Smart Cube India Pvt. Ltd., Noida V. ACIT, New Delhi

ITA 1178/DEL/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7876 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Next Hearing Date: 05-07-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 01-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; International transaction; Rule of consistency; Application of stay; Set aside
• Section: 143(3); 201; 144C; 192; 43; 13; 22

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI I-2 BENCH, NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NOS. 1178 & 4607/DEL/2017 [A.YS 2012-13 & 2013-14] SMART CUBE INDIA PVT. LTD. TOWER-B, WINDSOR IT PARK, A-1, SECTOR 125, NOIDA - 201 301 VS. ACIT, CIRCLE 24(1), NEW DELHI. PAN NO. AAHCS 8978 H [APPELLANT] [RESPONDENT] SA NO. 281/DEL/2020 (ARISING OUT OF ITA NO. 1178/DEL/2017) ( ASSESSMENT YEAR 2012-13 ) SMART CUBE INDIA PVT. LTD.TOWER-B, WINDSOR IT PARK, A-1, SECTOR 125, NOIDA - 201 301 (APPELLANT) VS ACIT, CIRCLE 24(1), NEW DELHI. (RESPONDENT) DATE OF HEARING : 26.08.2020 DATE OF PRONOUNCEMENT : 27.08.2020 ASSESSEE BY : SHRI AJAY VOHRA, SR. ADV. SHRI NEERAJ JAIN, ADV. SHRI RAMIT KATYAL, C.A. REVENUE BY : SHRI ANUPAM KANT GARG, CIT-D.R. 2 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THESE TWO SEPARATE APPEALS ALONGWITH A STAY APPLICATION BY THE ASSESSEE ARE PREFERRED AGAINST THE ASSESSMENT ORDERS DATED 19.01.2017 AND 29.06.2017 FRAMED U/S 143(3) R.W.S 144C OF THE ACT PERTAINING TO THE ASSESSMENT YEARS 2012-13 & 2013-14. 2. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. WE WILL FIRST ADDRESS TO THE APPEAL IN ITA NO.1178/DEL/2017 FOR A.Y. 2012-13. 4. THE APPELLANT COMPANY IS A SUBSIDIARY COMPANY OF SMART CUBE LTD. UK AND IS ENGAGED IN THE BUSINESS OF PROVIDING INFORMATION TECHNOLOGY ENABLED SERVICES (ITES) IN THE FIELD OF DATA PROCESSING TO ITS ASSOCIATED ENTERPRISES UNDER AGREEMENT DATED 20.02.2010. 5. THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE COMPANY WITH ITS AES DURING THE YEAR RELATES TO PROVISION OF SERVICES AMOUNTING TO RS.34,10,56,045/-. THE TNMM WAS SELECTED AS THE MOST APPROPRIATE METHOD WITH PLI OP/OC. 3 6. THE ASSESSEE COMPUTED ITS PLI AT 19.05% WHEREAS THE SAME WAS COMPUTED AT 13.61% BY THE TPO. 7. WHILE COMPUTING THE OPERATING MARGIN OF THE APPELLANT COMPANY, THE TPO EXCLUDED THE FOLLOWING: I. FOREX FLUCTUATION II. DOMESTIC REVENUE III. PRIOR PERIOD EXPENSES 8. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO THE RE-COMPUTATION OF OPERATING MARGIN BY THE TPO. BEFORE US, THE COUNSEL FOR THE ASSESSEE VEHEMENTLY STATED THAT IN SO FAR AS THE FOREX FLUCTUATION IS CONCERNED, THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2011-12 IN ITA NO.6078/DEL/2012 HAS HELD THAT PROFIT/ LOSS ARISING FROM FOREX FLUCTUATION IS IN THE NATURE OF OPERATING INCOME. COPY OF THE ORDER WAS SUPPLIED. 9. PER CONTRA, THE DR STRONGLY SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. IT IS THE SAY OF THE DR THAT THE FOREX GAINS/ LOSS ON RECEIVABLE IS ARISING ON ACCOUNT OF CHANGE IN FOREX RATE AT THE TIME OF REALIZATION AFTER BOOKING THE SALES AT A DIFFERENT FOREX RATE. THIS DOES NOT HAVE ANY BEARING ON THE TRANSACTION WHICH IS ALREADY BEEN 4 UNDERTAKEN AND THEREFORE CANNOT AFFECT THE ARMS LENGTH PRICE OF THE TRANSACTION. THE DR FURTHER STATED THAT THE ASSESSEE MAY BE FOLLOWING A CERTAIN POLICY IN RESPECT OF HEDGING OF FOREX. COMPARABLE COMPANIES MAY ALSO BE FOLLOWING A CERTAIN POLICY IN RESPECT OF HEDGING OF FOREX. HENCE IT IS BEST TO COMPARE THE RESULT OF TESTED PARTY AS WELL AS COMPARABLE COMPANIES BY EXCLUDING THE EFFECT OF FOREIGN GAINS/ SALES. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS, WE FIND FORCE IN THE CONTENTION OF THE LEARNED COUNSEL. THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 2011-12 IN ITA NO.6078/DEL/2015 HAD THE OCCASION TO CONSIDER A SIMILAR QUARREL AND HAS ADJUDICATED AS UNDER: 44. AS FAR AS THE COMPUTING OF OPERATING MARGINS IS CONCERNED, WE FIND THAT WHILE COMPUTING THE OPERATING MARGIN OF THE ASSESSEE TPO HAS CONSIDERED THE INCOME ARISING OUT OF FOREIGN EXCHANGE FLUCTUATION, MISCELLANEOUS INCOME AND SUNDRY BALANCES WRITTEN BACK TO BE NON-OPERATING AND WORKED OUT THE MARGIN ACCORDINGLY. AS FAR AS THE ISSUE OF FOREIGN EXCHANGE FLUCTUATION TO BE OPERATING INCOME IS CONCERNED, BEFORE US, IT IS LD ARS CONTENTION THAT IT IS AN INTEGRAL PART OF REVENUE RECEIPTS AND IS DIRECTLY CONNECTED TO IT. THE AFORESAID CONTENTION OF THE LD AR HAS NOT BEEN CONTROVERTED BY REVENUE. WE FIND THAT THE CO-ORDINATE BENCH OF TRIBUNAL IN THE CASE OF FISERV INDIA PVT. LTD. VS. DCIT (ITA NO.1822/DEL/2014) AFTER CONSIDERING THAT VARIOUS DECISIONS CITED IN THE ORDER HAS HELD THE FOREIGN EXCHANGE GAIN/LOSS TO BE AN OPERATING ITEM AND THEREFORE COULD NOT BE EXCLUDED FROM THE COMPUTATION OF THE OPERATING MARGINS. WE FURTHER FIND THAT AGAINST THE ORDER OF TRIBUNAL IN THE CASE OF FISERV INDIA (SUPRA), THE MATTER WAS CARRIED BY THE REVENUE BEFORE THE HONBLE DELHI HIGH COURT. DELHI HIGH COURT VIDE ORDER DATED 06.01.2016 IN ITA NO.17/2016 DISMISSED THE APPEAL OF THE REVENUE. WE FURTHER FIND THAT THE SIMILAR VIEW WAS TAKEN IN THE CASE OF AGILIS INFORMATION 5 TECHNOLOGIES INTERNATIONAL PVT. LTD. VS. ITO BY THE CO-ORDINATE BENCH OF TRIBUNAL AND ORDER OF THE TRIBUNAL HAS ALSO BEEN UPHELD BY THE HONBLE HIGH COURT. IN VIEW OF THE AFORESAID FACTS, WE DIRECT THE TPO/ AO TO CONSIDER FOREIGN FLUCTUATION INCOME TO BE OPERATING IN NATURE WHILE WORKING OUT THE PROFIT MARGIN OF THE ASSESSEE. 11. AS NO DISTINGUISHED FACT HAS BEEN BROUGHT TO OUR NOTICE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH (SUPRA), WE DIRECT THE AO/ TPO TO CONSIDER FOREX FLUCTUATION AS INCOME TO BE IN OPERATING IN NATURE WHILE WORKING OUT THE PROFIT MARGIN OF THE APPELLANT. 12. IN SO FAR AS, PRIOR PERIOD EXPENSES ARE CONCERNED. THE COUNSEL DREW OUR ATTENTION TO THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF TUPPERWARE INDIA PVT. LTD. IN ITA NO.2140/DEL/2011 WHEREIN THE TRIBUNAL HAS HELD THAT PRIOR PERIOD EXPENSES ARE NOT TO BE CONSIDERED AS PART OF OPERATING EXPENSES FOR THE PURPOSE OF CALCULATING THE OPERATING MARGIN. 13. PER CONTRA, THE DR SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDER OF THE AUTHORITIES BELOW. IN OUR CONSIDERED VIEW PRIOR PERIOD EXPENSES WHICH ARE CHARGED TO THE P&L ACCOUNT RELATES TO A PERIOD PRIOR TO THE YEAR UNDER CONSIDERATION. THEREFORE, TO DETERMINE THE CORRECT 6 OPERATING PROFIT FOR THE YEAR UNDER CONSIDERATION, THE SAME SHOULD NOT BE CONSIDERED AS PART OF THE OPERATING EXPENSES FOR THE YEAR. A SIMILAR VIEW WAS TAKEN BY THE CO-ORDINATE BENCH IN THE CASE OF TUPPERWARE INDIA PVT. LTD. (SUPRA). THE RELEVANT FINDINGS OF THE CO-ORDINATE BENCH READ AS UNDER: TABLE 2: PARTICULARS F.Y. 2003 - 04 SALES 564,764,554 COST OF SALES 318,840,248 SERVICE FEE 4,794,553 EMPLOYEE REMUNERATION & BENEFITS 54,176,687 ADMINISTRATION EXPENSES 73,323,119 SELLING & DISTRIBUTION EXPENSES 104,993,775 DEPRECIATION 14,640,476 TOTAL COST (T.C.) 569,626,964 OPERATING PROFIT (O.P.) 4,862,410 OP/SALES - 0.86% PARTICULARS FY 2003 - 04 RECONCILIATION ADD: NON - OPERATING/ EXTRAORDINARY INCOME OTHER INCOME 5,387,133 LESS: NON - OPERATING/ EXTRAORDINARY EXPENSES: OBSOLETE STOCK WRITTEN OFF 14,083,604 FINANCIAL & OTHER CHARGES 1,469,325 FIXED ASSETS WRITTEN OFF 81,630 PRIOR PERIOD EXPENSES 1,141,894 PROFIT AFTER TAX (16,251,730) REASONS FOR DECISION: AS CAN BE SEEN FROM THE ABOVE TABLE-2, OTHER INCOME TO THE EXTENT OF RS. 53,87,133/ - IS EXCLUDED. THE FINANCIAL CHARGES, OBSOLETE STOCK AND FIXED ASSET WRITTEN OFF, PRIOR PERIOD EXPENSES ARE EXCLUDED WHILE 7 COMPUTING THE PLI. DURING THE COURSE OF THE TP PROCEEDINGS, THE APPELLANT HAD FILED THE TP STUDY BEFORE THE TPO WHICH SPECIFICALLY EXCLUDED THESE ITEMS AS NON OPERATING ITEMS. TPO HAS NOT GIVEN ANY REASON FOR TAKING THE SAME AS OPERATING IN NATURE. THE EXPENSES WHICH ARE MENTIONED ABOVE LIKE FIXED ASSETS AND OBSOLETE STOCK WRITTEN OFF AND PRIOR PERIOD EXPENSES ARE NOT DIRECTLY LINKED TO THE OPERATION OF THE APPELLANT FOR THE CURRENT YEAR. FINANCIAL CHARGES FALLS IN THE SAME CATEGORY AS OTHER INCOME AND BOTH OF THEM HAVE TO BE EXCLUDED WHILE COMPUTING THE PLI. APPARENTLY, THE TPO HAS NOT TAKEN THE SAME AS OPERATING IN THE HANDS OF THE COMPARABLES CHOSEN. THEREFORE, THERE IS MERIT IN THE ARGUMENT OF THE APPELLANT THAT THE ABOVE ITEMS SHOULD BE EXCLUDED WHILE CALCULATING THE PLI. THE DECISIONS OF THE HON'BLE ITAT IN CASE OF SONY INDIA AND HONEYWELL AUTOMATION INDIA LTD. QUOTED ABOVE ALSO SUPPORTS THE SAME VIEW. 14. IN THE LIGHT OF THE AFORESAID OBSERVATION OF THE CO-ORDINATE BENCH, WE DIRECT THE AO/TPO NOT TO CONSIDER PRIOR PERIOD EXPENSES AS PART OF OPERATING EXPENSES. 15. IN SO FAR AS DOMESTIC REVENUE IS CONCERNED. IN OUR CONSIDERED VIEW, THE SAME CANNOT BE TAKEN INTO ACCOUNT FOR COMPUTING THE OPERATING PROFIT AS UNDER THE TP ADJUSTMENTS. THE TRANSACTIONS AND REVENUE RELATED TO THE ASSOCIATED ENTERPRISES ARE CONSIDERED TO DETERMINE THE ARMS LENGTH PRICE OF A TRANSACTION. IN OUR CONSIDERED VIEW, IF THE DOMESTIC SALE WERE TO BE TAKEN INTO CONSIDERATION, THE BENCH MARKING ANALYSES FOR DETERMINING THE ALP OF A TRANSACTION WOULD BE SKEWED. WE ACCORDINGLY CONFIRMED THE EXCLUSION OF DOMESTIC SALES. 8 16. PROCEEDING FURTHER WITH THE OTHER GRIEVANCE OF THE ASSESSEE, WE FIND THAT THE TPO HAS RE-CHARACTERISED THE BUSINESS OF THE ASSESSEE AS KPO SERVICE PROVIDER AND HAS CONSIDERED COMPANIES ENGAGED IN THE BUSINESS OF PROVIDING KPO SERVICE IN THE FINAL SET OF COMPARABLE COMPANIES. WE HAVE CAREFULLY CONSIDERED THE OUTSOURCE SERVICE AGREEMENT DATED 20.02.2010 ENTERED INTO BETWEEN THE APPELLANT WITH ITS AE. WE FIND THAT THE SCOPE OF WORK CARRIED OUT BY THE APPELLANT IS MERELY DATA PROCESSING/ DATA FEEDING. WE FURTHER FIND THAT IN A.Y 2011-12, THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.6078/DEL/2015 HAS HELD THAT THE APPELLANT IS NOT A KPO. THE RELEVANT FINDINGS OF THE CO-ORDINATE BENCH READ AS UNDER: 41. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. THE FIRST ISSUE IS WITH RESPECT TO TRANSFER PRICING ADJUSTMENT OF RS.5,52,01,139/-. WE FIND THAT IN TP STUDY REPORT ASSESSEE HAD CONSIDERED ITSELF TO BE IN THE BUSINESS OF PROVIDING INFORMATION TECHNOLOGY ENABLES SERVICES (ITES) IN THE FIELD OF DATA PROCESSING TO ITS ASSOCIATED ENTERPRISES. TPO RE-CHARACTERIZED THE BUSINESS OF THE ASSESSEE AND HELD THE ASSESSEE TO BE A KPO SERVICE PROVIDER. TPO THEREAFTER, AFTER CONSIDERING THE ASSESSEE TO BE A KPO SERVICES PROVIDER, CONSIDERED CERTAIN COMPANIES TO BE COMPARABLES WITH THAT OF THE ASSESSEE AS A KPO AND THEREAFTER WORKED OUT THE ADJUSTMENTS AT RS.5,52,01,139/-. THE TPO IN THE ALTERNATE NOTED THAT IF THE ASSESSEE IS TO BE CHARACTERIZED AS IT ENABLED SERVICES PROVIDER THEN ON THAT BASIS AFTER TAKING INTO CONSIDERATION THE NINE COMPARABLE COMPANIES WORKED OUT THE AVERAGE MARGIN OF THOSE COMPANIES AT 28.25%. 42. BEFORE US, LEARNED AR HAS POINTED TO THE STEP WISE PROCESS OF THE BUSINESS MODEL OF THE ASSESSEE AND FROM THERE IT IS SUBMITTED THAT THE ASSESSEE IS MERELY ENTERING THE CONTACT DETAILS, EMAIL IDS OF VENDORS IN INDIA IN THE DATA BASE AND VERIFYING THROUGH PHONE CALLS AND MAILS AND DETAILS OF THE VENDORS COLLECTED BY THE ASSESSEE ARE 9 COMMUNICATED TO THE ASSOCIATED ENTERPRISES, AND THESE DETAILS ARE IN TURN PROVIDED TO THE FINAL CUSTOMERS. FROM THE DETAILS OF SERVICE PROVIDED BY THE LEARNED AR, IT APPEARS THAT ASSESSEE IS PROVIDING ROUTINE PROCESSING OF ROUTINE DATA TO ITS AES WHICH CAN BE TERMED AS ITES SERVICES. 43. WE DO NOT AGREE WITH THE ACT OF RE-CHARACTERIZATION OF THE ASSESSEE TO BE A KPO BY THE TPO IN VIEW OF THE FACT THAT HONBLE DELHI HIGH COURT IN THE CASE OF RAMPGREEN SOLUTIONS P LTD (SUPRA) HAS OBSERVED THAT THE EXPRESSION 'KNOWLEDGE PROCESS OUTSOURCING' INDICATES THE INVOLVEMENT OF DOMAIN KNOWLEDGE IN PROVIDING ITES. TYPICALLY, KNOWLEDGE PROCESS OUTSOURCING INCLUDES INVOLVEMENT OF ADVANCE SKILLS; THE SERVICES PROVIDED MAY INCLUDE ANALYTICAL SERVICES, MARKET RESEARCH, LEGAL RESEARCH, ENGINEERING AND DESIGN SERVICES, INTELLECTUAL MANAGEMENT, ETC. WE FURTHER FIND THAT CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2010-11 HAS HELD THE CHARACTERIZATION OF THE NATURE OF SERVICE RENDERED BY THE ASSESSEE TO BE HIGH-END ITES SERVICES. WE FURTHER FIND THAT THE DRP WHILE DECIDING THE ISSUE FOR A.Y. 2013-14 HAS REJECTED THE TPOS CONTENTIONS OF CONSIDERING THE ASSESSEE AS THE KPO SERVICE PROVIDER AND HELD ASSESSEE TO BE A ROUTINE ITES COMPANY. BEFORE US, LEARNED DR HAS SUPPORTED THE RE-CHARACTERIZATION MADE BY THE TPO AND SUBMITTED THAT THOUGH THE BUSINESS OF THE ASSESSEE WOULD HAVE BEEN CHARACTERIZED AS ITES IN EARLIER AND SUBSEQUENT YEAR BUT IN VIEW OF THE PRINCIPLE OF RES JUDICATA BEING NOT APPLICABLE TO INCOME TAX PROCEEDINGS AND EACH ASSESSMENT YEAR BEING DISTINCT AND DIFFERENT, THE ORDER OF TPO NEEDS TO BE UPHELD. WE ARE AWARE OF THE PRINCIPLES THAT RES JUDICATA PRINCIPLE IS NOT APPLICABLE TO THE INCOME TAX MATTERS BUT AT THE SAME TIME IT IS ALSO A SETTLED LAW THAT THERE OUGHT TO BE UNIFORMITY IN TREATMENT AND CONSISTENCY WHEN FACTS AND CIRCUMSTANCES ARE IDENTICAL. IN THE PRESENT CASE, AS NOTED ABOVE, THE BUSINESS OF THE ASSESSEE HAS BEEN HELD TO BE IN ITES SEGMENT IN AY 2010-11 BY THE CO-ORDINATE BENCH OF TRIBUNAL AND BY DRP IN AY 2013- 14. BEFORE US, NO MATERIAL HAS BEEN PLACED BY THE REVENUE TO DEMONSTRATE THAT THE CHARACTERIZATION OF THE ASSESSEE AS ITES SERVICE PROVIDER AS HELD BY THE TRIBUNAL IN EARLIER YEARS HAS BEEN SET ASIDE/ STAYED OR OVERRULED BY HIGHER JUDICIAL FORUM. FURTHER NO DISTINGUISHING FEATURE IN THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION OR IN EARLIER/ SUBSEQUENT YEAR HAS BEEN POINTED OUT BY REVENUE. IN VIEW OF THESE FACTS AND FOLLOWING THE PRINCIPLE OF CONSISTENCY, WE HOLD THAT TPO WAS NOT JUSTIFIED IN RE- 10 CHARACTERIZING THE ASSESSEE TO BE A KPO SERVICE PROVIDER. WE THEREFORE, HOLD THAT THE ASSESSEE TO BE AN ITES COMPANY. 17. WE FURTHER FIND THAT THE DRP IN A.Y. 2013-14 VIDE ORDER DATED 12.05.2017 HAS REJECTED THE TPOS CONTENTION OF CONSIDERING THE APPELLANT AS A KPO SERVICE PROVIDER AND HELD THAT THE ASSESSEE IS A ROUTINE ITES COMPANY. 18. CONSIDERING THE PAST AND THE FUTURE HISTORY OF THE APPELLANT, WE HOLD THAT THE ASSESSEE IS AN ITES COMPANY, THEREFORE, COMPARABLE COMPANIES WHICH PERTAIN TO KPO SERVICE PROVIDER ARE DIRECTED TO BE EXCLUDED. 19. HOWEVER, THE TPO HAS ALSO CONSIDERED THE COMPARABLE COMPANIES BY CONSIDERING THE APPELLANT AS ITES SERVICE PROVIDER. BEFORE US, THE COUNSEL ARGUED FOR THE EXCLUSION OF FOLLOWING COMPANIES: I. ACROPETAL TECHNOLOGIES LTD. II. BNR UDYOG LTD. III. INFOSYS BPO LTD. IV. ECLERX SERVICES LTD. 20. WE WILL NOW ADDRESS FOR EXCLUSION OF THESE COMPARABLE COMPANIES. 11 I. ACROPETAL TECHNOLOGIES LTD. 21. WE FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 2011-12 HAS EXCLUDED THIS COMPANY ON THE BASIS THAT IT IS PROVIDING KPO SERVICE. THE RELEVANT FINDINGS OF THE CO-ORDINATE BENCH READ AS UNDER: 50. AS FAR AS LD ARS CONTENTION OF EXCLUDING ACROPETAL TECHNOLOGIES LTD (SEG) AS A COMPARABLE COMPANY IS CONCERNED, BEFORE US, LEARNED AR HAS POINTED OUT THAT IT IS PROVIDING KPO SERVICES AND OWNS SIGNIFICANT IPR, REQUIRING HIGH LEVEL OF SKILL AND APPLICATION OF INTELLECTUAL PROPERTY. THE AFORESAID CONTENTIONS OF THE LEARNED AR NOT BEEN CONTROVERTED BY DR. WE FURTHER FIND THAT HYDERABAD BENCH IN THE CASE OF TNS INDIA PVT. LTD. (ITA NO.1875/HYD/2012) HAD DIRECTED TO ITS EXCLUSION BY HOLDING THAT THE SERVICES PROVIDED BY IT IN THE NATURE OF HIGH END SERVICES COMING WITHIN THE CATEGORY OF KNOWLEDGE PROCESS OUTSOURCING (KPO) AND IT CANNOT BE COMPARED WITH A LOW END SERVICE PROVIDER. WE FURTHER FIND THAT HONBLE DELHI HIGH COURT IN THE CASE OF RAMPGREEN SOLUTIONS PVT. LTD. (SUPRA) HAS HELD THAT A COMPANY ENGAGED IN THE KPO SERVICES CANNOT BE A APPROPRIATE COMPARABLE FOR THE PURPOSE OF BENCHMARKING INTERNATIONAL TRANSACTION OF BPO SERVICES. IN VIEW OF THESE FACTS, WE ARE OF THE VIEW THAT THE AFORESAID COMPANY NEEDS