M/s. PricewaterhouseCoopers Private Limited, Kolkata V. ACIT, Cir-2(2), Kolkata, Kolkata

ITA 483/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0526 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 14-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K SRIHARI
• Keywords: Related party transaction; Transfer pricing; Double taxation relief; International transaction; Additional evidence; Question of law; Assessment record; Revised return
• Section: 92C; 143(3); 144; 90

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI, M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 483 / KOL / 20 17 ASSESSMENT YEAR :2012-13 M/S PRICEWATERHOUSECOOPERS PVT.LTD., BLOCK-EP, PLOT-Y-14, SALT LAKE CITY, SECTOR-V, KOKATA-91 [ PAN NO.AABCP 9181 H ] V/S . ACIT, CIRCLE-2(2), AAYAKAR BHAVAN, P-7, CHOWRINGHEE SQUARE, KOKATA-69 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI KANCHAN KAUSHAL, AR /BY RESPONDENT SHRI P.K. SRIHARI, CIT-DR /DATE OF HEARING 14-06-2018 /DATE OF PRONOUNCEMENT 12-09-2018 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2012-13 ARISES AGAINST THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-2(2), KOL KATAS ASSESSMENT ORDER DATED 30.01.2017, INVOLVING PROCEEDINGS SECTION 144 C R.W. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. THE ASSESSEE APPELLANTS FIRST SUBSTANTIVE GROUN D RAISED IN THE INSTANT APPEAL CHALLENGE CORRECTNESS OF TRANSFER PRICE ADJU STMENT AMOUNTING TO 345,51,562/- IN COURSE OF ASSESSMENT AS PERTAINING TO ITS INTERNATIONAL TRANSACTIONS WITH ITS OVERSEAS ASSOCIATE ENTERPRISE (AE). THIS ASSESSEE IS A COMPANY PROVIDING CONSULTANCY INCLUDING TAX AND REG ULATORY SERVICES. IT FILED ITS RETURN ON 30.11.2012 STATING TOTAL INCOME OF 51,62,16,310/-. THIS FOLLOWED ITS REVISED RETURN DATED 31.03.2014 REDUCING ITS TA XABLE INCOME TO 49,87,12,700/-. THE ASSESSING OFFICER TOOK UP SCRUT INY. HE CAME ACROSS ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 2 ASSESSEES FORM 3CEB AND TRANSFER PRISE WHICH STUDY REPORT (TPSR) REVEALING INTERNATIONAL TRANSACTIONS IN THE NATURE OF MANAGEMENT SERVICES PROVIDED TO ITS UK BASED ASSOCIATED ENTERPRISE M/S PRICE WATERHOUSE COOPERS DEVELOPMENT ASSOCIATE LTD. (PWCDA HEREAFT ER) IN LIEU OF HAVING RECEIVED CORRESPONDING MANAGEMENT CONSULTANCY FEE O F 18,48,88,843/- IN THE RELEVANT PREVIOUS YEAR. THE TAXPAYER HAD EMPLOY ED RESALE PRICE METHOD RPM IN ITS TPSR REPORT. THE ASSESSING AUTHORITY M ADE SECTION 92CA(1) REFERENCE FOR ASCERTAINING ARMS LENGTH PRICE ALP OF THE ABOVE INTERNATIONAL TRANSACTIONS. 3. THE TRANSFER PRISING OFFICER TPO TOOK UP CONSE QUENTIAL PROCEEDINGS. HE TREATED THE ASSESSEE AS AN INFORMATION TECHNOLOG Y SERVICES PROVIDER FIRST OF ALL BY TAKING INTO ACCOUNT RELEVANT COMPARABLES MAINLY FUNCTIONING ISINFORMATION TECHNOLOGY FIELD OR IT BASED SERVICES . THIS FOLLOWED HIS SHOW- CAUSE NOTICE DATED 11.01.2016. THIS SHOW-CAUSE NOTI CE FIRST OF ALL BROUGHT INTO LIGHT THE ASSESSEES AES FUNCTIONS COMPRISING INTE R ALIA IDENTIFICATION OF POTENTIAL CLIENTS, PROJECT UNDERTAKEN INVOLVING MUL TI FUNCTIONAL SERVICES RENDERED, ASSESSEES ENGAGEMENT THEREIN FOR IMPLEME NTATION, CUSTOMISED MODIFICATION ETC. OF THE PROJECTS; RESPECTIVELY. TH E ABOVE SHOW-CAUSE NOTICE THEN ANALYSED ASSESSEES RECIPROCAL FUNCTIONS PERFO RMED TO ITS AES INCLUDING INTERNAL SURVEILLANCE DATA AS WELL AS THIS ASSESSME NT FOR PWC CLIENTS, EMPLOYMENT OF TECHNICAL PERSONNEL FOR RENDERING COR RESPONDING SERVICES INCLUDING MANPOWER ALLOCATION TO CARRY OUT VARIOUS ASSIGNMENTS AS WELL AS PROVIDING TRAINING TO WORK FORCE. 4. THE ASSESSEE HAD APPLIED RESALE PRICE METHOD RP M AS THE MOST APPROPRIATE METHOD MAM FOR DECLARING ITS GROSS PR OFIT BY SALES @ 9.87% AS AGAINST THAT @ 18.64% IN ITS COMPARABLES ON AVERAGE BASIS. THE TPO TOOK NOTE OF THAT ASSESSEE HAVING SELECTED PWECDA AS T ESTED PARTY. HE WAS OF THE VIEW THAT THE ASSESSEES SAID DETAILED PROFILE OF INCLUDING SERVICES HAVING PERFORMED WAS NOWHERE AVAILABLE NOR WAS THERE ANY M ATERIAL SUGGESTING THE SAME TO BE A LEAST COMPLEX ENTITY. HE THEREFORE REJ ECTED PWCDA AS A TESTED PARTY. THE TPO THEREAFTER OBSERVED THAT GROSS PROFI T COMPUTATION DIFFERED FROM ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 3 ONE TAX JURISDICTION TO ANOTHER BE VERY SUBJECTIVE PHENOMENONA. HE THEREFORE PROPOSED TO APPLY THE TRANSACTIONAL NET MARGIN METH OD TNMM QUA ASSESSEES INTERNATIONAL TRANSACTIONS IN QUESTION. 5. THE TPOS SHOW-CAUSE NOTICE HEREINABOVE THEN ZER OED ON TO RELEVANT SEGMENT TO BE THAT OF SOFTWARE AND IT SERVICES. NEX T CAME CHOICE OF THE RELEVANT FILTERS I.E. AVAILABILITY OF DATA FOR FINA NCIAL YEAR 2011-12, COMPANIES HAVING INCOME FROM SOFTWARE SERVICES LESS THAN 75% OF THEIR TOTAL REVENUES, THOSE WITH MORE THAN 25% RELATED PARTY TRANSACTIONS , PERSISTENT LOSS MAKING ENTITIES, THOSE WITH DIFFERENT FINANCIAL YEARS ENDI NG THAN THAT ON 31.03.2012, FUNCTIONAL DIFFERENT AND TURNOVER NOT BETWEEN 5 TO 500 CRORES; RESPECTIVELY WERE ORDERED TO BE EXCLUDED. 6. THE ASSESSEE HAD CHOSEN OPERATING PROFITS / OVER TOTAL COST AS ITS PROFIT LEVEL INDICATOR PLI. THE TPO PROPOSED OVERALL REV ENUE IN COST @ 1.5% IN HIS SHOW-CAUSE NOTICE. NEXT CAME HIS 11 COMPARABLE ENTI TIES NAMELY ACROPETAL TECHNOLOGIES LTD. (SEGMENTED), CTIL LTD.,, DATAMATI CS GLOBAL SOLUTIONS LTD., RS SOFTWARE LTD., ASM TECHNOLOGIES LTD., E-INFOCHIP S LTD., ONWARD TECHNOLOGIES LTD., THIRDWARE SOLUTIONS (P) LTD., SA SKEN COMMUNICATIONS TECHNOLOGIES LTD.,, E-ZEST SOLUTIONS PVT. LTD., QUA GOLDSTONE TECHNOLOGIES LTD., HAVING OPERATING PROFITS OVER TOTAL COST OF 2 0.67%, 11.47%, 14.09%, 15.28%, 16.41%, 74.97%, 13.61%, 25.24% 12.13%, 16.0 6%, 10.86%; RESPECTIVELY AVERAGING 20.98%. IT WAS THIS AVERAGE PLI WHAT WAS FINALIZED SOUGHT TO BE APPLIED IN THE TPOS ABOVE STATED SHOW -CAUSE NOTICE. 7. THE ASSESSEES REPLY CAME TO BE SUBMITTED ON 22. 01.2016. IT FIRST OF ALL SOUGHT TO HIGHLIGHT THE FACT THAT ITS SELECTION AS A TESTED PARTY INSTEAD OF PWCDA (SUPRA) REQUIRED THE RELEVANT COMPARABILITY A DJUSTMENT AS IT WAS ENGAGED IN SERVICE OF CLIENT IN THE NATURE OF BOTH ENTREPRENEURIAL FUNCTIONS AS WELL AS ASSUMPTION OF RELATED SERVICES RISKS WHEREA S THE LATTER CARRIED OUT DISTRIBUTION ACTIVITY ONLY. THE ASSESSEE THEN CONTE STED TPOS SHOW-CAUSE PROPOSING REJECTION OF ITS RESALE PRICE METHOD. IT PLEADED THAT ITS AE M/S PWCDA DISTRIBUTED ROUTINE SERVICES PROCURED WITHOUT OWNING ANY NONE-ROUTINE ASSETS. ITS IMPUGNED DISTRIBUTION MARGIN WAS THEREF ORE STATED TO BE VERY WELL ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 4 PROPORTIONATE TO ITS FUNCTION. IT ALLEGED THAT ITS RESALE PRICE METHOD HAD NOT BEEN REJECTED BY WAY OF SPEAKING REASONS AS WELL. I TS CASE WAS THAT ITS AES MARGIN COULD BE EASILY SEGREGATED WITHOUT ANY ADJUS TMENT IN COMPUTATION. 8. THE ASSESSEES REPLY THEN DISPUTED ITS CHARACTER IZATION AS SOFTWARE AND IT SERVICES PROVIDER. IT PIN-POINTED THE FACT THAT ITS INTERNATIONAL TRANSACTIONS WITH PWCDA WERE IN THE NATURE OF MANAGEMENT CONSULT ANCY SINCE INVOLVING PROJECT MANAGEMENT CONSULTANCY, ADMINISTRATIVE SUPP ORT, SERVICES, TAX ADVISORY SERVICES ETC. IT REITERATED ITS FUNCTIONS ASSETS AND RISK (FAR) PROFILE TO BE OF A COMPLEX ENTITY HAVING BOTH COMPLEX FUNCTION AL AND RISK PROFILE PRIMARILY ENGAGED IN MARKETING AND ADMINISTRATIVE ACTIVITIES, IT AE PWCDA TO BE OPERATING UNDER GROSS MARGIN OF AROUND 7.5% FOR REC OUPING THE MARKETING AND ADMINISTRATIVE EXPENSES AND THE SAID MARGIN TO BE E ASILY IDENTIFIABLE AND COMPUTABLE SATISFYING ALL CARDINAL PRINCIPLES OF A TASTED PARTY. THE ASSESSEE CLAIMED THAT ITS AES OF MARGIN WAS VERY MUCH AT PAR WITH THOSE ENGAGED IN DISTRIBUTION OR TRADING ACTIVITIES. 9. WE NOW ADVERT TO TPOS FINDING IN HIS ORDER DATE D 29.01.2016. HE ATTRIBUTED ASSESSEES FAILURE IN SPECIFYING THE REL EVANT SERVICES RENDERED SO AS TO DISPUTE THE EARLIER SHOW-CAUSE NOTICE. WE NOTICE THAT TPOS ORDER PARA 5.2.2 CONTAINS THE FOLLOWING FINDINGS REGARDING THE EXACT NATURE OF SERVICES TO BE SELF-CONTRADICTORY AS FOLLOWS:- 5.2 TPOS COMMENT: 5.2.1. THE SUBMISSION OF THE ASSESSEE IN ITS ENTIR ETY HAS BEEN PERUSED. THE ASSESSEE STATED CERTAIN DETAILS O FUNCTIONS OF THE PWCPL, WHICH WAS ALREADY MENTIONED IN THE TPSR. HOWEVER THE ASSESSEE CHOOSE TO AVOID MENTIONING THE DETAILS OF SERVICES RENDERED AS PER ITS SUBMIS SION DATED 04/09/2015, WHICH THE UNDERSIGNED HAS MENTIONED IN THE SCN, WHI CH CLEARLY INDICATED THAT THE PRIMARY NATURE OF THE SERVICES RENDERED TO THE AE WAS IN NATURE OF IT SERVICES. THUS THERE WAS NO FAULT REGARDING FUNCTIO NAL PROFILE AS ARRIVED AT BY THE UNDERSIGNED. 5.2.2 THE ASSESSEE HAD REITERATED SELECTION OF PWC DA AS THE TESTED AND CONDUCTING BENCHMARKING ANALYSIS USING FOREIGN COMP ARABLES. THE SERVICES PROVIDED BY THE ASSESSEE TO ITS AE ARE BASICALLY IN THE NATURE OF INFRASTRUCTURE MANAGEMENT, SOFTWARE DEVELOPMENT AND IT CONSULTANCY SERVICES. THE ASSESSEE IS PERFORMING FUNCTIONS FOR ITS AE WHICH A COMPLEX ENTRY WOULD REQUIRE FROM THE VENDOR TO PERFORM. SUCH TYPE OF WO RK IS ALSO NOT NEEDED BY A COMPANY WHICH HAS DISTRIBUTION FUNCTIONS. THE TRANS FER PRICING REPORT ABOUT THE FUNCTIONS PERFORMED BY THE AE CANNOT BE RELIED UPON. MOREOVER, THE ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 5 SUPPLEMENTARY SUBMISSION OF THE ASSESSEE PROVIDING A BRIEF INSIGHT ABOUT THE SERVICES RENDERED TO THE AE, AND THE 3CD REPORT REV EALS MORE FUNCTION ABOUT THE ASSESSEE THAN THE TRANSFER PRICING REPORT AS CO NSULTING SERVICE INCLUDING TAX AND REGULATORY SERVICES, SOFTWARE DEVELOPMENT ( INCLUDING RESALE OF SOFTWARE) AND RELATED TECHNICAL SERVICE. IN VIEW OF THE ABOVE ANALYSIS AND DISCUSSION IT IS SUFFICIENT TO REJECT THE TRANSFER PRICING REPORT OF THE ASSESSEE. 10. THE TPO THEREAFTER OBSERVED THAT THE ASSESSEES AE TAKEN AS A TESTED PARTY ON ITS BEHALF WAS NOT LIABLE TO BE ACCEPTED S INCE THE RELEVANT DATA, ACCURACY OF ITS SELECTION PROCEDURAL AND FUNCTIONAL ASPECTS HAD TO BE DECLINED FOR LACK OF VERIFICATION OF THE RELEVANT FAR ANALYS IS. HE WAS OF THE VIEW THAT THE RELEVANT ALP HAD TO BE DETERMINED AS PER ASSESS EES AND NOT ITS OVERSEAS AES PROFITABILITY. HE ADOPTED THE VERY REJECTING F OR ASSESSEES TRANSFER PRICING REPORT. 11. THE TPO THERERAFTER PROCEEDED TO BENCHMARK ASSE SSEES INTERNATIONAL TRANSACTIONS IN TUNE WITH THE RELEVANT MOST APPROPR IATE METHOD. HE CONSIDERED BOTH SECTION 92C AS WELL AS THE INTER-PLAY BETWEEN THE COMPARABLE UNCONTROLLED PRICE METHOD CUP CLAIMED IN FIRST, R ESALE PRICE METHOD (RPM), COST PLUS METHOD (CPM) AND PROFITS SPLIT METHOD (PS M) IN SECOND AND TRANSACTIONAL NET MARGIN (TNM) IN THIRD CATEGORY; T O BE INTER ALIA APPLICABLE IN CASES OF BOTH FINANCIAL YEAR AND PRODUCTS SIMILARIT Y, OPERATING AND GROSS PROFIT MARGIN LEVEL REQUIRING FINANCE AND PRODUCTS SIMILAR ITY AND OPERATING PROFIT MARGIN LEVEL; RESPECTIVELY. HE RELIED ON THE ABOVE DISTINCTION TO APPLY TNMM AS THE MOST APPROPRIATE METHOD IN FACTS OF THE INST ANT CASE. 12. CASE FILE SUGGESTS THAT THE ASSESSEES CHALLENG E TO CORRECTNESS OF ABOVE STATED COMPARABLES (SUPRA) IN ITES SEGMENT ST OOD REJECTED IN TRANSFER PRICING PROCEEDINGS. THE TPO ADDED TWO MORE COMPARA BLES M/S MINDTREE TECHNOLOGIES (IT SERVICE SEGMENT) AND TATA ELXSI LT D. HAVING PLIS OF 20.02 AND 7.03; RESPECTIVELY FOR REDUCING THE EARLIER PRO POSED PLI @ 20.98% TO 18.71%. ALL THIS CULMINATED IN THE IMPUGNED ALP ADJ USTMENT OF 345,51,562/- AS PER TPOS ORDER DATED 29.01.2016. 13. THE ASSESSING OFFICER FRAMED HIS DRAFT ASSESSME NT ON 31.03.2016 ON THE SAME LINES. ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 6 14. THE ASSESSEE PREFERRED ITS OBJECTIONS BEFORE TH E DISPUTE RESOLUTION PANEL DRP THEREAFTER TO THE LEARNED PANEL DECLIN E ASSESSEES ALL PLEAS AS FOLLOWS:- 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. TPO AND THE LD. AO HAVE ERRED IN SELECTING THE ASSESSEE AS A TESTED PARTY AND NOT ITS AE (PWC DA). DRP DIRECTIONS: TESTED PARTY HAS BEEN DEFINED IN THE OECD GUIDELINE S AS THE ENTITY ON WHICH TRANSFER PRICING METHOD CAN BE APPLIED IN A RELIABLE MANNER AND GOOD AND RELIABLE COMPARABLES CAN BE FOUND. IT CAN BE THE ENTITY WITH LESS COMPLEX FUNCTIONAL PROFILE SO AS TO ENABLE LESS COMPLEX ANALYSIS. THE TESTED PART Y MAY HAVE (A) RELIABLE AND ACCURATE DATA, (B) LEAST COMPLEX DATA AND (C) THE D ATA IS USABLE WITHOUT MUCH ADJUSTMENTS, THE LD AR STATED THAT THE AE WAS SELECTED AS THE TE STED PARTY AS IT WAS PERFORMING SIMPLER FUNCTION IN THE SET INTERACTION. THE FACT R EMAINS THAT THE AE IS A MUCH MORE COMPLEX ENTITY THAN THE ASSESSEE AS IT IS THE CREAT OR OF THE ASSESSEE, PERFORMS ALL FUNCTIONS ON THE VALUE CHAIN OF DELIVERABLES FOR TH E CLIENTS ACROSS ITS GLOBAL SWEEP. WHEREAS THE ASSESSEE IS NOT OPERATING ON SUCH BROAD CANVASS NOR IS THE ASSESSEE HOLDING THE CONTROLLING STAKES AND COMPREHENSIVE AU THORITY OVER ITS SWATHE OF THE AES. JUST BECAUSE THE AE, FOR RECORD, PERFORMS A SI MPLER FUNCTION IN THIS TRANSACTION WITH THE ASSESSEE WOULD NOT RENDER IT SIMPLER ENTIT Y. THE AE RETAINS WITH ITSELF THE MAJOR FUNCTIONAL RESPONSIBILITY IN TERMS OF LAYING OUT THE WORK DISTRIBUTION FUNCTION- THE AE DECIDES WHETHER THE EXTERNAL CONSULTANTS WILL BE ENGAGED FOR EXECUTING THE WORK OR THE EXECUTION WILL BE DONE INTERNALLY. THE AE IS ALSO INTERACTING WITH THE END USER- THE CLIENT AND DELIVERS THE SERVICES TO IT, BESIDES BEING LEGALLY OBLIGED FOR EXECUTION OF THE PROJECTS. THE INVOICING IS DONE BY THE AE. CLIE NTS ARE SOLICITED AND BUSINESS OBTAINED BY THE AE. EVEN IF THE AE RETAINS A FIXED PERCENTAGE OF THE INVOICED AMOUNT BEFORE REMITTING TO THE ASSESSEE, THE PRIMARY NATUR E OF ITS OWNERSHIP OF THE ASSIGNMENT REMAINS. THE AE IS IN THE FOREFRONT WHIL E THE ASSESSEE IS MERELY EXECUTING THE JOB ASSIGNED. THIS FACT IS APPLICABLE FOR BOTH THE PROJECTS EXECUTED SEPARATELY WITH THE UK BASED AE AS ALSO THE LANKAN AE. THE AE (PWC UK) HAS MUCH COMPLEX PROFILE AND ALSO HOLDS RESPONSIBILITY FOR THE DELIVERABLES TO THE CLIENT AND IS ULTIMATE OWNER OF THE GROUP. THE VALID ANALY SIS CAN HENCE NOT BE DONE BY RETAINING IT AS THE TESTED PARTY. BESIDES, ITA T M UMBAI HAS ALSO HELD IN CASE OF AURIONPRO SOLUTION LIMITED ( ITA NO 7872 OF 2011 TH AT FOR THE PURPOSE OF DETERMINING THE ALP, TESTED PARTY IS ALWAYS TO BE THE ASSESSEE AND NOT THE AB. THE INDIAN TP REGULATION PER CHAPTER X OF THE INCOME TAX ACT 1961 IS AN ANTI-EVASION TOOL TO PREVENT ADVERSE PROFIT SHIFTS. THE MATERIALITY OF E XAMINATION OF THE INTERNATIONAL TRANSACTIONS HAS TO BE IN THIS LIGHT. THEREFORE, TH E TESTING HAS TO BE DONE IN ORDER TO EXAMINE IF THE INDIAN ENTITY IS OFFERING ITS PROFIT S TO LAWFUL TAXATION IN INDIA. IN ORDER TO DETERMINE THE CORRECT PROFITS BY ASCERTAINING CORRE CT ALP- THE TRANSACTIONS HAVE TO BE EXAMINED BY KEEPING THE INDIAN ENTITY IN PRIMARY FO CUS. KEEPING THE AB AS A TESTED PARTY WOULD FUNDAMENTALLY DEFEAT THE BASIC PURPOSE OF THE TP REGULATIONS. THE CONTENTION OF THE ASSESSEE IS HENCE DISMISSED AS UN TENABLE. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. TPO AND THE LD. AO HAVE ERRED IN REJECTING RESALE PRICE METHOD ('RP M') SELECTED BY THE ASSESSEE. DRP DIRECTIONS: RESALE PRICE METHOD IS APPLIED WHEN THE PRODUCT IS DELIVERED/ RESOLD WITHOUT ANY VALUE ADDITION IN THE DELIVERABLE. THE TPO HAS ALTE RED THE TESTED PARTY SELECTION BY THE ASSESSEE AND IN VIEW OF THE FUNCTIONAL PROFILE BASIS THE MATERIAL ON RECORD. RESALE PRICE METHOD IS TO BE APPLIED WHEN THE RESEL LER BUYS AND SELLS THE PRODUCT AS ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 7 IT IS WITHOUT ADDING ANY VALUE TO THE PRODUCT. IN T HIS CASE, THE ASSESSEE, THROUGH THE AE, IS DELIVERING SERVICES UPON QUALITATIVE ADDITIO N OR ADDING VALUE TO THE SAME. THE DELIVERABLES ARE PROCESSED AND THE HANDED TO THE EN D USER. IF THE ASSESSEE IS NOT DOING ANY SUCH VALUE ADDITION, THE WHOLE PURPOSE OF SUCH CONTRACT/ASSIGNMENT IS DEFEATED. SUCH A SCENARIO IS A COMMERCIAL IMPOSSIBI LITY. A PERUSAL OF THE FUNCTIONS PERFORMED BY THE ASSESSEE FOR THE UK BASED AE INDIC ATE A CLEAR VALUE ADDITION TO THE SERVICES. BESIDES, IT IS INCOMPREHENSIBLE AS TO HOW SERVICES DENUDED OF VALUE ADDITION CAN BE DELIVERED. THE DETAILS OF SERVICES RENDERED AND SOME INVOICES HAVE BEEN FURNISHED BEFORE THE PANEL TO CONSIDER THE PRI MARY NATURE OF SUCH SERVICES. THE NATURE OF SERVICES RENDERED ARE LISTED HEREUNDER TO SUPPORT THE ABOVE CONCLUSION: I. THE SERVICES INVOLVING PWC DA UK ARE SAP ADVISOR Y, STAFFWARE WORKFLOW, IT APPLICATION SUPPORT, ER &P PRODUCTISATION, IT SP READSHEET SERVICES AND SO FORTH- TO NAME A FEW. II THE SERVICES INVOLVING PWC LANKA ARE SURVEILLANC E, SAMURDHI PROGRAMME AND PROJECT MANAGEMENT- TO NAME A FEW. THE ASSESSEE CLAIMS TO BE IN BUSINESS OF RENDERING MANAGEMENT CONSULTANCY SERVICES. THE EXAMINATION OF THE TP STUDY DOES NOT BRING OUT THE FUNCTIONS PERFORMED BY THE ASSESSEE VERY CLEARLY. THE ASSIGNMENTS ARE L ISTED IN AMBIGUOUS TERMS. THE PANEL CALLED FOR AND EXAMINED SPECIFIC ASSIGNMENT D ETAILS. THE CHART PRODUCED IN THIS REGARD CLEARLY INDICATES THE NATURE OF SERVICES REN DERED TO BE OF IT AND ITES TYPE OF SERVICES. THE TPO HAS ALSO CATEGORIZED THE INTERNAT IONAL TRANSACTIONS ACCORDINGLY. THE CHOICE OF COMPARABLES BY THE ASSESSEE IN THE TP STUDY SHOWS THAT THE PROFILE OF SUCH ENTITIES TO BE OF IT AND ITES TYPE. FURTHER, T HE CHOICE OF PARAMETERS IN THE DATABASE WHEREBY THE CRITERIA OF SEARCH ARE LAID DO WN ALSO INDICATES SIMILAR. THE NACE CODES [NACE (NOMENCLATURE OF ECONOMIC ACTIVITI ES) IS THE EUROPEAN STATISTICAL CLASSIFICATION OF ECONOMIC ACTIVITIES. NACE GROUPS ORGANIZATIONS ACCORDING TO THEIR BUSINESS ACTIVITIES. STATISTICS PRODUCED O N THE BASIS OF NACE ARE COMPARABLE AT EUROPEAN LEVEL AND, IN GENERAL, AT WORLD LEVEL I N LINE WITH THE UNITED NATIONS' INTERNATIONAL STANDARD INDUSTRIAL CLASSIFICATION (I SIC). THE CHANGE IN THE IDENTIFICATION AND GROUPING OF SIMILAR ECONOMIC ACTIVITIES ASSOCIA TED WITH THE MOVE TO THE NEW NACE IMPLIES A STATISTICAL BREAK IN THE TIME SERIES . - NOTE: NACE (NOMENCLATURE OF ECONOMIC ACTIVITIES) IS THE EUROPEAN STATISTICAL C LASSIFICATION OF ECONOMIC ACTIVITIES. NACE GROUP ORGANIZATIONS ACCORDING TO THEIR BUSINES S ACTIVITIES. STATISTICS PRODUCED ON THE BASIS OF NACE ARE COMPARABLE AT EUROPEAN LEV EL AND, IN GENERAL, AT WORLD LEVEL IN LINE WITH THE UNITED NATIONS INTERNATIONA L STANDARD INDUSTRIAL CLASS (ISIC). THE CHANGE IN THE IDENTIFICATION AND GROUPING OF SI MILAR ECONOMIC ACTIVITIES ASSOCIATED WITH THE MOVE TO THE NEW NACE IMPLIES A STATISTICAL BREAK IN THE TIME SERIES NOTE: NACE (NOMENCLARTURE DES ACTIVITIES E CONOMIQUES DANS LA COMMUNAUTE EUROPENNE)] SELCGED BY THE ASSESSEE ALLK ERTAIN TO THE IT AND ITES SERVICES. IN VIEW OF THE FOREGOING, THE AO HAS, THE REFORE, RIGHTLY REJECTED RPM IN THIS CASE, APART FROM RIGHTLY TAKING THE ASSESSEE AS TES TED PARTY. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. TPO AND THE LD. AO HAVE ERRED IN APPLICATION OF ENTITY LEVEL TRANSA CTIONAL NET MARGIN METHOD ('TNMM') CONSIDERING THE ASSESSEE AS THE TESTED PAR TY (THE ASSESSEE HAVING A TURNOVER OF 1,166.84 CRS. VIS-A-VIS 18.49 CRS. OF R ELATED PARTY SALES TRANSACTION BEING TESTED). DRP DIRECTIONS: THE TPO HAS EXAMINED THE FACTUAL POSITION OF THE IN TERNATIONAL TRANSACTION INVOLVING BOTH THE AES. THE FUNCTIONALITY IN BOTH THE SETS OF TRANSACTIONS IS SIMILAR. THE PROFILE HAS ALSO BEEN DISCUSSED IN THE PARA IN OBJECTION NO 4. THE PANEL DOES NOT FIND ANY INFIRMITY IN APPLYING TNMM. THE APPLICATION AT ENTI TY LEVEL IS ALSO UNDERSTANDABLE IN VIEW OF THE NATURE OF TRANSACTIONS VIS A VIS SAME T ESTED PARTY WITH SAME SET OF COMPARABLES. THE PANEL HAS REQUESTED THE ASSESSE TO FURNISH COMPUTATIONS BASIS ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 8 SEGREGATED DATA. THE ASSESSEE HAS NOT FURNISHED ITS SET OF ALTERNATE COMPARABLES. ACCORDINGLY, THE PANEL IS INCLINED TO UPHOLD THE AC TION OF THE TPO. THE OBJECTION IS HENCE DISMISSED. 5. WITHOUT PREJUDICE, THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. TPO AND LD. AO HAVE ERRED IN NOT .RESTRICTING THE A DJUSTMENT TO THE MAXIMUM OF GROSS MARGIN (I.E. 7.5% OF THE BILLING TO END CUSTO MER) EARNED BY PWC DA. DRP DIRECTIONS: THE INDIAN TP REGULATION PER CHAPTER X OF THE INCOM E TAX ACT 1961 IS AN ANTI- EVASION TOOL TO PREVENT ADVERSE PROFIT SHIFTS. THE MATERIALITY OF EXAMINATION OF THE INTERNATIONAL TRANSACTIONS HAS TO BE IN THIS LIGHT. THEREFORE, THE TESTING HAS TO BE DONE IN ORDER TO EXAMINE IF THE INDIAN ENTITY IS OF FERING ITS PROFITS TO LAWFUL TAXATION IN INDIA. IN ORDER TO DETERMINE THE CORRECT PROFITS BY ASCERTAINING CORRECT ALP- THE TRANSACTIONS HAVE TO BE EXAMINED. THE TPO IS REQUIR ED TO DETERMINE THE ALP OF A TRANSACTION. THE RESTRICTIVE CAP SOUGHT TO BE IMPOS ED BY THE ASSESSEE ON REPORTED GP OF THE BILLED AMOUNT WOULD VITIATE THE VERY BASI C TENETS OF DETERMINATION OF ALP. THE ASSESSEE HAS TO DEMONSTRATE THAT THE ALP DETERM INATION WAS SPURIOUS ON THE FACTS/MERITS. THE ADJUSTMENT COULD NOT HAVE BEEN RE STRICTED TO THE GROSS MARGIN OF THE BILLING TO THE END CUSTOMER AS THERE COULD BE I NSTANCES OF MULTIPLE TRANSACTIONS AND VARIOUS SET OFFS BETWEEN THE AE AND THE END USE RS. THE END USER INTERACTS WITH THE AE AND AE ONLY IS LEGALLY LIABLE FOR DELIVERABL ES AND TO ENSURE END TO END SERVICES AS AND IF REQUIRED SO. THE OBJECTION IS DISMISSED AS UNTENABLE AND CONTRAR Y TO THE INTENT AND PURPOSE OF CHAPTER X OF THE INCOME TAX ACT 1961. 6. WITHOUT PREJUDICE, WHILE SELECTING THE ASSESSEE AS A TESTED PARTY, THE LD. TPO AND LD. AO HAVE ERRED IN CHARACTERIZING THE ASSESSEE AT ENTITY LEVEL AS SOFTWARE AND IT SERVICE PROVIDER. DRP DIRECTIONS: THE ASSESSEE HAS PERFORMED THE FUNCTIONS THE REFERE NCE TO THE TP STUDY INDICATES THAT THE ASSESSEE ITSELF HAS PROCESSED ITS TP STUDY ON THE LINES OF A SOFTWARE AND IT SERVICES PROVIDER. SECTION G OF THE STUDY ON SEARCH CRITERIA IS TO BE SEEN. THE ASSES SE CHOOSES NACE CODES (NACE (NOMENCLATURE OF ECONOMIC ACTIVITIES) I S THE EUROPEAN STATISTICAL CLASSIFICATION OF ECONOMIC ACTIVITIES. NACE GROUPS ORGANIZATIONS ACCORDING TO THEIR BUSINESS ACTIVITIES. STATISTICS PRODUCED ON THE BAS IS OF NACE ARE COMPARABLE AT EUROPEAN LEVEL AND, IN GENERAL, AT WORLD LEVEL IN L INE WITH THE UNITED NATIONS' INTERNATIONAL STANDARD INDUSTRIAL CLASSIFICATION (I S10). THE CHANGE IN THE IDENTIFICATION AND GROUPING OF SIMILAR ECONOMIC ACTIVITIES ASSOCIA TED WITH THE MOVE TO THE NEW NACE IMPLIES A STATISTICAL BREAK IN THE TIME SERIES .) IT IS SEEN FROM THE PAGE 41 OF THE TP STUDY THAT THE FOLLOWING NACE CODES HAVE BEEN SE LECTED_ 4651,5829,6201,6311,9511,6209-IT IS SEEN THAT ALL T HESE CODES RELATE TO THE IT AND COMPUTER SOFTWARE SECTORS. THE ASSESSEE HAS ALSO NO T STATED IN VERY CLEAR TERMS ON THE NATURE AND SCOPE OF THE SO CALLED CONSULTANCY S ERVICES RECEIVED/ RENDERED. THE SET OF COMPARABLES PER THE TP STUDY AT PAGE 43 IS A LSO FUNCTIONALLY AKIN TO THE IT AND SOFTWARE SERVICES RENDERER. THE FUNCTIONAL PROFILE OF SUCH COMPARABLES IS AT PAGE 48 TO 50 OF THE TP STUDY. THE ASSESSEE CLAIMS TO BE IN BUSINESS OF RENDERING MANAGEMENT CONSULTANCY SERVICES. THE EXAMINATION OF THE TP STUDY DOES NOT BRING OUT THE FUNCTIONS PERFORMED BY THE ASSESSEE VERY CLEARLY. THE ASSIGNMENTS ARE L ISTED IN AMBIGUOUS TERMS. THE PANEL CALLED FOR AND EXAMINED SPECIFIC ASSIGNMENT D ETAILS. THE CHART PRODUCED IN THIS REGARD CLEARLY INDICATES THE NATURE OF SERVICES REN DERED TO BE OF IT AND ITES TYPE OF SERVICES. THE TPO HAS ALSO CATEGORIZED THE INTERNAT IONAL TRANSACTIONS ACCORDINGLY. THE CHOICE OF COMPARABLES BY THE ASSESSEE IN THE TP STUDY SHOWS THAT THE PROFILE OF ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 9 SUCH ENTITIES TO BE OF IT AND ITES TYPE. FURTHER, T HE CHOICE OF PARAMETERS IN THE DATABASE WHEREBY THE CRITERIA OF SEARCH ARE LAID DO WN ALSO INDICATES SIMILAR. THE NACE CODES [NACE (NOMENCLATURE OF ECONOMIC ACTIVITI ES) IS THE EUROPEAN STATISTICAL CLASSIFICATION OF ECONOMIC ACTIVITIES. NACE GROUPS ORGANIZATIONS ACCORDING TO THEIR BUSINESS ACTIVITIES. STATISTICS PRODUCED O N THE BASIS OF NACE ARE COMPARABLE AT EUROPEAN LEVEL AND, IN GENERAL, AT WORLD LEVEL I N LINE WITH THE UNITED NATIONS' INTERNATIONAL STANDARD INDUSTRIAL CLASSIFICATION (I SIC). THE CHANGE IN THE IDENTIFICATION AND GROUPING OF SIMILAR ECONOMIC ACTIVITIES ASSOCIA TED WITH THE MOVE TO THE NEW NACE IMPLIES A STATISTICAL BREAK IN THE TIME SERIES . - NOTE: NACE (NOMENCLATURE DES ACTIVITES ECONOMIQUES DANS LA COMRNUNAUTE EUROPEENN EJ] SELECTED BY THE ASSESSE ALL PERTAIN TO THE IT AND ITES SERVICES. THE DETAILS OF SERVICES RENDERED AND SOME INVOICES HAVE BEEN FURNISHED BEFORE THE PANEL TO CONSIDER THE PRIMARY NATURE OF SUCH SERVIC ES. THE NATURE OF SERVICES RENDERED ARE LISTED HEREUNDER TO SUPPORT THE ABOVE CONCLUSION: I. THE SERVICES INVOLVING PWC DA UK ARE SAP ADVISOR Y, STAFFWARE WORKFLOW, IT APPLICATION SUPPORT, ER &P PRODUCTISATION, IT SP READSHEET SERVICES AND SO FORTH- TO NAME A FEW. II THE SERVICES INVOLVING PWC LANKA ARE SURVEILLANC E, SAMURDHI PROGRAMME AND PROJECT MANAGEMENT- TO NAME A FEW. THE PANEL THUS DOES NOT SEE ANY INFIRMITY IN THE CA TEGORIZATION DONE BY THE TPO MORE SO IN THE ABSENCE OF CLEAR DEPICTION OF FUNCTI ONS PERFORMED PER THE STATED INTERNATIONAL TRANSACTIONS ANYWHERE IN THE TP STUDY OR ELSEWHERE TO SUPPORT_ THE CONTENTION THAT THE MANAGEMENT CONSULTANCY SERVICES WERE RENDERED! RECEIVED AND WHAT WAS THE TYPE OF SUCH SERVICES. ACTION OF TPO I S UPHELD. THE OBJECTION IS DISPOSED OF AS ABOVE. 7. WITHOUT PREJUDICE, THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. TPO AND THE LD. AO HAVE ERRED IN COMPUTING THE RELA TED PARTY TRANSACTION FILTER AND SELECTING COMPARABLE COMPANIES WHICH ARE FUNCTIONAL LY INCOMPARABLE. DRP DIRECTIONS: IT HAS BEEN STATED ON BEHALF OF THE ASSESSEE THAT- 'THE ASSESSEE, IN RELATION TO TRANSACTION WITH PWC DA, IS PRIMARILY ENGAGED IN RE NDERING MANAGEMENT CONSULTANCY SERVICES IN THE NATURE OF PROJECT MANAGEMENT CONSUL TANCY, INSOLVENCY ADMINISTRATION SUPPORT SERVICES, TAX ADVISORY SERVICES AND A VERY INSIGNIFICANT QUANTUM OF EXCEL SPREADSHEET SERVICES. THE DETAILS OF SUCH SERVICES DO NOT DEMONSTRATE THE CONTENTION OF THE ASSESSEE. BESIDES, IT HAS ALSO TO BE SEEN WHETHER THE ASSESSEE IS RENDERING A TEMPLATE OR PROVIDING CUSTOMIZED SOLUTI ONS TO THE END USERS. THE DISCUSSIONS IN RESPECT OF FUNCTIONALITY AND SELECTI ON OF PARAMETERS PER NACE IN THE PRECEDING OBJECTIONS CLEARLY SHOWS THAT THE ASSES S E HAS ITSELF PROFILED THE ASSIGNMENT TO BE OF THE IT AND IT ENABLED SERVICES TYPE. THE OBJECTION IS THEREFORE, DISMISSED AS IT IS DEVO ID OF ANY FACTUAL BASIS. THE ASSESSING OFFICER HAS ACCORDINGLY FRAMED HIS FI NAL ASSESSMENT MAKING THE IMPUGNED TRANSFER PRICING ADJUSTMENT OF 345,51,562/-. 15. IT EMERGES AT THE OUTSET THAT THE ASSESSEE HAS FILED ITS APPLICATION SEEKING ADMISSION OF ADDITIONAL EVIDENCE IN THE FOR M OF SEGMENTAL PROFITS IN RELATION TO ITS AE IN QUESTION. IT QUOTES RULE 29 O F THE INCOME-TAX APPELLATE TRIBUNAL RULES, 1963 IN SUPPORT. IT PLEADS THAT THE LOWER AUTHORITIES OUGHT TO ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 10 HAVE TAKEN INTO CONSIDERATION ITS SEGMENTAL PROFIT ONLY THAN ENTITY BASED RESULTS. IT INVITES OUR ATTENTION TOWARDS THE IMPUG NED TRANSFER PRICING ADJUSTMENT COMPUTATION ENTERPRISE QUA THE ENTIRE OP ERATING EXPENSES OF 109,22,00,000/- AS AGAINST THE RELEVANT VALUE OF IN TERNATIONAL TRANSACTIONS OF 1848,88,843/-- (SUPRA) ONLY AS PER VARIOUS JUDICIAL PRECEDENTS CIT VS. RATILAL BECHLAL & SONS (2016) 65 TAXMAN.COM 155 (BOM), CIT VS. FIRE STONE INTERNATIONAL PVT. LTD. (2015) 60 TAXMAN.COM 235 (B OM), CIT VS. THYSEN GROUP INDUSTRIES (I) P. LTD. (2016) 70 TAXMAN.COM 3 29 AS WELL AS CIT VS. M/S TARA JEWEL EXPORT PVT. LTD., ITA 1814/2013 DECIDED ON 05.10.2015 HON'BLE BOMBAY HIGH COURT. ITS CASE ACCORDINGLY IS THAT LOW ER AUTHORITIES RIGHT FROM THE TPO UPTO ASSESSING OFFICER AS WELL AS DRP HAVE ERRE D IN LAW AS WELL AS ON FACTS IN TAKING ENTITY LEVEL MARGIN THAN THOSE PERT AINING TO ITS INTERNATIONAL TRANSACTIONS ONLY. 16. WE AFFORDED SUFFICIENT OPPORTUNITIES TO THE RE VENUE TO REBUT THE ABOVE LEGAL PRINCIPLE EMANATING FROM VARIOUS JUDICIAL PRE CEDENTS THAT ONLY INTERNATIONAL TRANSACTIONS WITH AE ARE TO BE CONSID ERED IN TPOS PROCEEDINGS AND NOT THE ENTIRE CORRESPONDING FIGURES AT ENTITY LEVEL. WE ARE INFORMED THAT HON'BLE APEX COURT HAS ADMITTED REVENUES SPECIAL L EAVE PETITION (SLP) ARISING FROM HON'BLE BOMBAY HIGH COURTS DECISION(S ) QUOTED IN PRECEDING PARAGRAPH. IT VEHEMENTLY CONTENDS THAT THE RELEVANT METHOD ADOPTED I.E TNMM IS AN INDIRECT METHOD BASED ON PROFIT MARGIN O F AN ENTITY IN ENTERITY WHICH HAS TO BE THEREAFTER APPORTIONED TO ITS INTER NATIONAL TRANSACTIONS. WE FIND NO MERIT IN REVENUES ABOVE ARGUMENTS. IT EMER GES THAT HON'BLE BOMBAY HIGH COURTS LAST JUDGMENT IN M/S TARA JEWELS EXPOR T PVT. LTD. CASE INVOLVED THE VERY SUBSTANTIAL QUESTION OF LAW RAISED AT THE REVENUES BEHEST WHICH HAS BEEN DECIDED IN TAXPAYERS FAVOUR. IT FURTHER TRANS PIRE THAT HON'BLE DELHI HIGH COURT IN CIT VS. KAIHIN PEANALFA ITA 11/2015 DECIDE D ON 09.09.2015 AS WELL AS HON'BLE BOMBAY HIGH COURTS YET ANOTHER JUDGMENT IN CIT VS. ALSTOM PROJECTS (I) LTD. ITA 362/2014 DECIDED ON 14.09.201 6 REITERATE THE SAME VERY LEGAL PROPOSITION. WE THEREFORE ARE OF THE VIEW THA T MERE ADMISSION OF REVENUES SPECIAL LEAVE PETITION DOES NOT ALTER THE ABOVE LEGAL POSITION AS OF ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 11 NOW. WE THEREFORE RESTORE THE INSTANT ISSUE BACK TO TPO FOR AFRESH ADJUDICATION AS PER LAW. THE ASSESSEES ADDITIONAL EVIDENCE APPLICATION (SUPRA) FILED UNDER RULE 29 OF ITAT RULES IS ADMITT ED SINCE THE REVENUE HAS FAILED TO EXPRESS ANY DOUBT ON RELEVANCE OF CORRESP ONDING DOCUMENTS FILED THEREOF AS WELL AS THE FACT THAT SAME ARE VERY MUCH REQUIRED FOR PROPER ADJUDICATION OF THE ISSUE OF ALP DETERMINATION RAIS ED BEFORE US. WE THUS ADMIT ASSESSEES ADDITIONAL EVIDENCE AND LEAVE IT O PEN FOR THE TPO TO CARRY OUT NECESSARY FACTUAL VERIFICATION. 17. LEARNED AUTHORITATIVE REPRESENTATIVES NEXT SUB MITS THAT LOWER AUTHORITIES HAVE ALSO ERRED IN LAW AS WELL AS ON FA CTS IN TREATING THE ASSESSEE TO BE PROVIDING INFORMATION TECHNOLOGY ENABLED SERV ICES WHEREAS THE TPOS OBSERVATIONS HOLD IT TO BE AN ENTITY HAVING PROVIDE D CONSULTANCY INCLUDING TAX REGULATORY SERVICES AND SOFTWARE (INCLUDING RESALE) AS WELL AS RELATED TECHNICAL SERVICES. HE REFERS TO A DETAILED CHART OF ALL THE RELEVANT HEADS IN BOTH TAX REGULATORY ADVISORY AND CONSULTANCY SERVICES ON REC ORD. ALL THIS ASSESSEES ASSERTIONS APPEAR TO BE PRIMA FACIE CORRECT. THE FACT HOWEVER REMAINS THAT WE HAVE ALREADY RESTORED THE ENTIRE ISSUE OF CORRECTNE SS OF TRANSFER PRICING ADJUSTMENT BACK TO THE TPO FOR AFRESH ADJUDICATION. WE THEREFORE LEAVE IT OPEN FOR HIM TO ADJUDICATE ALL FACTUAL AS WELL AS L EGAL ISSUES; AS THE CASE MAY BE IN CONSEQUENTIAL PROCEEDINGS. THE ASSESSEES FOR MER FIVE SUBSTANTIVE GROUNDS TO THIS EFFECT ARE ACCEPTED FOR STATISTICAL PURPOSES. 18. THE ASSESSEES NEXT SUBSTANTIVE GROUND PLEADS T HAT ALL THE LOWER AUTHORITIES HAVE ERRED IN LAW AS WELL AS ON FACTS I N MAKING AD HOC DISALLOWANCE OF 10,51,88,324/-@ 40% OF THE TOTAL EXPENDITURE CLAIME D AMOUNTING TO 26,29,70,810/-. THERE IS DISPUTE ABOUT THE IMPUGNED EXPENDITURE TO BE PERTAINING TO VARIOUS GOODS AND O THER WORKS PURCHASES TO EMPLOYEES REIMBURSEMENT, GUEST HOUSE EXPENDITURE, PROJECT EXPENSES, FOOD AND LAUNDRY CHARGES. THE ASSESSING OFFICER DISALLOW ED THE SAME ON ESTIMATION BASIS @ 40% ALLEGING ASSESSEES FAILURE IN PROVIDING ALL THE RELEVANT PARTICULARS OF ITS PAYEES AS WELL AS INDIC ATING THE RELEVANT NEXUS ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 12 BETWEEN ITS REPAIR AND MAINTENANCE VIS--VIS THE CO RRESPONDING ASSETS. THE DRP HAS UPHELD THE SAME IN ITS DIRECTIONS. 19. LEARNED AUTHORIZED REPRESENTATIVE VEHEMENTLY SU BMITS THAT ALL THOSE DETAILS TOTALING TO 142 PAGES AS WELL AS RELEVANT I NFORMATION ON RECORD IN PAGES 86 TO 89 AS WELL AS THE CORRESPONDING SUPPORT ING DOCUMENTS OF AROUND 500 PAGES IN PAPER BOOK DATED 03.03.2016 AND ALSO P AGES 92 TO 94 IN VOLUME-I AND PAGES 298 TO 1434 ALL PARAMETERS OF TH E IMPUGNED CLAIM. MR. KAUSHAL PLEADS THEREFORE THAT ALL THE EXPENSES IN Q UESTION HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSIN ESS. THE REVENUE STAND ON THE OTHER HAND IS THAT LOWER AUTHORITIES HAVE RIGHT LY DISALLOWED THE IMPUGNED EXPENSES AT AN ESTIMATED RATE OF 40% THAN 100%. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIVAL SUBMISSIONS. THER E IS HARDLY ANY DISPUTE THAT LOWER AUTHORITIES HAVE ALREADY ACCEPTED 60% OF ASSE SSEES EXPENSE TO BE CORRECT AS WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF THE BUSINESS. THE QUESTION THAT ARISE FOR OUR APT ADJUDICATION IS ONL Y QUA REMAINING 40%. LEARNED AUTHORIZED REPRESENTATIVES CASE IS THAT TH ERE SHOULD NOT BE ANY DISALLOWANCE AT ALL AS HE HAD FILED ALL THE DETAILE D AND VOLUMINOUS IN SUPPORT. OUR ATTENTION IS ALSO INVITED TO TRIBUNALS CO-ORDI NATE BENCHS ORDER DELETING ESTIMATED DISALLOWANCE EVEN @ 5%. THE FACT HOWEVER REMAINS THAT ALL THIS DOES NOT FORM SUFFICIENT MATERIAL TO PROVE THAT EAC H AND EVERY HEAD / ITEM OF EXPENDITURE TO BE WHOLLY AND EXCLUSIVELY INCURRED F OR THE PURPOSE OF THE ASSESSEE BUSINESS. WE THUS CONCLUDE THAT THE IMPUG NED DISALLOWANCE @ 40% IS VERY MUCH ON HIGHER SIDE NOT LIABLE TO BE SU STAINED. WE ACCORDINGLY CONCLUDE THAT AN ESTIMATED DISALLOWANCE OF 2% ONLY INSTEAD OF 40% WOULD MEET THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. THE ASSESSEE GETS PART RELIEF IN ITS INSTANT GRIEVANCE. 20. NEXT COMES ASSESSEES THIRD SUBSTANTIVE GROUND CHALLENGING THE LOWER AUTHORITIES ACTION MAKING AD HOC DISALLOWANCE OF 913,48,803/- @ 25% OF THE GROSS AMOUNT OF 36,53,95,215/- INCURRED ON ACCOUNT OF TRAVELLING A ND CONVEYANCE CHARGES. THE ASSESSEES CASE IS THAT IT HAS EMPLOYED AROUND 4,000 NUMBER OF PERSONS APPROXIMATELY AT 17 OFFICE LOCATION IN THE COUNTRY FOR ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 13 RENDERING VARIOUS SERVICES TO ITS CLIENTS (BOTH DOM ESTIC AND FOREIGN). IT IS STATED THAT THE IMPUGNED TRAVELLING AND CONVEYANCE CHARGES HAVE BEEN INCURRED FOR VISITING WORKING PLACES, GOVERNMENT DE PARTMENTS, PROJECT SITES, MEETINGS, SEMINARS BUSINESS DEVELOPMENT INITIATIVES , RECRUITING DERIVE AND BUSINESS EVENTS ETC., MR. KAUSHAL PLEADS THAT ASSES SEES DETAILS TOTALING TO 1919 PAGES AS WELL AS SUPPORTING DOCUMENTS COMPRISI NG 2500 PAGES FORM PART OF RECORDS HAVE GONE UNREBUTTED. HE THEREAFTER CLARIFIES THAT ASSESSEE HAS ALREADY DEDUCTED TDS ON PAYMENTS OF 14,65,80,718/-. AN AMOUNT OF 8,60,919/- IS STATED TO HAVE NOT ATTRACTED THE SAID TDS DEDUCTION. HE IS FAIR ENOUGH IN INFORMING US THAT ASSESSEE HAS ITSELF DIS ALLOWED AN AMOUNT OF 475,48,648/- IN TAX COMPUTATION VALUED BY CREDIT EN TRIES / REVERSAL OF 297,53,220/- CORRESPONDING REIMBURSEMENT TO EMPLOYE ES ARE STATED TO BE INVOLVING AN AMOUNT OF 344,060,684/-. NEXT COMES AN AMOUNT OF 311,510,067/- COMPRISING AIR FARE, TRAIN, AND CONVE YANCE CHARGES ONLY LEAVING BEHIND MISCELLANEOUS AMOUNT OF 36,53,95,215/- IN DISPUTE. THE ASSESSEES CASE ACCORDINGLY IS THAT THE LOWER AUTHO RITIES OUGHT NOT TO HAVE ESTIMATED THE IMPUGNED DISALLOWANCE @ 25% WITHOUT P IN-POINTING ANY IRREGULARITY IN THE RELEVANT BOOKS OF ACCOUNT. THIS TRIBUNALS ORDER (SUPRA) HAS GONE QUOTED IN SUPPORT. LEARNED DEPARTMENTAL REPRES ENTATIVE STRONGLY SUPPORTA THE IMPUGNED DISALLOWANCE MAINLY ON THE GR OUND THAT ASSESSEE HAS FAILED TO PROVE THE SAME BY TENDERING A COGENT EXPL ANATION IN SUPPORT. WE FIND CONSIDERABLE FORCE IN ASSESSEES ARGUMENTS IN PRINC IPLE. WE REITERATE THAT ALL THE ABOVE QUOTED DETAILS HAVE GONE UNREBUTTED FROM THE REVENUES SIDE. THE FACT HOWEVER REMAINS THAT AS WELL AS IN THE PRECEDI NG SUBSTANTIVE GROUND THAT ASSESSING OFFICER HAS NOT CARRIED OUT ONE-TO-ONE OR EVEN SAMPLE VERIFICATION OF THE IMPUGNED EXPENDITURE BEFORE INVOKING THE EST IMATED DISALLOWANCE @ 25%. WE THEREFORE ACCEPT THE ASSESSEES PLEADINGS I N PRINCIPLE TO RESTRICT THE IMPUGNED DISALLOWANCE FROM 25% TO 2% ONLY IN ORDER TO MAKE BOTH ENDS MEET FOR THE REASON THAT TAXPAYER HAS ALSO NOT BEEN PROV ED ALL OF ITS EXPENDITURE TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR ITS B USINESS ACTIVITY. THE IMPUGNED DISALLOWANCE TO BE THEREFORE RESTRICTED TO 2% ONLY. WE MAKE IT CLEAR ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 14 THAT NONE OF SUCH ESTIMATION WOULD BE AS A PRECEDEN T AGAINST ASSESSEE IN ANY EARLIER OR SUCCEEDING ASSESSMENT YEAR. 21. THE ASSESSEES FOURTH SUBSTANTIVE GROUND CHALLE NGES THE ASSESSING OFFICERS ACTION DISALLOWING ITS CLAIM OF 10,35,400/- INCURRED ON ACCOUNT OF PAYMENT MADE TOWARDS SUBSCRIPTION TO US INDIA BUSIN ESS COUNSEL UBIC N THE NATURE OF ANNUAL MEMBERSHIP FEES. THE ASSESSING OFFICER HAS DISALLOWED THE SAME FOR THE REASON THAT THIS PAYMENT DOES NOT HAVE ANY LINK WITH ASSESSEES BUSINESS. THE ASSESSEES CASE BEFORE US IS THAT IT HAS ALREADY FILED NAME, ADDRESS, DATE, AMOUNT INVOICE NO. AND D ATE OF INVOICE DETAILS BEFORE THE LOWER AUTHORITIES TO PROVE THE ACTUAL PA YMENT. IT PLEADS DURING THE COURSE OF HEARING THAT THE PAYEE HEREIN IS A RENOWN ED NON PROFIT ORGINZATION PROMOTING BILATERAL TRADE ENVIRONMENT BETWEEN THE T WO COUNTRIES. THE SAME IS PROJECTED AS WIDER PLATFORM CREATED FOR SUCCESSFULL Y CONTRIBUTING ITS EFFORTS TO GLOBAL ECONOMY. LEARNED COUNSEL TERMS ASSESSEES AN NUAL MEMBER-SHIP PAYMENT TO BE INVOLVING COMMERCIAL CONSIDERATION FO R OBTAINING COMMERCIAL ADVANTAGE LIABILITY TO BE TREATED AS REVENUE EXPEND ITURE. CASE LAW CIT VS. CHEMICALS & PLASTICS INDIA LTD. 292 ITR 155 (MAD), CIT VS. CO-OPERATIVE SUGARS LTD. 304 ITR 259 (KER) AND ACIT VS. RAJASTHA N SPG. & WVG. MILLS LTD. 274 ITR 465 (RAJ) IS QUOTED IN SUPPORT. WE FIND NO MERIT IN ASSESSEES ABOVE SUBMISSIONS. WE MAKE IT CLEAR THAT ALTHOUGH IT HAS PLACED ON RECORD ITS ONLY MEMBERSHIP DETAILED FOLLOWED BY ACTUAL PAYMENT. IT IS VERY MUCH IMPERATIVE TO PROVE THE SCHEME OF ABOVE COUNAL OR ITS BYE-LAWS VI S--VIS THE ASSESSEES RELEVANT BUSINESS ACTIVITY. WE ARE OF THE OPINION T HAT MERE PAYMENT OF AN AMOUNT DOES NOT PROVE THE SAME TO BE HAVING DIRECT LINK WITH BUSINESS ACTIVITIES. THE RELEVANT CASE LAW HEREINABOVE (SUPR A) INVOLVES INSTANCES OF CONTRIBUTION PAID FOR CONSTRUCTION OF CHAMBER AND C OMMERCE BUILDING, CONTRIBUTION TOWARDS CANAL CONSTRUCTION IRRIGATING SUGARCANE FIELDS AND PARTICIPATION EXPENDITURE IN A TRADE, ASSOCIATION O R FUND SET UP FOR ADVANCEMENT OF BUSINESS; RESPECTIVELY. NO SUCH FACT S EMERGE FROM ASSESSEES IMPUGNED CLAIM. WE THUS DECLINE THE SAME ON THIS COUNT ALONE ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 15 AFTER APPRECIATION OF THE ENTIRE FACTS RELEVANT TO THE ISSUE. THE ASSESSEE FAILS IN ITS EIGHTH SUBSTANTIVE GROUND. 22. THE ASSESSEES NEXT SUBSTANTIVE CHALLENGES CORR ECTNESS OF LOWER AUTHORITIES ACTION DISALLOWING AN AMOUNT OF 30,97,752/- INCURRED TOWARDS TRAINING EXPENSES IN LUMPSUM AS AGAINST 25% AD HOC DISALLOWANCE PROPOSED EARLIER. THE ASSESSEES CASE BEFORE US IS THAT THE DRP HAD RESTORED THE MATTER BACK TO THE ASSESSING OFFICER FOR ALLOWING T HE IMPUGNED EXPENDITURE AFTER VERIFICATION. IT PLEADS THAT ALL THE RELEVANT DETAILS STOOD FILED BEFORE IN THE CONSEQUENTIAL PROCEEDINGS, INVOLVING POWER PROJECT EXPENDITURE, MISCELLANEOUS VENDORS PAYMENT AND OTHER HEADS (PAYM ENT TO CHAMBER / ASSOCIATION) AMOUNTING TO 5,78,017/-, 3,23,897/- AND 4,91,838; RESPECTIVELY. IT IS VEHEMENTLY CONTENDED THAT ALL T HESE EXPENSES HAVE BEEN INCURRED FOR UPTO DATE KNOWLEDGE TO ITS WORK FORCE S KNOWLEDGE, FORMING KEY- ELEMENT OF OPERATION EFFICIENCY. RELEVANT DETAILS T O THIS EFFECT IN PAGES NO. 11 TO 113 OF THE PAPER BOOK PART ALSO REFERRED. WE FIN D FORCE IN ASSESSEES INSTANT CLAIM OF STAFF TRAINING EXPENSES IN PRINCIPLE. THE REVENUE FAILS TO INDICATE ANY REBUTTLE REGARDING FIRST AND THIRD HEADS HEREINABOV E. THE ONLY QUESTION REMAIN IS THAT OF MISCELLANEOUS VENDOR PAYMENT WHOSE DETAI LS ARE NOWHERE FORTHCOMING A PART FROM PAN ETC. WE THUS CONFIRM TH E IMPUGNED DISALLOWANCE OF 13,93,752/- TO THE EXTENT OF 3,23,897/- ONLY. THE ASSESSEE GETS PART RELIEF. 23. THE ASSESSEES NEXT SUBSTANTIVE GROUND CHALLENG ES CORRECTNESS OF DISALLOWANCE AMOUNTING TO 150,046,130/- IN RESPECT OF PWCDA NETWORK FORM CHARGES. THERE IS NO DISPUTE ABOUT THE SAME TO HAVE BEEN PAID TO ITS EPONYMOUS DUTCH ENTITY INCORPORATED IN NETHERLAND S AGAINST INVOICES RAISED BY PWCDA SERVICES IN TERMS OF FIRMING SERVICES AGRE EMENT. THE LOWER AUTHORITIES SEEM TO HAVE DISALLOWED THE ABOVE PAYME NT MAINLY FOR THE REASON THAT THE ASSESSEE COULD NOT ESTABLISH THE RELEVANT BUSINESS NEXUS / PURPOSE AND THERE WAS ALSO A FAILURE ON ITS PART IN NOT DED UCTING TDS THEREUPON. WE ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 16 HAVE HEARD RIVAL CONTENTIONS REITERATING BOTH PARTI ES RESPECTIVE FACTS. THERE IS NO DISPUTE IN PRINCIPLE ABOUT THE ASSESSEES FIRM SERVICE AGREEMENT WITH THE PAYEE M/S PWCDS SERVICES AS WELL AS ITS ROLE PLAYE D AS PROVIDING CENTRAL SERVICES TO THE ENTIRE PWC GROUP BASED ON COST AL LOCATION METHOD KEEPING IN MIND THE NATURE OF SERVICES RENDERED BENEFITS DE RIVED AS PER PAGES 117 TO 261 OF THE PAPER BOOK. THE ASSESSEE HAS ALSO PREPAR ED A LIST OF SERVICES AVAILED VIA THE PAYEE CONCERNED IN RESPECT OF ALL M EMBER FIRMS OF THE GROUP INVOLVING SAMPLE CASES OF E-LEARNING AND EDUCATION, MANDATORY FOUNDATION PROGRAMMES, TRAINING PROGRAMMES ALLOYS SPECIFIC / T ECHNICAL PROGRAMMES ETC. ALL THIS HAS GONE UNREBUTTED FROM THE REVENUE SIDE WHOSE CASE IS THAT THERE IS NO BUSINESS LINK FORTHCOMING FROM THE IMPUGNED E XPENDITURE. WE FIND NO SUBSTANCE IN REVENUES INSTANT STAND. WE MAKE IT CL EAR THAT THE ASSESSEE- COMPANY IS ENGAGED IN MULTI FUNCTIONAL CONSULTANCY SERVICES AS A GROUP ENTITY OF PWCDA ORGANIZATION BASED IN NETHERLANDS. LEARNED COUNSEL HAS ALSO FILED BEFORE US RELEVANT ASSESSMENT RECORDS WITH REGARD T O THE PAYEE ENTITY PERTAINING TO THE IMPUGNED ASSESSMENT YEAR ITSELF A CCEPTING THE RETURNED INCOME WITHOUT MAKING ANY ADDITION. NECESSARY REFER ENCE REGARDING FIRM SERVICES AGREEMENT IS ALSO MADE TO PAPER BOOK PAGES 6304 AND 6305. IT EMERGES THAT THIS TRIBUNALS DECISION IN DCIT VS. E RNST & YOUNG (P) LTD. 49 TAXMAN.COM 386 (KOL) ALSO HOLDS THAT NO TDS IS DEDU CTIBLE IN CASE OF SUCH FIRM SERVICES AGREEMENT PAYMENTS NOT INCLUDING ANY INCOME COMPONENT BUT ONLY REIMBURSEMENT OF EXPENSE ON COST ALLOCATION FO RMULA. WE TAKE INTO ACCOUNT ALL THESE FACTS AS WELL AS JUDICIAL PRECEDE NTS TO DELETE IMPUGNED DISALLOWANCE OF FIRM SERVICES EXPENDITURE PAYMENT A MOUNTING TO 150,046,130/-. 24. LEARNED COUNSEL DOES NOT PRESS FOR ASSESSEES E LEVENTH SUBSTANTIVE GROUND OF FOREIGN EXCHANGE LOSS ON MATURITY OF MTM CONTRACTS INVOLVING ADDITION OF 8,46,64,184/- ON THE GROUND THAT THIS TRIBUNALS DE CISION IN ITA 1156/KOL/2014 DATED 17.03.2017 HAS ALREADY ACCEPTED ITS CORRESPONDING ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 17 GRIEVANCE IN ASSESSMENT YEAR 2008-09. WE THUS DISMI SS THE INSTANT SUBSTANTIVE GROUND AS NOT PRESSED. 25. THE ASSESSEES THIRTEEN SUBSTANTIVE GROUND CHAL LENGES CORRECTNESS OF LOWER AUTHORITIES ACTION DISALLOWING ITS PAYMENT O F SOFTWARE CHARGES AMOUNTING TO 2,07,900/- U/S. 40(A)(IA) OF THE ACT ON ACCOUNT OF NON DEDUCTION OF TDS THEREUPON. AFTER ARGUING VERY SERIOUSLY FOR THE SOMETIME, LEARNED COUNSEL SUBMITS THAT THE ASSESSEE NO MORE WISHES TO PRESS FOR INSTANT SUBSTANTIVE GROUND KEEPING IN MIND SMALLNESS OF AMO UNT INVOLVED. WE THEREFORE AFFIRM THE IMPUGNED DISALLOWANCE WITH A R IDER THAT SAME SHALL NOT BE TREATED AS A PRECEDENT IN ANY PRECEDING OR SUCCEEDI NG ASSESSMENT YEAR. 26. THE ASSESSEES NEXT SUBSTANTIVE GROUND CHALLENG ES CORRECTNESS OF THE LOWER AUTHORITIES ACTION DISALLOWING ITS PROFESSIONAL FE E OF RS. 2,50,00,840/- ON ACCOUNT OF NON-DEDUCTION OF TDS THEREUPON BY INVOKING SECTION 40A(IA) OF THE ACT. IT EMERGES AT THE OUTSET THAT THE ASSESSING OFFICER HAD INITIA LLY COMPUTED THE IMPUGNED DISALLOWANCE OF RS. 1,28,70,0840/- OUT OF WHICH THE TAX PAYER SUO-MOTO ADDED A SUM OF RS. 1,03,70,00,000/-. THIS IS WHAT HAS GIVEN RAI SE TO THE DISALLOWANCE OF RS. 2,50,00,840/-. THE LEARNED COUNSEL SUBMITS THAT THE ASSESSEES MAIN GRIEVANCE IS NOT PRESSED TO THE EXTENT OF RS. 22,01,972/- AS FOL LOWS: ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 18 WE THEREFORE AFFIRM THE ASSESSING OFFICERS ACTION INVOKING THE IMPUGNED DISALLOWANCE TO THE EXTENT OF RS. 22,01,972/-. 27. NEXT PARA IS THE ASSESSEES PAYMENTS OF RS. 14, 08,115/-. THERE IS NO DISPUTE THAT THESE SUMS HAVE BEEN PAID TO REGARDING TAX ADM INISTRATION CAPACITY IN TAXPAYER SERVICES PROJECT AND BANGLADESH RAILWAYS. RELEVANT REFERENCE IS INVITED TO PAGE NO. 262 IN THE PAPER BOOK. LEARNED COUNSEL QUO TES SECTION 91(VII)(B) OF THE ACT AND MORE PARTICULARLY THE LATTER PORTION INVOLVING EXCEPTION CLAUSE TO THE MAIN PROVISION THAT WHERE FEES ARE PAYABLE IN RESPECT OF SERVICES UTILIZED IN A BUSINESS OR PROFESSION CARRIED ON BY A NON-RESIDENT OUTSIDE IND IA OR FOR THE PURPOSES OF MAKING OR EARNING INCOME FROM ANY SOURCE OUTSIDE INDIA. TH E ASSESSEES CASE THEREFORE IS THAT THE MAIN PAYMENT INSTANCES ARE SQUARELY COVERE D BY THE ABOVE EXCEPTION PROVISION ITSELF SINCE IT HAS BEEN PAID IN RESPECT OF SERVICES UTILIZED IN A BUSINESS OR ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 19 PROFESSION CARRIED ON BY BANGLADESH BASED PAYEES IN THE SAID COUNTRY ONLY. THERE IS NO DISPUTE ON THIS CLINCHING FACTS AS HIGHLIGHTED D URING THE COURSE OF HEARING AT THE REVENUES BEHEST. WE THUS QUOTE HONBLE DELHI HIGH COURTS DECISION IN DIT VS. LUFTHANSA CARGO LIMITED [375 ITR 85 (DEL)] TO DELET E THE IMPUGNED DISALLOWANCE. 28. NEXT DISALLOWANCE AMOUNT IS RS. 30,19,942/- OUT OF WHICH THE ASSESSEE PAID RS. 2,24,904/- AND RS. 90,000/- TO M/S LORMAN ZYRWA & MARYLINE NONG KYNRIH NOT INVITING TDS DEDUCTION IN VIEW OF NIL WITHHOLDING C ERTIFICATE AS PER PAGE 262 IN THE PAPER BOOK. REMAINING AMOUNT AS PER ASSESSMENT ORDE R INVOLVING PAYMENTS WITHOUT NON-DEDUCTION OF TDS OUT OF RS. 30,19,942/- ARE ST ATED TO BE RS. 22,34,904/-. COUPLED WITH THIS, THE ASSESSEE SUBMITS THAT ANOTHE R PAYMENT OF RS. 21.24 LACS PERTAINS TO PAYMENT BHUTAN BASED PAYEE ON ACCOUNT OF THE SAID NATIONS GOVERNMENT INITIATIVE WHICH IS AKIN TO BANGLADESH P AYMENT PROVIDED U/S 9(1)(VII)(B) OF THE ACT. WE THEREFORE ACCEPT THE ASSESSEES ARGU MENT TO THE EXTENT INDICATED HEREINABOVE. 29. THIS LEAVES US WITH PROFESSIONAL PAYMENTS TO NO N-RESIDENT PAYEES TOTALING TO RS. 18290741/- OUT OF TOTAL DISALLOWANCE OF RS. 19, 73,72,283/-. THE ASSESSEE FIRST OF ALL FILES A PAYMENT WISE CHART THEREOF AS FOLLOWS: ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 20 ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 21 LEARNED COUNSELS CASE IN VIEW OF ABOVE CHART IS TH AT SECTION 90(2) MAKES IT CLEAR THAT IT IS VERY MUCH OPEN FOR AN ASSESSEE TO OPT FO R MORE BENEFICIAL PROVISION EITHER IN UNDER DOMESTIC LAW OR AS PER THE RELEVANT DOUBLE TA XATION AVOIDANCE AGREEMENT; AS THE CASE MAY BE. HE THEREAFTER REFERS TO VARIOUS DOUBLE TAXATION AVOIDANCE AGREEMENTS PERTAINING TO ALL THESE COUNTRIES NAMEL Y AUSTRALIA, EGYPT, FRANCE, INDONESIA, MAURITIUS, NETHERLANDS, SINGAPORE, SRI L ANKA, THAILAND AND UAE THAT DOUBLE TAXATION AVOIDANCE AGREEMENTS PERTAINING TO 2 ND , 4 TH , 5 TH , 6 TH , 7 TH , 8 TH , 9 TH & 10 TH COUNTRIES HEREIN DO NOT CONTAIN TAXATION OF FEE FO R TECHNICAL SERVICES CLAUSE REQUIRING TDS DEDUCTION. REMAINING 1 ST , 3 RD , 6 TH AND 7 TH INSTANCES ARE THOSE NATIONS WHOSE DOUBLE TAXATION AVOIDANCE AGREEMENTS CONTAIN MAKE AVAILABLE CLAUSE I.E. THE PAYEES CONCERNED SHOULD HAVE MADE AVAILABLE THE RELEVANT TECHNICAL KNOWHOW ENABLING THE PAYEE TO INDEPENDENTLY USE THE SAME. A CO-ORDINATE BENCHS DECISION IN EIH LTD. VS. DCIT I.T.A. NO. 117/KOL/2017 DECIDE D ON 16.05.2018 ALSO HOLDS DOUBLE TAXATION AVOIDANCE AGREEMENT WITH AUSTRALIA, SINGAPORE, FRANCES DTAA TO BE NOT INVOLVING ANY FTS CLAUSE OR THE SAME TO BE T AXABLE ONLY IF MAKE AVAILABLE CONDITION IS SATISFIED.. ALL THESE SUBMISSIONS HAVE GONE UNREBUTTED FROM THE REVENUES SIDE. WE STILL FEEL IT APPROPRIATE THAT I N CASE THE ASSESSING OFFICER HEEDS TO CONDUCT A DETAILED EXERCISE PAYEE-WISE VIS--VIS THE RELEVANT CONDITIONS INCORPORATED IN THE CORRESPONDING DTAAS AND TAKE FR ESH A FRESH CALLAS PER THE NECESSARY ARTICLES THEREIN REGARDING TAXATION OF FE E FOR TECHNICAL SERVICES PAYMENTS. WE THUS ACCEPT ASSESSEES CONTENTION IN PRINCIPLE A ND LEAVE IT OPEN FOR THE ASSESSING OFFICER TO CONDUCT NECESSARY FACTUAL VERI FICATION MORE PARTICULARLY IN VIEW OF THE FACT THAT WE HAVE ALREADY RESTORED THE MAIN ISSUE (SUPRA) BACK TO THE ASSESSING OFFICER FOR AFRESH PROCEEDINGS IN PRECEDI NG PARAGRAPHS. 30. THE ASSESSEES NEXT SUBSTANTIVE GROUND CHALLENG ES LOWER AUTHORITIES ACTION DISALLOWING RENT CLAIM OF 7,13,000/- PERTAINING TO PROVISION MADE AMOUNTING TO 2,73,000/- AND GUEST HOUSE RENT OF 440,000/- PAID WITHOUT DEDUCTING TDS. IT EMERGES AT THE OUTSET FROM PAGE 4 4 THAT THE ABOVE PAYEE HAS ALREADY OBTAINED NIL WITHHOLDING TAX CERTIFICAT E DATED 21.02.2011 OF THE ACT. IT IS ALSO STATED TO BE EXEMPT U/S. 10(26) OF THE ACT. WE THEREFORE DELETE THE IMPUGNED DISALLOWANCE TO THE EXTENT OF 44,000/-. COMING TO THE BALANCE PROVISION AMOUNT FOR RENT OF 2,73,000/- LEARNED COUNSEL FAILS TO OFFER ANY EXPLANATION REGARDING THE BASIS THEREOF AS PER THE CASE RECORDS. WE ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 22 ACCORDINGLY AFFIRM THE IMPUGNED PROVISION DISALLOWA NCE IN THESE PECULIAR FACTS AND CIRCUMSTANCES. 31. THE ASSESSEES NEXT SUBSTANTIVE GROUND SEEKS TO CLAIM TAX CREDIT RELIEF U/S. 90 OF THE ACT QUA VARIOUS SUMS WITHHELD FOREIG N TAX JURISDICTION TO 204,49,803/- PAGES 286 TO 290 CONTAIN A LIST OF ALL SUCH COUNTRIES. LEARNED COUNSEL REPRESENTING ASSESSEE QUOTES SEC. 90 AND 91 OF THE ACT. HIS ONLY PLEA BEFORE US THAT ALL THE RELEVANT DETAILS FOR RAISING THE IMPUGNED CLAIM OF FOREIGN TAX CREDITS ARE VERY MUCH AVAILABLE VIS--VIS THE L IST OF SUCH NATIONS. THE REVENUE ON THE OTHER HAND SUBMITS THAT THOSE DETAIL ED EXERCISES OF FACTUAL VERIFICATION REGARDING INDIAS DOUBLE TAXATION AVOI DANCE AGREEMENT WITH THE ASSESSEES LIST OF COUNTRIES NEEDS TO BE UNDERTAKEN IN ELABORATE MANNER. WE THEREFORE RESTORE THE INSTANT ISSUE BACK TO THE ASS ESSING OFFICER FOR ABOVE NECESSARY VERIFICATION ABOUT INDIAS DOUBLE TAXATIO N AVOIDANCE AGREEMENT WITH ASSESSEES LIST OF FOREIGN TAX JURISDICTION IN CONSEQUENTIAL PROCEEDINGS AS PER LAW. NEEDLESS TO SAY, THE ASSESSEES CLAIM WOUL D STAND ACCEPT IN THOSE COUNTRIES WITH WHICH NO SUCH AGREEMENT EXISTS IN TW IN CONCLUSION SEC. 91. T HIS SUBSTANTIVE GROUND IS TREATED AS ACCEPTED FOR S TATISTICAL PURPOSES. 32. THE ASSESSEES LAST SUBSTANTIVE GROUND PLEADS T HAT ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN MAKING ADDI TION OF 13,96,258/- THEREBY GRANTING TDS CREDIT OF 640,242,931/- ONLY IN RESPECT OF 654,103,189/- AS CLAIMED IN THE RETURN OF INCOME AND IN VIEW OF ITS FORM 26AS. BOTH PARTIES ARE AD IDEM DURING THE COURSE OF HEARING THAT INSTANT I SSUE ALSO REQUIRES A DETAILED FACTUAL VERIFICATION. WE THUS RESTORE ASSESSEES GR IEVANCE BACK TO THE ASSESSING OFFICER FOR NECESSARY FACTUAL VERIFICATIO N AS PER LAW. 33. THIS ASSESSEES APPEAL PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 12/ 09/2018 SD/- SD/- ( %) (' %) (M.BALAGANESH) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S ITA NO.483/KOL/2017 A.Y. 2012-13 M/S PRICEWATERHOUSE COOPERS (P) LTD. VS. ACIT, CIR-2(2), KOL. PAGE 23 (- 12 / 09 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S PRICEWATERHOUSE COOPERS PVT. LTD. BL OCK-EP, PLOT Y-14 SALT LAKE CITY, SECTOR-V, KOLKATA-91 2 . /RESPONDENT-ACIT, CIRCLE-2(2), AAYAKAR BHAVAN, P-7, CHOWRINGHEE SQ. KOL-69 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5 . 7 ''3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 3,