Wipro GE Healthcare Private Limited (earlier known as GE Medical Systems India Private Limited), Bangalore V. Deputy Commissioner Of Income Tax, Circle-7(1)(1), Bangalore

ITA 344/BANG/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1521 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-09-2022
• Assessment Year: 2006-2007
• Appeal Filed On: 14-07-2021

Judgement Text

IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “C’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER IT(TP)A No.344/Bang/2021 Assessment Year: 2006-07 M/s. Wipro GE Healthcare Private Ltd. No.4, Kadugodi Industrial Area Whitefield, Bangalore 560 067 (Presently at Prestige Shanthiniketan, 6 th Floor, Crescent 4, ITPI, Whitefield, Bangalore 560 048) PAN NO : AAACW1685J Vs. Deputy Commissioner of Income-tax Circle 7(1)(1) Bangalore APPELLANT RESPONDENT ITA No.703/Bang/2021 Assessment Year: 2012-13 M/s. Wipro GE Healthcare Private Ltd. Bangalore 560 048) Vs. ACIT Circle 7(1)(1) Bangalore APPELLANT RESPONDENT Appellant by : Shri K.R. Pradeep & Smt. Girija G.P., A.Rs Respondent by : Shri Praveen Karanth, D.R. Date of Hearing : 12.09.2022 Date of Pronouncement : 07.10.2022 IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 2 of 89 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: These two appeals by the assessee, one is for assessment year 2006-07 and another for assessment year 2012-13, which are directed against the different orders passed u/s 143(3) r.w.s. 254 r.w.s. 144C(13) of the Income-tax Act,1961 ['the Act' for short] by Dispute Resolution Panel (“DRP”). The grounds are very lengthy and not in accordance with ITAT Rules as such we adjudicate the grounds as submitted by Ld. A.R. in his written submissions. ITA No.344/Bang/2021 2. In this case, an assessment order dt.12.10.2010 was passed by the AO u/s 143(3) r.w.s. 144C of the Act incorporating a transfer pricing adjustment on software services of Rs.2,35,51,065/-. Upon appeal to the Tribunal in its order dt.23.06.2017 in IT(TP)A No.1414/Bang/2010 has held on this issue as reproduced hereunder: ‘’5......Accordingly, the assessment order on entire TP issue is set aside and the matter is restored back to the file of AO/TPO for fresh decision after providing adequate opportunity of being heard to the assessee.’’ 2.1 In the set aside proceedings, the assessee filed its submissions on this issue vide its letter dt.12.09.2018. The TPO in the impugned order u/s 254 r.w.s 92CA dt.25.10.2019 has arrived at an adjustment of Rs.2,42,58,140/-. In arriving at the said adjustment, the TPO in para 3.1 has erred in assuming that the Tribunal has only set aside the issue of comparability of the comparable companies selected by the TPO but not objected to the filters adopted by the TPO for selection of comparables. Perusal of the grounds of appeal extracted in the Tribunal order shows that the assessee has raised grounds on filters, comparables among IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 3 of 89 others. Since the Tribunal has set aside the entire matter to the file of AO/TPO for fresh decision, the TPO ought to have dealt with the submissions of the assessee against the various filters adopted. In the absence of the same, the order u/s 92CA of the Act dt.25.10.2019 is against law as the binding nature of the order of Tribunal has not been followed. 2.2 The assessee company i.e, M/s.Wipro GE Healthcare Pvt Ltd (formerly M/s.GE Medical Systems India Pvt Ltd) is a 100% exporter of software services. The assessee provides IT/software services to its AE’s. These service solutions include base support, business, product and infrastructure software across all technologies and home grown or purchase software. It also includes expertise in various technologies, implementation, monitoring and support of IT infrastructures and software solutions. The assessee is a captive service provider providing software services only to its AE’s. 2.3 The assessee’s margin as adopted by the TPO is as under (page 3 of TP order). Operating revenue 29,91,47,461 Operating Cost 27,19,52,238 Operating profit 2,71,95,223 OP/OC 10% 2.4 The final list of comparables selected by the TPO in his order dt.25.10.2019 (page 86 of paper book) are as under: Sl. No. Name of the Company OP/OC (before WC adjustment) 1 Aztech Software Limited 18.09% 2 Geometric Software Solutions Co. Limited 6.70% IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 4 of 89 Sl. No. Name of the Company OP/OC (before WC adjustment) 3 Infosys Ltd 40.38% 4 Kals Information Systems Ltd 39.75% 5 Mindtree Consulting Limited 20.69% 6 Persistent Systems Limited 24.67% 7 R Systems International Limited 22.20% 8 Sasken Communication Ltd 13.90% 9 Tata Elxsi Ltd 27.65% 10 Lucid Software Limited 8.92% 11 Mediasoft Solutions Limited 6.29% 12 R S Software (India) Ltd 15.69% 13 SIP Technologies & Exports Limited 3.06% 14 Bodhtree Consulting Limited 15.99% 15 Accel Transmatics 44.07% 16 Synfosys Business Solutions Limited 10.61% 17 Flextronics Software Systems Ltd 27.24% 18 Lanco Global Systems Limited 5.27% 19 Megasoft Limited 51.73% 20 Igate Global Solutions Ltd 15.61% ARITHMETIC MEAN 20.93% 2.5 The Deputy Commissioner of Income Tax (Transfer Pricing)-2(2)(1), Bangalore (TPO) passed an order under section 92CA of the Act dated 25.10.2019 determining the arm’s length price in respect of software services segment as under: IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 5 of 89 Particulars Rs. Arm’s length price 32,34,05,601 Price received 29,91,47,461 Shortfall 2,42,58,140 2.6 The Draft assessment order u/s 143(3) r.w.s 254 r.w.s 144C(1) dated 20.12.2019 was passed by the AO by making the addition of Rs.2,42,58,140/- in respect of TP adjustment in Software segment. Against the Draft assessment order, the assessee filed its objections before the DRP on 17.01.2020. The assessee vide written submissions dated 07.01.2021 filed before DRP on 08.01.2021 has contested for rejection of following comparables interalia its objections on various filters. List of comparable companies contested by the Assessee on various grounds for rejection Sl. No. Name of the Company Grounds of Appeal 1 Aztech Software Ltd • Fails RPT filter 2 Geometric Software Limited • Fails RPT filter 3 Infosys Ltd • Functionally dissimilar – engaged in product development and provision of software developments services • Ownership of brand and IPR • Turnover exceeds 200 crores 4 Kals Information Systems Ltd (seg) • Functionally dissimilar – engaged in software products development • KALS should not be selected based on information received through 133 (6) route 5 Mindtree Consulting Ltd • Fails turnover filter – Turnover exceeds 200 crores • Functionally dissimilar - engaged in R&D activities 6 Persistent Systems Limited • Fails turnover filter – Turnover exceeds 200 crores • Functionally dissimilar – engaged in multiple activities such as software products development, technology innovation, R&D IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 6 of 89 Sl. No. Name of the Company Grounds of Appeal activities etc., 7 R Systems International Limited (Seg.) • Functionally dissimilar – engaged in multiple activities such as software products development, technology innovation, etc. • Different financial year • Engaged in development of intangibles • Fails RPT filter propose to be applied by the Assessee 8 Sasken Communication Ltd (Seg) • Fails turnover filter – Turnover exceeds 200 crores • Functionally dissimilar – engaged in software products development and services 9 Tata Elxsi Ltd (Seg) • Functionally dissimilar – software developments services segment of the company is engaged in industrial design & engineering, embedded product design services, animation activities etc. 10 Accel Transmatics (Seg.) • Functionally dissimilar – engaged in systems and services, technologies and animation division • Abnormal high margins • Fails RPT filter propose to be applied by the Assessee 11 Flextronics Software Systems Ltd (seg) • Fails turnover filter – Turnover exceeds 200 crores • Functionally dissimilar – engaged in software products development • No Segmental bifurcation available • Engaged in R&D activities • Audited financial statements of Flextronics Software Systems Limited for the 12-month period ended March 31 2006 is not available in the public domain. 12 Megasoft Limited • Fails the Different year ending filter applied by the TPO. Megasoft is a December year-ending company • Functionally dissimilar • Entity level margins cannot be considered – without prejudice to the approach of using data received under Section 133(6), if at all the company is to be selected only the software consulting division ought to be considered 13 Igate Global Solutions Ltd • Fails turnover filter – Turnover exceeds 200 crores IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 7 of 89 2.7 The Ld. DRP vide its directions u/s 144C(5) of the Act partly allowed the objections of the assessee vide order dated 30.03.2021. The DRP directed the TPO to remove Kals Information Systems Ltd (seg) as a comparable. 2.8 Pursuant to the directions of the DRP, the AO passed the final assessment order u/s 143(3) r.w.s. 254 r.w.s. 144C(1) on 29.05.2021 retaining the addition of Rs. 2,42,58,140/- as per draft assessment order ignoring and without giving effect to the directions of the DRP. 2.9 Against the orders of the authorities, the Assessee has preferred the above appeal before this Tribunal on 15.07.2021 raising the following grounds of appeal. 1. That the order of the Assessing Officer (AO), Transfer Pricing Officer (TPO) and the directions of the Dispute Resolution Panel (DRP) in so far as it is against the appellant is against the law, facts, circumstances, natural justice, equity, without jurisdiction, bad in law and all other known principles of law. 2. That the total income computed and the total tax computed is hereby disputed. 3. That the AO/TPO/DRP erred in not providing adequate and sufficient opportunity as required under law thus violating the principle of natural justice, hence on this ground alone the orders requires to be annulled. 4. The DRP erred in not considering the relevant materials, evidences, data and relevant law. The directions issued are without application of mind. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 8 of 89 5. That the Orders of AO / TPO and the Directions of the DRP violates the principles of judicial discipline as the binding nature of the orders of the higher appellate authorities have been totally ignored. 6. That the order of the AO/TPO/DRP are bad in law and not as per law requires to be cancelled. 7. The Learned authorities below erred in making adjustment towards the Arm’s Length Price difference in the Software Development Segment amounting Rs.2,42,58,140/-. 8. Without prejudice, the transfer pricing adjustment of Rs.2,42,58,140/- is not in conformity with the directions of the DRP. 9. The Learned AO/TPO/DRP erred in rejecting certain comparables on unsustainable and untenable grounds/reasons while considering comparables which failed to meet the filters /criteria as required under law. 10. The AO/TPO/DRP erred in not applying the turnover filter as per law. 11. The AO/TPO/DRP erred in not considering multiple year data white determining the ALP. 12. The AO/TPO/DRP erred in considering information gathered on the basis of responses received u/s 133(6) of the Act. 13. The AO/TPO/DRP erred in not following the rule of consistency in applying filters. 14. The AO/TPO/DRP erred in applying onsite filters. 15. The AO/TPO/DRP erred in considering a threshold limit for RPT of 25% for considering comparables. 16. The AO/TPO/DRP erred in not allowing appropriate risk adjustments as per law. 17. The Learned AO/TPO/DRP have failed to apply the provisions of Rule 10B(4)&(5) and 10CA(2) while selecting the criteria and filters. 18. The AO/TPO erred in not considering and allowing the variance deduction as envisaged in the Act and circulars. 19. The Learned AO / TPO / DRP erred in not carrying out the adjustments as required under law as well as the facts. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 9 of 89 20. The AO/TPO erred in not appreciating the fact that TP provisions are in the form of an anti avoidance legislation. 21. The Learned AO/TPO/DRP have failed to identify a comparable in terms of Rule 10B(3). 22. The Learned AO/TPO/DRP erred in considering the following companies as comparables rejecting the submissions/objections made by the appellant. a) Aztech Software Ltd b) Geometric Software Limited c) Infosys Ltd d) Mindtree Consulting Ltd e) Persistent Systems Limited f) R Systems International Limited (Seg.) g) Sasken Communication Ltd (Seg) h) Tata Elxsi Ltd (Seg) i) Accel Transmatics (Seg.) j) Flextronics Software Systems Ltd (seg) k) Megasoft Limited l) Igate Global Solutions Ltd 23. With prior permission of the ITAT, the appellant reserves the right to add/delete/amend any or all the ground stated above. 24. For the above and other grounds and reasons which may be submitted during the course of hearing of this appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered. 2.10 During the course of hearing the appellant has submitted a chart seeking for exclusion of the following comparables on various grounds (Ground 22): a) Aztech Software Ltd b) Geometric Software Limited c) Infosys Ltd d) Mindtree Consulting Ltd e) Persistent Systems Limited f) R Systems International Limited (Seg.) – Not pressed g) Sasken Communication Ltd (Seg) h) Tata Elxsi Ltd (Seg) i) Accel Transmatics (Seg.) j) Flextronics Software Systems Ltd (seg) IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 10 of 89 k) Megasoft Limited l) Igate Global Solutions Ltd 2.1.1. Ground Nos.1 to 9 and 11 to 21 are general in nature which do not require any adjudication. Ground 10 – 3. The Ld. A.R. submitted that on the issue of turnover filter, the TPO has excluded companies having turnover of less than 1crore. It is the view of the TPO that the exclusion of comparables on the basis of size and turnover of the companies is not justified in view of the judgment of Hon’ble Delhi High Court in Chryscapital Investment Advisors India (P) Ltd vs DCIT. The TPO in para 3.2 of the TP order has also relied on the decisions of Societe Generale Global Solution Centre P Ltd vs DCIT in IT(TP)A 1188/B/2011 and Capgemini India Pvt Ltd vs ACIT in ITA 7861/Mum2011 in his support. The DRP in para 3 has held that comparables cannot be excluded on the ground of size and level of operations. 3.1 The assessee submitted that the ITAT Bangalore in the case of Fulcrum Fund Services (India) Pvt Ltd vs ITO in IT(TP)A 2521/B/2017 dt.12.04.2019 by considering wide range of decisions on this issue including that of Chryscapital (held as obiter dicta) and the other decisions mentioned supra has held that the law laid down in Genisys Integrating System (India) Pvt Ltd. V. DCIT, ITA No.1231/Bang/2010 dt.05.08.2011 [152 TTJ 215/53 SOT 159] is the correct law on the application of turnover filter. In the case of Genisys the Tribunal has held that companies having turnover in the range of Rs.1crore to Rs.200 crores cannot be compared with companies having turnover above Rs.200 crores. The relevant observations of the Tribunal in the case of Fulcrum is extracted as hereunder: ‘’7.3. We have given a careful consideration to the rival submissions. The Bangalore Bench of the ITAT had an occasion to deal with an identical issue in the case of DCIT Vs. M/s. Northern Operating Services (supra), IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 11 of 89 wherein the Tribunal came to the conclusion that – turnover was relevant criteria in choosing comparable companies and that a company, whose turnover is more than Rs. 200 Crores, cannot be compared with the company, whose turnover is less then Rs. 200 Crores. In Coming to the aforesaid conclusion, the Tribunal relied on the decision rendered by the ITAT, Bangalore Bench in the case of Autodesk India P. Ltd., Vs. DCIT (2018) [96 taxmann.com 263] (Bangalore-Trib) reviewing all the conflicting decisions on the point, and concluding that the application of turnover filter still holds good and has not been in any manner diluted by the decision of Hon'ble Karnataka High Court in the case of M/s. Acusis Software (I) Pvt. Ltd., Vs. ITO in ITA No. 223/2017, dt. 14-08-2018, following the relevant observations of the Tribunal, held as under:..’’ 3.2 Applying the said decision, the companies having turnover more than Rs.200 crores should be eliminated from the list of comparables as the assessee’s turnover is Rs.29.91crores. 3.3 The assessee is seeking exclusion of the following 6 comparables on account of turnover filter. a) Infosys Ltd – Turnover Rs.9028 crores b) Mindtree Consulting Ltd – Turnover Rs.448.79 crores c) Persistent Systems Limited– Turnover Rs.209.17 crores d) Sasken Communication Ltd (Seg) – Turnover Rs.240.03 crores e) Flextronics Software Systems Ltd (seg) – Turnover Rs.595.12 crores f) Igate Global Solutions Ltd– Turnover Rs.527.91 crores 3.4 The turnover of the above companies are far higher than that of the assessee company. Since the assessee falls under category of companies having turnover less than Rs.200crores, the above comparables needs to be excluded. 4. The Ld. D.R. relied on the order of lower authorities. 5. We have heard the rival submissions and perused the materials available on record. The Ld. D.R. submitted that high turnover is not a relevant criterion to record a company as not comparable, so long as the IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 12 of 89 two companies are functionally comparable. If a function of 2 companies are identical then they have to be recorded as comparable. Therefore, Ld. DRP was justified in excluding the above comparables from the list of comparables. 5.1 In this case assessee’s turnover is at Rs.29.91 crores. However, the turnover of these companies is as follows:- Infosys Ltd. - Rs.9,028.00 crores Mindtree Consulting Ltd. - Rs.448.79 crores Persistent Systems Ltd. - Rs.209.17 crores Sasken Communications Ltd. - Rs.240.03 crores (Segmental turnover only) Flextronics Software Systems Ltd. - Rs.595.12 crores (Segmental turnover only) Igate Global Solutions Ltd. - Rs.527.91 crores 5.2 This Tribunal consistently holding that turnover filter is very important and the companies having turnover of Rs.1 crore to Rs.20 crores have to be taken as a particular range and the assessee is in that range having turnover of Rs.29.91 crores. The companies which also have turnover of Rs.1 crore to Rs.200 crores only should be taken into consideration for the purpose of making TP study. This view of ours was fortified by the order of the coordinate bench of the Bangalore Tribunal in the case of Autodesk India Pvt. Ltd. Vs. DCIT in IT(TP)A No.540, 541, 616 & 617/Bang/2013 dated 6.7.2018, wherein held as under: “17.7. We have considered the rival submissions. The substantial question of law (Question No.1 to 3) which was framed by the Hon'ble Delhi High Court in the case of Chryscapital Investment Advisors (India) Pvt.Ltd., (supra) was as to whether comparable can be rejected on the ground that they have exceptionally high profit margins or fluctuation profit margins, as compared to the Assessee in transfer pricing analysis. Therefore as IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 13 of 89 rightly submitted by the learned counsel for the Assessee the observations of the Hon'ble High Court, in so far as it refers to turnover, were in the nature of obiter dictum. Judicial discipline requires that the Tribunal should follow the decision of a non-jurisdiction High Court, even though the said decision is of a non-jurisdictional High Court. We however find that the Hon'ble Bombay High Court in the case of CIT Vs. Pentair Water India Pvt.Ltd. Tax Appeal No.18 of 2015 judgment dated 16.9.2015 has taken the view that turnover is a relevant criterion for choosing companies as comparable companies in determination of ALP in transfer pricing cases. There is no decision of the jurisdictional High Court on this issue. In the circumstances, following the principle that where two views are available on an issue, the view favourable to the Assessee has to be adopted, we respectfully follow the view of the Hon'ble Bombay High Court on the issue. Respectfully following the aforesaid decision, we uphold the order of the DRP excluding 5 companies from the list of comparable companies chosen by the TPO on the basis that the 5 companies turnover was much higher compared to that the Assessee. 17.8. In view of the above conclusion, there may not be any necessity to examine as to whether the decision rendered in the case of Genisys Integrating (supra) by the ITAT Bangalore Bench should continue to be followed. Since arguments were advanced on the correctness of the decisions rendered by the ITAT Mumbai and Bangalore Benches taking a view contrary to that taken in the case of Genisys Integrating (supra), we proceed to examine the said issue also. On this issue, the first aspect which we notice is that the decision rendered in the case of Genisys Integrating (supra) was the earliest decision rendered on the issue of comparability of companies on the basis of turnover in Transfer Pricing cases. The decision was rendered as early as 5.8.2011. The decisions rendered by the ITAT Mumbai Benches cited by the learned DR before us in the case of Willis Processing Services (supra) and Capegemini India Pvt.Ltd. (supra) are to be regarded as per incurium as these decisions ignore a binding co-ordinate bench decision. In this regard the decisions referred to by the learned counsel for the Assessee supports the plea of the learned counsel for the Assessee. The decisions rendered in the case of M/S.NTT Data (supra), Societe Generale Global Solutions (supra) and LSI Technologies (supra) were rendered later in point of time. Those decisions follow the ratio laid down in Willis Processing Services (supra) and have to be regarded as per incurium. These three decisions also place reliance on the decision of the Hon’ble Delhi High Court in the case of Chriscapital Investment (supra). We have already held that the decision rendered in the case of Chriscapital Investment (supra) is obiter dicta and that the ratio decidendi laid down by the Hon’ble Bombay High Court in the case of Pentair (supra) which is favourable to the Assessee has to be followed. Therefore, the decisions cited by the learned DR before us cannot be the basis to hold that high turnover is not relevant criteria for deciding on comparability of companies in determination of ALP under IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 14 of 89 the Transfer Pricing regulations under the Act. For the reasons given above, we uphold the order of the CIT(A) on the issue of application of turnover filter and his action in excluding companies by following the ratio laid down in the case of Genisys Integrating (supra).” 5.3 In view of the above, we direct the AO to exclude the above 6 companies from the list of comparables whose turnover is more than Rs.200 crores in the assessment year under consideration since the turnover of the assessee company in Rs.9,91 crores in AY 2006-07. Ground 22 – 6. The assessee is seeking exclusion of the following 3 comparables on account of RPT filter. a) Aztech Software Ltd – 17.78% 6.1 The excerpts of the RPT transactions from the annual report are provided below for ease of reference. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 15 of 89 b) Geometric Software Limited - 19.98% 6.2 The excerpts of the RPT transactions from the annual report are provided below for ease of reference. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 16 of 89 k) Megasoft Limited – 17.08% 6.3 The excerpts of the RPT transactions from the annual report are provided below for ease of reference 6.4 The TPO has considered threshold limit of 25% for Related party transactions. The DRP has upheld the reasoning of the TPO and stated that the limit of 25% is appropriate and rational. The threshold limit adopted by the Bangalore ITAT is 15% of the sales. The Bangalore Tribunal in the case of FCG Software Services (India) (P) Ltd vs ITO in ITA No.1447/Bang/2010 dt.08.01.2016 for AY 2006-07 – 176 TTJ 145 has excluded the above comparables as the RPT exceeded 15%. Relevant para 21 of the said decision is extracted hereunder: IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 17 of 89 ‘’21. As far as comparable companies chosen by the TPO viz., Aztec Software Limited and Geometric Software Ltd. (Seg.) and Megasoft Ltd., are concerned, it is not in dispute before us that the related party transaction in the case of companies exceeds 15% and in view of the decision of the Tribunal in the case of 24 X 7 Customer.Com Pvt. Ltd. in ITA No.227/Bang/2010, followed by this Tribunal in the case of Logica Private Ltd. (supra) wherein it was held that where the RPT exceeds 15%, such companies should not be taken as comparable companies. Following the said decision, we hold that the aforesaid companies referred to above be excluded from the list of comparable companies while working out the ALP.’’ 6.5 In view of the decision of the Tribunal in FCG, the companies Aztec Software Limited and Geometric Software Ltd. (Seg.) and Megasoft Ltd are to be excluded from the list of comparables. 7. The Ld. D.R. relied on the order of the lower authorities. 8. We have heard the rival submissions and perused the materials available on record. The TPO has considered the threshold limit of RPT filter at 25%. As seen from the above, the RPT transactions in these companies is as follows:- Aztech Software Ltd. 17.78% Geometric Software Ltd. 19.98% Mega Software Ltd. 17.08% 8.1 Being so, applying the order of the Bangalore Tribunal in the case of FCG Software Services India Ltd. in ITA No.1447/Bang/2020 dated 8.10.2016 for the assessment year 2006-07 (reported in 173 TTJ 145), wherein held that where the RPT exceeds 15%, such companies should not be taken as a comparable companies. Following the said proposition, we direct the AO/TPO to exclude above 3 companies from the list of comparables on the basis of RPT filter. This ground of assessee is allowed. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 18 of 89 9. The next ground is with regard to exclusion of the following 3 comparables on the ground of functional dissimilarity: a) Kals Information Systems Ltd (seg) b) Tata Elxsi Ltd (Seg) c) Accel Transmatics (Seg.) a) Kals Information Systems Ltd (seg) 9.1 The DRP vide order dated 30.03.2021 directed the TPO to remove Kals Information Systems Ltd (seg) as a comparable on the ground of functional dissimilarity. Relevant portion from DRP directions is extracted as under: 9.2 However, the AO/TPO did not give effect to the same in the final assessment order. There is no appeal by the department against the direction of the DRP. Hence Ld. A.R. requested that the same be removed from the list of comparables. 10. We have heard both the parties and perused the materials available on record. The AO/TPO has to give the effect to the findings of Ld. DRP and he cannot deviate from such direction of the Ld. DRP. Accordingly, we direct the AO/TPO to pass the final/TPO order in conformity with the Ld. DRP order. Directed accordingly. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 19 of 89 b) Tata Elxsi Ltd (Seg) 11. Regarding this comparable, the assessee has made the following submissions before TPO and DRP: 11.1 Tata Elxsi is predominantly engaged in product designing services and not software development services provider. Hence, Tata Elxsi cannot be compared to the Assessee. Although the Company has a segment called software development segment, the segment is engaged in embedded product design services and Animation Visual Effect Services, which are different from software development services. The TPO himself in the latest round of transfer audit for the Company has not considered the Company as a comparable. The two segments of the Company along with the activities undertaken under them is provided as follows: 1) Software development & services: a) Industrial design and engineering – Mechanical design with a focus on industrial design b) Animation and visual effects – 3D computer graphics, animation and visual effects c) Embedded product design services – design and development of hardware and software 2) Systems integration & support – integrated hardware and packaged software solutions IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 20 of 89 (Page 19, Annual Report 2005-06) IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 21 of 89 (Page 31, Annual Report 2005-06) 11.2 The following extracts of Ld. A.R. provide more insights on the embedded product development segment: (Page 20, Annual Report 2005-06) IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 22 of 89 11.3 Further, it is important to note that NASSCOM, which is the premier body for IT/ITES companies in India also classifies hardware and software designing activity as functionally different to software development activities. The below diagram as provided in the NASSCOM Report 2010 would justify the argument of the Assessee in this regard: 11.4 Hence, Tata Elxsi is not comparable to the Assessee as it is not engaged in software development services. 11.5 This is also evident from the response of Tata Elxsi to the notices issued by the TPO u/s 133(6) wherein the description of the services provided by Tata Elxsi is provided as follows- “unique to the customer, the product category and the specifications of the product including the hardware, operating system, middleware and applications. It requires composite teams and specialists with experience of various layers of embedded systems, various technologies that are embedded into these IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 23 of 89 systems and various standards and processes that are mandated by the industry or the specific customers. Very little work done by Tata Elxsi is of a repetitive nature due to the above variations.” 11.6 In addition, there are inconsistencies in the response to the notices u/s 133(6) vis-à-vis the description provided in the annual report of Tata Elxsi. The software development services, as laid out in the response to the notices u/s 133(6) comprises of:  Product development services – development of software for customers who look for solutions through embedded software  Visual computing labs – content development and animation services  Innovation design engineering – product design and engineering ’’ 11.7 The Ld. DRP has rejected the submissions of the assessee summarily and the directions given are not relevant and is clear case of lack of application of mind. The same is extracted as under: IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 24 of 89 11.8 The assessee placed reliance on the following decisions where Tata Elxsi was rejected as comparable on the basis of functional dissimilarity. Tesco Hindustan Service Centre Pvt Ltd vs The Deputy Commissioner of Income-Tax in IT(TP).A No.1317/Bang/2010 dt.26.05.2015 for AY 2006-07 - relevant paras 17 & 18 is extracted hereunder: ‘’17. As far as Tata Elxsi Ltd., a comparable chosen by the TPO is concerned, it was held in the case of 3DPLM Software Solutions Ltd., (supra) that this company is functionally different from a pure software development service provider such as the Assessee and it should be excluded for comparability purposes. 18. In view of the aforesaid decision, we hold that Tata Elxsi has to be excluded from the list of comparable chosen by the TPO.’’ FCG Software Services (India) (P) Ltd vs ITO in ITA No.1447/Bang/2010 dt.08.01.2016 for AY 2006-07 – 176 TTJ 145 11.9 Thus, he submitted that in view of the decisions of the Tribunal mentioned supra, this comparable needs to be rejected and removed from the list of comparables. 12. The Ld. D.R. relied on the order of the Ld. DRP. 13. We have heard both the parties and perused the materials available on record. In our opinion, this issue came for consideration before Coordinate Bench in the case of FCG Software Services (India) (P) Ltd vs ITO in ITA No.1447/Bang/2010 dt.08.01.2016 for AY 2006-07 – 176 TTJ 145 – relevant paras 22 & 23 is extracted hereunder: ‘’22. As far as comparable company chosen by the TPO viz., Tata Elxsi Ltd., is concerned, the comparability of the aforesaid company with that of the software service provider such as the Assessee was considered by the Mumbai Bench of this Tribunal in the case of Logica Pvt.Ltd. IT (TP) 1129/Bang/2011 AY 07-08) wherein on the IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 25 of 89 comparability of the aforesaid company, the Tribunal held as follows:-“14. As far as comparable at Sl.No.6 & 24 are concerned, the comparability of the aforesaid two companies with that of the software service provider was considered by the Mumbai Bench of the Tribunal in the case of Telcordia Technologies India Private Ltd. (supra) wherein on the aforesaid two companies, the Tribunal held as follows:- “7.7.Tata Elxsi Limited.: From the facts and material on record and submissions made by the learned AR, it is seen that the Tata Elxsi is engaged in development of niche product and development services, which is entirely different from the assessee company. We agree with the contention of the learned AR that the nature of product developed and services provided by this company are different from the assessee as have been narrated in para 6.6 above. Even the segmental details for revenue sales have not been provided by the TPO so as to consider it as a comparable party for comparing the profit ratio from product and services. Thus, on these facts, we are unable to treat this company fit for comparability analysis for determining the arms length price for the assessee, hence, should be excluded from the list of comparable parties.” 15. In view of the above, the ld. counsel for the assessee fairly admitted that comparable company at Sl.No.6 viz., Flextronics Software Systems Pvt. Ltd. should be taken as a comparable, while comparable at Sl.No.24 viz., Tata Elxsi Ltd. should be rejected as a comparable.” 23. In view of the aforesaid decision, we hold that Tata Elxsi has to be excluded from the list of comparable chosen by the TPO.’’ 13.1 In view of the above order of the Coordinate Bench, we inclined to direct the AO to exclude Tata Elxsi Ltd. from the list of comparables. c) Accel Transmatics (Seg.) 14. The assessee has made the following submissions before TPO and DRP: IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 26 of 89 ‘’Functionally diversified 14.1 The company’s annual report states that the company is engaged in three divisions namely - Transmatic systems (R&D, products and solutions for customer interfacing for banks, utilities etc.) - Ushus Technologies is an offshore development center engaged in sale of IP from software product called ‘prodigy’ - Accel IT academy – Engaged in IT Training in Hardware and networking enterprise. The screenshot of the annual report of Accel is provided as below: IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 27 of 89 14.2 From the above screen shot, it is clear that Accel is engaged in the business of software development services as well as media solutions and services. 14.3 The company under the “Ushus technology” (Software segment) has mentioned that it has sold its IPR & earns royalty. 14.4 Further, the revenue from software services segment of Accel only comprises 27.59% of the total operating revenue (Page No. 46 AR 2006) [i.e. 809.6 Cr/ 2934.34 Cr]. This does not satisfy the filter requirement of minimum 75% of operating sales to be software services revenue, as suggested by the TPO. • Abnormally high margins and fluctuating margins 14.5 The SWD service segment of Accel Transmatics has grown from 1.33 Crores in 2004 to 4.06 Crores in 2005 to 8.09 in 2006. This represents abnormally high growth rates [CAGR of 146%] even going by the TPO’s own metrics vis-à-vis the software development industry. The TPO in the TP Order has rejected companies with diminishing revenue, i.e. companies that are growing slower than the industry. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 28 of 89 Accordingly, the TPO, by the same logic ought to have rejected companies, which have demonstrated extraordinary growths rates, which are substantially higher that the average growth rate of the industry. The TPO in the TP Order has observed that the Software development industry during the said period had been growing at a rate of CAGR of 30% for the last ten years. Accordingly, Accel, which has witnessed a growth of CAGR of 146%, ought to be rejected as well. Rejection of companies with declining revenues on one hand, but retaining companies with abnormally high growth rates amounts to cherry picking of comparable companies. The filter of abnormal growth rate should be uniformly applied. If the TPO has applied a diminishing revenue filter, an abnormal growth rate filter ought to be applied as well. 14.6 The company displays highly fluctuating margins for the “software services” segment – from 5.68% in 2004 to a loss of (18.73%) in 2005 to a profit of 40.75% in 2006 – indicating that the segmental financials are highly unreliable to form a basis for comparability. The extraordinary variations in profitability are indicators of several abnormal business factors; which are not apparent from the annual report or even from the 133(6) replies. Therefore, the company should be rejected. 14.7 The DRP has rejected the submissions of the assessee negating the contention of functionality. The same is extracted as under: IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 29 of 89 14.8 The assessee placed reliance on the following decisions of Bangalore Tribunal where Accel Transmatics was rejected as comparable on the basis of functional dissimilarity. Tesco Hindustan Service Centre Pvt Ltd vs The Deputy Commissioner of Income-Tax in IT(TP).A No.1317/Bang/2010 dt.26.05.2015 for AY 2006-07 The above decision has been followed in the case of FCG Software Services (India) (P) Ltd vs ITO in ITA No.1447/Bang/2010 dt.08.01.2016 for AY 2006-07 – 176 TTJ 145 – relevant paras 18 to 20. 14.9 Thus, based on the above case-laws, it can be seen that Accel is functionally dissimilar to that of the assessee as it is engaged in diversified activities such as Accel IT and Accel animation services for 2D and 3D Technologies whereas the assessee is engaged in providing software services to its AE’s. Hence the assessee requests that Accel Transmatics be rejected and removed from the list of comparables. 15. The Ld. D.R. relied on the order of the lower authorities. 16. We have heard both the parties and perused the materials available on record. This comparable considered as not comparable in the case of Tesco Hindustan Service Centre Pvt Ltd vs The Deputy IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 30 of 89 Commissioner of Income-Tax in IT(TP).A No.1317/Bang/2010 dt.26.05.2015 for AY 2006-07 – relevant paras 11 to 13 extracted hereunder: ‘’11. Improper selection of comparables: It was submitted by the learned counsel for the Assessee that the following 2 companies are not functionally comparable with that of the Assessee. a) KALS Information Systems Limited b) Accel Transmission Limited. In this regard our attention was drawn to the decision of the ITAT Bangalore Bench in the case of Trilogy E-Business Software India Pvt.Ltd. (supra) wherein these companies were held to be not functionally comparable with that of a pure software developer like the Assessee. 12. The following were the relevant observations of the Tribunal on the aforesaid comparable companies in the case of Trilogy E-Business Software India Pvt.Ltd.(supra), which was followed by the ITAT Bangalore Bench in the case of 3DPLM Software Solutions Ltd. IT (TP)A.No.1109/Bang/2010 for AY 2006-07 order dated 10.5.2013: "(d) KALS Information Systems Ltd. 46. As far as this company is concerned, the contention of the assessee is that the aforesaid company has revenues from both software development and software products. Besides the above, it was also pointed out that this company is engaged in providing training. It was also submitted that as per the annual repot, the salary cost debited under the software development expenditure was Q 45,93,351. The same was less than 25% of the software services revenue and therefore the salary cost filter test fails in this case. Reference was made to the Pune Bench Tribunal's decision of the ITAT in the case of Bindview India Private Limited Vs. DCI, ITA No. ITA No 1386/PN/1O wherein KALS as comparable was rejected for AY 2006-07 on account of it being functionally different from software companies. The relevant extract are as follows: "16. Another issue relating to selection of comparables by the TPO is regarding inclusion of Kals Information System Ltd. The assessee has objected to its inclusion on the basis that functionally the company is not comparable. With reference to pages 185-186 of the Paper Book, it is explained that the said company is engaged in development of software products and services and is not comparable to software development services provided by the assessee. The appellant has submitted an extract on pages 185-186 of the Paper Book from the website of the company to establish that it is engaged in providing of I T enabled services and that the said company is into development of software products, etc. All these aspects have not been factually rebutted and, in our view, the said concern is liable to be excluded from the final set of comparables, and thus on this aspect, assessee succeeds." Based on all the above, it was submitted on behalf of the assessee that KALS Information Systems Limited should be rejected as a comparable. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 31 of 89 47. We have given a careful consideration to the submission made on behalf of the Assessee. We find that the TPO has drawn conclusions on the basis of information obtained by issue of notice u/s.133(6) of the Act. This information which was not available in public domain could not have been used by the TPO, when the same is contrary to the annual report of this company as highlighted by the Assessee in its letter dated 21.6.2010 to the TPO. We also find that in the decision referred to by the learned counsel for the Assessee, the Mumbai Bench of ITAT has held that this company was developing software products and not purely or mainly software development service provider. We therefore accept the plea of the Assessee that this company is not comparable." "(e) Accel Transmatic Ltd. 48. With regard to this company, the complaint of the assessee is that this company is not a pure software development service company. It is further submitted that in a Mumbai Tribunal Decision of Capgemini India (F) Ltd v Ad. CIT 12 Taxman.com 51, the DRP accepted the contention of the assessee that Accel Transmatic should be rejected as comparable. The relevant observations of DRP as extracted by the ITAT in its order are as follows: IT(TP)A No.1317/Bang/2010 "In regard to Accel Transmatics Ltd. the assessee submitted the company profile and its annual report for financial year 2005-06 from which the DRP noted that the business activities of the company were as under. (i) Transmatic system - design, development and manufacture of multi function kiosks Queue management system, ticket vending system (ii) Ushus Technologies - offshore development centre for embedded software, net work system, imaging technologies, outsourced product development (iii) Accel IT Academy (the net stop for engineers)- training services in hardware and networking, enterprise system management, embedded system, VLSI designs, CAD/CAM/BPO (iv) Accel Animation Studies software services for 2D/3D animation, special effect, erection, game asset development. 4.3 On careful perusal of the business activities of Accel Transmatic Ltd. DRP agreed with the assessee that the company was functionally different from the assessee company as it was engaged in the services in the form of ACCEL IT and ACCEL animation services for 2D and 3D animation and therefore assessee's claim that this company was functionally different was accepted. DRP therefore directed the Assessing Officer to exclude ACCEL Transmatic Ltd. from the final list of comparables for the purpose of determining TNMM margin." 49. Besides the above, it was pointed out that this company has related party transactions which is more than the permitted level and therefore should not be taken for comparability purposes. The submission of the ld. counsel for the assessee was that if the above company should not be considered as comparable. The ld. DR, on the other hand, relied on the order of the TPO. 50. We have considered the submissions and are of the view that the plea of the assessee that the aforesaid company should not be treated as comparables was considered by the Tribunal in Capgemini India Ltd (supra) where the assessee was IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 32 of 89 software developer. The Tribunal, in the said decision referred to by the IT(TP)A No.1317/Bang/2010 ld. counsel for the assessee, has accepted that this company was not comparable in the case of the assessees engaged in software development services business. Accepting the argument of the ld. counsel for the assessee, we hold that the aforesaid company should be excluded as comparables." 13. The facts and circumstances under which the aforesaid companies were considered as comparable is identical in the case of the Assessee as well as in the case of Trilogy E-Business Software India Pvt. Ltd. (supra). Respectfully following the decision of the Tribunal referred to above in the case of Trilogy E-Business Software India Pvt. Ltd.(supra), we direct that the said companies be excluded from the list of 22 comparable arrived at by the TPO.’’ 16.1 In view of the above decision of the Tribunal, we inclined to direct the AO/TPO to exclude Accel Transmatics (Seg) from the list of comparables. Ground 18 : 17. The authorities ought to grant the benefit of +/- 5% variances deduction as envisaged in the section 92C(2) of the Act and as per circular no.12 of 2001 dt.23.08.2001. It is requested that the same be granted in the interest of justice. 17.1 The assessment year involved is 2006-07, as such provisions of section 92C(2) of the Act is applicable for this assessment year. Accordingly, directed the AO/TPO to grant benefit of +/- 5% variances deduction as envisaged under this provision and as per Circular No.12/2001 dated 23.8.2001 issued by the CBDT for the AY 2006-07. 18. In the result, assessee’s appeal in IT(TP)A No.344/Bang/2021 is partly allowed. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 33 of 89 ITA No.703/Bang/2021 for AY 2012-13: 19. Ground Nos.1 to 11 are general in nature, which do not require any adjudication. Ground No.12 is with regard to the TP adjustment of distribution segment at Rs.91,39,62,617/-. The assessee came in appeal before this Tribunal against the Ld. DRP order. In this assessment the Tribunal vide order dated 340/Bang/2017 dated 31.8.2017 set aside the issue relating to TP adjustment made in this assessment year with following observations:- “Having carefully examined the order of the Tribunal for Assessment year 2011-12, we find that identical issues were raised before the Tribunal in Assessment year 2011-12 and the Tribunal, following its order for Assessment years 2006-07 to 2010-11, remitted matter back to the AO/TPO after setting aside the order of the CIT(Appeals) for re- adjudication of all the issues afresh........ Since the remitted issues are sub-judice before the lower authorities, we find no justification to adjudicate these issues at this stage. We, accordingly, following the order for earlier years, set aside the order of the AO passed consequent to t2he directions of the DRP and restore the matter to the AO/TPO for re-adjudication of all the issues in the light of the findings given in earlier years.” 20. The Ld. A.R. submitted that the assessee M/s. Wipro GE Healthcare Pvt Ltd is a Joint Venture between General Electric Company, USA (‘’GE’’ or ‘’the parent’’) and Wipro Limited. The assessee is engaged in contract manufacturing of medical diagnostic imaging equipment, ultrasound systems, patient monitoring and X-ray systems(“medical equipment”), provision of engineering and software services and distribution of medical diagnostic imaging equipment, therapy equipment and life sciences products (“medical products”). For the impugned year the entire matter was restored by the Tribunal vide order in IT(TP)A 340/Bang/2017 dated 31.08.2017 to the file of AO/TPO for re- adjudication in the light of the findings given in earlier years. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 34 of 89 21. The following additions have been made by the Assessing Officer on which the assessee is in appeal: Particulars As per Final Assessment order (Rs.) As per Draft Assessment order (Rs.) Transfer Pricing adjustments: 1135625171 1135625171 Royalty 126467850 126467850 Interest in Intra group trade advances 5181085 5181085 Distribution segment 913962617 913962617 Software Development segment 90013619 90013619 Other Issues: Provision for obsolescence of inventory 24997530 24997530 Loss on exchange fluctuation 138526037 138526037 Provision for sales tax and customs duty 9221561 9221561 Disallowance of Legal and Professional fees 219500000 219500000 Provision for expenses (disallowed as Contingent Liability) 4000000 4000000 Dealer Commission 138500000 138500000 Miscellaneous expenses 99700000 99700000 28.10.2019- The TPO passed order u/s 92CA making TP adjustments amounting to Rs.113,56,25,171/- as listed above. 30.12.2019 - The Draft assessment order dated was passed by the AO by making the additions as listed above. 27.01.2020 – Against the Draft assessment order, the assessee filed its objections before the DRP. 11.02.2021 - The DRP gave its directions to the objections of the assessee. 30.03.2021 – Without following the directions of the DRP, the AO passed the final assessment order reiterating the draft assessment order. 17.12.2021 - Against the orders of the authorities, the Assessee has preferred the above appeal before this Tribunal. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 35 of 89 A. SUBMISSIONS ON ADDITIONS/DISALLOWANCES : I. TRANSFER PRICING ADJUSTMENTS: Ground No 13 - Royalty – Rs. 12,64,67,850/- 22. The assessee has paid royalty of Rs.12,64,67,850/-. Royalty has been paid having regard to the support services by the Group company. The assessee is in the business of advanced diagnostic equipment. After sales support becomes a critical component for the equipment sold. The assessee’s group affiliates have extended a unique condition wherein the equipment is under constant monitoring through the network of satellites. The advantage of such a system is that it allows remote monitoring besides remote maintenance. The assessee is a beneficiary of such facility. It would have cost hundreds of millions of dollars to have an own exclusive facility besides the assessee also does not have such technology to put up the facility. It would not have made any economic sense to facilitate such facility independently. Thus, the payment of royalty enhances the commercial value for the business of the assessee. 22.1 The ITAT vide its order for AY 2005-06 & 2006-07 in IT(TP)A 40/B/11 & 1647/B/13 dt.21.04.2017 in the light of the directions of the Tribunal for the AY’s 2002-03 to 2004-05 has given specific direction which has not been followed by the lower authorities. Relevant portion extracted hereunder: ‘’18. Since the issue was already set aside to the file of the Assessing Officer for choosing the proper comparable therefore in view of the earlier year of this Tribunal, we set aside this issue to the record of the TPO/AO for reconsideration of the same in the light of the directions of the Tribunal for the Assessment years 2002-03 to 2004-05 (supra). Further in case no comparable is found in respect of royalty payment by the assessee then the TPO/AO may consider the royalty payment as part of the international transactions under trading segment and then determine the ALP by considering the royalty as part of operating cost for the purpose of computing the margin in the trading segment.’’ IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 36 of 89 22.2 For the impugned year this issue was restored by the Tribunal vide order in IT(TP)A 340/Bang/2017 dated 31.08.2017 to the file of AO/TPO for re-adjudication in the light of the findings given in earlier years. In the set aside proceedings, the TPO has considered the following comparables used for benchmark in the Equipment segment: Sl. No Company name R&D Exp Royalty/ trademark Net sale Margin oversale 1 Maestros Mediline Systems Ltd. (Seg.) 0 0 27,89,93,850 0% 2 Advanced Micronic Devices Ltd. (Seg.) 0 0 40,38,35,468 0% Average 0% 22.3 From the above, it can be seen that the AO/TPO has chosen M/s. Maestros Mediline Systems Ltd and M/s Advanced Micronic Devices Ltd as comparables which have not incurred any royalty payment as the company has no trademark licensed to it. Due to lack of comparable transaction, ex-facie the companies cannot be considered as a comparable with the assessee. The adoption of CUP method is also not as per law in the absence of comparable transaction. Hence in the impugned case, there are no comparables identified as required in law by the TPO. In the absence of comparable transaction, the Tribunal has held as extracted supra that the royalty payment be considered as operating cost in the Trading segment. The TPO has adopted M/s. Maestros Mediline Systems Ltd and M/s Advanced Micronic Devices Ltd as comparables in the Trading (Equipment) segment. By applying the same, the assessee has worked out the margin by considering royalty as part of the trading segment. The margin of the assessee in the trading segment works out to 46.69% after considering royalty as operating cost. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 37 of 89 22.4 The margin of the comparables M/s. Maestros Mediline Systems Ltd and M/s Advanced Micronic Devices Ltd in the trading segment worked out by TPO is at 18.43%. Sl No. Name of the comparable OR OC OP OP/OC OP/OR 1 Maestros Medline Systems Ltd (Seg) 21,89,93,850 19,64,84,245 8,25,09,605 41.99% 29.57% 2 Advanced Micronic Devices Ltd (Seg) 40,38,35,468 37,43,74,715 2,94,60,753 7.87% 7.29% Average 18.43% IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 38 of 89 22.5 Since the margin of the assessee (46.69%) is higher than that of the comparable (18.43%), the transaction is at arm’s length and consequently the addition requires to be deleted. 22.6 The ITAT in assessee’s own case for AY 2005-06 & 2006-07 in IT(TP)A 701 & 702/Bang/2021 dated 05.08.2022 has held as extracted hereunder: ‘’3.7 We have heard the rival submissions and perused the materials available on record. In earlier occasion, assessee came in appeal before this Tribunal. The Tribunal remitted the issue with the directions in IT(TP)(A) No.40/Bang/2011 & 1647/Bang/203 dated 21.4.2017 as discussed in para 3.3 of this order. 3.8 On set aside assessment, the TPO repeated the same what he has done on earlier occasion without considering the direction of the Tribunal where the Tribunal given a direction that in case comparable is not found in respect of payment of royalty by the assessee, then the TPO/AO may consider the royalty payment on part of the international transaction under trading segment and determine the ALP by considering the royalty as part of operating cost for the purpose of computing the margin in the trading segment. Before us, Ld. A.R. submitted that if it is considered as operating cost, then the margin of the assessee is higher than the margin of comparable i.e. M/s. Advance Micronic Devices Ltd. In our opinion, the AO has to consider this royalty payment as an operating cost and has to verify whether the margin of assessee is higher than the margin declared by the comparable company i.e. M/s. Advance Micronic Devices Ltd. and decide accordingly. In view of this, the issue in dispute is set aside to the file of AO/TPO for the limited purpose for comparison of margins with the comparable company and decide accordingly.’’ 22.7 In view of the above, the Ld. A.R. submitted that addition requires to be deleted in line with the orders of the ITAT mentioned supra. 23. On the other hand, the Ld. D.R. submitted that issue may be remitted to the AO/TPO on similar direction as above in assessment year 2005-06 & 2006-07. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 39 of 89 24. We have heard both the parties, and perused the materials available on record. Admittedly, this issue has been considered by this Tribunal in AY 2005-06 & 2006-07 in IT (TP)A No.701 & 702/Bang/2021 dated 5.8.2022. In view of the above order of the Tribunal, we remit this issue in this assessment year also to the file of AO/TPO on similar direction as reproduced in para 22.6 of this order. Ground No 14 - Interest in Intra group trade advances – Rs. 51,81,085/- 25. The alleged sum of Rs.11,05,00,000/- was a trade advance given in the earlier year to its overseas subsidiary GE Medical System Ltd, Bangladesh and outstanding balance at the year end is NIL. It may be noted that the assessee has not advanced any sum during the year and the sum advanced in the earlier year has been treated as not recoverable and suitable provision has been made in the books of account. 25.1 The TPO has calculated interest even on the advance considered as doubtful and provision made in the books. The facts above though mentioned in the original proceedings have been overlooked by the TPO. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 40 of 89 Even on these facts the adjustment made is erroneous and requires to be deleted. 25.2 The TPO in his order has stated as hereunder: ‘’Based on the above discussion and consideration of submission made by the Taxpayer, the Arm’s Length Price of the International Transaction entered into by the Taxpayer of receipt of interest on loan advanced is computed as under. The taxpayer has not submitted the month wise details of the advance made. Hence, the total loan amount of Rs. 11,05,41,602 is considered for computation of interest at the rate of 4.687%.’’ 25.3 The adjustment has been made on the alleged transaction of Rs.11,05,00,000/- adopting LIBOR + 400 basis points at 4.687%. The above finding is contrary to facts emerging from the record. The DRP has upheld the action of the AO/TPO without appreciating the facts on record and hence the directions of the DRP are without application of mind. 25.4 Without prejudice to the above, the AO/TPO has not identified any comparable as required under law. Though the TPO has stated that he has followed the CUP method, there is no comparable transaction which has been brought on record. What is stated by the TPO as rate of 4.687% is not the arm’s length interest rate comparable with the interest charged in a similar transaction. The assessee prays for deletion of the interest adjustment proposed on the alleged outstanding balance of Rs. 11,05,41,602/- as it is not based on facts, law and IT Act. 26. The Ld. D.R. relied on the order of the lower authorities. 27. We have heard both the parties and perused the materials available on record. The primary objection of Ld. A.R. is that the advance has been made in earlier year and a portion of it is not recoverable for which the assessee provided the provision for doubtful IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 41 of 89 loans and advances. However, AO/TPO considered the entire advances for computing the interest on intra-group trade advances. In our opinion, the argument of Ld. A.R. is justified. The provision for doubtful loans and advances cannot be considered for computation of interest on intra-group trade and advances as the recovery of the principal itself is doubtful. Hence, we direct the AO/TPO to consider net advances after deducting provision for doubtful loans and thereafter apply LIBOR+2% as held by Tribunal in the case of Swiss Re Global Business Solutions India Pvt. Ltd. in IT(TP)A No.397/Bang/2021 dated 21.1.2022 for the AY 2016- 17, wherein it was held as under:- “35. The only other issue that remains for adjudication is ground No.15 with regard to re-characterizing certain trade receivables as unsecured loans and computing notional interest on such trade receivables. The main contention of the ld. AR is that deferred receivables would not constitute a separate international transaction and need not be benchmarked while determining the ALP of the international transaction. In our opinion, this issue was considered by the Tribunal in assessee’s own case for AY 2014-15 and in para 23 to 23.9 of the order dated 21.5.2020 this Tribunal held as under:- “23. Ground No. 14-17 alleged by assessee against adjustment of notional interest on outstanding receivables. From TP study, it is observed that payments to assessee are not contingent upon payment received by AEs from their respective customers. Further Ld.AR submitted that working capital adjustment undertaken by assessee includes the adjustment regarding the receivables and thus receivables arising out of such transaction have already been accounted for. Alternatively, he submitted that working capital subsumes sundry creditors and therefore separate addition is not called for. 23.1. Ld.TPO computed interest on outstanding receivables under weighted average method using LIBOR + 300 basis points applicable for year under consideration that worked out to 3.3758% on receivables that exceeded 30 days. It has been argued by Ld.AR that authorities below disregarded business/commercial arrangement between the assessee and its AE's, by holding outstanding receivables to be an independent international transaction. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 42 of 89 23.2. Ld.AR placed reliance on decision of Delhi Tribunal in Kusum Healthcare (P.) Ltd. v. Asstt. CIT [2015] 62 taxmann.com 79, deleted addition by considering the above principle, and subsequently Hon'ble Delhi High Court in Pr. CIT v. Kusum Health Care (P.) Ltd. [2018] 99 taxmann.com 431/[2017] 398 ITR 66, held that no interest could have been charged as it cannot be considered as international transaction. He also placed reliance upon decision of Delhi Tribunal in case of Bechtel India (P.) Ltd. v. Dy. CIT [2016] 66 taxman.com 6 which subsequently upheld by Hon'ble Delhi High Court vide order in Pr. CIT v. Bechtel India (P.) Ltd. [IT Appeal No. 379 of 2016, dated 21-7-16] also upheld by Hon'ble Supreme Court vide order, in CC No. 4956/2017. 23.3. It has been submitted by Ld.AR that outstanding receivables are closely linked to main transaction and so the same cannot be considered as separate international transaction. He also submitted that into company agreements provides for extending credit period with mutual consent and it does not provide any interest clause in case of delay. He also argued that the working capital adjustment takes into account the factors related to delayed receivables and no separate adjustment is required in such circumstances. 23.4. On the contrary Ld.CIT.DR submitted that interest on receivables is an international transaction and Ld.TPO rightly determined its ALP. In support of the contentions, he placed reliance on decision of Delhi Tribunal order in Ameriprise India (P.) Ltd. v. Asstt. CIT [2015] 62 taxmann.com 237 wherein it is held that, interest on receivables is an international transaction and the transfer pricing adjustment is warranted. He stated that Finance Act, 2012 inserted Explanation to section 92B, with retrospective effect from 1.4.2002 and sub-clause (c) of clause (i) of this Explanation provides that: (i) the expression "international transaction" shall include— . . . . . (c) capital financing, including any type of longterm or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business;. . . . ' 23.5. Ld.CIT.DR submitted that expression 'debt arising during the course of business' refers to trading debt arising from sale of goods or services rendered in course of carrying on business. Once any debt arising during course of business is an international transaction, he submitted that any delay in realization of same needs to be considered within transfer pricing adjustment, on account of interest income short charged or uncharged. It was argued that insertion of Explanation with retrospective effect covers assessment year under consideration and IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 43 of 89 hence under/non-payment of interest by AEs on debt arising during course of business becomes international transactions, calling for computing its ALP. He referred to decision of Delhi Tribunal in Ameriprise (supra), in which this issue has been discussed at length and eventually interest on trade receivables has been held to be an international transaction. Referring to discussion in said order, it was stated that Hon'ble Delhi Bench in this case noted a decision of the Hon'ble Bombay High Court in the case of CIT v. Patni Computer Systems Ltd. [2013] 33 taxmann.com 3/215 Taxman 108 (Bom.), which dealt with question of law: "(c) 'Whether on the facts and circumstances of the case and in law, the Tribunal did not err in holding that the loss suffered by the assessee by allowing excess period of credit to the associated enterprises without charging an interest during such credit period would not amount to international transaction whereas section 92B(1) of the Income-tax Act, 1961 refers to any other transaction having a bearing on the profits, income, losses or assets of such enterprises?" 23.6. Ld.CIT.DR submitted that, while answering above question, Hon'ble Bombay High Court referred to amendment to section 92B by Finance Act, 2012 with retrospective effect from 1.4.2002. Setting aside view taken by Tribunal, Hon'ble Bombay High Court restored the issue to file of Tribunal for fresh decision in light of legislative amendment. It was thus argued that non/under-charging of interest on excess period of credit allowed to AEs for realization of invoices, amounts to an international transaction and ALP of such international transaction has to be determined by Ld.TPO. Insofar as charging of rate of interest is concerned, he relied on decision of the Hon'ble Delhi High Court in CIT v. Cotton Naturals (I) (P.) Ltd. [2015] 55 taxmann.com 523/231 Taxman 401 holding that currency in which such amount is to be re-paid, determines rate of interest. He, therefore, concluded by summing-up that interest on outstanding trade receivables is an international transaction and its ALP has been correctly determined. 23.7. We have perused the submissions advanced by both the sides in the light of the records placed before us. This Bench referred to decision of Special Bench of this Tribunal in case of Special Bench of ITAT in case of Instrumentation Corpn. Ltd. v. Asstt. DIT (IT) [2016] 71 taxmann.com 193/160 ITD 1 (Kol. - Trib.), held that outstanding sum of invoices is akin to loan advanced by assessee to foreign AE., hence it is an international transaction as per Explanation to section 92B of the Act. We also perused decision relied upon by Ld.AR. In our IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 44 of 89 considered opinion, these are factually distinguishable and thus, we reject argument advanced by Ld.AR. 23.8. Alternatively, it has been argued that in TNMM, working capital adjustment subsumes sundry creditors. In such situation computing interest on outstanding receivables and loans and advances to associated enterprise would amount to double taxation. Hon'ble Delhi Tribunal in case of Orange Business Services India Solutions (P.) Ltd. v. Dy. CIT [2018] 91 taxmann.com 286 has observed that: "There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which would have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the assessee would have to be studied. It went on to hold that, there has to be a proper inquiry by the TPO by analysing the statistics over a period of time to discern a pattern which would indicate that vis-a-vis the receivables for the supplies made to an AE, the arrangement reflected an international transaction intended to benefit the AE in some way. Similar matter once again came up for consideration before the Hon'ble Delhi High Court in Avenue Asia Advisors Pvt. Ltd v. DCIT [2017] 398 ITR 120 (Del). Following the earlier decision in Kusum Healthcare (supra), it was observed that there are several factors which need to be considered before holding that every receivable is an international transaction and it requires an assessment on the working capital of the assessee. Applying the decision in Kusum Health Care (supra), the Hon'ble High Court directed the TPO to study the impact of the receivables appearing in the accounts of the assessee; looking into the various factors as to the reasons why the same are shown as receivables and also as to whether the said transactions can be characterised as international transactions." 23.9. In view of the above, we deem it appropriate to set aside this issue to Ld.AO/TPO for deciding it in conformity with the above referred judgment. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in accordance with law.” 36. Accordingly, we are of the opinion that deferred receivables would constitute an independent international transaction and the same is required to be benchmarked independently as held by the Hon’ble Karnataka High Court in PCIT v. AMD (India) Pl. Ltd., ITA No.274/2018 dated 31.8.2018. 37. Once we have held that the transaction between the assessee and AE was in foreign currency with regard to receivables and transaction was international transaction, then transaction would have to be looked upon by applying the commercial principles with regard to international transactions and accordingly proceeded to take into account IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 45 of 89 interest rate in terms of London Inter Bank Offer Rate [LIBOR] and it would be appropriate to take the LIBOR rate + 2%. For this purpose, we place reliance on the judgment of the Bombay High Court in the case of CIT v. Aurionpro Solutions Ltd., 99 CCH 0070 (Mum HC). It is ordered accordingly.” 27.1 Accordingly, this issue remitted to the file of AO/TPO for re- computation of interest on intra-group trade advances. Ground No 15 - Distribution segment – Rs. 91,39,62,617/- 28. Wipro GE markets, distributes and services the complete range of GE’s medical diagnostic imaging and therapy equipment in the Indian market. Based upon customer requirements, Wipro GE imports medical systems from other GE Healthcare global entities. Wipro GE also caters to the after sales market segment by way of supply of spare parts and service of equipment. Based on the functional analysis, Wipro GE is classified as a Distributor of medical products which provides after sales services on diagnostic and therapy equipment. 28.1 The ITAT in IT(TP)A 340/Bang/2017 dated 31.08.2017 has restored the matter for re-adjudication of all the issues in the light of the findings given in earlier years. However, the order of the lower authorities violates the principles of judicial discipline as the binding nature of the orders of the higher appellate authorities have been totally ignored. Margin of the Assessee as computed by the TPO in the TP Order: Particulars Rs. Revenue 1388,87,76,432 Cost 1341,57,47,576 Profit 47,30,28,856 OP/OC 3.52% OP/OR 3.41% IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 46 of 89 28.2 Comparables selected by Assessee in TP report and their arithmetic mean: Sl. No. Name of the company ( %) 1 ADS Diagnostic Limited 8.41 2 Advanced Micronic Devices Ltd 2.07 3 Central Scientific Supplies Co. Ltd -0.15 4 Frontline Electro Medical Ltd 0.01 5 Kusum Electrical Inds Ltd 9.84 6 Softouch Hygiene Products Ltd 10.41 Arithmetical Mean 5.10 28.3 Out of the 6 comparables selected by the Assessee, the TPO accepted the 1 highlighted above, viz. Advanced Micronic Devices Ltd and rejected the other 5 comparables. 28.4 Final Comparables selected by TPO and their arithmetic mean: Computation of arm’s length price by the TPO and the adjustment made: PLI Margin 18.43 OR 1388,87,76,432 ALP* 81.57% 1132,90,74,935 OC 1341,57,47,576 Shortfall 208,66,72,641 Value of International Transaction (to be benchmarked) 791,22,27,227 Percentage to Total Cost 43.80% Proportionate adjustment 91,39,62,617 Sl No Company Name (OP/OR) (in%) 1 Maestors Medline Systems Ltd (seg) 29.57 2 Advanced Micronic Devices Ltd (seg) 7.29 Average 18.43 IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 47 of 89 28.5 The adjustment made by the TPO of Rs.91,39,62,617/- in the Distribution Segment has been adopted by the AO in the Draft assessment order u/s 143(3) rws 254 rws 144C(1) of the Act dated 30.12.2019. The assessee filed objections before DRP on 27.01.2020. The assessee filed its written submissions before DRP on 11.01.2021 emphasizing on the binding decisions of the Tribunal in assessee’s own case for earlier years. Without appreciating the submissions of the assessee, the DRP passed its directions u/s 144C(5) on 11.02.2021 rejecting the grounds. The AO passed the final assessment order u/s 143(3) rws 254 rws 144C(13) of the Act dated 30.03.2021 retaining the TP adjustment in Equipment segment of Rs.91,39,62,617/- as per draft assessment order. 28.6 The AO/TPO/DRP has erred in not relying on decision of the CIT (A) / ITAT in assessee’s own case for the years 2002 – 03 to 2004 – 05, 2005-06, 2006-07 and subsequent orders of the ITAT for other assessment years. The direction of the ITAT to restrict the adjustment to the international transaction i.e, AE purchases has not been adhered to by the TPO. The TPO yet again as was made in the original proceeding has made the adjustment on domestic sales which is not an international transaction. 28.7 The TPO/DRP have adopted TNMM as the MAM to benchmark the transaction. It was submitted to the TPO/DRP that the Tribunal in ITA 810 to 812/Bang/2007 dated 16.05.2008 for the AY’s 2002-03 to 2004- 05 has held Resale Price Method as the MAM to benchmark the transaction. Relevant portion is reproduced as under: “Accordingly, he has held Resale Price Method as explained in Rule 10B(1)(b) will be the MAM since the trading segment involves purchases of goods which is resale. In my view resale price method offers a solution for the issue on hand. Accordingly TPO is directed to adopt resale price method of ALP determination. In doing so gross margin IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 48 of 89 being the difference between the purchase price paid to AE and sale price realized offers a simple and reliable basis. Accordingly, TPO will do so. This decision takes care of the guidance offered in rule 10(c) of the rules.” 28.8 The said ruling by the ITAT has been accepted by the department and no further appeal has been made to the High Court. The Order giving effect to ITAT order passed by the TPO dt.09.07.2013 for AY 2002- 03 to 2004-05 wherein the TPO accepted the margin computation/results of the assessee and deleted the TP adjustment. The issue stands concluded in this manner. The same is extracted hereunder: IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 49 of 89 IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 50 of 89 IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 51 of 89 28.9 Similarly, the Tribunal in assessee’s own case for the AY 2005-06 vide order dt.21.04.2017 in IT(TP)A 40/Bang/11 and 1647/Bang/2013 held that the adjustment on account of transfer pricing can be made only in respect of the international transaction and in this case to be confined to the purchases made from AE. Relevant portion is extracted hereunder: ‘’15. Having considered the rival submissions as well as the relevant material on record, we find that the TPO while computing the ALP has apparently taken the gross profit margin of the AMDL at entity level by assuming that the entire activity of AMDL is only trading in the medical equipments. So far as the issue of considering the segmental details of the comparable companies, on principle we do not find any error on this point as the comparability of the assessee's trading segment in medical equipment has to be determined by considering the same segment of the comparable companies in the same activity. Therefore if the comparable company is having more than one segment as considered by the CIT (Appeals) then only the trading segment of the said company has to be compared with the assessee. Further the CIT (Appeals) has also recomputed the gross margin of the assessee and again held that the adjustment is required to be made only in respect of purchases made from the AE and not on the entire transaction in the trading segment. There is no quarrel on this issue that the adjustment on account of transfer pricing can be made only in respect of the international transactions. In the case on hand, the international transactions in trading segment is confined only to the purchases made from the AE. Since there are other transactions of import and procurement from domestic market therefore the adjustment cannot be made by considering the entire trading segment of the assessee. Thus on principle, we do not find any error on these points however, the CIT (Appeals) has undertaken to recompute the margins of the comparable as well as assessee by considering the fresh material which was not available with the TPO/A.O. which it is not permissible to the CIT (Appeals) to do this exercise of recomputation without giving an opportunity to the TPO/A.O. The IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 52 of 89 proper course of action on the part of CIT (Appeals) would have been to ask the TPO/A.O. for remand report by considering all the relevant material. However, the CIT (Appeals) did not choose to issue any remand order but undertaken the entire exercise on his own. Thus it is clear that the TPO/A.O. was not given an opportunity in this process of recomputing the margins of the comparable as well as assessee. Accordingly in view of the above facts and circumstances of the case, we set aside this issue to the record of the TPO/A.O. to consider and verify relevant record and then determine the ALP in the light of our above observations.’’ 28.10 The TPO for the AY 2005-06 while passing the order giving effect vide order dt.28.10.2019 has followed the direction of the ITAT of applying RPM method and restricting the adjustment only in respect of the international transactions and thus held that no adjustment was required. Relevant portion is extracted hereunder: IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 53 of 89 28.11 For AY 2006-07, similar computation considering RPM method, AE purchases and AMDL as comparable was made in line with the direction of ITAT for earlier years and the Learned CIT-A vide order dated 18.09.2013 deleted the TP adjustment in trading segment as the margin of the assessee was higher compared to that of the comparable. There has been no appeal by the department against the CIT-A order on this issue and thus stands concluded. Thus, for the earlier years the lower authorities have followed the binding decision of the Tribunal in assessee’s own case. 28.12 It may be noted that the same TPO i.e, DCIT, TP-2(2)(1), Bangalore passed the Order giving effect for both AY 2005-06 and AY 2012-13 on the same day 28.10.2019. Though TPO followed the specific direction of the ITAT for AY 2005-06, the same was not followed for the AY 2012-13. Thus the TPO has been inconsistent in her own approach. The TPO is in error in not following the orders of the Tribunal in assessee’s own case which is a binding precedent. The TPO has tried to take a contrary position on an issue which has been overwhelmingly settled in the earlier years. There being no change in fact or law it was imperative for the TPO to follow the same method of computation as done earlier. Not doing so amounts to violation of law as explained by Hon’ble Madras High Court in L.G. Ramamurthi 110 ITR 453. Relevant portion extracted hereunder: ‘’Appeal(Tribunal)—Precedent—Tribunal coming to conclusion that gifts were sham—In subsequent assessment year a differently constituted Tribunal came to a different conclusion, viz., gifts were real Tribunals is not right in taking an altogether different view in later year on same set of facts when there was no fresh material before it.’’ 28.13 In the impugned year the AE purchases are Rs.541,23,20,773/- in the trading segment. The assessee’s margin for the impugned year as calculated by applying RPM method and IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 54 of 89 considering AE purchases as the international transaction in the manner directed/accepted by the Tribunal and lower authorities in earlier years is hereunder: 28.14 In line with the treatment given to AY’s 2002-03 to 2004-05, AY 2005-06 & 2006-07 the margin of the assessee has been calculated at 50.11%. As mentioned supra, the TPO for the impugned year has considered M/s.Maestro Mediline Systems Ltd (seg) at a margin of 29.57% and M/s. Advanced Micronic Devices Ltd at a margin of 7.29%, thus average being 18.43%. It may be seen in all the earlier years that M/s. Advanced Micronic Devices Ltd (7.29%) has been consistently considered as a comparable and thus the margin of the assessee at 50.11% being higher than that of M/s. Advanced Micronic Devices Ltd, the adjustment requires to be deleted. 28.15 The assessee has objected to M/s. Maestro Mediline Systems Ltd (seg) being considered as a comparable on various grounds. Without going into the merits of the said company being considered as a comparable and assuming without admitting that M/s. Maestro Mediline Systems Ltd (seg) is considered as a comparable for this year, the margin IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 55 of 89 of the comparables as arrived at by TPO is 18.43%. Thus, the margin of the assessee at 50.11% is more than the margin of the comparables calculated by the TPO at 18.43%; therefore, no adjustment is required in the trading segment. 28.16 In view of the above, since the facts and law are the same and on the parity of reasoning the TP adjustment in the trading segment is to be deleted. 29. The Ld. D.R. relied on the order of the lower authorities. 30. We have heard both the parties and perused the materials available on record. The main grievance of the Ld. A.R. on this issue is that AO/TPO/DRP has not considered the earlier decision of Tribunal in A.Y. 2002-03 to 2004-05, 2005-06, 2006-07, as such order passed by the lower authorities is bad in law. The Judicial discipline requires consistency in its proceedings. The AO/TPO what criteria followed in earlier year for determining the ALP, the same to be followed in next assessment year unless and until there is a change in facts of the case. In the present case, the Ld. D.R. not brought on record any change in circumstances to deviate from earlier order of the Tribunal for the assessment year especially 2005-06 and 2006-07 in IT(TP)A No.40/Bang/2011 & 1647/Bang/2013 dated 21.4.2017 wherein the Tribunal followed the earlier order of the Tribunal for the AY 2002-03 and 2004-05, which has been reproduced in earlier para of this order. Being so, we direct the AO/TPO to pass fresh order in the light of above observation of the Tribunal in AY 2005-06 and 2006-07. Once the AO/TPO pass the order in conformity with earlier order of the Tribunal, other issue raised by the assessee with regard to comparables is infructuous. This ground of assessee is partly allowed for statistical purposes. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 56 of 89 Ground No 16 - Software Development segment – Rs.9,00,13,619/- 31. The assessee is engaged in providing software services and technology solutions to its parent for products manufactured worldwide. 31.1 Wipro GE has entered into a master development agreement with GE Healthcare (GEHC), whereby Wipro GE provides software services. The software services are part of the GEHC Global Technology Operations. The services pertain to the development of software, which is vital in terms of the functionality of the medical products manufactured by GEHC. The services rendered are in the nature of coding to sub- system work and providing image solutions as well as IT service solutions including base support, business, product and infrastructure software across all technologies and home grown or purchased software. It also includes expertise in various technologies, implementation, monitoring and support of IT infrastructure and software solutions. Wipro GE also carries on operations by way of providing online support and developing support platforms. 31.2 Wipro GE provides engineering services including value- engineering services for Wipro GE product design and solving Wipro GE Global’s customer related design problems and issues. The services are in the nature of providing engineering drawing/designs (both 2D and 3D models) by using software like CAD, CAM etc. Wipro GE does not create any engineering software but utilizes the engineering software to generate designs/drawings. The Margin of the Assessee as computed by the TPO in the TP Order Total revenue 92,79,15,217 Total expenses 85,31,79,814 Operating profit 7,47,35,403 ROTC 8.76% IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 57 of 89 31.3 The Comparables selected by Assessee in the TP Report and their arithmetic mean are as under: Sl. No. Name of the company ROTC (%) 1 Akshay Software Technologies Ltd 7.77 2 C G-VAK Software & Exports Ltd -11.78 3 Cades Digitech Pvt Ltd 5.47 4 Larsen & Toubro Infotech Ltd 23.80 5 Mindtree Ltd 11.18 6 Persistent Systems Ltd 26.14 7 R S Software (India) Limited 15.34 8 R systems International Ltd 4.22 9 Sasken Communication Technologies Ltd 12.49 10 Sonata Software Ltd 4.80 11 Spry Resources India Pvt Ltd 33.28 12 Tata Elxsi Ltd 12.78 Arithmetic Mean 12.12 31.4 Out of the 12 comparables selected by the assessee, the TPO accepted the 5 highlighted above and rejected 7 other comparables. 31.5 The final list of Comparables selected by TPO and their arithmetic mean are as under: Sl No. Name of the comparable Unadjusted margin (%) 1 Datamatics Global Services Ltd 16.35 2 Infosys Ltd 43.10 3 Larsen & Toubro Infotech Ltd 22.18 4 Mindtree Ltd 20.02 5 Persistent Systems Ltd 28.13 6 R S Software (India) Ltd 15.28 7 Spry Resources India Pvt Ltd 26.09 Average 24.45 IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 58 of 89 31.6 The Computation of arm’s length price by the TPO and the adjustment made is as under: Particulars Rs. Arm’s length price 101,79,28,836 Price received 92,79,15,217 Shortfall 9,00,13,619 31.7 The adjustment made by the TPO of Rs. 9,00,13,619/- in the Software Development Segment has been adopted by the AO in the Draft assessment order u/s 143(3) r.w.s. 254 r.w.s. 144C(1) of the Act dated 30.12.2019. The assessee filed objections before DRP on 27.01.2020. The assessee filed its written submissions before DRP on 11.01.2021 seeking inclusion and exclusion of comparables inter-alia on various filters. The DRP passed its directions u/s 144C(5) on 11.02.2021 and directed exclusion of M/s. Datamatics Global Services Ltd and R S Software (India) Ltd as comparable. Without giving effect to the directions of the DRP the AO passed the final assessment order u/s 143(3) rws 254 rws 144C(13) of the Act dated 30.03.2021 retaining the TP adjustment in Software Development segment of Rs.9,00,13,619/- as per draft assessment order. 31.8 Before the Tribunal the assessee has filed a chart seeking exclusion/inclusion of comparables on various grounds. The same are outlined hereunder. 31.9 The assessee is seeking exclusion of the following comparables: 1. Datamatics Global Services Ltd, 2. Infosys Ltd, 3. Larsen & Toubro Infotech Ltd, 4. Mindtree Ltd, 5. Persistent Systems Ltd, 6. R S Software (India) Ltd, 7. Spry Resources India Pvt Ltd The assessee is seeking inclusion of the following comparables: - 1. Akshay Software Technologies Ltd 2. Cades Digitech Pvt Ltd IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 59 of 89 31.10 However, at the time of hearing, below mentioned comparables are not pressed. 1. CG VAK Software & Exports Ltd, 2. R System International Ltd, 3. Sonata Software Ltd : Accordingly, these comparables are dismissed as not pressed. 31.11 On the issue of turnover filter, the TPO has excluded companies having turnover of less than 1crore. It is the view of the TPO that the exclusion of comparables on the basis of size and turnover of the companies is not justified in view of the judgment of Hon’ble Delhi High Court in Chryscapital Investment Advisors India (P) Ltd vs DCIT. The TPO in para 3.2 of the TP order has also relied on the decisions of Societe Generale Global Solution Centre P Ltd vs DCIT in IT(TP)A 1188/B/2011 and Capgemini India Pvt Ltd vs ACIT in ITA 7861/Mum2011 in his support. The DRP has held that comparables cannot be excluded on the ground of size and level of operations. 31.12 The assessee submits that the Bangalore Tribunal in the case of Fulcrum Fund Services (India) Pvt Ltd vs ITO in IT(TP)A 2521/B/2017 dt.12.04.2019 by considering wide range of decisions on this issue including that of Chryscapital (held as obiter dicta) and the other decisions mentioned supra has held that the law laid down in Genisys Integrating System (India) Pvt Ltd. V. DCIT, ITA No.1231/Bang/2010 dt.05.08.2011 [152 TTJ 215/53 SOT 159] is the correct law on the application of turnover filter. In the case of Genisys the Tribunal has held that companies having turnover in the range of Rs.1crore to Rs.200 crores cannot be compared with companies having turnover above Rs.200 crores. The relevant observations of the Tribunal in the case of Fulcrum is extracted as hereunder: ‘’7.3. We have given a careful consideration to the rival submissions. The Bangalore Bench of the ITAT had an occasion to deal with an identical issue in the case of DCIT Vs. M/s. Northern Operating Services (supra), wherein the Tribunal came to the conclusion that – turnover was relevant criteria in choosing comparable companies and that a IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 60 of 89 company, whose turnover is more than Rs. 200 Crores, cannot be compared with the company, whose turnover is less then Rs. 200 Crores. In Coming to the aforesaid conclusion, the Tribunal relied on the decision rendered by the ITAT, Bangalore Bench in the case of Autodesk India P. Ltd., Vs. DCIT (2018) [96 taxmann.com 263] (Bangalore-Trib) reviewing all the conflicting decisions on the point, and concluding that the application of turnover filter still holds good and has not been in any manner diluted by the decision of Hon'ble Karnataka High Court in the case of M/s. Acusis Software (I) Pvt. Ltd., Vs. ITO in ITA No. 223/2017, dt. 14-08-2018, following the relevant observations of the Tribunal, held as under:..’’ 31.13 Applying the said decision, the companies having turnover more than Rs.200 crores should be eliminated from the list of comparables as the assessee’s turnover is Rs.92.79crores. 31.14 The assessee is seeking exclusion of the following 6 comparables on account of turnover filter. a) Infosys Ltd – Turnover Rs.31254crores b) Larsen & Toubro Infotech Ltd – Turnover Rs.2959.55 crores c) Mindtree Ltd – Turnover Rs.1255.80 crores d) Persistent Systems Limited – Turnover Rs.810.36 crores e) R S Software (India) Ltd – Turnover Rs.247.14 crores 31.15 The turnover of the above companies are far higher than that of the assessee company. Since the assessee falls under category of companies having turnover less than Rs.200crores, the above comparables needs to be excluded. 32. The Ld. D.R. made submission as in the AY 2006-07. 33. We have heard both the parties and perused the materials available on record. As discussed in AY 2006-07, in ITA No.344/Bang/2021, the turnover of these companies is more than Rs.200 crores. These 5 companies listed in above para (a) to (d) are excluded from the list of comparables by applying the turnover filter as the turnover of assessee company was Rs.92.29 cores (software development segment). IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 61 of 89 34. Regarding the comparable Datamatics Global Services Ltd, the DRP vide order dated 11.02.2021 directed the TPO to remove Datamatics Global Services Ltd as a comparable on the ground of functional dis- similarity. Relevant portion from DRP directions is extracted as under: 34.1 However the AO/TPO did not give effect to the same in the final assessment order. There is no appeal by the department against the direction of the DRP. Hence it is requested that the same be removed from the list of comparables. 35. After hearing both the parties, we direct the AO/TPO to pass fresh order in conformity with the direction of the Ld. DRP. 36. Regarding the comparable R S Software (India) Ltd, the DRP vide order dated 11.02.2021 directed the TPO to remove R S Software (India) Ltd as a comparable on the ground of functional dissimilarity. Relevant portion from DRP directions is extracted as under: IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 62 of 89 36.1 However, the AO/TPO did not give effect to the same in the final assessment order. There is no appeal by the department against the direction of the DRP. Thus this comparable fails both on account of turnover filter and functional dissimilarity. Hence Ld. A.R. requested that the same be removed from the list of comparables. 37. After hearing both the parties, we direct the AO/TPO to pass fresh order in conformity with the direction of the Ld. DRP. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 63 of 89 38. Regarding the comparable Spry Resources India Pvt Ltd, the assessee submitted before TPO and DRP that the company is functionally dissimilar as it is engaged in software development as well as sale of software products. However, the TPO included the company in the final list of comparables for the reason that it is engaged in software development. The DRP rejected the objections of the assessee and held as extracted hereunder: 38.1 The assessee relied on the decision of the Bangalore Tribunal in the case of Applied Materials India Private Limited vs ITO - IT(TP)A No. 1838/Bang/2016 dated 05.02.2020 for the AY 2012-13 (58 CCH 106) wherein the DRP itself had rejected Spry Resources India Pvt Ltd and there was no appeal by the department. Relevant portion is extracted hereunder: IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 64 of 89 38.2 Thus following the above decision, the company Spry Resources India Pvt Ltd has to be rejected as a comparable. 39. The Ld. D.R. relied on the order of the lower authorities. 40. We have heard both the parties and perused the materials available on record. As rightly pointed out by the Ld. A.R. as seen from para 6 & 7 of the Tribunal order in the case of Applied Materials India Pvt. Ltd. in IT(TP)A No.1838/Bang/2016 dated 5.2.2020 for AY 2012-13, the Ld. DRP itself excluded Spry Resources India Pvt. Ltd. from the list of comparables. Accordingly, in the present case also we direct the AO/TPO to exclude Spry Resources India Pvt. Ltd. from the list of comparables. 41. The assessee has sought for inclusion of the following companies: 1) Akshay Software Technologies Ltd – 2) Cades Digitech Pvt. Ltd. 41.1 The Ld. A.R. submitted regarding this comparable as follows:- IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 65 of 89 Akshaya Software Technologies Ltd – 41.2 This company has been considered as a comparable in the TP report by the assessee. The TPO proposed to reject this as a comparable on the basis of functional dissimilarity. The assessee objected to the rejection by providing a copy of the annual report of the company and stating that the company is engaged in providing software services and also passes all the filters of the TPO. However, the TPO rejected this as a comparable in the TP order on the reason of functional dissimilarity. The reason as stated by the TPO in his order is extracted hereunder: ‘’Akshay Software Technologies Limited ('the Parent') is engaged in providing professional services, procurement, installation, implementation, support and maintenance of ERP products and services, in India and overseas. As reported in Note 27 of the annual report, the company has incurred Foreign Branch Expenditure of Rs. 11.64 Cr. against total expenditure of Rs.13.64 Cr. during the year (85.33%). The operating model of the company is different from the taxpayer. Functionally different. Hence rejected.’’ 41.3 The assessee filed objections before DRP seeking inclusion of the said company, however DRP upheld the action of the TPO and rejected the prayer of the assessee. 41.4 The assessee submits that the said company has been selected as functionally comparable by the Bangalore Tribunal in the case of NXP India Pvt Ltd vs DCIT - IT(TP)A 2861/Bang/2017 dt.27.04.2020 for AY 2012-13. 41.5 In view of the decision of the Bangalore Tribunal for very same assessment year, it is requested that the company should be considered as a comparable. 42. The Ld. D.R. relied on the order of lower authorities. 43. We have heard the both the parties on this issue and perused the record. As rightly pointed out by the Ld. A.R., the coordinate bench in IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 66 of 89 the case of NXP India Pvt Ltd vs DCIT - IT(TP)A 2861/Bang/2017 dt.27.04.2020 for AY 2012-13. Relevant portion can be found in para 32 of the order and is extracted as hereunder: ‘’IV. AKSHAY SOFTWARE TECHNOLOGIES LIMITED 32. It was rejected by the TPO for the reason that the function of this company appears to be more in the nature of support services and I.T. enabled services. However, this company is engaged in providing professional services, implementation, support and maintenance of ERP products and other services. These are nothing but software development services, as is evident from Notes forming part of the financial statement, which is placed at paper book page No.1825. Further, the revenue from software services accounts for 99.45% of the total revenue of the company as evident from the financial statement placed on record at paper book page No.1831. Being so, we direct the TPO to consider this company as comparable to the assessee’s case while selecting the comparables.’’ 43.1 Respectfully following the above decision of Coordinate Bench, we direct the AO/TPO to include Akshaya Software Technologies Ltd. in the list of comparables for determining the ALP of international transactions. Cades Digitech Pvt Ltd - 44. This company has been considered as a comparable in the TP report by the assessee. The TPO proposed to reject this as a comparable on the ground that no data is available. The assessee objected to the rejection and submitted a copy of the annual report of the company and stated that the company is functionally similar to that of the assessee. However, the TPO rejected this as a comparable in the TP order on the reason of functional dissimilarity. The reason as stated by the TPO in his order is extracted hereunder: ‘’The company derives its revenues primarily from engineering design services as shown in the Note 17 and Note 24 of the AR. Hence, the company is functionally dissimilar to the taxpayer and therefore rejected.’’ IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 67 of 89 44.1 The assessee filed objections before DRP seeking inclusion of the said company, however DRP upheld the action of the TPO and rejected the prayer of the assessee. 44.2 The assessee submits that the said company has been selected as functionally comparable by the Pune Tribunal in the case of DCIT vs Applied Micro Circuits India Private Limited - ITA 1250/Pun/2015 dt.24.11.2017. 44.3 The functional profile of the assessee is stated supra. The assessee is engaged in software and engineering and design services similar to the company Cades Digitech. In view of the decision above, L. A.R. requested that the company should be considered as a comparable. 44.4 The final list of comparables after considering the above arguments are as hereunder: Sl. No Name of the Comparable company (OP/OC) before WC Adjustment 1 Akshay software technologies ltd 7.77% 2 Cades Digitech Pvt Ltd 5.47% ARITHMETIC MEAN 6.62% 44.5 From the above it can be seen that assessee’s margin for the SWD segment is 8.76% which is higher than the aforementioned adjusted margins of the comparable companies i.e, 6.62%. In view of the above submissions, the assessee humbly submits that the transaction is at arms length and therefore the TP adjustment made requires to be deleted in the interest of justice and render justice. 45. The Ld. D.R. relied on the order of lower authorities. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 68 of 89 46. We have heard the both the parties on this issue and perused the record. As rightly pointed out by the Ld. A.R., the coordinate bench in the case of DCIT vs Applied Micro Circuits India Private Limited - ITA 1250/Pun/2015 dt.24.11.2017, as comparable. Relevant portion can be found in para 17 of the order and is extracted as hereunder: ‘’17. We have heard the rival contentions and perused the record. The limited issue which has been raised vide ground of objection No.2.1 by the assessee is restricted to inclusion of one concern i.e. Cades Digitech Pvt. Ltd. in final set of comparables. The case of the assessee before us is that the figures for the said assessment year were available in annual report for the succeeding year. The assessee also claimed that the financial data for the financial year 2009-10 was available and could be relied upon from the annual report of financial year 2010-11. The assessee had furnished the annual report for financial year 2010-11 before the TPO and the CIT(A). However, in the absence of annual report for financial year 2009-10, the same was not considered by the TPO and the CIT(A). The assessee on the other hand, claimed that all these data was available in financial statements and also in the Notes to accounts. Our attention has been drawn to the annual report for financial year 2010-11 and reference is made to the details at pages 235, 238, 239 and 240 of the Paper Book to point out that the figures of earlier year are available in the Profit and Loss Account, Balance Sheet and even in the Notes to accounts. He further pointed out that this year details are available in public domain, may be, not at that relevant time. He further pointed out that the TPO himself in assessment year 2013-14 had taken the said concern as comparable. We find merit in the plea of assessee, in view of information available in public domain and accordingly, we direct the TPO to include Cades Digitech Pvt. Ltd. as comparable in the hands of assessee and re-work the mean margins of external comparables and also determine the arm's length price of international transactions. Before parting, we may also refer to the transfer pricing order for assessment year 2013-14 in assessee's own case, wherein Cades Digitech Pvt. Ltd. was considered as comparable for design engineering segment. Further, the Delhi Bench of Tribunal in Bechtel India Pvt. Ltd. Vs. DCIT in ITA No.1478/Del/2015, relating to assessment year 2010-11, order dated 21.12.2015 had also considered Cades Digitech Pvt. Ltd. as comparable for design engineering segment. In view thereof, the said concern is to be considered as comparable. Accordingly, ground of objection No.2.1 is thus, allowed.’’ 46.1 In view of the above order of the Tribunal, we direct the AO/TPO to include M/s. Cades Digitech Pvt. Ltd. in the list of comparables while determining the ALP of the international transactions. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 69 of 89 Ground No 17 - Provision for obsolescence of inventory - Rs. 2,49,97,530/- 47. The AO has disallowed on the premise that the assessee has made a provision in the books of accounts for obsolescence and such provision according to AO does not amount to write off, hence not allowable. The second reason is that the said amount has been added by the assessee in the MAT computation. Also the Provision amount is Rs.4,96,70,106/- but the AO has erroneously adopted the amount of Rs.2,49,97,530/- which pertains to AY 2011-12. The DRP rejected the objections of the assessee and upheld the action of the AO. 47.1 The submission of the assessee in this regard is that there is no distinction between provision and write off when it comes to treatment in the books of accounts and the issue of obsolescence of stock. Legally there is no requirement. The assessee has consistently followed the same in all the earlier years. Further the claim has been based on proper well laid out procedure and after technical evaluation and as per the consistently followed method of evaluation i.e, market or cost whichever is lower. In this regard kindly refer to para 1.4 of the significant accounting policies of the financial statements. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 70 of 89 47.2 The disallowance has been deleted by the Tribunal in Assessee's own case for AY 2004-05 in ITA 810 to 812/B/2007 dt.16.05.2008. The Revenue appeal before High Court of Karnataka in ITA 912/2008 dt.07.06.2016 on this issue is answered in favour of the assessee. 47.3 Further the assessee relies on the following case laws in support of its claim: Decision of Supreme Court in the case of Rotork Controls India (P)Ltd vs CIT - 314 ITR 62- PB-III page 616 to 632. Decision of ITAT Pune Bench in the case of Racold Thermo Private Limited vs ACIT - ITA 2654/Pun/2017 dt.12.05.2022 - PB-III page 633 to 636. Decision of ITAT New Delhi Bench in the case of Nokia India Sales Pvt Ltd vs Addl.CIT - ITA 2527/Del/2018 dt.12.01.2021 - PB-III page 637 to 658. 47.4 Without prejudice, if the obsolescence in stocks is not allowed then it results in the enhancement in the value of closing stock and AO should allow the same as cost by reckoning higher value of the opening stock. The AO while disallowing ought to have allowed what has been disallowed in the earlier years as opening stock. However, as a principle of consistency the claim of the assessee being factually and legally correct, the disallowance is uncalled for. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 71 of 89 47.5 The argument of the AO that similar amount has been disallowed under MAT computation is not relevant. The assessment in this case has not been made under MAT. The assessee reserves the right to seek exclusion of this as and when the assessment is made under MAT, till then this becomes a non-issue. In any case if a deduction is allowable in law, the same cannot be denied on the plea of estoppel as the assessee is entitled to rectify its stand. Further no addition can be made on the basis of admission or estoppel or any other equitable doctrine. If an item is taxable same would be taxable irrespective of what the assessee may say or may not say. In this regard, reliance is placed by the Ld. A.R. on the decision of the Hon’ble Supreme Court in the cases of Kedarnath Jute Mfg Co Ltd vs CIT - 82 ITR 363 and CIT vs V.MR.P.Firm - 56 ITR 67. Hence the disallowance may be deleted. 48. On the other hand, Ld. D.R. relied on the order of the Ld. DRP and submitted that if the obsolete stock is written off in the books at Nil considering the nature of stock and its valuation, then the same may be allowed as expenditure during the year. However, if a provision is made towards stock as obsolete without writing off the same in the books, then it cannot be allowed as an expenditure. 49. After hearing both the parties, we are of the opinion that the Coordinate Bench has considered this issue for the A.Y. 2004-05 The disallowance has been deleted by the Tribunal in Assessee's own case for AY 2004-05 in ITA 810 to 812/B/2007 dt.16.05.2008. The Revenue appeal before High Court of Karnataka in ITA 912/2008 dt.07.06.2016 on this issue is answered in favour of the assessee. Relevant portion is extracted as hereunder: IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 72 of 89 ‘’6. The aforesaid would now lead us to examine question (b). We may record that the relevant discussion of the A.O. to the aforesaid question are at para 4.1 in the order of the assessment, which reads as under : “4.1 It is seen that the assessee had written off obsolete stock to the extent of Rs.1,18,69,458/-. The details regarding the items, date of purchase, etc. was called for vide Q.No.3 of this office letter dated 6.7.2006. The assessee vide letter dated 29.11.2006 has furnished the details of the break up of obsolete stock written off. In the letter, the assessee has stated that the stock has been written off as obsolete due to technological changes and lack of market for the products. The assessee’s reply has been examined. The assessee has not furnished the date of purchase of the stock and also how these stocks became obsolete due to technological change. In the absence of date of purchase of these stock, it is not possible to come to a conclusion whether the particular stock has become obsolete due to technological change or lack of market for the produce. In the absence of the relevant details, the claim of the assessee for write off of obsolete stock of Rs.1,18,69,458/- is disallowed.” 7. In the appeal before the CIT (Appeals), the discussion is at para 8 which reads as under:- “8. Disallowance of write off of obsolete stock of Rs.1,18,69,458/-. The assessing officer during the course of assessment proceedings of AY: 2004- 2005 called for item wise details of the obsolete stock written which was furnished by the appellant a copy which is also submitted during the course of hearing before me along with the written submissions. The AO has disallowed the same on the ground that date of purchase has not been furnished and how the same has become obsolete. It was submitted that the stock was written off as obsolete due to lack of demand for the said stock and technological changes in the products. That the stock written off when compared to the turnover of the appellant was very negligible, its accounts were audited and on the advice of its technical team and auditors, the same has been treated as obsolete and written off in the books. The disallowance has been made for unsustainable reasons and prayed for deletion of the disallowance in the interests of justice. I have looked into the discussion on this issue in the assessment order and the details submitted. After considering the same, I am of the view, there is no case for any disallowance when the details have been furnished, and its accounts have been audited and have been written off on the advice of technical team. Moreover such stock obsolence is a commercial reality in any kind of business due to change in technology, lack of demand, old stock, etc., I accordingly delete the addition made on this issue.” 8. The Tribunal in the further appeal at para 19(ii) has concluded thus : “19(ii). We have gone through the orders of authorities below on this issue and after considering the arguments, we do not see any need to disturb the order of the Id. CIT(A) as it is a commercial reality that stocks become obsolete due to change in technology, wear and tear, lack of demand, etc., more so, in today’s fast changing developments in technology and various fields. Further it is not for the AO to decide or determine how the assessee conducts its business. Assessee is the best judge of the market conditions, business requirements, demand for the products, changes in technologies, IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 73 of 89 etc., The write off of stock has been done on the advice of the technical team and audit team shows that experts opinion has been taken before the same is written off. It is also a fact that the obsolete stock written off when compared with the turnover of the company is very negligible and miniscule. Accordingly, we uphold the order of the Id. CIT(A) on this issue and dismiss the grounds.” 9. If the question is examined in the light of the above discussion of the earlier authority, one may say that whether the stock has become obsolete or not, is a question of fact for which the Tribunal is the ultimate fact finding authority. 10. However, Mr. Aravind, the learned Counsel appearing for the appellants, contended that A.O. during the course of enquiry, called for the date of purchase of the stock which was declared as obsolete, but the assessee having failed to submit the document, the A.O. was within his power to disallow the writing off of the obsolete stock. He submitted that neither the CIT (A) nor the Tribunal appreciated the said aspect, and therefore, the discussion made by the A.O. ought to have been maintained. 11. In our view, the judicial scrutiny in the present appeal is limited to the question of law and not the question of fact for which the Tribunal is the ultimate fact finding authority. The contention raised may fall in the arena of re-appreciation of evidence and upsetting the finding of fact as to whether the stock had become obsolete or not. It is true that one of the mode as to whether stock had become obsolete or not may be, the consideration of the date of purchase of the stock, but the same is not the only criteria, and there could be other criteria including that of the advice of the technical team, auditor, etc. The CIT (A) has found that not only the stock which is written off is very negligible in comparison to the total turnover, but the same was audited and upon the advice of the technical team of the auditor, the stock is written off. In our view, sufficiency of evidence cannot be invoked, as sought to be canvassed, that too, for upsetting the finding of fact, for which the Tribunal is the ultimate authority. Under these circumstances, we find that while considering the question (b), it cannot be said that such is a substantial question of law as sought to be canvassed. Hence, need not be answered.’’ 49.1 In view of above judgement of High Court, we are inclined to decide the above issue in favour of assessee. Ground No 18 - Loss on exchange fluctuation - Rs. 13,85,26,037/- 50. The assessee has debited a sum of Rs.13,85,26,037/- towards foreign exchange loss. The AO has disallowed the said sum under the IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 74 of 89 title ‘Mark to Market losses’ and applied CBDT’s Instruction no. 03 of 2010 dated 23.03.2010 and invoked section 43(5) holding it as speculative in nature. The AO erred in lack of application in as much he has not even adverted to the details filed. The DRP rejected the objections of the assessee and upheld the action of the AO. 50.1 The detail provided before the AO is extracted hereunder: ‘’Foreign exchange balance for the year ended 31 March 2012 Particulars Amount Remarks FX Remeasurement & related hedges (Realized) 16,89,96,379 The exchange difference when payment is made to creditors & / or received from debtors is accounted as gain or loss according to rate movement; Forward contracts realized & net effect taken as gain or loss. FX Remeasurement & related hedges (Unrealized) (3,04,70,342) Revaluation is done on monthly basis to reinstate the difference in MOR rate & GAAP rate for Account receivable \Account payable ,Due to\due from, A report generated from Oracle which shows the exchange rate differential being gain or loss for which manual accrual entry is passed on monthly basis which gets auto reversed subsequent month Total 13,85,26,037 50.2 Perusal of the above table brings out the fact that in this year the assessee incurred a loss(realised) amounting to Rs.16,89,96,379/- being the loss as a result of its business and trading while making payments and receiving revenue and collections from debtors. The said loss is inextricably and undeniably linked to the regular business of the assessee with underlying trade related transaction. In so far as the above sum is concerned it is neither a case of speculative nor it is a case of IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 75 of 89 mark to market. In so far as the above sum is concerned the reason given by the AO is erroneous and the above claim should be allowed. The assessee has recognized mark to market gain of Rs.3,04,70,342/- and offered for tax by setting off the realised loss. If the argument of the AO is to be accepted then the said Rs.3,04,70,342/- cannot be taxed and realised loss of Rs.16,89,96,379/- has to be allowed. However, the assessee has been consistently following in its tax treatment the same method. As a rule of consistency, the method may be upheld irrespective of whether there is a gain or loss. 50.3 The issue is covered in favour of the assessee by the decision of Bangalore Tribunal in the case of Quality Engineering and Software Technologies Pvt Ltd vs DCIT - ITA 257 & 275/B/2014 dt. 14.11.2014 (PB-II page 346 to 375 ) 50.4 The issue is covered in favour of the assessee by the decision of ITAT Bangalore in the case of Bharat Mines and Minerals vs DCIT - ITA 2378 & 2379/B/2018 dt.30.03.2022 - (PB-III page 672 to 684) 50.5 In view of the said decisions, the addition has to be deleted. 51. The Ld. D.R. submitted that this loss is notional and contingent in nature. As per CBDT instruction No.3/2010, even actual losses i.e. hedge loss are allowable as non-speculative only if the transaction quality under clause D of the proviso to section 43(5), “Marked to Market” losses claimed as notional losses prior to settlement has to be treated as speculative loss in terms of section 43(5) of the Act. 52. We have heard both the parties and perused the materials available on record. This issue has been considered by Coordinate Bench in the case of Bharat Mines and Minerals Vs. DCIT in ITA No.2378 & 2379/Bang/2018 dated 30.3.2022, wherein held as under:- IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 76 of 89 10. “We have heard the rival submissions. In this case the assessee is engaged in the business manufacture and export of iron ore. The business of the assessee for AY 2007- 08 to 2010-11 is as follows: - FY Income from Export sales (Rs.) 2007-08 5,48,7,069 2008-09 5,72,84,02,165 2009-10 8,81,87,22,763 2010-11 5,26,46,10,180 Total 2529,24,61,177 11. According to the learned D.R. the total forward exchange transaction in these two assessment years are below the total export made by the assessee in these two assessment years. As such it cannot be considered as normal hedging transaction, Otherwise it can be considered as speculative transaction. However, the assessee demonstrated before us that the of the hedging contract is more than 1 year and thus these s are undertaken with the SBI and Standard Chartered Bank :1 by the RBI. Further, these transactions extended for more tabulated below: - IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 77 of 89 For Assessment year 2013-14 Sl.No. Bank Notional Amount (Rs.) Trade Date Maturity Date Settlement Amount Loss/Gain 1 Sbi 8,74,00,000 17.08.2007 13.04.2012 1,55,50,000 2 SBI 8,54,00,000 26.07.2007 26.04.2012 1,97,95,000 3 SBI 8,74,00,000 17.08.2007 11.05.2012 1,98,00,000 4 SBI 8,74,00,000 17.08.2007 13.06.2012 2,43,50,000 5 SBI 8,54,00,000 26.07.2007 27.06.2012 2,88,80,000 6 SBI 8,74,00,000 17.08.2007 13.07.2012 2,39,40,000 7 SBI 8,54,00,000 26.07.2007 27.07.2012 2,54,80,000 8 SBI 8,74,00,000 17.08.2007 13.08.2012 2,31,70,000 Total 69,32,00,000 20,67,40,000 13. As per definition of Section 43(5) of the Act trading of shares which is done by eking delivery does not come under the purview of the said Section. Similarly in: clause (d) of Section 43(5) derivative transaction in shares is also not speculation transaction as defined in the said section. Therefore, both profit/ loss from all the share delivery transactions and derivative transaction are having the same meaning, so far as Section 45(3) of the Act is concerned. In view of the fact that both delivery transactions and derivative transactions are having the same meaning, so far as section 43(5) of the Act. Again, in view of the fact that both delivery transactions and derivative transactions are non-speculative as far as Section 43(5) is concerned, it follows that both will have the same treatment as far as application of Explanation to Section 73 of the Act is concerned. Therefor aggregation of the trading profit and loss from derivative transactions should be done before Explanation to Section 73 of the Act is applied. The above view was taken by the Special Bench of the Mumbai Tribunal in the case of CIT vs. Concord Commercial Pvt. Ltd. (2005) 95 ITD 117 (Mum) (SB). In this case the Special Bench held that: "Before considering whether the assessee's case is hit by the deeming provision of Explanation to Section 73 of the Act, aggregate of the business profit/ loss has to be worked out based on the non-speculative profits: either it is from share delivery or from share derivative." From the above it is concluded that both trading of shares and derivative transaction are not coming under the purview of Section 43(5) of the Act which provides definition of "Speculation" exclusively for the purpose of section 28 to 41 of the Act. Again, the fact that both the delivery based transaction in shares and derivative transaction are non- speculative as far as section 43(5) of the Act is concerned goes to confirm that both will have same treatment as regards application of the Explanation to Section 73 is concerned, which creates a deeming fiction. Now, before application of the said IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 78 of 89 explanation, aggregation of business profit/loss is to be workout irrespective of the fact, whether it is from share delivery transaction or derivative transaction. 14. To sum up: (i) The assessee has entered into forex derivative transactions only in order to contain foreign exchange fluctuation risk. ii) Thus, the loss on account forex derivative transactions are directly . attributable to the normal business of the assessee. (iii) The loss incurred by the assessee is realistic and not notional. (iv) Only money changers and banks are allowed to trade in foreign currency and the assessee is neither a money changer nor a bank. (v) The assessee has only utilized the service of Stat Bank of India/ Standard & Chartered Bank in order to iron out the loss arising out of foreign currency fluctuation risk by entering into forex derivative contract. (vi) The Instructions issued by CBDT Instruction No.03/2010 dated 23.03.2010 has recognized the loss out of forex derivatives on actual settlement/conclusion of contracts as allowable business loss, however they have directed the Revenue to examine whether the transactions would fall U/s. 43(5)(d) of the Act, and if so to treat the same as non-speculative transaction. By the above directions, it appears that though the CBDT has recognized the loss arising out of forex derivatives on actual settlement of the contracts, directed the Revenue to treat the same as speculative transaction when they are transacted through nationalized banks and as not speculative, when these transactions are transacted through recognized stock exchange. (vii) It is pertinent to note here that the bankers act as an advisory agent to in order to protect them from foreign exchange exposure their expertise and these services cannot be obtained by the stock exchange where their scope of service is very limited. (viii) In the present case the assessee has taken a hedging position as mentioned in these assessment years based on the RBI guidelines. The guidelines permitted hedging to the extent of last three years annual average turnover, or current year's actual export turnover whichever is higher. Where exact amount of underline transaction was not ascertainable according to RBI guidelines, the contracts could be booked on the basis of reasonable estimate. The assessee has taken its hedging position in accordance with the guidelines of RBI and the same is not disputed. (ix) The claim of the assessee was that the underlying exposure in respect of foreign currency is more than adequate to cover the hedging positions taken in respect of cross currency derivative contracts entered into by the assessee. The Revenue has not brought out any material on record to controvert to this claim of the assessee. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 79 of 89 (x) The forex derivative transactions transacted by the assessee are through banks in compliance with the RBI regulations. These regulations permit the assessee to enter into such derivative transactions only by fulfilling certain conditions in the course of the business of the assessee. These regulations do not permit the assessee to enter into forex derivative contract as a separate business. (xi) Section 73(1) of the Act restricts the set off of speculation loss against the other business income in only those cases were speculative transactions carried on by the assessee are of such nature so as to constitute a business by itself. It is pertinent to mention here that RBI does not permit any bank under its umbrella to entertain its client in any separate business of forex derivative transactions. Permission is granted only for the clients of the bank hedge on foreign exchange in order to minimize the risk of the foreign currency exposure arising out of import and export trade. (xii) Hon’ble jurisdictional Madras High Court in the case Mis. sugars and chemicals Ltd Vs. Axis Bank Ltd., in O.A 's 252 of 2008 in C.S.No.240 of 2008 O.A.No.251 & 252 of 2008 in C.S. No.240 of 2008 O.A. Nos.526 & 527 of 2008 in C.S No.240 of 2008A. Nos.1926, 1927, 2446 and 2447 of 2008 in S.S No.240 of 2008 vide order dated 14.10.2008 reported in 8 MU 261 has held that derivative transactions ceased to be speculative transactions or wages because pricing of the deal follows a scientific pattern on the basis of financial mathematics. Just as actuaries scientifically determined the value of insurance risk and the premium payable, Financial Mathematician/Portfolio Managers evaluate the price of these derivatives. 15. Thus in the present case before us, the assessee is an exporter of iron who 'has entered into forex derivative transactions through its bankers with a view to effectively hedge its foreign currency risk. Therefore, these forex derivative transactions have a close proximity or rather incidental to the export business of the assessee, which cannot be considered as speculative. Moreover, in the case of the assessee foreign currency contracts cannot be treated as wagering contracts for the reasons discussed herein above. Section-43(5) of the Act is applicable to transactions in commodity or stocks and shares. If currency is treated as commodity, then according to Section 43(5) (a) of the Act, such transaction shall not be deemed to be speculative transaction. Further currency cannot be treated as stock or shares because inherently they have different characteristic. Further, in the case of the assessees, the foreign exchange exposure for the "relevant period" specified by "R.B.I" regulations is quiet substantial in order to justify the forex derivative transactions made by the assessee through Government recognized channel, otherwise the RBI would not have entertained these transactions and would have restrained the banks from entering into such transaction with its clients. Thus, considering the totality of the facts and circumstance of the case and the decisions relied upon herein above we allow the grounds raised by the assessee's on this issue in both appeals in favour of the assessee and accordingly we hereby direct the Revenue to set off the losses incurred by the assessee on account of forex derivatives contracts against the business income of the assessee. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 80 of 89 16. In the result, the appeals filed by the assessee are allowed.” 52.1 In view of the above order of the Tribunal, we allow this ground taken by the assessee. Ground No 19 & 20 - Provision for sales tax and customs duty - Rs. 92,21,561/- 53. The assessee has created provision for sales tax and customs duty amounting to Rs.92,21,561/-. The assessee has already added back this amount while computing the total income under regular provisions of the Act. The AO has added the amount to book profit u/s 115JB of the Act on the premise that it is an unascertained liability. The details of sales tax and subsequent payments made alongwith challans were submitted to the AO and DRP (PB-II page 376 to 388). The DRP rejected the objections of the assessee and upheld the action of the AO stating that the same is not allowable during the year. Since the assessee has discharged liability by making payments the same cannot be treated as unascertained liability. Hence the argument of the AO is untenable. It is a case where not only the liability is ascertained but also discharged. Hence the addition may be deleted. 54. We have heard both the parties and perused the materials available on record. In our opinion, this issue came for consideration before Delhi Bench in the case of ACIT Vs. NHPC Limited (41 CCH 655) (Del.), wherein held as under:- After considering the rival submissions and perusing the relevant material on record, it is noticed that the Hon’ble Supreme Court in the aforenoted case of Bharat Earth Movers (supra) has held that the liability incurred by the assessee under the Leave Encashment Scheme determined on actuarial valuation is an ascertained liability and cannot be considered as a contingent liability. However, it is significant to note that the legislature has stepped in by inserting clause (f) to Section 43B mandating that any sum IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 81 of 89 payable by the assessee as an employer in lieu of any leave at the credit of his employee cannot be allowed as deduction unless this amount is paid by the assessee on or before the due date for furnishing the return of income u/s 139(1) of the Act. In view of this legislative amendment nullifying the ratio of the decision in the case of Bharat Earth Movers (supra), the amount of such provision can be claimed as deduction only on actual payment and not on the simple creation of provision. However, when we peruse the mandate of Explanation 1 to section 115JB, it becomes clear that clause (c) talks of making addition to book profit for ‘the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or’. If we consider the judgment of the Hon’ble Supreme Court holding such a provision as an ascertained liability and clause (f) of section 43B on one hand and clause (c) of Explanation 1 to section 115JB on the other, it becomes vivid that computation of income under the normal provisions debars deduction for the ascertained liability towards provision for leave encashment etc., unless the amount is actually paid before the due date. However, in the computation of book profit u/s 115JB, deduction is available for such provision of ascertained liability. The ld. DR has not drawn our attention towards any part of the provisions of section 115JB, which makes the provisions of section 43B(f) applicable to the computation of book profits. As the ground raised by the Revenue is only against the deletion of addition in the computation of book profit u/s 115JB, the impugned order needs to be upheld. It is however, made clear that if the income under the normal provisions of the Act turns out to be more than the book profit u/s 115JB and the total income is to be computed as per the normal provisions, then no deduction for such provision would be admissible unless the amount of such provision is paid before the due date u/s 139(1) of the Act. 54.1 In view of the above discussion, we set aside the issue to the file of AO to pass fresh order in conformity with the decision of coordinate Bench of Delhi in case of NHPC Ltd. cited (supra). Ground No 21 - Disallowance of Legal and Professional fees - Rs. 21,95,00,000/- 55. The assessee has debited an amount of Rs. 21,95,00,000/- as legal & professional fees in its P&L for the relevant AY. The AO sought details of the same which was provided by the assessee vide reply dated 26.12.2019 extracted hereunder: “The details of Legal and Professional Charges and the TDS mad thereon is enclosed as Annexure-5. In this regard the assessee submits that the applicable tax at source has been deducted wherever the TDS provisions are applicable. Further the statutory auditors after going through the books and records have in their Tax audit report have certified that TDS has been deducted, hence the assessee prays that no disallowance be made in this regard in the interests of justice. The assessee has been deducting tax at source and has also been filing the required annual/quarterly returns as per law and IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 82 of 89 requests your honour to kindly verify the factum of deduction of tax at source form records available with the department...’’ 55.1 The AO has made the disallowance for documentary evidence without specifying the nature of evidence. The DRP even after noting that the assessee has furnished the documentary evidences, upheld the action of the AO. 55.2 It may be seen that the assessee has submitted the entire breakup of expenditure with party name, amount, alongwith TDS details which are placed in paperbook-II page 389 to 392. The assessee has also placed the TDS certificates at paperbook -II pages 398 to 401 and Sample copies of invoices (Paperbook-II page 402 to 536). The disallowance has been made inspite of submitting all the details and particulars which has been duly noted by the AO and DRP. The AO did not ask for any other evidence or detail. The notice u/s 142(1) on this issue does not bring out any lapse on the part of the assessee to submit any detail/evidence. This is a case wherein the AO has made an addition without any justification and for no lapse on the part of the assessee. The details furnished by the assessee are self-explanatory and has been incurred wholly and exclusively for the purpose of business and is allowable u/s 37 of the Act. Hence the addition has to be deleted. 56. The Ld. D.R. relied on the order of the lower authorities. 57. After hearing both the parties, we are of the opinion that assessee has to establish the genuineness of the expenditure by filing the requisite details. In the present case, assessee produced the recipient’s details along with details of TDS and other evidence supporting the claim. Had the AO have any doubt, he should have made further enquiry by summoning the respective party, which he failed to do so. Hence, in our IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 83 of 89 opinion, the expenditure cannot be disallowed only on surmises and conjectures. Accordingly, we allow the ground taken by the assessee. Ground No 22 - Provision for expenses (disallowed as Contingent Liability) - Rs. 40,00,000/- 58. The assessee has made provision for litigation amounting to Rs. 40,00,000/-. The AO has made the disallowance under the premise that assessee was not able to furnish the kind of litigation expenses and nature of litigation. Relevant portion is extracted hereunder: ‘’15.3 The reply of the assessee is perused. In the said annexure, the assessee has furnished that the contingent liability includes litigation expenses pertaining to three parties. However, the assessee was not able to furnish the kind of litigation expenses and the nature of litigations. Any expenditure not related to earning business income should not be allowable as per the IT Act. In view of the above, the expenditure which is contingent in nature is hereby disallowed and added back to the total income.’’ 58.1 The DRP rejected the objections of the assessee and upheld the action of the AO. 58.2 The details of litigation expenses are as under: Sl.No Name Amount 1 Dr.Ravinder Kler 30,00,000 2 Jaddu Bhagat 1,75,000 3 Pragati Foundation Hira Mongi Hospital 8,25,000 Total 40,00,000 IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 84 of 89 58.3 The detail provided in the financial statement at para 2.32 is extracted hereunder: 58.4 The Provision is towards litigation expenses and not a contingent liability as named by the AO. The disallowance has been made inspite of submitting all the details and particulars which has been duly noted by the AO. The AO did not ask for any other evidence or detail. The notice u/s 142(1) on this issue does not bring out any lapse on the part of the assessee to submit any detail/evidence. This is a case wherein the AO has made an addition without any justification and for no lapse on the part of the assessee. The details furnished by the assessee are self- explanatory and has been incurred wholly and exclusively for the purpose of business and is allowable u/s 37 of the Act. Hence the addition has to be deleted. 59. Ld. D.R. relied on the order of lower authorities. 60. After hearing both the parties, we are of the opinion that assessee has to establish the genuineness of the expenditure/provisions by filing the requisite details and details of TDS. If the assessee furnishes these details, the claim of assessee to be allowed. In the present case, it is not the case of revenue that this expenditure is bogus. The assessee has furnished the details called for by AO u/s 142(1) of the Act. There is no IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 85 of 89 failure on the part of the assessee to substantiate the claim, we allow the ground taken by the assessee. Ground No 23 - Dealer Commission - Rs. 13,85,00,000/- 61. The assessee has debited expenditure towards dealer commission and was asked to provide details of the same. The assessee in the written submissions made on 26.12.2019 submitted as under: “The details Dealers Commission and the TDS made thereon is enclosed as Annexure-6. It may be noted that the dealer commission debited to profit and loss account is Rs. 9,45,00,000/- and not Rs. 13,85,00,000/-. The assessee submits that the applicable tax at source has been deducted wherever the TDS provisions are applicable. Further the statutory auditors after going through the books and records have in their Tax audit report have certified that TDS has been deducted, hence the assessee pays that no disallowance be made in this regard in the interest of justice. The assessee has been deducting tax at source and has also been filing the required annual/ quarterly returns as per law and requests your honor to kindly verify the factum of deduction of tax at source from the records available with the department...’’ 61.1 However the AO has made the disallowance of Rs.13,85,00,000/- for want of documentary evidence. The expenditure towards dealer commission debited in the books is Rs.9,45,00,000/-. The AO has incorrectly taken as Rs.13,85,00,000/- which is the amount reflected for ‘foreign exchange loss’. 61.2 The DRP in para 13.2 has stated as under: ‘’13.2 The assessee has filed to substantiate with documentary evidence before the panel and also before the AO that the expenses have been incurred and they are for the purpose of business of the assessee...’’ 61.3 The DRP however sustained the disallowance on the premise that no reconciliation between Rs.13.85lacs and Rs.9.45 lacs was furnished. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 86 of 89 61.4 The assessee has provided the entire breakup of the expenditure alongwith dealer name, amount, TDS made which is placed on record in Paperbook-II page 393 to 395. The assessee has also placed on record the TDS certificates at Paperbook -II page 398 to 401. The disallowance has been made inspite of submitting all the details and particulars which has been duly noted by the AO. The AO did not ask for any other evidence or detail. The notice u/s 142(1) on this issue does not bring out any lapse on the part of the assessee to submit any detail/evidence. This is a case wherein the AO has made an addition without any justification and for no lapse on the part of the assessee. The details furnished by the assessee are self-explanatory and has been incurred wholly and exclusively for the purpose of business and is allowable u/s 37 of the Act. He relied on the order of the Tribunal in assessee’s own case for AY 2005-06 in ITA 701/bang/2021 dated 05.08.2022, wherein similar addition has been deleted. 62. Ld. D.R. relied on the order of lower authorities. 63. We have both the parties on this issue and perused the materials available on record. In this case assessee has filed all the details called for by AO and Ld. D.R. is not able to point out the lapse on the part of the assessee, hence, this ground of appeal is allowed by placing reliance on the earlier order of the Tribunal for the assessment year 2005-06 in ITA No.701/Bang/2021 dated 5.8.2022, wherein held as under:- ‘’4.4. We have heard the rival submissions and perused the materials available on record. The assessee claimed that it has paid a sum of Rs.2,42,33,641/- towards commission to dealers and according to the assessee, it is wholly and exclusively incurred for the purpose of business. Further, assessee submitted the list of payments made to various parties and also furnished the details of deductions of TDS at the time of payment of commission to various dealers. It was also noted that in the case of receipt of this commission by those parties, the department has accepted it. However, in the hands of assessee it was treated as not incurred by the assessee, which is incorrect. Further, the IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 87 of 89 books of accounts of the assessee is not rejected by challenging the entries in the books of accounts. On this point also, we are of the opinion that the claim of assessee is to be allowed as genuine. Accordingly, we allow this ground of appeal taken by the assessee.’’ 63.1 In view of the above discussion, we allow the ground taken by the assessee. Ground No 24 - Miscellaneous expenses - Rs. 9,97,00,000/- 64. The AO vide notice u/s 142(1) dated 10.12.2019 sought the detail regarding miscellaneous expenses to be furnished in the required format. The assessee submitted the detail sought for in the required format alongwith TDS made vide reply dated 26.12.2019 as extracted hereunder: “The details of Miscellaneous Expenses and the TDS made thereon are enclosed as Annexure-7... Further the statutory auditors after going through the books and records have in their Tax audit report have certified that TDS has been deducted, hence the assessee prays that no disallowance be made in this regard in the interests of justice. The assessee has been deducting tax at source and has also been filing the required annual/ quarterly returns as per law and requests your honour to kindly verify the factum of deduction of tax at source from the records available with the department...’’ 64.1 However the AO has made the disallowance for want of documentary evidence. The DRP rejected the objections of the assessee and upheld the action of the AO. 64.2 The disallowance has been made inspite of submitting all the details and particulars which has been duly noted by the AO. The entire breakup of expenditure including the name of the party, amount, TDS made alongwith description is available at paperbook-II page 396. The AO did not ask for any other evidence or detail. The notice u/s 142(1) on this issue does not bring out any lapse on the part of the assessee to submit any detail/evidence. This is a case wherein the AO has made an IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 88 of 89 addition without any justification and for no lapse on the part of the assessee. The details furnished by the assessee are self-explanatory and has been incurred wholly and exclusively for the purpose of business and is allowable u/s 37 of the Act. Hence the addition has to be deleted. 65. After hearing both the parties, we are of the opinion that assessee has to establish the genuineness of the expenditure by filing the requisite details. In the present case, assessee produced the recipient’s details along with details of TDS. Had the AO have any doubt, he should have made further enquiry by summoning the respective party, which he failed to do so. Hence, in our opinion, the expenditure cannot be disallowed only on surmises and conjectures. Accordingly, we allow the ground taken by the assessee Ground No 26 – TDS Credit 66. The assessee requests that the eligible TDS credit as claimed in the return of income may be given. The issue is remitted to AO for giving due TDS credit. Ground No 27, 28 – 234B interest 67. The above grounds are regarding interest u/s 234B of the Act. The assessee prays for consequential relief in this regard. This is mandatory and consequential in nature and to be recomputed accordingly. 67.1 No other grounds are argued before us. Hence, not considered for adjudication. 68. The appeal in IT(TP)A No.703/Bang/2021 is partly allowed for statistical purposes. IT(TP)A Nos.344 & 703/Bang/2021 M/s. Wipro GE Healthcare Pvt. Ltd., Bangalore Page 89 of 89 69. In the result, the appeal filed by the assessee in IT(TP)A No.344/Bang/2021 is allowed and the appeal in IT(TP)A No.703/Bang/2021 is partly allowed for statistical purposes. Order pronounced in the open court on 7 th Oct, 2022 Sd/- (Beena Pillai) Judicial Member Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 7 th Oct, 2022. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.