TO BE EXCLUDED AS A COMPARABLE COMPANY AND ACCORDINGLY DIRECT ITS EXCLUSION. II. BNR UDYOG LTD. 22. THE COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THOUGH THE TPO HAS ADOPTED RPT FILTER @ 25% BUT DID NOT CONSIDER THE EXCLUSION OF THIS COMPANY WHICH HAS RPT OF 47.95%. THE COUNSEL FURNISHED THE COMPUTATION OF RPT TO SALES. A PERUSAL OF THE COMPUTATION FILED BY THE COUNSEL SHOW THAT THE RPT/ SALES RATIO OF THIS COMPANY COMES TO 47.95%. WE ACCORDINGLY DIRECT THE AO/ TPO TO 12 EXAMINE THE COMPUTATION OF RPT/ SALES AND IF FOUND IN EXCESS OF 25% THIS COMPANY SHOULD BE EXCLUDED FROM FINAL SET OF COMPARABLES. III. INFOSYS BPO LTD. 23. THE COUNSEL VEHEMENTLY STATED THAT THIS COMPANY HAS BEEN EXCLUDED IN A SERIES OF DECISIONS ACROSS THE COUNTRY BY VARIOUS BENCHES OF THE TRIBUNAL AND ALSO BY THE HONBLE HIGH COURTS. IN PARTICULAR THE COUNSEL REFERRED TO THE DECISION IN THE CASE OF AVAYA INDIA PVT. LTD. IN ITA NO.532/2019. 24. PER CONTRA, THE DR STATED THAT TNMM BEING MORE PROMINENT TAKES CARE OF MATERIAL ITSELF IN TERMS OF SITUATION/ CIRCUMSTANCES AND ENVIRONMENT. IT IS THE SAY OF THE DR THAT IT IS NEARLY IMPOSSIBLE TO GET COMPARABLE CASES WITH NO DIFFERENCES AT ALL. THE DR CONTINUED BY SAYING THAT THIS COMPANY HAS SIMILAR FUNCTIONAL PROFILE AND, THEREFORE, SHOULD BE RETAINED. 25. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. THE HONBLE HIGH COURT OF DELHI IN THE CASE OF AVAYA INDIA PVT. LTD. 416 ITR 638 HAD THE OCCASION TO ADJUDICATE ON THE INCLUSION OR OTHERWISE OF INFOSYS BPO LTD. THE RELEVANT FINDINGS OF THE HONBLE HIGH COURT READ AS UNDER: 13 22. THE REVENUE S APPEAL AGAINST THE SAME ASSESSEE FOR AY 2011- 2012 AGAINST ANOTHER ORDER OF THE ITAT EXCLUDING TCS E-SERVE INTERNATIONAL LIMITED, INFOSYS BPO LIMITED FROM COMPARABLES MET THE SAME FATE. IN ITS DECISION DATED 29TH AUGUST, 2018 THE COURT REFERRED TO THE EARLIER DECISION DATED 26TH FEBRUARY, 2018 WHICH AGAIN PERTAINED TO AY 2010-2011. REFERENCE WAS AGAIN MADE TO THE DECISION IN BC MANAGEMENT SERVICES LIMITED. 23. IT APPEARS THEREFORE THAT THIS COURT HAS CONSISTENTLY UPHELD DECISIONS OF THE ITAT EXCLUDING BOTH THESE VERY COMPARABLES. THE ITAT ITSELF APPEARS TO HAVE TAKEN A CONSISTENT VIEW IN A LARGE NUMBER OF CASES EXCLUDING THESE TWO COMPARABLES AND ITS DECISIONS HAVE BEEN UPHELD BY THIS COURT. ILLUSTRATIVELY REFERENCE MAY BE MADE TO THE DECISION OF THE TRIBUNAL IN VERTEX CUSTOMER SERVICES INDIA PRIVATE LIMITED V. DCIT (2017) 88 TAXMANN.COM 286 ( DEL- TRI), STRYKER GLOBAL TECHNOLOGY CENTRE PRIVATE LIMITED V. DCIT (2017) 87 TAXMANN.COM 43 ( DEL-TRI), SAMSUNG HEAVY INDUSTRIES PRIVATE LIMITED V. DCIT (2017) 84 TAXMANN.COM 154 ( DEL-TRI) AND EQUANT SOLUTIONS INDIA PRIVATE LIMITED V. DCIT (2016) 66 TAXMANN.COM 192 (DELHI-TRIBUNAL). 24. ALL OF THESE DECISIONS PERTAINED TO AY 2010-2011. WHAT WEIGHED INVARIABLY IS THE FACT THAT BOTH COMPANIES HAD HUGE TURNOVERS WHEN COMPARED TO THE TESTED ENTITY. BOTH ENTITIES HAD CLOSE CONNECTION OF THE TATA GROUP OF COMPANIES AND TCS E-SERVE INTERNATIONAL HAD GIVEN A HUGE AMOUNT TO TCS TOWARDS BRAND EQUITY. FURTHER THERE WAS NO SEGMENTAL BIFURCATION BETWEEN THE TRANSACTION PROCESSING AND TECHNICAL SERVICES. THE ASSETS EMPLOYED BY TCS E-SERVE ALONG WITH HUGE INTANGIBLES IN THE FORM OF BRAND VALUE WERE FOUND TO HAVE A DEFINITE CONSIDERABLE EFFECT ON ITS PLI. THESE FACTORS VITIATED ITS COMPARABILITY UNDER THE FAR ANALYSIS WITH THE TESTED COMPANY, WHICH COULD BE A CAPITAL SERVICE PROVIDER WITHOUT MUCH INTANGIBLE AND RISKS. 25. IN THIS CONTEXT IT REQUIRES TO BE NOTED THAT THE ITAT ALSO REFERRED TO THE DECISION OF THIS COURT CIT V. AGNITY INDIA TECHNOLOGIES PRIVATE LIMITED (2013) 36 TAXMANN.COM 289. 26. THE COURT MAY ALSO NOTE THAT THE KARNATAKA HIGH COURT HAS IN PCIT V. SOFTBRANDS (2018) 406 ITR 513 (KAR) NOTED AS UNDER: '48. THE TRIBUNAL OF COURSE IS EXPECTED TO ACT FAIRLY, REASONABLY AND RATIONALLY AND SHOULD SCRUPULOUSLY AVOID PERVERSITY IN THEIR ORDERS. IT 14 SHOULD REFLECT DUE APPLICATION OF MIND WHEN THEY ASSIGN REASONS FOR RETURNING THE PARTICULAR FINDINGS. 49. FOR INSTANCE, WHILE DEALING WITH COMPARABLES OF FILTERS, IF UNEQUALS LIKE SOFTWARE GIANT INFOSYS OR WIPRO ARE COMPARED TO A NEWLY ESTABLISHED SMALL SIZE COMPANY ENGAGED IN SOFTWARE SERVICE, IT WOULD OBVIOUSLY BE WRONG AND PERVERSE. THE VERY WORD 'COMPARABLE' MEANS THAT THE GROUP OF ENTITIES SHOULD BE IN A HOMOGENEOUS GROUP. THEY SHOULD NOT BE WILDLY DISSIMILAR OR UNLIKE OR POLES APART. SUCH WILD COMPARISONS MAY RESULT IN THE BEST JUDGMENT ASSESSMENT GOING HAYWIRE AND DIRECTIONLESS WILD, WHICH MAY LAND UP THE FINDINGS OF THE TRIBUNAL IN THE REALM OF PERVERSITY ATTRACTING INTERFERENCE UNDER SECTION 260-A OF THE ACT.' 27. THERE IS MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE SCALE OF OPERATIONS OF THE COMPARABLES WITH THE TESTED ENTITY IS A FACTOR THAT REQUIRES TO BE KEPT IN VIEW. TCS E-SERVE HAS A TURNOVER OF RS.1359 CRORES AND HAS NO SEGMENTAL REVENUE WHEREAS THE ASSESSEE S ENTIRE SEGMENTAL REVENUE IS A MERE 24 CRORES. AS OBSERVED BY THIS COURT IN ITS DECISION DATED 5TH AUGUST 2016 IN ITA 417/2016(PCIT V. ACTIS GLOBAL SERVICES PRIVATE LIMITED) 'SIZE AND SCALE OF TCS S OPERATION MAKES IT AN INAPPOSITE COMPARABLE VIS-A- VIS THE PETITIONER.' AS ALREADY POINTED OUT EARLIER THERE IS A CLOSER COMPARISON OF TCS E- SERVE LIMITED WITH INFOSYS BPO LIMITED WITH EACH OF THEM EMPLOYING 13,342 AND 17,934 EMPLOYEES RESPECTIVELY AND MAKING RS.37 CRORES AND RS.19 CRORES AS CONTRIBUTION TOWARDS BRAND EQUITY. WHEN RULE 10(B) (2) IS APPLIED I.E. THE FAR ANALYSIS, NAMELY, FUNCTIONS PERFORMED, ASSETS OWNED AND RISKS ASSUMED IS DEPLOYED THEN BRAND AND HIGH ECONOMIC UPSCALE WOULD FALL WITHIN THE DOMAIN OF 'ASSETS' AND THIS ALSO WOULD MAKE BOTH THESE COMPANIES AS UNSUITABLE COMPARABLES. 28. THE DIRECTOR S REPORT OF TCS E-SERVE LIMITED BEARS OUT THE CONTENTION OF THE ASSESSEE THAT BOTH ENTITIES HAVE BEEN LEVERAGING TCSS SCALE AND LARGE CLIENT BASE TO INCREASE THEIR BUSINESS IN A SIGNIFICANT WAY. THE SUBMISSION THAT THE TWO COMPARABLES OFFER AN ILLUSTRATION OF 'AN IDENTICAL TRANSACTION BEING CONDUCTED IN AN UNCONTROLLED MANNER' OVERLOOKS THE EFFECT OF THE TATA BRAND ON THE PERFORMANCE OF THE IMPUGNED COMPARABLES. THE QUESTION WAS NOT MERELY WHETHER THE MARGINS EARNED BY THE TATA GROUP IN PROVIDING CAPTIVE SERVICE TO THE CITI ENTITIES WERE AT ARM S LENGTH. THE QUESTION WAS WHETHER THEY OFFERED A RELIABLE BASIS TO RE-CALIBRATE THE 15 PLI OF THE ASSESSEE WHOSE SCALE OF OPERATIONS WAS OF A MUCH LOWER ORDER THAN THE TWO IMPUGNED COMPARABLES. THE MERE FACT THAT THE TRANSACTIONS WERE IDENTICAL WAS NOT, IN TERMS OF THE LAW EXPLAINED IN THE ABOVE DECISIONS, EITHER A SOLE OR A RELIABLE YARDSTICK TO DETERMINE THE APPOSITE CHOICE OF COMPARABLES. 29. FOR ALL OF THE AFOREMENTIONED REASONS, THE COURT FINDS MERIT IN THE CONTENTION OF THE ASSESSEE THAT BOTH THE IMPUGNED COMPARABLES VIZ., TCS E- SERVE LIMITED AND TCS E-SERVE INTERNATIONAL LIMITED OUGHT TO BE EXCLUDED FROM THE LIST OF COMPARABLES FOR THE PURPOSES OF DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTIONS INVOLVING THE ASSESSEE AND ITS AES. CONCLUSION 30. FOR THE AFOREMENTIONED REASONS, THE QUESTION FRAMED IS ANSWERED IN THE NEGATIVE I.E. IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE IMPUGNED ORDER OF THE ITAT AS WELL AS THE CORRESPONDING ORDERS OF THE DRP AND TPO ON THE ISSUE ARE HEREBY SET ASIDE. THE APPEAL IS ALLOWED IN THE ABOVE TERMS BUT IN THE CIRCUMSTANCES NO ORDER AS TO COSTS. IV. ECLERX SERVICES LTD. 26. THE COUNSEL STATED THAT THIS COMPANY HAS BEEN REJECTED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 2011-12 IN ITA NO.6078/DEL/2015 ON THE GROUND THAT THIS COMPANY IS A KPO SERVICE PROVIDER. THE RELEVANT FINDINGS OF THE CO-ORDINATE BENCH READ AS UNDER: 47. WITH RESPECT TO EXLERX SERVICES LTD., WE FIND THAT LEARNED AR HAS POINTED TO ITS BUSINESS WHICH IS IN THE NATURE OF KNOWLEDGE PROCESSING OUTSOURCING (KPO) NAMELY WEB ANALYTICS, BUSINESS INTELLIGENCE, COMPETITION BENCHMARKING AND PRICING, CONSULTING ETC. WE FIND THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF RAMPGREEN SOLUTIONS PVT. LTD. (SUPRA) HAS HELD IT TO BE A COMPANY ENGAGED IN THE PROVISION OF KPO SERVICE AND THEREFORE CANNOT BE REGARDED AS AN APPROPRIATE COMPARABLE FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF PROVISION OF BPO SERVICES. WE ALSO FIND THAT IN VARIOUS 16 OTHER DECISIONS, THE CO-ORDINATE BENCH OF TRIBUNAL HAS HELD IT TO BE PROVIDING KPO SERVICES AND THEREFORE NOT COMPARABLE TO THE BPO SERVICES. IN VIEW OF THESE FACTS, WE DIRECT THE AO TO EXCLUDE IT ON ACCOUNT OF FUNCTIONAL DISSIMILARITY. 27. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDINATE BENCH (SUPRA), WE DIRECT FOR THE EXCLUSION OF THIS COMPANY FROM THE FINAL SET OF COMPARABLES. 28. THE COUNSEL FURTHER ARGUED ON THE EXCLUSION OF TCS E-SERVE LTD. THE DR POINTED OUT THAT THIS COMPANY WAS INCLUDED IN THE FINAL SET OF COMPARABLES BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2011-12 WHEREIN THE TRIBUNAL HAS FOLLOWED ITS OWN DECISION FOR A.Y. 2010-11. 29. THE COUNSEL VEHEMENTLY STATED THAT THE WISDOM OF THE SUPERIOR COURT SHOULD PREVAIL OVER THE CO-ORDINATE BENCH. IT IS THE SAY OF THE COUNSEL THAT THIS COMPANY HAS BEEN EXCLUDED BY THE HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF AVAYA INDIA PVT. LTD. 416 ITR 638. 30. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL CONTENTIONS. IT IS TRUE THAT IN ASSESSEES OWN CASE, THE TRIBUNAL IN A.Y 2010-11 & 2011-12 HAVE RETAINED THIS COMPANY IN THE FINAL SET OF COMPARABLES BUT IT IS EQUALLY TRUE THAT THE HONBLE JURISDICTIONAL HIGH 17 COURT OF DELHI HAS EXCLUDED THIS COMPANY IN THE CASE OF AVAYA INDIA PVT. LTD. (SUPRA). THE RELEVANT FINDING READ AS UNDER: 18. ON THE ASPECT OF EXCLUSION OF COMPARABLES THAT HAVE A HIGH ECONOMIC UPSCALE VIZ., INFOSYS, TCS AND WIPRO, PARTICULAR REFERENCE MAY BE MADE TO THE DECISION OF THIS COURT IN PCIT V. BC MANAGEMENT SERVICES PVT. LTD. (SUPRA) WHERE A PARTICULAR REFERENCE WAS MADE TO TCS E-SERVE AS UNDER: '13. ...THE THIRD COMPARABLE THAT THE AO/TPO EXCLUDED IS TCS E- SERVE. THE ITAT OBSERVED THAT THOUGH THERE IS A CLOSE FUNCTIONAL SIMILARITY BETWEEN THAT ENTITY AND THE ASSESSEE, HOWEVER, THERE IS A CLOSE CONNECTION BETWEEN TCS E-SERVE AND TATA CONSULTANCY SERVICE LTD. WHICH WAS HIGH BRAND VALUE: THAT DISTINGUISHED IT AND MARKED IT OUT FOR EXCLUSION. THE ITAT RECORDED THAT THE BRAND VALUE ASSOCIATED WITH TCS CONSULTANCY REFLECTED IMPACTED TCS E-SERVE PROFITABILITY IN A VERY POSITIVE MANNER. THIS INFERENCE TOO IN THE OPINION OF COURT, CANNOT BE TERMED AS UNREASONABLE. THE RATIONALE FOR EXCLUSION IS THEREFORE UPHELD.' 31. WITH OUR UTMOST RESPECT TO THE DECISION OF THE CO-ORDINATE BENCH, THE HIGHER WISDOM OF THE HONBLE JURISDICTIONAL HIGH COURT SHOULD PREVAIL. WE, THEREFORE, RESPECTFULLY FOLLOWING THE FINDINGS OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA), DIRECT FOR THE EXCLUSION FOR THIS COMPANY FROM THE FINAL SET OF COMPARABLES. 32. IN THE LIGHT OF THE AFORE MENTIONED FINDINGS, WE HOLD ACCORDINGLY. 18 33. THE LAST GRIEVANCE RELATES TO THE CHARGE OF INTEREST U/S 234C OF THE ACT. WE DIRECT THE AO/ TPO TO CHARGE INTEREST U/S 234C OF THE ACT ON THE RETURNED INCOME OF THE ASSESSEE AS PER THE PROVISION OF LAW. 34. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.1178/DEL/2017 IS ALLOWED. ITA NO.4607/DEL/2017 FOR A.Y. 2013-14 35. THE BUSINESS PROFILE OF THE ASSESSEE REMAINS THE SAME AS DISCUSSED IN ITA NO.1178/DEL/2017 (SUPRA). THE FIRST GRIEVANCE IS SIMILAR TO THE GRIEVANCE RAISED IN ITA NO.1178/DEL/2017 (SUPRA) AND RELATES TO THE COMPUTATION OF THE OPERATING MARGIN OF THE APPELLATE COMPANY. THE APPELLANT COMPANY HAS COMPUTED ITS OPERATING MARGIN AT 12.62% WHEREAS THE TPO HAS COMPUTED THE SAME AT 10.46%. THE TPO DID NOT CONSIDER (I) FOREX FLUCTUATION, (II) BANK CHARGES, (III) ASSETS WRITTEN OFF AND (IV) PRIOR PERIOD EXPENSES. 36. IN SO FAR AS FOREX FLUCTUATION AND PRIOR PERIOD EXPENSE ARE CONCERNED, WE HAVE DISCUSSED THIS ISSUE IN DETAIL IN ITA 19 NO.1178/DEL/2017 (SUPRA) FOR OUR DETAILED DISCUSSED THEREIN. WE HOLD ACCORDINGLY. 37. SO FAR AS BANK CHARGES ARE CONCERNED. THE SAME WAS DEFINITELY A CHARGE AGAINST THE OPERATING PROFIT AND DESERVES TO BE EXCLUDED. IN SO FAR AS ASSET WRITTEN OFF IS CONCERNED, THE WRITE OFF IS OF CAPITAL IN NATURE AND SHOULD BE EXCLUDED FOR THE COMPUTATION OF OPERATING MARGIN WITH THESE ABOVE DIRECTIONS WE DIRECT THE AO/ TPO TO RECOMPUTE THE OPERATING MARGIN OF THE APPELLANT COMPANY. 38. IN THE FINAL SET OF COMPARABLES EXCLUSION OF TCS E-SERVE HAS BEEN ARGUED AT LENGTH. THOUGH THIS COMPANY WAS INCLUDED IN THE FINAL SET OF COMPARABLES BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2010-11 AND 2011-12. BUT IN ITA NO.1178/DEL/2017, WE HAVE DISCUSSED IN DETAIL RELYING UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT THAT THIS COMPANY SHOULD BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. FOR OUR DETAILED DISCUSSION THEREIN, WE DIRECT FOR THE EXCLUSION OF THIS COMPANY FROM FINAL SET OF COMPARABLES. 39. THE NEXT GRIEVANCE RELATES TO THE DEPRECIATION ON COMPUTER WRITTEN OFF. FACTS OF THE RECORD SHOW THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.21,451/- ON 20 ACCOUNT OF ASSETS WRITTEN OFF IN ITS P&L ACCOUNT. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF ASSETS WRITTEN OFF. IN ITS REPLY THE ASSESSEE STATED THAT THE ASSETS HAVE BEEN WRITTEN OFF AND THE SAME HAS BEEN CLAIMED AS BUSINESS DEDUCTION IN THE COMPUTATION OF INCOME. IT WAS EXPLAINED THAT THE ASSESSEE HAS WRITTEN OFF COMPUTER EQUIPMENTS WHICH WAS DAMAGED DURING THE YEAR. THE AO PROPOSED TO DISALLOW THE SAME AS IT WAS NOT AN ELIGIBLE EXPENSE. 40. OBJECTIONS WERE RAISED BEFORE THE DRP AND THE DRP DIRECTED THE AO TO EXAMINE THE DETAILS OF ASSETS WRITTEN OFF, IF THEY CONSTITUTED A PART OF BLOCK OF ASSETS. THE CLAIM OF THE ASSESSEE MAY BE ALLOWED OTHERWISE NOT. 41. PURSUANT TO THE DIRECTION OF DRP, THE AO ONCE AGAIN EXAMINED THE CLAIM AND THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS ONCE AGAIN. IT WAS EXPLAINED THAT THE ASSESSEE HAS RECEIVED AN INSURANCE CLAIM OF RS.23,428/- AGAINST THE DAMAGED COMPUTER AND THE VALUE OF COMPUTER IS INCLUDED IN THE BLOCK OF ASSETS. THE AO WAS OF THE OPINION THAT SINCE THE ASSESSEE HAS RECEIVED THE CLAIM OF RS. 23,428/- AGAINST THE DAMAGED COMPUTER FROM THE INSURANCE COMPANY AND HAS OFFERED THIS RECEIPT AS PROFIT AND THE DIFFERENCE OF RS. 1,977/- HAS BEEN ADDED BACK BY THE ASSESSEE ITSELF IN THE COMPUTATION OF INCOME. IT IS EVIDENT THAT 21 THE ASSESSEE HAS ALREADY DEDUCTED THE COST OF RS.21,451/- WHILE COMPUTING THE PROFIT ON SALE OF FIXED ASSETS. ACCORDINGLY, THE AO DISALLOWED THE CLAIM OF DEDUCTION OF RS.21,451/-. 42. BEFORE US, THE COUNSEL FOR THE ASSESSEE STATED THAT EVEN IF THE ASSETS HAVE BEEN WRITTEN OFF THE ASSESSEE IS STILL ENTITLED FOR THE CLAIM OF DEPRECIATION ON THE BLOCK OF ASSETS. WE HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER, WE DO NOT FIND ANYWHERE THAT THE CLAIM OF DEPRECIATION WAS DENIED BY THE AO. THE ONLY OBSERVATION IS IN RESPECT OF THE DENIAL OF DEDUCTION ON ACCOUNT OF IT BEING A CAPITAL LOSS. WE FURTHER FIND THAT THE AOS DECISION IS PURSUANT TO THE DIRECTIONS OF THE DRP AND IT CANNOT BE SAID THAT THE AO HAS NOT FOLLOWED THE DIRECTIONS OF THE DRP. WE THEREFORE DO NOT FIND ANY MERIT IN THIS GRIEVANCE OF THE ASSESSEE AND THE SAME IS ACCORDINGLY DISMISSED. 43. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.4607/DEL/2017 IS PARTLY ALLOWED. SA NO.281/DEL/2020 (IN ITA NO.1178/DEL/2017) FOR A.Y. 2012-13: 44. SINCE WE HAVE DECIDED THE APPEAL FOR A.Y. 2012-13, THIS STAY APPLICATION BECOMES OTIOSE. 22 45. IN THE COMBINED RESULT, APPEALS OF THE ASSESSEE IN ITA NO.1178/DEL/2017 IS ALLOWED AND IN ITA NO.4607/DEL/2017 IS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 27.08.2020. SD/- SD/- S /- [KULDIP SINGH] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27 TH AUGUST, 2020 PRITI YADAV, SR. PS* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI