Asst.C.I.T., Bangalore V. M/s Mphasis Limited, Bangalore

ITA 429/BANG/2015

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2548 (ITAT-BANGALORE)
• Duration Of Justice: 6 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-03-2021
• Assessment Year: 2010-2011
• Appeal Filed On: 23-03-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEERA MALHOTRA PAGE OF ITT
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Depreciation; Transfer pricing; International transaction; Notional interest; Revised return; TDS
• Section: 143(3); 92B; 10AA; 234B; 40(a)(ia); 10B; 144C; 13; 22; 92CA; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI. CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER IT(TP)A NO.429/BANG/2015 ASSESSMENT YEAR : 2010-11 THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-4(1)(2), BENGALURU. VS. M/S MPHASIS LIMITED BAGMANE WORLD TECHNOLOGY CENTER MARATHAHALLI RING ROAD, DODDANAKUNDI VILLAGE, MAHADEVAPURU BENGALURU-560 048. PAN AAACB 6820 C APPELLANT RESPONDENT IT(TP)A NO.578/BANG/2015 ASSESSMENT YEAR : 2010-11 M/S MPHASIS LIMITED BAGMANE WORLD TECHNOLOGY CENTER MARATHAHALLI RING ROAD, DODDANAKUNDI VILLAGE, MAHADEVAPURU BENGALURU-560 048. PAN AAACB 6820 C VS. THE ADDL. COMMISSIONER OF INCOME-TAX, CIRCLE-4(1)(2), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI PADAMCHAND KHINCHA, C.A REVENUE BY : MS. NEERA MALHOTRA, CIT(DR) PAGE 2 OF 24 IT(TP)A NO.429 & 578/BANG/2015 DATE OF HEARING : 09-03-2021 DATE OF PRONOUNCEMENT : 14-06-2021 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT CROSS APPEALS HAS BEEN FILED BY REVENU E AS WELL AS ASSESSEE AGAINST FINAL ASSESSMENT ORDER DATED 29/01 /2015 PASSED UNDER SECTION 143(3) READ WITH SECTION 144C (5) OF THE ACT BY THE LD.ACIT RANGE-4 (1), BANGALORE ON FOLLOWING GROUNDS OF APPEAL: ITA NO. 429/B/2015 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE DISPUTE RESOLUTION PANEL ERRED IN DIRECTING THE AO TO RECOM PUTED THE DEDUCTION ALLOWABLE U/S 10A OF THE INCOME TAX ACT, WHEN THERE IS NO PROVISION STIPULATED IN THE SECTION THAT THE EXPENS ES REQUIRED TO BE REDUCED FROM THE EXPORT TURNOVER AS PER CLAUSE (IV) OF THE EXPLANATION TO SECTION 10A TO BE REDUCED FROM THE TOTAL TURNOVE R ALSO. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND / OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. ITA NO. 578/B/2015 GROUNDS RELATING TO LEGAL ISSUES 1. THE ORDERS PASSED BY LEARNED ADDITIONAL COMMISSI ONER OF INCOME TAX CIRCLE- 4(1), BANGALORE (HEREINAFTER REFERRED TO AS 'AO' FOR BREV ITY), LEARNED JOINT COMMISSIONER OF INCOME TAX TP-II, BANGALORE (HEREINAFTER REFERRED T O AS 'TPO' FOR BREVITY) AND HONORABLE DISPUTE RESOLUTION PANEL (HEREINAFTER REFERRED TO A S HONORABLE DRP) ('AO 'TPO' AND 'DRP' COLLECTIVELY REFERRED AS 'LOWER INCOME TAX AUTHORIT IES' FOR BREVITY) ARE BAD IN LAW AND LIABLE TO BE QUASHED. 2. THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKIN G A REFERENCE TO TRANSFER PRICING OFFICER FOR DETERMINING ARM'S LENGTH PRICE WITHOUT DEMONSTR ATING AS TO WHY IT WAS NECESSARY AND EXDIENT TO DO SO. THE HONORABLE DRP HAS ERRED IN CO NFIRMING THE ACTION OF THE ASSESSING OFFICER. 3. THE LOWER INCOME TAX AUTHORITIES HAVE ERRED IN A. MAKING TRANSFER PRICING ADJUSTMENT OF RS. 117,20 ,60,655/-. B. PASSING THE ORDER WITHOUT DEMONSTRATING THAT APP ELLANT HAD MOTIVE OF TAX EVASION. C. NOT APPRECIATING THAT THERE IS NO AMENDMENT TO T HE DEFINITION OF 'INCOME' AND CHARGING OR COMPUTATION PROVISION RELATING TO INCOM E UNDER THE HEAD 'PROFITS & GAINS OF BUSINESS OR PROFESSION' DO NOT REFER TO OR INCLUDE THE AMOUNTS COMPUTED UNDER CHAPTER X AND THEREFORE ADDITION MADE UNDER C HAPTER X IS BAD IN LAW. D. PASSING THE ORDERS WITHOUT CONSIDERING ALL THE S UBMISSIONS AND/OR WITHOUT APPRECIATING PROPERLY THE FACTS AND CIRCUMSTANCES O F THE CASE AND THE LAW APPLICABLE. PAGE 3 OF 24 IT(TP)A NO.429 & 578/BANG/2015 GROUND RELATING DETERMINATION OF ARM'S LENGTH PRICE BY THE TPO 4. THE LOWER INCOME TAX AUTHORITIES HAVE ERRED IN: A. NOT APPRECIATING THAT THE APPELLANT HAD ADOPTED TNMM AT EACH SEGMENT LEVEL, IN WHICH PROCESS, THE SELLING COMMISSION, NETWORK CHAR GES AND OTHER INTRA-GROUP SERVICE PAYMENTS WERE CONSIDERED AS CLOSELY LINKED TRANSACTION AND HENCE WERE SUBSUMED INTO THE EXPENDITURE AND ACCORDINGLY ALREA DY CONSIDERED; B. NOT APPRECIATING THAT ONCE THE NET PROFIT MARGIN IS TESTED ON THE TOUCHSTONE OF ARM'S LENGTH PRICE, IT PRE-SUPPOSES THAT THE VARIOUS COMP ONENTS OF INCOME AND EXPENDITURE CONSIDERED IN THE PROCESS OF ARRIVING A T THE NET PROFIT ARE ALSO AT ARM'S LENGTH; AND C. COMPARING PRICES AFTER COMPLETING THE ANALYSIS O F COMPARING MARGINS, WHICH PROCESS INACCEPTAB1E IN LAW. ADJUSTMENT MADE BY THE TPO FOR SELLING COMMISSION A ND NETWORK CHARGES ALP OF SELLING COMMISSION 5. WITH RESPECT TO SELLING COMMISSION, THE LOWER IN COME TAX AUTHORITIES HAVE ERRED IN: A. CONCLUDING THAT ARM'S LENGTH PRICE OF SELLING CO MMISSION IS NIL WITHOUT BASING THE SAME ON ANY COMPARABLE; B. NOT APPRECIATING THAT THE LAW OF TRANSFER PRICIN G IS BASED ON THE TEST OF COMPARABILITY AND IF NO COMPARABLES ARE IDENTIFIED, IT CANNOT BE CONCLUDED THAT THE TRANSACTION IS NOT AT ARM'S LENGTH; C. CONCLUDING THAT ARM'S LENGTH PRICE OF SELLING CO MMISSION IS NIL WITHOUT APPRECIATING THAT THE COMMISSION WAS PAID BASED ON THE AGREEMENT ENTERED INTO WITH AE AND WAS FOR PROVIDING MARKETING SERVICES FOR OFF-SHORE SERVICES; D. CONCLUDING THAT THE COST BASE ADOPTED FOR THE MA RK UP IS NOT CLEAR WHEN ALL THE DETAILS OF COST INCURRED AND ALLOCATION THEREOF WER E AVAILABLE ON THE RECORD; E. ADOPTING CUP METHOD AS THE MOST APPROPRIATE METH OD WITHOUT JUSTIFYING HOW THE SAME WAS THE MOST APPROPRIATE METHOD IN THE FACTS A ND CIRCUMSTANCE OF THE CASE; AND F. NOT APPRECIATING THAT THE APPELLANT HAD RECEIVED TANGIBLE AND DIRECT BENEFIT FROM SERVICES RENDERED BY THE AE. ALP OF NETWORK CHARGES 6. WITH RESPECT TO NETWORK CHARGES, THE LOWER INCOM E TAX AUTHORITIES HAVE ERRED IN: A. CONCLUDING THAT THE NETWORK CHARGES WERE ONLY RE IMBURSEMENT OF EXPENSES WITHOUT APPRECIATING THAT THE AE RENDERED VARIOUS VALUE ADD ED SERVICES ON WHICH MARK UP WAS LEVIED IN ADDITION TO CERTAIN COST TO COST REIM BURSEMENT; B. CONCLUDING THAT NO MARK UP SHOULD HAVE BEEN PAID BY THE APPELLANT IGNORING THE BUSINESS AND COMMERCIAL REALITIES; C. CONCLUDING THAT THE ARM'S LENGTH MARK UP ON NETW ORK CHARGES IS NIL ADOPTING INTERNAL CUP WITHOUT APPRECIATING THAT THE TRANSACT IONS BEING COMPARED WERE THEMSELVES INTERNATIONAL TRANSACTIONS AND THEREFORE CANNOT BE CONSIDERED FOR COMPARISON; D. CONSIDERING AND ERRONEOUSLY CLUBBING INCORRECT E XPENSE HEADS OF 'COMMUNICATION COSTS AND OTHER EXPENSES PAID TO HP SINGAPORE' TOGE THER WITH NETWORK CHARGES AND DEEMING THE DIFFERENTIAL AMOUNT OF RS. 12,80,73 ,476 AS ADJUSTMENT WITHOUT APPRECIATING THE NATURE OF TRANSACTION AND ON GROUN D THAT DETAILS OF SUCH PAYMENTS ARE NOT MADE AVAILABLE; E. ADOPTING CUP METHOD AS THE MOST APPROPRIATE METH OD WITHOUT JUSTIFYING HOW THE SAME WAS THE MOST APPROPRIATE METHOD IN THE FACTS A ND CIRCUMSTANCE OF THE CASE; F. CONCLUDING THAT ARM'S LENGTH MARK UP FOR NETWORK CHARGES IS NIL WITHOUT CONSIDERING ANY COMPARABLE; AND G. ASSUMING WITHOUT ADMITTING THAT THE ADJUSTMENT I S TO BE MADE, THE LOWER INCOME TAX AUTHORITIES HAVE ERRED IN NOT ALLOWING THE BENE FIT OF THE +/-5% RANGE PRESCRIBED IN THE PROVISO TO SECTION 92C(2). PAGE 4 OF 24 IT(TP)A NO.429 & 578/BANG/2015 GROUND RELATING TO CHARGING INTEREST ON EXTENDED PA YMENT TERMS GIVEN TO AE 7. THE LOWER INCOME TAX AUTHORITIES HAVE ERRED IN: A. IGNORING THE BUSINESS, COMMERCIAL AND INDUSTRY R EALITIES AND ECONOMIC CIRCUMSTANCES APPLICABLE TO THE APPELLANT; B. MAKING ADJUSTMENT FOR NOTIONAL INTEREST ON EXTEN DED PAYMENT TERMS GIVEN TO AE WITHOUT APPRECIATING THAT THERE IS NO REAL INCOME A RISING TO THE APPELLANT; C. NOT APPRECIATING THAT THE RECEIVABLE FROM THE AE IS NOT AN INTERNATIONAL TRANSACTION WITHIN THE MEANING OF SECTION 92B OF THE ACT; D. WITHOUT PREJUDICE, ASSUMING THAT RECEIVABLE IS A N INTERNATIONAL TRANSACTION, THE LOWER INCOME TAX AUTHORITIES HAVE ERRED IN NOT APPR ECIATING THAT RECEIVABLE IS NOT SEPARATE TRANSACTION FROM THE SALE FROM WHICH IT IS ARISING; E. NOT APPRECIATING THAT THE APPELLANT'S MARGIN AT EACH SEGMENT LEVEL ARE CONCLUDED TO BE AT ARM'S LENGTH AND THEREFORE SEPARATE ADDITION OF NOTIONAL INTEREST ON RECEIVABLE IS NOT WARRANTED; F. NOT APPRECIATING THAT THE APPELLANT DOES NOT CHA RGE INTEREST ON RECEIVABLE FROM BOTH THE AE AS WELL AS NON-AE AND ON THIS GROUND ITSELF THE ADDITION MADE BY THE TPO IS LIABLE TO BE QUASHED; G. WITHOUT PREJUDICE, ADOPTING FLAWED METHODOLOGY F OR DETERMINING ARM'S LENGTH INTEREST RATE AT 14.74%. THE RATE DETERMINED IS EXC ESSIVE; H. WITHOUT PREJUDICE, NOT ADOPTING LIBOR AS THE BAS IS FOR BENCHMARKING. I. COMPUTING INTEREST FROM THE DATE OF INVOICE AND NOT FOR THE EXCESS CREDIT PERIOD ONLY; AND J. ASSUMING WITHOUT ADMITTING THAT THE ADJUSTMENT I S TO BE MADE, THE LOWER INCOME TAX AUTHORITIES HAVE ERRED IN NOT ALLOWING THE BENE FIT OF THE +/-5% RANGE PRESCRIBED IN THE PROVISO TO SECTION 92C(2). GROUND RELATING TO VARIATION OF DEDUCTION UNDER SEC TION I0A/10AA/10B 8. THE LOWER INCOME TAX AUTHORITIES HAVE ERRED IN: A. NOT GRANTING DEDUCTION U/S 1OA/1OAA/1OB WITH RES PECT TO PROFITS ATTRIBUTABLE TOWARDS ONSITE SOFTWARE DEVELOPMENT WORK BEING SUB- CONTRACTED TO AND PERFORMED BY THE AE'S OVERSEAS WITHOUT APPRECIATING THE FACT THAT I) THE ENTIRE RISK & REWARDS AND FUNCTIONS & RESPONSIBILITIES OF EXECUTING THE W ORK LIES WITH THE APPELLANT; AND II) THE ENTIRE ON-SITE SOFTWARE DEVELOPMENT WORK WA S PERFORMED UNDER THE CONTROL AND SUPERVISION OF THE APPELLANT. B. EXCLUDING COMMUNICATION CHARGES FROM EXPORT TU RNOVER IN PROCESS OF COMPUTING DEDUCTION U/S 1 OA/ 1OAA/1OB WITHOUT REDUCING THE S AME FROM TOTAL TURNOVER C. NOT APPRECIATING THAT, UNDER SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE, THE HONORABLE HIGH COURT OF KARNATAKA AND THE BANGALORE BENCH OF THE ITAT AS WELL AS OTHER TRIBUNALS HAVE HELD THAT IF SOME EXPENSES, FO R ANY REASON ARE EXCLUDED IN ARRIVING AT THE 'EXPORT TURNOVER' THE SAME SHOULD A LSO BE REDUCED FROM 'TOTAL TURNOVER'. D. NOT APPRECIATING THAT, UNDER SIMILAR FACTS AN D CIRCUMSTANCES OF THE CASE, THE HONORABLE BANGALORE BENCH OF THE ITAT IN CASE OF MP HASIS SOFTWARE SERVICES INDIA PVT LTD (MSSIP[L) IN AY 08 (A GROUP COMPANY OF MPHA SIS GROUP), HAVE HELD THAT WHERE ENTIRE ON-SITE SOFTWARE DEVELOPMENT WORK WAS PERFORMED UNDER THE CONTROL AND SUPERVISION OF THE APPELLANT, PROFITS ATTRIBUTA BLE TO ONSITE DEVELOPMENT OF SOFTWARE IS ELIGIBLE FOR DEDUCTION ULS 1OA/1OB/1OAA AS THE CASE MAY BE, AND THE RATIO THIS DECISION APPLIES TO THE IMPUGNED ASSESSM ENT OF THE APPELLANT. GROUND RELATING DEPRECIATION 9. THE LOWER INCOME TAX AUTHORITIES HAVE ERRED IN: A. HOLDING THAT THE SERVERS, SWITCHES, ROUTERS PART AKE THE CHARACTER OF 'PLANT MACHINERY' AS AGAINST 'COMPUTERS & SOFTWARE'. PAGE 5 OF 24 IT(TP)A NO.429 & 578/BANG/2015 B. HOLDING THAT THE SERVERS, SWITCHES, ROUTERS SHOU LD FORM PART OF BLOCK OF 'PLANT & MACHINERY' AND DEPRECIATION @ 15% BE ALLOWED ON THE M. C. GRANTING DEPRECIATION ON SERVERS, SWITCHES, ROUT ERS @ 15% AND ACCORDINGLY, DISALLOWING THE EXCESS DEPRECIATION OF 45% AMOUNTIN G TO RS. 63,3 8,865. D. WITHOUT PREJUDICE, NOT RE-COMPUTING OPENING WDV TO TAKE INTO CONSIDERATION DISALLOWANCE OF EXCESS DEPRECIATION MADE IN THE PRE CEDING ASSESSMENT YEAR. E. WITHOUT PREJUDICE, NOT GRANTING DEDUCTION UND ER SECTION 1OA/1OB/1OAA ON THE EXCESS DEPRECIATION DISALLOWED. GROUND RELATING ADDITIONAL CLAIM 10. THE LOWER INCOME TAX AUTHORITIES HAVE ERRED IN: A. DIS-REGARDING THE ADDITIONAL CLAIM MADE BY THE A PPELLANT DURING THE ASSESSMENT PROCEEDINGS WITH RESPECT TO DEPRECIATION OF GOODWIL L, ADDITIONAL TDS CLAIM AND DEDUCTION U/S 40(A)(IA) ON THE GROUND THAT VALID CL AIM CAN ONLY BE MADE BY FILING REVISED RETURN. B. NOT GRANTING DEPRECIATION ON GOODWILL ARISING O N ACCOUNT MERGER OF MPHASIS FINSOLUTIONS WITH ITSELF. C. GRANTING CREDIT FOR TAXES DEDUCTED AT SOURCE OF RS. 119,172,068/- AS AGAINST THE CORRECT AMOUNT OF RS. 123,256,842/- RESULTING INTO LOWER CR EDIT OF RS 4,084,774/-. D. NOT CONSIDERING ADDITIONAL TDS CLAIM ARISING ON ACCOUNT OF MERGER OF MPHASIS FINSOLUTIONS, ELECTRONIC DATA SYSTEMS INDIA PVT LTD . AND KSHEMA TECHNOLOGIES INDIA LTD WITH THE APPELLANT, RESULTING INTO LOWER CREDIT OF RS. 6,905,109/-. E. NOT GRANTING CREDIT FOR ADDITIONAL TDS CLAIMED OF RS.68,77,303/- DURING ASSESSMENT PROCEEDING BASED ON TDS CERTIFICATES. F. NOT ALLOWING DEDUCTION U/S 40(A)(IA) TO THE TUNE OF RS. 10,40,253 FOR EXPENSES DISALLOWED DURING AY 2009-10 AND FOR WHICH TDS WAS DULY DEDUCTED AND DEPOSITED TO THE CREDIT OF GOVERNMENT DURING THE YEAR UNDER C ONSIDERATION. THE LEARNED AO HAS FURTHER ERRED IN REDUCING RS. 10,40,253 FROM THE PR OFITS OF THE BUSINESS AND THEREBY REDUCING DEDUCTION U/S 10A/10B/10AA. GENERAL GROUNDS 11. THE LOWER INCOME TAX AUTHORITIES HAVE ERRED IN LEVYING A SUM OF RS.77,43,733 TOWARDS INTEREST UNDER SECTION 234A EVEN THOUGH THE RETURN OF INCOME WAS FILED WITHIN THE DUE DATE PRESCRIBED UNDER THE ACT. THE APPELLANT DENIES ITS LIABILITY TO PAY INTEREST. 12. THE LOWER INCOME TAX AUTHORITIES HAVE ERRED IN LEVYING A SUM OF RS. 42,36,34,219 /- TOWARDS INTEREST UNDER SECTION 234B. ON THE FACTS A ND IN THE CIRCUMSTANCES OF THE CASE, INTEREST UNDER SECTION 234B IS NOT LEVIABLE. THE AP PELLANT DENIES ITS LIABILITY TO PAY INTEREST. THE APPELLANT SUBMITS THAT EACH OF THE ABOVE GROUND S/ SUB-GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMI T, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT, THE TI ME OF HEARING, OF THE APPEAL, SO AS TO ENABLE THE INCOME-TAX APPELLATE TRIBUNAL TO DECIDE THE APPEAL ACCORDING TO LAW. THE APPELLANT PRAYS ACCORDINGLY. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. THE ASSESSEE IS A COMPANY AND ENGAGED IN THE BUS INESS OF SOFTWARE DEVELOPMENT, PROVIDING INFORMATION TECHNOL OGY ENABLED SERVICES, BPO INCLUDING CALL CENTRE SERVICES. IT FI LED ITS RETURN OF PAGE 6 OF 24 IT(TP)A NO.429 & 578/BANG/2015 INCOME ON 06/10/2010 DECLARING TOTAL INCOME OF RS.288,31,65,798/-. THE RETURN WAS PROCESSED UNDER SECTION 143 (1) OF THE ACT. 3. THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 10A, 10B, 10AA OF THE ACT AS UNDER: PARTICULARS DEDUCTION AMOUNT MPHASIS 10A 320,99,79,247 MPHASIS FINSOLUTIONS (MERGED INTO ASSESSEE) 10A 12,13,52,081 MPHASIS 10AA(4 UNITS) 2,10,16,39,388 MPHASIS 10B (8 UNITS) 3,37,43,69,464 TOTAL 880,73,40,180 4. SUBSEQUENTLY ASSESSEE REVISED ITS RETURN OF INCO ME ON 29/11/2011 ON ACCOUNT OF MERGER OF M/S.MPHASIS FINE SOLUTIONS LTD., WITH ASSESSEE W.E.F. 01.11.2009. 5. SUBSEQUENTLY, NOTICE UNDER SECTION 143 (2) AND 1 42 (1) WERE ISSUED IN RESPONSE TO WHICH, REPRESENTATIVE OF ASSE SSEE APPEARED BEFORE THE LD.AO AND FILED REQUISITE DETAILS AS CAL LED FOR. THE LD. AO OBSERVED THAT, ASSESSEE HAD INTERNATIONAL TRANSA CTION WITH ITS ASSOCIATED ENTERPRISES THAT EXCEEDED RS.15 CRORES A ND ACCORDINGLY A REFERENCE WAS MADE TO THE TRANSFER PR ICING OFFICER FOR DETERMINING ARMS LENGTH PRICE IN RESPECT OF THO SE INTERNATIONAL TRANSACTIONS. 6. ON RECEIPT OF REFERENCE UNDER SECTION 92CA OF TH E ACT, LD.TPO CALLED UPON ASSESSEE TO FILE ECONOMIC DETAIL S OF INTERNATIONAL TRANSACTIONS. LD.TPO OBSERVED THAT AS SESSEE HAD FOLLOWING INTERNATIONAL TRANSACTIONS AS MENTIONED I N FORM 3CEB: PAGE 7 OF 24 IT(TP)A NO.429 & 578/BANG/2015 SL.NO DESCRIPTION AMOUNT PAID(RS.) AMOUNT RECEIVED(RS.) 1. PURCHASE OF COMPUTERS EQUIPMENT, SERVERS AND RELATED ACCESSORIES 2,41,92,493 2 PURCHASE OF SOFTWARE LICENCES 2,45,19,997 3. PROVISION SERVICES 3170,18,14,860 4. SOFTWARE DEVELOPMENT & IT CONSULTANCY 242,79,84, 925 5. SOFTWARE DEVELOPMENT, ITES & IT CONSULTANCY 475,78,65,788 6. SELLING COMMISSION 93,53,07,973 7. SOFTWARE SUPPORT ANNUAL MAINTENANCE CHARGES,COMMUNICATION CHARGES AND OTHER EXPENSES SUCH AS TECHNICAL AND PROFESSIONAL SERVICES. USE OF SERVER AND SOFTWARE 196,48,07,913 8. OPERATING EXPENSES ALLOCATION 14,00,25,260 9. GENERAL ADMINISTRATION EXPENSE ALLOCATION 17,18 ,67,704 10. REIMBURSEMENT OF VARIOUS EXPENSES 19,02,96,505 11. RECOVERY OF VARIOUS EXPENSES 2,37,26,352 7. THE SEGMENTAL RESULTS OF THE REVENUE GENERATED U NDER SWD AND ITES SEGMENT AND IT OUTSOURCING SUPPORT SERVICE S ARE AS UNDER: SEGMENTAL RESULTS DESCRIPTION APPLICATION SERVICES (SWD) (RS.) ITES (RS.) IT OUTSOURCING (SUPPORT SERVICES) (RS.) OPERATING REVENUE 2662,46,27,000 291,99,93,000 836,73,53,000 OPERATING EXPENSES 1981,56,45,000 234,36,57,000 551,70,41,000 OPERATING PROFIT 680,89,82,000 57,63,36,000 285,03,12,000 OP/ EXPENSES 34.36% 24.59% 51.66% PAGE 8 OF 24 IT(TP)A NO.429 & 578/BANG/2015 8. THE LD.TPO OBSERVED THAT, ASSESSEE USED TNMM AS MOST APPROPRIATE METHOD FOR DETERMINING THE ARMS LENGTH PRICE OF THE SERVICES RENDERED. ASSESSEE USED OP/OC AS THE PLI A ND COMPUTED THE NET PROFIT MARGIN OF ASSESSEE AT 34.36 % FOR SWD SERVICES SEGMENT, 24.59% UNDER ITES SEGMENT AND IT OUTSOURCING (SUPPORT SERVICES) AT 51.66%. 9. THE COMPARABLES SELECTED BY ASSESSEE SWD AND ITE S SEGMENT AND IT OUTSOURCING SERVICE SEGMENT HAD AVER AGE MARGIN OF 11.26% ON SALES 18.52% AND 14.08% ON COST FOR IT ES AND IT OUTSOURCING SERVICES RENDERED. 10. THE LD.TPO DISSATISFIED WITH THE STUDY, CONDUC TED INDEPENDENT SEARCH FOR ALL THE 3 SEGMENTS, AND FOUN D THAT, THE MARGIN COMPUTED BY THE LD.TPO WAS LESS THAN THE MAR GIN COMPUTED BY ASSESSEE. LD.TPO THUS CONCLUDED SWD, IT ES SEGMENT AND IT OUTSOURCING SEGMENT TO BE AT ARMS LE NGTH. 11. THE LD.TPO FURTHER OBSERVED THAT, DURING THE YE AR UNDER CONSIDERATION ASSESSEE PAID CERTAIN AMOUNTS AS SELL ING COMMISSION AND NETWORKING CHARGES TO ITS AE. A NOTI CE WAS ISSUED TO ASSESSEE ASKING FOR THE DETAILS IN RESPEC T OF THESE PAYMENTS. ASSESSEE FILED VARIOUS SUBMISSIONS IN RES PECT OF ITS CONTENTIONS WHICH WERE REJECTED BY THE LD. TPO. THE LD. TPO COMPUTED ARMS LENGTH PRICE OF SELLING COMMISSION A T NIL ON THE GROUND THAT, THERE IS NO DIRECT AND TANGIBLE BENEFI T TO THE ASSESSEE FROM PAYMENT OF SELLING COMMISSION. IN RES PECT OF PAYMENT FOR NETWORK CHARGES, TECHNICAL AND PROFESSI ONAL SERVICES USE OF SERVER OF SOFTWARE, THE LD. TPO OBSERVED THA T CHARGING OF PAGE 9 OF 24 IT(TP)A NO.429 & 578/BANG/2015 MARKUP OF 8% - 10% BY AE IS WITHOUT ANY BASIS AND T HAT THESE TRANSACTIONS ARE IN THE NATURE OF REIMBURSEMENT. TH E LD. TPO THUS DETERMINED THE MARKUP ON COST AT NIL FOR THE NETWORKING CHARGES PAID. 12. THE LD.TPO ALSO COMPUTED NOTIONAL INTEREST ON O UTSTANDING RECEIVABLES FOR MORE THAN 180 DAYS AT THE RATE OF 1 4.74%. 13. THUS THE ADJUSTMENTS PROPOSED BY THE LD. TPO AR E AS UNDER: PARTICULARS TP ADJUSMENT SELLING COMMISSION 93,53,07,973 NETWORK CHARGES 22,75,19,231 NATIONAL INTEREST ON RECEIVABLE 92,33,451 TOTAL 117,20,60,655 14. ON RECEIPT OF THE TRANSFER PRISING ORDER THE LD .AO IN THE DRAFT ASSESSMENT ORDER MADE FOLLOWING ADDITIONS: RECOMPUTED DEDUCTION UNDER SECTION 10 A/10 B/10 AA OF THE ACT; WHILE COMPUTING EXPORT TURNOVER/TOTAL TURNOVER, THE LD.AO REDUCED FOREX GAIN ON HEDGING AND TELECOMMUNICATION EXPENDITURE INCURRED IN FOREIGN CURRENCY; DISALLOWED DEPRECIATION ON COMPUTER PERIPHERALS BY RESTRICTING IT TO 15% AS AGAINST 60% CLAIMED BY ASS ESSEE; ASSESSEE HAD MADE AN ADDITIONAL CLAIM VIDE LETTER D ATED 05/04/2013, WHEREIN CERTAIN INADVERTENT COMPUTATION AL ERRORS WERE POINTED OUT UNDER THE DEDUCTION COMPUTE D FOR SECTION 10A/10B/10AA. ASSESSEE HAD CLAIMED DEPRECI ATION ON GOODWILL ARISING DUE TO MERGER OF MPHASIS FINESO LUTIONS PAGE 10 OF 24 IT(TP)A NO.429 & 578/BANG/2015 INTO ASSESSEE AND ASSESSEE CLAIMED DEDUCTION DISA LLOWED FOR ASSESSMENT YEAR 2009-10 UNDER SECTION 40(A)(IA) OF THE ACT, AS THE TDS WAS REMITTED DURING THE YEAR UNDER CONSIDERATION. ALL THESE CLAIMS WERE INCORPORATED I N THE REVISED RETURN WHICH WORK REJECTED BY THE LD.AO. 15. THE LD.AO THUS COMPUTED PROPOSED ADJUSTMENT AT RS.6,46,47,17,384/- AS INCOME IN THE HANDS OF ASSES SEE, AFTER GIVING CREDIT TO TAXES PAID AND RAISED A DEMAND OF RS.106,26,14,503/-. 16. ON RECEIPT OF THE DRAFT ASSESSMENT ORDER, ASSES SEE RAISED OBJECTIONS BEFORE THE DRP. 17. DRP DIRECTED THE LD. AO TO RECOMPUTE EXPORT TUR NOVER FOR PURPOSES OF COMPUTING DEDUCTION UNDER SECTION 1 0A IN ACCORDANCE WITH THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS TATA ELXI LTD. , REPORTED IN 349 ITR 98 . HOWEVER, EXCLUSION OF THE ON-SITE DEVELOPMENT CHARG ES AND COMMUNICATION CHARGES FROM EXPORT TURNOVER FOR COMP UTING DEDUCTIONS UNDER SECTION 10 A/10 AA/10 B WAS NOT DE CIDED BY THE DRP. 18. IN TERMS OF THE DEPRECIATION CLAIMED AND THE AD DITIONAL CLAIM RAISED BY ASSESSEE, THE DRP DID NOT CONSIDER THE OBJECTIONS AS THESE DID NOT FORM PART OF THE ORIGIN AL RETURN OF INCOME. 19. IN RESPECT OF THE OTHER ISSUES THE DRP UPHELD T HE OBSERVATIONS OF THE LD. AO/TPO. PAGE 11 OF 24 IT(TP)A NO.429 & 578/BANG/2015 20. UPON RECEIPT OF THE DRP DIRECTIONS, THE LD. AO PASSED THE FINAL IMPUGNED ASSESSMENT ORDER, AGAINST WHICH BOTH ASSESSEE AS WELL AS REVENUE ARE IN APPEAL. 21. AT THE OUTSET, BOTH SIDES SUBMIT THAT THE ISSUE RAISED BY REVENUE IS NO MORE RESINTEGRA BY VIRTUE OF THE DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS HCL TECHNOLOGIES LTD. , REPORTED IN (2018) 404 ITR 719 . HONBLE SUPREME COURT UPHELD THE OBSERVATIONS OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS TATA ELXI LTD. (SUPRA) . ACCORDINGLY THE APPEAL FILED BY REVENUE STANDS DISM ISSED. ASSESSEES APPEAL: 22. GROUND NO. 4-6 RELATES TO THE ADDITION MADE ON ACCOUNT OF SELLING COMMISSION AND NETWORKING CHARGE S: 23. IT HAS BEEN SUBMITTED THAT DURING THE YEAR UNDE R CONSIDERATION ASSESSEE PAID FOLLOWING AMOUNTS AS SE LLING COMMISSION AND NETWORKING CHARGES TO ITS AE: SELLING COMMISSION - RS.93,53,07,973/- NETWORKING CHARGES - RS.183,67,34,437/- 24. THE LD.AR SUBMITTED THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING SOFTWARE DEVELOPMENT SERVICES TO DOMESTIC AND INTERNATIONAL CUSTOMERS AND ITS AES. THESE TRANSACTIONS ENTERED BY ASSESSEE ARE STRUCTURED UND ER 2 CATEGORIES BEING-: TYPE I: COMPOSITE CONTRACTS OF PERFORMING BOTH OFFS HORE AND ON-SITE SERVICES ENTERED BY ASSESSEE WITH THE E ND CUSTOMER AND OFFSHORE WORK SUB CONTRACTOR TO ASSESS EE PAGE 12 OF 24 IT(TP)A NO.429 & 578/BANG/2015 TYPE 2 COMPOSITE CONTRACTS FOR PERFORMING BOTH OFFS HORE AND ON-SITE SERVICES ENTERED BY THE ASSESSEE WITH T HE END CUSTOMER AND ON-SITE WORK SUBCONTRACTED TO AE TYPE III-COMPOSITE CONTRACTS FOR PERFORMING BOTH OF FSHORE AND ON-SITE SERVICES ENTERED BY ASSESSEE WITH THE E ND CUSTOMER AND OFFSHORE WORK ASSIGNED TO THE ASSESSEE . 25. IT WAS BEEN SUBMITTED THAT THE PAYMENTS MADE TO WARDS SELLING COMMISSION BY ASSESSEE TO ITS AE ARE AT A P ERCENTAGE OF TOTAL REVENUES AS PER THE TRANSFER PRICING POLICY O F MPHASIS LTD. THE LD.AR ALSO SUBMITTED THAT THE INTERNATIONAL TRA NSACTION PERTAINING TO PROVIDING OFFSHORE SOFTWARE DEVELOPME NT SERVICES TO AE AND AVAILING OF MARKETING AND ON-SITE SERVICES A RE CONSIDERED CLOSELY LINKED TO THE ACTIVITY OF PROVIDING SOFTWAR E DEVELOPMENT SERVICES AND HENCE THE SAME HAS TO BE ANALYSED BY U SING COMBINED TRANSACTION APPROACH. IT WAS ALSO SUBMITTE D THAT, THE MARGIN EARNED BY ASSESSEE ARE COMPARABLE TO MARGINS EARNED BY OTHER SERVICE PROVIDERS OPERATING IN INDIA AND THER EFORE THESE SERVICES ARE TO BE TREATED TO BE AT ARMS LENGTH. IN REGARDS TO NETWORKING CHARGES LD.AR SUBMITTED TH AT ASSESSEE PAID SUCH CHARGES FOR USING SOME TOOLS/SOFTWARE DEV ELOPED BY EDS INTERNATIONAL SINGAPORE PTE. ASSESSEE PAID MARK UP ON SUCH COST, AS THESE ARE DEVELOPED BY EDS SINGAPORE, WHIL E FOR OTHER COST, SUCH AS BT CIRCUIT AND GSM, NO MARKUP IS ADDE D SINCE THESE COSTS ARE RESULTED DUE TO THE CONTRACTS EDS S INGAPORE HAS WITH 3 RD PARTIES CUSTOMER. IT WAS SUBMITTED THAT, ALL THESE DETAILS PAGE 13 OF 24 IT(TP)A NO.429 & 578/BANG/2015 AND BREAKUPS OF THE MARKUP WERE PROVIDED TO THE AUT HORITIES BELOW, HOWEVER THE SAME WERE NOT APPRECIATED. 25.1 ON THE CONTRARY THE LD.CIT.DR SUBMITTED THAT A S PER AGREEMENT FOR SELLING AND MARKETING SERVICES DATED 01/04/2008 BETWEEN ASSESSEE AND ITS US AE IT IS MUTUALLY AGREE D THAT FEE FOR SERVICES RENDERED BY THE US AE WILL BE AT COST, ALL OCATED TO THE COMPANY TO WHICH PROFIT MARKUP WILL BE ADDED WHICH IS MUTUALLY AGREED. THE LD.CIT.DR FURTHER SUBMITTED THAT, THE S ERVICE FEE CHARGED TO THE TAXPAYER ON THE GROSS BILL IS WITHOU T NETTING OF THE RECEIVABLES THAT ARE PAYABLE BY THE AE TO ASSESSEE. SHE ALSO SUBMITTED THAT THE AGREEMENT DOES NOT DISCUSS ON WH AT SHALL BE THE COST BASE AND HOW THAT WILL BE ALLOCATED AND WH AT SHALL BE THE MARK UP. SHE THUS SUPPORTED THE ADDITION MADE IN THIS BY AUT HORITY BELOW. 26. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE US. 27. WE NOTE THAT, THE REASON FOR MAKING ADJUSTMENT IN THE HANDS OF ASSESSEE TOWARDS SELLING COMMISSION AND NE TWORKING CHARGES IS THAT, THERE IS NO BASIS FOR SUCH COST AL LOCATION. FURTHER THE DISALLOWANCE OF NETWORKING CHARGES IS ON THE BA SIS THAT THE AGREEMENT DOES NOT MENTION ABOUT THE MARKUP ON COST . 28. WE NOTE THAT THIS ISSUE HAS NOT BEEN DECIDED BY THE DRP THOUGH OBJECTION WAS RAISED. UNDER SUCH CIRCUMSTANC E WE DIRECT DRP TO CONSIDER THIS ISSUE BASED ON VARIOUS EVIDENC ES/DETAILS FILED BY ASSESSEE HAVING REGARDS TO VARIOUS JUDICIA L PAGE 14 OF 24 IT(TP)A NO.429 & 578/BANG/2015 PRONOUNCEMENTS PASSED BY HONBLE HIGH COURTS , IN ACCORDANCE WITH LAW. 29. NEEDLESS TO SAY THAT PROPER OPPORTUNITY OF BEIN G HEARD MUST BE GRANTED TO ASSESSEE IN ACCORDANCE WITH LAW. ACCORDINGLY, GROUNDS 4-6 STANDS ALLOWED FOR STATIST ICAL PURPOSES. 30. GROUND NO.7 HAS BEEN RAISED BY ASSESSEE IN RESP ECT OF ADDITION MADE ON ACCOUNT OF OUTSTANDING RECEIVABLES . 31. AT THE OUTSET THE LD.AR SUBMITTED THAT MARGIN H AS BEEN FOUND TO BE AT ARMS LENGTH BY USING TNMM AS MOST AP PROPRIATE METHOD. HOWEVER ADJUSTMENT WAS MADE IN RESPECT OF O UTSTANDING RECEIVABLES THAT EXCEEDED 180 DAYS AT 14.74% WITHOU T ADOPTING LIBOR AS A BASIS FOR BENCHMARKING. 32. LD.AR SUBMITTED THAT, AS TNMM IS USED AS MOST APPROPRIATE METHOD, THE OUTSTANDING RECEIVABLES GET SUBSUMED IN THE WORKING CAPITAL ADJUSTMENT AND THEREFORE SEPARA TE ADDITION IS NOT WARRANTED. 33. THE LD.CIT.DR PLACED RELIANCE ON VARIOUS DECISI ONS OF COORDINATE BENCHES OF THIS TRIBUNAL WHEREIN, THIS ISSUE IS REMANDED TO LD.AO FOR VERIFICATION IN ACCORDANCE WI TH LAW BASED ON THE EVIDENCES FILED BY ASSESSEE. 34. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH S IDES IN LIGHT OF RECORDS PLACED BEFORE US. 35. WE NOTE THAT, THE LD.AO HAS NOT LOOKED INTO VAR IOUS ASPECTS IN THE LIGHT OF THE EVIDENCES FILED BY ASSESSEE. TH E SUBMISSION BY LD.AR THAT UNDER TNMM THE WORKING CAPITAL ADJUSTMEN T PAGE 15 OF 24 IT(TP)A NO.429 & 578/BANG/2015 SUBSUMES THE OUTSTANDING RECEIVABLES, NEEDS TO BE V ERIFIED BY THE LD.AO/TPO. SEVERAL FACTORS NEED TO BE CONSIDERED B EFORE COMING TO THE CONCLUSION THAT THE RECEIVABLES FROM AE NEED S TO BE SEPARATELY BENCHMARKED. MOST IMPORTANTLY THE IMPACT THIS WOULD HAVE ON WORKING CAPITAL OF ASSESSEE WOULD HAVE TO B E STUDIED. IN THE EVENT ANY RECEIVABLES NEEDS TO BE SEPARATELY BENCHMARKED, WE DIRECT LD.AO/TPO TO COMPUTE THE INTEREST IN ACCO RDANCE WITH THE RATIO OF HONBLE DELHI HIGH COURT IN CASE OF CIT VS COTTON NATURALS INDIA PVT. LTD. REPORTED IN (2015) 276 CTR 445. 36. WITH THE ABOVE DIRECTIONS WE REMAND THIS ISSUE BACK TO THE LD.AO/TPO TO RECONSIDER THE ISSUE IN ACCORDANCE WI TH LAW. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS A LLOWED FOR STATISTICAL PURPOSES. 37. GROUND NO.8 IS RAISED BY ASSESSEE AGAINST NOT GRANTING DEDUCTION UNDER SECTION 10A/10AA/10B WITH RESPECT T O PROFITS ATTRIBUTABLE TOWARDS ON-SITE SOFTWARE DEVELOPMENT W ORK BEING SUB CONTRACTOR TO AN PERFORMED BY THE AES OVERSEAS. 38. LD.AR SUBMITTED THAT, ASSESSEE SUBCONTRACTED P ART OF ON- SITE SOFTWARE DEVELOPMENT ACTIVITY TO ITS ASSOCIATE D ENTERPRISE AND THAT THE RISK, REWARDS AND RESPONSIBILITIES OF THE OUTCOME OF THE SUB CONTRACTOR WORK CONTINUE TO REST WITH ASSESSEE. IT WAS SUBMITTED THAT, ASSESSEE HAS ENTERED INTO THE MAIN CONTRACT WITH THE FOREIGN CLIENT IN RESPECT OF THE WORK THAT WAS SUB CONTRACTED TO THE AE. LD.AR SUBMITTED THAT, LD. AO/TPO WRONGL Y HELD THAT ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTIO N PAGE 16 OF 24 IT(TP)A NO.429 & 578/BANG/2015 10A/10AA/10B IN RESPECT OF PROFITS ATTRIBUTABLE TO SUB CONTRACTING OF SOFTWARE DEVELOPMENT WORK. 39. THE LD.AR SUBMITTED THAT, COORDINATE BENCH OF T HIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 IN ITA NO.1209/B/2012 AND ITA NO.1168/B/2012 BY ORDER DATED 20/12/2013 HAS HELD THAT ASSESSEE IS NOT INVOLVED IN RENDERIN G OF TECHNICAL SERVICES AND THEREFORE NO EXPENDITURE INCURRED IN FOREIGN CURRENCY IS TO BE EXCLUDED FROM EXPORT TURN OVER IN COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT. T HIS VIEW HAS BEEN UPHELD BY HONBLE HIGH COURT IN 263-264/2014 BY ORDER DATED 29/07/2015 REPORTED IN (2015) 62 TAXMANN.COM 165 . ON THE CONTRARY, LD.CIT.DR RELIED ON ORDERS PASSED BY AUTHORITIES. 40. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE US. 41. WE NOTE THAT, THE LD.AO OPINED THAT, THE EXPEND ITURE INCURRED BY ASSESSEE IN FOREIGN CURRENCY HAS ALREAD Y BEEN FACTORED IN FOR THE PURPOSE OF ARRIVING AT PROFITS ATTRIBUTABLE TO ON-SITE DEVELOPMENT OF COMPUTER SOFTWARE OUTSIDE IN DIA AND THEREFORE WAS EXCLUDED FROM EXPORT TURNOVER FOR PUR POSE OF DETERMINING THE DEDUCTION UNDER SECTION 10A/10AA/10 B OF THE ACT. HONBLE HIGH COURT IN ASSESSEES OWN CASE (SUPRA) OBSERVED AS UNDER: 17. A PLAIN READING OF THE SAID NOTICE WOULD MAKE IT C LEAR THAT THE ASSESSING OFFICER HAS HIMSELF ACCEPTED THAT IT WAS ONLY SOME PART OF THE SOFTWARE DEVELOPMENT WHICH WAS CARRIED OUT 'ON- SITE' BY THE ASSESSEE, MEANING THEREBY THAT THE OTHER PART OF TH E CONTRACT WAS CARRIED OUT BY THE ASSESSEE 'OFF-SHORE' I.E., AT IT S SITE OR WORKPLACE IN PAGE 17 OF 24 IT(TP)A NO.429 & 578/BANG/2015 INDIA. SUCH BEING THE POSITION, WE ARE OF THE CLEAR OPINION THAT IT WAS NOT THE ENTIRE CONTRACT WHICH WAS PASSED ON TO THE AE BY THE ASSESSEE BUT SOME PART OF IT WAS DONE BY THE ASSESS EE ITSELF IN INDIA AS 'OFF-SHORE' WORK AND THE REMAINING PART WAS SUB- CONTRACTED TO THE AE FOR 'ON-SITE' WORK. IT MAY BE RELEVANT TO NOTICE HERE THAT THE SUB- CONTRACTED PART CARRIED OUT 'ON- SITE' OUTSIDE INDI A BY THE SUB- CONTRACTOR, DID NOT HAVE THE PERSONNEL OF THE ASSES SEE BUT ADMITTEDLY THE SUPERVISION AND CONTROL (WITH REGARD TO THE QUA LITY AND SPECIFICATIONS OF THE WORK TO BE DONE) WAS WITH THE ASSESSEE THROUGH ITS PROJECT MANAGER, AS WOULD BE CLEAR FROM THE TER MS OF THE MSA. IN FACT, ASSESSEE HAD ALSO RIGHT TO REJECT SUCH ACTIVI TIES OF AE, IF IT DID NOT CONFORM TO SPECIFICATION AGREED TO IT UNDER THE CON TRACT. 18. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF MASTER SERVICE AGREEMENT WHICH WAS ENTERED INTO BETWEEN THE ASSESS EE AND THE AE, WHICH ADMITTEDLY WAS A GROUP COMPANY OF THE ASSESSE E. THE TERMS OF THE MSA RELATE TO THE 'ON-SITE' WORK WHICH WAS TO B E CARRIED OUT BY THE AE, ON BEHALF OF THE ASSESSEE. IN SUCH AGREEMENT, T HE TASK ORDER WAS TO BE GIVEN BY THE ASSESSEE TO THE AE, FOR WHICH TH E RESPONSIBILITY WAS OF THE AE, SUBJECT TO THE SUPERVISION AND ALL PERVA SIVE CONTROL OF THE ASSESSEE. THE PRODUCT WHICH WAS TO BE DELIVERED WOU LD BE THAT OF THE ASSESSEE, AFTER PAYMENT WAS MADE TO THE AE. AS SUCH , IT IS CLEAR THAT THE AE WAS CARRYING ON THE WORK UNDER THE SUPERVISI ON AND CONTROL OF THE ASSESSEE, AS WELL AS ON BEHALF OF THE ASSESSEE. THE PROPRIETORSHIP OF THE PRODUCT WAS ALSO TO REMAIN WITH THE ASSESSEE . 19. WE MAY EXPLAIN THE TRANSACTION WITH AN EXAMPLE. IF A TOTAL CONTRACT (TYPE II MODEL) WAS PROCURED BY THE ASSESS EE, SAY FOR AN AMOUNT OF RS.10 CRORES, FOR CARRYING ON THE WORK OF THE END CUSTOMER, OUT OF WHICH 'OFF SHORE' WORK WAS TO BE CARRIED OUT BY THE ASSESSEE TO THE EXTENT OF, SAY RS.8 CRORES AND THE REMAINING 'O N-SITE' WORK OF RS. 2 CRORES WAS SUB-CONTRACTED TO THE AE, THEN, THE QUES TION FOR CONSIDERATION WOULD BE WITH REGARD TO THE PROFITS E ARNED FROM 'ON-SITE' DEVELOPMENT WORK OF RS. 2 CRORES WHICH HAD BEEN SUB -CONTRACTED TO THE AE. THERE IS, ADMITTEDLY, NO DISPUTE WITH REGAR D TO PROFITS EARNED FROM 'OFF-SHORE' WORK CARRIED OUT BY THE ASSESSEE, AMOUNTING TO RS. 8 CRORES. FOR SUCH 'ON-SITE' DEVELOPMENT WORK, THE AS SESSEE HAS AN OPTION OF SENDING ITS OWN PERSONNEL FOR WHICH IT WI LL HAVE TO HAVE AN ESTABLISHMENT AT THE PLACE OF THE END CUSTOMER SITU ATE OUTSIDE INDIA, FOR WHICH IT MAY HAVE TO INCUR TRAVELLING AND OTHER EXPENSES FOR ITS PERSONNEL TO GO 'ON-SITE' OUTSIDE INDIA FOR PERFORM ING SUCH WORK; OR ON THE OTHER HAND, ANOTHER OPTION FOR THE ASSESSEE IS OF SUB-CONTRACTING THE 'ON-SITE' WORK TO AN AE WHICH HAS TO WORK UNDER THE SUPERVISION AND ALL PERVASIVE CONTROL OF THE ASSESSEE AND CARRY OUT THE 'ON-SITE' WORK ON BEHALF OF THE ASSESSEE AT THE PLACE OF THE END CUSTOMER. THE PAYMENT FOR 'ON-SITE' WORK DONE WOULD, IN SUCH A CA SE, BE MADE BY THE ASSESSEE TO THE AE AND NOT BY THE END CUSTOMER, WHO WOULD MAKE THE PAGE 18 OF 24 IT(TP)A NO.429 & 578/BANG/2015 ENTIRE PAYMENT OF RS.10 CRORES TO THE ASSESSEE. THE RE COULD BE A MARGINAL DIFFERENCE IN THE EXPENSES WHICH THE ASSES SEE WOULD HAVE INCURRED IF IT WOULD HAVE CARRIED OUT THE 'ON- SITE ' WORK THROUGH ITS OWN PERSONNEL AS AGAINST THE PAYMENT WHICH IS MADE TO T HE AE FOR DOING SUCH WORK, BUT SUCH DECISION OF PASSING ON PART OF THE WORK TO BE DONE BY A SUB-CONTRACTOR (AE) OR NOT, HAS TO BE TAKEN BY THE ASSESSEE AS A PRUDENT BUSINESSMAN KEEPING IN VIEW THE BUSINESS NE CESSITIES AND THE COMPARATIVE COST EFFECTIVENESS AND IT IS NOT FO R THE COURTS OR THE INCOME TAX AUTHORITIES TO DECIDE THE SAME. EVEN BY EXECUTING THE CONTRACT AS PER THE GIVEN EXAMPLE, THE BENEFIT OF F OREIGN EXCHANGE BEING BROUGHT INTO THE COUNTRY WOULD STILL BE THERE AND THUS THE OBJECT OF INSERTION OF SECTION 10A WOULD BE ACHIEVED. 20. THE QUESTION WHICH NOW REMAINS TO BE ANSWERED BY T HIS COURT IS THAT WOULD IT BE PERMISSIBLE FOR THE BENEFIT UNDER SECTION 10A TO BE GIVEN TO THE ASSESSEE IF THE 'ON-SITE' WORK CARRIED OUTSIDE THE COUNTRY IS NOT DONE THROUGH ITS OWN PERSONNEL. FOR THIS, WE MA Y REFER TO EXPLANATION-3 TO SECTION 10A, WHICH IS CLARIFICATOR Y IN NATURE AND DOES NOT LIMIT THE BENEFIT PROVIDED BY SECTION 10A BUT O NLY ENLARGES ITS SCOPE. IN THE SAID EXPLANATION, IT IS PROVIDED THAT THE PROFITS AND GAINS DERIVED FROM 'ON-SITE' DEVELOPMENT OF COMPUTER SOFT WARE OUTSIDE INDIA WOULD BE DEEMED TO BE PROFITS AND GAINS FROM THE EX PORT OF COMPUTER SOFTWARE OUTSIDE INDIA. BY THIS EXPLANATION, IT IS CLEAR THAT THE PROFITS AND GAINS WHICH ARE DERIVED FROM 'ON-SITE' DEVELOPM ENT OF COMPUTER SOFTWARE WOULD ALSO BE COVERED UNDER SECTION 10A OF THE ACT. WHAT WE NOTICE IS THAT THE MAIN SECTION 10A NO WHERE PRO VIDES THAT THE 'ON- SITE' WORK OF SOFTWARE DEVELOPMENT SHOULD BE CARRIE D OUT BY THE OWN PERSONNEL OF THE ASSESSEE. AS SUCH, IT WOULD BE WRO NG TO DENY THE BENEFIT UNDER THE SAID SECTION MERELY BECAUSE THE ' ON-SITE' WORK WAS NOT DONE BY THE PERSONNEL OF THE ASSESSEE AS WE ARE OF THE FIRM VIEW THAT AUTHORITIES OR COURTS ARE NOT TO READ SOMETHIN G INTO THE PROVISION OF LAW WHICH IS NOT THERE IN THE SECTION OR ITS EXP LANATION; MORE SO, IN THE CASE OF A BENEFICIAL PIECE OF LEGISLATION, AS I S THE PRESENT ONE. 21. WITH REGARD TO DENIAL OF BENEFIT OF SECTION 10A BE CAUSE OF THE PERSONNEL OF THE ASSESSEE HAVING NOT PERFORMED THE 'ON-SITE' WORK, EMPHASIS HAS BEEN LAID BY THE LEARNED COUNSEL FOR R EVENUE ON THE CIRCULAR NO.694 DATED 23.11.1994 ISSUED BY THE CENT RAL BOARD OF DIRECT TAXES (CBDT). THE RELEVANT PARAGRAPH 7 OF TH E SAID CIRCULAR IS REPRODUCED BELOW: 'SIMILARLY, FOR THE PURPOSE OF S.10A OR 10B, AS LON G AS A UNIT IN THE EPZ/EOU/STP ITSELF PRODUCES COMPUTER PROGRAMMES AND EXPORTS THEM, IT SHOULD NOT MATTER WHETHER THE PROG RAMME IS ACTUALLY WRITTEN WITHIN THE PREMISES OF THE UNIT. I T IS, ACCORDINGLY, CLARIFIED THAT, WHERE A UNIT IN THE EPZ/EOU/STP DEV ELOPS SOFTWARE SUR PLACE, THAT IS, AT THE CLIENT'S SITE A BROAD, SUCH UNIT SHOULD NOT BE DENIED THE TAX HOLIDAY UNDER S.10A OR 10B ON THE PAGE 19 OF 24 IT(TP)A NO.429 & 578/BANG/2015 GROUND THAT IT WAS PREPARED ON SITE, AS LONG AS THE SOFTWARE IS A PRODUCT OF THE UNIT, I.E., IT IS PRODUCED BY THE UN IT.' 22. IN OUR VIEW, THE SAID CIRCULAR IS IN FAVOUR OF THE ASSESSEE AND NOT AGAINST IT. LEARNED COUNSEL FOR REVENUE HAS LAID MU CH STRESS ON THE WORDINGS THAT THE ASSESSEE UNIT SHOULD HAVE PRODUCE D THE COMPUTER PROGRAMME BY ITSELF OR THAT IT SHOULD BE PRODUCED B Y THE UNIT OF THE ASSESSEE ITSELF. THERE IS NO DENIAL OF THE FACT THA T EVEN THE 'ON-SITE' WORK OF COMPUTER SOFTWARE DEVELOPMENT HAS BEEN DONE UNDER THE DIRECT SUPERVISION AND CONTROL OF THE ASSESSEE THRO UGH THE AE, WHICH WOULD BE NOTHING BUT ON BEHALF OF THE ASSESSEE 'ITS ELF'. AS INDICATED IN THE SAID CIRCULAR, 'ITSELF' WOULD NOT MEAN THAT PER SONNEL OF THE ASSESSEE WILL HAVE TO CARRY OUT THE WORK. HOWEVER, IT SHOULD BE THE PRODUCT OF THE ASSESSEE AND SINCE IN THE PRESENT CA SE, THE OWNERSHIP OF THE PRODUCT (SOFTWARE), AFTER PAYMENT BY THE ASS ESSEE FOR THE WORK DONE BY THE AE, WOULD BE OF THE ASSESSEE, THE SAME WOULD BE NOTHING BUT THE PRODUCT OF THE ASSESSEE AND NOT A PRODUCT O F AE. THE OTHER CIRCULAR DATED 17.1.2013 ON WHICH THE LEARNED COUNS EL FOR REVENUE HAS RELIED UPON, ALSO DOES NOT ANY WHERE SPECIFY TH AT THE PERSONNEL OF THE ASSESSEE SHOULD ONLY BE DEPUTED FOR CARRYING ON THE WORK. EVEN OTHERWISE, THE CIRCULARS ISSUED BY THE CBDT CANNOT OVER RIDE THE PROVISIONS OF THE ACT. IF THE MAIN SECTION OF THE A CT DOES NOT PROVIDE FOR THE BENEFIT TO BE GIVEN ONLY TO SUCH UNITS OR EXPOR TERS WHO CARRY OUT 'ON-SITE' WORK THROUGH ITS OWN PERSONNEL, THE SAME CANNOT BE READ INTO THE PROVISIONS OF SECTION 10A OF THE ACT. 23. THE SOLE GROUND FOR DENYING THE BENEFIT OF SECTION 10A BY THE ASSESSING OFFICER OR THE APPELLATE COMMISSIONER IS THAT 'ON-SITE' DEVELOPMENT OF COMPUTER SOFTWARE HAS NOT BEEN EXECU TED BY THE ASSESSEE ITSELF THROUGH ITS OWN PERSONNEL. SUCH INT ERPRETATION OF THE SECTION CANNOT BE ACCEPTED BECAUSE WHAT IS NOT THER E IN THE SECTION OR THE EXPLANATION, CANNOT BE READ INTO BY THE AUTHORI TIES OR BY THIS COURT. 24. LEARNED COUNSEL FOR THE REVENUE HAS ALSO SUBMITTED THAT THE CONDITIONS LAID DOWN IN SUB-SECTION (2) OF SECTION 10A OF THE ACT HAVE NOT BEEN FULFILLED BY THE ASSESSEE, WHICH HAVE TO B E STRICTLY CONSTRUED AND AS SUCH, THE ASSESSEE WOULD NOT BE ENTITLED TO THE BENEFIT OF SECTION 10A. ACCORDING TO THE LEARNED COUNSEL FOR T HE REVENUE, THE PRODUCTION OR MANUFACTURE SHOULD BE IN ANY FREE TRA DE ZONE AND IF THE SAME IS NOT DONE IN THE FREE TRADE ZONE, THE ASSESS EE WOULD NOT GET BENEFIT OF SUCH MANUFACTURE OR PRODUCE. THE BENEFIT IS SITE SPECIFIC AND NOT PROJECT SPECIFIC. ACCORDING TO HIM, ONLY SUCH P RODUCTION OR MANUFACTURE WHICH IS CARRIED AT THE SITE OF THE ASS ESSEE'S UNIT IN THE FREE TRADE ZONE WOULD ALONE BE ELIGIBLE FOR THE BEN EFIT UNDER SECTION 10A AND NOT SUCH PRODUCTION OR MANUFACTURE WHICH HA S BEEN CARRIED OUTSIDE OR BY A THIRD PARTY. A MERE READING OF SUB- SECTION (2) WOULD NOT BE SUFFICIENT. THE ENTIRE SECTION HAS TO BE REA D IN CONJUNCTION WITH PAGE 20 OF 24 IT(TP)A NO.429 & 578/BANG/2015 EXPLANATION 3, WHICH CLARIFIES THAT PROFITS AND GAI NS DERIVED FROM 'ON- SITE' DEVELOPMENT OF SOFTWARE OUTSIDE INDIA SHALL A LSO BE DEEMED TO BE PROFITS AND GAINS DERIVED FROM THE EXPORT OF SOFTWA RE OUTSIDE INDIA, AND SAME WOULD ALSO BE ENTITLED TO SUCH BENEFIT. IF THE INTERPRETATION, AS CONTENDED BY THE REVENUE IS ACCEPTED, THE VERY P URPOSE OF INSERTING EXPLANATION 3 TO SECTION 10A OF THE ACT W OULD BE LOST OR FRUSTRATED. 25. LASTLY, LEARNED COUNSEL FOR THE REVENUE HAS CONTEN DED THAT THERE IS NO NEXUS BETWEEN 'OFF-SHORE' PRODUCTION BY THE A SSESSEE IN INDIA AND 'ON-SITE' PRODUCTION BY THE AE OUTSIDE INDIA. H E RELIES ON THE FINDING OF THE ASSESSING OFFICER GIVEN IN THIS REGA RD, WHICH IS AS UNDER: 'HENCE THE PROFITS AND GAINS DERIVED FROM MODEL NO. 2 CANNOT BE DEEMED TO BE THE PROFITS AND GAINS OF THE ASSESSEE COMPANY W.R. TO EXPORT OF COMPUTER SOFTWARE OUTSIDE INDIA. TO BE PR ECISE, THE DEDUCTION IS AVAILABLE ONLY IF THE ON-SITE DEVELOPM ENT OF COMPUTER SOFTWARE IS EXECUTED BY THE ASSESSEE ITSELF THROUGH ITS OWN PERSONNEL. THE SUB-CONTRACTING OF 'ON SITE' PART OF THE SOFTWA RE DEVELOPMENT TO OTHER ENTITY AND THE RESULTANT PROFIT IS NOT COVERE D IN EXPLANATION 3 TO SECTION 10A OF IT ACT AND SUCH PROFITS AND GAINS WO ULD NOT QUALIFY FOR DEDUCTION UNDER SECTION 10A OF IT ACT. . FROM THE DISCUSSION ON RELEVANT PARAS OF THE MSA, I T IS FURTHER BROUGHT ON RECORD THAT THE EXECUTION OF OFF-SHORE PART OF T HE CONTRACT HAD GOT NOTHING TO DO WITH THE ON SITE WORK EXECUTED FROM A BROAD BY THE AES. THE EXECUTION OF OFF SHORE PART OF THE CONTRACT WAS ON A SEPARATE CHANNEL AND THE AES WERE NEVER INVOLVED IN ANY IMPL EMENTATION OF THE PRODUCT DEVELOPED BY THE ASSESSEE IN INDIA. THE AES WORKED INDEPENDENTLY WITH ITS OWN PERSONNEL AND CREATED IT S OWN INTELLECTUAL PROPERTIES I.E., SOFTWARE PRODUCT (DELIVERABLES). HENCE IT IS ABUNDANTLY CLEAR THAT THE ASSESSEE NEVE R INVOLVED EITHER DIRECTLY OR INDIRECTLY IN THE ON-SITE SOFTWARE DEVE LOPMENT ACTIVITY EXECUTED BY THE AES. EVEN IF IT IS INVOLVED ADMINIS TRATIVELY FOR CO- ORDINATION BETWEEN THE AES AND ITS CLIENTS IN GETTI NG THE CONTRACT EXECUTED, THE ASSESSEE SHALL NOT BE ELIGIBLE FOR DE DUCTION SINCE THE CORE FUNCTION OF SOFTWARE DEVELOPMENT FUNCTION WAS EXECUTED BY THE AES. NEITHER THE PLANT AND MACHINERY NOR THE EMPLOY EES OF THE STP UNIT WERE UTILIZED IN DEVELOPING THE SOFTWARE IN ON -SITE LOCATIONS ABROAD. THE SUB-CONTRACT WORK EXECUTED BY AES DID N OT HAVE ANY INDIAN CONNECTION ON THESE WORKS EXECUTED BY IT. TH E ASSESSEE HAS ATTEMPTED TO CLAIM EXEMPTION ON THE WORK EXECUTED B Y A FOREIGN ENTITY OVER WHICH THE PROVISIONS OF INDIAN INCOME TAX ACT, 1961 ARE NOT APPLICABLE.' 26. THE TRIBUNAL HAS CONSIDERED THIS ASPECT AND HAS CO ME TO THE CONCLUSION THAT THE ASSESSEE COMPANY WAS SOLELY RES PONSIBLE FOR THE PAGE 21 OF 24 IT(TP)A NO.429 & 578/BANG/2015 RISKS AND REWARDS ARISING OUT OF THE SUB-CONTRACT T O THE AE. IT HAS GIVEN A CLEAR FINDING THAT 'THE ASSESSEE IS SOLELY RESPONSIBLE FOR THE DISCHARGE OF ITS OBLIGATIONS UNDER THE CONTRACT TO THE CUSTOMER AND THE SUB-CONTRACTOR HAS NO SAY IN THE MATTER. IT IS SEEN FROM THE MASTER SERVICES AGREEMENT THAT IT IS THE ASSESSEE WHICH IS UNDER AN OBLIGATION TO DISCHARGE ITS OBLIGATION OF SPECIFIC REQUIREMENT OF THE CUSTOMER AND IN PURSUANCE THEREOF, TO PASS ON THE S PECIFICATION OF THE PRODUCTS TO THE AE AND ALSO TO RESERVE RIGHT TO REJ ECT THE PRODUCT IF THE AE DOES NOT PRODUCE THE PRODUCT IN CONFORMITY WITH THE PRODUCT AS GIVEN IN THE TASK ORDER. THEREFORE, IT CAN BE SAFEL Y CONCLUDED THAT THE DEVELOPMENT OF THE SOFTWARE BY THE AE IS UNDER THE SUPERVISION AND CONTROL OF THE ASSESSEE'. 27. FROM THE RECORD IT IS NOT BORNE OUT THAT THE ENTIR E 'ON-SITE' WORK HAS BEEN SUB-CONTRACTED TO THE AE. THE MSA PROVIDES FOR THE AE TO WORK UNDER TOTAL SUPERVISION AND CONTROL OF THE ASS ESSEE. THE SOFTWARE TO BE PRODUCED BY THE ASSESSEE DURING ITS 'ON-SITE' DEVELOPMENT HAS TO BE AS PER THE SPECIFICATIONS GIV EN BY THE ASSESSEE. THE AE HAS NO CONCERN OR DIRECT DEALING WITH THE EN D CUSTOMER. THE ASSESSEE PROVIDES ALL RELEVANT INFORMATION AND INPU TS TO THE AE ON BEHALF OF THE END CUSTOMER. THE AE IS ADMITTEDLY AN SWERABLE TO THE ASSESSEE AND NOT THE END CUSTOMER. IN SUCH NATURE O F THE WORK WHICH IS CARRIED ON BY THE AE ON BEHALF OF THE ASSESSEE, IT CANNOT BE SAID THAT THERE IS NO NEXUS BETWEEN 'OFF-SHORE' DEVELOPM ENT AND 'ON-SITE' DEVELOPMENT. 28. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE OPI NION THAT IN THE FACTS OF THE PRESENT CASE, THE INCOME EARNED BY THE ASSESSEE THROUGH 'ON- SITE' DEVELOPMENT OF SOFTWARE BY THE AE ON BEH ALF OF THE ASSESSEE, WOULD BE ELIGIBLE FOR DEDUCTION UNDER SECTION 10A O F THE ACT. 42. BASED ON THE ABOVE OBSERVATIONS BY HONBLE HIGH COURT , WE DIRECT THE LD.AO TO VERIFY THE MSA HAVING REGARD TO THE CONTRACT ENTERED INTO BY ASSESSEE WITH THE FOREIGN CLIENTS. IN THE EVENT THE SERVICES RENDERED BY AES UNDER THE TOTAL SUPERVISI ON OF ASSESSEE AND THAT THE ENTIRE RISK IN RESPECT OF THESE CONTRA CTS ARE OWNED BY ASSESSEE THEN THE EXPENDITURE DESERVES TO BE INC LUDED FOR THE PURPOSES OF COMPUTING DEDUCTION UNDER SECTION 10A/1 0AA/10B OF THE ACT AS THEY ARE ATTRIBUTABLE TO RENDERING OF SERVICES TO FOREIGN CLIENTS. PAGE 22 OF 24 IT(TP)A NO.429 & 578/BANG/2015 ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS A LLOWED FOR STATISTICAL PURPOSES. 43. GROUND NO.9 IS IN RESPECT OF DISALLOWANCE OF DEPRECIATION ON COMPUTER PERIPHERALS AT 60% AND RESTRICTING IT TO 1 5%. ADMITTEDLY, THIS ISSUE STANDS SETTLED BY DECISION O F HONBLE SPECIAL BENCH IN CASE OF DCIT VS DATACRAFT INDIA LTD. REPORTED IN (2010) 40 SOT 295. 44. WE THEREFORE DIRECT THE LD.AO TO GRANT DEPRECIA TION ON THE COMPUTER PERIPHERALS AT 60%. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS A LLOWED. GROUND NO. 10 ARE IN RESPECT OF THE ADDITIONAL CLAIMS RAISED BY ASSESSEE BEFORE THE LD. AO. 45. IT HAS BEEN SUBMITTED THAT DRP WRONGLY OBSERVED THAT ASSESSEE HAS NOT RAISED THESE CLAIM BY WAY OF REVIS ED RETURN AND THEREFORE THESE ISSUES HAVE NOT BEEN ADJUDICATED. 46. HOWEVER ON PERUSAL OF RECORDS WE NOTE THAT THES E ISSUES HAVE BEEN RAISED BY ASSESSEE BY WAY OF REVISED RETU RN FILED SUBSEQUENTLY. AS THESE ISSUES HAVE NOT BEEN CONSIDE RED BY DRP, WE REMAND THIS ISSUE TO DRP TO CONSIDER IT IN LIGHT OF EVIDENCES/DOCUMENTS FILED BY ASSESSEE IN ACCORDANCE WITH LAW. ACCORDINGLY GROUND NO. 10 RAISED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. 47. GROUND NO. 11-12 ARE CONSEQUENTIAL IN NATURE AND THEREFORE DO NOT REQUIRE ANY ADJUDICATION. ACCORDINGLY APPEAL FILED BY ASSESSEE STANDS ALLOWED AS INDICATED HEREIN ABOVE. PAGE 23 OF 24 IT(TP)A NO.429 & 578/BANG/2015 IN THE RESULT APPEAL FILED BY REVENUE STANDS DISMI SSED AND APPEAL FILED BY ASSESSEE STANDS ALLOWED AS INDI CATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JUNE, 2021 SD/- SD/- (CHANDRA POOJARI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 14 TH JUNE, 2021. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE PAGE 24 OF 24 IT(TP)A NO.429 & 578/BANG/2015 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -6-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -6-2021 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -6-2021 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -6-2021 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -6-2021 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -6-2021 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -6-2021 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS