ACIT, New Delhi V. M/s. Birla Soft Ltd, New Delhi

ITA 4001/DEL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3769 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 29-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY PURI
• Assessee Lawyers: PALLAV RAJB
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 92C; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE G.E. VEERABHADRAPPA, HON'BLE VICE-PRESIDENT AND SHRI RAJPAL YADAV: HONBLE JUDICIAL MEMBER ITA NO. 4001/DEL/2009 ASSESSMENT YEAR: 2004-05 ASSISTANT COMMISSIONER OF IT, VS. M/S. BIRLA SOFT LIMITED, CIRCLE 3(1), 10 TH FLOOR, PRAKASH DEEP BLDG, NEW DELHI. 7 TH FLOOR, TOLSTOY MARG, NEW DELHI. (PAN: AAACB2769E) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SANJAY PURI, CIT(DR) RESPONDENT BY: S/S. AJAY VOHRA, NEERAJ JAIN, MS P. KAPOOR & MR. PALLAV RAJBANSHI , ADV. ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED CIT(APPEALS) DATED 28.7.2009 PASSED FOR THE ASSESSM ENT YEAR 2004-05. IN THE FIRST GROUND OF APPEAL, REVENUE HAS PLEADED THA T LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITIONS MADE BY THE ASS ESSING OFFICER ON THE RECOMMENDATIONS MADE BY THE LEARNED TPO FOR ADJUSTM ENT IN ARMS LENGTH PRICE ON THE INTERNATIONAL TRANSACTIONS CARRIED OUT BY THE ASSESSEE WITH ITS ASSOCIATE ENTERPRISES. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A 100% SUBSIDIARY OF BIRLA SOFT ENTERPRISES, WHICH IS A 100% SUBSIDIARY OF BIRLA SOFT INC. US. IT IS 2 ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND RELATED SERVICES. IT HAS FILED ITS RETURN OF INCOME ON IST OF NOVEMBER 2004 DECLARING AN INCOME OF RS.7,82,54,384. THE SOFTWARE RELATED BUSINESS WAS B EING CARRIED OUT BY THE ASSESSEE FROM SOFTWARE TECHNOLOGICAL PARK (STP), SC HEME NOTIFIED BY THE GOVERNMENT OF INDIA IN THE MINISTRY OF COMMERCE AND INDUSTRIES. THE UNDERTAKINGS WERE OPERATIONAL AT THREE DIFFERENT AD DRESS, NAMELY, (I) BIRLASOFT SOFTWARE TECHNOLOGY PARK BLOCK-III, 2 ND FLOOR GANGA SHOPPING COMPLEX, SECTOR-29, NOIDA-201303 (II) BIRLASOFT (GE-GDC) SOFTWARE TECHNOLOGY PARK BLOCK-III, 3 RD FLOOR, GANGA SHOPPING COMPLEX, SECTOR 29, NOIDA-201303 (III) BIRLASOFT 36, VIJAYARAGHAVA ROAD, 3 T. NAGAR, CHENNAI. THE ASSESSEE HAD A BRANCH OFFICE IN AUSTRALIA AND S INGAPORE WHICH WERE ALSO ENGAGED IN THE BUSINESS OF DEVELOPING AND SUPPLYING CUSTOMIZED COMPUTER SOFTWARE AND RELATED SOFTWARE SERVICES TO BOTH ASSO CIATED ENTERPRISES AND 3 OTHER UNRELATED ENTERPRISES OUTSIDE INDIA. ON SCRUT INY OF THE ACCOUNTS, ASSESSING OFFICER FOUND THREE INTERNATIONAL TRANSAC TIONS UNDERTAKEN BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES DURING THE ACCOUNTING YEAR RELEVANT FOR THE PRESENT ASSESSMENT YEAR. THE LEARNED CIT(AP PEALS) HAS NOTICED THE TRANSACTIONS AS WELL AS VALUE OF TRANSACTION AND TH E METHOD USED BY THE ASSESSEE FOR DETERMINING THE ALP IN RESPECT OF THOS E TRANSACTIONS. THEY READ AS UNDER: S.NO. NATURE OF TRANSACTIONS VALUE OF TRANSACTIONS (RS.) METHOD USED 1. SOFTWARE DEVELOPMENT SERVICES 1,53,16,98,060 TNMM 2. CHARGEBACK OF EXPENSES BY AES 3,31,30,369 NO BENCHMARKING REQUIRED 3. CHARGEBACK OF EXPENSES FROM AES 4,01,580 NO BENCHMARKING REQUIRED 3. ASSESSING OFFICER HAS MADE A REFERENCE TO THE TP O FOR VERIFICATION AND DETERMINATION OF ALP IN RESPECT OF INTERNATIONA L TRANSACTION ENTERED WITH ASSOCIATE ENTERPRISES. LEARNED TPO DID NOT ACCEPT T HE TRANSFER PRICING REPORT SUBMITTED BY THE ASSESSEE IN FORM NO. 3 CEB. HE HAS RECOMMENDED 4 THE ADJUSTMENT OF RS.4,95,51,723. THIS HAS BEEN NOT ICED BY THE LEARNED CIT(APPEALS) IN PARAGRAPH NO. 4.2.3 AND IT READS AS UNDER: STP UNITS AGGREGATE MARGIN OF STP UNIT ARMS LENGTH MARGIN (AS COMPUTED BY TPO) ADDITION MADE BY THE TPO/A.O. NOIDA STP UNIT 1 2.11% 14.01% 2.27,05,996 NOIDA STP UNIT 2 17.11% 14.01% NIL CHENNAI STP -21.98% 14.01% 2M68,45,727 TOTAL 4,95,51,723 4. ON APPEAL, LEARNED CIT(APPEALS) HAS REAPPRECIATE D THE CONTROVERSY AND ARRIVED AT A CONCLUSION THAT ARITHMETIC MEAN OF PROFIT LEVEL INDICATOR OF THE COMPARABLE SELECTED BY THE ASSESSING OFFICER IS 14.01% WHEREAS ASSESSEE HAS DISCLOSED ARITHMETIC MEAN OF ITS INTER NATIONAL TRANSACTION WITH ASSOCIATE ENTERPRISES CARRIED OUT IN ALL THE THREE STP UNITS AT 10.91%. THIS OPERATING PROFIT DISCLOSED BY THE ASSESSEE IS WITHI N THE TOLERABLE BAND PROVIDED IN THE PROVISO APPENDED TO SEC. 92C(2) AND , THEREFORE, NO ADJUSTMENT IS REQUIRED. 5 5. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE DISPUTE BETWEEN THE PART IES FOR DETERMINATION OF ALP WITH RESPECT TO INTERNATIONAL TRANSACTION IS IN A VERY NARROW COMPASS. IN ORDER TO EXAMINE THE ISSUE, WHETHER ANY ADJUSTMENT IS REQUIRED TO BE MADE IN THE ALP DISCLOSED BY THE ASSESSEE RELATING TO ITS I NTERNATIONAL TRANSACTION WITH ITS ASSOCIATE ENTERPRISES, THE FIRST AREA OF D ISPUTE WHICH COULD ARISE BETWEEN THE PARTIES IS IN RESPECT OF MOST APPROPRIA TE METHOD REQUIRED TO BE ADOPTED FOR DETERMINATION OF ALP AS PROVIDED IN SEC . 92C OF THE INCOME-TAX ACT, 1961 READ WITH RULE 10B OF THE IT RULES. SECTI ON 92C PROVIDES FIVE MAIN METHODS AND ONE RESIDUARY METHOD. THESE ARE (A ) COMPARABLE CONTROLLED PRICE METHOD; (B) RESALE PRICE METHOD; ( C) COST PLUS METHOD; (D)PROFITS SPLIT METHOD; AND (E) TRANSACTIONAL NET MARGIN METHOD AND THE RESIDUARY METHOD IS; SUCH OTHER METHOD AS MAY BE PR ESCRIBED BY THE BOARD. IN THE PRESENT YEAR, ON AN ANALYSIS OF THE INTERNAT IONAL TRANSACTION WITH THE ASSOCIATE PARTIES AND DATA OF COMPARABLES, ASSESSEE HAS SELECTED TNMM, USING NET PROFIT MARGIN BASED ON COST AS PLI. THIS METHOD IS NOT DISPUTED BY THE TPO HENCE WE CAN SAY THAT BOTH SIDES ARE IN AGR EEMENT ON THE METHOD. 6. THE NEXT AREA OF DISPUTE IS USE OF CURRENT YEAR DATA VERSUS MULTIPLE YEAR DATA. THE ASSESSEE HAS USED MULTIPLE YEAR DATA BUT TPO HAS USED CURRENT 6 YEAR DATA. THIS CONTROVERSY HAS BEEN SLICED IN A NU MBER OF JUDGMENTS, NAMELY, M/S. AZTEL SOFTWARE & TECH. SERVICES VS. AC IT REPORTED IN 294 ITR (AT) 32 AND MENTORGRAPHIC (NOIDA) PVT. LTD. VS. DCIT REPORTED IN 109 ITD 101 ETC. 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GO NE THROUGH THE RECORD CAREFULLY. RULE 10B(4) OF THE INCOME TAX RULES HAS A DIRECT BEARING ON THE CONTROVERSY. THEREFORE, IT IS SALUTARY UPON US TO TAKE NOTE OF THIS RULE IT READ AS UNDER :- 10(4) THE DATA TO BE USED IN ANALYSING THE COMPARA BILITY OF AN UNCONTROLLED TRANSACTION WITH AN INTERNATIONAL TRAN SACTION SHALL BE THE DATA RELATING TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO: PROVIDED THAT DATA RELATING TO A PERIOD NOT BEING M ORE THAN TWO YEARS PRIOR TO SUCH FINANCIAL YEAR MAY ALSO BE CONS IDERED IF SUCH DATA REVEALS FACTS WHICH COULD HAVE AN INFLUEN CE ON THE DETERMINATION OF TRANSFER PRICES IN RELATION TO THE TRANSACTIONS BEING COMPARED. 8. A BARE PERUSAL OF THIS RULE WOULD REVEAL THAT EX PRESSION SHALL HAS BEEN EMPLOYED IN THIS RULE WHICH MAKE IT ABUNDA NTLY CLEAR THAT CURRENT YEAR DATA OF AN UNCONTROLLED TRANSACTION IS TO BE USED FOR THE 7 PURPOSE OF COMPARABILITY, WHILE EXAMINING THE INTER NATIONAL TRANSACTIONS WITH ASSOCIATE ENTERPRISES. THE PROVIS O APPENDED TO THE SECTION CARVES OUT AN EXCEPTION THAT THE DATA RELAT ING TO THE PERIOD OF BEING MORE THAN TWO YEAR PRIOR TO SUCH FINANCIAL YEAR MAY ALSO BE CONSIDERED, IF SUCH DATA REVEALS FACTS WHICH COULD HAVE AN INFLUENCE ON THE DETERMINATION OF TRANSFER PRICE IN RELATION TO TRANSACTION OF COMPARISON. THUS THE MAIN SECTION USED THE EXPRESS ION SHALL WHICH MAKE IT MANDATORY TO FIRST USE THE CURRENT YEAR D ATA. IF CERTAIN OTHER CIRCUMSTANCES REVEALS AN INFLUENCE ON THE DETERMINA TION OF TRANSFER PRICING IN RELATION TO THE TRANSACTION BEING COMPAR ED THAN OTHER DATAS FOR PERIOD NOT MORE THAN TWO YEARS PRIOR TO SUCH FI NANCIAL YEAR MAY BE USED. THUS LD. CIT(A) HAS RIGHTLY UPHELD THE VIEW P OINT OF TPO FOR USING CURRENT YEAR DATA. 9. THE NEXT AREA OF DISPUTE RELATES TO SELECTION OF COMPARABLES WHO HAVE UNCONTROLLED TRANSACTIONS OF SIMILAR NATURE. THE AS SESSEE HAS SELECTED 24 COMPANIES IN ITS TP STUDY REPORT. LEARNED TPO HAS R EJECTED 9 COMPARABLES FROM THE LIST. LEARNED REPRESENTATIVES HAVE NOT ADV ANCED DETAILED ARGUMENT ON SELECTION OF COMPARABLES. THE DISPUTE RAISED BEF ORE US AT THE TIME OF HEARING WAS WHETHER ASSESSING OFFICER IS JUSTIFIED IN CONSIDERING THE EACH 8 STP UNIT AS A STAND ALONE UNIT FOR COMPUTING THE AL P. IN OTHER WORDS, WHETHER RESULT OF ALL THE STP UNITS HAS TO BE CONSI DERED FOR WORKING OUT THE OPERATING PROFIT. THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT ASSESSEE HAS TRANSACTION WITH UNRELATED PARTIES ALSO, THEREF ORE, FOR THE PURPOSE OF BENCHMARKING ITS INTERNAL COMPARABLES ARE ONE OF TH E BEST COMPARABLES. HE POINTED OUT THAT THIS ISSUE HAS ARISEN IN ASSESSMEN T YEAR 2006-07 ALSO WHERE HONBLE BENCH HAS UPHELD THE INTERNAL BENCH MARKING ANALYSIS UNDERTAKEN BY THE ASSESSEE WHILE JUSTIFYING THE ALP OF INTERNA TIONAL TRANSACTION FOR SOFTWARE DEVELOPMENT SERVICES. LEARNED DR AT THE TI ME OF HEARING POINTED OUT THAT INTERNAL COMPARISON NEEDS TO BE REFINED TO ACCOUNT FOR GEOGRAPHICAL DIFFERENCES BETWEEN INTERNAL AND EXTERNAL SEGMENTS. ACCORDING TO HIM, THERE CAN BE VARIOUS REASONS FOR REQUIRING ADJUSTMENT AND THESE FACTORS ARE STRENGTH OF CURRENCY, LABOUR COST ETC. IN DIFFERENT GEOGRAPHICAL CONDITIONS. HE POINTED OUT THAT A SERVICE SOLD IN INDIA FOR SOME P RICE THE SAME SERVICE WOULD FETCH DIFFERENT PRICE IN EUROPE AND AMERICA E TC. THEREFORE, FOR TAKING UP THE INTERNAL BENCHMARKING, AN ADJUSTMENT BE MADE FOR ELIMINATING THE GEOGRAPHIC CONDITION EFFECTING THE VALUE OF SUCH SE RVICES. 10. BEFORE ADVERTING TO THE FACTS WHETHER AS A STAN D ALONE, UNIT FOR THE PURPOSE OF DETERMINING THE ALP RELATING TO INTERNAT IONAL TRANSACTION IS RIGHT 9 OR WRONG, WE HAVE A GLANCE OVER THE DETAILS PLACED ON RECORD BY THE LEARNED COUNSEL FOR THE ASSESSEE IN A TABULAR FORM AT PAGE 158 OF THE PAPER BOOK EXHIBITING THE TRANSACTION OF EACH UNIT WITH RELATE D PARTIES AND UNRELATED PARTIES. THE FIRST STP UNIT IS NOIDA UNIT. IT HAS S HOWN OP OVER TC WITH RESPECT TO RELATED PARTIES AT 8.42%. IN THE CASE OF UNRELATED PARTIES, IT HAS SHOWN OP OVER TC AT -30.57%. THE TOTAL RESULT IS 2 .11%. SIMILARLY AT NOIDA-2, THE OPERATING PROFIT IS 26.17% IN THE CAS E OF RELATED PARTIES, IT -25.82% IN THE CASE OF UNRELATED PARTIES AND 17.11% IS THE OVERALL RESULT. AT CHENNAI, IT IS -20.12% FOR RELATES PARTIES, -26.97% FOR UNRELATED PARTIES AND OVERALL RESULT IS MINUS 21.98%. WITH RESPECT TO NON STP UNIT, THE OPERATING PROFIT IS 11.97% IN RESPECT OF RELATED PARTIES AND 14.79% IN RESPECT OF UNRELATED PARTIES. THE OVERALL RESULT OF THE COMPAN Y IS 14.33% IN THE CASE OF RELATED PARTIES 14.10% IN RESPECT OF UNRELATED PAR TIES. THE OVERALL OPERATING PROFIT MARGIN OF INTERNATIONAL TRANSACTION IS 10.91 %. THIS RESULT IS WITHIN THE TOLERANCE BAND PROVIDED IN THE PROVISO TO SEC. 92C( 2) OF THE ACT AND, THEREFORE, NO ADJUSTMENT IS REQUIRED. LEARNED TPO H AS RECOMMENDED THE ADJUSTMENT BY IGNORING THE RESULT OF NOIDA STP UNIT . 2. WE HAVE NOTICED THIS WORKING IN PARAGRAPH NO.3 EXTRACTED SUPRA. 11. LEARNED FIRST APPELLATE AUTHORITY DID NOT ACCEP T THE APPROACH OF TPO FOR SEGREGATING THE MARGIN EARNED BY THE ASSESSEE I N ITS VARIOUS STP UNITS. 10 THE REASONS FOR NOT CONCURRING WITH THE TPO ARE THA T THE ASSESSEE HAD PROVIDED SOFTWARE DEVELOPMENT SERVICES, SUCH AS, SO FTWARE DEVELOPMENT SERVICES, SOFTWARE MAINTENANCE AND REPAIR SERVICES, QUALITY TESTING SERVICES FROM ITS THREE UNITS. IT IS AN IDENTICAL SERVICES. 12. THERE IS NO SIGNIFICANT FUNCTIONAL DIFFERENCE I N THE SOFTWARE DEVELOPMENT AND MAINTENANCE SERVICES TO RELATED AND UNRELATED VALUES. THE SERVICES RENDERED BY THE STP UNIT WERE RENDERED TO THE SAME AES OF THE ASSESSEE, NAMELY, BIRLA SOFT INC. US AND BIRLA SOFT UK ON CONTINUING BASIS. 13. THE TERMS AND CONDITIONS FOR RENDERING SUCH SER VICES BY EACH OF STP UNIT WAS GOVERNED BY ONE SINGLE AGREEMENT ENTERED I NTO BETWEEN BIRLA SOFT INDIA AND BIRLA SOFT INC. US. THE LEARNED TPO HAS A SSUMED THAT FUNCTIONS, ASSETS AND RISK UNDERTAKEN BY EACH OF THE STP UNIT ARE DISTINCT FROM EACH OTHER AND IS COMPARABLE WITH THE FUNCTION, ASSETS A ND RISK UNDERTAKEN BY EXISTING COMPARABLES. IN OTHER WORDS, LEARNED TPO H AS TOTALLY IGNORED THE UNITY OF THE BUSINESS, ADMINISTRATIVE CONTROL AND UNITY OF FUNDS ETC. THE INDEPENDENT FAR ANALYSIS OF EACH UNIT WITH EXISTING COMPARABLES IS PRACTICALLY NOT POSSIBLE BECAUSE THERE IS A COMMON MANAGEMENT, INTERLACING OF THE FUNDS ETC. 11 14. THUS, ON DUE CONSIDERATION OF THE ORDER OF THE LEARNED CIT(APPEALS), WE ARE SATISFIED THAT LEARNED FIRST APPELLATE AUTHO RITY RIGHTLY DID NOT CONCUR WITH THE CONCLUSION OF THE TPO FOR SEGREGATING THE EACH STP UNIT AND CONSIDERING THE RESULT OF EACH STP UNIT AS A STAND ALONE FOR THE PURPOSE OF DETERMINING THE ALP RELATING TO INTERNATIONAL TRANS ACTION. 15. IN ASSESSMENT YEAR 2006-07, ITAT HAS UPHELD THE BENCHMARKING OF INTERNAL INTERNATIONAL TRANSACTIONS WITH UNRELATED PARTIES FOR TESTING THE ALP OF ASSESSEE WITH ITS RELATED PARTIES. WE HAVE A GLA NCE OVER SUCH RESULT COMPILED AT PAGE 158 OF THE PAPER BOOK, THE OPERATI NG PROFIT MARGIN WITH RESPECT TO UNRELATED TRANSACTION IS MINUS 14.10% WH EREAS THE ASSESSEE IS SHOWING OPERATING PROFIT WITH RELATED PARTIES AT 14 .33%. THE OVERALL RESULT SHOWN BY THE ASSESSEE IS 10.91%. EVEN IF WE EXAMINE THIS RESULT WITHIN THE RIGHT OF THE ITATS ORDER FOR ASSESSMENT YEAR 2006- 07, THEN ALSO NO ADJUSTMENT IS REQUIRED IN THE RESULT OF INTERNATION AL TRANSACTION SHOWN BY THE ASSESSEE. LEARNED FIRST APPELLATE AUTHORITY HAS TAK EN INTO CONSIDERATION ALL THESE ASPECTS ELABORATELY AND WE DO NOT SEE ANY REA SON TO INTERFERE IN HIS FINDINGS. IN VIEW OF THE ABOVE, GROUND NO.1 IS REJE CTED. 12 16. IN GROUND NO.2, GRIEVANCE OF THE REVENUE IS THA T LEARNED CIT(APPEALS) HAS ERRED IN ALLOWING EXEMPTION UNDER SEC. 10A OF THE ACT. ASSESSING OFFICER HAS DENIED THE EXEMPTION UNDER SE . 10A WITH REFERENCE TO THE STP UNIT ON THE THIRD FLOOR AT STP COMPLEX, SEC TOR 29, NOIDA, ON THE GROUND THAT IT WAS AN EXTENSION OF THE EXISTING UNI T. LEARNED CIT(APPEALS) DELETED THE DENIAL OF EXEMPTION ON THE GROUND THAT EXEMPTION UNDER SEC. 10A HAS BEEN ALLOWED TO THE ASSESSEE BY THE ITAT ON THIS NEW UNIT IN ASSESSMENT YEAR 2003-04. THE ITAT HAS HELD THAT IT IS NOT AN EXTENSION OF THE EXISTING UNIT. THE LEARNED COUNSEL FOR THE ASSE SSEE PLACED ON RECORD COPY OF THE ITATS ORDER IN ITA NO. 3821/DEL/06 AND 3919 /DE/-06. TAKING INTO CONSIDERATION THE ORDER OF THE ITAT, IN ASSESSMENT YEAR 2003-04, WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF THE LEA RNED CIT(APPEALS). 17. IN GROUND NO.3, GRIEVANCE OF THE REVENUE IS THA T LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.19,26,120. THE BRIEF FACTS OF THE CASE ARE THAT ON PERUSAL OF THE TAX AU DIT REPORT, ASSESSING OFFICER FOUND THAT AT CLAUSE NO.22B, THE AUDITOR HAS STATED THAT ASSESSEE HAS MADE PRIOR PERIOD EXPENSES OF RS.19,26,120. IT CLAIMS TH E DEDUCTION OF THIS AMOUNT IN THE PRESENT ASSESSMENT YEAR. HE DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY THESE AMOUNTS BE NOT DISALLOWED. IN RESPONSE TO THE QUERY OF THE 13 ASSESSING OFFICER, ASSESSEE HAS MADE THE SUBMISSION S VIDE LETTER DATED 15.12.06. IT READS AS UNDER: EVERY EMPLOYER IS OBLIGATED TO PAY THE PAYROLL TAX ES ON MONTHLY BASIS WHICH IS CALCULATED AS A % ON THE MONTHLY WAG ES. BIRLASOFT AUSTRALIA BRANCH HAS COMPLIED WITH THIS PROVISION A ND HAS PAID THE SAME ON MONTHLY BASIS. ON AN ANNUAL BASIS, THE BRAN CH IS FURTHER OBLIGATED TO RECONCILE THE ANNUAL WAGES AND PAY THE DIFFERENTIAL OR IS ENTITLED TO RECEIVE THE TAX BACK IF PAID EXTRA. THE ACCOUNTING PERIOD FOR THIS ACTIVITY IS JULY IST THROUGH JUNE 30 TH . BASED ON THE RECONCILIATION, AUSTRALIA BRANCH WAS OBLIGATED TO PAY RS.19,26,120 AND THIS WAS PAID WITHIN THE PERMISSIBLE PERIOD IN JULY 2003. 18. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTEN TION OF THE ASSESSEE. HE RECORDED A FINDING THAT THESE AMOUNTS CANNOT BE SAID TO BE ACCRUED AND CRYSTALLIZED DURING THE ACCOUNTING YEAR, HENCE HE M ADE THE ADDITION. ON APPEAL, LEARNED CIT(APPEALS) DELETED THE ADDITION B Y FOLLOWING THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF SOURAS THRA CEMENT & CHEMICAL IND. VS. CIT, REPORTED IN 123 ITR 669. 19. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE ACTUAL LIABILITY TO PAY TO RECONCILED PAY ROLL TAXES HAS ACTUALLY ACCRUED AND CRYSTALLIZED ON JUNE 30, 2 003. WHEN THE 14 RECONCILIATION OF AUSTRALIAN PAY ROLL TAX WAS DONE, PURSUANT TO THE CLOSURE OF AUSTRALIAN TAX YEAR. LEARNED CIT(APPEALS) HAS APPRE CIATED THE FACTS AND CIRCUMSTANCES IN RIGHT PERSPECTIVE. WE DO NOT SEE A NY REASON TO INTERFERE IN HIS FINDINGS. 20. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY MERIT IN THIS APPEAL, IT IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 17.06.201 1 SD/ SD/- (G.E. VEERABHADRAPPA ) ( RAJPAL YADAV ) VICE-PRESIDENT JUDICIAL MEMBER DATED: 17/06/2011 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR