AT & T GLOBAL NETWORK SERVICES (INDIA) PVT. LTD., NEW DELHI V. DCIT CIRCLE-2(1) - National E-Assesment Order, NEW DELHI

ITA 489/DEL/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7584 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Assessment Year: 2016-2017
• Appeal Filed On: 05-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL; SHASHI KAJLE
• Keywords: Transfer pricing; Business expenditure; International transaction; Application of stay; Non-deduction of tax; Revenue expenditure; Capital expenditure; TDS
• Section: 145; 37; 143(3); 115JB; 37(1); 201; 194J; 13; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1, NEW DELHI BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 489/DEL/2021 : ASSTT. YEAR : 2016-17 & SA NO. 75/DEL/2021 : ASSTT. YEAR : 2016-17 AT&T GLOBAL NETWORK SERVICES (INDIA) PVT. LTD., VATIKA TRIANGLE, 3 RD FLOOR, SUSHANT LOK-I, BLOCK-A, GURGAON, HARYANA-122002 VS DCIT, CIRCLE-2(1), NATIONAL E- ASSESSMENT CENTRE, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AA FCA8810L ASSESSEE BY : SH. RAVI SHARMA, ADV. & SH. RISHABH MALHOTRA, AR REVENUE BY : SH. SURENDERPAL, CIT DR & MS. SHASHI KAJLE, SR. DR DATE OF HEAR ING: 28 . 0 7 .20 2 1 DATE OF PRONOUNCEMENT: 24 .0 8 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER DATED 30.03.2021 PASSED BY AO U/S 143(3) R.W.S. 144C(3) OF THE INCOME TAX ACT, 1961. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: 1. TP ADJUSTMENT WITH RESPECT TO RECEIPT OF INTRA-GROUP SERVICES ON THE FACTS AND CIRCUMSTANCES OF THE CASE, & IN LA W, THE LD. ASSESSING OFFICER (LD. AO)/ LEARNED TRANS FER ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 2 PRICING OFFICER (LD. TPO) [IN PURSUANCE TO THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL (DRP)] , ERRED IN ENHANCING THE INCOME OF THE APPELLANT BY I NR 17,67,56,395 HOLDING THAT THE INTERNATIONAL TRANSAC TION PERTAINING TO RECEIPT OF INTRA-GROUP SERVICES DO NO T SATISFY THE ARMS LENGTH PRINCIPLE ENVISAGED UNDER THE INCOME-TAX ACT, 1961 (THE ACT), AND IN DOING SO H AVE GROSSLY ERRED IN: 1.1. DISREGARDING THE FAVOURABLE ADJUDICATION/ FINDINGS OF THE HONBLE INCOME- TAX APPELLATE TRIBU NAL (ITAT) IN APPELLANTS OWN CASE FOR AY 2008-09, AY 2009-10, AY 2010-11, AY 2011-12, AY 2012-13, AY 2013-IIG AY 2014-15 AND AY 2015-16 WHEREIN THE HONBLE ITAT HAS CONCLUDED THE ISSUE IN FAVOUR OF T HE APPELLANT. 1.2. REJECTING THE COMBINED TRANSACTION APPROACH O F BENCHMARKING ADOPTED BY THE APPELLANT IN ITS TP DOCUMENTATION (I.E. AGGREGATING AVAILING OF INTRA-G ROUP SERVICES WITH PROVISION OF NETWORK SUPPORT SERVICES ) AND PROCEEDING TO DETERMINE THE ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION PERTAINING TO AVAILING OF INTRA-GROUP SERVICES FROM ITS AES ON A STANDALONE BASIS; 1.3. ARBITRARILY APPLYING COMPARABLE UNCONTROLLED PRICE (CUP) METHOD AS THE MOST APPROPRIATE METHOD AS AGAINST TRANSACTIONAL NET MARGIN METHOD (TNMM) APPLIED BY THE APPELLANT IN ITS TRANSFER PRICING DOCUMENTATION; 1.4. DISREGARDING THE ELABORATE DOCUMENTARY EVIDENCE SUBMITTED AS PART OF ASSESSMENT PROCEEDING S TO ERRONEOUSLY ASSUME THAT NO BENEFIT HAS BEEN CONFERRED UPON THE APPELLANT FROM THE INTERNATIONAL TRANSACTIONS PERTAINING TO AVAILING OF INTRA-GROUP SERVICES AND THEREAFTER RE-DETERMINING THE ALP OF T HE SAID TRANSACTION AS NIL; AND 1.5. DISREGARDING THE RECEIPT OF SERVICES BY THE APPELLANT FROM ITS AES WHICH IS CONTRARY TO THE FAC TS OF THE PRESENT YEAR AS WELL AS TO THE STAND TAKEN BY T HE LD. TPO IN PRIOR YEAR DESPITE NO CHANGE IN THE NATU RE ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 3 OF SERVICES INVOLVED. FURTHER, THE LEARNED TPO ERRE D IN CONTENDING THAT THE SERVICES RECEIVED ARE DUPLICATI VE AND STEWARDSHIP IN NATURE, IGNORING THE DOCUMENTATI ON AND EVIDENCES SUBMITTED BY THE APPELLANT WHICH CONTRADICTS HIS OWN CONTENTION THAT THE SERVICES HA VE ACTUALLY NOT BEEN RECEIVED; 1.6. ARBITRARILY CHALLENGING THE VERACITY OF THE CONTRACTUAL SERVICE AGREEMENT DISREGARDING THE ACTU AL CONDUCT OF THE APPELLANT IN THE AVAILING OF INTRA-G ROUP SERVICES FROM AES BASIS THE ELABORATE DOCUMENTARY EVIDENCES SUBMITTED AS PART OF ASSESSMENT PROCEEDINGS. 2. TP ADJUSTMENT WITH RESPECT TO PAYMENT OF ROYALTY ON THE FACTS AND CIRCUMSTANCES OF THE CASE, & IN LA W, THE LD. AO/ LD. TPO (IN PURSUANT TO THE DIRECTIONS OF THE DRP), ERRED IN ENHANCING THE INCOME OF THE APPELLANT BY INR 17,64,30,505 AND HOLDING THAT THE INTERNATIONAL TRANSACTION PERTAINING TO PAYMENT OF ROYALTY DOES NOT SATISFY THE ARMS LENGTH PRINCIPLE ENVISAGED UNDER THE ACT, AND IN DOING SO HAVE GROSS LY ERRED IN: 2.1. REJECTING THE COMBINED TRANSACTION APPROACH O F BENCHMARKING ADOPTED BY THE APPELLANT IN ITS TP DOCUMENTATION (I.E. AGGREGATING PAYMENT OF ROYALTY, AVAILING OF INTRA-GROUP SERVICES WITH PROVISION OF NETWORK SUPPORT SERVICES) AND PROCEEDING TO DETERMI NE THE ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION PERTAINING TO PAYMENT OF ROYALTY FROM ITS AES ON A STANDALONE BASIS BY REJECTING TNMM AS THE MOST APPROPRIATE METHOD; 2.2. HOLDING THAT THE APPELLANT DID NOT RECEIVE TANGIBLE BENEFIT IN LIEU OF THE PAYMENT OF ROYALTY THEREBY CHALLENGING THE COMMERCIAL WISDOM OF THE APPELLANT IN MAKING PAYMENT FOR ROYALTY AND PASSING THE ORDER IN CONTRAST WITH THE RECENT JUDICIAL PRONOUNCEMENTS IN THIS REGARD; ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 4 2.3. DISREGARDING THE JUDICIAL PRONOUNCEMENT/ FINDING OF THE ITAT IN APPELLANTS OWN CASE FOR THE AY 2009-10, AY 2010-11, AY 2013-14, AY 2014-15 AND AY 2015-16 AND MERELY PLACING RELIANCE ON PAST YEAR ORDERS PASSED BY THE DRP; 2.4. ARBITRARILY REJECTING THE SUPPLEMENTARY ANALY SIS USING CUP METHOD TO BENCHMARK THE PAYMENT OF ROYALTY TRANSACTION SUBMITTED BY THE APPELLANT WITH OUT GIVING ANY COGENT REASONS; 2.5. UNDERTAKING FRESH BENCHMARKING ANALYSIS USING ROYALTYSTAT DATABASE AND SELECTING AGREEMENTS WHICH ARE NOT COMPARABLE TO THE ROYALTY PAYMENT MADE BY THE APPELLANT TO ITS AES. 2.6. NOT PROVIDING THE DETAILED SEARCH PROCESS ALO NG WITH BACKUP DOCUMENTATION SUCH AS ACCEPT-REJECT MATRIX TO PROVIDE APPELLANT AN OPPORTUNITY TO EVALU ATE THE APPROPRIATENESS OF THE BENCHMARKING ANALYSIS; A ND 2.7. ERRONEOUSLY COMPUTING ARMS LENGTH PRICE AS AVERAGE OF THE ROYALTY RATES OF SIX COMPARABLE AGREEMENTS INSTEAD OF APPLYING THE RANGE CONCEPT AS PRESCRIBED UNDER RULE 10CA OF THE INCOME-TAX RULES, 1962. 3. DISALLOWANCE OF CIRCUIT ACCRUALS 3.1. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/ DRP ERRED IN MAKING A DISALLOWA NCE OF INR 5,18,23,315 ON ACCOUNT OF CIRCUIT ACCRUALS CREATED TOWARDS BANDWIDTH AND LAST MILE SERVICES AVAILED BY THE APPELLANT COMPANY, IGNORING THAT THE ACCRUALS WERE BASED ON A REASONABLE AND SCIENTIFIC BASIS. 3.2. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/ DRP FAILED TO APPRECIATE THAT T HE APPELLANT FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING A ND ACCRUES CIRCUIT CHARGES ON SCIENTIFIC BASIS. 3.3. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/ DRP FAILED TO APPRECIATE THAT A S PER ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 5 THE ACCOUNTING STANDARDS NOTIFIED UNDER SECTION 145 (2) OF THE ACT, THE APPELLANT WAS REQUIRED TO MAKE PROVISION FOR CIRCUIT ACCRUALS FOR THE SUBJECT FINA NCIAL YEAR. 3.4. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/ DRP ERRED IN NOT APPRECIATING T HAT THE APPELLANT PRODUCED EVIDENCES TO THE EXTENT OF MORE THAN 94.89% FOR UTILIZATION/REVERSAL MADE IN SUBSEQUENT YEARS AND NO ADVERSE FINDING HAS BEEN GIVEN BY LD. AO/ DRP ON THE SAME. 3.5. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/ DRP ERRED IN IGNORING THE CLAIM OF REVERSALS OF CIRCUIT ACCRUALS OF INR 4,70,15,658 MA DE IN THE SUBSEQUENT YEARS, SUBMITTED BEFORE THE LD. A O/ DRP. 3.6. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/ DRP ERRED IN NOT ALLOWING DEDUC TION OF CIRCUIT ACCRUALS OF INR 10,95,20,722 DISALLOWED IN THE PRECEDING ASSESSMENT YEAR (I.E. AY 2015-16) WITHOUT APPRECIATING THAT NON-DEDUCTION OF SUCH AMOUNT WOULD RESULT IN DOUBLE DISALLOWANCE OF THE SAME AMOUNT IN AY 2015-16 AS WELL AS IN AY 2016-17, WHICH IS UNTENABLE IN LAW. 3.7. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, WHERE ANY DISALLOWANCE IS MADE IN RESPECT OF THE AFORESAID ACCRUALS FOR THE YEAR UNDER CONSIDERATION, DEDUCTIO N IN RESPECT OF THE DISALLOWED AMOUNT SHOULD BE ALLOWED IN THE SUBSEQUENT YEAR(S) IN WHICH SUCH ACCRUALS WERE REVERSED OR UTILIZED. 3.8. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.AO/ DRP ERRED IN IGNORING THAT THE AFORESAID DISALLOWANCE OF CIRCUIT ACCRUALS HAS BEEN DELETED BY THE HONBLE ITAT IN APPELLANTS OWN CASE FOR ASSESSMENT YEARS 2008-09 TO AY 2015-16. THEREFORE, ANY DISALLOWANCE ON ACCOUNT OF CIRCUIT ACCRUAL IS NOT TENABLE. ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 6 4. DISALLOWANCE OF YEAR-END ACCRUALS 4.1. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/ DRP ERRED IN MAKING A DISALLOWA NCE OF INR 62,972 ON ACCOUNT OF YEAR-END ACCRUALS REPRESENTING ACCRUALS CREATED TOWARDS NORMAL BUSINE SS EXPENDITURE INCURRED BY THE APPELLANT IGNORING THAT THE ACCRUALS WERE BASED ON A REASONABLE BASIS. 4.2. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/ DRP FAILED TO APPRECIATE THAT A S PER THE ACCOUNTING STANDARDS NOTIFIED UNDER SECTION 145 (2) OF THE ACT, THE APPELLANT WAS REQUIRED TO MAKE PROVISION FOR ALL LIABILITIES/EXPENSES FOR THE SUBJ ECT FINANCIAL YEAR. 4.3. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/ DRP ERRED IN NOT APPRECIATING T HAT THE APPELLANT PRODUCED EVIDENCES TO THE EXTENT OF MORE THAN 99.88% FOR UTILIZATION/REVERSAL MADE IN SUBSEQUENT YEARS AND NO ADVERSE FINDING HAS BEEN GIVEN BY LD.AO/ DRP ON THE SAME. 4.4. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/ DRP ERRED IN NOT ALLOWING DEDUC TION OF YEAR-END ACCRUALS OF INR 1,40,82,744 DISALLOWED IN THE PRECEDING ASSESSMENT YEAR (I.E. AY 2015-16) WITHOUT APPRECIATING THAT NON-DEDUCTION OF SUCH AMOUNT WOULD RESULT IN DOUBLE DISALLOWANCE OF THE SAME AMOUNT IN AY 2015-16 AS WELL AS IN AY 2016-17, WHICH IS UNTENABLE IN LAW. 4.5. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, WHERE ANY DISALLOWANCE IS MADE IN RESPECT OF THE AFORESAID ACCRUALS FOR THE YEAR UNDER CONSIDERATION, DEDUCTIO N IN RESPECT OF THE DISALLOWED AMOUNT SHOULD BE ALLOWED IN THE SUBSEQUENT YEAR(S) IN WHICH SUCH ACCRUALS WERE REVERSED OR UTILIZED. 4.6. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/ DRP ERRED IN IGNORING THAT THE AFORESAID DISALLOWANCE OF YEAR-END ACCRUALS HAS BEE N ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 7 DELETED BY THE HONBLE ITAT IN APPELLANTS OWN CASE FOR AY 2010-11 TO AY 2015-16. THEREFORE, ANY DISALLOWANCE ON ACCOUNT OF YEAR-END ACCRUAL IS UNJUSTIFIED. 5. DISALLOWANCE OF SUPPORT SERVICE EXPENDITURE 5.1. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ DRP ERRED IN DISALLOWING THE LEGITIMATE BUSINESS EXPENDITURE BEING IN THE NATURE OF SUPPORT SERVICE EXPENSES OF INR 8,75,98,575 PAID TO AT&T COMMUNICATION SERVICES INDIA PRIVATE LIMITED (ACSI). 5.2. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/ DRP ERRED IN NOT TAKING COGNIZA NCE OF THE SUBMISSIONS MADE BY APPELLANT AND THE DOCUMENTARY AND CIRCUMSTANTIAL EVIDENCE/ PROOF PRODUCED BY THE APPELLANT, WHICH DULY SUBSTANTIATE THAT SUPPORT SERVICES WERE RENDERED BY ACSI TO THE APPELLANT COMPANY. 5.3. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/ DRP ERRED IN IGNORING THAT THE AFORESAID DISALLOWANCE ON ACCOUNT OF SUPPORT SERVIC E EXPENDITURE HAS BEEN DELETED BY THE HONBLE ITAT FO R AYS 2008-09, 2009-10, 2010-11 AND 2011-12. 6. DISALLOWANCE OF ANNUAL REVENUE SHARE BASED LICENSE FEE 6.1. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ DRP ERRED IN DISALLOWING AN AMOUNT OF INR 40,17,70,517 UNDER THE HEAD LICENSE FEES DEBITED TO PROFIT & LOSS ACCOUNT BY HOLDING TH AT ANNUAL LICENSE FEE IS NOT ALLOWABLE AS A REVENUE EXPENDITURE AND IT SHOULD BE AMORTIZED UNDER SECTIO N 35ABB OF THE ACT. 6.2. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. AO/ DRP ERRED IN NOT FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONAL DELHI HIGH C OURT IN THE CASE OF BHARTI HEXACOM LTD. [2014] 265 CTR ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 8 130 (DELHI) WHEREIN IT WAS HELD THAT ANNUAL REVENUE SHARE BASED LICENSE FEE PAID BY THE TELECOM OPERATO RS IS REVENUE EXPENDITURE, ALLOWABLE UNDER SECTION 37( 1) OF THE ACT AND NOT A CAPITAL EXPENDITURE AMORTIZABL E UNDER SECTION 35ABB OF THE ACT. 6.3. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. AO/ DRP ERRED IN IGNORING THAT THE AFORESAID DISALLOWANCE HAS BEEN DELETED BY THE HON BLE ITAT IN APPELLANTS OWN CASE FOR AY(S) 2010-11, AY 2012-13, AY 2013-14, AY 2014-15 AND AY 2015-16. 7. DISALLOWANCE OF LEASE LINE CHARGES ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE 7.1. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. AO/ DRP ERRED IN MAKING DISALLOWANCE OF INR 8,55,380 UNDER SECTION 4O(A)(IA ) OF THE ACT ON ACCOUNT OF NON-DEDUCTION OF TAX AT SO URCE UNDER SECTION 194I OF THE ACT ON LEASE LINE EXPENSE S OF INR 28,51,268 INCURRED BY APPELLANT. 7.2. WITHOUT PREJUDICE TO ABOVE, ON THE FACTS, IN CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. AO ERR ED IN DISALLOWING THE ENTIRE EXPENSE OF INR 28,51,268 INSTEAD OF 30% THEREOF I.E. INR 8,55,380 IN THE COMPUTATION SHEET. 7.3 ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ DRP ERRED IN IGNORING THAT THE AFORESAID DISALLOWANCE HAS BEEN DELETED BY THE HON BLE ITAT IN APPELLANTS OWN CASE FOR AY 2012-13 TO AY 2015-16. 8. SHORT-GRANT OF CREDIT FOR TAXES DEDUCTED AT SOURCE 8.1. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. AO ERRED IN GRANTING COMPLETE CREDIT OF TAXES DEDUCTED AT SOURCE TO THE APPELLANT . 9. ALLOWABILITY OF ROAD TAX AND VALUE ADDED TAX ON ASSETS TAKEN ON LEASE ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 9 9.1. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ROAD TAX AND VALUE ADDED TAX ON MOT OR VEHICLES AMOUNTING TO INR 22,78,910 PAID BY APPELLA NT IS ALLOWABLE BUSINESS EXPENDITURE UNDER SECTION 37( 1) AND OUGHT TO HAVE BEEN ALLOWED BY THE LD. AO WHILE COMPUTING THE TOTAL INCOME OF THE APPELLANT. 10. ALLOWABILITY OF EDUCATION CESS AND HIGHER AND SECONDARY EDUCATION CESS ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, EDUCATION CESS PAID BY THE APPELLANT IS AN ALLOWABL E EXPENSE AND OUGHT TO HAVE BEEN ALLOWED BY THE LD. A O WHILE COMPUTING THE TOTAL INCOME OF THE APPELLANT. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVI DING TELE- COMMUNICATION SERVICES UNDER INTERNATIONAL LONG DIS TANCE (ILD), NATIONAL LONG DISTANCE (NLD) AND INTERNET SE RVICE PROVIDER (ISP) LICENSES. THE ASSESSEE HAD ENTERED I NTO VARIOUS INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTE RPRISES (AES). THE ASSESSING OFFICER MADE REFERENCE U/S 92CA(1) OF THE ACT TO THE TRANSFER PRICING OFFICER (TPO) TO DETERMINE THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTIONS UND ERTAKEN BY THE ASSESSEE. THE TPO FIRST DETERMINED THE ARMS LE NGTH PRICE OF THE INTRA GROUP SERVICES AVAILED BY THE ASSESSEE . THE TPO WAS OF THE VIEW THAT THE ASSESSEE HAD NOT RECEIVED ANY BENEFIT FROM SUCH SERVICES AND HENCE, THE ARM'S LENGTH PRIC E OF THE ALLEGED SERVICES WERE HELD TO BE NIL, ON APPLICATIO N OF COMPARABLE UNCONTROLLED PRICE (CUP) METHOD. THE A SSESSING OFFICER WAS DIRECTED TO MAKE AN UPWARD ADJUSTMENT O F RS.35,31,86,900/-. ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 10 INTRA GROUP SERVICES: 4. THE ASSESSEE IS PROVIDING SEAMLESS SERVICES TO I TS CUSTOMERS WAS AVAILING SERVICES FROM ITS AE. AS THE SERVICES REQUIRED SPECIALIZED KNOWLEDGE AND EXPERIENCE IN TH E FIELD, THE ASSESSEE HAD ENTERED INTO SERVICES AGREEMENT IN THE EARLIER YEARS IN ORDER TO AVAIL SUCH INTRA GROUP SERVICES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE AVAILED THES E SERVICES FROM GLOBAL CUSTOMERS SERVICES CENTER. SIMILAR ISSU ES AROSE BEFORE THE TRIBUNAL AND ON SIMILAR FACTS, THE ADJUS TMENT MADE IN THE HANDS OF THE ASSESSEE WAS DELETED BY THE TRI BUNAL IN FOLLOWING ORDERS: ITA NO.2538/DEL/2014 RELATING TO ASSESSMENT YEAR 20 08- 09, VIDE ORDER DATED 18.09.2017; ITA NO.1059/DEL/2015 RELATING TO ASSESSMENT YEAR 20 10- 11, VIDE ORDER DATED 18.09.2017 ITA NO.292/DEL/2016 RELATING TO ASSESSMENT YEAR 201 1-12, VIDE ORDER DATED 18.09.2017 ITA NO.5535/DEL/2016 AND 7115/DEL/2017 RELATING TO ASSESSMENT YEARS 2012-13 AND 2013-14, VIDE ORDER DA TED 27.05.2019 5. THE ISSUE OF INTRA GROUP SERVICES, AVAILED BY TH E ASSESSEE HAS BEEN BENCHMARKED BY THE TNMM WHICH HAS BEEN FOU ND TO BE ACCEPTABLE BY THE TRIBUNAL FOR THE EARLIER YEAR 201 4-15 AND 2015-16. SINCE, THE FACTS ARE IDENTICAL, WE HEREBY ALLOW THE CLAIM OF THE ASSESSEE. ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 11 ISSUE OF ROYALTY: 6. DURING THE YEAR, THE ASSESSEE PAID ROYALTY TO AE OF RS.31,08,90,758/- @ 4% ON NET SALES OF RS.777.22 CR ORES. THE ALP OF THE ROYALTY DETERMINED @1.73% RESULTED IN RS.13,44,60,253/- THUS ADJUSTING AN AMOUNT OF RS.17,64,30,505/-. THE LD. DRP CONFIRMED THE ADJUST MENT MADE BY THE TPO ON THE GROUNDS THAT THE SIMILAR ISSUE IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEARS 2012-13 TO 2015-1 6 HAS BEEN CONTINUOUSLY UPHELD. 7. BEFORE US, THE LD. AR ARGUED THAT THE ROYALTY DE TERMINED IN THE EARLIER YEAR BY THE REVENUE WAS 3.76% AGAINST T HE ROYALTY OF 4% AS PER THE ASSESSEE WHEREAS DURING THE YEAR T HE REVENUE HAS ALLOWED ONLY 1.73% ON ROYALTY. THE LD. DR ARGUE D THAT THE ROYALTY PAYMENT MADE TO THE ENTITIES IN THE EARLIER YEAR IS DIFFERENT FROM THE ENTITIES WHICH HAVE BEEN PAID DU RING THE CURRENT YEAR. REFERENCE WAS INVITED TO PAGE NOS. 30 9, 322 & 581 OF THE PAPER BOOK WITH REGARD TO THESE FACTS. T HE MAIN GRIEVANCE OF THE ASSESSEE REVOLVES AROUND NOT FOLLO WING THE COMPARABLE DATA OF THE RELEVANT FINANCIAL YEAR. 8. WE HAVE GONE THROUGH THE HISTORY OF THE CASE AND FOUND THAT THE ISSUE HAS BEEN LIMITED BACK TO THE FILE OF THE AO TO CARRY OUT COMPARABILITY ANALYSIS WITH DIRECTION TO PROVIDE AN OPPORTUNITY TO THE ASSESSEE WITH BENCHMARKING ANALY SIS ADOPTED AND THE COMPARABLES APPLIED SO. FOR THE SAKE OF REA DY REFERENCE, THE ORDER OF THE CO-ORDINATE BENCH OF IT AT IN ITA NO. 6385/DEL/2019 VIDE ORDER DATED 22.10.2019 IN THE CA SE OF THE ASSESSEE FOR THE EARLIER YEAR IS REPRODUCED AS UNDE R: ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 12 13.................IN THIS APPEAL AGAINST THE TRAN SFER PRICING ADJUSTMENT OF PAYMENT OF ROYALTY. THE ASSESSEE HAD ENTERED INTO PROVIDING LONG DISTANCE TELECOMMUNICATION SERVICES PURSUANT TO THE INTERNATIONAL LONG DISTANCE (ILD), NATIONAL LONG DISTANCE (NLD) AND INTERNET SERVICE PROVIDER (ISP) LICENSES GRAN TED BY THE DEPARTMENT OF TELECOMMUNICATION (DOT). THE ASSESS EE HAD ENTERED INTO SERVICE MARK LICENSE AGREEMENT WITH AT & T INTELLECTUAL PROPERTY II L.P., PURSUANT TO WHICH IT WAS GRANTED THE RIGHT TO USE LICENSED MARKS I.E. AT & T BRAND IN MARKETING MAT ERIAL. THE CONSIDERATION FOR USAGE BETWEEN BOTH THE PARTIES WA S AGREED @ 4 % OF NET SALES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD PAID RS. 29.13 CRORES AS ROYALTY TO ITS AE. THE ASS ESSEE WAS GRANTED NON-EXCLUSIVE, NONTRANSFERABLE AND NON-LICENSABLE R OYALTY BEARING LICENSE AND RIGHT TO USE THE LICENSED MARKS IN RESP ECT OF THE TELECOMMUNICATION SERVICES PROVIDED OVER AT & T GLO BAL TELECOMMUNICATIONS NETWORK WHICH WAS USED FOR OBTAI NING CUSTOMERS CONTRACTS IN INDIA. THE ASSESSEE IN THE TP STUDY RE PORT WHILE BENCHMARKING THE SAID TRANSACTION OF PAYMENT OF ROY ALTY HAD ON AGGREGATE BASIS, APPLIED TRANSACTIONAL NET MARGIN M ETHOD, ALONG WITH PROVISION OF NETWORK CONNECTIVITY SERVICES. THE MAR GINS OF THE ASSESSEE WERE AT 54.08% AS AGAINST MEAN MARGINS OF THE COMPARABLE COMPANIES AT 7.70%, HENCE THE CLAIM TO BE AT ARMS LENGTH. DURING THE COURSE OF THE TP PROCEEDINGS, THE ASSESSEE UNDE RTOOK AN ALTERNATE ANALYSIS WHEREIN A SEARCH USING ROYALTYST AT DATABASE TO DETERMINE THE CONTEMPORANEOUS INDUSTRY RATE OF ROYA LTY FOR BRAND NAME/TRADE MARK PAID BY OTHER INDEPENDENT COMPANIES ON SIMILAR PRODUCTS WAS CARRIED OUT. THE SAID DOCUMENT IS PLAC ED AT PAGE 934 OF PAPER BOOK VOLUME-II. THE TPO REJECTED BOTH THE ANA LYSIS OF THE ASSESSEE AND APPLIED COMPARABLE UNCONTROLLED PRICE METHOD ONLY AND UNDERTOOK FRESH SEARCH WHEREIN HE CONCLUDED THAT AR MS LENGTH PAYMENT @ 2.48% OF NET SALES AND MADE AN UPWARD ADJ USTMENT OF ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 13 RS.11.30 CRORES. THE GRIEVANCE OF THE ASSESSEE BEFO RE US IS THAT THE TPO DID NOT SHARE THE SEARCH PROCESS RESULT AND HEN CE, DID NOT ALLOW AN OPPORTUNITY FOR HEARING TO THE ASSESSEE TO REBUT HIS FINDINGS AND ALSO DID NOT CONSIDER THE COMPARABLES PICKED UP BY THE ASSESSEE. THE SECOND GRIEVANCE OF THE ASSESSEE IS BEFORE US T HAT THE DRP ACKNOWLEDGED THAT THE FACTS WERE SIMILAR TO THE EAR LIER YEARS, PLACED RELIANCE ON THE ORDERS OF THE EARLIER YEARS AND UPH ELD THE ADDITION. 14. ON THIS ISSUE, THE FIRST ASPECT IS WHETHER BENE FIT TEST IS TO BE APPLIED OR NOT, WHILE BENCHMARKING THE PAYMENT OF R OYALTY. WE FIND THAT THE TRIBUNAL IN THE EARLIER YEARS HAS ALLOWED THE CLAIM OF THE ASSESSEE AND HAS HELD THAT THE BENEFIT TEST CANNOT BE APPLIED. SUCH IS THE VIEW TAKEN FROM ASSESSMENT YEAR 2009-10 ONWA RDS. THE RELEVANT FINDINGS OF THE TRIBUNAL IN THIS REGARD AR E REPRODUCED IN THE ORDER OF THE TRIBUNAL RELATING TO ASSESSMENT YEAR 2 014-15 AT PARAS 17 & 18 WHICH ARE BEING REFERRED, BUT NOT BEING REP RODUCED FOR THE SAKE OF BREVITY. THE TRIBUNAL FURTHER NOTED THAT TH OUGH THE BENEFIT TEST COULD NOT BE APPLIED TO DETERMINE THE ARM'S LE NGTH PRICE OF INTERNATIONAL TRANSACTION BUT THE MATTER WAS RESTOR ED BACK TO THE ASSESSING OFFICER/TPO TO EXAMINE AS TO WHETHER THE PAYMENT WAS BASED ON THE AGREEMENT AND THE SAME ADHERES TO ARMS LENGTH PRICE OR NOT. FOLLOWING THE SAME PARITY AND REASONING, WE HOLD THAT THE BENEFIT TAX COULD NOT BE APPLIED IN THE HANDS OF TH E ASSESSEE. HOWEVER, WE REMIT THE ISSUE BACK TO THE FILE OF ASS ESSING OFFICER/TPO TO CARRY OUT THE COMPARABILITY ANALYSIS WITH DIRECT ION TO CONFRONT THE ASSESSEE WITH BENCHMARKING ANALYSIS ADOPTED AND THE COMPARABLES APPLIED AND ALSO TO LOOK INTO THE COMPARABLES SELEC TED BY THE ASSESSEE AND DECIDE THE ISSUE IN ACCORDANCE WITH LA W, AFTER ALLOWING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE . 9. SINCE, THE FACTUAL AND LEGAL POSITION REMAINS UN ALTERED EXCEPT THE QUANTUM INVOLVED, WE HEREBY REFERRED THE MATTER TO ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 14 THE TPO TO EXAMINE THE ISSUE AFRESH AFTER AFFORDING DUE OPPORTUNITY TO THE ASSESSEE. CIRCUIT ACCRUALS: 10. THE ASSESSEE WAS FOLLOWING CONSISTENT METHOD OF ACCOUNTING WHEREIN ON A SCIENTIFIC BASIS. THE ASSES SEE IS ESTIMATING THE EXPENSES TO BE INCURRED ON ACCOUNT O F CIRCUIT ACCRUALS. THE SAID ACCOUNTING IS THROUGH AN AUTOMAT ED SYSTEM, WHICH IS USED BY THE ASSESSEE AS AN OPERATIONAL TOO L AND SUCH METHOD IS FOLLOWED BY ALL THE CONNECTED COMPANIES O F THE GROUP WORLDWIDE. THE ASSESSEE CLAIMED THE SAID EXPENDITUR E AS BUSINESS EXPENDITURE. FURTHER, THE ASSESSEE ALSO FO LLOWING RECOGNIZED METHOD WHEREIN THE ACTUAL EXPENDITURE IN CURRED AGAINST THE ACCRUAL/PROVISIONS FOR THE YEAR IS ACCO UNTED FOR IN THE SUBSEQUENT YEAR. THIS APPROACH ADOPTED BY THE A SSESSEE IN RECOGNIZING THE PROVISION OF CIRCUIT ACCRUALS WAS N OT ACCEPTED BY THE ASSESSING OFFICER/ DRP ON THE GROUND THAT SIMIL AR DISALLOWANCE WAS MADE IN THE EARLIER YEARS. WE FIND THAT THE TRIBUNAL HAS CONSISTENTLY FROM ASSESSMENT YEARS 200 9-10 TO 2014-15 ALLOWED THE CLAIM OF THE ASSESSEE IN ENTIRE LY. DISALLOWANCE OF YEAR-END ACCRUALS: 11. THE ASSESSEE WAS FOLLOWING SYSTEMATIC METHOD OF ACCOUNTING FROM YEAR TO YEAR AND WAS CREATING YEAR END ACCRUALS TOWARDS NORMAL BUSINESS EXPENDITURE AND WA S DEBITING THE EXPENDITURE WHEN PAID OR REVERSED IN THE SUBSEQ UENT YEARS. THE SAID DETAILS WERE FURNISHED BEFORE THE AUTHORIT IES BELOW AND THE AR FOR THE ASSESSEE HAS ALSO REFERRED TO THEM B EFORE US. THE TRIBUNAL IN ASSESSMENT YEAR 2014-15 RELYING ON THE ORDERS ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 15 OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE IN EARL IER YEARS HAD ALLOWED THE CLAIM OF THE ASSESSEE. FOLLOWING THE SA ME PARITY OF REASONING, WE HOLD THAT THE SAID EXPENDITURE IS DUL Y ALLOWABLE IN THE HANDS OF THE ASSESSEE. SUPPORT SERVICE EXPENDITURE: 12. THE ASSESSEE HAD INCURRED THE SAID EXPENDITURE OF SUPPORT SERVICES ON ACCOUNT OF SERVICES AVAILED FROM THE GR OUP COMPANY IN DIFFERENT FIELDS OF OPERATION, WHICH WAS NECESSA RY AND IMPERATIVE FOR CARRYING ON ITS BUSINESS. NO MARK UP WAS CHARGED ON THE SAID SERVICES PROVIDED BY THE AE. THE AVAILM ENT OF THE SUPPORT SERVICES FROM THE AE WAS THROUGH SUPPORT SE RVICES AGREEMENT. WHILE DECIDING THE SAID ISSUE, THE TRIBU NAL HAS REMITTED THE SAME TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION TO CONSIDER THE EVIDENCES FILED BY THE AS SESSEE OF AVAILMENT OF SUPPORT SERVICES FROM ITS AE. THE AR F OR THE ASSESSEE POINTED OUT THAT ALL THESE EVIDENCES WERE DULY FILED BEFORE THE AUTHORITIES BELOW. HOWEVER, FOLLOWING TH E SAME PARITY AND REASONING AS IN ASSESSMENT YEAR 2015-16, WE REMIT THE ISSUE BACK TO THE ASSESSING OFFICER TO CARRY OU T THE NECESSARY VERIFICATION EXERCISE AND DECIDE THE ISSU E IN ACCORDANCE WITH OUR DIRECTION IN THE EARLIER YEARS. SHARE BASED LICENSE FEE: 13. DURING THE FINANCIAL YEAR, THE ASSESSEE INCURRE D EXPENDITURE OF RS.64,42,91,680/- OUT OF WHICH AN AM OUNT OF RS.5,85,71,971/- WAS ALLOWED TO BE AMORTIZED BY THE TPO AND THE REST OF RS.58,57,19,710/- HAS BEEN DISALLOWED A ND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSES SEE FOR ITS ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 16 OPERATIONS IN INDIA HAD ACQUIRED THE TELECOM LICENC ES FROM FINANCIAL YEAR 2006-07 AS PER THE AGREEMENT WITH DE PARTMENT OF TELECOM. ONE TIME ENTRY FEE OF RS.5 CRORE WAS PA ID BY THE ASSESSEE IN FINANCIAL YEAR 2006-07 WHICH WAS CAPITA LIZED AND IS BEING AMORTIZED UNDER THE PROVISION OF SECTION 35BB OF THE ACT. 14. THE ASSESSEE WAS GRANTED TELECOM LICENSE FOR IN ITIAL TERM OF 20 YEARS UPON THE PAYMENT OF ONE TIME ENTRY FEE. HOWEVER, THE LICENSE HOLDER AS PER THE RULES OF DOT IS ALSO REQUIRED TO PAY RECURRING FEE ON PERIODIC BASIS TOWARDS USE OF THE TELECOM SERVICES, WHICH DURING THE YEAR UNDER CONSIDERATION WERE RS.64.44 CRORES. THE ASSESSEE CLAIMED THE SAID EXPE NDITURE TO BE ITS REVENUE EXPENDITURE. HOWEVER, THE ASSESSING OFFICER APPLIED THE PROVISIONS OF SECTION 35BB OF THE ACT A ND AMORTIZED THE EXPENDITURE OVER THE REMAINING LIFE OF THE LICE NCE RESULTING IN DISALLOWANCE OF RS. 58.57 CRORES. 15. WE FIND THAT THE ISSUE STAND SQUARELY COVERED B Y THE ORDER OF THE HONBLE HIGH COURT IN THE CASE OF CIT VS BHA RTI HEXACOM LIMITED (SUPRA) WHEREIN HONBLE HIGH COURT HELD THA T THE REVENUE SHARE BASED LICENSE FEE WAS AN ALLOWABLE RE VENUE EXPENDITURE U/S 37(1) OF THE ACT. SIMILAR PROPOSITI ON IS ALSO BEING LAID DOWN BY THE TRIBUNAL IN ASSESSEES OWN C ASE IN ASSESSMENT YEAR 2015-16. SINCE, THE MATTER IS REPET ITIVE IN NATURE AND IN THE ABSENCE OF ANY CHANGE IN THE FACT UAL AND LEGAL PROPOSITIONS, WE HEREBY DIRECT THAT THE ADDITION MA DE, BE DELETED. ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 17 TDS ON LEASE LINE CHARGES: 16. THE ASSESSEE HAD WITHHELD TAX ON LEASE LINE CHA RGES PAID TO OTHER TELECOM OPERATORS U/S 194J OF THE ACT. THE CLAIM OF THE ASSESSEE WAS THAT THE LEASE LINE SERVICES WERE STAN DARD AUTOMATIC SERVICES WHICH WERE AVAILED BY ANY TELECO M SERVICE PROVIDER FOR THE TRANSMISSION OF DATA AND WAS NOT U NDER ANY EXCLUSIVE ARRANGEMENT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE TAX ON SUCH EXPENDITURE WAS TO BE WITHHELD U/S 194I OF THE ACT. WE FIND THAT SIMILAR ISSUE OF NON-DEDUCTIO N OF TAX ON LEASE LINE EXPENSES AROSE BEFORE THE TRIBUNAL IN IT A NO.6385/DEL/2019 FOR ASSESSMENT YEAR 2015-16 AND FO R ASSESSMENT YEAR 2014-15 ALSO. 17. THE TRIBUNAL FOR ASSESSMENT YEAR 2014-15 VIDE P ARAS 22 TO 24 AT PAGES 29 TO 35 HAS DECIDED THE ISSUE AND CONC LUDED BY HOLDING AS UNDER:- 24. IT IS PERTINENT TO NOTE HERE THAT THE ANNUAL REVEN UE SHARE BASED LICENSE FEE INCURRED BY THE ASSESSEE IS A BUSINESS EXPENDITURE ALLOWABLE U/S 37 OF THE INCOME TAX ACT, 1961. THIS EXPENDITURE WAS INCURRED BY THE ASSESSEE COMPANY TOWARDS MAINTENANC E AND USAGE OF THE TELECOM LICENSE, AND NOT FOR ACQUIRING A RIGHT TO OPERATE TELECOMMUNICATION SERVICES AND THUS WOULD NOT ATTRA CT THE PROVISIONS OF SECTION 35ABB OF THE ACT. THE ASSESSEES CASE IS SQUARELY COVERED BY THE DECI SION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHARTI HEXA COM LIMITED [2014] 265 CTR 130 (DELHI) OTHER CASE LAWS RELIED U PON BY THE ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 18 APPELLANT AS CITED ABOVE. IT IS ALSO IMPORTANT TO N OTE THAT IN ONE OF THE PRECEDING YEAR ON SAME FACTS, THE DRP ALLOWED T HE CLAIM OF THE LICENCE FEES ON REVENUE BASIS U/S 37(1) OF THE ACT. THUS, THE ISSUE IS IDENTICAL AND THEREFORE GROUND NOS. 6 TO 6.3 ARE AL LOWED. 18. THE ISSUE ARISING BEFORE US IS SIMILAR AND FOLL OWING THE SAME PARITY AND REASONING, WE HOLD THAT THERE WAS N O REQUIREMENT TO DEDUCT TAX AT SOURCE U/S 194I OF THE ACT. ROAD TAX AND VALUE ADDED TAX: (NOT IN GROUNDS BEFOR E THE DRP) EDUCATION CESS: 19. THE LD. AR RELYING ON THE JUDGMENT OF HONBLE R AJASTHAN HIGH COURT IN THE CASE OF CHAMBAL FERTILIZERS AND C HEMICALS LTD. VS JCIT IN ITA NO. 52/2018 DATED 31.07.2018 WHEREIN THE SAME ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AN D PARTICULARLY HELD THAT EDUCATION CESS IS AN ALLOWAB LE EXPENDITURE. 20. FURTHER, HE ARGUED THAT IN THE CASE OF ITC VS A CIT IN ITA NO. 685/KOL/2014 DATED 27.11.2018 WHEREIN IT WAS HE LD THAT THE EDUCATION CESS IS AN ALLOWABLE EXPENDITURE. 21. THE LD. AR HAS ALSO RELIED IN THE CASE OF PEERL ESS GENERAL FINANCE & INVESTMENT CO. LTD. VS DCIT IN ITA NO.937 & 938/KOL/2018 DATED 24.03.2019 WHEREIN IT WAS HELD T HAT EDUCATION CESS IS NOT TAX AND IS AN ALLOWABLE EXPEN DITURE. 22. THE LD. DR ARGUED THAT IT IS NOT THE APPROPRIATE FORUM TO RAISE THE ISSUE AT THIS JUNCTURE. SINCE, THERE IS NO DISPUTE BETWEEN THE ASSESSEE AND ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 19 THE ASSESSING AUTHORITIES, A NON-DISPUTE CANNOT BE ADJUDICA TED. HE ARGUED THAT THE EDUCATION CESS IS A PART OF THE INCOME TAX AND IS A CHARGE ON THE ASSESSEE. HENCE, IT CANNOT BE TREATED AS EXPENSE ELIGIBLE FO R DEDUCTION. 23. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 24. REGARDING THE CLAIM OF EDUCATION CESS AS AN ALLOWABLE EXPENDITURE, WE FIND THAT THE CBDT VIDE CIRCULAR NO. 91/58/66 I TJ(19) CLARIFIED AS UNDER: INTERPRETATION OF PROVISIONS OF SECTION 40(A)(II) OF THE I.T ACT CLARIFICATION REGARDING. SECTION 40(A)(II) RECENTLY A CASE HAS COME TO THE NOTICE OF THE BOARD WHERE THE ITO HAS DISALLOWED THE CESS PAID B Y THE ASSESSEE ON THE GROUND THAT THERE HAS BEEN NO MATERIAL CHANGE IN THE PROVISIONS OF SECTION 10(4) OF THE OLD ACT AND SECTION 40(A)(II) OF THE NEW ACT. 2. THE VIEW OF THE ITO IS NOT CORRECT. CLAUSE 40(A)(II) OF THE IT BILL, 1961 AS INTRODUCED IN THE PARLIAMENT STOOD AS UN DER: (A) ANY SUM PAID ON ACCOUNT OF ANY CESS, RATE OR TAX L EVIED ON THE PROFITS OR GAINS OF ANY BUSINESS OR PROFESSION OR ASSESSED AT A PROPORTION OF, OR OTHERWISE ON THE BASIS OF, ANY SUCH PROFITS OR GAINS. WHEN THE MATTER CAME UP BEFORE THE SELECT COMMITTEE, IT WAS DECIDED TO OMIT THE WORD CESS FROM THE CLAUSE. THE EFFECT OF THE OMISSION OF THE WORD CESS IS THAT ONLY TA XES PAID ARE TO BE DISALLOWED IN THE ASSESSMENTS FOR THE YEARS 196 2-63 AND ONWARDS. 3. THE BOARD DESIRE THAT THE CHANGED POSITION MAY PLEA SE BE BROUGHT TO THE NOTICE OF ALL THE ITOS SO THAT FURTHER LITIGATION ON THIS ACCOUNT MAY BE AVOIDED. 25. THE SIMILAR ISSUE OF ALLOWABILITY OF CESS U/S 37 HAS B EEN EXAMINED BY THE CO-ORDINATE BENCH OF ITAT IN ITA NO. 685/CAL./20 14 WHEREIN THE AMOUNT OF THE CESS PAID HAS BEEN HELD TO BE AN ALLOWABL E DEDUCTION. ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 20 26. FURTHER, WE FIND THAT THE HONBLE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR IN ITA NO. 52/2018 IN THE CASE OF CHAMBAL FERTILIZERS AND CHEMICALS LTD. HELD THAT IN VIEW OF THE CIRCULAR O F CBDT WHERE THE WORD CESS IS DELETED, THE CLAIM OF THE ASSESSEE FOR DEDUCTI ON IS ACCEPTABLE. IN THAT CASE, THE HONBLE HIGH COURT HELD THA T THERE IS DIFFERENCE BETWEEN THE CESS AND TAX AND CESS CANNOT BE EQUA TED WITH THE CESS. 27. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF SEC . 115 OF THE INCOME TAX ACT 1961 WHICH ARE AS UNDER: EXPLANATION 2 TO SECTION 115JB (2) OF THE ACT DEFI NES THE TERM 'INCOME-TAX' IN AN INCLUSIVE MANNER, WHICH INCLUDES CESS. PROVISION OF THE EXPLANATION 2 TO SECTION 115JB IS AS GIVEN BELOW:- FOR THE PURPOSES OF CLAUSE (A) OF EXPLANATION 1, TH E AMOUNT OF INCOME-TAX SHALL INCLUDE (I)ANY TAX ON DISTRIBUTED PROFITS UNDER SECTION 115- O OR ON DISTRIBUTED INCOME UNDER SECTION 115R ; (II) ANY INTEREST CHARGED UNDER THIS ACT; (III) SURCHARGE, IF ANY, AS LEVIED BY THE CENTRAL A CTS FROM TIME TO TIME; (IV) EDUCATION CESS ON INCOME-TAX, IF ANY, AS LEVIE D BY THE CENTRAL ACTS FROM TIME TO TIME; AND (V) SECONDARY AND HIGHER EDUCATION CESS ON INCOME-TAX, IF ANY, AS LEVIED BY THE CENTRAL ACTS FROM TIME TO TIME. 28. THUS, WHEREVER THE LEGISLATURE WANTED TO INCLUD E THIS TERM SPECIFICALLY IN THE STATUE IT HAS DONE SO UNDER THE ACT. THE TERM 'TAX' HAS BEEN DEFINED IN SECTION 2(43) OF THE ACT TO INCLUDE ONLY INCOME-TAX, SUPER TAX AND FRINGE BENEFIT TAX (FBT). PROVISION OF THE SECTION 2(43) IS AS GIVEN BELOW: ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 21 'TAX' IN RELATION TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1965, AND ANY SUBSEQUENT ASSESSMENT YEAR MEANS INCOME-TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT, AND IN RELATION TO ANY OTHER ASSESSMENT YEAR INCOME-TAX AND SUPER-TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT PRIOR T O THE AFORESAID DATE AND IN RELATION TO THE ASSESSMEN T YEAR COMMENCING ON THE 1ST DAY OF APRIL, 2006, AND ANY SUBSEQUENT ASSESSMENT YEAR INCLUDES THE FRINGE BENEFIT TAX PAYABLE UNDER SECTION 115WA . 29. SURCHARGE ON INCOME-TAX FINDS PLACE IN THE FIRS T SCHEDULE, BUT THAT IS NOT THE CASE SO FAR AS EDUCATION CESS I S CONCERNED. THEREFORE, THE EDUCATION CESS ON THIS REASONING CAN NOT BE EQUATED AS TAX OR SURCHARGE. BASED ON THIS, IT CAN BE SAID THAT SINCE THE WORD 'CESS' IS NOT SPECIFICALLY INCLUDED IN THE DEFINITION, IT CANNOT BE CONSIDERED A PART OF TAX, AND ACCORDINGLY, IT SHOULD NOT BE DISALLOWED IN U/S 40( A)(II) OF THE ACT. 30. FURTHER, WE ARE GUIDED BY THE JUDGMENT OF THE CONSTITUTIONAL BENCH WHICH WAS ALSO REFERRED IN THE CASE OF DEWAN CHAND BUILDERS & CONTRACTORS VS. UNION OF IND IA & OTHERS IN CIVIL APPEAL NO. 1830 OF 2008 DATED 18.11 .2011. 31. THE CONSTITUTION BENCH OF THIS COURT IN HINGIR RAMPUR COAL CO. LTD. VS. STATE OF ORISSA2 WAS FACED WITH THE CH ALLENGE TO THE CONSTITUTIONAL VALIDITY OF THE ORISSA MINING AR EAS DEVELOPMENT FUND ACT, 1952, LEVYING CESS ON THE PET ITIONER'S COLLIERY. THE BENCH EXPLAINED DIFFERENT FEATURES OF A `TAX', A `FEE' AND `CESS' IN THE FOLLOWING PASSAGE: 'THE NEAT AND TERSE DEFINITION OF TAX WHICH HAS BEE N GIVEN BY LATHAM, C.J., IN MATTHEWS V. CHICORY MARKETING BOARD (1938) 60 C.L.R. 263 IS OFTEN CITED AS ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 22 A CLASSIC ON THIS SUBJECT. 'A TAX', SAID LATHAM, C. J., 'IS A COMPULSORY EXACTION OF MONEY BY PUBLIC AUTHOR ITY FOR PUBLIC PURPOSES ENFORCEABLE BY LAW, AND IS NOT PAYMENT FOR SERVICES RENDERED'. IN BRINGING OUT THE ESSENTIAL FEATURES OF A TAX THIS DEFINITION ALSO AS SISTS IN DISTINGUISHING A TAX FROM A FEE. IT IS TRUE THAT BE TWEEN A TAX AND A FEE THERE IS NO GENERIC DIFFERENCE. BOT H ARE COMPULSORY EXACTIONS OF MONEY BY PUBLIC AUTHORITIES ; BUT WHEREAS A TAX IS IMPOSED FOR PUBLIC PURPOSES AN D IS NOT, AND NEED NOT, BE SUPPORTED BY ANY CONSIDERATION OF SERVICE RENDERED IN RETURN, A FEE 1 AIR 1954 SC 282 2 1961 (2) SCR 537 IS LEVIED ESSENTIALL Y FOR SERVICES RENDERED AND AS SUCH THERE IS AN ELEME NT OF QUID PRO QUO BETWEEN THE PERSON WHO PAYS THE FEE AND THE PUBLIC AUTHORITY WHICH IMPOSES IT. IF SPECI FIC SERVICES ARE RENDERED TO A SPECIFIC AREA OR TO A SP ECIFIC CLASS OF PERSONS OR TRADE OR BUSINESS IN ANY LOCAL AREA, AND AS A CONDITION PRECEDENT FOR THE SAID SERVICES OR IN RETURN FOR THEM CESS IS LEVIED AGAINST THE SAID ARE A OR THE SAID CLASS OF PERSONS OR TRADE OR BUSINESS THE CESS IS DISTINGUISHABLE FROM A TAX AND IS DESCRIBED AS A FEE. TAX RECOVERED BY PUBLIC AUTHORITY INVARIABLY GOES I NTO THE CONSOLIDATED FUND WHICH ULTIMATELY IS UTILISED FOR ALL PUBLIC PURPOSES, WHEREAS A CESS LEVIED BY WAY OF FE E IS NOT INTENDED TO BE, AND DOES NOT BECOME, A PART OF THE CONSOLIDATED FUND. IT IS EARMARKED AND SET APART FO R THE PURPOSE OF SERVICES FOR WHICH IT IS LEVIED.' 32. WE ALSO FIND THAT THE PROCEEDS FROM COLLECTION OF EDUCATION CESS ARE NOT CREDITED TO CONSOLIDATED F UND BUT TO A NON-LAPSABLE FUND FOR ELEMENTARY EDUCATION- PRARAMBHIK SHIKSHA KOSH . SINCE THE PROCEEDS FROM COLLECTION OF EDUCATION CESS ARE KEPT SEPARATE FOR A SPECIFIED PURPOSE, APP LYING THE PRINCIPLES IN THE AFORESAID DECISION OF APEX COURT IN THE CASE OF M/S DEWAN CHAND BUILDERS (SUPRA) , IT CAN BE SAID THAT THE SAME IS NOT IN THE NATURE OF TAX. HENCE, IT IS ALLO WABLE AS DEDUCTION. ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 23 33. FURTHER, PROVISIONS OF SECTION 37 ARE PERUSED W HICH ARE AS UNDER: 37. (1) ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. EXPLANATION 1.FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE. EXPLANATION 2.FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT FOR THE PURPOSES OF SUB-SECTIO N (1), ANY EXPENDITURE INCURRED BY AN ASSESSEE ON THE ACTIVITIES RELATING TO CORPORATE SOCIAL RESPONSIBILITY REFERRED TO IN SECTION 135 OF THE COMPANIES ACT, 2013 (18 OF 2013) SHALL NOT BE DEEMED TO BE AN EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. 34. FROM THE ABOVE, WE FIND THAT EDUCATION CESS IS NOT OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36, EDUCATION CE SS IS NOT IN THE NATURE OF CAPITAL EXPENDITURE, EDUCATION CESS I S NOT PERSONAL EXPENSE OF THE ASSESSEE, IT IS MANDATORY F OR IT TO PAY EDUCATION CESS AND FOR THE PURPOSE OF COMPUTATION O F EDUCATION CESS, THE INCOME TAX IS TAKEN AS THE CRITERIA FOR COMPUTATIONAL PURPOSE. THUS, THE EXPENSE OF EDUCATION CESS IS MAN DATORY EXPENSES TO BE PAID BUT DOES NOT FALL UNDER CAPITAL EXPENSE AND PERSONAL EXPENDITURE AND HENCE MAY BE ALLOWED AS DE DUCTION. ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 24 35. WE HAVE ALSO GONE THROUGH THE VARIOUS JUDGMENTS OF JUDICIAL AUTHORITIES PAN INDIA WHEREIN THE FRESH CL AIM OF THE ASSESSEE IS CONSIDERED AND THE DEDUCTION U/S 37 OF EDUCATION CESS HAS BEEN ALLOWED. THE HONBLE HIGH COURT OF BO MBAY HELD THAT THE APPELLATE AUTHORITIES MAY CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT OR REMAND THE CASE TO THE AO, BECAUSE THE BASIC PURPOSE OF A TAX APPEAL WAS TO ASCERTAIN THE CORRECT TAX LIABILITY IN ACCORDANCE WITH THE LAW. TO MENTI ON A FEW, DCIT VS M/S. AGRAWAL COAL CORPORATION PVT. LTD ITA NOS. 801 TO 803/INDORE/2018. ATLAS COPCO INDIA LTD. VS ACIT IN ITA NO. 736/PUNE/2011 TATA AUTOCOMP HENDRICKSON VS DCIT IN ITA NO. 2486/PUNE/2017 SYMANTEC SOFTWARE INDIA PVT. LTD. VS DCIT IN ITA NO . 1824/PUNE/2018 SICPA INDIA PVT. LTD. VS ACIT IN ITA NO. 704/KOL/20 15 PHILIPS INDIA LTD. VS ACIT IN ITA NO. 2612/KOL/2019 ITC LIMITED VS ACIT IN ITA NO. 685/KOL/2014 DCIT VS THE PEERLESS GENERAL FINANCE & INVESTMENT & CO. LTD. IN ITA NO. 1469/KOL/2019. ACIT VS ITC INFOTECH IN ITA NO. 220/KOL/2017 RECKITT BENCKISER INDIA PVT. LTD. VS DCIT (2020) 11 7 TAXMANN.COM 519 (KOL.) CRYSTAL CROP. PROTECTION PVT. LTD. VS JCIT IN ITA N O. 1539/DEL/2016 MIDLAND CREDIT MANAGEMENT INDIA VS ACIT IN ITA NO. 3892/DEL/2017 VOLTAS LTD. VS ACIT IN ITA NO. 6612/MUM/2018 SESA GOA LTD. VS JCIT (2020) 117 TAXMANN.COM 96 (BOM.) CHAMBAL FERTILISERS AND CHEMICALS VS JCIT IN ITA NO . 52 OF 2018 (RAJ. HC) 36. HENCE, KEEPING IN VIEW THE PROVISIONS OF THE ACT PER TAINING TO SECTION 40(A)(II) AND SECTION 115JB, CIRCULAR OF THE C BDT NO. 91/58/66- ITJ(19), THE ORDERS OF CO-ORDINATE BENCHES OF ITAT AND JUDICIAL ITA NO. 489/DEL/2021 SA NO. 75/DEL/2021 AT&T GLOBAL NETWORK SERVICES INDIA PVT. LTD. 25 PRONOUNCEMENTS OF THE HONBLE HIGH COURT OF BOMBAY AND HONBLE HIGH COURT OF RAJASTHAN, WE HEREBY HOLD THAT THE ASSESSEE IS E LIGIBLE TO CLAIM THE DEDUCTION OF THE EDUCATION CESS AS PER THE PROVISI ONS OF SECTION 37 OF THE INCOME TAX ACT. 37. OWING TO THE DISPOSAL OF THE APPEAL THE ASSESSE E, THE STAY APPLICATION NO. 75/DEL/2021 IS DISMISSED AS INFRUCT UOUS. 38. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THE STAY APPLICATION OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/08/2021. SD/- SD/- (AMIT SHUKLA) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED: 24/08/2021 *SUBODH KUMAR, SR. PS* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR