M/s. Ciena India Private Ltd., Gurgaon V. DCIT, New Delhi

ITA 3324/DEL/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9984 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 22-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 24-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JUDY JAMES
• Assessee Lawyers: HIMANSHU S SINHA; MD FAHAD KHALID
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Additional evidence; Wholly owned subsidiary; Capital expenditure
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : I : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI C.M. GARG, JM ITA NO.3324/DEL/2013 ASSESSMENT YEAR : 2008-09 CIENA INDIA PVT. LTD., PLOT NO.14, SECTOR 32, ECHELON INSTITUTIONAL AREA, GURGAON. PAN: AACCC6131B VS. DCIT, CIRCLE-3(1), NEW DELHI. ITA NO.2948/DEL/2013) ASSESSMENT YEAR : 2008-09 DCIT, CIRCLE-3(1), NEW DELHI. VS. CIENA INDIA PVT. LTD., PLOT NO.14, SECTOR 32, ECHELON INSTITUTIONAL AREA, GURGAON. PAN: AACCC6131B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI HIMANSHU S. SINHA, ADVOCATE & SHRI MD. FAHAD KHALID, CA DEPARTMENT BY : SHRI JUDY JAMES, STANDING COUNSEL DATE OF HEARING : 21.04.2015 DATE OF PRONOUNCEMENT : 23.04.2015 ITA NOS.3324 & 2948/DEL/2013 2 ORDER PER R.S. SYAL, AM: THESE TWO CROSS APPEALS ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE ARISE OUT OF THE ORDER PASSED BY THE CIT( A) ON 11.3.2013 IN RELATION TO THE ASSESSMENT YEAR 2008-09. 2. GROUND NOS. 1(A) AND (B) WERE STATED BY THE LD. AR TO BE GENERAL NOT REQUIRING ANY SPECIFIC ADJUDICATION. THESE GRO UNDS, THEREFORE, STAND DISMISSED AS NOT PRESSED. 3. GROUND NO. 1(C) IS AGAINST THE CHOICE OF CERTA IN COMPARABLES IN RESPECT OF `SOFTWARE DEVELOPMENT SEGMENT. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THA T THE ASSESSEE IS A WHOLLY OWNED SUBSIDIARY OF CIENA CORPORATION, USA AND IS E NGAGED IN THE BUSINESS OF PROVISION OF SOFTWARE DEVELOPMENT AND M ARKETING SUPPORT SERVICES TO ITS OVERSEAS GROUP COMPANIES. THE ASSE SSEE REPORTED FOUR INTERNATIONAL TRANSACTIONS. THE ASSESSING OFFICER (AO) REFERRED THE INTERNATIONAL TRANSACTIONS TO THE TRANSFER PRICING OFFICER (TPO) FOR DETERMINATION OF THEIR ARMS LENGTH PRICE (ALP). TW O OF SUCH ITA NOS.3324 & 2948/DEL/2013 3 TRANSACTIONS WERE ACCEPTED BY THE TPO AS AT ARMS L ENGTH PRICE. THE OTHER TWO INTERNATIONAL TRANSACTIONS IN DISPUTE ARE PROVISION OF SOFTWARE DEVELOPMENT SERVICES WITH TRANSACTED VALUE OF RS .98,42,37,491/-; AND `PROVISION OF MARKETING SUPPORT SERVICES WITH TRAN SACTED VALUE OF RS.4,21,25,941/-. THE TPO EXAMINED THE ASSESSEES SEGMENTAL RESULTS. AS REGARDS THE SEGMENT OF `SOFTWARE DEVELOPMENT SER VICES, THE ASSESSEE APPLIED THE TRANSACTIONAL NET MARGIN METHO D (TNMM) AS THE MOST APPROPRIATE METHOD WITH THE PROFIT LEVEL INDIC ATOR (PLI) OF OPERATING PROFIT/TOTAL COST (OP/TC). PROFIT MARGIN IN THE SOFTWARE DEVELOPMENT SERVICE SEGMENT WAS DECLARED BY THE ASS ESSEE AT 19.16%. IN ORDER TO DEMONSTRATE THAT THESE SERVICES WERE PR OVIDED AT ARMS LENGTH PRICE, THE ASSESSEE CHOSE 20 COMPANIES AS COMPARABL E. THE TPO REJECTED THE ASSESSEES COMPUTATION OF ARMS LENGTH PRICE WORKED OUT ON THE BASIS OF MULTIPLE YEAR DATA OF THE COMPARABLES AND PROCEEDED TO DETERMINE THE ALP OF SUCH TRANSACTIONS BY RELYING O N THE CURRENT YEARS DATA ALONE. HE REJECTED 14 OUT OF 20 COMPANIES CHO SEN BY THE ASSESSEE AS COMPARABLES AND ADDED NEW 13 COMPANIES TO THE LI ST OF COMPARABLES, ITA NOS.3324 & 2948/DEL/2013 4 WITH THE FINAL TALLY OF 19 COMPARABLE COMPANIES G IVING THEIR PROFIT RATIO AS UNDER:- SL.NO. NAME OF THE COMPANY SALES (RS. CR.) OP TO TO TAL COST 1. AVANI CINCOM TECHNOLOGIES 3 21.65 2. BODHTREE CONSULTING LTD. 10.42 19.14 3. CELESTIAL BIOLABS 20.21 87.94 4. E-ZEST SOLUTIONS LTD. 7.66 28.95 5. FLEXTRONICS (ARICENT) 958 8.07 6. IGATE GLOBAL SOLUTION LTD. 781.51 13.9 7. INFOSYS 156.48 40.41 8. KALS INFORMATION SYSTEMS LTD. (SEG.) 2.05 41.94 9. LGS GLOBAL LTD. 136.52 26.64 10. MINDTREE LTD. (SEG.) 572.96 17.51 11. PERSISTENT SYSTEMS LTD. 409.88 27.23 12. QUINTEGRA SOLUTION LTD. 89.88 21.74 13. R SYSTEMS INTERNATIONAL (SEG.) 144.56 15.3 14. RS. SOFTWARE (INDIA) LTD. 101.11 7.79 15. SASKEN COMMUNICATION TECHNOLOGIES LTD. (SEG.) 389 13.44 16. TATA ELXSI (SEG.) 342.05 18.97 17. THIRDWARE SOLUTION LTD. 522.76 18.01 18. WIPRO LTD. (SEG.) 11955.6 28.38 19. SOFTSOL INDIA LTD. 23.65 42.15 AVG 26.20 ITA NOS.3324 & 2948/DEL/2013 5 5. AFTER CONSIDERING THE OBJECTIONS RAISED BY THE A SSESSEE, THE TPO WORKED OUT THE AVERAGE OF THE OPERATING PROFIT MARG IN OF THE ABOVE 19 COMPANIES AT 25.20% AND ACCORDINGLY PROPOSED TRANSF ER PRICING ADJUSTMENT OF RS.5,25,78,549/-. THE ADDITION WAS M ADE BY THE ASSESSING OFFICER AT THIS LEVEL. THE LD. CIT(A) HEL D CELESTIAL BIOLABS AS INCOMPARABLE; ADJUSTED MARGINS OF PROFIT OF TWO COM PANIES, NAMELY, KALS INFORMATION SYSTEMS LTD., AND SOFTSOL INDIA LT D. WITH THE REVISED LIST OF 18 COMPANIES, THE LD. CIT(A) COMPUTED AVERA GE OF THE OP/TC OF THESE COMPANIES AT 20.48%. SINCE THE PLI OF THE AS SESSEE WAS AT 19.15%, BEING WITHIN THE PERMISSIBLE RANGE, HE ORDE RED FOR THE DELETION OF ADDITION OF RS.5.25 CRORE AND ODD. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT CAN BE SEEN FROM THE ORDERS OF THE AUTHORITIES BELOW THAT NEITHER THE APPLICATION OF TNMM AS THE M OST APPROPRIATE METHOD NOR THE PLI HAS BEEN DISPUTED FOR DETERMINAT ION OF THE ALP IN THE `SOFTWARE DEVELOPMENT SERVICES SEGMENT. EVEN THOUGH THE LD. CIT(A) HAS ORDERED FOR THE DELETION OF ADDITION ON ACCOUNT OF TP ITA NOS.3324 & 2948/DEL/2013 6 ADJUSTMENT IN RESPECT OF THIS INTERNATIONAL TRANSAC TION, THE ASSESSEE IS STILL AGGRIEVED AGAINST THE INCLUSION OF THE FOLLOWING TH REE COMPANIES IN THE LIST OF COMPARABLES :- I) INFOSYS TECHNOLOGIES LTD.; II) PERSISTENT SYSTEMS LTD.; AND III) WIPRO LTD. 7. BUT FOR THE INCLUSION OF THE ABOVE THREE COMPANI ES IN THE FINAL LIST OF COMPARABLES, THE ASSESSEE IS SATISFIED WITH ALL THE FINDINGS GIVEN BY THE TPO, AS ENDORSED IN THE FIRST APPEAL, IN RESPEC T OF OTHER ISSUES CONNECTED WITH THE DETERMINATION OF ALP OF THE INTE RNATIONAL TRANSACTION OF `PROVISION OF SOFTWARE DEVELOPMENT SERVICES. W E WILL TAKE UP THE ABOVE THREE COMPANIES, ONE BY ONE, FOR THE PURPOS ES OF ASCERTAINING AS TO WHETHER THEY ARE COMPARABLE OR NOT. BEFORE EMBA RKING UPON THE EXERCISE OF MAKING COMPARISON OF THESE THREE COMPAN IES WITH THE ASSESSEE, IT IS SINE QUA NON TO CONSIDER THE FUNCTIONAL PROFILE OF THE ASSESSEE UNDER THIS SEGMENT. IT CAN BE SEEN FROM TH E TPOS ORDER THAT HE HAS SIMPLY STATED THAT THE ASSESSEE IS ENGAGED IN T HE PROVISION OF ITA NOS.3324 & 2948/DEL/2013 7 SOFTWARE DEVELOPMENT SERVICES, BUT, HAS NOT SPELT O UT THE FURTHER DETAILS OF THE PRECISE NATURE OF ACTUAL SERVICES RENDERED. WE HAVE GONE THROUGH THE ASSESSEES TP STUDY REPORT, A COPY OF WHICH IS AVAILABLE ON PAGES 12- 127 OF THE PAPER BOOK, FROM WHICH SOME ASSISTANCE I S AVAILABLE ON THE QUESTION OF DETERMINATION OF THE EXACT NATURE OF SE RVICES. THE CIENA GROUP IS A SUPPLIER OF COMMUNICATIONS NETWORKING EQ UIPMENT, SOFTWARE AND SERVICES THAT SUPPORT THE DELIVERY AND TRANSPOR T OF VOICE, VIDEO AND DATA SERVICES. THE PRODUCTS OF CIENA GROUP INCLUDE OPTICAL NETWORKING, BROADBAND NETWORKING AND DATA NETWORKING PRODUCTS A LONG WITH NETWORK AND SERVICES MANAGEMENT SOFTWARE USED IN COMMUNICAT ION NETWORKS AND FOLLOWED BY TELECOMMUNICATIONS SERVICE PROVIDERS AC ROSS THE GLOBE. THE GROUP SPECIALIZES IN TRANSITIONING LEGACY COMMUNICA TIONS NETWORKS TO BE CONVERGED, NEXT GENERATION ARCHITECTURE CAPABLE OF DELIVERING A MIX OF HIGH BAND WIDTH SERVICES. THE ASSESSEE IS ENGAG ED IN DESIGN, DEVELOPMENT AND MAINTENANCE OF SOFTWARE, WHICH ESSE NTIALLY INCLUDE THE ACTIVITIES, NAMELY, SOFTWARE DEVELOPMENT SERVICES; PROCUREMENT, RESEARCH AND TECHNOLOGY; DEVELOPMENT OF DESIGN; AFT ER-SALES ACTIVITY; AND ACCOUNTING/ADMINISTRATION. THE ASSESSEE PROVID ES CONTRACTUAL ITA NOS.3324 & 2948/DEL/2013 8 SOFTWARE DEVELOPMENT SERVICES TO ITS GROUP COMPANIE S ALONE AND NOT TO OUTSIDERS. THESE SERVICES INCLUDE MAINTENANCE AND UPDATION ACTIVITIES. THE ASSESSEE ENTERED INTO AN AGREEMENT WITH ITS HOL DING COMPANY, CIENA, USA TO CONTINUE TO ASSIST CIENA, USA IN RESE ARCH AND DEVELOPMENT ACTIVITIES RELATED TO CIENA, USA PRODUC TS. A COPY OF THIS AGREEMENT DATED 10.4.2006 IS AVAILABLE ON RECORD. AS PER THIS AGREEMENT, THE ASSESSEE PROVIDED SOFTWARE DEVELOPME NT/ENGINEERING DESIGN/RESEARCH RELATED TO CIENA, USA PRODUCTS AND TECHNOLOGY. THE ASSESSEE IS COMPENSATED BY ITS USA ASSOCIATED ENTER PRISE (AE) WITH AGGREGATE OF DIRECT AND INDIRECT COSTS INCURRED BY IT IN PERFORMING THE SERVICES TO CIENA, USA PLUS SUITABLE MARK-UP TO BE DECIDED ON AGREED BASIS FROM TIME TO TIME. FOR THE YEAR UNDER CONSID ERATION, THE ASSESSEE WAS COMPENSATED WITH A MARK- UP OF 19%. AS PER THI S AGREEMENT, THERE IS A CONFIDENTIALITY CLAUSE BY WHICH ALL INFORMATIO N COMMUNICATED TO ONE PARTY BY THE OTHER CAN BE USED ONLY FOR THE PUR POSES OF THIS AGREEMENT. CLAUSE (9) OF THE AGREEMENT IS CAPTIONE D AS INTANGIBLE PROPERTY RIGHTS. THIS CLAUSE PROVIDES THAT THE ASS ESSEE, AT NO TIME, SHALL ACQUIRE OR RETAIN ANY RIGHT, TITLE OR INTEREST WHAT SOEVER IN THE WORK DONE ITA NOS.3324 & 2948/DEL/2013 9 BY IT. THIS CLAUSE FURTHER PROVIDES THAT THE INTEL LECTUAL PROPERTY RIGHTS IN THE FORMAT, PRESENTATION, PROCEDURES, PROCESS, COMP UTER SOFTWARE AND OTHER MATERIAL OF WHATEVER NATURE CREATED, DEVELOPE D OR ENHANCED BY CIENA INDIA IN THE COURSE OF PROVIDING THE SERVICES TO CIENA, USA SHALL BE AND REMAIN THE SOLE PROPERTY OF CIENA, USA ABSOL UTELY. FROM THE ABOVE CLAUSES OF THE AGREEMENT, IT IS MANIFEST THAT THE ASSESSEE IS SIMPLY A CAPTIVE UNIT PROVIDING SOFTWARE DEVELOPMENT SERVI CES TO ITS AES WITHOUT ACQUIRING OR RETAINING ANY INTELLECTUAL PRO PERTY RIGHTS IN THE WORK DONE BY IT FOR AND ON BEHALF OF ITS FOREIGN AE , FOR WHICH IT IS COMPENSATED WITH ACTUAL COSTS INCURRED PLUS 19% MAR K UP. TOTAL OPERATING REVENUE OF THE ASSESSEE FROM THIS SEGMENT STANDS AT RS.98.42 CRORE WITH THE OPERATING COSTS AT RS.86.95 CRORE, GIVING PROFIT BEFORE INTEREST AND TAX AT RS.11.46 CRORE AND THE RESULTAN T PROFIT RATIO OF 13.19%. WITH THE ABOVE UNDERSTANDING OF THE NATURE OF SERVICES PROVIDED BY THE ASSESSEE TO ITS AES UNDER THIS SEGM ENT, WE WILL ESPOUSE THE DISPUTED COMPANIES FOR CONSIDERATION AS TO THEI R COMPARABILITY OR OTHERWISE. ITA NOS.3324 & 2948/DEL/2013 10 INFOSYS TECHNOLOGIES LTD . 8.1. THE TPO NOTICED THAT THIS COMPANY WAS FINDING PLACE IN THE ACCEPT/REJECT MATRIX AND WAS REJECTED IN THE TP DOC UMENTATION BY SAYING THAT IT FAILED FUNCTIONAL AREA COMPARABILITY. THE TPO FOUND THIS COMPANY TO BE INTO SOFTWARE DEVELOPMENT SERVICES QU ALIFYING ALL THE FILTERS APPLIED BY HIM. THE ASSESSEE RAISED CERTAI N OBJECTIONS TO THE INCLUSION OF THIS COMPANY, BUT WITHOUT ANY SUCCESS. THE TPO COMPUTED OPERATING PROFIT MARGIN OF THIS COMPANY AT 40.41% A ND INCLUDED IT IN THE FINAL LIST OF COMPARABLES. THE ASSESSEE IS AGGRIEV ED AGAINST THE INCLUSION OF THIS COMPANY IN THE SET OF COMPARABLES. 8.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE RELEVANT MATERIAL ON RECORD. IT CAN BE SEEN THAT THE TPO IN CLUDED THIS COMPANY IN THE LIST OF COMPARABLES BY REJECTING THE ASSESSEES CONTENTION ABOUT THE BRAND OF THIS COMPANY HELPING IN EARNING HUGE PROFI TS AND ALSO THE BRAND RELATED PROFITS SWELLING ITS ULTIMATE PROFIT RATE. WE FIND THAT THE ASSESSEE IS A CAPTIVE UNIT RENDERING SERVICES TO ITS AES ALO NE WITHOUT ACQUIRING ANY INTELLECTUAL PROPERTY RIGHTS IN THE WORK DONE B Y IT IN THE ITA NOS.3324 & 2948/DEL/2013 11 DEVELOPMENT OF SOFTWARE. THE HONBLE DELHI HIGH CO URT IN CIT VS. AGNITY INDIA TECHNOLOGIES (P) LTD. (2013) 219 TAXMA NN 26 (DEL) CONSIDERED THE GIANTNESS OF INFOSYS LTD., IN TERMS OF RISK PROFILE, NATURE OF SERVICES, NUMBER OF EMPLOYEES, OWNERSHIP OF BRAN DED PRODUCTS AND BRAND RELATED PROFITS, ETC. IN COMPARISON WITH SIMI LAR FACTORS PREVAILING IN THE CASE OF AGNITY INDIA TECHNOLOGIES PVT. LTD., BEING, A CAPTIVE UNIT PROVIDING SOFTWARE DEVELOPMENT SERVICES WITHOUT HAV ING ANY IP RIGHTS IN THE WORK DONE BY IT. AFTER MAKING COMPARISON OF VA RIOUS FACTORS AS ENUMERATED ABOVE, THE HONBLE DELHI HIGH COURT HELD INFOSYS LTD., TO BE INCOMPARABLE WITH AGNITY INDIA TECHNOLOGIES PVT. LTD. THE FACTS OF THE INSTANT CASE ARE MORE OR LESS SIMILAR INASMUCH AS THE ASSESSEE IS ALSO A CAPTIVE SERVICE PROVIDER WITH A LIMITED NUMBER OF EMPLOYEES AT ITS DISPOSAL AND ALSO NOT OWNING ANY BRANDED PRODUCTS W ITH NO EXPENDITURE ON R&D AT ITS OWN ETC. WHEN WE CONSIDER THE CUMULA TIVE EFFECT OF ALL THE ABOVE FACTORS, WE FIND THAT BY NO STANDARD, THE ASSESSEE CAN BE COMPARED WITH INFOSYS TECHNOLOGIES LTD. RESPECTFUL LY FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT I N AGNITY INDIA (SUPRA) , WE HOLD THAT INFOSYS TECHNOLOGIES LTD. TO BE INCO MPARABLE WITH ITA NOS.3324 & 2948/DEL/2013 12 THE ASSESSEE COMPANY. THIS COMPANY IS, THEREFORE, DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLES. PERSISTENT SYSTEMS LTD . 9.1. THE TPO OBSERVED THIS COMPANY TO BE ENGAGED IN SOFTWARE DEVELOPMENT SERVICES WITH PREDOMINANT REVENUES FROM SOFTWARE DEVELOPMENT SERVICES. HE CALLED FOR SOME INFORMATI ON U/S 133(6) OF THE ACT FROM THIS COMPANY REGARDING BREAK UP OF SOFTWAR E PRODUCTS AND SOFTWARE DEVELOPMENT SERVICES. ON CONSIDERATION O F SUCH INFORMATION, HE OBSERVED THAT AROUND 95.1% OF THE TOTAL REVENUE OF THIS COMPANY WAS FROM SOFTWARE DEVELOPMENT SERVICES AND THE REMAININ G AMOUNT WAS FROM SOFTWARE PRODUCTS. AFTER CONSIDERING THE ASSESSEE S OBJECTIONS, THE TPO INCLUDED IT IN THE LIST OF COMPARABLES. THE ASSESS EE IS AGGRIEVED AGAINST THE CONSIDERATION OF THIS COMPANY AS COMPARABLE. 9.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD. IT CAN BE SEEN FROM THE INFORM ATION SUPPLIED BY THIS COMPANY U/S 133(6) OF THE ACT, A PART OF WHICH HAS BEEN REPRODUCED IN THE TPOS ORDER, THAT THIS COMPANY HAS DEVELOPED A FEW OF ITS OWN ITA NOS.3324 & 2948/DEL/2013 13 PRODUCTS IN THE AREA OF IDENTITY MANAGEMENT CONNECT ORS. REVENUE FROM PRODUCT LICENCES STANDS AT RS.288.93 MILLION AS AGA INST THE REVENUE FROM SOFTWARE DEVELOPMENT SERVICES AT RS.4829.57 MILLION S. THOUGH THIS COMPANY IS MORE ENGAGED IN SOFTWARE DEVELOPMENT SER VICES, BUT, IS ALSO A SOFTWARE PRODUCT COMPANY, WHICH IS EVIDENT FROM T HE INFORMATION SUPPLIED BY IT TO THE TPO. THUS, THE TOTAL PROFITS OF THE COMPANY ON ENTITY LEVEL ALSO, INTER ALIA, INCLUDE REVENUE FROM PRODUCT LICENCES. AS THERE IS NO SEPARATE SEGMENTAL INFORMATION AND IT H AS BEEN CONSIDERED AS COMPARABLE ON ENTITY LEVEL, IT IMPLIES THAT THE TO TAL REVENUE CONSIDERED ALSO CONSIST OF SOME PART FROM PRODUCT LICENCES. IN SUCH CIRCUMSTANCES, IT IS NOT POSSIBLE TO ASCERTAIN THE IMPACT OF SUCH REV ENUE ON THE TOTAL REVENUE OF THIS COMPANY. FURTHER, THERE IS NO INF ORMATION AVAILABLE FROM THE ANNUAL REPORT OF THIS COMPANY OR THE DATA COLLECTED BY THE TPO U/S 133(6) OF THE ACT TO DIVULGE THE AMOUNT OF REVE NUE FROM SOFTWARE DEVELOPMENT SERVICES ALONE TO THE EXCLUSION OF REVE NUE FROM PRODUCT LICENCES. AS THE ASSESSEE IS NOT ENGAGED IN THE SA LE OF ANY SOFTWARE PRODUCTS, THIS COMPANY ON ENTITY LEVEL, CANNOT BE C ONSIDERED AS COMPARABLE. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF TOLUNA ITA NOS.3324 & 2948/DEL/2013 14 INDIA PVT. LTD. VS. ACIT (ITA NO.5645/DEL/2011 , VIDE ITS ORDER DATED 26.8.2014 HAS HELD PERSISTENT SYSTEMS LTD. TO BE IN COMPARABLE WITH TOLUNA INDIA PVT. LTD., ALSO A COMPANY ENGAGED IN P ROVIDING SOFTWARE DEVELOPMENT SERVICES TO ITS RELATED PARTIES ALONE. SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN LEAR AUTOMOTIVE INDIA PVT. LTD. VS. ACIT (ITA NO.5612/DEL/2011) VIDE ITS ORDER DATED 22.12.2014. THE LD. DR COULD NOT POINT OUT ANY DISTINGUISHING FEATURE IN THE FAC TUAL MATRIX OF THE ASSESSEE IN QUESTION AND TOLUNA INDIA PVT. LTD., AN D LEAR AUTOMOTIVE INDIA PVT. LTD. SINCE BOTH THESE COMPANIES ARE ALS O ENGAGED IN THE BUSINESS OF PROVIDING SOFTWARE DEVELOPMENT SERVICES TO ITS AES, SIMILAR TO THE ACTIVITY DONE BY THE ASSESSEE, RESPECTFULLY FOLLOWING THE PRECEDENTS, WE ORDER FOR THE EXCLUSION OF THIS COMP ANY FROM THE LIST OF COMPARABLES. WIPRO LTD. (SEG.) 10.1. THE ASSESSEE REJECTED THIS COMPANY IN IT S TP DOCUMENT BY TREATING IT AS FUNCTIONALLY DIFFERENT. THE TPO OBS ERVED THAT THE IT SERVICES SEGMENT OF THIS COMPANY ON STANDALONE BASI S WAS COMPARABLE ITA NOS.3324 & 2948/DEL/2013 15 WITH THE ASSESSEE COMPANY. HE SOUGHT SOME INFORMAT ION FROM THIS COMPANY U/S 133(6) OF THE ACT AND, THEREAFTER, CAME TO THE CONCLUSION THAT ITS IT SERVICES SEGMENT WAS COMPARABLE WITH TH E ASSESSEE. IN DOING SO, HE REJECTED THE ASSESSEES CONTENTION ABOUT BRA NDING AND TURNOVER, WHICH WAS ALSO TAKEN BY THE ASSESSEE AGAINST THE IN CLUSION OF INFOSYS TECHNOLOGIES LTD. THE LD. CIT(A) UPHELD THE FINDIN G OF THE AO/TPO IN TREATING IT AS A CORRECT COMPARABLE. THE ASSESSEE I S AGGRIEVED. 10.2. WE HAVE HEARD THE RIVAL SUBMISSIONS THE PE RUSED THE RELEVANT MATERIAL ON RECORD. IT CAN BE OBSERVED FROM THE TP OS ORDER ITSELF THAT THE FACTS AND CIRCUMSTANCES OF WIPRO LTD., ARE SOME WHAT SIMILAR TO INFOSYS TECHNOLOGIES LTD., INASMUCH AS HE HAS PROCE EDED TO REJECT THE ASSESSEES OBJECTIONS BY RELYING ON THE REASONING G IVEN BY HIM FOR THE INCLUSION OF INFOSYS LTD. IT IS FURTHER OBSERVED T HAT WIPRO LIMITED (SEG.) WAS CONSIDERED AS COMPARABLE BY THE TPO IN T HE CASE OF TOLUNA INDIA (SUPRA) AND LEAR AUTOMOTIVE (SUPRA) . THE TRIBUNAL, IN BOTH THE CASES, HAS HELD WIPRO LTD. (SEG.) AS NOT COMPARABLE . THIS COMPANY IS ALSO OPERATING AS A FULL-FLEDGED RISK TAKING ENTITY ; ENGAGED IN PROVIDING ITA NOS.3324 & 2948/DEL/2013 16 TECHNOLOGY INFRASTRUCTURE SERVICES, TESTING SERVICE S, PACKAGE IMPLEMENTATION HAVING MORE THAN 82,000 EMPLOYEES. IT HAS ITS OWN R&D CENTRE. IT INCURRED AROUND 11% OF NET SALES AS EXPENDITURE ON RESEARCH AND DEVELOPMENT. NONE OF THE ABOVE FACTOR S MATCH WITH THE ASSESSEE COMPANY. RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS, WE HOLD THAT THIS COMPANY IS NOT COMPARABLE. 10.3. THERE IS ANOTHER REASON FOR HOLDING THIS CO MPANY AS INCOMPARABLE. IT CAN BE SEEN THAT THERE WAS A MERGE R OF WIPRO INFRASTRUCTURE ENGINEERING LTD., WIPRO HEALTHCARE I T LTD., QUANTECH GLOBAL SERVICES LTD., WITH THIS COMPANY DURING THE YEAR IN QUESTION. THIS MERGER WAS APPROVED BY THE HONBLE KARNATAKA H IGH COURT AND THE HONBLE AP HIGH COURT DURING THE FINANCIAL YEAR 200 7-08. THE MUMBAI BENCH OF THE TRIBUNAL IN PETRO ARANDITE (P) LTD. VS. DCIT (2013) 154 TTJ (MUM) 176 HAS HELD THAT A COMPANY CANNOT BE CONSIDERED AS COMPARABLE BECAUSE OF FINANCIAL RESULTS DISTORTED D UE TO MERGERS AND DEMERGERS, ETC. SIMILAR VIEW HAS BEEN TAKEN BY THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF TOLUNA INDIA PVT. LTD. (SUPRA) . AS THERE WERE ITA NOS.3324 & 2948/DEL/2013 17 AMALGAMATIONS IN WIPRO LTD. DURING THE FINANCIAL YE AR IN QUESTION, THIS FACT ALSO MAKES IT INCOMPARABLE WITH THE ASSESSEE C OMPANY. IN VIEW OF THE FOREGOING REASONS, WE DIRECT TO EXCLUDE WIPRO L IMITED (SEG.) FROM THE LIST OF COMPARABLES. 11. NO OTHER ASPECT OF THE COMPUTATION OF ALP OF T HE INTERNATIONAL TRANSACTION OF `PROVISION OF SOFTWARE DEVELOPMENT S ERVICES HAS BEEN CHALLENGED BY THE ASSESSEE IN THE PRESENT APPEAL. THE IMPUGNED ORDER IS ERGO SET ASIDE ON THE QUESTION OF DETERMINATION OF THE ALP OF THE `SOFTWARE DEVELOPMENT SERVICES SEGMENT AND THE MAT TER IS REMITTED TO THE FILE OF AO/TPO FOR COMPUTING ALP OF THE INTERNA TIONAL TRANSACTION OF THIS SEGMENT AFRESH IN CONSONANCE WITH OUR ABOVE DIRECTIONS. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REA SONABLE OPPORTUNITY OF BEING HEARD. 12. GROUND NO. 1(D) IS AGAINST THE EXCLUSION OF CER TAIN COMPANIES FROM THE LIST OF COMPARABLES IN THE MARKETING SUPPORT S ERVICES SEGMENT. BRIEFLY STATED, THE FACTS OF THIS GROUND ARE THAT T HE ASSESSEE REPORTED INTERNATIONAL TRANSACTION OF PROVISION OF MARKETIN G SUPPORT SERVICES ITA NOS.3324 & 2948/DEL/2013 18 WITH THE TRANSACTED VALUE OF RS.4,21,25,941/-. THE ASSESSEE EMPLOYED TNMM AS THE MOST APPROPRIATE METHOD WITH THE PLI O F OPERATING PROFIT TO TOTAL COST (OP/TC). THE ASSESSEES PROFIT MARGI N UNDER THIS SEGMENT WAS DECLARED AT 13.58%. THE ASSESSEE CHOSE 11 COMP ANIES AS COMPARABLES WHOSE AVERAGE PROFIT MARGIN WAS WITHIN THE PERMISSIBLE RANGE OF THE ASSESSEES PROFIT MARGIN UNDER THIS SE GMENT. FOR THE REASONS GIVEN IN HIS ORDER, THE TPO COMPLETELY REJE CTED THE ASSESSEES LIST OF COMPARABLES AND CHOSE 10 NEW COMPANIES AS C OMPARABLE. THE AVERAGE OPERATING PROFIT MARGIN OF THESE COMPANIES WAS COMPUTED AT 22.5% AND, ACCORDINGLY, TRANSFER PRICING ADJUSTMENT OF RS.33,13,077/- WAS PROPOSED BY THE TPO, WHICH WAS EVENTUALLY MADE BY THE AO. THE LD. CIT(A) EXCLUDED APITCO LTD., RITES LTD., AND VA PI WASTE AND AFFLUENT MANAGEMENT COMPANY LTD. FROM THE FINAL LIS T OF COMPARABLES DRAWN BY THE TPO. THIS RESULTED INTO THE DELETION OF ADDITION ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT UNDER THIS S EGMENT. BOTH THE SIDES ARE IN APPEAL AGAINST THE IMPUGNED ORDER TO T HE EXTENT IT IS PREJUDICIAL TO THEM. WHEREAS THE ASSESSEE HAS CHAL LENGED THE INCLUSION OF CHOKSI LABORATORIES LTD., AND WAPCOS LTD. (SEG. ) IN THE LIST OF ITA NOS.3324 & 2948/DEL/2013 19 COMPARABLES, THE REVENUE IS AGGRIEVED ONLY AGAINST THE EXCLUSION OF APITCO LTD. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. BEFORE EXAMINING THE COMPARABI LITY OR OTHERWISE OF THE COMPANIES CHALLENGED BEFORE US, IT IS OF UTMOST IMPORTANCE TO CONSIDER THE NATURE OF ACTIVITY CARRIED OUT BY THE ASSESSEE IN THE PROVISION OF MARKETING SUPPORT SERVICES. THERE IS NO ELABORATION OF THE NATURE OF SERVICES IN THE AGREEMENT BETWEEN THE ASS ESSEE AND CIENA CORPORATION, USA, EXCEPT FOR MENTIONING IN SCHEDULE 2: PROVISION OF OTHER SUCH SERVICES TO CIENA, USA AS CIENA, USA MAY REASONABLY REQUEST FROM TIME TO TIME. THE TPO HAS ALSO NOT D ISCUSSED THE NATURE OF SERVICES UNDER THIS SEGMENT EXCEPT FOR RECORDING THE DESCRIPTION OF TRANSACTIONS WITH ITS NOMENCLATURE BEING PROVISION OF MARKETING SUPPORT SERVICES. WHEN WE ADVERT TO THE TP STUDY REPORT, I T CAN BE FOUND THAT THE FUNCTIONS PERFORMED BY THE ASSESSEE IN THE PROV ISION OF MARKETING SUPPORT SERVICES ARE INDICATED AT PAGE 29 OF THE PA PER BOOK, AS UNDER:- ITA NOS.3324 & 2948/DEL/2013 20 MARKETING: MARKETING ACTIVITIES UNDERTAKEN BY CIEN A INDIA INCLUDES IDENTIFYING POTENTIAL CUSTOMER, COLLECTING MARKET RELATED INFORMATION, ATTENDING TRADE EXHIBITIONS AND INDUST RY SHOWS, ETC. SALES SUPPORT: SALES SUPPORT ACTIVITIES COMPRISE GA THERING INFORMATION AND ANALYZING INDUSTRY INFORMATION, MAK ING PRESENTATIONS ON CIENA PRODUCTS AND SERVICES AND PR OVIDING RELEVANT SUPPORT TO CIENA, US. TECHNICAL SUPPORT: CIENA INDIA ALSO PROVIDES TECHNI CAL SUPPORT SERVICES TO THE CUSTOMERS. DURING FY 2007-08, THE COMPANY RENDERED TRAINING AND INSTALLATION SUPPORT TO THE E ND CUSTOMERS OF CIENA US. ALSO, CIENA INDIA RECEIVED TRAINING ON T ECHNICAL MATTERS FROM CIENA GROUP. 14. FROM THE ABOVE DESCRIPTION OF MARKETING SUPPORT SERVICES PERFORMED BY THE ASSESSEE FOR ITS FOREIGN AE, IT IS PATENT THAT THE ASSESSEES NATURE OF WORK BASICALLY INCLUDES IDENTI FYING POTENTIAL CUSTOMERS AND PROVIDING TECHNICAL SUPPORT SERVICES TO THE CUSTOMERS OF ITS AE. THE WORK OF IDENTIFYING CUSTOMERS IS CARRI ED OUT BY COLLECTING ITA NOS.3324 & 2948/DEL/2013 21 MARKET RELATED INFORMATION, ATTENDING TRADE EXHIBIT IONS, ETC. WITH THIS BACKGROUND IN MIND ABOUT THE NATURE OF SERVICES PRO VIDED BY THE ASSESSEE UNDER THIS SEGMENT, WE NOW PROCEED TO EXAM INE WHETHER OR NOT THE COMPANIES UNDER CHALLENGE ARE COMPARABLE. CHOKSI LABORATORIES LTD . 15. THE TPO VISITED THE WEBSITE OF THIS COMPANY AND NOTICED THAT IT WAS ENGAGED IN PROVIDING ANALYSIS, CALIBRATIONS, P OLLUTION CONTROL AND CONSULTANCY SERVICES TO A BROAD SPECTRUM OF INDUST RIES. BY CONSIDERING SUCH NATURE OF SERVICES PROVIDED BY THIS COMPANY, T HE TPO HELD THAT THESE WERE SIMILAR TO THE SERVICES PROVIDED BY THE ASSESSEE TO ITS AE. WE HAVE GONE THROUGH THE ANNUAL REPORT OF THIS COMP ANY, WHICH IS AVAILABLE ON PAGES 2370 ONWARDS OF THE PAPER BOOK. NOTE NO. 8 TO PART B - NOTES FORMING PART OF THE ACCOUNTS - PROVIDES THAT THIS COMPANY IS A COMMERCIAL TESTING HOUSE ENGAGED IN TESTING OF VA RIOUS PRODUCTS AND ALSO OFFERS SERVICES IN THE FIELD OF POLLUTION CONT ROL AS ALLIED ACTIVITY. PARA 2 OF THE ANNEXURE TO THE AUDITORS REPORT ALSO CLARIFIES THAT THIS IS A COMPANY ENGAGED IN RENDERING SERVICES FOR TESTING PURPOSES. FROM THE ITA NOS.3324 & 2948/DEL/2013 22 ABOVE DESCRIPTION OF THE NATURE OF SERVICES CARRIED ON BY THIS COMPANY, IT IS EVIDENT THAT IT IS BASICALLY ENGAGED IN PROVIDIN G TESTING SERVICES FOR VARIOUS PRODUCTS AND ALSO OFFERS SERVICES IN THE FI ELD OF POLLUTION CONTROL. AS AGAINST THIS, THE SERVICES PROVIDED BY THE ASSES SEE ARE PURELY IN THE NATURE OF IDENTIFYING CUSTOMERS FOR ITS AES AND PRO VIDING TECHNICAL SUPPORT SERVICES TO THEIR CUSTOMERS. WE FAIL TO AP PRECIATE AS TO HOW MARKETING SUPPORT SERVICES CAN BE EQUATED WITH TEST ING SERVICES. WHEN WE PERUSE SCHEDULE OF FIXED ASSETS OF THIS COMPANY, IT CAN BE SEEN THAT THE MAJOR ASSET IS INSTRUMENTS. IT IS WITH THE HE LP OF THESE INSTRUMENTS THAT THE COMPANY IS PROVIDING SERVICES IN THE NATUR E OF TESTING OF VARIOUS PRODUCTS. BY NO STANDARD, THIS COMPANY CAN BE CONS IDERED AS COMPARABLE WITH THE ASSESSEE COMPANY. WE, THEREFOR E, DIRECT THE EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARAB LES. WAPCOS LTD. (SEG.) 16.1. THE TPO CONSIDERED THIS COMPANY AS COMPARABL E BY OBSERVING THAT IT WAS PROVIDING SUPPORT SERVICES IN TERMS OF TECHNICAL SUPPORT, TECHNICAL KNOW-HOW VALUATION AND ASSISTANC E IN ITA NOS.3324 & 2948/DEL/2013 23 DEVELOPMENT/UPGRADATION OF POTENTIAL SUPPLIERS, ETC . THE ASSESSEES OBJECTIONS ABOUT THE FUNCTIONAL DISSIMILARITY OF TH IS COMPANY, WERE REJECTED. 16.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS A ND PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND FROM THE ANNUA L REPORT OF THIS COMPANY THAT IT HAS TWO SEGMENTS, NAMELY, CONSULTA NCY AND ENGINEERING PROJECTS AND LUMPSUM TURNKEY PROJECTS . THE TPO HAS TAKEN CONSULTANCY AND ENGINEERING PROJECT SEGMENT FOR THE PURPOSES OF COMPARISON WITH THE ASSESSEE COMPANY. THIS COMPANY IS ENGAGED IN INFRASTRUCTURE DEVELOPMENT PROJECTS. THIS COMPANY IS ALSO WORKING AS INDEPENDENT REVIEW AND MONITORING AGENCY FOR PROJEC TS IN SOME STATES. IT IS ALSO PROVIDING SUPERVISION AND QUALITY CONTRO L CONSULTANCY FOR CONSTRUCTION/UPGRADATION OF RURAL ROADS UNDER PMGSY . IT ALSO SECURED PROJECTS FOR DEVELOPMENT AND HYGIENE EDUCATION, DEV ELOPMENT OF DRY PIT LATRINES, DESIGNS FOR LOCAL CONDITIONS FOR HOUSEHOL D AND SCHOOLS AND SOLID WASTE MANAGEMENT. IT ALSO SECURED PROJECTS FOR TRA NSMISSION LINE KIRTI IRTI TO STA, TRENG, CAMHODIA. A REVIEW OF THE ABOV E SERVICES PROVIDED ITA NOS.3324 & 2948/DEL/2013 24 BY THIS COMPANY, IT CAN BE EASILY ASCERTAINED THAT IT IS NOWHERE CLOSE TO THE RENDERING OF MARKETING SUPPORT SERVICES, WHICH IS BEING DONE BY THE ASSESSEE UNDER THIS SEGMENT. THE NATURE OF ACTIVIT Y DONE BY THE ASSESSEE IS QUITE DISTINCT FROM THIS COMPANY. WE, THEREFORE , DIRECT TO EXCLUDE WAPCOS LTD. (SEG.) FROM THE LIST OF COMPARABLES. 17.1. THE REVENUE IS AGGRIEVED AGAINST THE EXCLUSI ON BY THE LD. CIT(A) OF APITCO LTD. THIS COMPANY WAS CONSIDERED AS COMPARABLE BY THE TPO. THE LD. CIT(A) NOTICED THAT THIS COMPANY TO BE ENGAGED IN PROVIDING TECHNICAL AND ENGINEERING SERVICES AND AL SO EXECUTING PROJECTS ON TURNOVER BASIS. HE, THEREFORE, HELD THIS COMPAN Y TO BE NOT COMPARABLE. 17.2. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE RELEVANT MATERIAL ON RECORD, WE FIND FROM THE ANNUAL REPORT OF THIS COMPANY THAT IT IS ENGAGED IN PROVIDING SEVERAL SERVICES, VIZ., MICRO ENTERPRISES DEVELOPMENT, SKILL DEVELOPMENT, ENTREPRENEURSHIP DE VELOPMENT, RESEARCH STUDIES, PROJECT RELATED SERVICES, INFRAST RUCTURE PLANNING & DEVELOPMENT, ENVIRONMENT MANAGEMENT, ENERGY RELATED SERVICES, ITA NOS.3324 & 2948/DEL/2013 25 CLUSTER DEVELOPMENT, TECHNOLOGY FACILITATION, ASSET RECONSTRUCTION & MANAGEMENT SERVICES, EMERGING AREAS. IT CAN BE SEEN FROM THE NATURE OF OPERATIONS CARRIED OUT BY THIS COMPANY TH AT THE SAME IS TOWARDS MICRO ENTERPRISES DEVELOPMENT, SKILL DEVELO PMENT AND PROJECT RELATED SERVICES, ETC., ALSO INCLUDING INFRASTRUCTU RE PLANNING AND DEVELOPMENT ALONG WITH ENERGY RELATED SERVICE AND C LUSTER DEVELOPMENT. A PART OF ITS ACTIVITIES HAS GOT SOME RESEMBLANCE WITH THE NATURE OF SERVICE PROVIDED BY THE ASSESSEE UNDER TH IS SEGMENT. THE LD. CIT(A) HAS RECORDED THAT ONLY 12% OF TOTAL INCOME OF THIS COMPANY IS FROM RESEARCH STUDIES WHICH IS AKIN TO THE NATURE O F SERVICES PROVIDED BY THE ASSESSEE COMPANY. THIS CONTENTION HAS NOT BEEN CONTROVERTED BY THE LD. DR WITH ANY CLINCHING EVIDENCE. WHEN WE CONSID ER THE OPERATIONS OF THIS COMPANY AS ENUMERATED ABOVE AND THE FACT TH AT THIS COMPANY HAS MAINTAINED ACCOUNTS ON ENTITY LEVEL AND THERE IS NO BIFURCATION AVAILABLE IN RESPECT OF THE SERVICES SIMILAR TO THOSE PROVIDE D BY THE ASSESSEE UNDER THIS SEGMENT, THIS COMPANY ON ENTITY LEVEL CANNOT B E CONSIDERED AS COMPARABLE. WE, THEREFORE, HOLD THAT THE LD. CIT(A ) WAS JUSTIFIED IN CONSIDERING THIS COMPANY AS NOT COMPARABLE. ITA NOS.3324 & 2948/DEL/2013 26 18. GROUND NOS. 2 AND 3 OF THE ASSESSEES APPEAL WE RE NOT PRESSED. THE SAME, THEREFORE, STANDS DISMISSED. 19.1. GROUND NO. 2 OF THE REVENUES APPEAL IS AGAI NST THE DELETION OF ADDITION MADE BY THE AO ON ACCOUNT OF TRAINING A ND RECRUITMENT EXPENSES. THE ASSESSEE CLAIMED DEDUCTION FOR A SUM OF RS. 2,24,62,589/- TOWARDS RECRUITMENT AND TRAINING EXPE NSES. THE AO ALLOWED 20% DEDUCTION FOR SUCH EXPENSES IN THE CUR RENT YEAR AND TREATED THE REMAINING 80% AS CAPITAL EXPENDITURE, F OR WHICH DISALLOWANCE WAS MADE FOR A SUM OF RS.1,79,70,072/- . THE LD. CIT(A) DELETED THIS ADDITION. 19.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS A ND PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE VIEW TAKEN BY THE LD. CIT(A) ACCORDS WITH THE JUDGMENT DATED 27.4.2010 OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SOLUS PHARMACEUTICALS LTD ., IN WHICH IT HAS BEEN HELD THAT THE TRAINING EXPE NSES ARE TO BE ALLOWED AS REVENUE EXPENSES. WE, THEREFORE, UPHOLD THE VIEW TAKEN BY THE LD. CIT(A). THIS GROUND FAILS. ITA NOS.3324 & 2948/DEL/2013 27 20. THE LAST GROUND IS AGAINST THE DELETION OF ADDI TION ON ACCOUNT OF SUNDRY BALANCES WRITTEN OFF WITHOUT GIVING ANY OPP ORTUNITY TO THE AO EXAMINE THE EVIDENCE FILED BY THE ASSESSEE BEFORE T HE LD. FIRST APPELLATE AUTHORITY. THE LD. AR FAIRLY ADMITTED THAT THE LD. CIT(A) PARTLY DELETED THE ADDITION BY CONSIDERING ADDITIONAL EVIDENCE WHI CH WAS NOT THERE BEFORE THE AO. UNDER SUCH CIRCUMSTANCES, WE DO NOT PROPOSE TO EXAMINE THE MERITS OF THE ADDITION, WHICH HAS BEEN DELETED IN VIOLATION OF RULE 46A OF THE INCOME-TAX RULES, 1962. ACCORDIN GLY, THE IMPUGNED ORDER ON THIS ISSUE IS SET ASIDE AND THE MATTER IS SENT TO THE FILE OF AO FOR DECIDING IT AFRESH AS PER LAW, AFTER ALLOWING A REA SONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. NEEDLESS TO SAY, THE ASSESSEE WILL BE AT LIBERTY TO LEAD ANY FRESH EVIDENCE BEFORE THE AO IN THIS REGARD. 21. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 23.04.201 5. SD/- SD/- [C.M. GARG] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 23 RD APRIL, 2015. ITA NOS.3324 & 2948/DEL/2013 28 DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.