Jardine Lloyd Thompson Private Limited Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that interest income earned by the assessee on account of surplus funds placed in FD is eligible for deduction under section 10AA of the Income Tax Act.
Facts- The assessee is engaged in the business of rendering administrative and back office support services in India to its associated enterprise. The assessee filed the return of income for A.Y. 2013-14 on 28/11/2013 declaring total income of Rs.10,87,09,850/-. The assessee filed subsequently a revised return on 30/03/2015 where the assessee revised the claim of credit for taxes paid in UK. The case was selected for scrutiny and notice under section 143(2) was duly served on the assessee. Since the assessee had international transactions with its associated enterprise, a reference was made to the Transfer Pricing Officer (TPO). The TPO passed an order wherein an adjustment of Rs.6,70,16,931/- was proposed. AO passed a draft assessment order incorporating the transfer pricing adjustment. Besides, AO also treated the interest income as not eligible for deduction claimed u/s. 10AA and according made the addition to the income.
Aggrieved, the assessee raised its objections before the Ld.Dispute Resolution Panel(DRP). The Ld.DRP sustained the TP adjustments as well as the additions made by the Assessing Officer. Aggrieved, the assessee is in appeal before the Tribunal.
Conclusion- We notice that the Hon’ble Karnataka High Court while considering the issue of interest on deposits being treated as income eligible for deduction under section 10A / 10B has held that the interest income earned incidentally cannot be de-linked from its profits and gains derived by the Undertaking engaged in the export of Articles as envisaged under Section 10-A or Section 10-B of the Act and cannot be taxed separately under Section 56 of the Act.
In assessee’s case, we notice that the assessee has placed the surplus funds in FDs and has earned interest from the same. The facts of assessee’s case being identical to the case of Hewlett Packard Global Soft Ltd, respectfully following the above full bench decision of the Hon’ble Karnataka High Court, we hold that the interest income earned by the assessee is eligible for deduction under section 10AA. Accordingly, we delete the disallowance made by the Assessing Officer in this regard.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is against the final order of assessment passed by the Assistant Commissioner of Income-tax-15(2)(1), Mumbai dated 15/09/2017 for AY 2013-14 passed u/s.143(3) r.w.s. 144C(13)
2. The assessee is engaged in the business of rendering administrative and back office support services in India to its associated enterprise. The assessee filed the return of income for A.Y. 2013-14 on 28/11/2013 declaring total income of Rs.10,87,09,850/-. The assessee filed subsequently a revised return on 30/03/2015 where the assessee revised the claim of credit for taxes paid in UK. The case was selected for scrutiny and notice under section 143(2) was duly served on the assessee. Since the assessee had international transactions with its associated enterprise, a reference was made to the Transfer Pricing Officer (TPO). The TPO passed an order wherein an adjustment of Rs.6,70,16,931/- was proposed. The Assessing Officer passed a draft assessment order incorporating the transfer pricing adjustment. Besides, the Assessing Officer also treated the interest income as not eligible for deduction claimed under section 10AA and according made the addition to the income. Aggrieved, the assessee raised its objections before the Ld.Dispute Resolution Panel(DRP). The Ld.DRP sustained the TP adjustments as well as the additions made by the Assessing Officer. Aggrieved, the assessee is in appeal before the Tribunal.
3. The assessee raised 9 grounds contesting the transfer pricing adjustment as well as treatment of interest income as not eligible for deduction u/s.10A and other consequential issues.
TP Adjustment(Grounds 1 to 3)
4. As per the Transfer Pricing Study, the assessee has entered into the following international transactions:-
