WNS GLOBAL SERVICES PVT LTD., Mumbai V. DCIT-14(3)(1), Mumbai

CO 52/MUM/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3132 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-08-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: J
• Next Hearing Date: 07-06-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 28-10-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; International transaction; Earning of tax free income; Rule 8D; CHAPTER IV
• Section: 32; 271(1)(c); 90; 154; 143(3); 10AA; 14A; 115JB; 144C; 48; 13; 22; 92CA

Judgement Text

Page | 1 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 IN THE INCOME TAX APPELLATE TRIBUNAL “J” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI PAVAN KUMAR GADALE, JM ITA No. 295/Mum/2020 (Assessment Year 2015-16) Cross Objection No. 52/Mum/2020 (Arising in ITA No. 2383/Mum/2019 for A.Y. 10-11) WNS Global Services Private Limited PL 10, Gate no,4 Godrej & Boyce Complex Pirojshanagar, LBS Marg Vikhroli (West) Mumbai-400 079 Vs. The DCIT Circle 14(3)(1), Room No. 455, 4 th Floor, Aayakar Bhavan, M.K. Road, Mumbai-400 020 (Appellant) (Respondent) PAN No. AAACW2598L ITA No. 2383/Mum/2019 (Assessment Year 2010-11) The DCIT Circle 14(3)(1), Room No. 455, 4 th Floor, Aayakar Bhavan, M.K. Road, Mumbai-400 020 Vs. WNS Global Services Private Limited PL 10, Gate no,4 Godrej & Boyce Complex Pirojshanagar, LBS Marg Vikhroli (West) Mumbai-400 079 (Appellant) (Respondent) Assessee by : Shri Porus Kaka & Shri Manish Kanth, ARs’ Revenue by : Shri Tejandra Pal Singh, DR Page | 2 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 Date of hearing: 08.06.2022 Date of pronouncement 23.08.2022 O R D E R PER PRASHANT MAHARISHI, AM: A Y 2010 -11 ITA No. 2383/Mum/2019 Cross Objection No. 52/Mum/2020 1. For A.Y. 2010-11, The Dy. Commissioner of Income Tax- 14(3)(1), Mumbai [ the Ld AO ] filed ITA No. 2383/Mum/2019 against the Appellate order of the learned Commissioner of Income-tax (Appeals)–58, Mumbai [The learned CIT (A)] passed on 31 st January, 2019. Assessee, WNS Global Services Pvt. Ltd. (The Assessee) filed CO No. 52/Mum/2020. 2. The learned Assessing Officer has raised following 12 grounds of appeal: - “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in basing his entire order on his presumption that aggregating the international transactions under one entity level TNMM adopted by the TPO is not correct without adjudicating the ground number 3.1 preferred by the assessee and without understanding the business model of the assessee that the international transaction of provision of ITES to AES (Rs. 1108.86 Crores) and the international transaction of receipt of Page | 3 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 marketing support services from AES (Rs.16.64 Lakhs) are closely linked as ITES provided by the assessee to the AES has been simply marketed by the AES and hence aggregating the transaction under one entity level TNMM is most appropriate under the facts and circumstances of the case? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in holding that the foreign AES have to be taken as the tested party for the paltry marketing support services rendered by the AES to the assessee without understanding that it is closely linked with the huge ITES provided by the assessee to the AES and that the assessee in its TPSR treated itself as the tested party for the provision of ITES.? 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in relying upon the APA signed by the assessee for the period beginning from AY 2014-15 to hold that the AES to be treated as the tested parties for the paltry marketing support services provided by them for the impugned AY 2010-11, violating the principle enshrined in Rule 108 as to contemporaneous nature of facts based TP audits specific to the AY and facts and circumstances during the period.? 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in relying Page | 4 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 upon his predecessor's order for the A.Y. 2009- 10 to hold that the AES have to be taken as tested party in a non speaking manner without analysing the facts of the case independently, without understanding the business model of the assessee, closely linked nature of the international transactions, etc.? 5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in holding that the comparable eClerx services Ltd (eCSL) is KPO company and cannot be used as comparable for the provision of ITES by the assessee which is BPO nature, by just looking at one portion of the annual report of eCSL, whereas the same annual report states clearly that eCSL is "Recognized as the Best of Breed in BPO segment by AT Kearney.?" 6. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in rejecting TCS e-Serve international Itd as a comparable though in the Annual report of the said company it has been clearly mentioned that it is engaged in the business of providing information technology enabled services (ITES)/ Business process outsourcing (BPO) services, which is exactly similar function relating to the huge international transaction of provision of ITES by the assessee to the AES which was benchmarked and that the TPO has rightly chosen it as a comparable.? Page | 5 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 7. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in rejecting TCS e-serve International Ltd as a comparable relying on certain decisions which are distinguishable, as the assessee is into business process management (BPM) as declared by its own website which also involves BPO and without analysing the facts of the case independently."? 8. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in rejecting the comparable eClerx services Ltd and TCS e-serve international Ltd, though the assessee has not raised any objection before the TPO on their inclusion and observing in his order" I find that there is no discussion by Transfer Pricing on any objection of appellant and yet without remanding the case to the TPO which is violation of Rule 46A? 9. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) having rightly held CUP is not most appropriate method for benchmarking the marketing support services provided by the AE WNS capital investment itd, is correct in directing the TPO to treat it as tested party instead of assessee, in spite of the finding in para 13.1 of his predecessor's order for AY 2009-10 relied upon by him that the AE primarily undertakes marketing activities for the assessee which is providing the BPO services for which the Page | 6 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 AE identifies the customers, contracts with these customers and sub-contracts the work to the assessee, clearly denoting the closely linked nature of the transactions of provision of ITES by the assessee and provision of marketing support services by AE, thereby clearly intending that entity level TNMM is most appropriate.? 10. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the deleting deduction u/s. 10A of the Act of Rs. 11,89,92,131/- in respect of the profits earned by the eligible units of the assessee company viz. Pune-2 unit without appreciating the fact that the said units were not eligible for deduction u/s.10A pursuant to the provisions of section 10A(9) of the Act existing on 1.4.2003 as the assessee company underwent change in ownership / shareholding in A.Y.2003-04. 11. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the depreciation of Rs.81,52,282/- on the customer contract rights without appreciating the fact that the customer contract rights do not represent intangible assets as contemplated u/s 32(1) of the Act. 12. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not allowing set off of losses of eligible units against the profits on unit eligible for deduction u/s.10A/10AA, without considering the CBDT's Page | 7 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 Circular No.7 of 2013 and the fact that the AO has rightly set off the losses of eligible units against profits of eligible units, before allowing deduction u/s.10A/10AA of the Act." 13. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. 14. The appellant craves leave to amend, or alter any grounds or add a new ground, which may be necessary." 3. Assessee has filed cross objection raising following six grounds :- “On the facts and in the circumstances of the case, the learned Commissioner of income Tax (Appeals) - 58 [CITA(A)] has 1. erred in not adjudicating on the ground that, the learned TPO has erred in rejecting the benchmarking analysis undertaken by the Respondent to benchmark its international transactions without giving any reason. 2. erred in not adjudicating on the ground that, the learned TPO has erred in rejecting the following comparable companies, identified by the Respondent in its transfer pricing documentation for benchmarking the international transaction relating to provision of IT enabled services where the Respondent is selected as the tested party, Page | 8 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 without giving any reason for rejection of the companies a. R Systems International Limited. 3. erred in not adjudicating on the ground that, the learned TPO has erred in considering the following companies which are functionally different as comparable to the Respondent, for benchmarking the international transaction relating to provision of IT enabled services where the Respondent is selected as the tested party a. Infosys BPO Limited b. BNR Udyog Limited c. HOV Services Limited 4. erred in not adjudicating on the ground that, the learned TPO has erred in considering the following companies having significant related party transactions as comparable to the Respondent, for benchmarking the international transaction relating to provision of IT enabled services where the Respondent is selected as the tested party d. BNR Udyog Limited e. HOV Services Limited 5. erred in rejecting the ground that, the learned TPO erred in considering "TCS e-serve Limited as comparable for benchmarking the international transaction relating to provision of IT enabled services where the Respondent is selected as the tested party without appreciating the fact that the Page | 9 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 company is functionally different, earns super normal profits and has an exceptional year of operations for the year under consideration. 6. erred in not adjudicating on the ground that, the learned TPO erred in computing operating margins of the following companies considered as comparable by the learned TPO: a. BNR Udyog Limited b. In House Productions Limited c. Informed Technologies Limited. The Respondent craves to consider each of the above grounds of cross-objections without prejudice to each other and craves leave to add, alter, delete or modify all or any of the above grounds of cross objections.” 4. Briefly, WNS group is engaged in the business of providing a variety of information technology enabled services, business process outsourcing services including back office administration services and call centre services to its customers. It serves several industrial segments including travel, insurance, financial services, healthcare, professional services, manufacturing, distribution and retail. The assessee is a company part of that group engaged in the business of providing information technology enabled services and BPO services. 5. Assessee filed its return of income on 14 th October, 2010 declaring net loss of ₹11,20,31,557/- . Page | 10 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 6. Assessee is engaged in into four different types of international transactions such as provision of IT enable services and receipt of IT enable services and reimbursement of expenses as well as recovery of expenses described as Under:- Sr No International transaction Associated enterprises Amount of international transactions INR 1 provision of IT enabled services various associated enterprises in North America and United Kingdom 1,108,85,87,198/– 2 receipt of IT enabled services WNS customer solutions North America and Corporation 16,64,214/– 3 reimbursement of expenses various associated enterprises 38,07,46,497 4 recovery of expenses various associated enterprises 4,72,71,723/– 7. The assessee submits that it provides IT enabled services to WNS North America incorporation, WNS global services United Kingdom Ltd, WNS global services Netherlands cooperative and WNS capital investment Ltd which is a separate set of business transaction [ first set of business transactions] 8. In the second set of business transaction assessee provides IT enabled services to WNS global services UK Ltd (town and country assistance and workflow business unit) and WNS customer solutions North America incorporation (marketics unit) Page | 11 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 9. With respect to the first set of transactions, associated enterprise undertake marketing activities to market the services provided by the group, identify customers in that jurisdiction, contract with such customers and subcontract the entire servicing of the contract to assessee. Associated enterprise enters into contracts with the clients and passes on the work to the assessee. These associated enterprises carry out the function of providing marketing and support services to the assessee. They carry out limited functions. All other risks and rewards under that contract are with the assessee. Assessee is responsible to undertake all duties, obligations, liabilities, and risk under such customer contracts. Therefore, in such contracts, assessee bears all the risks and rewards associated with these transactions and the associated enterprises assumes limited risk. The remuneration of associated enterprise is 10% markup on cost for the costs incurred by them in connection with the marketing activities with respect to all other entities except WNS capital investment Ltd that is compensated at the rate of 15% of revenue from third parties. Thus, assessee claimed that as associated enterprises are least complex entities in the transaction they are taken as tested parties. Margins earned by the foreign associated enterprise are benchmarked by using foreign comparable adopting the transactional net margin method as being the most appropriate method considering operating profit/operating cost of the AE as the profit level indicator. PlI of tested parties are higher, assessee contends these transactions are at arm’s length. 10. With respect to the another set of transactions for provision of IT enabled services assessee states that Page | 12 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 i. WNS UK has another unit, T&CA BU, which provides services to the clients in the UK market, in connection with rendering of administration of motor insurance claims and related services and it outsources a portion of such work to assessee . With respect to this international transaction, the Appellant operates as a captive service provider rendering services as may be requested for by WNS UK-T&CA BU for which assessee invoices it on a full time equivalent (FTE) basis. ii. Marketics-India division of assessee has also entered into an agreement with WNS Customer Solutions North America Under which that company provides marketing services to Marketics - India division. The compensation model between Marketics - India division and that AE is such that Marketics - India division pays a commission to AE at the rate of 18% of the contract value, when the contract is directly entered into by Marketics-India division with the client. However, in the cases, where AE enters into contract with the client and passes on the same to Marketics-India division, the pricing is based on the normal rates billed by the Marketics - India division to client minus a discount of 18%, reason being that in respect of sales to AE , Marketics - India division does not have to incur any marketing cost separately. These transactions are benchmarked by the assessee by considering assessee as the tested party. Assessee adopted the transactional net margin method using comparable providing IT enabled services. Assessee submitted that this international transaction is also at arm’s-length. Page | 13 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 11. With respect to the reimbursement and recovery of expenses they were at cost., hence same were not benchmarked. 12. The international transactions of the assessee were referred to the Addl. Commissioner of Income Tax, transfer pricing (11)(6), Mumbai (the learned TPO) under Section 92CA(1) for determination of arm’s length price. 13. The learned transfer pricing officer disregarded the benchmarking of the appellant , he held that with the first set of transaction stating that foreign AE cannot be taken as a tested party as Revenue has consistently over the past years having not accepted the stand of the assessee of benchmarking its international transactions using foreign Associated Enterprises as a tested parties. SO he aggregated all the transactions entered into by the appellant and benchmarked the entity level margin of the appellant with that of the third- party comparables engaged in provision of IT enabled services. He applied the Transactional Net Margin Method considering the assessee as the tested party for determination of its Arms Length Price of international transaction. The Transfer Pricing Officer was further noted that for A.Y. 2008-09, the Dispute Resolution Panel has also accepted the assessee as tested party. Accordingly, the learned Transfer Pricing Officer selected 15 comparables whose arithmetic mean of the margin (PLI) OP/OC was determined at 24.26%, whereas, the margin of the assessee was determined at 17.07.%. Accordingly, the adjustment was proposed of ₹78,60,61,239/- by order under Section 92CA(3) of the Act, dated 27 th January, 2014. 14. The learned Assessing Officer incorporated the above adjustment in the assessment order. The learned Assessing Officer further noted that Page | 14 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 i. assessee has claimed deduction under Section 10A of the Act in respect of units prior to A.Y. 2002-03 and therefore, assessee claimed deduction with respect to Pune Unit No.2 of ₹11,89,92,131/-, the same was disallowed for the reason that during the F.Y. 2002-03 WNS Mauritius Limited acquired the entire share capital of the assessee company from British Airways and therefore, according to the provision of Sections 10A(9) of the Act, the claim of the assessee was denied. ii. assessee has claimed deduction on intangible assets in the rate of 25% of `81,52,282/–. The claim of the depreciation because of the reason that assessee acquired the business of one company from its UK associated as per agreement dated 13/01/2004 . The business acquired was consisting of various contracts of the company. The amount paid by the assessee was capitalized in the books of accounts as intangible assets. The learned Assessing Officer was of the view that the rights acquired by the company are not intangible asset on which depreciation can be allowed. This was not the stand of the Revenue from earlier also. Therefore, depreciation of `81,52,282/– was disallowed. iii. The claim under Section 10A and 10AA of the Act was also examined. The learned Assessing Officer found that deduction is allowable to the assessee out of the total income computed after giving effect to the provisions of Chapter IV and chapter VI of the Act and therefore, the claim of the assessee under that Section of set off of carried forward losses and unabsorbed depreciation is rejected. Page | 15 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 iv. assessee has 11 units which are eligible for deduction under Section 10A of the Act. Some of them incurred the losses and therefore, he considered set off of losses of eligible units against profits of eligible units before allowing deduction under Section 10A of the Act. Accordingly, he considered set off of losses of eligible units against profits of eligible units before allowing deduction under Section 10A of the Act. Accordingly, he computed the deduction under Section 10A of the Act at `182,46,66,705/– allowable to the assessee. 