M/s. American Express India Private Limited, New Delhi V. DCIT, New Delhi

ITA 2712/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7642 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I2
• Next Hearing Date: 28-04-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 02-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A M GOVIL
• Assessee Lawyers: PARTH S; NAGESWAR RAO SANDEEP KARHAIL
• Keywords: Transfer pricing; International transaction; Scheme of amalgamation
• Section: 92C; 260A; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-2 : NEW DELHI) BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.2712/DEL./2014 (ASSESSMENT YEAR : 2005-06) AMERICAN EXPRESS INDIA PRIVATE LTD., VS. DCIT, METROPOLITAN SAKET, 7 TH FLOOR, CIRCLE 1 (1), OFFICE BLOCK, DISTRICT CENTRE, SAKET, NEW DELHI. NEW DELHI 110 017. (PAN : AAACA8163F) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI NAGESWAR RAO, SANDEEP KARHAIL AND PARTH, ADVOCATES REVENUE BY : SHRI A.M. GOVIL, CIT DR DATE OF HEARING : 28.04.2016 DATE OF ORDER : 16.05.2016 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, AMERICAN EXPRESS INDIA PRIVATE LTD. (HER EINAFTER REFERRED TO AS THE ASSESSEE), BY FILING THE PRESE NT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 16.12.2006 PASSE D BY THE CIT(A)/TPO/AO QUA THE ASSESSMENT YEAR 2005-06 ON TH E GROUNDS INTER ALIA THAT :- ITA NO.2712/DEL./2014 2 1. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) - XX ('LEARNED CIT(A)') HAS ERRED IN UPHOLDING THE ORDERS PASSED B Y THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 1 (1), NE W DELHI ('LEARNED AO') AND JOINT DIRECTOR OF INCOME TAX, TR ANSFER PRICING OFFICER-II(I), NEW DELHI ('LEARNED TPO') WH ICH ARE BAD IN LAW AND VOID AB-INITIO TO THE EXTENT OF ADDITION CONFIRMED BY THE LEARNED CIT(A). TRANSFER PRICING GROUNDS OF APPEAL 2. THAT ON FACTS OF THE CASE AND IN LAW, THE CIT(A)/TPO/AO HAVE ERRED IN REJECTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT BY CONDUCTING A FRESH E CONOMIC ANALYSIS FOR EXPORT OF DATA PROCESSING AND BACK OFF ICE SUPPORT SERVICES ('IMPUGNED TRANSACTION') TO FIND NEW COMPA RABLE COMPANIES. 3. THAT ON FACTS OF THE CASE AND IN LAW, THE CIT(A)/TPO/AO HAVE ERRED IN REJECTING CERTAIN COMPA NIES AND ADDING CERTAIN COMPANIES TO THE FINAL SET OF ALLEGE D COMPARABLE COMPANIES ON AN AD-HOC BASIS, THEREBY RESORTING TO CHERRY PICKING OF COMPARABLE COMPANIES FOR BENCHMARKING OF THE INTERNATIONAL TRANSACTION PERTAINING TO EXPORT OF D ATA PROCESSING AND BACK OFFICE SUPPORT SERVICES. 4. THAT ON FACTS OF THE CASE AND IN LAW, THE CIT(A)/TPO/AO HAVE ERRED IN FUNCTIONALLY DIFFERENT COMPANIES IN THE FINAL SET OF ALLEGED COMPARABLES F OR THE BENCHMARKING OF THE INTERNATIONAL TRANSACTION PERTA INING TO EXPORT OF DATA PROCESSING AND BACK OFFICE SUPPORT S ERVICES. 5. THAT ON FACTS OF THE CASE AND IN LAW, THE CIT(A)/TPO/AO HAVE ERRED IN REJECTING COMPANIES IDE NTIFIED BY THE APPELLANT ON ACCOUNT OF ARBITRARY FILTERS. 6. THAT ON FACTS AND IN LAW, THE CIT(A) AND TPO/AO HAVE FAILED TO MAKE APPROPRIATE ADJUSTMENTS TO ACCOUNT F OR VARYING RISK PROFILES OF THE APPELLANT VIS-A-VIS THE ALLEGE D COMPARABLES AND IN THE PROCESS INTER-ALIA NEGLECTED THE INDIAN TRANSFER PRICING REGULATIONS, INTERNATIONAL GUIDELINES ON TR ANSFER PRICING AND JUDICIAL PRECEDENCE IN THIS REGARD. 7. THAT ON FACTS AND IN LAW, THE CIT(A) AND TPO/AO HAVE ERRED BY NOT CONSIDERING THAT THE ADJUSTMENT TO THE ARM'S LENGTH PRICE, IF ANY, SHOULD BE LIMITED TO THE LOWER END OF THE 5 PERCENT RANGE AS THE APPELLANT HAS THE RIGHT TO EXERCISE THIS OPTION UNDER THE SEC OND PROVISO TO SECTION 92C(2) OF THE ACT. ITA NO.2712/DEL./2014 3 8. THAT ON FACTS OF THE CASE AND IN LAW, THE CIT(A) / TPO/AO HAVE ERRED IN USING SINGLE YEAR DATA FOR FIN ANCIAL YEAR (UFY') 2004-05 OF ALLEGED COMPARABLE COMPANIES WITH OUT CONSIDERING THE FACT THAT THE SAME WAS NOT AVAILABL E TO THE APPELLANT AT THE TIME OF COMPLYING WITH THE TRANSFE R PRICING DOCUMENTATION REQUIREMENTS AND DISREGARDING THE APP ELLANT'S CLAIM FOR USE OF MULTIPLE YEAR DATA FOR COMPUTING T HE ARM'S LENGTH PRICE. 9. THAT ON FACTS AND IN LAW, THE CIT(A)/AO HAS ERRE D IN CONFIRMING THAT TPO HAS DISCHARGED HIS STATUTORY ON US BY ESTABLISHING THAT THE CONDITIONS SPECIFIED IN CLAUS E (A) TO (D) OF SECTION 92C (3) OF THE ACT HAVE BEEN SATISFIED BEFO RE DISREGARDING THE ARM'S LENGTH PRICE DETERMINED BY T HE APPELLANT AND PROCEEDING TO DETERMINE THE ARM'S LENGTH PRICE. 10. THAT ON FACTS OF THE CASE AND IN LAW, THE CIT(A)/TPO/AO ERRED AND VITIATED THE PRINCIPLE OF N ATURAL JUSTICE BY NOT GIVING DUE COGNIZANCE TO THE DETAILE D ANALYSIS AND TECHNICAL ARGUMENTS SUBMITTED BY THE APPELLANT. CORPORATE TAX GROUNDS OF APPEAL 11. THAT THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN TAXING THE SUM OF RS.24,855,294 BEING INTEREST O N SHORT-TERM DEPOSITS AND RS.1,027,284 BEING INTEREST ON INCOME-TAX REFUND AS 'INCOME FROM OTHER SOURCES', EVEN THOUGH THE SAME IS INEXTRICABLY LINKED WITH TH E BUSINESS OF THE APPELLANT. 12. THAT THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT ACCEPTING THAT INTEREST ON SHORT-TERM DEPOSI TS OF RS. 24,320,234 AND INTEREST ON INCOME TAX REFUND OF RS. 1,027,284 IS INCOME DERIVED FROM THE BUSINESS OF THE UNDERTAKING AND ACCORDINGLY ELIGIBLE FOR DEDUCT ION UNDER SECTION 10A/10B OF THE ACT. 13. THAT THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT NETTING OFF THE SUCH INTEREST INCOME AGAINST THE INTEREST EXPENSE FOR THE PURPOSE OF COMPUTING DEDUCTION UNDE R SECTION 10A/10B OF THE ACT. 2. BRIEFLY STATED, THE FACTS OF THIS CASE ARE : ASS ESSEE COMPANY, NAMELY, AMERICAN EXPRESS INDIA PRIVATE LTD. (AIPL), IS A WHOLLY ITA NO.2712/DEL./2014 4 OWNED SUBSIDIARY OF AMERICAN EXPRESS INTERNATIONAL INC. (AEII), USA INTO THE BUSINESS OF PROVIDING IT-ENABLED SERVI CES TO ITS GROUP COMPANIES I.E. TRANSACTION PROCESSING, DATA MANAGEM ENT, INFORMATION MANAGEMENT AND CONTROL. DURING THE YEAR UNDER ASSESSMENT, ASSESSEE COMPANY CARRIED OUT ITS BUSINE SS THROUGH FC EAST UNIT, A 100% EXPORT ORIENTED UNIT (EOU), AEGSC UNIT AT GURGAON REGISTERED AS SOFTWARE TECHNOLOGY PARK (STP ) UNIT WITH STPI AUTHORITIES ENTITLED TO DEDUCTION U/S 10A OF T HE INCOME-TAX ACT, 1961 (SHORT THE ACT) FROM ASSESSMENT YEAR 20 03-04 AND FCE-GGN AT GURGAON, AGAIN REGISTERED AS STP UNIT WI TH STPI AUTHORITIES BUT HAS NOT CLAIMED ANY DEDUCTION U/S 1 0A OF THE ACT. 3. ASSESSEE COMPANY ENTERED INTO 10 NUMBERS OF INTE RNATIONAL TRANSACTIONS DULY RECORDED IN PARA 3 OF THE TP ORDE R, DURING THE YEAR UNDER ASSESSMENT, OUT OF WHICH, 6 NUMBERS OF I NTERNATIONAL TRANSACTIONS OF CATEGORY NO.1 ARE UNDER CHALLENGE F OR TP ADJUSTMENT. ASSESSEE COMPANY BY ADOPTING THE COST PLUS METHOD BUSINESS MODEL CHARGED ITS ASSOCIATED ENTERPRISES ( AES) FOR THE SERVICE ON COST PLUS CERTAIN MARK-UP. ASSESSEE COMP ANY IN BENCHMARKING ITS CATEGORY NO.1 TRANSACTION ADOPTED APPROACH OF AGGREGATION OF INTERNATIONAL TRANSACTIONS REFERRED AT SL.NO.1 TO 6 AND ADOPTED THE TRANSACTIONAL NET MARGIN METHOD (TN MM) AS THE MOST APPROPRIATE METHOD TO BENCHMARK ITS INTERNATIO NAL ITA NO.2712/DEL./2014 5 TRANSACTIONS OF CATEGORY NO.1. ASSESSEE COMPARED I TS OPERATING MARGIN / OPERATING COST (OP/OC) FOR THE YEAR UNDER ASSESSMENT BY CHOOSING 14 COMPARABLE COMPANIES HAVING MEAN AVERAG E AT 14.30% AS AGAINST ASSESSEES OWN MEAN MARGIN AT 9 .44%. THE LD. TPO, AFTER APPLYING VARIOUS FILTERS, FINALLY CHOSEN 10 COMPARABLES REFERRED IN PARA 6.7 OF THE TP ORDER WITH MEAN MARG IN OF 17.81AND COMPUTED THE DIFFERENCE AT RS.29,00,51,046/- AND TH EREBY ENHANCED THE INCOME OF THE ASSESSEE BY AN AMOUNT OF RS.29,00 ,51,046/- BEING THE DIFFERENCE BETWEEN THE ARMS LENGTH PRICE (ALP) AND THE PRICE CHARGED BY THE ASSESSEE FROM ITS AES FOR RENDERING SERVICES TO THEM. ASSESSING OFFICER PASSED THE ASS ESSMENT ORDER IN CONSONANCE WITH THE TP ORDER AND ASSESSED THE TOTAL INCOME AT RS.51,37,85,750/-. 4. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) WHO HAS PARTLY ALLOWED THE APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS APPROACHED THE TRIBUNAL BY WAY OF FILING THE PRESEN T APPEAL. 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. ASSESSEE, IN ORDER TO BENCHMARK ITS INTERNATIONA L TRANSACTION OF CATEGORY NO.1, ADOPTED TNMM METHOD BEING THE MOS T ITA NO.2712/DEL./2014 6 APPROPRIATE METHOD AS OPERATING PROFIT / TOTAL COST AS PROFIT LEVEL INDICATOR (PLI), WHICH IS NOT DISPUTED BY THE TPO/A O. ASSESSEE, FOR ITS TRANSFER STUDY TO BENCHMARK THE INTERNATION AL TRANSACTION, IDENTIFIES 14 COMPARABLE COMPANIES ENGAGED IN FUNCT IONALLY SIMILAR ACTIVITIES WHOSE PROFIT MARGINS HAVE BEEN C ALCULATED ON WEIGHTED AVERAGE BASIS BY RELYING UPON THE DATA OF PREVIOUS YEAR / MULTIPLE YEARS. HOWEVER, IN ORDER TO MEET WITH THE OBJECTION RAISED BY THE LD. TPO FOR USE OF MULTIPLE YEARS DATA, THE ASSESSEE USED DATA FOR THE YEAR ENDING MARCH 2005 AND THE ARITHME TIC MEAN OF THESE 10 COMPARABLE COMPANIES WAS SHOWN AT 10.41%. 7. LD. TPO ON THE BASIS OF ANALYSIS OF TRANSFER PRI CING STUDY ADOPTED BY THE ASSESSEE AS WELL AS FILTER APPLIED B Y HIM CHOSEN 10 COMPARABLE COMPANIES HAVING MEAN OF 17.81 AND PROPO SED TRANSFER PRICING ADJUSTMENT TO THE TUNE OF RS.29,00,51,046/- BY RETURNING THE FOLLOWING FINDINGS :- 6.7 AFTER CARRYING OUT THE ABOVE ADDITIONS AND ELI MINATIONS, THE FOLLOWING COMPANIES ARE LEFT IN THE LIST OF COMPARA BLES :- SR. NO. NAME OF THE COMPANY OPERATING PROFIT ON OPERATING COST (%) 2005 1. ACE SOFTWARE EXPORTS LIMITED 13.69 2. C S SOFTWARE ENTERPRISE LIMITED 4.99 3. ALLSEC TECHNOLOGIES LIMITED 25.66 4. FORTUNE INFOTECH LIMITED 9.79 5. SPANCO TELESYSTEMS AND SOLUTIONS LTD. 8.77 6. NUCLEUS NETSOFT & GIS INDIA LIMITED 40.66 7. TRANSWORKS INFORMATION SERVICES LTD. 0.94 ITA NO.2712/DEL./2014 7 8. VISHAL INFORMATION TECHNOLOGIES LTD. 35.59 9. TYLSYAN TECHNOLOGIES LTD. 15.90 10. WIPRO BPO SOLUTIONS LTD. 22.14 MEAN 17.81 ADJUSTMENTS 7. RULE 10B (1)(E)(III) OF THE INCOME TAX RULES PRO VIDES THAT WHILE APPLYING TNMM THE NET PROFIT MARGIN ARISING I N COMPARABLE UNCONTROLLED TRANSACTIONS IS TO BE ADJUS TED TO TAKE INTO ACCOUNT THE DIFFERENCES, IF ANY, BETWEEN THE I NTERNATIONAL TRANSACTIONS AND COMPARABLE UNCONTROLLED TRANSACTIO NS, OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS, WH ICH COULD MATERIALLY AFFECT THE AMOUNT OF NET PROFIT MARGIN I N THE OPEN MARKET. 7.2 THE ASSESSEE COMPANY IN TRANSFER PRICING DOCUME NTATION HAS INDICATED THE ADMISSIBILITY OF ADJUSTMENTS ON A CCOUNT OF FACTORS LIKE MARKET RISK, PRODUCT RISK, TECHNOLOGIES RISK, FINANCIAL RISK ETC. HOWEVER, AIPL HAS RECOGNIZED THE FACT THAT IT IS DI FFICULT TO QUANTIFY IMPACT OF THE DIFFERENCES ON WHICH ADJUSTM ENTS ARE SOUGHT. A PERUSAL OF DOCUMENTATION SUBMITTED BY THE ASSESSEE FOR TRANSFER PRICING PROCEEDINGS FOR IMMEDIATELY TWO PR ECEDING YEARS IT WAS SEEN THAT AIPL HAS QUANTIFIED AND CLAIMED WO RKING CAPITAL ADJUSTMENT WHICH WAS PROVIDED DURING TRANSFER PRICI NG PROCEEDINGS. A CONSISTENT APPROACH WAS INTENDED TO BE FOLLOWED DURING THE YEAR UNDER CONSIDERATION ALSO AND THEREF ORE, WORKING CAPITAL ADJUSTED FIGURES, AS GIVEN IN ANNEXURE 5 AR E BEING CONSIDERED. 8. IN THE MANNER DISCUSSED ABOVE, THE ARITHMETIC ME AN OF ADJUSTED OPERATING PROFIT OVER THE TOTAL COST MARGI NS OF THE COMPARABLES FOR THE FINANCIAL YEAR WORKS OUT TO 17. 8L %. THE ARM' S LENGTH PRICE OF TILE INTERNATIONAL TRANSACTIONS ENT ERED INTO BY THE ASSESSEE WITH ITS VARIOUS ASSOCIATED ENTERPRISES IS WORKED OUT AS UNDER. TOTAL COST OF PROVISION OF SERVICES BY THE ASSESSEE : RS.346,40,40,210/- (AS PER APPENDIX F OF TP REPORT) MARGIN @ 17.81 % OF THE ABOVE: RS.61,69, 45,561/- OPERATING MARGIN CALCULATED BY ASSESSEE RS.32,68.94,515/- (AS PER APPENDIX F OF TP REPORT) DIFFERENCE RS.29,00,51,046/- 9. SINCE THE PRICE CHARGED BY THE ASSESSEE VARIES B Y MORE THAN 5% FROM THE ARM'S LENGTH PRICE, AN ADJUSTMENT OF RS.29,00,51,046/- IS TO BE MADE TO THE INCOME OF TH E ASSESSEE, ITA NO.2712/DEL./2014 8 BEING THE DIFFERENCE BETWEEN THE ARM'S LENGTH PRICE AND THE PRICE CHARGED BY THE ASSESSEE FROM ITS AES FOR RENDERING SERVICES TO THEM. I.E., THE ASSESSING OFFICER SHALL ENHANCE THE INCOME OF THE ASSESSEE BY AN AMOUNT OR RS.29,00,51,046/- WHILE CO MPUTING ITS TOTAL INCOME. NO EXEMPTION U/S 10B SHALL BE ADMISS IBLE ON SUCH ADJUSTMENT IN ACCORDANCE WITH PROVISO OF SUB-SECTIO N (4) OF SECTION 92C. 8. AO PASSED THE ASSESSMENT ORDER IN CONSONANCE WIT H THE DIRECTIONS ISSUED BY THE LD. TPO. LD. CIT (A) DECL INED TO INTERFERE WITH THE FINDINGS RETURNED BY THE TPO/AO. 9. LD. AR FOR THE ASSESSEE BEING AGGRIEVED WITH THE ADDITION MADE BY THE TPO/ AO CONTENDED THAT THE LD. TPO HAS ARBITRARILY INCLUDED M/S. VISHAL INFORMATION TECHNOLOGIES LTD., M/S. NUCLEUS NETSOFT & GIS INDIA LIMITED AS COMPARABLE COMPANIES AND HAS ARBITRARILY NOT INCLUDED MERCURRY OUTSOURCING MANAG EMENT LTD. IN THE FINAL SET OF COMPARABLE COMPANIES AND CATEGORIC ALLY SOUGHT THE EXCLUSION OF M/S. VISHAL INFORMATION TECHNOLOGIES L TD. AND M/S. NUCLEUS NETSOFT & GIS INDIA LIMITED AND INCLUSION O F MERCURRY OUTSOURCING MANAGEMENT LTD. IN THE FINAL SET OF COM PARABLES FOR BENCHMARKING ITS INTERNATIONAL TRANSACTION. 10. IN ORDER TO EXAMINE THE CONTENTIONS RAISED BY T HE LD. AR, WE FIND IT NECESSARY TO SCAN THE PROFILE AND FUNCTION PERFORMED BY THE ASSESSEE IN ITS INTERNATIONAL TRANSACTION OF CATEGO RY NO.1 IN QUESTION. ITA NO.2712/DEL./2014 9 11. FIRST TRANSACTION TO THE TUNE OF RS.3,77,87,17, 224/- IS QUA EXPORT OF BUSINESS PROCESSING AND SUPPORT AND BACK OFFICE SUPPORT, DULY DISCUSSED IN THE TRANSFER PRICING STUDY REPORT , UNDERTAKING DATA MANAGEMENT, INFORMATION ANALYSIS AND CONTROL ACTIVI TIES, PROVIDING TELE-SERVICING AND TRANSACTION PROCESSING REPORT FO R EXPORT TO AMEX GROUP. ASSESSEE RECEIVED INPUTS IN THE FORM O F DATA IN ELECTRONIC FORM TO CARRY OUT BUSINESS PROCESSES AND EXPORTS ITS OUTPUT TO THE CONCERNED GROUP COMPANIES WORLD-WIDE. ALL THESE SERVICES ARE BASICALLY IN THE NATURE OF INFORMATION TECHNOLOGY ENABLED SERVICES (ITES). 12. SECOND INTERNATIONAL TRANSACTION IS QUA CHARGES OF CONSOLIDATED DATA NETWORK (CDN) / CENTRAL PROCESSIN G UNIT (CPU) TO THE TUNE OF RS.19,31,46,113/-. THIS TRANS ACTION IS DULY EXPLAINED IN THE TP STUDY AS IT MAINTAINS WORLD-WID E INFORMATION PROCESSING TELECOMMUNICATION CENTRE AT PHOENIX IN U SA AND IT UTILIZES CDN/CPU AND TECHNOLOGY SERVICES OF AETRS A ND THE CHARGES ARE LINKED TO CDN/ CPU FACILITY AND TECHNOL OGY; THIRD SUCH INTERNATIONAL TRANSACTION IS CHARGES FOR GLOBA L MAX SOFTWARE TO THE TUNE OF RS.49,60,670/- WHICH IS EXPLAINED AS USAGE FOR GLOBAL MAX SOFTWARE BY THE ASSESSEE IN ITS TP STUDY ; FOURTH SUCH INTERNATIONAL TRANSACTION IS SECONDMENT OF PERSONNE L TO THE TUNE OF RS.6,28,15,881/-. UNDER THIS TRANSACTION, ASSESSEE REIMBURSES ON ITA NO.2712/DEL./2014 10 COST TO COST BASIS AN AMOUNT EQUIVALENT TO THE COMP ENSATION AND OTHER BENEFIT ACTUALLY INCURRED BY AES FROM TIME TO TIME ON THE SECONDED EMPLOYEE, WHICH INCLUDES REMUNERATION, ALL OWANCES, INSURANCE AND ROYALTY AMOUNT AS EXPENDED BY AES, WH ICH ALSO INCLUDES ACTUAL TRAVELING AND REASONABLE INCIDENTAL EXPENSES; FIFTH SUCH INTERNATIONAL TRANSACTION IS RELOCATION OF EXP ENSES WHICH IS EXPENDITURE AS REIMBURSEMENT OF AN AMOUNT ON COST T O COST BASIS EQUIVALENT TO THE EXPENDITURE INCURRED BY AES ON RE LOCATION OF EMPLOYEES SECONDED TO THE ASSESSEE COMPANY; SIXTH A ND LAST SUCH INTERNATIONAL TRANSACTION IS REIMBURSEMENT OF THE E XPENSES TO THE TUNE OF RS.21,303/- BEING THE REIMBURSEMENT OF EXPE NSES BY ASSESSEE COMPANY TO ITS AES. 13. ON SCRUTINY OF THE AFORESAID INTERNATIONAL TRAN SACTIONS IN TOTALITY, IT GOES TO INDICATE THAT ASSESSEE COMPANY IS A ROUTINE DATA PROCESSING AND BACK OFFICE SUPPORT COMPANY AND ALL THE AFORESAID TRANSACTIONS ARE IN THE NATURE OF RENDERING ITES. IT IS NOT DISPUTED THAT THE ASSESSEE COMPANY HAS PROVIDED ITES TO ITS AES UNDER CATEGORY NO.1 TRANSACTIONS. IN ORDER TO EXAMINE TH E VALIDITY OF THE BENCHMARKING MADE BY THE TPO/AO QUA INTERNATIONAL T RANSACTIONS UNDERTAKEN BY THE ASSESSEE COMPANY, WE HEREBY CONFI NE OURSELVES TO THE OBJECTIONS RAISED BY THE ASSESSEE FOR EXCLUS ION OF M/S. VISHAL INFORMATION TECHNOLOGIES LTD. AND M/S. NUCLEUS NETS OFT & GIS ITA NO.2712/DEL./2014 11 INDIA LIMITED AND INCLUSION OF MERCURRY OUTSOURCING MANAGEMENT LTD. FROM THE FINAL LIST OF COMPARABLES. 14. HOWEVER, LD. DR FOR THE REVENUE OPPOSED THE EXC LUSION OF VISHAL INFORMATION TECHNOLOGIES LTD. AND NUCLEUS NE TSOFT AND GIS INDIA LIMITED AND INCLUSION OF MERCURRY OUTSOU RCING MANAGEMENT LTD. FROM/IN THE FINAL LIST OF COMPARABL E FOR TP ADJUSTMENT OF INTERNATIONAL TRANSACTION BY CONTENDI NG INTER ALIA THAT THE COMPARABLES, NAMELY, M/S. VISHAL INFORMATI ON TECHNOLOGIES LTD. AND M/S. NUCLEUS NETSOFT & GIS IN DIA LIMITED NOW SOUGHT TO BE EXCLUDED BY THE ASSESSEE, WERE INI TIALLY CHOSEN BY THE ASSESSEE IN ITS TP STUDY AND NOW IT CANNOT B E ALLOWED TO PICK ONE COMPANY OR THE OTHER IN ORDER TO REDUCE TH E MARGIN FOR BENCHMARKING; THAT THESE COMPARABLES HAVE BEEN INCL UDED FOR BENCHMARKING BY THE TPO AS VALID COMPARABLE ON THE BASIS OF TP STUDY SUBMITTED BY THE ASSESSEE; THAT THIS IS PRERO GATIVE OF THE TPO ONLY TO PICK AND DROP THE COMPARABLES FOR CORRECT B ENCHMARKING AND THE AUTHORITY ABOVE HIM ARE ONLY EMPOWERED TO S EE THEIR CORRECTNESS. 15. NO DOUBT, BOTH THE AFORESAID COMPARABLES WERE C HOSEN BY THE ASSESSEE FOR TP STUDY AND DETAILED TP STUDY IS AVAILABLE AT PAGES 339 TO 342 OF THE PAPER BOOK. HOWEVER, IN VI EW OF THE SETTLED PRINCIPLE OF LAW LAID DOWN BY THE ITAT, CHANDIGARH ITA NO.2712/DEL./2014 12 SPECIAL BENCH IN CASE OF M/S. QUARK SYSTEMS PVT. LT D. VS. ITO, CHANDIGARH - (2010) TIOL 31 ITAT CHD SB , WE ARE OF THE CONSIDERED VIEW THAT ASSESSEE CAN REJECT THE CO MPARABLE COMPANY EVEN IF CHOSEN BY IT IN ITS TRANSFER STUDY DUE TO SOME MISTAKE OR SOME WRONG INTERPRETATION OF THE EVIDENC E ADDUCED BY THE TAXPAYERS, BECAUSE IN ORDER TO ADVANCE THE CAUS E OF JUSTICE, THE ASSESSEE CANNOT BE RESTRAINED FROM SEEKING REJECTIO N OF THE COMPARABLE OTHERWISE CHOSEN BY IT. EVEN OTHERWISE, IT DOES NOT AMOUNT TO CHERRY PICKING AND CORRECT BENCHMARKING I S TO BE DONE ON THE BASIS OF NUMEROUS FACTORS LIKE FUNCTIONAL SI MILARITY AND OP/OC OF THE COMPARABLE COMPANY VIS--VIS ASSESSEE COMPANY ETC. 16. SIMILAR ARGUMENT HAS BEEN ADDRESSED BY THE LD. DR AGAINST THE INCLUSION OF MERCURRY OUTSOURCING MANAGEMENT LT D., HAVING BEEN REJECTED BY THE TPO ON THE GROUND OF LOW TURNO VER FILTERS WHICH HAVE BEEN APPLIED BY THE ASSESSEE COMPANY ITS ELF. BUT, AGAIN, IT IS SETTLED PRINCIPLE OF LAW THAT ANY COMP ARABLE COMPANY CANNOT BE INCLUDED OR EXCLUDED MERELY ON THE BASIS OF LOW OR HIGH TURNOVER AS HAS BEEN HELD IN THE CASE OF CHRYS CAPITAL INVESTMENT ADVISORS (INDIA) P. LTD. VS. DCIT (2015) 93 CCH 2 9 DELHC . SO THIS COMPARABLE HAS ALREADY BEEN ORDERED TO BE I NCLUDED IN THE ITA NO.2712/DEL./2014 13 LIST OF COMPARABLE FOR BENCHMARKING AS PER DISCUSSI ON IN THE PRECEDING PARAS. 17. IN VIEW OF THE DECISION RENDERED BY ITAT, CHAND IGARH SPECIAL BENCH IN THE CASE OF M/S. QUARK SYSTEMS PVT. LTD. (SUPRA), , THE ASSESSEE IS ENTITLED TO RAISE NEW GR OUND EVEN IF NOT RAISED BEFORE TPO/DRP DUE TO SOME MISTAKE ON ITS PA RT. SO, THE CONTENTIONS OF THE LD. DR NOT TO RAISE THIS GROUND BEFORE THE TRIBUNAL ARE NOT SUSTAINABLE. EXCLUSION OF COMPARABLE COMPANY SOUGHT FOR BY THE ASSESSEE COMPANY : (I) VISHAL INFORMATION TECHNOLOGIES LTD. : 18. INITIALLY, THIS COMPARABLE COMPANY WAS ADOPTED BY THE ASSESSEE COMPANY FOR ITS TP STUDY AND HAS NOT BEEN DISPUTED EVEN BEFORE AO. LD. CIT (A), EVEN WITHOUT GOING INTO TH E MERITS OF THE ARGUMENTS RAISED BY THE ASSESSEE COMPANY, ACCEPTED IT AS A VALID COMPARABLE IN THE LIGHT OF THE FINDINGS GIVEN BY TH E LD. TPO. 19. HOWEVER, NOW THIS COMPARABLE IS SOUGHT TO BE EX CLUDED BY THE ASSESSEE COMPANY ON THE GROUNDS INTER ALIA THAT IT IS ENGAGED IN VARIED AND COMPLEX ACTIVITIES WHICH ARE NOT COMPARA BLE TO ITES; THAT IT RENDERS HIGH END SERVICES LIKE IT CONSULTAN CY SERVICES. WE ARE NOT INCLINED TO AGREE WITH THE CONTENTION RAISE D BY THE LD. DR ITA NO.2712/DEL./2014 14 NOT TO EXCLUDE ANY COMPANY AS COMPARABLE IF INITIAL LY ADOPTED BY THE ASSESSEE FOR ITS TP STUDY BECAUSE THIS QUESTION IS TO BE DETERMINED IN THE LIGHT OF THE ANNUAL REPORT OF THE COMPARABLE COMPANY AND ITS FUNCTIONAL PROFILE BROUGHT ON RECOR D AND NOT AT THE MERE ASKING AND REFUSAL OF THE ASSESSEE AS WELL AS REVENUE. 20. LD. AR FOR THE ASSESSEE BY RELYING UPON THE ORD ER PASSED BY INCOME TAX APPELLANT TRIBUNAL, DELHI BENCH I-2, NEW DELHI IN ITA NO.3532/DEL/2014 AY 2006-07 IN AMERICAN EXPRESS INDIA PVT. LTD. VS. DCIT ORDER DATED 15.10.2015 IN ASSESSEES OWN CASE CONTENDED THAT THIS COMPARABLE COMPANY HAS ALR EADY BEEN EXCLUDED BY THE TRIBUNAL IN ASSESSEES OWN CASE ON THE GROUND THAT THIS COMPANY OUTSOURCED A SIGNIFICANT PART OF ITS O PERATION AND ITS OUTSOURCING CHARGES CONSTITUTE 78% OF THE TOTAL COS T. 21. LD. CIT (A) HAS NOT RETURNED ANY FINDINGS ON TH IS ASPECT WHICH IS APPARENT FORM THE ANNUAL REPORT OF THIS CO MPANY AVAILABLE ON THE PAPER BOOK. BARE COMPARABILITY OF THE ASSES SEE COMPANY VIS--VIS COMPARABLE COMPANY GOES TO PROVE THAT THE ASSESSEES OUTSOURCING COST IS ROUGHLY 6.32% WHEREAS COMPARABL E COMPANYS OUTSOURCING COST IS 78% AND IN OUR VIEW, THIS IS AN IMPORTANT FACTOR TO IMPACT OVERALL PROFITABILITY OF THE COMPANY. FU RTHERMORE, THERE IS A VAST DIFFERENCE OF EMPLOYEES COST OF THE ASSE SSEE COMPANY AS WELL AS COMPARABLE COMPANY. PAGE 32 OF THE PAPER B OOK GOES TO ITA NO.2712/DEL./2014 15 PROVE THAT THE ASSESSEES EMPLOYEE COST IS RS.1.73 CRORES WHEREAS AS PER ANNUAL REPORT OF THE COMPARABLE COMPANY, ITS EMPLOYEE COST IS ROUGHLY RS.19.70 LAKHS WHICH MAKES IT INCOMPARAB LE WITH THE ASSESSEE COMPANY. SO, BY RESPECTFULLY FOLLOWING TH E ORDER PASSED BY THE TRIBUNAL IN CASE ENTITLED AMERICAN EXPRESS INDIA PVT. LTD. (SUPRA), IN ASSESSEES OWN CASE AND IN VIEW OF THE FACTUAL DIS- SIMILARITIES, WE HEREBY ORDER THE EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARABLES. (II) NUCLEUS NETSOFT & GIS INDIA LIMITED : 22. THIS COMPARABLE IS CHOSEN BY THE ASSESSEE IN IT S TP STUDY AND INCLUDED BY THE TPO IN HIS FINAL LIST OF COMPAR ABLES. NOW, THE ASSESSEE SOUGHT TO EXCLUDE THIS COMPARABLE ON THE G ROUND THAT PROFIT BEFORE TAX OF THIS COMPANY HAS BEEN INCREASE D BY 347% DURING THE YEAR UNDER ASSESSMENT AND THIS COMPANY O UTSOURCED ITS WORK TO THE THIRD PARTY TO THE TUNE OF 16.04% OF TH E TOTAL COST AND HAS EARNED SUPER-NORMAL PROFIT. 23. THERE IS NO DISPUTE AS TO THE FUNCTIONAL SIMILA RITY OF THIS COMPANY. THIS COMPARABLE COMPANY HAS BEEN EXCLUDED BY THE COORDINATE BENCH IN CASE ENTITLED AMERICAN EXPRESS INDIA PVT. LTD. (SUPRA), IN ASSESSEES OWN CASE, FOR THE AY 2006-0 7, BY RETURNING FOLLOWING FINDINGS :- ITA NO.2712/DEL./2014 16 7.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS NOT DISPUTED THE FUNCTIONAL DISSIMILARITY OF THIS COMPANY. THE ONLY REASON TAKEN BY THE ASSESSEE IN SEEKING ITS EXCLUSION IS THE AMALGA MATION OF ANOTHER COMPANY WITH IT DURING THE YEAR. THIS FACT IS BORNE OUT FROM THE ANNUAL REPORT OF THIS COMPANY, A COPY OF W HICH HAS BEEN PLACED ON RECORD. THE ANNUAL REPORT OF THIS COMPA NY PROVIDES THAT: THE SCHEME OF AMALGAMATION (THE SCHEME) OF ERSTWHILE NUCLEUS AND GIS (INDIA) LTD., THE TRANSFEROR COMPAN Y, WITH YOUR COMPANY WAS SANCTIONED BY HONBLE HIGH COURT OF JUD ICATURE OF BOMBAY ON 22ND FEBRUARY, 2006. ON COMPLYING WITH T HE REQUISITE FORMALITIES, THE SCHEME BECAME EFFECTIVE AND OPERAT IVE RETROSPECTIVELY FROM THE APPOINTED DATE OF 1 APRIL 2005 AS PER THE SCHEME. IN THE ACCOMPANYING FINANCIAL STATEMENTS, RESULTS OF THE TRANSFEROR COMPANY HAVE BEEN INCORPORATED AND THE F IGURES GIVEN HEREIN AND ELSEWHERE IN THIS ANNUAL REPORT ARE NOT STRICTLY COMPARABLE WITH THOSE OF PREVIOUS YEAR. IT IS CLE AR FROM THE ABOVE EXTRACTION THAT THE AMALGAMATION TOOK PLACE I N THE YEAR IN QUESTION AND THE FINANCIAL RESULTS OF THIS COMPANY INCLUDE THOSE OF THE AMALGAMATING COMPANY AS WELL. IN OUR CONSIDERE D OPINION, THE FACTOR OF AMALGAMATION OR MERGER OR ACQUISITIONS, E TC., HAS ITS OWN IMPLICATIONS ON THE FINANCIAL RESULTS OF A COMPANY AS THESE ARE ABNORMAL FINANCIAL CHARACTERISTICS WHICH DISTORT TH E NORMAL PROFITABILITY. THE MUMBAI BENCH OF THE TRIBUNAL IN PETRO ARALDITE (P) LTD. VS. DCIT (2013) 154 TTJ (MUM) 176, HAS HELD THAT A COMPANY CANNOT BE CONSIDERED AS COMPARABLE BECAUSE OF EXCEPTIONAL FINANCIAL RESULTS DUE TO MERGERS/DEMERG ERS. SIMILAR VIEW HAS BEEN BOLSTERED BY THE DELHI BENCH OF THE T RIBUNAL IN SEVERAL CASES INCLUDING CIENA INDIA PVT. LTD. VS. DCIT (ITA NO.3324/DEL/2013) VIDE ITS ORDER DATED 23.4.2015. IN VIEW OF THE FACT THAT THERE WAS A MERGER BY WAY OF AMALGAMATION DURING THE YEAR ITSELF, WE HOLD THAT NUCLEUS NETSOFT AND GIS ( INDIA) LTD. CANNOT BE CONSIDERED AS COMPARABLE DUE TO THIS EXTR AORDINARY FINANCIAL EVENT. ACCORDINGLY, WE DIRECT TO ELIMINA TE THIS COMPANY FROM THE FINAL SET OF COMPARABLES. 24. BY FOLLOWING THE DECISION RENDERED BY THE COORD INATE BENCH, WE HEREBY ORDER TO EXCLUDE THIS COMPANY FROM THE LI ST OF COMPARABLE ON TWO GROUNDS - ONE : THAT THERE IS VAS T DIFFERENCE IN THE OUTSOURCING OF WORK BECAUSE ASSESSEE COMPANY OU TSOURCED ITS WORK TO THE EXTENT OF 6% VIS--VIS 16.4% BY THE COM PARABLE COMPANY; TWO : DUE TO AMALGAMATION THE FINANCIAL RE SULT OF THE ITA NO.2712/DEL./2014 17 COMPARABLE COMPANY HAS BEEN SUBSTANTIALLY IMPACTED IN EARNING SUPER-NORMAL PROFIT TO THE TUNE OF 347%. COMPARABLE COMPANY SOUGHT TO BE INCLUDED BY THE ASSESSEE : MERCURRY OUTSOURCING MANAGEMENT LTD. : 25. THIS COMPARABLE COMPANY BEING ENGAGED IN ITE SE RVICES IN THE FIELD OF MANAGEMENT OF OUTSOURCED BUSINESS SERV ICE AND FOR THE PERIOD ENDING MARCH, 2004 AND MARCH 31, 2003, 100% OF THE OPERATING REVENUES HAS BEEN DERIVED BY THIS COMPANY FROM ITES. HOWEVER, THIS COMPARABLE HAS BEEN REJECTED BY THE T PO ON THE GROUND THAT ITS SALES IN THE RELEVANT FINANCIAL YEA R STOOD AT RS.61,00,000/- ONLY. 26. ASSESSEES OBJECTION IN REJECTING THIS COMPARAB LE THAT THE TURNOVER CRITERIA IS NOT APPLICABLE IN CASE AN ENTI TY OPERATES ON COST PLUS OPERATING MODEL AND THE ISSUE IF IT IS A RISK MITIGATED CONTRACT SERVICE PROVIDER HAS NEITHER BEEN DECIDED BY THE TP O NOR LD. CIT (A). LD. AR WHILE REFERRING TO PAGE 342 OF THE PAP ER BOOK CONTENDED THAT THE DONATION AMOUNT OF RS.25,44,124/ - GIVEN BY THE COMPANY HAS NOT BEEN ACCOUNTED FOR TO WORK OUT THE WORKING MARGIN. THE LD. AR FOR THE ASSESSEE FURTHER CONTEN DED THAT THIS COMPARABLE COMPANY HAS ALREADY BEEN ORDERED TO BE I NCLUDED BY ITA NO.2712/DEL./2014 18 THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE ENTITLED AMERICAN EXPRESS INDIA PVT. LTD. (SUPRA). 27. FOR READY REFERENCE, FINDINGS RETURNED BY THE C OORDINATE BENCH OF THE TRIBUNAL IN JUDGMENT CITED AS ENTITLED AMERICAN EXPRESS INDIA PVT. LTD. (SUPRA) ARE REPRODUCED AS UNDER :- 9.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE TPO H AS ACCEPTED THE FUNCTIONAL COMPARABILITY OF THESE COMPANIES ON SEGM ENTAL LEVEL. THE LD. DR WAS ALSO FAIR ENOUGH TO CANDIDLY ACCEPT THE FUNCTIONAL SIMILARITY OF THE RELEVANT SEGMENT OF THESE COMPANI ES. IN SUCH CIRCUMSTANCES, THE QUESTION ARISES AS TO WHETHER TH E RELEVANT SEGMENT OF THESE COMPANIES CAN BE EXCLUDED FROM THE LIST OF COMPARABLES MERELY ON THE GROUND THAT THE REVENUE F ROM THIS SEGMENT IS VERY LIMITED? IN OUR CONSIDERED OPINION , THE QUANTUM OF TURNOVER CAN BE NO REASON FOR THE EXCLUSION OF A COMPANY, WHICH IS OTHERWISE COMPARABLE. THE HONBLE JURISDIC TIONAL HIGH COURT IN THE CASE OF CHRYSCAPITAL INVESTMENT ADVISORS (INDIA) P. LTD VS. DCIT (2015) 93 CCH 29 DELHC HAS HELD THAT HIGH TURNOVER OR HIGH PROFIT CAN BE NO REASON TO ELIMINATE AN OTH ERWISE COMPARABLE COMPANY. THE SAME APPLIES WITH FULL FOR CE IN THE CONVERSE MANNER AS WELL TO A LOW TURNOVER/LOW PROFI T COMPANY. WE, THEREFORE, HOLD THAT A COMPANY CANNOT BE EXCLUD ED FROM THE LIST OF COMPARABLES ON THE GROUND OF ITS LOW TURNOV ER. IN PRINCIPLE, WE DIRECT THE INCLUSION OF THE RELEVANT SEGMENT OF THESE COMPANIES IN THE LIST OF COMPARABLES. THE TPO IS DIRECTED TO INCLUDE THE OPERATING PROFIT/OPERATING COSTS OF THE ITES SEGMEN T OF THESE COMPANIES IN THE FINAL SET OF COMPARABLES, AFTER DU E VERIFICATION OF THE NECESSARY FIGURES FOR DETERMINATION OF THEIR OP ERATING PROFIT MARGIN ETC. 28. BY RESPECTFULLY FOLLOWING THE DECISION RENDERED BY COORDINATE BENCH IN ASSESSEES OWN CASE, REFERRED T O ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THIS COMPANY IS QUALIFI ED TO BE INCLUDED IN THE LIST OF COMPARABLE AND THE TPO TO INCLUDE TH E PARTIAL PROFIT/OPERATING COST OF THE ITES SEGMENT OF THIS C OMPANY IN THE FINAL SET OF COMPARABLES AFTER VERIFICATION OF THE NECESSARY FIGURES ITA NO.2712/DEL./2014 19 FOR DETERMINING THEIR OPERATING PROFIT MARGIN ETC. TPO IS ALSO DIRECTED TO VERIFY THEIR OPERATING PROFIT MARGIN ET C. AND TO ALSO VERIFY THE DONATION OF RS.25,44,124/- FOR THE PURPO SE OF DETERMINING OF THE OPERATING PROFIT MARGIN. 29. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, THE I MPUGNED ORDER, SO FAR AS TRANSFER OF PRICING GROUNDS ARE CO NCERNED, IS HEREBY SET ASIDE AND FILE IS RESTORED TO THE FILE OF THE A O/TPO FOR FRESH COMPUTATION OF ALP OF THE INTERNATIONAL TRANSACTION UNDER CATEGORY NO.1 IN PURSUANCE TO THE OBSERVATIONS MADE HEREINBEFORE BY THE BENCH BY PROVIDING AN OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. CORPORATE GROUND : 30. THE ONLY CORPORATE GROUND RAISED BY THE ASSESSE E COMPANY IS AS TO TAXING THE AMOUNT OF RS.2,48,55,294/- BEING INTEREST ON SHORT TERM DEPOSITS AND RS.10,27,284/- BEING INTERE ST ON INCOME TAX REFUND AS INCOME FROM OTHER SOURCES? 31. UNDISPUTEDLY, THIS ISSUE WAS DEALT WITH IN ASSE SSEES OWN CASE IN ITA NO.1700/DEL/2010 AY 2004-05 AND ITA NO.1832/DEL/2010 FOR AY 2004-05 ORDER DATED 28.08.2 015, WHEREIN THE COORDINATE BENCH OF THE TRIBUNAL HAS RE TURNED THE FINDINGS IN FAVOUR OF THE ASSESSEE AS UNDER :- ITA NO.2712/DEL./2014 20 11.2 BEFORE US, THE LD. AR SUBMITTED THAT INTEREST INCOME EARNED ON SHORT TERM DEPOSIT IS ELIGIBLE FOR DEDUCTION U/S 10A/10B OF THE ACT. FOR THE ABOVE PROPOSITION, THE LD. AR RELIED ON ASSESSEES OWN CASE IN ITA NO.1016/DEL/2001 FOR AY 2002-03. I T WAS FURTHER SUBMITTED THAT THE ISSUE IN QUESTION IS SQU ARELY COVERED BY THE FOLLOWING JUDGMENTS/ORDERS OF THE HONBLE HIGH COURT AND THE TRIBUNAL :- (I) CIT VS. MOTOROLA INDIA ELECTRONICS (P) LTD. I TA NO.428 AND 447 OF 2007 (KARNATAKA HIGH COURT); (II) CIT VS. HRITNIK EXPORTS PVT. LTD. ITA NO.219 AND 239 OF 2014 (DELHI HIGH COURT); AND (III) MERCER CONSULTING (INDIA0 PRIVATE LIMITED VS. DCIT ITA NO.966/DEL/2014 (DELHI ITAT). 11.3 IT WAS ALSO SUBMITTED IN THIS CONTEXT THAT THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HR ITNIK EXPORTS DELIVERED ON NOVEMBER 2014 REFERS TO AND RELIES UPO N DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF MOTOROL A INDIA ELECTRONICS (P) LTD. AND DEALS WITH THE ISSUES OF E NTITLEMENT OF INTEREST FROM SURPLUS FUNDS UNDER SECTION 10A/10B O F THE ACT. 11.4 ON THE OTHER HAND, THE LD. DR RELIED ON THE JU DGMENT OF HONBLE SUPREME COURT IN THE CASE OF M/S. LIBERTY I NDIA LTD. VS. CIT (THE JUDGMENT RELIED UPON BY THE LD. CIT (A)) A ND ALSO IN THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF MARUBENI INDIA PRIVATE LIMITED VS. DIRECTOR OF INCO ME-TAX REPORTED IN 354 ITR 638. 11.5 AFTER HEARING THE RIVAL SUBMISSIONS, WE NOTICE THAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2002-03, TH E MATTER HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSES SEE. IT HAS BEEN BROUGHT TO OUR NOTICE THAT THIS ORDER OF THE TRIBUN AL IS SUBJECT MATTER OF APPEAL TO THE HONBLE JURISDICTIONAL HIGH COURT U/S 260A OF THE ACT. IT WAS SUBMITTED THAT APPEAL BEFORE TH E HONBLE HIGH COURT IS PENDING ADJUDICATION. FOR THE SAKE OF CON SISTENCY, WE DECIDE THE MATTER IN FAVOUR OF THE ASSESSEE BY HOLD ING THAT INTEREST ON SURPLUS BUSINESS FUNDS KEPT WITH SHORT TERM DEPO SITS IS TO BE TREATED AS INCOME FROM BUSINESS ENTITLED TO THE B ENEFIT OF DEDUCTION U/S 10A/10B OF THE ACT. IT IS ORDERED AC CORDINGLY. 32. SO, BY RESPECTFULLY FOLLOWING THE DECISION REND ERED BY THE COORDINATE BENCH, WE ARE OF THE CONSIDERED VIEW THA T THE AMOUNT OF RS.2,48,55,294/- CANNOT BE TAXED BEING INTEREST ON THE SHORT TERM ITA NO.2712/DEL./2014 21 DEPOSITS. HOWEVER, INTEREST INCOME OF RS.10,27,287 /- GENERATED IN FAVOUR OF THE ASSESSEE FROM IT REFUND IS TO BE TREA TED AS INCOME FROM OTHER SOURCES, HENCE NOT ELIGIBLE FOR DEDUCT ION. SO, CORPORATE GROUND IS PARTLY DETERMINED IN FAVOUR OF THE ASSESSEE. 33. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE HE REBY PARTLY ALLOW THE PRESENT APPEAL FILED BY THE ASSESSEE FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 16 TH DAY OF MAY, 2016. SD/- SD/- (R.S. SYAL) (KULDIP SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 16 TH DAY OF MAY, 2016 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.