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6. Variation of 3% from the arithmetic mean The Ld. AO/Ld. TPO erred in law in not granting the benefits of proviso to section 92C(2) of the Act available to the Appellant. The Ld. Panel erred in confirming the same.

B. Corporate Tax

7. Disallowance of deduction claimed under section 10AA of the Act -- Chennai SEZ unit - Rs. 181,403,235

a) The Ld. AO has erred in denying the deduction under Section 10AA of the Act amounting to Rs.181,403,235 claimed by the Appellant, by relying on the assessment order and order of Commissioner of Income-tax (Appeals) [' CIT-(A)'] for AY 2010-11.

e) The Ld. AO has erred in not considering the submission dated 18 October 2017, wherein the Appellant had furnished all the records/documents substantiating its claim.

8. Re-computation of deduction under section 10AA of the Act -- Coimbatore SEZ unit - Rs. 63,570

a) The Hon'ble DRP and Ld. AO has erred in re-computing the deduction under Section 10AA of the Act of Coimbatore SEZ unit by reducing expenses incurred in foreign currency and the communication expenses only from export turnover without corresponding deduction from the total turnover.

17.1 The ld. A.R. submitted that the assessee had claimed a sum of Rs. 18,14,03,235/- as deduction under Section 10AA of the Act in respect of its SEZ unit at Chennai. It is submitted that the claim for deduction under Section 10AA of the Act commenced in the year 2010-11 when the Chennai unit was part of the erstwhile company i.e., Perot Systems Business Process Solutions India Pvt. Ltd. which was subsequently merged with the Assessee's company.

17.2 She submitted that the Perot was engaged in the business of process outsourcing services in the nature of data processing and software development since 1998. Until 2009, Perot had two units, one in Chennai and one in Coimbatore. Perot later set up a third unit in Chennai in a Special Economic Zone ("SEZ") and was registered with the SEZ authorities in 2008 and the said unit commenced its activities in the year 2009. Thereby, FY 2009-10 was the first year of claim of deduction under Section 10AA of the Act for the Chennai SEZ unit. The claim of Perot came to be disallowed by the Assessing Officer in the year AY 2010-11 on the ground that (i) the Softex forms were not certified by the SEZ/STPI authorities; (ii) the Chennai unit was formed by splitting up or reconstruction of a business already in existence and; (iii) the unit did not export any computer software. Following the order for AY 2010-11, the Assessing Officer disallowed the claim for the present assessment year also, on the basis that there was no change in the facts. The DRP remanded the issue to the Assessing Officer with a direction to verify the information furnished by the Assessee and thereafter make a disallowance, if any deficiencies were found in the information furnished.

58. In terms of the above circular, it is clear that the test is to be performed on the first year of commencement of business. It is noticed that the coordinate bench of the Tribunal in the case of IBM India (P.) Ltd vs ACIT [2020] 120 taxmann.com 424 (Bangalore - Trib.) has considered a similar issue and held that that the satisfaction of conditions in section 10AA(4) regarding formation are required to be established only in the year of formation.

59. In assessee's case the Chennai unit is formed in the year 2009 and the first year of claiming the deduction u/s.10AA is AY 2010-11. We therefore direct the AO to keep in mind in the remand proceedings that conditions in section 10AA(4) regarding formation are required to be established only in the year of formation."