Transcend MT Services Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 4048/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3152 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Next Hearing Date: 27-06-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 28-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY I BARU
• Keywords: Related party transaction; Transfer pricing; International transaction; Scheme of amalgamation
• Section: 92C; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I : NEW DELHI) BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.4048/DEL./2013 (ASSESSMENT YEAR : 2006-07) TRANSCEND MT SERVICES PVT. LTD., VS. ACIT, CIRCLE 16 (1), (FORMERLY KNOWN AS HEARTLAND NEW DELHI. INFORMATION AND CONSULTANCY SERVICES PVT. LTD.), (IN RELATION TO HEARTLAND BANGALORE TRANSCRITPION AND SERVICES PVT. LTD. (HBTS)) B 4, SAGAR TOWERS, JANAKPURI DISTRICT CENTRE, NEW DELHI 110 058. (PAN : AAACJ8644L) ITA NO.4501/DEL./2013 (ASSESSMENT YEAR : 2006-07) TRANSCEND MT SERVICES PVT. LTD., VS. ACIT, CIRCLE 16 (1), (FORMERLY KNOWN AS HEARTLAND NEW DELHI. INFORMATION AND CONSULTANCY SERVICES PVT. LTD.), (IN RELATION TO HEARTLAND DELHI TRANSCRITPION AND SERVICES PVT. LTD. (HDTS)) B 4, SAGAR TOWERS, JANAKPURI DISTRICT CENTRE, NEW DELHI 110 058. (PAN : AAACJ8644L) (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI VISHAL KALRA, ADVOCATE SHRI S.S. TOMAR, ADVOCATE SHRI ANKIT SAHNI, ADVOCATE REVENUE BY : SHRI SANJAY I. BARU, CIT DR DATE OF HEARING: 15.11.2017 DATE OF ORDER : 12.12.2017 ITA NOS.4048 & 4501/DEL/2013 2 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN BOTH THE AFORESAID APPEALS, THE SAME ARE BEING D ISPOSED OFF BY WAY OF CONSOLIDATED ORDER TO AVOID REPETITION OF DI SCUSSION. ITA NO.4048/DEL./2013 2. THE APPELLANT, M/S. TRANSCEND MT SERVICES PVT. L TD. (FORMERLY KNOWN AS HEARTLAND INFORMATION AND CONSUL TANCY SERVICES PVT. LTD.)(IN RELATION TO HEARTLAND BANGAL ORE TRANSCRIPTION AND SERVICES PVT. LTD. (HBTS)) (HEREINAFTER REFERRE D TO AS THE TAXPAYER - HBTS) BY FILING THE PRESENT APPEAL BEIN G ITA NO.4048/DEL/2013 SOUGHT TO SET ASIDE THE IMPUGNED O RDER DATED 30.04.2013, PASSED BY THE AO IN CONSONANCE WITH THE ORDERS PASSED BY THE LD. DRP/TPO UNDER SECTION 143 (3) REA D WITH SECTION 144C OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE AC T) QUA THE ASSESSMENT YEAR 2006-07 ON THE GROUNDS INTER ALIA T HAT :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP' ), THE TRANSFER PRICING OFFICER ('TPO') AND CONSEQUENT LY THE ASSESSING OFFICER ('AO') HAVE ERRED: . TRANSFER PRICING ADJUSTMENTS 1 IN MAKING AN ADJUSTMENT OF INR 17,403,385 TO THE VALUE OF THE INTERNATIONAL TRANSACTION OF PROVI SION OF MEDICAL TRANSCRIPTION SERVICES. ITA NOS.4048 & 4501/DEL/2013 3 1.1 IN DETERMINING THE ABOVE ADJUSTMENT HAVE, IN PARTICULAR ERRED IN: 1.1.1 USING FINANCIAL INFORMATION OF THE COMPARABL E COMPANIES RELATING TO THE FINANCIAL YEAR ('FY') 200 5-06 ALTHOUGH SUCH INFORMATION WAS NOT AVAILABLE WHEN TH E ASSESSEE MAINTAINED DOCUMENTATION AS PER THE REQUIREMENT OF THE ACT; 1.1.2 REJECTING CERTAIN FUNCTIONALLY COMPARABLE COMPANIES, ON GROUNDS SUCH AS: A. PERSISTENT LOSS MAKING COMPANIES; AND B. HIGHLY UNPREDICTABLE PROFITABILITY 1.1.3 RETAINING CERTAIN SUPER PROFIT MAKING COMPANI ES AS FUNCTIONALLY COMPARABLE COMPANIES; 1.1.4 RETAINING VISHAL INFORMATION TECHNOLOGIES LIMITED AS A FUNCTIONALLY COMPARABLE COMPANY; 1.1.5 REJECTING B T TECHNET FOR NON-AVAILABILITY OF FINANCIAL INFORMATION FOR FY 2005-06 ALTHOUGH THE ANNUAL REPORT OF THE SAME WAS MADE AVAILABLE DURING THE PROCEEDINGS BEFORE THE HON'BLE DRP; 1.1.6 RETAINING COMPARABLE COMPANIES WITH SIGNIFICA NT RELATED PARTY TRANSACTIONS; 1.1.7 NOT GRANTING COMPARABILITY ADJUSTMENTS ON ACCOUNT OF DIFFERENCE IN WORKING CAPITAL REQUIREMEN T, RISK ASSUMED BY THE APPELLANT VIS A VIS THE COMPARA BLE COMPANIES AND IN IGNORING THE QUANTIFICATION OF ABO VE ADJUSTMENTS FOR SUCH DIFFERENCES; 1.1.8 NOT FOLLOWING THE ORDER OF THE HON'BLE ITAT W ITH RESPECT TO THE APPLICABILITY OF PROVISO TO SECTION 92C(2) OF THE ACT; 1.1.9 NOT CORRECTLY COMPUTING THE MARGINS OF SOME COMPARABLES; ITA NOS.4048 & 4501/DEL/2013 4 1.1.10 NOT CORRECTLY COMPUTING THE MARGIN OF NUCLE US NET SOFT AND GIS INDIA LIMITED; 1.1.11 IGNORING THE FACT THAT THE APPELLANT IS A S TPI UNIT WHICH IS ENTITLED TO TAX HOLIDAY AND CONSEQUEN TLY THERE IS NO MOTIVATION FOR SHIFTING PROFITS THROUGH TRANSFER PRICING MECHANISM. 2. IN NOT PASSING A SPEAKING 'ORDER. 3. WITHOUT PREJUDICE TO THE GROUNDS ABOVE, IF THE TRANSFER PRICING ADJUSTMENT IS SUSTAINED THEN THE L D. AO HAS ERRED IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT TO THE EXTENT THE ADDITION IS MADE BASED ON THE UPDATED FINANCIAL DATA FOR THE COMPARABLE COMPANIES . ITA NO.4501/DEL./2013 3. THE APPELLANT, M/S. TRANSCEND MT SERVICES PVT. L TD. (FORMERLY KNOWN AS HEARTLAND INFORMATION AND CONSUL TANCY SERVICES PVT. LTD.)(IN RELATION TO HEARTLAND BANGAL ORE TRANSCRIPTION AND SERVICES PVT. LTD. (HDTS)) (HEREINAFTER REFERRE D TO AS THE TAXPAYER - HDTS) BY FILING THE PRESENT APPEAL BEIN G ITA NO.4501/DEL/2013 SOUGHT TO SET ASIDE THE IMPUGNED O RDER DATED 31.05.2013, PASSED BY THE AO IN CONSONANCE WITH THE ORDERS PASSED BY THE LD. DRP/TPO UNDER SECTION 143 (3) REA D WITH SECTION 144C OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE AC T) QUA THE ASSESSMENT YEAR 2006-07 ON THE GROUNDS INTER ALIA T HAT :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP' ), THE TRANSFER PRICING OFFICER ('TPO') AND CONSEQUENT LY THE ASSESSING OFFICER ('AO') HAVE ERRED: . ITA NOS.4048 & 4501/DEL/2013 5 TRANSFER PRICING ADJUSTMENTS 1 IN MAKING AN ADJUSTMENT OF RS.1,60,81,312 TO THE VALUE OF THE INTERNATIONAL TRANSACTION OF PROVISION OF MEDICAL TRANSCRIPTION SERVICES. 1.1 IN DETERMINING THE ABOVE ADJUSTMENT HAVE, IN PARTICULAR ERRED IN: 1.1.1 USING FINANCIAL INFORMATION OF THE COMPARABL E COMPANIES RELATING TO THE FINANCIAL YEAR ('FY') 200 5-06 ALTHOUGH SUCH INFORMATION WAS NOT AVAILABLE WHEN TH E ASSESSEE MAINTAINED DOCUMENTATION AS PER THE REQUIREMENT OF THE ACT; 1.1.2 REJECTING CERTAIN FUNCTIONALLY COMPARABLE COMPANIES, ON GROUNDS SUCH AS: A. PERSISTENT LOSS MAKING COMPANIES; AND B. HIGHLY UNPREDICTABLE PROFITABILITY 1.1.3 RETAINING CERTAIN SUPER PROFIT MAKING COMPANI ES AS FUNCTIONALLY COMPARABLE COMPANIES; 1.1.4 RETAINING VISHAL INFORMATION TECHNOLOGIES LIMITED AS A FUNCTIONALLY COMPARABLE COMPANY; 1.1.5 REJECTING B T TECHNET FOR NON-AVAILABILITY OF FINANCIAL INFORMATION FOR FY 2005-06 ALTHOUGH THE ANNUAL REPORT OF THE SAME WAS MADE AVAILABLE DURING THE PROCEEDINGS BEFORE THE HON'BLE DRP; 1.1.6 RETAINING COMPARABLE COMPANIES WITH SIGNIFICA NT RELATED PARTY TRANSACTIONS; 1.1.7 NOT GRANTING COMPARABILITY ADJUSTMENTS ON ACCOUNT OF DIFFERENCE IN WORKING CAPITAL REQUIREMEN T, RISK ASSUMED BY THE APPELLANT VIS A VIS THE COMPARA BLE COMPANIES AND IN IGNORING THE QUANTIFICATION OF ABO VE ADJUSTMENTS FOR SUCH DIFFERENCES; ITA NOS.4048 & 4501/DEL/2013 6 1.1.8 NOT FOLLOWING THE ORDER OF THE HON'BLE ITAT W ITH RESPECT TO THE APPLICABILITY OF PROVISO TO SECTION 92C(2) OF THE ACT; 1.1.9 NOT CORRECTLY COMPUTING THE MARGINS OF SOME COMPARABLES; 1.1.10 NOT CORRECTLY COMPUTING THE MARGIN OF NUCLE US NET SOFT AND GIS INDIA LIMITED; 1.1.11 IGNORING THE FACT THAT THE APPELLANT IS A S TPI UNIT WHICH IS ENTITLED TO TAX HOLIDAY AND CONSEQUEN TLY THERE IS NO MOTIVATION FOR SHIFTING PROFITS THROUGH TRANSFER PRICING MECHANISM. DIRECT TAX GROUNDS 2. ON THE FACTS AND IN LAW, THE LD. AO HAS ERRED IN : 2.1 NOT FOLLOWING THE DIRECTIONS DATED 18 TH MARCH 2013 ISSUED UNDER SECTION 144C OF THE ACT BY THE HONBLE DRP AND CONSEQUENTLY NOT ALLOWING THE DEDUCTION UNDER SECTION 10A OF THE ACT. 2.2 NOT ALLOWING THE CREDIT OF TAXES OF RS. 82,00, 000 ALREADY PAID BY THE APPELLANT PURSUANT TO THE DEMAN D RAISED BY THE LD. AO VIDE NOTICE OF DEMAND DATED 27 TH OCTOBER 2010 FOR THE CAPTIONED ASSESSMENT YEAR. 2.3 CHARGING THE INTEREST UNDER SECTION 220 OF THE ACT WHILE PASSING THE FINAL ASSESSMENT ORDER DATED 31ST MAY 2013. 3 ON FACTS AND IN LAW, THE LD. AO HAS ERRED IN COMPUTING THE INTEREST UNDER SECTION 234B OF THE AC T. 4 ON FACTS AND IN LAW, THE LD. AO HAS ERRED IN NOT PASSING A SPEAKING ORDER. 5 WITHOUT PREJUDICE TO THE GROUNDS ABOVE, IF THE TRANSFER PRICING ADJUSTMENT IS SUSTAINED THEN THE L D. AO ITA NOS.4048 & 4501/DEL/2013 7 HAS ERRED IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT TO THE EXTENT THE ADDITION IS MADE BASED ON THE UPDATED FINANCIAL DATA FOR THE COMPARABLE COMPANIES . ITA NO.4048/DEL/2013 (HBTS) 4. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ERSTWHILE HEARTLAND BANGA LORE TRANSCRIPTION AND SERVICES PRIVATE LIMITED (HBTS), THE TAXPAYER HBTS WAS AMALGAMATED WITH THE HEARTLAND INFORMATION AND CONSULTANCY SERVICES PRIVATE LTD. (HICS) W.E.F. APR IL 1, 2008. SO, THE TAXPAYER - HBTS CEASED TO EXIST W.E.F 01.04.200 8. THEN THE NAME OF HICS WAS CHANGED TO M/S. TRANSCEND MT SERVI CES PRIVATE LIMITED (TMTSPL). 5. THE TAXPAYER HBTS IS A SUBSIDIARY OF HEARTLAND ASIA (MAURITIUS) LIMITED WITH 99.99% OF SHAREHOLDING BY HEARTLAND ASIA (MAURITIUS) LIMITED AND 0.01% HELD BY HCR INFO RMATION CORPORATION USA. THE TAXPAYER - HBTS IS 100% EXPOR T ORIENTED UNIT REGISTERED UNDER SOFTWARE TECHNOLOGY PARK SCHE ME (STP) OF DEPARTMENT OF ELECTRONICS, GOVERNMENT OF INDIA. TH E TAXPAYER - HBTS IS INTO IT ENABLED BACK OFFICE MEDICAL TRANSCR IPTION SERVICES AS PART OF ITS BUSINESS OPERATION, PROVIDI NG MEDICAL TRANSCRIPTION SERVICES EXCLUSIVELY TO HCR INFORMATI ON CORPORATION USA, THE ULTIMATE HOLDING COMPANY OF THE TAXPAYER - HBTS. ITA NOS.4048 & 4501/DEL/2013 8 6. DURING THE YEAR UNDER ASSESSMENT, ASSESSEE ENTER ED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTE RPRISES AS UNDER:- S.NO. NATURE OF TRANSACTION METHOD USED BY ASSESSEE VALUE OF TRANSACTION METHOD PLI RECEIPT PAID 1 MEDICAL TRANSCRIPTION TNMM OP/TC 14,94,04,081 - 7. THE TAXPAYER - HBTS IN ORDER TO BENCHMARK ITS IN TERNATIONAL TRANSACTION IN ITS TP STUDY SELECTED TRANSACTIONAL NET MARGIN METHOD (TNMM) AS MOST APPROPRIATE METHOD (MAM) AS I TS PROFIT LEVEL INDICATOR (PLI) (OPERATING PROFIT / TO TAL COST) AT 10%. THE TAXPAYER - HBTS CHOSEN 20 COMPARABLES FOR BENCH MARKING THE ARMS LENGTH PRICE (ALP) HAVING AVERAGE PLI OF COMP ARABLE AT 10% AND FOUND ITS INTERNATIONAL TRANSACTIONS AT ARM S LENGTH. 8. THE TAXPAYER - HBTS IN ITS TP STUDY AFTER SELECT ING 20 COMPARABLES USED WEIGHTED AVERAGE MARGIN OF THREE Y EARS TO ARRIVE AT THE CONCLUSION THAT THE INTERNATIONAL TRANSACTIO N ARRIVED AT BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISE (AE) AT IS ARMS LENGTH. TPO, AFTER FINALLY SELECTING 13 COMPARABLES OUT OF THE TOTAL 20 COMPARABLES CHOSEN BY THE ASSESSEE AS PER ITS TP ST UDY FOR BENCHMARKING THE INTERNATIONAL TRANSACTION, PROCEED ED TO DETERMINE THE ARMS LENGTH PRICE OF PROVISION OF BACK OFFICE MEDICAL TRANSCRIPTION SERVICES RENDERED OF M/S. HEARTLAND U SA AND HCRIC ITA NOS.4048 & 4501/DEL/2013 9 AT RS.16,61,10,174/- AND BOOK VALUE OF THIS INTERNA TIONAL TRANSACTION AT RS.14,94,04,081/- AND PROPOSED TO EN HANCE THE TOTAL INCOME BY RS.1,67,06,093/- FOR AY 2006-07 TO BRING THE INTERNATIONAL TRANSACTION AT ARMS LENGTH PRICE. ITA NO.4501/DEL/2013 (HDTS) 9. HEARTLAND BANGALORE TRANSCRIPTION AND SERVICES P VT. LTD. (HDTS), THE TAXPAYER HDTS BY ADOPTING TNMM FOR BENCHMARKING THE INTERNATIONAL TRANSACTION CHOSEN 2 0 COMPARABLES HAVING ARITHMETIC MEAN OF 10% ON TOTAL COST PLUS OF MULTIPLE YEAR DATA. THE TAXPAYER HDTS IN ITS TP STUDY ALSO COM PUTED ITS OWN OPERATING MARGIN AT 10% ON TOTAL COST AND FOUND ITS INTERNATIONAL TRANSACTION WITH ITS AE QUA MEDICAL TRANSCRIPTION S ERVICES AT ARMS LENGTH. UNDISPUTEDLY, THE TPO ACCEPTED FAR CHARACT ERIZATION OF THE TAXPAYER HDTS AND TNMM AS THE MOST APPROPRIAT E METHOD BASED ON WITH OP/TC AS PLI BUT REJECTED 7 OF THE CO MPARABLES CHOSEN BY THE ASSESSEE AND FINALLY, SELECTED 13 COM PARABLES AND COMPUTED THE DIFFERENCE OF ARMS LENGTH REVENUE AND BOOK VALUE OF THE REVENUE AT RS.1,67,06,093/-. 10. HOWEVER, PURSUANT TO THE DIRECTIONS ISSUED BY T HE LD. DRP, TPO PASSED FRESH ORDER DATED 22.12.2009 AND CALCULA TED THE MARGIN OF FINAL LIST OF COMPARABLES AS UNDER :- ITA NOS.4048 & 4501/DEL/2013 10 SL. NO. NAME OF THE COMPANY TOTAL OP. RECEIPTS INR (CRORE) TC INR (CRORE) OP OP/T C PER- CENT I. ACE SOFTWARE EXPORTS LTD. 5.4982366 5.14295 0.35 529 6.91 II. ALLSEC TECHNOLOGIES LTD. 9.22565 7.18254 2.0431 1 28.45 III. CMC LTD. (SEGMENTAL) 3.14249 3.07562 0.6687 2. 17 IV. CS SOFTWARE ENTERPRISES LTD. 11.5678198 9.87798 1.68984 17.11 V. COSMIC GLOBAL 3.1114891 2.68165 0.42983 16.03 VI. GOLDSTONE TELESERVICES LTD. 5.0271 3.8966 1.130 5 29.01 VII. INDUS NETWORKS LTD. 3.36 3.22 0.14 4.35 VIII. TATA SERVICES LTD. 41.0292 38.7366 2.2926 5.9 2 IX. VISHAL INFORMATION TECHNOLOGIES LTD. 25.64284 17.32306 8.31978 48.03 X. NUCLEUS NETSOFT & GIS INDIA LTD. 6.0578376 4.1756645 1.8821731 45.07 XI. ASK ME INFO HUB LTD. (SHREEJAL) 4.71 4.5 0.21 4.67 XII. TRANSWORKS INFORMATION SERVICES LTD. 163.3007 136.6095 26.6912 19.54 XIII. TRICOM INDIA LTD. 23.70 14.80 8.90 60.14 11. LD. TPO ON THE BASIS OF HIS OWN ANALYSIS CALCUL ATED THE PLI FOR 13 COMPARABLES AT 22.11% AS AGAINST PLI OF ASSE SSEE AT 10% AND PROCEEDED TO COMPUTE THE ALP AS UNDER :- AVERAGE PLI (OP/TC) OF THE COMPARABLES = 22.11% TOTAL COST OF MEDICAL TRANSCRIPTION SERVICES = 13 ,58,21,892/- ARMS LENGTH REVENUE OF THE TRANSACTION = 13,58,21 ,892/- *122.11% = 16,58,52,112/- BOOK VALUE OF REVENUE = 14,94,04,081/- DIFFERENCE OF ARMS LENGTH REVENUE & = 1,64,48,03 1/- BOOK VALUE OF REVENUE PERCENTAGE OF ADJUSTMENT TO ARMS = 9.92% REVENUE PROVISO TO SEC. 92C (2) IS NOT ATTRACTED AS PERCENT AGE OF ADJUSTMENT TO ARMS LENGTH REVENUE IS MORE THAN 5%. THE INTERNAT IONAL TRANSACTIONS REFLECTED IN FORM 3CEB PERTAINING TO SOFTWARE SERVI CES WILL BE ADJUSTED TO BRING IT AT ARMS LENGTH PRICE. THE OTHER MINOR TRANSACTIONS ARE HELD TO BE AT ARMS LENGTH PRICE. ITA NOS.4048 & 4501/DEL/2013 11 12. THE TAXPAYER CARRIED THE MATTER BY WAY OF RAISI NG OBJECTIONS BEFORE THE LD. DRP, WHICH HAVE BEEN DISPOSED OFF. FEELING AGGRIEVED, THE TAXPAYER HAS COME UP BEFORE THE TRIB UNAL BY WAY OF FILING THE PRESENT APPEALS. 13. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE S OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NOS.1.1.1, 1.1.2 & 1.1.5 IN ITA NO.4048/DEL/2013 & ITA NO.4501/DEL/2013 14. GROUNDS NO.1.1.1, 1.1.2 & 1.1.5 NEED NO FINDING S BEING GENERAL IN NATURE AND HAVING NOT BEEN PRESSED BY TH E LD. AR FOR THE TAXPAYER. GROUND NOS.1, 1.1.3, 1.1.4, 1.1.6, 1.1.10 & 1.1.11 IN ITA NO.4048/DEL/2013 & ITA NO.4501/DEL/2013 15. UNDISPUTEDLY, THE TNMM AS THE MOST APPROPRIATE METHOD (MAM) BASED ON OP/TC AS THE PLI APPLIED BY THE ASSE SSEE HAS BEEN ACCEPTED BY THE TPO. IT IS ALSO NOT IN DISPUTE THAT THE TPO ACCEPTED THE FAR CHARACTERIZATION OF THE TAXPAYER. OUT OF 20 COMPARABLES CHOSEN BY THE TAXPAYER, THE LD. TPO REJ ECTED 13 ITA NOS.4048 & 4501/DEL/2013 12 COMPARABLES BEING FUNCTIONALLY DISSIMILAR, LIST OF FINAL SET OF COMPARABLES IS AS UNDER :- SL. NO. NAME OF THE COMPARABLES 1. ACE SOFTWARE EXPORT LTD. 2. CS SOFTWARE ENTERPRISES LTD. 3. TATA SERVICES LTD. 4. TULSIYAN TECHNOLOGIES LTD. 5. VISHAL INFORMATION TECHNOLOGIES LTD. 6. ALLSEC TECHNOLOGIES LTD. 7. TRANSWORKS 8. ASK ME INFO HUB LTD. 9. NUCLEUS NETSOFT & GIS INDIA LTD. 10. TRICOM INDIA LTD. 11. GOLDSTONE TELE-SERVICES LTD. 12. CMC SEG. 13. INDUS NETWORKS LTD. 16. LD. TPO COMPUTED THE AVERAGE PLI OF THE FINAL 1 3 COMPARABLES SELECTED FOR THE INTERNATIONAL TRANSACT IONS AT 22.30% AS AGAINST PLI OF THE ASSESSEE AT 10% AND PROCEEDED TO COMPUTE THE ALP OF THE INTERNATIONAL TRANSACTIONS AS UNDER :- AVERAGE PLI (OP/TC) OF THE COMPARABLES = 22.30% BOOK VALUE OF MEDICAL TRANSCRIPTION SERVICES = 16 ,26,34,428/- TOTAL COST OF MEDICAL TRANSCRIPTION SERVICES = 14, 77,65,769/- ARMS LENGTH REVENUE OF THE TRANSACTION = 14,77,6 5,769/- *122.30% = 18,07,17,535/- DIFFERENCE OF ARMS LENGTH REVENUE & = 1,80,83,1 07/- BOOK VALUE OF REVENUE PERCENTAGE OF ADJUSTMENT TO ARMS = 10.00% REVENUE PROVISO TO SEC. 92C (2) IS NOT ATTRACTED AS PERCENT AGE OF ADJUSTMENT TO ARMS LENGTH REVENUE IS MORE THAN 5%. THE INTERNATIONAL TRANSACTIONS REFLECTED IN FORM 3CEB PERTAINING TO SOFTWARE SERVICES WILL BE A DJUSTED TO BRING IT AT ARMS LENGTH PRICE. ITA NOS.4048 & 4501/DEL/2013 13 17. THE TAXPAYER TAKEN WEIGHTED AVERAGE BECAUSE DUR ING TP STUDY, DATA WAS NOT AVAILABLE, BUT DURING TP PROCEE DINGS WHEN THE DATA GOT AVAILABLE AVERAGE WAS CALCULATED ON THE BA SIS OF CURRENT YEARS DATA. PURSUANT TO THE DIRECTION ISSUED BY L D. DRP, THE TPO PASSED FRESH TP ORDER DATED 25.04.2013 BY COMPUTING THE CORRECT MARGIN OF THE COMPARABLES AS UNDER :- AVERAGE PLI (OP/TC) OF THE COMPARABLES = 21.84% TOTAL COST OF MEDICAL TRANSCRIPTION SERVICES = 13, 58,21,892/- ARMS LENGTH REVENUE OF THE TRANSACTION = 13,58,21 ,892/- *121.84% = 16,54,85,393/- BOOK VALUE OF REVENUE = 14,94,04,081/- DIFFERENCE OF ARMS LENGTH REVENUE & = 1,60,81,31 2/- BOOK VALUE OF REVENUE 18. LD. DR RELIED UPON THE ORDER OF THE TPO. 19. NOW, IN ORDER TO CUT SHORT THE CONTROVERSY AT H AND, THE LD. AR FOR THE ASSESSEE SOUGHT TO EXCLUDE THREE COMPARA BLES VIZ. VISHAL INFORMATION TECHNOLOGIES LTD., NUCLEUS NETSO FT & GIS INDIA LTD. AND TRICOM INDIA LTD. IN BOTH THE APPEALS BEING ITA NOS.4048/DEL/2013 & 4501/DEL/2013 QUA AY 2006-07. WE WOULD EXAMINE THE SUITABILITY OF ALL THE AFORESAID COMPAR ABLES VIS--VIS ASSESSEE COMPANY FOR BENCHMARKING THE INTERNATIONAL TRANSACTION ONE BY ONE. ITA NOS.4048 & 4501/DEL/2013 14 VISHAL INFORMATION TECHNOLOGIES LTD. (VISHAL) 20. THE TAXPAYER SOUGHT EXCLUSION OF VISHAL IN BOTH THE APPEALS ON THE GROUNDS INTER ALIA THAT VISHAL HAS DIFFERENT BUSINESS MODEL AND IT IS FUNCTIONALLY NOT COMPARABLE VIS--VIS THE TAXPAYER. 21. ANNUAL REPORT AND BALANCE SHEET OF VISHAL AS ON 31.0.2007, AVAILABLE AT PAGES 579 TO 586 OF THE PAPER BOOK, SH OWS THAT VISHAL HAS THE EMPLOYEE COST TO SALES RATIO OF 2% FOR FY 2 005-06 VIS--VIS TAXPAYER WHICH IS AT 67.57%. THIS FACT GOES TO PRO VE THAT VISHAL OUTSOURCED ITS SUBSTANTIVE WORK TO THIRD PARTY VEND ORS WHICH MAKE IT FUNCTIONALLY DISSIMILAR. 22. FURTHERMORE VISHAL IS INTO THE BUSINESS OF KNOW LEDGE PROCESS OUTSOURCING (KPO) AS IT PROVIDES SERVICES O F DATA CONVERSION, MICROFILMING AND MICROFILM SCANNING, DA TA AND DOCUMENT MANAGEMENT, DATA PROCESSING, DIGITAL LIBRA RY MANAGEMENT, ETC. FROM THE WEBSITE EXTRACT BROUGHT ON RECORD BY THE TAXPAYER, AVAILABLE AT PAGE 412 OF THE PAPER BO OK, IT HAS ALSO COME ON RECORD THAT VISHAL IS INTO PRINT ON DEMAND SERVICES AND AS SUCH, IS NOT COMPARABLE WITH THE TAXPAYER. 23. HONBLE DELHI HIGH COURT IN RAMPGREEN SOLUTIONS (P.) LTD. VS. CIT (2015) 377 ITR 533 (DELHI), WHILE EXAMINING THE COMPARABILITY OF VISHAL WITH RAMPGREEN SOLUTIONS (P .) LTD., A ITA NOS.4048 & 4501/DEL/2013 15 SIMILARLY SITUATED ITES PROVIDER TO ITS AE, ORDERED TO EXCLUDE VISHAL ON GROUND OF EXPENDITURE ON EMPLOYMENT COST AS IT WAS A SMALL FRACTION OF PROPORTIONATE COST INCURRED BY TH E ASSESSEE AND ON THE GROUND THAT VISHAL USED TO OUTSOURCED MOST OF I TS WORK FROM VENDORS AND SERVICE PROVIDERS. 24. VISHAL HAS BEEN EXCLUDED AS A COMPARABLE FOR BE NCHMARKING THE INTERNATIONAL TRANSACTIONS IN TAXPAYERS OWN CA SE FOR AY 2005- 06 IN ITA NO.6043/DEL/2012, AVAILABLE AT PAGES 11 & 12, ON GROUND OF DIFFERENT BUSINESS MODEL AS WELL AS FUNCT IONAL DISSIMILARITY. SO, WE ARE OF THE CONSIDERED VIEW T HAT VISHAL IS NOT A SUITABLE COMPARABLE FOR BENCHMARKING THE INTERNATIO NAL TRANSACTION ENTERED INTO BY THE TAXPAYER WITH ITS AE FOR AY 200 6-07. NUCLEUS NETSOFT & GIS INDIA LTD. (NUCLEUS) 25. THE TAXPAYER SOUGHT TO EXCLUDE NUCLEUS FROM THE FINAL SET OF COMPARABLES FOR BENCHMARKING ITS INTERNATIONAL TRAN SACTION WITH ITS AE ON THE GROUNDS INTER ALIA THAT NUCLEUS HAS UNDER GONE EXTRA ORDINARY EVENT OF AMALGAMATION AND MERGER DURING TH E RELEVANT FINANCIAL YEAR; THAT IT IS OUTSOURCING MOST OF ITS WORK; THAT NUCLEUS IS A HIGH PROFIT EARNING COMPANY WITH MARGIN OF 36. 63% AND THAT CALCULATION OF PLI OF NUCLEUS BY THE TPO IS ALSO ER RONEOUS AS 45.07% AS AGAINST CORRECT MARGIN BY EXCLUDING LEAVE AND LICENCE ITA NOS.4048 & 4501/DEL/2013 16 FEE AT 36.63% AND RELIED UPON THE DECISIONS OF AMERIPRISE INDIA (P.) LTD. VS. DCIT (2015) 67 SOT 136 (DELHI TRI B.), AMERICAN EXPRESS (INDIA) (P.) LTD. VS. DCIT (2016) 177 TTJ 33 (DELHI TRIB.) AND HSBC ELECTRONIC DATA PROCESSING INDIA LT D. VS. ACIT IN ITA NO.1624/HYD./2010 FOR AY 2006-07 . 26. THE TAXPAYER HAS BROUGHT ON RECORD THE ANNUAL R EPORT OF NUCLEUS, AVAILABLE AT PAGE 391, WHICH SHOWS THAT IN ACCORDANCE WITH THE SCHEME OF AMALGAMATION AS DETAILED IN DIRE CTORS REPORT OF ASSETS AND LIABILITIES OF THE ERSTWHILE NUCLEUS HAV E BEEN TRANSFERRED TO AND VESTED IN THE COMPANY W.E.F. 01.04.2005. CO NSEQUENTLY, RESULT FOR THE YEAR ENDING 31.03.2006 INCLUDES THE RESULT OF ERSTWHILE NNGIS AND ARE NOT COMPARABLE WITH THOSE O F THE PREVIOUS YEAR ENDING 31.03.2005. 27. FURTHERMORE NUCLEUS OUTSOURCES MOST OF ITS WORK /SERVICES TO OTHER VENDORS / SERVICE PROVIDERS. COORDINATE BENC H OF THE TRIBUNAL EXAMINED THE COMPARABILITY IN AMERIPRISE INDIA (P) LTD. AND AMERICAN EXPRESS (INDIA)(P.) LTD. (SUPRA), AVAILABLE AT PAGE 52 OF THE CASE LAWS PAPER BOOK, WHEREIN NUCLEUS HAS BEEN ORDERED TO BE EXCLUDED AS A COMPARABLE VIS--VIS AMERIPRISE INDIA (P) LTD. WHICH IS ALSO A CAPTIVE CONTRACT SERVICE PROVIDER E NGAGED IN IT ENABLED BACK OFFICE SERVICE ON GROUND OF AMALGAMATI ON BY FOLLOWING M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD. ITA NOS.4048 & 4501/DEL/2013 17 (SUPRA) AND PR. CIT VS. IHG IT SERVICES (INDIA) PVT. LTD. IN IT A NO.264 OF 2016 (HONBLE PUNJAB & HARYANA HIGH COURT ) . HONBLE PUNJAB & HARYANA HIGH CURT IN IHG IT SERVICES (INDIA) PVT. LTD. (SUPRA) ORDERED TO EXCLUDE NUCLEUS FROM THE FINAL SET OF COMPARABLES VIS--VIS IHG IT SERVICES ON GROUND OF OUTSOURCING OF ITS WORK BY MAKING FOLLOWING OBSERVATIONS :- 6. THE ONLY CONTENTION REGARDING THE EXCLUSION OF NUCLEUS NETSOFT AND GIS (INDIA) LIMITED IS THAT THE RE IS NO REASONING. THIS, HOWEVER, IS NOT EVEN A GROUND TAKEN IN THE APPEAL FILED BEFORE US. IN ANY EVENT, WE PERUSED THE 22 ND ANNUAL REPORT FOR THE YEAR 2005-2006 OF NUCLEUS NETSOFT AND GIS (INDIA) LIMITED. SCHEDU LE 12 FURNISHES THE OPERATING & OTHER EXPENSES. THE D ATA PROCESSING CHARGES ARE RS.1.04 CRORES OUT OF THE TO TAL OPERATING & OTHER EXPENSES OF ABOUT RS.2.41 CRORES. THUS, AN AMOUNT OF OVER 40% IS OUTSOURCED. THE FINDING OF THE TRIBUNAL, THEREFORE, CANNOT BE HELD TO BE PERVERSE. 28. SO, WE ARE OF THE CONSIDERED VIEW THAT BECAUSE OF AMALGAMATION AND OUTSOURCING MOST OF ITS WORK, THE NUCLEUS CANNOT BE A SUITABLE COMPARABLE VIS--VIS THE TAXPA YER FOR BENCHMARKING THE INTERNATIONAL TRANSACTION. AO/TPO IS DIRECTED TO RECOMPUTE THE MARGIN ACCORDINGLY. TRICOM INDIA LTD. (TRICOM) 29. THE TAXPAYER SOUGHT TO EXCLUDE TRICOM FROM THE FINAL SET OF COMPARABLES ON THE GROUNDS INTER ALIA THAT IT HAS R ELATED PARTY TRANSACTIONS (RPT) TO THE TUNE OF 61.86%; THAT THE COMPANY HAS ITS ITA NOS.4048 & 4501/DEL/2013 18 OWN SOFTWARE PRODUCT WHICH PROVIDES TO ITS BPO CUST OMERS AND HENCE HAVING NO INTANGIBLES AND THAT IT INCURS CONS IDERABLE AMOUNT ON R&D OF SOFTWARE. 30. PERUSAL OF THE RELEVANT PAGE OF ANNUAL REPORT, AVAILABLE AT PAGES 689 & 690, THE TAXPAYER HAS RPT TO THE TUNE O F RS.14,48,17,710/- IN FY 2005-06 AS AGAINST TOTAL SA LE OF RS.23,70,09,469/- WHICH IS 61.86%. FURTHERMORE FRO M THE PERUSAL OF RELEVANT PAGE OF THE ANNUAL REPORT AVAILABLE AT PAGE 60 OF THE COMPILATION EXPLAINS THE FUNCTIONAL PROFILE OF TRIC OM AS, TECHNOLOGY ABSORPTION AND RESEARCH & DEVELOPMENT : YOUR COMPANY DEVELOPS SOFTWARE TO PROVIDE EFFICIENT BUSI NESS PROCESS OUTSOURCING SERVICES TO ITS CUSTOMERS. THE SYSTEMS TEAM OF YOUR COMPANY DOES CONTINUOUS RESEARCH AND DEVELOPMENT FO R UP GRADATION OF THE SOFTWARE IN ORDER TO PROVIDE BETTE R SERVICES TO ITS CLIENTELE. YOUR COMPANY ALSO DEVELOPS SOFTWARE PRO DUCTS TO PROCESS THE DATA REQUIRED FOR PROVIDING BPO SERVICE S TO ITS CUSTOMERS. YOUR COMPANY TAKES EFFORTS TO ADAPT LAT EST TECHNOLOGY AND TECHNIQUES, WHICH HELPS IT TO BE IN COMPETITION . 31. COORDINATE BENCH OF THE TRIBUNAL IN ITO VS. BUS INESS PROCESS OUTSOURCING INDIA (P.) LTD. (2014) 61 SOT 83 (BANGALORE TRIB.) EXAMINED THE COMPARABILITY OF T RICOM VIS-A- VIS THE ASSESSEE COMPANY ORDERED TO EXCLUDE THE SAM E ON GROUND OF ITA NOS.4048 & 4501/DEL/2013 19 THE FACT THAT TRICOM DEVELOPS ITS OWN SOFTWARE WHER EAS THE ASSESSEE HAS NO SUCH SOFTWARE PRODUCT INTANGIBLES. SO, KEEPING IN VIEW THE RPT OF 61.86% AND THE FACT THAT TRICOM DEV ELOPS ITS OWN SOFTWARE PRODUCT AND OWN ITS OWN INTANGIBLES, IT CA NNOT BE A SUITABLE COMPARABLES VIS--VIS THE TAXPAYER. SO, W E ORDER TO EXCLUDE THE SAME. SO, IN VIEW OF THE MATTER, GROUN DS NO.1, 1.1.3, 1.1.4, 1.1.6, 1.1.10 AND 1.1.11 ARE DETERMINED IN F AVOUR OF THE TAXPAYER GROUNDS NO.1.1.7 & 1.1.8 IN ITA NO.4048/DEL/2013 & ITA NO.4501/DEL/2013 32. THE LD. AR FOR THE TAXPAYER CONTENDED THAT WHIL E COMPARING THE MARGIN EARNED BY THE COMPARABLE COMPANY VIS--V IS THE TAXPAYER ITSELF ON ACCOUNT OF WORKING CAPITAL EMPLO YED SHOULD ALSO BE FACTORED INTO. LD. TPO/DRP HAVE NOT GRANTED CO MPARABILITY ADJUSTMENT ON ACCOUNT OF DIFFERENCE IN WORKING CAPI TAL REQUIREMENT, RISK ASSUMED BY THE TAXPAYER VIS--VIS COMPARABLE COMPANY AND IN IGNORING THE QUANTIFICATION OF AFORE SAID ADJUSTMENT FOR SUCH DIFFERENCES. ISSUE AS TO THE WORKING CAPI TAL ADJUSTMENT HAS BEEN EXAMINED BY THE COORDINATE BENCH OF THE TRIBUN AL IN ASSESSEES OWN CASE FOR AY 2005-06 (SUPRA) IN TAXPA YERS OWN CASE FOR AY 2005-06. ITA NOS.4048 & 4501/DEL/2013 20 33. THE LD. CIT (A) HAS GRANTED WORKING CAPITAL ADJ USTMENT TO THE TAXPAYER IN AY 2005-06 WHICH ORDER HAS BEEN UPH ELD BY THE COORDINATE BENCH OF THE TRIBUNAL BY FOLLOWING THE D ECISION RENDERED BY BANGALORE BENCH OF THE TRIBUNAL IN ITA NO.1442/BNG/2008 IN TNT INDIA PVT. LTD. VS. ACIT . SO, FOLLOWING THE DECISIONS RENDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN TAXPAYERS OWN CASE FOR AY 2005-06, WE ARE OF THE CONSIDERED VIEW THAT THE TAXPAYER IS ENTITLED FOR W ORKING CAPITAL ADJUSTMENT QUA MARGIN EARNED BY THE COMPARABLE COMP ANIES VIS-- VIS THE TAXPAYER. 34. HOWEVER, DURING THE COURSE OF ARGUMENT, THE LD. AR FOR THE TAXPAYER CONTENDED THAT IN CASE AFORESAID THREE COM PARABLES VIZ. VISHAL INFORMATION TECHNOLOGIES LTD., NUCLEUS NETSO FT & GIS INDIA LTD. AND TRICOM INDIA LTD. ARE EXCLUDED, THE TAXPAYER DOES NOT NEED ANY WORKING CAPITAL ADJUSTMENT. 35. THE LD. AR FOR THE TAXPAYER FURTHER CONTENDED T HAT THE LD. DRP HAS NOT FOLLOWED THE ORDER OF THE TRIBUNAL PASS ED IN THE FIRST ROUND OF LITIGATION IN TAXPAYERS OWN CASE AS TO TH E APPLICABILITY OF PROVISO TO SECTION 92C (2) OF THE ACT. 36. COORDINATE BENCH OF THE TRIBUNAL IN TAXPAYERS OWN CASE IN FIRST ROUND OF LITIGATION QUA AY 2006-07 IN ITA NO.7175/DEL/2010 ITA NOS.4048 & 4501/DEL/2013 21 ORDER DATED 30.06.2011 HAS APPLIED THE PROVISO TO SECTION 92C (2) IN FAVOUR OF THE TAXPAYER BY RETURNING FOLLOWING FI NDINGS :- 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE ORDER O F THE LD. DRP WE FIND THAT THE ASSESSEE HAS RAISED OBJECT IONS ON VARIOUS POINTS ON WHICH THE LD. DRP HAS NOT PASS ED SPEAKING ORDER. THE OBJECTIONS RAISED BY THE ASSESS EE HAVE BEEN SUMMARILY REJECTED. 5 PER CENT STANDARD DEDUCTION HAS BEEN DENIED ON THE GROUND THAT PROVIS O TO SECTION 92C(2) OF THE ACT HAS BEEN AMENDED THOUGH T HE SAID AMENDMENT HAS BEEN MADE BY FINANCE (NO.2) ACT, 2009 WITH EFFECT FROM 1/10/2009. PRIOR TO THIS AMENDMENT AS PER PROVISO TO SECTION 92C(2) THE ASSESSEE WAS ELIGIBLE FOR 5 PER CENT OF ADJUSTMENTS . SINCE THE AMENDMENT HAS BEEN MADE EFFECTIVE FROM 1/10/2009 IT IS HELD THAT THE ASSESSEE WILL BE ELIG IBLE FOR 5 PER CENT OF ADJUSTMENT WHILE COMPUTING ARMS LENGT H PRICE. THE ASSESSING OFFICER IS DIRECTED ACCORDINGL Y. 37. WHEN THE ISSUE AS TO THE ALLOWABILITY TO THE TA XPAYER FOR 5% OF ADJUSTMENT HAS ALREADY BEEN DECIDED IN FAVOUR OF THE TAXPAYER IN FIRST ROUND OF LITIGATION AND THE MATTER WAS REMAND ED ON SPECIFIC ISSUES, THE LD. DRP WAS UNDER LEGAL OBLIGATION TO P ROVIDE THE BENEFIT OF PROVISO TO SECTION 92C(2) OF THE ACT TO THE TAXPAYER. FOR READY REFERENCE, OPERATIVE PART OF ORDER PASSED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.5176/DEL/2010 IN FIRST ROUND OF LITIGATION IN AY 2006-07 IS REPRODUCED FOR READY PERUSAL AS UNDER :- 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE MATERIAL AVAILABLE ON RECORD. FROM THE ORDER O F THE LD. DRP WE FIND THAT THE ASSESSEE HAS RAISED OBJECT IONS ON VARIOUS POINTS ON WHICH THE LD. DRP HAS NOT PASS ED ITA NOS.4048 & 4501/DEL/2013 22 SPEAKING ORDER. THE OBJECTIONS RAISED BY THE ASSESS EE HAVE BEEN SUMMARILY REJECTED. 5 PER CENT STANDARD DEDUCTION HAS BEEN DENIED ON THE GROUND THAT PROVIS O TO SECTION 92C(2) OF THE ACT HAS BEEN AMENDED THOUGH T HE SAID AMENDMENT HAS BEEN MADE BY FINANCE (NO.2) ACT, 2009 WITH EFFECT FROM 1/10/2009. PRIOR TO THIS AMENDMENT AS PER PROVISO TO SECTION 92C(2) THE ASSESSEE WAS ELIGIBLE FOR 5 PER CENT OF ADJUSTMENTS . SINCE THE AMENDMENT HAS BEEN MADE EFFECTIVE FROM 1/10/2009 IT IS HELD THAT THE ASSESSEE WILL BE ELIG IBLE FOR 5 PER CENT OF ADJUSTMENT WHILE COMPUTING ARMS LENGT H PRICE. THE ASSESSING OFFICER IS DIRECTED ACCORDINGL Y. SO, IN VIEW OF THE MATTER, GROUNDS NO.1.1.7 AND 1.1 .8 ARE DETERMINED IN FAVOUR OF THE TAXPAYER. GROUND NO.1.1.9 IN ITA NO.4048/DEL/2013 & ITA NO.4501/DEL/2013 38. GROUND NO.1.1.9 IN BOTH THE AFORESAID APPEALS N EED NO SPECIFIC FINDINGS BEING GENERAL IN NATURE AND HAVIN G NOT BEEN PRESSED. GROUND NO.2.1 IN ITA NO.4501/DEL/2013 39. THE TAXPAYER HAS RAISED OBJECTION BEFORE LD. DR P AS TO DISALLOWING DEDUCTION U/S 10A BY THE AO WHICH WAS D ISPOSED OFF BY THE LD. DRP IN FAVOUR OF THE TAXPAYER BY RETURNI NG FOLLOWING FINDINGS :- 5.13 IN THE CASE OF ASSESSEE, THE CONDITIONS PRESC RIBED BY SECTION 10A(2) OF THE I.T. ACT HAVE BEEN SATISFI ED BY ITA NOS.4048 & 4501/DEL/2013 23 THE ELIGIBLE UNDERTAKE AT THE TIME OF FORMATION. T HE ELIGIBLE UNDERTAKING WAS TRANSFERRED AS IT IS TO THE ASSESSEE AND CONTINUES TO FUNCTION AS BEFORE. ACCORDINGLY, THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 10A OF THE ACT FOR THE CURRENT ASSESSMENT Y EAR. 40. SINCE DRP HAS GIVEN CATEGORIC DIRECTION TO THE AO TO ALLOW DEDUCTION TO THE TAXPAYER U/S 10A, THE AO WAS UNDER JUDICIAL DISCIPLINE TO CARRY OUT THE DEDUCTIONS. SO, THE AO IS DIRECTED TO COMPLY WITH THE DIRECTIONS ISSUED BY LD. DRP. CONS EQUENTLY, GROUND NO.2.1 IS DETERMINED IN FAVOUR OF THE TAXPAY ER. GROUND NO.2.2 IN ITA NO.4501/DEL/2013 41. AO IS DIRECTED TO EXAMINE THE CREDIT OF TAXES O F RS.82,00,000/- ALREADY PAID BY THE TAXPAYER IN ACCO RDANCE WITH THE DEMAND RAISED BY THE AO VIDE NOTICE DATED 27.10.201 0 FOR THE YEAR UNDER ASSESSMENT AND ALLOW THE SAME AFTER DUE VERIF ICATION OF THE FACTS. GROUND NO.2.3 IN ITA NO.4501/DEL/2013 42. THE LD. AR FOR THE TAXPAYER CONTENDED THAT THIS ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE TAXPAYER IN I TS OWN CASE FOR AY 2006-07 IN ITA NO.2136/DEL/2014. PERUSAL OF THE ORDER ITA NOS.4048 & 4501/DEL/2013 24 PASSED BY THE COORDINATE BENCH IN ITA NO.2136/DEL/2 014 (SUPRA) SHOWS THAT IDENTICAL ISSUE WAS RAISED AND HAS BEEN DECIDED IN FAVOUR OF THE TAXPAYER BY RETURNING THE FOLLOWING F INDINGS :- 11. IN THE PRESENT CASE, THE ORIGINAL ASSESSMENT O RDER 27.10.2010 WAS SET ASIDE BY THE ITAT VIDE ITS ORDER DATED 30.06.2011 AND NOTHING WAS BROUGHT ON RECORD TO SUBSTANTIATE THAT THE SAID ORDER DATED 30.06.2011 W AS CHALLENGED BY THE DEPARTMENT. THEREFORE, THE SAID O RDER ATTAINED FINALITY. IN COMPLIANCE TO THE ORDER OF TH E ITAT, THE DRP DIRECTED THE AO VIDE ORDER DATED 26.02.2013 TO COMPLETE THE ASSESSMENT. IN COMPLIANC E TO THE SAID DIRECTIONS, THE AO PASSED THE ASSESSMEN T ORDER DATED 30.04.2013 AND RE-FRAMED THE ASSESSMENT . THEREFORE, AS PER THE AFORESAID CIRCULAR NO. 334(F. NO. 400/3/81-ITCC), DATED 03.04.1982 WHICH IS BINDING O N THE DEPARTMENT, THE INTEREST U/S 220(2) OF THE ACT CAN BE CHARGED ONLY AFTER EXPIRY OF 35 DAYS FROM THE DATE OF SERVICE OF DEMAND NOTICE PURSUANT TO SUCH FRESH ASSESSMENT ORDER DATED 30.04.2013 AND NOT THE ORIGI NAL ASSESSMENT ORDER DATED 27.10.2010. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS, DIRECT THE A O TO LEVY THE INTEREST U/S 220(2) OF THE ACT AS PER THE ABOVE SAID DIRECTION GIVEN BY THE CBDT IN CIRCULAR NO. 334 DAT ED 30.04.1982. 43. KEEPING IN VIEW THE FACT THAT THIS IS A SECOND ROUND OF LITIGATION AND IN THIS CASE ALSO, ORIGINAL ASSESSME NT WAS COMPLETED ON 27.10.2010 AND AS SUCH, ISSUE IS ENTIRELY COVERE D IN FAVOUR OF THE TAXPAYER. SO, THE AO IS DIRECTED TO CHARGE THE INTEREST U/S 220 OF THE ACT BY FOLLOWING THE FINDINGS RETURNED BY TH E COORDINATE BENCH OF THE TRIBUNAL IN ITA NO. 2136/DEL/2014 (SUP RA) AFTER DUE VERIFICATION. ITA NOS.4048 & 4501/DEL/2013 25 GROUND NO.2 IN ITA NO.4048/DEL/2013 GROUND NO.4 IN ITA NO.4501/DEL/2013 44. GROUND NO.2 IN ITA NO.4048/DEL/2013 AND GROUND NO.4 IN ITA NO. 4501/DEL/2013 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. GROUND NO.3 IN ITA NO.4048/DEL/2013 GROUND NO.3 & 5 IN ITA NO.4501/DEL/2013 45. GROUND NO.3 IN ITA NO.4048/DEL/2013 AND GROUNDS NO.3 & 5 IN ITA NO.4501/DEL/2013 QUA LEVY OF INTEREST U/ S 234B OF THE ACT NEED NO SPECIFIC FINDING BEING CONSEQUENTIAL IN NATURE. 46. RESULTANTLY, BOTH THE APPEALS FILED BY THE ASSE SSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 12 TH DAY OF DECEMBER, 2017. SD/- SD/- (B.P. JAIN) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 12 TH DAY OF DECEMBER, 2017 TS ITA NOS.4048 & 4501/DEL/2013 26 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A) 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.