Additional TP related adjustment offered by an assessee whether allowed as deduction u/s 10A/10B ?

Approva Systems Pvt. Ltd vs. DCIT (ITAT Pune)- 21 March 2018

Some of important discussions of the case (for easy reference):

1- Under section 92CA of the Act, where a person has entered into an international transaction in any previous year with its associated enterprises, then in order to benchmark the arm's length price of such an international transaction and to compute its arm's length price under section 92C of the Act, reference is to be made to the TPO by the Assessing Officer under the specified conditions, who in turn has to compute the said arm's length price in the hands of assessee,

2- Section 92C(4) of the Act provides that where an arm's length price is determined under sub-section (3), then the Assessing Officer may compute total income of assessee having regard to the arm's length price so determined. In other words, the Assessing Officer is empowered to compute total income of assessee in relation to international transactions undertaken by the assessee with its associated enterprises. The proviso therein provides that no deduction under section 10A/10AA or 10B or Chapter VI-A of the Act shall be allowed in respect of such amount of income, by which the total income of assessee had been enhanced after computation of arm's length price of international transactions,

3- The assessee on its own motion has offered additional income on account of transfer pricing provisions to the extent of ₹ 64,07,399/-. The said income was offered as part of business profits of assessee and was declared as income from business in the computation of income filed by the assessee. The issue which arises is whether on such additional income, the assessee is entitled to claim the benefit of section 10B/10A of the Act,

4- The assessee has computed the additional income by following the transfer pricing provisions and has offered the same to tax as its business profits. Once it has been so offered to tax, it forms part of profits of business and while computing the deduction under section 10A(4) of the Act, the said profits have to be taken into consideration and the deduction so computed,

5- We find that on similar facts the Bangalore Bench of Tribunal in the case of iGate Global Solutions Ltd. Vs. ACIT (supra) had allowed the deduction under section 10A of the Act in respect of transfer pricing adjustment suo-moto offered by the assessee.


For reading full text of the case please refer link - http://itatonline.org/archives/approva-systems-pvt-ltd-vs-dcit-itat-pune-s-10a-10b-the-bar-in-s-92ca4-that-the-assessee-is-not-entitled-to-s-10a-10b-deductions-in-respect-of-transfer-pricing-adjustments-applies-only-where-t/approva-systems-transfer-pricing-10a-10b/