AT & T Global Network Services (India) Private Limited, New Delhi V. ACIT Special Range-1, New Delhi

ITA 6385/DEL/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6984 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Assessment Year: 2015-2016
• Appeal Filed On: 30-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY I.BARA
• Keywords: Capital asset converted into stock in trade; Transfer pricing; Business expenditure; International transaction; Initiation of penalty proceedings; Non-deduction of tax; Revenue expenditure; Capital expenditure; TDS
• Section: 37; 144; 154; 143(3); 234B; 40(a)(ia); 37(1); 201; 194J; 13; 22; 20

Judgement Text

, -1, IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1, NEW DELHI !'#$% !'#$% !'#$% !'#$% &'& &'& &'& &'& ( ( ( ( BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER & SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ) )) ) / ITA NO. 6385/DEL/2019 *%% *%% *%% *%% / ASSESSMENT YEAR: 2015-16 AT & T GLOBAL NETWORK SERVICES (INDIA) PVT.LTD., VATIKA TRIANGLE, 3 RD FLOOR, SUSHANT LOK-1, BLOCK-A, GURGAON-122002. PAN-AAFCE8810L .......... +, /APPELLANT VS THE ACIT, SPECIAL RANGE-1, NEW DELHI-110002. . -+, / RESPONDENT +,./& / APPELLANT BY : SH. RAVI SHARMA, ADV. -+,./& / RESPONDENT BY : SH. SANJAY I.BARA, CIT DR *.'0' / DATE OF HEARING : 18.09.2019 12.'0' / DATE OF PRONOUNCEMENT: 22.10.2019 &! &! &! &! / ORDER PER SUSHMA CHOWLA, JM: THE APPEAL FILED BY ASSESSEE IS AGAINST ORDER OF AS SESSING OFFICER DATED 28.06.2019 RELATING TO ASSESSMENT YEAR 2015-1 6 AGAINST THE ORDER PASSED UNDER SECTION 144 R.W.S 143(3) OF THE INCOME -TAX ACT, 1961 (IN SHORT THE ACT). ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THI S APPEAL:- TRANSFER PRICING GROUNDS 1. TP ADJUSTMENT WITH RESPECT TO RECEIPT OF INTRA- GROUP SERVICES TP ADJUSTMENT WITH RESPECT TO RECEIPT OF INTRA-GROU P SERVICES THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AN D IN LAW, THE ASSESSING OFFICER ('LD. AO') (FOLLOWING THE DIRECTI ONS OF THE DISPUTE RESOLUTION PANEL ('LD. DRP')), ERRED ON FACTS AND I N LAW IN ENHANCING THE INCOME OF THE APPELLANT BY INR 17,83,93,654/- H OLDING THAT THE INTERNATIONAL TRANSACTION PERTAINING TO RECEIPT OF INTRA-GROUP SERVICES DO NOT SATISFY THE ARM'S LENGTH PRINCIPLE ENVISAGED UNDER THE INCOME- TAX ACT, 1961 ('THE ACT'), AND IN DOING SO HAVE GRO SSLY ERRED IN: 1.1. DISREGARDING THE JUDICIAL PRONOUNCEMENT/ FINDI NG OF THE HON'BLE INCOME- TAX APPELLATE TRIBUNAL ('1TAT') IN APPELLANT'S OWN CASE FOR AY 2009-10, AY 2010-11, AY 2011-12, AY 201 2-13, AY 2013-14 AND AY 2014-15 WHEREIN THE HON'BLE I TAT HA S CONCLUDED THE MENTIONED ISSUE IN FAVOUR OF THE APPELLANT. 1.2. REJECTING THE COMBINED TRANSACTION APPROACH OF BENCHMARKING ADOPTED BY THE APPELLANT IN ITS TP DOCUMENTATION (I .E. AGGREGATING AVAILING OF INTRA-GROUP SERVICES WITH PROVISION OF NETWORK SUPPORT SERVICES) AND PROCEEDING TO DETERMINE THE ARM'S LEN GTH PRICE OF INTERNATIONAL TRANSACTION PERTAINING TO AVAILING OF INTRA-GROUP SERVICES FROM ITS AES ON A STANDALONE BASIS; 1.3. ARBITRARILY APPLYING COMPARABLE UNCONTROLLED P RICE ('CUP') METHOD AS THE MOST APPROPRIATE METHOD AS AGAINST TR ANSACTIONAL NET MARGIN METHOD ('TNMM') APPLIED BY THE APPELLANT IN ITS TRANSFER PRICING DOCUMENTATION; 1.4. DISREGARDING THE ELABORATE DOCUMENTARY EVIDENC E SUBMITTED AS PART OF ASSESSMENT PROCEEDINGS TO ERRONEOUSLY ASSUM E THAT 'NO BENEFIT' HAS BEEN CONFERRED UPON THE APPELLANT FROM THE INTERNATIONAL ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 3 TRANSACTIONS PERTAINING TO A DING OF INTRA-GROUP SE RVICES AND THEREAFTER RE-DETERMINING THE AEP OF THE SAID TRAN SACTION AS 'NIL'; 1.5. DISREGARDING THE RECEIPT OF SERVICES BY THE AP PELLANT FROM ITS AES WHICH IS CONTRARY TO THE FACTS OF THE PRESENT Y EAR AS WELL AS TO THE STAND TAKEN BY THE LD.TPO IN PRIOR YEAR DESPITE NO CHANGE IN THE NATURE OF SERVICES INVOLVED. FURTHER, THE LD. TPO ERRED IN CONTENDING THAT THE SERVICES RECEIVED ARE DUPLICATIVE AND STEW ARDSHIP IN NATURE, IGNORING THE DOCUMENTATION AND EVIDENCES SUBMITTED BY THE APPELLANT; WHICH CONTRADICTS HIS OWN CONTENTION THA T THE SERVICES HAVE ACTUALLY NOT BEEN RECEIVED; 1.6. ARBITRARILY CHALLENGING THE VERACITY OF THE CO NTRACTUAL SERVICE AGREEMENT DISREGARDING THE ACTUAL CONDUCT OF THE AP PELLANT IN THE AVAILING OF INTRA-GROUP SERVICES FROM AES BASIS THE ELABORATE DOCUMENTARY EVIDENCES SUBMITTED AS PART OF ASSESSME NT PROCEEDINGS. 2. TP ADJUSTMENT WITH RESPECT TO PAYMENT OF ROYALTY THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AN D IN LAW, THE LD. AO (FOLLOWING THE DIRECTIONS OF THE LD. DRP), ERRED ON FACTS AND IN LAW IN ENHANCING THE INCOME OF THE APPELLANT BY INR 11, 30,68,317/- AND HOLDING THAT THE INTERNATIONAL TRANSACTION PERTAINI NG TO PAYMENT OF ROYALTY DOES NOT SATISFY THE ARM'S LENGTH PRINCIPLE ENVISAGED UNDER THE ACT, AND IN DOING SO HAVE GROSSLY ERRED IN: 2.1. REJECTING THE COMBINED TRANSACTION APPROACH OF BENCHMARKING ADOPTED BY THE APPELLANT IN ITS TP DOCUMENTATION (I .E. AGGREGATING PAYMENT OF ROYALTY, AVAILING OF INTRA-GROUP SERVICE S WITH PROVISION OF NETWORK SUPPORT SERVICES) AND PROCEEDING TO DETERMI NE THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTION PERTAININ G TO PAYMENT OF ROYALTY FROM ITS AES ON A STANDALONE BASIS BY REJEC TING TNMM AS THE MOST APPROPRIATE METHOD; ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 4 2.2. HOLDING THAT THE APPELLANT DID NOT RECEIVE TAN GIBLE BENEFIT IN LIEU OF THE PAYMENT OF ROYALTY THEREBY CHALLENGING THE COMMERCIAL WISDOM OF THE APPELLANT IN MAKING PAYMENT FOR ROYAL TY AND PASSING THE ORDER IN CONTRAST WITH THE RECENT JUDICIAL PRON OUNCEMENTS IN THIS REGARD; 2.3. ERRONEOUSLY HOLDING THAT THE APPELLANT IS INCU RRING LOSSES AT THE NET LEVEL AND THAT AS PER THE FACTS OF THE CASE OF THE APPELLANT, NO INDEPENDENT PARTY WOULD HAVE MADE A PAYMENT FOR ROY ALTY; 2.4. DISREGARDING THE JUDICIAL PRONOUNCEMENT/ FINDI NG OF THE HON'BLE ITAT IN APPELLANT'S OWN CASE FOR THE AY 200 9-10, AY 2010- 11 AND AY 2013-14 AND MERELY PLACING RELIANCE ON PA ST YEAR ORDERS PASSED BY THE DRP; 2.5. ARBITRARILY REJECTING THE SUPPLEMENTARY ANALYS IS USING COMPARABLE UNCONTROLLED PRICE ('CUP') METHOD TO BEN CHMARK THE PAYMENT OF ROYALTY TRANSACTION SUBMITTED BY THE APP ELLANT WITHOUT GIVING ANY COGENT REASONS; 2.6. UNDERTAKING FRESH BENCHMARKING ANALYSIS USING ROYALTYSTAT DATABASE AND SELECTING AGREEMENTS WHICH ARE NOT COM PARABLE TO THE ROYALTY PAYMENT MADE BY THE APPELLANT TO ITS AES. 2.7. NOT PROVIDING THE DETAILED SEARCH PROCESS ALON G WITH BACKUP DOCUMENTATION SUCH AS ACCEPT-REJECT MATRIX TO PROVI DE APPELLANT AN OPPORTUNITY TO EVALUATE THE APPROPRIATENESS OF THE BENCHMARKING ANALYSIS. 3. DISALLOWANCE OF CIRCUIT ACCRUALS 3.1. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/DRP ERRED IN MAKING A DISALLOWANCE OF INR 10,95, 20,722 ON ACCOUNT OF CIRCUIT ACCRUALS CREATED TOWARDS BANDWID TH AND LAST MILE SERVICES AVAILED BY THE APPELLANT COMPANY, IGNORING THAT THE ACCRUALS WERE BASED ON A REASONABLE AND SCIENTIFIC BASIS. ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 5 3.2. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO FAILED TO APPRECIATE THAT THE APPELLANT FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING AND ACCRUES CIRCUIT CHARGES ON SCIENT IFIC BASIS. 3.3. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/DRP FAILED TO APPRECIATE THAT AS PER THE ACCOUNT ING STANDARDS NOTIFIED UNDER SECTION 145(2) OF THE ACT, THE APPEL LANT WAS REQUIRED TO MAKE PROVISION FOR CIRCUIT ACCRUALS FOR THE SUBJECT FINANCIAL YEAR. 3.4. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/DRP ERRED IN NOT APPRECIATING THAT THE APPELLANT PRODUCED EVIDENCES TO THE EXTENT OF MORE THAN 99.50% FOR UTI LISATION/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 AND IN LAW, THE LD. AO/DRP ERRED IN IGNORING THE CLAIM OF REVERSALS OF CIRCUIT ACCRUALS OF INR 10,88,55,005 MADE IN THE SUBSEQUENT YEARS, SUBM ITTED BEFORE THE LD. AO/DRP. 3.6. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, WHERE ANY DISALLOWANCE IS M ADE IN RESPECT OF THE AFORESAID ACCRUALS FOR THE YEAR UNDER CONSIDERA TION, DEDUCTION IN RESPECT OF THE DISALLOWED AMOUNT SHOULD BE ALLOWED IN THE SUBSEQUENT YEAR(S) IN WHICH SUCH ACCRUALS WERE REVE RSED OR UTILISED. 3.7. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.AO/DRP ERRED IN IGNORING THAT THE AFORESAID DISA LLOWANCE OF CIRCUIT ACCRUALS HAS BEEN DELETED BY THE HON'BLE IT AT IN APPELLANT'S OWN CASE FOR ASSESSMENT YEARS 20(18-09 TO AY 2014-1 5. THEREFORE, ANY DISALLOWANCE ON ACCOUNT OF CIRCUIT A CCRUAL IS NOT TENABLE. ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 6 4. DISALLOWANCE OF YEAR-END ACCRUALS 4.1. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/DRP ERRED IN MAKING A DISALLOWANCE OF INR 100,82 ,744 ON ACCOUNT OF YEAR-END ACCRUALS REPRESENTING ACCRUALS CREATED TOWARDS NORMAL BUSINESS EXPENDITURE INCURRED BY THE APPELLA NT IGNORING THAT THE ACCRUALS WERE BASED ON A REASONABLE BASIS. 4.2. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/DRP FAILED TO APPRECIATE THAT AS PER THE ACCOUNT ING STANDARDS NOTIFIED UNDER SECTION 145(2) OF THE ACT, THE APPEL LANT WAS REQUIRED TO MAKE PROVISION FOR ALL LIABILITIES/EXPENSES FOR THE SUBJECT FINANCIAL YEAR. 4.3. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/DRP ERRED IN NOT APPRECIATING THAT THE APPELLANT PRODUCED EVIDENCES TO THE EXTENT OF MORE THAN 99.99% FOR UTI LISATION/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 AND IN LAW, THE LD. AO/DRP ERRED IN IGNORING THE CLAIM OF REVERSALS OF YEAR END ACCRUALS OF INR 1,40,69,895 MADE IN THE SUBSEQUENT YEARS, SU BMITTED BEFORE THE LD. AO/DRP. 4.5. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, WHERE ANY DISALLOWANCE IS M ADE IN RESPECT OF THE AFORESAID ACCRUALS FOR THE YEAR UNDER CONSIDERA TION, DEDUCTION IN RESPECT OF THE DISALLOWED AMOUNT SHOULD BE ALLOWED IN THE SUBSEQUENT YEAR(S) IN WHICH SUCH ACCRUALS WERE REVE RSED OR UTILIZED. 4.6. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.AO/DRP ERRED IN IGNORING THAT THE AFORESAID DISA LLOWANCE OF YEAR- END ACCRUALS HAS BEEN DELETED BY THE HON'BLE ITAT I N APPELLANT'S OWN CASE FOR AY 2010-11 TO AY 2014-15. ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 7 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 10,22,08,983 PAID TO AT&T' COMMUNICATION SERVICES INDIA PRIVATE LIMITED ('ACSL). 5.2. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/DRP ERRED IN NOT TAKING COGNIZANCE OF THE SUBMIS SIONS MADE BY APPELLANT AND THE DOCUMENTARY AND CIRCUMSTANTIAL E VIDENCE/ PROOF PRODUCED BY THE APPELLANT, WHICH DULY SUBSTANTIATE THAT SUPPORT SERVICES WERE RENDERED BY ACSI TO THE APPELLANT COM PANY. 5.3. ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.AO/DRP ERRED IGNORING THAT THE AFORESAID DISALLO WANCE ON ACCOUNT OF SUPPORT SERVICE EXPENDITURE HAS BEEN DEL ETED BY THE HON'BLE ITAT TOR ASSESSMENT YEARS 2008-09, 2009-10, 2010-11 AND 2011-12. 6. DISALLOWANCE OF ANNUAL REVENUE SHARE BASED LICEN SE FEE 6.1. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/DRP ERRED N DISALLOWING AN AMOUNT OF INR 44, 57,84,302 (BEING DISALLOWANCE OF EXPENSE DEBITED IN AY 2015-1 6 AMOUNTING TO INR 62,97,33,498 LESS CREDIT OF 1NR 5,24,77,792 BEI NG 12TH PART OF DISALLOWANCE IN AY 2015-16 AND CREDIT OF INR 13.14, 71,401 CUMULATIVELY FOR AY 2010-11 TO AY 2014-15) UNDER TH E HEAD LICENCE FEES DEBITED TO PROFIT & LOSS ACCOUNT BY HOLDING TH AT ANNUAL LICENSE FEE IS NOT ALLOWABLE AS A REVENUE EXPENDITURE AND I T SHOULD BE AMORTISED UNDER SECTION 55ABB OF THE ACT. 6.2. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/DRP ERRED IN NOT FOLLOWING THE JUDGMENT OF T HE HON'BLE ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 8 JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF BHAR TI HEXACOM LTD. [2014] 265 CTR 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 A CT AND NOT A CAPITAL EXPENDITURE AMORTIZABLE UNDER SECTION 35ABB OF THE ACT. 6.3. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/DRP ERRED IN IGNORING THAT THE AFORESAID DIS ALLOWANCE HAS BEEN DELETED BY THE HON'BLE ITAT IN APPELLANT'S OWN CASE FOR AY 2010-11, AY 2012-13, AY 2013-14 AND AY 2014-15. 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 CASE AND IN LAW, THE LD. AO/DRP ERRED IN MAKING DISALLOWANCE OF INR 1,31 ,66,943 UNDER SECTION 40(A)(IA) OF THE ACT ON ACCOUNT OF NON-DEDU CTION OF TAX AT SOURCE UNDER SECTION 1941 OF THE ACT CM LEASE LINE EXPENSES OF INR 4,38,89,811 INCURRED BY APPELLANT. 7.2. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/DRP ERRED IN IGNORING THAT THE AFORESAID DIS ALLOWANCE HAS BEEN DELETED BY THE HON'BLE ITAT IN APPELLANT'S OWN CASE FOR AY 2012-13, AY 2013-14 AND AY 2014-15. 8. SHORT-GRANT OF CREDIT FOR TAXES DEDUCTED AT SOUR CE 8.1. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN NOT GRANTING COMPLETE CREDIT OF TAX ES DEDUCTED AT SOURCE TO THE APPELLANT. 9. LEVY OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT 9.1. ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN INCORRECTLY CHARGING INTEREST UNDER SECTION 234B AND 234C OF THE ACT. ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 9 10. INITIATION OF PENALTY PROCEEDINGS 10.1. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. AO ERRED IN INITIATING PENALTY PROCEEDINGS UNDE R SECTION 274(1)(C) OF THE ACT AGAINST THE APPELLANT ON ACCOUNT OF THE ABOVE ADJUSTMENTS MADE IN THE IMPUGNED FINAL ASSESSMENT ORDER. ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY OF THE AFORE SAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. THE APPELLANT PRAXES THAT APPROPRIATE RELIEF BE GRA NTED BASED ON THE SAID GROUNDS OF WEAL AND THE FACTS AND CIRCUMSTANCE S OF THE CASE. 3. THE LD. AR FOR THE ASSESSEE AT THE OUTSET POINTE D OUT THAT THE ISSUES RAISED IN THE GROUNDS OF PRESENT APPEAL ARE SQUARELY COVERED BY THE ORDERS OF TRIBUNAL STARTING FROM ASSESSMENT YEAR 20 09-10 ONWARDS. HE FURTHER POINTED OUT THAT SIMILAR ISSUES HAVE BEEN A DJUDICATED BY THE TRIBUNAL IN ITA NO.7001/DEL/2018 RELATING TO ASSESS MENT YEAR 2014-15, VIDE ORDER DATED 18.07.2019. 4. THE LD. DR FOR THE REVENUE POINTED OUT THAT THE ISSUES WERE DECIDED IN THE EARLIER YEARS, BUT CERTAIN FACTUAL A SPECTS NEEDS TO BE CONSIDERED. 5. WE SHALL REFER TO THE SUBMISSIONS MADE BY BOTH T HE AR AND DR WHILE DECIDING THE GROUNDS OF APPEAL IN THE PARAS B ELOW. 6. BRIEFLY IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD FURNISHED THE RETU RN OF INCOME ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 10 DECLARING TOTAL INCOME OF RS. 301.37 CRORES. THE A SSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDING TELE-COMMUNICATION SERVIC ES UNDER INTERNATIONAL LONG DISTANCE (ILD), NATIONAL LONG DI STANCE (NLD) AND INTERNET SERVICE PROVIDER (ISP) LICENSES. THE ASSE SSEE HAD ENTERED INTO VARIOUS INTERNATIONAL TRANSACTION WITH ITS ASSOCIAT ED ENTERPRISES (AES). THE ASSESSING OFFICER MADE REFERENCE U/S 92CA(1) OF THE ACT TO THE TRANSFER PRICING OFFICER (TPO) TO DETERMINE THE AR MS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE. THE TPO FIRST DETERMINED THE ARMS LENGTH PRICE OF THE INTR A 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 PRICE OF THE ALLEGED SERVICES WERE HELD TO BE NIL, ON APP LICATION OF COMPARABLE UNCONTROLLED PRICE (CUP) METHOD. THE ASSESSING O FFICER WAS DIRECTED TO MAKE AN UPWARD ADJUSTMENT OF RS.17,83,93,654/-. WI TH REGARD TO THE ROYALTY PAYMENT MADE BY THE ASSESSEE TO ITS AES, WH EREIN THE PLEA OF THE ASSESSEE WAS THAT SIMILAR ADJUSTMENT MADE IN ASSESS MENT YEAR 2009-10 HAS BEEN DELETED BY THE TRIBUNAL, THE TPO NOTED THA T THE ASSESSEE HAD BENCHMARKED THE TRANSACTIONS RELATING TO PAYMENT OF ROYALTY UNDER THE TRANSACTIONAL NET MARGIN METHOD (TNMM), AFTER AGG REGATING THE SAME WITH OTHER TRANSACTIONS. THE TPO WAS OF THE VIEW T HAT THE SAME HAD TO BE BENCHMARKED SEPARATELY AND COULD NOT BE AGGREGATED WITH OTHER TRANSACTIONS. HE FURTHER OBSERVED THAT CUP METHOD AS SUGGESTED BY THE ASSESSEE IS NOT TO BE APPLIED. HE WAS OF THE VIEW THAT ROYALTY TRANSACTION WAS TO BE BENCHMARKED BY APPLYING THE BENEFIT TEST WHICH WAS ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 11 INTERNATIONALLY ACCEPTED METHOD. IN THE FINAL ANAL YSIS, THE TPO OBSERVED THAT THE ASSESSEE HAD NEITHER BENCHMARKED THE TRANS ACTION PROPERLY BY APPLYING THE MOST APPROPRIATE METHOD NOR IT HAD FUR NISHED ITS REQUISITE INFORMATION; HENCE, THE ARM'S LENGTH PRICE OF THE S AID TRANSACTION WAS TAKEN AT NIL BY APPLYING CUP. HE THEN VIDE PARA 6. 2 REFERRED TO COMPARABLE LICENSE AGREEMENTS FOR TECHNOLOGY OF TRA DE-MARKET (BUNDLED) IP AND TAKING AN AVERAGE OF 2.48 % AFTER MAKING SEA RCH ON ROYALTYSTAT DETERMINED THE ARM'S LENGTH PRICE AT 2.85 % OF NET SALES AND THE UPWARD ADJUSTMENT WAS MADE BY HIM AT RS.11,30,68,317/-. T HE ASSESSING OFFICER PROPOSED DRAFT ASSESSMENT ORDER AGAINST WHI CH THE ASSESSEE FILED OBJECTION BEFORE DISPUTE RESOLUTION PANEL (DRP) O N THE GROUND THAT THERE WERE NO CHANGE IN THE FACTS OF THE CASE AS IN EARLIER YEARS I.E ASSESSMENT YEARS 2009-10, 2013-14 & 2014-15. THE D RP REJECTED THE SAME. THE ASSESSING OFFICER IN THE FINAL ASSESSMENT ORDER THUS, UPHELD THE SAID ADJUSTMENT OF RS.29.15 CRORES. 7. THE ASSESSING OFFICER IN THE DRAFT ASSESSMENT OR DER AND ALSO IN FINAL ASSESSMENT ORDER MADE CERTAIN DISALLOWANCE ON ACCOUNT OF CORPORATE ISSUES. FIRST SUCH ADDITION MADE IN THE HANDS OF T HE ASSESSEE WAS ON ACCOUNT OF CIRCUIT ACCRUALS AMOUNTING TO RS.10,95,2 0,722/-. THE BASIS FOR THE SAID DISALLOWANCE WAS SIMILAR DISALLOWANCE BEING MADE IN ASSESSMENT YEAR 2014-15. THE ASSESSING OFFICER OBS ERVED THAT THE ASSESSEE COMPANY HAD MADE REVERSAL TO THE TUNE OF 8 7.15 % OF THE TOTAL ACCRUAL IN FINANCIAL YEAR ENDING 31.03.2016 & 31.03 .2017 FOR EXPENSES ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 12 BOOKED IN FINANCIAL YEAR ENDING 31.03.2015. HE WAS OF THE VIEW THAT THE ASSESSEE WAS DELIBERATELY SHIFTING ITS TAX LIABILIT Y OF CURRENT ASSESSMENT YEAR TO SUBSEQUENT YEARS BY CREATING FICTITIOUS AND CONTINGENT LIABILITY WHICH COULD NOT BE ALLOWED. HENCE, THE ADDITION OF RS.10,95,20,722/-. 8. OTHER ADDITION MADE IN THE HANDS OF THE ASSESSEE WAS ON ACCOUNT OF THE ACCRUAL OUTSTANDING OTHER THAN CIRCUIT ACCRU AL TOTALING TO RS.1,00,82,744/- AND DISALLOWANCE OF SUPPORT SERVIC E EXPENDITURE OF RS.10,22,08,983/-. 9. THE NEXT HEAD OF DISALLOWANCE WAS THE LICENSE FE E CLAIMED BY THE ASSESSEE, WHEREIN THE ASSESSING OFFICER WAS OF THE VIEW THAT THE LICENSE FEE WAS PAID FOR THE ACQUISITION OF RIGHT/BENEFIT / ADVANTAGE OF ENDURING NATURE HENCE, NOT ALLOWABLE. AN ADDITION OF RS.44, 57,84,302/- WAS MADE ON THIS ACCOUNT. 10. FURTHER, THE ASSESSEE HAD ALSO PAID LEASE LINE CHARGES WHEREIN IT HAD DEDUCTED THE TAX AT SOURCE UNDER THE PROVISION OF SECTION 194J OF THE ACT. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIE W THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE U/S 194I OF THE ACT AND FOR SUCH FAILURE TO DEDUCT TAX AT SOURCE, THE ASSESSEE WAS HELD TO BE I N DEFAULT AND HENCE, AN ADDITION OF RS.1,31,66,943/- WAS MADE TO THE INCOME OF THE ASSESSEE. ALL THESE ADJUSTMENTS/DISALLOWANCES/ADDITIONS WERE PROP OSED IN THE DRAFT ASSESSMENT ORDER AND THE DRP FOLLOWING ITS DIRECTIO NS IN THE EARLIER YEARS I.E. ASSESSMENT YEARS 2009-10, 2013-14 & 2014-15 H AD UPHELD THE ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 13 AFORESAID ADDITIONS. THE ASSESSING OFFICER IN THE FINAL ASSESSMENT ORDER DISALLOWED THE ABOVE SAID AMOUNTS AND COMPLETED THE ASSESSMENT IN THE HANDS OF THE ASSESSE AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 11. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FIRST ISSUE RAISED IN THE PRESENT A PPEAL VIDE GROUND NOS. 1 TO 1.6 IS AGAINST THE TRANSFER PRICING ADJUSTMENT I N RESPECT OF RECEIPT OF INTRA GROUP SERVICES. THE ASSESSEE FOR PROVIDING S EAMLESS SERVICES TO ITS CUSTOMERS WAS AVAILING SERVICES FROM ITS AE. AS TH E SERVICES REQUIRED SPECIALIZED KNOWLEDGE AND EXPERIENCE IN THE FIELD, THE ASSESSEE HAD ENTERED INTO SERVICES AGREEMENT IN THE EARLIER YEAR S IN ORDER TO AVAIL SUCH INTRA GROUP SERVICES. DURING THE YEAR UNDER CONSID ERATION, THE ASSESSEE AVAILED THESE SERVICES FROM GLOBAL CUSTOMERS SERVIC ES CENTER. SIMILAR ISSUES AROSE BEFORE THE TRIBUNAL AND ON SIMILAR FAC TS, THE ADJUSTMENT MADE IN THE HANDS OF THE ASSESSEE WAS DELETED BY TH E TRIBUNAL IN FOLLOWING ORDERS:- (A) ITA NO.2538/DEL/2014 RELATING TO ASSESSMENT YEA R 2008-09, VIDE ORDER DATED 18.09.2017; (B) ITA NO.1059/DEL/2015 RELATING TO ASSESSMENT YE AR 2010-11, VIDE ORDER DATED 18.09.2017 (C) ITA NO.292/DEL/2016 RELATING TO ASSESSMENT YEAR 2011-12, VIDE ORDER DATED 18.09.2017 (D) 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 ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 14 (E) ITA NO.7001/DEL/2018 RELATING TO ASSESSMENT YEA R 2014-15, VIDE ORDER DATED 18.07.2017. 12. THE TRIBUNAL WHILE DECIDING THE ISSUE OF INTRA GROUP SERVICES AVAILED BY THE ASSESSEE HAD HELD THAT TRANSACTIONAL NET MARGIN METHOD WAS THE MOST APPROPRIATE METHOD TO BE APPLIED FOR B ENCHMARKING THE SAID SERVICES AND HAD DELETED THE ADJUSTMENT MADE IN THE HANDS OF THE ASSESSEE. THE FINDINGS OF THE TRIBUNAL IN ASSESSME NT YEAR 2014-15 WITH REGARD TO THE AFORESAID ISSUE ARE IN PARAS 4 TO 6 A T PAGES 09 TO 16 OF THE ORDER OF THE TRIBUNAL. WE ARE REFERRING TO THE AFO RESAID FINDINGS OF THE TRIBUNAL BUT FOR THE SAKE OF BREVITY, ARE NOT REPRO DUCING THE SAME. THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACT S IN THE EARLIER YEARS AND FOLLOWING THE SAME PARITY AND REASONING, WE ALLOW T HE CLAIM OF THE ASSESSEE. HENCE, GROUND NOS. 1 TO 1.6 RAISED BY TH E ASSESSEE IN THIS APPEAL ARE ALLOWED. 13. NOW COMING TO THE ISSUE RAISED IN GROUND NOS. 2 TO 2.7 IN THIS APPEAL AGAINST THE TRANSFER PRICING ADJUSTMENT OF P AYMENT OF ROYALTY. THE ASSESSEE HAD ENTERED INTO PROVIDING LONG DISTANCE TELECOMMUNICATION SERVICES PURSUANT TO THE INTERNATIONAL LONG DISTANC E (ILD), NATIONAL LONG DISTANCE (NLD) AND INTERNET SERVICE PROVIDER (ISP) LICENSES GRANTED BY THE DEPARTMENT OF TELECOMMUNICATION (DO T). THE ASSESSEE HAD ENTERED INTO SERVICE MARK LICENSE AGREEMENT WI TH 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 MATERIAL. T HE CONSIDERATION FOR ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 15 USAGE BETWEEN BOTH THE PARTIES WAS AGREED @ 4 % OF NET SALES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD PAID RS. 29.13 CRORES AS ROYALTY TO ITS AE. THE ASSESSEE WAS GRANTED NON-EX CLUSIVE, NON- TRANSFERABLE AND NON-LICENSABLE ROYALTY BEARING LIC ENSE AND RIGHT TO USE THE LICENSED MARKS IN RESPECT OF THE TELECOMMUNICAT ION SERVICES PROVIDED OVER AT & T GLOBAL TELECOMMUNICATIONS NETWORK WHICH WAS USED FOR OBTAINING CUSTOMERS CONTRACTS IN INDIA. THE ASSESS EE IN THE TP STUDY REPORT WHILE BENCHMARKING THE SAID TRANSACTION OF PAYMENT OF ROYALTY HAD ON AGGREGATE BASIS, APPLIED TRANSACTIONAL NET M ARGIN METHOD, ALONG WITH PROVISION OF NETWORK CONNECTIVITY SERVICES. T HE MARGINS 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 UNDERTOO K AN ALTERNATE ANALYSIS WHEREIN A SEARCH USING ROYALTYSTAT DATABAS E TO DETERMINE THE CONTEMPORANEOUS INDUSTRY RATE OF ROYALTY FOR BRAND NAME/TRADE MARK PAID BY OTHER INDEPENDENT COMPANIES ON SIMILAR PROD UCTS WAS CARRIED OUT. THE SAID DOCUMENT IS PLACED AT PAGE 934 OF PA PER BOOK VOLUME-II. THE TPO REJECTED BOTH THE ANALYSIS OF THE ASSESSEE AND APPLIED COMPARABLE UNCONTROLLED PRICE METHOD ONLY AND UNDER TOOK FRESH SEARCH WHEREIN HE CONCLUDED THAT ARMS LENGTH PAYMENT @ 2. 48% OF NET SALES AND MADE AN UPWARD ADJUSTMENT OF RS.11.30 CRORES. THE GRIEVANCE OF THE ASSESSEE BEFORE US IS THAT THE TPO DID NOT SHARE TH E SEARCH PROCESS RESULT AND HENCE, DID NOT ALLOW AN OPPORTUNITY FOR HEARING TO THE ASSESSEE TO REBUT HIS FINDINGS AND ALSO DID NOT CONSIDER THE CO MPARABLES PICKED UP ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 16 BY THE ASSESSEE. THE SECOND GRIEVANCE OF THE ASSES SEE IS BEFORE US THAT THE DRP ACKNOWLEDGED THAT THE FACTS WERE SIMILAR TO THE EARLIER YEARS, PLACED RELIANCE ON THE ORDERS OF THE EARLIER YEARS AND UPHELD 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 ROYALTY. 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 ONWARDS. THE RELEVANT FINDINGS OF THE TRIBUNAL IN THIS REGARD ARE REPRODUCED IN THE ORDER OF THE TRIBUNAL RELATING TO ASSESSMENT YEAR 2014-15 AT PARAS 17 & 1 8 WHICH ARE BEING REFERRED, BUT NOT BEING REPRODUCED FOR THE SAKE OF BREVITY. THE TRIBUNAL FURTHER NOTED THAT THOUGH THE BENEFIT TEST COULD N OT BE APPLIED TO DETERMINE THE ARM'S LENGTH PRICE OF INTERNATIONAL T RANSACTION BUT THE MATTER WAS RESTORED BACK TO THE ASSESSING OFFICER/T PO 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 PA RITY AND REASONING, WE HOLD THAT THE BENEFIT TAX COULD NOT BE APPLIED IN THE HANDS OF THE ASSESSEE. HOWEVER, WE REMIT THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER/TPO TO CARRY OUT THE COMPARABILITY ANALYSIS WITH DIRECTION TO CONFRONT THE ASSESSEE WITH BENCHMARKING ANALYSIS AD OPTED AND THE COMPARABLES APPLIED AND ALSO TO LOOK INTO THE COMPA RABLES SELECTED BY THE ASSESSEE AND DECIDE THE ISSUE IN ACCORDANCE WITH LA W, AFTER ALLOWING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. HENCE, GROUND OF ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 17 APPEAL NOS. 2 TO 2.7 RAISED BY THE ASSESSEE IN THIS APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 15. NEXT ISSUE RAISED IN THIS APPEAL VIDE GROUND NO S. 3 TO 3.7 IS AGAINST THE DISALLOWANCE MADE ON ACCOUNT OF CIRCUIT ACCRUAL S. THE ASSESSEE WAS FOLLOWING CONSISTENT METHOD OF ACCOUNTING WHEREIN O N A SCIENTIFIC BASIS, THE ASSESSEE IS ESTIMATING THE EXPENSES TO BE INCUR RED ON ACCOUNT OF CIRCUIT ACCRUALS. THE SAID ACCOUNTING IS THROUGH A N AUTOMATED SYSTEM, WHICH IS USED BY THE ASSESSEE AS AN OPERATIONAL TOO L AND SUCH METHOD IS FOLLOWED BY ALL THE CONNECTED COMPANIES OF THE GROU P WORLDWIDE. THE ASSESSEE CLAIMED THE SAID EXPENDITURE AS BUSINESS E XPENDITURE. FURTHER, THE ASSESSEE ALSO FOLLOWING RECOGNIZED METHOD WHERE IN THE ACTUAL EXPENDITURE INCURRED AGAINST THE ACCRUAL/PROVISIONS FOR THE YEAR IS ACCOUNTED FOR IN THE SUBSEQUENT YEAR. THIS APPROAC H ADOPTED BY THE ASSESSEE IN RECOGNIZING THE PROVISION OF CIRCUIT A CCRUALS WAS NOT ACCEPTED BY THE ASSESSING OFFICER/ DRP ON THE GROUND THAT SI MILAR DISALLOWANCE WAS MADE IN THE EARLIER YEARS. WE FIND THAT THE TR IBUNAL HAS CONSISTENTLY FROM ASSESSMENT YEARS 2009-10 TO 2014-15 ALLOWED TH E CLAIM OF THE ASSESSEE IN ENTIRELY. THE RELEVANT FINDINGS OF THE TRIBUNAL IN THE ASSESSMENT YEAR 2014-15 ARE AT PAGES 19-23 (PART), WHICH ARE BEING REFERRED BUT NOT BEING REPRODUCED FOR THE SAKE OF B REVITY. THE ASSESSEE HAS ALSO FURNISHED EVIDENCE OF THE SERVICES PROVIDE D IN THE SUBSEQUENT YEAR AGAINST THE AFORESAID ACCRUALS AND IN VIEW THE REOF, WE FIND NO MERIT IN THE ORDERS OF THE AUTHORITIES BELOW IN MAKING AF ORESAID DISALLOWANCE IN ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 18 THE HANDS OF THE ASSESSEE. CONSEQUENTLY, GROUND NO S. 3 TO 3.7 RAISED BY THE ASSESSEE IN THIS APPEAL ARE THUS, ALLOWED. 16. NOW, COMING TO THE NEXT ISSUE RAISED VIDE GROUN D NOS. 4 TO 4.6 WHICH IS SIMILAR TO THE GROUND NO.3 I.E. HERE THE ACCRUAL ARE OTHER THAN CIRCUIT ACCRUALS. THE ASSESSEE WAS FOLLOWING SYSTE MATIC METHOD OF ACCOUNTING FROM YEAR TO YEAR AND WAS CREATING YEAR END ACCRUALS TOWARDS NORMAL BUSINESS EXPENDITURE AND WAS DEBITING THE EX PENDITURE WHEN PAID OR REVERSED IN THE SUBSEQUENT YEARS. THE SAID DETA ILS WERE FURNISHED BEFORE THE AUTHORITIES BELOW AND THE AR FOR THE ASS ESSEE HAS ALSO REFERRED TO THEM BEFORE US. THE TRIBUNAL IN ASSESSMENT YEAR 2014-15 RELYING ON THE ORDERS OF THE TRIBUNAL IN THE CASE OF THE ASSES SEE IN EARLIER YEARS HAD ALLOWED THE CLAIM OF THE ASSESSEE VIDE PARAS 13 TO 15 AT PAGES 23 TO 25 (PART) OF ITS ORDER. FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT THE SAID EXPENDITURE IS DULY ALLOWABLE IN THE HANDS OF THE ASSESSEE. WE ARE REFERRING TO THE FINDINGS OF THE TRIBUNAL AT PA GES 23 TO 25. FOR THE SAKE OF BREVITY, THE SAME ARE NOT REPRODUCED. THUS , GROUND NOS. 4 TO 4.6 RAISED BY THE ASSESSEE IN THIS APPEAL ARE ALLOWED. 17. NEXT DISALLOWANCE MADE IN THE CASE OF THE ASSES SEE IS SUPPORT SERVICE EXPENSES WHICH IS RAISED VIDE GROUND NOS. 5 TO 5.3. THE ASSESSEE HAD INCURRED THE SAID EXPENDITURE OF SUPPORT SERVIC ES TOTALING TO RS.10.22 CRORES WHICH WAS PAID TO THE GROUP COMPANY. THE AS SESSEE CLAIMS THAT IT HAD AVAILED THE SAID SERVICES FROM THE GROUP COMPAN Y IN DIFFERENT FIELDS OF OPERATION, WHICH WAS NECESSARY AND IMPERATIVE FOR C ARRYING ON ITS ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 19 BUSINESS. NO MARK UP WAS CHARGED ON THE SAID SERVI CES PROVIDED BY THE AE. THE AVAILMENT OF THE SUPPORT SERVICES FROM THE AE WAS THROUGH SUPPORT SERVICES AGREEMENT. THE ASSESSEE CLAIMS TH AT THE ALLOCATION OF COST OF RS.10.22 CRORES IS TO BE ALLOWED IN ITS HAN DS. IN THIS REGARD, WE FIND THAT THE ISSUE HAS ALSO BEEN DECIDED BY THE TR IBUNAL IN ASSESSEES OWN CASE IN EARLIER YEARS AND THE TRIBUNAL VIDE PAR AS 16 TO 18 AT PAGES 25 TO 27 IN ASSESSMENT YEAR 2014-15 HAD DECIDED THE S AID ISSUE. WHILE DECIDING THE SAID ISSUE, THE TRIBUNAL HAS REMITTED THE SAME TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION TO CONSIDER TH E EVIDENCES FILED BY THE ASSESSEE OF AVAILMENT OF SUPPORT SERVICES FROM ITS AE. THE AR FOR THE ASSESSEE POINTED OUT THAT ALL THESE EVIDENCES WERE DULY FILED BEFORE THE AUTHORITIES BELOW. HOWEVER, FOLLOWING THE SAME PAR ITY AND REASONING AS IN ASSESSMENT YEAR 2014-15, WE REMIT THE ISSUE BACK TO THE ASSESSING OFFICER TO CARRY OUT THE NECESSARY VERIFICATION EXE RCISE AND DECIDE THE ISSUE IN ACCORDANCE WITH OUR DIRECTION IN THE EARLI ER YEARS. WE ARE RELYING ON THE FINDINGS OF THE TRIBUNAL ORDER VIDE PAGE 16 TO 18 AND THE SAME ARE NOT REPRODUCED FOR THE SAKE OF BREVITY. THUS, GROU ND NOS. 5 TO 5.3 RAISED BY THE ASSESSEE ARE ALLOWED. 18. THE NEXT ISSUE RAISED IN GROUND NOS. 6 TO 6.3 I S AGAINST THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF ANNUAL REVENUE SHARE BASED LICENSE FEE OF RS.44,57,84,302/-. THE ASSESSEE DUR ING THE YEAR UNDER CONSIDERATION HAD INCURRED EXPENDITURE OF RS.62.97 CRORES TOWARDS ANNUAL REVENUE SHARE BASED LICENSE FEE FOR MAINTENA NCE AND USER OF THE ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 20 TELECOM LICENCE PAYABLE TO THE DEPARTMENT OF TELECO M. THE ASSESSEE FOR ITS OPERATIONS IN INDIA HAD ACQUIRED THE TELECOM LI CENCES FROM FINANCIAL YEAR 2006-07 AS PER THE AGREEMENT WITH DEPARTMENT O F TELECOM. ONE TIME ENTRY FEE OF RS.5 CRORE WAS PAID BY THE ASSESS EE IN FINANCIAL YEAR 2006-07 WHICH WAS CAPITALIZED AND IS BEING AMOTORIZ ED UNDER THE PROVISION OF SECTION 35BB OF THE ACT. THE ASSESSEE WAS GRANTED TELECOM LICENSE FOR INITIAL TERM OF 20 YEARS UPON THE PAYME NT 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.62.97 C RORES. THE ASSESSEE CLAIMED THE SAID EXPENDITURE TO BE ITS REVENUE EXPE NDITURE. HOWEVER, THE ASSESSING OFFICER APPLIED THE PROVISIONS OF SECTION 35BB OF THE ACT AND AMORTIZED THE EXPENDITURE OVER THE REMAINING LIFE O F THE LICENCE I.E 15 YEARS, RESULTING IN DISALLOWANCE OF RS.44.57 CRORES . 19. THE LD. AR FOR THE ASSESSEE DREW OUR ATTENTION TO THE PROVISION OF SECTION 35BB OF THE ACT AND POINTED OUT THAT THE SA ID SECTION TALKS OF THE EXPENDITURE INCURRED ON OBTAINING AND ACQUIRING THE LICENCES. HOWEVER, WHERE FOR MAINTAINING THE SERVICES, REGULAR CHARGES WERE PAID, THE SAME WERE TO BE ALLOWED AS EXPENDITURE IN THE HANDS OF T HE ASSESSEE AND NOT CAPITALIZED AND AMORTIZED U/S 35BB OF THE ACT. THE LD.AR FOR THE ASSESSEE ALSO POINTED OUT THAT THIS ISSUE IS ALSO C OVERED BY THE ORDER OF THE TRIBUNAL WHICH IN TURN HAD FOLLOWED THE RATIO L AID DOWN BY THE ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 21 HONBLE HIGH COURT IN THE CASE OF CIT VS BHARTI HEX ACOM LIMITED [2014] 265 CTR 130 (DELHI). 20. WE FIND THAT THE ISSUE STAND SQUARELY COVERED B Y THE DICTATE OF THE HONBLE HIGH COURT IN THE CASE OF CIT VS BHARTI HE XACOM LIMITED (SUPRA) WHEREIN HONBLE HIGH COURT HELD THAT THE REVENUE SH ARE BASED LICENSE FEE WAS AN ALLOWABLE REVENUE EXPENDITURE U/S 37(1) OF T HE ACT. SIMILAR PROPOSITION IS ALSO BEING LAID DOWN BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2014-15 UNDER PARAS 19 TO 21 AT PAGES 27 TO 29 OF THE ORDER, WHICH ARE BEING REFERRED BUT NOT BEING R EPRODUCED FOR THE SAKE OF BREVITY. SINCE THE ISSUE STANDS COVERED BY THE JURISDICTIONAL HIGH COURT, WE FIND NO MERIT IN THE DISALLOWANCE MADE IN THE HANDS OF THE ASSESSEE ON THIS ACCOUNT. HENCE, WE DIRECT THE ASS ESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE. THUS, GROUND NOS. 6 TO 6.3 RAISED BY THE ASSESSEE IN THIS APPEAL ARE ALLOWED. 21. NEXT ISSUE RAISED VIDE GROUND NOS. 7 TO 7.4 IS AGAINST THE DISALLOWANCE MADE U/S 14A(IA) OF THE ACT. THE ASSE SSEE HAD WITHHELD TAX ON LEASE LINE CHARGES PAID TO OTHER TELECOM OPERATO RS U/S 194J OF THE ACT. THE CLAIM OF THE ASSESSEE WAS THAT THE LEASE LINE S ERVICES WERE STANDARD AUTOMATIC SERVICES WHICH WERE AVAILED BY ANY TELECO M SERVICE PROVIDER FOR THE TRANSMISSION OF DATA AND WAS NOT UNDER ANY EXCL USIVE ARRANGEMENT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE TAXE S ON SUCH EXPENDITURE WAS TO BE WITHHELD U/S 194I OF THE ACT. WE FIND TH AT SIMILAR ISSUE OF NON- DEDUCTION OF TAX ON LEASE LINE EXPENSES AROSE BEFOR E THE TRIBUNAL IN ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 22 EARLIER YEARS IN ASSESSEES OWN CASE. THE TRIBUNAL IN ASSESSMENT YEAR 2014-15 VIDE PARAS 22 TO 24 AT PAGES 29 TO 35 HAS D ECIDED THE ISSUE AND CONCLUDED BY HOLDING AS UNDER:- 24. IT IS PERTINENT TO NOTE HERE THAT THE ANNUAL REVE NUE SHARE BASED LICENSE FEE INCURRED BY THE ASSESSEE IS A BUS INESS EXPENDITURE ALLOWABLE U/S 37 OF THE INCOME TAX ACT, 1961. THIS EXPENDITURE WAS INCURRED BY THE ASSESSEE COMPA NY TOWARDS MAINTENANCE AND USAGE OF THE TELECOM LICENS E, AND NOT FOR ACQUIRING A RIGHT TO OPERATE TELECOMMUNICAT ION SERVICES AND THUS WOULD NOT ATTRACT THE PROVISIONS OF SECTIO N 35ABB OF THE ACT. THE ASSESSEES CASE IS SQUARELY COVERED BY THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHARTI HEXACOM LIMITED [2014] 265 CTR 130 (DELHI) O THER CASE LAWS RELIED UPON BY THE APPELLANT AS CITED ABOVE. T HE LD. DR ALSO COULD NOT CONTROVERT THAT HOW THIS ISSUE IS NO T SQUARELY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT. IT IS ALSO IMPORTANT TO NOTE THAT IN ONE OF THE PRECEDING YEAR ON SAME FACTS, THE DRP ALLOWED THE CLAIM OF THE LICENC E 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 ALLOWED. 22. THE ISSUE ARISING BEFORE US IS SIMILAR AND FOLL OWING THE SAME PARITY AND REASONING, WE HOLD THAT THERE WAS NO REQUIREME NT TO DEDUCT TAX AT SOURCE U/S 194I OF THE ACT. THUS, GROUND NOS. 7 TO 7.2 OF THE ASSESSEE ARE ALLOWED. ITA NO.6385/DEL/2019 ASSESSMENT YEAR: 2015-16 PAGE | 23 23. THE NEXT ISSUE VIDE GROUND NO.8 IS NON-GRANTING COMPLETE CREDIT OF TAXES DEDUCTED AT SOURCE. THE LD. AR FOR THE ASSESS EE POINTED OUT THAT EVEN AN APPLICATION U/S 154 OF THE ACT WAS PENDING BEFORE THE ASSESSING OFFICER IN THIS REGARD. WE DIRECT THE ASSESSING OF FICER TO ALLOW CREDIT OF TDS IN THE HANDS OF THE ASSESSEE AS PER THE AVAILAB LE DATA. THUS, GROUND NO.8 RAISED BY THE ASSESSEE IS ALLOWED. 24. THE NEXT GROUND NO.9 IS AGAINST THE CHARGING OF INTEREST U/S 234B AND 234C OF THE ACT WHICH IS CONSEQUENTIAL IN NATUR E, HENCE THE SAME IS DISMISSED. 25. THE ISSUE RAISED VIDE GROUND NO.10 IS AGAINST T HE INITIATION OF PENALTY PROCEEDINGS, WHICH IS PREMATURE AND THE SAM E IS DISMISSED. 26. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND DAY OF OCTOBER, 2019. SD/- SD/- (PRASHANT MAHARISHI) (SUSH MA CHOWLA) &' &' &' &' /ACCOUNTANT MEMBER /JUDICIAL MEMBER / * DATED : 22 ND OCTOBER, 2019 . * AMIT KUMAR * &!. '$3&$'4 COPY OF THE ORDER IS FORWARDED TO : 1. +, / THE APPELLANT; 2. -+, / THE RESPONDENT; 3. 5 6 7 / THE CIT(A) 4. $89 '* / DR, ITAT, DELHI 5. 9:%; 4 GUARD FILE. &!* &!* &!* &!* / BY ORDER , -$' ' // TRUE COPY // # <=> , ASSISTANT REGISTRAR, ITAT, DELHI