WNS GLOBAL SERVICES P.LTD, V. ADDL CIT RG 10(2),

CO 44/MUM/2013

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4868 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 11 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2007-2008
• Appeal Filed On: 28-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: MANISH KANTH LD ARS
• Keywords: Capital asset; Depreciation; Transfer pricing; International transaction; Arm length price; Notional interest; Set aside
• Section: 143(3); 92B; 37(1); 43D; 13; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K, BE NCH MUMBAI BEFORE SHRI C.N.PRASAD, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.1451/MUM/2012 ( ASSESSMENT YEAR: 2007-08 ) ADDL.CIT, RANGE-10(2) ROOM NO.432, 4 TH FLOOR AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 VS. WNS GLOBAL SERVICES PVT.LTD. PLANT-10, GATE NO.4 GODREJ & BOYCE COMPLEX PIROJSHANAGAR, VIKHROLI(W) MUMBAI-400 079 PAN/GIR NO. AAACW2598L APPELLANT ) .. RESPONDENT ) & CO.NO.44/MUM/2013 ( ASSESSMENT YEAR: 2007-08 ) WNS GLOBAL SERVICES PVT.LTD. PLANT-10, GATE NO.4 GODREJ & BOYCE COMPLEX PIROJSHANAGAR, VIKHROLI(W) MUMBAI-400 079 VS. ADDL.CIT, RANGE-10(2) ROOM NO.432, 4 TH FLOOR AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 PAN/GIR NO.AAACW2598L APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI PORUS KAKA & SHRI MANISH KANTH, LD. ARS REVENUE BY SHRI ANAND MOHAN, CIT-DR DATE OF HEARING 22/11/2019 DATE OF PRONOUNCEME NT 19 /02/2020 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTIO N FILED BY THE ASSESEE ARE DIRECTED AGAINST ORDER OF THE LD. C OMMISSIONER OF ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 2 INCOME TAX (APPEALS)-15, MUMBAI, DATED 30/12/2011 F OR THE AY 2007-08. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD T OGETHER AND ARE DISPOSED -OFF BY THIS CONSOLIDATED ORDER. ITA NO.1451/MUM/2012:- 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ' 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE ID. CIT(A) ERRED IN HOLDING THAT THE INTERNATIONAL TRAN SACTION ENTERED INTO BY THE ASSESSEE WITH ITS AUTHORISED REPRESENTATIVE INC LUDING MANAGEMENT AND MARKETING FEE PAID BY THE ASSESSEE TO THE AUTHO RISED REPRESENTATIVES, THE RECEIPT OF CONTRACT REVENUES A ND THE BEARING OF MIGRATION COSTS BY THE ASSESSEE BE BENCHMARKED SEPA RATELY THOUGH BEING INTERRELATED AND NOT AGGREGATED AS DONE BY TH E TPO. 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID, CIT(A) ERRED IN HOLDING THAT THE AUTHORISED REPRESE NTATIVES IN UK AND USA CAN BE TAKEN AS TESTED PARTY AS THEY ARE PERFOR MING LESS COMPLEX FUNCTIONS AND THEIR COMPARABLES TOO ARE BASED IN TH E SAME GEOGRAPHICAL AREA SUBJECT TO THE SAME ACCOUNTING STANDARDS AND H OLDING THAT THE TPO WAS NOT RIGHT IN SELECTING THE ASSESSES AS THE TEST ED PARTY FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS. 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) ERRED IN HOLDING THAT THE CONTRACTING MIGRAT ION COSTS SHOULD NOT BE CONSIDERED FOR THE CALCULATION OF THE OPERATING MAR GIN OF THE ASSESSEE THOUGH THEY ARE IN THE NATURE OF OPERATIONAL COSTS. 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) ERRED IN HOLDING THAT THE INTERNATIONAL TRAN SACTION ENTERED INTO BY THE ASSESSES WITH ITS AUTHORISED REPRESENTATIVES WE RE AT ARMS LENGTH AND THEREBY GIVING A RELIEF OF RS.13,61,665,000/- T O THE ASSESSEE. 5. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID, CIT(A) ERRED IN RESTRICTING THE GUARANTEE FEE TO 0. 5% OF THE VALUE OF GUARANTEE IGNORING THE FACT THAT THE CHARGE OF GUAR ANTEE COMMISSION AT A PARTICULAR RATE IS NOT DEPENDENT UPON THE EVENTUALI TY OF THE REPAYMENT OF THE LOAN BY THE BORROWER OR ITS UTILIZATION, IN FAC T IT IS A CHARGE FOR THE PROVISION OF GUARANTEE IN ABSENCE OF WHICH, THE LOA N COULD NOT HAVE BEEN OBTAINED BY THE AUTHORISED REPRESENTATIVE. ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 3 6. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) ERRED IN HOLDING THAT THE DEBTS COLLECTIONS PERIOD SHOULD BE COMPUTED BY CONSIDERING NOT ONLY THE DEBTORS ALLOWA NCES BUT ALSO THE CREDITOR'S BALANCES AND DIRECTING TO DELETE THE ADD ITION OF RS.6,09,08,000/- BEING THE ARMS LENGTH INTEREST CH ARGED FOR THE EXTENDED CREDIT PERIOD ALLOWED TO THE ASSESSEE IGNORING THE FACT THAT. A) THE DEBT COLLECTION PERIOD IS TO BE CALCULATED ON THE DEBTORS (AUTHORIZED REPRESENTATIVES) B) ACCORDINGLY L ASSESSED HAS ALLOWED AN EXCESS CREDIT PERIOD TO ITS AUTHORISED REPRESENTATIVES C) AN INDEPENDENT ENTERPRISE WOULD HAVE CHARGED AN INTEREST FOR THE EXCESS CREDIT PERIOD ALLOWED TO AN UNRELATED ENTITY WHICH THE ASSESSEE HAS NOT CHARGED. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) ERRED IN DIRECTING TO ALLOW DEDUCTION U/S,10 A TO THE ASSESSEE BY HOLDING THAT THE OMISSION OF SUB-SECTION 9 OF SECTI ON 10A WITH EFFECT FROM THE ASSESSMENT YEAR 2004-05 WOULD HAVE RETROSPECTIV E APPLICATION SINCE THE OMISSION IS CURATIVE IN NATURE AND IT SHOULD BE CONSIDERED AS IF SUCH PROVISION NEVER EXISTED ON THE STATUTE. 8. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) FAILED TO APPRECIATE THAT THE SHAREHOLDING O F THE ASSESSEE UNDERWENT A CHANGE IN THE PREVIOUS YEAR 2002-03 AND HENCE AS PER THE PROVISIONS OF SUB-SECTION 9 OF SECTION 10A WHICH EX ISTED IN THE STATUTE DURING THE SAID PREVIOUS YEAR, NO DEDUCTION U/S.10A (1) WAS TO BE ALLOWED TO THE ASSESSEE ON CHANGE OF BENEFICIAL OWNERSHIP F OR THE ASSESSMENT YEAR RELEVANT TO SUCH PREVIOUS YEAR I.E. ASSESSMENT YEAR 2003-04 AND THE SUBSEQUENT ASSESSMENT YEARS. 9. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) ERRED IN DIRECTING THAT THE ASSESSEE BE ALLO WED DEPRECIATION OF RS. 1,93,23,292/- ON THE 'INTANGIBLE ASSET REPRESENTIN G CONSIDERATION PAID FOR ACQUISITION OF BUSINESS CONTRACTS. 10. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE ID, CIT(A) FAILED TO APPRECIATE THAT A RUNNING BUSINESS HAS BEEN ACQUIRED ON A LUMP SUM PAYMENT AND THE ACQUISITION OF THE CAPIT AL ASSET IS OF THE BUSINESS AS A WHOLE, AND THE CAPITAL ASSET DOES NOT HAVE THE CHARACTERISTICS OF INTANGIBLE ASSETS AS LISTED IN C LAUSE (B) OF EXPLANATION 3 TO SECTION 32(1) OF THE IT ACT. 11. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE ID. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S.10A ON THE VARIOUS ADDITIONS / DISALLOWANCES MADE TO TH E PROFITS OF THE BUSINESS IN TERMS OF THE PROVISIONS OF SECTION 30 T O 43D OF THE INCOME TAX ACT, 1961 WITHOUT APPRECIATING THAT THE ASSESSEE IS NOT ENTITLED TO ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 4 DEDUCTION U/S.10A IN VIEW OF THE CHANGE IN SHAREHOL DING OF THE ASSESSEE COMPANY IN THE PREVIOUS YEAR 2002-03. 12. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD.CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S10A TO THE ASSESSE IN RESPECT OF THE PROFITS OF ITS ELIGIBLE UNITS VIZ.MUMBAI UNIT 1, PUNE UNIT 1, PUNE UNIT 2 AND NAS HIK UNIT 1 WITHOUT SET OFF OF LOSSES INCURRED BY ITS STP UNITS VIZ. MUMBA I UNIT 2, PUNE UNIT 3, NASHIK UNIT 2 AND GURGAON UNIT 1. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF EXPORTING INFORMATION TE CHNOLOGY ENABLED BUSINESS PROCESS OUTSOURCING, INCLUDING DAT A PROCESSING AND TRANSMISSION OF DATA ETC. THE ASSESEE PERFORMS ITES SERVICES FOR CLIENTS LOCATED IN USA AND EUROPE LIKE WNS GLO BAL SERVICES UK LIMITED AND WNS NORTH AMERICA INC. DURING THE YEAR UNDER CONSIDERATION, WNS INDIA HAS PROVIDED IT ENABLED SE RVICES TO THE CUSTOMERS REFERRED TO IT BY ITS ASSOCIATED ENTERPRI SES (AES) AND HAD RECEIVED 100% PAYMENT FOR PROVIDING THE IT ENABLED SERVICES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A REFE RENCE WAS MADE TO THE TRANSFER PRICING OFFICER (TPO) TO DETER MINE THE ARM LENGTH PRICE (ALP) OF INTERNATIONAL TRANSACTIONS EN TERED INTO BY THE ASSESSEE WITH ITS AES. THE TPO, VIDE ITS ORDER DAT ED 29/10/2010 PASSED U/S 92CA(3) OF THE I.T.ACT, 1961 HAS SUGGEST ED TP ADJUSTMENT OF RS. 142,25,73,000/- TOWARDS ADJUSTMEN T RELATED TO RECEIPT OF CONTRACT REVENUE , PAYMENT OF MARKETING AND MANAGEMENT FEES AND PAYMENT OF COST OF SERVICES AMOUNTING TO RS. 1,36,16,65,000/- AND A FURTHER SUM OF RS. 6,09,08,0 00/- TOWARDS INTEREST ON EXPORT RECEIVABLES. THE LD. AO THEREAFT ER, HAS PASSED DRAFT ASSESSMENT ORDER U/S 144C(1) OF THE I.T.ACT, 1961 AND DETERMINED TOTAL INCOME AT RS. 175,58,10,390/- BY M AKING VARIOUS ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 5 ADDITIONS, INCLUDING ADDITIONS TOWARDS TRANSFER PRI CING ADJUSTMENT (TPA) U/S 92CA(3) OF RS. 142,25,73,000/-, DISALLOWA NCES OF DEPRECIATION ON INTANGIBLES AMOUNTING TO RS. 1,93,2 3,929/- AND ADHOC DISALLOWANCES OF EXPENSES AMOUNTING TO RS. 5, 35,000/-. IN RESPONSE TO DRAFT ASSESSMENT ORDER, THE ASSESSEE VI DE LETTER DATED 27/01/2011 HAS FILED OBJECTIONS TOWARDS TPA AS SUGG ESTED BY THE TPO U/S 92CA(3) OF THE ACT. THE LD. AO AFTER CONSID ERING RELEVANT SUBMISSIONS OF THE ASSESSEE HAD PASSED FINAL ASSESS MENT ORDER U/S 143(3) OF THE I.T.ACT, 1961, DATED 21/02/2011 AND D ETERMINED TOTAL INCOME AT RS. 175,58,10,390/- BY MAKING ADDITIONS T OWARDS TPA U/S 92CA(3) OF THE ACT, DISALLOWANCES OF DEPRECIATION ON INTANGIBLES AND ADHOC DISALLOWANCES OF ADMINISTRATIVE EXPENSES. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESEE P REFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSEE HAS CHALLENGED ADDITIONS MADE BY THE LD. AO TOWARD S TPA, IN RESPECT OF RECEIPT OF CONTRACT REVENUE AND OTHER SE RVICES. THE ASSESSE HAS ALSO CHALLENGED ADDITIONS MADE BY THE L D. AO TOWARDS NOTIONAL INTEREST CHARGED ON EXPORT RECEIVABLES FOR BELATED REALIZATION OF PROCEEDS FROM AES AND ALSO, ADDITIO NS MADE BY THE LD. AO TOWARDS DISALLOWANCES OF DEPRECIATION ON INT ANGIBLES AND ADHOC DISALLOWANCES OF ADMINISTRATIVE EXPENSES. THE LD.CIT(A) FOR THE REASONS STATED IN HIS APPELLATE ORDER, DATED 30 /12/2011 HAS DELETED ADDITIONS MADE BY THE LD. AO TOWARDS TPA, I N RESPECT OF PAYMENT OF MARKETING AND MANAGEMENT FEES AND RECEIP T ON ACCOUNT OF CONTRACT REVENUE ECT. THE LD.CIT(A) HAS ALSO, DE LETED ADDITIONS MADE BY THE LD. AO TOWARDS INTEREST ON EXPORT RECEI VABLES, ON THE GROUND THAT, AS PER THE WORKING OF DEBT COLLECTION PERIOD SUBMITTED BY THE ASSESSEE AFTER NETTING OF CREDITORS, THE SAM E WORKS OUT TO 4 ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 6 DAYS, WHICH IS WELL WITHIN THE TERMS OF TRANSACTION S AND ACCORDINGLY, NO ADJUSTMENT IS REQUIRED TOWARDS INTEREST ON EXPOR T RECEIVABLES. THE LD. CIT(A) HAS ALSO DELETED ADDITIONS MADE BY T HE LD. AO TOWARDS DEDUCTIONS CLAIMED U/S 10A OF THE I.T.ACT, 1961, IN RESPECT OF PROFITS EARNED BY THE ELIGIBLE UNITS, ON THE GRO UND THAT OMISSION OF SUB-SECTION (9) OF SECTION 10A W.E.F. AY 2004-05 W OULD HAVE RETROSPECTIVE APPLICATION, SINCE THE OMISSION IS CU RATIVE IN NATURE AND IT SHOULD BE CONSIDERED, AS IF SUCH PROVISION NEVER EXISTED ON THE STATUTE. LIKEWISE, THE LD.CIT(A) HAS ALSO DELETED A DDITIONS MADE BY THE LD. AO TOWARDS DISALLOWANCES OF DEPRECIATION ON INTANGIBLE, ON THE GROUND THAT CONSIDERATION PAID FOR ACQUISITION OF BUSINESS CONTRACTS OVER AND ABOVE THE VALUE OF ASSETS REPRES ENTS INTANGIBLES ASSETS, WHICH IS ELIGIBLE FOR DEPRECIATION @25% AS ON INTANGIBLE ASSET. AS REGARDS, ADHOC DISALLOWANCES OF ADMINIST RATIVE EXPENSES, THE LD.CIT(A) AFTER CONSIDERING THE RELEVANT FACTS HAS DIRECTED THE LD. AO TO RESTRICT DISALLOWANCES TO THE EXTENT OF 5 0% OF TOTAL EXPENDITURE DISALLOWED BY THE LD. AO. AGGRIEVED BY THE LD.CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US AND THE A SSESSEE HAS FILED CROSS OBJECTION. 5. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO.1 TO 5 OF REVENUE APPEAL IS AGGREGATION OF INTER NATIONAL TRANSACTIONS AND CONSIDERATION OF AES OF WNS INDIA IN UK & US AS THE TESTED PARTY. THE LD. AR FOR THE ASSESSEE, AT T HE TIME OF HEARING SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FA VOUR OF THE ASSESSEE BY THE DECISION OF ITAT, MUMBAI K BENCH IN ASSESSEE OWN CASE FOR AY 2005-06 AND 2008-09, WHERE UNDER ID ENTICAL SET OF FACTS, THE TRIBUNAL DECIDE THE ISSUE IN FAVOUR OF T HE ASSESSEE. THE LD. AR, FURTHER SUBMITTED THAT FOR THE AY 2011-12 T O 2014-15 ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 7 ONWARDS, THE TPO HIMSELF ACCEPTED THE TP STUDY COND UCTED BY THE ASSESSEE BENCH MARKING THE TRANSACTIONS WITH AES S EPARATELY WITHOUT AGGREGATION OF ALL TRANSACTIONS. 6. THE LD. DR, ON THE OTHER HAND, FAIRLY ACCEPTED T HAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF ITAT FOR AY 2005-06 AND 2008-09. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE CO-ORDINATE BENCH OF ITAT, MUMBAI IN ASSESSEE OWN CASE FOR AY 2005-06 AND 2008- 09, WHERE UNDER IDENTICAL SET OF FACTS, THE TRIBUNA L HAS DELETED TPA MADE BY THE LD. AO/TPO TOWARDS INTERNATIONAL TRANSA CTIONS OF THE ASSESSEE WITH ITS AES, ON THE GROUND THAT ONCE, TH E DEPARTMENT ITSELF HAS ACCEPTED THE AES AS TESTED PARTY, BUT ALSO ACCEPTED THE FOREIGN COMPARABLES PROPOSED BY THE ASSESEE. THE TP O CANNOT AGGREGATE THE INTERNATIONAL TRANSACTIONS FOR BENCHM ARKING. THE TRIBUNAL, FURTHER HELD THAT THE TRANSACTIONS OF THE ASSESSEE WITH ITS AE DO NOT FORM A SINGLE COMPOSITE TRANSACTIONS AND THE TERMS OF EACH TRANSACTIONS HAVE BEEN AGREED SEPARATELY BY TH E ASSESEE WITH ITS AES. THUS, THE LD. TPO APPROACH OF AGGREGATING THE INTERNATIONAL TRANSACTIONS IS NOT APPROPRIATE. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER:- 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D MATERIALS ON RECORD. AS COULD BE SEEN FROM THE ORDER OF THE TRAN SFER PRICING OFFICER, PRIMARILY RELYING UPON HIS DECISION IN ASSESSMENT Y EAR 2004-05, HE HAS HELD THAT THE ASSESSEE HAS TO BE TREATED AS TESTED PARTY AND ALL INTERNATIONAL TRANSACTIONS HAVE TO BE AGGREGATED FO R BENCH MARKING PURPOSE. HOWEVER, IT IS OBSERVED, WHILE DECIDING ID ENTICAL ISSUE IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2004-05 , THE TRIBUNAL HAS ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 8 UPHELD LEARNED COMMISSIONER (APPEALS)'S DECISION IN TREATING THE AES AS THE TESTED PARTY ON THE FOLLOWING OBSERVATIONS: - '15. WHILE DELETING THE ADDITION MADE BY TPO DISREG ARDING THE BENCHMARKING APPROACH, CIT(A) OBSERVED AS UNDER:- I. THE APPELLANT HAS CHANGED THE BUSINESS MODEL TO INCREASE ITS TURNOVER WHICH REQUIRE THE RISK FREE ENVIRONMENT TO ITS MARKETING COMPANIES I.E., ITS A.ES AS RISKS AND REWARDS FROM CUSTOMERS ARE PASSED ON TO THE ASSESSEE UNDER THE NEW BUSINESS MO DEL. II. THE TWO BUSINESS MODELS OF THE APPELLANT ARE EN TIRELY DIFFERENT IN FUNCTIONAL ANALYSIS: A. IN BUSINESS MODEL I, THE RISKS AND REWARDS IS WI TH THE APPELLANT. THE A.ES WHICH ARE REMUNERATED ON A COST PLUS FEES ARE INSULATED FROM THE RISKS WHICH IS BORNE BY THE APPELLANT AS E NTREPRENEUR. THE AES RENDER ONLY MARKETING AND MANAGEMENT SERVIC ES AND ARE LEAST COMPLEX PARTY IN THE TRANSACTION. B. IN BUSINESS MODEL 2, THE MAJOR RISKS ARE BORNE B Y WNS UK. IT FUNCTIONS AS THE ENTREPRENEUR, IT BEARS THE RISK AN D THE APPELLANT IS ONLY A CAPTIVE SERVICE PROVIDER BEARING LIMITED RIS KS. III. IN BUSINESS MODEL I, THE AES WERE LEAST COMPLE X PARTIES AND THEY WERE RIGHTLY USED AS TESTED PARTY FOR THE MARK ETING AND MANAGEMENT FEES PAID TO THE AES ON COST PLUS BASIS, UNLIKE IN BUSINESS MODEL 2. IV. EACH INTERNATIONAL TRANSACTION HAS TO BE BENCHM ARKED SEPARATELY AND THE ASSESSEE HAS DIFFERENT FUNCTIONA L PROFILES FOR THE TWO BUSINESS MODELS, ONE AS AN ENTREPRENEUR AND THE OTHER AS A CAPTIVE SERVICE PROVIDER. V. SUCH DIFFERENT TRANSACTIONS CANNOT BE CLUBBED TO GETHER AS LAID DOWN IN : A. AZTEC SOFTWARE AND TECHNICAL SERVICES LTD V/S AC IT, (107 ITD 141) B. DEVELOPMENT CONSULTANTS PVT. LTD. V/S DCIT, {115 TTJ 577) C. STAR INDIA PVT. LTD. V/S ACIT, ITA NO.3585/ MUM./2006) 16. IN VIEW OF THE ABOVE FINDINGS OF CIT(A), WE ACC EPT ASSESSEE'S CONTENTION THAT THE FOREIGN AE SHOULD BE CONSIDERED AS THE TESTED PARTY, ACCORDINGLY ALL OTHER GROUNDS OF APPEAL IN THE DEPA RTMENT'S APPEAL WITH RESPECT TO TRANSFER PRICING RELATED ISSUES BECOME A CADEMIC IN NATURE.' 9. AS REGARDS THE ISSUE RELATING TO SEPARATE BENCHM ARKING OF INTERNATIONAL TRANSACTIONS WITH THE AES, THE TRIBUNAL HAS HELD AS UNDER:- '21 WE HAVE CONSIDERED RIVAL CONTENTIONS AND FIND F ROM THE NATURE OF THE TRANSACTIONS MENTIONED ABOVE THAT THEY ARE NOT INT ERLINKED AS THE VARIOUS TRANSACTIONS FORM PART OF DIFFERENT BUSINESS MODELS ADOPTED BY THE ASSESSEE. THUS, THE LEARNED TPO'S APPROACH OF AGGRE GATING THESE INTERNATIONAL TRANSACTIONS AND BENCHMARKING THE ASS ESSEE AT AN ENTITY LEVEL IS NOT APPROPRIATE SINCE THE FAR PROFILE OF W NS INDIA IS DIFFERENT IN BOTH THE TRANSACTIONS AND HENCE, AGGREGATING THESE INTERNATIONAL TRANSACTIONS AND CONSIDERING WNS INDIA AS THE TESTE D PARTY IS WHOLLY MISPLACED AND CONTRARY TO THE TP REGULATIONS. IN VI EW OF THESE FACTUAL ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 9 POSITION, THE HON'BLE CIT(A) HAS CORRECTLY UPHELD T HE BENCHMARKING APPROACH ADOPTED BY THE ASSESSEE. 22. FOR THIS PURPOSE RELIANCE MAY BE PLACED ON DECI SION OF THE HON'BLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF KNORR - BREMSE INDIA PVT. LTD., ITA NO.172 & 182 OF 2013) WHEREIN THE HON'BLE COURT HAS UPHELD THE PRINCIPLE THAT ONLY CLOSELY LINKED TRANSACTIONS WHICH ARE COMPONENTS OF SINGLE COMPOSITE TRANSACTION CAN CONSTITUTE A TR ANSACTION. 23. IN VIEW OF THE ABOVE, WE OBSERVE THAT THE AFORE SAID TRANSACTIONS DO NOT FORM A SINGLE COMPOSITE TRANSACTION AND THE TER MS OF EACH TRANSACTIONS HAVE BEEN AGREED SEPARATELY BY THE ASS ESSEE WITH ITS AES. THUS, THE LEARNED TPO'S APPROACH OF AGGREGATING THE INTERNATIONAL TRANSACTIONS IS NOT APPROPRIATE AND THE LEARNED DR' S CLAIM OF FOLLOWING THE LEARNED TPO'S CLAIM IS NOT ACCEPTABLE. FURTHERM ORE, DETAILED FINDINGS GIVEN BY CIT(A) ARE AS PER MATERIAL ON RECORD, WHIC H HAS NOT BEEN CONTROVERTED BY DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT SEE ANY JUSTIFIABLE REASON T O INTERFERE IN THE FINDINGS OF CIT(A) WHICH RESULTED INTO DELETION OF ADDITION MADE ON ACCOUNT OF INTERNATIONAL TRANSACTION.' 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAVING NOT BROUGHT ANY MATERIAL DIFFERENCE IN FACT IN THE IMPUGNED ASSESSM ENT YEAR, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL AS REFERRED TO ABOVE, WE UPHOLD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) WITH REGARD TO THE ISSUES RAISED IN THIS GROUND. FURTHERMORE, AS BROUGHT TO O UR NOTICE BY THE LEARNED SR. COUNSEL FOR THE ASSESSEE, THE TRANSFER PRICING OFFICER HIMSELF IN THE ORDERS PASSED IN ASSESSEE'S OWN CASE FOR AS SESSMENT YEARS 2011-12 TO 2014-15, HAS NOT ONLY ACCEPTED THE AES A S THE TESTED PARTY BUT ALSO ACCEPTED THE FOREIGN COMPARABLES PROPOSED BY THE ASSESSEE. EVEN, IN THE ADVANCE PRICING AGREEMENT DATED 3RD AU GUST 2015, THE DEPARTMENT HAS ACCEPTED THE AES AS THE TESTED PARTI ES INSOFAR AS IT RELATES TO FEES PAID TOWARDS MANAGEMENT AND MARKETI NG SERVICES RENDERED BY THEM. 8. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH V IEW TAKEN BY THE CO-ORDINATE BENCH, WE ARE OF THE CONSIDERED VIEW TH AT THE LD.CIT(A) HAS RIGHTLY DELETED ADDITIONS MADE BY THE LD. AO TO WARDS TPA, AS SUGGEST BY THE TPO U/S 92CA(3) OF THE ACT, IN RESPE CT OF INTERNATIONAL TRANSACTIONS OF THE ASSESSE WITH ITS AES. HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE LD.CIT(A ) AND REJECT GROUND TAKEN BY THE REVENUE. ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 10 9. THE NEXT ISSUE IS THAT CAME UP FOR OUR CONSIDERA TION FROM GROUND NO.6 OF REVENUE APPEAL IS NOTIONAL INTEREST CHARGED ON EXPORT RECEIVABLES FROM AES FOR EXTENDED CREDIT PERIOD. T HE LD. AR FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, MUMBAI K BENCH IN ASSESSEE OWN CASE FOR AY 2005-06 & 2008-09, WHERE UNDER IDEN TICAL SET OF FACTS, THE TRIBUNAL HELD THAT IF, THE CREDIT PERIOD ALLOWED TO AES FOR RECEIVABLES AND CREDIT PERIOD TAKEN BY THE ASSESSE FOR MAKING PAYMENTS TO AES, IN RESPECT OF PAYABLES IS NETTED OFF THEN. THE CREDIT PERIOD ALLOWED TO AES IS LESS THAN THE CRE DIT PERIOD ALLOWED TO NON AES AND HENCE, NO TPA COULD BE MADE, IN RESPEC T OF RECEIVABLES FROM AES. THE LD. AR, FURTHER SUBMITTE D THAT IN ORDER TO RE-CHARACTERIZE RECEIVABLES AS INTERNATIONAL TRANSA CTIONS, THE LD. TPO SHOULD BRING ON RECORD, THE BENEFIT DERIVED BY THE ASSESSEE BY EXTENDED CREDIT PERIOD TO THE AES. SIMPLY, BECAUSE THERE IS EXTENDED CREDIT PERIOD FOR THE AES, NO ADJUSTMENT COULD BE MADE, IN RESPECT OF NOTIONAL INTEREST, WHEN THE ASSESEE HAS EXPLAINED THE REASONS FOR DELAY IN REALIZATION OF RECEIVABLES FRO M AES. 10. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORT ING ORDER OF THE LD.AO/TPO SUBMITTED THAT THE ISSUE, WHETHER EXPORT RECEIVABLES IS A INTERNATIONAL TRANSACTION OR NOT HAS BEEN SETTLED B Y THE HONBLE DELHI HIGH COURT, IN THE CASE OF M/S MCKINSEY KNOWLEDGE C ENTER INDIA PVT.LTD. VS. PCIT ( 2018) TAXMANN.COM 237, WHERE IT WAS HELD THAT IF, THERE IS ANY DELAY IN THE REALIZATION OF A TRADING DEBT ARISING FROM THE SALES OF GOODS OR SERVICES RENDERED IN THE COURSE O F CARRYING ON THE BUSINESS, IT IS LIABLE TO BE VISITED WITH TPA ON A CCOUNT OF INTEREST INCOME SHORT CHARGED/UNCHARGED. THE LD. DR, FURTHE R SUBMITTED THAT WHILE DELIVERING THE JUDGMENT, THE HONBLE COU RT HAS TAKEN NOTE ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 11 OF SUB CLAUSE (C) OF CLAUSE (I) OF EXPLANATION TO SECTION 92B OF THE ACT, INSERTED BY THE FINANCE ACT, 2012 W.E.F. 01/04 /2012. FURTHER, THE SLP FILED AGAINST THE JUDGMENT BEFORE HONBLE SUPREME COURT HAS BEEN REJECTED, VIDE ORDER DATED 04/02/2019. THE LD. DR, FURTHER SUBMITTED THAT A SIMILAR VIEW HAS BEEN EXPRESSED BY THE JURISDICTIONAL HIGH COURT, IN THE CASE OF PATNI COM PUTERS SYSTEMS LIMITED (2013) 33 TAXMANN.COM 03. HE, FURTHER SUBM ITTED THAT THE RECEIVABLES OR ANY OTHER DEBT ARISING DURING THE CO URSE OF THE BUSINESS IS INCLUDED IN THE DEFINITION OF CAPITAL F INANCING AS ON INTERNATIONAL TRANSACTION, AS PER EXPLANATION TO SE CTION 92B OF THE ACT W.E.F 01/04/2002 BY THE FINANCE ACT, 2012 AND H ENCE, ANY RECEIVABLES OR ANY OTHER DEBT CONSTITUTE INTERNATI ONAL TRANSACTIONS, WHICH NEEDS TO BE BENCHMARKED FOR THE PURPOSE OF AS CERTAINING ALP OF TRANSACTIONS WITH AES. THE LD. DR, FURTHER SUBM ITTED THAT ALTHOUGH, THE TRIBUNAL, WHILE DECIDING THE REVENUE APPEAL FOR AY 2005-06 HAS HELD THE ISSUE IN FAVOUR OF THE ASSESSE , BUT SAID DECISION WAS SOLELY ON THE PREMISE OF THE ASSESSEE DOES NOT CHARGED ANY INTEREST EITHER FROM THE AES OR NON A ES TOWARDS EXTENDED CREDIT PERIOD AND SECONDLY, THE TPO HAS IG NORED THE DELAY IN PAYMENT MADE BY THE ASSESSEE TO THE AES. BUT, FACT REMAINS THAT CHARGING OF INTEREST TOWARDS EXTENDED CREDIT P ERIOD IS A SEPARATE INTERNATIONAL TRANSACTION AS HELD BY HONBLE DELHI HIGH COURT AND APPROVED BY THE HONBLE SUPREME COURT, IT CANNOT BE AFFECTED SET OFF BY DELAYED PAYMENT MADE BY THE ASSESSEE TO THE AES, IF ANY. THEREFORE, HE SUBMITTED THAT ALTHOUGH, THE ISSUE HA S BEEN DECIDED IN FAVOUR OF THE ASSESSEE FOR EARLIER YEARS, BUT SAID DECISION WAS ON DIFFERENT FOOTING AND HENCE, IN VIEW OF THE DECISIO N OF HONBLE DELHI HIGH COURT , DELAY IN REALIZATION OF EXPORT RECEIVA BLES NEEDS TO BE BENCHMARKED AS INTERNATIONAL TRANSACTION. ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 12 11. PER CONTRA, THE LD. AR FOR THE ASSESSEE SUBMIT TED THAT THERE IS NO MERIT IN ARGUMENTS OF THE ASSESSEE THAT THE H ONBLE DELHI HIGH COURT HAS OVERRULED THE DECISION OF KUSUM HEALTH CA RE PVT.LTD. VS PCIT (SUPRA), BECAUSE, THE HONBLE COURT VERY CATEG ORICALLY HELD THAT INCLUSION IN THE EXPLANATION TO SECTION 92B OF THE ACT, OF THE EXPRESSION RECEIVABLES DOES NOT MEAN THAT DE-HORS T HE CONTEXT EVERY ITEM OF RECEIVABLES APPEARING IN THE ACCOUNTS OF ENTITY, WHICH MAY HAVE DEALING WITH FOREIGN AES WOULD AUTOMATICA LLY BE CHARACTERIZED, AS AN INTERNATIONAL TRANSACTIONS. TH ERE MAY BE DELAY IN COLLECTION OF MONEYS FOR SUPPLIES MADE, EVEN B EYOND THE AGREED LIMIT DUE TO A VARIETY OF FACTORS, WHICH WILL HAVE TO BE INVESTIGATED ON CASE TO CASE BASIS. THE HONBLE COURT, FURTHER HELD THAT WHEN, THE ASSESEE IS ALREADY FACTORED THE RECEIVABLES IN THE WORKING CAPITAL AND THEREBY ON ITS PRICING/PROFITABILITY VIS--VIS THAT OF ITS COMPARABLES, ANY FURTHER ADJUSTMENT ONLY ON THE BAS IS OF THE OUTSTANDING RECEIVABLES WOULD HAVE DISTORTED THE PI CTURE AND RE- CHARACTERIZED THE TRANSACTIONS, THIS WAS CLEARLY IM PERMISSIBLE IN LAW. THEREFORE, HE SUBMITTED EVEN AFTER MAKING SAY ,THE LAW IS VERY CLEAR, IN RESPECT OF RECEIVABLES FROM AES, AS PER WHICH EACH TRANSACTIONS HAS TO BE EXAMINED, IN LIGHT OF FACTS BROUGHT OUT BY THE ASSESSEE TO BRING IT WITHIN THE AMBIT OF INTERNATIO NAL TRANSACTIONS. HE, FURTHER SUBMITTED THAT THE ITAT HAS CONSIDERED ALL THESE ASPECTS FOR EARLIER YEARS AND HELD THAT WHILE CHARACTERIZING TH E EXPORT RECEIVABLES FROM AES FOR BENCHMARKING, THE LD. AO OUGHT TO HAVE CONSIDERED PAYABLES TO AES TO ASCERTAIN IS THERE A NY BENEFIT HAS BEEN PROVIDED TO THE AES ON ACCOUNT OF EXTENDED CR EDIT FACILITY. THEREFORE, THERE IS NO MERIT IN THE ARGUMENTS OF TH E LD. DR THAT THE ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 13 LD. AO WAS RIGHT IN BENCHMARKING INTEREST ON EXPOR T RECEIVABLES FOR DELAYED REALIZATION FROM AES. 12. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT THE TRIBUNAL HAD CONSIDERED AN IDENTICAL ISSUE FOR AY 2005-06 & AY 2008-09, WHERE UNDER IDENTICAL SET OF FACTS, IT HAS BEEN HELD THAT WHEN, THE ASSESSEE IS NOT CHARGING INTEREST, EITHER FROM THE AE OR FROM THE THIRD PARTIES TOWARDS EXTENDED CREDIT PERI OD, THE LD. AO/TPO WAS INCORRECT IN CHARGING NOTIONAL INTEREST ON RECEIVABLES FROM THE AES FOR EXTENDED CREDIT PERIOD WITHOUT CO NSIDERING THE IMPACT OF PAYABLES TO AES, IN RESPECT OF VARIOUS S ERVICES. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER:- 28. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D MATERIALS ON RECORD. IT IS EVIDENT FROM THE FACTS ON RECORD, NOT ONLY THE ASSESSEE RECEIVES PAYMENT FROM AES TOWARDS SERVICES RENDERED BUT THE AES ALSO RECEIVE PAYMENT FROM THE ASSESSEE ON ACCOUNT OF PRO VISION OF MARKETING SUPPORT SERVICES. IT IS A FACT ON RECORD THAT IN SO ME INSTANCES THERE IS A DELAY IN RECEIVING PAYMENTS FROM THE AES. THE ASSES SEE HAS EXPLAINED SUCH DELAY TO BE ON ACCOUNT OF LATE RECEIPT OF PAYM ENT BY THE AES FROM THE OVERSEAS CUSTOMERS. IT IS ALSO EVIDENT, THE ASS ESSEE HAS ALSO MADE DELAYED PAYMENT TO AES TOWARDS MARKETING SUPPORT SE RVICES RENDERED BY THEM. THEREFORE, THERE IS WNS GLOBAL SERVICES PVT. LTD. 13. WE, FURTHER NOTED THAT IN THIS YEAR, THE LD.CIT (A) HAS RECORDED CATEGORICALLY FINDING THAT IF, CREDIT PERIOD EXTEND ED TO AES FOR RECEIVABLES AND CREDIT PERIOD TAKEN BY THE ASSESSEE FOR MAKING PAYMENTS TO AES FOR PAYABLES IS NETTED OF THEN, TH E CREDIT PERIOD ALLOWED TO AE IS LESS THAN FOUR DAYS AND WHICH IS L ESS THAN THE CREDIT PERIOD ALLOWED TO NON AES. THEREFORE, NO ADJUSTMEN T IS REQUIRED, IN RESPECT OF INTEREST ON RECEIVABLES FROM AES. WE, F URTHER NOTED THAT AS A MATTER OF FACT, THE ASSESSE DOES NOT CHARGED A NY INTEREST, EITHER ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 14 FROM THE AE, OR FROM THE NON AES TOWARDS EXTENDED CREDIT PERIOD. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE L D.CIT(A) WAS RIGHT IN DELETING ADDITIONS MADE BY THE LD. AO TOWA RDS TPA ON ACCOUNT OF NOTIONAL INTEREST ON RECEIVABLES FROM AE S AND HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE LD.CIT(A ) AND REJECT GROUND TAKEN BY THE REVENUE. 14. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO.7,8 & 11 OF REVENUE APPEAL IS DISALLOWANCES OF DEDUCTION U/S 10A OF THE I.T.ACT, 1961, IN RESPECT OF PROFITS EAR NED BY THE ELIGIBLE UNITS IN VIEW OF ERSTWHILE PROVISIONS OF SECTION 10 A(9) OF THE ACT. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE I S ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, MUM BAI K BENCH IN ASSESSEE OWN CASE FOR AY 2005-06 & 2008-09, WHERE I T HAS BEEN HELD THAT OMISSION OF SUB-SECTION (9) OF SECTION 10 A OF THE ACT, BY FINANCE ACT, 2003 WOULD EFFECTIVELY MEAN THAT THE P ROVISION NEVER EXISTED IN THE STATUTE. 15. THE LD. DR, ON THE OTHER HAND, FAIRLY ACCEPTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F TRIBUNAL FOR EARLIER YEARS. 16. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT THE TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE FOR AY 2005-06 & 2008-09 AND AFTER CONSIDERING THE AMENDMENT MADE BY THE FINANCE ACT, 2003, PROVISIONS OF SECTION 10A OF THE ACT, HE LD THAT OMISSION OF SUB-SECTION (9) OF SECTION 10A BY THE FINANCE ACT, 2003 WOULD EFFECTIVELY MEANT THAT THE PROVISION NEVER EXISTED IN THE STATUTE AND ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 15 CONSEQUENTLY, THE ASSESSEE IS ENTITLED FOR DEDUCTIO N TOWARDS PROFIT DERIVED FROM ELIGIBLE UNITS U/S 10A OF THE I.T.ACT, 1961. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER:- 34. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUS ED MATERIALS ON RECORD. IT IS EVIDENT, THE ASSESSING OFFICER REFERR ING TO THE PROVISIONS OF SECTION 10A(9) OF THE ACT HAS DISALLOWED ASSESSEE'S CLAIM OF DEDU CTION UNDER SECTION 10A OF THE ACT. WHEREAS, LEARNED COMMISSIONER (APPEALS ) RELYING UPON CERTAIN JUDICIAL PRECEDENTS AS REFERRE D TO ABOVE, HAS ALLOWED ASSESSEE'S CLAIM OF DEDUCTION BY HOLDING THAT THE O MISSION OF SECTION 10A(9) OF THE ACT WILL OPERATE RETROSPECTIVELY AS IF THE SAID SUB-SECTION NEVER EXISTED IN THE STATUTE. IT IS RELEVANT TO OBS ERVE, WHEN IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN AS SESSEE'S OWN CASE IN ASSESSMENT YEAR 2003-04, THE TRIBUNAL IN THE ORDER PASSED IN ITA NO.4520/MUM./2013, DATED 17TH FEBRUARY 2016, HAS HE LD THAT THE OMISSION OF SUB-SECTION (9) OF SECTION 10A OF THE ACT, WOULD EFFECTIVELY MEAN THAT THE SAID PROVISION NEVER EXISTED IN THE S TATUTE AND ACCORDINGLY ALLOWED ASSESSEE'S CLAIM UNDER SECTION 10A OF THE ACT. FURTHER, WHILE DECIDING ASSESSEE'S APPEAL AGAINST ORDER PASSED UND ER SECTION 263 OF THE ACT FOR ASSESSMENT YEAR 2004-05, THE TRIBUNAL I N ITS ORDER PASSED IN ITA NO.2566/MUM./2009 DATED 10 TH AUGUST 2012, UPHE LD THE DECISION OF THE ASSESSING OFFICER IN ALLOWING ASSESSEE'S CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT BY HOLDING THAT OMISSION OF SUB-SECTION (9) OF SECTION 10A OF THE ACT BY FINANCE ACT , 2003, WOULD EFFECTIVELY MEAN THAT THE PROVISION NEVER EXISTED IN THE STATUTE. FA CTS BEING IDENTICAL, RESPECTFULLY FOLLOWING THE DECISIONS OF THE CO-ORDI NATE BENCH IN ASSESSEE'S OWN CASE, WE UPHOLD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) ON THE ISSUE. GROUNDS RAISED ARE DISMISSED. 17. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH, WE ARE OF THE CONSIDERED VIEW TH AT THE LD.CIT(A) WAS RIGHT IN DELETING ADDITIONS MADE BY THE LD. AO TOWARDS DISALLOWANCES OF DEDUCTIONS CLAIMED U/S 10A OF THE I.T.ACT, 1961, IN RESPECT OF PROFITS EARNED BY THE ELIGIBLE UNITS AND HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE LD.CIT(A) AN D REJECT GROUND TAKEN BY THE REVENUE. 18. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO.9 & 10 OF ASSESSEE APPEAL IS DISALLOWANCES OF D EPRECIATION ON ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 16 INTANGIBLES REPRESENTING ACQUISITION OF BUSINESS CO NTRACTS. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS AL SO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, MUM BAI, K BENCH IN ASSESSEE OWN CASE FOR AY 2005-06 & 2008-09. 19. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD. WE FIND THAT THE TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE FOR AY 2008-09, WHERE UNDER IDENTICAL SET OF FACTS, IT HAS BENCH HELD THAT THE ASSESSEE HAS ACQUIRED CONTRACTUAL RIG HTS, WHICH NO DOUBT IS A VALUABLE COMMERCIAL RIGHT AND HENCE,IT C OMES WITHIN THE MEANING OF INTANGIBLE ASSETS, AS PER SECTION 32(1)( II) R.W. EXPLANATION 3(B) OF THE ACT AND HENCE, THE ASSESSEE IS ENTITLED FOR DEPRECIATION ON SAID INTANGIBLES AT THE RATE APPLIC ABLE TO INTANGIBLE ASSETS. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE A S UNDER:- 40. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUS ED MATERIALS ON RECORD. INSOFAR AS FACTUAL ASPECT OF THE ISSUE IS C ONCERNED, THERE IS NO DISPUTE THAT BY VIRTUE OF ACQUISITION OF M/S. TOWN AND COUNTRY ASSISTANCE LTD., VARIOUS CONTRACTS EXECUTED BY THE SAID CONCER N WITH THIRD PARTY CLIENTS WERE ASSIGNED TO THE ASSESSEE. IT IS ALSO A FACT THAT SUCH ACQUISITION TOOK PLACE BY VIRTUE OF AN AGREEMENT EX ECUTED ON 13 TH JANUARY 2004. IT IS ALSO A FACT ON RECORD THAT IN A SSESSMENT YEAR 2004-05, THE ASSESSEE FOR THE FIRST TIME CLAIMED DEPRECIATIO N BY TREATING THE CAPITALIZED VALUE OF THE AMOUNT PAID TOWARDS ACQUIR ING M/S. TOWN AND COUNTRY ASSISTANCE LTD., AS AN INTANGIBLE ASSET AND CLAIMED DEPRECIATION @ 25%. NOTABLY, THE ASSESSING OFFICER WHILE COMPLET ING ASSESSMENT UNDER SECTION 143(3) OF THE ACT ALSO ALLOWED ASSESSEE'S CLAIM OF DEPRECIATION. HOWEVER, LEARNED COMMISSIONER OF INCO ME TAX REVISED THE ASSESSMENT ORDER UNDER SECTION 263 OF THE ACT. SUBSEQUENTLY, WHILE DECIDING ASSESSEE'S APPEAL AGAINST THE SAID ORDER T HE TRIBUNAL QUASHED THE ORDER PASSED UNDER SECTION 263 OF THE ACT AND RESTORED THE ASSESSMENT ORDER. THUS, IN EFFECT, ASSESSEE'S CLAIM OF DEPRECIATION IN RESPECT OF INTANGIBLE ASSET BECAME FINAL. IN ANY CA SE OF THE MATTER, THERE IS NO DISPUTE THAT BY ACQUIRING M/S. TOWN AND COUNT RY ASSISTANCE LTD. THE ASSESSEE HAS ALSO ACQUIRED CONTRACTUAL RIGHTS WHICH , NO DOUBT, IS A VALUABLE COMMERCIAL RIGHT. THEREFORE, IT COMES WITH IN THE MEANING OF INTANGIBLE ASSET AS PER SECTION 32(1)(II) R/W EXPLANATION 3(B) OF THE ACT. HENCE, DEPRECIATION CLAIMED BY THE ASSESSEE IS ALLO WABLE. THE DECISIONS RELIED UPON BY THE LEARNED SR. COUNSEL FOR THE ASSE SSEE ALSO SUPPORTS ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 17 OUR AFORESAID VIEW. ACCORDINGLY, WE UPHOLD THE DECI SION OF THE LEARNED COMMISSIONER (APPEALS) BY DISMISSING THE GROUNDS RA ISED . 20. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH VIEW TAKEN BY THE TRIBUNAL IN ASSESSEE OWN CASE, WE ARE OF THE CONSID ERED VIEW THAT THE LD.CIT(A) WAS RIGHT IN DELETING ADDITIONS MADE BY THE LD. AO TOWARDS DISALLOWANCES OF DEPRECIATION ON INTANGIBLE S AND HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE LD.CIT(A ) AND REJECT GROUND TAKEN BY THE REVENUE 21. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. CO.NO.44/MUM/2013:- 22. THE ONLY ISSUE THAT CAME UP FOR OUR CONSIDERAT ION FROM GROUND NO.1 OF CROSS OBJECTION FILED BY THE ASSESEE IS ADH OC DISALLOWANCES OF 50% OF THE ADMINISTRATIVE EXPENSES. THE LD. AO H AS DISALLOWED ADMINISTRATIVE EXPENSES OF RS. 5,35,000/-, ON THE G ROUND THAT THE ONUS IS ON THE ASSESEE TO PROVE THE FACT OF EXPENSE S, AS WELL AS TO ESTABLISH THAT THESE EXPENSES WERE INCURRED FOR THE PURPOSE OF THE BUSINESS, AS PROVIDED U/S 37(1) OF THE I.T.ACT, 196 1. SINCE, THE ASSESSEE HAS FAILED TO PROVIDE NECESSARY EVIDENCES, HE HAS DISALLOWED TOTAL EXPENDITURE OF RS. 5,35,000/- U/S 37(1) OF THE I.T.ACT, 1961. THE LD.CIT(A) HAS RESTRICTED DISALLOWANCES MA DE BY THE LD. AO TOWARDS ADMINISTRATIVE AND OTHER EXPENSES TO 50% OF SUCH EXPENSES. 23. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F ITAT, MUMBAI ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 18 K BENCH FOR AY 2005-06 & 2008-09, WHERE THE TRIBU NAL HAS DIRECTED THE AO TO RESTRICT THE DISALLOWANCES TO 10 % OF THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE UNDER THE HEAD OTHER EXPENSES. THE LD. DR, ON THE OTHER HAND, FAIRLY ACC EPTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF TRIBUNAL FOR EARLIER YEARS. 24. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSUE IS COVE RED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, MUMBAI FOR EARLIE R YEARS, WHERE UNDER IDENTICAL SET OF FACTS, THE TRIBUNAL HAS DIRE CTED THE AO TO RESTRICT THE DISALLOWANCES TO 10% OF TOTAL EXPENDIT URE CLAIMED UNDER THE HEAD OTHERS. THE RELEVANT FINDINGS OF THE TRIBU NAL ARE AS UNDER:- 58. HAVING CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD, WE FIND THAT WHILE DECIDING IDENTICAL ISSUE IN ASSE SSMENT YEAR 2004-05, THE TRIBUNAL HAS RESTRICTED THE DISALLOWANCE TO 10% OF THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE. FACTS BEING ID ENTICAL, FOLLOWING THE AFORESAID DECISION OF THE TRIBUNAL IN ITA NO.2318/M UM./ 2009, DATED 4TH MAY 2018, WE RESTRICT THE DISALLOWANCE TO 10% OF TH E TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE UNDER THE HEAD 'OTHERS'. 25. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN ASSESSEE OWN CASE FOR EARLIER YEARS, WE DIRECT THE LD. AO TO RESTRICT DISALLOWANCES TO 10% OF TOTA L EXPENDITURE CLAIMED UNDER THE HEAD OTHER EXPENSES. 26. IN THE RESULT, CROSS OBJECTION FILED BY THE ASS ESEE IS PARTLY ALLOWED. 27. AS A RESULT, APPEAL FILED BY THE REVENUE IS DIS MISSED AND CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO.1451/MUM/2012 & CO.NO.44/MUM/2013 WNS GLOBAL SERVICES PVT.LTD. 19 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19/02/ 2020 SD/- ( C.N .PRASAD ) SD/- ( G. MANJUNATHA ) JUDICIAL MEMBER ACCOUNT ANT MEMBER MUMBAI ; DATED: 19/02/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//