TATA CONSULTANCY SERVICES LTD, MUMBAI V. ASST CIT LTU-1, MUMBAI

ITA 1650/MUM/2016

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5081 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2011-2012
• Appeal Filed On: 21-03-2016
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Assessee Lawyers: WAY OF ADDITIONAL GROUND IS
• Keywords: Business income; Depreciation; Transfer pricing; Business expenditure; Double taxation relief; Opportunity of being heard; International transaction; Earning of tax free income; Retrospective amendment; Additional evidence; Capital expenditure; TDS; Rule 8D; Set aside; Capital Gains; CHAPTER IV
• Section: 37; 90; 2; 143(3); 92B; 10AA; 234B; 14A; 115JB; 80IB; 10B; 195; 274; 80HH; 43; 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “J” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No. 1650/Mum./2016 (Assessment Year : 2011–12) Tata Consultancy Services Ltd. 9 th Floor, Nirmal Building, Nariman Point Mumbai 400 021 PAN – AAACR4849R ................ Appellant v/s Asstt. Commissioner of Income Tax Large Taxpayer Unit–1, Mumbai ................ Respondent ITA No. 1054/Mum./2016 (Assessment Year : 2011–12) Asstt. Commissioner of Income Tax Large Taxpayer Unit–1, Mumbai ................ Appellant v/s Tata Consultancy Services Ltd. 9 th Floor, Nirmal Building, Nariman Point Mumbai 400 021 PAN – AAACR4849R ................ Respondent ITA No. 17/Mum./2011 (Assessment Year : 2006–07) Tata Consultancy Services Ltd. 9 th Floor, Nirmal Building, Nariman Point Mumbai 400 021 PAN – AAACR4849R ................ Appellant v/s Deputy Commissioner of Income Tax Large Taxpayer Unit–1, Mumbai ................ Respondent Assessee by : Shri Porus Kaka, Sr. Advocate Revenue by : Ms. Vatsalaa Jha, CIT–DR Date of Hearing – 02.02.2022 Date of Order – 06/04/2022 Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 2 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present appeals have been filed by the assessee and Revenue challenging final assessment orders dated 25.10.2010 and 29.01.2016, passed by the Assessing Officer under section 143(3) r/w section 144C(13) Income Tax Act, 1961 ("the Act") for assessment year 2006-07 and 2011- 12, respectively. 2. Since all these appeals pertain to the same assessee and the issues involved, inter–alia, common, therefore, these appeals were heard together as a matter of convenience and are being adjudicated by way of this consolidated order. Further, as the basic facts in all these appeals are same, we have elaborately mentioned only the facts for assessment year 2011–12 for the sake of brevity. However, if any particular issue is arising in any assessment year for the first time, the facts pertaining to the same are discussed accordingly. ITA no.1650/Mum./2016 Assessee’s Appeal – A.Y. 2011–12 3. In this appeal, the assessee has raised grounds pertaining to the additions made by the Assessing Officer in corporate tax as well as transfer pricing. We will first deal with the issues relating to corporate tax additions. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 3 4. The assessee is a Public Limited Company and is engaged in the business of export of computer software providing e–solutions, BPO activities and other management consultancy activities. During the relevant assessment year, the assessee company filed its return of income electronically on 23.11.2011, declaring total income of Rs.19,98,64,93,014. The book profit under section 115JB of the Act was declared at Rs.48,49,54,27,020. The assessee was assessed to tax under the normal provisions of the Act. 5. The issue arising in ground no.2 in assessee‟s appeal is pertaining to disallowance of State taxes paid overseas under section 40(a)(ii) of the Act. 6. The brief facts of the case pertaining to this issue as emanating from the record are: The assessee had paid tax amounting to Rs.19,73,51,059, to various local State authorities in USA. The assessee claimed deduction under section 37 of the Act on the aforesaid local tax paid. During the course of assessment proceedings, the assessee was asked to show cause as to why the claim of State tax paid in USA cannot be disallowed under the provisions of section 40(a)(ii) of the Act. The assessee submitted that as per Explanation–1 to section 40(a)(ii) of the Act only the sum eligible for relief of tax under section 90 or under section 91 of the Act are not eligible for deduction as per section 40(a)(ii) of the Act. The State and local taxes being outside the scope of ambit of the Double Taxation Avoidance Agreement (―DTAA‖) are ineligible for relief under section 90 of the Act. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 4 The assessee further submitted that the term ―tax‖ as defined under section 2(43) of the Act would only include taxes chargeable under the Act. The Assessing Officer, vide draft assessment order dated 16.02.2015, passed under section 143(3) r/w section 144C(1) of the Act did not agree with the submissions of the assessee and disallowed the deduction claimed on State / local taxes paid overseas under section 40(a)(ii) of the Act. Being aggrieved, the assessee filed detailed objections before the Dispute Resolution Panel (―the DRP‖). The DRP, vide its directions dated 16.11.2015, issued under section 144C(5) of the Act, inter–alia, rejected the objections filed by the assessee following the order passed by the Co– ordinate Bench of the Tribunal in assessee‟s own case for the assessment year 2005–06. In conformity with the directions issued by the DRP, the A.O. has passed the impugned final assessment order. Being aggrieved, the assessee is in appeal before us. 7. During the course of hearing, Shri Porus Kaka, the learned Sr. Counsel appearing for the assessee submitted that as per section 40(a)(ii) r/s 2(43) of the Act, deduction is prohibited only for those taxes for which credit is allowable under section 90 or 91 of the Act and thus provisions of section 40(a)(ii) of the Act are not applicable to state taxes paid overseas. Learned Sr. Counsel further submitted that the issue has been decided by the Co–ordinate Bench of the Tribunal in assessee‟s own case for the assessment year 2009–10. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 5 8. On the other hand, Ms. Vatsalaa Jha, the learned Departmental Representative (―learned D.R.‖) vehemently relied upon the orders passed by the lower authorities. 9. We have considered the rival submissions and perused the material available on record. We find that on identical issue, the Co–ordinate Bench of the Tribunal in assessee‟s own case vide order dated 30.10.2019, passed in Tata Consultancy Services Ltd. v/s ACIT, ITA no.5713/Mum./2016, for the assessment year 2009–10, following the decision of the Hon'ble Jurisdictional High Court in Reliance Infrastructure Ltd. v/s CIT, [2017] 390 ITR 271 (Bom.) observed as under:– ―6. We have considered the rival submissions and perused the material on record. From the stage of the assessment proceeding itself, it is the claim of the assessee that the term ―tax‖, as defined under section 2(43) of the Act would only include taxes chargeable under the Indian Income Tax Act. It is the further case of the assessee that since in respect of the State taxes paid overseas, the assessee is not eligible to claim relief under section 90 or 91 of the Act, it will not be covered under section 40(a)(ii) of the Act. On a perusal of provisions of sub–section (43) of section 2 of the Act, it becomes clear that the term ―tax‖ has been defined to mean any tax paid under the provisions of the Act. Section 40(a)(ii) of the Act says that any rate or taxes levied on the profits or gain in any business or profession would not be allowable as deduction. Explanation–1 to section 40(a)(ii) of the Act inserted by the Finance Act, 2006, w.e.f. 1 st April 2006, further clarifies that any sum eligible for relief of tax either under section 90 or 91 of the Act would not be allowable as deduction under section 40(a)(ii) of the Act. It is the say of the assessee that the tax eligible for relief under section 90 of the Act are only those taxes which are levied by Federal / Central Government and not by any local authority of State, City or County. Thus, it is ineligible for any relief under section 90 of the Act. The aforesaid submissions of leaned Sr. Counsel for the assessee, prima facie, is acceptable if one has to strictly go by the meaning of ―tax‖, defined under section 2(43) of the Act, as it only refers to tax paid under the provisions of the Act. It is also worth mentioning, the State taxes paid by the assessee in DTAA countries are not eligible for relief under section 90 of the Act. Therefore, the issue which arises is, whether it can be allowed as deduction under section 37 of the Act. No doubt, in assessee‘s own case in assessment year 2005–06, the Tribunal in the order referred to above Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 6 following its own decision in DCIT v/s Tata Sons Ltd., [2011] 43 SOT 27 (Mum.), has held that the State taxes paid overseas cannot be allowed as deduction in view of the provisions of section 40(a)(ii) of the Act. However, the aforesaid legal position has substantially changed after the decision of the Hon'ble Jurisdictional High Court in Reliance Infrastructure Ltd. (supra). While interpreting the provisions of section 2(43) of the Act, vis–a–vis section 40(a)(ii) of the Act, the Hon‘ble Court held that the tax which has been paid abroad would not be covered within the meaning of section 40(a)(ii) of the Act, since, the meaning of the word ―tax‖ as defined under section 2(43) of the Act would mean only the tax chargeable under the Act. Thus, as per the aforesaid decision of the Hon'ble Jurisdictional High Court, taxes levied overseas which are not eligible for relief either under section 90 or 91 of the Act, would not come within the purview of section 40(a)(ii) of the Act. It is the specific plea of the assessee that the State tax is not covered either under Indo–US or Indo–Canada tax treaty, hence, not eligible for any relief under section 90 of the Act. Pertinently, unlike section 91 read with Explanation–(iv), section 90 does not provide for inclusion of tax levied by any State/ local authority of that country within the expression ̳income tax‘. In view of the aforesaid, we direct the Assessing Officer to verify whether the State taxes paid by the assessee overseas are eligible for any relief under section 90 of the Act and if it is not found to be so, assessee‘s claim of deduction should be allowed. In view of our decision above, no separate adjudication of grounds no.1.2 is required.‖ 10. The aforesaid conclusion was also followed by another Co–ordinate Bench of the Tribunal in assessee‟s own case vide order dated 18.08.2020, passed in Tata Consultancy Services Ltd. v/s DCIT, ITA no.794/Mum./ 2018, for the assessment year 2010–11. As the facts and circumstances of the present case are similar to earlier assessment years and the learned D.R. could not show us any reason to deviate from the aforesaid orders and no change in facts and law was alleged in the relevant assessment year, respectfully following the decisions of the Co–ordinate Bench rendered in assessee‟s own case cited supra, we direct the Assessing Officer to verify as to whether the State Tax paid by the assessee overseas are eligible for any relief under section 90 of the Act and if it is not found to be so, the assessee‟s claim of deduction should be allowed. Accordingly, Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 7 ground no.2 raised in assessee‟s appeal is allowed for statistical purpose. Consequently, no separate adjudication of ground no.2.1, raised in assessee‟s appeal is required. 11. Further as regards ground no.2.2, raised in assessee‟s appeal, in view of the above, the same is consequential in nature and shall be accordingly dealt by the Assessing Officer as per law. Accordingly, the same is allowed for statistical purpose. 12. The issue arising in ground no.3, raised in assessee‟s appeal pertains to expenditure incurred on import of software. 13. The brief facts of the case pertaining to this issue as emanating from the record are: During the relevant assessment year, the assessee imported software for its business. The software imported were both for internal use in its business as well as for the purpose of trading. The break–up of the same is as under:– i) Software for internal use Rs. 77,44,41,142 ii) Software for trading purpose Rs. 50,21,70,495 –––––––––––––––– Rs.127,66,11,637 =========== 14. During the course of assessment proceedings, the assessee was asked to show cause as to why the expenditure incurred on import of software should not be disallowed under section 40(a)(i) of the Act as tax at source was not deducted from the payments made to overseas vendors. In reply thereto, the assessee submitted that payment for purchase of Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 8 software cannot be considered as payment of royalty under section 9(1)(vi) of the Act. Further, the assessee submitted that the payment for purchase of software is also not covered under the restrictive definition of the word ―Royalty” provided in DTAA entered into by India with foreign countries. Thus, the assessee submitted that there was no withholding tax obligation on the assessee on the payments made to the non–residents as no income was chargeable to tax in India. The Assessing Officer, vide draft assessment order dated 16.02.2015, held that the payment made for import of software is in the nature of royalty within the meaning of section 9(1)(vi) of the Act. The Assessing Officer also referred to Explanation–3 to section 9(1)(vi) of the Act as well as CBDT Circular no.621 dated 09.12.1991, in support of its conclusion. Accordingly, the Assessing Officer disallowed payment of Rs.127,66,11,637 [i.e., Rs.77,44,41,142 (+) Rs.50,21,70,495] under section 40(a)(i) of the Act for non–deduction of tax at source under section 195 of the Act. 15. Being aggrieved, the assessee filed objections before the DRP. Vide directions dated 16.11.2015, the DRP, following order dated 04.11.2015 passed by the Co-ordinate Bench of Tribunal in assessee‟s own case in ITA No. 7513/Mum/2010 for assessment year 2005-06, directed the Assessing Officer to capitalise the expenditure incurred by the assessee on import of software. In conformity with the directions issued by DRP, Assessing Officer vide impugned final assessment order dated 29.01.2016, capitalised the expenditure in respect of import of software and allowed depreciation on same to the assessee. Being aggrieved the assessee is in appeal before us. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 9 16. During the course of hearing, learned Senior Counsel at the outset submitted that the issue whether payment for purchase of software is royalty is no longer res integra and has been decided in favour of the taxpayer by Hon‟ble Supreme Court in Engineering Analysis Centre of Excellence Pvt. Ltd. v/s CIT, [2021] 432 ITR 471 (SC). Learned Senior Counsel further submitted that the Co-ordinate Bench of Tribunal in assessee‟s own case for assessment year 2005-06 vide order dated 23.03.2017 also held that the amount paid for purchase of software product would not fall within the definition of „royalty‟ and accordingly, no TDS was required to be deducted. On the other hand, learned D.R. vehemently relied upon the draft assessment order. 17. We have considered the rival submissions and perused the material available on record. In the present case, the Assessing Officer vide draft assessment order treated the expenditure for import of software as royalty with the meaning of section 9(1)(vi) of the Act. In support of its conclusion the Assessing Officer also placed reliance on CBDT‟s Circular No. 621 dated 09.12.1991 and also decision of Hon‟ble Karnataka High Court in CIT v/s Samsung Electronics Co. Ltd.(2012) 354 ITR 494. In further proceedings, the DRP directed the expenditure on purchase of software to be capitalised following order dated 04.11.2015, passed by Co-ordinate Bench of Tribunal in assessee‟s own case. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 10 18. At this stage it is pertinent to note that the Co-ordinate Bench‟s order dated 04.11.2015 in ITA No.7513/Mum/2010 for assessment year 2005-06 on this issue was subsequently recalled vide order passed in M.A. No. 93 of 2016 and the matter was reheard and adjudicated afresh. Pursuant to the recall order, the Co-ordinate Bench of Tribunal vide order dated 23.03.2017 passed in ITA No. 7513/Mum/2010 in assessee‟s own case for assessment year 2005-06 dismissed the appeal filed by the Revenue on the similar issue and held that payment for import of software would not fall within the definition of „royalty‟ and no TDS was required to be deducted. Thus, we are of the view that DRP‟s direction based on the Tribunal‟s order dated 04.11.2015, which was subsequently recalled, is not correct in law and cannot be sustained. Therefore, the final assessment order to the extent expenditure on import of software was capitalised and deprecation was allowed, in conformity with aforesaid directions of DRP, is directed to be set aside. 19. We further noticed that the Co-ordinate Bench of Tribunal while deciding the similar issue in favour of the assessee for assessment year 2005-06 vide order dated 23.03.2017 considered agreements entered into by the assessee for purchase of software. The Tribunal also noted that CIT(A) had also taken note of various agreements entered into by the assessee and considered the relevant clauses of the agreement while deciding that the payment would not fall within the definition of „royalty‟ and thus not taxable in the hands of the payee in India in absence of there being „PE‟ of the vendors in India. However, in the present case the Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 11 Assessing Officer has not at all deliberated on the factual aspect of the issue and has not considered the agreements entered into by the assessee with vendors for import of software and merely by relying upon certain judicial precedents and statutory provisions have come to the conclusion that the payment made by the assessee for import of software is in the nature of „royalty‟ under section 9(1)(vi) of the Act and thus assessee was liable to deduct tax at source under section 195 of the Act. Though it has been submitted by the assessee that the payment for purchase of software is for acquiring of copyrighted article and not for transfer of any right in the copyright and payment cannot be construed as „royalty‟ under section 9(1)(vi) of the Act. However, no factual verification vis-a-vis relevant clauses of agreements entered into by the assessee for import of software was done by the Assessing Officer or the DRP. There is no iota of doubt that payment for transfer of „copyrighted article‟ as against the payment for transfer of „copyright‟ does not qualify as „royalty‟ and thus the same is not taxable in India in the absence of PE of the seller. However, each case is decided on its own facts. It is also pertinent to note that the conclusion in favour of the taxpayer by the Hon‟ble Supreme Court in Engineering Analysis Centre for Excellence Pvt. Ltd. (supra) was also reached after considering relevant clauses of End User License Agreement. However, in the present case as is evident from the orders passed by the Assessing Officer and DRP, such factual aspects were not considered and claim of the assessee was denied merely by referring to judicial precedents and CBDT circular. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 12 20. Thus, in view of the above we deem it appropriate to restore this issue to the file of Assessing Officer for de novo adjudication after examination of the agreements entered into by the assessee for import of software in light of the law laid down by the Hon‟ble Supreme Court in Engineering Analysis Centre for Excellence Pvt. Ltd. (supra). Further, if it is found by the Assessing Officer that the assessee‟s case falls within the parameters laid down by the Hon‟ble Supreme Court in the aforesaid judgment then payment for import of software be allowed. Needless to mention that before passing the order on this issue adequate opportunity of hearing shall be granted to the assessee. In view of the above, ground no. 3 raised in assessee‟s appeal is allowed for statistical purpose. 21. The next issue arising from ground no.4, raised in assessee‟s appeal is regarding disallowance made under section 14A of the Act by applying provisions of rule 8D of the Income Tax Rules, 1961 (―the Rules‖). 22. The brief facts of the case pertaining to this issue as emanating from the record are: During the relevant assessment year, the assessee had earned dividend income of Rs. 39,27,12,369, which was claimed as exempt under section 10(34) of the Act. As the assessee had not worked out any expenditure eligible for earning the aforesaid exempt income, during the course of assessment proceedings, the assessee was asked to furnish the details of dividend income earned and the expenditure incurred as per the provisions of section 14A r/w rule 8D. In reply, the assessee submitted that the expenditure of Rs.71,98,280, have been identified towards salary and Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 13 other overheads for earning exempt income and offered the same for disallowance under section 14A of the Act. The assessee further submitted that there was no direct expenditure which was incurred by the assessee to earn the exempted dividend income and accordingly the assessee has allocated indirect expenditure incurred for earning the exempt income. As per the assessee, the Treasury Department of the assessee carries on the activities of forex management, investment management, cash management, retrial fund management. As investment being one of the activities of the Treasury Department among all the four activities, salary cost of persons who were overseeing investment functions and 25% of the other expenditure of Treasury Department can be reasonably attributed for earning the exempt dividend income. Accordingly, the assessee offered a total expenditure of Rs.71,98,280, for disallowance under section 14A of the Act. As regards the interest expenditure incurred by the assessee during the relevant assessment year, the assessee submitted that the same had no nexus direct or indirect with earning of exempt income. The Assessing Officer vide draft assessment order dated 16.02.2015, held that the expenditure suo–motu offered for disallowance under section 14A of the Act by the assessee for earning the exempt income are very meager. Accordingly, the Assessing Officer made a further disallowance of Rs. 14,51,69,647, in addition to the disallowance offered by the assessee under section 14A of the Act, by treating 0.5% of average value of investment income towards expenditure for earning the exempt income and also interest not directly attributable to any particular income. The DRP Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 14 vide directions dated 16.11.2015, upheld the disallowance made in the draft assessment order on this issue. Being aggrieved, the assessee is in appeal before us. 23. During the course of hearing, the learned Senior Counsel for the assessee submitted that the Assessing Officer has not provided any cogent reason for doubting the correctness of the claim of the assessee for offering suo–motu disallowance made under section 14A of the Act. The learned Senior Counsel further submitted that the A.O. without any basis has treated the expenditure offered for disallowance under section 14A of the Act by the assessee mere meager in nature. The learned Senior Counsel in support of his submissions placed reliance upon the decision of the Co–ordinate Bench of the Tribunal in assessee‟s own case for the assessment year 2010–11. 24. On the other hand, the learned Departmental Representative vehemently relied upon the order passed by the authorities below. 25. We have considered the rival submissions and perused the material available on record. From the facts available on record, it is evident that the Revenue has merely treated the expenditure offered for disallowance as meager in nature and proceeded to make further disallowance by treating 0.5% of average value of investment income as expenditure towards earning the exempt income on ad–hoc basis. The Revenue has also not discharged its onus that the claim made by the assessee is incorrect and there exist a direct nexus between the expenditure disallowed Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 15 under section 14A and the exempt income earned by the assessee. We find that in similar facts and circumstances, the Co–ordinate Bench of the Tribunal in assessee‟s own case vide order dated 18.08.2020, passed in DCIT v/s Tata Consultancy Services Ltd., ITA no.1207/Mum./2018, for the assessment year 2010–11, dismissed the appeal filed by the Revenue against the order passed by the learned CIT(A) deleting the disallowance made by the Assessing Officer under section 14A of the Act by observing as under:– ―30. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities. The AO after invoking the provisions of Rule 8D made disallowance of Rs.14,12,77,945/-, which consist disallowance under Rule 8D(2)(i) of Rs. 53,18,829/- (suo moto offered by assessee), under Rule 8D(2)(ii) of Rs. 14,391/- and Rule 8D(2)(iii) of Rs.13,59,44,725/-. We have noted that the assessee furnished the working of suo moto disallowance of Rs.53,18,829/-, which consist of Rs. 35,92,649/- (salary of the employee who is looking after investment functions) and Rs. 17,26,180/- (overhead expenses other than his salary). The AO has not examined the correctness of the claim of the assessee. No reason as to why the AO is not satisfied with the working of the assessee except recording that the expenses are very meager. The ld CIT(A) after considering the submissions and the material placed before him directed to delete the disallowance including the disallowance of Rule 8D(iii). The ld DR for the revenue failed to bring any material in our notice to take the other view, no contrary decision is also brought to our notice. Thus, we affirm the order of ld CIT(A). In the result this ground of appeal is dismissed.‖ 26. The learned D.R. could not show us any reason to deviate from the aforesaid order and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the decision of the Co– ordinate Bench rendered in assessee‟s own case cited supra, we direct the Assessing Officer to delete the disallowance of expenditure to the extent of Rs.14,51,54,283 and accept the suo–motu disallowance offered by the Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 16 assessee under section 14A of the Act. Accordingly, ground no.4, raised in assessee‟s appeal is allowed. 27. In view of the above, the Assessing Officer is also directed to delete the addition of disallowance of Rs.14,51,54,283 under section 14A r/w Rule 8D while computing Book Profit under section 115JB of the Act. As a result, ground no.4.1, raised in assessee‟s appeal is allowed. 28. The next issue arising in ground no.5, raised in assessee‟s appeal pertains to disallowance of advertisement expenditure. 29. The brief facts of the case pertaining to this issue as emanating from the record are: During the relevant assessment year, the assessee incurred expenditure of Rs.53,61,38,738, in the nature of advertising and other promotional / publicity activities conducted by the assessee. The details of the expenditure are as under:– Particulars Amount Advertisement in Newspaper / Magazine Rs.7,72,95,691 Event/Seminar/Conferences/Exhibitions Rs.40,77,42,998 Experience Certainty Rs.2,25,76,886 Advertisement at Airport Rs.1,59,83,676 Market Related Research and other expenses Rs.1,25,39,488 Total:– Rs.53,61,38,738 30. These expenditures were incurred by the assessee for advertisement in newspaper, marketing of its products, etc., in respect of its on–going business. During the course of assessment proceedings, the assessee was asked to show cause as to why the said expenditure should not be treated Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 17 as capital in nature. In reply, the assessee submitted that the expenditure was routinely incurred by the assessee for advertisement in newspaper, marketing of its products, etc. in respect of its on–going business. Thus, the same was submitted not to be in the nature of brand building expenditure and thus not capital in nature. The Assessing Officer vide draft assessment order dated 16.02.2015, treated the amount of Rs. 49,74,90,893, as brand building expenditure having enduring benefit to the assessee and accordingly, treated the same as capital in nature. The Assessing Officer also granted depreciation @ 25% amounting to Rs.12,43,72,723. 31. The DRP, vide its directions dated 16.11.2015, upheld the disallowance made in the draft assessment order on this issue. Being aggrieved, the assessee is in appeal before us. 32. During the course of hearing, the learned Sr. Counsel submitted that the expenditure incurred by the assessee in respect of advertisement in newspaper / magazine marketing of its product, etc., were routinely incurred for its on–going business and the same was not in the nature of brand building. The learned Senior Counsel further submitted that the assessee did not derive enduring benefit by incurring the said expenditure. In support of his submissions, the learned Senior Counsel placed reliance on the orders passed by the Co–ordinate Bench of the Tribunal in assessee‟s own case for the preceding assessment years. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 18 33. On the other hand, the learned Departmental Representative vehemently relied upon the orders passed by the authorities below. 34. We have considered the rival submissions and perused the material available on record. As it is evident from the details of expenditure mentioned in the aforesaid paragraphs, the expenditures were incurred by the assessee for the purpose of advertisement in newspaper, magazine, events, seminar, conferences, exhibition, advertisement at Airport, etc. We find that on identical issue, the Co–ordinate Bench of the Tribunal vide order dated 30.10.2019, passed in assessee‟s own case in Tata Consultancy Services Ltd. v/s ACIT, ITA no.5713/Mum./2016, for the assessment year 2009–10, vide Para–23 at Page–22, observed as under:– ―23. We have considered rival submissions and perused the material on record. We have also carefully examined the case laws cited before us. On a detailed analysis of facts on record, we have noted that the reasoning of the Assessing Officer that the expenditure was incurred for brand building is without any basis. It is to be noted, before the Departmental Authorities the assessee had demonstrated that in no way it is connected with development of Tata brand. The details of expenditure incurred clearly demonstrate that they were basically for the purpose of advertising assessee‘s products in print media or through seminar, conferences, etc. As rightly observed by learned Commissioner (Appeals), the Assessing Officer has brought no material on record to establish that the expenditure is for brand building. As observed earlier, the expenditure relates to advertisement in newspaper, magazine, events, seminars, conferences, exhibitions, etc. Thus, the nature of expenditure incurred by the assessee clearly indicates that it was for promoting its own business. Further, considering the turnover of the assessee, the expenditure incurred on advertisement does not appear to be unusually high. That being the case, the expenditure incurred on advertisement cannot be treated to be in the nature of capital expenditure and amortized over a period of five years. To that extent, we agree with the decision of learned Commissioner (Appeals) on the issue. However, as regards experience certainty expenditure amounting to Rs.5.28 crore, it appears that learned Commissioner (Appeals) has held it to be of capital nature on the basis that the assessee itself admitted so. However, before us, leaned Sr. Counsel for the assessee has vehemently argued that no such admission was made by the assessee before learned Commissioner (Appeals) and under a misconception, learned Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 19 Commissioner (Appeals) has come to such conclusion. The leaned Sr. Counsel submitted, the experience certainty campaign was also for the purpose of advertisement only and in this context, he has furnished before us the details of such expenditure through additional evidences. Since, the additional evidences furnished by the assessee will have a crucial bearing in determining the nature of expenditure, we are inclined to admit the additional evidences. However, considering the fact that these evidences were not furnished before the Departmental Authorities, to afford a fair opportunity to the Department to verify the authenticity of assessee‘s claim vis–a–vis the additional evidences furnished before us, we restore the issue to the Assessing Officer for de novo adjudication after providing reasonable opportunity of being heard to the assessee. We make it clear, our aforesaid direction is only with regard to the experience certainty expenditure of Rs. 5.28 crore. The decision of learned Commissioner (Appeals) on this issue is modified to this extent only.‖ 35. The learned D.R. could not show us any reason to deviate from the aforesaid order and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the decision of the Co– ordinate Bench rendered in assessee‟s own case cited supra, ground no.5, raised in assessee‟s appeal is allowed with similar directions. This ground is allowed for statistical purpose. 36. The issue arising in ground no.6, raised in assessee‟s appeal is regarding disallowance of payment towards Tata Brand Equity subscription. 37. The brief facts of the case pertaining to the issue as emanating from the record are: During the relevant assessment year, the assessee paid an amount of Rs. 51,69,49,601 to Tata Sons Limited as Tata Brand Equity Subscription under „Tata Brand Equity and Business Promotion Agreement‟ entered into between Tata Sons Ltd and the assessee. The Assessing Officer vide draft assessment order dated 16.02.2015 held that the payment was made by the assessee to Tata Sons Ltd. in respect of using Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 20 the business name, for organizing corporate identity and brand promotion activities and campaigns etc. and thus the payment was towards the brand building which will give enduring benefit to the assessee. The Assessing Officer, accordingly, treated the payment to be capital in nature and allowed depreciation @ 25% to the assessee. The DRP upheld the disallowance made in the draft assessment order on this issue. Being aggrieved, the assessee is in appeal before us. 38. During the course of hearing, learned Senior Counsel submitted that Tata brand is owned by Tata Sons Ltd., and the payment is required to be made annually by all the subscriber‟s to Tata Sons Ltd. towards subscription on the basis of their profitability. The payment made by the assessee towards subscription fee is for the purpose of carrying out normal business activities of the company. Learned Senior Counsel further submitted that in case of sister concerns similar payment has been allowed by the Tribunal. On the other hand, learned D.R. vehemently relied upon the orders passed by the lower authorities. 39. We have considered the rival submissions and perused the material available on record. As per the „Tata Brand Equity and Business Promotion Agreement‟, the assessee was under contractual obligation to make annual payment towards the subscription fees. According to assessee, in consideration of this subscription fees, Tata Sons Limited was, inter-alia, responsible for organising corporate identity and brand promotional activities and campaigns, engage professional consultants, make available Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 21 a pool of sharable resources of the Tata Group to the assessee and provide assistance in accessing the network of domestic and international business contacts and also permit the assessee to use the business name. All the activities were predominantly the activities carried out or to be carried out by Tata Sons Limited to enhance the value of TATA Brand, which is owned by Tata Sons Limited and for same expenses were incurred by Tata Sons Limited and accounted in its books of account. 40. In the case of sister concern of assessee, the Co-ordinate Bench of Tribunal in ACIT v/s M/s Rallis India Ltd.: ITA No. 5701/Mum/2008 vide order dated 30.08.2011 dismissed the appeal filed by the Revenue against the allowance of similar contribution to Tata Sons Limited under the Brand Equity and Business Promotion Scheme. In another sister concern‟s case, the Co-ordinate Bench of Tribunal in M/s Tata Autocomp Systems Ltd. v/s ACIT: ITA No. 7596/Mum/2012 vide order dated 12.06.2013, following the earlier decision in Rallis India Ltd. (supra), deleted the disallowance on account of similar subscription paid to Tata Sons Ltd. towards brand equity and promotion scheme. The Co-ordinate Bench also noted that department has accepted the decision in Rallis India Ltd. (supra) and no appeal has been filed by the department against the same. Further, in the present case, nothing has been brought on record to suggest that the subscription fee paid by the assessee to Tata Sons Limited under the „Tata Brand Equity and Business Promotion Agreement‟ is different in nature from the one considered in aforesaid decisions. Thus, respectfully following the judicial precedence in case of sister concerns, we direct the Assessing Officer to Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 22 delete the disallowance on account of subscription fees paid by the assessee to Tata Sons Limited. Accordingly, ground no. 6 raised in assessee‟s appeal is allowed. 41. The issue arising in ground no.7, raised in assessee‟s appeal is regarding disallowance of commission paid to non–resident under section 40(a)(i) of the Act. 42. The brief facts of the case pertaining to the issue as emanating from the record are: During the relevant assessment year, the assessee paid commission of Rs.8,69,33,182, to foreign sales/marketing agents in connection with assessee‟s export business. The aforesaid commission was paid by the assessee outside India to non-resident agents operating outside India. During the assessment proceedings, the Assessing Officer noted that the assessee has not deducted TDS on commission paid to non- residents under section 195 read with section 5 and 9 of the Act. Vide draft assessment order dated 16.02.2015, the Assessing Officer by placing reliance upon the decision of Hon‟ble Karnataka High Court in Samsung Electronics Company Ltd. held that as the assessee has neither deducted TDS nor sought exemption certificate from the Department, commission payment of Rs. 8,69,33,182 is not allowable under section 40(a)(i) of the Act. The DRP vide direction dated 16.11.2015 upheld the disallowance made in the draft assessment order on this issue. Being aggrieved, the assessee is in appeal before us. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 23 43. During the course of hearing, learned Senior Counsel submitted that the payment of commission to non-resident agents are not chargeable to tax in India under section 5 read with section 9 of the Act as the non- resident agents operated outside India and the commission was remitted directly outside India. Thus assessee was not liable to deduct TDS under section 195 of the Act. On the other hand, learned D.R. vehemently placed reliance on the orders passed by lower authorities. 44. We have considered the rival submissions and perused the material available on record. We find that on identical issue, the Co-ordinate Bench of the Tribunal in assessee‟s own case vide order dated 30.10.2019, passed in ACIT v/s Tata Consultancy Service Ltd., ITA No. 5823/Mum/2016, for assessment year 2009-10, dismissed the appeal filed by the Revenue observing as under: “5. We have considered rival submissions and perused the material on record. The facts on record clearly reveal that commission has been paid to non–resident agents located in their respective countries towards services rendered by them in those countries in relation to obtaining export contracts for the assessee. No material has been brought on record by the Assessing Officer to demonstrate that the non–resident agents either have any business connection in India or have PE in India so as to bring the commission payment within the tax net. The factual finding recorded by learned Commissioner (Appeals) that the non–resident agents have rendered the services in their respective countries and do not have either any business connection in India or any PE in India has not been controverted by the Revenue. Further, the nature of payment viz. commission has also not been disputed by the Revenue. That being the case, since the commission paid to the non–resident agents is not chargeable to tax in India at their hands, there is no necessity for the assessee to withhold tax under section 195(1) of the Act on such payment. Accordingly, we uphold the decision of learned Commissioner (Appeals) on this issue.‖ Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 24 45. As there is no change in facts and circumstances in relevant assessment year and learned D.R. could not show us any reason to deviate from the aforesaid order, respectfully following the decision of the Co– ordinate Bench rendered in assessee‟s own case cited supra, we direct the Assessing Officer to delete the disallowance made under section 40(a)(i) of the Act in respect of commission paid by assessee to non–resident agents. Accordingly, ground no.7 raised in assessee‟s appeal is allowed. 46. The issue arising in ground no.8, raised in assessee‟s appeal is regarding additional reduction from Export and Total Turnover of foreign currency communication expenses of Rs.45.91 crore which have already been included in proportionate expenses of Rs.1601.51 crore excluded by the Assessing Officer. As per the assessee, foreign currency communication expenses to an extent of Rs.45.91 crore have been reduced twice from Export and Total Turnover. Thus, we direct the Assessing Officer to conduct necessary verification and delete the additional/double reduction of foreign currency communication expenses of Rs.45.91 crore, if any, from Export and Total Turnover as per law. As a result, ground no.8 raised in assessee‟s appeal is allowed for statistical purpose. 47. The issue arising in ground nos.9 and 10, raised in assessee‟s appeal is regarding deduction under section 10AA of the Act in respect of SEZ units of the assessee which commenced its operations during earlier years. 48. The brief facts of the case pertaining to this issue as emanating from the record are: The assessee had claimed deduction under section 10AA of Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 25 the Act for the first time during the assessment year 2007–08. The relevant assessment year is the fifth year of deduction claimed on SEZ units under section 10AA of the Act. During the relevant assessment year, the assessee had claimed deduction under section 10AA of the Act in respect of SEZ units which had commenced its operation during the earlier assessment year i.e., A.Y. 2008–09, 2009–10 and 2010–11. In addition, the assessee had commenced operation in respect of below mentioned new SEZ units in respect of which deduction under section 10AA of the Act was claimed by the assessee. Sr. no. Name of Unit Approval Number 1. Chennai–EB3–Siruseri–Unit–II–SEZ STPIC/SEZ/D001/U084/10–11/267 2. Chennai – Chennai One – Unit–II – SEZ STPIC/SEZ/D003/U072/09–10/803 3. Powai – Kensington–B Wing–Phase III – Hirnandani – SEZ SEZ/IT/UTES/ER/U–12/ 2008–351 4. Kolkata–Infospace – Unitech Hi–tech Structures – SEZ SEZ/HIRA–MM/(15)/LOA–15/2009–10 /25/5524 5. Vaverock–AP II C, Nanakramguda – Hyderabad – SEZ SEZ(IT/ITES/TCS/AOUUC–TSI/(HYD)/ 0019/2009–10/19210 49. During the course of assessment proceedings, the assessee was asked to show cause as to why deduction under section 10AA of the Act be not denied as the SEZ units are formed by splitting up or re–construction of an already existing business. In reply thereto, the assessee by referring to the conditions laid down in the provisions of section 10AA(4) of the Act submitted that the SEZ units in respect of which deduction under section 10AA of the Act has been claimed are neither formed by splitting up or reconstruction of existing business nor there is a transfer of building or plant previously used to the new business. The assessee provided the details of fresh investment in new plant and machinery during the relevant Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 26 assessment year. The assessee also submitted that the number of new recruits at the enterprise level (i.e., 35,185 employees) during the year was far more than the number of employees comprising both new and old employees engaged during the year in the new SEZ units (i.e., 10,778 employees). The assessee accordingly submitted that the employees engaged in the new SEZ units were not at the cost of reducing the strength of the employees working in the existing units of the company and, therefore, there was no splitting up or re–construction of the existing business. The assessee submitted that unlike in the case of plant and machinery where not more than 20% of the plant and machinery which were already existing can be re–allocated there is no such restriction on re–location of employees under section 10AA(4) of the Act. The assessee also by referring to Circular no.14/2014, issued by the CBDT on 08.10.2014, submitted that the assessee had fulfilled the alternative condition provided in the aforesaid circular of addition of new technical manpower in all the units of the assessee exceeding 50% of the total technical manpower of the new SEZ unit during the previous year. The Assessing Officer vide draft assessment order dated 16.02.2015, came to the conclusion that during the relevant assessment year, more than 3/4 th of the employees of the existing business of the assessee were relocated to the SEZ units which is nothing but re–construction of the business and thus, the assessee is not entitled to deduction under section 10AA of the Act. The Assessing Officer further held that over the years there have been substantial increase in employees and corresponding increase in revenue of Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 27 SEZ units as compared to other units of the assessee. Accordingly, the Assessing Officer denied the deduction under section 10AA of the Act in respect of SEZ unit which have already commenced operation prior to relevant assessment year. 50. The DRP vide its directions dated 16.11.2015, held that the eligibility of deduction under section 10AA of the Act in relevant assessment year is dependent upon the final outcome on this issue in earlier assessment years and accordingly directed the Assessing Officer that the disallowance as proposed in the draft assessment year should be subject to final decision in the earlier assessment years. 51. During the course of hearing, the learned Sr. Counsel submitted that the CIT(A) has allowed the assessee‟s appeal for the assessment years 2008–09, 2009–10 and 2010–11 granting deduction under section 10AA of the Act in respect of SEZ units. It was further submitted that no appeal has been filed by the Department against the orders of the CIT(A). 52. On the other hand, the learned Departmental Representative vehemently relied upon the findings in the draft assessment order. 53. We have considered the rival submissions and perused the material available on record. In the present appeal, ground no.9, is in respect of various SEZ units which had commenced its operations during the assessment years 2008–09, 2009–10 and 2010–11. While ground no.10 in assessee‟s appeal, is in respect of Chennai–one SEZ units which also Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 28 commenced its operations in earlier assessment year i.e., A.Y. 2007–08. Thus, it has not been denied that in respect of all the units the relevant assessment year is not the first year of operation. Section 10AA of the Act allows deduction to the SEZ unit which begins to manufacture or produce articles or things or provide any service during the previous year relevant to any assessment year commencing on/or after 1 st Day of April 2006, but before the 1 st Day of April 2021. Sub–section (4) of section 10AA of the Act lays down certain conditions upon fulfillment of which the SEZ units shall be entitled to claim deduction under section 10AA of the Act. Section 10AA(4) of the Act reads as under:– ―(4) This section applies to any undertaking, being the Unit, which fulfils all the following conditions, namely:— (i) it has begun or begins to manufacture or produce articles or things or provide services during the previous year relevant to the assessment year commencing on or after the 1st day of April, 2006 in any Special Economic Zone; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence: Provided that this condition shall not apply in respect of any undertaking, being the Unit, which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (iii) it is not formed by the transfer to a new business, of machinery or plant previously used for any purpose. Explanation.—The provisions of Explanations 1 and 2 to sub-section (3) of section 80-IA shall apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section.‖ 54. The Hon'ble Supreme Court in DCIT v/s ACE Multi Axes Systems Ltd., [2018] 400 ITR 141 (SC) while dealing with the issue of eligibility of deduction under section 80IB of the Act has observed as under:– Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 29 ―No doubt, certain qualifications are required only in the initial assessment year, e.g. requirements of initial constitution of the undertaking. Clause 2 limits eligibility only to those undertakings as are not formed by splitting up of existing business, transfer to a new business of machinery or plant previously used. Certain other qualifications have to continue to exist for claiming the incentive such as employment of particular number of workers as per sub-clause 4(i) of Clause 2 in an assessment year. For industrial undertakings other than small scale industrial undertakings, not manufacturing or producing an article or things specified in 8th Schedule is a requirement of continuing nature.‖ [emphasis supplied] 55. Thus, it appears that the Hon'ble Supreme Court considered two types of conditions in order to decide the eligibility of deduction. The first are the conditions which need to be examined only in the initial year while the second are the conditions which need to be examined every year before allowing the deduction. Therefore, once the first set of conditions is established in the initial year, these should not be examined in subsequent assessment years. We are of the view that provisions of section 10AA(4) of the Act lay down the first set of conditions which is to be satisfied in the initial year of operation and should not be examined in the subsequent years. As the CIT(A) has already allowed the deduction under section 10AA of the Act in respect of SEZ units for assessment years 2008–09, 2009–10 and 2010–11 and no further appeal has been filed by the Revenue against the same, which has also not been controverted by the learned Departmental Representative nor any facts contrary to the same has been adduced. Thus, as the deduction under section 10AA of the Act has already been allowed to the assessee in respect of SEZ units for the assessment years 2008–09, 2009–10 and 2010–11, we find no reason to deny the same in the relevant assessment year which is the fifth year of deduction Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 30 claimed on SEZ unit under section 10AA of the Act. Thus, to this extent, we endorse the conclusion of the DRP and accordingly the Assessing Officer is directed to allow the deduction under section 10AA of the Act in respect of SEZ units commenced during the assessment years 2008–09, 2009–10 and 2010–11 as the same has already been allowed in the preceding assessment years. Thus, grounds no.9 and 10, raised in assessee‟s appeal are allowed. 56. The issue arising in ground no.11 raised in assessee‟s appeal is regarding grant of foreign tax credit as per the provisions of section 90(1)(a) of the Act read with provisions of the applicable Double Taxation Avoidance Agreement („DTAA‟) for taxed paid overseas in relation to income eligible for deduction under section 10A/10AA of the Act. 57. The brief facts of the case pertaining to the issue as emanating from the record are: During the relevant assessment year, the assessee claimed the relief as per the provisions of section 90(1) and 90(2) of the Act read with the relevant DTAA, on the amount of income which is doubly taxed i.e. income taxed in India and in foreign country. The relief was computed by comparing the tax payable in India with the tax paid in foreign country on the doubly taxed income and is restricted to the foreign taxes or Indian taxes whichever is lower. In addition to above, during the course of proceedings before the DRP, the assessee raised an additional ground claiming that foreign tax credit should be allowed, as per respective tax treaties in respect of taxes paid overseas, on income eligible for deduction Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 31 under section 10A/10AA of the India. In support of the additional ground of objection, the assessee placed reliance on the decision of Hon‟ble Karnataka High Court in Wipro Limited v/s DCIT, [2016] 382 ITR 179. The DRP vide directions dated 16.11.2015 refused to render any directions on the additional ground of objection on the basis that the issue doesn‟t relate to the variation of the income and further is not emanating from the draft assessment order. Being aggrieved the assessee is in appeal before us. 58. During the course of hearing, the learned Sr. Counsel by placing reliance on the decision of the Hon‟ble Karnataka High Court in Wipro Ltd. (supra) submitted that the foreign tax credit should also be provided for taxes paid in overseas jurisdiction in respect of section 10A / 10AA of the Act eligible income in India as per the provision of respective DTAA. 59. On the other hand, the learned Departmental Representative vehemently relied upon the order passed by the DRP. 60. We have considered the rival submissions and perused the material available on record. We find that the Hon‟ble Karnataka High Court in Wipro Ltd. (supra) observed as under:– ―56. Therefore, it follows that the income under Section 10A is chargeable to tax under Section 4 and is includible in the total income under Section 5, but no tax is charged because of the exemption given under Section 10A only for a period of 10 years. Merely because the exemption has been granted in respect of the taxability of the said source of income, it cannot be postulated that the assessee is not liable to tax. The said exemption granted under the statute has the effect of suspending the collection of income tax for a period of 10 years. It does not make the said income not leviable to income tax. The said exemption granted under the statute stands revoked after a period of 10 years. Therefore, the case falls under Section 90(1)(a)(ii).‖ Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 32 61. Further, we find that on identical issue, the Co–ordinate Bench of the Tribunal in assessee‟s own case vide order dated 30.10.2019, passed in Tata Consultancy Services Ltd. v/s ACIT, ITA no.5713/Mum./2016, for the assessment year 2009–10, following the aforesaid decision of Hon‟ble Karnataka High Court, has observed as under: ―Thus, on a careful reading of the aforesaid judgment of the Hon‘ble Karnataka High Court, it becomes clear that where the respective tax treaty provides for benefit for foreign tax paid even in respect of income on which the assessee has not paid tax in India, still, it would be eligible for tax credit under section 90 of the Act. Like Article 25 of the Indo–USA treaty, treaties with various other countries such as Indo–Denmark, Indo–Hungary, Indo–Norway, Indo–Oman, Indo–US, Indo–Saudi Arabia, Indo–Taiwan also have similar provision providing for benefit of foreign tax credit even in respect of income not subjected to tax in India. However, Indo–Canada and Indo–Finland treaties do not provide for such benefit unless the income is subjected to tax in both the countries. Therefore, the foreign tax credit would be available to the assessee in all cases except the foreign tax paid in Finland and Canada. The Assessing Officer is directed to grant credit accordingly.‖ 62. The learned D.R. could not show us any reason to deviate from the aforesaid order and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the decision of the Co– ordinate Bench rendered in assessee‟s own case cited supra, ground no.11, raised in assessee‟s appeal is allowed with similar directions. This ground is allowed for statistical purpose. 63. Similarly, ground no.11.1 is also restored to the file of the Assessing Officer for de novo adjudication in accordance with law. 64. The issue arising in ground no.12, raised in assessee‟s appeal is regarding short credit for tax deducted at source. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 33 65. As per the assessee, the Assessing Officer / DRP has erred in not granting credit for tax deducted at source to the tune of Rs.5,19,89,049, even though the relevant TDS certificates were submitted by the assessee during the assessment proceedings. Thus, we direct the Assessing Officer to verify the claim of the assessee and grant credit for tax deducted at source after necessary verification and in accordance with law. Accordingly, ground no.12 raised in assessee‟s appeal is allowed for statistical purpose. 66. The assessee, vide separate applications dated 10.01.2020 and 16.06.2021, sought admission of additional grounds of appeal which involve following issues:– (a) Deduction on account of education cess paid by the assessee; (b) Allowability of deduction under section 10AA on ―commercial profit‖ instead of income from business and professional. 67. The learned Sr. Counsel for the assessee submitted that both the issues raised by way of additional grounds of appeal are purely legal in nature which do not require enquiry into new facts. 68. We have considered the rival submissions and perused the material available on record. As the issues raised by the assessee by way of additional grounds of appeal are legal in nature which can be decided on the basis of material available on record, we are of the view that the same can be admitted for consideration and adjudication in view of the ratio laid down by the Hon'ble Supreme Court in National Thermal Power Co. Ltd. v/s Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 34 CIT, [1998] 229 ITR 383 (SC). Accordingly, the additional grounds of appeal raised by the assessee are hereby admitted for adjudication on merit. 69. Coming to the first issue raised by way of additional ground of appeal in respect of allowance of deduction on education cess paid by the assessee, the learned Sr. Counsel submitted that the issue raised is decided in favour of the tax payer by the Hon'ble Jurisdictional High Court in Sesa Goa Ltd. v/s JCIT, [2020] 423 ITR 426 (Bom.). 70. On the other hand, the learned Departmental Representative submitted that in the recent Finance Bill, 2022, an amendment has been proposed by way of insertion of Explanation (iii) to section 40(a)(ii) of the Act in order to disallow claim of deduction on account of education cess with retrospective effect from 1 st April 2005, which will accordingly apply in relation to the assessment year 2005–06 and to the subsequent assessment years. In reply, the learned Senior Counsel submitted that the Finance Bill, 2022, is still pending consideration of the Parliament. The learned Senior Counsel further fairly submitted that the issue may be restored to the file of the Assessing Officer for decision as per law. 71. We have considered the rival submissions and perused the material available on record. In view of the aforesaid submissions, we deem it appropriate to direct the Assessing Officer to decide the issue of allowability of education cess, as per law. Consequently, the first issue raised by way of additional ground of appeal is allowed for statistical purpose. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 35 72. The next issue raised by the assessee by way of additional ground is regarding claim of deduction under section 10AA of the Act on the basis of commercial profit instead of income from business or profession. 73. During the course of hearing, the learned Sr. Counsel for the assessee submitted that the issue is covered in favour of the assessee by the decision of the Co–ordinate Bench of the Tribunal in Reliance Industries Ltd. v/s ACIT, ITA no.7299/Mum./2017, vide order dated 10.11.2020. 74. We have considered the rival submissions and perused the material available on record. We find that the Co–ordinate Bench of the Tribunal in Reliance Industries Ltd. (supra), by following the decision of the Hon'ble Supreme Court in Vijay Industries v/s CIT, [2019] 412 ITR 001 (SC), came to the conclusion that the language of section 80HH of the Act, as was considered by the Hon'ble Supreme Court in Vijay Industries (supra) is pari materia to section 10AA inasmuch as both the sections provide that in computing the total income of the assessee deduction shall be allowed at certain percentage of profit and gains derived. The Co–ordinate Bench further noted that the meaning of the term ―Profits & Gains‖ refers to profits which are commercial profit and without deducting the depreciation and investment allowance as per the Act. Accordingly, the Co–ordinate Bench in Reliance Industries Ltd. (supra) observed as under:– ―Accordingly in the background of aforesaid discussion and the precedent from the Hon'ble Supreme Court we direct the Assessing Officer to grant the deduction under section 10AA with reference to the profit and gains as Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 36 determined by the honourable Supreme Court in the case of Vijay Industries (supra).‖ 75. We find that the issue raised by the assessee by way of additional ground of appeal is squarely covered in favour of the assessee by the aforesaid order passed by the Co–ordinate Bench of the Tribunal in Reliance Industries Ltd. (supra) and the law laid down by the Hon'ble Supreme Court in Vijay Industries (supra). The learned Departmental Representative could not show us any reason to deviate from it. In view of the above, respectfully following the aforesaid judicial precedence, we direct the Assessing Officer to allow the deduction under section 10AA of the Act on ―Commercial Profit‖ instead of ―Income From Business And Profession‖. Consequently, the second issue raised by way of additional ground of appeal is allowed. 76. Now we will deal with the grounds raised in assessee‟s appeal pertaining to transfer pricing adjustment. 77. At the outset, learned Senior Counsel submitted that MAP (Mutual Agreement Procedure) proceedings amongst the respective Competent Authorities in respect of transfer pricing adjustment pertaining to provision of software development services to US and Netherlands Associated Enterprises (―A.Es.‖) are complete and the conclusions reached in same have been accepted by the assessee. Accordingly, grounds of appeal in respect of transfer pricing adjustment covered under the MAP were withdrawn and consequently assessee filed revised grounds of appeal vide Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 37 letters dated 25.05.2018 and 17.12.2018 on the remaining transfer pricing additions. We have considered aforesaid revised grounds of appeal filed by the assessee. 78. The issue arising in ground no.17, raised in assessee‟s appeal is regarding transfer pricing adjustment in respect of international transaction pertaining to provision of software consultancy services. 79. The brief facts of the case pertaining to ground no.17 as emanating from the record are: The assessee is a leading global information technology consulting services and outsourcing company having worldwide presence. Assessee provides consultancy services, develops and implements products for customers covering on all matters pertaining to implementation of computer software and hardware system, management of data processing and information systems and data communication systems. During the relevant assessment year, assessee entered into following international transactions with its A.Es.:  Lease of Officer Premises  Purchase of Fixed asset  Provision of Software, Technical and Consultancy Services  Availing of services  Interest received on account of loan outstanding  Reimbursement of Expenses 80. As per the transfer pricing study conducted by the assessee in respect international transaction of provision of software, technical & consultancy services, its subsidiaries outside India act as marketing and Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 38 sales companies of the assessee. The subsidiaries serve as a hub for realization of the international projects. Client service are carried out by the assessee and its subsidiaries. The assessee has rendered software development, technical and consultancy services to it‟s A.Es. on the basis of specific requests received from them. The charges for the services rendered were determined on the basis of mutual negotiation between the parties. Based on the functional analysis presented in the TP report, the assessee has selected itself as a tested party, Transactional Net Margin Method (―TNMM‖) as the most appropriate method with OP/OC as profit level indicator (―PLI‖) for benchmarking receipts from A.Es. for provision of software, technical and consultancy services rendered. 81. The Assessing Officer made reference to Transfer Pricing Officer (―the TPO‖) for the determination of ALP of the international transactions entered into by the assessee. The TPO vide order dated 23.01.2015 passed under section 92CA(3) of the Act noted that the facts of the relevant assessment year are almost identical with those of preceding assessment year i.e. 2010-11. Thus, following the approach adopted in assessment year 2010- 11, TPO issued show cause notice to the assessee, inter-alia, asking as to why the operating margins of foreign comparables as selected by the TPO for benchmarking in the order for last assessment year should not be applied with net cost plus as the PLI. The TPO following approach adopted in earlier assessment years treated A.Es. as tested parties. The TPO further held that the cost incurred by the A.Es. on payment of transfer price to the assessee should not be taken into consideration because such cost, being Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 39 in the nature of pass through cost, does not represent the functions performed by A.Es. and only the costs incurred by the A.Es. for the functions performed by them should be considered. TPO selected the comparables following the approach as in assessment year 2010-11 and made an adjustment of Rs. 1328.50 crore to the international transaction of provision of software, technical & consultancy services. The Assessing Officer passed the draft assessment order dated 16.02.2015, inter-alia, on the basis of adjustment proposed by the TPO. The DRP vide directions dated 16.11.2015, inter-alia, rejected the objections filed by the assessee treating the approach of the TPO to be consistent. Being aggrieved, the assessee is in appeal before us. 82. During the course of hearing learned Senior Counsel submitted that the transfer pricing adjustment should limited be to the international transactions only. Learned Senior Counsel further submitted that PLI of gross margin on sales has been affirmed by the Co-ordinate Bench of the Tribunal in assessee‟s own case for earlier assessment years. Further, in respect of comparables for benchmarking the transaction, learned Senior Counsel submitted that comparables selected by the CIT(A) in previous assessment years, for North American Region, APAC Region and Europe Region, can be considered and sent to the TPO/AO for verification. On the other hand, learned D.R. vehemently relied upon the orders passed by TPO and DRP. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 40 83. We have considered the rival submissions and perused the material available on record. It has not been disputed by the Revenue that the facts of the relevant assessment year are similar to preceding assessment years. Further, the TPO has also followed the approach adopted in assessment year 2010-11 while selecting the tested party, PLI and comparables for benchmarking the international transaction. We find that the Co-ordinate Bench of the Tribunal in assessee‟s own case in DCIT v. Tata Consultancy Services Ltd., ITA No. 1207/Mum/2018 for assessment year 2010-11 vide order dated 18.08.2020 dismissed the appeal filed by the Revenue and upheld the order passed by the CIT(A) observing as under: ―44. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities. We have also deliberated on the decision of Tribunal in AY 2009-10. During the TP assessment proceeding the TPO rejected the basis of the PLI shown by the assessee by taking view that the cost incurred by the AEs on the payment of price to assessee are in the nature of past through cost. The TPO held that the PLI to compute the margin would be operating profit/ value added expenditure (OP/VAE). The ld CIT(A) granted relief to the assessee by following the order of his predecessor/ ld CIT(A) for AY 2009-10. We have noted that the order of ld CIT(A) for AY 2009-10 has been affirmed by the Tribunal by passing the following order; ―20. We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. From the grounds raised by the Revenue, the following three issues arise for consideration – (i) what should be the appropriate PLI; (ii) whether cost of outsourcing / sub– contracting to the TCS should be considered for computing the margin; and (iii) whether the alternative benchmarking furnished by the assessee by treating the AEs as tested party with comparables in the same geographical locations is acceptable. On a careful perusal of the facts on record as well as submissions of the learned Counsel for the parties in the course of hearing as well as in the written note, we are of the view that the decision of learned Commissioner (Appeals) on the aforesaid issues are unassailable. As regards the issue of appropriate PLI, we are of the view that considering the nature of activity performed by the assessee as well as the AEs, it cannot be said that the A.Es are not bearing any risk. Rather the facts on record reveal that the AEs performed the role of risk bearing distributors. It is well brought out by learned Commissioner (Appeals) in his order that the AEs are bearing credit risk and Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 41 risk of default by client. In fact, the assessee through proper evidences has demonstrated instances where the credit risk with reference to part cancellation of contract has been borne by the AEs without compensation from the assessee. The documentary evidences in this regard furnished by the assessee were thoroughly examined not only by learned Commissioner (Appeals) but they were also produced before us. Thus, from the aforesaid facts, it becomes clear that significant marketing functions are being performed and distribution and marketing risk are being taken by the AEs. On examination of the financials of the subsidiaries it is revealed that some subsidiaries are still making loss at net level which signifies that some risk is being borne by the AEs. It has further been brought on record that the manpower base of AEs performed various functions relating to marketing as well as client co– ordination. The AEs have developed sufficient competency to handle the marketing work independently. The entire contract related work is performed by the AEs, though, in cooperation with the assessee. Thus, it is quite natural that for being a sufficiently motivated work force, the AEs are compensated at return on sales and not merely on value added costs. Therefore, learned Commissioner (Appeals) was justified in directing the Transfer Pricing Officer to adopt the PLI of gross margin on sales. As regards consideration by the Transfer Pricing Officer, the outsourcing / sub– contracting cost to assessee as a pass through cost, learned Commissioner (Appeals) was absolutely correct in observing that the decision of the Transfer Pricing Officer to exclude such costs while computing the margin of the AEs is incorrect. When similar cost incurred by the comparables were not excluded while computing their margin, a different treatment cannot be given to such costs in case of the AEs. Certainly, the aforesaid approach of the Transfer Pricing Officer has resulted in distorting the correct PLI of the AEs. In the aforesaid context, the observations of learned Commissioner (Appeals) are appreciable, wherein, he has observed that the PLI of the AEs and PLI of comparables have not been computed on similar lines by the Transfer Pricing Officer, hence, comparability condition fails. It is further relevant to observe, the alternative benchmarking furnished by the assessee before the Transfer Pricing Officer by considering the AEs in different geographic locations as tested parties with the comparables selected on the basis of the respective geographic locations furnished before the Transfer Pricing Officer were not properly considered. However, in course of appeal proceedings, the learned Commissioner (Appeals) examined them in detail and after a detailed analysis approved some comparables selected by the assessee and also added some new comparables. Whereas, the comparable selected by the Transfer Pricing Officer were not on the basis of any detailed search process. At least, no such analysis is either forthcoming from the order of the Transfer Pricing Officer or could be brought to our notice by learned Departmental Representative. On the contrary, on a thorough and careful reading of the impugned order of learned Commissioner (Appeals), we are of the view that learned Commissioner (Appeals) has taken pains to examine in detail the alternative benchmarking done by the assessee with foreign comparables and after detailed analysis has shortlisted the final comparables to be considered for comparability analysis. No convincing argument or evidence has been brought on record by the learned Departmental Representative to persuade us to disturb the finding of learned Commissioner (Appeals) on these issues. In view of the aforesaid, we do not find any merit in the grounds raised by the Revenue on the issues. Accordingly, grounds are dismissed.‖ 45. Considering the decision of Tribunal in appeal for AY 2009-10 on identical grounds of appeal, wherein all the contentions as raised by the ld DR for the revenue before us, has been considered by the Tribunal, while affirming the order of ld CIT(A). No variation in facts nor any contrary law is Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 42 brought to our notice, hence, we uphold the order of ld CIT(A) on this ground of appeal. In the result this ground of appeals raised by revenue are dismissed.‖ 84. Thus, in view of the aforesaid order passed by the Tribunal in assessee‟s own case for assessment year 2010-11, the order of the TPO and DRP on the issue of transfer pricing adjustment in respect of provision of software consultancy services cannot sustain and are accordingly set aside to this extent. Further the TPO/ Assessing Officer is directed to conduct the benchmarking of the international transaction of provision of software consultancy services as per the findings of the Tribunal referred above. The TPO/Assessing Officer is also directed to consider the comparables selected by the CIT(A) in previous assessment years, for North American Region, APAC Region and Europe Region, for the purpose of benchmarking after necessary verification. Further, any transfer pricing adjustment should be restricted to the international transactions undertaken by the assessee. In view of the above, ground no.17 in assessee‟s appeal is allowed for statistical purpose. 85. The issue arising in ground no.18, raised in assessee‟s appeal is regarding transfer pricing adjustment in respect of provision of guarantee. 86. The brief facts of the case pertaining to this issue as emanating from the record are: The assessee in a note in the form 3CEB submitted that the assessee has provided guarantee and the same is not considered as an international transaction. The TPO on perusal of the Annual Report of the assessee noticed that during the year assessee had provided guarantees of Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 43 various tenors on behalf of different A.Es. Accordingly, after considering the details sought during the course of TP proceedings, TPO vide order dated 23.01.2015 held that the guarantee given by the assessee on behalf of its A.Es. as an international transaction. The TPO applying a rate of 3% on the basis of information gathered from SBI and adding a further mark up made a total adjustment of Rs.37,31,65,344/- to the international transaction of provision of guarantee. The Assessing Officer passed the draft assessment order dated 16.02.2015, inter-alia, on the basis of adjustment proposed by the TPO. The DRP vide directions dated 16.11.2015, inter-alia, rejected the objections filed by the assessee on this issue. Being aggrieved, the assessee is in appeal before us. 87. During the course of hearing, learned senior counsel submitted that the Co-ordinate Bench of Tribunal in assessee‟s own case has directed the Assessing Officer to charge guarantee commission at the rate of 0.5% per annum. 88. On the other hand, learned D.R. vehemently replied upon the order passed by the TPO and DRP. 89. We have considered the rival submissions and perused the material available on record. We find that the Co-ordinate Bench of the Tribunal in assessee‟s own case in Tata Consultancy Service Ltd. v/s ACIT in ITA No. 5713/Mum/2016 for assessment year 2009-10 vide order dated 30.10.2019 following the decision of Hon‟ble Jurisdictional High Court in CIT v/s Everest Canto Cylinders Ltd. (2015) 378 ITR 57 directed the Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 44 Assessing Officer to charge guarantee commission @ 0.5% per annum by observing as under: ―43. We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. Insofar as the contention of learned Sr. Counsel for the assessee that provision of guarantee is not an international transaction as per section 92B of the Act, we are unable to accept such contention. In our considered opinion, after introduction of Explanation–(i)(c) to section 92B of the Act, with retrospective effect from 1 st April 2002, provision of guarantee to AEs has to be considered as an international transaction. Different Benches of the Tribunal have also expressed similar view on the issue. Therefore, we hold that the provision of guarantee to the AEs is an international transaction. In fact, the aforesaid view has been expressed by the Co–ordinate Bench in WNS Global Services Pvt. Ltd. (supra). Therefore, following the aforesaid decision of the Co–ordinate Bench and the decision of the Hon'ble Jurisdictional High Court in Everest Canto Cylinders Ltd. (supra), we direct the Assessing Officer to charge guarantee commission @ 0.5% per annum both on performance / lease guarantee as well as financial guarantee.‖ 90. The learned D.R. could not show us any reason to deviate from the aforesaid order and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the order passed by the Co- ordinate Bench in assessee‟s own case cited supra, we upheld the conclusion of the TPO / DRP to the extent provision of guarantee was held to be an international transaction. However, the TPO/Assessing Officer is directed to charge guarantee commission @ 0.5% and compute the adjustment accordingly. As a result, ground no.18 raised in assessee‟s appeal is partly allowed. 91. Other grounds pertaining to transfer pricing raised in assessee‟s appeal were not pressed during the course of hearing being academic in nature and are accordingly dismissed. While ground no. 1, raised in Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 45 assessee‟s appeal is general in nature and need no separate adjudication in view of our aforesaid findings in assessee‟s appeal. 92. In the result, appeal by the assessee is partly allowed for statistical purpose. ITA no.1054/Mum./2016 Revenue’s Appeal – A.Y. 2011–12 93. The issue arising in ground no.1 in Revenue‟s appeal pertaining to the expenditure on import of software is similar to the issue raised in assessee‟s appeal in ground no.3. Thus, our findings / conclusion in ground no.3, raised by the assessee for the same assessment year shall apply mutatis mutandis to this ground also. Accordingly, ground no.1, raised by the Revenue is allowed for statistical purpose. 94. Ground no.2, raised in Revenue‟s appeal is regarding reduction of expenses incurred in foreign exchange from both export turnover and total turnover while computing the deduction under section 10A of the Act. 95. The brief facts of the case pertaining to this issue as emanating from the record are: During the relevant assessment year, the assessee incurred an expenditure of Rs.45.91 crore towards communication bandwidth for delivery of software outside India. While claiming the deduction under section 10A of the Act, the assessee reduced this expenditure from both export turnover as well as the total turnover. The Assessing Officer vide draft assessment order dated 16.02.2015, held that the communication Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 46 expense cannot be reduced from the total turnover while computing the deduction under section 10A of the Act. 96. The DRP vide its directions dated 16.11.2015, allowed objections filed by the assessee following the decision of the Hon'ble Jurisdictional High Court in CIT v/s Gem Plus Jewellery India Ltd., [2011] 330 ITR 175 (Bom.) and directed the Assessing Officer to exclude the communication expenses both from export turnover as well as the total turnover. Being aggrieved, the Revenue is in appeal before us. 97. We have considered the rival submissions and perused the material available on record. We find that this issue is no longer res integra and has been decided in favour of the taxpayer by the Hon'ble Supreme Court in CIT v/s HCL Technologies Ltd., [2018] 404 ITR 719 (SC), wherein the Hon'ble Court held that the expenditure excluded from the export turnover while computing the deduction under section 10A of the Act should also be reduced from the total turnover. We also find that the Hon'ble Jurisdictional High Court in assessee‟s own case in CIT v/s Tata Consultancy Services Ltd., ITA no.1788 of 2016, vide order dated 18.03.2019, dismissed the appeal filed by the Revenue on this issue following the aforesaid judgment of the Hon'ble Supreme Court in HCL Technologies Ltd. (supra). In view of the above, we find no infirmity in the directions issued by the DRP and accordingly ground no.2, raised in Revenue‟s appeal is dismissed. 98. The issue arising in ground no.3, raised in Revenue‟s appeal is regarding charging of interest on loans provided to A.Es. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 47 99. The brief facts of the case pertaining to this issue as emanating from the record are: During the relevant assessment year, the assessee received the interest from following A.Es. on account of loan outstanding:  TCS Iberoamerica S.A.  TCS FNS Pty. Ltd.  TCS Morocco SARL AU 100. As per the assessee, no new loan was granted by the assessee to its A.Es. during the year. The loans subsisting during the year or part of the year (due to repayments) were given in prior years either for acquisition of downstream subsidiaries by the A.Es. or for working capital requirements. The primary contention of the assessee was that loans given to the A.Es. are in quasi equity in nature and are extended for ultimate benefit of the assessee and thus no interest was charged. The assessee on without prejudice basis, charged interest at a rate which was derived by considering the prevailing LIBOR and added a mark-up on same for various risks. The TPO vide order dated 23.01.2015 passed under section 92CA(3) of the Act rejected the submissions of the assessee and benchmarked the transaction by applying the interest rate paid by the assessee on borrowed funds i.e. 9.75% and added further mark up of 3% in order to cover various risk factors. Thus, by applying total interest at the rate of 12.75% and also after reducing the interest already charged by the assessee, on without prejudice basis, the TPO made an adjustment of Rs. 40,45,95,104/- to the international transaction of loans provided to A.Es. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 48 The Assessing Officer passed the draft assessment order dated 16.02.2015, inter-alia, on the basis of adjustment proposed by the TPO. The DRP vide directions dated 16.11.2015 issued under section 144C(5) of the Act rejected the objections filed by the assessee and upheld the findings of TPO to the extent of benchmarking the transaction by applying the interest rate. However, the DRP, following the decision of the Co-ordinate Bench of the Tribunal in VVF Ltd. v/s DCIT (2012) 31 CCH 0474 MumTrib, observed as under: ―In the present case, the assessee has charged interest on loans in the range of 4% to 5% by calculating applying the principle of LIBOR plus 300 to 400 basis points. In view of these circumstances, the TPO is directed not to make any further adjustment on this issue. Thus, this ground of objection of the assessee company is accepted and the AO/TPO is directed to modify the draft assessment order accordingly.‖ 101. Being aggrieved by the aforesaid findings of DRP, the Revenue is in appeal before us. During the course of hearing, learned Senior Counsel submitted that the directions of DRP are in conformity with the decision of the Tribunal referred therein. On the other hand, learned D.R. vehemently relied upon the order passed by the TPO. 102. We have considered the rival submissions and perused the material available on record. In the present case, the DRP found that the interest on loans charged by the assessee in the range of 4% to 5% by applying the principle of LIBOR plus 300 to 400 basis points is reasonable after observing as under: ―17.8 However, the issue regarding quantum of spread over LIBOR rate is to be decided on the basis of peculiar facts of each case, after Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 49 evaluating the terms of the loan i.e. period of loan, quantum of loan currency, creditworthiness of the borrower before borrowing, collateral( secured/unsecured loans). The rate of interest is clearly depended upon all these factors and it can be seen from the public data (like Bloomberg data) available that banks / financial institutions / corporate lend loans at interest rates, which increases with increase in tenure and amount and it also increases with decrease in creditworthiness of borrowing entity. The interest rate increases at very fast rate with creditworthiness of the borrower, as it goes down from "AAA" rating to "C" rating. The interest rate also increases in the case of unsecured loans or where no guarantees for loans have been made available, beside that every bank/financial institution charges markup/service charge over labor rate ranging from 100 basis points to 200 basis points.‖ 103. The DRP further noted that the Co-ordinate Bench of the Tribunal in VVF Ltd. (supra) justified the application of LIBOR plus 3% rate for the interest free loan. It is pertinent to note that while charging mark up, over and above the interest rate paid by the assessee on borrowed funds, for computation of adjustment the TPO held that the mark up of 3% will cover various risks factors like exchange rate fluctuation risk, entity risk, country specific risk. Thus, when TPO itself had applied a mark-up of 3%, interest charged by assessee in the range of 4% to 5% by applying the principle of LIBOR plus 300 to 400 basis points cannot be find fault with and to this extent we do not find any infirmity in the directions issued by the DRP, which are also based upon the decision of the Co-ordinate Bench cited supra. As a result, ground no. 3 raised in Revenue‟s appeal is dismissed. 104. The ground no.4, raised in Revenue‟s appeal is general in nature and need no separate adjudication in view of our aforesaid findings in Revenue‟s appeal. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 50 105. In the result, appeal by the Revenue is partially allowed for statistical purpose. ITA no.17/Mum./2011 Assessee’s Appeal – A.Y. 2006–07 106. In this appeal, the assessee has raised grounds pertaining to the additions made by the Assessing Officer in corporate tax as well as transfer pricing. We will first deal with the issues relating to corporate tax additions. 107. The issue arising in ground no.1, in assessee‟s appeal pertains to the disallowance of State taxes paid overseas under section 40(a)(ii) of the Act. 108. Having heard the parties and having perused the material on record, we find that the issue for our adjudication is similar to the issue arising out of ground no.2, raised by the assessee in its appeal being ITA no.1650/ Mum./2016, for assessment year 2011–12. Consequently, our findings given therein shall apply mutatis mutandis to this issue also. Thus, ground no.1, raised by the assessee is allowed for statistical purpose. 109. The issue arising in ground no.2, raised in assessee‟s appeal pertains to disallowance of interest / penalty for delayed overseas return filing and delayed payment of overseas advance tax. 110. The brief facts pertaining to this issue, as emanating from the record are: The tax audit report at clause 17(e)(ii) mentions that the assessee has debited a claim of penalty of Rs. 65,51,580, being the amount paid for Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 51 delayed overseas return filing and delayed payment of overseas advance tax. As the aforesaid payment was not disallowed by the assessee while computing its total income, the assessee was asked to justify such claim. In reply, the assessee submitted that the payment was neither on account of any offence committed or for any purpose which is prohibited by law and such payment was on account of compensatory penalty / interest due to delay in complying tax laws and, hence, was claimed as business expenses. The Assessing Officer, vide draft assessment order dated 29.12.2009, passed under section 143(3) r/w section 144C(1) of the Act disallowed the claim of the assessee. 111. The DRP vide its direction dated 29.09.2010, issued under section 144C(5) of the Act rejected the objections raised by the assessee on this issue. Being aggrieved, the assessee is in appeal before us. 112. During the course of hearing, the learned Senior Counsel submitted that the last paragraph of Article 2(1) of India–USA DTAA clearly remove the doubt in respect of any amount payable in respect of any default in relation to tax mentioned in Article–2 or any penalty imposed relating to those taxes. Thus, such amount / penalty shall not be included under Article–2 of India–USA DTAA and, therefore, the same cannot be disallowed under section 40(a)(ii) of the Act. 113. On the other hand, the learned Departmental Representative vehemently relied upon the orders passed by the lower authorities. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 52 114. We have considered the rival submissions and perused the material available on record. As we have restored the issue arising in ground no.1, in the present appeal for the assessment year 2006–07 to the Assessing Officer, with similar directions the present issue is also restored to the file of the Assessing Officer for necessary verification as to whether the interest / penalty paid by the assessee overseas is eligible for any relief under section 90 of the Act and if it is not found to be so, the assessee‟s claim should be allowed. Accordingly, ground no.2, raised in assessee‟s appeal is allowed for statistical purpose. 115. The issue arising in ground no. 3 in assessee‟s appeal is with regard to expenditure incurred on import of software. 116. The brief facts of the case pertaining to this issue as emanating from the record are: During the relevant assessment year, the assessee imported software for its business. The software imported were both for internal use in its business as well as for the purpose of trading. The break–up of the same is as under:– iii) Software for internal use Rs. 13,44,29,183 iv) Software for trading purpose Rs. 8,11,24,788 ––––––––––––––– Rs.21,55,53,971 ========== 117. During the course of assessment proceedings, the assessee was asked to show cause as to why the expenditure incurred on import of software should not be disallowed under section 40(a)(i) of the Act as tax at source was not deducted from the payments made to overseas vendors. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 53 In reply thereto, the assessee submitted that payment for purchase of software cannot be considered as payment of royalty under section 9(1)(vi) of the Act. Thus, the assessee submitted that there was no withholding tax obligation on the assessee on the payments made to the non–residents as no income was chargeable to tax in India. The Assessing Officer, vide draft assessment order dated 29.12.2009, held that the payment made for import of software is in the nature of royalty within the meaning of section 9(1)(vi) of the Act. The Assessing Officer also referred to Explanation–3 to section 9(1)(vi) of the Act as well as CBDT Circular no.621 dated 09.12.1991, in support of its conclusion. Accordingly, the Assessing Officer disallowed payment of Rs. 21,55,53,971 [i.e., Rs. 13,44,29,183 (+) Rs. 8,11,24,788] under section 40(a)(i) of the Act for non–deduction of tax at source under section 195 of the Act. 118. Being aggrieved, the assessee filed objections before the DRP. Vide directions dated 29.09.2010, the DRP, rejected the objections filed by the assessee on this issue. Being aggrieved the assessee is in appeal before us. 119. During the course of hearing, learned Senior Counsel relied upon his arguments made in respect of identical issue in appeal for assessment year 2011-12. On the other hand, learned D.R. vehemently relied upon the orders passed by lower authorities. 120. We have considered the rival submissions and perused the material available on record. In the present case, the Assessing Officer vide draft assessment order treated the expenditure for import of software as royalty Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 54 with the meaning of section 9(1)(vi) of the Act. In support of its conclusion the Assessing Officer also placed reliance on Explanation–3 to section 9(1)(vi) of the Act as well as CBDT Circular no.621 dated 09.12.1991. In further proceedings, the DRP rejected the objections filed by the assessee and upheld the draft assessment order. As in assessment year 2011-12, in the relevant assessment year also the Assessing Officer has not at all deliberated on the factual aspect of the issue and has not considered the agreements entered into by the assessee with vendors for import of software and merely by relying upon certain judicial precedents and statutory provisions have come to the conclusion that the payment made by the assessee for import of software is in the nature of „royalty‟ under section 9(1)(vi) of the Act and thus assessee was liable to deduct tax at source under section 195 of the Act. Though it has been submitted by the assessee that the payment for purchase of software is for acquiring of copyrighted article and not for transfer of any right in the copyright and payment cannot be construed as „royalty‟ under section 9(1)(vi) of the Act. However, no factual verification vis-a-vis relevant clauses of agreements entered into by the assessee for import of software was done by the Assessing Officer or the DRP and claim of the assessee was denied merely by referring to judicial precedents and CBDT circular. 121. Thus, in view of the above, in present appeal also we deem it appropriate to restore this issue to the file of Assessing Officer for de novo adjudication after examination of the agreements entered into by the assessee for import of software in light of the law laid down by the Hon‟ble Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 55 Supreme Court in Engineering Analysis Centre for Excellence Pvt. Ltd. (supra). Further, if it is found by the Assessing Officer that the assessee‟s case falls within the parameters laid down by the Hon‟ble Supreme Court in the aforesaid judgment then payment for import of software be allowed. Needless to mention that before passing the order on this issue adequate opportunity of hearing shall be granted to the assessee. In view of the above, ground no.3 raised in assessee‟s appeal is allowed for statistical purpose. 122. Ground no.4, relates to the expenditure incurred for purchase of software within India. During the course of hearing, the learned Senior Counsel expressed his intention not to press this ground. Consequently, ground no.4, is dismissed as not pressed. 123. The issue arising in ground no. 5 raised in assessee‟s appeal is with regard to disallowance of set off of loss of the STP units against the taxable business income. 124. The brief facts of the case pertaining to this issue as emanating from the record are: During the relevant assessment year, the assessee had incurred losses in respect of few of its STP units and loss so incurred were set off against its business income chargeable to tax, as per the provisions of section 70 of the Act. The assessee was asked to submit the explanation about justification of setting off of such losses with normal income during the assessment proceedings. In reply, the assessee submitted that the “loss” in respect of STP units does not fall within section 14A of the Act Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 56 which refer to „expenditure‟ incurred in relation to income, which does not form part of total income. The Assessing Officer vide draft assessment order dated 29.12.2009 did not agree with the submissions of the assessee and held that the set off of losses of section 10A units cannot be allowed under section 70 of the Act. The Assessing Officer further held that the provision of section 10A of the Act does not come under Chapter IV under which total income is computed. Accordingly, disallowed the claim of loss of Rs. 44,99,46,311 as claimed by the assessee in respect of STP units and added the same to the income of the assessee. The DRP vide directions dated 29.09.2010 rejected the objections filed by the assessee on this issue. Being aggrieved, the assessee is in appeal before us. 125. During the course of hearing, learned Sr. Counsel submitted that the section 10A is now been held to be a deduction provision by the Hon‟ble Supreme Court in Yokogawa India Ltd. v. CIT: [2017] 391 ITR 274 and thus loss of STP unit should be allowed to be set off against the taxable business income of the assessee under section 70 of the Act. On the other hand, the learned D.R. vehemently relied upon the orders passed by the lower authorities. 126. We have considered the rival submissions and perused the material available on record. We find that on identical issue, the Co–ordinate Bench of the Tribunal vide order dated 04.11.2015, passed in assessee‟s own case in M/s Tata Consultancy Services Ltd. v/s ACIT, ITA no.6820/Mum./2010, for the assessment year 2005–06, observed as under:– Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 57 ―38. With regard to this issue, it is seen that in "Hindustan Unilever Ltd." (supra), the jurisdictional High Court, while dealing with the provisions of section 10B of the Act, the provisions whereof are like those of section 10A, were amended by the Finance Act, 2000, held, that the provisions, post amendment, are for deduction and that u/s 10B, loss in an eligible unit could be set off against the profits of business. The provisions of section 10A and those of section 10B are, mutatis mutandis, undisputedly pari-materia inter- se. Therefore, "Hindustan Unilever Ltd." is squarely applicable to the facts of the present case also. No decision contrary to this jurisdictional High Court judgment has been placed before us. Further, in "Galaxy Surfactants Ltd." (supra), again rendered by the jurisdictional High Court and in the context of section 10B of the Act, it has been held that loss in an eligible unit can be set off against the profits of business. "Hindustan Unilever Ltd." was referred to. 39. Besides, "Yokogawa India Ltd." (supra), according to the assessee, is the assessee's own case, the decision wherein has been rendered by the Hon'ble Karnataka High Court. Therein, the scope of section 10A of the Act has been considered. "Hindustan Unilever Ltd." (supra) has been referred to. It has been held that the principle in "Hindustan Unilever Ltd." (supra), qua section 10B of the Act, equally applies to a case falling u/s 10A of the Act. 40. Since none of the above decisions, besides the other ones referred to by the assessee, has been countered by any decision in favour of the department, the grievance of the assessee is accepted. 41. The assessee has further contended that the term "loss" is different from the "expenditure" referred to section 14A of the Act and that, therefore, section 14A is not applicable to the present case. The following case laws have been relied on : "i. "Hindustan Unilever Ltd.", 325 ITR 102 (Bom. HC) ii. "Galaxy Surfactants Ltd.", 343 ITR 108 (Bom. HC) iii. Assessee's Own case being "Yokogawa India Ltd. and other connected appeals", 341 ITR 385 (Kar. HC) iv) "Black and Veatch Consulting Pvt. Ltd.", 348 ITR 72 (Bom.HC) v) "Scientific Atlanta India Technology Pvt. Ltd.", 2 ITR (T) 66 (Chennai Tribunal - SB). vi) "Navin Bharat Industries", 90 ITD 1 (Mumbai ITAT) vii) "Capgenimi India (P) Limited", 141 TTJ 33 (Mumbai ITAT) 42. In this regard, a co-ordinate Bench of the Tribunal in "Navin Bharat Industries" (supra), has held that where expenditure is incurred in relation to income not includible in the total income, loss cannot be construed to be expenditure and section 14A of the Act is applicable qua expenditure and not qua loss. 43. Then, in "Capgenimi India (P) Limited", (supra), again, a co- ordinate Bench of this Tribunal, through one of us, i.e. the ld. AM, has held that in case of loss of units, eligible for deduction u/s 10A, section Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 58 10A is a deduction provision and not an exemption provision after its amendment with effect from the assessment year 2001-02 and that, therefore, the loss from the section 10A unit has to be adjusted against the taxable profits of other units after deduction u/s 10A has been allowed in respect of each eligible unit. The other case laws relied on by the assessee also hold that set off of loss of the eligible unit is allowable against the other taxable income. 44. For the above discussion, this grievance of the assessee is accepted.‖ 127. Further, it is now settled by Hon‟ble Supreme Court in Yokogawa India Ltd. (supra) that after amendment by Finance Act 2000 with effect from 1-4-2001, section 10A has become a provision for deduction. Thus, respectfully following the judicial precedents cited supra, the Assessing Officer is directed to allow set off of losses of STP units eligible under section 10A of the Act against the taxable business income. Accordingly, the ground no. 5(a) raised in assessee‟s appeal is allowed. In view of the above, no separate adjudication is required in respect of ground no. 5(b) being alternative in nature and the same is dismissed as infructuous. 128. The issue arising in ground no. 6 raised in assessee‟s appeal is with regard to claim of deduction under section 10A in respect of units on which deduction under section 80HHE of the Act was availed in past. 129. The brief facts of the case pertaining to this issue as emanating from the record are: During the relevant assessment year, the assessee claimed deduction under section 10A in respect of following units for which deduction under section 80HHE of the Act was claimed in the past:– Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 59 Sl. No. Name of the undertaking 1. SEEPZ ODC I 2. Chennai Sholinganallur STP 3. Delhi Gurgaon-II STP 4. Delhi Noida I STP 130. In past, deduction under section 80HHE of the Act was claimed by the assessee in respect of profits from software export of all undertakings upto assessment year 2001-02. The Assessing Officer vide draft assessment order dated 29.12.2009 held that at the time of commencement of such undertakings, deduction under section 10A of the Act was not available for export of computer software and thus the deduction under section 10A of the Act is not allowable to the undertakings which were already in existence and claiming deduction under section 80HHE of the Act. The Assessing Officer further held that the section 80HHE(5) of the Act also prohibits the claim under any other section of the Act, once the deduction is claimed under section 80HHE. The DRP vide directions dated 29.09.2010 rejected the objections filed by the assessee on this issue. Being aggrieved, the assessee is in appeal before us. 131. During the course of hearing, learned Sr. Counsel submitted that there is nothing in section 10A of the Act which prohibits claim of deduction in respect of profits of an undertaking, where deduction under section 80HHE of the Act has been claimed in past. Learned Sr. Counsel further submitted that the claim of deduction under section 10A of the Act is availed for the residual years in the block of ten years and there was no Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 60 attempt to extend the period of tax holiday by exercising the option to claim deduction under section 10A instead of continuing under section 80HHE of the Act. Learned Sr. Counsel also submitted that the CBDT Circular 1 of 20005 dated 06.01.2005 clarified that an undertaking set up in Domestic Tariff Area and deriving profit from export of computer software and which is subsequently converted in EOU, shall be eligible for deduction under section 10B for the remaining period of ten consecutive assessment years, beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce computer software as a DTA unit. On the other hand, learned D.R. vehemently relied upon the orders passed by the lower authorities. 132. We have considered the rival submissions and perused the material available on record. In the present case, it is not in dispute that the units in respect of which deduction under section 10A of the Act was claimed by the assessee were not into export of computer software. The only basis for denying the claim of the assessee is that deduction under section 80HHE was previously claimed in respect of such units. We find that on identical issue, the Co–ordinate Bench of the Tribunal vide order dated 04.11.2015, passed in assessee‟s own case in DCIT v/s M/s Tata Consultancy Services Ltd., ITA no.7513/Mum./2010, for the assessment year 2005–06 held that old unit of assessee on which deduction under section 80HHE was claimed is entitled to claim deduction under section 10A of the Act from the profits of its units. Revenue‟s appeal against the aforesaid order of Co-ordinate Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 61 Bench was dismissed by the Hon‟ble Jurisdictional High Court in ITA No. 1778 of 2016 vide judgment dated 18.03.2019 by observing as under: ―6. Section 80HHE of the Act pertains to deduction in respect of profits from export of computer software etc. Sub-section (5) of section 80HHE provides that where deduction under said section is claimed and allowed in respect of the profits of the business referred in sub-section (1) for any assessment year, no deduction shall be allowed in relation to such profits under any other provision of the Act for the same or any other assessment year. What sub-section (5) of section 80HHE thus prohibits is the claim of deduction allowed under section 80HHE under any other provision, be it in the same assessment year or in other assessment year. In the present case, it is not even the ground of the revenue that the deduction under section 10A of the Act claimed by the assessee in the present year is in relation to profit for which the assessee was granted deduction under section 80HHE. Sub- section 5 of section 80HHE of the Act, therefore, in the present case would have no applicability. We are fortified in our view by a division bench judgement of Delhi High Court in the case of CIT v. Damco Solutions (P.) Ltd. [2011] 11 taxmann.com 365/200 Taxman 26 (Mag.) in which it was observed as under:- "2. This stand of the Assessing Officer was repelled by the CIT (A) holding that the purpose of sub-section (5) of section 80HHE was to avoid double benefit and that would not mean that if the assessee for a particular assessment year wanted relief only under section 10A of the Act that would be denied to the assessee. The only embargo was not to give relief under both the provisions." 7. Coming to the revenue's second objection to the assessee's claim of deduction under section 10A of the Act, we may recall, that the assessee had admittedly started manufacturing computer software for export prior to 1st April 2001, when section 10A was substituted by the Finance Act of 2000. It was under this amendment that the profit and gains derived by an undertaking from export of computer software came to be covered for deduction under section 10A. The revenue contends that this benefit would not be available to an industry which was already existing and engaged in such activity. However, the interpretation of the revenue would render the first proviso to sub-section (1) of section 10A wholly redundant. This proviso reads as under:— "10A(1) .... Provided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to deduction referred to in this sub-section only for the unexpired period of the aforesaid ten consecutive assessment years." 8. As per this proviso, therefore, while computing total income of the undertaking for any assessment year, the profit and gain which had not been included prior to the introduction of Finance Act, 2000, such an undertaking would be entitled to deduction as per sub-section (1) only for the unexpired period of 10 consecutive assessment years. In plain terms, Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 62 therefore, this proviso would apply to an industry which was already in existence, engaged in manufacturing and export of computer software when the said amendment was made in section 10A. However, such an industry would be eligible to claim that deduction in relation to profit and gain arising out of such activity only for remainder of the period of 10 assessment years, which could be claimed for consequent assessment years alone. 9. If the revenue's interpretation of sub-section (1) of section 10 were to be accepted, then, this proviso would be rendered redundant.‖ 133. As there is no change in facts and circumstances in relevant assessment year, respectfully following the decision of Co-ordinate Bench as upheld by the Hon‟ble Jurisdictional High Court in assessee‟s own case cited supra, we direct the Assessing Officer to allow assessee‟s claim of deduction under section 10A in respect of units on which deduction under section 80HHE of the Act was availed in past. Accordingly, ground no.6 raised in assessee‟s appeal is allowed. 134. The issue arising in ground no.7 raised in assessee‟s appeal is with regard to reduction of expenses incurred in foreign exchange from both export turnover and total turnover while computing the deduction under section 10A of the Act. Upon consideration of rival submissions and perusal of material on record, we find that this issue is similar to ground no. 2 raised in Revenue appeal being ITA No. 1054/Mum./2016 for assessment year 2011-12. Thus, our findings / conclusion in ground no.2, raised in Revenue‟s appeal for the assessment year 2011-12 shall apply mutatis mutandis to this ground also. Accordingly, ground no.7, raised in assessee‟s appeal is allowed. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 63 135. The issue arising in ground no.12 in assessee‟s appeal is with regard to charging of interest under section 234B of the Act before grant of credit of taxes paid under section 90 / 91 of the Act. 136. The brief facts of the case pertaining to this issue as emanating from record are: The Assessing Officer while charging interest under section 234B of the Act vide draft assessment order dated 29.12.2009 did not grant credit of taxes paid under section 90 / 91 of the Act. The DRP, vide directions dated 29.09.2010 treated the issue as consequential in nature and issued no directions in respect of the objections filed by the assessee. Being aggrieved, the assessee is in appeal before us. 137. During the course of hearing, learned Sr. Counsel submitted that interest under section 234B of the Act should be computed till the date of filing of return on assessed tax as reduced by the credit of taxes paid under the provisions of section 90 / 91 of the Act. The learned Sr. Counsel also submitted that amendment to Explanation 1 to section 234B of the Act also clarifies this position. On the other hand, learned D.R. vehemently relied upon the orders passed by the lower authorities. 138. We have considered the rival submissions and perused the material available on record. Explanation 1 to section 234B of the Act, as substituted by Finance Act 2006, w.e.f. 01.04.2007, reads as under: ―Explanation 1.—In this section, "assessed tax" means the tax on the total income determined under sub-section (1) of section 143 and where a regular assessment is made, the tax on the total income determined under such regular assessment as reduced by the amount of,— Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 64 ........... (ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India; (iii) any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section; (iv) any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India; and.....‖ 139. Hon‟ble Jurisdictional High Court in CIT v/s Apar Industries Ltd.: [2010] 323 ITR 411, by referring to CBDT (Circular No. 14 of 2006) on 28.12.2006, held that the amendment brought about by the Parliament by the Finance Act, 2006 by substituting the Explanation 1 to section 234B was clarificatory or curative in nature and therefore will have retrospective effect. Thus in view of the aforesaid decision, we direct the Assessing Officer to compute the interest under section 234B of the Act, after giving credit of taxes paid under section 90 / 91 of the Act, as per law. As a result, ground no.12 raised in assessee‟s appeal is allowed. 140. The assessee vide application dated 04.03.2016 sought admission of additional ground of appeal in respect of issue of grant of foreign tax credit as per the provisions of section 90(1)(a) of the Act read with provisions of the applicable Double Taxation Avoidance Agreement („DTAA‟) for taxed paid overseas in relation to income eligible for deduction under section 10A/10AA of the Act. 141. The learned Sr. Counsel for the assessee submitted that the issue raised by way of additional ground of appeal is purely legal in nature which do not require enquiry into new facts. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 65 142. We have considered the rival submissions and perused the material available on record. As the issue raised by the assessee by way of additional ground of appeal are legal in nature which can be decided on the basis of material available on record, we are of the view that the same can be admitted for consideration and adjudication in view of the ratio laid down by the Hon'ble Supreme Court in National Thermal Power Co. Ltd. v/s CIT, [1998] 229 ITR 383 (SC). Accordingly, the additional ground of appeal raised by the assessee is hereby admitted for adjudication on merit. 143. Upon consideration of rival submissions and perusal of material on record, we find that this issue raised by way of additional ground of appeal is similar to ground no. 11 raised in assessee‟s appeal being ITA No. 1650/Mum./2016 for assessment year 2011-12. Thus, our findings / conclusion in ground no.11, raised in assessee‟s appeal for the assessment year 2011-12 shall apply mutatis mutandis to this ground also. Accordingly, additional ground no. 15 raised by the assessee is allowed for statistical purpose. 144. Now we will deal with the grounds raised in assessee‟s appeal pertaining to transfer pricing adjustment. 145. At the outset, learned Senior Counsel submitted that MAP (Mutual Agreement Procedure) proceedings amongst the respective Competent Authorities in respect of transfer pricing adjustment pertaining to provision of software development services to US and Netherlands Associated Enterprises (―A.Es.‖) are complete and the conclusions reached in same Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 66 have been accepted by the assessee. Accordingly, grounds of appeal in respect of transfer pricing adjustment covered under the MAP were withdrawn and consequently assessee filed revised grounds of appeal vide letters dated 25.05.2018 and 17.12.2018 on the remaining transfer pricing additions. We have considered aforesaid revised grounds of appeal filed by the assessee. 146. The issue arising in ground no.10, raised in assessee‟s appeal is regarding transfer pricing adjustment in respect of international transaction pertaining to provision of software consultancy services. Upon consideration of rival submissions and perusal of material on record, we find that this issue raised in assessee‟s appeal is similar to ground no. 17 raised in assessee‟s appeal being ITA No. 1650/Mum./2016 for assessment year 2011-12. Thus, our findings / conclusion in ground no.17, raised in the assessee‟s appeal for the assessment year 2011-12 shall apply mutatis mutandis to this ground also. Accordingly, ground no.10 raised in assessee‟s appeal is allowed with similar directions for statistical purpose. 147. The issue arising in ground no. 11 raised in assessee‟s appeal is with regard to provision of interest free loans by the assessee to its A.Es. 148. The brief facts of the case pertaining to this issue as emanating from the record are: During the relevant assessment year, the assessee had advanced interest free loans to its following A.Es.: (a) Tata Consultancy Service Sverige AB, Sewden – Rs. 19,58,85,000 (b) Financial Network Services Pty. Ltd., Australia – Rs. 1,22,71,11,028 Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 67 149. During the course of proceedings before the TPO, assessee was asked to show cause as to why the adjustment on account of interest not charged (@6% being the rate at which loan was given to Diligenta Ltd. during the year) should not be made. In reply, the assessee submitted that the loans were given to respective subsidiaries to finance the downstream investments / acquisition by these respective subsidiaries. The amounts have been utilised by respective A.Es. to disburse the acquisition price to the erstwhile shareholders. The assessee further submitted that being a 100% shareholder, it was assessee‟s duty to provide necessary financial assistance either by way of share capital or interest free loans and thus based on the debt equity ratio of A.Es. the above loan is in the nature of quasi-equity. The assessee also submitted that for the purpose of advancing loans the assessee has not borrowed the money and hence there is no corresponding cost to it. And if it all interest is to be charged then without prejudice same should be considered @ LIBOR plus 44 basis points i.e. the rate at which USA based A.E. has been able to borrow in the international market. 150. The TPO vide order dated 30.10.2009 passed under section 92CA(3) of the Act rejected assessee‟s submissions and held that if the similar loan was to be given to an unrelated party it would have carried an arm‟s length rate of interest. The TPO further observed as under: ―if the intention of the assessee, as submitted, is to treat the said loan as ―quasi-equity‖, it should have made an equity contribution in the first instance instead of granting a loan. If the assessee had directly funded the Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 68 said acquisitions, the assessee would be entitled to dividends as and when the same are declared and the same would be taxed in India. It would also have been liable to capital gains tax on sale of shares in future. By advance the monies as a interest free loan, the assessee is shifted the profits outside India. The overseas AEs in the instant case would enjoy the dividend income and capital gain income which would not be taxed in India.‖ 151. Thus, the TPO concluded that the interest free loans have resulted in benefit to A.E. without any benefit to the assessee and accordingly, made an adjustment of Rs. 4,10,28,373 by adopting rate of interest of 6% based on loan given by the assessee itself to another A.E. The Assessing Officer passed the draft assessment order dated 29.12.2009, inter-alia, on the basis of adjustment proposed by the TPO. The DRP, vide directions dated 29.09.2010 rejected the objections filed by the assessee and upheld the order of TPO/Assessing Officer on this issue. Being aggrieved, the assessee is in appeal before us. 152. During the course of hearing, learned Sr. Counsel submitted that the money was advanced to the subsidiaries as a share capital and therefore cannot be treated as interest free loan. Learned Senior Counsel further submitted that before the loan was granted its objective was clear. By referring to the order of the Tribunal in assessee‟s own case for assessment year 2009-10, learned Senior Counsel submitted that similar issue has been restored to the file of Assessing Officer for de novo adjudication. The learned D.R. vehemently relied upon the orders passed by lower authorities. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 69 153. We have considered the rival submissions and perused the material available on record. The assessee acquired certain Australian companies / group and for this purpose, the assessee set up FNS, Australia as its 100% subsidiary as the special purpose vehicle for such acquisition. The assessee remitted the amount of AUD 36,258,815 (equivalent to Rs. 122,71,11,028) to FNS, Australia so that FNS, Australia could disburse the acquisition price to the erstwhile shareholders of the target companies/group. Similarly, the assessee acquired Swedish company through its wholly owned subsidiary TCS Sverige AB, Sewden. For this purpose, the assessee remitted the amount of USD 4.5 millions (equivalent to Rs.19,58,85,000) to its subsidiary so that same can be disbursed as a acquisition price to the erstwhile shareholders of acquired Swedish company. 154. While dealing with facts for the assessment year 2011-12, we noticed that the assessee received the interest on account of loan outstanding from its various A.Es., including TCS FNS Pty. Ltd., Australia. It was also noticed from the facts on record for assessment year 2011-12 that the loan was granted in prior years to the said subsidiary, inter-alia, for purpose of acquisition of downstream subsidiaries. The assessee, on a without prejudice basis, charged interest at a rate which was derived by considering the prevailing LIBOR and added a mark-up on same for various risks. Ultimately, said benchmarking, by applying LIBOR and adding a mark-up, in respect of loans was accepted by the DRP and no further adjustment was directed to be made. We, while deciding the Revenue‟s appeal being ITA No. 1054/Mum/2016 for assessment year 2011-12, have Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 70 upheld the aforesaid conclusion reached by the DRP and dismissed the appeal filed by the Revenue. At the outset, we are of the view that the adjustment made by TPO by adopting rate of interest of 6% based on loan given by the assessee itself to another A.E. is not a valid CUP as the transaction is also between the related parties, thus to this extent order passed by the TPO and upheld by the DRP is set aside. Further, as we have already upheld the benchmarking of this transaction of loan to the A.Es., inter-alia, for the purpose of acquisition of downstream subsidiaries, for assessment year 2011-12 by applying the principle of LIBOR plus 300 to 400 basis points, we direct the TPO / Assessing Officer to compute the adjustment in respect of loan to A.Es. for the relevant assessment year by applying rate of interest of LIBOR, which will further be marked up with basis points. We further direct that the quantification of markup shall be done by the TPO / Assessing Officer after hearing the assessee. As a result, ground no.11 raised in assessee‟s appeal is allowed for statistical purpose. 155. The assessee vide application dated 07.11.2014 sought admission of additional grounds of appeal in respect of transfer pricing adjustment. However, the additional grounds of appeal as well as other grounds in respect of transfer pricing adjustment were not pressed during the course of hearing being academic in nature and are accordingly dismissed. 156. Ground no. 12.2 pertaining to initiation of penalty is premature in nature and is accordingly dismissed. Tata Consultancy Services Ltd. ITA No. 17/Mum./2011 ITA no.1650/Mum./2016 ITA no.1054/Mum./2016 71 157. In the result, appeal by the assessee is partly allowed for statistical purpose. 158. To sum up, cross appeals for assessment year 2011-12 as well as assessee‟s appeal for assessment year 2006-07 are partly allowed for statistical purpose. Order pronounced in the open court on 06/04/2022 Sd/- PRASHANT MAHARISHI ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 06/04/2022 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai