DCIT 2(3), MUMBAI V. TECH MAHINDRA LTD ( FORMERLY BRITISH TELECOM LTD), MUMBAI

ITA 1176/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49264 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 19-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 12-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Notional interest

Judgement Text

ITA NO. 3127/MUM/10 ASSESSMENT YEAR: 2005-06 PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI V DURGA RAO, JUDICIAL MEMBER ITA NO. 1176/MUM/2010 ASSESSMENT YEAR: 2004-05 DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 2 (3), MUMBAI .. APPELLANT VS. TECH MAHINDRA LIMITED RESPONDENT (FORMERLY MAHINDRA BRITISH TELECOM LTD) GATEWAY BUILDING, APOLLO BUNDER, MUMBAI 400 001 PAN : AAACM3484F APPEARANCES: JAY KUMAR AND VIJAY SHANKAR, FOR THE APPELLANT NONE, FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR : 1. THIS APPEAL, FILED BY THE ASSESSING OFFICER, IS DIRECTED AGAINST THE ORDER DATED 8 TH DECEMBER 2009, PASSED BY THE COMMISSIONER (APPEALS ), IN THE MATTER OF ASSESSMENT UNDER SECTION 143 (3) OF T HE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), FOR TH E ASSESSMENT YEAR 2004- 05. ITA NO. 3127/MUM/10 ASSESSMENT YEAR: 2005-06 PAGE 2 OF 10 2. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT, AS SUCH, CALL FOR ANY SPECIFIC ADJUDICATION BY US. 3. IN THE SECOND GROUND OF APPEAL, THE ASSESSING OF FICER HAS RAISED THE FOLLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN DETERMINING THE ALP INTEREST RATE O F 2% FOR TRADE CREDIT CHARGEABLE TO THE AE, WITHOUT APPRECIA TING THE FACT THAT THE SAME WAS REQUIRED TO BE CHARGED @ 10% BEIN G THE RATE CHARGED BY THE ASSESSEE TO ITS GERMAN AE ON AN EURO DENOMINATED LOAN. 4. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE, A JOINT VENTURE BETWEEN AN INDIAN COMPANY BY THE NAME OF MA HINDRA & MAHINDRA LTD AND A UK BASED COMPANY BY THE NAME OF BRITISH T ELECOMMUNICATIONS, IS ENGAGED IN THE BUSINESS OF SOFTWARE SERVICES REL ATING TO TELECOMMUNICATION, INTERNET TECHNOLOGY AND ENGINEER ING ETC. DURING THE ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASS ESSEE HAD ALLOWED CREDIT TO ITS US BASED ASSOCIATED ENTERPRISES, BEYO ND THE STIPULATED CREDIT PERIOD. IT WAS IN THIS BACKDROP, AND PURSUANT TO A REFERENCE MADE BY THE ASSESSING OFFICER TO THE TRANSFER PRICING OFFICER F OR DETERMINATION OF ARMS-LENGTH PRICE, ON ACCOUNT OF NOTIONAL INTEREST RELATING TO EXCESS CREDIT PERIOD GRANTED BY THE ASSESSEE TO ITS AES, THAT THE ASSESSEE WAS REQUIRED TO SHOW CAUSE AS TO WHY INTEREST @ 10% NOT BE TREAT ED AS ARMS-LENGTH INTEREST FOR SUCH DELAYED RECEIPTS ON ACCOUNT OF SE RVICES PROVIDED TO THE AES. THE STAND OF THE ASSESSEE WAS THAT EXCESS CRED IT PERIOD WAS ALLOWED TO THE US AE IN VIEW OF THE LIQUIDITY PROBLEMS FACE D BY THE AE, AND THAT, IN ANY EVENT, NO SUCH INTEREST IS CHARGED FROM EVEN IN DEPENDENT ENTERPRISES. IT WAS ALSO SUBMITTED THAT INTEREST WAS NOT CHARGED BECAUSE OF THE ITA NO. 3127/MUM/10 ASSESSMENT YEAR: 2005-06 PAGE 3 OF 10 BUSINESS EXPEDIENCY. THE TRANSFER PRICING OFFICER WAS, HOWEVER, NOT IMPRESSED BY THE STAND SO TAKEN BY THE ASSESSEE. HE WAS OF THE VIEW THAT A COST SHOULD HAVE BEEN CHARGED BY THE ASSESSEE FOR H AVING ALLOWED THIS EXCESS CREDIT PERIOD TO THE US AE, AND THE MERE FAC T THAT THE ASSESSEE HAS NOT CHARGED THE INDEPENDENT ENTERPRISES, FOR EXCESS CREDIT PERIOD ALLOWED TO THEM, DOES NOT HELP THE CAUSE OF THE ASSESSEE WA S HAVING LOW LEVEL OF BUSINESS WITH SUCH INDEPENDENT ENTERPRISES. THE DE ALINGS WITH INDEPENDENT ENTERPRISES WERE THUS REJECTED ON THE G ROUND THAT THESE DEALINGS CONSTITUTE INAPPROPRIATE COMPARABLES. WHI LE THE ASSESSING OFFICER DID OBSERVE THAT IT IS NOT DENIED THAT THE RE MAY BE A REASON FOR BUSINESS EXPEDIENCY AND ALSO THE GENUINENESS OF TRA NSACTION, HE HELD THAT BY NOT CHARGING INTEREST ON SUCH EXTENDED PER IOD GRANTED TO THE AE, THE ASSESSEE HAS NOT CARRIED OUT THE TRANSACTION AT ARMS LENGTH. HE ALSO NOTED THAT THE ASSESSEE HAS CHARGED INTEREST @ 10% FROM ITS GERMAN AE ON THE EURO DENOMINATED LOAN GRANTED BY THE ASSESSE E, AND, ACCORDINGLY, ADOPTED THE SAME INTEREST RATE AS AN ARMS LENGTH IN TEREST FOR SUCH EXCESS CREDIT PERIOD ALLOWED. THE INTEREST ON EXCESS CRED IT PERIOD THUS ALLOWED WAS COMPUTED AT RS 1,87,52,378, AND AN ALP ADJUSTME NT WAS MADE IN RESPECT OF THE SAME. AGGRIEVED, ASSESSEE CARRIED TH E MATTER IN APPEAL BEFORE THE CIT(A), WHO CONFIRMED THE ALP ADJUSTMENT IN PRINCIPLE BUT RESTRICTED THE SAME TO USD LIBOR RATE ( WHICH WAS 1.22% AT THAT POINT OF TIME) PLUS A MARK UP OF 80 BASIS POINTS, WHICH WAS ROUNDED OFF TO 2%. AGGRIEVED BY THE RELIEF SO GRANTED BY THE CIT(A), T HE ASSESSING OFFICER IS IN APPEAL BEFORE US. 5. HAVING HEARD THE LEARNED DEPARTMENTAL REPRESENTA TIVE, AND HAVING PERUSED THE MATERIAL ON RECORD, WE ARE NOT INCLINED TO INTERFERE IN THE MATTER AT THE INSTANCE OF THE ASSESSING OFFICER. L EARNED DEPARTMENTAL REPRESENTATIVES SPIRITED DEFENCE OF, AND VEHEMENT RELIANCE ON, THE STAND ITA NO. 3127/MUM/10 ASSESSMENT YEAR: 2005-06 PAGE 4 OF 10 ON THE TRANSFER PRICING OFFICER DOES NOT IMPRESS US FOR MORE REASONS THAN ONE. THE VERY SELECTION OF COMPARABLE BY THE TPO IS CONTRARY TO THE SCHEME OF THE APPLICABLE TRANSFER PRICING REGULATIO NS. WE HAVE NOTED THAT THE TPO HAS PROCEEDED TO ADOPT THE INTEREST RATE AT WHICH THE ASSESSEE HAS GIVEN A EURO DENOMINATED LOAN TO ITS AE, AS AN INTERNAL COMPARABLE UNDER THE COMPARABLE UNCONTROLLED PRICE (CUP) METHO D, BUT, IN DOING SO, HE APPARENTLY OVERLOOKED THE FACT THAT TO BE AN INT ERNAL COMPARABLE UNDER THE CUP METHOD, THE TRANSACTION HAS TO BE WITH AN I NDEPENDENT ENTERPRISES. RULE 10B(1)(A) SPECIFICALLY PROVIDES T HAT, AS A FIRST STEP FOR DETERMINING THE COMPARABLE UNCONTROLLED PRICE THE PRICE CHARGED OR PAID FOR PROPERTY TRANSFERRED OR SERVICES PROVIDED IN A COMPARABLE UNCONTROLLED TRANSACTION , OR A NUMBER OF SUCH TRANSACTIONS, IS IDENTIFIED ( EMPHASIS BY UNDERLINING SUPPLIED BY US ). RULE 10(A), IN TURN, DEFINES THE EXPRESSION UNCONTROLLED TRANSACTION AS A TRANSACTION BETWEEN ENTERPRISES OTHER THAN ASSOCIATED ENTERPRISES, WHET HER RESIDENT OR NON-RESIDENT . IT IS THUS CLEAR THAT A TRANSACTION BETWEEN THE ASSOCIATED ENTERPRISES CANNOT BE TAKEN AS A COMPARABLE FOR THE PURPOSE OF APPLICATION OF CUP METHOD. INTERNAL CUP, THEREFOR E, CAN ONLY BE A COMPARABLE TRANSACTION WHICH THE ASSESSEE ENTERS IN TO WITH AN INDEPENDENT ENTERPRISE, WHILE IT WILL BE AN EXTERNA L CUP WHEN THE COMPARABLE TRANSACTION IS BETWEEN TWO INDEPENDENT E NTERPRISES NOT INVOLVING THE ASSESSEE. ACCORDINGLY, A TRANSACTION ADMITTEDLY WITH AN ASSOCIATED ENTERPRISE OF THE ASSESSEE COMPANY CANNO T BE TAKEN AS AN INTERNAL COMPARABLE FOR THE PURPOSE OF ASCERTAINING THE ALP. THE TRANSFER PRICING WAS CLEARLY IN ERROR IN ADOPTING THE INTERE ST RATE IN RESPECT OF TRANSACTIONS BETWEEN THE AES AS AN INTERNAL COMPARA BLE UNDER THE CUP METHOD AND OBSERVING THAT WHEN AN INTERNAL COMPARABLE IN THE FORM OF RATE OF INTEREST CHARGED ON FOREIGN CURRENCY LOA N IS AVAILABLE, THE SAME SHOULD BE PREFERABLE OVER ANY OTHER COMPARABLE PARTICULARLY WHEN HE HIMSELF HAD UNAMBIGUOUSLY NOTED THAT THIS L OAN WAS GIVEN BY THE ITA NO. 3127/MUM/10 ASSESSMENT YEAR: 2005-06 PAGE 5 OF 10 ASSESSEE TO ITS ASSOCIATED ENTERPRISES IN GERMANY. IN THE CASE OF SKODA AUTO INDIA LTD VS ACIT ( 30 SOT 319) , A COORDINATE BENCH OF THIS TRIBUNAL ALSO TOOK THE SAME STAND. WHILE HOLDING SO , THE COORDINATE BENCH, SPEAKING THROUGH ONE OF US ( I.E. THE ACCOUNTANT ME MBER) OBSERVED AS FOLLOWS: WE HAVE NOTED THAT THERE ARE REFERENCES TO THE DETE RMINATION OF ARMS LENGTH PRICE ON THE BASIS OF CUP (COMPARAB LE UNCONTROLLED PRICE) METHOD, BUT, IN THE COURSE OF H EARING BEFORE US, LEARNED COUNSEL FOR THE ASSESSEE ADMITTE D THAT THE TRANSACTIONS WHICH WERE RELIED UPON WERE TRANSACTIO NS THAT THE PARENT COMPANY HAD WITH OTHER AES AND THE PRICE OF EURO 680 THUS GIVEN IS NOT THE PRICE AT WHICH TRANSACTIONS H AVE BEEN ENTERED INTO BETWEEN INDEPENDENT PERSONS. THIS IS T HE PRICE THAT THE ASSESSEE HAD ADOPTED AS INTERNAL CUP. THE ASSESSEE ALSO SUBMITTED THAT EXTERNAL CUP IS NOT AVAILABLE B ECAUSE THE PRODUCT IS UNIQUE. TO OUR UNDERSTANDING, THIS ARGUM ENT IS TOTALLY DEVOID OF ANY MERITS. TO BE CONSIDERED AS I NTERNAL CUP ALSO, THE TRANSACTION HAS TO BE AN INDEPENDENT TRAN SACTION I.E., BETWEEN TWO ENTITIES, WHICH ARE INDEPENDENT OF EACH OTHER. THE SALE OF CAR KIT HAS ADMITTEDLY TAKEN PLACE ONLY BET WEEN THE ASSOCIATED CONCERNS. THEREFORE, THE PRICE AT WHICH SUCH TRANSACTION HAS TAKEN PLACE IS IRRELEVANT FOR CUP A NALYSIS; WHAT IS REFERRED TO AS CUP (COMPARABLE UNCONTROLLED PRIC E) IS PRICE OF A COMPARABLE BUT CONTROLLED TRANSACTION, SINCE T O BE TERMED AS AN UNCONTROLLED TRANSACTION, THE TRANSACTION HAS TO BE BETWEEN TWO ENTITIES WHICH CANNOT INFLUENCE OR CONT ROL EACH OTHERS DECISION. THE TRANSACTIONS BETWEEN AES OBVI OUSLY DO NOT SATISFY SUCH A CRITERION. THERE IS THUS NO INTE RNAL CUP, AS ITA NO. 3127/MUM/10 ASSESSMENT YEAR: 2005-06 PAGE 6 OF 10 CLAIMED BY THE ASSESSEE BEFORE THE AUTHORITIES BELO W AND AS STATED IN THE INFORMATION FILED ALONG WITH THE IT R ETURN. 6. GRIEVANCE OF THE ASSESSEE TO THE EFFECT THAT THE CIT(A) OUGHT TO HAVE UPHELD THE STAND OF THE TRANSFER PRICING OFFICER IS , THEREFORE, DEVOID OF ANY LEGALLY SUSTAINABLE MERITS. AS A MATTER OF FACT, I N CASE THE TRANSFER PRICING INDEED WANTED TO ADOPT INTERNAL CUP IN THIS CASE, I T WOULD PRIMA FACIE APPEAR THAT THE CORRECT COMPARABLE WAS THE INTEREST THAT THE ASSESSEE WAS CHARGING FROM INDEPENDENT ENTERPRISES WHICH WAS A DMITTEDLY NIL IN THE PRESENT CASE. IT IS ONLY ELEMENTARY THAT AN ALP ADJ USTMENT CAN ONLY BE MADE TO NULLIFY THE IMPACT OF INTERRELATIONSHIPS BE TWEEN THE ASSOCIATE ENTERPRISES, I.E. FOR VARIATIONS IN ASSESSEES DEAL INGS VIS--VIS DEALINGS WITH INDEPENDENT ENTERPRISES, AND, THEREFORE, WHEN ASSESSEE IS NOT CHARGING THE INTEREST ON DELAYED PAYMENTS FROM INDE PENDENT ENTERPRISES, A VIEW IS PERHAPS POSSIBLE THAT THE ASSESSEE CANNOT B E SUBJECTED TO THE ALP ADJUSTMENT IN RESPECT OF DELAYED PAYMENTS FROM ASSO CIATED ENTERPRISES EITHER. IN OTHER WORDS, THE TPO NEED NOT CONSIDER W HAT MUST HAPPEN IN IDEAL CIRCUMSTANCES BUT NEED TO RESTRICT HIMSELF TO LOCATING THE DIFFERENCES IN ASSESSEES DEALINGS WITH AES VIS--VIS ASSESSEE S DEALINGS WITH NON AES, AND NEUTRALIZE THE IMPACT OF SUCH DIFFERENCES. HOW EVER, RIGHT NOW WE ARE NOT CONCERNED WITH THE LARGER QUESTION WHETHER AN A LP ADJUSTMENT COULD INDEED HAVE BEEN MADE, IN RESPECT OF THE EXTENDED C REDIT PERIOD ALLOWED TO THE AE, AND THEREFORE THESE PRIMA FACIE OBSERVATIONS ARE NOT REALLY RELEVANT FOR DETERMINING THE ISSUE IN APPEAL BEFORE US. EVEN ASSUMING THAT AN ALP ADJUSTMENT COULD INDEED HAVE BEEN MADE ON TH E FACTS OF THIS CASE, IN OUR CONSIDERED VIEW, SINCE THE AE WAS BASED IN U NITED STATES, THE RIGHT PARAMETER TO BE APPLIED IN US DOLLARS LIBOR RATE, W ITH AN APPROPRIATE MARK UP, AS AGAINST THE RATE OF INTEREST ON A EURO DENOMINATED LOAN GRANTED BY THE ASSESSEE TO ANOTHER AE AS ADOPTED BY THE TRANSFER PRICING OFFICER. IN THE CASE OF SIVA INDUSTRIES & HOLDINGS LTD VS ACIT ( ITA ITA NO. 3127/MUM/10 ASSESSMENT YEAR: 2005-06 PAGE 7 OF 10 2148/MDS/10; ORDER DATED 20 TH MAY 2011, A COORDINATE BENCH OF THIS TRIBUNAL HAS OBSERVED AS FOLLOWS: THE ASSESSEE HAS GIVEN THE LOAN TO THE ASSOCIATED ENTERPRISES IN US DOLLARS. THE ASSESSEE IS ALSO RECEIVING INTE REST FROM THE ASSOCIATED ENTERPRISES IN INDIAN RUPEES. ONCE THE TRANSACTION BETWEEN THE ASSESSEE AND THE ASSOCIATED ENTERPRISE S IS IN FOREIGN CURRENCY AND THE TRANSACTION IS AN INTERNAT IONAL TRANSACTION, THEN THE TRANSACTION WOULD HAVE TO BE LOOKED UPON BY APPLYING THE COMMERCIAL PRINCIPLES IN REGARD TO INTERNATIONAL TRANSACTION. IF THIS IS SO, THEN TH E DOMESTIC PRIME LENDING RATE WOULD HAVE NO APPLICABILITY AND THE IN TERNATIONAL RATE FIXED BEING LIBOR WOULD COME INTO PLAY. IN TH E CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT LIBOR RAT E WHICH HAS TO BE CONSIDERED WHILE DETERMINING THE ARMS LENGT H INTEREST RATE IN RESPECT OF THE TRANSACTION BETWEEN THE ASSE SSEE AND THE ASSOCIATED ENTERPRISES. AS IT IS NOTICED THAT THE AVERAGE OF THE LIBOR RATE FOR 1.4.2005 TO 31.3.2006 IS 4.42% AND T HE ASSESSEE HAS CHARGED INTEREST AT 6% WHICH IS HIGHER THAN THE LIBOR RATE, WE ARE OF THE VIEW THAT NO ADDITION ON THIS COUNT I S LIABLE TO BE MADE IN THE HANDS OF THE ASSESSEE. 6. THE VIEW TAKEN BY US ALSO FINDS SUPPORT FROM THE SE OBSERVATIONS OF THE COORDINATE BENCH. WHEN THERE IS A CHOICE BETWE EN THE INTEREST RATE OF A CURRENCY OTHER THAN THE CURRENCY IN WHICH TRANSAC TION HAS TAKEN PLACE AND THE INTEREST RATE IN RESPECT OF THE CURRENCY IN WHICH TRANSACTION HAS TAKEN PLACE, IN OUR CONSIDERED VIEW, THE LATTER SHO ULD BE ADOPTED. IN SIVA INDUSTRIES CASE (SUPRA), COORDINATE BENCH WAS MAKING A CHOICE BETWEEN ITA NO. 3127/MUM/10 ASSESSMENT YEAR: 2005-06 PAGE 8 OF 10 THE PLR (PRIME LENDING RATE IN INDIA) AND THE LIBOR (LONDON INTER BANK OFFERED RATE). THE COORDINATE BENCH HELD THAT ONCE THE TRANSACTION BETWEEN THE ASSESSEE AND THE ASSOCIATED ENTERPRIS ES IS IN FOREIGN CURRENCY AND THE TRANSACTION IS AN INTERNATIONAL T RANSACTION, THEN THE TRANSACTION WOULD HAVE TO BE LOOKED UPON BY APPLYIN G THE COMMERCIAL PRINCIPLES IN REGARD TO INTERNATIONAL TRANSACTIONS , AND ACCORDINGLY PROCEEDED TO TAKE INTO ACCOUNT INTEREST RATE IN TER MS OF LIBOR BASIS. WE HAVE ADOPTED THE SAME APPROACH BY TAKING INTO ACCOU NT THE COMMERCIAL PRINCIPLES AND PRACTICES WITH REGARD TO A US DOLLAR DENOMINATED EXTENDED CREDIT FOR ARRIVING AT THE BENCHMARK RATE, AND TAKE LIBOR AS THE BASE. ACCORDINGLY, THE LIBOR (US DOLLAR) HAS TO BE AS BEN CHMARK FOR US DOLLAR TRANSACTIONS - RATHER THAN THE RATE OF INTEREST ON DOMESTIC BORROWINGS, EVEN WHICH IS LOWER THAN THE INTEREST RATE OF 10% T AKEN AS ALP BY THE TPO, OR, FOR THAT PURPOSE, RATE OF INTEREST ON ANY OTHER CURRENCY LOANS. HAVING SAID THAT, WE MAY ALSO REITERATE THAT AS WE HOLD SO, WE ARE NOT GIVING ANY DECISION ON WHETHER THE ALP ADJUSTMENT C AN BE MADE, ON THE BASIS OF LIBOR PLUS MARK UP, IN RESPECT OF EXTENDED CREDIT BECAUSE WE ARE DEALING WITH A VERY LIMITED ISSUE IN THIS APPEAL WH ICH DOES NOT REQUIRE ADJUDICATION ON THE BROADER QUESTION AS TO WHETHER AN EXTENDED CREDIT PERIOD CAN ANYWAY BE COMPARED WITH A LOAN, MUCH LES S A LOAN IN SOME OTHER CURRENCY WHICH WILL HAVE DISTINCT LENDING RAT ES DEPENDING ON THE PECULIARITIES RELATING THAT CURRENCY, SINCE IT DOES NOT INVOLVE THE LENDING PERIOD COMMITMENT AS A LOAN NECESSARILY INVOLVES. B E THAT AS IT MAY, THE CIT(A) CANNOT THUS BE SAID TO BE IN ERROR IN ADOPTI NG THE US DOLLARS LIBOR RATE, WITH MARK-UP WHICH IS NOT IN DISPUTE FOR ITS BEING TOO LOW, AS A BASIS FOR ALP ADJUSTMENT - AS LONG AS HE CAN BE SAID TO B E JUSTIFIED IN UPHOLDING THE ALP ADJUSTMENT. THERE IS THUS NO JUSTIFICATION IN GRIEVANCE RAISED BY THE ASSESSING OFFICER AGAINST THE RELIEF GRANTED B Y THE CIT(A). AS WE UPHOLD THE RELIEF GIVEN BY THE CIT(A), WE REFRAIN F ROM MAKING ANY OBSERVATIONS ON WHETHER OR NOT SUCH AN ALP ADJUSTME NT COULD HAVE BEEN ITA NO. 3127/MUM/10 ASSESSMENT YEAR: 2005-06 PAGE 9 OF 10 MADE IN THE FIRST PLACE. THE MERE FACT THAT THE RE LIEF GRANTED BY THE CIT(A) IS UPHELD, IT DOES NOT IMPLY THAT THE CIT(A)S ACTI ON OF CONFIRMING THE ALP ADJUSTMENT ON THE FACTS OF THIS CASE, IN PRINCIPLE, IS UPHELD TOO. THAT REMAINS AN OPEN QUESTION AND NEED NOT BE ADJUDICATE D IN THIS APPEAL. WITH THESE OBSERVATIONS, AND TO THE EXTENT THE GRIE VANCE OF THE REVENUE IS CONCERNED, WE CONFIRM THE ORDER OF THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER AT THE INSTANCE OF THE REVENUE AUTHORITI ES. GROUND NO. 2 IS THUS DISMISSED. 8. IN GROUND NO. 3, THE ASSESSING OFFICER HAS RAISE D THE FOLLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, CIT(A) ERRED IN INCLUDING THE EXPENSES INCURRED IN FOREIGN CURRENCY ON TELECOMMUNICATION CHARGES AND IN PROVID ING TECHNICAL SERVICES OUTSIDE INDIA IN THE TOTAL TURNO VER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 1 0A, IGNORING THE FACT THAT IN THE ABSENCE OF SPECIFIC DEFINITION OF TOTAL TURNOVER, WHETHER THE SAME DEFINITION CAN BE IMPORTED FROM THE OTHER SECTIONS FOR THE COMPUTATION OF DEDU CTION UNDER SECTION 10 A OF THE INCOME TAX ACT, 1961. 9. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE ISSUE IS COVERED, IN FAVOUR OF THE ASSESSEE, BY SPECIAL BENC H DECISION IN THE CASE OF ITO VS SAK SOFT LIMITED ( 121 TTJ 865) AND BY TRIBU NALS DECISION IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03 . RESPECTFULLY FOLLOWING THESE DECISIONS, WE UPHOLD THE ORDER OF T HE CIT(A) ON THIS ISSUE ITA NO. 3127/MUM/10 ASSESSMENT YEAR: 2005-06 PAGE 10 OF 10 AS WELL AND DECLINE TO INTERFERE IN THE MATTER. GRO UND NO. 3 IS ALSO THUS DISMISSED. 10. GROUND NO. 4 IS GENERAL IN NATURE AND DOES NOT, THEREFORE, CALL FOR ANY ADJUDICATION BY US. THIS GROUND IS ALSO DISMISS ED. 11. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUN CED IN THE OPEN COURT TODAY ON 30 TH DAY OF JUNE, 2011. SD/- SD/- (V DURGA RAO ) (PRAMOD KUMAR) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI; 30 TH _ DAY OF JUNE , 2011 . COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER MUMBAI CITY , MUMBAI 4. COMMISSIONER (APPEALS) , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, E BENCH, MUMBAI 6. GUARD FILE TRUE COPY BY ORDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI