submission of the assessee, has not made any adjustment. We further note that, the assessee had also entered into a Bilateral Advance Pricing Agreement with the CBDT covering F.Y. 2021-22 to F.Y. 2025-26, wherein it has been clearly agreed that the salary and other employee-related costs incurred by the assessee in respect of employees seconded to AEs are required to be recovered on a cost-to-cost basis. From the above, it is very clear that, the reimbursement of salary and travel costs of seconded employees has been examined and accepted by the lower authorities in earlier assessment years and also in subsequent assessment years, and further the same is fortified by the agreement between the assessee and the CBDT in the Bilateral Advance Pricing Agreement, wherein it has been agreed that no mark-up is leviable on the salary and other cost of employees seconded to its AE. Therefore, in our considered view, the Ld. TPO erred in making TP adjustment in respect of reimbursement expenses. This position is further strengthened by the decision of Hon’ble Supreme Court in the case of Radhasoami Satsang v. CIT (supra), wherein it has been held that although the principle of res judicata is not applicable to income tax proceedings, but the rule of consistency needs to be followed and unless there is a change in facts when compared to earlier years, the Revenue cannot be allowed to take a contrary view.
12. In this view of the matter and considering the facts and circumstances of the case and also by following the decision of Hon’ble Supreme Court in the case of Radhasoami Satsang Sabha, we are of the considered view that, the Ld. TPO and Ld. DRP were in error in making TP adjustment in respect of mark-up on reimbursement of cost of salary and travel expenses of seconded employees to its AE. Therefore, we direct the Ld. A.O./TPO, to delete the TP adjustment made in respect of amount received by the assessee from its AE towards reimbursement of cost of salary and travel expenses.
13. The next issue that came up for our consideration from ground no.12 of appeal is disallowance of deduction under Section 35DD of the Act. The Ld. Counsel for the assessee submitted that during the F.Y. 2011-12, BA Cantinum Private Limited, formerly known as Merrill Lynch India Technology Services Private Limited, was amalgamated with the assessee pursuant to the order of the High Court of Andhra Pradesh dated 28th August 2011 and the order of High Court of Bombay dated 14th October 2011, with the appointed date of amalgamation as 1st April 2009. In connection with the said amalgamation, the assessee incurred certain expenses, including stamp duty, aggregating to Rs. 3,33,51,348/-, which was paid during the F.Y. 2011-12 relevant to the assessment year 2012-13. Since the expenses were incurred pursuant to the amalgamation approved by the Hon’ble High Courts in financial year 2011-12, the assessee started claiming one-fifth of said expenses under Section 35DD of the Act from the assessment year 2012-13 and up to A.Y. 2016-17. The deduction claimed by the assessee from A.Ys. 2012-13 to 2015-16 has been allowed by the AO. However, for the year under consideration, the AO has held that the appointed date of amalgamation is 01-04-2009, and therefore, the assessee is entitled to claim deduction for A.Y. 2010-11, and since A.Y. 2016-17 is beyond the period of five years, the deduction under Section 35DD is not allowable. However, fact remains that the assessee has incurred expenditure in the financial year 2011-12 upon approval of amalgamation by the Hon’ble High Court of Andhra Pradesh and Bombay, and therefore rightly claimed deduction for A.Ys. 2012-13 and up to 2016-17. The AO, having accepted the claim of the assessee for four years, was erred in denying the claim for fifth year, even though the claim of the assessee is in accordance with law, because unless the assessee has incurred expenditure, claim for deduction cannot be allowed. In this regard, he relied upon the decision of Hon’ble Supreme Court in the case of Shasun Chemicals and Drugs Limited v. CIT, reported in [2016] 73 taxmann.com 293 (SC), and the decision of Delhi High Court in the case of CoFords Limited v. ACIT, reported in [2021] 436 ITR 546 (Delhi).
14. The Ld. CIT-DR, on the other hand, supporting the order of the AO and the Ld. DRP submitted that, the AO has rightly disallowed the claim of deduction under Section 35DD, because going by the appointed date, the claim of deduction for the assessment year under consideration is beyond five years, and as per the provisions of Section 35DD, the assessee can claim deduction only for five years from the date of expenditure, and therefore the reasons given by the AO for making disallowance of deduction under Section 35DD should be upheld.
15. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that pursuant to order of the Hon’ble High Court of Andhra Pradesh dated 20th August 2011 and the order of Hon’ble High Court of Bombay dated 14th October 2011, Merrill Lynch India Technology Services Private Limited was amalgamated with the assessee company with the appointed date of amalgamation on 1st April 2009. In connection with the above amalgamation, the assessee incurred certain stamp duty expenses aggregating to Rs. 3,33,51,348/-, which was paid during the F.Y. 2011-12 relevant to the A.Y. 2012-13. The assessee claimed deduction under Section 35DD of the Act, for a period of five years starting from A.Y. 2012-13, and the deduction claimed by the assessee from A.Y. 2012-13 to A.Y. 2015-16 has been accepted by the AO. However, for the assessment year under consideration, the AO disallowed that claim on the ground that going by the appointed date 1st April 2009, the assessee was entitled to claim deduction for A.Y. 2010-11 and up to A.Y. 2014- 15, and therefore the claim of the assessee for A.Y. 2016-17 is beyond the period of five years and the same cannot be allowed.
16. In our considered view, the AO is completely erred in disallowing the deduction under Section 35DD on two grounds. First of all, expenditure incurred towards amalgamation has been paid during the financial year 2011-12, relevant to the assessment year 2012-13, upon receipt of orders of Hon’ble High Court of Andhra Pradesh and Hon’ble High Court of Bombay in the financial year 2011-12, and therefore, the arguments of the AO on the basis of appointed date of amalgamation, the assessee should have claimed deduction for A.Y. 2010-11, is incorrect and also against the principles of impossibility of performance. Further, unless expenditure incurred by the assessee, the question of deduction does not arise, and in the present case, the assessee has incurred the expenditure in connection with amalgamation in the F.Y. 2011-12, relevant to the A.Y. 2012-13. Therefore, in our considered view, the claim of deduction under Section 35DD starting from A.Y. 2012-13 is in accordance with law. Consequently, the AO has accepted the claim of deduction starting from A.Y. 2012-13 to A.Y. 2015-16 for four years, and having accepted the claim for four years, the AO cannot reject the claim for fifth year unless there is a change in facts, as held by the Hon’ble Supreme Court in the case of Shasun Chemicals and Drugs Limited v. CIT (supra). A similar view has been held by the Hon’ble Delhi High Court in the case of Coforge Limited v. ACIT (supra).
17. In the present case, there is no dispute with regard to the fact that the assessee has incurred expenditure in connection with amalgamation in the F.Y. 2011-12, and therefore, in our considered view, the claim of the assessee under Section 35DD of the Act, starting from A.Y. 2012-13, is in accordance with law, and therefore the AO ought to have allowed the deduction for fifth year, i.e., for A.Y. 2016-17. The Ld. DRP, without considering the relevant facts, simply upheld the disallowance of deduction under Section 35DD of the Act. Thus, we direct the AO to allow the deduction claimed under Section 35DD of the Act.
18. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the Open Court on 30th September, 2026.
