Satyam Venture Engineering Services Private Limited, Hyderabad V. DCIT, Circle 3(1), Hyderabad

ITA 197/HYD/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6315 (ITAT-HYDERABAD)
• Duration Of Justice: 5 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 16-03-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 07-02-2011
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: C S SUBRAMANYAM; V SIVA KUMAR A RS
• Keywords: Transfer pricing; Business expenditure; Services rendered outside India; Reasonable cause; Condonation of delay
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. AY. APPELLANT RESPONDENT 1590 /HYD/ 20 10 2004 - 05 SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED, SECUNDERABAD [PAN: AAFCS3287D] DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1), HYDERABAD 217 /HYD/2009 2004 - 05 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1), HYDERABAD SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED, SECUNDERABAD [PAN: AAFCS3287D] 197/HYD/2011 2005 - 06 SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED, SECUNDERABAD [PAN: AAFCS3287D] ADDL. COMMISSIONER OF INCOME TAX, RANGE-3, HYDERABAD 354/HYD/2011 2006 - 07 DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-9, HYDERABAD 1905/HYD/2011 2007 - 08 1138/HYD/2013 2008 - 09 FOR ASSESSEE : SHRI C.S. SUBRAMANYAM & SHRI V. SIVA KUMAR, ARS FOR REVENUE : SHRI V. SRINIVAS, DR DATE OF HEARING : 04-08-2016 DATE OF PRONOUNCEMENT : 26-08-2016 O R D E R PER BENCH: THESE ARE GROUP OF APPEALS MAINLY BY ASSESSEE AND O NE CROSS- APPEAL IN AY. 2004-05 BY THE REVENUE AGAINST THE ORD ERS OF THE SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 2 -: COMMISSIONER OF INCOME TAX(APPEALS) [CIT(A)] / DISP UTE RESOLUTION PANEL [DRP] IN RESPECTIVE ASSESSMENT YEARS. SINCE CO MMON ISSUES ARE INVOLVED IN ALL THESE APPEALS, THESE ARE HEARD TO GETHER AND DECIDED BY THIS COMMON ORDER. CONDONATION OF DELAY IN ITA NO. 1590/HYD/2010 : 2. THIS APPEAL BY ASSESSEE WAS FILED WITH A DELAY O F 667 DAYS. ASSESSEE HAS STATED THAT HE HAS RECEIVED THE ORDE R OF THE CIT(A) ON 18-12-2008 AND THAT APPEAL WAS TO HAVE BEE N FILED ON OR BEFORE 16-02-2009. HOWEVER, THE APPEAL WAS FILED ON 14-12-2010 WITH A DELAY OF 667 DAYS. ASSESSEE FILED A CONDONA TION PETITION BY STATING AS UNDER: 3.1 THE APPELLATE ORDER PASSED BY THE C.I.T(APPEAL S) WAS RECEIVED BY THE ASSESSEE ON 18-11-2008. APPEAL TO THE HON'BL E ITAT WAS TO HAVE BEEN FILED ON OR BEFORE 16-02-2009. AS ALREADY SUBM ITTED, THE ASSESSEE COMPANY IS A JOINT VENTURE BETWEEN SATYAM COMPUTER SERVICES LTD., [SCSL] AND VENTURE GLOBAL ENGINEERING LCC, USA. IN JANUARY, 2009, A MAJOR EVENT HAVING UNPRECEDENTED REPERCUSSIONS ON T HE ASSESSEE'S AFFAIRS OCCURRED IN THAT THE THEN PROMOTER AND CHAIRMAN OF SCSL, SRI B.RAMALINGA RAJU, SUBMITTED A LETTER TO THE BOARD O F DIRECTORS, THE SECURITIES AND EXCHANGE BOARD OF INDIA, AND THE STO CK EXCHANGES ACKNOWLEDGING MANIPULATION IN ACCOUNTS OF SCSL RUNN ING INTO SEVERAL HUNDREDS OF CRORES. CONSIDERING THE CIRCUMSTANCES I N THE CASE OF SCSL, AND ON A REQUEST MADE BY IT, THE COMPANY LAW BOARD EXTENDED TIME LIMIT FOR FILING VARIOUS RETURNS/DOCUMENTS UPTO 31ST DECE MBER, 2009 AND LATER AGAIN TILL 30-062010 IN THE CASE OF SCSL. 3.2 HAVING REGARD TO THE UPHEAVAL IN THE SAT YAM GR OUP THERE WAS A MAJOR DISLOCATION OF WORK IN THE ASSESSEE COMPANY T HROWING ACCOUNTING WORK OUT OF GEAR. SINCE ALL THE TRANSACTIONS BETWEE N THE ASSESSEE AND SCSL HAD TO BE ACCOUNTED AND ALSO CLOSING BALANCES HAD TO BE RECONCILED, THE ASSESSEE COMPANY FOUND THAT IT WOULD BE DIFFICU LT TO FINALISE ITS ACCOUNTS IN TIME AND ACCORDINGLY PETITIONED TO THE CENTRAL BOARD OF DIRECT TAXES, NEW DELHI [CBOT] SEEKING TIME FOR FINALISATI ON OF ACCOUNTS SO THAT GENUINE HARDSHIP AND FINANCIAL LOSS ARE NOT CAUSED TO ITS INVESTORS. SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 3 -: 3.3.THE CBDT, CONSIDERING THE FACT THAT INVESTIGATI ON WAS BEING CARDED OUT BY THE CENTRAL BUREAU OF INVESTIGATION, SERIOUS FRAUD INVESTIGATION OFFICE, ENFORCEMENT DIRECTORATE AND T HE INCOME TAX DEPARTMENT AND ALSO CONSIDERING THE FACT THAT THE M ANAGEMENT OF SCSL WAS TAKEN OVER BY M/S.TECH MAHINDRA LTD., AND ALSO CONSIDERING THAT THE COMPANY LAW BOARD HAD ALLOWED TIME TO SCSL TO FILE RETURN AND DOCUMENTS UNDER DIFFERENT STATUTES TILL 30-06-2010/ CONDONED DELAY IN PERFORMING VARIOUS STATUTORY OBLIGATIONS LIKE OBTAI NING TAX AUDIT REPORTS, OTHER REPORTS, CARRY FORWARD LOSSES ETC. TILL 31-03 -2010. A COPY OF THE ORDER DATED 25-01-2010 PASSED BY THE CBDT, NEW DELHI UNDE R SEC.119(2) OF THE INCOME TAX ACT, 161 IS SUBMITTED HEREWITH. 3.4 IN VIEW OF CERTAIN INTERNAL ISSUES AND OTHER DI STURBANCES PURSUANT TO THE DEVELOPMENTS IN SAT YAM COMPUTER SE RVICES LIMITED, ONE OF THE SHAREHOLDER IN THE APPELLANT COMPANY AS NARR ATED ABOVE, AND IN VIEW OF THE CHANGE IN THE PERSONNEL WORKING IN THE FINANCE DEPARTMENT THE ORDER OF THE C.I.T(APPEALS) WAS MISPLACED AND TRACE D ONLY IN SECOND WEEK OF DECEMBER, 2010 WHEN THE APPELLANT COMPANY CONDUC TED A COMPREHENSIVE REVIEW. AS SUCH THE APPELLANT WAS NOT IN A POSITION TO FILE THE APPEAL IN TIME AND THERE IS A DELAY OF 667 DAYS FOR WHICH THE APPELLANT PRAYS FOR CONDONATION. 3.5 THE ASSESSEE SUBMITS THAT THE DELAY IN FILING T HE APPEAL WAS ON ACCOUNT OF EXTRAORDINARY CIRCUMSTANCES AS NARRATED ABOVE WHICH CAUSED COMPLETE DISLOCATION OF WORK IN THE ASSESSEE COMPAN Y PARTICULARLY IN THE FINANCE AND ACCOUNTS WING. 3. LD. COUNSEL REITERATING THE ABOVE ALSO PLACED ON RECORD VARIOUS NOTICES RECEIVED FROM INVESTIGATION AGENCIES DURING THE PERIOD AND ALSO THE LIST OF DIRECTORS WHO HAVE BEEN AP POINTED AT VARIOUS TIMES. LD. COUNSEL ALSO SUBMITTED THAT RULES OF LIMITATION ARE NOT MEANT TO DESTROY THE RIGHTS OF THE PARTIES. THEY A RE MEANT TO SEE THAT THE PARTIES DO NOT RESORT TO DILATORY TACTICS TO S EEK REMEDY PROMPTLY. WHILE ADMITTING THAT CONDONATION OF DE LAY IS THE DISCRETION OF THE COURT, IT WAS SUBMITTED THAT LENGTH OF THE DELAY IS NOT THE MATTER BUT ACCEPTABILITY OF THE EXPLANATION IS THE ONLY CRITERIA. IT WAS SUBMITTED THAT DUE TO VARIOUS INVESTIGATION S BY VARIOUS AUTHORITIES, THE MATTERS OF ASSESSEE COULD NOT BE ATTENDED SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 4 -: TO. IT WAS SUBMITTED THAT THE CO-ORDINATE BENCH OF DELHI IN THE CASE OF FORAMER FRANCE VS. DCIT [2 ITR (TRIB) 773] (DEL) HAS ELABORATED THE PRINCIPLES RELYING ON VARIOUS SUPREME COURT JUDGMENTS AND FORMULATED CERTAIN PRINCIPLES REITERATING THEM. IT WAS SUBMITTED THAT THE DELAY MAY BE CONDONED AND THE APP EAL MAY BE ADMITTED TO RENDER SUBSTANTIAL JUSTICE TO ASSES SEE. 4. LD. DR HOWEVER, OBJECTED TO THE PETITION FILED BY ASSESSEE SEEKING CONDONATION OF THE DELAY. IT WAS SUB MITTED THAT THE EXPLANATION FURNISHED DOES NOT MAKE OUT A CASE FOR SUFFICIENT CAUSE, WHICH IS DISTINGUISHABLE FROM REASONABLE CAUSE. THE AVERMENTS OF DISLOCATION CAUSED BY THE ADMISSION OF IM PROPRIETY AND MALFEASANCE BY THE CHAIRMAN OF ITS PARENT COMPANY IS NO MORE THAN A PART OF THE FACTUAL BACKDROP, WITH NO DEMON STRABLE CASUAL NEXUS TO THE EVERYDAY HAPPENINGS AT THE ASSES SEE COMPANY MORE SO AS CONTINUING WITHOUT REMIT FOR THE ENTIRE DURA TION OF 667 DAYS. IT WAS SUBMITTED THAT THE ONGOING ENQUIRIES COMMEN CED MORE THAN A MONTH AFTER RECEIPT OF THE ORDER OF THE CIT( A) AND CANNOT BE SEEN AS DETAINING THE KEY PERSONNEL OF THE A SSESSEE COMPANY FOR THE ENTIRE LENGTH OF THE DELAY CAUSED. IT WAS FURTHER SUBMITTED THAT IN ADDITION TO THE EXISTENCE OF SUFFICIENT CAUSE FOR DELAY, THE ASSESSEE SHOULD BE ABLE TO DEMONSTRATE PRESENCE OF DUE DILIGENCE ALONG WITH THE ABSENCE OF NEGLIGENCE . RELIANCE WAS PLACED UPON THE FOLLOWING DECISIONS FOR THE ABOVE PROPOSITION S: A. JCIT, SPL RANGE 1 VS. TAFE LTD., [104 ITD 149, ITAT (CHENNAI) (TM); SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 5 -: B. AP HOUSING BOARD VS. DIT (EXEMPTIONS), ITA NO. 110/H /08 DT. 14.05.2010 ITAT A HYDERABAD; C. CIT VS. RAM MOHAN KABRA, [257 ITR 773] (P&H) AND THE REFERENCES CONTAINED THEREIN TO THE SUPREME COURT DECISI ON IN THE CASE OF MST KATJI [167 ITR 471] AND K. RAMACHA NDRAN VS. STATE OF KERALA (AIR 1998 SC 2276]; D. M.S. NULON INDIA LTD., VS. DCIT [219 ITR 736] (DEL); E. M/S. KARNATAKA FOREST DEVELOPMENT CORPORATION LTD., VS . ACIT, ITA NO. 266/BANG/08, DT. 23.10.2008; 5. LD. CIT DR REFERRED TO THE ORDER OF THE CO-ORDINAT E BENCH OF THE ITAT IN THE CASE OF KARNATAKA FOREST DEVE LOPMENT CORPORATION LTD., SUBMITTED THAT PARTIES MUST ACT BONAFID ELY, EXPEDITIOUSLY AND WITH DUE CARE. A CASUAL OR NEGLIGE NT LITIGANT WHO HAS ACTED WITH UTTER IRRESPONSIBILITY ATTITUDE CANNOT CLA IM THE CONDONATION OF DELAY IN LAW AND RIGHT HAS ACCRUED TO TH E OTHER SIDE. HE ALSO RELIED ON VARIOUS CASE LAW AND THE FA CT THAT THE DIRECTOR WAS TRAVELLING ABROAD AS MADE OUT BY THE AO DO INDICATE THAT THERE WAS NO CAUSE FOR CONDONATION OF DELAY. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUS ED THE DOCUMENTS AND CASE LAW PLACED ON RECORD. IT IS TRU E THAT SATYAM COMPUTER SERVICES LTD., IS ONE OF THE PROMOTERS OF THIS COMPANY AND THE CHAIRMAN CUM MANAGING DIRECTOR THEREIN HAS GIVEN A PUBLIC STATEMENT ABOUT A SERIOUS FRAUD THAT WAS COMMITTED THEREIN, WHICH LEAD TO VARIOUS INVESTIGATIONS. THIS CO MPANY IS ALSO AFFECTED BY THE SAID INVESTIGATIONS AND THERE IS REASON ABLE CAUSE IN SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 6 -: NOT ATTENDING TO THE FILING OF APPEAL IN TIME. IT IS NOTI CED THAT CBDT HAS PERMITTED THE SATYAM COMPANY TO FILE RETURNS B ELATEDLY AND EXCEPT THIS YEAR IN ALL OTHER YEARS, THE APPEALS W ERE FILED IN TIME. THERE IS ALSO GENERAL COMPLIANCE WITH THE SAID GROUP COMPANIES SUBSEQUENT TO THE INITIAL PERIOD. CONSIDERIN G THESE FACTS, WE ARE OF THE OPINION THAT THERE IS SUFFICIENT AN D REASONABLE CAUSE FOR NOT PREFERRING THE APPEAL IN TIME. BOTH THE L D. COUNSELS RELIED ON VARIOUS CASE LAW FOR AND AGAINST THE CONDO NATION. WHAT WE NOTICE IS THAT THE CASE LAW ARE RENDERED ON CERTAIN FACT CONDITIONS. HOWEVER, IT IS THE APPRECIATION OF THE FAC TS AND EXAMINING WHETHER THERE IS SUFFICIENT AND REASONABLE C AUSE IN PREFERRING THE APPEAL BELATEDLY WHICH CAN DECIDE THE ISSUE. AS SUBMITTED BY ASSESSEE, VARIOUS STATUTORY AUTHORITIES INV ESTIGATIONS HAVE LEAD TO DISLOCATION OF THE ADMINISTRATIVE WORK, CON SEQUENTLY, WE ARE SATISFIED THAT THERE IS REASONABLE AND SUFFICIEN T CAUSE IN NOT PREFERRING THE APPEAL IN TIME. ACCORDINGLY, THE DELAY IN FILING THE APPEAL IS CONDONED AND THE APPEAL IS MAINTAINED. 7. AS FAR AS ASSESSEES APPEALS ARE CONCERNED, THE ISSUE MAINLY IN ALL THE YEARS IS WITH REFERENCE TO DISALLOWA NCE OF COMMISSION PAID TO ONE OF THE PROMOTER VENTURE GLOBAL ENGINEERING SERVICES LLC (VENTURE). ASSESSEE-COMPAN Y, SVES WAS INCORPORATED ON 03-01-2000 AS A PRIVATE LIMITED COMPA NY WITH TWO COMPANIES AS PROMOTERS I.E., SATYAM COMPUTER SERVICES LTD., INDIA AND VENTURE (GROUP), USA. THESE TWO PROMOTERS HOLD S HARE CAPITAL IN ASSESSEE-COMPANY IN EQUAL PROPORTION AT 50 :50. AT THE RELEVANT POINT OF TIME, SATYAM (NOW MERGED WITH TECH M AHINDRA LTD.,) WAS A LEADING GLOBAL CONSULTING COMPANY. VENTUR E GLOBAL ENGINEERING IS AN US BASED TIER ONE AUTOMOTIVE COMPO NENT SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 7 -: SUPPLIER AND DEVELOPMENTAL SERVICES SPEARED ACROSS U SA, AUSTRALIA, SOUTH AFRICA, CHINA AND INDIA. IT HAS EX PERTISE IN INTERIOR AND EXTERIOR TRIMMING, COMPOUND TOOLING AND MANUFACTURING. BOTH SCSL AND VENTURE GLOBAL WERE RENDERING ENGINEERING SERVICES TO VARIOUS ENTITIES IN AUTOMOTIVE I NDUSTRIES PRIOR TO THE FORMATION OF ASSESSEE-COMPANY. VENTURE LLC, BEING THE LEADER IN AUTOMOTIVE DESIGNING HAS ENTERED INTO JO INT VENTURE WITH SATYAM AND HAS DECIDED TO SHARE THEIR EXPERTISE. BY VIRTUE OF JOINT VENTURE AGREEMENT, VARIOUS TERMS AND CONDITIONS W ERE PROPOSED. WE ARE NOT ON THE ISSUE OF JOINT VENTURE B UT THE ISSUE IN APPEAL, CONSIDERED BY THE AO IN THE TRANSFER PRICING STUDY, IS WITH REFERENCE TO COMMISSION PAID TO VENTURE ON ASSESSEES SALES. THERE WAS AN EXPORT SALES COMMISSION AGREEMENT DT. 11- 02-2000 BY WHICH ASSESSEE-COMPANY WAS TO PAY 10% COMMISSION ON ALL THE EXPORT SALES, OTHER THAN THOSE ORDERS RECEIVED FROM VE NTURE OR ITS AFFILIATES. THERE WAS ANOTHER SALES COMMISSION AGREE MENT ON 18-02-2000 AS WELL AT 10% ON ALL DOMESTIC SALES, OTHER THAN ORDERS RECEIVED FROM VENTURE OR ITS AFFILIATES. AO INITIAL LY IN AY. 2004-05 HAS NOTICED THAT THERE WERE CERTAIN SALES RECEIVED FRO M SCSL I.E., ONE OF THE PROMOTER COMPANIES ON WHICH 10% COMMISSION WAS PAID TO VENTURE AND CLAIMED AS DEDUCTION. ON THE RE ASON THAT THERE IS NO NECESSITY FOR PAYING COMMISSION ON THE SA LES RECEIVED FROM SCSL, IN THE TP STUDY, THE TPO DISALLOWED AN AMOUNT OF RS. 85,64,314/- BEING COMMISSION PAID TO VENTURE GLOBAL. IT WAS CONTESTED BEFORE THE CIT(A) THAT THE TPOS METHODOLOGY IN ADOPTING CUP METHOD IS NOT CORRECT AND FURTHER DETERMINING THE AMOUNT AT NIL IS ALSO NOT CORRECT. LD. CIT(A) HOWEVER, IN HIS ORDER HAS EXAMINED THE COMMISSION PAYMENT IN A DIFFERENT PERSPEC TIVE AND HELD THAT THERE IS NO NEED TO PAY THE COMMISSION U/S. 3 7(1) AND SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 8 -: ACCORDINGLY, HE DISALLOWED THE AMOUNT INVOKING THE PR OVISIONS OF SECTION 37(1). 8. IN AY. 2005-06 THE TPO, FOLLOWING THE ORDERS IN AY. 2004-05, HAS AGAIN DISALLOWED THE COMMISSION PAID TO VENTURE ON ORDERS RECEIVED FROM SATYAM (SATYAM SALES) TO AN EXTE NT OF RS. 3.20 CRORES. THE CIT(A) IN THAT YEAR HOWEVER, UPHELD THE ORDERS OF THE TPO/AO, WITHOUT INVOKING THE PROVISIONS OF SECTION 37 (1). HOWEVER, IN SUBSEQUENT YEARS OF 2006-07 TO 2008-09, E VEN THOUGH AO WAS FOLLOWING THE EARLIER YEARS ORDERS OF DISALL OWING THE COMMISSION TO VENTURE OF SATYAM SALES, HOWEVER, DISAL LOWED THE ENTIRE COMMISSION PAID TO VENTURE ON ALL SALES, IN DI FFERENT YEARS THERE ARE DIFFERENT METHODOLOGIES ADOPTED BY THE REVENU E, PURPORTEDLY DISALLOWING COMMISSION PAID TO VENTURE ON SATYAM SALES. IN ADDITION TO THE ABOVE ISSUE, THERE ARE TWO O THER ISSUES, ONE ARISING OUT OF RE-WORKING OUT OF DEDUCTION U/S. 10 A AND OTHER ISSUE IS WITH REFERENCE TO ADJUSTMENT MADE UNDER TP PRO VISIONS ON AN HOURLY BASIS PAYMENT BY THE TPO. FOR THE SAKE OF C LARITY, APPEALS IN AY. 2004-05 ARE DECIDED HERE UNDER. AY 2004-05: 9. IN AY. 2004-05, ASSESSEE HAS PREFERRED AN APPEA L IN ITA NO. 1590/HYD/2010 AND THE ONLY CROSS-APPEAL BY THE R EVENUE IS IN ITA NO. 217/HYD/2009. IN THIS YEAR, ASSESSEE FIL ED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 1,25,02,860/- A FTER CLAIMING DEDUCTION U/S. 10A. ASSESSEE CLAIMED AN AMOUNT OF RS . 1,90,26,559/- AS EXEMPTED U/S. 10A. AO HAS EXCLUD ED CERTAIN EXPENDITURE INVOLVING COMMUNICATION EXPENSES AND ALSO FOREIGN EXCHANGE IN PROVIDING TECHNICAL SERVICES OUTSIDE INDI A TOTALING TO SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 9 -: RS. 22,74,75,484/- FROM EXPORT TURNOVER. THEREFORE, AS AGAINST RS. 26.03 CRORES OF EXPORT TURNOVER, THE AO DETERMINED THE EXPORT TURNOVER AT RS. 3.28 CRORES. ACCORDINGLY, THE DEDUCTIO N U/S. 10A WAS REDUCED TO AN AMOUNT OF RS. 23,99,728/-. IN ADD ITION TO THE ABOVE ADDITION UNDER THE TP PROVISIONS, THE TPO VIDE H IS ORDER DT. 22-12-2006 HAS SUGGESTED TP ADJUSTMENT OF RS. 5,15,77 8/- TOWARDS EXPORT OF SERVICE INCOME AND DISALLOWANCE OF RS. 85,65,314/- FOR PAYMENT OF SALES COMMISSION. ACCORD INGLY, THE FINAL ORDER WAS PASSED BY THE AO INCORPORATING THE ADJ USTMENTS AND RE-WORKING OUT THE DEDUCTION U/S. 10A. 10. LD. CIT(A) DID NOT AGREE WITH THE CONTENTION OF AS SESSEE THAT THE AMOUNT OF RS. 22,24,75,804/- WAS NOT LIABLE TO BE CONSIDERED UNDER EXPLANATION-2, SECTION 10A. HOWEVER , LD. CIT(A) ACCEPTED THE ALTERNATE CLAIM OF ASSESSEE THAT SUCH EXP ENSES IF AT ALL REDUCED FROM EXPORT TURNOVER SHOULD ALSO BE REDUCED F ROM THE TOTAL TURNOVER. ACCORDINGLY, HE GAVE A DIRECTION TO THE AO FOR REDUCTION OF THE SAME ACCOUNT FROM THE TOTAL TURNOVER AS WELL. ON THIS ISSUE, REVENUE IS AGGRIEVED AND RAISED THE GROUNDS IN ITS AP PEAL, WHEREAS ASSESSEE HAS ACCEPTED THE LEGAL POSITION. IN CONNEC TION WITH THE TP ADJUSTMENT OF RS. 5,15,778/- FOR EXPORT OF SERVICES, TH E LD. CIT(A) CONCLUDED THAT THE ARMS LENGTH PRICE [ALP] DETERMINED BY THE AO FALL UNDER THE PROVISO TO SECTION 92C(2), WHEREIN THE BENEFIT OF (+/-) 5% WAS PROVIDED. SINCE TPO DID NOT CONSIDER SUCH B ENEFIT, LD. CIT(A) GRANTED THE BENEFIT AND ACCORDINGLY THE ADDITION OF RS. 5,15,778/- WAS DELETED. REVENUE IS AGGRIEVED ON THI S ISSUE AS WELL. WITH REFERENCE TO THE TP ADJUSTMENT OF RS. 85,64,314/- P ROPOSED BY THE TPO, LD. CIT(A) HOWEVER, HELD THAT EXPENDITURE OF ABOVE AMOUNT BEING COMMISSION PAID TO VENTURE WAS NOT ALLOWA BLE AS SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 10 -: BUSINESS EXPENSES AS THE SAME WAS NOT INCURRED WHOL LY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. HE INVOKED THE PROVISIONS OF SECTION 37(1) AND CONFIRMED THE DISALLOWANCE. ASSESSEE HAS RAISED THE MATERIAL GROUND NO. 2 ON THE ABOVE ISSUE AS UNDER: 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) ERRED IN LAW AND FACTS OF THE CASE ON CONFIRMING TH E ADDITION OF RS. 85,64,314/- BEING THE COMMISSION PAID TO VENTUR E GLOBAL FOR THE CUSTOMER INTRODUCTION AND MANAGEMENT SERVICES A S THE SAME IS EXPENDITURE DEDUCTIBLE UNDER SECTION 37 OF THE I NCOME-TAX ACT, 1961. ITA NO. 1590/HYD/2010: 11. REFERRING TO THE AGREEMENTS PLACED ON RECORD AND ALSO OTHER CORRESPONDENCE BETWEEN THE PARTIES, IT WAS THE SUB MISSION OF LD. COUNSEL THAT VENTURE GROUP BEING THE LEADER IN THE A UTOMOTIVE SERVICES HAS ENTERED INTO A JOINT VENTURE WITH SATYAM A ND IT WAS AGREED UPON BETWEEN THE PARTIES THAT ON ALL THE SALES, EXCEPT FROM THE ORDERS OF VENTURE GROUP, ASSESSEE-COMPANY HAS TO PAY 10% COMMISSION. REFERRING TO THE ORDER OF THE TPO, IT WAS THE SUBMISSION OF THE LD. COUNSEL THAT TPO HAS WRONGLY CON SIDERED THE SATYAM AS AFFILIATE OF VENTURE, WHEREAS SATYAM IS NOT AN AFFILIATE OF VENTURE BUT A COMPETITOR AND AN INDEPENDENT PROMOTER OF ASSESSEE-COMPANY. REFERRING TO THE TERMS OF THE A GREEMENT, IT WAS SUBMITTED THAT NO COMMISSION WAS PAID ON SALES MADE TO VENTURE OR TO ITS AFFILIATES AND REFERRED TO THE SCHEDUL E PLACED ON RECORD THAT COMMISSION WAS PAID ON ALL THE ORDERS RECE IVED FROM OTHER COMPANIES, INCLUDING ORDERS ROUTED THROUGH SATYA M. IT WAS FURTHER SUBMITTED THAT SATYAM WAS ALSO IN THE BUSINESS O F PROVIDING CAD/CIM SERVICES TO VARIOUS AUTOMOTIVE COM PANIES AND THEY HAVE PLACED A CONSOLIDATED ORDER TO SATYAM AND PA RT OF WHICH SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 11 -: WAS IN TURN ORDERED TO ASSESSEE-COMPANY. SUCH ORDER S ARE FROM INDEPENDENT COMPANIES AND AS PER THE AGREEMENT COMMI SSION WAS PAYABLE TO VENTURE. IT WAS FURTHER SUBMITTED THAT NO COM MISSION WAS PAID TO SATYAM, BUT ENTIRE COMMISSION WAS PAID/PA YABLE TO VENTURE ONLY. HE SUBMITTED THAT THE COMMISSION WAS A BUS INESS NECESSITY, WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IT WAS FURTHER SUBMITTED THAT 10% PROVIDED IN THE AGREEMEN T IS AS PER THE GUIDELINES AND REGULATIONS PRESCRIBED UNDER F EMA. THEREFORE, PAYMENT IS TO BE CONSIDERED AS ARMS LENGTH FOR THIS REASON. IT WAS ALSO SUBMITTED THAT THEY ARE WITHIN THE G UIDELINES OF RBI FOR REMITTANCE OF THE AMOUNTS. THEREFORE, THERE IS NO NEED TO CONSIDER ANY TP ADJUSTMENT. 11.1. OBJECTING THE METHOD ADOPTED BY THE TPO I.E., CU P METHOD, THE COUNSELS OBJECTIONS ARE AS UNDER: 1. THE LEARNED TPO OBSERVED THAT NO TANGIBLE BENEFI T WAS RECEIVED BY SVES TO JUSTIFY THE COMMISSION PAYMENT TO VENTUR E GLOBAL LLC., USA. AS EXPLAINED ABOVE, THE CUSTOMERS THROUGH WHOM SVES RECEIVED INCOME EITHER DIRECTLY OR INDIRECTLY WERE BROUGHT IN AND M ONITORED BY VENTURE GLOBAL LLC., USA. HENCE THE LEARNED TPOS OBJECTIO N THAT THERE WAS NO BENEFIT WAS NOT CORRECT. 2. FURTHER, THE LEARNED TPO APPLIED CUP METHOD AS MOST APPROPRIATE METHOD FOR ARRIVING AT THE ARMS LENGTH PRICE. IN ORDER TO APPLY SUCH CUP METHOD, AVAILABILITY OF VALID COMPAR ABLES EITHER INTERNALLY OR EXTERNALLY IS NEEDED. WITHOUT A VALID COMPARABL E, THE CUP METHOD CANNOT BE APPLIED. 11.2. LD. COUNSEL SUBMITTED THAT CO-ORDINATE BENCH IN TH E CASE OF QUAL CORE LOGIC LIMITED [22 TAXMANN.COM 4] ( HYD), HAS HELD THAT FOR THE PURPOSE OF CUP METHOD, THERE SHOULD BE SIMILARITY OF TRANSACTIONS TO BE COMPARED. IN THE ABS ENCE OF ANY SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 12 -: INTERNAL COMPARABLE OR EXTERNAL COMPARABLE, THE ANALY SIS MADE BY THE TPO IS NOT CORRECT. LD. COUNSEL ALSO REFERRED TO S ECTION 10B(1)(A) DEALING WITH CUP METHOD ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF GHARDA CHEMICAL S LIMITED., [35 SOT 406] (MUM), SUBMITTED THAT IN ORDER TO APPLY CU P METHOD, THE IDENTIFICATION OF COMPARABLE UNCONTROLLED PRICE TRAN SACTION IS MANDATORY IF SUCH UNCONTROLLED PRICE EITHER INTERNALLY OR EXTERNALLY IS NOT AVAILABLE, THEN THE METHOD NEEDS TO BE REJECTED. RELYING ON THE CO-ORDINATE BENCH DECISION OF MUMBAI IN THE CASE O F CABOT INDIA LTD., [12 TAXMANN.COM 70] (MUM), IT WAS SUBMITTED THAT WHERE NO DATA WAS AVAILABLE IN RESPECT OF UNCONTROLLED COMPARABLE TRANSACTIONS, CUP METHOD COULD NOT BE REGULATED AS MOST APPROPRIATE METHOD FOR DETERMINING ALP. LD. COUNSEL HOWEVER, SUBMITTED THAT EVEN THOUGH THE TPO HAS ANALYSED THE ISSUE ON CUP METHOD, LD. CIT(A) MODIFIED THE ORDER SO AS TO DIS ALLOW THE AMOUNTS U/S. 37(1) AND REVENUE IS NOT IN APPEAL ON THE ABOVE ISSUE. IN VIEW OF THAT, IT WAS SUBMITTED THAT THE ARGUMEN TS ON CUP METHOD ARE ACADEMIC IN NATURE IN THIS YEAR AND ASSESSE E IS MAINLY CONTESTING DISALLOWANCE MADE U/S. 37(1). 12. LD. DR HOWEVER, REITERATED THE ORDERS OF THE TPO AND THE ORDER OF THE CIT(A) IN COMING TO A CONCLUSION THAT THERE IS NO NEED TO PAY COMMISSION TO VENTURE ON THE SALES MADE BY SATYAM AS SATYAM IS ONE OF THE PROMOTER COMPANIES AND ACCORD INGLY, THE EXPENDITURE CANNOT BE CONSIDERED AS WHOLLY AND EXCLUS IVELY FOR THE PURPOSE OF BUSINESS. 13. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERU SED THE ORDERS OF THE AUTHORITIES. AS RIGHTLY POINTED OUT B Y THE LD. SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 13 -: COUNSEL, EVEN THOUGH LD.TPO INVOKED THE CUP METHOD AND DETERMINED THE ALP AT NIL SO AS TO DISALLOW PART OF THE COMMISSION PAID TO VENTURE ON THE SO CALLED SALES MADE TO SATYAM , ON THE REASON THAT SATYAM IS AN AFFILIATED COMPANY AND NO CO MMISSION NEED TO BE PAID ON SALES MADE TO THE AFFILIATED COMPAN IES. THIS ASPECT WAS EXAMINED IN DETAIL AND WE FOUND THAT SATYAM IS AN INDEPENDENT PROMOTER AND NOT AN AFFILIATE OF VENTURE. V ENTURE GLOBAL SERVICES LLC IS AN INDEPENDENT GLOBALLY OPERA TED LEAD COMPANY WHICH WAS COMPETING WITH SATYAM BEFORE FORMI NG A JOINT VENTURE COMPANY. THE SALES COMMISSION IS PROVIDED B Y VIRTUE OF THE AGREEMENT DT. 11-02-2000 AND ANOTHER AGREEMENT PLAC ED TO BE 18-02-2000 (BOTH ARE SIMILARLY WORDED EXCEPT THAT ONE DEALS AS EXPORT SALES AND OTHER DEALS WITH DOMESTIC SALES). THE TERMS OF AGREEMENT ARE AS UNDER: 2. SALES COMMISSION: (A) VENTURE SHALL RECEIVE A SALES COMMISSION PAYMENT FR OM THE COMPANY OF 10% OF SALES OF ALL ENGINEERING SERVICE S SOLD BY THE COMPANY (OTHER THAN TO VENTURE OR FOR COMPANYS CON TRACT WHICH ARE LISTED ON EXHIBIT A HERETO) FOR SALES TO CUSTOMERS LOCATED OUTSIDE OF INDIA. ENGINEERING SERVICES IS DEFINE D AS CAD-BASED, CAE-BASED AND CAM-BASED PRODUCT AND TOOL DESIGN PRO JECTS. (B) SALES COMMISSION PAYMENTS SHALL BE MADE WITHIN FIFT EEN (15) DAYS OF THE END OF EACH CALENDAR QUARTER FOR ALL ENGINEE RING SERVICES RECEIPTS DURING SUCH CALENDAR QUARTER. ALL PAYMENT S TO BE MADE BY THE COMPANY TO VENTURE SHALL BE MADE IN U.S. DOLLAR S. PAYMENTS FOR SALES WHICH ORIGINATE FROM OUTSIDE THE USA SHALL BE CONVERTED TO U.S. DOLLARS AS OF THE LAST DAY OF THE CALENDAR QUARTER WHEN RECEIVED. (C) VENTURE SHALL HAVE THE RIGHT TO SET-OFF THE SALES C OMMISSION PAYMENTS OWNED TO IT AGAINST ANY OBLIGATIONS OWNED BY IT TO THE COMPANY FOR SERVICES OF THE COMPANY. THE COMPANY S HALL HAVE THE RIGHT TO SET-OFF PAYMENTS OWNED TO IT BY VENTUR E FOR SERVICES SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 14 -: AGAINST ANY OBLIGATIONS OWNED BY THE COMPANY TO VEN TURE FOR SALES COMMISSIONS. 13.1. AS SEEN FROM THE RECITAL ITSELF, VENTURE DOES M EAN AFFILIATES REFERRED TO OR GROUP CONCERNS OF VENTURE GL OBAL ENGINEERING LLC AND DOES NOT INCLUDE SATYAM GROUP AT ALL. THEREFORE, THERE IS FUNDAMENTAL FLAW IN ANALYSIS OF TH E TPO IN CONSIDERING SATYAM AS AFFILIATE OF VENTURE. BE THAT AS IT MAY, WHILE ACCEPTING THAT PAYMENT OF COMMISSION TO VENTURE IS PERMIS SIBLE AS PER AGREEMENT, IN OUR VIEW, THE TPO AND CIT(A) HAS ER RED IN RESTRICTING THE DISALLOWANCE ON THE SO CALLED SALES M ADE TO SATYAM. FIRST OF ALL, THE COMMISSION WAS NOT PAID TO SATYAM, SO AS TO DISALLOW ON THE SALES MADE TO SATYAM. THE COMMISSION IS BEING PAID TO VENTURE, AS PART OF EXPORT / DOMESTIC SALES COM MISSION AGREEMENTS. THE SALES MADE TO SATYAM, WHETHER DIRECTL Y PLACED BY THE SATYAM OR INDIRECTLY PASSED ON FROM THE ORDERS REC EIVED FROM OTHER AUTOMOTIVE COMPANIES FORM PART OF DOMESTIC SALES O F ASSESSEE-COMPANY AND COMMISSION IS PAYABLE TO VENTURE FROM THE AGREEMENT. IN VIEW OF THIS, WE DO NOT SEE ANY REASON TO DISALLOW THE AMOUNT OF COMMISSION, PARTICULARLY WITH REFERENCE TO SALES MADE TO/ORDERS RECEIVED FROM SATYAM. ASSESSEE ALSO PLACED ON RECORD THAT MOST OF THE ORDERS RECEIVED FROM SATYAM ARE PART OF CONSOLIDATED ORDERS RECEIVED FROM VARIOUS OTHER AUTO MOBILE/ AUTOMOTIVE COMPANIES LIKE FORD, A PART OF WHICH WAS P ASSED TO ASSESSEE-COMPANY. WE ALSO NOTICE THAT TPO/AO HAS NO OBJECTION FOR PAYMENT OF COMMISSION TO VENTURE PER SE. OUT OF THE TOTAL CLAIM OF COMMISSION OF RS. 3,66,00,492/- IN THIS YEA R, THE AO/TPO DISALLOWED ONLY AN AMOUNT OF RS. 85,64,314/-. THIS AMOUNT WAS ALSO PAID TO VENTURE ON THE DOMESTIC SALES MADE TO SATYA M. THESE SALES ARE NOT MADE TO ANY AFFILIATED COMPANY OF VENTUR E. SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 15 -: THEREFORE, THE COMMISSION IS PAYABLE TO VENTURE. ACCO RDINGLY, THE SAME IS ALLOWABLE U/S. 37(1) OF THE ACT. IN VIEW OF THIS, WE DIRECT THE AO TO ALLOW THE AMOUNT. THE GROUND IS CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 217/HYD/2009: 14. THIS IS A CROSS-APPEAL BY REVENUE AGAINST THE OR DER OF THE CIT(A)-III, HYDERABAD DT. 10-12-2008. REVENUE IS AGGRIEVED ON TWO ISSUES AND RAISED FOUR GROUNDS I.E., GROUND NOS . 2 TO 5. 15. GROUND NO. 2 PERTAINS TO THE DIRECTION OF THE CI T(A) TO EXCLUDE THE SO CALLED EXPENSES INCURRED ABROAD BOTH F ROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER. IT WAS THE CONTENTION OF THE REVENUE THAT NO SUCH ADJUSTMENT HAS BEEN PROVIDED FOR TOTAL TURNOVER IN SECTION 10A. 15.1. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES ON THE ISSUE AND PERUSED THE MATERIALS ON RECORD. THIS I SSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE BOMBA Y HIGH COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD., [330 ITR 175] (BOM) AND ALSO SPECIAL BENCH DECISION OF THE ITAT, C HENNAI IN THE CASE OF ITO VS. SAK SOFT LTD. [313 ITR (AT) 353] WHER EIN IT HAS BEEN HELD THAT COMMUNICATION CHARGES ETC., ATTRIBUTABLE TO THE D ELIVERY OF THE COMPUTER SOFTWARE OUTSIDE INDIA WHICH ARE TO BE REDUCED FROM THE EXPORT TURNOVER SHOULD ALSO BE REDUCED FROM THE TOTAL TURNOVER AS WELL, WHILE COMPUTING THE DEDUCTION U/S. 1 0A. THEREFORE, FOLLOWING THE RATIO LAID DOWN IN THE AFORE SAID CASES, WE UPHOLD THE DIRECTION OF LD.CIT(A) TO REDUCE THE AMOUNT FROM THE EXPORT TURNOVER AS WELL AS TOTAL TURNOVER, WHILE COMPUT ING THE SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 16 -: DEDUCTION U/S. 10A OF THE I.T. ACT. THIS GROUND IS ACC ORDINGLY REJECTED. 16. GROUND NOS. 3, 4 & 5 PERTAIN TO THE ISSUE OF DIF FERENTIAL AMOUNT TOWARDS EXPORT OF IT ENGINEERING SERVICES BETWE EN NON- AES AND AES. LD.TPO IN HIS ORDER FOUND THAT THE SERV ICES TO AE I.E., VENTURE WERE PROVIDED @ $39 PER HOUR WHEREAS TH E SAME WAS SHOWN TO HAVE BEEN PROVIDED TO NON-AES @ $45 PER HOUR . AFTER REDUCING THE SALES COMMISSION PAID @ 10% ON THE SALES MADE TO NON-AES, THE ADJUSTED RATE BASED ON NET REALISATION BAS IS WAS ARRIVED @ $40.5 PER HOUR. THE DIFFERENCE WAS BROUG HT TO TAX AND AN ADDITION OF RS. 5,15,778/- WAS MADE. IT WAS THE C LAIM OF ASSESSEE THAT RATE CHARGED FROM AE IS WITHIN 5% RANGE PROVIDED IN SECTION 92C(2) OF THE ACT. LD. CIT(A) HAS ACCEPTED THE ABOVE CONTENTION AND HELD AS UNDER: 3.3 ON DUE CONSIDERATION OF THE MATERIAL AVAILABLE ON RECORD, I AGREE WITH THE CONTENTION OF THE APPELLANT. TPO HAS SELECTED TWO NON-AES AS INTERNAL COMPARABLES IN CUP METHOD, WHICH WERE P ROVIDED DIFFERENT TECHNICAL SERVICES BY THE APPELLANT. HOWEVER, WITHO UT GOING INTO THIS ASPECT OF THE ISSUE, THE ADJUSTMENT MADE BY THE TPO IS OTHERWISE REQUIRED TO BE DELETED SINCE THE DIFFERENCE IN THE RATES CHA RGED FROM AE & NON-AES IS WITHIN THE 5% RANGE PROVIDED U/S.92C(2) OF THE A CT. BENEFIT OF +/-5% VARIATION IN TERMS OF PROVISO TO S.92C(2) IS ALLOWE D IN VIEW OF THE DECISION OF ITAT, KOLKATA IN THE CASE OF DEVELOPMENT CONSULT ANTS (P) LTD (115TTJ577) & ITAT, DELHI IN THE CASE OF SONY INDIA PVT. LTD.(SUPRA) WHERE IT HAS BEEN HELD IN PARA 163.4 AS UNDER -. '163.4 THE OTHER VIEW IS THE ONE ACCEPTED BY KOLKAT A 'A' BENCH OF THE TRIBUNAL IN THE CASE OF DEVELOPMENT CONSULTANTS (P) LTD. VS DCIT, CIRCLE 2, KOLKATA (ITA NO. 79 & BO/KOL/200B) DECIDED ON 4. 4.200B . AS PER THE SAID DECISION, THE BENEFIT OF SECOND LIMB OF THE PR OVISO WAS ALLOWED TO THE TAXPAYERS ALTHOUGH THE PRICE DISCLOSED BY IT WAS MO RE THAN 5% OF ARITHMETIC MEAN. THE DECISION OF THE COORDINATE BENCH IS BINDI NG ON US AND WE ARE INCLINED TO FOLLOW THE SAME. THAT APART, WE ARE OF THE VIEW THAT KOLKATA BENCH OF THE TRIBUNAL HAS TAKEN A RIGHT VIEW OF THE PROVI SION. WE ARE TO GO BY THE LANGUAGE OF THE PROVISION AND WHEN WE DO SO, WE DO NOT SEE ANYTHING IN THE SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 17 -: LANGUAGE TO RESTRICT THE APPLICATION OF THE PROVISI ON ONLY TO MARGINAL CASES WHERE PRICE DISCLOSED BY THE TAXPAYER DOES NOT EXCE ED 5% OF THE ARITHMETIC MEAN. IN OUR CONSIDERED OPINION, THE ARM'S LENGTH P RICE DETERMINED ON APPLICATION OF MOST APPROPRIATE METHOD IS ONLY AN A PPROXIMATION AND IS NOT A SCIENTITIC EVALUATION. THEREFORE, THE LEGISLATURE THOUGHT IT PROPER TO ALLOW MARGINAL BENEFIT TO CASES WHO OPT FOR SUCH BENEFIT .. HENCE, WE ARE OF THE VIEW THAT SECOND LIMB IS APPLICABLE EVEN TO CAS ES WHERE THE TAXPAYER INTENDS TO CHALLENGE ARM'S LENGTH PRICE TAKEN AS ARITHMETIC MEAN AND DETERMINED THROUGH THE MOST APPROPRIATE METHOD. AS STATED ABOV E, THE SECOND PROVISO IS INTENDED TO GIVE MARGINAL RELIEF TO ALL TAXPAYERS A S DETERMINATION OF ARM'S LENGTH PRICE IS NOT AN EXACT SCIENCE BUT IS AN APPR OXIMATION. ..THEREFORE, IN LINE WITH THE VIEW TAKEN BY KO LKATA BENCH OF THE TRIBUNAL, WE ARE OF THE VIEW THAT BENEFIT OF THE SE COND LIMB IS AVAILABLE TO ALL TAXPAYERS IRRESPECTIVE OF THE FACT THAT PRICE OF IN TERNATIONAL TRANSACTION DISCLOSED BY THEM EXCEEDS THE MARGIN PROVIDED IN TH E PROVISION. IT WAS FURTHER HELD THAT THE CIRCULAR 12/2001 WAS I SSUED PRIOR TO INSERTION OF THE PROVISO TO SECTION 92(2). HENCE, IT WOULD BE INCORRECT TO ASSUME THAT THE CIRCULAR EXPLAINS THE PROVISO TO SECTION 92(2). 17. PROVISIONS OF SECTION 92C(2) PROVIDE FOR RANGE OF (+/-) 5%. ALP DETERMINED BY THE TPO IS WITHIN THAT RANGE. CONSEQUENTLY, WE DO NOT SEE ANY REASON TO INTERFERE W ITH THE ORDER OF THE LD. CIT(A). GROUNDS ARE ACCORDINGLY REJECTED . 18. IN THE RESULT, APPEAL IN ITA NO. 217/HYD/2009 IS DISMISSED. ITA NO. 197/HYD/2011 (AY. 2005-06) 19. IN THIS ASSESSMENT YEAR, ASSESSEE HAS RAISED AS MANY AS SEVEN GROUNDS. OUT OF WHICH, 1 AND 7 ARE GENERA L IN NATURE. GROUND NOS. 2 & 3 ON THE ISSUE OF CAPITAL INVESTMENT S UBSIDY, GROUND NO. 6 IS ON THE ISSUE OF COMMISSION PAID ON SALES U/S. 37(1) OF THE ACT AND GROUND NO. 5.1 ON THE ISSUE OF A DJUSTMENT MADE OF RS. 3.07 LAKHS TOWARDS ITES SALES ARE NOT PR ESSED. ACCORDINGLY, THESE GROUNDS ARE TREATED AS WITHDRAWN. SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 18 -: 20. THE MAJOR ISSUE IS WITH REFERENCE TO DISALLOWAN CE OF RS. 3.20 CRORES PAID TOWARDS COMMISSION ON SALES MADE TO SATYAM COMPUTER SERVICES, INVOKING TP PROVISIONS AND ALSO C UP METHOD. AS DISCUSSED EARLIER IN THE AY. 2004-05, THE TPO HEL D THAT SATYAM COMPUTER SERVICES IS AN AFFILIATE OF VENTURE GROUP AND NO AMOUNT NEED BE PAID AS COMMISSION ON THE SALE MADE TO SATYA M. LD. COUNSEL SUBMITTED THAT IN THE YEAR 2004-05, LD. CIT(A) H AS CONVERTED THE DISALLOWANCE UNDER THE TP PROVISIONS TO THE DISALLOWANCE U/S. 37(1), WHEREAS IN THIS ASSESSMENT YEAR, LD.CIT(A) CONFIRMED THE ORDER OF TPO OF DISALLOWING THE ENTIRE AMOUNT. IN ADDITION TO THE OBJECTIONS WITH REFERENCE TO THE CUP METHOD WHEN THERE ARE NO COMPARABLE CASES, IT WAS THE C ONTENTION THAT SATYAM CANNOT BE CONSIDERED AS AN AFFILIATE COMPAN Y. LD. COUNSEL FURTHER SUBMITTED THAT THE AGREEMENT WITH VENTURE I S INDEPENDENT OF SALES MADE TO ALL OTHERS, EXCEPT TO VENTU RE GROUP AND SATYAM CANNOT BE CONSIDERED AS PART OF VENTURE GR OUP. 20.1. IT WAS FURTHER SUBMITTED THAT THERE WERE DISPUTES BETWEEN THE TWO PROMOTER COMPANIES AND IN LATER YEAR, COMMISSION WAS NOT PAID AND HAS DISALLOWED BY ASSESS EE-COMPANY AS SUO MOTTO ADJUSTMENT UNDER THE TP PROVISIONS. IT WAS CONTENDED THAT FOR THE IMPUGNED ASSESSMENT YEAR, THE AMOU NT IS TO BE PAID AS PER THE AGREEMENT ON WHICH THERE IS NO D ISPUTE. 21. FOR THE REASONS STATED IN AY. 2004-05, WE AGREE WITH THE CONTENTION OF ASSESSEE THAT THE TPO CANNOT DISALLOW THE AMOUNT PAID TO VENTURE AS THE AGREEMENT UNDER WHICH ASS ESSEE IS OPERATING COVERS EXPORT AND DOMESTIC SALES, OTHER THAN TH OSE MADE TO VENTURE OR VENTURE GROUP. SATYAM IS NOT THE PART OF V ENTURE SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 19 -: GROUP. THEREFORE, THERE IS NO VALID REASON FOR DISA LLOWING ON THAT GROUND. MOREOVER, THE TPO HAS TO CONSIDER THE ALP ON LY UNDER ONE OF THE METHODS PRESCRIBED AND AS ALREADY DISCUSSE D IN EARLIER YEAR, CUP METHOD CANNOT BE INVOKED AS THERE ARE NO UNC ONTROLLED COMPARABLE PRICES. IN VIEW OF THAT, THE METHODOLOGY AD OPTED BY THE AO/TPO IN DISALLOWING THE AMOUNT OR FIXING THE A LP AT NIL ITSELF IS NOT CORRECT. MOREOVER, THE HONBLE DELHI HI GH COURT IN THE CASE OF EKL APPLIANCES (2012) [24 TAXMANN.COM 199] HAS ALREADY HELD THAT TPO CANNOT DISALLOW THE AMOUNTS U/S. 37(1) IN VOKING TRANSFER PRICING PROVISIONS. IN VIEW OF THIS, WE DIR ECT THE AO TO ALLOW THE AMOUNT AS CLAIMED. GROUND NO. 5 OF ASSESS EE IS ACCORDINGLY ALLOWED. 22. THE NEXT ISSUE FOR CONSIDERATION IS THE DISALLOWA NCE MADE UNDER THE PROVISIONS OF 10A. AO HAS EXCLUDED C ERTAIN EXPENDITURE HOLDING THEM TO BE COMMUNICATION EXPENSES AND EXCLUDED THEM ONLY FROM EXPORT TURNOVER AND NOT FROM TOTA L TURNOVER THEREBY EFFECTING THE DEDUCTION CLAIMED U/S. 10 A. ASSESSEE CONTESTED THE SAME IN EARLIER YEAR BEFORE THE LD.CIT(A) WHO, CONSIDERING THE ALTERNATE CLAIM DIRECTED THE AO TO EXCLUDE THE SAME FROM TOTAL TURNOVER AS WELL. REVENUE HAS COME UP IN APPEAL WHICH WAS DISCUSSED IN REVENUES APPEAL ABOV E IN ITA NO. 217/HYD/2009 VIDE PARA 15. HOWEVER, IN THIS YEAR, LD.CIT(A) DID NOT FOLLOW HIS PREDECESSORS ORDER AND CONFIRMED THE ACTION OF THE AO CONSEQUENTLY, THIS GROUND BY ASSESSEE. 23. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT THE ACTION OF THE AO IN EXCLUDING ALL EX PENDITURE IS NOT CORRECT AS HE HAS TO IDENTIFY ONLY THE EXPENSES RE LATABLE TO SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 20 -: DELIVERY OF GOODS AND SERVICES AS PROVIDED UNDER THE ACT. NO SUCH EXERCISE SEEMS TO HAVE BEEN DONE. MOREOVER, AO ALSO CANNOT EXCLUDE THE BRANCH EXPENSES UNDER THIS HEAD. THEREFO RE, IN PRINCIPLE, THE CONTENTION OF ASSESSEE IS TO BE ACCEPTE D. HOWEVER, ASSESSEE ALSO RAISED AN ALTERNATE GROUND THAT THE SAM E EXPENDITURE WHICH WAS DISALLOWED FROM EXPORT TURNOVER SHOULD ALSO BE EXCLUDED FROM TOTAL TURNOVER. THIS ALTERNATE C ONTENTION WAS ALLOWED IN EARLIER YEAR AND ASSESSEE HAS NOT QUE STIONED THE TREATMENT OF VARIOUS EXPENSES AS COMMUNICATION EXPENS ES IN ITS APPEAL. CONSIDERING THAT, WE ARE OF THE OPINION THA T THE ALTERNATE GROUND CAN BE ALLOWED. ACCORDINGLY, AO IS DIRECTED TO WORK OUT DEDUCTION, AFTER EXCLUDING THE SO CALLED COMMUNICATI ON EXPENSES DETERMINED BY HIM, FROM BOTH EXPORT TURNOVER AND TOTAL TURNOVER. THIS VIEW WAS SUPPORTED BY THE DECISION OF THE HONBL E BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD., [330 ITR 175] (BOM) AND ALSO SPECIAL BENCH DECISION OF THE ITAT, CHENNAI IN THE CASE OF ITO VS. SAK SOFT LTD. [313 ITR (AT) 353] WHEREIN IT HAS BEEN HELD THAT COMMUNICATION CHARGES ETC. , ATTRIBUTABLE TO THE DELIVERY OF THE COMPUTER SOFTWARE OUTSI DE INDIA WHICH ARE TO BE REDUCED FROM THE EXPORT TURNOVER SHOULD ALSO BE REDUCED FROM THE TOTAL TURNOVER AS WELL WHILE COMPUTING THE DEDUCTION U/S. 10A. ACCORDINGLY THE GROUND IS CONSID ERED ALLOWED. 24. IN THE RESULT, THE APPEAL IN ITA NO. 197/HYD/2011 IS ALLOWED. ITA NO. 354/HYD/2011 (AY. 2006-07) 25. THIS APPEAL BY ASSESSEE IS AGAINST THE ORDER OF THE DRP, HYDERABAD DT. 24-09-2010, RAISING GROUNDS 1 TO 6 AND ALSO AN ADDITIONAL GROUND ON THE ISSUE OF NOT EXCLUDING FOREIG N CURRENCY SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 21 -: WHICH WAS CONSIDERED AS PART OF COMMUNICATION EXPENSE S. THIS ADDITIONAL GROUND BEING LEGAL IN NATURE, IS ALLOWED A FTER DUE CONSIDERATION. 26. GROUND NO.2 PERTAINS TO ADDITION MADE UNDER TP PROVISIONS OF RS. 4,12,493/- BEING DIFFERENCE OF EX PORT OF ENGINEERING SERVICES. THIS ISSUE HAS COME UP FOR C ONSIDERATION IN AY. 2004-05 IN REVENUES APPEAL IN ITA NO.217/HYD/2 009 FOR THE REASONS STATED THEREIN, SINCE THE DIFFERENCE IS WITHIN ( +/-) 5% RANGE AS PROVIDED U/S. 92CA(2) PROVISO, THERE IS NO NEED TO MAKE THE ADJUSTMENT. AO IS DIRECTED TO DETERMINE THE ALP AFTER CONSIDERING THE ABOVE SAID PROVISO. GROUND OF ASSESSEE IS CONSI DERED ALLOWED. 27. GROUND NO. 3 PERTAINS TO DISALLOWANCE OF COMMISS ION PAID ON SALES TO VENTURE GLOBAL AT RS. 4.38 CRORES. INSTEAD OF DISALLOWANCE ON THE COMMISSION ATTRIBUTABLE TO SALES M ADE TO SATYAM GROUP AS IN EARLIER YEARS, THE ENTIRE COMMISSI ON PAID WAS DISALLOWED WITHOUT ASSIGNING ANY REASONS. AS SEEN F ROM THE ORDER OF TPO, HE WAS MAINLY DISCUSSING ABOUT THE DISALLOWAN CE MADE OF SIMILAR NATURE IN EARLIER YEARS, BUT SURPRISINGLY, DI SALLOWED THE ENTIRE COMMISSION PAID TO VENTURE CAPITAL EVEN ON THE A MOUNTS PAYABLE ON SALES, OTHER THAN TO VENTURE GROUP, WHICH WA S BEING ALLOWED IN EARLIER YEARS. HOWEVER, FOR THE REASONS STATED IN EARLIER YEARS, WE ARE OF THE OPINION THAT TPO IS NOT CORRECT IN DISALLOWING THE AMOUNT BY DETERMINING THE ALP AT NIL. FOR THE REASON S STATED IN EARLIER YEAR, THE COMMISSION PAID TO VENTURE IS PAY ABLE AND ACCORDINGLY, THE GROUND IS CONSIDERED ALLOWED. SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 22 -: 28. GROUND NO. 4 PERTAINS TO MAKING ADJUSTMENT TO THE EXPORT TURNOVER BY AN AMOUNT OF RS. 1,25,32,717/- BEIN G THE COMMUNICATION CHARGES. IT WAS THE CONTENTION THAT THE SAM E WERE NOT COMMUNICATION CHARGES FOR DELIVERY OF COMPUTER S OFTWARE OR SERVICES OUTSIDE INDIA AND ACCORDINGLY, SAME SHOULD NOT HAVE BEEN DISALLOWED. HOWEVER, FOLLOWING THE DECISION IN EARL IER YEARS I.E., AY. 2004-05 & 2005-06, WE ARE OF THE OPINION THAT THE ALT ERNATE CONTENTION THAT THE SAME AMOUNT SHOULD ALSO BE EXCLUDED FROM TOTAL TURNOVER HAS TO BE ALLOWED. FOLLOWING THE PRINCI PLES LAID DOWN IN THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD., [330 ITR 1 75] (BOM) AND ALSO SPECIAL BENCH DECISION OF THE ITAT, CHENNAI IN THE CASE OF ITO VS. SAK SOFT LTD. [313 ITR (AT) 353], WE DIRECT THE AO TO EXCLUDE WHATEVER COMMUNICATION EXPENSES DISALLOWED F ROM THE EXPORT TURNOVER, THE SAME AMOUNT WAS ALSO BE DISALLOWED FROM THE TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION U/S 10A. W ITH THESE DIRECTIONS, THE GROUND IS CONSIDERED ALLOWED. 29. GROUND NO. 5 PERTAINS TO EXCLUSION OF THE DISALL OWANCES MADE UNDER TP PROVISIONS FROM EXPORT TURNOVER. THE A O IN HIS WISDOM HAS EXCLUDED THE AMOUNTS DISALLOWED UNDER TP P ROVISIONS FROM EXPORT TURNOVER. WE ARE UNABLE TO UNDERSTAND HOW T HE TPO CAN EXCLUDE THE ADDITIONS BEING MADE UNDER THE TP PROV ISIONS. THE ADDITION OF DIFFERENCE OF EXPORT OF ENGINEERING S ERVICES (CONTESTED IN GROUND NO. 2) OF RS. 4,12,493/- AND AL SO THE AMOUNT OF RS. 4,83,27,840/- BEING COMMISSION DISALLOWED ON ENTIRE SALES PAID TO VENTURE GLOBAL WERE THE AMOUNTS CONSIDERED. TH ESE CAN NOT BE CONSIDERED AS COMMUNICATION EXPENSES SO AS E XCLUDE FROM EXPORT TURN OVER. MOREOVER, WHEN THESE AMOUNTS ARE DI SALLOWED SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 23 -: OUT OF THE EXPENDITURE CLAIMS/ADJUSTMENTS MADE, IT WILL RESULT IN INCREASING THE PROFITS OF ASSESSEE-COMPANY, BUT IN NO WAY CAN BE CONSIDERED AS TURNOVER SO AS TO EXCLUDE FROM THE EX PORT TURNOVER. THERE IS NO LEGAL BASE FOR THE AO/TPO TO EXCLUDE THE P ROFITS FROM THE EXPORT TURNOVER AND SO THE COMPUTATION MADE BY THE AO IS NOT ACCORDING TO THE PROVISIONS OF LAW. AS THERE IS NO LE GAL BASE TO EXCLUDE THE AMOUNT FROM EXPORT TURN OVER, WE DIRECT THE TPO NOT TO EXCLUDE THE ABOVE AMOUNTS FROM EITHER EXPORT TURNOVER O R TOTAL TURNOVER, AS THE PROFIT ENHANCED CANNOT BECOME TURNOVER. THE GROUND IS CONSIDERED ALLOWED. 30. THE ADDITIONAL GROUND RAISED IN THIS YEAR IS WI TH REFERENCE TO EXCLUSION OF FOREIGN CURRENCY FROM THE E XPORT TURNOVER. FOR THE REASONS STATED IN GROUND NO. 4 ABOVE, WE DIRE CT THE AO/TPO TO EXCLUDE THE SAME AMOUNT FROM THE TOTAL TURNOVER AS WELL. ADDITIONAL GROUND IS ALLOWED. 31. IN THE RESULT, APPEAL IN ITA NO. 354/HYD/2011 IS ALLOWED. ITA NO. 1905/HYD/2011 (AY. 2007-08) 32. IN THIS APPEAL, ASSESSEE FILED REVISED GROUNDS FROM 1 TO 4. OUT OF WHICH, GROUND NOS. 1 AND 4 ARE GENERAL IN NATURE. 33. GROUND NO. 2 PERTAINS TO DISALLOWANCE OF COMMISS ION PAID TO VENTURE GLOBAL AT RS. 6.42 CRORES. INSTEAD O F DISALLOWANCE OF COMMISSION ATTRIBUTABLE TO SALES MADE TO SATYAM GRO UP, THE ENTIRE COMMISSION PAID WAS DISALLOWED WITHOUT ASSIGNIN G ANY REASONS. THIS DISALLOWANCE IS SIMILAR TO ONE MADE I N IMMEDIATE PRECEDING YEAR. WE ARE OF THE OPINION THAT TPO IS NOT C ORRECT IN SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 24 -: DISALLOWING THE AMOUNT BY DETERMINING THE ALP AT NIL. FOR THE REASONS STATED IN EARLIER YEARS ABOVE IN OTHER ASSESSE E APPEALS, THE COMMISSION PAID TO VENTURE IS PAYABLE AND ACCORDINGL Y, THE GROUND IS CONSIDERED ALLOWED. 34. GROUND NO. 3 PERTAINS TO MAKING ADJUSTMENT TO THE EXPORT TURNOVER BY AN AMOUNT OF RS. 22,91,09,664/- BEI NG THE COMMUNICATION CHARGES. FOLLOWING THE DECISION IN EAR LIER YEARS I.E., AY. 2004-05, 2005-06 & 2006-07, WE ARE OF THE OPINION THAT THE ALTERNATE CONTENTION THAT THE SAME AMOUNT SHOULD BE E XCLUDED FROM TOTAL TURNOVER HAS TO BE ALLOWED. FOLLOWING THE P RINCIPLES LAID DOWN IN THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD., [330 ITR 1 75] (BOM) AND ALSO SPECIAL BENCH DECISION OF THE ITAT, CHENNAI IN THE CASE OF ITO VS. SAK SOFT LTD. [313 ITR (AT) 353], WE DIRECT THE AO TO EXCLUDE WHATEVER COMMUNICATION EXPENSES DISALLOWED F ROM THE EXPORT TURNOVER, ALSO FROM THE TOTAL TURNOVER WHILE COMPU TING THE DEDUCTION U/S 10A. WITH THESE, THE GROUND IS CONSIDERE D ALLOWED. 35. THE ADDITIONAL GROUND RAISED IN THIS YEAR IS WI TH REFERENCE TO EXCLUSION OF FOREIGN CURRENCY FROM THE E XPORT TURNOVER. FOR THE REASONS STATED ABOVE, WE DIRECT THE AO/TPO TO E XCLUDE THE SAME AMOUNT FROM THE TOTAL TURNOVER AS WELL WHILE COMPU TING THE DEDUCTION U/S 10A. ADDITIONAL GROUND IS ALLOWED. 36. IN THE RESULT, ITA NO. 1905/HYD/2011 IS ALLOWED SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 25 -: ITA NO. 1138/HYD/2013 (AY. 2008-09) 37. IN THIS APPEAL, ASSESSEE HAS FILED 10 REVISED G ROUNDS. OUT OF WHICH, GROUND NOS. 2 & 3 ON REOPENING OF ASSE SSMENT ARE WITHDRAWN. 38. GROUND NO. 4 PERTAINS TO THE ISSUE OF REFERENCE MADE TO SPECIAL AUDIT U/S. 142(2A). IT WAS THE CONTENTION THAT ASSESSEES ACCOUNTS ARE NOT CUMBERSOME AND REFERENCE WAS MADE WI TH AN INTENTION TO GAIN TIME WHICH CONSTITUTES MISUSE OF PROVI SIONS OF LAW. HOWEVER, AFTER CONSIDERING THE ORDER OF THE AO AND THE CIRCUMSTANCES IN WHICH SATYAM GROUP WAS OPERATING AT THE RELEVANT POINT OF TIME, WE ARE OF THE OPINION THAT, AO H AS EXERCISED HIS JURISDICTION TO REFER THE MATTER TO SPECIAL U/S. 14 2(2A) FOR VALID REASONS AND ACCORDINGLY THIS GROUND IS REJECTED. 39. GROUND NO. 5 PERTAINS TO EXCLUSION OF COMMUNICA TION CHARGES FROM EXPORT TURNOVER. IT WAS ALSO CONTENTION TH AT AO EXCLUDED THE BRANCH EXPENSES AS PART OF COMMUNICATION CHARGES WHICH ARE NOT TO BE INCLUDED. THE BRANCH EXPENSES CA NNOT BE CONSIDERED AS COMMUNICATION EXPENSES UNLESS THERE IS A FINDING THAT THESE ARE INCURRED FOR DELIVERY OF PRODUCTS OR SE RVICES AS PER THE PROVISIONS AND DO FALL WITHIN THE DEFINITION. AO I S DIRECTED TO EXAMINE THIS ISSUE AFTER GIVING DUE OPPORTUNITY TO AS SESSEE.. AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF C IT VS. GEM PLUS JEWELLERY INDIA LTD., [330 ITR 175] (BOM) AND A LSO SPECIAL BENCH DECISION OF THE ITAT, CHENNAI IN THE CASE OF ITO VS. SAK SOFT LTD. [313 ITR (AT) 353], AO IS DIRECTED TO EXCLUD E WHAT EVER EXPENSES INCLUDING COMMUNICATION EXPENSES SO DETERM INED ARE SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 26 -: EXCLUDED FROM EXPORT TURN OVER, THE SAME IS ALSO TO BE EXCLUDED FROM TOTAL TURNOVER AS WELL. THIS GROUND IS ALLOWED. 40. SIMILARLY, GROUND NOS. 6 & 7 PERTAINS TO EXCLUSI ON OF EXPENDITURE IN FOREIGN CURRENCY. THE GROUND ITSELF I S THAT THE SAME AMOUNT MAY BE EXCLUDED FROM THE TOTAL TURNOVER AS WELL. FOLLOWING THE PRINCIPLES ON THE SUBJECT AS LAID DOWN BY THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD., [330 ITR 175] (BOM) AND ALSO SPECIAL BENCH DECISION OF THE ITAT, CHENNAI IN THE CASE OF ITO VS. SAK SOFT LTD. [313 IT R (AT) 353], AO IS DIRECTED TO EXCLUDE THE SAME FROM THE TOTAL TURNOVE R AS WELL. GROUND IS ALLOWED. 41. GROUND NO. 8 IS ON THE ISSUE OF NOT ALLOWING DED UCTION U/S. 10A ON THE ENHANCE INCOME, AFTER DISALLOWANCE O F ENTIRE COMMISSION PAID. IT WAS THE CONTENTION THAT THE DISALLOW ANCE OF EXPENDITURE CLAIM WILL INCREASE THE PROFITS OF THE BUSI NESS AND THEREFORE, A HIGHER DEDUCTION SHOULD HAVE BEEN ALLOWE D BY THE AO. EVEN THOUGH, THERE IS MERIT IN ASSESSEES CONTENTION, SI NCE WE HAVE ALLOWED THE COMMISSION PAYMENT IN THE NEXT GROUND, THER E IS NO SUCH CONSIDERATION REQUIRED FOR THIS GROUND. THE GRO UND IS ACADEMIC IN NATURE. ACCORDINGLY, SAME IS REJECTED. 42. GROUND NO. 9 PERTAINS TO DISALLOWANCE OF COMMISS ION PAID TO VENTURE GLOBAL ON ENTIRE SALES TO THE TUNE OF RS . 6.36 CRORES, UNDER THE CUP METHOD WITH OUT THERE BEING ANY COMPARABLE CASES. FOR THE REASONS STATED ABOVE IN THE EARLIER ASSESSMENT YEARS, INSTEAD OF DISALLOWANCE OF THE COMMI SSION ATTRIBUTABLE TO SALES MADE TO SATYAM GROUP, THE ENTIRE CO MMISSION SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 27 -: PAID WAS DISALLOWED WITHOUT ASSIGNING ANY REASONS. F OR THE REASONS STATED IN EARLIER YEARS, WE ARE OF THE OPINION THAT TPO IS NOT CORRECT IN DISALLOWING THE AMOUNT BY DETERMINING TH E ALP AT NIL. AS STATED IN EARLIER YEARS, THE COMMISSION PAID TO VENTURE IS PAYABLE AND ACCORDINGLY, THE GROUND IS CONSIDERED AL LOWED. 43. IN THE RESULT, APPEAL IN ITA NO. 1138/HYD/2013 IS PARTLY ALLOWED. 44. TO SUM-UP, REVENUE APPEAL IN ITA NO. 217/HYD/20 09 IS DISMISSED. ASSESSEES APPEALS IN ITA NO. 1590/HYD/2010 IS ALLO WED FOR STATISTICAL PURPOSES, ITA NO. 1138/HYD/2013 IS PARTLY ALLOWED & ALL THE REMAINING APPEALS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 26 TH AUGUST, 2016 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 26 TH AUGUST, 2016 TNMM SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED :- 28 -: COPY TO : 1. SATYAM VENTURE ENGINEERING SERVICES PRIVATE LIMITED, 1-8-301 TO 306, ASHOKA MY HOME CHAMBERS, SP ROAD, SECUNDERABAD. 2. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-3, HYDERABAD. 3. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1), HYDERABAD. 4. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCL E-9, HYDERABAD. 5. ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -3(2 ), HYDERABAD. 6. DISPUTE RESOLUTION PANEL (DRP), HYDERABAD. 7. THE DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATI ON, INCOME TAX TOWERS, HYDERABAD. 8. THE ADDL. COMMISSIONER OF INCOME TAX (TRANSFER P RICING), HYDERABAD. 9. D.R. ITAT, HYDERABAD. 10. GUARD FILE.