Income Tax Appellate Tribunal - Pune
Deputy Commissioner Of Income-Tax, ... vs Capegemini Technology Services India ... on 8 May, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCHES "C", PUNE
BEFORE SHRI VINAY BHAMORE, JUDICIAL MEMBER &
SHRI DR DIPAK P. RIPOTE, ACCOUNTANT MEMBER
ITA No. 399/PUN/2020
Assessment Years: 2014-15
Dy. CIT, Circle -1(1) Vs. M/s Capegemini
PMT Bldg, Swargate, Technology Services
Shankarshet Road, Pune - India Ltd., (Formerly
411037. known as iGate Global
Solutions Ltd)
Plot No. 114, Rajiv
Gandhi Infotech Park,
Hinjewadi, Phase -III,
MIDS SEZ, Pune -
411057.
PAN - AABCM4573E
Appellant Respondent
ITA No. 410/PUN/2020
Assessment Years: 2014-15
M/s Capegemini Technology Vs. Dy. CIT, Circle -1(1)
Services India Ltd., (Formerly PMT Bldg, Swargate,
known as iGate Global Shankarshet Road,
Solutions Ltd) Pune - 411037.
Plot No. 114, Rajiv Gandhi
Infotech Park, Hinjewadi,
Phase -III, MIDS SEZ, Pune -
411057.
PAN - AABCM4573E
Appellant Respondent
Assessee by : Shri C H Naniwadekar
Revenue by : Shri Prakash L Pathade,
CIT DR
Date of hearing : 10.02.2026
Date of pronouncement : 08.05.2026
आदे श / ORDER
PER Dr. DIPAK P. RIPOTE, ACCOUNTANT MEMBER :
2
ITA Nos. 399 & 410/Pun/2020, ITA No. 399/Pun/2020 filed by revenue for A.Y 2014-15 and ITA No. 410/Pun/2020 filed by assessee for A.Y 2014-15 are emanating from order u/s 250 of Income Tax Act, 1961, passed by Commissioner of Income Tax (Appeals) -13, Pune for A.Y 2014-15 on 30.01.2020 emanating from assessment order u/s 143(3) r.w.s 144C(13) dated 05.02.2018. These two appeals were heard together and are being decided by this common order.
ITA No. 399/Pun/20202. The grounds of appeal raised by revenue in ITA no. 399/Pun/2020 are as under:
1. The order of the Ld. CIT(A) is contrary to law and to the facts and circumstances of the case.
2. Whether in the facts and circumstances of the case Ld CIT(A) is correct in accepting the Assessee's contention regarding inclusion of Tata Elxsi Ltd, without considering the fact that assessee itself had rejected this company in it TP Study Report (Annexure 3 Page 43) considering it functionally different than assessee?"
3. The Ld. CIT(A) has erred in allowing Assessee's claim of deduction of Rs Rs.37,07,40,112/- u/s 10AA of the Act in respect of three undertakings without appreciating the fact that the these units were formed by splitting up and reconstructing of the existing business as provided in section 10AA(4)(ii) of the I.T. Act, 1961.
4. The Ld. CIT(A) erred on the f acts and circumstances of the case in directing to deleting the disallowance of Rs.
79,32,582/- and the consequent reduction made in the deduction' allowable u/s. 10A on account of DTM and onsite software development income without considering the facts that the assessee did not exercise control and supervision over the onsite work carried out at the clients premises and 3 ITA Nos. 399 & 410/Pun/2020, also onsite work carried out at the clients' premises was not referable to any STPs?
5. The Ld. CIT(A) erred in directing the Assessing officer to delete the disallowance made u/s 14A r.w. Rule. 8D holding that he assessee has not earned tax free income.
6. The Ld. CIT(A) erred in directing the Assessing officer to delete the disallowance made u/s 14A r.w. Rule. 8D, completely ignoring the CBDT Circular 5/2014 dated 11/02/2014 as per which section 14A of the Act can be invoked even where taxpayer in a particular year has not earned any exempt income.
7. The Ld. CIT(A) on the facts and circumstances of the case erred in directing AO to allow depreciation of Rs. 14,88,428/- on goodwill even though the goodwill was acquired in F.Y. 2003-04 and assessee has not made similar claim in any of the earlier years.
8. The Ld. CIT(A) has erred in directing the Assessing Officer to exclude the amount of FBT paid in Australia while computation of book profit u/s. 115JB of the IT Act.
9. The Ld. CIT(A) has erred in directing AO to delete the addition of Rs. 3,10,170/- made by Assessing Officer on account of delisting expenses without appreciating the fact that the such expenses is not related to the business of the assessee company and also that the same is incurred in the capital field.
10. The Ld. CIT(A) has erred in directing the Assessing Officer to allow the foreign tax credit on account of taxes paid in Japan pursuant to DTAA between India and Japan.
11. The appellant craves to add, amend, alter or delete any of the above ground of appeal during the course of appellate proceedings before the Hon'ble Tribunal.
Ground No. 23. Ground No.2 pertains to transfer pricing adjustment. Ld. AR submitted that AO has passed an rectification order dated 25.04.2025 vide which 4 ITA Nos. 399 & 410/Pun/2020, TPO/AO has rectified the margin of TATA Elxsi Ltd. After the rectification order assessee's OP / OC is within the margin. Therefore this ground becomes academic in nature. Therefore, ground No. 2 raised by the revenue is dismissed without adjudication.
Ground No. 34. The AO has recorded following facts regarding deduction u/s 10AA of the Act.
G. Deduction u/s. 10AA in respect of undertakings of erstwhile GATE Computer Systems Limited:
G.1 As mentioned earlier, the assessee company has claimed deduction u/s. 10AA in respect of three undertakings belonging to erstwhile iGATE Computer Systems Limited. In this regard, following f acts are submitted:
"Note on deduction u/s 10AA in respect of units of erstwhile iGATE Computer Systems Limited As submitted earlier, iGATE Computer Systems Limited (ICSL) is amalgamated with the assessee company w.e.f.
1st April, 2012. In case of ICSL, deduction u/s. 10A/10AA was denied during the course of assessment proceedings for earlier years. For A.Y. 2014-15, deduction u/s 10AA is claimed in respect of three undertakings of the erstwhile ICSL as under:
Srl. Unit Initial Year of Profit for the No Year deductio year u/s n 10AA 1 Noida SEZ-10AA 2009-10 Sixth 26,96,96,640 Unit (ND SEZ and BP SEZ) 2 GNSEZ - 10AA 2011-12 Fourth 7,76,59,851 Unit 3 PUSEZ 10AA Unit 2012-13 Third 5,18,12,148 Total 39,91,68,639 5 ITA Nos. 399 & 410/Pun/2020, For A.Y. 2009-10, Pune ITAT has decided the matter in favour of ICSL and deduction u/s 10A/10AA as claimed by ICSL has been allowed. Similarly, in the appellate order for A.Y. 2012-13, the CIT(A) has allowed the deduction u/s 10A/10AA in respect of all the eligible units of ICSL, including the above three undertakings.
ICSL has made detailed submissions in respect of the above undertakings during the course of assessment proceedings and appellate proceedings of the respective years and are relied on.
In view of the decisions of the appellate authorities as aforesaid. and the submissions made in the respective assessment years, the deduction claimed u/s 10AA in A.Y. 2014-15 for the above undertakings may please be allowed as claimed."
G.2 From the case records, it is gathered that in the case of erstwhile iGATE Computer Systems Limited, eligibility for deduction u/s. 10A/10AA of the Act has been the subject matter of assessment since A.Y. 2004-05. For A.Y. 2004-05, the assessment was completed treating all the then twelve units (including unit operating from A.Y. 2004-05), as mere expansion or splitting up of the existing business and the claim of exemption u/s. 10A of the Act was denied. The claim of deduction on the Unit called NDA-58 at Sector 58, NOIDA, UP, India from where BPO/IT Enabled Services was treated as a different branch of the Information Technology Sector and was found eligible for the deduction allowable u/s. 10A of the Act.
G.3 In the current year, there is no claim for deduction u/s. 10A of the Act in view the expiry of 10A benefits in A.Y. 2011-12. In continuation of the stand taken in earlier years, in A.Y. 2009-10 to A.Y. 2013-14, the assessee's claim for deduction u/s. 10AA in respect of SEZ undertakings of erstwhile iGATE Computer Systems was denied in the assessment orders.
G.4 Since there is no change in the facts in respect of above units, the claim u/s. 10AA of deduction of profits of these units is continued to be disallowed for the current year also and accordingly, the same is proposed to be added to the income of the assessee company.
6ITA Nos. 399 & 410/Pun/2020, G.5 Even though in the appellate orders of Ld. Commissioner of Income Tax (Appeals) for earlier years, this matter was decided in f avour of the assessee company, the Department had not accepted the same and further appeals were f iled before the Tribunal.
G.6 In view of the above f acts, therefore, the assessee's claim of deduction u/s. 10AA amounting to Rs. 37,07,40,112/- (as recomputed) in respect of such units is proposed to be disallowed. Also, penalty proceedings u/s. 271(1)(c) of the Act is proposed to be initiated separately in the case as the assessee company had concealed particulars of its income for A.Y. 2014-15.
4.1 Thus, AO has not specified how the impugned units were farmed by splitting up and reconstruction. AO has merely relied on earlier years order.
4.2 Ld. CIT(A) has deleted the addition by following the decision of ITAT Pune in assessee's own case for A.Y 2012-13.
4.3 Ld. DR has not brought to our notice any contrary findings and has not distinguished the decision of ITAT on facts. In the facts and circumstances of the case we uphold the order of Ld. CIT(A) on this issue. Accordingly, ground No. 3 of the revenue is dismissed.
Ground No. 4-Deputation of Technical Manpower (DTM) :
5. The AO has recorded following facts regarding Deputation of Technical Manpower (DTM).
H.5 The on-site offshore employee's strength was given by the assessee company as under:
7ITA Nos. 399 & 410/Pun/2020, S.No Particulars Offshore Onsite Total A Average number of 24665 330 24995 employees B Of the above non- 981 130 1111 technical / support employees C Employees rendering 3227 14 3241 ITES D Employees rendering 20457 186 20643 software development services H.6 By excluding the number of call centre employees, it is seen that the software employee's strength is 20,643 out of whom, 186 software professionals are stationed abroad. These employees are typically high earning Project Managers and special experts stationed in U.S and other cities. The assessee company has claimed a substantial amount of expenses incurred towards maintenance of these engineers. These employees have worked on various onshore contracts without any link to the STP/SEZ centers in India. The onsite branches have conducted all kinds of operations including simulations, design development and such other studies. Nonetheless, the Company has accounted all the expenses with respect to its STP/SEZ branches only, even though expenses have been incurred substantially by the foreign based branches.
H.7 Further, the assessee company has also submitted that "the services rendered onsite were at all times integral part of services rendered offshore and belonged to the SEZ undertakings situated in India. It was the SEZ undertakings situated in India which were responsible for the software development, coding, testing and delivery." It has further submitted that "Based on the above facts and Explanation 2 of section 10AA it can be concluded that all the profits ascribed towards onsite software services were related to and formed integral part of SEZ undertakings in India and eligible for 10AA deduction and hence we request your honour to conclude the assessment by allowing 10AA deduction in full without making any adjustments/reductions towards onsite profits."8
ITA Nos. 399 & 410/Pun/2020, H.8 It is further ascertained that the appellate orders passed in the assessee's own case for the A.Y. 2011-12 and A.Y. 2012-13, the Ld. CIT(Appeals) has upheld the stand taken by the Assessing Officer in the matter.
H.9 Through its submissions, the Company has stated that there has been total revenue of Rs. 7.49 crores from 100% onsite/DTM projects in respect of its two SEZ units (viz. Hyderabad and Chennai units) for A.Y. 2014-15. By reducing a direct cost of Rs. 5.42 crores, the assessee company had a gross margin of Rs. 2.07 crores. The Company has further reduced the operating expenses with its indirect cost taken at 17.09% of the such revenue. After subtracting the same, it has come out with a profit figure of Rs. 79,32,582/- as net profit derived from the 100% onsite/DTM project executed from SEZ units.
H.10 On the basis of above discussions, Rs. 79,32,582/- is proposed to be reduced from the amount of deduction u/s. 10AA in the computation as per Annexure. Thus, the eligible profits for deduction u/s. 10AA will reduce by Rs. 79,32,582/-. Accordingly, penalty proceedings u/s. 271(1)(c) of the Act is proposed to be initiated separately in the case as the Company had concealed particulars of its income.
5.1 Ld. AR relied on the ITAT order for A.Y 2011-12 in assessee's own case. However for A.Y 2011-12 ITAT has relied on ITAT order in assessee's own case for A.Y 2007-08 in IT(TP) No. 286/BANG/2013.
5.2 It is observed that for A.Y 2007-08 assessee has filed copies of the agreements to establish the direct nexus between the onsite development of computer software with the development of software from eligible under takings. Based on those facts after anylizing the relevant agreement ITAT concluded that there was a direct link between the eligible under takings and 9 ITA Nos. 399 & 410/Pun/2020, the onsite development of computer software or onsite development services.
5.3 Ld. DR has accepted that the issue is covered against department. Ld. DR has not distinguished the decision of ITAT (supra).
5.4 Respectfully following the Coordinate Bench of ITAT in assessee's own case for the A.Y 2007-08, the revenu's ground No. 4 is dismissed.
Ground No. 5 & 6 - 14A disallowance
6. In this case in the assessment order, it is recorded that assessee claimed that no dividend income was earned during the year from the investments mentioned in the assessment order.
Therefore assessee claimed that no disallowance is required u/s 14A of the Act. AO relying on the CBDT Circular No. 5/2014 dated 11.02.2014 calculated disallowance u/s 14A r.w.r 8D of Rs. 1,44,435/-.
6.1 Ld. CIT(A) has recorded the finding that no tax free dividend income has been earned by the assessee during the year. Therefore Ld. CIT(A) deleted the addition following the judicial precedents.
6.2 Ld. DR has not contradicted these facts.
6.3 It is observed that this issue has been decided by Hon'ble High Court of Bombay in favour of assessee. Hon'ble Bombay High Court in the case of Pr.CIT vs Kohinoor 10 ITA Nos. 399 & 410/Pun/2020, Project (P.) Ltd [2020] 121 taxmann.com 177 (Bombay) has held as under :
Quote, " Section 14A of the Act deals with expenditure incurred in relation to income not includible in total income. As per sub-section (1) of section 14A, for the purpose of computing the total income, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income. In Cheminvest Ltd. (supra) Delhi High Court examined the expression "does not form part of the total income" as appearing in sub-section (1) of section 14A of the Act. Delhi High Court held that the said expression envisages that there should be an actual receipt of income which is not includible in the total income during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. It was clarified that section 14A will not apply if no exempt income is received or receivable during the relevant previous year.
9. This view has been followed in several decisions by this Court. In fact in Pr. CIT v. Man Infraprojects Ltd. [IT Appeal No. 259 of 2017, dated 9-4-2019], this Court followed the decision of the Delhi High Court in Cheminvest Ltd. (supra). It was further noted in MAN Infraprojects Ltd. that the decision of the Delhi High Court was challenged by the revenue before the Supreme Court by fling SLP but the SLP was dismissed.
10. In the light of the above, we hold that no substantial question of law arises from the order of the Tribunal. The appeal is devoid of merit and is accordingly, dismissed. "
Unquote.
6.4 The ITAT Pune Bench in the case of Kumar Properties and Real Estate (P.) Ltd. Vs DCIT , [2021] 128 taxmann.com 364 (Pune - Trib.) has held as under :
Quote , "Having heard the rival submissions gone through the relevant material on record, it is found as an admitted position that the assessee, in fact, did not earn any exempt income from the investment made in Marigold Properties during the year under consideration. The Hon'ble Delhi High Court in Cheminvest Ltd. v. CIT [2015] 61 taxmann.com 118/234 11 ITA Nos. 399 & 410/Pun/2020, Taxman 761/378 ITR 33 has held that if there is no exempt income, there can be no question of making any disallowance u/s 14A of the Act. Similar view has been taken by the Hon'ble Delhi High Court in CIT v. Holcim India (P.) Ltd . [2015] 57 taxmann.com 28. More recently the Hon'ble jurisdictional High Court in Pr. CIT v. Kohinoor Projects (P.) Ltd . [2021] 276 Taxman 180/[2020] 121 taxmann.com 177/425 ITR 700 (Bom.) has held that in the absence of any exempt income, there cannot be any disallowance of expenses u/s 14A of the Act.
19. The raison d'etre given by the ld. first appellate authority for sustaining the disallowance that the computation of income of the firm may result into positive income as well as negative income, i.e. loss and therefore, the provision of section 14A do not prohibit disallowance of expenditure in relation to exempt loss incurred by the assessee, is neither here nor there. The Hon'ble jurisdictional High Court in Pr. CIT v. HSBC Invest Direct (India) Ltd. [2020] 421 ITR 125 (Bom.) has held 'that disallowance cannot exceed the exempt income so earned by the assessee during the year under consideration.' If the disallowance is to be restricted to the amount of exempt income, the sequitur is that there can never be any disallowance u/s 14A in the absence of positive exempt income for the year. Insofar as section 14A is concerned, there is no qualitative difference between two situations, first, where the exempt income is Nil and second, where there is negative income for the year joined with a possibility of earning positive income in future. As the assessee in the instant case admittedly did not earn any exempt income during the year, respectfully following the ratio of the above decisions, we hold that no disallowance was called for. " Unquote.
6.5 Respectfully following the judicial precedents, since no exempt income earned by the assessee during the year, we uphold the order of Ld. CIT(A) in deleting the addition made u/s 14A. Accordingly Ground No. 5 & 6 raised by the revenue is dismissed.
Ground No. 7- Goodwill :12
ITA Nos. 399 & 410/Pun/2020,
7. In the assessment order the AO has disallowed assessee's claim for depreciation on goodwill amounting to Rs. 14,88,428/-. The AO has merely mentioned that issue was discussed at length in the assessment order for A.Y 2011-12 and following the same AO disallowed it. Thus, the AO has not bothered to bring on record any facts.
7.1 It is observed that ITAT Pune in ITA No. 2395 & 2624/Pun/2017 for A.Y 2011-12 vide order dated 26.10.2021 in para 20 of the order has directed the AO to grant depreciation at 25% on written down value of the goodwill.
7.2 Respectfully following the judicial consistency, we uphold the order of Ld. CIT(A) in deleting the addition in respect of goodwill. Accordingly Ground No. 7 raised by the revenue is dismissed.
Ground No.8, FBT Paid in Australia
8. This issue has been decided by ITAT Pune in assessee's own case in ITA No. 1857 & 1935/Pun/2017, A.Y 2013-14 as under:
Quote "16. Having heard both the sides and gone through the relevant material on record, it is seen that the Board, vide Circular No.8/2015, has opined that the prohibition for claiming deduction in respect of FBT does not apply in the computation of book profits u/s.115JB and the same has to be allowed as deduction in such computation. We therefore countenance the view taken by the ld. CIT(A) on this score. The Department's ground No.8 is not allowed ." Unquote.13
ITA Nos. 399 & 410/Pun/2020, 8.1 Accordingly, we uphold the order of Ld. CIT(A) on this issue. In the result, ground No. 8 raised by the revenue is dismissed.Ground No. 9
9. The AO has disallowed an amount of Rs.
3,05,21,676/- paid to KPMG, EY regarding purchase of shares from Pan Asia, review of land related documents, delisting expenses. The AO treated these amounts as capital expenditure and hence disallowed.
9.1 The assessee contested only Rs. 3,10,170/- which were alleged to be delisting expenses. Ld. CIT(A) allowed the amount of Rs. 3,10,170/-.
9.2 It is observed that during the assessment proceedings assessee had not filed any details of Rs. 3,10,170/- before the AO. Even before Ld. CIT(A) no details were filed. Ld. CIT(A) allowed only because identical expenditure was allowed for earlier year.
9.3 In this case it is observed that no details have been filed for the expenditure of Rs. 3,10,170/-. Even before us no specific details have been filed. The onus is on assessee to prove that expenditure was incurred wholly and exclusively for the purpose of business. In this case assessee has failed to prove the same. Accordingly, we are of the opinion that Ld. CIT(A) has erred in deleting the amount of Rs. 3,10,170/-.
14ITA Nos. 399 & 410/Pun/2020, Hence, we confirm the addition of Rs. 3,10,170/-. Accordingly ground No. 9 of the revenue is allowed.
Ground No. 10- Japan DTAA
10. This issue has been decided by ITAT, Pune in assessee's own case for A.Y 2013-14 in ITA No. 1857 & 1935/Pun/2017, in assessee's favour. ITAT held that assessee is eligible for foreign tax credit for taxes paid in Japan.
10.1 Accordingly revenue's Ground No. 10 is dismissed.
11. Ground No. 1 & 11 are general in nature hence no adjudication is required. Accordingly dismissed the same.
12. In the result appeal filed by the revenue is partly allowed.
13. The grounds of appeal raised by the assessee in ITA No. 410/Pun/2020 are as under:
1. In making a transfer pricing addition of Rs. 49,34,57,816 in respect of profits of the software development services.
2. In adopting the comparable PLI for software development services segment at 22.52% as against PLI of 18.76% of the Appellant.
3. In law and in facts, in rejecting the mechanism adopted by the Appellant for benchmarking its international transaction of provision of software development services 15 ITA Nos. 399 & 410/Pun/2020, using three year weighted average data of comparables and determining the arm's length operating margin for such services using the operating margins earned by the companies for only financial year ('FY') 2013-14.
4. In introducing additional filters / altering the filters adopted by the Appellant and accordingly modifying the comparable set a. erred in arbitrarily increasing the threshold of export earning filter to 75% of revenues from 25% of revenues as applied by the Appellant in its TP Report.
b. erred in applying a filter of rejecting companies which followed a financial year other than April to March.
c. applying a turnover f ilter for rejecting companies with a turnover of less than 1/10th and more than 10 times the Appellant's turnover disregarding the f act that the profitability of companies operating in the service industry is not dependent on its turnover and that margins of a risk mitigated service provider such as the Appellant are not dependent on scale or size of operations.
d. Without prejudice to the above contention, erred in applying the turnover filter on the total software development services turnover of the Appellant instead of calculating 10 times higher & lower of the software development services turnover earned from the AEs.
5. In rejecting the comparable companies selected by the Appellant a. erred in disregarding the comparable companies selected by the Appellant for benchmarking the international transaction of provision of software development services, without appreciating the fact that the companies are functionally comparable to the activities undertaken by the Appellant.
b. erred in rejecting Zylog Systems Limited considered to be comparable by the Appellant on the basis that the company has experienced an abnormal year of operations.
6. In disregarding the segmental operating margin submitted by the Appellant for Tata Elxsi Limited (Software Development & Services Segment) and computing incorrect 16 ITA Nos. 399 & 410/Pun/2020, segmental operating margins i.e. considering the operating expenses after allocating the net unallocated expenses (gross unallocated total expenses less other income) instead of the gross unallocated operating expenses.
7. Without prejudice to the above ground, the Appellant submits that margin of Tata Elxsi Limited should be computed at an entity level since activities of both the segments of the company are akin to IT services.
8. In considering certain companies as comparable for benchmarking the international transaction of provision of software development services, without appreciating the fact that the companies are functionally different to the Appellant.
a. erred in considering Persistent Systems Limited as comparable to the Appellant disregarding the fact that the company is engaged in development of software products, provision of services and technology innovation and earns income from royalty and segmental information is not available in the financial statements of the company for the relevant year.
b. erred in considering RS Software (India) Limited as comparable disregarding the fact the company is functionally different from the Appellant.
B. In respect of Non-transfer pricing matters:
9. In respect of deduction u/s 10AA:
Allocating interest of Rs. 91,70,823/- to 10AA undertakings for the purpose of computing deduction u/s 10AA.
10. In respect of foreign currency translation reserve:
Making an addition of Rs. 5,10,23,348/- on account of the amount of foreign currency fluctuation in respect of overseas branches directly credited to foreign currency translation reserve which is capital in nature.
11. In respect of prior period expenses:
Not allowing deduction of Rs. 1,08,08,761/- debited to the profit and loss during the year on account of ineligible service tax input credit for earlier years 17 ITA Nos. 399 & 410/Pun/2020,
12. In respect of taxes paid In Japan:
Not allowing deduction of Rs. 35,40,313/- u/s 37(1) for taxes paid in Japan for which credit under DTAA is not claimed
13. In respect of credit under DTAA for taxes paid in Japan:
a) Not allowing credit under DTAA for certain taxes aggregating to Rs. 1,77,11,860/- paid in Japan.
b) Without prejudice to above, alternatively, not allowing such taxes as deduction u/s 37(1) while computing total income.
14. In respect of amount of credit available under DTAA:
Reducing the amount of credit available under DTAA by Rs. 2,30,27,348/- on account of proportion of deduction u/s 10AA.
15. In respect of brought forward MAT credit entitlement:
Not allowing the set-off of brought forward MAT credit entitlement as claimed in the return of income of Rs. 40,80,70,704/-.
C. General Ground
16. The Appellant craves leave to add to, withdraw or modify any of the grounds of objections at the time of hearing.
Ground No. 1 to 8.
14. Ld. AR filed a note stating that Ground Nos. 1 to 8 raised by the assessee are not pressed as the TPO has passed the rectification order dated 25.04.2025 and after the rectification order the Ground Nos. 1 to 8 become infructuous. Assessee filed a letter dated 11.02.2026 requesting for withdrawal of ground No. 1 to 8 raised by the assessee.
18ITA Nos. 399 & 410/Pun/2020, 14.1 Accordingly ground Nos. 1 to 8 are dismissed as withdrawn.
Ground No. 9 - Allocation of Interest
15. The AO has discussed this issue of allocation of interest expenses to Units which have claimed deduction u/s 10AA of the Act in paragraph F of the assessment order. It is an admitted position by the assessee that assessee has not allocated interest cost to the units which have claimed deduction u/s 10AA of the Act. Assessee pleaded before the AO that there were no specific borrowings for SEZ Units, hence assessee pleaded that no allocation is required.
15.1 It is the fact that identical issue has been decided by the ITAT Pune in assessee's own case in ITA No. 1857 & 1935/Pune/2017 against the assessee.
15.2 Ld. AR has not brought on record any contradiction facts.
15.3 Respectfully following the Coordinate Bench of ITAT in assessee's own case for 2013-14 (supra), we dismiss the ground raised by the assessee.
Ground No. 10 -foreign currency translation reserve
16. The AO has treated the foreign currency fluctuation in respect of overseas branches directly 19 ITA Nos. 399 & 410/Pun/2020, credited to foreign currency translation reserve as income of the assessee and made addition of Rs. 5,10,23,348/-. It is admitted position that the amount of foreign exchange fluctuation gain relatable to the items of revenue, should be considered as includible in the total income and the part relatable to the items in capital field should be excluded.
16.1 It is the fact that identical issue has been decided by the ITAT Pune in assessee's own case in ITA No. 1857 & 1935/Pune/2017, 2013-14. The ITAT (supra) had directed the AO to include only the amount which are revenue in nature.
16.2 For A.Y 2014-15 AO had made an addition of Rs. 5,10,23,348/-. However, Ld. CIT(A) in para 11.3 directed the AO to obtain the breakup of foreign exchange fluctuation on account of capital account and on account of revenue account. Ld. CIT(A) directed the AO to make addition only of the amount which pertains to revenue account.
16.3 We do not find any infirmity in the order of Ld. CIT(A), accordingly ground No. 10 raised by the assessee is dismissed.
Ground No. 11- Rs. 1,08,08,761/- Prior Period Expenses.
17. Ld. CIT(A) has held as under in para 13.4:
Quote "13.4 I have carefully considered the facts of the case as well as the reply of the appellant. Sum total of submission is that an amount of Rs. 3 Crores out of Rs.20
ITA Nos. 399 & 410/Pun/2020, 5,79,72,564/- disallowed by the AO relates to the head "Merger and reorganization expenses" that is already submitted in the disallowance by the appellant in its computation of income filed along with the return of Income. This is a case of double disallowance. There rest Rs. 2,79,72,564/- pertains to current year input credit and earlier year input credit written off. The AO is directed to verify the claim of double disallowance and the current year rates and taxes claim. However, before doing so, the AO will be entitled to verify the arithmetical accuracy of the claim. Subject to the above remarks, the ground is treated as allowed for statistical purposes". Unquote 17.1 Ld. AR during the hearing has submitted a written note on his pleading on this issue, which is reproduced here as under:
Quote "Out of the above, INR 30,000,000 pertaining to merger and re-org expenses have already been disallowed by the assessee company which computing the deduction u/s 35DD of the Act, in its tax computation. As such, the only prior period expenses remain is INR 2,79,72,564.
In respect of the prior period expense of INR 2,79,72,564, it is submitted that, during FY 2013-14, the assessee company was in process of integrating various service tax returns filed by the erstwhile Patni Computer Systems Ltd and IGate Global Solutions Ltd, post receipt of merger order from the Hon'ble Bombay High Court on 31st May, 2013. The merger was effective from 1st April 2012. As a part of this integration activity, the assessee company reviewed the service tax returns filed vis-à-vis service tax input credit receivable for period from 1st April 2012 to 31st March 2014 (2 Years). Based on this review, the assessee company identif ied certain ineligible service tax input credit out of the same as under;
Particulars Amount
Ineligible service tax credit for F.Y 2013-14 17,163,803
(current year)
Ineligible service tax credit pertaining to 10,808,761
earlier periods
Total 27,972,564
21
ITA Nos. 399 & 410/Pun/2020,
It is submitted that, the assessee company had conducted this review exercise and identif ied and actually written off the ineligible service tax credit in FY 2013-14 i.e. post merger order, the same may please be considered as allowable expenditure for FY 2013-14. It is also submitted that, the amount of INR 17,163,803 pertains to FY 2013-14 itself and hence not a prior-period expenditure." Unquote.
17.2 Thus Ld. AR pleaded that the amount of Rs.
2,79,72,564/- pertains to ineligible service tax credit and the impugned amount was written off. However, copy of the ledger account demonstrating written off amount was not filed before us. AO has not recorded whether the ledger account was filed before AO or not? In these facts and circumstances of the case we set aside the issue to the file of AO for denovo verification. The assessee shall file necessary documents before the AO. Therefore, the ground No. 11 of the assessee is allowed for statistical purposes.
Ground No. 1218. This ground pertains to Taxes paid by Igate Japan Branches and Patni Japan Branches in Japan. Assessee had claimed payment of following taxes.
18.1 Assessee claimed an expenditure u/s 37 of the Act. This issue is covered in favour of the assessee by 22 ITA Nos. 399 & 410/Pun/2020, the decision of Coordinate Bench of ITAT in assessee's own case for A.Y 2013-14 (supra), the relevant portion of the same is extracted below:
Quote "30. The first objection of the Department is that the ld. CIT(A) erred in directing the AO to allow deduction under section 37(1) of the Act in respect of the taxes paid in Japan, which is the first part of the foreign tax credit as discussed above. The ld. CIT(A) directed to allow deduction u/s.37(1) in respect of Inhabitant tax, Enterprise tax etc., paid in Japan. Since such a deduction is in respect of taxes for which no benef it of foreign tax credit has been allowed in terms of section 90/91 of the Act, the same has been rightly allowed u/s.37(1) of the Act in view of Explanation 1 to section 40(a)(ii) of the Act as discussed supra in the context of Fringe benefit tax paid in Australia. The grievance of the Revenue on this count is, ergo, repelled." Unquote 18.2 Respectfully following the decision of ITAT in assessee's own case (Supra), we direct the AO to allow the deduction. Accordingly ground No. 12 of the assessee is allowed.Ground No. 13
19. This issue pertains to credit of taxes paid in Japan under DTAA amounting to Rs. 1,77,11,860/-.
This issue has been decided by ITAT, Pune in assessee's own case for A.Y 2013-14 in ITA No. 1857 & 1935/Pun/2017, in assessee's favour. ITAT held that assessee is eligible for foreign tax credit for taxes paid in Japan. Accordingly ground No. 13 of the assessee is allowed.
Ground No. 14 23ITA Nos. 399 & 410/Pun/2020,
20. This ground pertains to reduction of amount of Rs. 2,30,27,348/- of credit available under DTAA on account of proportion of deduction u/s 10AA of the Act. For A.Y 2014-15 AO observed that turnover of Units eligible for 10AA was Rs. 673 Crores out of total turnover of Rs. 3425 Crores. In the assessment order AO has disallowed assessee's claim for deduction u/s 10AA of the Act with respect to units of erstwhile Igate Computer Systems Ltd. the AO allowed deduction u/s 10AA of the Act only for three units. Therefore AO held that the turnover of the three units for which deduction u/s 10AA of the Act was allowed is 10.10% of total turnover. Therefore AO reduced DTAA claim by 10.10% of taxes paid in foreign countries. The calculation of the AO is as under:
Q.4 On the basis of above, the amount of DTAA credit is computed as under:
Total claim by the assessee as per the 28,84,36,180 submission made during the course of assessment proceedings Less: Reduction in respect of Japa 1,77,11,861 taxes, other than corporation taxes Revised amount - as per separate 27,07,24,319 working on record Less: 10.10% in respect of 10AA units 2,73,43,156 Balance claim 24,33,81,163 20.1 ITAT in assessee's own case in ITA No. 1857 & 1935/Pun/2017 has held as under:
Quote "47. The AO computed the ineligibility of foreign tax credit at 8.90% of revised amount of foreign tax credit as per Table I drawn above by considering the proportionate sales made by the 10AA units to these six countries vis-à-vis total sales of the assessee. This 24 ITA Nos. 399 & 410/Pun/2020, working made by the AO cannot be upheld because of the discussion made above about the question for consideration not being the deductibility of such income from Indian income tax, but the credit in respect of tax paid on such income in six countries. Thus, we need to find out the precise amount of foreign tax in respect of sale of 10AA units made to Australia and Canada, which cannot be allowed credit. However, such amount, though not available for credit, will be eligible for deduction u/s.37(1) of the Act, as being not hit by section 40(a)(ia) of the Act in line with our decision on the first part of the ground raised by the Department. The taxes paid in other four countries, namely, Belgium, Japan, Swiss and Malaysia in respect of sale of 10AA units, will be available for credit in terms of the relevant Article of the concerned DTAAs as discussed supra. We, therefore, set-aside the impugned order and remit the matter to the file of the AO for deciding this issue accordingly. Needless to say, the assessee will be allowed reasonable opportunity of hearing". Unquote 20.2 Respectfully following the above referred decision we set aside the issue to the AO to calculate as per ITAT's direction in ITA No. 1857 & 1935/Pun/2017 reproduced above.
20.3 In the result, ground No. 14 raised by the assessee is allowed for statistical purposes.
Ground No. 15 - MAT 21 AO shall verify earlier years MAT credit and recompute the credit available for year under consideration.
21.1 This ground is consequential hence academic in nature, accordingly dismissed unadjudicated.
25ITA Nos. 399 & 410/Pun/2020, Ground No. 16
22. This ground raised by the assessee is general in nature hence no adjudication is required. Therefore this ground raised by the assessee is dismissed.
23. Accordingly, appeal of the assessee is partly allowed.
24 In the result, appeal filed by the assessee and revenue are partly allowed.
Order Pronounced in the open court 08 May, 2026 dsss ds Sd/- Sd/-
(VINAY BHAMORE) (DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER
पुणे / Pune; िदनां क / Dated : 08 May, 2026. KRK, Sr. PS 26 ITA Nos. 399 & 410/Pun/2020, आदे श की ितिलिप अ ेिषत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. थ / The Respondent.
3. The Pr. CIT concerned.
4. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, "SMC" बच, पुणे / DR, ITAT, "SMC" Bench, Pune.
5. गाड फ़ाइल / Guard File.
आदे शानु सार / BY ORDER, // True Copy // Assistant Registrar, आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.
27ITA Nos. 399 & 410/Pun/2020,