ITO 11(3)(4), MUMBAI V. ZENTA P.LTD, MUMBAI

ITA 1802/MUM/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1258 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 27-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Initiation of penalty proceedings; Wholly owned subsidiary; TDS
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K , BENCH MUMBAI BEFORE SHRI M. BALAGANESH , AM & SHRI RAVISH SOOD , JM ITA NO. 1802 / MUM/20 1 5 ( ASSESSMENT YEAR : 2010 - 11 ) ITO 11(3)(4) ROOM NO.429, 4 TH FLOOR AAYAKAR BHAVAN MUMBAI 20 VS. M/S. ZENTA P VT . LTD., 6 TH FLOOR, UNIT NO.601, NOMURA HIRANANDANI BUSINESS PARK POWAI, MUMBAI 400 076 PAN/GIR NO. AAACH3235M ( APPELLANT ) .. ( RESPONDENT ) CO NO. 1 6 4 /MUM/201 5 (ARISING OUT OF ITA NO.1802/MUM/2015 ) ( ASSESSMENT YEAR : 2010 - 11 ) M/S. ZENTA PVT. LTD., 4 TH FLOOR, TOWE R II PHASE II, LOGITECH PARK ANDHERI KURLA ROAD ANDHERI (E) MUMBAI 400 072 VS. ITO 11(3)(4) ROOM NO.429, 4 TH FLOOR AAYAKAR BHAVAN MUMBAI 400020 PAN/GIR NO. AAACH3235M (APPELLANT ) .. (RESPONDENT ) ITA NO.795/MUM/2016 ( ASSESSMENT YEAR : 2011 - 12 ) ITO 11 (3)(4) ROOM NO.429, 4 TH FLOOR AAYAKAR BHAVAN MUMBAI 400020 VS. M/S. ZENTA P VT . LTD., 6 TH FLOOR, UNIT NO.601, NOMURA, HIRANANDANI BUSINESS PARK, POWAI, MUMBAI 400 076 PAN/GIR NO. AAACH3235M (APPELLANT ) .. (RESPONDENT ) CO NO.85/MUM/2016 (ARISING OUT O F ITA NO.795/MUM/2016) ( ASSESSMENT YEAR : 2011 - 12 ) M/S. ACCENTURE SOLUTIONS PVT. LTD., (FORMERLY KNOWN AS ZENTA PVT. LTD.,) VS. ITO 11(3)(4) AAYAKAR BHAVAN MUMBAI 400020 ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 2 4 TH FLOOR, TOWER II PHASE II, LOGITECH PARK ANDHERI KURLA ROAD ANDHERI (E) MUMBAI 400 072 PAN/GIR NO. AAACH3235M (APPELLANT ) .. (RESPONDENT ) ITA NO.1623/MUM/2014 ( ASSESSMENT YEAR : 2009 - 10 ) INCOME TAX OFFICER 3(3)(4) MUMBAI (NOW ASSESSED UNDER ASST. COMMISSIONER OF INCOME TAX 11(3)(2) , ROOM NO.427 AAYAKAR BHAVAN MUMBAI - 400020 VS. M/S . ACCENTURE SOLUTIONS PVT. LTD., 4 TH FLOOR, TOWER II PHASE II, LOGITECH PARK ANDHERI KURLA ROAD ANDHERI (E) MUMBAI 400 072 PAN/GIR NO. AAACH3235M (APPELLANT ) .. (RESPONDENT ) CO NO. 222 /MUM/201 4 (ARISING OUT OF ITA NO.1623/MUM/2014) ( ASSESSMENT YEAR : 2 009 - 10 ) M/S. ZENTA PVT. LTD., 4 TH FLOOR, TOWER II PHASE II, LOGITECH PARK ANDHERI KURLA ROAD ANDHERI (E) MUMBAI 400 072 VS. ITO 3(3)(4) ROOM NO.672, AAYAKAR BHAVAN MUMBAI 400020 PAN/GIR NO. AAACH3235M (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI ANAND MOHAN ASSESSEE BY SHRI M.P. LOHIA DATE OF HEARING 16 / 05 /201 9 & 19/08/2019 DATE OF PRONOUNCEMENT 04 / 09 /201 9 ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 3 O R D E R PER BENCH : TH ESE APPEAL S IN ITA NO S . 1802/MUM/2015, ITA NO.1623/MUM/2014 & ITA NO.795/MUM/2016 ALONGWITH C ROSS OBJECTIONS IN C.O. NO.164/MUM/2015, CO NO.222/MUM/2014 AND CO NO.85/MUM/2015 FOR A.Y RS . 2009 - 10, 2010 - 11 AND 2011 - 12 ARISE OUT OF THE ORDER BY THE LD. DISPUTE RESOLUTION PANEL, MUMBAI (LD. DRP IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143( 3) R.W.S. 144C(13 ) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) . ITA NO.1623/MUM/2014 (REVENUE APPEAL) & CO NO.222/MUM/2014 (CO BY ASSESSEE) (A.Y.2009 - 10) 2. THE BRIEF FACTS OF THE APPEAL IN A.Y.2009 - 10 ARE THAT THE ASSESSEE IS PRIMARILY ENGAGED IN THE PROVISION OF IT AND ITES SECTOR AS PER DISCLOSURE MADE IN THE ANNUAL REPORT OF THE ASSESSEE COMPANY. THE LD. TPO OBSERVED THAT AS PER TP STUDY REPORT, THE ASSESSEE IS AN ITES COMPANY. IT IS PROVIDING ITES SERVICES TO M/S. ZENTA GLOBAL LTD. B ARBADOS (ZGL). ZGL IS A WHOLLY OWNED SUBSIDIARY OF M/S. ZENTA GROUP (LLC), USA. THE ASSESSEE COMPANY IS OWNED BY OUTSOURCING MA U RITIUS - 1 LTD., AND OUTSOURCING MA URITIUS - 2 LTD., IN THE RATIO OF 51:49. THESE TWO MA URITIUS BASED COMPANIES ARE IN TURN HELD BY SUBSIDIARY BARBADOS LTD. SUBSIDIARY BARBADOS LTD., IS HELD BY ZGL BARBADOS. 2.1. AS PER THE TP STUDY REPORT, THE ASSESSEE IS RENDERING FOLLOWING SERVICES TO ITS ZGL BARBADOS, ASSOCIATED ENTERPRISES (AE) IN SHORT: - ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 4 I) ACCOUNTING SERVICES II) CREDIT CARD SERVICES III) MORTGAGE PROCESSING SERVICES IV) BANK BACK OFFICE SERVICES V) ACCOUNTS RECEIVABLE MANAGEMENT VI) INSURANCE CLAIMS MANAGEMENT 2.2. THE LD. TPO OBSERVED THAT AS PER TP STUDY REPORT THE ASSESSEE GETS A MARK - UP OF 15% OF COST OF RENDERING ITES S ERVICES. THE TPO ALSO OBSERVED THAT THE ENTIRE TURNOVER OF THE ASSESSEE IS CONTROLLED BY ZGL. THE LIST OF INTERNATIONAL TRANSACTIONS CARRIED OUT BY THE ASSESSEE IS AS UNDER: - SR. NO. NATURE OF INTERNATIONAL TRANSACTION VALUE IN RUPEES METHOD FOLLOWED 1. P ROVISION OF CALL CENTRE AND BACK OFFICE SERVICES 160,71,82,991 TNMM - ITES 2. REIMBURSEMENT RECEIVED 36,09,589 CUP 2.3. THE MARGIN OF THE ASSESSEE WAS 14.63%. THE ASSESSEE COMPUTED THE INDUSTRY MARGIN FROM 14 COMPARABLES BY ADOPTING OPERATING PROFIT [ OP TC(TOTAL COST)] AS PROFIT LEVEL INDICATOR AND ARRIVED MARGIN OF 14.84%. SINCE THE SAME WAS FALLING WITHIN +/ - 5% RANGE, THE ASSESSEE CONSIDERED ITS PRICING TO BE AT ARMS LENGTH P RICE (ALP). THE LD. TPO REJECTED 8 COMPARABLES AMONG 14 COMPARABLES CHOSEN B Y THE ASSESSEE. THE LD. TPO FURTHER ADDED 20 COMPARABLES BASED ON HIS OWN SEARCH. HENCE, THE AVERAGE MARGIN OF 26 COMPARABLES CHOSEN BY THE LD. TPO WAS WORKED OUT AT 28.45%. THE LD. TPO ACCORDINGLY MADE AN ADJUSTMENT OF ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 5 RS.19,37,59,272/ - TO ALP IN THE ORD ER PASSED BY HIM U/S.92CA(3) OF THE ACT ON 31/12/2012. THE LD. DRP DIRECTED THE LD. TPO TO RE COMPUTE THE ALP OF INTERNATIONAL TRANSACTION WITH CERTAIN DIRECTIONS. THE LD. TPO WHILE GIVING EFFECT TO THE DIRECTIONS OF THE LD. DRP RE COMPUTED THE ALP, AS A RE SULT OF WHICH , THE ENTIRE VARIATION MADE ORIGINALLY W AS SOUGHT TO BE DELETED. IN OTHER WORDS, NO ADJUSTMENT TO ALP WAS MADE BY THE LD. TPO WHILE GIVING EFFECT TO THE DIRECTIONS OF THE LD. DRP. 3 . AGGRIEVED BY THIS , THE REVENUE HAS PREFERRED APPEALS BEFORE US AND ASSESSEE HAS ALSO PREFERRED CROSS OBJECTIONS BEFORE US. 3.1 . AT THE TIME OF HEARING , BOTH THE PARTIES BEFORE US MUTUALLY AGREED AND STATED THAT IF ONE OF THE COMPARABLES NAMELY EXCEL INFOWAYS LTD., WHICH HAS BEEN DIRECTED TO BE EXCLUDED BY THE LD. DRP FROM THE LIST OF TOTAL COMPARABLES CHOSEN BY THE LD. TPO IS HELD IN ASSESSEES FAVOUR, THEN THE ADJUDICATION OF THE OTHER COMPARABLES WOULD BECOME ACADEMIC IN NATURE AS THE ASSESSEE WOULD FALL WITHIN +/ - 5% RANGE. ACCORDINGLY, AS DECIDED BY BOTH THE PA RTIES BEFORE US THE BENCH DECIDED TO ADJUDICATE THE EXCLUSION OF COMPARABLE I.E. M/S. EXCEL INFOWAYS LTD., THE MARGIN OF THIS COMPARABLE FOR THE YEAR UNDER CONSIDERATION WAS 243.69%. THE CRUX OF THE ARGUMENTS OF THE LD. AR WITH REGARD TO THE EXCLUSION OF T HIS COMPARABLE ARE AS UNDER: - ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 6 I) THIS COMPARABLE HAS GOT EMPLOYEE COST OF 8.82% WHEREAS THE EMPLOYEE COST OF ASSESSEE WORKS OUT TO 54.55%. SINCE THE EMPLOYEE COST OF THE COMPARABLE IS LESS THAN 25% OF THE TOTAL COST, THE SAME IS TO BE EXCLUDED FROM THE LIS T OF COMPARABLES. II) THE SAID COMPARABLE M/S. EXCEL INFOWAYS LTD., AS PER ITS DIRECTORS REPORT FOR THE YEAR ENDING 31/03/2009 H AS MENTIONED THAT IT IS IN IT ENABLED SERVICES INDUSTRY PROVIDING EFFECTIVE BUSINESS SOLUTIONS TO THE GLOBAL AND INDIAN COMPANI ES WITH EXCELLENCE IN TECHNOLOGY AND ROBUST PROCESSES. THE SAID COMPARABLE HAD CONTINUED TO WIN NEW ASSIGNMENTS AS WELL AS ACHIEVED GROWTH IN TRADITIONAL AREA OF BPO / IT ENABLED SERVICES WHICH HAS SIGNIFICANT GROWN POTENTIAL IN THE YEARS TO COME. THE SAID DIRECTORS REPORT ALSO MENTIONED THAT THE SAID COMPARABLES IS AN ISO CERTIFIED COMPANY AND IS A C USTOMER C ONTACT CENTER BASED IN INDIA, OFFERING A RANGE OF CUSTOMER CARE SERVICES INCLUDING TELECOM FULFILLMENT CENTRE, PROVIDING TECHNICAL SERVICES, FINANCIAL SERVICES, HEALTHCARE, OUTBOUND SALES AND MARKETING, VOICE, EMAIL RESPONSE, REAL TIME CHAT , KNOWLEDGE MANAGEMENT, ECRM ARCHITECTURE AND OTHER VALUE ADDED SERVICES, WHERE EACH COMPONENT OF SERVICES DELIVERY IS CRITICAL. HOWEVER, FROM THE PERUSAL OF THE ANNU AL REPORT OF THIS COMPARABLE IN THE PROFIT AND LOSS ACCOUNT, THE TOTAL RECEIPTS FROM BPO / IT ENABLED SERVICES WAS REFLECTED AT RS.18,60,40,738/ - . III) THE LD. AR ARGUED THAT THERE IS NO BREAK - UP OF THIS REVENUE OF RS.18.60 CRORES PROFIT IN THE ANNUAL REP ORT OF THE SAID COMPARABLE. ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 7 HENCE, IN THE ABSENCE OF SEGMENTAL DATA OF THE REVENUE, THE SAME IS TO BE EXCLUDED. THE LD. AR ALSO DREW OUR ATTENTION TO THE BALANCE SHEET EXTRACT AND THE CON TENTS CONTAIN ED IN G ENERAL B USINESS P ROFILE REFLECTED IN PART - IV OF T HE COMPANIES ACT , 1956 ENCLOSED IN PAGE 334 OF THE PAPER BOOK WHEREIN UNDER THE HEAD G ENERIC N AMES OF T HREE PRINCIPAL P RODUCTS/ S ERVICES OF THE C OMPANY, THE SAID COMPARABLE HAD MENTIONED THAT THEY ARE ENGAGED IN PROVIDING FOLLOWING SERVICES: - A . BUSINESS AUX ILIARY SERVICES B . INFORMATION TECHNOLOGY ENABLED SERVICES IV) LD. AR ALSO RELIED ON PAGE 339 OF THE PAPER BOOK CONTAINING DETAILS OF ACTIVITIES CARRIED OUT BY M/S. EXCEL INFOWAYS LTD., DOWNLOADED FROM THE WEBSITE ON 11/11/2013 WHEREIN IT IS ENGAGED IN RENDE RING FOLLOWING SERVICES: - FUNDS MANAGEMENT OVERSEAS PROPERTY COLLECTIONS BUSINESS, FINANCIAL E - MEDIA TRANSCRIPTION INBOUND SALES OUTBOUND SALES ENQUIRIES & APPLICATION CREDIT INSPECTION OF UNDERWRI TING & FUNDING OUT COLLECTIONS INBOUND SALES OUTBOUND SA LES EXHIBITION ENQUIRIES INSPECTIONS TRIPS AFTER SALES CUSTOMER SUPPORT THIRD PARTY COLLECTION EARLY OUT COLLECTION PRIMARY COLLECTION SECONDARY AND LATER STAGE COLLECTION PRE - LEGAL COLLECTION SKIP TRACING FINANCIAL BRIEF NEWS RECORDING TRANSCRIPTED IN LI TERATURE IN TAT Q & A SESSIONS EXCEL INFOWAYS IS A LEADING COMPANY IN PROVIDING COLLECTIONS & CUSTOMER RELATIONS SERVICE TO VARIOUS CLIENTS SINCE 2003. ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 8 V) BASED ON THIS, THE LD. AR ARGUED THAT THE AFORESAID SERVICES ARE NOT IT SERVICES AND HENCE, THE S AME ARE NOT FUNCTIONALLY COMPARABLE WITH THAT OF THE ASSESSEE. VI) THE LD. AR ARGUED THAT THE LD. TPO HIMSELF HAS REMOVED M/S. EXCEL INFOWAYS LTD., FROM THE LIST OF COMPARABLES AS FUNCTIONALLY NOT COMPARABLE IN THE A.Y.2010 - 11. VII) THE SAID COMPARABLE H AS GOT FLUCTUATING MARGINS. 3.2. IN RESPONSE, THE LD. DR ARGUED THAT THE SAID COMPARABLE HAVING HIGH EMPLOYEE COST RATIO IS NOT RELEVANT FOR THE YEAR UNDER CONSIDERATION IN AS MUCH AS THE SAME WAS NOT CONSIDERED AS FILTER BY THE LD. TPO. THE LD. DR VEHEM ENTLY ARGUED THAT NO FRESH FILTERS COULD BE APPLIED AT THE STAGE OF APPEAL BEFORE ITAT. THE LD. DR ALSO ARGUED THAT THE ACTIVITIES OF M/S. EXCEL INFOWAYS LTD., ARE FUNCTIONALLY SIMILAR TO THAT OF THE ASSESSEE AND THE HIGHLIGHTED PORTION IN PAGE 379 OF THE PAPER BOOK ONLY REPRESENTS VARIOUS OTHER SERVICES THAT ARE RELEVANT FOR THE PURPOSE OF ISO CERTIFICATION ONLY AND NOT OTHERWISE. THE ENTIRE RECEIPTS ARE FROM BPO/ITES AND HENCE THE SAME ARE FUNCTIONALLY COMPARABLE AND NO SEGMENTAL DATA IS WARRANTED THEREON . 4. WE HAVE HEARD RIVAL SUBMISSIONS AND WE FIND THAT CERTAIN BASIC CLARIFICATIONS ARE REQUIRED FROM THE LD. TPO WHICH WOULD CLINCH THE ENTIRE DISPUTE BEFORE US. ACCORDINGLY, WE DEEM IT FIT TO SEEK A REMAND REPORT FROM THE LD. TPO TO PROVIDE SPECIFIC CLAR IFICATIONS ON THE FOLLOWING ISSUES: - ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 9 I) TO OBTAIN DETAILS OF BREAK - UP OF THE REVENUE FROM M/S. EXCEL INFORWAYS LTD., IN THE MANNER KNOWN TO LAW. II) TO SEEK CLARIFICATION FROM M/S. EXCEL INFOWAYS LTD., AS TO WHETHER ANY REVENUE WAS EARNED DURING THE YEAR I .E., A.Y.2009 - 10 FROM SERVICES OTHER THAN ITES. III) TO OBTAIN CLARIFICATION AS TO WHETHER THE SAID COMPARABLE IS ENGAGED IN OUTSOURCING ACTIVITY. IV) TO OBTAIN SPECIFIC CLARIFICATION FROM THE SAID COMPARABLE WITH REGARD TO DETAILED BIFURCATION OF ITES SER VICES RENDERED BY M/S. EXCEL INFOWAYS LTD., 4.1 . THE LD. TPO FURNISHED THE REMAND REPORT THROUGH THE LD. DR IN REFERENCE NO. MUM/DCIT(TP) - 1( 1)(1)/REMAND REPORT / ASPL - 09 - 10/2019 - 20 DATED 08/07/2019. THE LD. TPO HAD ISSUED NOTICE U/S.133(6) TO M/S. EXCEL IN FOWAYS LTD.(NOW KNOWN AS M/S. EXCEL REALTY N INFRA LTD) WHEREIN THE QUESTION RAISED BY THE LD. TPO AND THE REPLY GIVEN BY THE SAID PARTY ARE REPRODUCED HEREIN : - I . PLEASE PROVIDE THE DETAILS OF BREAK - UP OF SERVICES RENDERED BY YOUR COMPANY WITH RESPECT T O BPO/ITES REPLY OF EIL: IN REFERENCE TO DETAILS OF BREAKUP OF SERVICES RENDERED, KINDLY NOTE THAT WE PROVIDED BPO/ITES ENABLED SERVICES TO OUR CLIENT OUTSIDE INDIA ONLY. II. PLEASE PROVIDE THE DETAILS WHETHER ANY REVENUE HAS BEEN OBTAINED FROM THE SERV ICES OTHER THAN BPO/ITES BY YOUR COMPANY. REPLY OF EIL: KINDLY NOTE THAT OUR REVENUE WAS FROM BPO/1TES ENABLED SERVICES ONLY, DID NOT HAVE ANY OTHER INCOME. ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 10 III. PLEASE PROVIDE DETAILED BREAK - UP OF ALL THE ACTIVITIES INCLUDED UNDER BPO/1TES OF YOUR COMPANY. REPLY OF E1L: KINDLY NOTE THAT WE WERE PROVIDING TELECOM FULFILLMENT SOLUTION SERVICES AS WELL AS FINANCIAL SERVICES TO OUR CLIENTS. IV. PLEASE PROVIDE THE DETAILS WHETHER YOUR COMPANY IS ENGAGED IN ACTIVITIES WHICH REQUIRE OUTSOURCING. R EPLY OF E IL: KINDLY NOTE WE HAD OUR OWN EMPLOYEES, WE WERE PROVIDING BPO/ITES ENABLED SERVICES TO OUR CLIENTS OUTSIDE INDIA ONLY. 4.2. WE FIND THAT THE LD. TPO IN HIS FINAL REMARKS IN THE REMAND REPORT HAD STATED THAT M/S. EXCEL INFOWAYS LTD. AND THE ASSESSEE COMPANY ARE ENGAGED IN THE BUSINESS OF PROVIDING BPO/IT ENABLED SERVICES AND HENCE ARE FUNCTIONALLY COMPARABLE. THE LD. TPO ALSO REMARKED THAT M/S. EXCEL INFOWAYS LTD. HAS RECEIVED RS.18,60,40,738/ - AND RS.23,09,11,000/ - FROM BPO / IT ENABLED SERV ICES FOR F.Y S 2008 - 09 AND 2007 - 08 RESPECTIVELY. WE FIND THAT THESE FIGURES ARE NOTHING BUT THE TOTAL REVENUE FROM OPERATIONS OF M/S. EXCEL INFOWAYS LTD. REFLECTED IN THE AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31/03/2009 BUT WE FIND FROM THE DIRECT ORS REPORT OF M/S. EXCEL INFOWAYS LTD. THAT THE SAID COMPANY IS ENGAGED IN VARIOUS ACTIVITIES AND HAD CLASSIFIED EVERY ACTIVITY UNDER BPO/IT ENABLED SERVICES. THE LIST OF VARIOUS ACTIVITIES LISTED OUT IN THE DIRECTORS REPORT HAVE ALREADY BEEN INCORPORATE D BY US IN PARA 4 ABOVE WHILE ADDRESSING THE ARGUMENTS OF THE LD. AR. WE ALSO FIND FROM THE ANNUAL REPORT OF M/S. EXCEL INFOWAYS ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 11 LTD. THAT 31/03/2009, UNDER PART IV BALANCE SHEET ABSTRACT AND COMPANIES GENERAL BUSINESS PROFILE UNDER THE COLUMN GENERIC N AMES OF THREE PRINCIPAL PRODUCTS / SERVICES OF COMPANY , THE SAID COMPANY I.E., M/S. EXCEL INFOWAYS LTD. HAD REPORTED THE FOLLOWING TWO ACTIVITIES AS PRINCIPAL ACTIVITIES: - (I) BUSINESS AUXILIARY SERVICES (II)INFORMATION TECHNOLOGY ENABLED SERVICES 4.3. M OREOVER, WE FIND FROM PAGE 399 OF THE PAPER BOOK CONTAINING DETAILS OF ACTIVITIES CARRIED OUT BY M/S. EXCEL INFOWAYS LTD. WHICH IS DOWNLOADED FROM THE WEBSITE ON 11/11/2013 , THAT T HE SAID COMPANY WAS STATED TO BE ENGAGED IN PROVIDING COLLECTIONS AND CUSTOM ER RELATION SERVICES TO VARIOUS CLIENTS SINCE 2003, APART FROM VARIOUS OTHER SERVICES AS LISTED IN PARA 3.1. (IV) ABOVE. THIS GOES TO PROVE BEYOND DOUBT THAT M/S. EXCEL INFOWAYS LTD. WAS ALSO ENGAGED IN PROVIDING FINANCIAL SERVICES WHICH HAD BEEN CLASSIFIE D AS BUSINESS AUXILIARY SERVICES BY M/S. EXCEL INFOWAYS LTD. UNDER THE G ENERIC NAMES OF PRINCIPAL SERVICES RENDERED BY IT SUPRA. OUR OBSERVATION IN THIS REGARD IS FURTHER STRENGTHENED BY THE REPLY GIVEN BY M/S. EXCEL INFOWAYS LTD. BEFORE THE LD. TPO IN R ESPECT TO QUESTION NO.III RAISED BY THE LD. TPO U/S.133(6) OF THE ACT WHICH HAS ALREADY BEEN REPRODUCED HEREINABOVE. HENCE, THE TOTAL REVENUE OF RS.18.60 CRORES CREDITED IN THE P & L ACCOUNT DOES NOT BELONG PRIMARILY TO IT ENABLED SERVICES SIMPLICIT O R AND THAT SOME PART OF SUCH REVENUE SHOULD ALSO PERTAIN TO FINANCIAL SERVICES RENDERED BY THAT COMPARABLE. ADMITTEDLY ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 12 NO SEGMENTAL BREAK - UP OF REVENUE AND SEGMENTAL RESULTS ARE AVAILABLE FOR VARIOUS ACTIVITIES CARRIED OUT BY M/S. EXCEL INFOWAYS LTD. 4.4. THE LD . DR ON THE CONTRARY ARGUED THAT ALL THE SERVICES RENDERED BY M/S. EXCEL INFOWAYS LTD. ARE ONLY SUPPORT SERVICES TO THE MAIN ACTIVITY OF IT ENABLED SERVES AND HENCE, ARE TO BE CONSTRUED ON A BUNDLED MANNER AND 100% FUNCTIONAL SIMILARITY WITH THAT OF THE AS SESSEE COMPANY CANNOT BE EXPECTED FOR THE PURPOSE OF COMPARABILITY. WE ARE NOT INCLINED TO ACCEPT TO THESE ARGUMENTS OF THE LD. DR FOR THE SIMPLE REASON THAT BUSINESS AUXILIARY SERVICES ARE COMPLETELY DIFFERENT FORM IT ENABLED SERVICES. FROM THE VARIOUS SE RVICES RENDERED BY M/S. EXCEL INFOWAYS LTD. SINCE 2003 ONWARDS AS DETAILED HEREINABOVE, IT COULD BE SAFELY CONCLUDED THAT THE SAID COMPANY WAS ALSO PREDOMINANTLY RENDERING FINANCIAL SERVICES WHICH HAD BEEN CATEGORIZED BY THEM AS IT ENABLED SERVICES, WHEREA S IN THE ASSESSEES CASE, IT IS RENDERING ROUTINE IT ENABLED SERVICES WHICH ARE LISTED IN PARAGRAPH 2.1 OF OUR ORDER HEREINABOVE. 4.5. WE ALSO FIND LOT OF FORCE IN THE ARGUMENT MADE BY THE LD. AR WHEREIN HE SUBMITTED THAT IN THE TRANSFER PRICING ASSESSMEN T PROCEEDINGS FOR A.Y.2010 - 11 , THE VERY SAME COMPARABLE I.E. M/S. EXCEL INFOWAYS LTD. WAS SOUGHT TO BE INCLUDED BY THE LD. TPO AS A VALID COMPARABLE. THE ASSESSEE HAD THERE PLEADED IT IS NOT FUNCTIONALLY COMPARABLE APART FROM OTHER DIFFERENCES. THE LD TPO AFTER EXAMINING THE VARIOUS DETAILS AND EVIDENCES SUBMITTED BY THE ASSESSEE FOR EXCLUSION OF THE SAME, FINALLY ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 13 EXCLUDED THE SAID COMPARABLE FROM THE LIST OF COMPARABLES WHILE COMPLETING THE TP ASSESSMENT FOR THE A.Y.2010 - 11. IN THIS REGARD, THE LD. AR PLAC ED ON RECORD THE LETTER DATED 08/01/2011 ADDRESSED BEFORE THE LD. TPO DURING TP ASSESSMENT PROCEEDINGS FOR A.Y.2010 - 11 AND THE COPY OF THE TPO ORDER FOR A.Y.2010 - 11 DATED 17/01/2014 WHEREIN M/S. EXCEL INFOWAYS LTD. WAS EXCLUDED. 4.6. APART FROM THE AFORE SAID OBSERVATIONS, WE ALSO FIND THAT THE CO - ORDINATE BENCH OF THIS TRIBUNAL UNDER SIMILAR CIRCUMSTANCES HAD EXCLUDED M/S. EXCEL INFOWAYS LTD. ON FUNCTIONAL DISSIMILARITIES AMONG OTHERS IN THE FOLLOWING CASES : - 1. WILLIS PROCESSING SERVICES (INDIA) PRIVATE L IMITED - ITA NO 2152/MUM/2014 [AY 2009 - 10] 2. GOLDMAN SACHS SERVICES (P.) LTD. - ITA NO. 1315(MUM.) 2014 [AY 2009 - 10] 3. SWISS RE - SERVICES INDIA (P.) LTD. - ITA NO. 1465 & 1493/MUM/2014 [AY 2009 - 10] 4 . 7 . THE LD. AR HAD FURNISHED A CHART ON A VERY CONSERVAT IVE BASIS BY EXCLUDING M/S. EXCEL INFOWAYS LTD.; BY INCLUDING ACCENTIA TECHNOLOGIES PVT. LTD. WHICH WAS ACTUALLY EXCLUDED BY THE LD. TPO WHILE GIVING EFFECT TO THE ORDER OF THE LD. DRP AND BY EXCLUDING LOSS MAKING COMPARABLE [TRITON CORP LTD] WHICH WAS SOU GHT TO BE INCLUDED BY THE LD. DR P AND STATED THAT THE ASSESSEE WOULD BE THROUGH IF M/S. EXCEL INFOWAYS LTD. ALONE HAD BEEN EXCLUDED FROM THE LIST OF COMPARABLES. WE FIND LOT OF FORCE IN THE SAID ARGUMENT OF ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 14 THE LD. AR AND CHART PLACED BY HIM DOES NOT REQUI RE ANY VERIFICATION AS THE SAME HAS BEEN PREPARED ON A CONSERVATIVE MANNER BY HIM AND HE HAS ALSO EXPLAINED THE COMPUTATION OF COMPARABLE MARGIN THEREON BEFORE US AT THE TIME OF HEARING WHICH HAVE BEEN VERIFIED BY US. FOR THE SAKE OF CONVENIENCE , THE SAID CH ART IS REPRODUCED BELOW: - SR NO NAME OF THE COMPANY COMPARABLE SET AS PER TP ORDER COMPARABLE SET POST DRP DIRECTIONS SCENARIO - DEPARTMENT APPEAL IS DISMISSED ONLY ON EXCEL INFOWAYS ASSESSEE'S COMPARABLES 1 BNR UDYOG LTD (SEG) 40. 10% 40.10% 40.10% 2 CAMEO CORPORATE SERVICES LTD 14.42% 14.42% 14.42% 3 COSMIC GLOBAL LTD 40.68% 40.61% 40.61% 4 OPTIMUS GLOBAL SERVICES - 3.52% - 3.85% - 3.52% 5 PROXIMUS KNOWLEDGE & TECHNOLOGY SERVICES PVT LTD 28.80% 28.80% 6 S PARSH BPO SERVICES LTD 3.98% 3.98% 3.98% 7 TRITON CORP LTD - 22.17% ADDITIONAL COMPARABLES INTRODUCED BY THE TPO 8 AOK IN HOUSE BPO SERVICES LTD 12.48% 12.48% 12.48% 9 AXA BUSINESS SERVICES PVT LTD 14.40% 14.40% 14.40% 10 AC CENTIA TECHNOLOGIES LTD 43.44% 43.44% ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 15 11 ADITYA BIRLA MINACS WORLDWIDE 23.88% 23.88% 23.88% 12 CORAL HUB (VISHAL INFORMATION TECHNOLOGIES LTD) 36.90% 36.93% 36.93% 13 CROSSDOMAIN SOLUTIONS LTD 29.40% 29.40% 14 DATAMATICS FINANCIAL SERVICES LTD 3.07% 3.07% 3.07% 15 ECLERX SERVICES LTD 46.92% 46.98% 46.98% 16 EXCEL INFOWAYS LTD 243.69% 17 FIRSTSOURCE SOLUTIONS LTD 6.58% 6.58% 6.58% 18 HDO TECHNOLOGIES LTD 13.94% 13.94% 13.94% 19 INFORMED TECHNOLOGIES L TD 23.13% 23.13% 23.13% 20 KARVY DATA MANAGEMENT SERVICES LTD 4.97% 4.97% 4.97% 21 MAPLE ESOLUTIONS LTD 4.90% 4.90% 4.90% 22 MOLD TEK TECHNOLOGIES LTD 60.92% 60.92% 23 MPHASIS FINSOURCE LTD 20.56% 20.56% 20.56% 24 NUCLEUS CIS AND ITES LTD 18.78% 18.78% 1 8.78% 25 ONE TWO THREE GREETINGS INDIA PVT LTD 1 .77% 1 .77% 1 .77% 26 SUNDARAM BUSINESS SERVICES LTD 2.45% 2.45% 2.45% 27 SUREVIN INTERNET 3.14% 3.14% 3.14% ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 16 SERVICES LTD ARITHMETIC MEAN 28. 45% 14.15% 19.84% ZPL'S MARGIN 14.63% 14.63% 14.63% UPPER RANGE OF 5% 20.36% 20.36% 20.36% WHETHER AT ALP NOT ALP ALP ALP 4.8. IN VIEW OF THE ABOVE OBSERVATIONS AND BY RESPECTFULLY FOLLOWING THE VARIOUS JUDICIAL PRECEDENT S RELIED UPON HEREINABOVE, WE HOLD THAT M/S. EXCEL INFOWAYS LTD. IS FUNCTIONALLY NOT COMPARABLE WITH THAT OF THE ASSESSEE COMPANY. 4.9. APART FROM THIS, WE FIND THAT M/S. EXCEL INFOWAYS LTD. HAD EARNED SUPER NORMAL PROFIT OF 243.69% ON WHICH GROUND ALSO , THIS COMPARABLE DESERVES TO BE EXCLUDED FROM THE LIST OF COMPARABLES WITH THAT OF THE ASSESSEE COMPANY. 4.10. IN VIEW OF THE AFORESAID OBSERVATIONS, THE GROUND NO.1 OF REVENUE APPEAL IN ITA NO.1623/MUM/2014 IS DISMISSED AND GROUND NOS.1 - 18 OF CROSS OBJECT IONS OF THE ASSESSEE IN CO NO.222/MUM/2014 FOR A.Y.2009 - 10 ARE ALLOWED. ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 17 5 . WE FIND THAT THE ASSESSEE HAS ALSO FILED THE ADDITIONAL CROSS OBJECTION WITH REGARD TO DEPARTMENT NOT COMPL YING WITH STATUTORY PROVISION OF FILING FEES. THIS WAS STATED TO BE NOT P RESSED AT THE TIME OF HEARING AND ACCORDINGLY, THE SAME IS DISMISSED AS NOT PRESSED. 6 . THE GROUND NO.2 RAISED BY THE REVENUE FOR A.Y.2009 - 10 WITH REGARD TO DELETION OF DISALLOWANCE OF INTEREST PAID ON DELAYED PAYMENT OF TDS OF RS.6,82,464 BY THE LD. DRP. 6.1 . WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT THERE IS NO DISPUTE THAT ASSESSEE HAD INDEED REMITTED THE TDS BELATEDLY FOR WHICH IT HAD PAID SOME INTEREST. ACCORDING TO THE LD. AR , SAID INTEREST IS ONLY COMPENSATORY IN NATURE AND ACCORDINGLY ALLOWABLE AS DEDUCTION. IN SUPPORT OF THIS, THE LD. AR PLACED RELIANCE ON THE THIRD MEMBER DECISION OF CHENNAI TRIBUNAL IN THE CASE OF MASCON GLOBAL LTD. VS. ACIT REPORTED IN 37 SOT 202 (CHENNAI)(TM) DATED 26/08/2009 WHEREIN IT WAS HELD AS UNDER: - 11 . SO FAR AS T HE MAIN ISSUE IS CONCERNED, THAT IS REGARDING THE A L LOWABILITY OF THE INTEREST, I AM UNA BLE TO AGREE WITH THE LD. JUDICIAL MEMBER THAT THE ASSESSEE'S CLAIM SHOULD BE DISMISSED. AS ALREADY NOTED BY ME, THE CORRECT BR EAK UP OF THE INTEREST REQUIRES TO BE CON SIDERED IN PROPER PERSPECTIVE. FURTHER, AGAIN AS ALREADY NOTED BY ME, THE ID. JUDICIAL MEMBER HAS PROCEEDED ON THE ASSUMPTION THAT THE TAXES PAID TO THE US GOVERNMENT BY THE ASSESSEE REPRESENTED TAXES ON THE ASSESSEE'S INCOME EARNED IN AMERICA. THIS IS, W ITH RESPECT TO AN ERRONEOUS ASSUMPTION THAT HAS PERMEATED THROUGH THE ENTIRE DECISION OF THE ID. JUDICIAL MEMBER AS ALSO THE ORDER OF THE CIT. THE AUTHORITIES ON WHICH THE ID. JUDICIAL MEMBER HAS RELIED ARE ALSO RELEVANT ONLY IF THE TAXES PAID ARE THE TAXE S ON THE INCOME EARNED BY THE ASSESSEE IN FOREIGN COUNTRIES. THE FACTUAL POSITION, HOWEVER, IS THAT THE TAXES ARE WITHHOLDING TAXES WHICH THE ASSESSEE HAD DEDUCTED FROM THE PAYMENTS MADE TO ITS EMPLOYEES IN USA. THE ASSESSEE MERELY DEDUCTED THE TAXES FROM ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 18 SUCH PAYMENTS AND DEPOSITED THEM WITH THE US GOVERNMENT BUT AFTER A DELAY. THE INTEREST IS PAYABLE FOR SUCH DELAY. THE QUESTI ON IS WHETHER TH E INTEREST IS ALLOWABLE AS A DEDUCTION. IN THE LIGHT OF THIS FACTUAL POSITION, THE DECISION OF THE ID. JUDICIAL ME MBER THAT THE TAXES PAID BY THE ASSESSEE ON ITS FOREIGN INCOME ARE NOT ALLOWABLE AS A DEDUCTION AND THE INTEREST, BEING AN ADJUNCT OF THE TAX, CANNOT ALSO ALLOWED AS A DEDUCTION CANNOT BE UPHELD. 6.2. WE FIND THAT THE LD. AO DID NOT ADDUCE ANY REASON AS TO ON WHAT ACCOUNT THIS PAYMENT MADE BY THE ASSESSEE IS TO BE TREATED AS PENAL IN NATURE OR UNDER WHAT PROVISIONS OF THE ACT IT HAS TO BE CONSTRUED AS PENAL IN NATURE. THE ENTIRE READING OF THE ASSESSMENT ORDER (BOTH DRAFT AS WELL AS THE FINAL ASSESSMEN T ORDER) IS SILENT IN THIS REGARD. WE FIND THAT THE LD. AO MERELY STATES THAT SUCH INTEREST PAYMENT O N DELAYED PAYMENT OF T D S IS INADMISSIBLE UNDER STATUTE AND DISALLOWED ACCORDINGLY. THIS GOES TO PROVE THAT IT WAS NEVER THE CASE OF THE LD. AO TO HAVE EVEN REMOTELY CONTEMPLATED / CATEGORIZING TH E PAYMENT OF INTEREST TO BE PENA L IN NATURE. HENCE, THERE IS NO NEED IN THE INSTANT CASE TO LOOK INTO THE FACT AS TO WHETHER THE SAID PAYMENT OF INTEREST OF DELAYED PAYMENT OF T D S COULD BE PENAL IN NATURE SO AS TO BE DISALLOWED IN THE LIGHT OF THE PROVISIONS OF EXPLANATION TO SECTION 37(1) OF THE ACT. ACCORDINGLY, THE RELIANCE PLACED BY THE LD. DR ON CERTAIN DECISIONS VIZ. 88 TAXMAN 184 AND 230 ITR 733 NEED NOT TO BE ADJUDICATED AT ALL. WE FIND THAT THE MAIN CRUX OF T HE ARGUMENT OF THE LD. DR WAS THAT THERE IS NO PENALTY PROVISION PROVIDED IN THE STATEMENT FOR DELAYED PAYMENT OF T D S. IN THIS REGARD, THE LD. AR RIGHTLY CLARIFIED BEFORE US THAT THE STATUTE INDEED PROVIDES FOR LEVY OF PENALTY U/S.271 C OF THE ACT FOR SUCH VIOLATION. HENCE, THE ARGUMENT OF THE ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 19 LD. DR DESERVES TO BE DISMISSED AND ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. DRP GRANTING RELIEF TO THE ASSESSEE IN THIS REGARD. ACCORDINGLY, THE GROUND NO.2 RAISED BY THE REVENUE FOR A.Y.2009 - 10 IS DISMISSED. 7 . THE GROUND NO.3 RAISED BY THE REVENUE IS CHALLENGING THE ACTION OF THE LD. DRP IN ALLOWING DEDUCTION U/S.10A OF THE ACT IN RESPECT OF THE FOLLOWING RECEIPTS OF THE ASSESSEE: - (I) FOREIGN EXCHANGE GAIN EARNED AS A RESULT OF HEDGING CO NTRACTS - RS.36,54,431/ - (II) OCTROI REFUND - RS.21,25,585/ - (III) INCOME RECEIVED ON SALE OF OLD PAPERS AND CARTONS - RS. 49,050/ - 7 .1. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT THE LD. AO HAD CHALLENGED THE DEDUCTION U/S.10A OF THE ACT IN RESPECT OF THE AFORESAID THREE ITEMS ON THE GROUND THAT THEY DO NOT FALL UNDER THE AMBIT OF THE EXPRESSION PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS. IN OTHER WORDS , IN THE OPINION OF THE LD. AO , THEY ARE NOT LINKED OR CONNECTED WI TH THE EXPORT ACTIVITY OF THE ASSESSEE AND HENCE, THEY ARE NOT ELIGIBLE FOR DEDUCTION U/S.10A OF THE ACT. WE ARE UNABLE TO PERSUADE OURSELVES TO APPRECIATE THE CONTENTIONS OF THE LD. AO IN VIEW OF THE SPECIFIC PROVISIONS CONTAINED IN THE STATUTE U/S.10A(4) OF THE ACT WHICH IS AS UNDER: - ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 20 (4) FOR THE PURPOSES OF SUB - SECTIONS (1) AND (1A), THE PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS OF THE UNDERTAKING, THE SAME PROPOR TION AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING . 7 .2. IT IS NOT IN DISPUTE THAT THE FOREIGN EXCHANGE GAIN EARNED AS A RESULT OF HEDG ING CONTRA CTS RS.36,54,431/ - , OCTROI REFUND - RS.21,25,585/ - AND INCOME RECEIVED ON SALE OF OLD PAPERS AND CARTONS - RS.49,050/ - WERE EARNED BY THE ASSESSEE FROM THIS ELIGIBLE UNDERTAKING ELIGIBLE FOR DEDUCTION U/S.10A OF THE ACT. INFACT THE LD. AR ALSO SUBMITTED DU RING THE COURSE OF HEARING THAT THIS IS THE ONLY UNDERTAKING AVAILABLE WITH THE ASSESSEE. HENCE, AS PER THE SPECIFIC PROVISIONS OF SECTION 10A(4) OF THE ACT IS REPRODUCED SUPRA, THE ENTIRE PROFITS OF THE BUSINESS OF THE ELIGIBLE UNDERTAKING SHALL BE ELIGIB LE FOR DEDUCTION IN THE PROPORTION OF EXPORT TURN OVER TO TOTAL TURNOVER. WE FIND THAT THE LD. DRP HAD DULY CONSIDERED THIS ASPECT WHILE GRANTING RELIEF TO THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION, DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE G ROUND NO.3 RAISED BY THE REVENUE FOR A.Y.2009 - 10 IS DISMISSED. 8 . THE GROUND NO.4 RAISED BY THE REVENUE FOR A.Y.2009 - 10 IS CHALLENGING THE ACTION OF THE LD. DRP IN DELETING THE ADDITION OF RS.12,000/ - BEING INTEREST RECEIVED FROM HDFC BANK ON THE BASIS OF INFORMATION RECEIVED IN FORM 26AS. ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 21 8 .1. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT THE LD. AO HAD MADE AN ADDITION OF RS.12,000/ - TOWARDS INTEREST INCOME FROM HDFC BANK ALLEGEDLY EARNED BY THE ASSESSEE ON THE GROUND THAT THE SAME WAS REFLECTED IN FORM 26AS OF THE ASSESSEE AND THE SAME WAS NOT DISCLOSED BY THE ASSESSEE IN ITS RETURN OF INCOME. WE FIND THAT THE ASSESSEE HAD PLEADED COMPLETE IGNORANCE OF THE SAME BEFORE THE LD. AO AND HAD ALSO PLACED BANK STATEMENTS TO DEMONSTRATE THAT IT HAD NEVER MADE A NY DEPOSITS WITH HDFC BANK AND HAD NOT EARNED ANY INTEREST THEREON. HOWEVER, THE LD. AO DID NOT APPRECIATE THE CONTENTION AND PROCEEDED TO MAKE THE ADDITION. WE FIND THAT THE LD. DRP HAD GRANTED RELIEF TO THE ASSESSEE BY ACCEPTING ITS CONTENTIONS AND HAD A LSO OBSERVED THAT IT WOULD BE IMPOSSIBLE FOR THE ASSESSEE TO PROVE THAT IT HAD NOT RECEIVED ANY INTEREST FROM HDFC BANK. WE ARE INCLINED TO ACCEPT TO THESE OBSERVATIONS OF THE LD. DRP IN AS MUCH AS THE ASSESSEE CANNOT BE DIRECTED TO PROVE THE NEGATIVE. IN THE INSTANT CASE, THE ASSESSEE HAD CATEGORICALLY STATED BEFORE THE LD. AO ITSELF THAT IT HAD NEVER EARNED ANY INTEREST INCOME FROM HDFC BANK AND HAD ALSO ADDUCED EVIDENCES IN THE FORM OF ITS BANK STATEMENTS , BOOKS OF ACCOUNTS, BALANCE SHEET TO DEMONSTRATE THE SAME. THIS HAS NOT BEEN REBUTTED BY THE LD. AO. THE LD. AO HAD ALSO NOT MADE ANY VERIFICATION FROM HDFC BANK TO UNDERSTAND THE REAL FACTS. 8 .2 ON THE CONTRARY, WE FIND THE ASSESSEE HAD TAKEN EFFORTS BY ADDRESSING THE LETTER TO HDFC BANK ASKING THEM TO REVISE THEIR ANNUAL INFORMATION RETURN SUBMITTED TO THE INCOME TAX DEPARTMENT BY REMOVING ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 22 THE ALLEGED INTEREST TRANSACTIONS TO THE TUNE OF RS.12,000/ - WITH CORRESPONDING TDS OF RS.1236/ - IN THE NAME OF ASSESSEE . THE ASSESSEE HAD ADDUCED EVIDENCES IN THIS R EGARD BEFORE THE LOWER AUTHORITIES AND HENCE, WE FIND THAT THE LD. DRP WAS RIGHT IN DELETING THE ADDITION MADE IN THE SUM OF RS.12,000/ - TOWARDS ALLEGED INTEREST FROM HDFC BANK. ACCORDINGLY, THE GROUND NO.4 RAISED BY THE REVENUE FOR A.Y.2009 - 10 IS DISMISSE D. 9 . THE GROUND NOS.5& 6 RAISED BY THE REVENUE FOR A.Y.2009 - 10 ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 10 . IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO.1623/MUM/2014 FOR A.Y.2009 - 10 IS DISMISSED AND CROSS OBJECTIONS NO.22 2/MUM/2014 BY THE ASSESSEE FOR A.Y.2009 - 10 IS PARTLY ALLOWED. ITA NO.1802/MUM/2015 (A.Y.2010 - 11) REVENUE APPEAL 11 . THE GROUND NO.1 RAISED BY THE REVENUE OF A.Y.2010 - 11 IS EXACTLY SIMILAR TO GROUND NO.3 RAISED BY IT IN A.Y.2009 - 10. THE DECISION RENDERED F OR A.Y.2009 - 10 WOULD APPLY HERE WITH EQUAL FORCE FOR A.Y.2010 - 11 ALSO EXCEPT WITH VARIANCE IN FIGURES. ACCORDINGLY, GROUND NO.1 RAISED BY THE REVENUE FOR A.Y.2010 - 11 IS DISMISSED. ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 23 12 . THE GROUND NO.2 RAISED BY THE REVENUE FOR A.Y.2010 - 11 IS EXACTLY SIMIL AR TO GROUND NO.4 RAISED BY THE REVENUE FOR A.Y.2009 - 10 AND THE DECISION RENDERED THEREON WOULD APPLY WITH EQUAL FORCE FOR A.Y.2010 - 11. ACCORDINGLY, THE GROUND NO.2 RAISED BY THE REVENUE FOR A.Y.2010 - 11 IS DISMISSED. 13 . THE GROUND NOS. 3 & 4 RAISED BY THE REVENUE ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. CO NO.164/MUM/2015 ( BY ASSESSEE) (A.Y.2010 - 11) 1 4 . THE GROUND NOS. 1 - 3 RAISED BY THE ASSESSEE IN ITS CROSS OBJECTIONS ARE SUPPORTIVE OF THE ORDER OF THE LD. DRP. 15. THE G ROUND NO. 4 RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION IS WITH REGARD TO THE ACTION OF THE LD.DRP NOT GRANTING DEDUCTION U/S.10A OF THE ACT IN RESPECT OF DISALLOWANCE MADE U/S.40(A)(IA) OF THE ACT AMOUNTING TO RS.20,94,076/ - AND ADDITION ON ACCOUNT OF A DVANCES WRITTEN OFF AMOUNTING TO RS.16,41,800/ - . 1 5 .1 . WE HAVE HEARD RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT THE DISALLOWANCE U/S.40(A)(IA) OF THE ACT IN THE SUM OF RS.20,94,076/ - AND ADDITION ON ACCOUNT OF ADVANCES WRITTEN OFF IN THE SUM OF RS.16,41 ,800/ - PERTAIN TO THE ELIGIBLE UNDERTAKING OF THE ASSESSEE. ONCE ANY DISALLOWANCE IS MADE IN RESPECT OF ELIGIBLE UNDERTAKING OF THE ASSESSEE , IT WOULD ONLY ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 24 GO TO INCREASE THE PROFITS OF SUCH ELIGIBLE UNDERTAKING, CONSEQUENTLY IT WOULD BE ELIGIBLE FOR ENHAN CED DEDUCTION U/S.10A OF THE ACT THEREBY MAKING THE ENTIRE EXERCISE REVENUE NEUTRAL. WE FIND THAT THE CENTRAL BOARD OF DIRECT TAXES IN ITS CIRCULAR NO.37/2016 DATED 02/11/2016 HAD DULY CLARIFIED THE SAME, WHICH IS NOT REITERATED HEREIN FOR THE SAME OF BREV ITY. ACCORDINGLY, WE HOLD THAT ASSESSEE IS ENTITLED FOR ENHANCED DEDUCTION U/S.10A OF THE ACT IN THE SUMS OF RS.20,94,076/ - AND RS.16,41,800/ - IN RESPECT OF AFORESAID TWO ADDITIONS / DISALLOWANCES. ACCORDINGLY, THE GROUND NO.4 RAISED BY THE ASSESSEE IN ITS CROSS OBJECTIONS IS ALLOWED. 1 6 . THE GROUND NOS. 5 & 6 RAISED BY THE ASSESSEE IN ITS CROSS OBJECTIONS ARE WITH REGARD TO SHORT GRANT OF CREDIT FOR TAX DEDUCTED AT SOURCE AND FOR ADVANCE TAX. WE DIRECT THE LD. AO TO MAKE VERIFICATION OF THE SAME AND GRAN T CREDIT AS PER LAW TO THE ASSESSEE. 1 7 . THE GROUND NOS. 7 & 8 RAISED BY THE ASSESSEE ARE WITH REGARD TO CHARGING OF INTEREST U/S.234B & 234C OF THE ACT WHICH ARE CONSEQUENTIAL IN NATURE. 1 8 . IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO.1802/MUM/2015 F OR A.Y.2010 - 11 IS DISMISSED AND CROSS OBJECTION IN CO NO.164/MUM/2015 FOR A.Y.2010 - 11 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 25 ITA NO. 795/MUM/2016 (REVENUE APPEAL ) (A.Y.2011 - 12) 1 9 . THE ONLY GROUND RAISED BY THE REVENUE FOR A.Y.2011 - 12 IS SIMILAR TO GROUND N O.1 RAISED BY THE REVENUE FOR A.Y.2010 - 11 AND THE DECISION RENDERED THEREON WOULD APPLY WITH EQUAL FORCE FOR A.Y.2011 - 12 ALSO. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE FOR A.Y.2011 - 12 ARE DISMISSED. CO NO.86/MUM/2016 (A.Y.2011 - 12) (BY ASSESSEE) 20 . THE GROUND NOS.1 - 3 RAISED BY THE ASSESSEE IN ITS CROSS OBJECTIONS ARE ONLY SUPPORTIVE BY THE ORDER OF THE LD. DRP. 2 1 . THE GROUND NO.4 RAISED BY THE ASSESSEE IN ITS CROSS OBJECTIONS IS CHALLENGING THE ACTION OF THE LD. AO IN CONFIRMING THE TRANSFER PRIC ING ADJUSTMENT AMOUNTING TO RS.9,64,24,442/ - WITHOUT COMPLYING WITH THE DIRECTIONS ISSUED BY THE LD. DRP. 2 1 .1 . WE HAVE HEARD RIVAL SUBMISSIONS. IN THIS REGARD, THE FOLLOWING LIST OF DATES AND EVENTS REQUIRE CONSIDERATION : - DATE EVENT 20/02/2015 DATE OF PASSING OF DRAFT ASSESSMENT ORDER BY THE LD. AO ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 26 27/11/2015 DATE OF DIRECTIONS ISSUED BY THE LD. DRP WHEREIN THE LD. DRP HAD DIRECTED THE LD. TPO TO INCLUDE ONE OF THE COMPARABLES E - CLERX SERVICES LTD 31/12/2015 DATE OF PASSING OF FINAL ASSESSMENT ORDE R BY THE LD. AO WITHOUT WAITING FOR THE ORDER OF THE LD. TPO PURSUANT TO DIRECTIONS OF THE LD. DRP. 05/01/2016 DATE OF ORDER PASSED BY THE LD. TPO PURSUANT TO DIRECTIONS OF THE LD. DRP 2 1 .2 . THE ABOVE LIST OF DATES AND EVENTS CLEARLY DEMONSTRATE THAT THE LD. AO HAS PASSED THE FINAL ASSESSMENT ORDER ON 31/12/2015 WITHOUT WAITING FOR THE GIVING EFFECT ORDER TO BE PASSED BY THE LD. TPO PURSUANT TO THE DIRECTIONS OF LD. DRP. WE HAVE GONE THROUGH THE ORDER OF THE LD. TPO DATED 05/01/ 2 016 PASSED PURSUANT TO DIRECTIONS OF LD. DRP , WHEREIN THE LD. TPO HAD INDEED EXCLUDED E - CLERX SERVICES LTD., AND HAD ARRIVED AT THE REVISED MARGIN OF THE COMPARABLES AND HAD ALSO CATEGORICALLY HELD THAT NO A DJUSTMENT TO ARMS LENGTH PRICE IS WARRANTED IN THE CASE OF THE ASSESSEE . SINCE THE AO HAD PASSED THE ORDER PRIOR TO PASSING OF THE GIVING EFFECT ORDER BY THE LD. TPO, WE DIRECT THE LD. AO TO RECTIFY THE ORDER AND DELETE THE ADDITION MADE TOWARDS ADJUSTMENT TO ARMS LENGTH PRICE IN THE LIGHT OF THE TPOS ORDER DATED 05/01/2016 . ACCORDINGLY, THE GROUND NO.4 RAISED BY THE ASSESSEE IN ITS CROSS OBJECTIONS ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 27 2 2 . THE GROUND NO.5 RAISED BY THE ASSESSEE IS WITH REGARD TO SHORT CREDIT OF ADVANCE TAX, FOR WHICH WE DIRECT THE LD. AO TO MAKE THE NECESS ARY VERIFICATION OF EVIDENCES AND GRANT CREDIT AS PER LAW. ACCORDINGLY, GROUND NO.5 RAISED BY THE ASSESSEE IN CROSS OBJECTION IS ALLOWED FOR STATISTICAL PURPOSES. 2 3 . THE GROUND NOS. 6 & 7 ARE CONSEQUENTIAL IN NATURE. 2 4 . THE GROUND NO.8 IS WITH REGARD TO INITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT WHICH WOULD BE PREMATURE TO BE ADJUDICATED AT THIS STAGE. 2 5 . IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO.795/MUM/2016 FOR A.Y.2011 - 12 IS DISMISSED AND CROSS OBJECTIONS OF THE ASSESSEE IN CO NO.85/MUM/2016 IS ALLOWED FOR STATISTICAL PURPOSES. 2 6 . TO SUM UP: - SR. NO. ITA NO. AY APPEAL BY RESULT 1. ITA NO.1802/MUM/2015 2010 - 11 REVENUE DISMISSED 2. CO NO.164/MUM/2015 2010 - 11 ASSESSEE ALLOWED FOR STATISTICAL PURPOSES 3. ITA NO.795/MUM/2016 2011 - 12 REVENUE DISMISSED 4. CO NO.85/MUM/2016 2011 - 12 ASSESSEE ALLOWED ITA NOS.1802/MUM/2015 AND OTHER APPEALS M/S. ZENTA PVT. LTD ., 28 FOR STATISTICAL PURPOSES 5. ITA NO.1623/MUM/2014 2009 - 10 REVENUE DISMISSED 6. CO NO.222/MUM/2014 2009 - 10 ASSESSEE ALLOWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED IN THE OPEN CO URT ON THIS 04 / 09 /201 9 SD/ - ( RAVISH SOOD ) SD/ - ( M.BALAGANESH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 04 / 09 /201 9 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//