15. Accordingly, the assessment order under Section 143(3) of the Act read with Section 144C (3) of the Act was passed on 27 th May, 2014, Computing total income of the assessee was computed at `97,43,04,279/–. Wherein; i. The depreciation on intangible of `81,52,282/– was disallowed. ii. Transfer Pricing Officer under Section 92CA(3) of the Act of `78,60,61,239/–was made and iii. further the deduction under Section 10A of the Act was allowed of `182,46,66,706/–. 16. Assessee aggrieved with the order of the learned Assessing Officer preferred the appeal before the learned CIT(A). The learned CIT(A) i. with respect to the first set of international transaction of provision of ITeS services, following his earlier years decision directed the learned Assessing Officer to consider the foreign Associated Enterprises as tested party. Page | 16 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 ii. With respect to the second set of services of provision of ITeS services directed the learned Assessing Officer to exclude e–clerk services limited, TCS international limited but upheld the action of inclusion of TCS e–serve limited. As after the above all rejection of comparables, the total transfer pricing additions were deleted. iii. With respect to the deduction of `11,89,92,131/– in respect of profits of the Pune unit–2, disallowed by the learned Assessing Officer, following Jurisdictional precedents, he held that provision of Section 10A(9) of the Act omitted with effect from 1 st July, 2004, he ruled in favour of the assessee. iv. With respect to setting off of losses and unabsorbed depreciation of the eligible unit, he agreed with the contention of the assessee that this issue is squarely covered in favour of the assessee in view of the decision of Hon'ble Supreme Court in case of CIT vs. Yokogawa India dated 16 th December, 2016 and agreed that the stage of deduction would be while computing gross total income of eligible undertaking under Chapter 4 of the Act and not at the stage of computation of total income under Chapter 6 of the Act. v. With respect to the depreciation of intangible assets, he allowed the claim of the assessee following the decision in earlier years. 17. Therefore, the assessee and the learned Assessing Officer both are aggrieved. The learned Assessing Officer preferred the appeal and assessee has filed cross objection. Page | 17 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 18. At the outset, both the parties agreed that the various issues in the Department appeal are already decided in favour of the assessee by the various orders of coordinate benches in assesse’s own case in earlier and subsequent years. Therefore, if the grounds in Department’s appeal are decided in favour of the assessee, ld AR stated that cross objection filed by the assessee becomes academic. The learned Authorised Representative has submitted a chart of appeal in Departments appeal and various orders of the co–ordinate Benches in assessee’s own case. He relied upon the same. The learned Departmental Representative also agreed with the same. 19. We have carefully considered the rival contentions, perused the orders of the lower authorities, considered 23 page note of ld AR . Assessee has also filed a factual paper book and case law paper book. Those are also perused. 20. We first adjudicate the appeal of the learned AO. Ground no. 1 to 9 of the appeal, are related to Transfer Pricing adjustment in case of assessee. We find that with respect to the first set of transaction of provision of ITeS services where the assessee has adopted foreign AE as a tested party, same has been accepted by the coordinate bench in case of the assessee for assessment year 2004 – 05 to assessment year 2009 – 10. In those orders the coordinate bench also held that both the set of transactions of provision of ITeS services should not be aggregated but should be benchmarked separately. The issue is squarely covered in favour of the assessee by the decision of the coordinate benches in case of assessee itself for [1] assessment year 2004 – 05 in ITA number 1886/ M/2009, [2] for assessment year 2005 – 06 in ITA number 631 – 2011, miscellaneous application 261 – 2019, [3] for assessment year Page | 18 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 2007 – 08 in ITA number 1451 /2012, [4] for assessment year 2008 – 09 in ITA number 7378/ 2012, [5] for assessment year 2009 – 10 in ITA number 1410/2017, [6] in assessment year 2011 – 12 and 2012 – 13 in ITA number 2257/2017 and 1955/2016 has accepted the identical claim of the assessee. 21. Further, assessee has entered into advance transfer pricing agreement for FYs 2013–14 to 2017–18 where the Transfer Pricing approach of the assessee accepting the foreign AE as a tested party is also accepted. 22. With respect to the second set of transactions where the learned CIT – A has directed the learned transfer pricing officer to exclude e–clerx services limited and TCS e–serve international Limited. We find that e–clerx services limited has been excluded by the co–ordinate bench in assessee’s own case for A.Y. 2008–09. Further, for A.Y. 2009–10, the learned CIT(A) rejected and excluded the above company which is accepted by the learned Assessing Officer by not agitating before the Tribunal further, therefore, we do not find any reason to not to follow the order of the co–ordinate Bench in assessee’s own case for earlier years on this count. Independently, With respect to the exclusion of TCS e–clerk serve international limited, we find that the TCS e–serve international is part of Tata group, enjoys the goodwill and brand value of the group and company is paying in expenses towards Tata equity. In view of this, we do not find any infirmity in the order of the learned CIT(A) in excluding TCS e– serve international limited from the comparability analysis. 23. The learned Departmental Representative also could not show any reason to deviate from the same. Page | 19 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 24. In view of these overwhelming orders of the co–ordinate Bench in assessee’s own case for earlier years, we do not find any infirmity in the order of the learned CIT(A) in i. directing the assessee to adopt the foreign associated enterprise as tested party with respect to 1 st set of transactions ii. not to aggregate the first set of transaction and second set of transactions for benchmarking iii. exclusion of e–clerk services limited and TCS e–serve international Limited for benchmarking second set of transactions 25. In view of this, we confirm the order of the learned CIT(A) with respect to transfer pricing issues. Accordingly, ground no. 1 to 9 of the appeal of the learned Assessing Officer are dismissed. 26. Ground no. 10 of the appeal is with respect to deleting the disallowance of deduction under Section 10A of the Act of `11,89,92,131/– of Pune Unit no.2. The fact shows that till FY 1996–97, assessee was wholly owned subsidiary of British Airways PLC. In May 2002, WNS Mauritius Limited acquired the entire share capital of assessee from British Airways. Thus, there was change in the entire shareholding of the assessee. At the time of change in shareholding, there were three unit of the assessee which were eligible for deduction under Section 10A of the Act. However, only in one Unit - Pune Unit no.2, which was established in 2002–03 there was a profit of `11,89,92,131/– on which deduction under Section 10A of the Act was claimed for A.Y. 2010–11. The learned Assessing Officer invoked the provision of Section 10A(9) of the Act and held that due to change in the shareholding the assessee is not entitled to the Page | 20 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 deduction. The learned CIT(A) allowed the same following his own order for earlier years. We find that the identical issue arose in case of the assessee for A.Y. 2009–10, wherein the co–ordinate bench allowed the claim of the assessee vide order dated 18 th June, 2021. Further, for A.Y. 2011–12 and 2012–13, the co–ordinate Bench allowed the claim of the assessee vide order dated 19 th March, 2020. In earlier years also, the claim of the assessee was allowed by the ITAT on identical facts. There is no change in the facts and circumstances of the case and therefore, respectfully following the orders of the co–ordinate bench on this issue, since A.Y. 2003–04 till A.Y. 2012–13. We also confirm the order of the learned CIT(A) in deleting the disallowance of deduction under Section 10A of the Act with respect to Pune Unit no.2 amounting to `11,89,92,131/–. Accordingly, ground no.10 of the appeal is dismissed. 27. Ground no. 11 of the appeal is with respect to the disallowance of deprecation of intangible assets of contracts. The fact shows that assessee has acquired the business of one company vide agreement dated 13 th January, 2004, wherein the assets acquired consists of various contract with third party clients. The assessee claims that these contracts are long term contracts and are intangible assets eligible for depreciation at the rate of 25% and accordingly, the claimed depreciation of `81,52,282/–. This issue also arose in the case of assessee in all the years from A.Y. 2005–06 to 2012–13. The co–ordinate bench for A.Y. 2005–06 to 2008–09 held that assessee is entitled to depreciation on these contracts as ‘intangible assets’. Therefore, respectfully following the same, we direct the learned Assessing Officer to delete disallowance of depreciation. Accordingly, ground no. 11 is dismissed. Page | 21 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 28. Ground no. 12 is with respect to computing the deduction under Section 10A and 10AA of the Act without setting off of losses of eligible units against the profits of eligible units. The brief facts of the case show that assessee has various units, which are eligible for deduction under Section 10A of the Act. Assessee computed the deduction by considering only the profits of eligible units and ignored the losses of eligible units. Thus, wherever there is a profit in eligible unit, assessee computed deduction to that extent ignoring the losses of eligible units. The learned Assessing Officer held that deduction under Section 10A of the Act should be computed after setting of the losses incurred by the loss making eligible units against the profit of eligible units. It is submitted that deduction u/s 10 A of the act is required to be computed by taking into account the profits of the each undertaking on a standalone basis and not by taking into account the profits of the entire business of the assessee. Therefore the deduction u/s 10 A of the act was to be computed qua unit and not qua business of the assessee, therefore, it is claimed that where there is a profit in an eligible undertaking the deduction is allowable on the whole of such profit irrespective of the fact that in another eligible unit assessee has incurred the losses. Thus for the purpose of claiming deduction u/s 10 A of the act only profits of eligible undertaking is required to be allowed as a deduction without setting of of the losses of another eligible undertaking. The assessee has also stated that this issue is squarely covered in favour of the assessee by the coordinate bench decision for assessment year 2004 – 05, 2005 – 06 and 2008 – 09 as well as for assessment year 2011 – 12 and 2012 – 13. Thus, the issue is decided in favour of the assessee by the coordinate benches in assessee’s own case. Further honourable Supreme Court in Commissioner of Income-tax vs YokogawaIndiaLtd.* Page | 22 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 [2017] 77 taxmann.com 41 (SC) held that From a reading of the relevant provisions of section 10A it is more than clear that the deductions contemplated therein is qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the assessee. This is also more than clear from the contemporaneous Circular No. 794, dated 9-8-2000. In view of this we uphold the action of the learned CIT – A in directing the learned assessing officer to compute the deduction u/s 10 A of the act by including only the profits of eligible units ignoring the losses of another eligible units. Accordingly ground number 12 of the appeal is dismissed. 29. In the result, appeal of the learned AO is dismissed. 30. In view of our decision in appeal of the learned AO, cross objection filed by the assessee have become infructuous and hence dismissed. 31. Accordingly, appeal of the learned AO as well as cross objections of the assessee for assessment year 2010 – 11 are dismissed. ITA No. 295/Mum/2020 (Assessment Year 2015-16) 32. Assessee filed ITA number 295/Mumbai/2020 assessment year 2015 – 16 against the order passed by the Deputy Commissioner of income tax – 14 (3) (1), Mumbai (the learned AO) u/s 143 (3) read with Section 144C (13) of The Income Tax Act, 1961 in pursuance of the directions issued by The Page | 23 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 Dispute Resolution Panel – 2 (the learned DRP) raising following grounds of appeal. “Based on the facts and in the circumstances of the case and in law, the Appellant respectfully craves leave to prefer an appeal against the order passed by the Deputy Commissioner of Income-tax, Circle -14(3)(1), Mumbai learned AO'), under Section 143(3) r.w.s 144C(13) of the Income-tax Act, 1961 (Act') ('Assessment order), in pursuance of the directions issued by Dispute Resolution Panel - 2 ("Hon'ble DRP'), Mumbai, on the following grounds: On the facts and circumstances of the case and in law, the Learned AO/TPO, based on the directions of the Hon'ble DRP has: General Ground 1. erred in determining the total taxable income of the Appellant for AY 2015-16 at Rs. 4,32,38,13,634 instead of the income offered by the Appellant for the subject AY in its income-tax return of Rs. 3,78,55,73,760. 2. erred in passing a draft assessment order in lieu of the final assessment order without considering that the Appellant is an Indian company in whose case the transfer pricing order passed under Section 92CA(3) of the Act for the subject AY has not resulted in any variation to the income or loss returned on account of international transactions entered into by Page | 24 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 the Appellant during the subject AY and accordingly, the draft assessment order is void ab initio and the final assessment order dated 23 October 2019 (received on 13 November 2019) passed in the case of the Appellant is time barred; Transfer Pricing Grounds 3. erred in not providing adequate opportunity of being heard to the Assessee prior to incorporating a disallowance of depreciation of Rs 18,13,34,581 in his order passed for the year under consideration. Therefore, the learned Hon'ble DRP/ learned TPO has violated the principles of natural justice and the impugned order passed by the learned Hon'ble DRP/ learned TPO should be quashed. 4. erred in incorporating a disallowance of depreciation in his order passed for the year under consideration based on an adjustment proposed to the value of business and commercial rights purchased by the Assessee from its associated enterprise in AY 2011- 12, which has been capitalized in the books of accounts of the Assessee. 5. erred in proposing a disallowance of depreciation in his order passed for the year under consideration which is a consequence of the adjustment proposed by the learned TPO's predecessor to the valuation of business and commercial rights purchased by the Assessee from its associated enterprise in AY 2011-12 without appreciating that Page | 25 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 disallowance of depreciation, if any, does not fall within Chapter X of the Act. 6. erred in disallowing depreciation amounting to Rs 33,71,68,243 on intangible assets acquired from WNS Capital Investments Private Limited, Mauritius by the Appellant contending that the business rights acquired by the Appellant do not fall under the definition of intangible assets under Section 32(1) of the Act. 7. (a) The learned AO/Hon'ble DRP erred in making a disallowance of Rs 1,97,37,049 under Section 14A of the Act read with Rule 8D of the Income tax Rules, 1962. (b) Without prejudice to the above, the learned AO/Hon'ble DRP erred in invoking the provisions of Section 14A(2) read with Rule 8D of the Rules, without appreciating the fact that the Appellant has suo moto disallowed Rs 11,70,329 under Section 14A of the Act. (c) Without prejudice to all the above grounds, the learned AO/Hon'ble DRP erred in imputing disallowance under Rule 8D(2)(ii) of the Rules without appreciating the fact that the borrowed funds have been used for specific purposes for which they have been borrowed and not been utilized for investment Mutual Funds. (d) Without prejudice to all the above grounds, the learned AO/Hon'ble DRP erred in making disallowance under Rule 8D(2)(ii) of the Rules without appreciating Page | 26 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 the fact that the appellant had surplus interest free funds available which was more than the amount of investment in Mutual Funds. (e) Without prejudice to all the above grounds, the learned AO/Hon'ble DRP has erred in adding the amount of alleged disallowance under Section 14A read with Rule 8D of the Rules in the computation of 'Book Profits' under Section 115JB of the Act. 8. The learned AO erred in not allowing credit under Section 115JAA of the Act to the tune of Rs. 38,72,88,979 (as per the return of income) against the assessed total income for the assessment year under consideration as per the provisions of the Act. 9. The learned AO erred in not allowing tax relief under Section 90 of the Act to the tune of Rs. 13,59,530 (as per the return of income) against the assessed total income for the assessment year under consideration as per the provisions of the Act. 10. The learned AO has erred in initiating penalty proceedings under Section 271(1)(c) of the Act. Each of the above ground of appeal is without prejudice to and independent of one another. The Appellant craves leave to add, alter, amend or delete the above ground of appeal at or before the time of hearing of the appeal, so as to enable the Hon'ble Income tax Appellate Tribunal to decide this appeal according to law.” Page | 27 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 33. Assessee has filed its return of income on 30/11/2015 declaring total income of ₹ 378,55,73,760/– [wrongly mentioned in Draft and Final assessment orders as well as in DRP directions Rs 378,55,73,76,055/-] . The draft assessment order was passed on 26 December 2018 at Rs. 432,57,48,208/- . Assessee filed an objection before the learned dispute resolution panel, the relevant directions were issued on 9/9/2019, pursuant to that final assessment order was passed determining total income of the assessee at ₹ 432, 38,13,634/–. Assessee is aggrieved with that order and has preferred this appeal. 34. Ground number 1 is general in nature and ground number 2 is not pressed. Ground number 8 and 9 of the appeal are addressed by the AO u/s 154 of the act, ground number 10 against the initiation of penalty proceedings is premature, and accordingly, those grounds are dismissed. 35. Ground number 3 – 5 of the appeal are against the disallowance of depreciation of ₹ 181,334,581/–. The fact shows that during assessment year 2011 – 12 WNS capital investment private limited entered into a Master services agreement with Aviva global services private limited on 11 July 2008 provides TPO services. The WNS capital investment private limited was required to provide services to those entities across the word for a period of 8 years and 4 months. However during that period assessee purchased all rights and obligations in respect of the above Master services agreement from WNS capital investment private limited for a consideration of US dollar 110 million as per agreement dated 24 th of March 2011. This international transaction was analyzed in assessment year 2011 – 12 and after considering the facts of the case the learned transfer pricing officer made an Page | 28 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 adjustment of ₹ 1,719,320,475/–. In subsequent years the depreciation claimed on those assets was also disallowed partly to that extent and accordingly this year also an adjustment of ₹ 183,034,581 was made by order u/s 92CA (3) of the act dated 10/Del/2018. On objections before the learned DRP, the adjustment was upheld. Therefore, assessee is in appeal before us. 36. The learned senior advocate, Mr Porus Kaka, submitted that original adjustment was made in assessment year 2011 – 12 and impugned assessment in this appeal is assessment year 2015 – 16, therefore, this issue arose in assessee’s own case for assessment year 2011-12 and 2012 – 13 wherein this issue is decided by deleting the consequential disallowance of depreciation in assessment year 2012 – 13 as well as deleting the original adjustment to the value of contract in assessment year 2011 – 12. Therefore according to him, this issue is covered in favour of the assessee. 37. The learned departmental representative agreed but supported the order of the lower authorities. 38. We have carefully considered the rival contentions and perused the orders of the lower authorities as well as the orders of the coordinate bench in assessee’s own case for assessment year 2011 – 12 wherein the adjustment to the value of the transaction was made of the contract pursuant to which the disallowance of depreciation resulted in subsequent years. In that year in ITA number 1955/M/2016 dated 19/3/2020 wherein per paragraph number 27 the coordinate bench deleted the adjustment made to the cost of Master service agreement. Therefore, when the original addition itself is deleted, the consequential disallowance of depreciation in Page | 29 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 subsequent year cannot be sustained. On identical facts, coordinate bench for assessment year 2012 – 13 per paragraph number 46 deleted the disallowance of depreciation, therefore, respectfully following the decision of coordinate bench in assessee’s own case, we direct the AO to delete the disallowance of depreciation on the acquisition of Master service agreement from foreign AE. Accordingly ground number 3 – 5 of the appeal is allowed. 39. Ground number 6 is with respect to the disallowance of depreciation on intangible asset representing acquisition of business contracts of ₹ 518,502,824/–. The briefly stated the facts show that the business and commercial rights were quite by assessee from WNS capital investment Ltd in respect of Master service agreement entered into between the seller company and Aviva global services private limited. On acquisition of the business assessee acquired commercial right from its associated enterprise which included the right to receive revenue coupled with all the obligation and liability is with respect to the said contract. The assessee classified the same rights acquired by it as an intangible asset as per explanation 3 (b) to Section 32 (1) of the act. Therefore the assessee claimed depreciation at the rate of 25% on the written down value of the same amounting to ₹ 518,502,824/–. The learned AO did not allow the depreciation as according to him the rights acquired by the assessee may be a commercial right but are different then the commercial right and intangible asset which are entitled to the depreciation. The learned dispute resolution panel also upheld the findings of the AO. The learned transfer pricing officer while passing the order u/s 90 2CA (3) of the act disallowed the depreciation of ₹ 181,334,581/– as a part of the transfer pricing adjustment and Page | 30 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 the balance depreciation of ₹ 337,168,243/– is disallowed by the AO while passing the assessment order. Therefore assessee is in appeal on this issue. 40. The learned authorised representative submitted that that the rights acquired by the assessee are customer contracts, where interest to receive the revenue out of the service for a long- term is acquired. Therefore, same qualifies as intangible asset. It was stated that this issue is covered in favour of the assessee by the coordinate bench in assessee’s own case for assessment year 2011 – 12 and assessment year 2012 – 13 and there is no material change in the facts and circumstances of the case. The learned authorised representative further stated that this issue is covered by all the decisions in case of the assessee by the coordinate bench for respective assessment years. 41. The learned departmental representative vehemently supported the order of the lower authorities. 42. We have carefully considered the rival contention and perused the orders of the lower authorities as well as the orders of the coordinate bench in case of the assessee for earlier years. We find that the issue of disallowance of depreciation on the assets acquired out of the Master service agreement has already been dealt with by the coordinate bench in assessee’s own case for assessment year 2011 – 12 and 2012 – 13 as per paragraph number 48 of that order wherein the coordinate bench followed the orders in the case of the assessee for earlier years, we do not have any reason to deviate from the same as there is no change in material facts and circumstances of the case, therefore respectfully following the decision of the coordinate bench we direct the learned assessing officer to grant Page | 31 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 depreciation to the assessee on intangible asset. Further when the transfer pricing addition made in the case of the assessee for assessment year 2011 – 12 is already deleted with respect to the transfer price of the amount of acquisition of the share and when in subsequent years it is held to be an intangible asset, there is no reason to uphold the action of the learned AO. Accordingly ground number 6 of the appeal is allowed. 43. Ground number 7 is with respect to the disallowance u/s 14 A of the act of Rs. 1,97,37,049/– made by the learned AO by invoking the provisions of rule 8D of the income tax rules 1962. The fact shows that assessee has earned income of ₹ 145,541,748 from mutual funds which is exempt u/s 10 (35) of the income tax act 1961. The assessee disallowed a sum of ₹ 1,170,329/– stating that these are the expenses incurred by the assessee for earning the exempt income. For this purpose the assessee submitted a certificate dated 10 th number 2015 of chartered accountant wherein the salary expenses of the Treasury Department for the activity of investment in mutual fund was classified at ₹ 561,000/–. The infrastructure cost of ₹ 139,042 was also included as well as the communication and other administrative expenses of the cost estimated at Rs 4,70,288 were determined and the total disallowance was worked out at 11,70,329/–. The learned assessing officer dealt with the same as per paragraph number 6 of the draft assessment order wherein it is stated that the disallowance u/s 14 A has to be made pursuant to the specific formula devised as per rule 8D of the IT rules 1962. Therefore he is satisfied that the working of the disallowance made by the assessee is not in accordance with the above rule, he issued notices u/s 142 (1) of the act stating to explain the reasons and supporting documentary evidences as to why the disallowance of Page | 32 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 expenditure u/s 14 A should not be made in accordance with the rule 8D. The assessee submitted on 19/12/2018 wherein it is stated that it has SUO motto disallowed a sum of ₹ 1,170,329 incurred in connection with the earning of the exempt income. Assessee also raised several other objections to the same. The learned assessing officer considered the objection of the assessee and made the disallowance Under rule 8D of Rs 2,09,07,378/– as assessee has offered the disallowance of ₹ 1,170,329/– the net disallowance of Rs. 1, 97,37,049/– was made. The learned dispute resolution panel also confirmed the same. 44. Before us, the learned authorised representative contested that there is no recording of the satisfaction by the learned assessing officer about the correctness of the claim of the assessee. He submitted that the learned AO has merely dealt with the legal objection but did not say anything on the amount of expenditure incurred by the assessee which were disallowed u/s 14 A of the act. He referred to page number 71 of the paper book wherein a certificate of the chartered accountant certifying the amount of expenditure incurred by the assessee for earning of the exempt income was shown. He submitted that this issue is squarely covered in favour of the assessee for assessment year 2012 – 13. 45. The learned departmental representative vehemently supported the order of the learned assessing officer. 46. We have carefully considered the rival contention and perused the orders of the lower authorities as well as the order of the coordinate bench in assessee’s own case for assessment year 2012 – 13. In this case we find that the assessee has earned exempt income from mutual funds and offered the disallowance Page | 33 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 of ₹ 1,170,329/-. The learned assessing officer without recording any satisfaction that why the explanation offered by the assessee is not correct, invoke the provisions of rule 8D for working out disallowance u/s 14 A of the act. We find that according to the provisions of Section 14 A (2) the learned assessing officer before invoking application of rule 8D is required to satisfy about the correctness of the claim of the assessee in respect of expenditure incurred in relation to the exempt income having regard to the accounts of the assessee. We find that in the present case the learned assessing officer did not consider at all that why the disallowance offered by the assessee is incorrect. In view of absence of any satisfaction made by the learned assessing officer about the correctness of the claim of the assessee, he is not empowered to invoke the provisions of rule 8D of income tax rules. Therefore, the disallowance made by the learned assessing officer deserves to be deleted. Our view is also guided by the order of the honourable Supreme Court in case of Maxopp investment Ltd 91 taxmann.com 154. Therefore, any addition made by the learned assessing officer to normal computation of the total income is deleted. Similarly the disallowance of such expenses as computed as per the provisions of Section 14 A with rule 8D cannot also be imputed while working out the book profit of the assessee u/s 115 JB of the act for the simple reason that there is no provision u/s 115 JB of the act to make any such adjustment. Further it is not denied before us that the assessee has already made an adjustment with respect to the provision of that Section where there is profit is required to be increased by the expenditure related to exempt income. Accordingly the addition to the book profit is also required to be deleted. This issue is also similar to the issue involved in assessee’s own case for assessment year 2012 – 13 wherein identical view is Page | 34 ITA Nos. 295/M/2020 & CO No.52/M/2020, 2383/M/2019 WNS Global Services P. Ltd; A.Ys. 15-16, 10-11 taken. Therefore respectfully following the decision of the coordinate bench in assessee’s own case for the earlier year i.e. assessment year 2012 – 13 number 6 of the appeal of the assessee is allowed. 47. In the result appeal filed by the assessee is partly allowed. Order pronounced in the open court on 23.08.2022. Sd/- Sd/- (PAVAN KUMAR GADALE) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 23.08.2022 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai