I signed an APA with rollback and filed a modified return under s.92CD offering additional income. The officer says the proviso to s.92C(4) bars any Chapter III deduction on that extra income. Is he right?
He is not. The proviso to s.92C(4) bars a s.10A deduction on income by which the total income is ENHANCED by a transfer pricing addition made by the authorities; income the assessee itself offers in a modified return under the APA is not such an addition. Section 92CD(2) then supplies the positive answer: save as otherwise provided in that section, all other provisions of the Act apply as if the modified return were a return under s.139, so any deduction otherwise available applies to the income offered in the modified return.
Decided by the ITAT (R.S. Syal, Vice President and Partha Sarathi Chaudhury, Judicial Member (Pune Bench 'C')) on 2019-12-02, reported as ITA No.1413/PUN/2019 (AY 2010-11). It bears on section 92CD, section 92CD(1), section 92CD(2), section 92CD(3), section 92CC, section 92CC(1), section 92C(4), section 10A, section 10A(3), section 139 of the Income Tax Act 1961, in Deductions & Disallowances, Assessment & Scrutiny and Capital Gains Exemptions matters.
This is the single most valuable point in the APA machinery for an assessee with a Chapter III or Chapter VI-A claim, and it is routinely denied at assessment on the strength of the proviso to s.92C(4). The route has two limbs and both must be pleaded: first, that the incremental income is a suo motu offer and not an addition by the officer, so the proviso never engages; second, that the saving clause in s.92CD(2) carries the whole of the rest of the Act into the s.92CD assessment, so the absence of an express deduction provision in s.92CD is not an objection. The order also shows the APA itself doing work: because clause 5 of Appendix II required the applicant to raise and REALISE the invoice for the difference in the month following signature, the Tribunal read that as the APA relaxing the normal repatriation timetable, and the assessee, having brought in the foreign exchange within that month, satisfied s.10A(3). Read your own APA's critical assumptions and invoicing clause before arguing the point.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee entered into an advance pricing agreement with the CBDT on 24 November 2015 covering, among others, AY 2010-11. Under the agreement the profit margin was raised from 15 per cent to 17 per cent, and the assessee filed a modified return under s.92CD offering additional income of Rs 20,36,023, on which it claimed deduction under s.10A. Clause 7 of the APA dealt with critical assumptions, specified in Appendix II, clause 5 of which required the applicant to show the difference between the invoiced amount for the previous year and rollback years and the agreed arm's length price as a tax adjustment in the modified returns for AY 2010-11 to AY 2014-15, and to raise an invoice and realise it for the equivalent amount in the month following the month in which the agreement was signed. The assessee brought the convertible foreign exchange into India within that month. The Assessing Officer and the CIT(A) refused the s.10A deduction on the incremental income, relying on the proviso to sub-section (4) of s.92C.
The appeal was allowed and the deduction of Rs 20,36,023 granted. The proviso to s.92C(4) does not debar a deduction under s.10A on additional income in an assessment under s.92CD; an assessment under s.92CD provides for granting the deduction; and the assessee had satisfied the requirement of s.10A(3) read with s.92CD(2).
The Tribunal framed three sub-questions. On the first, it held that under the s.92CD scheme the assessee is mandated to file a modified return in consonance with the APA and the Assessing Officer then assesses under s.92CD(3) or (4) in accordance with the agreement; because the incremental income is offered by the assessee itself, it cannot be equated with a computation under s.92C or s.92CA, which speak of a transfer pricing addition made by the officer. A suo motu offer under the APA is of the same nature as an assessee offering a transfer pricing adjustment in its original return, where the deduction, if otherwise permissible, would be allowed. On the second, s.92CD(2) provides that 'Save as otherwise provided in this section, all other provisions of this Act shall apply accordingly as if the modified return is a return furnished under section 139'; that saving clause carries the applicability of s.10A into the assessment of the modified return, and the view that no deduction can be given for want of an express provision in s.92CD is without merit. On the third, reading s.92CC(1) with s.92CD(1) and (2), the Tribunal held that where the APA contains a clause departing from the normal provisions that clause prevails; clause 5 of Appendix II required realisation of the additional invoice within the month following signature, which can only have been stipulated in order to grant the consequential benefits of realisation, and since the foreign exchange was brought in within that month the assessee became entitled to the s.10A deduction.
It, therefore, follows that if an assessee is otherwise entitled to deduction u/s.10A, or for that matter under any other provision of the Act, in respect of the income offered in the modified return, the same cannot be denied.
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Handle my notice → Ask a CA on WhatsAppHe is not. The proviso to s.92C(4) bars a s.10A deduction on income by which the total income is ENHANCED by a transfer pricing addition made by the authorities; income the assessee itself offers in a modified return under the APA is not such an addition. Section 92CD(2) then supplies the positive answer: save as otherwise provided in that section, all other provisions of the Act apply as if the modified return were a return under s.139, so any deduction otherwise available applies to the income offered in the modified return. This was decided by the ITAT (R.S. Syal, Vice President and Partha Sarathi Chaudhury, Judicial Member (Pune Bench 'C')) and bears on section 92CD, section 92CD(1), section 92CD(2), section 92CD(3), section 92CC, section 92CC(1), section 92C(4), section 10A, section 10A(3), section 139 of the Income Tax Act 1961. It is reported as ITA No.1413/PUN/2019 (AY 2010-11). This is the single most valuable point in the APA machinery for an assessee with a Chapter III or Chapter VI-A claim, and it is routinely denied at assessment on the strength of the proviso to s.92C(4). The route has two limbs and both must be pleaded: first, that the incremental income is a suo motu offer and not an addition by the officer, so the proviso never engages; second, that the saving clause in s.92CD(2) carries the whole of the rest of the Act into the s.92CD assessment, so the absence of an express deduction provision in s.92CD is not an objection. The order also shows the APA itself doing work: because clause 5 of Appendix II required the applicant to raise and REALISE the invoice for the difference in the month following signature, the Tribunal read that as the APA relaxing the normal repatriation timetable, and the assessee, having brought in the foreign exchange within that month, satisfied s.10A(3). Read your own APA's critical assumptions and invoicing clause before arguing the point. If it applies to you, the first step is this: File the modified return within three months from the end of the month in which the APA was entered into, as s.92CD(1) requires, limited to and in accordance with the agreement.
The assessee entered into an advance pricing agreement with the CBDT on 24 November 2015 covering, among others, AY 2010-11. Under the agreement the profit margin was raised from 15 per cent to 17 per cent, and the assessee filed a modified return under s.92CD offering additional income of Rs 20,36,023, on which it claimed deduction under s.10A. Clause 7 of the APA dealt with critical assumptions, specified in Appendix II, clause 5 of which required the applicant to show the difference between the invoiced amount for the previous year and rollback years and the agreed arm's length price as a tax adjustment in the modified returns for AY 2010-11 to AY 2014-15, and to raise an invoice and realise it for the equivalent amount in the month following the month in which the agreement was signed. The assessee brought the convertible foreign exchange into India within that month. The Assessing Officer and the CIT(A) refused the s.10A deduction on the incremental income, relying on the proviso to sub-section (4) of s.92C. The matter was decided on 2019-12-02 by the ITAT (R.S. Syal, Vice President and Partha Sarathi Chaudhury, Judicial Member (Pune Bench 'C')). On those facts the ITAT held as follows. The appeal was allowed and the deduction of Rs 20,36,023 granted. The proviso to s.92C(4) does not debar a deduction under s.10A on additional income in an assessment under s.92CD; an assessment under s.92CD provides for granting the deduction; and the assessee had satisfied the requirement of s.10A(3) read with s.92CD(2).
The Tribunal framed three sub-questions. On the first, it held that under the s.92CD scheme the assessee is mandated to file a modified return in consonance with the APA and the Assessing Officer then assesses under s.92CD(3) or (4) in accordance with the agreement; because the incremental income is offered by the assessee itself, it cannot be equated with a computation under s.92C or s.92CA, which speak of a transfer pricing addition made by the officer. A suo motu offer under the APA is of the same nature as an assessee offering a transfer pricing adjustment in its original return, where the deduction, if otherwise permissible, would be allowed. On the second, s.92CD(2) provides that 'Save as otherwise provided in this section, all other provisions of this Act shall apply accordingly as if the modified return is a return furnished under section 139'; that saving clause carries the applicability of s.10A into the assessment of the modified return, and the view that no deduction can be given for want of an express provision in s.92CD is without merit. On the third, reading s.92CC(1) with s.92CD(1) and (2), the Tribunal held that where the APA contains a clause departing from the normal provisions that clause prevails; clause 5 of Appendix II required realisation of the additional invoice within the month following signature, which can only have been stipulated in order to grant the consequential benefits of realisation, and since the foreign exchange was brought in within that month the assessee became entitled to the s.10A deduction. In the words reproduced by the source cited on this page: "It, therefore, follows that if an assessee is otherwise entitled to deduction u/s.10A, or for that matter under any other provision of the Act, in respect of the income offered in the modified return, the same cannot be denied."
It was decided by the ITAT on 2019-12-02 and is reported as ITA No.1413/PUN/2019 (AY 2010-11). Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 92CD, section 92CD(1), section 92CD(2), section 92CD(3), section 92CC, section 92CC(1), section 92C(4), section 10A, section 10A(3), section 139, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed and the deduction of Rs 20,36,023 granted. The proviso to s.92C(4) does not debar a deduction under s.10A on additional income in an assessment under s.92CD; an assessment under s.92CD provides for granting the deduction; and the assessee had satisfied the requirement of s.10A(3) read with s.92CD(2). It arises in Deductions & Disallowances, Assessment & Scrutiny and Capital Gains Exemptions matters, on section 92CD, section 92CD(1), section 92CD(2), section 92CD(3), section 92CC, section 92CC(1), section 92C(4), section 10A, section 10A(3), section 139 of the Income Tax Act 1961, and was decided by R.S. Syal, Vice President and Partha Sarathi Chaudhury, Judicial Member (Pune Bench 'C'). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Claim the deduction in the modified return itself; do not offer the incremental income and leave the claim to be made in appeal. Plead the two limbs separately — the proviso to s.92C(4) does not engage because there is no addition by the officer, and s.92CD(2) affirmatively applies every other provision of the Act. Read the APA's critical assumptions and Appendix clauses: an invoicing and realisation clause can substitute for the ordinary time limit for bringing in convertible foreign exchange, and evidence of realisation within that window then becomes the whole case. For rollback years where an appeal is pending on an issue covered by the agreement, remember Rule 10RA(4) requires the appeal to be withdrawn to the extent of the covered issues.
Searched for later treatment; none was found. That is not the same as a source affirming it. The citator returns nothing. A name search returns ten documents. The four Bombay High Court matters involving this assessee (20 September 2025, 6 January 2026, 19 January 2026, 5 February 2026) are writ petitions about IGST on de-bonded capital goods under Notification 52/2003-Customs; they have nothing to do with section 92CD or section 10A. The later Pune Tribunal order of 27 September 2022 in the assessee's own case is for AY 2018-19 and decides section 36(1)(va) and section 43B; it does not refer to this order. No appeal under section 260A was traced and no Bench has applied the construction of section 92CD(3) adopted here. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
A ?type=print fetch of this order returned a structured summary rather than the text; everything quoted or attributed here was re-retrieved verbatim through /docfragment/ and verified on a second pass. The order was subsequently reproduced at length by the Bangalore Bench in Dell International Services India Pvt Ltd (IT(TP)A No.879/Bang/2018, order of 24 June 2020), which followed it; paragraphs 15, 16 and 18 as reproduced in that order match the text retrieved directly from this one. I did not read the full text of paragraphs 10 to 12, in which the first sub-question is answered, beyond paragraph 9 and the Tribunal's statement at paragraph 13 that it had answered that question in the negative. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed and the deduction of Rs 20,36,023 granted. The proviso to s.92C(4) does not debar a deduction under s.10A on additional income in an assessment under s.92CD; an assessment under s.92CD provides for granting the deduction; and the assessee had satisfied the requirement of s.10A(3) read with s.92CD(2).
TaxSphere, “Dar Al Handasah Consultants (Shair & Partners) India Pvt Ltd v DCIT”, https://taxnotice.vittsphere.com/caselaw/case/dar-al-handasah-92cd-modified-return-10a/ (validity last checked 2026-09-08)
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You signed an APA and filed a modified return under s.92CD. The Commissioner has now issued a s.263 notice on the old assessment order. Can he?
Your client offered a transfer pricing adjustment itself because its APA required it. The officer says s.92C(4) bars the s.10AA exemption on that extra income. Is he right?
My APA was signed after the assessment and I filed a modified return under s.92CD(1) offering a smaller figure. The officer has levied s.270A penalty on the pre-APA assessed income. Is there anything I can do about it now?
You offered extra income to give effect to a MAP resolution. The officer says the proviso denying a Chapter III deduction on enhanced income applies. Does it?
