SCHL (INDIA) P. LTD, MUMBAI V. DCIT RG 8(2)(1), MUMBAI

ITA 2495/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5567 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 06-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUNIL K JHA
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Corroborative evidences; TDS
• Section: 143(3); 40(a)(ia); 37(1); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHR I MANOJ KUMAR AGGARWAL , ACCOUNTANT MEMBER IT (TP) A NO. 2495 / MUM . /201 7 ( ASSESSMENT YEAR : 20 12 13 ) SHL INDIA PVT. LTD. 902, 9 TH FLOOR, PENINSULA CORPORATE PARK TOWER 1, GANPATRAO KADAM MARG LOWER PAREL, MUMBAI 400 013 PAN AADCS2982D . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX RANGE 8(2)(1), MUMBAI . RESPONDENT ASSESSEE BY : SHRI VIJAY MEHTA REVENUE BY : SHRI SUNIL K. JHA DATE OF HEARING 04.06.2019 DATE OF ORDER 30.08.2019 O R D E R PER SAKTIJIT DEY. J.M. CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AGAINST FINAL ASSESSMENT ORDER DATED 31 ST JANUARY 2017, PASSED UNDER SECTION 143(3) R/W SECTION 144C(13) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 20 12 13 , IN PURSUANCE TO THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL 2 , MUMBAI, (FOR SHORT THE DRP ). 2 SHL INDIA PVT. LTD. 2 . G ROUND NO.1, BEING A GENER AL GROUND DOES NOT REQUIRE ADJUDICATION. 3 . IN GROUND NO.2, THE ASSESSEE HAS RAISED VARIOUS ISSUES RELATING TO THE ADDITION OF ` 1,36,42,150, MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT RELATING TO INTERNATIONAL TRANSACTION OF PAYMENT OF COST RECHARGE. HO WEVER, THE DISPUTE BETWEEN THE PARTIES IS PRIMARILY WITH REGARD TO SELECTION OF TWO COMPARABLES VIZ . TCS E SERVE LTD. AND E CLERX LTD., THEREFORE, AT THE OUTSET, WE PROCEED TO DEAL WITH THE AFORESAID ISSUE. 4 . BRIEF FACTS RELATING TO THIS ISSU E ARE, THE ASSESSEE IS AN INDIAN COMPANY. AS STATED BY THE TRANSFER PRICING OFFICER, ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING SHL PRODUCTS AND SOLUTIONS TO THE CLIENTS IN INDIA IN VARIOUS INDUSTRIES SUCH AS BANKING, INSURANCE, RETAIL, MANUFACTURING, ETC., AND ALSO PERFORMS RESEARCH AND DEVELOPMENT AS WELL AS BUSINESS SUPPORT SERVICE. IT ALSO PROVIDES PRODUCT CONSULTING, TRAINING, ONE TO ONE ASSESSMENTS AND GROUP ASSESSMENTS THROUGH QUALIFIED PSYCHOLOGISTS WHICH INCLUDES SCIENCE BASED ASSESSMENT, BENC H MARK DATA, TECHNOLOGIES AND CONSULTANCY SERVICES TO HELP ORGANIZATI ON ASSESS, SELECT AND DEVELOP RIGHT PEOPLE FOR RIGHT ROLES. ACCORDING TO THE TRANSFER PRICING OFFICER, THE SUPPORT SERVICE S PROVIDED BY T HE ASSESSEE TO ITS OVERSEAS ASSOCIATED AE ARE IN 3 SHL INDIA PVT. LTD. TH E NATURE OF HIGH END CONSULTANCY WHICH FALLS IN THE DOMAIN OF KNOWLEDGE P ROCESSING OUTSOURCING ( KPO ) SERVICES. AS PER THE AUDIT R EPORT FURNISHED IN FORM NO.3CEB, D URING THE YEAR UNDER CO NSIDERATION, THE ASSESSEE ENTERED INTO A NUMBER OF INTERNATIONAL T RANS ACTIONS WITH ITS OVERSEAS A E. HOWEVER, THE DISPUTE IN THE PRESENT APPEAL IS WITH REGARD TO PAYME NT MADE TOWARDS COST RECHARGE AMOUNTING TO ` 12,12,43,791. AS REVEALED FROM THE FACTS ON RECORD , IN PURSUANCE TO INTER COMPANY TRADING AGREEMENT DATED 1 ST JANUA RY 2010, THE ASSESSEE MADE THE AFORESAID PA YMENT TOWARDS COST RECHARGE TO THE AE FOR THE FOLLOWING: I ) GRANT OF A LICENSE TO MARKET, DISTRIBUTE, RENT AND DELIVER THE SHL SOLUTIONS TO CLIENTS IN INDIA, WHICH INCLUDES PSYCHO ME TRIC TEST SOFTWARE, ASSESSMENTS, CONSULTANCY AND TRAINING; AND II ) AVAILING OF CERTAIN INTRA GROUP SERVICE S, INCLUDING INFORMATION TECHNOLOGY SERVICES, BUSINESS SUPPORT SERVICE (INCLUDING FINANCE SERVICE S , LEGAL SERVICE S AND HUMAN RESOURCES SERVICES) AND R & D SERVICES FROM ITS A E. 5 . TO BENCH MARK THE AFORESAID INTERNATIONAL TRANSACTION IN THE TRANSFER PRICING STUDY REPORT, THE ASSESSEE SELECTED TRANSACTIONAL NET MARGIN METHOD (TNMM) AS TH E MOST APPROPRIATE METHOD WITH NET PROFIT 4 SHL INDIA PVT. LTD. MARGIN AS PROFIT LE VEL INDICATOR (PLI). BY CONDUCTING SEARCH IN T HE DATABASE S, THE ASSESSEE SELECTED ELEVEN COMPANIES AS COMPARABLE S WITH ARITHMETIC MEAN OF 3.25% ON MULTIPLE YEAR DATA AND UPDATED MARGIN OF 4.90% ON THE BASIS OF SINGLE YEAR DATA. SINCE , THE MARGIN SHOWN BY THE ASSESSEE @ 5.15% WAS WITHIN 5% OF THE ARIT HMETIC MEAN OF THE COMPARABLES, THE T RANSACTION WITH THE AE WAS CLAIMED TO BE AT ARM'S LENGTH. OUT OF THE LIST OF NINE COMPARABLES SUBMITTED BY THE ASSESSEE BEFORE THE TRANSFER PRICING OFFICER ON SINGLE YEAR MARGIN BASIS, THE TRANSFER PRICING OFFICER RETAI NED SIX OF THE COMPARABLES WHILE REJECTING THREE. IN ADDITION, THE TRANSFER PRICING OFFICER SELECTED TWO ADDITIONAL COMPARABLES ON HIS OWN WHICH ARE TCS E SERVE LTD. AND E CLERX LTD. THEREFORE, FINALLY, THE TRANSFER PRICING OFFICER SELECTED EIGHT COMPARABL ES WITH ARITHMETIC MEAN OF 15.80%. BY APPLYING THE ARITHMETIC MEAN OF SELECTED COMPARABLES, THE ASSESSING OFFICER DETERMINED THE ARMS LENGTH PRICE OF COST RECHARGE AT ` 10,78,56,248, WHICH RESULTED IN AN ADJUSTMENT OF ` 1,36,42,150. AS DISCUSSED EARLIER, THE ASSESSEE HAS DISPUTED SELECTION OF TCS E SERVE LTD. AND E CLERX LTD. IN THE PRESENT APPEAL. 6 . OBJECTING TO THE SELECTION OF TCS E SERVE LTD., THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE COMPANY CANNOT BE TREATED AS COMPARABLE DUE TO ITS HUGE TURNOVER WHICH IS MORE THAN SEVENTY ONE TIMES OF ASSESSEES TURNOVER. FURTHER, HE SUBMITTED , SINCE THE 5 SHL INDIA PVT. LTD. COMPANY BELONGS TO THE TATA GROUP OF COMPANIES, IT HAS VARIOUS ADVANTAGES OVER THE ASSESSEE INCLUDING BRAND VALUE, GOODWILL, INTANGIBLES, ETC. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE ANNUAL REPORT OF THE COMPANY. FURTHER, HE SUBMITTED , THAT THE ASSESSEE ENJOYS THE BRAND VALUE OF THE GROUP IS EVIDENT FROM THE FACT THAT IT HAS MADE CONTRIBUTI ON TOWARDS TATA BRAND EQUITY. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE ANNUAL REPORT OF THE COMPANY. FURTHER, HE SUBMITTED , DURING THE YEAR UNDER CONSIDERATION, IT HAS ACQUIRED ANOTHER COMPANY VIZ; CITI GROUP GLOBAL SERVICE LTD. A S A RESULT , THERE IS A QUANTUM JUMP IN THE PROFITABILITY OF THIS COMPANY. THUS, HE SUBMITTED , THE COMPANY CANNOT BE TREATED AS COMPARABLE TO THE ASSESSEE. IN SUPPORT OF SUCH CONTENTION, THE LEARNED AUTHORISED REPRESENTATIVE RELIED UPON THE FOLLOWING DECISIONS: I ) CIT V/S PAINTA IR WATER INDIA PVT. LTD., [2016] 381 ITR 216 (BOM.); II ) PCIT V/S B.C. MANAGEMENT SERVICES PVT. LTD., [2018] 403 ITR 45 (DEL.); III ) AGILENT TECHNOLOGIES (INTERNATIONAL) PVT. LTD. V/S ITO, ITA NO.1620/DEL./2015 &ORS, DATED 12 TH FEBRUARY 2018; AND IV ) INTGREON MANAGED SOLUTIONS INDIA PVT. LTD. V/S ACIT, ITA NO.6927/MUM./2016, DATED 14.12.2018. 7 . AS REGARDS E CLERX LTD., THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE TURNOVER OF THIS COMPANY IS 21 TIMES MORE THAN THE TURNOVER OF THE ASSESSEE. THUS, HE SUBMITTED , THE TURNOVER OF THIS 6 SHL INDIA PVT. LTD. COMPANY BEING ABNORMALLY HIGHER THAN THE TURNOVER OF THE ASSESSEE, IT CANNOT BE TREATED AS COMPARABLE. IN SUPPORT OF SUCH CONTENTION, HE RELIED ON THE DECISION OF THE TRIBUNAL, DELHI BENCH, IN AGILENT TECHNOLOGIES (INTERN ATIONAL) PVT. LTD. (SUPRA) . 8 . THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELYING UPON THE OBSERVATIONS OF THE TRANSFER PRICING OFFICER AND LEARNED DRP SUBMITTED , NEITHER THE ASSESSEE NOR THE TRANSFER PRICING OFFICER HAVE APPLIED TURNOVER FILTER. THEREFORE, A COMPANY CANNOT BE EXCLUDED DUE TO HIGH TURNOVER. FURTHER, HE SUBMITTED , THE TURNOVER OF A COMPANY WOULD HAVE NO IMPACT ON THE PROFITABILITY. FURTHER, HE SUBMI TTED , EXCEPTION AL PROFIT EARNED BY A COMPANY CANNOT BE A CRITERIA FOR REJECTING A COMPARABLE IF THE COMPANY IS OTHERWISE FUNCTIONALLY SIMILAR. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN RAMPGREEN SOLUTIONS PVT. LTD. V/S CIT, ( ITA 102/2015 DATED AUGUST 10, 2015 ) . THUS, HE SUBMITTED , THERE IS NO REASON TO EXCLUDE THESE TWO COMPANIES AS COMPARABLES. 9 . IN REJOINDER, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , NONE OF THE COMPANIES IN THE FINAL LIST OF COMPARABLE SELECTED BY THE TRANSFER PRICING OFFICER EXCEPT TCS E SERVE LTD. AND E CLERX LTD. HAVE TURNOVER EXCEEDING TEN TIMES OF THE TURNOVER OF THE ASSESSEE. THUS, HE 7 SHL INDIA PVT. LTD. SUBMITTED , THE COMPANIES HAVING SUBSTANTIAL L Y HIGH TURNOVER CANNOT BE TREATED AS COMPARABLE S . 10 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECISIONS RELIED UPON. AS FAR AS TCS E SERVE LTD. IS CONCERNED, UNDISPUTEDLY, IT BELONGS TO THE TATA GROUP AND CARRIES THE BRAND VALUE OF THE GROUP. FROM THE ANNUAL REPORT OF THE COMPANY, IT IS EVIDENT THAT IT HAS ALSO CONTRIBUTED TOWARDS BRAND CREATION. THAT BEING THE CASE, THOUGH , THERE MAY BE SOME FUNCTIONAL SIMILARITY BETWEEN THE ASSESSEE AND T H IS COMPANY, HOWEVER, IT CANNOT BE TREATED AS COMPARABLE TO THE ASSESSEE BECAUSE OF ITS HIGH BRAND VALUE WH ICH CERTAINLY MUST HAVE IMPACTED THE PROFITABILITY OF THE COMPANY. THIS VIEW WAS EXPRESSED BY THE T RIBUNAL IN CASE OF B.C. MANAGEMENT SERVICES PVT. LT D. (SUPRA) , WHICH WAS CONFIRMED BY THE HONBLE DELHI HIGH COURT IN B.C. MANAGEMENT SERVICES PVT. LTD. (S UPRA). THAT APART, THE TURNOVER OF THIS COMPANY FOR THE IMPUGNED ASSESSMENT YEAR IS ` 1578.44 CRORE AS COMPARED TO ASSESSEES TURNOVER OF ` 22,07,08,981. THUS, AS COULD BE SEEN, THE TURNOVER OF THE COMPANY IS SUBSTANTIALLY HIGHER, WORKING OUT TO ALMOST 71 TIMES OF THE TURNOVER OF THE ASSESSEE. THE HON'BLE JURISDICTIONAL HIGH COURT IN PEN TAIR WATER INDIA PVT. LTD. (SUPRA) WHILE APPROVING THE V IEW EXPRESSED BY THE TRIBUNAL THAT THE TURNOVER HAS A CRUCIAL BEARING IN COMPARABILITY ANALYSIS HAS OBSERVE D THAT PROFIT EARNED BY A LARGE 8 SHL INDIA PVT. LTD. COMPANY CANNOT BE BENCH MARKED OR EQUATED WITH RELATIVELY LESS TURNOVER COMPANY. IT IS RELEVANT TO OBSERVE , THE TRIBUN AL, DELHI BENCH, IN AGILENT TECHNOLOGIES (INTERNATIONAL) PVT. LTD. (SUPRA) , EXCLUDED THIS COMPANY FROM BEING TREATED AS A COMPARABLE BY APPLYING THE TURNOVER CRITERIA AMONGST OTHERS. FURTHER, THE TRIBUNAL, MUMBAI BENCH, IN INTGREON MANAGED SOLUTIONS INDIA PVT. LTD. (SUPRA), HOLDING THAT THE TURNOVER IS A RELEVANT CRITERIA EXCLUDED THIS COMPANY FROM BEING TREATED AS COMPARABLE DUE TO SUBSTANTIALLY HIGH TURNOVER COMPARED TO THE TURNOVER OF THE ASSESSEE BEFORE IT. PERTINENTLY, THE AFORESAID DECISION OF T HE TRI BUNAL PERTAINS TO THE VERY SAME ASSESSMENT YEAR. IT IS FURTHER RELEVANT TO OBSERVE , THE OTHER COMPANIES SELECTED BY THE TRANSFER PRICING OFFICER , EXCEPT THE TWO COMPANIES DISPUTED BEFORE US , HAVE TURNOVER WITHIN THE RANGE OF TEN TIMES THE TURNOVER OF THE A SSESSEE. THEREFORE, APPLYING THE PRINCIPLE LAID DOWN IN THE DECISIONS CITED BEFORE US BY THE LEARNED AUTHORISED REPRESENTATIVE, WE HOLD THAT THERE SHOULD BE A UPPER LIMIT RELATING TO TURNOVER WHILE SELECTING COMPARABLES. IN OTHER WORDS, THE COMP ANIES HAVIN G SUBSTANTIALLY HIGH TURNOVER COMPARED TO THE ASSESSEE SHOULD NOT BE SELECTED AS COMPARABLE S . IN VIEW OF THE AFORESAID, WE HOLD THAT THE TCS E SERVE LTD., CANNOT BE TREATED AS COMPARABLE TO THE ASSESSEE. 11 . AS REGARDS E CLERX LTD., UNDISPUTEDLY, THE TURNOVER OF THIS COMPANY IS ` 472 CRORE COMPARED TO THE ASSESSEES TURNOVER OF ` 9 SHL INDIA PVT. LTD. 22.07 CRORE. THUS, THE TURNOVER OF THIS COMPANY IS MORE THAN TWENTY ONE TIMES THE TURNOVER OF THE ASSESSEE. THAT BEING THE CASE, THIS COMPANY HAS TO BE TREATED AS A SUBSTANTIAL HIGH TURNOVER COMPANY. AS OBSERVED BY US EARLIER, THE REST OF THE COMPANIES SELECTED BY THE TRANSFER PRICING OFFICER ARE HAVING TURNOVER WITHIN THE RANGE OF TEN TIME S THE TURNOVER OF THE ASSES SEE. THEREFORE, THERE MUST BE PARITY WITH REGARD TO SELECTION OF COMP ANIES FOR COMPARABILITY ANALYSIS. WHEN REST OF THE COMPARABLES SELECTED BY THE TRANSFER PRICING OFFICER ARE HAVING TURNOVER WITHIN THE RANGE OF TEN TIMES THE TURNOVER OF THE ASSESSEE, HE SHOULD NOT HAVE SELECTED COMPARABLES EXCEEDING THAT LIMIT. FOR THE AF ORESAID REASONS, WE HOLD THAT E CLERX LTD. SHOULD ALSO BE EXCLUDED FROM THE LIST OF COMPARABLES. 12 . IN THE COURSE OF HEARING, THE LEARNED AUTHORISED REPRESENTATIVE HAD SUBMITTED BEFORE US THAT IN THE EVENT OF EXCLUSION OF THE AFORESAID TWO COMPANIES ASSESSEE S MARGIN WOULD FALL WITHIN 5% OF THE REST OF THE COMPARABLES SELECTED BY THE TRANSFER PRICING OFFICER, HENCE, OTHER ISSUES RELATING TO THE TRANSFER PRICING ADJUSTMENT WOULD BECOME ACADEMIC. IN VIEW OF THE AFORESAID SUBMISSIONS OF THE LEARNED AUTHORISED R EPRESENTATIVE, WE REFRAIN FROM DECIDING ALL OTHER ISSUES RELATING TO THE TRANSFER PRICING ADJUSTMENT WHICH ARE LEFT OPEN FOR ADJUDICATION IF THEY ARISE IN ANY OTHER ASSESSMENT YEAR IN FUTURE. GROUNDS ARE PARTLY ALLOWED. 10 SHL INDIA PVT. LTD. 13 . IN G ROUND NO.3, THE ASSESSEE HAS CH ALLENGED THE ADDITION MADE ON ACCOUNT OF CHANGE IN REVENUE RECOGNITION POLICY. 14 . BRIEF FA CTS ARE, THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING. UNDER THE SAID ACCOUNTING SYSTEM, THE ASSESSEE USED TO RECOGNIZE REVENUE ON THE BASIS OF INVOICES R AISED TOWARDS SERVICES RENDERED/ GOODS SOLD. HOWEVER, DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2010 11, THE ASSESSEE CHANGED ITS REVENUE RECOGNITION POLICY BY RECOGNISING REVENUE ON THE BASIS OF ACTUAL USAGE OF WEB UNITS BY ITS CUSTOMERS AND NOT O N THE BASIS OF INVOICES RAISED. AFTER EXAMINING THE MATERIAL ON RECORD, THE TRANSFER PRICING OFFICER OBSERVED , AS A RESULT OF CHANGE IN REVENUE RECOGNITION POLICY, THE REVENUE SHOWN BY THE ASSESSEE IN THE ASSESSMENT YEAR 2010 11 WAS LESSER BY ` 77,63,974. HE OBSERVED , WHIL E COMPLETING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2010 11, THE ASSESSING OFFICER ADDED BACK THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE. SIMILAR ADDITION WAS ALSO MADE IN ASSESSMENT YEAR 2011 12. HE OBSERVED , DUE TO CHANGE IN REVENUE R ECOGNITION POLICY, THE PROFIT HAS BEEN REDUCED BY ` 95,11,929. ACCORDINGLY, HE ADDED BACK THE SAME AMOUNT TO THE INCOME OF THE ASSESSEE. WHILE CONSIDERING THE OBJECTIONS OF THE ASSESSEE ON THE SAID ISSUE, LEARNED DRP UPHELD THE DECISION OF THE ASSESSING OF FICER. 11 SHL INDIA PVT. LTD. 15 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ISSUE RELATING TO THE IDENTICAL ADDITION MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT YEA R 2010 11, IS NOW IN APPEAL BEFORE LEARNED COMMISSIONER (APPEALS). THUS, HE SUBMITTED , THE ISSUE MAY BE RESTORED BACK TO THE ASSESSING OFFICER FOR RE ADJUDICATION ON THE BASIS OF THE DECISION TO BE TAKEN BY LEARNED COMMISSIONER (APPEALS) IN ASSESSMENT YEAR 2010 11. 16 . THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO AGREED THAT THE ISSUE SHOULD BE RESTORED BACK T O THE ASSESSING OFFICER FOR RE ADJUDICATION. 17 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. UNDISPUTEDLY, THE ASSESSING OFFICER HAS MADE THE DISPUTED ADDITION RELYING UPON THE ASSESSMENT ORDER PASSED ON IDENTICAL ISSUE IN THE ASS ESSMENT YEAR 2010 11 AND 2011 12. IT IS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE INITIAL YEAR WHEREIN THE ISSUE AROSE FOR THE FIRST TIME I.E., 2010 11, IS STILL PEN DING FOR ADJUDICATION BEFORE LEARNED COMMISSIONER (APPEALS). CONSIDERING THE ABOVE, WE ARE INCLINED TO RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION KEEPING IN VIEW THE DECISION TO BE TAKEN BY LEARNED COMMISSIONER (APPEALS) WHILE DECIDING THE ISSUE IN THE ASSESSMENT YEAR 2010 11. OF COURSE, THE ASSESSEE MUST BE GIVEN A REASONABLE 12 SHL INDIA PVT. LTD. OPPORTUNITY OF BEING HEARD BEFORE DECIDING THE ISSUE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 18 . IN GROUND NO.4, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF PROFESSIONAL FEE AMOUNTING TO ` 2,58,81,235. 19 . BRIEF FACTS ARE, IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HAS CLAIMED DEDUCTION ON ACCOUNT OF PROFESSIONAL FEE PAID OF ` 2,58,81,235, CALLED UPON THE ASSESSEE TO FURNISH PARTY WISE DETAILS OF PAYMENTS MADE WITH SUPPORTING EVIDENCES SUCH AS BILLS, AGREEMENTS, BASIS OF ALLOCATION, TDS DEDUCTED, ETC. AS ALLEGED BY THE ASSESSING OFFICER, THOUGH THE ASSESSEE MADE SUBMISSIONS REGARDING THE PAYMENT MADE, HOWEVER, NECESSARY DETAILS WERE NOT FURNISHED. THE ASSESSING OFFICER OBSERVED , SIMILAR CLAIM MADE BY THE ASSESSEE IN THE ASSESSMENT YEAR 2008 09 WAS DISALLOWED WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THE DISALLOWANCE WAS ALSO CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS). HE ALSO OBSERVED THAT SIMILAR CLAIM MADE BY THE ASSESSEE WAS DISALLOWED IN ASSESSMENT YEAR 2010 11 AND 2011 12. ACCORDINGLY, HE PROCEEDED TO DISALLOW THE EXPENDITURE CLAIMED BY THE ASSESSEE. 20 . LEARNED DRP ALSO SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 13 SHL INDIA PVT. LTD. 21 . THE L EARNED AUTHORISED REPRESENTATIVE SUBMITTED , WHILE DECIDING IDENTICAL ISSUE IN ASSESSMENT YEAR 2008 09, LEARNED COMMISSIONER (APPEALS) HAD ALLOWED ASSESSEES CLAIM. HOWEVER, THE REVENUE CHALLENGED THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) BEFORE TH E TRIBUNAL. HE SUBMITTED , WHILE DISPOSING OFF THE APPEAL FILED BY THE REVENUE THE TRIBUNAL RESTORED THE ISSUE TO THE ASSESSING OFFICER FOR ADJUDICATION AFTER CONSIDERING THE EVIDENCES FURNISHED BY THE ASSESSEE. HE SUBMITTED , WHILE COMPLYING TO THE DIRECTIO NS OF THE TRIBUNAL IN ASSESSMENT ORDER DATED 28 TH DECEMBER 2018, THE ASSESSING OFFICER HAS ALLOWED ASSESSEES CLAIM. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE PAYMENTS MADE ARE NOT TO THE A ES BUT TO THE PROFESSIONALS WORKING IN INDIA. THEREFORE, ASSESSEES CLAIM HAS TO BE ALLOWED. WITHOUT PREJUDICE, HE SUBMITTED , IN VIEW OF THE DECISION OF THE TRIBUNAL IN ASSESSMENT YEAR 2008 09, THE ISSUE MAY BE RESTORED BACK TO THE ASSE SSING OFFICER FOR VERIFYING ASSESSEES CLAIM. 22 . THE LEARNED DEPARTMENTAL REP RESENTATIVE SUBMITTED , THE ISSUE MAY BE RESTORED TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 23 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS COULD BE SEE N FROM THE FACTS ON RECORD, ASSESSEES CLAIM WAS DISALLOWED BY THE AS SESSING OFFICER PRIMARILY DUE TO THE NON FURNISHI NG OF EVIDENCES CALLED FOR. LEARNED DRP , THOUGH , H AS OBSERVED 14 SHL INDIA PVT. LTD. THAT IN ASSESSMENT YEAR 2008 09, LEARNED COMMISSIONER (APPEALS) HAS ALLOWED SIMILAR CLAIM, HOWEVER, TO KEEP THE ISSUE ALIVE UPHELD THE DISALLOWAN CE MADE BY THE ASSESSING OFFICER. NOTABLY, WHILE DECIDING THE APPEALS FILED BY BOTH THE PAR TIES AGAINST THE DECISION OF LEARNED COMMISSIONER (APPEALS) IN ASSESSMENT YEAR 2008 09, THE TRIBUNAL IN ITA NO.4092 & 4419/MUM./2012, DATED 6 TH DECEMBER 2017, HAS RESTORED THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER CONSIDERING THE EVIDENCES FILED BY THE ASSESSEE. IN VIEW OF THE AFORESAID, WE RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER CONSIDERING T HE EVIDENCES FILED BY THE ASSESSEE. THE ASSESSING OFFICER SHALL PROVIDE ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 24 . IN G ROUND NO.5, THE ASSESSEE HAS CHALLENGED THE ADDITION OF ` 1,22,45,850, DUE TO UN RECONCILED DIFFERENCE IN ANNUAL INFORMATION R EPORT (AIR). 25 . BRIEF FACTS ARE, AS PER THE AIR INFORMATION AVAILABLE ON RECORD, THE ASSESSING OFFICER FOUND DIFFERENCE IN INCOME SHOWN BY T H E ASSESSEE. THEREFORE, HE CALLED UPON THE ASSESSEE TO RECONCILE THE DIFFERENCE. IN RESPONSE, IT WAS SUBM ITTED BY THE ASSESSEE THAT THE DIFFERENCE IN INCOME BETWEEN 26AS AND THE BOOKS OF ACCOUNT IS ON ACCOUNT OF SERVICE TAX. HOWEVER, THE ASSESSING OFFICER WAS NOT 15 SHL INDIA PVT. LTD. CONVINCED WITH THE EXPLANATION OF THE ASSESSEE. HE OBSERVED , ADDITION ON ACCOUNT OF SIMILAR DIFFERENCE WAS MA DE IN ASSESSMENT YEAR 2008 09 TO 2011 12. ACCORDINGLY, HE PROCEEDED TO ADD THE AMOUNT OF ` 1,22,45,850. THE ASSESSEE CH ALLENGED THE ADDITION BEFORE LEARNED DRP. 26 . A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, LEARNED DRP DIRECTED THE ASSESSING OFFICER TO VERIFY THE RECONCILIATION STATEMENT PREPARED BY THE ASSESSEE ALONG WITH THE AIR DATA AND MAKE ADDITION ONLY IN RESPECT OF ENTRIES WHICH REMAINS UNEXPLAINED. WHILE I MPLEMENTING THE DIRECTION OF LEARNED DRP, THE ASSESSING OFFICER, HOWEVER, MADE THE SAME A DDITION BY STATING THAT THE DIFFERENCE REMAINS UN - RECONCILED. 27 . REITERATING THE STAND TAKEN BEFORE THE DEPARTMENTAL AUTHORITIES, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE DIFFERENCE IN RECEIPT AS PER THE BOOKS OF ACCOUNT AND THE AIR INFORMATION IS ON ACCOUNT OF SERVICE TAX. DRAWING OUR ATTENTION TO THE RECONCILIATION STATEMENT PLACED IN THE PAPER BOOK, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE RECEIPT SHOWN BY THE ASSESSEE IS MORE THAN THE RECEIPT SHOWN IN AIR. THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION WITHOUT PROPERLY VERIFYING THE CLAIM OF THE ASSESSEE. 16 SHL INDIA PVT. LTD. 28 . THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , SINCE THE ASSESSEE FAILED TO RECONCILE THE DIFFERENCE PROPERLY, THE ADDITION WAS MADE. 29 . WE HAVE CONS IDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS THE CONTENTION OF THE ASSESSEE BEFORE THE DEPARTMENTAL AUTHORITIES AS WELL AS BEFORE US THAT THE DIFFERENCE IN RECEIPT IS ON ACCOUNT OF SERVICE TAX. IT IS OBSERVED , BEFORE LEARNED DRP THE A SSESSEE HAS FURNI SHED A RECONCILIATION STATEMENT. FROM THE AFORESAID STATEMENT IT APPEARS THAT THE RECEIPT SHOWN BY THE ASSESSEE IS MORE THAN THE AIR FIGURE. FROM THE AFORESAID FACTS, IT APPEARS THAT THE ASSESSING OFFICER WITHOUT PROPERLY EXAMINING THE REC ONCILIATION STATEMENT AND OTHER EVIDENCES FURNISHED BY THE ASSESSEE HAS PROCEEDED TO MAKE THE ADDITION, WHICH IN OUR VIEW IS IMPROPER. ACCORDINGLY, WE RESTORE THE ISSUE TO THE ASSESSING OFFICER WITH A DIRECTION TO PROPERLY VERIFY THE RECONCILIATION STATEME NT AND ALL OTHER EVIDENCES FURNISHED BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM. THE ASSESSING OFFICER ALSO MUST ALLOW REASONABLE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE DIFFERENCE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 30 . IN GROUND NO.6, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF EXCESS TDS WRITTEN OFF AMOUNTING TO ` 12,94,058. 17 SHL INDIA PVT. LTD. 31 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE AMOUNT OF ` 15,85,201, WAS CLAIMED BY THE ASSESSEE TOWARDS BAD DEBT WRITTEN OFF. AFTER VERIFYING THE DETAILS FURNISHED, HE FOUND THAT THE DEDUCTION CLAIMED INCLUDED THE AMOUNT OF ` 12,94,058, BEING EXCESS TDS W RITTEN OFF. WHEN CALLED UPON TO EXPLAIN, IT WAS SUBMITTED BY THE ASSESSEE THAT THE DIFFE RENCE BETWEEN THE TDS ACCOUNTED IN THE BOOKS OF ACCOUNT AND APPEARING IN FORM NO.26AS, HAS BEEN WRITTEN OFF. IT WAS SUBMITTED , SUCH DIFFERENCE PERTAINS TO VARIOUS YEARS. IT WAS SUBMITTED , AS THE CORRESPONDING INVOICE S RELATIN G TO THE TDS WRITTEN OFF HAVE BEEN CONSIDERED AS PART OF REVENUE IN RESPECTIVE YEARS, THE TDS WRITTEN OFF IS IN THE NATURE OF BAD DEBT, HENCE, SHOULD BE ALLOWED. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE CLAIM AS ACCORDING TO HIM IT IS NOT IN TERM S OF SECTION 36(1)(VII) R/W SECTION 36(2) OF THE ACT. ACCORDINGLY, HE DISALLOWED ASSESSEES CLAIM. 32 . LEARNED DRP ALSO SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 33 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE AMOUNT RECEIVABLE BY THE A SSESSEE IS AS PER INVOICE S RAISED. WHEREAS, THE PAYMENTS MADE BY THE CUSTOMERS ARE AFTER DEDUCTION OF TAX AT SOURCE. THUS, HE SUBMITTED , THE TDS AMOUNT NOT REFLECTED IN FORM NO.26AS 18 SHL INDIA PVT. LTD. AND NOT CLAIMED BY THE ASSESSEE HAS TO BE WRITTEN OFF SINCE CORRESPONDING INCOME HAS BEEN OFFERED IN THE RESPECTIVE ASSESSMENT YEARS. THUS, HE SUBMITTED , ASSESSEES CLAIM HAS TO BE ALLOWED. 34 . THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , THE TDS NOT BEING IN THE NATURE OF BAD DEBT CANNOT BE WRITTEN OFF. 35 . WE HAVE CONSIDERED R IVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS THE CONTENTION OF THE ASSESSEE THAT THE TDS WRITTEN OFF REPRESENT THE AMOUNT OF TDS DEDUCTED BY THE CUSTOMER BUT NOT REFLECTED EITHER IN FORM NO.26AS OR CLAIMED BY THE ASSESSEE. UNDISPUTEDLY, THE A SSESSEE RECOGNIZES REVENUE ON THE BASIS OF INVOICES RAISED. WHEREAS, THE PAYMENT MADE BY THE CUSTOMERS ARE AFTER DEDUCTION OF TAX AT SOURCE. THEREFORE, THE TDS AMOUNT FORMS PART OF THE REVENUE SHOWN BY THE ASSESSEE. TO THAT EXTENT, WE ACCEPT ASSESSEES CON TENTION THAT THE TDS AMOUNT NOT CLAIMED BY THE ASSESSEE IS AN UNREALIZED DEBT. IN VIEW OF THE AFORESAID, WE DIRECT THE ASSESSING OFFICER TO VERIFY ASSESSEES CLAIM FACTUALLY AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 36 . IN GROUND NO.7, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF ` 9,67,343 UNDER SECTION 37(1) OF THE ACT. 19 SHL INDIA PVT. LTD. 37 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED TDS OF ` 9,67,343 , ON PROVISION MADE . THE ASSESSING OFFICER OBSERVED , SIMILAR CLAIM BY THE ASSESSEE IN ASSESSMENT YEAR 2008 09 AND 2009 1 0 WERE DISALLOWED UNDER SECTION 37(1) OF THE ACT. HE FURTHER OBSERVED , ASSESSEES CLAIM THAT THE EXPENDITURE IS ALLOWABLE SINCE THE ASSESSEE HAS DEDUCTED TAX AT SOURCE IN THE IMPUGNED ASSESSMENT YEAR WAS REJECTED BY THE ASSESSING OFFICER ON THE GROUND THAT THE DISALLOWANCE HAS BEEN MADE UNDER SECTION 37(1) OF THE ACT. THE AS SESSEE CHALLE NGED THE DISALLOWANCE BEFORE LEARNED DRP. 38 . AFTER CONSIDERING THE S UBMISSIONS OF THE ASSESSEE, LEARNED DRP OBSERVED THAT IT IS THE CLAIM OF THE ASSESSEE THAT THE DISALLOWANCE WAS MADE IN THE ASSESSMENT YEAR 2010 11 UNDER SECTION 40(A)(IA) OF TH E ACT DUE TO NON DEDUCT ION OF TAX AT SOURCE. THUS, LEARNED DRP OBSERVED , SINCE ASSESSEES CLA IM REQUIRES VERIFICATION OF RECORD OF RELEVANT ASSESSMENT YEARS , HE DIRECTED THE ASSESSING OFFICER TO VERIFY ASSESSEES CLAIM AND IF IT IS FOUND THAT DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT WAS MADE IN THE ASSESSMENT YEAR 2010 11, C ONSEQUENTIAL RELIEF SHOULD BE GRANTED IN THE IMPUG NED ASSESSMENT YEAR. HOWEVER, IN THE FINAL ASSESSMENT ORDER THE ASSESSING OFFICER AGAIN MADE THE DISALLOWANCE. 20 SHL INDIA PVT. LTD. 39 . THE LEARNED AUTHO RISED REPRESENTATIVE SUBMITTED , THE EXPENDITURE WAS INCURRED IN THE ASSESSMENT YEAR 2010 11. HOWEVER, SINCE THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE, IT WAS DISALLOWED IN THE SAID ASSESSMENT YEAR. HE SUBMITTED , THE DISPUTE RELATING TO THE DISALLOWANCE MAD E IN THE ASSESSMENT YEAR 2010 11 IS STI LL PENDING IN APPEAL BEFORE LEARNED COMMISSIONER (APPEALS). THEREFORE, HE SUBMITTED , IF ASSESSEES CLAIM IS DISALLOWED IN ASSESSMENT YEAR 2010 11, THEN IT SHOULD BE ALLOWED IN THE IMPUGNED ASSESSMENT YEAR SINCE THE AS SESSEE HAS DEDUCTED AND PAID TAX ON THE SAID AMOUNT IN THE IMPUGNED ASSESSMENT YEAR. THUS, HE SUBMITTED , THE ISSUE MAY BE RESTORED BACK TO THE ASSESSING OFFICER FOR RE ADJUDICATION ON THE BASIS OF DECISION TO BE TAKEN IN THE ASSESSMENT YEAR 2010 11. 40 . THE L EARNED DEPARTMENTAL REPRESENTATIVE ALSO AGREED FOR RESTORATION OF THE ISSUE TO THE ASSESSING OFFICER. 41 . HAV ING CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD, WE ARE OF THE VIEW THAT ASSESSEES CLAIM OF DEDUCTION IN THE IMPUGNED ASSESSMENT YEAR DEPENDS ON THE DECISION TO BE TAKEN BY THE LEARNED COMMISSIONER (APPEALS) IN RESPECT OF SIMILAR DISALLOWANCE MADE IN THE ASSESSMENT YEAR 2010 11. IF ASSESSEES CLAIM IS ACCEPTED IN ASSESSMENT YEAR 2010 11, THE DISALLOWANCE MADE IN THE IMPUGNED ASSESSM ENT YEAR HAS TO BE SUSTAINED. OTHERWISE , IF ASSESSEES CLAIM IS 21 SHL INDIA PVT. LTD. DISALLOWED IN ASSESSMENT YEAR 2010 11, IT HAS TO BE ALLOWED IN THE IMPUGNED ASSESSMENT YEAR AS THE ASSESSEE HAS DEDUCTED TDS IN CURRENT YEAR. ACCORDINGLY, WE RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION KEEPING IN VIEW THE DECISION TO BE TAKEN BY LEARNED COMMISSIONER (APPEALS) ON SIMILAR DISALLOWANCE MADE IN THE ASSESSMENT YEAR 2010 11. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 42 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 30.08.2019 SD/ - MANOJ KUMAR AG GARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 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