EIT Services India Pvt Ltd vs Asst. CIT
Assessee is in the business of rendering Software Development Services, filed its return of income for AY 2005-06 declaring total income of Rs.2,19,86,860/-. Assessment order under Section 143(3) was passed by the Assessing Officer computing total income at Rs. 725,277,770. The three additions that were made by the AO in this order were as follows:-
- Expenditure on Software which was claimed as revenue expenditure but was disallowed and treated as capital expenditure.
- deduction u/s.10A was allowed by the AO
- on account of determination of Arm’s Length Price (ALP) u/s. 92
In terms of Explanation (1)(c) to section 263(1), the issues raised in the appeals before the CIT(A) ought to have been adjudicated by the CIT(Appeals) and the conclusion that the entire assessment order has been set aside in the proceedings is erroneous. The issue with regard to expenditure on computer software, method of computation of deduction u/s.10A have been considered from a different facet in the order which had nothing to do with the issues that were raised by the Assessee in the appeal before the CIT(A). The Transfer pricing adjustment issue was not at all an issue that was considered in the order u/s.263. Therefore the CIT(A) ought to have adjudicated the issues raised by the Assessee before it. Since the issues sought to be now raised in the present appeals have not been adjudicated by the CIT(Appeals), it is deemed fit to set aside the order of CIT(A) and restore the issues raised in the appeals before the CIT(A) for adjudication by the CIT(Appeals) on merits.