AT & T Communication Services India Pvt. Ltd., Gurgaon V. ACIT, New Delhi

ITA 1015/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0908 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I2
• Next Hearing Date: 06-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 19-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY BARA
• Keywords: Transfer pricing; Business expenditure; International transaction; Period of limitation; Initiation of penalty proceedings; Wholly owned subsidiary; Non-deduction of tax; Corroborative evidences; Competent authority; Notional interest; Commercial expediency; TDS
• Section: 43B; 244A; 234B; 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 1015/DEL/2015 ASSESSMENT YEAR: 2008-09 AT&T COMMUNICATION SERVICES INDIA PVT. LTD., VATIKA TRIANGLE, 3 RD FLOOR, SUSHANT LOK-1, BLOCK-A, GURGAON-122002 (PAN: AACCA8033E) VS ACIT, CIRCLE-3(2), NEW DELHI. APPELLANT RESPONDENT ITA NO. 1779/DEL/2015 ASSESSMENT YEAR: 2008-09 ACIT, CIRCLE-3(2), ROOM NO. 380B, DC.R. BUILDING, I.P. ESTATE, NEW DELHI. VS AT&T COMMUNICATION SERVICES INDIA PVT. LTD., MOHAN DEV HOUSE, 13, TOLSTOY MARG, NEW DELHI-110001 (PAN: AACCA8033E) APPELLANT RESPONDENT ASSESSEE BY : MS POONAM AHUJA, CA MS CHINU BHASIN, CA DEPARTMENT BY: SHRI SANJAY BARA, CIT DR DATE OF HEARING : 17. 01.2019 DATE OF PRONOUNCEMENT : 26.03.201 9 ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 2 O R D E R PER SUDHANSHU SRIVASTAVA, JM: ITA NO.1015/DEL/2015 IS THE ASSESSEES APPEAL PREF ERRED AGAINST THE FINAL ASSESSMENT ORDER PASSED SUBSEQUEN T TO THE DIRECTIONS OF THE LD. DISPUTE RESOLUTION PANEL (DRP ) VIDE DIRECTIONS DATED 16.12.2014 AND PERTAINS TO ASSESSM ENT YEAR 2008-09. ITA 1770/DEL/2015 IS THE DEPARTMENTS CRO SS APPEAL FOR THE SAME YEAR. 2.0 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE INDIAN COMPANIES INC OME TAX ACT, 1956 AND IS A WHOLLY OWNED SUBSIDIARY OF AT&T COMMUNICATION SERVICES INTERNATIONAL INC. USA. THE BUSINESS OF THE ASSESSEE IS DIVIDED INTO THREE BROAD SEGMENTS:- I) NETWORK CONNECTIVITY SERVICES II) MARKET RESEARCH, ADMINISTRATIVE SUPPORT AND LIAISON SERVICES III) MANAGED NETWORK SERVICES 2.1 FOR THE YEAR UNDER CONSIDERATION, THE RETURN O F INCOME WAS FILED DECLARING AN INCOME OF RS. 6,95,74,835/-. THE FINAL ASSESSMENT ORDER WAS PASSED ON 29.1.2015 AT AN INCO ME OF RS. 21,64,57,948/-AFTER MAKING THE FOLLOWING ADDITIONS/DISALLOWANCES:- ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 3 2.2 PRIOR TO THE PASSING OF THE FINAL ASSESSMENT O RDER, SINCE THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSAC TION, A REFERENCE WAS MADE TO THE TRANSFER PRICING OFFICER (TPO) WHEREIN THE TPO HAD RECOMMENDED AN ADJUSTMENT OF RS. 1,53,5 5,412/- WITH REFERENCE TO THE INTERNATIONAL TRANSACTION EN TERED INTO BY THE ASSESSEE. IN THE DRAFT ASSESSMENT ORDER, BESID ES THE ADJUSTMENT RELATING TO TRANSFER PRICING ADDITION/AD JUSTMENT, THE ASSESSING OFFICER (AO) HAD ALSO MADE ADJUSTMENTS PE RTAINING TO NON-DEDUCTION OF TDS, NON-TAXABLE ALLOWANCES PAID T O I) ADDITION ON ACCOUNT OF NON-DEDUCTION OF TDS U/S 40(A)(IA) OF THE I.T. ACT, 1961 1,46,84,844 II) ADDITION ON ACCOUNT OF NON TAXABLE ALLOWANCES PAID TO THE EXPATS 2,60,90,328 III) ADDITION ON ACCOUNT OF GRATUITY LIABILITY OF EMPLOY EES TRANSFERRED TO AT&T GNS 48,51,041 IV) ADDITION ON ACCOUNT OF PRIOR PERIOD EXPENSES 38,55,230 ADDITION ON ACCOUNT OF DIFFERENTIAL AMOUNT OF MARK- UP 57,79,795 VI) ADDITION ON ACCOUNT OF INTEREST NOT CHARGED FROM AGNS 2,46,141 VII) ADDITION ON ACCOUNT OF EXPENSES INCURRED ON BEHALF OF EXPATS 15,45,155 VIII) ADDITION ON ACCOUNT OF PERCENTAGE OF PROFIT ON NETWORK CONNECTIVITY SERVICES 7,92,00,000 IX) ADDITION ON ACCOUNT OF YEAR END PROVISONS 1,26,30,579 14,68,83,113 ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 4 EXPATRIATES, GRATUITY LIABILITY TRANSFERRED, PRIOR PERIOD EXPENSES, DIFFERENTIAL AMOUNT OF MARK UP, INTEREST NOT CHARGE D FROM THE FOREIGN AE, ADDITION ON ACCOUNT OF MUTUAL SERVICES AGREEMENT (MSA), ADDITION ON ACCOUNT OF TAX DEPOSITED ON BEHA LF OF EXPATRIATES AND MARGINS THEREOF, ADDITION ON ACCOUN T OF EXPENSES INCURRED ON BEHALF OF EXPATRIATES, ADDITION ON ACCO UNT OF PERCENTAGE OF PROFIT ON NETWORK CONNECTIVITY SERVIC ES AND YEAR END PROVISIONS WHICH IS REFLECTED IN THE TABLE PRODUCED ABOVE. 2.3 AGGRIEVED WITH THE DRAFT ASSESSMENT ORDER, THE ASSESSEE APPROACHED THE LD. DRP AND CHALLENGED THE PROPOSED ADJUSTMENTS/ADDITIONS IN THE DRAFT ASSESSMENT ORDER AND THE LD. DRP PARTLY ACCEPTED THE ASSESSEES OBJECTIONS. THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL (ITAT) AND HAS R AISED THE FOLLOWING GROUNDS OF APPEAL:- 1. GROUND NO. 1 - NO TIME AVAILABLE WITH THE LEAR NED AO FOR MAKING AN ORDER OF ASSESSMENT AFTER EXCLUDING T HE PERIOD OF LIMITATION 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE IMPUGNED ORDER OF ASSESSMENT IS BAD IN LAW AND VOID-AB-INITIO AS THE SAME HAS BEEN FRAMED BY THE L EARNED AO AFTER THE EXPIRY OF/TIME LIMIT FOR COMPLETION OF ASSESSMENT AS PROVIDED IN SECTION 153(1) OF THE ACT . 2. GROUND NO. 2 - DISALLOWANCE OF ANNUAL MAINTENAN CE CHARGES PAID TO CISCO SYSTEMS INTERNATIONAL BV (CI SCO) UNDER SECTION 40(A)(I) OF THE ACT ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 5 2.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN DISALLOWING RS 1,46,84, 844 TOWARDS MAINTENANCE CHARGES PAID TO CISCO UNDER SEC TION 40(A)(I) OF THE ACT ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE THEREON. 2.2 WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED A O HAS ERRED IN DISALLOWING AN AMOUNT OF RS. 89,48,681 OUT OF THE TOTAL AMOUNT OF RS/1,46,84,844 PAID TO CISCO ALLEGI NG THE SAME TO BE IN THE NATURE OF PRIOR PERIOD EXPENDITUR E. 3. GROUND NO. 3 - ADDITION ON ACCOUNT OF NON-TAXAB LE ALLOWANCES PAID TO EXPATRIATE EMPLOYEES 3.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED AO HAS ERRED IN DISALLOWING RS 2,60,90, 328 TOWARDS DIFFERENCE BETWEEN THE SALARY AND OTHER COS TS INCURRED BY THE APPELLANT IN RELATION TO THE EXPATR IATE EMPLOYEES AND TAXABLE SALARY REPORTED BY THE EMPLOY EES IN INDIA. 3.2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED AO HAS ERRED IN HOLDING THAT THE SUBJEC T TRANSACTION HAS BEEN ROUTED BY THE APPELLANT TO UND ERSTATE ITS INCOME AND TO AVOID PAYMENT OF TAXES THEREON WI THOUT APPRECIATING THE FACT THAT THE ENTIRE AMOUNT PROPOS ED FOR DISALLOWANCE (I.E. RS 2,60,90,328) HAS BEEN CHARGED BACK FROM AT&T COMMUNICATION SERVICES INTERNATIONAL INC. (AT&T US) UNDER THE MASTER SERVICE AGREEMENT (MS A) AT A MARK-UP OF 8%. 3.3 WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS A ND CIRCUMSTANCES OF THE CASE AND IN LAW, IN CASE THE A BOVE CLAIM OF THE ASSESSEE IS NOT ACCEPTED, THEN THE SAI D AMOUNT ALONG WITH MARK-UP THEREON/6F 8% SHOULD BE REDUCED FROM THE INCOME OF THE ASSESSEE, BEING THE AMOUNT CLAIME D FROM/AT&T US TOWARDS SUCH REIMBURSEMENTS. 4. GROUND NO. 4 - ADDITION ON ACCOUNT OF GRATUITY LIABILITY OF EMPLOYEES TRANSFERRED TO AT&T GLOBAL NETWORK SERVIC ES INDIA PVT LTD (AGNSI) ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 6 4.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED AO HAS ERRED IN MAKING AN ADDITION OF RS 48,51,041 TOWARDS GRATUITY LIABILITY OF EMPLOYEES TRANSFERRED BY THE APPELLANT TO AGNSI. 5. GROUND NO. 5 - DISALLOWANCE OF PRIOR PERIOD EXPENSE 5.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN DISALLOWING AN AMO UNT OF RS 38,55,230 BY TREATING THE SAME AS PRIOR PERIOD E XPENSE. 5.2 WITHOUT PREJUDICE TO ABOVE AND IN THE ALTERNATIVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED AO HAS ERRED IN NOT CONCLUDING THAT IF THE EXPENSES OF RS 38,55,230 ARE DISALLOWED ON THE BASIS THAT SA ME RELATE TO THE PRECEDING FINANCIAL YEAR (I.E. FINANC IAL YEAR (FY) 2006-07), THEN THE SAME SHOULD BE ALLOWED AS A DEDUCTION IN THE PRECEDING FINANCIAL YEAR (I.E. FY 2006-07). 6. GROUND NO. 6 - ADDITION ON ACCOUNT OF NON-CHARGING OF MARK-UP ON SUPPORT SERVICE CHARGES BILLED TO AGNSI 6.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED AO HAS ERRED IN MAKING AN ADDITION OF RS. 37,79,795 BEING THE DIFFERENCE BETWEEN THE MARK-UP OF 8% CHARGED BY THE APPELLANT ON SUPPORT SERVICE CHARGES BILLED TO AGNSI AND MARK-UP OF 12.85% APPLIED BY THE TRANS FER PRICING OFFICER (TPO) BASIS DIRECTION OF THE HON BLE DRP FOR SERVICES RENDERED BY THE APPELLANT TO AT&T US UNDER THE MSA IN THE ORDER GIVING EFFECT TO THE *' DIRECTIONS OF THE HONBLE DRP. 7. GROUND NO. 7 - ADDITION ON ACCOUNT OF INTEREST NOT CHARGED FROM AGNSI 7.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED AO HAS ERRED IN MAKING AN ADDITIO N OF RS. 2,46,141 TOWARDS NOTIONAL INTEREST NOT CHARGED FROM AGNSI BY THE APPELLANT ON ACCOUNT OF DELAY IN SETTL EMENT OF INVOICES. ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 7 8. GROUND NO. 8 - ADDITION ON ACCOUNT OF EXPENSES INCU RRED ON THE EXPATRIATE EMPLOYEES NOT CHARGED TO AT&T US 8.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED AO HAS ERRED IN MAKING AN ADDITION OF RS. 15,45,155 TOWARDS EXPENDITURE OF RS 13,08,677 INCUR RED BY THE APPELLANT ON THE EXPATRIATE EMPLOYEES AND IN CREASED IT BY THE MARK-UP OF 18.07% . 8.2 WITHOUT PREJUDICE TO GROUND 7.1 ABOVE, THE LEARNED AO HAS ERRED IN APPLYING A MARK-UP OF 18.07% INSTEAD O F THE REVISED MARK-UP OF 12.85% APPLIED BY THE TPO BASIS THE DIRECTIONS OF THE HONBLE DRP, ON SERVICES RENDERED BY THE APPELLANT TO AT&T US. 9. GROUND NO. 9 - ADDITION ON ACCOUNT OF NOTIONAL LOSS OF PROFIT TO THE APPELLANT 9.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED AO HAS ERRED IN OBSERVING THAT THE APPE LLANT SHOULD HAVE RECEIVED COMPENSATION FOR THE LOSS OF R EVENUE ARISING DUE TO TRANSFER OF BUSINESS TO AGNSI AND HA S THEREBY ERRED IN MAKING AN ADDITION OF 7,92,00,000 ON ACCOUNT OF NOTIONAL LOSS OF PROFIT TO THE APPELLANT . 10.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN MAKING DISALLOW ANCE OF EXPENSES, AMOUNTING TO RS 1,26,30,579 (REPRESENTED BY YEAR-END ACCRUALS), BY ALLEGING THE SAME AS EXCESSI VE ON ACCOUNT OF NON-SUBMISSION OF SUPPORTING DOCUMENTS. 10.2 WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED A O HAS ERRED IN NOT OBSERVING THAT DEDUCTION IN RESPECT OF THE DISALLOWED AMOUNT ON ACCOUNT OF YEAR-END ACCRUALS S HOULD BE ALLOWED IN THE SUBSEQUENT YEAR(S) IN WHICH SUCH ACCRUALS ARE REVERSED/ UTILIZED. 11. GROUND NO. 11 - SHORT CREDIT IN RESPECT OF TAX ES DEDUCTED AT SOURCE (TDS) 11.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN GRANTING CREDIT FOR TDS OF RS 1,78,55,046, AS AGAINST RS 1,93,43,8551 CLAIM ED BY ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 8 THE APPELLANT IN ITS RETURN OF INCOME FOR THE SUBJE CT AY. 12. GROUND NO. 12 - NON-GRANT OF FULL CREDIT IN RE SPECT OF ADVANCE TAX 12.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN GRANTING CREDIT FOR ADVANCE OF RS 58,63,848, AS AGAINST RS 1,00,00,000 CLAIMED BY THE APPELLANT IN ITS RETURN OF INCOME FO R THE SUBJECT AY. 13. GROUND NO. 13 - INCORRECT LEVY OF INTEREST UND ER SECTION 234B AND 234 D OF THE ACT 13.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED AO HAS ERRED IN CHARGING INTEREST UNDER SECTION 234B AND 234D OF THE ACT. 14. GROUND NO. 14 - WITHDRAWAL OF INTEREST UNDER S ECTION 244A OF THE ACT 14.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED AO HAS ERRED IN WITHDRAWING INTERE ST GRANTED UNDER SECTION 244A OF THE ACT. 15. GROUND NO. 15 - INITIATION OF PENALTY PROCEEDI NGS UNDER SECTION 271(L)(C) 15.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED AO HAS ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(L)(C) OF THE ACT AGAI NST THE APPELLANT ON ACCOUNT OF THE ABOVE ADJUSTMENTS MADE IN THE ASSESSMENT ORDER. 2.4 THE DEPARTMENT IS ALSO IN CROSS APPEAL BEFOR E THE ITAT AND THE GROUNDS PREFERRED BY THE BY THE DEPARTMENT ARE AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HONBLE DRP HAS ERRED ON FACTS AND IN LAW: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. DRP ERRED IN DELETING THE ADDITION OF RS.98,63,013/ - ON ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 9 ACCOUNT OF TAX DEPOSITED ON BEHALF OF EX PAT EMPLOY EES AND MARGIN THEREOF NOT CHARGED UNDER MSA AS THE ASSESSE E HAD RECOVERED THE SAID AMOUNT FROM AT&T WPS IN THE SUBS EQUENT YEAR. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RI GHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) O F APPEAL AT ANY TIME BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 3.0 THE LD. AUTHORISED REPRESENTATIVE (LD. AR) SUB MITTED THAT GROUND NO. 1 OF THE ASSESSEES APPEAL WAS NOT BEING PRESSED; HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 3.1.0 COMING TO GROUND NO. 2 OF THE ASSESSEES APP EAL, THE LD. AR SUBMITTED THAT THIS GROUND CHALLENGES THE DI SALLOWANCE OF MAINTENANCE CHARGES PAID TO CISCO. IT WAS SUBMITTE D THAT THE ASSESSEE HAD PAID AN AMOUNT OF RS. 1,46,84,844/- TO CISCO TOWARDS ANNUAL MAINTENANCE CHARGES (AMC). IT WAS S UBMITTED THAT DURING THE YEAR, THE ASSESSEE HAD UNDERTAKEN T WO SEPARATE TRANSACTIONS WITH CISCO SYSTEMS INTERNATIONAL BV WH ICH WAS A TAX RESIDENT OF NETHERLANDS. THESE SEPARATE TRANSA CTIONS PERTAINED TO PURCHASE OF EQUIPMENT AND PROVISION OF ANNUAL MAINTENANCE SERVICES. THE LD. AR FURTHER SUBMITTED THAT IT WAS THE ALLEGATION OF THE ASSESSING OFFICER THAT THE AS SESSEE HAD NOT SUBMITTED PARTICULARS OF THE EQUIPMENT PURCHASED FR OM CISCO IN RELATION TO WHICH THE ANNUAL MAINTENANCE CHARGES HA D BEEN PAID. ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 10 IT WAS ALSO SUBMITTED THAT THE ASSESSING OFFICER HA D ALLEGED THAT NO SUPPORTING EVIDENCES HAD BEEN SUBMITTED BY THE A SSESSEE TO SUBSTANTIATE THAT THE EQUIPMENT DID NOT HAVE ANY EL EMENT OF ROYALTY EMBEDDED THEREIN AND FURTHER THAT THE PAYME NT OF ANNUAL MAINTENANCE CHARGES DID NOT CONSTITUTE PAYMENT TOWA RDS FEE FOR TECHNICAL SERVICES (FTS). IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAD HELD THAT SINCE THE ASSESSEE HAD FAILED TO SUBSTANTIATE THAT THE SAID ANNUAL MAINTENANCE CHARG ES WERE NOT IN THE NATURE OF FEE FOR TECHNICAL SERVICES, THE IM PUGNED AMOUNT OF RS. 1,46,84,844/- WAS LIABLE TO BE DISALLOWED U /S 40A(IA) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED 'THE A CT') ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE. IT WAS ALSO SUB MITTED BY THE LD. AR THAT THE ASSESSING OFFICER HAD ALLEGED THAT OUT OF THIS AMOUNT, ONLY RS. 57.3 LAKH PERTAINED TO THE YEAR UN DER CONSIDERATION AND THE BALANCE PERTAINED TO ASSESSME NT YEARS 2006-07 AND 2007-08. THE LD. AR SUBMITTED THAT THE PURCHASE OF EQUIPMENT WAS AN OUTRIGHT PURCHASE TRANSACTION A ND, THEREFORE, THE SAME COULD NOT BE CONSIDERED AS PAYM ENT TOWARDS ROYALTY. IT WAS ALSO SUBMITTED THAT THE ASSESSEE H AD CAPITALIZED THE EQUIPMENT IN ITS BOOKS OF ACCOUNTS AND DEPRECIA TION ON THE SAME HAD BEEN CLAIMED ON THE SAME IN THE PRECEDING YEAR AS WELL ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 11 AS DURING THE THE YEAR UNDER CONSIDERATION. IT WAS ALSO SUBMITTED THAT THE ANNUAL MAINTENANCE CHARGES IN QU ESTION DID NOT HAVE ANY CORRELATION WITH THE NATURE OF EQUIPME NT PURCHASED AND, THEREFORE, NO ADVERSE INFERENCE SHOULD HAVE BE EN DRAWN BY THE ASSESSING OFFICER IN RELATION TO THE AMC. IT W AS ALSO SUBMITTED THAT THE ASSESSEE HAD DULY SUBMITTED THE PURCHASE ORDERS AND INVOICES RAISED BY CISCO BEFORE THE ASSE SSING OFFICER TO DEMONSTRATE THAT BOTH PURCHASE AS WELL AS PAYMEN T OF AMC WERE SEPARATE TRANSACTIONS. OUR ATTENTION WAS ALSO DRAWN TO THE COPY OF AGREEMENT PERTAINING TO ANNUAL MAINTENANCE CHARGES AS WELL AS INVOICES ETC. WHICH WERE EARLIER PRODUCED B EFORE THE ASSESSING OFFICER AND WERE NOW PLACED IN THE PAPER BOOK FILED BY THE ASSESSEE. THE LD. AR ALSO SUBMITTED THAT THE A NNUAL MAINTENANCE CHARGES WERE INCURRED FOR THE ENTIRE LO T OF MACHINES PURCHASED BY THE ASSESSEE AND WERE NOT BE IDENTIFIE D OR RELATED TO ANY PARTICULAR EQUIPMENT. IT WAS EMPHASISED BY THE LD. AR THAT THE PAYMENT OF ANNUAL MAINTENANCE CHARGES PAID TO CISCO WAS A REGULAR THIRD PARTY TRANSACTION AND NOT A TRA NSACTION WITH ANY RELATED PARTY AND, THEREFORE, IT SHOULD BE CONS IDERED AS AN INDEPENDENT TRANSACTION. IT WAS ALSO SUBMITTED THA T THE MAINTENANCE SERVICES PROVIDED BY CISCO DID NOT MAKE AVAILABLE ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 12 ANY TECHNICAL KNOWLEDGE, EXPERTISE, SKILL, KNOW-HOW ETC. TO THE ASSESSEE AND, THEREFORE, THE AMC WOULD NOT CONSTITU TE FEE FOR TECHNICAL SERVICES UNDER THE INDIA-NETHERLANDS TAX TREATY. RELIANCE WAS PLACED ON THE ORDER OF THE ITAT DELHI BENCH IN THE CASE OF ACIT VS. M/S HCL COMNET LTD. (TS-456-ITAT-2 016(DEL)) WHEREIN IT HAD BEEN HELD THAT WHILE ANALYSING THE T AXABILITY OF ANNUAL MAINTENANCE CHARGES, NO TECHNICAL SERVICES C OULD BE SAID TO HAVE BEEN PROVIDED TO THE ASSESSEE. IT WAS FURT HER SUBMITTED THAT REGARDING THE ALLEGATION OF THE ASSESSING OFFI CER IN RESPECT OF PRIOR PERIOD EXPENSES, THE RELEVANT INVOICES HAD BE EN RECEIVED AS WELL AS PAID IN THE YEAR UNDER CONSIDERATION ITSELF AND, THEREFORE, THE LIABILITY HAD CRYSTALLISED IN THE SUBJECT YEAR ITSELF AND, THEREFORE, THE SAME WAS TO BE ALLOWED AS A DEDUCTIO N IN THE YEAR UNDER CONSIDERATION ONLY. 3.1.1 IN RESPONSE, THE LD. DEPARTMENTAL REPRESENTA TIVE (C.I.T. DR) SUBMITTED THAT THE ASSESSEE HAD NOT FIL ED ANY DETAILS REGARDING THE ANNUAL MAINTENANCE EXPENSES BEFORE TH E ASSESSING OFFICER AND, THEREFORE, THE ASSESSING OFFICER HAD N O OPTION BUT TO MAKE THE ADDITION. IT WAS ALSO EMPHASISED BY THE L D. C.I.T. DR THAT A SPECIAL AUDIT U/S 142(2A) OF THE ACT HAD BEE N ORDERED BY THE REVENUE IN THE CASE OF THE ASSESSEE AND EVEN TH E SPECIAL ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 13 AUDITOR APPOINTED BY THE DEPARTMENT HAD STATED IN T HE AUDIT REPORT THAT THE ASSESSEE HAD NOT PROVIDED THE RELEV ANT INFORMATION, EXPLANATION, REFERENCE, DOCUMENTS, CLA RIFICATION AND EVIDENCES AS WERE REQUIRED FOR THE PURPOSE OF CARRY ING OUT THE SPECIAL AUDIT. THE LD. CIT DR ALSO REFERRED TO THE ORDER OF THE ASSESSING OFFICER AND POINTED OUT THAT THE ASSESSIN G OFFICER HAD PROVIDED REASONABLE OPPORTUNITY TO THE ASSESSEE FOR FURNISHING THE RELEVANT DETAILS PERTAINING TO THE ANNUAL MAINT ENANCE CONTRACT BUT THE ASSESSEE HAD NOT SUBMITTED ANY PAR TICULARS AND NEITHER HAD SUBMITTED ANY SUPPORTING EVIDENCE TO SU BSTANTIATE THAT THE EQUIPMENT PURCHASED DID NOT HAVE ANY ELEME NT OF ROYALTY EMBEDDED THEREIN AND FURTHER THAT THE ASSES SEE COULD DEMONSTRATE THAT THE PAYMENT OF AMC CHARGES DID NOT CONSTITUTE PAYMENT TOWARDS FEE FOR TECHNICAL SERVICES. THE LD . CIT DR SUBMITTED THAT THE DISALLOWANCE HAD RIGHTLY BEEN MA DE AND THAT EVEN THE LD. DRP HAD REJECTED THE ASSESSEES OBJECT IONS IN THIS REGARD AND HAD HELD THAT THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS CAST UPON IT AND, THEREFORE, THE PROVISIONS OF SECTION 40A(IA) WERE APPLICABLE IN THE CASE OF THE ASSESSEE. 3.2.0 WITH RESPECT TO GROUND NO. 3, THE LD. AR SUB MITTED THAT THIS GROUND PERTAINED TO DISALLOWANCE OF NON-T AXABLE ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 14 ALLOWANCES AMOUNTING TO RS. 2,60,90,328/- PAID TO E XPATRIATES. THE LD. AR SUBMITTED THAT THE ASSESSEE HAD ENTERED INTO MASTER SERVICE AGREEMENT (MSA) WITH AT&T COMMUNICATION SER VICES INTERNATIONAL INC, USA FOR PROVISION OF MARKET RESE ARCH, ADMINISTRATIVE SUPPORT AND LIAISON SERVICES AND OTH ER SUPPORT SERVICES. IT WAS SUBMITTED THAT THE COPY OF THE MA STER SERVICE AGREEMENT WAS SUBMITTED BEFORE THE ASSESSING OFFICE R AND WAS ALSO NOW PART OF THE PAPER BOOK SUBMITTED BY THE AS SESSEE BEFORE THIS TRIBUNAL. THE LD. AR FURTHER SUBMITTED THAT F OR THE PROVISION OF SOME OF THESE SERVICES, THE ASSESSEE H AD EMPLOYED SENIOR EXPATRIATE EMPLOYEES AND SINCE THESE EXPATRI ATES WERE TO BE PAID DIRECTLY BY TRANSFERS IN THE OVERSEAS BANK ACCOUNT OF SUCH EXPATRIATES, THE ASSESSEE HAD ENTERED INTO DIS BURSING AGENCY AGREEMENT WITH AT&T WORLDWIDE PERSONNEL SERV ICES INC. WHICH WAS AN ENTITY INCORPORATED IN THE UNITED STAT ES UNDER WHICH THE SALARY PAYABLE BY THE ASSESSEE TO SUCH EX PATRIATE EMPLOYEES WAS DISBURSED TO AT&T WORLDWIDE PERSONNEL SERVICES INC. WHICH CREDITED THE SAME TO THE FOREIGN BANK AC COUNT OF THE EXPATRIATES OUTSIDE INDIA. IT WAS ALSO SUBMITTED T HAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD REIMBURS ED AN AMOUNT OF RS 3.90 CRORES FOR SALARY AND OTHER COSTS PAID BY AT&T ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 15 WORLDWIDE PERSONNEL SERVICES INC. WHEREAS AS PER TH E RETURNS OF INCOME OF THE EXPATRIATES, THE TAXABLE SALARY RETUR NED BY THEM AMOUNTED TO RS. 1.29 CRORE. IT WAS ALSO SUBMITTED THAT COST + 8% WAS CHARGED IN THIS REGARD. THE LD. AR SUBMITTED T HAT THE ASSESSING OFFICER, ON THE BASIS OF THE SPECIAL AUDI T REPORT, NOTED THAT THE AMOUNT OFFERED TO TAX IN THE RETURNS OF IN COME OF THE EXPATRIATES AND FORM 16 ISSUED TO THEM REFLECTED ON LY RS. 1.29 CRORE AS AGAINST THE PAYMENT OF RS. 3.90 CRORES MAD E BY THE ASSESSEE TO M/S AT&T WORLDWIDE PERSONNEL SERVICES I NC. AND, THEREFORE, THE DIFFERENTIAL AMOUNT WAS DISALLOWED B Y THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE H AD NOT SUBMITTED ANY RECONCILIATION STATEMENT TO JUSTIFY T HAT THE DIFFERENTIAL AMOUNT REPRESENTED NON-TAXABLE COMPONE NT OF THE EXPATRIATE SALARY. IT WAS ALSO SUBMITTED THAT THE ASSESSING OFFICER HAD ALLEGED THAT THE ASSESSEE COULD NOT SUB STANTIATE THAT THE IMPUGNED PAYMENT/S HAD BEEN MADE ONLY WITH RESP ECT TO THE BUSINESS ACTIVITY OF THE ASSESSEE. THE LD. AR SUB MITTED THAT THE ASSESSEE HAD ISSUED EMPLOYMENT LETTERS TO THREE EXP ATRIATES NAMELY MR. MARK SHINE, MR. VS GOPINATH AND MR. RICH ARD MCCOMICK. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD SUBMITTED DOCUMENTS LIKE COPY OF MASTER SERVICE AGR EEMENT, COPY ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 16 OF DISBURSING AGENCY AGREEMENT, COPIES OF APPROVAL LETTERS ISSUED BY RBI, COPY OF INVOICES RAISED BY AT&T WORLDWIDE P ERSONNEL SERVICES INC., COPIES OF FORM 16 ISSUED BY THE ASSE SSEE TO THE EXPATRIATES, COPIES OF EMPLOYMENT LETTERS ISSUED TO THE EXPATRIATES, ETC. BEFORE THE ASSESSING OFFICER IN S UPPORT OF ITS CLAIM AND CONTENTION. THE LD. AR ALSO DREW OUR ATT ENTION TO THE COPIES OF THESE DOCUMENTS PLACED IN THE PAPER BOOK FILED BY THE ASSESSEE BEFORE THIS TRIBUNAL. THE LD. AR ALSO SUB MITTED THAT THE DIFFERENCE IN THE TAXABLE SALARY RETURNED BY TH E EXPATRIATES AND THE PAYMENTS MADE BY THE ASSESSEE ALSO INCLUDED EXPENDITURE FOR TRAVEL, ACCOMMODATION, LODGING ETC. OF THESE EXPATRIATES WHICH, THOUGH, DID NOT FORM PART OF THE TAXABLE INCOME, WERE REIMBURSED TO THE AT&T WORLDWIDE PERSO NNEL SERVICES INC. NEVERTHELESS. IT WAS SUBMITTED THAT THE ASSESSEE WAS UNDER AN OBLIGATION TO REIMBURSE OTHER PAYMENTS AND COSTS INCURRED BY THESE EXPATRIATES ALTHOUGH THEY MIGHT N OT HAVE BEEN TAXABLE UNDER THE PROVISIONS OF THE INCOME TAX ACT AND, THEREFORE, THE DISCREPANCY IN THE TWO AMOUNTS WAS V ISIBLE BU ALLOWABLE. 3.2.1 IN RESPONSE, THE LD. C.I.T. DR SUBMITTED THA T THE LD. DR HAS NOTED THAT THE ASSESSEE HAD, NEITHER BEFORE THE SPECIAL ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 17 AUDITORS NOR BEFORE THE ASSESSING OFFICER AND NOR E VEN BEFORE THE DRP, SUBMITTED PARTICULARS OF NON-TAXABLE ALLOWANCE S. THE LD. C.I.T. DR POINTED OUT TO THE OBSERVATION OF THE LD. DRP IN PARA 5.4.1 OF ITS DIRECTIONS THAT THE ASSESSEE HAD NOT S UBMITTED ANY RECONCILIATION STATEMENT TO JUSTIFY ITS CLAIM THAT THE DIFFERENTIAL SUM OF RS. 2,60,90,328/- ACTUALLY REPRESENTED NON-T AXABLE COMPONENT ONLY. IT WAS SUBMITTED THAT IN VIEW OF T HE FAILURE OF THE ASSESSEE TO SUBSTANTIATE ITS CLAIM, THE ASSESSE E WAS NOT ENTITLED TO MAKE THE CLAIM. 3.3.0 WITH RESPECT TO GROUND NO. 4 OF THE ASSESSEE S APPEAL CHALLENGING THE DISALLOWANCE OF GRATUITY LIABILITY OF EMPLOYEES TRANSFERRED TO AT&T GNS AMOUNTING TO RS. 48,51,041/ -, THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED THIS AMOUNT ALLEGING THAT THE LIABILITY WAS TRANSFERRED TO AT&T GNS AND HAD NOT PAID BEEN PAID THE EMPLOYEES DIRECTLY. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAD ALLEGED TH AT AT&T GNS HAD NOT PAID THIS AMOUNT TO THE EMPLOYEES EVEN ON T HEIR RESIGNATION FROM THE ASSESSEE COMPANY AND, THEREFOR E, THE TRANSFER OF SUCH SUM BY THE ASSESSEE TO AT&T GNS CA NNOT BE TREATED AS AN ALLOWABLE EXPENDITURE. THE LD. AR SU BMITTED THAT THE ASSESSEE COMPANY HAD MADE PAYMENT OF GRATUITY T O AT&T ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 18 GNS WHICH WAS DULY RECORDED AS A LIABILITY IN THE B OOKS OF ACCOUNT OF AT&T GNS. IT WAS FURTHER SUBMITTED THAT THE PAYMENT HAD BEEN MADE THROUGH BANK WHICH WAS EVIDEN CED THROUGH THE BANK STATEMENT. IT WAS FURTHER SUBMITT ED THAT THE TRANSFERRED EMPLOYEES CONTINUED WITH THEIR EMPLOYME NT WITH AT&T GNS AND, THEREFORE, THE QUESTION OF AT&T GNS M AKING THE PAYMENT OF GRATUITY TO SUCH EMPLOYEES AT THE TIME O F THEIR RESIGNATION DID NOT ARISE AT ALL. IT WAS EMPHASISE D THAT THE LIABILITY FOR MAKING THE PAYMENT OF GRATUITY AMOUNT BY AT&T GNS TO THE TRANSFERRED EMPLOYEES WOULD ARISE ONLY AT TH E TIME OF TERMINATION OF THEIR EMPLOYMENT WITH AT&T GNS. THE LD. AR ALSO DREW OUR ATTENTION TO THE COPIES OF CONSENT LE TTERS FOR SIX EMPLOYEES (ON SAMPLE BASIS) WHICH EVIDENCED THE CON SENT OF THE EMPLOYEES ON THE TERMS OF TRANSFER WHICH WERE DULY SUBMITTED BEFORE THE ASSESSING OFFICER AND WERE NOW ALSO IN T HE PAPER BOOK FILED BY THE ASSESSEE. THE LD. AR ALSO SUBMITTED T HAT FOUR EMPLOYEES OUT OF THE TRANSFERRED EMPLOYEES HAD RESI GNED FROM AT&T GNS AND THEIR GRATUITY AMOUNT TRANSFERRED FROM THE ASSESSEE HAD BEEN DULY PAID TO THEM BY AT&T GNS AND HAD NOT BEEN CLAIMED BY THAT COMPANY AS AN EXPENDITURE IN I TS RETURN OF INCOME. IT WAS ALSO SUBMITTED THAT THIS FACT WAS A LSO SUBMITTED ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 19 BEFORE THE ASSESSING OFFICER BUT WAS NOT GIVEN DUE CREDENCE BY HIM. THE LD. AR ALSO SUBMITTED THAT THE PROVISIONS OF SECTION 43B OF THE ACT DO NOT POSTULATE THAT THE PAYMENT OF GRATUITY SHOULD BE MADE DIRECTLY TO THE EMPLOYEES AND IT DOE S NOT PROVIDE A BAR ON THE DEDUCTIBILITY OF THE GRATUITY AMOUNT W HERE SUCH GRATUITY IS PAID TO ANOTHER CONCERN TO WHICH THE EM PLOYEES HAVE BEEN TRANSFERRED. RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF W.T. SUREN & CO. REPORTED IN 230 ITR 643 (SC) WHEREIN IT HAD BEEN HELD THAT I N CASE OF TRANSFER OF EMPLOYEES BY ONE COMPANY TO ANOTHER, GR ATUITY LIABILITY RELATABLE TO THE TRANSFERRED EMPLOYEES AN D PAID TO THE TRANSFEREE COMPANY WAS TO BE ALLOWED AS A DEDUCTION TO THE TRANSFEROR COMPANY IN THE YEAR OF PAYMENT OF THE AM OUNT TO THE TRANSFEREE COMPANY. 3.3.1 IN RESPONSE, THE LD. CIT DR SUBMITTED THAT T HE ASSESSING OFFICER HAD DULY CONSIDERED THE RATIO OF THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF W.T. SUREN & CO. VS. CIT (SUPRA) AND HAD, THEREAFTER, REACHED THE CONCLUSION THAT THE FACTS IN THE ASSESSEES CASE WERE DISTINGUISHABLE. THE L D. CIT DR ALSO SUBMITTED THAT IN TERMS OF PROVISIONS OF SECTION 40 A(7) AND IN VIEW OF THE JUDGEMENT OF THE HONBLE APEX COURT IN THE CASE OF ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 20 SHREE SAJJAN MILLS LIMITED (1986) 156 ITR 85 (SC), DEDUCTION FOR GRATUITY PAYMENT CANNOT BE ALLOWED ON GENERAL PRINC IPLES UNDER ANY OTHER SECTION OF THE ACT. THE LD. CIT DR SUBMI TTED THAT A PERUSAL OF THE CONSENT LETTERS WOULD SHOW THAT THER E IS NO TERMINATION OF EMPLOYEES BY THE ASSESSEE AND THE EM PLOYEES HAVE BEEN TRANSFERRED TO AT&T GNS. THE LD. CIT DR ALSO DREW OUR ATTENTION TO THE DIRECTIONS OF THE LD. DRP, AS CONT AINED IN PARA 4.6.3 OF ITS DIRECTIONS, THAT THE ASSESSEE HAD NOT BEEN FORTHCOMING IN BRINGING OUT THE RELEVANT FACTS ON R ECORD TO FACILITATE THE ADJUDICATION OF THE ISSUE. THE LD. C.I.T. DR SUBMITTED THAT THE DISALLOWANCE HAD BEEN CORRECTLY MADE AND THE SAME SHOULD BE UPHELD. 3.4.0 WITH RESPECT TO GROUND NO. 5 PERTAINING TO P RIOR PERIOD EXPENSES AMOUNTING TO RS. 38,55,230/-, THE LD. AR S UBMITTED THAT THIS GROUND WAS NOT BEING PRESSED. ACCORDINGL Y, THIS GROUND IS DISMISSED AS NOT PRESSED. 3.5.0 GROUND NO. 6 OF THE ASSESSEES APPEAL PERTAI NS TO DISALLOWANCE OF DIFFERENTIAL MOUNT OF MARK-UP LEADI NG TO AN ADDITION OF RS. 37,79,795/-. THE LD. AR SUBMITTED THAT AT&T GLOBAL NETWORKS SERVICES INDIA PRIVATE LIMITED, A G ROUP COMPANY OF THE ASSESSEE HAD COMMENCED ITS BUSINESS OPERATIO N DURING ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 21 FINANCIAL YEAR 2005-06 AND IT DID NOT HAVE ITS OWN SUPPORT- SERVICE FUNCTIONS LIKE TAX, LEGAL, HR ETC. WHEREAS THE ASSESSEE, WHICH WAS IN OPERATION FOR MORE THAN 10 YEARS, HAD A FULLY DEVELOPED SUPPORT-SERVICE FUNCTIONS. IT WAS FURTHE R SUBMITTED THAT IN VIEW OF THIS, THE ASSESSEE ENTERED INTO THE SUPPORT-SERVICE AGREEMENT WITH AT&T GLOBAL NETWORKS SERVICES INDIA PRIVATE LIMITED FOR PROVIDING THESE SUPPORT SERVICES. IT W AS SUBMITTED THAT AS PER THE SUPPORT SERVICE AGREEMENT, NO MARK- UP WAS REQUIRED TO BE CHARGED ON THE SUPPORT SERVICE CHARG ES. IT WAS FURTHER SUBMITTED THAT ALL THE SAME, THE ASSESSEE H AD CHARGED A MARK-UP OF 8% ON THE COST OF SUPPORT SERVICES CHARG ES BILLED TO AT&T GLOBAL NETWORKS SERVICES INDIA PRIVATE LIMITED . HOWEVER, THE ASSESSING OFFICER PROPOSED A MARK UP OF 18.07% WHICH WAS REDUCED TO 12.85% BY THE LD. DRP AGAINST WHICH THE ASSESSEE WAS IN APPEAL. THE LD. AR SUBMITTED THAT THIS ISSU E WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT IN ASSESSEES OWN CASE FOR SUBSEQUENT ASSESSMENT YEAR I.E. 2010-1 1 IN ITA NO. 1016/DEL/2015. OUR ATTENTION WAS DRAWN TO PARA 16 OF THIS ORDER DATED 15.02.2018 AND IT WAS SUBMITTED THAT TH E ITAT HAD DELETED AN IDENTICAL ADDITION IN THAT YEAR. IT WAS FURTHER ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 22 SUBMITTED THAT THIS INCORRECT ADDITION ON ACCOUNT O F MARK-UP WAS NOT SUSTAINABLE IN LAW. 3.5.1 IN RESPONSE, THE LD. C.I.T. DR SUBMITTED THA T THE PURPOSE OF THE ASSESSEE TO CHARGE MARK-UP AT A LOWE R RATE WAS TO LOWER THE TAXABLE INCOME. IT WAS ALSO SUBMITTED TH AT THE DIFFERENTIAL MARK UP HAD BEEN DETERMINED BY THE TPO BY COMPARING IT TO THE EXPENSES CHARGED TO AT&T COMMUN ICATION SERVICES INTERNATIONAL INC. (US) AND, FURTHER, THE ASSESSEE HAD FAILED TO POINT OUT THE DIFFERENCES BETWEEN THE SER VICES PROVIDED TO AT&T COMMUNICATION SERVICES INTERNATIONAL INC. ( US) AND TO AT&T GLOBAL NETWORKS SERVICES INDIA PRIVATE LIMITED OR THE DIFFERENCE IN BUSINESS EXPEDIENCY AND, THEREFORE, T HE ADDITION HAD BEEN RIGHTLY MADE. 3.6.0 WITH RESPECT TO GROUND NO. 7 PERTAINING TO A DDITION ON ACCOUNT OF NOTIONAL INTEREST INCOME NOT CHARGED FRO M AT&T GLOBAL NETWORKS SERVICES INDIA PRIVATE LIMITED, LEA DING TO ADDITION OF RS. 2,46,141/- , THE LD. AR SUBMITTED T HAT GROUND WAS IDENTICAL/CONSEQUENTIAL TO THE ADJUDICATION OF GROUND NO. 6 AND THE ARGUMENTS ALSO WOULD REMAIN THE SAME. 3.6.1 IN RESPONSE, THE LD. C.I.T. DR PLACED RELIAN CE ON THE FINDINGS OF THE ASSESSING OFFICER/TPO AND THE DIREC TIONS OF THE ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 23 LD. DRP IN THIS REGARD AND SUBMITTED THAT IT WAS A STRONG CASE FOR APPLYING NOTIONAL INTEREST IN THE CASE OF THE A SSESSEE. 3.7.0 WITH RESPECT TO GROUND NO. 8 PERTAINING TO A DDITION ON ACCOUNT OF CERTAIN EXPENSES INCURRED ON BEHALF OF T HE EXPATRIATES LEADING TO AN ADDITION OF RS. 15,45,155/-, THE LD. AR SUBMITTED THAT THIS GROUND WAS NOT BEING PRESSED. ACCORDINGL Y, THIS GROUND IS DISMISSED AS NOT PRESSED. 3.8.0 WITH RESPECT TO GROUND NO. 9 PERTAINING TO A DDITION ON ACCOUNT OF NOTIONAL PROFIT ON TRANSFER OF BUSINESS TO AT&T GLOBAL NETWORKS SERVICES INDIA PRIVATE LIMITED LEADING TO AN ADDITION OF RS. 7,92,00,000/-, THE LD. AR SUBMITTED THAT THE AS SESSEE HAD ENTERED INTO A CONTRACT WITH VIDESH SANCHAR NIGAM L IMITED (VSNL) FOR PROVIDING TELECOMMUNICATION SERVICES TO THE CUSTOMERS OF AT&T IN INDIA. IT WAS FURTHER SUBMITTED THAT TH E ASSESSEE HAD ENGAGED VSNL AS ALL THE NECESSARY CORPORATE AND LEG AL APPROVALS TO OFFER SUCH SERVICES WERE AVAILABLE WITH VSNL. T HE LD. AR SUBMITTED THAT THE ASSESSEE WAS ACTING AS A SERVICE SUPPORT ORGANISATION FOR VSNL WHICH WAS RESPONSIBLE FOR MAR KETING OF AT&T GLOBAL NETWORKS SERVICES IN INDIA TO THE CUSTO MERS OF THE ASSESSEE PURSUANT TO THE AGREEMENT ENTERED INTO BET WEEN THE AT&T WORLDWIDE TELECOMMUNICATION SERVICES SINGAPORE PVT. LTD. ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 24 OUR ATTENTION WAS DRAWN TO THE COPY OF AGREEMENT PL ACED IN THE PAPER BOOK IN THIS REGARD. IT WAS ALSO SUBMITTED T HAT THIS AGREEMENT HAD BEEN SUBMITTED BEFORE THE ASSESSING O FFICER ALSO. IT WAS FURTHER SUBMITTED THAT THE REVENUE EARNED BY THE ASSESSEE FROM THE RENDITION OF SERVICES TO THE CUSTOMERS OF VSNL WAS ACCOUNTED FOR UNDER THE NETWORK CONNECTIVITY SERVIC ES BUSINESS SEGMENT. IT WAS FURTHER SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, ANOTHER GROUP ENTITY I.E. AT&T GLOBA L NETWORKS SERVICES INDIA PRIVATE LIMITED COMMENCED ITS BUSINE SS OPERATION AND THIS ENTITY HAD OBTAINED INTERNATIONAL LONG DIS TANCE, NATIONAL LONG DISTANCE AND INTERNET SERVICES LICENCE AND HAD ALSO COMMENCED PROVIDING INTERNATIONAL LONG DISTANCE SER VICES. ACCORDINGLY, NETWORK SERVICES WERE, THEREAFTER, PRO VIDED BY AT&T GLOBAL NETWORKS SERVICES INDIA PRIVATE LIMITED INST EAD OF VSNL. IT WAS ALSO SUBMITTED THAT SUBSEQUENTLY THE SUPPORT SERVICES AGREEMENT WITH VSNL WAS TERMINATED AND THE ASSESSEE STOPPED PROVIDING SERVICES TO THE CUSTOMERS OF VSNL. THE L D. AR SUBMITTED THAT THERE WAS NO TRANSFER OF BUSINESS BU T TERMINATION OF CONTRACT WITH VSNL AS THE CONNECTIVITY SERVICES BEING PROVIDED BY THE VSNL WERE NO LONGER REQUIRED BY THE ASSESSEE . THIS LED TO THE REVENUES BEING EARNED BY THE ASSESSEE FROM REND ITION OF ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 25 SUPPORT SERVICES OF VSNL BEING REDUCED. IT WAS FUR THER SUBMITTED THAT THE ASSESSING OFFICER NOTED THAT THE RE WAS A REDUCTION IN REVENUE FROM NETWORK CONNECTIVITY SERV ICES SEGMENT FROM RS. 62.30 CRORES TO RS. 7.11 CRORE AND, THEREA FTER, THE ASSESSING OFFICER ALLEGED THAT THE ASSESSEE HAD TRA NSFERRED ASSETS AS WELL AS EMPLOYEES TO AT&T GLOBAL NETWORKS SERVIC ES INDIA PRIVATE LIMITED LEADING TO REDUCTION IN REVENUES AN D FURTHER THAT THERE WAS A TRANSFER OF BUSINESS. THE LD. AR FURTH ER SUBMITTED THAT IT WAS THE ALLEGATION OF THE ASSESSING OFFICER THAT THE ASSESSEE SHOULD BE ENTITLED TO CERTAIN ADDITIONAL C OMPENSATION FROM AT&T GLOBAL NETWORKS SERVICES INDIA PRIVATE LI MITED. ACCORDINGLY, THE ASSESSING OFFICER APPLIED PROFIT P ERCENTAGE AND DETERMINED AN AMOUNT OF RS. 7,90,00,000/- TO BE ADD ED TO THE ASSESSEES INCOME. THE LD. AR ARGUED THAT THERE WA S NO TRANSFER OF BUSINESS BY THE ASSESSEE BUT ONLY TERMINATION OF THE SUPPORT SERVICE AGREEMENT WITH THE VSNL WHICH LED TO THE DE CREASE IN REVENUE INCOME. HE DREW OUR ATTENTION TO THE NOTES ON ACCOUNT FORMING PART OF THE FINANCIAL STATEMENTS OF THE ASS ESSEE COMPANY (WHICH IS PLACED IN THE PAPER BOOK FILED BY THE ASS ESSEE) WHEREIN IT HAS BEEN SPECIFICALLY MENTIONED THAT THE ASSESSE E COMPANY HAD DISCONTINUED SERVICES BEING PROVIDED TO VARIOUS CUS TOMERS UNDER ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 26 SERVICES AGREEMENT WITH VSNL. IT WAS SUBMITTED THA T THE QUESTION OF RECEIVING ANY CONSIDERATION FROM AT&T G LOBAL NETWORKS SERVICES INDIA PRIVATE LIMITED DOES NOT AR ISE. IT WAS ALSO SUBMITTED THAT THERE WAS NO PROVISION UNDER TH E ACT WHICH PROVIDES FOR IMPUTING CONSIDERATION IN THE HANDS OF THE TAXPAYER ON ACCOUNT OF TRANSFER OF BUSINESS DESPITE THERE BE ING NO TRANSFER OF BUSINESS. IT WAS SUBMITTED THAT THERE WAS NO TR ANSFER OF EMPLOYEES AS ALLEGED BY THE ASSESSING OFFICER AND F URTHER NO ASSETS HAD BEEN TRANSFERRED BY THE ASSESSEE AND, TH EREFORE, THIS ADDITION WAS NOT SUSTAINABLE. 3.8.1 IN RESPONSE, THE LD. C.I.T. DR SUBMITTED THA T THE LD. DRP HAD OBSERVED THAT THE SETTING UP OF A NEW COMPA NY UNDER THE NAME OF AT&T GLOBAL NETWORKS SERVICES INDIA PRI VATE LIMITED WAS NOT DEVOID OF ANY PLANNED EXERCISE AND THAT IT WAS ONLY DUE TO SUCH RESTRUCTURING OF SUCH BUSINESS ACTIVITIES T HAT THE ASSESSEE HAD TERMINATED ITS AGREEMENT WITH THE VSNL . THE LD. C.I.T. DR ALSO PLACED RELIANCE ON THE OBSERVATIONS OF THE LD. DRP THAT THE CANCELLATION OF CONTRACT WITH VSNL BY THE ASSESSEE WAS NOT A STANDALONE ACTIVITY AS IT INVOLVED SHIFTING O F 29 EMPLOYEES AS WELL AS TRANSFER OF RELEVANT ASSETS TO THE TUNE OF RS. 6,71,57,014/- (BEING THE WRITTEN DOWN VALUE) AND, T HEREFORE, IT ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 27 WAS OBVIOUS THAT THERE WAS A TRANSFER OF BUSINESS. THE LD. C.I.T. DR ALSO EMPHASISED THE FACT THAT THE ASSESSEE HAD N OT BROUGHT FULL FACTS OF THE TRANSACTION ON RECORD AND THAT SI NCE BY THIS ARRANGEMENT THE INCOME OF THE TAXPAYER HAD SUBSTANT IALLY REDUCED, THE PROPOSED ADDITION WAS TO BE UPHELD. 3.9.0 WITH RESPECT TO GROUND NO. 10 PERTAINING TO DISALLOWANCE OF RS. 1,26,30,579/- PERTAINING TO THE YEAR-END PROVISIONING, THE LD. AR SUBMITTED THAT THE ASSESSE E FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING AND DURING THE YEAR UNDER CONSIDERATION, PROVISION AMOUNTING TO RS. 7.12 CROR E HAD BEEN CREATED. IT WAS FURTHER SUBMITTED THAT INVOICES AG GREGATING TO RS. 5.27 CRORE ALONG WITH EXTRACT OF BANK STATEMENT/S E VIDENCING PAYMENT OF SUCH INVOICE IN THE IMMEDIATELY SUCCEEDI NG FINANCIAL YEAR WERE ALSO SUBMITTED BEFORE THE ASSESSING OFFIC ER AND OUT OF THE REMAINING PROVISION OF RS. 1.84 CRORE, ADDITION AL EVIDENCES WERE SUBMITTED FOR PROVISION OF RS. 0.09 CRORE WITH RESPECT TO FOREIGN EXCHANGE FLUCTUATION LOSS AND OF RS. 0.49 C RORE CREATED FOR LEASE EQUALISATION. IT WAS SUBMITTED THAT THE ASSE SSING OFFICER DISALLOWED THE BALANCE AMOUNT OF RS. 1.26 CRORE ON THE GROUND THAT NO DOCUMENTARY EVIDENCES WERE FURNISHED WITH R ESPECT TO REVERSAL OF THESE PROVISIONS IN THE SUBSEQUENT YEAR . THE LD. AR ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 28 SUBMITTED THAT THE ASSESSEE HAD BEEN ABLE TO PRODUC E DOCUMENTARY EVIDENCES SUPPORTING PAYMENT OF MORE TH AN 80% OF THE EXPENSES REPRESENTED BY YEAR END PROVISIONING A ND IT SUBSTANTIATED THE FACT THAT EVEN THE BALANCE PROVIS IONING WOULD NOT HAVE BEEN CREATED WITHOUT A REASONABLE BASIS AN D, THEREFORE, NO DISALLOWANCE COULD HAVE BEEN MADE IN THIS REGARD . THE LD. AR ALSO SUBMITTED THAT THIS ISSUE WAS COVERED IN FA VOUR OF THE ASSESSEE BY ORDER OF THE ITAT DELHI BENCH IN ASSESS EES OWN CASE FOR ASSESSMENT YEAR 2010-11 (VIDE ITA NO. 1016/DEL/ 2015 DATED 15.2.2018) WHEREIN THE ISSUE HAD BEEN DECIDED IN FA VOUR OF THE ASSESSEE VIDE PARA NO. 25 AND 26 OF THE SAID ORDER. 3.9.1 IN RESPONSE, THE LD. C.I.T. DR DREW OUR ATTE NTION TO THE COMMENTS OF THE SPECIAL AUDITOR IN THIS REGARD THAT NO DETAILS HAD BEEN FILED BY THE ASSESSEE AND FURTHER THAT THE LD. DRP HAD PARTIALLY ALLOWED THE ASSESSEES CLAIM. THE LD. C. I.T. DR SUBMITTED THAT NO FURTHER RELIEF WAS REQUIRED TO BE ALLOWED TO THE ASSESSEE. 3.10.0 WITH RESPECT TO GROUND NO. 11 PERTAINING TO SHORT CREDIT IN RESPECT OF TAX DEDUCTED AT SOURCE, GROUND NO. 12 RELATING TO NON-GRANT OF FULL CREDIT IN RESPECT OF ADVANCE T AX, BOTH THE PARTIES AGREED THAT SUITABLE DIRECTIONS MAY BE GIVE N TO THE ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 29 ASSESSING OFFICER TO ALLOW FULL CREDIT TO THE TAXPA YER AFTER DUE VERIFICATION. 3.11.0 WITH RESPECT TO GROUND NO. 13 PERTAINING TO LEVY OF INTEREST U/S 234B AND 234D OF THE ACT, GROUND NO. 1 4 PERTAINING TO WITHDRAWAL OF INTEREST UNDER SECTION 244A OF THE ACT, BOTH THE PARTIES AGREED THAT THESE GROUNDS WERE CONSEQUENTIA L. 3.12.0 WITH REGARD TO GROUND NO. 15 PERTAINING TO I NITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C), THE LD. AR FAIRL Y AGREED THAT THIS GROUND WAS PREMATURE IN THE QUANTUM PROCEEDING S. 4.0.0 ARGUING FOR THE DEPARTMENTS APPEAL IN ITA N O. 1779/DEL/2015, THE LD. CIT DR SUBMITTED THAT THE SO LE GROUND UNDER CHALLENGE WAS THE DIRECTION OF THE LD. DRP IN DIRECTING DELETION OF ADDITION OF RS. 98,63,013/- ON ACCOUNT OF TAX DEPOSITED ON BEHALF OF THE EXPATRIATE EMPLOYEES AND MARGIN THEREOF NOT CHARGED UNDER MSA AS THE ASSESSEE HAD RECOVERED THE SAID AMOUNT FROM AT&T WPS. THE LD. C.I.T. DR S UBMITTED THAT THE SPECIAL AUDITOR HAD STATED THAT WHILE REMI TTING THE AMOUNT OF SALARIES OF THE EXPATRIATES, TAX HAD NOT BEEN DEDUCTED AND, THEREFORE, BY REASON OF SUCH NON-DEDUCTION OF TAXES, SUCH AMOUNT HAS BEEN SHORTLY CHARGED UNDER THE MUTUAL SE RVICES AGREEMENT. THE LD. C.I.T. DR ALSO DREW ATTENTION T O THE ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 30 OBSERVATIONS OF THE ASSESSING OFFICER THAT NO RECON CILIATION OR ANY CORROBORATIVE EVIDENCE HAD BEEN FILED BY THE ASSESS EE IN THIS REGARD AND, THEREFORE, THE ASSESSEES CONTENTION TH AT SUCH AMOUNT HAS BEEN CHARGED UNDER THE MUTUAL SERVICES A GREEMENT IS NOT TENABLE. 4.0.1 IN RESPONSE, THE LD. AR SUBMITTED THAT THE T AX AND THE LIABILITY WERE PAID BY THE ASSESSEE IN THE MONTH OF JULY 2008. OUR ATTENTION WAS DRAWN TO THE COPY OF CHALLANS EVIDENCING THE PAYMENT OF THE SAME AND ATTACHED AS ANNEXURE TO THE WRITTEN SUBMISSIONS FILED BEFORE THE BENCH. HE ALSO DREW O UR ATTENTION TO COPY OF BANK STATEMENTS IN THIS REGARD. HE ALSO DREW OUR ATTENTION TO THE DIRECTIONS OF THE LD. DRP AS CONTA INED IN PARA 11.4 OF ITS DIRECTIONS WHEREIN IT HAS BEEN DULY NOT ED THAT THE SINCE TAXPAYER HAS BORNE THE TAX TO THE EXTENT OF I NCOME OFFERED FOR TAXATION IN INDIA BY SUCH EXPATRIATE EMPLOYEES IN INDIA AND THE BALANCE TAX PAYABLE IN THE HOME COUNTRY IS BORN E BY THE EMPLOYEE/S CONCERNED, THE ADDITION WAS NOT WARRANTE D. THE LD. AR SUBMITTED THAT IN VIEW OF THE FACTUAL FINDING RE CORDED BY THE LD. DRP, THE DEPARTMENTS CHALLENGE TO THE DELETION DOES NOT STAND. ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 31 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. WE NOW TAKE UP THE AP PEALS ONE BY ONE. FIRST WE TAKE UP THE ASSESSEES APPEAL NO. 10 15/DEL/2015. 5.1 GROUND NO. 1 IS DISMISSED AS NOT PRESSED. 5.2.0 GROUND NO. 2 CHALLENGES THE ADDITION OF RS. 1,46,84,844/- ON ACCOUNT OF MAINTENANCE CHARGES PAI D TO CISCO SYSTEMS INTERNATIONAL BV. THIS DISALLOWANCE HAS BE EN MADE ON THE GROUND OF THE ASSESSEES FAILURE TO DEDUCT TAX AT SOURCE. IT HAS BEEN SUBMITTED BY THE LD. AR THAT NO IDENTICAL DISALLOWANCE HAD BEEN MADE EITHER IN THE PRECEDING OR SUBSEQUENT ASSESSMENT YEARS AND THE DEPARTMENT HAS ACCEPTED THE ANNUAL MA INTENANCE CHARGES PAID TO CISCO SYSTEMS INTERNATIONAL BV IN T HESE YEARS BUT HAS GIVEN AN ALTOGETHER NEW DIMENSION TO THE IS SUE BY TAKING A VIEW THAT ANNUAL MAINTENANCE CHARGES PAID WERE IN THE NATURE OF FEE FOR TECHNICAL SERVICES AND THAT THE PAYMENT FOR PURCHASE OF MACHINERY HAD AN ELEMENT OF ROYALTY IN IT AND, THER EFORE, THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE PRIOR T O MAKING PAYMENT FOR THE ANNUAL MAINTENANCE CHARGES. THE LD . AR HAS REFERRED TO VOLUMINOUS DOCUMENTS CLAIMING TO HAVE B EEN FILED BEFORE THE LOWER AUTHORITIES IN THIS REGARD WHICH I NCLUDE AGREEMENTS, INVOICES AND FAQS ISSUED BY CISCO. IT HAS ALREADY ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 32 BEEN SUBMITTED BY THE LD. AR THAT THESE DOCUMENTS W ERE ENTIRELY DISREGARDED BY THE LOWER AUTHORITIES AND EVEN THE S UBMISSIONS OF THE ASSESSEE WERE NOT CONSIDERED. IT HAS BEEN EMPH ASISED BY THE LD. AR THAT THE ANNUAL MAINTENANCE CONTRACT WAS FOR THE PURPOSE OF PROVIDING REGULAR MAINTENANCE SERVICES A ND IT DID NOT HAVE ANY ELEMENT OF MAKE AVAILABLE. ON THE OTHER HAND, IT IS THE CONTENTION OF THE DEPARTMENT THAT NO DETAILS WERE F ILED BEFORE THE ASSESSING OFFICER AND A REFERENCE HAS ALSO BEEN MAD E TO THE COMMENTS CONTAINED IN THE SPECIAL AUDIT REPORT WHER EIN IT HAS BEEN MENTIONED THAT THE ASSESSEE HAD NOT COOPERATED DURING THE PROCEEDINGS OF SPECIAL AUDIT. IT HAS ALREADY BEEN POINTED OUT BY THE LD. C.I.T. DR THAT EVEN THE LD. DRP HAS TAKEN N OTE OF NON- COMPLIANCE BY THE ASSESSEE DURING THE COURSE OF SPE CIAL AUDIT AND FURTHER THAT THE RELEVANT DOCUMENTS IN RESPECT OF THIS CLAIM WERE NOT FURNISHED BEFORE THE LOWER AUTHORITIES. T HUS, THE STAND OF THE DEPARTMENT AND THE ASSESSEE IS CONTRARY ON T HE FACTUAL ASPECT OF THE ISSUE I.E. AS TO WHETHER THE ASSESSEE HAD PROVIDED THE RELEVANT DETAILS AND DOCUMENTS BEFORE THE ASSES SING OFFICER OR NOT. LOOKING INTO THE FACTS OF THE CASE AND IN THE INTEREST OF JUSTICE, IT IS OUR CONSIDERED OPINION THAT THE ISSU E SHOULD BE RE- EXAMINED BY THE ASSESSING OFFICER SPECIALLY IN THE LIGHT OF CLAIM ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 33 OF THE ASSESSEE THAT THE ASSESSEE HAD SUBMITTED VOL UMINOUS DOCUMENTS AND EXPLANATIONS BEFORE THE ASSESSING OFF ICER WHICH HAD NOT BEEN GIVEN DUE CREDENCE BY THE ASSESSING OF FICER. ACCORDINGLY, THE ISSUE OF PAYMENT OF ANNUAL MAINTEN ANCE CHARGES PAID TO CISCO SYSTEM INTERNATIONAL BV STANDS RESTOR ED TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO THE ASSESSING OFFICER TO RE-EXAMINE THE ISSUE AND PASS APPROPRIATE ORDERS IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. WE ALSO DIRECT THE ASSESSEE T O COOPERATE WITH THE ASSESSING AUTHORITY AND FURNISH ALL THE RELEVAN T DETAILS AND DOCUMENTS WHEN CALLED UPON TO DO SO BY THE ASSESSIN G OFFICER FAILING WHICH THE ASSESSING OFFICER SHALL BE AT LIB ERTY TO PROCEED EX PARTE QUA THE ASSESSEE AND PASS APPROPRIATE ORDERS IN ACCORDANCE WITH LAW. 5.2.1 GROUND NO. 2 STANDS ALLOWED FOR STATISTICAL PURPOSES. 5.3.0 GROUND NO. 3 CHALLENGES THE DISALLOWANCE OF RS. 2,60,90,328/- BEING NON-TAXABLE ALLOWANCES PAID TO THE EXPATRIATES. THIS ADDITION PERTAINS TO THE DIFFERE NTIAL AMOUNT WHICH THE ASSESSEE HAD PAID TO AT&T WORLDWIDE PERSO NNEL SERVICES INC. BEING A SUM OF RS. 3.90 CRORE BEING S ALARY AND OTHER EXPENSES PAID TO EXPATRIATES OUTSIDE INDIA AND THE TAXABLE SALARY ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 34 RETURNED BY THE EXPATRIATES AMOUNTING TO RS. 1.29 C RORE. IN THIS REGARD, THE ASSESSEE HAS SUBMITTED COPIES OF MASTER SERVICE AGREEMENT AND HAS ALSO SUBMITTED THAT COST PLUS MAR K-UP OF 8% HAD BEEN CHARGED IN THIS REGARD. IT HAS ALSO BEEN SUBMITTED THAT THE ENTIRE COST HAS BEEN RECOVERED BY THE ASSESSEE AS INCOME ALONG WITH MARK-UP. THE LD. AR HAS ALSO SUBMITTED THAT THE DIFFERENCE BETWEEN THE TWO AMOUNTS WAS ON ACCOUNT O F EXPENSES INCURRED ON BEHALF OF THE EXPATRIATES WHICH WERE IN THE NATURE OF REIMBURSEMENTS AND WERE NOT IN THE NATURE OF SALARY WHICH WOULD FALL WITHIN THE AMBIT OF TAXABILITY UNDER THE INDIAN INCOME TAX ACT. IT HAS BEEN SUBMITTED THAT FORM 16 HAD BE EN ISSUED TO THE EXPATRIATES ONLY FOR THE AMOUNT/S WHICH HAD BEE N PAID AS SALARY AND, THEREFORE, THE DIFFERENCE AROSE. THE L D. C.I.T. DR HAS EMPHASISED THAT THE INVOICES SUBMITTED BY THE ASSES SEE IN THIS REGARD WERE NOT SPECIFIC AND CLEAR SO AS TO VERIFY THE CLAIM OF THE ASSESSEE IN THIS REGARD. THE LD. C.I.T. DR HAS ALS O REFERRED TO THE OBSERVATIONS OF THE LD. DRP ON THE ISSUE WHEREIN IT HAS BEEN NOTED BY THE LD. DRP THAT THE ASSESSEE DID NOT SUBM IT ANY RECONCILIATION STATEMENT TO JUSTIFY ITS CLAIM THAT THE DIFFERENTIAL SUM OF RS. 2,60,90,328/- ACTUALLY REPRESENTED THE N ON-TAXABLE COMPONENT. THE LD. C.I.T. DR, HOWEVER, HAS SUBMITT ED THAT THE ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 35 MATTER COULD BE RE-EXAMINED BY THE ASSESSING OFFICE R. ACCORDINGLY, IN VIEW OF THE DIVERGENT CLAIMS OF BOT H THE PARTIES REGARDING THE FACTUAL ASPECT OF THE ISSUE AND IN TH E INTEREST OF JUSTICE, WE DEEM IT FIT TO RESTORE THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO THE ASSESSI NG OFFICER TO RE- EXAMINE THE ISSUE AND PASS APPROPRIATE ORDERS IN AC CORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY TO THE ASSESS EE TO PRESENT ITS CASE. WE ALSO DIRECT THE ASSESSEE TO COOPERATE WITH THE ASSESSING AUTHORITY AND FURNISH ALL THE RELEVANT DE TAILS AND DOCUMENTS WHEN CALLED UPON TO DO SO BY THE ASSESSIN G OFFICER FAILING WHICH THE ASSESSING OFFICER SHALL BE AT LIB ERTY TO PROCEED EX PARTE QUA THE ASSESSEE AND PASS APPROPRIATE ORDERS IN ACCORDANCE WITH LAW. 5.3.1 GROUND NO. 3 STANDS ALLOWED FOR STATISTICAL PURPOSES. 5.4.0 GROUND NO 4 OF THE ASSESSEES APPEAL CHALLEN GES THE DISALLOWANCE OF GRATUITY AMOUNTING TO RS. 48,51,041 /- PERTAINING TO EMPLOYEES WHO HAVE BEEN TRANSFERRED FROM AT&T GL OBAL NETWORK SERVICES INDIA PVT. LTD. IT IS SEEN THAT TH E DISALLOWANCE HAS BEEN MADE ON THE GROUND THAT IT IS JUST A TRANS FER OF LIABILITY FROM THE ASSESSEE COMPANY TO AT&T GLOBAL NETWORK SE RVICES INDIA PVT. LTD. AND IT IS NOT AN ACTUAL PAYMENT TO THE EMPLOYEES ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 36 DIRECTLY ON THEIR ATTAINING SUPERANNUATION OR IN TH E EVENT OF THEIR RESIGNATION. IT HAS BEEN SUBMITTED BY THE LD. AR T HAT THE ASSESSEE COMPANY HAS MADE THE PAYMENT OF GRATUITY L IABILITY TO AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. WHICH WAS RECORDED AS A LIABILITY IN THE BOOKS OF ACCOUNTS OF THAT COM PANY. RELIANCE HAS ALSO BEEN PLACED ON THE EVIDENCE IN THE FORM OF BANK STATEMENT WHICH EVIDENCED THE PAYMENT OF THE IMPUGN ED AMOUNT TO THE OTHER COMPANY. IT HAS ALSO BEEN SUBMITTED TH AT SINCE THE TRANSFERRED EMPLOYEES CONTINUED THEIR EMPLOYMENT WI TH THE OTHER COMPANY, THEREFORE, THE QUESTION OF AGNS MAKING PAY MENT TO SUCH EMPLOYEES AT THE TIME OF THEIR RESIGNATION/SUP ERANNUATION DOES NOT ARISE. IT HAS ALSO BEEN EMPHASISED THAT O UT OF THE TRANSFERRED EMPLOYEES, FOUR EMPLOYEES RESIGNED FROM AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. AND THEIR G RATUITY AMOUNT HAD BEEN DULY PAID BY THAT COMPANY BUT HAD NOT BEEN CLAIMED AS A DEDUCTION BY THAT OTHER COMPANY IN ITS RETURN OF INCOME. APART FROM THIS, RELIANCE HAS BEEN PLACED ON THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF W.T. SUREN & CO. LTD. (19 88) 230 ITR 643 (SC) FOR THE PROPOSITION THAT WHERE THE EMPLOYE ES ARE TRANSFERRED FROM ONE UNIT TO ANOTHER WITH CONTINUIT Y OF SERVICES, PAYMENT OF GRATUITY TO TRANSFEREE COULD BE ALLOWED AS DEDUCTION ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 37 IN THE HANDS OF THE ASSESSEE. ON THE OTHER HAND, I T IS THE CONTENTION OF THE DEPARTMENT THAT THE LD. DRP HAS N OTED THAT THE TAXPAYER HAD NOT BEEN FORTHCOMING IN BRINGING OUT T HE RELEVANT FACTS ON RECORD TO ENABLE ADJUDICATION OF THE ISSUE IN PROPER PERSPECTIVE. IT HAS BEEN NOTED BY THE LD. DRP THAT IN THE ABSENCE OF RELEVANT FACTS, IT COULD NOT BE SAID THA T THE IMPUGNED AMOUNT HAD BECOME PAYABLE DURING THE YEAR UNDER CON SIDERATION AND WAS THEREFORE ALLOWABLE U/S 40 A(7)(B) OF THE A CT. THE LD. DRP HAS ALSO NOTED THAT THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF W.T. SUREN & CO. LTD. (SUPRA) PERTAI NED TO THE 1922 ACT IN WHICH THERE WAS NO PROVISION EQUIVALENT TO SECTION 40A(7) OF THE 1961 ACT. ON AN OVERALL CONSIDERATIO N OF THE FACTS, ESPECIALLY IN VIEW OF THE SUBMISSIONS OF THE LD. AR THAT NO DEDUCTION HAS BEEN CLAIMED BY THE TRANSFEREE COMPAN Y IN THIS REGARD AND FURTHER THE PAYMENT OF GRATUITY OF TRANS FERRED EMPLOYEES HAD BEEN PAID THROUGH BANKING CHANNELS WH ICH COULD BE EVIDENCED FROM THE BANK STATEMENT COUPLED WITH T HE FACT THAT THE LD. DRP HAS NOTED THAT THE TAXPAYER HAD NOT BEE N FORTHCOMING IN BRINGING RELEVANT FACTS ON RECORD TO FACILITATE THE ADJUDICATION, IN OUR CONSIDERED OPINION, ENDS OF JU STICE WOULD BE MET IF THIS ISSUE IS ALSO RESTORED TO THE FILE OF T HE ASSESSING OFFICER ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 38 FOR EXAMINING THEM AFRESH AND THEREAFTER PASSING AN ORDER IN ACCORDANCE WITH LAW. WE DEEM IT FIT TO RESTORE THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIO N TO THE ASSESSING OFFICER TO RE-EXAMINE THE ISSUE AND PASS APPROPRIAT E ORDERS IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. WE ALSO DIRECT THE ASSESSEE T O COOPERATE WITH THE ASSESSING AUTHORITY AND FURNISH ALL THE RELEVAN T DETAILS AND DOCUMENTS WHEN CALLED UPON TO DO SO BY THE ASSESSIN G OFFICER FAILING WHICH THE ASSESSING OFFICER SHALL BE AT LIB ERTY TO PROCEED EX PARTE QUA THE ASSESSEE AND PASS APPROPRIATE ORDERS IN ACCORDANCE WITH LAW. 5.4.1 ACCORDINGLY, GROUND NO. 4 STANDS ALLOWED FOR STATISTICAL PURPOSES. 5.5.0 WITH RESPECT TO GROUND NO 5 PERTAINING TO DI SALLOWANCE OF PRIOR PERIOD EXPENSES, SINCE IT HAS BEEN SUBMITT ED BY THE LD. AR THAT THIS GROUND IS NOT BEING PRESSED, THE SAME IS BEING DISMISSED AS NOT PRESSED. 5.6.0 WITH RESPECT TO GROUND NO. 6 WHICH PERTAINS TO DISALLOWANCE OF DIFFERENTIAL AMOUNT OF MARK-UP WITH RESPECT TO SERVICES PROVIDED BY THE ASSESSEE TO AT&T GLOBAL NE TWORK SERVICES INDIA PVT. LTD. LEADING TO AN ADDITION OF RS. 53,15,246/- ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 39 AND GROUND NO. 7 PERTAINING TO ADDITION OF RS. 2,46 ,141/- BEING ADDITION ON ACCOUNT OF NOTIONAL INTEREST INCOME NOT CHARGED FROM AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD., IT IS SEEN THAT BOTH THESE ISSUES ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11 IN ITA NO. 1016/DEL/2015. VIDE ORDER DATED 15 TH FEBRUARY, 2018, AN IDENTICAL ISSUE HAS BEEN DISCUSSED AND ADJ UDICATED BY THE COORDINATE BENCH OF THE TRIBUNAL IN PARAGRAPHS 10 TO 16 WHICH ARE BEING REPRODUCED HEREUNDER FOR READY REFE RENCE:- 10. THE AO MADE ADDITION OF RS.1,84,14,784/- ON ACCOUNT OF NON-CHARGING OF MARK-UP ON SUPPORT SERVI CE CHARGES BILLED TO AT&T GLOBAL NETWORK SERVICES INDI A PVT. LTD. (AGNSI), A GROUP COMPANY OF THE TAXPAYER WHICH HAS STARTED ITS OPERATION FROM AY 2008-09 ON THE GROUND THAT WITHOUT ANY PROFIT MOTIVE, NO SUCH SERVICES CAN BE PROVIDED IN A BUSINESS SET UP. THE AO NOTICED THAT THE TAXPAYER HAS CHARGED MARK UP OF 8% FROM AGNSI IN AY 2008- 09 AND FIRST THREE MONTHS OF AY 2009-10 AND THEREAFTER UNILATERALLY REVERSED THE SAME ON THE PL EA THAT IT WAS MANAGEMENT DECISION AND AO CONSIDERED IT AN AFT ER- THOUGHT DUE TO LACK OF COMPLETE DOCUMENTATION IN TH IS REGARD. THE LD. DRP HELD THE DECISION OF AO TO THE EXTENT THAT THE AO SHOULD RESTRICT THE MARK-UP AS FINALLY DETERMINED BY THE TPO PURSUANT TO THE DIRECTIONS IS SUED BY THIS ORDER ON TP MATTERS. 11. CHALLENGING THE IMPUGNED ORDER PASSED BY AO/DRP , THE LD. AR FOR THE TAXPAYER CONTENDED THAT THERE IS NO PROVISION UNDER THE ACT TO IMPUTE NOTIONAL INCOME F OR DOMESTIC TRANSACTIONS AND MOREOVER TRANSFER PRICING PROVISION AS HAS BEEN AMENDED BY THE FINANCE ACT, 2 012 SPECIFICALLY TO COVER THE DOMESTIC TRANSACTIONS, HO WEVER ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 40 W.E.F. APRIL 1,2013, AND WOULD NOT BE APPLICABLE TO THE TRANSACTION PRIOR TO APRIL 1, 2013; THAT NO MARK UP IS APPLICABLE AND REQUIRED TO BE CHARGED ON THE SUPPOR T SERVICES CHARGES PAID BY AGNSI TO ACSI AS IS DULY EXPLAINED IN THE AGREEMENT BETWEEN ACSI AND AGNS; T HAT IT WAS DECIDED BETWEEN THE PARTIES THAT NO MARK UP IS CHARGED BY ACSI ON THE SUPPORT SERVICE CHARGES BILL ED TO AGNS AND RECOVERY SHOULD BE MADE ON COST TO COST BA SIS AS PER AGREEMENT; THAT COMMERCIAL EXPEDIENCY OF A PARTICULAR TRANSACTION WOULD BE EXAMINED FROM THE PERSPECTIVE OF A BUSINESSMAN; THAT BOTH AGNSI AND T HE TAXPAYER ARE PROFIT MAKING ENTITIES AND THERE WAS N O TAX INCENTIVES FOR THE PURPOSE TO DEFLATE THE REVENUES EARNED BY THE TAXPAYER AND RELIED UPON THE JUDGMENT OF HON 'BLE APEX COURT IN CIT VS. A. RAMAN & COMPANY (1968 AIR 49) AND THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COUR T IN SMT. SUMANLATA DIDWANIA VS. ITO (1986) 17 ITD 830 ( ALL.). 12. HOWEVER, ON THE OTHER HAND, THE LD. DR FOR THE REVENUE CONTENDED THAT IF SOMETHING IS CHARGED BY A COMPANY , THERE MUST BE SOME AGREEMENT THAT THERE IS NO MARK UP AND IN THIS CASE, NO SUCH AGREEMENT HAS BEEN PRODUC ED AND RELIED UPON THE ORDER PASSED BY THE AO/DRP. 13. UNDISPUTEDLY, THE TAXPAYER AS WELL AS AGNSI, IT S GROUP COMPANY ARE PROFIT MAKING ENTITY AND THERE IS NO TA X INCENTIVE FOR THE PURPOSE TO DEFLATE THE REVENUES E ARNED BY THE TAXPAYER. EVEN IN CASE HIGHER AMOUNT HAVE BEEN CHARGED BY THE TAXPAYER FROM AGNSI, NO ADDED TAX ADVANTAGE IS BEING AVAILED BY THE TAXPAYER BY CHARG ING SUPPORT SERVICES COST FROM AGNSI AT COST TO COST BA SIS WITHOUT ANY MARK UP. 14. ISSUE OF NON-CHARGING OF MARK UP ON SUPPORT SER VICES BEING BUILT UP TO AGNSI HAS COME UP IN THE APPEAL F OR AGNSI FOR AY 2008-09 TO AY 2011-12 WHEREIN THE REVE NUE HAS RAISED A GROUND THAT SUCH SUPPORT SERVICES EXPENDITURE SHOULD BE DISALLOWED IN THE BOOKS OF AC COUNT OF AGNSI. 15. THE COORDINATE BENCH OF THE TRIBUNAL IN CASE OF AGNSI FOR AY 2009-10 IN ITA NO.2538/DEL/2014 UPHELD THE ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 41 DECISION RENDERED BY THE LD. DRP IN FAVOUR OF THE A SSESSEE ON IDENTICAL ISSUE BY RETURNING THE FOLLOWING FINDI NGS :- '75. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT IONS AND PERUSED THE FACTS OF THE CASE. THE FACTS OF THE CASE AS EXPLAINED BY THE APPELLANT ARE THAT, ACSI, A GROUP COMPANY OF APPELLANT AND AN ENTITY IN OPERATIONS FO R MORE THAN 10 YEARS BY THEN, WAS HAVING DEVELOPED SUPPORT SERVICES FUNCTIONS. ACCORDINGLY, SINCE SUCH FUNCTIO NS WERE ALREADY HOUSED IN ACSI, APPELLANT ENTERED INTO A SU PPORT SERVICES AGREEMENT WITH ACSI FOR PROVISION OF THE A FORESAID SUPPORT SERVICES TO APPELLANT. WE HAVE GONE THROUGH THE SUBMISSION OF THE ASSESSEE AND FIND THAT NECESSARY EVIDENCES IN THE FORM OF THE SUPPORT SERVICE AGREEM ENT, INVOICES, THE DETAILS OF PAYMENTS MADE AND THE BANK STATEMENTS EVIDENCING THE PAYMENT THEREOF HAVE BEEN FURNISHED BY THE ASSESSEE TO PROVE THE GENUINENESS OF THE EXPENSES. WE FIND THAT NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE DEPARTMENT TO DISPUTE THE SAID CLAIM. RATHER, THE DEPARTMENT'S CLAIM IS MERELY BASED ON SUSPICION AS ALSO NOTED BY THE DRP WHILE DELETING T HE ABOVE DISALLOWANCE. WE ALSO FIND THAT EVEN OTHERWIS E, BOTH ACSI AND APPELLANT ARE PROFIT MAKING ENTITIES AND HENCE, THERE WAS NO TAX INCENTIVE FOR THE PARTIES T O DEFLATE THE REVENUES EARNED BY APPELLANT. THE DECISION WAS TOTALLY BASED ON COMMERCIAL CONSIDERATIONS. BY TRANSFERRING THE COST FROM ACSI TO APPELLANT NO ADDED TAX ADVANTAGE IS BEING AVAILED BY APPELLANT. WE ARE ALSO OF THE VIEW THAT COMMERCIAL EXPEDIENCY OF A PARTICULAR EXPENDITURE I NCURRED BY A BUSINESSMAN SHOULD BE EXAMINED FROM THE PERSPECTIVE OF THE BUSINESS PERSON AND NO THIRD PAR TY, INCLUDING THE TAX AUTHORITIES, IS ENTITLED TO QUEST ION THE COMMERCIAL REASONING/ JUSTIFICATION OF THE EXPENDIT URE SO INCURRED. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING JUDICIAL PRECEDENTS FURNISHED BY THE ASSESSEE: I. CIT V. PANIPAT WOOLLEN & GENERAL MILLS CO LTD (1 03 ITR 66) (SUPREME COURT) II. CIT V. SALES MAGNESITE (P) LTD [1995) 214 ITR 1 III. BINODIRAM BALCHAND VS. COMMISSIONER OF INCOME TAX (48 1TR 548) IV. CALCUTT A LANDING AND SHIPPING CO LTD VS. CIT (65 ITR 1) (CAL HIGH COURT) V. CIT VS B DALMIA CEMENT LTD (254 ITR 377) ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 42 76. RESPECTFULLY FOLLOWING THE PRINCIPLES LAID DOWN IN THE AFORESAID JUDICIAL PRECEDENTS, WE FIND THAT WHERE T HE APPELLANT HAS ACTUALLY INCURRED THE AFORESAID SUPPO RT SERVICES COST AND NO EVIDENCE HAS BEEN BROUGHT BY T HE DEPARTMENT TO CONTROVERT THE SAME, SUCH EXPENDITURE CANNOT BE DISALLOWED MERELY ON SUSPICION. WE AFFIRM THE FINDING OF THE LD DRP ON THIS ISSUE. IN VIEW OF THE ABOVE, THE APPEAL OF THE REVENUE ON THIS GROUND IS DISMISS ED.' 16. SO, IN THE INSTANT CASE ALSO, THE REVENUE HAS F AILED TO CONTROVERT THE INVOICES, THE DETAILS OF PAYMENT MAD E AND EVIDENCING THE PAYMENTS THEREOF TO DISPUTE THE GENUINENESS OF THE EXPENSES AND THE FACT THAT THE TAXPAYER AS WELL AS AGNSI ARE PROFIT MAKING ENTITIE S AND THERE WAS NO TAX INCENTIVES FOR THE PURPOSE TO DEFL ATE THE REVENUES EARNED BY THE TAXPAYER, THE REVENUE HAS BA SED ITS DECISION ON COMMERCIAL CONSIDERATION. MOREOVER, IN CASE OF BOTH THE RESIDENT PARTIES, TERMS AND CONDITIONS OF THE ARRANGEMENT CANNOT BE QUESTIONED BY THE REVENUE UNL ESS SPECIFICALLY PROVIDED UNDER THE ACT. IN CASE OF A C ONTRACT BY BOTH THE PARTIES WHO ARE ADMITTEDLY RESIDENT INDIAN ENTITIES, THEY MAKE THE LAW FOR THEMSELVES WHICH CA NNOT BE INTERFERED UNLESS CONTRACT IS UNLAWFUL OR SPECIA LLY BARRED BY THE LAW OF THE LAND. MOREOVER BY SUCH A D ECISION OF NOT CHARGING MARK UP BY THE TAXPAYER ON SUPPORT SERVICES CHARGES BILLED TO AGNSI, NO LOSS OF TAX HA S BEEN CAUSED TO REVENUE. SO, THE FINDINGS OF THE TPO/DRP THAT THE TAXPAYER IS NOT ONLY TO CUT CHARGES BUT MARK UP ALSO IS NOT SUSTAINABLE IN THE EYES OF LAW. SO, WE ORDER TO DELETE THE ADDITION ON ACCOUNT OF NOT CHARGING OF MARK UP ON SUPPORT SERVICES CHARGES BILLED TO AGNSI. 5.6.1 THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSM ENT YEAR 2010-11 AS AFOREMENTIONED, WE ORDER DELETION OF ADD ITION ON ACCOUNT OF NOTIONAL CHARGING OF MARK-UP AS SUSTAINE D BY THE LD. DRP. ON THE SAME REASONING, WE ALLOW GROUND NO. 7 ALSO AND ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 43 HOLD THAT NOTIONAL INTEREST COULD NOT HAVE BEEN CHA RGED ON THIS ACCOUNT AND WE ORDER DELETION OF THIS ADDITION ALSO . 5.6.2 ACCORDINGLY, GROUND NOS. 6 AND 7 STAND ALLOW ED. 5.7.0 WITH RESPECT TO GROUND NO. 8 PERTAINING TO A DDITION OF RS. 15,45,155/- IN RESPECT OF EXPENSES INCURRED ON BEHALF OF EXPATRIATES, THE LD. AR HAS SUBMITTED THAT THIS GRO UND IS NOT BEING PRESSED. ACCORDINGLY, GROUND NO. 8 OF THE AS SESSEES APPEAL STANDS DISMISSED AS NOT PRESSED. 5.8.0 GROUND NO. 9 PERTAINS TO ADDITION OF RS. 7,9 2,00,000/- ON ACCOUNT OF PERCENTAGE OF PROFIT OF NETWORK CONNE CTIVITY SERVICES WHICH HAS BEEN ADDED TO THE INCOME OF THE ASSESSEE ON A NOTIONAL BASIS. THE MAIN REASON BEHIND THIS ADDITION IS THE REDUCTION IN REVENUE OF NETWORK CONNECTIVITY SERVICES SEGMENT FR OM RS. 62.30 CRORES TO RS. 7.11 CRORE FOR THE REASON THAT THE AS SESSEE HAD TERMINATED THE SUPPORT SERVICES AGREEMENT WITH VSNL AFTER THE COMMENCEMENT OF BUSINESS OF AT&T GLOBAL NETWORK SER VICES INDIA PVT. LTD. IT IS THE ALLEGATION OF THE DEPART MENT THAT THE REDUCTION OF REVENUES UNDER THIS SEGMENT WAS ON ACC OUNT OF TERMINATION OF THE SUPPORT SERVICES. IT IS A FURTH ER ALLEGATION THAT THIS ARRANGEMENT AND TERMINATION OF AGREEMENT HAD B EEN EXECUTED BY THE ASSESSEE WITH A VIEW TO REDUCE ITS TAXABLE PROFITS. ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 44 IN THIS REGARD, THE LD. DRP HAS ALSO NOTED THAT THE TAXPAYER HAS NOT EXPLAINED/BROUGHT ON RECORD ANY DOCUMENT EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE DRP SO AS TO EXPLAI N:- I) WHY A NEW ENTITY NAMELY AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. WAS SET UP BY THE AT&T GRO UP? II) WHAT WERE THE CONTENTS OF THE RESTRUCTURING EXERCIS E OF THE AT&T GROUP OPERATIONS IN INDIA? III) IF THERE WAS ANY RESOLUTION OF THE BOARD OF DIRECTO RS ON THIS ISSUE, WHAT WERE THE CONTENTS OF THE SAID RESOLUTION? IV) WHETHER THE CLIENTS OF THE AT&T WERE INFORMED OF TH E EMPLOYEE STRUCTURE OR WHETHER THEY REMAINED UNDER THE IMPRESSION THAT THE SERVICES WERE BEING RENDERE D TO THEM IN THE SAME MANNER BY THE SAME ENTITY? V) WHETHER THE RELEVANT FACTS WERE BROUGHT TO THE KNOWLEDGE OF ANY COMPETENT AUTHORITY IN THIS REGARD ? 5.8.1 APART FROM THIS, THE LD. DRP HAS ALSO NOTED THAT 29 EMPLOYEES WERE SHIFTED FROM THE ASSESSEE COMPANY TO AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. WHO WERE PE RFORMING RELEVANT ACTIVITIES IN THIS SEGMENT AND FURTHER THE RE WAS A TRANSFER OF ASSETS TO AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 45 FROM THE ASSESSEE COMPANY TO THE TUNE OF RS. 6,71,1 57,014/-. HOWEVER, ON THE OTHER HAND, IT IS THE CONTENTION OF THE ASSESSEE THAT NEITHER WERE ANY EMPLOYEES TRANSFERRED WITH RE SPECT TO THIS SEGMENT NOR WERE ANY ASSETS TRANSFERRED TO THE OTHE R COMPANY WITH RESPECT TO THIS SEGMENT AND, THEREFORE, THERE WAS NO TRANSFER OF BUSINESS AS ALLEGED BY THE DEPARTMENT. THUS, IN VIEW OF THE CONTRADICTORY STAND OF BOTH THE PARTIES WITH REFERE NCE TO THE RELEVANT FACTS, WE HAVE NO OTHER OPTION BUT TO REST ORE THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO THE ASSESSING OFFICER TO RE-EXAMINE THE ISSUE AND PASS APPROPRIATE ORDERS IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPO RTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. WE ALSO DIRECT THE A SSESSEE TO COOPERATE WITH THE ASSESSING AUTHORITY AND FURNISH ALL THE RELEVANT DETAILS AND DOCUMENTS WHEN CALLED UPON TO DO SO BY THE ASSESSING OFFICER FAILING WHICH THE ASSESSING OFFIC ER SHALL BE AT LIBERTY TO PROCEED EX PARTE QUA THE ASSESSEE AND PASS APPROPRIATE ORDERS IN ACCORDANCE WITH LAW. 5.8.2 ACCORDINGLY, GROUND NO. 9 ALSO STANDS ALLOWE D FOR STATISTICAL PURPOSES. 5.9.0 IN RESPECT OF GROUND NO. 10 PERTAINING TO DI SALLOWANCE OF YEAR END PROVISIONING AMOUNTING TO RS. 1,26,30,5 79/-, IT IS ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 46 SEEN THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF T HE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FO R ASSESSMENT YEAR 2010-11 IN ITA NO. 1016/DEL/2015. THE RELEVAN T OBSERVATIONS OF THE ITAT ARE CONTAINED IN PARA 17 T O 26 AND THE SAME ARE BEING REPRODUCED HERE IN UNDER FOR A READY REFERENCE:- 17. AO DISALLOWED AN AMOUNT OF RS.56,15,035/- AND ADDED BACK THE SAME TO THE INCOME OF THE TAXPAYER O N THE GROUND THAT THE TAXPAYER DOES NOT HAVE THE BASI S OF RECORDING YEAR END ACCRUAL. THE LD. DRP APPROVED TH E PROPOSED ADDITION ON THIS ACCOUNT. 18. UNDISPUTEDLY, THE DETAIL OF YEAR END ACCRUAL OUTSTANDING AS ON MARCH 31, 2010 ARE AS UNDER :- PARTICULARS ACCRUALS AS ON M ARCH 31, 2010 ACCRUAL CONTROL ACCOUNT 11,25,51 ,600 SALARY PAYABLE 50,26,782 IPA ACCRUALS 24,21,901 SIP ACCRUALS 51,00,353 INTERNAL LSP LIABILITY 25,24,592 TOTAL 12,76,25,228 19. IT IS ALSO NOT IN DISPUTE THAT OUT OF THE AFORE SAID AMOUNT OF RS.12.76 CRORES, INVOICES OF RS.10.69 CRO RES WERE SUBMITTED AND ACCEPTED BY THE AO. IT IS ALSO N OT IN DISPUTE THAT REVERSAL ENTRIES OF RS.1.50 CRORES WER E MADE IN THE SUCCEEDING YEARS BY GIVING BENEFIT OF T HE SAME TO THE TAXPAYER. IT IS ALSO NOT IN DISPUTE THA T RS.5.02 CRORES FOR THE DISALLOWANCE MADE IN THE PRECEDING ASSESSMENT YEAR HAS BEEN ALLOWED TO THE TAXPAYER AGAINST THE ABOVE DISALLOWANCE RESULTING I N CREDIT OF RS.4.46 CRORES. IT IS ALSO NOT IN DISPUTE THAT TAXPAYER IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG AND HAS PRODUCED DOCUMENTARY EVIDENCE SUPPORTING PAYMENT/REVERSAL OF MORE THAN 95% OF THE EXPENSES REPRESENTED BY THE YEAR END ACCRUAL. ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 47 20. THE LD. AR FOR THE TAXPAYER CONTENDED THAT YEAR END ACCRUALS BEING PROVISIONS MADE TOWARDS ROUTINE BUSINESS EXPENDITURE INCURRED ARE BASED ON PAST TRE NDS AS WELL AS SCIENTIFIC AND REASONABLE BASIS AND ARE LIABLE TO BE ALLOWED AS DEDUCTION IN VIEW OF THE DECISIONS RENDERED BY HON'BLE APEX COURT IN ROTORK CONTROLS I NDIA (P) LTD. - 314 ITR 62. 21. THE LD. AR FOR THE TAXPAYER FURTHER CONTENDED T HAT THE ISSUE IS ALSO COVERED BY THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN CASE OF AGNSI I N ITA NO.1059/DEL/2015 FOR AY 2010-11. 22. LD. DR FOR THE REVENUE CONTENDED THAT BEFORE TH E LD. DRP, THE TAXPAYER HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE NOR PRESSED THE ADDITION AND MOREOVER AO H AS ALREADY BEEN DIRECTED TO VERIFY AND PROCEED ACCORDI NGLY. 23. SO FAR AS QUESTION OF NOT PRESSING THE ISSUE BE FORE THE LD. DRP, AS CONTENDED BY THE LD. DR FOR THE REV ENUE, IS CONCERNED, WHEN WE SEE THE ENTIRE DISCUSSION ON THIS ISSUE IN PARA 8.1, IT GOES TO PROVE THAT THE ISSUE WAS PRESSED AND DISPOSED OF BY THE LD. DRP ON MERITS AN D MERELY ON THE BASIS OF ONE SENTENCE IT CANNOT BE SA ID THAT THE ISSUE HAS NOT BEEN PRESSED. 24. HON'BLE SUPREME COURT IN CASE CITED AS ROTORK CONTROLS INDIA (P) LTD. (SUPRA) DECIDED THE IDENTIC AL ISSUE IN FAVOUR OF THE TAXPAYER BY RETURNING THE FOLLOWIN G FINDINGS :- ' HELD, REVERSING THE DECISION OF THE HIGH COURT, T HAT THE VALVE ACTUATORS, MANUFACTURED BY THE ASSESSEE, WERE SOPHISTICATED GOODS AND STATISTICAL DATA INDICATED THAT EVERY YEAR SOME OF THESE WERE FOUND DEFECTIVE; THAT VALVE ACTUATOR BEING A SOPHISTICATED ITEM NO CUSTOM ER WAS PREPARED TO BUY A VALVE ACTUATOR WITHOUT A WARRANTY. THEREFORE, THE WARRANTY BECAME AN INTEGRA L PART OF THE SALE PRICE; IN OTHER WORDS, THE WARRANT Y STOOD ATTACHED TO THE SALE PRICE OF THE PRODUCT. IN THIS CASE THE WARRANTY PROVISIONS HAD TO BE RECOGNIZED ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 48 BECAUSE THE ASSESSEE HAD A PRESENT OBLIGATION AS A RESULT OF PAST EVENTS RESULTING IN AN OUTFLOW OF RE SOURCES AND A RELIABLE ESTIMATE COULD BE MADE OF THE AMOUNT OF THE OBLIGATION. THEREFORE, THE ASSESSEE HAD INCURRE D A LIABILITY DURING THE ASSESSMENT YEAR WHICH WAS ENTI TLED TO DEDUCTION UNDER SECTION 37 OF THE INCOME-TAX ACT , 1961. THE PRESENT VALUE OF A CONTINGENT LIABILITY, LIKE T HE WARRANTY EXPENSE, IF PROPERLY ASCERTAINED AND DISCOUNTED ON ACCRUAL BASIS CAN BE AN ITEM OF DEDUC TION UNDER SECTION 37. THE PRINCIPLE OF ESTIMATION OF TH E CONTINGENT LIABILITY IS NOT THE NORMAL RULE. IT WOU LD DEPEND ON THE NATURE OF THE BUSINESS, THE NATURE OF SALES, THE NATURE OF THE PRODUCT MANUFACTURED AND S OLD AND THE SCIENTIFIC METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE. IT WOULD ALSO DEPEND UPON THE HISTORICAL TREND AND UPON THE NUMBER OF ARTICLES PRODUCED. A PROVISION IS A LIABILITY WHICH CAN BE MEASURED ON LY BY USING A SUBSTANTIAL DEGREE OF ESTIMATION. A PROVISI ON IS RECOGNIZED WHEN: (A) AN ENTERPRISE HAS A PRESENT OBLIGATION AS A RESULT OF A PAST EVENT; (B) IT IS P ROBABLE THAT AN OUTFLOW OF RESOURCES WILL BE REQUIRED TO SE TTLE THE OBLIGATION, AND (C) A RELIABLE ESTIMATE CAN BE MADE OF THE AMOUNT OF THE OBLIGATION. IF THESE CONDITIONS ARE N OT ME, NO PROVISION CAN BE RECOGNIZED. THE PRINCIPLE IS THAT IF THE HISTORICAL TREND INDIC ATES THAT A LARGE NUMBER OF SOPHISTICATED GOODS WERE BEING MANUFACTURED IN THE PAST AND THE FACTS SHOW THAT DEFECTS EXISTED IN SOME OF THE ITEMS MANUFACTURED A ND SOLD, THEN PROVISION MADE FOR WARRANTY IN RESPECT O F SUCH SOPHISTICATED GOODS WOULD BE ENTITLED TO DEDUC TION FROM THE GROSS RECEIPTS UNDER SECTION 37.' 25. WHEN UNDISPUTEDLY NO MISTAKE HAS BEEN POINTED O UT BY THE AO IN THE CALCULATION NOR IT IS THE CASE OF THE AO THAT THE TAXPAYER HAD NOT PAID CERTAIN BILLS AND TH E TAXPAYER IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG AND THE EXPENSES ARE HAVING ELEMENT OF ESTIMATION A S WELL AS SCIENTIFIC BASIS, KEEPING IN VIEW THE PAST TREND, ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 49 THE EXPENSES ARE REQUIRED TO BE ALLOWED IN THE YEAR OF CREATION ITSELF, PARTICULARLY, WHEN THE REVENUE AUTHORITIES HAS ALLOWED THE ENTIRE CLAIM OF EXPENDI TURE IN THE SUBSEQUENT YEARS. 26. SO, FOLLOWING THE LAW LAID DOWN BY THE HON'BLE APEX COURT IN ROTORK CONTROLS INDIA (P) LTD. (SUPRA) AND THE DECISION RENDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN AGNSI IN ITA NO.1059/DEL/2015 FOR AY 2010-11, WE ARE OF THE CONSIDERED VIEW THAT WHEN TH E TAXPAYER HAS WORKED OUT THE LIABILITY BY USING A SUBSTANTIAL DEGREE OF ESTIMATION BY PROVING 95% OF THE INVOICES ON THE BASIS OF HISTORICAL TREND, NO DISAL LOWANCE CAN BE MADE. SO, WE ORDER TO DELETE THIS ADDITION. 5.9.1 IN THE PRESENT APPEAL ALSO, UNDISPUTEDLY NO MISTAKE HAS BEEN POINTED OUT BY THE ASSESSING OFFICER IN TH E CALCULATION AND NOR IS IT THE CASE OF THE REVENUE THAT THE TAXP AYER HAS NOT PAID CERTAIN BILLS. IT IS ALSO UNDISPUTED THAT MOR E THAN 80% OF THE EVIDENCE/S FOR THE YEAR END PROVISIONING HAVE B EEN PRODUCED BY THE ASSESSEE AND THERE IS NO FINDING BY THE ASSE SSING OFFICER THAT THE PROVISIONING WAS NOT REASONABLE OR DID NOT HAVE ANY SCIENTIFIC BASIS. THEREFORE, RESPECTFULLY FOLLOWIN G THE LAW LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF ROTOR K CONTROLS INDIA PVT. LTD. AND ALSO THE ORDER OF THE COORDINAT E BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11 AS AFORESAID, WE ORDER DELETION OF THIS ADDITION. 5.9.2 GROUND NO. 10 ACCORDINGLY STANDS ALLOWED. ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 50 5.10.0 GROUND NO. 11 AGITATES THE ACTION OF THE DEP ARTMENT IN ALLOWING SHORT CREDIT IN RESPECT OF THE TAX DEDUCTE D AT SOURCE AND GROUND NO. 12 AGITATES NON-GRANTING OF FULL CREDIT. WE DEEM IT FIT TO RESTORE THESE ISSUES TO THE FILE OF THE AO WITH A DIRECTION TO GIVE DUE CREDIT TO THE ASSESSEE BOTH IN RESPECT OF TAX D EDUCTED AT SOURCE AND ADVANCE TAX AFTER DUE VERIFICATION AT HI S END. THE ASSESSING OFFICER SHALL ALSO GIVE AN ADEQUATE OPPOR TUNITY TO THE ASSESSEE IN THIS REGARD. ACCORDINGLY, GROUND NOS. 11 AND 12 STAND ALLOWED FOR STATISTICAL PURPOSES. 5.11.0 GROUND NOS. 13 AND 14 PERTAINING TO INCORREC T LEVY OF INTEREST U/S 234B AND 234D OF THE ACT AND WITHDRAWA L OF INTEREST UNDER SECTION 244A OF THE ACT ARE CONSEQUENTIAL AND THE AO WILL TAKE ADEQUATE STEPS IN THIS REGARD. 5.12.0 GROUND NO. 15 CHALLENGING THE INITIATION OF PENALTY PROCEEDINGS U/S 2712(1)(C) IS DISMISSED AS BEING PR EMATURE. 6.0 IN THE RESULT, THE ASSESSEES APPEAL BEARING I TA NO. 1015/DEL/2015 STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN LIGHT OF OUR SPECIFIC OBSERVATIONS AND DIRECTIONS. 7.0.0 WE NOW TAKE UP DEPARTMENTS APPEAL. THE ONL Y GROUND BEING AGITATED IS THE DIRECTION OF THE LD. DRP IN D ELETING THE ADDITION OF RS. 98,63,013/- ON ACCOUNT OF TAXES DEP OSITED ON ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 51 BEHALF OF EXPATRIATE EMPLOYEES. IN THIS REGARD, IT IS SEEN THAT THE LD. DRP HAS GIVEN A CATEGORICAL FINDING THAT THE AS SESSEE HAD BORNE THE TAXES TO THE EXTENT OF THE INCOME OFFERED FOR TAXATION IN INDIA AND THE BALANCE TAX PAYABLE IN THE HOME COUNT RY WAS BORNE BY THE EMPLOYEE/S CONCERNED. THE RELEVANT OBSERVAT IONS OF THE LD. DRP ARE CONTAINED IN PARA 11.4 OF ITS DIRECTION S AND THE SAME ARE BEING REPRODUCED HEREUNDER FOR A READY REFERENC E:- 11.4 THE PANEL HAS EXAMINED THE MATTER. THE DRAFT ASSESSMENT ORDER SHOWS THAT THE AO PROPOSED TO DISALLOW THE PAYMENT (ALONG WITH MARK-UP) FOR THE REASON THAT HE CONSIDERED THAT THE TAXPAYER HAS BOR NE THE EXPENSES OF TAX OF THE EXPAT EMPLOYEES AND DID NOT DEDUCT THE SAME WHILE REIMBURSING AT&T WPS. IN OTHE R WORDS, THE AO IS OF THE VIEW THAT ULTIMATELY THE EMPLOYEES CONCERNED SHOULD HAVE BORNE THE TAX EXPENSES RATHER THAN THE TAXPAYER AND FOR THIS REAS ON, THE TAXPAYER SHOULD HAVE PAID LESSER AMOUNT TO AT&T WPS CORRESPONDINGLY. THE AO HAS NOT DISPUTED THE TAXPAYER'S VERSION THAT THE TAX AMOUNT OF RS.83,53,530/- HAS BEEN RECOVERED ALONG WITH MARK-U P OF 8% FROM AT&T US IN AUGUST 2008. THE PRIMARY ARGUMENT OF THE AO HAS BEEN THAT THE TAXPAYER HAS BEEN BURDENED BY THE TAX OF RS.83,53,530/- WHICH SHOULD HAVE BEEN OTHERWISE PERTAINING TO THE EMPLOYEES THEMSELVES AND TO THAT EXTENT, THE PROFIT S ARE RELATIVELY LESSER. 11.4... FROM THE ABOVE, IT IS EVIDENT THAT THE TAXPAYER HAS BORNE THE TAXES TO THE EXTENT OF THE INCOME OFFERED FOR T AXATION IN INDIA BY SUCH EXPAT EMPLOYEES IN INDIA AND THE BALANCE TAX PAYABLE IN THE HOME COUNTRY IS BORNE BY THE EMPLOYEE CONCERNED. THUS, THE VIEW OF THE AO THAT T HE AMOUNT OF TAX BORNE BY THE TAXPAYER SHOULD HAVE BEE N REDUCED WHILE MAKING PAYMENT TO AT&T WPS IS NOT ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 52 CORRECT AS THE INDIAN COMPONENT OF TAX HAS BEEN BOR NE BY THE TAXPAYER UNDER A CONTRACTUAL OBLIGATION. THE PANEL FURTHER NOTICES THAT THE TAXPAYER HAS RECOVER ED THE SAID AMOUNT FROM AT&T US IN THE NEXT YEAR I.E. FY 2008-09 IN AUGUST 2008 AND ACCORDINGLY, IT HAS NOT ULTIMATELY SUFFERED OUT GO ON THIS ACCOUNT. THUS, T HE PANEL IS OF THE VIEW THAT THE ADDITION PROPOSED BY THE AO IS NOT ON THE SOUND FOOTING. CONSEQUENTLY, WHEN THE ADDITION IS HELD TO BE NOT WARRANTED, THE PANEL IS OF THE VIEW THAT THE ISSUE OF MARK-UP ON SUCH AMOUNT DOES NOT REQUIRE ANY DISCUSSION. THE AO IS THEREFORE, DIRECT ED TO DELETE THE ADDITION PROPOSED ON THIS ACCOUNT. 7.0.1 THE LD. CIT DR COULD NOT POINT OUT ANY FACTUA L INACCURACY IN THE DIRECTIONS OF THE LD. DRP. ACCORD INGLY, WE FIND NO REASON TO INTERFERE WITH THE FINDING OF THE LD. DRP IN THIS REGARD AS THE LD. DRP HAS RECORDED A CATEGORICAL FI NDING AND HAS HELD THAT EVEN AN ADDITION PROPOSED BY THE ASSESSIN G OFFICER WAS NOT ON A SOUND FOOTING. THEREFORE, GROUND NO. 1 RA ISED BY THE DEPARTMENT STANDS DISMISSED. 7.1.0 GROUND NO. 2 IS GENERAL IN NATURE AND DOES NO T NEED ANY SEPARATE ADJUDICATION. 8.0.0 THEREFORE, THE DEPARTMENTS APPEAL STANDS DIS MISSED. 9.0.0 IN THE FINAL RESULT, THE APPEAL OF THE ASSESS EE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES WHEREAS THE APPEAL OF THE DEPARTMENT STANDS DISMISSED. ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 53 ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH MARCH, 2019. SD/- SD/- (R.K. PANDA) (SUDHANSHU SRIVASTAV A) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26 TH MARCH, 2019 GS COPY FORWARDED TO: - 1) APPELLANT 2) RESPONDENT 3) CIT(A) 4) CIT 5) DR TRUE COPY BY ORDER ASSTT. REGISTRAR ITA 1015 & 1779/D/2015 ASSESSMENT YEAR 2008-09 54 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER