DCIT Rg. - 3(1), MUMBAI V. M/s. ACCENTURE SERVICES P. LTD, MUMBAI

ITA 4540/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7232 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-01-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 04-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: RITIKA SACHADE
• Keywords: Transfer pricing; Business expenditure; International transaction; Bad and doubtful debts; Assessment record; Commercial expediency; Revenue expenditure; Capital expenditure; Set aside
• Section: 80HHC; 37(1); 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI R.K. GUPTA, J.M. AND SHRI A.L. GEHLOT, A.M. SL. NO. ITA NO. AY APPELLANT RESPONDENT 01 4540/M/08 2002-03 DY. COMMISSIONER OF INCOME-TAX, CIRCLE 3(1), ROOM NO. 607, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020 M/S ACCENTURE SERVICES PVT. LTD., 17 TH FLOOR, EXPRESS TOWER, NARIMAN POINT, MUMBAI 400 021 (PAN AACCA8897K) 02 5029/M/08 2003-04 INCOME TAX OFFICER, RANGE 3(1)(1), ROOM NO. 666, MK ROAD, AAYAKAR BHAVAN, MUMBAI 400 020. -DO- 03 4541/M/08 2002-03 DY. COMMISSIONER OF INCOME-TAX, CIRCLE 3(1), ROOM NO. 607, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020 M/S ACCENTURE INDIA PVT. LTD., 17 TH FLOOR, EXPRESS TOWER, NARIMAN POINT, MUMBAI 400 021 (PAN AABCA1826A) 04 5008/M/08 2003-04 -DO- -DO- 05 5009/M/08 2004-05 -DO- -DO- CROSS OBJECTIONS SL. NO. C.O. NO. AY CROSS OBJECTOR RESPONDENT 1 214/M/08 (IN ITA NO. 4540/M/08) 2002-03 M/S ACCENTURE SERVICES PVT. LTD., 17 TH FLOOR, EXPRESS TOWER, NARIMAN POINT, MUMBAI 400 021 (PAN AACCA8897K) DY. COMMISSIONER OF INCOME-TAX, CIRCLE 3(1), ROOM NO. 607, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020 2 47/M/09 (IN ITA NO. 5029/M/08) 2003-04 -DO- INCOME TAX OFFICER, RANGE 3(1)(1), ROOM NO. 666, MK ROAD, AAYAKAR BHAVAN, MUMBAI 400 020 ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 2 3 20/M/09 (IN ITA NO. 4541/M/08 2002-03 M/S ACCENTURE INDIA PVT. LTD., 17 TH FLOOR, EXPRESS TOWER, NARIMAN POINT, MUMBAI 400 021 (PAN AABCA1826A) DY. COMMISSIONER OF INCOME-TAX, CIRCLE 3(1), ROOM NO. 607, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020 4 44/M/09 (IN ITA NO. 5008/M/08 2003-04 -DO- -DO- 5 45/M/09 (IN ITA NO. 5009/M/08) 2004-05 -DO- -DO- REVENUE BY : MR. S.S. RANA ASSESSEE BY : MR. RAJAN VORA & MS. RITIKA SACHADE ORDER PER BENCH: THESE APPEALS FILED BY THE REVENUE ARE DIRECTED AG AINST THE ORDERS OF CIT(A) OF TWO DIFFERENT ASSESSES, NAMELY M/S ACCENTURE SERVICES PVT. LIMITED (IN SHORT ASPL) AND M/S ACCEN TURE INDIA PVT. LTD ( IN SHORT AIPL). THE ASSESSES ALSO FILED CROSS OBJECTIONS AGAINST THE ORDERS OF CIT(A). SINCE IDENTICAL ISSUES ARE IN VOLVED IN THESE APPEALS AND CROSS OBJECTIONS, THEY WERE HEARD TOGET HER AND, THEREFORE, FOR THE SAKE OF CONVENIENCE, A COMMON OR DER IS PASSED. ITA NO. 4540/M/08 :BY REVENUE IN (ASPL) 2. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) XXVII, PASSED ON 25.04.2008 FOR THE AY 2002-03. 3. GROUND NO. 1 IS AGAINST THE ACTION OF THE CIT(A) IN DELETING DISALLOWANCE OF RS. 1,29,16,425/- BEING EXPENSES IN CURRED BY THE ASSESSEE IN RESPECT OF M/S ACCENTURE ORGANISATION I NTERNATIONAL SERVICES AGREEMENT (SA). ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 3 4. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY INCORPORATED UNDER THE INDIAN COMPANIES ACT, 1956, IS ENGAGED IN PROVIDING A RANGE OF SOFTWARE DEVELOPMENT AND INFOR MATION TECHNOLOGY ENABLED SERVICES. THE ASSESSEE ALSO ENGA GED IN THE BUSINESS OF PROVIDING COORDINATED CONSULTING BUSINE SS TO ITS CLIENTS OPERATING ON A GLOBAL BASIS. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD DEBITED RS. 1, 29,16,425/- ON ACCOUNT OF PAYMENTS MADE FOR TECHNICAL SERVICES OBT AINED FROM M/S ACCENTURE PARTICIPATION BV, AMSTERDAM. ( IN SHORT APBV). M/S APBV BELONGED TO THE PARENT COMPANY OF THE WHOLE AC CENTURE GROUP OF COMPANIES. IT WAS EXPLAINED BY THE ASSESSEE TO T HE AO THAT DURING THE YEAR SERVICES WERE OBTAINED FROM VARIOUS GROUP COMPANIES ACROSS THE WORLD. THE SERVICES HAD ALSO B EEN RENDERED TO VARIOUS GROUP COMPANIES. IN ORDER TO STREAMLINE THE INTRA GROUP TRANSACTIONS, ALL THE TRANSACTIONS HAD BEEN ROUTED THROUGH COMMON PLATFORMS AND BILLED ACCORDINGLY. THE AO DID NOT AC CEPT THE ASSESSEES SUBMISSIONS FOR THE FOLLOWING REASONS: I) AS PER THE COPIES OF AGREEMENTS ENTERED INTO WIT H M/S APBV, THE AO NOTICED THAT TECHNICAL FEES HAVE BEEN WORKED OUT AND THE AMOUNT PAYABLE WAS WORKED OUT TOWARDS TECHNICAL FEE. AS PER THE AGREEMENT THERE ARE 8 HEA DS CLASSIFIED FOR THE PURPOSE OF DETERMINING THE FEES PAYABLE. OUT OF THESE EIGHT, THE CHARGES UNDER SIX HEADS ARE BASED ON THE NET FEE (REVENUE) GENERATED BY THE ASSESSEE COM PANY. THE AO OBSERVED THAT IT IS BEYOND ANY REASONING OR LOGI C THAT ANY SERVICES OBTAINED BY AN ENTITY SHOULD BE QUANTIFIED BY THE RECEIPTS OF THE ENTITY. II) AS REGARDS THE REMAINING TWO HEADS, VIZ., PERS ONAL AND POLICIES AND EDUCATION DEVELOPMENT SERVICES, THE AO NOTICED THAT THESE ISSUED HAD BEEN EXAMINED IN THE CASE OF AN ASSOCIATE CONCERN OF THE ASSESSEE, NAMELY, M/S ACCE NTURE INDIA PVT. LTD. A COMPARISON OF THE CALCULATION OF THE FEE PAYABLE UNDER THIS TWO HEADS SHOWS THAT THERE IS NE ITHER ANY CONSISTENCY NOR ANY LOGIC BEHIND THE ALLOCATION OF THE ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 4 EXPENDITURE IN THE CASE OF THE ASSESSEE COMPANY OR ITS ASSOCIATE CONCERN. 4.1 THE AO CONCLUDED THAT THE ENTIRE SCHEME OF ARRA NGEMENT IS NOTHING BUT AN AFTER THOUGHT ADOPTED BY THE ASSESSE E TO REDUCE ITS INCOME BY DEBITING EXPENSES IN THE NAME OF TECHNICA L SERVICES OBTAINED FROM ITS PARENT ORGANISATION. THE CIT(A) D ELETED THE SAID ADDITION BY OBSERVING AS UNDER:- 2.20 I HAVE GONE THROUGH THE FACTS, MATERIAL ON REC ORD AND THE SUBMISSIONS MADE BY THE APPELLANT. I HAVE NOTED THA T A REFERENCE TO TPO IS SOUGHT IN CASES INVOLVING SPECI AL ATTENTION FROM A TRANSFER PRICING PERSPECTIVE. ONCE THE ARMS LENGTH PRICE ADOPTED BY THE APPELLANT HAS BEEN A SUBJECT MATTER OF ADEQUATE REVIEW BY THE TPO AND FOUND TO BE IN ORDER . I HAVE ALSO ANALYSED THE DECISION OF THE SPECIAL BENCH IN THE CASE OF AZTEC SOFTWARE AS RELIED UPON BY THE APPELLANT, AND AM OF THE VIEW THAT THE AO SHOULD BE BOUND BY THE ANALYSIS UN DERTAKEN AND ORDER PASSED BY THE TPO UNLESS THE AO CAN SATIS FACTORILY PROVE OTHERWISE. SINCE THE AO HAS NOT PLACED ANY MA TERIAL ON RECORD TO REBUT THE TPOS CONCLUSIONS, I AGREE WITH THE APPELLANTS CONTENTION THAT THE ORDER OF THE TPO SH OULD BE FOLLOWED AS REGARDS THE PAYMENTS MADE BY THE APPELL ANT UNDER THE ABOVE MENTIONED AGREEMENTS. 2.21 THE INCOME OF THE FOREIGN RECIPIENT ENTITIES U NDER THE SAME AGREEMENT HAS BEEN OFFERED TO TAX IN INDIA BY THE FOREIGN RECIPIENT ENTITY. FURTHER, THE APPELLANT HAS ITSELF OFFERED TO TAX IN INDIA THE AMOUNTS RECEIVED BY THE APPELLANT UNDE R THE AGREEMENT. THUS, THE TRANSACTION APPEARS TO BE A FA IR BUSINESS TRANSACTION AND SINCE THE RECEIPTS UNDER THE TRANSA CTION HAVE BEEN APPROPRIATELY OFFERED TO TAX IN INDIA, I DO NO T SEE ANY REASON WHY THE EXPENDITURE INCURRED UNDER THE ARRAN GEMENT SHOULD BE DISALLOWED. 2.22 FURTHER, I HAVE ANALYSED THE CASE OF ARTHUR AN DERSON ON WHICH RELIANCE HAS BEEN PLACED BY THE APPELLANT. TH E FACTS OF ASPLS CASE ARE SIMILAR TO AAS AND THE NATURE OF T HE SERVICES OBTAINED BY ASPL AND THE MANNER OF REMUNERATION FOR THE SAME UNDER THE ISA IS SIMILAR TO THE SERVICES RENDE RED TO AA UNDER THE MEMBER FIRM INTER-FIRM AGREEMENT AND THE REMUNERATION FOR THE SAME PAID BY AA. GIVEN THIS, I AM OF THE OPINION THAT THE EXPENDITURE INCURRED BY ASPL UNDER THE ISA SHOULD BE ALLOWED AS A DEDUCTION TO ASPL UNDER THE PROVISIONS OF SECTION 37(1) OF THE ACT. 2.23 THE APPELLANT HAS ACKNOWLEDGED THAT DATA FOR D IFFERENT PERIODS WAS ERRONEOUSLY SUBMITTED BY THE AIPL AND I TS GROUP COMPANY, ASPL. IN THIS REGARD IT HAS COME TO MY NOT ICE THAT THE JURISDICTION OF BOTH AIPL AND ASPL HAVE BEEN VE STED WITH THE SAME AO. AS SUCH ASSESSMENT RECORDS, FACTS AND OTHER ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 5 INFORMATIONS ARE ALREADY AVAILABLE WITH THE AO FOR COMPARATIVE EXAMINATION AND VERIFICATION. THE APPELLANT HAS LAT ER RECONCILED THE STATEMENT AND EVEN SUBMITTED A CERTI FICATE FROM THE CHARTERED ACCOUNTANT FOR THE SAME. THE BASIS OF ALLOCATION OF COSTS ADOPTED BY THE APPELLANT SEEMS FAIR AND RE ASONABLE. BASED ON THE ABOVE, I HEREBY DELETE THE ADDITION MA DE BY THE AO ON GROUND NO.2. 5. THE LEARNED DR HAS RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT THE CLAIM OF THE ASSESSEE IS NOT BUS INESS EXPENDITURE AND THE SAME WAS NOT REQUIRED FOR THE P URPOSE OF BUSINESS AT ALL. HE, FURTHER, SUBMITTED THAT WHAT T YPE OF SERVICES RENDERED AGAINST THE PAYMENT WAS NOT EXPLAINED BY T HE ASSESSEE. HE ALSO SUBMITTED THAT THE CIT(A) WRONGLY RELIED UP ON THE REPORT GIVEN BY THE TPO. THE LEARNED DR RELIED UPON THE JU DGMENT OF HONBLE SUPREME COURT IN THE CASE OF INDIAN MOLASSE S CO. LTD. V. CIT, [1959] 37 ITR 66(SC) WHERE IN IT HAS BEEN HELD THAT PUTTING ASIDE OF MONEY WHICH MAY BECOME EXPENDITURE ON HAPP ENING OF AN EVENT IS NOT ALLOWABLE EXPENDITURE. THE LEARNED DR HAS ALSO RELIED UPON THE JUDGMENT OF DALMIA DAIRY INDUSTRIES LTD. V . COMMISSIONER OF INCOME-TAX 241 ITR 9.(DELHI) WHERE IT WAS HELD THAT SALE CONSIDERATION TO BE SATISFIED BY EXPORT O F CEMENT--CEMENT NOT SUPPLIED--LITIGATION EXPENSES FOR REALISING VAL UE OF CEMENT AND INTEREST THEREON--NOT DEDUCTIBLE AS BUSINESS EXPEND ITURE-- THE LEARNED DR FURTHER SUBMITTED THAT THE BURDEN IS ON THE ASSESSEE TO ESTABLISH THAT THE EXPENDITURE HAS BEEN INCURRED FO R THE PURPOSE OF BUSINESS, FOR WHICH HE RELIED UPON THE FOLLOWING JU DGMENTS:- A. L.H. SUGAR FACTORY AND OIL MILLS (P.) LTD. V. CO MMISSIONER OF INCOME-TAX 1 25 ITR 293(SC) B. GOODLAS NEROLAC PAINTS LTD. V. COMMISSIONER OF I NCOME-TAX 137 ITR 58(BOMB) C. PARASMANI INVESTMENT CO.(P.) LTD. V. ACIT, 85 I TD 133(KOL) (TM) D. ANDREW YULE AND CO. LTD. V. COMMISSIONER OF INCO ME-TAX 49 ITR 57(CAL) E. RAM BAHADUR THAKUR LTD. V. COMMISSIONER OF INCOM E-TAX 261 ITR 390(KER) ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 6 6. THE LEARNED AR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF CIT(A) AND SUBMITTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION IN RESPECT OF AMOUNTS PAID UNDER ISA U/S 37(1) OF THE ACT, BEING LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURP OSE OF BUSINESS. THE LEARNED AR FURTHER SUBMITTED THAT THE EXPENDITU RE CANNOT BE DISALLOWED AS A DEDUCTION TO THE ASSESSEE ON THE BA SIS THAT THE EXPENDITURE INCURRED WAS NOT COMMERCIALLY EXPEDIENT AND REASONABLE FROM THE SUBJECTIVE STANDARD OF THE REVE NUE AUTHORITIES. THE EXPENDITURE CLAIMED BY THE ASSESSEE IS NOT IN T HE NATURE DESCRIBED UNDER SECTION 30 TO 36 OF THE ACT. THE EX PENDITURE IS ALSO NOT IN THE NATURE OF CAPITAL EXPENDITURE AND THE SA ME WAS NOT PERSONAL EXPENSES. THE EXPENDITURE INCURRED WAS WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE LEARNE D AR SUBMITTED THAT THE ACCENTURE GROUP ENTITIES HAVE RECOGNIZED T HE NEED TO ENTER INTO A COST CONTRIBUTION ACCOUNT IN ORDER TO PROVID E SEAMLESS AND UNIFORM HIGH QUALITY SERVICE TO THEIR MULTINATIONAL CLIENTS. IT IS FURTHER SUBMITTED THAT AS A RESULT OF ENTERING INTO THE CCA, THE ACCENTURE GROUP ENTITIES INCLUDING THE ASSESSEE (AS PL) HAVE AGREED TO MUTUALLY SHARE IN THE BENEFITS ARISING FROM THIS POOLING. ANTICIPATED BENEFITS ACCRUING TO THE PARTICIPATING ENTITIES INCLUDING THE ASSESSEE INCLUDE GLOBAL CONSISTENCY IN BUSINESS PRACTICES, ECONOMIES OF SCALE, IMPROVEMENTS IN EFFICIENCY AND PRODUCTIVITY, AND ACCESS TO THE SKILLS AND EXPERTISE FROM ALL PAR TS OF THE GLOBAL ORGANIZATION. THE LEARNED AR WHILE REFERRING CLAUS ES 3 TO 7 OF THE ISA, WHICH HAVE BEEN PLACED IN PAPER BOOK AT PAGES 4 TO 5 WHERE DETAILED ARRANGEMENT UNDER ISA WERE GIVEN. THE LEAR NED AR HAS ALSO REFERRED TO PAGES 8 TO 30 WHERE THE DETAILED D ESCRIPTION OF THE CATEGORIES OF SERVICES AND THE EXAMPLES OF SERVICES OBTAINED BY THE ASSESSEE WERE GIVEN. THE LEARNED AR SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED A DETAIL ED NOTE ON CCA UNDER ISA ALONG WITH THE NATURE OF SERVICES OBTAINE D UNDER CCA. THE ASSESSEE HAS ALSO OBTAINED A CERTIFICATE FROM T HE AUDITORS OF APBV CERTIFYING THAT THE AMOUNTS RECOVERED FROM THE ASSESSEE UNDER THE ISA ARE ACTUAL REIMBURSEMENTS OF ASSESSEE S PORTION OF THE COSTS INCURRED UNDER THE ISA. THE LEARNED AR FU RTHER SUBMITTED THAT TPO HAS HELD IN HIS ORDER ISSUED U/S 92CA(3) T HAT THE ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 7 INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSE SSEE, WHICH INTER-ALIA INCLUDES THE TRANSACTIONS UNDER THE ISA ARE AT ARMS LENGTH PRICE. AT PAGE 103 OF THE PAPER BOOK, A COPY OF THE SAID ORDER OF TPO HAS BEEN PLACED. THE LEARNED AR SUBMI TTED THAT THE ASSESSEE HAS SATISFIED ALL THE CONDITIONS OF SECTIO N 37(1) OF THE ACT, THEREFORE, THE CIT(A) HAS RIGHTLY ALLOWED THE DEDUC TION ON THE BASIS OF COMMERCIAL EXPEDIENCY AND REASONABLENESS OF THE EXPENDITURE. THE LEARNED AR IN SUPPORT OF HIS CONTENTION RELIED UPON THE FOLLOWING JUDGMENTS:- 1. CIT VS. MALAYALAM PLANTATIONS LTD., [1964] 53 I TR 140. 2. SASSON J. DAVID AND CO. (P.) LTD. V. CIT, [1979 ] 118 ITR 261. 3. CIT VS. DHANRAJGIRI RAJA NARASINGIRJI [1973], 9 1 ITR 544 4. INCOME TAX V. SALES MAGNESITE (PVT. LTD., [1995 ] 214 ITR 1 5. BOMBAY STEAM NAVIGATION CO. PVT. LTD. V. CIT [19 65] 56 ITR 52(SC). 6. CIT VS. CHANDULAL KESHAVLAL & CO. [1960] 38 ITR 601 7. CIT VS. PANIPAT WOOLEN AND GENERAL MILLS CO. LTD ., [1976] 103 ITR 66) (SC) 8. CIT VS. JAGANNATH KISONLAL [1956] 30 ITR 654 (BO M.) 9. SANJEEVI & CO. V. CIT, [1966] 62 ITR 156 (MAD.). 10. CIT V. RAMAN AND RAMAN LTD. [1966] 71 ITR 345 ( MAD.) 11. NEWTONE STUDIOS LTD. V. CIT [1955] 28 ITR 378 12. CIT V. HINDUSTAN MOTORS LTD. [1989] 175 ITR 411 (CAL.) 13. CIT VS. DEVELOPMENT TRUST PVT. LTD., [1992] 198 ITR 766 (ALL.) 14. AMARJOTHI PICTURES V. CIT [1968] 69 ITR 755 (MA D.) 15. CIT V. SHRIRAM PRAYAGDAS AND MAHADEO PRASAD [19 83] 144 ITR 883 (MP) 16. CIT VS. GOBALD MOTOR SERVICE (P) LTD. [1975] 10 0 ITR 240 (MAD.) 17. CIT VS. KAMAL & CO. [1993] 203 ITR 1038 (RAJ.) 18. CIT V. TIRRIHANNAH CO. LTD. [1992] 195 ITR 393 (CAL.) 19. CIT V. JAY ENGINEERING WORKS [1988] 172 ITR 341 (DEL.) 20. CIT V. ARTHUR ANDERSON & CO., 94 TTJ 736 (MUM.) ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 8 6.1 THE LEARNED AR SUBMITTED THAT THE FACTS IN THE CASE OF CIT VS. ARUTHUR ANDERSON & CO., 94 TTJ 736 (MUM.) ARE I DENTICAL TO THE FACTS OF THE CASE UNDER CONSIDERATION. THE LEAR NED AR SUBMITTED THAT THE CIT(A) HAS ALLOWED THE EXPENDITU RE ON THE BASIS THAT THE AMOUNTS OFFERED UNDER THE ISA HAS BEEN OFF ERED TO TAX IN INDIA BY THE FOREIGN ENTITIES AND THE TRANSACTIONS WERE FAIR BUSINESS TRANSACTIONS. THE LEARNED AR FURTHER SUBM ITTED THAT THE TPO IN HIS ORDER HELD THAT THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE UNDER THE ISA ARE AT ARMS LENGTH PRICE. T HE LEARNED AR SUBMITTED THAT THE REVENUE DID NOT PLACE ANY MATERI AL OR RECORD TO REBUT THE TPOS CONCLUSION AND AGAINST THE ORDER OF CIT(A). HE ACCORDINGLY, SUBMITTED THAT THE ORDER OF CIT(A) ON THIS ISSUE MAY BE CONFIRMED. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE CLAIM OF THE ASSESSEE IS UN DER 37(1) OF THE ACT. IN ORDER TO CLAIM DEDUCTION OF EXPENDITURE U/S 37(1) OF THE ACT, THE FOLLOWING CONDITIONS SHOULD BE SATISFIED: I) THE EXPENDITURE IN QUESTION SHOULD NOT BE OF THE NATURE DESCRIBED UNDER THE SPECIFIC PROVISIONS OF SECTION 30 TO 36. II) THE EXPENDITURE SHOULD NOT BE OF THE NATURE OF CAPITAL EXPENDITURE III) IT SHOULD NOT BE A PERSONAL EXPENDITURE. IV) THE EXPENDITURE SHOULD HAVE BEEN LAID OUT OR EX PENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSI NESS OR PROFESSION. 7.1 THE SCOPE OF EXPRESSION FOR THE PURPOSE OF BUS INESS OR PROFESSION IS WIDER IN SCOPE AND ITS RANGE IS WIDE . IT MAY TAKE NOT ONLY DAY-TO-DAY RUNNING OF BUSINESS BUT ALSO RATION ALIZATION OF ITS ADMINISTRATIVE AND MODERNIZATION OF ITS MACHINERY. IT MAY INCLUDE GLOBAL CONSISTENCY IN BUSINESS PRACTICES, ECONOMIES OF SCALE IMPROVEMENTS IN EFFICIENCY AND ITS PRODUCTIVITY AND ACCESS TO THE SKILLS AND EXPERTISE FROM ALL PARTS OF GLOBAL ORGAN IZATIONS. IN THE CASE UNDER CONSIDERATION, SERVICES COVERED UNDER IS A HAVE BEEN CLASSIFIED IN TO EIGHT DIFFERENT CATEGORIES, WHICH ARE THE GLOBAL ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 9 BUSINESS, STRATEGY, CLIENT BUSINESS DEVELOPMENT, KN OWLEDGE, QUALITY AND RISK MANAGEMENT, PERSONNEL AND POLICIES, COMMUN ICATION AND INFORMATION SERVICES, GLOBAL FACILITIES MANAGEMENT, FINANCE, LEGAL AND TAX SERVICES AND EDUCATION DEVELOPMENT SERVICES . UNDER THE PRESENT CIRCUMSTANCES OF THE BUSINESS, SUCH GLOBAL ARRANGEMENT IS NECESSARY FOR THE PURPOSE OF BUSINESS. THE EXPENDIT URE INCURRED FOR SUCH GLOBAL ARRANGEMENT IS ALLOWABLE EXPENSES U/S 3 7(1) OF THE ACT. IN ADDITION TO THAT, WE FIND THAT THE PAYMENT OF EX PENDITURE IS AT ARMS LENGTH DETERMINED BY THE TPO U/S 92CA(3) OF T HE ACT. WE DO NOT FIND ANY SUBSTANCE IN THE CASE OF THE REVENUE B ECAUSE WHEN AN INTERNATIONAL TRANSACTION AT ARMS LENGTH AS DETERMI NED BY THE TPO IN THE SAID TRANSACTION, IT CANNOT BE SAID THAT THE ASSESSEE HAS PAID THE PRICES UNDER THE SAID TRANSACTION WITHOUT OBTAINING ANY SERVICES. THE CONTENTION OF THE REVENUE IS BASELESS AND UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE EXPENDITUR E IS INCURRED FOR THE PURPOSE OF BUSINESS. THEREFORE, WE ARE OF THE V IEW THAT THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSE E. THUS, GROUND NO.1 OF THE REVENUE IS DISMISSED. 8. GROUND NO. 2 IS AGAINST THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWANCE OF EXPENSES OF RS. 10,42,394/- PAI D TO M/S LITTLE & CO. TOWARDS PROFESSIONAL FEES FOR REBRANDING EXER CISE AND REVIEW OF LEAVE AND LICENSE AGREEMENT U/S 35 OF THE ACT. 9. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS PAID RS. 10,42,394/- TO M/S L ITTLE & CO. ON ACCOUNT OF PROFESSIONAL FEES FOR REBRANDING EXERCIS E AND REVIEW OF LEAVE AND LICENSE ARRANGEMENT. THE AO NOTED THAT TH E ASSESSEE DID NOT SUBMIT ANY BREAK-UP FEES PAID SEPARATELY FOR RE BRANDING EXERCISE AND REVIEW OF LEAVE AND LICENSE AGREEMENT AS PER THE PROVISIONS OF SECTION 35B. THE AO DISALLOWED A SUM OF RS. 8,33,915/- BEING 4/5 TH OF THE EXPENSES OF RS. 10,42,394/-. THE CIT(A) DELETED THE SAID DISALLOWANCE BY OBSERVING A S UNDER:- I HAVE GONE THROUGH THE SUBMISSION. ON THE PERUSAL OF THE FACTS AND MATERIAL ON RECORD, IT APPEARS THAT AO HA S TREATED THE WHOLE EXPENDITURE AS PRELIMINARY EXPENSES IRRES PECTIVE OF THE FACT THAT SUCH EXPENDITURE ARE NOT IN THE NATUR E OF THE ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 10 EXPENSES INCURRED PRIOR TO THE COMMENCEMENT OF THE BUSINESS OR FOR THE PURPOSES OF EXTENSION OF THE APPELLANTS UNDERTAKING OR FOR THE PURPOSES OF SETTING UP A NEW INDUSTRIAL UNIT OF THE APPELLANT. HENCE, SUCH EXPENDITURE CANNOT BE CONSIDERED AS PRE LIMINARY EXPENSES WITHIN THE MEANING OF SECTION 35D(2) OF TH E ACT. IN VIEW OF THE ABOVE, I DELETE THE ADDITION MADE BY TH E AO. 10. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD. WE FIND THAT THE CIT(A) HAS GI VEN CATEGORICAL FINDING THAT EXPENSES INCURRED WERE WHOLLY AND EXCL USIVELY FOR THE PURPOSE OF BUSINESS, REVENUE IN NATURE AND EXPENDIT URE CANNOT BE CONSIDERED AS PRELIMINARY EXPENSES WHICH IS NEITHER CAPITAL EXPENDITURE NOR PERSONAL EXPENDITURE. THERE IS NO C ONTRARY MATERIAL ON THE RECORD. UNDER THE CIRCUMSTANCES, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE. 11. GROUND NO. 3 IS IN RESPECT OF DISALLOWANCE OF 3 0% OF CONVEYANCE & COMMUNICATION EXPENSES AS NOT FOR BUSI NESS EXPEDIENCY. 12. THE AO DISALLOWED 30% OF THE CONVEYANCE EXPENSE S OF RS. 2,99,903/-OUT OF TOTAL EXPENSES OF RS. 9,99,678/- A ND COMMUNICATION EXPENSES OF RS. 1,99,741/- OUT OF TOT AL EXPENSES OF RS. 6,65,803/- ON THE BASIS THAT THE SAME ARE NOT B USINESS EXPENSES, REIMBURSED BY THE ASSESSEE TO ITS EMPLOYE ES. THE CIT(A) AFTER CONSIDERING THE ASSESSEES SUBMISSIONS HELD A S UNDER:- 6.6 I HAVE GONE THROUGH THE FACTS AND MATERIAL ON R ECORD. I HAVE NOTED THAT AO HAS DISALLOWED THE EXPENDITURE O N AN AD- HOC BASIS AT 30%. THE ARGUMENTS OF THE APPELLANT CL EARLY INDICATE THAT SUCH EXPENDITURE IS INCURRED FOR THE PURPOSE OF BUSINESS ONLY AND WHOLE EXPENDITURE SHOULD BE ALLOW ED AS DEDUCTION. AS SUCH I DELETE THE ADHOC ADDITION MADE BY THE AO AS ABOVE. 13. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD. THERE IS NO CONTRARY MATERIAL ON RECORD NOR ANY THING AGAINST THE FINDINGS OF THE CIT(A) HAS BE EN POINTED OUT BY THE LEARNED DR AT THE TIME OF HEARING BEFORE US. IN THAT VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORD ER OF THE CIT(A) IN DELETING AD-HOC DISALLOWANCE MADE BY THE AO. ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 11 14. GROUND NO. 4 IS AGAINST THE ACTION OF THE CIT(A ) IN DELETING THE DISALLOWANCE OF RS. 5,09,958/- MADE BY THE AO O N ACCOUNT OF CUSTOMS DUTY AS REVENUE EXPENDITURE. 15. THE AO DISALLOWED THE AMOUNT OF RS. 5,09,958/- BEING CLEARANCE CHARGES FOR IMPORT DUTY PAID ON SERVERS B Y TREATING THE SAME AS CAPITAL IN NATURE. THE CIT(A) AFTER CONSIDE RING THE SUBMISSIONS OF THE ASSESSEE, DELETED THE SAID DISAL LOWANCE BY OBSERVING AS UNDER:- 7.10 AFTER GOING THROUGH THE SUBMISSION OF THE APP ELLANT AND FACTS ON RECORDS OF THE CASE, I AM OF THE VIEW THAT AMOUNT INCURRED ON ACCOUNT OF IMPORT DUTY WHICH IS PAID ON CERTAIN COMPUTER SPARE PARTS, MISCELLANEOUS EXPENSES, REIMB URSEMENT OF CONVEYANCE EXPENSES CAN NOT BE CAPITAL IN NATURE . SINCE THE SPARE PARTS PURCHASED ARE ALLOWED AS REVENUE EXPEND ITURE, CONTENTION OF THE AO TO TREAT SUCH EXPENSES AS CAPI TAL IS NOT VALID. ACCORDINGLY SUCH EXPENDITURE INCURRED IN RES PECT OF CUSTOMS DUTY CLEARANCE CHARGES SHOULD BE ALLOWED AS DEDUCTION UNDER THE ACT. 7.11 REGARDING THE CUSTOMS DUTY/CUSTOMS CLEARANCE CHARGES PAID TO EXEL INDIA PVT. LTD. (RS. 338,287) PERTAINS TO CUSTOMS DUTY PAID ON THE IMPORT OF COMPUTER SERVERS WHICH A RE NOT ASSET OF THE ASPL. THE SERVERS ARE IMPORTED FOR THE PURPOSE OF A PARTICULAR PROJECT WHICH IS AGAIN RE EXPORTED AND HENCE CANNOT BE TREATED AS AN ASSET OF THE ASPL. THE AOS CONTENTION TO TREAT THE AMOUNT OF RS. 60,645/- INCURRED TOWARD S ROUTINE CUSTOMS EXAMINATION CHARGES, HANDLING CHARGES AND DOCUMENTATION CHARGES FOR THE CENVAT CERTIFICATE AS CAPITAL IN NATURE IS NOT VALID. HENCE I HEREBY DELETE THE ADDI TION MADE BY THE AO. 16. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD. THE CIT(A) GAVE A FINDING AFTER CONSIDERING THE ASSESSEES SUBMISSION THAT THE CLAIM OF THE ASSESSE E IS A REVENUE EXPENSES INCURRED FOR THE PURPOSE OF BUSINESS. THE REVENUE HAD FAILED TO POINT OUT ANY CONTRARY MATERIAL AGAINST T HE FINDINGS OF THE CIT(A). IN THE LIGHT OF THAT FACT, WE INCLINE TO UP HOLD THE ORDER OF CIT(A) AND DISMISS THE GROUND RAISED BY THE REVENUE . 17. GROUND NO. 5 IS AGAINST THE DELETION OF DISALLO WANCE OF EXPENSES ON EMPLOYEES STOCK PURCHASE PLAN AS THE EX PENSES INCURRED FOR THE BENEFIT OF PARENT COMPANY. ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 12 18. THE ASSESSEE COMPANY INCURRED CERTAIN EXPENSES ON ACCOUNT OF PAYMENTS MADE BY IT FOR THE SHARES ALLOTTED TO I TS EMPLOYEES IN CONNECTION WITH THE ESPP. THE AO HAD DISALLOWED RS . 9,06,788/- INCURRED BY THE ASSESSEE ON THE GROUND THAT THIS EX PENDITURE IS NOT THE EXPENDITURE OF ASSESSEE COMPANY BUT THAT EXPEND ITURE IS OF PARENT COMPANY AND THE BENEFIT OF SUCH EXPENDITURE ACCRUES TO THE PARENT COMPANY AND NOT ASSESSEE. THE DISALLOWANCE M ADE BY THE AO HAS BEEN DELETED BY THE CIT(A) BY OBSERVING AS U NDER:- I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPELLAN T AND PERUSED THE MATERIAL ON RECORD AND NOTED THAT THE C OMMON SHARES OF ACCENTURE LTD. THE PARENT COMPANY, HAVE B EEN ALLOTTED TO THE EMPLOYEES OF ASPL AND NOT TO THE EM PLOYEES OF THE PARENT COMPANY. THOUGH THE SHARES OF THE PARENT COMPANY HAVE BEEN ALLOTTED, THE SAME HAVE BEEN GIVEN TO THE EMPLOYEES OF THE APPELLANT AT THE BEHEST OF THE APPELLANT. IT IS AN EXPENSE INCURRED BY THE APPELLANT TO RETAIN, MOTIVE AND AWA RD ITS EMPLOYEES FOR THEIR HARD WORK AND IS AKIN TO THE SA LARY COSTS OF THE APPELLANT. AS HAS BEEN POINTED OUT BY THE AP PELLANT, THIS IS A COMMON PRACTICE TO RETAIN AND MOTIVATE HA RD-WORKING EMPLOYEES WHICH IS BEING FOLLOWED BY ALL MAJOR COMP ANIES SUCH AS INFOSYS. FURTHER, THE AMOUNT THAT HAS BEEN CLAIMED BY THE APPELLANT IS THE DIFFERENCE IN THE MARKET PRICE OF THE SHARES OF ACCENTURE LTD AND THE EXERCISE PRICE OF SUCH SHA RES BY THE EMPLOYEES OF AIPL AND NOT THE ENTIRE SHARE PRICE OF THE SHARES ALLOTTED. FURTHER, SUCH SHARES HAVE NOT BEEN ISSUED OUT OF THE SHARE CAPITAL OF THE APPELLANT AND HENCE CANNOT BE SAID TO BE A CAPITAL EXPENDITURE. I HAVE ANALYSED THE DECISION O F SSI LTD. RELIED ON BY THE APPELLANT AND AM OF THE VIEW THAT THE SAME IS APPLICABLE TO THE APPELLANTS CASE. AS ARGUED BY TH E APPELLANT, SUCH EXPENSE IS A QUALIFIED BUSINESS EXPENDITURE AN D SHOULD BE ALLOWABLE IN COMPUTING THE TAXABLE INCOME OF THE APPELLANT. THIS ASPECT HAS BEEN UPHELD IN VARIOUS JUDICIAL PRE CEDENTS. BASED ON THE ABOVE, I AM OF THE OPINION THAT SUCH E XPENSES QUALIFY AS BUSINESS EXPENSES OF THE APPELLANT AND T HE APPELLANT SHOULD ACCORDINGLY BE GIVEN A DEDUCTION O N THIS ACCOUNT. ACCORDINGLY I HEREBY DELETE THE ADDITION M ADE BY THE AO ON GROUND NO. 9. 19. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD. THE CIT(A) HAS GIVEN A CATEGOR ICAL FINDING AFTER EXAMINING THE RELEVANT MATERIAL AND SUBMISSION OF T HE ASSESSEE THAT SHARES WERE ALLOTTED TO ITS EMPLOYEES AND NOT TO THE EMPLOYEES OF THE PARENT COMPANY. THE EXPENSES INCURRED BY THE ASSESSEE TO MOTIVATE AND AWARD ITS EMPLOYEES FOR THEIR HARD WOR K, WHICH ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 13 AMOUNTS SALARY COST OF THE ASSESSEE COMPANY. THE EX PENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOSE OF BUSINES S ON EMPLOYEES IS ALLOWABLE EXPENSES. THE CIT(A) HAS EXAMINED THE ENTIRE SCHEME AND FOUND THAT SUCH EXPENSES ARE BUSINESS EXPENSES AND SHOULD BE ALLOWABLE AS DEDUCTION. SINCE THERE IS NO CONTRARY MATERIAL TO THE FINDINGS OF THE CIT(A), IN THE LIGHT OF THAT WE CO NFIRM THE ORDER OF CIT(A) ON THIS ISSUE. 20. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. C.O. NO. 214/M/08 BY ASSESSEE(ASPL) 21. GROUND NOS. 1 & 2 RAISED IN C.O. ARE IN RESPECT OF DEDUCTION U/S 10A OF THE ACT. 22. THE LEARNED AR SUBMITTED THAT THERE IS NO DISPU TE THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 10A OF THE A CT. THE ASSESSEE FURNISHED RETURN DECLARING LOSS AND, THEREFORE, THE ASSESSEE DID NOT FURNISH AUDITORS REPORT IN FORM 56F ALONG WITH RET URN OF INCOME. THE LEARNED AR SUBMITTED THAT, AUDITORS REPORT IN FORM 56F WAS FURNISHED BEFORE THE CIT (A) AS THERE WAS POSITIVE INCOME ON ACCOUNT OF ADDITION MADE BY THE AO. THE LEARNED AR SUBMITTED THAT THESE ARE CONSEQUENTIAL TO THE EFFECT TO THE ISSUES RAISED IN THE REVENUES APPEAL. IF THE ISSUES RAISED BY THE REVEN UE IN ITS APPEAL ARE DECIDED AGAINST THE REVENUE, THERE WILL BE ASSE SSED LOSS AND UNDER THE CIRCUMSTANCES THE QUESTION OF FURNISHING CERTIFICATE IN FORM NO. 56F DOES NOT ARISE. THE LEARNED AR SUBMITT ED THAT GROUNDS NOS. 1 & 2 IN CO ARE CONSEQUENTIAL TO THE E FFECT OF REVENUES APPEAL. THE LEARNED AR FURTHER SUBMITTED THAT GROUND NOS. 3 & 4 IN RESPECT OF RS. 5,09,958/- TOWARDS CUS TOM DUTY PAID AND THE EXPENDITURE INCURRED TOWARDS EMPLOYEES SHAR E PURCHASE PLAN ARE IN SUPPORT OF ORDER OF CIT(A). 23. AFTER HEARING THE LEARNED DR AND AFTER CONSIDER ING THE FINDINGS GIVEN IN REVENUES APPEAL WHERE IN WE DISM ISSED THE REVENUE APPEAL, SINCE WE DISMISSED THE REVENUE APPE AL AND THE CO ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 14 BY ASSESSEE IS CONSEQUENTIAL TO THE REVENUES APPEA L, THE CO FILED BY THE ASSESSEE BECOMES INFRUCTUOUS, THEREFORE, THE CO IS DISMISSED AS INFRUCTUOUS. ITA NO. 5029/M/08 BY REVENUE & C.O. 47/M/09 BY ASSE SEE (ASPL) 24. THIS APPEAL FILED BY THE REVENUE AGAINST THE OR DER OF CIT(A)- XXVII, MUMBAI PASSED ON 21.05.2008 FOR THE ASSESSME NT YEAR 2003-04. 25. GROUND NO. 1 IS AGAINST THE DELETION OF DISALLO WANCE U/S 10A OF REIMBURSEMENT OF EXPENSES OF RS. 19,81,27,943/- MADE BY THE AO. 26. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTIC ED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 10A OF THE ACT A MOUNTING TO RS. 39,94,62,356/-. THE AO NOTICED THAT THE ASSESSE E DID NOT FURNISH ANY DETAILS REGARDING RECEIPTS FROM REIMBUR SABLE EXPENSES. THE AO WAS OF THE VIEW THAT THE ASSESSEE HAD NOT BE EN ABLE TO PROVE THE REIMBURSABLE EXPENSES ARE DERIVED FROM EX PORT OF SOFTWARE AND IT ENABLES SERVICES AND, THEREFORE, CA NNOT BE CONSIDERED AS EXPORT TURNOVER. THE AO, ACCORDINGLY, DISALLOWED DEDUCTION U/S 10A ON THE TOTAL AMOUNT OF RS. 19,81, 27,943/-. THE CIT(A) DIRECTED THE AO TO COMPUTE DEDUCTION U/S 10A OF THE MUMBAI UNDERTAKING OF THE ASSESSEE BY LEAVING THE P ROFITS OF THE UNDERTAKING AS REPORTED BY THE ASSESSEE IN ITS RETU RN OF INCOME UNTOUCHED BUT REDUCING ONLY THE REIMBURSEMENT OF TELECOMMUNICATION CHARGES OF RS. 18,382,911/- FROM THE EXPORT TURNOVER AS WELL AS THE TOTAL TURNOVER OF THE MUMBA I UNDERTAKING OBSERVING AS UNDER:- I HAVE GONE THROUGH THE FACTS, MATERIAL ON RECORD A ND SUBMISSION MADE BY THE APPELLANT AND AM OF THE FOLL OWING VIEW: 1.28 I AM OF THE OPINION THAT THE APPELLANT IS CORR ECT IN CONTENDING THAT THE RECEIPTS FROM REIMBURSABLE EXPE NSES AMOUNTING TO RS. 198,127,943/- RELATE TO THE BUSINE SS OF THE ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 15 MUMBAI UNDERTAKING WHICH IS ELIGIBLE FOR THE DEDUCT ION UNDER SECTION 10A. IT CANNOT BE SAID THAT THE RECEIPTS FR OM THE REIMBURSABLE EXPENSES DO NOT RELATE TO THE BUSINESS OF DEVELOPMENT AND EXPORT OF COMPUTER SOFTWARE WHEN TH E STP UNIT OF THE APPELLANT WHICH HAS INCURRED THIS EXPEN DITURE IS ENGAGED SOLELY IN THIS BUSINESS AND SUCH EXPENSES H AVE BEEN INCURRED IN THE COURSE OF SUCH BUSINESS. THE DECISI ONS CITED BY THE APPELLANT IN ITS SUBMISSIONS SQUARELY APPLY TO ITS CASE ON THIS ISSUE. 1.29 I ALSO AGREE WITH THE APPELLANTS CONTENTION T HAT WHAT CAN SOUGHT TO BE EXCLUDED FROM THE COMPUTATION OF S ECTION 10A DEDUCTION IS ONLY THE PROFIT ELEMENT IN THE REIMB URSABLE EXPENSES. IT IS A WELL SETTLED PRINCIPLE THAT PROFI T OF A TRADE OR BUSINESS IN THE SURPLUS BY WHICH THE RECEIPTS FROM TRADE OR BUSINESS EXCEEDED THE EXPENDITURE NECESSARY FOR THE PURPOSE OF EARNING THOSE RECEIPTS. THE TAX IS UPON INCOME, PROFITS OR GAINS; IT IS NOT A TAX ON GROSS RECEIPTS. 1.30 BASED ON THE ABOVE, I SEE NO REASON WHY THE RE CEIPTS CLASSIFIED UNDER THE HEAD REIMBURSABLE EXPENSES A MOUNTING TO RS. 198,127,943/- SHOULD NOT BE INCLUDED IN THE PROFITS OF THE MUMBAI UNDERTAKING OF THE APPELLANT FOR THE PUR POSES OF COMPUTING THE DEDUCTION U/S 10A. 1.31 I ALSO AGREE WITH THE APPELLANTS CONTENTION T HAT THE AMOUNT OF REIMBURSABLE EXPENSES (EXCEPT THE REIMBUR SEMENT OF TELECOMMUNICATION CHARGES AMOUNTING TO RS. 18,382,9 11) SHOULD NOT BE EXCLUDED FROM THE EXPORT TURNOVER OF THE MUMBAI UNDERTAKING FOR THE PURPOSES OF SECTION 10 COMPUTAT ION. THESE RECEIPTS ARE NOWHERE SPECIFIED IN EXPLANATION 2(IV) OF SECTION 10A OF THE ACT WHICH DEFINES EXPLICITLY AS TO WHAT IS TO BE REDUCED FROM EXPORT TURNOVER OF THE UNDERTAKING. 1.32 HOWEVER, GIVEN THAT EXPLANATION 2(IV) TO SECTI ON 10A OF THE ACT CLEARLY MENTIONS THAT TELECOMMUNICATION CHA RGES ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE O UTSIDE INDIA SHOULD BE EXCLUDED FROM THE EXPORT TURNOVER, I AGRE E WITH THE CONTENTION OF THE AO THAT THE REIMBURSEMENT OF TELECOMMUNICATION CHARGES AMOUNTING TO RS. 18,182,9 11 SHOULD BE REDUCED FROM THE EXPORT TURNOVER OF THE M UMBAI UNDERTAKING FOR THE PURPOSES OF COMPUTING THE DEDUC TION U/S 10A. 1.33 I HAVE ALSO GONE THROUGH THE DECISIONS CITED B Y THE APPELLANT IN SUPPORT OF ITS CONTENTION THAT WHERE C ERTAIN ITEMS ARE EXCLUDED FROM THE EXPORT TURNOVER OF THE MUMBAI UNDERTAKING, THE SAME SHOULD ALSO BE REDUCED FROM T HE TOTAL TURNOVER OF THE UNDERTAKING ON THE PRINCIPLES OF PA RITY FOR THE PURPOSE OF COMPUTATION OF SECTION 10A DEDUCTION. I AGREE WITH THE APPELLANTS CONTENTION ON THIS ISSUE. 1.34 BASED ON THE ABOVE, I HEREBY DIRECT THE AO TO COMPUTE THE SECTION 10A DEDUCTION OF THE MUMBAI UNDERTAKING OF THE ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 16 APPELLANT BY LEAVING THE PROFITS OF THE UNDERTAKING AS REPORTED BY THE APPELLANT IN ITS RETURN OF INCOME MENTIONED AND REDUCING THE REIMBURSEMENT OF TELECOMMUNICATION CHA RGES OF RS. 18,382,911/- FROM THE EXPORT TURNOVER AS WELL A S THE TOTAL TURNOVER OF THE MUMBAI UNDERTAKING. 27. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF C IT(A) IN DIRECTING AO TO ALLOW CLAIM OF THE ASSESSEE U/S 10A IN RESPECT OF REIMBURSEMENT OF EXPENSES OF RS. 17,81,27,943 (19,8 1,27,943- 1,83,82,911) BY ALLOWING THE SAID RECEIPTS TO BE IN CLUDED IN THE EXPORT TURNOVER. THE ASSESSEE VIDE GROUND NOS. 1 TO 3 IN C.O. AGAINST THE FINDINGS OF THE CIT(A) THAT REIMBURSEME NT OF EXPENSES ON ACCOUNT OF TELECOMMUNICATION CHARGES RS 1,83,82, 911/- ARE HELD TO BE NOT ELIGIBLE FOR DEDUCTION U/S 10A. IN G ROUND NO. 2 IS AGAINST THE DIRECTIONS OF THE CIT(A) TO AO TO REDUC E THE REIMBURSEMENT TELECOMMUNICATION EXPENSES OF FROM EX PORT TURNOVER AND TOTAL TURNOVER AND IN GROUND NO. 3 WIT HOUT PREJUDICED TO THE GROUND NO. 1 & 2, THE REIMBURSEME NT OF EXPENSES SHOULD BE EXCLUDED FROM THE EXPORT TURNOVER AND TOT AL TURNOVER. 28. THE LEARNED DR RELIED UPON THE ORDER OF AO WHER E AS THE LEARNED AR RELIED UPON THE ORDER OF CIT(A) AND SUBM ITTED THAT THE ASSESSEE COMPANY INCURRED CERTAIN EXPENSES IN THE C OURSE OF UNDERTAKING ITS BUSINESS OF DEVELOPMENT AND EXPORT OF COMPUTER SOFTWARE AND INFORMATION TECHNOLOGY (IT) ENABLED SE RVICES , WHICH IS ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT. THE LEAR NED AR FURTHER SUBMITTED THAT THE ABOVE EXPENSES HAD SPECIFICALLY INCURRED BY THE ASSESSEE IN THE COURSE OF UNDERTAKING ITS BUSINESS ELIGIBLE FOR DEDUCTION U/S 10A HAVE INITIALLY BEEN DEBITED BY TH E ASSESSEE UNDER VARIOUS EXPENSE HEADS IN THE PROFIT & LOSS A/ C. THESE EXPENSES HAVE BEEN SUBSEQUENTLY REIMBURSED BY ASSES SEES CLIENTS TO ASSESSEE AT ACTUAL WITHOUT PROFIT ELEMENT AND TH E SAME HAS BEEN DISCLOSED UNDER THE HEAD REIMBURSEMENT EXPENSES IN THE P&L A/C OF ASSESSEE IN THE YEAR UNDER CONSIDERATION. THE LE ARNED AR SUBMITTED THAT THE ABOVE METHOD OF ACCOUNTING ADOPT ED BY THE ASSESSEE HAS ALSO BEEN DISCLOSED IN SCHEDULE 13 SIGNIFICANT ACCOUNTING POLICIES UNDER THE HEAD REIMBURSABLE E XPENSES. THE LEARNED AR SUBMITTED THAT RECEIPTS PERTAINING TO TH E REIMBURSABLE ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 17 EXPENSES ARE DIRECTLY RELATABLE TO AND DERIVED FROM THE BUSINESS OF DEVELOPMENT AND EXPORT OF COMPUTER SOFTWARE AND IT ENABLES SERVICES AS UNDERTAKEN BY THE MUMBAI UNDERTAKING OF ASSESSEE. THE REIMBURSABLE EXPENSES PRIMARILY CONSIST OF THE FOLLOWING: I) TRAVEL COST II) VISA EXPENSES III) HARDWARE OR SOFTWARE PURCHASE FOR SPECIFIC PR OJECTS IV) REIMBURSEMENT OF TELECOMMUNICATION CHARGES (AMO UNTING TO RS. 18,382,911); AND V) COST CONTRIBUTION POOL REIMBURSEMENTS. 28.1 THE LEARNED AR SUBMITTED THAT THE MANNER IN WH ICH THE RECEIPTS RELATING TO THE REIMBURSABLE EXPENSES HAVE BEEN TREATED IN THE COMPUTATION OF TOTAL INCOME BY THE ASSESSEE AS IT BECOMES EVIDENT THAT THESE RECEIPTS ARE INEXTRICABLY LINKED TO THE BUSINESS OF DEVELOPMENT AND EXPORT OF COMPUTER SOFTWARE AND IT ENABLED SERVICES UNDERTAKEN BY THE MUMBAI UNDERTAKING OF AS SESSEE. THE LEARNED AR SUBMITTED THAT FOR THE PURPOSES OF COMPU TATION OF DEDUCTION U/S 10A OF THE ACT, THE ASSESSEE HAS INCL UDED THE RECEIPTS IN RESPECT OF THE REIMBURSABLE EXPENSES IN THE PROFITS OF THE BUSINESS OF THE MUMBAI UNDERTAKING AS WELL AS T HE EXPORT TURNOVER AND THE TOTAL TURNOVER OF THIS UNDERTAKING . THE LEARNED AR SUBMITTED THAT THE AO HAS WRONGLY TAXED THE GROSS A MOUNT OF THE REIMBURSABLE EXPENSES RELATING TO THE MUMBAI UNDERT AKING ON THE BASIS THAT SUCH RECEIPTS ARE NOT DERIVED FROM THE E LIGIBLE BUSINESS OF THE ASSESSEE. THE LEARNED AR HAS RELIED UPON THE FOLLOWING DECISIONS AND SUBMITTED THAT THE ASSESSEE IS ENTITL ED FOR DEDUCTION U/S 10A IN RESPECT OF REIMBURSABLE EXPENSES: 1. CIT VS. ALFA LAVAL INDIA LTD., 295 ITR 451 (SC) 2. INDIAN COMMUNICATION NETWORK LTD. V. INSPECTING ASSISTANT COMMISSIONER, 50 ITD 411 (DELHI SB) 3. SAMTEX FASHIONS LTD. ACIT, 92 ITD 535 (DELHI ITA T) 4. ITAT MUMBAI DECISION IN THE CASE OF BEST EXPORTS CENTRE PVT. LTD., ITA NO. 5753/MUM/03. 5. SONY INDIA, 114 ITD 448 (DELHI ITAT) 6. BANGALORE ITAT IN THE CASE OF ACIT V. MOTOROLA I NDIA ELECTRONICS PVT. LTD., 295 ITR 376 ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 18 7. AHMEDABAD ITAT IN THE CASE OF PRIYANKA GEMS VS. ACIT, 94 TTJ 557 8. JCIT V. SUDITI INDUSTRIES LTD., ITA NO. 3490/MUM /2000 (MUM ITAT) 9. M/S PADHROD V. ITO, ITA NO. 4191/M/2004 (MUM ITA T) 10. CIT V. ELTEK SGS (P) LD., 215 CTR 279 (DEL) 11. SHAH ORIGINALS V. ACIT, 112 TTJ 754 (MUM ITAT) 28.2 THE LEARNED AR SUBMITTED THAT WITHOUT PREJUDIC E TO THE ABOVE SUBMISSIONS, SUBMITTED THAT IF IT IS HELD THAT THE RECEIPTS FOR THE REIMBURSABLE EXPENSES ARE NOT ELIGIBLE FOR DEDUCTIO N U/S 10A OF THE ACT, ONLY PROFITS, IF ANY, RELATING TO SUCH REIMBUR SABLE EXPENSES SHOULD BE CONSIDERED AS BEING NOT ELIGIBLE FOR DEDU CTION U/S 10 OF THE ACT. THE LEARNED AR IN SUPPORT OF HIS SUBMISSIO NS RELIED UPON THE FOLLOWING JUDGMENTS:- 1. LALSONS ENTERPRISES V. DCIT, 89 ITD 25 (DEL.) 2. CIT V. PUNJAB STAINLESS STEEL IND., 162 TAXMAN 9 (DELHI) 3. CIT V. BOKARO STEEL LTD., 170 ITR 522 (PATNA HC ) 4. CA GALIKOTWALLA & CO., ITA NO. 1512/M/96 DT. 22. 11.2002 (MUM.] 5. KEDARNATH JUTE MFG CO LTD. V. [1971] 82 ITR 363 (SC) 6. MADEVA UPENDRA SINAI V. UNION OF INDIA, [197] 98 ITR 209 (SC) 28.3 THE LEARNED AR FURTHER SUBMITTED THAT WH AT CAN BE SOUGHT TO BE REDUCED FROM EXPORT TURNOVER OF THE MU MBAI UNDERTAKING CAN ONLY BE THE ITEMS SPECIFIED IN EXPL ANATION 2(IV) TO SECTION 10A OF THE ACT. IT IS ALSO THE SUBMISSION O F THE LEARNED AR THAT WITH REGARD TO THE REIMBURSABLE EXPENSES WHICH ARE IN THE NATURE OF TRAVEL COSTS, VISA EXPENSES, ETC., THE LE ARNED AO HAS SOUGHT TO ADOPT A POSITION THAT THE SAME RELATE TO THE EXPENDITURE INCURRED ON THE BOARDING AND LODGING AND OTHER ALLO WANCES PAID TO THE ENGINEERS AND CONSULTANTS WHO ARE SENT ABROAD F OR DOING OUTSIDE WORK. THE LEARNED AR FURTHER SUBMITTED THAT A PLAIN READING OF THE EXPLANATION 2(IV) TO SECTION 10A IND ICATES THAT WHAT ARE SOUGHT TO BE EXCLUDED FROM EXPORT TURNOVER ARE ONLY THE ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 19 EXPENSES WHICH HAVE BEEN INCURRED IN FOREIGN EXCHAN GE IN PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. IN SUPP ORT OF HIS CONTENTION, THE LEARNED AR RELIED UPON THE DECISION OF BANGALORE BENCH OF ITAT IN THE CASE OF INFOSYS TECHNOLOGIES L TD. AND IN THE CASE OF DCIT V. WIPRO LTD., ITA NO. 1072/BAG/2007 D T. 30 TH JANUARY, 2009. THE LEARNED AR FURTHER SUBMITTED TH AT WITHOUT PREJUDICE TO THE ABOVE SUBMITTED THAT IF IT IS CONS IDERED THAT THE SAID REIMBURSABLE EXPENSES SHOULD NOT FORM PART OF THE EXPORT TURNOVER OF THE MUMBAI UNDERTAKING ELIGIBLE TO TAKE DEDUCTION U/S 10A OF THE ACT. THE LEARNED AR IN SUPPORT OF HIS CO NTENTION RELIED UPON THE SPECIAL BENCH DECISION OF ITAT, CHENNAI IN THE CASE OF ITO V. SAK SOFT LTD., 313 ITR 353 (CHENNAI) (SB). T HE LEARNED AR HAS ALSO RELIED UPON THE FOLLOWING JUDGMENTS:- 1. MPHASIS LTD. V. ACIT, ITA NO. 524/BANG/2008 2. FOURSOFT PVT. LTD. VS. ACIT, ITA NOS. 1049/HYD/0 5, 1125/HYD/04 & 1179/HYD/06. 3. NOUS INFOSYSTEMS PVT. LTD. VS. ACIT, ITA NOS. 58 9 & 666/BANG/08. 4. TATA ELEXI LTD. (ITA NO. 315/BANG/2006 5. ACIT V. KHODAY INDIA LTD. (2009-TIOL-42-ITAT-BAN G) 6. CIT V SUDARSHAN CHEMICAL INDUSTRIES LTD., 245 IT R 769(BOM) 7. CIT V. I GATE GLOBAL SOLUTIONS LTD., BANGALORE I TAT 8. CIT VS. ABAD FISHERIES [2002] 258 ITR 641 (KER.) 9. CIT V. KANTILAL CHHOTALAL 246 ITR 439 (BOM) 10. CIT VS. BHARAT EARTH MOVERS LTD., 268 ITR 232 ( KAR] AND 11. CHLORIDE INDIA LD. VS. DCIT, 53 ITD 180 (CAL.) 28.4 THE LEARNED AR SUBMITTED THAT THE DECISION S MENTIONED ABOVE FROM SL. NO. 7 TO 11 ARE IN RESPECT OF SECTIO N 80 HHC OF THE ACT, THE PRINCIPLES ENUNCIATED IN THESE DECISIONS S HOULD ALSO BE APPLIED EQUALLY AND CONSISTENTLY WHILE COMPUTING TH E DEDUCTION U/S 10A OF THE ACT. 29. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD. THE CONTROVERSY IN THE CASE UND ER ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 20 CONSIDERATION IS IN RESPECT OF METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IN RESPECT OF REIMBURSEMENT OF EXPENSES. I N SIMPLE WORDS THE ISSUE IS THAT WHETHER AMOUNT OF REIMBURSEMENT O F EXPENSES TO BE INCLUDED IN ELIGIBLE BUSINESS PROFIT AS WELL AS IN EXPORT TURNOVER IN THE YEAR OF RECEIPT OF SUCH AMOUNT FOR THE PURPO SE OF COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE A CT. TO APPRECIATE METHOD OF ACCOUNTING IN RESPECT OF REIMB URSEMENT OF EXPENSES, WE WOULD LIKE TO GO THROUGH RELEVANT ACCO UNTING ENTRIES TO BE PASSED IN BOOKS OF ACCOUNT. THERE ARE TWO WAY S OF PASSING ACCOUNTING ENTRIES IN SUCH A SITUATION. FIRST ONE I S THAT WHEN THE ASSESSEE INCURRED VARIOUS EXPENSES WHICH ARE TO BE REIMBURSED, IN OTHER WORDS, THE EXPENDITURE INCURRED ON BEHALF OF OTHERS, THE AMOUNT SHOULD BE DEBITED IN A SEPARATE ACCOUNT I.E REIMBURSEMENT OF EXPENSES A/C. WHEN AMOUNT IS REIMBURSED BY THE O THER PARTIES SAID ACCOUNT REIMBURSEMENT OF EXPENSES ACCOUNT IS CREDITED. THE BALANCE OF THAT ACCOUNT REIMBURSEMENT OF EXPENSES ACCOUNT WILL NOT PART OF THE TRADING ACCOUNT AND PROFIT AND LOSS ACCOUNT. BUT IT WILL BE SHOWN IN BALANCE SHEET ON ASSET SIDE. THE S ECOND METHOD OF ACCOUNTING IS THAT WHATEVER THE EXPENDITURE INCURRE D INCLUDING EXPENSES TO BE REIMBURSED IS TO BE DEBITED TO RESPE CTIVE EXPENSES ACCOUNT AND WHENEVER THE AMOUNT IS REIMBURSED RESPE CTIVE EXPENSES ACCOUNT IS CREDITED. IN THIS SECOND METHOD OF ACCOUNT ALL EXPENDITURE INCLUDING REIMBURSED EXPENSES ARE DEBIT ED TO PROFIT & LOSS ACCOUNT BY UNDER RESPECTIVE HEADS OF EXPENDITU RE. WHEN AMOUNT IS REIMBURSED THE CONSOLIDATED AMOUNT OF REI MBURSED EXPENSES CREDITED TO PROFIT AND LOSS ACCOUNT. THE P ROBLEM ARISES WHILE CALCULATING PROFIT FOR THE PURPOSE OF DEDUCTI ON U/S 10A & OTHERS IN CASES WHERE ASSESSEE FOLLOWS SECOND TYPE OF METHOD OF ACCOUNT. TO APPRECIATE THE ISSUE ONE HAS TO KEEP IN MIND A FUNDAMENTAL PRINCIPLE IN RESPECT OF REIMBURSEMENT I S THAT THERE IS NO ELEMENT OF PROFIT. IN THE CASE UNDER CONSIDERATI ON THE ASSESSEE HAS FOLLOWED SECOND METHOD OF ACCOUNTING THAT IS WH EN THE ASSESSEE INCURRED SUCH REIMBURSABLE EXPENSES AND AC COUNTED FOR IN PROFIT AND LOSS ACCOUNT THE ELIGIBLE PROFIT WAS REDUCED AS TOTAL EXPENSES INCLUDING REIMBURSEMENT PART OF EXPENSES W ERE DEBITED TO PROFIT & LOSS ACCOUNT. AT THAT TIME IF PROFIT IS NO T INCREASED THEN ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 21 THE SAME CANNOT BE REDUCED WHEN THE AMOUNT OF EXPEN DITURE IS REIMBURSED. THE CIT (A) HAS APPRECIATED THE ACCOUNT ING METHOD FOLLOWED BY THE ASSESSEE AND DELETED DISALLOWANCE O F CLAIM MADE BY THE AO EXCEPT IN RESPECT OF REIMBURSEMENT OF TELECO MMUNICATION CHARGES (AMOUNTING TO RS. 18,382,911).THE CIT(A) IN VOKED EXPLANATION 2(IV) TO SECTION 10A OF THE ACT IN RESP ECT OF REIMBURSEMENT OF TELECOMMUNICATION CHARGES. IN PRIN CIPLE WE AGREE WITH FINDING OF THE CIT (A) IN RESPECT OF REI MBURSEMENT OF EXPENSES. WE ALSO FIND FORCE IN ALTERNATE SUBMISSIO N OF THE LEARNED AR THAT IF IT IS HELD THAT THE RECEIPTS FOR THE REI MBURSABLE EXPENSES ARE NOT ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT, ONLY PROFITS, IF ANY, RELATING TO SUCH REIMBURSABLE EXPENSES SHOULD BE CONSIDERED AS BEING NOT ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT. FURTHER, SAME SHOULD NOT PART OF TOTAL TURNOVER AND EXPORT T URNOVER. 29.1 THE CIT (A) HAS DECIDED THE ISSUE RELATED TO REIMBURSEMENT OF TELECOMMUNICATION CHARGES AGAINST ASSESSEE. TO E XAMINE THIS ISSUE WE WOULD LIKE TO REFER EXPLANATION 2 OF SECTION 10A WHICH DEFINES CERTAIN TERMS FOR THE PURPOSE OF SECTION 10 A . EXPORT TURNOVER HAS BEEN DEFINED IN THE SAID EXPLANATION 2 TO SECTION 10A UNDER CLAUSE (IV) WHICH READS AS UNDER : (IV) EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPECT OF EXPORT (BY THE UNDERTAKING) OF ARTICLES OR THINGS O R COMPUTER SOFTWARE RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE WITH SUB -SECTION (3), BUT DOES NOT INCLUDE FREIGHT, TELECOMMUNICATIO N CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTIC LES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHN ICAL SERVICES OUTSIDE INDIA; 29.2 SUB-SECTION (4) OF SECTION 10A REFERS ABOUT PR OFITS OF THE BUSINESS RELATING TO EXPORT TURNOVER. THE SAID SUB- SECTION (4) OF SECTION 10A READS AS UNDER: ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 22 [(4) FOR THE PURPOSES OF 57 [SUB-SECTIONS (1) AND (1A)], THE PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS O R COMPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS TO THE PRO FITS OF THE BUSINESS OF THE UNDERTAKING, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS OR C OMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF THE BUSINES S CARRIED ON BY THE UNDERTAKING.] 29.3 THE MEANING OF EXPORT TURNOVER IS ALSO PROVI DED IN OTHER SECTIONS OF THE INCOME-TAX ACT, SAY CLAUSE (C) OF S ECTION 80HHE AND EXPLANATION (B) TO SECTION 80HHC. ACCORDING TO EXPL ANATION (B) OF SECTION 80HHC, THE SALE PROCEEDS RECEIVABLE IN FORE IGN EXCHANGE AS PER SUB-SECTION (2)(A) OF SECTION 80HHC ALL GOODS W HICH ARE EXPORTED OUT OF INDIA BUT WHICH DOES NOT INCLUDE FR EIGHT AND INSURANCE. SIMILARLY, TOTAL TURNOVER FOR THE PURPOS E OF DEDUCTION UNDER SECTION 80HHC WHICH IS DEFINED IN EXPLANATION (BA) AT THE END OF SECTION 80HHC IN THE NEGATIVE TERM AS NOT IN CLUDING FREIGHT AND INSURANCE ATTRIBUTABLE TO TRANSPORT OF GOODS OR MERCHANDISE BEYOND THE CUSTOM STATION AND PROFIT ON SALE OF LIC ENCE, CASH ASSISTANCE, DUTY DRAW BACK ETC. THUS THE TERM EXPO RT TURNOVER DOES NOT INCLUDE FREIGHT AND INSURANCE ATTRIBUTABLE TO TRANSPORT. EXPLANATION (C) TO SECTION 80HHE IS SIMILAR TO CLAU SE (IV) OF EXPLANATION 2 OF SECTION 10A. 29.4 ON AN ANALYSIS OF DEFINITION OF EXP ORT TURNOVER AS PROVIDED IN CLAUSE (IV) OF THE EXPLANATION 2 TO SEC TION 10A, WE NOTICE THAT FOR THE PURPOSE OF NOT INCLUDING IN THE CONSIDERATION RECEIVED IN OR BROUGHT INTO INDIA IN CONVERTIBLE FO REIGN EXCHANGE THERE ARE TWO TYPES OF EXPENDITURES. THE FIRST TYPE OF EXPENDITURE IS FREIGHT, TELECOMMUNICATION CHARGES, OR INSURANCE AT TRIBUTABLE TO THE DELIVERY OF ARTICLE OR THING OR COMPUTER SOFTWA RE OUT OF INDIA. THE SECOND TYPE OF EXPENDITURE IS EXPENDITURE, IF A NY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING TECHNICAL SERVICES OU TSIDE INDIA. THE BASIC IDEA OR INTENTION FOR DEDUCTING THE FIRST TYP E OF EXPENDITURE, I.E., FREIGHT, TELECOMMUNICATION CHARGES, OR INSURA NCE CHARGES IS THAT DELIVERY OF GOODS SHOULD BE FREE ON BOARD (FOB ). THE C.B.D.T. ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 23 VIDE ITS CIRCULAR NO. 564, DATED 5-7-1990 (184 ITR (ST.) 137 CLARIFIED THIS ASPECT IN RESPECT OF DEDUCTION UNDER SECTION 80HHC, THE RELEVANT PORTION OF THE CIRCULAR IS REPRODUCED AS BELOW : THE TERM EXPORT TURNOVER UNDER THE EXISTING PROV ISIONS, MEANS THE SALE PROCEEDS (EXCLUDING FREIGHT AND INSU RANCE), RECEIVABLE BY THE ASSESSEE IN CONVERTIBLE FOREIGN E XCHANGE. IN OTHER WORDS, FOB VALUE OF EXPORTS. THE FINANCE ACT, 1990 HAS RESTRICTED THE DEFINITION OF THE TERM EXPORT TURNO VER TO MEAN FOB SALE PROCEEDS ACTUALLY RECEIVED BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE WITHIN SIX MONTHS OF T HE END OF THE PREVIOUS YEAR OR WITHIN SUCH FURTHER PERIOD AS THE CHIEF COMMISSIONER/COMMISSIONER MAY ALLOW IN THIS REGARD. 29.5 ON THE BASIS OF THE ABOVE MATERIAL AND DISCUSSION, IT CAN BE SAID THAT ONLY THOSE FREIGHT, TELECOMMUNICAT ION CHARGES OR INSURANCE ATTRIBUTABLE TO DELIVERY OF GOODS OUT OF INDIA ARE TO BE CONSIDERED WHILE REDUCING FROM CONSIDERATION RECEIV ED IN CONVERTIBLE FOREIGN EXCHANGE. THUS IF SUCH EXPENSES ARE NOT ATTRIBUTABLE TO DELIVERY OF GOODS OUTSIDE INDIA, SU CH EXPENSES ARE NOT REQUIRED TO BE DEDUCTED FROM THE CONSIDERATION. ONE MORE ASPECT WHICH IS REQUIRED TO BE CONSIDERED HERE IS T HAT THE CONSIDERATION RECEIVED IN CONVERTIBLE FOREIGN EXCHA NGE IS INCLUDING SUCH EXPENSES. IF SUCH EXPENSES ARE NOT INCLUDED IN THE CONSIDERATION RECEIVED IN CONVERTIBLE FOREIGN EXCHA NGE, DEDUCTION OF SUCH EXPENDITURES FROM THE CONSIDERATION DOES NOT A RISE. NORMALLY IN A TRANSACTION OF PURCHASE AND SALE THERE ARE TWO TYPES OF CONDITIONS BETWEEN THE PARTIES. ONE IS WHERE PRICE QUOTED OF GOODS IS INCLUSIVE OF ALL EXPENSES OR IN OTHER WORDS PRIC E QUOTED IS ONLY IN RESPECT OF GOODS. ANOTHER CONDITION WHERE PRICE OF GOODS AND CHARGES OF EXPENSES ARE SEPARATELY STATED. IN CASE WHERE SUCH EXPENSES ARE TO BE SEPARATELY CHARGED, INVOICES ARE PREPARED SHOWING VALUE OF THE GOODS AND SUCH EXPENSES. IF TH E QUOTED PRICE IS INCLUSIVE OF SUCH EXPENSES, THEN CONSOLIDATED VA LUE OF THE GOODS IS ONLY MENTIONED IN THE INVOICE. IN CASE WHERE ONL Y VALUE OF GOODS IS QUOTED, EXPENSE IS BORNE BY THE SUPPLIER. IN CAS ES WHERE ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 24 EXPENSES HAVE NOT BEEN SEPARATELY CHARGED, THE CONV ERTIBLE FOREIGN EXCHANGE RECEIVED IS CONSIDERATION OF THE GOODS ONL Y. WHERE SUCH EXPENSES ARE SEPARATELY CHARGED IN THE INVOICES, TH E CONSIDERATION RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE INCLUDES T HE VALUE OF THE GOODS AND SUCH EXPENSES. IF THE CONSIDERATION RECEI VED IS ONLY AGAINST THE GOODS THEN THERE IS NO NEED TO DEDUCT S UCH EXPENSES FROM THE CONSIDERATION RECEIVED IN CONVERTIBLE FORE IGN EXCHANGE. IN CASES WHERE SUCH EXPENSES ARE SEPARATELY CHARGED, T HE EXPENSES ARE REQUIRED TO BE REDUCED FROM THE CONSIDERATION R ECEIVED FOR THE PURPOSE OF ARRIVING ALL THE EXPORT TURNOVER. THE LO GIC AND REASON BEHIND THIS HAVE BEEN EXPLAINED BY THE CBDT VIDE IT S CIRCULAR NO. 564, DATED 5-7-1990 QUOTED ABOVE THAT THE DELIVERY OF THE GOODS SHOULD BE FREE ON BOARD (FOB). BOTH THE SITUATIONS CAN BE EXPLAINED BY A SIMPLE EXAMPLE. MR. X EXPORTED GOODS OUT OF INDIA AND RECEIVED CONSIDERATION RS. 1,000 IN CONVERTIBLE FOREIGN EXCHANGE WHICH IS ONLY IN RESPECT OF GOODS. MR. Y I N A SIMILAR TYPE OF TRANSACTION CHARGED RS. 1,000 FOR GOODS AND RS. 100 FOR SUCH EXPENSES. TOTAL CONVERTIBLE FOREIGN EXCHANGE RECEIV ED IN CASE OF X IS RS. 1,000 AND IN CASE OF Y IS RS. 1,100. IN CASE OF MR. Y RS. 100 IS REQUIRED TO BE DEDUCTED FROM CONSIDERATION RECEI VED AS HE IS GETTING RS. 100 ATTRIBUTABLE TO DELIVERY OF THE GOO DS. IN CASE OF X NO DEDUCTION IS REQUIRED FROM CONSIDERATION RECEIVED I N CONVERTIBLE FOREIGN EXCHANGE. THUS BY REDUCTION OF RS. 100 IN C ASE OF Y THE GOODS EXPORTED IS FOB. THE GOODS EXPORTED AT FOB IS IMPORTANT IN THE SENSE THAT DEDUCTION UNDER SECTION 10A IS PERMI SSIBLE ONLY IN RESPECT OF CONSIDERATION RECEIVED AGAINST GOODS AND NOT FOR THE CONSIDERATION RECEIVED AGAINST FREIGHT ETC. ALL THE ASSESSEES SHOULD GET DEDUCTION UNDER SECTION 10A ON CONSIDERATION RE CEIVED AGAINST SUPPLY OF GOODS AT FOB. THEREFORE, THE CONDITION OF DELIVERY OF GOODS AT FOB HAS BEEN PUT AND THE DEFINITION OF EXPORT TU RNOVER AS PROVIDED IN CLAUSE (IV) OF EXPLANATION 2 TO SECTION 10A IS REQUIRED TO BE INTERPRETED ACCORDINGLY. ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 25 29.6 THE DEFINITION OF EXPORT TURNOVER CAN BE SUMMARIZED IN THE FOLLOWING FORMULA : PARTICULARS AMOUNT THE CONSIDERATION IN RESPECT OF EXPORT (BY UNDERTAKING) OF ARTICLES OR THING OR COMPUTER SOFTWARE RECEIVED IN OR BROUGHT IN TO INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE WITH SUB-SECTION (3). XXXXXXXXX LESS : (1) FOLLOWING EXPENSES ATTRIBUTABLE TO THE DELIVERY OF ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA (IF SAME ARE INCLUDED IN ABOVE CONSIDERATION) (I) FREIGHT X (II) TELECOMMUNICATION CHARGES X (III) INSURANCE OR X XX (2) EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING TECHNICAL SERVICES OUTSIDE INDIA XXX EXPORT TURNOVER XXXXXXXX 29.7 IN THE LIGHT OF ABOVE DISCUSSIONS THE FA CTS AND QUANTUM OF EXPENDITURES ARE REQUIRED TO DETERMINE AFTER VERIFI CATION FROM RECORD, WE THEREFORE SEND BACK MATTER OF THIS CROSS GROUND OF APPEAL AND CO TO THE FILE OF THE AO FOR NECESSARY V ERIFICATIONS IN THE LIGHT OF ABOVE DISCUSSIONS. THE AO WILL PROVIDE REA SONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 30. GROUND NO. 2 IS IN RESPECT OF DISALLOWANCE OF D EDUCTION U/S 10A OF RS. 26,31,604/-ON FOREIGN EXCHANGE FLUCTUATI ON WITHOUT APPRECIATING THAT THE SAME IS NOT DERIVED FROM EXPO RT BUSINESS BUT THE SAME IS INCOME FROM OTHER SOURCES. 31. THE AO DISALLOWED RS. 26,31,604/- U/S 10A OF TH E ACT BEING THE INCOME IN THE NATURE OF OTHER INCOME ON THE BAS IS THAT SUCH OTHER INCOME DOES NOT PERTAIN TO AND IS NOT DIRECTL Y LINKED TO THE ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 26 BUSINESS OF THE EXPORT OF SOFTWARE OR IT ENABLED SE RVICES OF THE ASSESSEE. THE DETAILS OF THESE EXPENSES ARE AS UNDE R:- 1. FOREIGN EXCHANGE FLUCTUATION GAIN RS. 25,87,8 15/- 2. INTEREST INCOME ON SHORT TERM DEPOSITS RS. 23 ,788/- 3. MISCELLANEOUS INCOME RS. 20,000/-. 32. THE CIT(A) IN RESPECT OF FOREIGN EXCHANGE FLUCTUATION GAIN OF RS. 25,87,815/- HELD THAT INCOME RECOGNIZED ON ACCOUNT OF EXCHANGE-FLUCTUATION HAS A DIRECT NEXUS WITH THE BU SINESS OPERATIONS OF THE MUMBAI UNDERTAKING. THE CIT(A) WA S OF THE VIEW THAT FOREIGN EXCHANGE FLUCTUATION GAIN SHOULD BE IN CLUDED IN THE PROFITS OF THE MUMBAI UNDERTAKING AND SHOULD BE ELI GIBLE FOR DEDUCTION U/S 10A OF THE ACT. HOWEVER, THE CIT(A) C ONFIRMED THE ORDER OF AO IN RESPECT OF INCOME ON SHORT TERM DEPO SITS OF RS. 23,788/- AND MISCELLANEOUS INCOME OF RS. 20,000/- W ITH THE BUSINESS OPERATIONS OF THE MUMBAI UNDERTAKING. 33. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. AFTER CONSIDERING T HE FACTS OF THE CASE, WE FIND THAT ITAT DELHI BENCH IN THE CASE OF SUJATA GROVER 74 TTJ 347(DEL.) HELD THAT BASIC CHARACTER OF THE REC EIPT OF FOREIGN CURRENCY REMAINS THE SAME I.E. IT REMAINS ATTRIBUTA BLE TO THE EXPORT EFFECTED BY THE ASSESSEE. FOLLOWING THE SAID DECIS ION OF ITAT, THE MUMBAI BENCH OF ITAT IN THE CASE OF RENAISSANCE JEW ELLERY PVT. LTD. V. ITO [2005] 4 SOT 50 HELD THAT EXCHANGE GAI N ARISING ON ACCOUNT OF CHANGE IN EXCHANGE RATE AFTER THE END OF ACCOUNTING YEAR CONSTITUTES PART OF EXPORT TURNOVER ELIGIBLE FOR DE DUCTION U/S 10A. WE FIND THAT THE ISSUE UNDER CONSIDERATION IS COVER ED BY THE DECISIONS OF ITAT MENTIONED ABOVE AND THE ORDER OF CIT(A) IS IN CONSONANCE WITH THOSE DECISIONS OF ITAT, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) AND THE SAME I S HEREBY CONFIRMED ON THE ISSUE. 34. GROUND NO. 3 IS AGAINST THE DELETION OF DI SALLOWANCE OF EXPENSES OF RS. 4,00,40,832/- ON ACCOUNT OF COST PO OL EXPENSES. ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 27 35. THE LEARNED AR SUBMITTED THAT THIS ISSUE IS SIM ILAR TO THE AY 2002-03 VIDE GROUND NO. 1. 36. AFTER HEARING THE LEARNED DR, WE FIND THAT SINCE THE ISSUE IS IDENTICAL TO THAT OF AY 2002-03 VIDE GROUND NO. 1, WE RESPECTFULLY FOLLOW THE CONCLUSIONS IN GROUND NO. 1 FOR AY 2002-03 IN ITA NO. 4540/M/08 (SUPRA) AND IN THE LIGHT OF TH AT WE CONFIRM THE ORDER OF CIT(A) ON THIS ISSUE. 37. GROUND NO. 4 IS AGAINST THE DELETION OF DIS ALLOWANCE OF RS. 68,61,271/- ON ACCOUNT OF EMPLOYEE SHARE PURCHASE P LAN. 38. THE LEARNED AR SUBMITTED THAT THIS ISSUE IS ALSO SIMILAR TO THE ISSUED RAISED IN GROUND NO. 5 IN AY 2002-03 VID E ITA NO. 4540/M/08 (SUPRA). 39. AFTER HEARING THE LEARNED DR, THIS ISSUE HA S BEEN DECIDED BY US IN AY 2002-03 (SUPRA), THEREFORE, FOLLOWING T HE CONCLUSIONS DRAWN THEREIN, WE CONFIRM THE ORDER OF CIT(A). 40. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE C.O. FILED BY THE ASSE SSEE IS ALLOWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE. IT IS TO NOTE THAT GROUNDS OF CO HAS BEEN TAKEN AS PER SEPARATE SUMMAR Y SHEET OF GROUNDS OF APPEAL AS WELL GROUNDS OF CO. FILED BY T HE LEARNED AR. ITA NO. 4541/M/08 AND CO NO. 20/M/09 IN THE CASE OF ACCENTURE INDIA PVT. LTD. 41. GROUND NO.1 IS AGAINST THE ACTION OF THE CIT(A) IN DELETING THE AMOUNT OF RS. 5,40,15,935/- BEING EXPE NSES INCURRED FOR JOB IN PROCESS. 42. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE AO NOTICED THAT THE ASSESSEE HAS INCURRED EXPENSES ON CERTAIN RUNNING JOBS DURING THE SUBJECT ASSESSMENT YEAR THAT HAVE N OT BEEN ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 28 COMPLETELY AND FINALLY BILLED. THE AO WAS OF THE VI EW THAT SUCH JOB DURING THE SUBJECT ASSESSMENT YEAR BEYOND THE AMOUN T BILLED SHOULD HAVE BEEN CARRIED TO P & L A/C AND THE BALAN CE SHEET OF THE ASSESSEE AS JOBS IN PROGRESS. THE AO, ACCORDINGLY, DISALLOWED AN AMOUNT OF RS. 5,40,15,935/- DURING THE SUBJECT ASSE SSMENT YEAR ON THIS ACCOUNT. WHILE DISALLOWING THE SAID EXPENS ES THE AO HAS ALSO OBSERVED THAT 50% OF THE EXPENSES INCURRED IN THE LAST 3 MONTHS IN THE YEAR UNDER CONSIDERATION HAVE BEEN IN CURRED TOWARDS JOBS THAT HAVE NOT BEEN COMPLETED AND FINAL LY BILLED. THE AO HAS ALSO NOTED THAT THE ASSESSEE WOULD HAVE RAIS ED ADVANCE/INTERIM BILLS AGAINST THESE JOBS, 50% OF TH E EXPENSES INCURRED TOWARDS SUCH JOBS HAVE BEEN TAKEN TO BE RE COVERED/BILLED. THE AO WAS OF THE VIEW THAT 50% OF THE EXPENSES INC URRED ON SUCH JOBS HAVE NOT BEEN RECOVERED OR BILLED BY THE ASSES SEE. AFTER THE SAID DISCUSSION, THE AO HELD THAT 25% OF THE TOTAL EXPENSES INCURRED IN THE LAST 3 MONTHS ARE TOWARDS JOBS IN P ROGRESS AND HENCE DETERMINED AN AMOUNT OF RS. 5,40,15,935/- AS JOBS-IN- PROCESS CHARGES. THE CIT(A) AFTER CONSIDERING THE A SSESSEES SUBMISSION HELD THAT THE ASSESSEE IS CORRECT IN CON TENDING THAT THE METHOD OF ACCOUNTING CONSISTENTLY FOLLOWED BY THE A SSESSEE IN REPORTING ITS REVENUES AND EXPENSES SHOULD NOT BE D ISTURBED. THE CIT(A) ALSO AGREED WITH THE SUBMISSION AND THE JUDI CIAL PRECEDENTS QUOTED BY THE ASSESSEE AND ALSO AGREED WITH THE CON TENTION OF THE ASSESSEE THAT THE METHOD OF ACCOUNTING CONSISTENTLY FOLLOWED BY THE ASSESSEE SHOULD BE ACCEPTED. THE CIT(A) ALSO OBSERV ED THAT THE SAME METHOD OF ACCOUNTING FOR REVENUES AND EXPENSES HAS BEEN ACCEPTED BY THE DEPARTMENT IN EARLIER YEAR AS WELL AS IN SUBSEQUENT YEARS. 43. WE HAVE HEARD THE LEARNED REPRESENTATIVE S OF THE PARTIES AND PERUSED THE RECORD. WE ARE OF THE CONSIDERED VI EW THAT IT IS A SETTLED POSITION OF LAW THAT THE METHOD OF ACCOUNTI NG FOLLOWED BY THE ASSESSEE AND THE SAME HAS BEEN ACCEPTED BY THE DEPARTMENT IS BEING CONTINUOUSLY FOLLOWED BY THE ASSESSEE. IN THE LIGHT OF THIS FACT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 29 44. GROUND NOS. 2 & 3 ARE AGAINST THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWANCE OF AN AMOUNT OF RS. 10,49 ,86,974/- BEING EXPENSES INCURRED BY THE ASSESSEE IN RESPECT OF M/S ACCENTURE ORGANISATION INTERNATIONAL SERVICES AGREEMENT (ISA) AND RS. 96,96,416/- ON ACCOUNT OF EMPLOYEES SHARE PURCHASE PLAN. 45. THE LEARNED REPRESENTATIVES OF THE PARTIES SUBMITTED THAT SIMILAR ISSUES ARE DECIDED IN AY 2002-03 IN IT A NO. 4540/M/08 CITED SUPRA. FOLLOWING THE DISCUSSION AN D CONCLUSIONS DRAWN THEREIN, WE CONFIRM THE ORDER OF CIT(A) ON TH ESE ISSUES. 46. GROUND NO. 4 IS AGAINST THE ACTION OF THE CIT(A) IN HOLDING THAT NO INTEREST U/S 234D CAN BE LEVIED ON THE ASSESSEE SINCE SECTION 234D. 47. THE LEARNED AR SUBMITTED THAT THIS IS COVE RED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT SPECIAL BEN CH IN THE CASE OF ITO VS. EKTA PROMOTERS, 304 ITR 1 (DELHI SB) WHEREI N IT HAS BEEN HELD THAT SECTION 234D WHICH HAS BEEN BROUGHT TO TH E STATUTE FROM 01.06.2003 CANNOT BE APPLIED TO AY 2003-04 OR EARLI ER YEARS. 48. AFTER HEARING THE LEARNED DR AND PERUSING THE SPECIAL BENCH DECISION OF ITAT CITED SUPRA, WE CONFIRM THE ORDER OF CIT(A) ON THIS ISSUE. 49. THE CO FILED BY THE ASSESSEE IS IN SUPPORT O F ORDER OF CIT(A) AS STATED IN FACTS SHEET FILED BY THE LEARNED AR, S INCE WE CONFIRM THE ORDER OF CIT(A) IN REVENUES APPEAL, THE CO BEC OMES INFRUCTUOUS, THEREFORE, THE CO IS DISMISSED AS INFR UCTUOUS. 50. IN THE RESULT, THE APPEAL OF THE REVENUE A ND THE CO OF THE ASSESSEE ARE DISMISSED. ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 30 ITA NO. 5008/M/08 & 5009/M/09 IN THE CASE OF ACCENT URE INDIA PVT. LTD. 51. THESE APPEALS FILED BY THE REVENUE ARE AGAINST THE ORDERS OF CIT(A) XXVII, MUMBAI FOR AY 2003-04 & 2004-05. SI NCE THE ISSUES ARE IDENTICAL IN BOTH THESE APPEALS, THE SAM E ARE DECIDED AS UNDER:- 52. TO DECIDE THESE APPEALS, THE FACTS FROM AY 2003-04 ARE TO BE TAKEN INTO CONSIDERATION. GROUND NOS. 1, 2 & 3 ARE AGAINST THE ACTION OF THE CIT(A) IN DELETING I) DISALLOWANC E OF RS. 5,18,37,025/- BEING EXPENSES INCURRED BY THE ASSESS EE IN RESPECT OF M/S ACCENTURE ORGANISATION INTERNATIONAL SERVICE S AGREEMENT (ISA), II) DISALLOWANCE OF RS. 6,44,26,977/- UNDER IEA, IAA, AND BSA AGREEMENT AND, III) DELETING THE AMOUNT OF RS. 3,05,41,483/- ON ACCOUNT OF EMPLOYEE SHARE PURCHASE PLAN. 53. THE LEARNED REPRESENTATIVES OF THE PARTIES SUBM ITTED THAT SIMILAR ISSUES ARE DECIDED IN AY 2002-03 IN ITA NO. 4540/M/08 CITED SUPRA. RESPECTFULLY FOLLOWING THE DISCUSSION AND CONCLUSIONS DRAWN THEREIN, WE CONFIRM THE ORDERS OF CIT(A) ON T HESE ISSUES IN BOTH THE ASSESSMENT YEARS AY 2003-04 AND 2004-05 UN DER CONSIDERATION. 54. 4 TH COMMON GROUND IS IN RESPECT OF DISALLOWANCE OF DED UCTION ON BAD DEBTS. 55. THE AO DISALLOWED THE BAD DEBTS CLAIM OF THE AS SESSEE ON THE GROUND THAT THE ASSESSEE HAD NOT DEMONSTRATED THAT THE BAD DEBTS WRITTEN OFF DURING THE SUBJECT ASSESSMENT YEAR HAD BECOME IRRECOVERABLE AND HE ALSO HELD THAT THE DEBTS WRITT EN OFF BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT HAD BEEN WRITTEN O FF WITHOUT VALID REASONS AND PROPER BASIS AND ACCORDINGLY THESE DEBT S WHICH HAD BEEN WRITTEN OFF WERE STILL REALIZABLE. BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT ALL CONDITIONS AS MENTIONED IN SECTION ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 31 36(1)(VII) AND SECTION 36(2) TO CLAIM A DEDUCTION I N RESPECT OF BAD DEBTS WRITTEN OFF HAVE BEEN SATISFIED AND ACCORDING LY, THE ASSESSEE IS ELIGIBLE TO CLAIM THE BAD DEBTS WRITTEN OFF AS A DEDUCTION IN COMPUTING ITS TAXABLE INCOME FROM BUSINESS. THE CIT (A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DELETI NG THE DISALLOWANCE OF DEDUCTION ON BAD DEBTS BY OBSERVING AS UNDER:- I HAVE GONE THROUGH THE SUBMISSION OF THE APPELLANT AND MATERIAL ON RECORD IN THIS REGARD AND I AM OF THE F OLLOWING VIEW: 4.10 THE PROVISIONS OF SECTION 36(1)9VII) AS AMENDE D WITH EFFECT FROM APRIL 1, 1989, REQUIRES THE ASSESSEE TO WRITE OFF THE DEBTS IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVI OUS YEAR AS IT BECOMES BAD AND IRRECOVERABLE. THE ONLY CONDITIO N REQUIRED FOR CLAIMING A DEDUCTION FOR SUCH WRITE OFF IS THAT THE INCOME PERTAINING TO THE SAME SHOULD HAVE BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOU S YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR PART THEREOF IS WR ITTEN OFF OR OF AN EARLIER PREVIOUS YEAR. IT IS NOT REQUIRED FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT HAS BECOME BAD IN VIEW O F THE AMENDMENT TO THE PROVISIONS OF SECTION 36(1)(VII) B Y THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 WITH EFFECT FROM APR IL 1, 1989. 4.11 THE CONTENTION OF THE AO REGARDING THE HONESTY AND JUDGEMENT OF THE ASSESSEE REGARDING THE WRITING OFF THE BAD DEBTS DOES NOT HOLD GOOD. IT HAS BEEN LEFT TO THE P RUDENCE OF THE BUSINESSMAN TO JUDGE HIMSELF WHETHER THE DEBT H AS BECOME BAD OR IRRECOVERABLE. A DECISION TO WRITE OF F A BAD DEBT BASED ON COMMERCIAL CONSIDERATIONS IS SUFFICIENT GR OUND FOR CLAIMING THE BAD DEBT AS A DEDUCTION. THERE IS NO B URDEN ON THE ASSESSEE TO PROVIDE THE AO WITH DEMONSTRATIVE A ND INFALLIBLE PROOF OF THE FACT THAT THE DEBTS HAVE GO NE BAD. 4.12 THE BASIS FOR CLAIMING THE DEDUCTION FOR BAD D EBTS ALSO SEEMS TO FAIR AND REASONABLE AND CONTENTION OF THE AO THAT BAD DEBT MUST BE ACTUALLY WRITTEN OFF IN THE ACCOUN TS IN BONAFIDE MANNER AND ASSESSEE HAS JUST PASSED ENTRY IN THE ACCOUNTS IN ORDER TO CLAIM DEDUCTION IS NOT JUSTIFI ABLE. THE APPELLANT HAS ALSO SUBMITTED THE REASONS FOR THE WR ITE OFF OF SUCH BAD DEBTS. 4.13 FURTHER, I HAVE GONE THROUGH THE DECISIONS IN THE CASE OF OMAN INTERNATIONAL BANK SAOG AND ANIL H RASTOGI (SU PRA) ON WHICH RELIANCE HAS BEEN PLACED BY THE ASSESSEE IN T HIS REGARD. ALSO FROM THE PERUSAL OF THE SUBMISSION MADE BY THE ASSESSEE IN THIS REGARD, I AM OF THE OPINION THAT APPELLANT HAS SATISFIED ALL THE CONDITIONS FOR CLAIMING THE DEDUCTION UNDER SECTION 36(1)(VII) AND HENCE DEDUCTION IN RESPECT OF BAD DE BTS CLAIMED BY AIPL SHOULD BE ALLOWED. ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 32 4.14 BASED ON THE ABOVE, I HERE BY DELETE THE ADDIT ION MADE BY THE AO ON GROUND NO. 4 55.1 THE LEARNED DR HAS RELIED UPON THE ORDER OF AO WHEREAS THE LEARNED AR HAS RELIED UPON THE ORDER OF CIT(A) AND SUBMITTED THAT THE BAD DEBTS WRITTEN OFF ARE ELIGIBLE FOR DEDUCTIO N U/S 36(1)(VII) FOR THE FOLLOWING REASONS:- 1. ASSESSEE HAS WRITTEN OFF BAD DEBTS IN ITS BOOKS OF ACCOUNT FOR AY 2003-04 AND AY 2004-05 AND CLAIMED A DEDUCTI ON IN RESPECT OF THE SAME IN ITS RETURN OF INCOME FOR THE RESPECTIVE YEARS. 2. FURTHER, THE ASSESSEE HAS GIVEN UP ITS CLAIM IN RESPECT OF THESE DEBTS WHICH HAVE BEEN WRITTEN OFF AS BAD DEBT S DURING AY 2003-04/AY 2004-05 SINCE THESE DEBTS HAD BECOME IRRECOVERABLE. 3. OUT OF THE TOTAL DEBTS WRITTEN OFF AMOUNTING TO RS. 11,215,803/- FOR AY 2003-04, ONLY AN AMOUNT OF RS. 49,370/- HAD BEEN PAID UP BY THE CLIENTS AS AT MARC H 31, 2006 (IE THE DATE OF COMPLETION OF ASSESSMENT PROCE EDINGS FOR AY 2003-04) AND THIS AMOUNT OF RS. 49,370/- HAS BEE N OFFERED TO TAX BY ASSESSEE IN ITS RETURN OF INCOME FOR THE SUBSEQUENT YEARS. 4. THE ABOVE BAD DEBTS HAVE BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF ASSESSEE IN EITHER THE YEAR ENDED MARCH 31, 2003/MARCH 31, 2004 OR IN EARLIER YEARS. 56. IN VIEW OF THE ABOVE REASONS, THE LEARNED AR SU BMITTED THAT ALL CONDITIONS TO CLAIM A DEDUCTION IN RESPECT OF B AD DEBTS WRITTEN OFF HAVE BEEN SATISFIED AND ACCORDINGLY, THE ASSESS EE IS ELIGIBLE TO CLAIM THE BAD DEBTS WRITTEN OFF AS A DEDUCTION IN C OMPUTING ITS TAXABLE INCOME FROM BUSINESS. IN SUPPORT OF HIS SUB MISSIONS, THE LEARNED AR RELIED UPON VARIOUS JUDGMENTS INCLUDING JUDGMENTS OF JURISDICTIONAL HIGH COURT IN THE CASE OF DCIT VS. O MAN INTERNATIONAL BANK SAOG, 313 ITR 128 AND CIT V. STA R CHEMICALS, 313 ITR 126 (BOM). 57. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD. AS PER THE PROVISIONS OF SECTIO N 36(1)(VII) AND 36(2) OF THE ACT, THE FOLLOWING CONDITIONS NEED TO BE FULFILLED FOR ALLOWABILITY OF BAD DEBT:- I) IT MUST BE A PROPER DEBT OR A PART THEREOF ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 33 II) IT HAS BEEN WRITTEN OFF AS BAD AND IRRECOVERABL E IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR, AND III) IT HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING TH E INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOU NT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN E ARLIER PREVIOUS YEAR. 58. THE CIT(A) ALLOWED THE BAD DEBTS CLAIM OF THE A SSESSEE U/S 36(1)(VII) AFTER CONSIDERING THE FACTS OF THE CASE BY HOLDING THAT THE BASIS FOR CLAIMING THE DEDUCTION FOR BAD DEBTS SEEM S TO FAIR AND REASONABLE AND CONTENTION OF THE AO THAT BAD DEBT M UST BE ACTUALLY WRITTEN IN THE ACCOUNT IN BONAFIDE MANNER AND THE ASSESSEE HAS JUST PASSED ENTRY IN THE ACCOUNTS IN O RDER TO CLAIM IS NOT JUSTIFIABLE. WE ARE OF THE VIEW THAT THE ASSESS EE HAS FULFILLED THE CONDITIONS LAID DOWN U/S 36(1)(VII) AND THE CIT(A) HAD EXAMINED THE CASE BEFORE ALLOWING THE BAD DEBTS CLAIM OF THE ASS ESSEE. THEREFORE, WE INCLINE TO UPHOLD THE ORDER OF THE CIT(A) ON THI S COUNT AND DISMISS THE GROUND RAISED BY THE REVENUE IN BOTH TH E YEARS UNDER CONSIDERATION. 59. 5 TH COMMON GROUND IN BOTH THE APPEALS ARE THAT THE CIT (A) ERRED IN DELETING THE DISALLOWANCE OF DEDUCTION U/S 40(A)(I) OF RS. 15,13,236/- AND RS. 1,47,16,109/- IN CONNECTION WIT H THE REIMBURSEMENT OF TRAINING EXPENSES TO ACCENTURE GRO UP ENTITIES. 60. THE AO HELD THAT REIMBURSEMENT OF TRAINING EXPE NSES TO THE ACCENTURE GROUP ENTITY TO APBV WERE IN THE NATURE O F FEES FOR TECHNICAL SERVICES WHICH WERE TAXABLE IN INDIA IN T HE HANDS OF APBV UNDER THE PROVISIONS OF DOUBLE TAX AVOIDANCE AGREEM ENT BETWEEN INDIAN AND NETHERLANDS (INDIA-NETHERLANDS TREATY), THUS, THE ASSESSEE IS REQUIRED TO WITHHOLD TAX AT APPROPRIATE RATES ON SUCH TRAINING EXPENSES PAID BY THE ASSESSEE TO APBV. TH E CIT(A) DELETED THE DISALLOWANCE BY FOLLOWING HIS DECISION IN AY 20 01-02. 61. THE LEARNED DR HAS RELIED UPON THE ORDER OF THE AO AND THE LEARNED AR HAS RELIED UPON THE ORDER OF THE CIT(A) AND SUBMITTED ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 34 THAT THE ASSESSEE HAS NOT DEDUCTED TAXES AT SOURCE ON THE REIMBURSEMENT OF TRAINING EXPENSE FOR AYS 2003-04 A ND 2004-05 TO THE ACCENTURE GROUP ENTITIES ON THE BASIS THAT I) R EIMBURSEMENT OF TRAINING EXPENSES TO ACCENTURE GROUP ENTITIES IS NO T TAXABLE IN INDIA IN THE HANDS OF THE ACCENTURE GROUP ENTITIES AS THE TRAININGS HAVE BEEN IMPARTED TO THE EMPLOYEES OF ASSESSEE OUT SIDE INDIA AND II) THE ASSESSEE HAS REIMBURSED ONLY THE ACTUAL EXP ENSES INCURRED BY THE ACCENTURE GROUP ENTITIES IN IMPARTING SUCH T RAININGS TO THE EMPLOYEES OF ASSESSEE AND HENCE, IN THE ABSENCE OF ANY MARK- UP/PROFIT ON SUCH REIMBURSEMENTS, THE PAYMENTS MADE TO THE ACCENTURE GROUP ENTITIES FOR SUCH TRAINING EXPENSES ARE NOT TAXABLE IN INDIA. IN SUPPORT OF HIS SUBMISSIONS, THE LEARNE D AR HAS PLACED RELIANCE ON THE FOLLOWING JUDGMENTS:- 1. INDUSTRIAL ENGG. PROJECT PVT. LTD., 202 ITR 101 4 2. CLIFFORD CHANCE (82 ITD 106) 3. SEDCO FOREX INTERNATIONAL DRILLING INC., 72 ITD 415 4. ROLLS ROYCE INDIA LTD., 25 ITD 136 5. S G PGNATALE, 124 ITR 391 6. MANNESMANN DEMAG LAUCHHAMMER, 26 ITD 198 7. DUNLOP RUBBER CO. LTD., 142 ITR 493 8.STYLES VS. NEW YORK LIFE INSURANCE CO. 2 TC 460 (HL) 9. MERCHANT NAVY, 96 ITR 261 10. BANKIPUR CLUB LTD., 226 ITR 97 11. DECTA, 237 ITR 190 62. THE LEARNED AR FURTHER SUBMITTED THAT FOR AY 20 03-04, THE ASSESSEE HAD DEDUCTED AT SOURCE ON THE TRAINING EXP ENSES OF RS. 256,675/- PAID TO THE INDIAN THIRD PARTIES AS PER T HE PROVISIONS OF THE ACT AND DEPOSITED THE SAME INTO THE GOVERNMENT TREASURY. 63. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD. ON IDENTICAL SET OF FACTS THIS ISSUE HAS BEEN SENT TO THE FILE OF THE AO BY ITAT IN ASSESSEES OW N CASE FOR AY 2001.2002 VIDE ITA NO 8962/MUM/2004 ORDER DATED 29. 1.2009. SINCE FACTS ARE IDENTICAL AND CIT (A) HAS ALSO FOLL OWED THEIR ORDER FOR AY 2001-2002 WHICH HAS BEEN SET ASIDE BY THE IT AT AND THE MATTER SEND BACK TO THE FILE OF THE AO. WE RESPECTF ULLY FOLLOW THAT ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 35 ORDER OF THE ITAT AND IN THE LIGHT OF THAT WE ALSO SEND BACK THIS MATTER TO THE FILE OF THE AO WITH IDENTICAL DIRECTI ONS. THE AO IS FURTHER DIRECT TO VERIFY THE CONTENTION OF LEARNED AR THAT THE ASSESSEE HAD DEDUCTED AT SOURCE ON THE TRAINING EXP ENSES OF RS. 256,675/- PAID TO THE INDIAN THIRD PARTIES AS PER T HE PROVISIONS OF THE ACT AND DEPOSITED THE SAME INTO THE GOVERNMENT TREASURY. 63.4 IN THE RESULT, THE APPEAL OF THE REVENUE ARE P ARTLY ALLOWED FOR STATISTICAL PURPOSES. C.O. 44/M/09 AND 45/M/09 FOR AY 2003-04 AND 2004-05 IN THE CASE OF ACCENTURE INDIA PVT. LTD. 64. IT IS TO NOTE THAT GROUNDS OF CO HAVE BEEN TAKE N AS PER SEPARATE SUMMARY SHEET OF GROUNDS OF APPEAL AS WELL GROUNDS OF CO. FILED BY THE LEARNED AR. THE CO FOR AY 2004-200 5 IS IN SUPPORT OF THE ORDER OF THE CIT(A) SINCE WE CONFIRM THE ORD ERS OF THE CIT(A) IN REVENUES APPEALS FOR AY 2004-05, THE COS BECOME IN FRUCTUOUS THEREFORE, THE SAME ARE DISMISSED AS IN FRUCTUOUS. HOWEVER THE CO FOR AY 2003-2004 WHEREIN ONE OF THE GROUND RELATED TO DISALLOWANCE UNDER SECTION 40(A)(I) . THIS ISSUE HA S BEEN SEND BACK TO THE FILE OF THE AO WHILE DECIDING APPEAL OF THE REVENUE, FOLLOWING THE SAME THIS GROUND IS ALLOWED FOR STATISTICAL PUR POSES. 64.1 IN THE RESULT, THE C.O. NO. 44 FOR AY 2003-04 IS ALLOWED FOR STATISTICAL PURPOSES AND THE C.O. NO. 45 FOR AY 200 4-05 IS DISMISSED. 65. TO SUM UP, ALL THE APPEALS AND C.OS. ARE DISPOS ED OFF AS UNDER:- I) THE APPEAL FILED BY THE REVENUE BEING 4540/M/08 IN THE CASE OF ASPL IS DISMISSED AND THE C.O. NO. 214/M/08 FILED BY THE ASSESSEE (ASPL) IS ALSO DISMISSED. II) THE APPEAL FILED BY THE REVENUE BEING 5029/M/0 8 IN THE CASE OF ASPL IS PARTLY ALLOWED FOR STATISTICAL PURP OSES AND THE ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 36 C.O. NO. 47/M/09 FILED BY THE ASSESSEE(ASPL) IS ALL OWED FOR STATISTICAL PURPOSES. III) THE APPEAL FILED BY THE REVENUE BEING 4541/M/ 08 IN THE CASE OF AIPL AND THE C.O. NO. 20/M/09 FILED BY THE ASSESSEE (AIPL) ARE DISMISSED. IV) THE APPEALS FILED BY THE REVENUE BEING 5008 & 5009/M/09 IN THE CASE OF AIPL ARE PARTLY ALLOWED FO R STATISTICAL PURPOSES WHEREAS THE C.O. FILED BY THE ASSESSEE(AIPL) BEING 44/M/09 FOR AY 2003-04 IS ALLO WED FOR STATISTICAL PURPOSES AND C.O. NO. 45/M/09 FILED BY THE ASSESSEE(AIPL) FOR AY 2004-05 IS DISMISSED. PRONOUNCED ON THIS 23 RD DAY OF MARCH, 2010 SD/- SD/- (R.K. GUPTA) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED: 23 RD MARCH, 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, A BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV ITA NOS. 4540, 4541, 5029, 5008 & 500/M/089 AND COS. 214, 47, 20, 44 & 45/M/09/M/09 ACCENTURE SERVICES PVT. LTD. AND ACCENTURE INDIA PVT . LTD . 37 S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 8.3.2010 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 22.3.2010 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER