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"V. Whether the TP provisions apply when deduction is available under the Act ?
9.1. The ld. AR argued that its profit is deductible u/s 80IC of the Act. He vehemently submitted that once the profit from rendering of software development services is deductible, then, no motive can be attributed for artificially reducing the profit by manipulating the price with its AE. It was elaborated that the profit of an assessee, eligible for deduction under section 80IC, becomes tax neutral irrespective of its quantum. He, therefore, urged that either the international transaction should not be processed in terms of Chapter-X of the Act or higher amount of deduction should be allowed corresponding to the amount of addition on account of transfer pricing adjustment. This was forcefully contested by the ld. DR.
9.2. Having heard the rival submissions and perused the relevant material, we find ourselves unable to accept both the submissions advanced by the ld. AR on this aspect of the matter. In so far as the first submission for not carrying out any transfer pricing adjustment in view of the benefit enjoyed by it u/s 80IC of the Act is concerned, we find that no exception has been carved out by the statute for non- determination of the ALP of an international transaction of an assessee who is eligible for the benefit of deduction section 10A/10B or any other section of Chapter-VIA of the Act. Section 92(1) clearly provides that any income arising from an international transaction is required to be computed having regard to its arm's length price. There is no provision exempting the computation of total income arising from an international transaction having regard to its ALP, in the case of an assessee entitled to deduction u/s 80IC or any other such relevant provision. Section 92C dealing with computation of ALP clearly provides that the ALP in relation to an international transaction shall be determined by one of the methods given in this provision. This section also does not immune an international transaction from the computation of its ALP when income is otherwise eligible for deduction. On the contrary, we find that sub-section (4) of section 92C plainly stipulates that where an ALP is determined, the AO may compute the total income of the assessee having regard to the ALP so determined. This shows that the total income of an assessee entering into an international transaction, is required to be necessarily computed having regard to its ALP without any exception. Thus, the ld. AR's argument that since its income is subject to deduction u/s 80IC, the provisions of the Chapter-X of the Act should not be applied, in our considered opinion, has no force in view of the clear statutory mandate contained in proviso to section 92C(4), which reads as under:-
9.3. A circumspect perusal of this proviso read along with sub-section (4) of section 92C divulges that when the total income of an assessee from an international transaction is computed having regard to its ALP, then, no deduction u/s 10A or any other section including those covered under Chapter VIA of the Act shall be allowed in respect of the amount of income by which the total income of the assessee has been enhanced after computation of income determined on the basis of the ALP of an international transaction. The legislature has unconditionally provided for not allowing the benefit of deduction under any section in respect of the addition made on account of transfer pricing adjustment. Not allowing of any benefit u/s 80IC in respect of an addition on account of transfer pricing adjustment pre-supposes the existence of transfer pricing addition in the first instance to an assessee who is otherwise eligible to the benefit of deduction under this section. If one was to presume that no addition towards transfer pricing adjustment is comprehensible in the case of an assessee enjoying the benefit of deduction u/s 80IC, then there was no need to enshrine an express provision forbidding the grant of deduction under this section in respect of enhancement of income due to transfer pricing adjustment. Once the legislature has engrafted an unambiguous provision explicitly spelling out the non- granting of deduction u/s 80IC on the enhanced income due to transfer pricing addition, we are afraid to accept the assessee's contention, which runs diagonally opposite to the unequivocal language of proviso to section 92C(4). This contention, if taken to a logical conclusion, would amount to obliterating the proviso itself, which is patently incorrect.
9.4. Our view is fortified by the Special Bench order in the case of Aztech Software and Technology Services Ltd. vs. ACIT (2007) 107 ITD 141 (SB) (Bangalore) in which similar issue has been decided by the Special Bench by holding that availability of exemption u/s 10A to the assessee is no bar to applicability of sections 92C and 92CA. Similar view has been taken by Pune Bench of the Tribunal in the case of ACIT vs. MSS India (P) Ltd. (2009) 123 TTJ 657 (Pune) and several other orders. The reliance of the ld. AR on the order of the Mumbai Bench of the Tribunal in the case of DCIT vs. Tata Consultants Services Ltd. (ITA No. 7513/M/2010) dated 4.11.2015, in our considered opinion is misconceived, because, in that case, the Tribunal primarily found that the AO erred in not himself examining the issue of TP and failed to apply his mind to the TP report filed by the assessee. The last sentence in para 54 of the order upholding the assessee's contention that no TP adjustment can be made where the assessee enjoys benefit of deduction u/s 10A or 80HHE, etc., is only obiter dicta inasmuch as the addition was found to be not sustainable on the other main grounds as discussed in the body of the order. On the contrary, we find that the decision of the Special bench in Aztech Software (supra) permitting the applicability of sections 92C and 92CA to an assessee availing the benefit of section M/s J.J. Exports Limited ITA No.1371 & 1372/Kol/2017 Co. No. 71 & 72/Kol/2018 80IC etc. of the Act is its ratio decidendi. The ld. AR has not pointed out any judgment of some Hon'ble High Court deciding this point either way. In view of the fact that there is already a Special Bench decision in the case of Aztech Software (supra) which supports the making of transfer pricing adjustment notwithstanding the availability of deduction under such sections to the assessee, apart from clear statutory mandate contained in proviso to section 92C(4), we are more inclined to go with the view of the Special Bench.