American Express (India) Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 3532/DEL/2014

• Counselvise Citation: 353220114 RSA 2014
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I2
• Assessment Year: 2006-2007
• Appeal Filed On: 11-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PEEYUSH JAIN
• Keywords: Business income; Transfer pricing; Opportunity of being heard; International transaction; Wholly owned subsidiary; Scheme of amalgamation
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : I-2 : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI KULDIP SINGH, JM ITA NO.3532/DEL/2014 ASSESSMENT YEAR : 2006-07 AMERICAN EXPRESS (INDIA) PVT. LTD., METROPOLITAN SAKET, 7 TH FLOOR, OFFICE BLOCK, DISTRICT CENTRE, SAKET, NEW DELHI. PAN: AAACA8163F VS. DCIT, CIRCLE-1(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NAGESHWAR RAO, ADVOCATE, DEPARTMENT BY : SHRI PEEYUSH JAIN, CIT, DR DATE OF HEARING : 13.10.2015 DATE OF PRONOUNCEMENT : .10.2015 ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE FINA L ORDER DATED 28.4.2014 PASSED BY THE ASSESSING OFFICER (AO) U/S 143(3)/254 READ ITA NO.3532/DEL/2014 2 WITH SECTION 144C(5) OF THE INCOME-TAX ACT, 1961 (H EREINAFTER ALSO CALLED THE ACT) IN RELATION TO THE ASSESSMENT YEA R 2006-07. 2. A FINAL ASSESSMENT ORDER WAS EARLIER PASSED IN T HIS CASE WHICH WAS ASSAILED BY THE ASSESSEE BEFORE THE TRIBUNAL. VIDE ITS ORDER DATED 29.12.2011, THE TRIBUNAL IN ITA NO.3990/DEL/2010 OB SERVED THAT THE DISPUTE RESOLUTION PANEL (DRP) HAD NOT DISPOSED OF THE ASSESSEES OBJECTIONS BY MEANS OF A SPEAKING ORDER. RESULTANT LY, THE MATTER WAS RESTORED TO THE FILE OF THE DRP FOR PASSING A FRESH SPEAKING ORDER GIVING PROPER REASONS. THAT IS HOW, THE DRP ISSUED DIRECT ION DATED 21.3.2014, PURSUANT TO WHICH, THE AO HAS PASSED THE IMPUGNED O RDER. 3. THE FIRST ISSUE RAISED IN THIS APPEAL IS AGAINST THE ADDITION AMOUNTING TO RS.28,30,09,294/- ON ACCOUNT OF TRANSF ER PRICING ADJUSTMENT. THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSEE IS A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS INTERNATIONAL INC., USA. IT IS ENGAGED IN PROVIDING SERVICES TO ITS GROUP COMPANIE S IN THE NATURE OF DATA MANAGEMENT, INFORMATION ANALYSIS AND CONTROL A CTIVITIES. THE ASSESSEE ALSO PROVIDES TELE-SERVICING AND TRANSACTI ON PROCESSING SUPPORT ITA NO.3532/DEL/2014 3 TO AMERICAN EXPRESS GROUP ENTITIES. THE ASSESSEE R EPORTED 11 INTERNATIONAL TRANSACTIONS WHICH HAVE BEEN MENTIONE D ON PAGE 2 OF THE TRANSFER PRICING OFFICER (TPO)S ORDER. THESE TRANS ACTIONS WERE DIVIDED BY THE ASSESSEE IN TWO CATEGORIES, NAMELY, CATEGORY -1 COVERING TRANSACTIONS FROM SL. NO. 1-6 AND CATEGORY-2 COVERI NG TRANSACTIONS FROM SL. NO. 7-11. IN THE INSTANT APPEAL, WE ARE CONCER NED ONLY WITH INTERNATIONAL TRANSACTIONS OF CATEGORY-1 WHICH ARE AS UNDER :- SL.NO. INTERNATIONAL TRANSACTION METHOD VALUE (IN R S.) 1. EXPORT OF DATA PROCESSING AND BACK OFFICE SUPPORT TNMM 478,99,69,898 2. CHARGES FOR CDN/CPU TNMM 28,73,83,112 3. CHARGES FOR GLOBAL MAX SOFTWARE TNMM 31,92,769 4. SECONDMENT OF PERSONNEL TNMM 5,95,75,184 5. RELOCATION OF EXPENSES TNMM 1,04,05,294 6. REIMBURSEMENT OF EXPENSES TNMM 1,55,552 4. THE ASSESSEE FOLLOWS COST PLUS BUSINESS MODEL, I.E., IT CHARGES THE ASSOCIATED ENTERPRISES (AE) FOR THE SERVICES ON THE COST PLUS CERTAIN MARK-UP. THIS MARK-UP IS CHARGED ON OVERALL TOTAL COSTS INCLUDING ALL DIRECT AND INDIRECT COSTS. DURING THE YEAR, THE AS SESSEE CHARGED MARK-UP OF 15% FOR RENDERING THE ABOVE SERVICES. THE ASSES SEE APPLIED TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE ITA NO.3532/DEL/2014 4 METHOD TO BENCHMARK INTERNATIONAL TRANSACTIONS OF C ATEGORY-1 BY CHOOSING PROFIT LEVEL INDICATOR (PLI) OF OPERATING PROFIT/OPERATING COST (OP/OC). INITIALLY, IT CHOSE 13 COMPARABLE COMPANIE S WITH THEIR WEIGHTED AVERAGE MARGIN, CALCULATED ON THE BASIS OF MULTIPLE YEAR DATA, AT 15.20%. THE ASSESSEE COMPUTED ITS OWN MARGIN AT 17.43% AND CLAIMED THAT THESE INTERNATIONAL TRANSACTIONS WERE AT ARMS LENGTH PRICE (ALP). THE AO MADE A REFERENCE TO THE TPO FOR DETE RMINING THE ALP OF THE INTERNATIONAL TRANSACTIONS. THE TPO, INTER ALIA , DID NOT ACCEPT THE USE OF MULTIPLE YEAR DATA. THE ASSESSEE FURNIS HED A REVISED LIST OF COMPARABLE COMPANIES WITH THEIR PROFIT MARGINS ON T HE BASIS OF SINGLE YEAR DATA. THE NUMBER OF COMPARABLE COMPANIES IN TH IS LIST GOT SHRINKED TO 11. THE TPO EXCLUDED CERTAIN COMPANIES FROM THE ASSESSEES LIST OF COMPARABLES AND INCLUDED CERTAIN FRESH COMPANIES. THAT IS HOW THE TPO SHORTLISTED 8 COMPANIES TABULATED ON PAGE 23 AN D 24 OF HIS ORDER WITH THEIR AVERAGE OP/OC COMPUTED AT 30.71%, AS UN DER : - ITA NO.3532/DEL/2014 5 S.NO. NAME OF THE COMPANY OPERATING PROFIT ON OPERATING COST (%) 2006 1. ACE SOFTWARE EXPORTS LIMITED 7.92% 2. ALLSEC TECHNOLOGIES LIMITED 28.84% 3. CS SOFTWARE LIMITED 18.77% 4. NUCLEUS NETSOFT AND GIS (INDIA) LIMITED 44.83% 5. SPANCO TELESYSTEMS AND SOLUTIONS LIMITED (SEGMENTAL) 20.82% 6. TRANSWORKS INFORMATION SERVICES LIMITED 24% 7. TRICOM INDIA LIMITED 52.56% 8. VISHAL INFORMATION TECHNOLOGIES LIMITED 48% MEAN 30.71% 5. ON THE BASIS OF THE ABOVE MEAN PROFIT MARGIN OF THE COMPARABLE COMPANIES, THE TPO PROPOSED TRANSFER PRICING ADJUST MENT OF RS.5.41 CRORE. AFTER PASSING OF ORDER BY THE TRIBUNAL AND T AKING INTO CONSIDERATION THE FRESH DIRECTIONS GIVEN BY THE DRP , THE AO HAS FINALLY REDUCED THE AMOUNT OF ADDITION ON ACCOUNT OF TRANSF ER PRICING ADJUSTMENT TO RS.2.83 CRORE. THE ASSESSEE IS AGGRIEVED AGAINS T THIS ADDITION. TO BE MORE PRECISE, THE GRIEVANCE OF THE ASSESSEE IS REST RICTED IN SEEKING EXCLUSION OF TWO COMPANIES, NAMELY, NUCLEUS NETSOFT AND GIS (INDIA) LTD. (SEG.) AND VISHAL INFORMATION TECHNOLOGY LTD.; AND INCLUSION OF ITA NO.3532/DEL/2014 6 KIRLOSKAR COMPUTER SERVICES LIMITED AND MERCURY OUT SOURCING MANAGEMENT LTD. WE WILL DEAL WITH THESE COMPANIES I N SERIATIM. 6. BEFORE ARRIVING AT A CONCLUSION ABOUT THE COMPAR ABILITY OR OTHERWISE OF THE ABOVE REFERRED FOUR COMPANIES, IT IS PERTINENT TO OBSERVE THE NATURE OF FUNCTIONS PERFORMED BY THE AS SESSEE UNDER CATEGORY-1 OF THE INTERNATIONAL TRANSACTION IN DISP UTE. FIRST TRANSACTION IS `EXPORT OF DATA PROCESSING AND BACK OFFICE SUPPORT , WHOSE NATURE HAS BEEN DISCUSSED IN THE TRANSFER PRICING STUDY REPORT AS UNDERTAKING DATA MANAGEMENT, INFORMATION ANALYSIS AND CONTROL MANAGE MENT ACTIVITIES AND PROVIDING TELE-SERVICING AND TRANSACTION PROCE SSING REPORT FOR EXPORT TO AMERICAN EXPRESS GROUP. THE ASSESSEE RECEIVES I NPUTS IN THE FORM OF DATA, MAINLY IN ELECTRONIC FORM TO UNDERTAKE BUSINE SS PROCESSING. IT EXPORTS ITS OUTPUT TO THE CONCERNED GROUP COMPANIES WORLDWIDE. THESE SERVICES ARE PRIMARILY IN THE NATURE OF I.T. ENABLE D SERVICES. THE SECOND INTERNATIONAL TRANSACTION IS CHARGES FOR CDN/CPU WITH THE TRANSACTED VALUE OF RS.28.73 CRORE. THE NATURE OF THIS TRANSA CTION HAS BEEN GIVEN IN THE TP STUDY REPORT TO MEAN UTILIZATION OF WORLD WI DE INFORMATION ITA NO.3532/DEL/2014 7 PROCESSING TELECOMMUNICATION CENTRE AT PHOENIX IN T HE USA MAINTAINED BY ANOTHER AE. THE UTILIZATION OF CONSO LIDATED DATA NETWORK (CDN) AND CENTRAL PROCESSING UNIT (CPU) AND TECHNOLOGY SERVICES IS FOR RENDERING I.T. ENABLED SERVICES TO ITS AES. THE NEXT INTERNATIONAL TRANSACTION UNDER CATEGORY-1 IS CHAR GES FOR GLOBAL MAX SOFTWARE WITH THE TRANSACTED VALUE OF RS.31.92 LAC . SIMILARLY, NEXT TRANSACTION UNDER THIS CATEGORY IS `SECONDMENT OF P ERSONNEL. THE ASSESSEE REIMBURSES COMPENSATION AND OTHER BENEFITS ACTUALLY INCURRED BY THE AES FROM TIME TO TIME ON THE SECONDED EMPLOY EES SENT TO IT ON COST TO COST BASIS. SUCH AMOUNT INCURRED BY THE AE INCLUDES REMUNERATION, ALLOWANCES, INSURANCE AND RELATED AMO UNTS AS SPENT BY AES DURING SECONDMENT TERM, WHICH ALSO INCLUDES TRA VELLING AND OTHER INCIDENTAL EXPENSES. THE SERVICES OF SUCH SECONDED EMPLOYEES ARE UTILIZED BY THE ASSESSEE IN RENDERING I.T. ENABLED SERVICES TO ITS AES. THEN IT IS RELOCATION OF EXPENSES, WHICH IS, AGAI N, NOTHING, BUT, THE REIMBURSEMENT OF COST INCURRED BY THE ASSOCIATED EN TERPRISES ON RELOCATION OF EMPLOYEES SECONDED TO IT. IF WE CLOS ELY LOOK AT THE NATURE OF THE INTERNATIONAL TRANSACTIONS UNDER CATEGORY-1, IT BECOMES MANIFEST ITA NO.3532/DEL/2014 8 THAT THESE ARE THE TRANSACTIONS IN THE NATURE OF RE NDERING OR ENABLING TO RENDER I.T. ENABLED SERVICES. THERE IS NO DISPUTE ON THE NATURE OF THE SERVICES PROVIDED BY THE ASSESSEE UNDER THIS CATEGO RY. NOW, WE WILL EXAMINE THE COMPARABILITY OR OTHERWISE OF THE COMPA NIES DISPUTED BY THE LD. AR. (I) NUCLEUS NETSOFT AND GIS (INDIA) LTD . 7.1. THIS COMPANY WAS INITIALLY INCLUDED BY THE AS SESSEE IN ITS LIST OF COMPARABLES ON WEIGHTED AVERAGE BASIS. THEREAFTER, WHEN THE TPO REQUIRED THE ASSESSEE TO FURNISH THE PROFIT RATES O F THE COMPANIES SELECTED BY IT WITH CURRENT YEAR DATA ALONE, THE ASSESSEE EX CLUDED THIS COMPANY. THE TPO INCLUDED IT IN THE FINAL SET OF COMPARABLES DESPITE THE ASSESSEES OBJECTION THAT THERE WAS AMALGAMATION OF SOME OTHER COMPANY IN THIS COMPANY DURING THE YEAR UNDER CONSI DERATION AND THE AUDITED FINANCIAL ACCOUNTS CONTAIN THE FIGURES RELE VANT TO THE AMALGAMATING COMPANY AS WELL. THE TPO WAS UNCONVIN CED WITH THIS REASON FOR EXCLUSION. THE DRP AFFIXED ITS SEAL OF APPROVAL ON THE INCLUSION OF THIS COMPANY. ITA NO.3532/DEL/2014 9 7.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS NOT DISPUTED THE FUNCTIONAL DISSIMILARITY OF THIS COMPANY. THE ONLY REASON TAK EN BY THE ASSESSEE IN SEEKING ITS EXCLUSION IS THE AMALGAMATION OF ANOTHE R COMPANY WITH IT DURING THE YEAR. THIS FACT IS BORNE OUT FROM THE A NNUAL REPORT OF THIS COMPANY, A COPY OF WHICH HAS BEEN PLACED ON RECORD. THE ANNUAL REPORT OF THIS COMPANY PROVIDES THAT: THE SCHEME OF AMALGAMATION (THE SCHEME) OF ERSTWHILE NUCLEUS AND GIS (INDIA) LTD., THE TRANSFEROR COMPANY, WITH YOUR COMPANY WAS SANCTIONE D BY HONBLE HIGH COURT OF JUDICATURE OF BOMBAY ON 22ND FEBRUARY , 2006. ON COMPLYING WITH THE REQUISITE FORMALITIES, THE SCHEM E BECAME EFFECTIVE AND OPERATIVE RETROSPECTIVELY FROM THE APPOINTED DA TE OF 1 APRIL 2005 AS PER THE SCHEME. IN THE ACCOMPANYING FINANCIAL STAT EMENTS, RESULTS OF THE TRANSFEROR COMPANY HAVE BEEN INCORPORATED AND THE F IGURES GIVEN HEREIN AND ELSEWHERE IN THIS ANNUAL REPORT ARE NOT STRICTL Y COMPARABLE WITH THOSE OF PREVIOUS YEAR. IT IS CLEAR FROM THE ABOV E EXTRACTION THAT THE AMALGAMATION TOOK PLACE IN THE YEAR IN QUESTION AND THE FINANCIAL RESULTS OF THIS COMPANY INCLUDE THOSE OF THE AMALGAMATING C OMPANY AS WELL. IN ITA NO.3532/DEL/2014 10 OUR CONSIDERED OPINION, THE FACTOR OF AMALGAMATION OR MERGER OR ACQUISITIONS, ETC., HAS ITS OWN IMPLICATIONS ON THE FINANCIAL RESULTS OF A COMPANY AS THESE ARE ABNORMAL FINANCIAL CHARACTERIS TICS WHICH DISTORT THE NORMAL PROFITABILITY. THE MUMBAI BENCH OF THE TRIBU NAL IN PETRO ARALDITE (P) LTD. VS. DCIT (2013) 154 TTJ (MUM) 176 , HAS HELD THAT A COMPANY CANNOT BE CONSIDERED AS COMPARABLE BECAUSE OF EXCEPTIONAL FINANCIAL RESULTS DUE TO MERGERS/DEMERGERS. SIMILA R VIEW HAS BEEN BOLSTERED BY THE DELHI BENCH OF THE TRIBUNAL IN SEV ERAL CASES INCLUDING CIENA INDIA PVT. LTD. VS. DCIT (ITA NO.3324/DEL/2013) VIDE ITS ORDER DATED 23.4.2015. IN VIEW OF THE FACT THAT THERE WA S A MERGER BY WAY OF AMALGAMATION DURING THE YEAR ITSELF, WE HOLD THAT N UCLEUS NETSOFT AND GIS (INDIA) LTD. CANNOT BE CONSIDERED AS COMPARABLE DUE TO THIS EXTRAORDINARY FINANCIAL EVENT. ACCORDINGLY, WE DIR ECT TO ELIMINATE THIS COMPANY FROM THE FINAL SET OF COMPARABLES. (II) VISHAL INFORMATION TECHNOLOGY LTD . 8.1. THE ASSESSEE INITIALLY CONSIDERED THIS COMPAN Y AS COMPARABLE WHICH THE TPO INCLUDED AS SUCH. NO DISPUTE WAS RAIS ED BEFORE THE DRP ITA NO.3532/DEL/2014 11 IN THE FIRST ROUND. IT WAS ONLY DURING THE SECOND ROUND OF PROCEEDINGS BEFORE THE DRP THAT THE ASSESSEE ARGUED FOR THE EXC LUSION OF THIS COMPANY FROM THE FINAL SET OF COMPARABLES. THE DRP REFUSED TO ACCEPT THE ASSESSEES CONTENTION, INTER ALIA , ON THE GROUND THAT THE FUNCTIONAL DIFFERENCES POINTED OUT BY THE ASSESSEE WERE NOT SI GNIFICANT ENOUGH TO WARRANT ITS REJECTION AS A GOOD COMPARABLE. THE AS SESSEE ARGUED BEFORE THE DRP THAT THIS COMPANY OUTSOURCED A SIGNIFICANT PART OF ITS OPERATIONS, INASMUCH AS SUCH OUTSOURCING CHARGES C ONSTITUTE 65.98% OF THE TOTAL COSTS AND THAT WAS ONE OF THE REASONS REN DERING IT INCOMPARABLE. THOUGH THE DRP UPHELD THE INCLUSION OF THIS COMPANY , BUT IT DID NOT ADVERSELY COMMENT ON THIS ASPECT OF OUTSOURCING OF SIGNIFICANT PARTS OF ITS OPERATIONS. THE ASSESSEE IS AGGRIEVED AGAINST T HE INCLUSION OF THIS COMPANY. 8.2. WE HAVE TAKEN INTO CONSIDERATION THE ANNUAL RE PORT OF THIS COMPANY WHICH IS AVAILABLE IN THE PAPER BOOK, FROM WHICH IT CAN BE SEEN THAT IT HAS OUTSOURCED ITS MANUAL ACTIVITIES. AS A GAINST THE ASSESSEES CONTENTION BEFORE THE DRP OF THIS COMPANYS OUTSOUR CING COSTS AT ITA NO.3532/DEL/2014 12 65.98%, WE FIND THAT THE ASSESSEES OUTSOURCING COS T IS ROUGHLY 8%. THIS IS AN IMPORTANT FACTOR WHICH HAS ITS IMPACT ON THE OVERALL PROFITABILITY OF A COMPANY. SEVERAL BENCHES OF THE TRIBUNAL ACROSS THE BOARD HAVE UNANIMOUSLY HELD THIS FACTOR TO BE A REL EVANT ONE IN DECIDING THE QUESTION OF EXCLUSION OF A PARTICULAR COMPANY F ROM THE LIST OF COMPARABLES. COPIES OF SOME OF SUCH ORDERS EXPUNGI NG COMPANIES ON THIS SCORE HAVE BEEN PLACED BY THE LD. AR ON RECORD . IN VIEW OF THIS DIFFERENT BUSINESS MODEL ADOPTED BY VISHAL INFORMAT ION TECHNOLOGY LTD. (NOW KNOWN AS CORAL HUB LTD.) VIS--VIS THE ASSESSEE, WE ORDER FOR THE OMISSION OF THIS COMPANY FROM THE LIST OF COMPA RABLES. (III) KIRLOSKAR COMPUTER SERVICES LIMITED (SEG.) AND MERC URY OUTSOURCING MANAGEMENT LTD . 9.1. THESE TWO COMPANIES WERE ORIGINALLY INCLUDED B Y THE ASSESSEE IN ITS LIST OF COMPARABLES, WHICH WERE ELIMINATED BY T HE TPO ON THE GROUND OF FAILING TURNOVER FILTER OF RS.1 CRORE. THE ASSE SSEE IS AGGRIEVED AGAINST THE EXCLUSION OF THESE COMPANIES. 9.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE TPO HAS ACCEPT ED THE FUNCTIONAL ITA NO.3532/DEL/2014 13 COMPARABILITY OF THESE COMPANIES ON SEGMENTAL LEVEL . THE LD. DR WAS ALSO FAIR ENOUGH TO CANDIDLY ACCEPT THE FUNCTIONAL SIMILARITY OF THE RELEVANT SEGMENT OF THESE COMPANIES. IN SUCH CIRCU MSTANCES, THE QUESTION ARISES AS TO WHETHER THE RELEVANT SEGMENT OF THESE COMPANIES CAN BE EXCLUDED FROM THE LIST OF COMPARABLES MERELY ON THE GROUND THAT THE REVENUE FROM THIS SEGMENT IS VERY LIMITED? IN OUR CONSIDERED OPINION, THE QUANTUM OF TURNOVER CAN BE NO REASON F OR THE EXCLUSION OF A COMPANY, WHICH IS OTHERWISE COMPARABLE. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHRYSCAPITAL INVESTMENT ADVISORS (INDIA) P. LTD VS. DCIT (2015) 93 CCH 29 DELHC HAS HELD THAT HIGH TURNOVER OR HIGH PROFIT CAN BE NO REASON TO ELIMINATE AN OTHERW ISE COMPARABLE COMPANY. THE SAME APPLIES WITH FULL FORCE IN THE C ONVERSE MANNER AS WELL TO A LOW TURNOVER/LOW PROFIT COMPANY. WE, THER EFORE, HOLD THAT A COMPANY CANNOT BE EXCLUDED FROM THE LIST OF COMPARA BLES ON THE GROUND OF ITS LOW TURNOVER. IN PRINCIPLE, WE DIRECT THE I NCLUSION OF THE RELEVANT SEGMENT OF THESE COMPANIES IN THE LIST OF COMPARABL ES. THE TPO IS DIRECTED TO INCLUDE THE OPERATING PROFIT/OPERATING COSTS OF THE ITES SEGMENT OF THESE COMPANIES IN THE FINAL SET OF COMP ARABLES, AFTER DUE ITA NO.3532/DEL/2014 14 VERIFICATION OF THE NECESSARY FIGURES FOR DETERMINA TION OF THEIR OPERATING PROFIT MARGIN ETC. 10. IN THE FINAL ANALYSIS, WE SET ASIDE THE IMPUGNE D ORDER AND REMIT THE MATTER TO THE FILE OF AO/TPO FOR A FRESH COMPUTATIO N OF THE ALP OF THE INTERNATIONAL TRANSACTION UNDER CATEGORY-1 IN CONSO NANCE WITH OUR ABOVE DIRECTIONS/OBSERVATIONS. NEEDLESS TO SAY, THE ASSE SSEE WILL BE ALLOWED A REASONABLE OPPORTUNITY OF BEING HEARD IN THIS REGAR D. 11. FIRST CORPORATE GROUND IS AGAINST THE DENIAL OF DEDUCTION U/S 10A AMOUNTING TO RS.36,31,98,760/- IN RESPECT OF AEGSC (STP) UNIT SET UP BY THE ASSESSEE DURING THE FINANCIAL YEAR 2002-03 O N THE GROUND THAT THE STP UNIT WAS SET UP AFTER SPLITTING UP ITS EXISTING BUSINESS OF FCE (EOU). 12. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THIS IS A R ECURRING ISSUE COMING FROM EARLIER YEARS. THIS FACT HAS ALSO BEEN RECOGN IZED BY THE DRP ON PAGE 19 OF ITS DIRECTIONS IN WHICH IT HAS BEEN NOTI CED THAT THE TRIBUNAL HAS ACCEPTED THE ASSESSEES CLAIM FOR THE BENEFIT O F SECTION 10A IN THIS ITA NO.3532/DEL/2014 15 REGARD. WE HAVE ALSO GONE THROUGH THE ORDER PASSED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y. 2004-05, A COP Y OF WHICH HAS BEEN PLACED ON RECORD. THIS ASPECT HAS BEEN DISCUSSED O N PAGE 21 OF THE ORDER. AFTER FOLLOWING THE VIEW TAKEN BY THE TRIBUN AL IN THE ASSESSEES OWN CASE FOR THE A.Y. 2002-03, THE TRIBUNAL HAS GRA NTED THE BENEFIT OF DEDUCTION U/S 10A IN RESPECT OF PROFITS OF NEWLY SE T UP AEGSC UNIT. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE HAVING BE EN BROUGHT TO OUR NOTICE BY THE LD. DR, RESPECTFULLY FOLLOWING THE P RECEDENT, WE GRANT THE BENEFIT OF DEDUCTION U/S 10A IN RESPECT OF PROFITS OF AEGSC UNIT. THIS GROUND IS ALLOWED. 13. THE ONLY OTHER GROUND WHICH SURVIVES FOR CONSID ERATION IS AGAINST TREATING INTEREST ON SHORT-TERM DEPOSITS AMOUNTING TO RS.4,54,09,340/- AS INCOME FROM OTHER SOURCES AND THEREBY DENYING THE BENEFIT OF DEDUCTION U/S 10A/10B. HERE AGAIN, IT IS AN ADMITT ED POSITION THAT THE TRIBUNAL HAS DECIDED THIS ISSUE IN THE ASSESSEES F AVOUR IN EARLIER YEARS BY HOLDING SUCH INTEREST ON SHORT-TERM DEPOSITS TO BE IN THE NATURE OF `BUSINESS INCOME AND THEREBY ELIGIBLE FOR THE BENE FIT OF DEDUCTION U/S ITA NO.3532/DEL/2014 16 10A/10B. RESPECTFULLY FOLLOWING THE PRECEDENT, WE ALLOW THIS GROUND OF APPEAL. 14. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 15.10.201 5. SD/- SD/- [KULDIP SINGH] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 15 TH OCTOBER, 2015. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.