Microsoft Corporation India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 6417/DEL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7169 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 04-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 27-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR
• Assessee Lawyers: VIJAY IYER; SANDEEP KARHAIL
• Keywords: Depreciation; Transfer pricing; Business expenditure; International transaction; Question of law; Wholly owned subsidiary
• Section: 92C; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I-1 NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH.N.K.SAINI, ACCOUNTANT MEMBER I.T.A .NO.-6417/DE L/2012 (ASSESSMENT YEAR-2008- 09) MICROSOFT CORPORATION INDIA PVT. LTD., F-40, NDSE, PART-I, NEW DELHI-110049. PAN-AAACM5586C (APPELLANT) VS DCIT, CIRCLE-6(1), NEW DELHI (RESPONDENT) APPELLANT BY SH.VIJAY IYER, CA & SH. SANDEEP KARHAIL, ADV. RESPONDENT BY SH.AMRENDRA KUMAR, CIT DR ORDER PER DIVA SINGH, JM THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A SSAILING THE CORRECTNESS OF THE OF THE ORDER DATED 26.10.2012 PA SSED BY THE AO PURSUANT TO THE DIRECTIONS OF THE DISPUTE RESOLUTIO N PANEL (HEREINAFTER REFERRED TO AS DRP) 143(3) R.W.S 144 C OF THE INCOME TAX ACT, 1961 ON THE FOLLOWING GROUNDS:- 1. THAT ON FACTS AND IN LAW, THE ORDER PASSED BY T HE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 6(1), NEW DELHI ('AO') UNDER SECTION 143(3) READ WITH SECTION 144C OF THE INCOME TAX ACT, DATE OF HEARING 18.11.2015 DATE OF PRONOUNCEMENT 09.02.2016 I.T.A .NO.-6417/DEL/2012 PAGE 2 OF 34 1961 (THE ACT') [AFTER CONSIDERING THE ADJUSTMENTS PROPOSED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX, TRANSFER PRICING-1 (3) ('TPO') IN HIS ORDER PASSED UNDER SECTION 92CA(3) O F THE ACT], ON THE DIRECTIONS OF THE HON'BLE DISPUTE RESOLUTION PA NEL ('DRP') IS BAD IN LAW IN AS MUCH AS FAILED TO APPRECIATE THE F ACTS INVOLVED AND THE APPLICABLE LAW THEREON. PART I - TRANSFER PRICING GROUNDS 2. THAT ON FACTS AND IN LAW, THE DRP HAS ERRED IN C ONFIRMING THAT TPO HAS DISCHARGED HIS STATUTORY ONUS BY ESTAB LISHING THAT THE CONDITIONS SPECIFIED IN CLAUSE (A) TO (D) OF SE CTION 92C (3) OF THE ACT HAVE BEEN SATISFIED BEFORE DISREGARDING THE ARM'S LENGTH PRICE DETERMINED BY THE APPELLANT AND PROCEEDING TO DETERMINE THE ARM'S LENGTH PRICE HIMSELF. 3. THAT ON FACTS AND IN LAW, THE DRP AND TPO/AO HAV E ERRED IN MAKING I UPHOLDING AN UPWARD ADJUSTMENT OF RS. 64,21,85,866 IN RESPECT OF THE INTERNATIONAL TRANS ACTIONS OF THE APPELLANT PERTAINING TO PROVISION OF MARKETING SUPP ORT SERVICES AND REGIONAL GUEST EMPLOYEE SERVICES TO ITS ASSOCIA TED ENTERPRISES (UAES'). 3.1 THAT ON THE FACTS AND IN LAW, THE DRP AND TPO/ AO HAVE ERRED, IN LAW AND FACTS, BY TREATING MARKET SUPPORT SERVICES SEGMENT AND REGIONAL GUEST EMPLOYEE SERVICES SEGMEN T AS SIMILAR SEGMENTS WITHOUT CONDUCTING A PROPER FAR (F UNCTIONAL ASSET AND RISK) ANALYSIS AND BENCHMARKING THE RGE S EGMENT WITH THE ALP OF THE MARKETING SUPPORT SERVICES SEGM ENT. 3.2 THAT ON FACTS AND IN LAW, THE DRP AND TPO/AO H AVE ERRED IN REJECTING THE ECONOMIC ANALYSIS UNDERTAKEN BY TH E APPELLANT WITHOUT PROPER JUSTIFICATION AND HAVE ARBITRARILY A CCEPTED CERTAIN COMPANIES AND REJECTED CERTAIN COMPANIES WHICH TANT AMOUNTS TO CHERRY PICKING WITH THE SOLE OBJECTIVE OF ARRIVING AT SKEWED RESULTS. 3.3 THAT ON FACTS AND IN LAW, THE DRP AND TPO/AO H AVE ERRED IN USING SINGLE YEAR DATA OF COMPANIES WITHOUT CONS IDERING THE FACT THAT THE SAME WAS NOT AVAILABLE TO THE APPELLA NT AT THE TIME OF COMPLYING WITH THE TRANSFER PRICING DOCUMENTATIO N REQUIREMENTS AND DISREGARDING THE APPELLANT'S CLAIM FOR USE OF MULTIPLE YEAR DATA FOR COMPUTING THE ARM'S LENGTH P RICE. 3.4. THAT ON FACTS AND IN LAW, THE DRP AND TPO/AO HAVE ERRED BY NOT MAKING SUITABLE ADJUSTMENTS TO ACCOUNT FOR D IFFERENCES IN THE WORKING CAPITAL EMPLOYED BY THE ASSESSEE VIS-A- VIS THE COMPARABLES AND IN THE PROCESS DISREGARDED THE FACT THAT WORKING CAPITAL ADJUSTMENT HAD BEEN ALLOWED IN THE PREVIOUS ASSESSMENT YEAR BY THE LEARNED TPO, AND NEGLECTED T HE INDIAN TRANSFER PRICING REGULATIONS, OECD GUIDELINES ON TR ANSFER PRICING AND JUDICIAL PRECEDENCE. 3.5 THAT ON FACTS AND IN LAW, THE DRP AND TPO/AO H AVE ERRED IN NOT ACCEPTING THE ASSESSEE AS A RISK FREE ENTITY AND NOT MAKING APPROPRIATE ADJUSTMENTS TO ACCOUNT FOR THE DIFFEREN CE IN THE RISK I.T.A .NO.-6417/DEL/2012 PAGE 3 OF 34 PROFILES OF THE ASSESSEE, WHICH IS A RISK-FREE ENTI TY VIS-A-VIS THE COMPARABLES, AND IN THE PROCESS ALSO NEGLECTED THE INDIAN TRANSFER PRICING REGULATIONS, OECD GUIDELINES ON TR ANSFER PRICING AND JUDICIAL PRECEDENCE. 3.6 THAT ON FACTS AND IN LAW, THE DRP AND TPO/AO H AVE ERRED BY INCORRECTLY COMPUTING THE OPERATING MARGINS OF T HE COMPANIES SELECTED AS COMPARABLE BY THE LEARNED TPO. 3.7 THAT ON FACTS AND IN LAW, THE TPO I AO HAS ERR ED IN NOT REJECTING TSR DARASHAW LTD. DESPITE THE SPECIFIC DI RECTIONS OF THE DRP. 3.8 THAT ON FACTS AND IN LAW, THE TPO I AO HAS ERR ED IN NOT ACCEPTING ICRA MANAGEMENT CONSULTING SERVICES LTD I N THE SET OF COMPARABLE COMPANIES DESPITE THE SPECIFIC DIRECTION S OF THE DRP. 4. THAT ON FACTS AND IN LAW, THE HON'BLE DRP AND LD . TPOI AO HAVE ERRED BY NOT PROVIDING THE BENEFIT ENVISAGED U NDER SECTION 92C(2) OF THE ACT. PART' - CORPORATE TAX GROUNDS 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP AND AO HAVE ERRED BOTH IN FACTS AND LA W BY DISALLOWING 50% OF RUNNING AND MAINTENANCE EXPENDIT URE AMOUNTING TO RS 1,51,00,500 WITH RESPECT TO THE VEH ICLES THAT WERE USED FOR THE PURPOSE OF THE BUSINESS OF THE AP PELLANT. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP AND AO HAVE ERRED IN TREATING REPAIR A ND MAINTENANCE EXPENSE OF RS. 207,549 AS EXPENSES PERT AINING TO PRIOR YEARS. 7. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE AO HAS ERRED IN CHARGING INTEREST UNDER SECTION 234 8, 234C AND 234D AND INITIATING PENALTY UNDER SECTION 271 (1 )( C) OF THE ACT AS CONSEQUENCES OF THE ADDITIONS MADE IN THE ASSESSMEN T ORDER PASSED U/S 143(3) READ WITH SECTION 144C( 5) OF THE ACT. THE ABOVE GROUNDS OF APPEAL ARE MUTUALLY EXCLUSIVE AND WITHOUT PREJUDICE TO EACH OTHER. THE APPELLANT CRAV ES LEAVE TO ADD, ALTER, AMEND AND / OR MODIFY ANY OF THE GROUND S OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL. 2. ADDRESSING THE SAME IT WAS SUBMITTED BY THE LD. AR THAT ALTHOUGH VARIOUS GROUNDS HAVE BEEN RAISED IN THE PR ESENT APPEAL, HOWEVER, THE ASSESSEE IN THE FACTS OF THE PRESENT CASE WOULD ADDRESS ONLY CERTAIN SPECIFIC ISSUES IN THE GROUNDS RAISED. I.T.A .NO.-6417/DEL/2012 PAGE 4 OF 34 3. INVITING ATTENTION TO THE SYNOPSIS DATED 07.04.20 15, IT WAS SUBMITTED THAT WHEREAS GROUND NO.1 IS GENERAL IN NA TURE AND THUS WOULD REQUIRE NO ADJUDICATION. ADDRESSING THE ISSU ES RAISED IN GROUND NOS.2 AND 3.1 IT WAS SUBMITTED THAT IN THE FACTS OF THE PRESENT CASE THESE GROUNDS WOULD BECOME ACADEMIC IN NATURE FOR THE ASSESSEE AND RESERVING ITS RIGHT TO ARGUE THESE IN SOME OTHER YEAR HE WOULD ONLY FOCUS ATTENTION ON THE SPECIFIC GRIEVANCES QUA CERTAIN COMPARABLES UNDER THE UMBRELLA OF GROUND NO .3.2. APART FROM THAT THE ASSESSEE IT WAS SUBMITTED WOULD ALSO BE ARGUING GROUND NO.5 RAISED IN THE PRESENT APPEAL. THUS IT WAS HIS SUBMISSION THAT IN THE FACTS OF THE PRESENT CASE IT IS ONLY THESE TWO ISSUES WHICH THE ASSESSEE WOULD BE ARGUING. 3.1. FOR THE SAKE OF COMPLETENESS, IT WAS SUBMITTED THA T THE ASSESSEE DOES NOT WANT TO PRESS GROUND NO.6. 3.2. GROUND NO.7 IT WAS STATED WOULD BE CONSEQUENTIAL I N NATURE AND WOULD NOT REQUIRE ANY ADJUDICATION. THE REMAIN ING SUB- GROUNDS OF GROUND NO.3 ALONGWITH GROUND 4 IT WAS ST ATED AGAIN MAY BE TREATED AS ACADEMIC IN NATURE AND THUS REQUIRE N O ADJUDICATION IN THE YEAR UNDER CONSIDERATION WHEREIN THE RIGHT T O AGITATE THE ISSUES IN SOME OTHER ASSESSMENT YEAR IS NOT GIVEN U P. I.T.A .NO.-6417/DEL/2012 PAGE 5 OF 34 3.3. THE SAID STAND IT WAS SUBMITTED HAS BEEN TAKEN IN T HE YEAR UNDER CONSIDERATION DUE TO CERTAIN PECULIAR REASONS WHICH WOULD BE ELABORATED HEREINAFTER AND IT SHOULD NOT BE SO CO NSTRUED THAT THE ASSESSEE HAS GIVEN UP THE ISSUES AND HAS ACCEPTED T HE APPROACH OF THE TPO FOR ALL TIMES TO COME. IT WAS HIS SUBMISSI ON THAT SINCE IN THE YEAR UNDER CONSIDERATION THERE IS NO IMPACT CON SEQUENTLY THIS POSITION HAS BEEN TAKEN KEEPING THE ISSUE OPEN FOR SUBSEQUENT YEARS. 4. ADDRESSING THE ISSUE IN THE YEAR UNDER CONSIDERATI ON IT WAS SUBMITTED THAT OUT OF THE FIVE COMPARABLES CONSIDER ED BY THE TPO, THE ASSESSEE IS AGGRIEVED BY THE THREE COMPARABLES TAKEN BY THE TPO. RELYING UPON THE PAST DECISIONS OF THE ITAT I N ASSESSEES OWN CASE, IT WAS SUBMITTED THAT EACH OF THESE COMPARABL ES WAS CONSIDERED BY THE ITAT AS FUNCTIONALLY INCOMPARABLE AND IN THE ABSENCE OF ANY CHANGE IN MATERIAL FACTS RELYING UPO N THE PRECEDENT IN ASSESSEES OWN CASE IT WAS HIS SUBMISSION THAT T HE THREE SPECIFIC COMPARABLES TAKEN BY THE TPO MAY BE DIRECTED TO BE EXCLUDED. 4.1. FOR READY-REFERENCE, THE COMPARABLES TAKEN INTO CON SIDERATION BY THE TPO ARE EXTRACTED HEREUNDER FROM THE SYNOPSI S FILED:- IDC INDIA LIMITED; ICRA MANAGEMENT CONSULTING SERVICES LTD; VIMTA LABS LIMITED; I.T.A .NO.-6417/DEL/2012 PAGE 6 OF 34 WATER AND POWER CONSULTANCY SERVICES INDIA LIMITED; TCE CONSULTING ENGINEERS LIMITED. (THE GRIEVANCE IS POSED TO THE LAST THREE COMPARABL ES) 4.2. IT WAS SUBMITTED THAT THE ITAT IN THE FACTS OF THE ASSESSEES CASE HAS DIRECTED EXCLUSION OF THESE THREE SPECIFIC COMPARABLES ON THE REASONS AS CAPTURED IN THE SYNOPSIS FILED. THE SPECIFIC REASONS JUSTIFYING THEIR EXCLUSION IS EXTRACTED FROM THE S YNOPSIS ITSELF SO AS TO ENSURE THAT NOTHING IS LEFT OUT:- TCE CONSULTING ENGINEERS LIMITED FUNCTIONALLY DIFFERENT - HON'BLE ITAT HAS REJECTED IT AS A COMPARABLE IN APPELLANT'S OWN CASE FOR AY 2006-07 B Y STATING THAT IT IS ENGAGED RENDERING ENGINEERING CONSULTANCY SERVICES (COVERED UNDER GROUND 7.6 OF APPEAL FOR AY 2006-07 ITAT VERDICT COVERED IN PARA 15 TO 1 9 OF THE JUDGEMENT) VIMTA LABS LTD. (VIMTA') FUNCTIONALLY DIFFERENT- HON'BLE ITAT HAS REJECTED VIMTA (ERRONEOUSLY MENTIONED AS VINITA LABS IN ITAT AY 20 06- 07 JUDGEMENT) AS A COMPARABLE IN APPELLANT'S OWN CA SE FOR AY 2006-07 BY STATING THAT IT IS A COMPANY CONDUCTING CLINICAL TRIALS ON FOODS AND DRUGS, CANN OT BE CONSIDERED AS COMPARABLE TO A MARKETING SUPPORT SERVICE PROVIDER LIKE MCIPL. (COVERED UNDER GROUND 7.6 OF APPEAL FOR A Y 2006-07. ITAT VERDICT COVERED IN PARA 15 TO 1 9 OF THE JUDGEMENT) I.T.A .NO.-6417/DEL/2012 PAGE 7 OF 34 WATER AND POWER CONSULTANCY SERVICES (INDIA) LIMITED ('WAPCOS') FUNCTIONALLY DIFFERENT - HON'BLE ITAT HAS REJECTED WAPCQS AS COMPARABLE IN APPELLANT'S OWN CASE FOR AY 2006-07 BY STATING THAT IT IS ENGAGED RENDERING ENGINEERING CONSULTANCY SERVICES (COVERED UNDER GROUND 7.6 OF APPEAL FOR A Y 2006-07. ITA T VERDICT COVERED IN PARA 15 TO 19 OF THE JUDGEMENT). 4.3. INVITING ATTENTION TO THE DECISION DATED 12.10.201 5 OF THE HONBLE HIGH COURT (COPY FILED IN ITA NO.504/2015) IT WAS SUBMITTED THAT THE REVENUE HAD CHALLENGED THE DECISION OF THE ITAT DATED 18.12.2014 IN 2006-07 ASSESSMENT YEAR RENDERED IN ITA NO.5855/DEL/2010, (COPY FILED) ONLY ON THE CORPORAT E ISSUE. IT WAS SUBMITTED THAT DESPITE HAVING FILED AN APPEAL AGAIN ST THE ORDER OF THE TIAT THE REVENUE HAS CONSCIOUSLY CHOSEN NOT TO AGITATE THE ISSUE OF EXCLUSION OF THE COMPARABLES DIRECTED TO BE EXCLUDED BY THE ITAT. ACCORDINGLY THE ISSUE HAVING BEEN GIVEN UP B Y THE REVENUE ITSELF IN 2006-07 ASSESSMENT YEAR BY WAY OF NOT AGI TATING THE ISSUE BEFORE THE HIGH COURT IT CANNOT NOW DISPUTE THIS PO SITION BEFORE THE ITAT. THIS ORDER OF THE ITAT IN 2006-07 ASSESSMENT YEAR WHICH NOT CHALLENGED BY THE REVENUE DESPITE HAVING FILED AN A PPEAL IT WAS SUBMITTED WAS FURTHER FOLLOWED BY THE ITAT IN 2007- 08 ASSESSMENT I.T.A .NO.-6417/DEL/2012 PAGE 8 OF 34 YEAR. ACCORDINGLY IT WAS HIS SUBMISSION THAT THE DEPARTMENT WOULD NOW BE PRECLUDED FROM TAKING A CONTRARY VIEW. 5. THE LD. CIT DR, MR. AMRENDER KUMAR CONSIDERING THE BACKGROUND OF THE CASE WHEREIN DESPITE FILING AN AP PEAL BEFORE THE HONBLE HIGH COURT IN 2006-07, THE REVENUE DID NOT AGITATE THE ISSUE OF EXCLUSION OF THESE SPECIFIC COMPARABLES P LACED RELIANCE UPON THE ASSESSMENT ORDER. 6. THE RECORD WOULD SHOW THAT THE ASSESSEE COMPANY WA S INCORPORATED ON 22.07.1988 AND AS PER RECORD IS STA TED TO BE PRIMARILY ENGAGED IN PROVIDING MARKETING SUPPORT SE RVICES TO ITS ASSOCIATED ENTERPRISES (HEREINAFTER REFERRED TO AS AE) IN RESPECT OF THE SALE OF MICROSOFT SOFTWARES IN INDIA. THE COMP ANY ALSO PROVIDES THE FOLLOWING SERVICES TO INDEPENDENT CUSTOMERS IN INDIA:- CONSULTANCY SERVICES IN SUPPORTING THE DEVELOPMENT OF CLIENT SERVER APPLICATIONS; ASSIST CUSTOMERS IN THE SUCCESSFUL DEVELOPMENT OF MICROSOFT TECHNOLOGY, BOTH DIRECTLY AND THROUGH SER VICE PROVIDERS; AND PROVIDE TRAINING THROUGH AUTHORIZED TRAINING CENTRE S TO ASSIST CUSTOMERS IN THE OPERATION OF MICROSOFT SOFT WARE. 6.1. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION RETUR NED AN INCOME ON 30.09.2008 OF RS.181,63,97,089/- WHICH WA S REVISED ON 25.03.2010 AT RS.145,30,74,639/-. I.T.A .NO.-6417/DEL/2012 PAGE 9 OF 34 6.2. THE ASSESSEE I.E. MICROSOFT CORPORATION INDIA PVT. LTD. (HEREINAFTER REFERRED TO AS MCIPL) HAVING BEEN IN CORPORATED AS A PRIVATE COMPANY IN INDIA IN JULY 1988 WAS CONVERTED TO A WHOLLY OWNED SUBSIDIARY OF MS CORP. IN JANUARY 1996. MCIP L IS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES IN SUPPORTING THE DEVELOPMENT OF CLIENT SERVER APPLICATIONS, TO ASSIST CUSTOMERS IN THE SUCCESSFUL DEVELOPMENT OF MICROSOFT TECHNOLOGY, BOTH DIRECTLY AND THROUGH SERVICE PROVIDERS AND TO PROVIDE TRAINING THROUGH A UTHORIZED TRAINING CENTRES TO ASSIST CUSTOMERS IN THE OPERATION OF MIC ROSOFT LICENSED SOFTWARE. DURING THE FINANCIAL YEAR UNDER CONSIDERA TION, MCIPL WAS ENGAGED IN THE PROVISION OF MARKETING SUPPORT TO MS CORP. AND AFFILIATE ENTITLES IN RETURN FOR A SERVICE FEE. FU RTHER, MCIPL ALSO AS PER RECORD PROVIDED SOFTWARE CONSULTING SERVICES (H EREINAFTER REFERRED TO AS MCS SERVICES) AND PRODUCT SUPPORT SERVICES (HEREINAFTER REFERRED TO AS PSS) TO MICROSOFT GROUP ENTITIES A ND TO THIRD PARTY CUSTOMERS OF GROUP ENTITIES. IN ADDITION, MCIPL AL SO PROVIDED CERTAIN OTHER SUPPORT SERVICES SUCH AS ADMINISTRATI VE SUPPORT SERVICES, INFORMATION TECHNOLOGY SUPPORT SERVICES E TC. TO ITS ASSOCIATED ENTERPRISE. 6.3. IN THE YEAR UNDER CONSIDERATION FOLLOWING INTERNATI ONAL TRANSACTIONS WERE REPORTED BY THE ASSESSEE IN ITS F ORM 3CEB :- I.T.A .NO.-6417/DEL/2012 PAGE 10 OF 34 S.NO. INTERNATIONAL TRANSACTION METHOD VALUE (IN R S.) 1. PROVISION OF MARKETING SUPPORT SERVICES (MSS) TNMM 6,145,200,101 2. PROVISION OF PRODUCT SUPPORT SERVICES (PSS) TNMM 61,361,923 3. PROVISION OF MICROSOFT CONSULTING SOLUTIONS SERVICES (MCS SERVICES) TNMM 74,906,128 4. PROVISION OF REGIONAL GUEST EMPLOYEE SERVICES (RGE SERVICES) TNMM 1,285,371,363 5. ASSIGNMENT OF PERSONNEL TNMM 336,137,533 6.4. THE ASSESSEE SELECTED THE TRANSACTIONAL NET MARGIN METHOD (HEREINAFTER REFERRED TO AS TNMM) AS THE MOST APP ROPRIATE METHOD FOR BENCHMARKING OF THE INTERNATIONAL TRANSACTIONS FOR PROVISION OF MARKETING SUPPORT SERVICE WHICH IS THE SUBJECT MATT ER OF DISPUTE IN THE PRESENT PROCEEDINGS. RETURN ON TOTAL OPERATING COST WAS TAKEN AS A PROFIT LEVEL INDICATOR (HEREINAFTER REFERRED T O AS PLI). OPERATING PROFIT TO TOTAL COST (HEREINAFTER REFERRE D TO AS OP/TC) MARGINS REVISED BY THE ASSESSEE FOR MSS WAS DISCLOS ED AT 16.17%. 6.5 . THE TPO CARRYING OUT THE FAR ANALYSIS WAS OF THE VIEW THAT THE ASSESSEE WAS PROVIDING HIGH END SERVICES TO ITS AE. THE DOCUMENTATION AS PRESENTED BY THE ASSESSEE WAS CONS IDERED BY HIM IN THE FOLLOWING MANNER:- 6.1. AS PER THE TP DOCUMENTATION SUBMITTED BY THE ASSESSEE, MICROSOFT INDIA PROVIDES MARKETING SUPPOR T SERVICES WITH RESPECT TO CREATION OF LOCAL MARKETIN G MATERIAL, CREATION AND EXECUTION OF LOCAL MARKETING AND ADVERTISING CAMPAIGNS, PUBLIC RELATION ACTIVITIES, MARKET I.T.A .NO.-6417/DEL/2012 PAGE 11 OF 34 RESEARCH AND ANTIPIRACY CAMPAIGNS. THE RESPONSIBIL ITY OF THE OVERSEAS ENTITY PERTAINS TO THE APPROVAL OF THE BUDGETS AND IT DOES NOT COVER ACTUAL CONDUCT AND SUPERVISION OF THESE SERVICES. AS PER THE TP REPORT, PART-3, STATES THAT MICROSOFT INDIA PROVIDES MARKETING SUPPORT TO ITS GROUP COMPANIES. THESE SERVICES ARE RENDERED AS PER TERMS SET OUT IN THE RESPECTIVE AGREEMENTS. IT IS FURTHER STATED THAT MICROSOFT INDIA IS COMPENSATED FOR SUCH SERVICES WI TH A FEE WHICH IS EQUAL TO ACTUAL EXPENSES PLUS AN AMOUN T EQUAL TO 15% IN RESPECT TO SERVICES RENDERED TO MIC ROSOFT PTE. LTD. SINGAPORE (REFERRED TO AS MO) AND 10% I N RESPECT TO SERVICES RENDERED TO MICROSOFT MS. CORP. DURING FY 2007-08, MICROSOFT INDIA HAS RENDERED THE FOLLOWING SUPPORT SERVICES TO THE FOLLOWING ENTITIE S:- ASSOCIATED ENTERPRISE AMOUNT (INR) MICROSOFT CORPORATION 59,295,468 MICROSOFT OPERATIONS PTE. LTD. SINGAPORE 6,085,904,633 TOTAL 6,14,52,00,101 6.6. ACCORDINGLY A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE BASED ON THE FAR ANALYSIS CONDUCTED TAKING INTO CON SIDERATION THE I.T.A .NO.-6417/DEL/2012 PAGE 12 OF 34 PAST POSITION OF THE ASSESSEE. FOR READY-REFERENCE , THE SAME IS REPRODUCED HEREUNDER FROM THE TPOS ORDER ITSELF:- 6.2. SHOW CAUSE NOTICE TO THE ASSESSEE FROM THE ANALYSIS OF THE FUNCTIONAL PROFILE OF TH E ASSESSEE, FAR ANALYSIS CONDUCTED AND ON THE BASIS O F STUDY MATERIAL AVAILABLE ON THE WEBSITE OF THE ASSE SSEE, IT WAS FOUND IN THE PREVIOUS YEARS 2005-06 AND 2006 - 07 THAT THE ASSESSEE WAS INVOLVED IN CREATION OF MARKING INTANGIBLE AND THE ECONOMIC, OWNERSHIP OF THESE INTANGIBLES IS WITH THE ASSESSEE FOR WHICH IT WAS NOT ADEQUATELY COMPENSATED. ON THE BASIS OF ABOVE ANALYSIS, THE ASSESSEE WAS ASKED TO SHOW CAUSE VIDE NOTICE DATED 06.09.2011 AS TO WHY AS PER THE REASONS RECORDED IN THE ORDER FOR AY 2006-07 AND 2007-08, THE REIMBURSEMENT RECEIVED FOR MARKETING ACTIVITIES CARRIED OUT BY THE MCIPL SHOUL D NOT BE CONSIDERED AS INADEQUATE COMPENSATION IN VIEW OF THE MARKETING INTANGIBLES CREATED. THE ASSESSEE WA S ALSO REQUIRED TO SHOW CAUSE AS TO WHY THE COMPARABL ES AS DISCUSSED IN ORDER FOR AY 2007-08 SHOULD NOT BE CONSIDERED THIS YEAR ALSO FOR COMPARABILITY ANALYSI S. 6.7. NOT SATISFIED WITH THE EXPLANATION OFFERED BY THE ASSESSEE AND TAKING INTO CONSIDERATION THAT IN ITS ORIGINAL TRAN SFER PRICING REPORT THE ASSESSEE HAD COMPUTED MARGINS OF 12 COMPARABLES COMPANIES USING TNMM AND THREE YEARS DATA AT AVERAGE ARITHMET IC MEAN OF 7.90% BASED ON WHICH THE ASSESSEE HAD CLAIMED THAT ITS PLI OF I.T.A .NO.-6417/DEL/2012 PAGE 13 OF 34 6.17% COMPARED TO THE ARITHMETIC MEAN OF THE COMPAR ABLES AS 7.90% ON OPERATING COST WAS AT ARMS LENGTH. REJEC TING THE THREE YEARS DATA AND TAKING INTO CONSIDERATION THE PAST P OSITION TAKEN BY THE REVENUE. 6.8. THE TPO QUA THE SPECIFIC COMPARABLES UNDER CONSIDER ATION REJECTED THE ASSESSEES PRAYER. THE GENERAL REASON S FOR REJECTING THE ARGUMENTS FOR ALL THE COMPARABLES WAS AS UNDER:- 10. SELECTION OF FINAL SET OF COMPARABLES THE ABOVE STATED REPLY OF THE ASSESSEE HAS BEEN CONSIDERED IN DETAIL. HOWEVER, THERE IS NO MERIT I N THE CONTENTIONS OF THE ASSESSEE AS ALL THE AFORE-MENTIO NED COMPANIES ARE ENGAGED IN PROVIDING CONSULTING AND SUPPORT SERVICES LIKE THE ASSESSEE. THE ASSESSEE I S ALSO PROVIDING HIGH END MARKETING SERVICES AND ACCORDINGLY THE COMPANIES SELECTED ALSO NEED TO BE PERFORMING SIMILAR HIGH LEVEL ACTIVITIES. THE FIND INGS IN CASE OF EACH COMPARABLES IS GIVEN BELOW. 6.9. QUA THE SPECIFIC COMPARABLE WAPCOS HE REJECTED THE ARGUMENTS ADVANCED BY THE ASSESSEE ON THE FOLLOWING REASONING:- 10.1.WAPCOS LTD.- THE ASSESSEE HAS ITSELF USED THIS COMPARABLE DURING AY 2002-03, AY 2003-04, AY 2004- 05 WHILE SELECTING THE COMPARABLE FOR AY 2002-03, T HE ASSESSEE IN ITS TP REPORT HAD NOTED THE SAID COMPAN Y PERFORMED COMPARABLE FUNCTIONS AS UNDER:- I.T.A .NO.-6417/DEL/2012 PAGE 14 OF 34 PUBLIC SECTOR ENTERPRISE WAS SET UP TO CHANNELIZE INDIA EXPERTISE IN WATER POWER INFRASTRUCTURE AND ALLIED SECTORS FOR THE BENEFIT OF DEVELOPING COUNTRIES AND IS NOW RECOGNIZED AMONGST THE TOP RANKING CONSULTANCY ORGANIZATIONS OF THE WORLD IN THESE SECTORS. THE SPECTRUM OF SERVICES INCLUDED PRELIMINARY INVESTIGA TIONS /RECONNAISSANCE FEASIBILITY, STUDIES/PLANNING/PROJE CT FORMULATION FIELD INVESTIGATION AND TESTING, ENGINE ERING DESIGNS, DRAWING AND ............................PR OCESS, CONTRACT MANAGEMENT AND CONSTRUCTION SUPERVISION, OPERATION AND MAINTENANCE INSTITUTIONAL HUMAN RESOURCE DEVELOPMENT (SOURCE WWWW.WAPCOS..) THE ASSESSEE HAS AGAIN SELECTED THIS COMPARABLE IN AY 20003-04 COMMENTING THAT THE SAID COMPANY PERFORMS COMPARABLE FUNCTIONS AS UNDER:- WAPCOS PROVIDES CONSULTING SERVICES IN THE DOMESTI C AND INTERNATIONAL WATER AND POWER SECTORS. SERVIC E OFFERED INCLUDE MARKET INTELLIGENCE, FEASIBILITY ST UDIES, PLANNING/PROJECT FORMULATION, FIELD INVESTIGATIONS AND TESTING, ENGINEERING DESIGNS, CONTRACT MANAGEMENT, QUALITY ASSURANCE & MANAGEMENT AND HUMAN RESOURCE DEVELOPMENT. APART FROM THE INDIAN SUB-CONTINENT, WAPCOS RENDERS CONSULTANCY SERVICES IN OVER 30 DEVELOPING COUNTRIES. THIS COMPANY WAS ONCE AGAIN TREATED AS COMPARABLE COMPANY IN AY 2004-05 AND AY 2006-07 ALSO WITH THE SAME COMMENTS AS MENTIONED ABOVE. THEREFORE, THE I.T.A .NO.-6417/DEL/2012 PAGE 15 OF 34 COMPANY IS CONSIDERED AS A COMPARABLE AND IS BEING TAKEN THIS YEAR ALSO. HOWEVER, IT SEEN FROM THE ANNUAL REPORT FOR FY 2007 -08 THAT THIS COMPANY HAS A REPORTABLE SEGMENT OF CONSULTANCY AND ENGINEERING PRODUCTS. THE ENTITY LE VEL RESULT WILL NOT BE DESIRABLE, WHEN A COMPARABLE SEGMENT IS AVAILABLE. HENCE, IT IS DECIDED TO USE THAT TO THAT SEGMENT AS A COMPARABLE. 6.10. FOR RETAINING TCE CONSULTING ENGINEERS LTD. THE ASSESSEES ARGUMENTS WERE REJECTED ON THE FOLLOWIN G REASONS:- 10.2. TCE CONSULTING:- THIS COMPANY WAS ITSELF SELECTED BY THE ASSESSEE AS COMPARABLE COMPANY DURING AY 2004-05 WITH COMMENTS AS UNDER:- TCE CONSULTING ENGINEERS LTD., A TATA GROUP COMPAN Y IS ENGAGED IN PROVISION OF ENGINEERING SERVICES SUC H AS OPERATION AND DESIGN ENGINEERING, UPGRADATION & RENOVATION SERVICES, SURVEY & FIELD INVESTIGATION SERVICES, ETC. IT IS NOT THE CASE OF THE ASSESSEE THAT THIS COMPAN Y IS PERFORMING DIFFERENT FUNCTIONS OR THE ASSESSEE ITSE LF IS PERFORMING DIFFERENT FUNCTIONS. THEREFORE THE COMPA NY IS CONSIDERED AS A COMPARABLE AND IS BEING TAKEN THIS YEAR ALSO. 6.11. SIMILARLY FOR RETAINING VIMTA LAB LIMITED ITS INCLUSION WAS JUSTIFIED OVER RULING THE OPPOSITION POSED BY THE A SSESSEE ON THE FOLLOWING GROUNDS:- I.T.A .NO.-6417/DEL/2012 PAGE 16 OF 34 10.5. VIMTA LABS LTD. THE REPLY OF THE ASSESSEE REGARDING USE OF THIS COMPARABLE HAS BEEN CONSIDERED VIMTA LABS HAS BEEN USED AS A COMPARABLE TO THE ASSESSEE BY THE TPO EVE RY YEAR SINCE AY 2002-03. VIMTA LABS IS IN A SIMILAR SERVICE PROVIDING INDUSTRY AS THAT OF THE ASSESSEE. IT PROVIDES HIGH END SERVICES IN THE SECTORS OF FOOD A ND DRUGS ANALYSIS, CLINICAL REFERENCE LAB SERVICES, CL INICAL TRIALS AND ENVIRONMENTAL ASSESSMENT. THE PLEA OF T HE ASSESSEE THAT VIMTA LABS EMPLOYS SKILLED WORKFORCE IN TERMS OF PHDS AND SCIENTIST AND IS HENCE PERFORMING HIGH END SERVICES IS TRUE BUT AT THE SAME TIME THE ASSESSEE IS ALSO EMPLOYING HIGHLY SKILLED TECHNICAL WORKFORCE FOR SELLING HIGHLY SOPHISTICATED AND COMP LEX TECHNOLOGICAL PRODUCTS. THE ASSESSEE IS ALSO ENGAG ED IN PROVISION OF HIGH END SERVICES AND CREATION OF MARK ETING INTANGIBLES. THEREFORE, BASED ON THE ABOVE, AND FO R REASONS AS RECORDED IN ALL OF THE PREVIOUS FOUR AYS , VIMTA LABS IS ALSO SELECTED AS FUNCTIONALLY COMPARA BLE TO THE ASSESSEE FOR THE PURPOSE OF BENCHMARKING ITS INTERNATIONAL TRANSACTION. THIS COMPANY WAS TREATED AS COMPARABLE COMPANY SINCE AY 2002-03. THEREFORE, THE COMPANY I S CONSIDERED AS A COMPARABLE AND IS BEING TAKEN THIS YEAR ALSO. 7. THE ISSUE WAS AGITATED BY THE ASSESSEE BEFORE THE DRP WHEREIN THE OBJECTION NO.3 WAS POSED OBJECTING TO THE TPOS FINDING THAT THE I.T.A .NO.-6417/DEL/2012 PAGE 17 OF 34 ASSESSEE WAS PROVIDING HIGH MARKETING SERVICES. TH E SAID OBJECTION WAS DECIDED BY THE DRP IN ASSESSEES FAVOUR. THIS FACT IS EVIDENT FROM THE FOLLOWING EXTRACT OF OBJECTION NO.3 MADE B Y THE ASSESSEE AND THE REASON OF THE DRP IN DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE:- 4.3. GROUND NO.3:THIS ISSUE HAD ARISEN LAST YEAR T OO BEFORE THE DRP. THE CONTENTIONS OF THE ASSESSEE WH ICH ARE AS FOLLOWS HAD BEEN EXAMINED BY THE DRP. CREATING AWARENESS OF MICROSOFT PRODUCTS IN INDIA THROUGH SEMINARS, CONFERENCES, LIMITED ADVERTISING IN PUBLIC MEDIA, PROMOTIONAL CAMPAIGNS ETC. EXPANDING THE MARKETS FOR MICROSOFT RETAIL PRODUCTS IN INDIA THROUGH LOCAL PRINT AND ELECTRONI C ADVERTISING, PROMOTIONAL CAMPAIGN, ANTIPIRACY DRIVE S, ETC; AND PERFORMANCE OTHER ACTIVITIES WHICH INCLUDES THE FOLLOWING:- O DISSEMINATION OF INFORMATION TO POTENTIAL CUSTOMERS; O COMMENTING ON ANY DEVELOPMENTS IN THE TERRITORY AFFECTING THE INDUSTRY IN WHICH MCIPL FUNCTIONS; O INVESTIGATING FEASIBILITY OF NEW MARKETS FOR MICROSOFT RETAIL PRODUCTS AND BASIC MARKET RESEARCH; AND O PROVIDE MISCELLANEOUS MARKETING SUPPORT. I.T.A .NO.-6417/DEL/2012 PAGE 18 OF 34 THE PROFILE AS DESCRIBED ABOVE, HAD BEEN ACCEPTED B Y THE DRPO, WE FIND FACTS AND CIRCUMSTANCES ARE SAME THIS YEAR TOO, HENCE THE VIEW OF DRP REMAINS SAME. IN VIEW OF DRP, THE ASSESSEE SERVICES ARE NOT HIGH END AND THE OBJECTION IS ACCEPTED. 7.1. WE FIND THAT HOWEVER, THE DRP DID NOT AGREE WITH TH E ASSESSEES OBJECTIONS TO THE EXCLUSION OF THE ABOVE MENTIONED COMPARABLES. THE SPECIFIC REASONS GIVEN BY THE DRP FOR REJECTING THE OBJECTION IS REPRODUCED HEREUNDER:- 4.5. GROUND NO.4.1 AND 8: THE PROFILE OF THE COMPA NY IS SAME AS ACCEPTED BY DRP LAST YEAR. HENCE FOR COMPARABILITY ANALYSIS THE COMPARABLES ACCEPTED LAS T YEAR MUST BE USED THIS YEAR ALSO UNLESS THEIR PROFI LE HAS UNDERGONE ANY CHANGE AND IS THEREFORE NO LONGER COMPARABLE. NO SUCH FACT HAS BEEN BROUGHT TO OUR NOTICE HENCE IT IS A REASONABLE PRESUMPTION THAT FA CTS ARE SAME AS LAST YEAR. HENCE TPO IS DIRECTED TO IN CLUDE ALL THE COMPARABLES IN LAST YEAR AS ACCEPTED BY THE DRP. 8. ON A READING OF THE ABOVE, IT IS BORNE OUT THAT BOTH THE TPO AS WELL AS THE DRP WERE CONSISTENTLY OF THE VIEW THAT FACTS AND CIRCUMSTANCES ON THE ISSUES REMAINED IDENTICAL TO THE FACTS AS CONSIDERED IN THE EARLIER YEARS. THIS FACT IS ALSO BORNE OUT FROM THE ORDER OF THE CO-ORDINATE BENCH DATED 18.12.2014 IN ITA NO.5855/DEL/2010 FOR 2006-07 ASSESSMENT YEAR WHEREI N THE I.T.A .NO.-6417/DEL/2012 PAGE 19 OF 34 DISCUSSION ON THIS SPECIFIC SEGMENT IS AVAILABLE IN PARAS 12, 13 & 14 AND IS EXTRACTED HEREUNDER:- 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUT E ON THE FACT THAT THE ASSESSEE BENCHMARKED THE INTERNATIONAL TRANSACTION OF PROVISION OF MARKETIN G SUPPORT SERVICES BY SELECTING TNMM, WHICH HAS ALSO BEEN ACCEPTED BY THE TPO AS THE MOST APPROPRIATE METHOD. THE CHANGE OF BENCHMARKING DONE BY THE TPO OF THE COMPARABLES ON THE BASIS OF SINGLE YEAR DATA INSTEAD OF MULTIPLE YEAR DATA, HAS ALSO NOT BEEN ASSAILED BY THE ASSESSEE. IN FACT, NO OTHER ASPECT OF THE TP ADJUSTMENT HAS BEEN CHALLENGED EXCEPT THE DETERMINATION OF PLI OF THE COMPARABLES. HERE AGAIN , THE ASSESSEE HAS CONFINED ITSELF TO CHALLENGING THE INC LUSION OF FIVE NEW COMPANIES BY THE TPO IN THE FINAL LIST OF COMPARABLES. WE ARE, THEREFORE, RESTRICTING OURSELV ES IN EXAMINING THE COMPARABILITY OR OTHERWISE OF THE FIV E NEW COMPANIES INTRODUCED BY THE TPO IN THE FINAL LI ST OF COMPARABLES. 13. BEFORE EMBARKING UPON MAKING AN ANALYSIS OF COMPARABILITY, IT IS SINE QUA NON TO FIRST ASCERTAI N THE CORRECT NATURE OF THE ASSESSEES ACTIVITY UNDER THE SEGMENT OF PROVISION OF MARKETING SUPPORT SERVICES . THE ASSESSEES TRANSFER PRICING STUDY REPORT INDICA TES THAT THE ASSESSEE, A WHOLLY OWNED SUBSIDIARY OF MICROSOFT CORPORATION, PROVIDED MARKETING SUPPORT I.T.A .NO.-6417/DEL/2012 PAGE 20 OF 34 SERVICES MAINLY TO MICROSOFT CORPORATION PTE LTD., SINGAPORE AND A SMALL PORTION OF REVENUE AROSE FROM SERVICES RENDERED TO MICROSOFT CORPN., UK. THE ASSE SSEE WAS COMPENSATED FOR SUCH SERVICES WITH ACTUAL COSTS INCURRED WITH A MARK-UP OF 15% FOR SERVICES RENDERE D TO MICROSOFT CORPORATION PTE LTD., SINGAPORE AND 10% F OR SERVICES RENDERED TO MICROSOFT CORPN., UK. ALL THE OPERATING EXPENSES, DEPRECIATION, REALIZED FOREIGN EXCHANGE GAIN/LOSS AND BANK CHARGES WERE TAKEN INTO ACCOUNT FOR CALCULATING THE MARKUP. THE TPO HAS REPRODUCED RELEVANT CLAUSES OF THE ASSESSEES AGREEMENT WITH MICROSOFT CORPORATION PTE LTD., SINGAPORE ON PAGE 4 ONWARDS OF HIS ORDER. THIS AGREEMENT STIPULATES THAT THE ASSESSEE SHALL PROVID E PRODUCT SUPPORT SERVICES AND CONSULTING SERVICES FO R THE MICROSOFT PRODUCTS IN THE DEFINED TERRITORY. CLAUSE 3 OF THE AGREEMENT PROVIDES THAT THE ASSESSEE SHALL HAV E A NON- EXCLUSIVE RIGHT TO MARKET MICROSOFT PRODUCTS I N THE TERRITORY. ITS DUTIES HAVE BEEN SET OUT IN CLAUSE 3.2 BY PROVIDING THAT THE ASSESSEE SHALL USE ITS BEST EFFO RTS TO FURTHER THE INTEREST OF MO AND MAXIMIZE THE MARKETS FOR MICORSOFT PRODUCTS IN THE TERRITORY. IT HAS ALSO BE EN PROVIDED THAT THE ASSESSEE IN SOLICITING ORDERS SHA LL ONLY BE AUTHORIZED TO INFORM CUSTOMERS OF PRICE, PAYMENT DELIVERY AND OTHER TERMS OFFERED BY MO IN ACCORDANC E WITH INFORMATION RECEIVED FROM MO OR ITS AFFILIATES . IT FURTHER PROVIDES THAT THE ASSESSEE SHALL NOT ENTER INTO ANY AGREEMENTS WITH CUSTOMERS REGARDING MICROSOFT I.T.A .NO.-6417/DEL/2012 PAGE 21 OF 34 PRODUCTS, BUT SHALL INSTEAD PROMPTLY SUBMIT WRITTEN CUSTOMER ORDERS TO MO OR ITS AFFILIATES AS APPROPRI ATE, FOR ITS ACCEPTANCE OR REJECTION. THE NATURE OF SER VICES PROVIDED BY THE ASSESSEE TO MICROSOFT CORPORATION, USA IS ALSO THAT OF MARKETING RESEARCH AND DEVELOPMENT. THUS, IT CAN BE SEEN THAT THE ASSESSEE IS BASICALLY ENGAGED IN CREATING AWARENESS OF MICROSOFT PRODUCTS AMONGST EXISTING AND POTENTIAL USERS OF MICROSOFT PRODUCTS IN INDIA THROUGH SEMINARS, CONFERENCES, ADVERTISEMENT IN PUBLIC MEDIA AND PROMOTIONAL CAMPAIGNS. ALL THE EXPENSES INCURRED BY THE ASSESSE E ON SUCH SALES PROMOTION ACTIVITIES HAVE BEEN COMPLE TELY REIMBURSED TO THE ASSESSEE WITH A MARK-UP OF 15% BY SINGAPORE AE. EVEN THOUGH SOME MARKETING INTANGIBLE S GET CREATED BY THE ASSESSEES SPENDING ON ADVERTISEMENT AND MARKETING EXPENSES, SUCH INTANGIBLES BELONG TO ITS AES BECAUSE THE ASSESSEE IS NOT INDULGING IN ANY SALE OR PURCHASE ACTIVITIES OF MICROSOFT PRODUCTS AT ITS OWN. 14. THE TPO HAS REFERRED TO CERTAIN CLIPPINGS, MOST LY RELATING TO THE PERIOD OF OCTOBER/NOVEMBER, 2008 TO BRING HOME HIS POINT THAT THE ASSESSEE IS PROVIDING HIGH-END MARKETING SERVICES AFTER IDENTIFYING THE CUSTOMERS AND ITS JOB IS NOT SIMPLY TO CREATE MARKE T AWARENESS BY PERFORMING A LOW-END NON-COMPLEX FUNCTION. THIS, IN THE OPINION OF THE TPO, IS DONE BY THE LAUNCHING OF THE PRODUCTS WITH BIG ADVERTISEMENT CAMPAIGNS, CUSTOMER INTERFACE AND PROVISION FOR I.T.A .NO.-6417/DEL/2012 PAGE 22 OF 34 TRAINING AND BACK-UP FOR USE OF PRODUCTS AND SOFTWA RES. IN THIS REGARD, IT IS FIRSTLY RELEVANT TO NOTE THAT WE ARE DEALING WITH THE AY 2006-07 AND THE RELEVANT FINANC IAL YEAR ENDS ON 31.3.2006. ALL THE CLIPPINGS REFERRED TO BY THE TPO RELATE TO SUBSEQUENT YEARS. BE THAT AS IT M AY, IT CAN BE SEEN THAT THE INFERENCE DRAWN BY THE TPO THA T THE ASSESSEE IS NOT ONLY ENGAGED IN THE DISSEMINATI ON OF INFORMATION, BUT ALSO PROVIDING HIGH-END MARKETI NG SERVICES LEADING TO CREATION OF MARKETING INTANGIBL E FOR ITS AE, IS NOT CORRECT. IT CAN BE SEEN FROM THE CLI PPING DATED 24 TH NOVEMBER, ON PAGE 19 OF THE TPOS ORDER THAT MICROSOFT CORPORATION INDIA PTE LTD., ANNOUNCE D THE AVAILABILITY OF THE GET GENUINE SOLUTIONS (GGS) FOR WINDOWS, VISTA THROUGH WHICH CUSTOMERS WERE ABLE TO LEGALISE THEIR COUNTERFEIT OR UNLICENSED WINDOWS XP PROFESSIONAL PCS UNDER GGS BY SIMPLY PLACE(ING) AN ORDER WITH THEIR RESELLER TO LEGALISE THEIR COUNTER FEIT SOFTWARE. FROM THE ABOVE, IT IS CLEAR THAT THE ASS ESSEE IS NOWHERE ENGAGED IN THE ACTUAL SELLING OF THE PRO DUCTS TO THE CUSTOMERS DIRECTLY. IT IS SIMPLY PROVIDING MARKETING SUPPORT SERVICES BY CREATING CUSTOMER AWARENESS FOR THE MICROSOFT PRODUCTS AND ALSO IN CE RTAIN CASES PROVIDING TRAININGS AND BACK-UPS FOR THE USE OF SUCH PRODUCTS AND SOFTWARES. WITH THIS BACKGROUND O F THE NATURE OF THE ASSESSEES ACTIVITY UNDER THIS SEGMENT, LET US ANALYSE AS TO WHETHER THE FIVE COMPANIES CHOSEN BY THE TPO ARE, IN FACT, COMPARABLES. I.T.A .NO.-6417/DEL/2012 PAGE 23 OF 34 8.1. IT IS SEEN THAT THE CO-ORDINATE BENCH HAS MADE THE RELEVANT DISCUSSION QUA THESE COMPARABLES IN PARAS 17.1 & 17 .2 QUA THE TCE CONSULTING ENGINEERS LTD.; PARAS 18.1 & 18.2 QUA WA PCOS AND PARAS 19.1 & 19.2 QUA VIMTA LABS. THESE PARAS ARE EXTRACTED FOR READY-REFERENCE:- (III) TCE CONSULTING ENGINEERS LTD.: 17.1. THIS COMPANY WAS CONSIDERED BY THE TPO AS COMPARABLE ON THE SAME REASONS, BEING, THE ASSESSEE S INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLE S FOR THE AYS 2002-03 AND 2003- 04. 17.2. IT IS NOTICED THAT THIS COMPANY IS ENGAGED IN THE PROVISION OF ENGINEERING SERVICES, SUCH AS, OPERATI ON AND DESIGN ENGINEERING, UPGRADATION & RENOVATION SERVICES, SURVEYS & FIELD INVESTIGATION SERVICES. T HIS COMPANY IS OPERATING ONLY IN ONE SEGMENT, NAMELY, ENGINEERING CONSULTANCY SERVICES. AS SUCH, THERE CA N BE NO COMPARISON OF THIS COMPANY WITH THE ASSESSEE COMPANY. THIS COMPANY IS ALSO DIRECTED TO BE EXPELL ED FROM THE LIST OF COMPARABLES. (IV) WAPCOS: 18.1. THIS COMPANY WAS CONSIDERED BY THE TPO AS COMPARABLE ON THE SAME REASONS, BEING, THE ASSESSEE S INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLE S FOR THE AYS 2002-03 AND 2003-04. 18.2. WE FIND THAT THIS COMPANY OPERATES IN TWO SEGMENTS, NAMELY, CONSULTANCY & ENGINEERING PROJECT S I.T.A .NO.-6417/DEL/2012 PAGE 24 OF 34 AND LUMPSUM TURNKEY PROJECTS. THIS COMPANY PROVIDES CONSULTANCY SERVICES, SUCH AS, PRE-FEASIBILITY REPO RT OF HYDROELECTRIC PROJECTS, FIELD INVESTIGATION DRILLIN G OF TUBE WELLS, ETC. FROM THE ABOVE DESCRIPTION OF THE NATUR E OF ACTIVITIES PERFORMED BY THIS COMPANY, IT CAN BE SEEN THAT THE SAME IS ENGAGED IN PROVIDIN G ENGINEERING AND CONSULTANCY SERVICES, WHICH CAN BE OF NO MATCH TO THE ASSESSEES MARKETING SUPPORT SERVIC ES. THIS COMPANY IS ALSO DIRECTED TO BE EXCLUDED FROM T HE LIST OF COMPARABLES. (V) VIMTA LABS LTD.: 19.1. THE TPO INCLUDED THIS COMPANY IN THE LIST OF COMPARABLES BY NOTICING THAT IT HAS BEEN SO USED AS COMPARABLE TO THE ASSESSEE BY THE TPO SINCE THE AY 2002-03. HE FURTHER SUPPORTED HIS FINDING BY NOTICI NG THAT THIS COMPANY WAS PROVIDING SIMILAR SERVICES AS PROVIDED BY THE ASSESSEE. 19.2. WE DO NOT FIND ANY FORCE IN THE FUNCTIONAL COMPARABILITY OF THIS COMPANY WITH THE ASSESSEE. IT CAN BE SEEN FROM THE ANNUAL REPORT OF THIS COMPANY, A C OPY OF WHICH IS AVAILABLE AT PAGE 155 OF THE THIRD PAPE R BOOK, THAT THE SPECTRUM OF THE SERVICES RENDERED BY THIS COMPANY COVERS ANALYTICAL FOOD AND DRUGS; CLINICAL REFERENCE LAB SERVICES TO ADDRESS THE SPECIALTIES A ND CENTRAL LAB SERVICES FOR CLINICAL TRIALS; CLINICAL TRIALS PHASE-I-IV AND BA/BE STUDIES; PRE-CLINICAL SAFETY ASSESSMENTS; AND ENVIRONMENTAL ASSESSMENTS. ON A CURSORY LOOK AT THE NATURE OF SERVICES PROVIDED BY THIS I.T.A .NO.-6417/DEL/2012 PAGE 25 OF 34 COMPANY, IT TRANSPIRES THAT THE SAME IS FUNCTIONALL Y DISSIMILAR FROM THAT OF THE ASSESSEE. HOW A COMPANY CONDUCTING CLINICAL TRIALS ON FOODS AND DRUGS CAN B E CONSIDERED AS COMPARABLE WITH THE ASSESSEE UNDERTAKING MARKETING SUPPORT SERVICES, IS ANYBODY S GUESS. THIS COMPANY BEING IN THE NATURE OF BUSINESS TOTALLY ALIEN TO THAT OF THE ASSESSEE, CANNOT BE CONSIDERED AS A COMPARABLE. WE, THEREFORE, DIRECT T HE EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARAB LES. 9. IT IS FURTHER SEEN THAT THE CO-ORDINATE BENCH VIDE ITS ORDER DATED 30.06.2015 IN ITA NO.5766/DEL/2011 IN 2007-08 ASSESSMENT YEAR HAS REITERATED THIS FACTUAL POSITION AS IS EVI DENT FROM PARA 19- 24 OF THE SAID ORDER. THESE PARAS ARE ALSO REPRODU CED HEREUNDER FOR READY-REFERENCE:- II. TCE CONSULTING ENGINEERS LTD. 19. THIS COMPANY WAS CONSIDERED BY THE TPO AS COMPARABLE ON THE STRENGTH OF HIS REASON OF INCLUSI ON IN THE LIST OF COMPARABLES FOR THE AYS 2002-03 AND 200 3- 04. 20. WE FIND THAT THIS COMPANY IS ENGAGED IN THE PROVISION OF ENGINEERING SERVICES, SUCH AS, OPERATI ON AND DESIGN ENGINEERING, UPGRADATION & RENOVATION SERVICES, SURVEYS & FIELD INVESTIGATION SERVICES. T HIS COMPANY IS OPERATING ONLY IN ONE SEGMENT, NAMELY, ENGINEERING CONSULTANCY SERVICES. IT IS AXIOMATIC T HAT I.T.A .NO.-6417/DEL/2012 PAGE 26 OF 34 THERE CAN BE NO COMPARISON OF THIS COMPANY WITH THE ASSESSEES INTERNATIONAL TRANSACTION OF RENDERING MARKETING SUPPORT SERVICES. THE HONBLE DELHI HIGH COURT IN CIT VS. VERIZON INDIA (P.) LTD. (2014) 360 ITR 342 (DEL) HAS HELD THAT MARKETING SERVICES PROVIDED BY COMPANIES CANNOT BE COMPARED WITH ENGINEERING SERVICES PROVIDED BY ASSESSEE. THIS COMPANY HAS ALS O BEEN HELD BY THE TRIBUNAL TO BE INCOMPARABLE IN ITS ORDER FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR PASSE D IN THE CASE OF THE ASSESSEE ITSELF. AS SUCH, THIS C OMPANY IS ALSO DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLES. III. VIMTA LABS LTD.: 21. THE TPO INCLUDED THIS COMPANY IN THE SET OF COMPARABLES BY NOTICING THAT IT HAS BEEN SO USED AS COMPARABLE WITH THE ASSESSEE SINCE THE AY 2002-03. HE FURTHER SUPPORTED HIS FINDING BY NOTICING THAT THIS COMPANY WAS PROVIDING SIMILAR SERVICES AS PROVIDED BY THE ASSESSEE. 22. WE DO NOT FIND ANY FORCE IN THE FUNCTIONAL COMPARABILITY OF THIS COMPANY WITH THE ASSESSEE. SPECTRUM OF THE SERVICES RENDERED BY THIS COMPANY COVERS ANALYTICAL FOOD AND DRUGS; CLINICAL REFERENC E LAB SERVICES TO ADDRESS THE SPECIALTIES AND CENTRAL LAB SERVICES FOR CLINICAL TRIALS; CLINICAL TRIALS PHASE -I-IV AND BA/BE STUDIES; PRE-CLINICAL SAFETY ASSESSMENTS; AND ENVIRONMENTAL ASSESSMENTS. A CURSORY LOOK AT THE NATURE OF SERVICES PROVIDED BY THIS COMPANY DIVULGE S I.T.A .NO.-6417/DEL/2012 PAGE 27 OF 34 THAT THE SAME IS FUNCTIONALLY DISSIMILAR FROM THE ASSESSEE. HOW A COMPANY CONDUCTING CLINICAL TRIALS ON FOODS AND DRUGS CAN BE CONSIDERED AS COMPARABLE WIT H THE ASSESSEE UNDERTAKING MARKETING SUPPORT SERVICES , IS ANYBODYS GUESS. THIS COMPANY BEING IN THE NATURE O F BUSINESS TOTALLY ALIEN TO THAT OF THE ASSESSEE, CAN NOT BE CONSIDERED AS A COMPARABLE. SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN THE CASE OF THE ASSESSEE F OR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. WE, THEREFOR E, DIRECT THE EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARABLES. IV. WAPCOS: 23. THIS COMPANY WAS CONSIDERED BY THE TPO AS COMPARABLE ON THE REASON OF ITS INCLUSION IN THE LI ST OF COMPARABLES FOR THE AYS 2002-03 AND 2003-04. 24. WE FIND THAT THIS COMPANY OPERATES IN TWO SEGMENTS, NAMELY, `CONSULTANCY & ENGINEERING PRODUCTS AND LUMPSUM TURNKEY PROJECTS. IT IS NOT ICED THAT THE TPO HAS CONSIDERED ONLY `CONSULTANCY AND ENGINEERING PRODUCTS SEGMENT FOR THE PURPOSES OF COMPARISON AND HAS NOT TAKEN INTO CONSIDERATION THE OTHER SEGMENT OF `LUMPSOM TURNKEY PROJECTS. THE COMPANY, UNDER THE ALLEGED COMPARABLE SEGMENT, PROVIDES CONSULTANCY SERVICES, SUCH AS, PRE-FEASIBI LITY REPORT OF HYDROELECTRIC PROJECTS, FIELD INVESTIGATI ON DRILLING OF TUBE WELLS, ETC. FROM THE ABOVE DESCRIP TION OF THE ACTIVITIES PERFORMED BY THE COMPANY UNDER THIS I.T.A .NO.-6417/DEL/2012 PAGE 28 OF 34 SEGMENT, IT IS VIVID THAT THE SAME IS ENGAGED IN PROVIDING ENGINEERING AND CONSULTANCY SERVICES, WHI CH CAN BE NO MATCH TO THE ASSESSEES MARKETING SUPPORT SERVICES. SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUN AL IN THE CASE OF THE ASSESSEE FOR THE IMMEDIATELY PRECED ING ASSESSMENT YEAR. THIS COMPANY IS ALSO DIRECTED TO B E EXCLUDED FROM THE LIST OF COMPARABLES. 10. IN VIEW OF THE ABOVE DETAILED FACTUAL POSITION WHE REIN WE FIND THAT THE REVENUE THOUGH HAS FILED AN APPEAL IN 2006 -07 ASSESSMENT YEAR BEFORE THE HONBLE HIGH COURT HAS TAKEN A DECI SION NOT TO ASSAIL THE FINDINGS OF THE CO-ORDINATE BENCH DIRECTING THE EXCLUSION OF THESE THREE COMPARABLES ON SIMILAR FACTS AND THE VI EW TAKEN BY THE CO-ORDINATE BENCH HAS BEEN FOLLOWED IN 2007-08 ASSE SSMENT YEAR. WE FIND THAT THERE BEEN NO CHANGE IN THE PROFILE OF THE ASSESSEE AND THE PROFILE OF THE COMPARABLES AND IN THE ABSENCE O F ANY CONTRARY FACT AS WAS CANVASSED BEFORE THE CO-ORDINATE BENCH RESPECTFULLY FOLLOWING THE PRECEDENT THE FOLLOWING THREE COMPARA BLES ARE DIRECTED TO BE EXCLUDED:- VIMTA LABS LIMITED; WATER AND POWER CONSULTANCY SERVICES INDIA LIMIT ED; TCE CONSULTING ENGINEERS LIMITED. I.T.A .NO.-6417/DEL/2012 PAGE 29 OF 34 11. THE NEXT ISSUE AGITATED BY THE ASSESSEE IS ADDRESS ED IN GROUND NO.5. A PERUSAL OF THE DISCUSSION ON THE ISSUE WH ICH HAS LED TO THE PASSING OF THE ORDER UNDER CHALLENGE WOULD SHOW THA T THE DRP CONSIDERED THE ISSUE IN THE FOLLOWING MANNER:- 4.14. GROUND NO.11: IT IS REPORTED THAT DISALLOWA NCE OF 50% CAR RUNNING EXPENSES HAVE BEEN MADE IN THE PAST ASSESSMENT YEARS ALSO AND THE MATTER IS NOW BEFORE THE ITAT. AS THE MATTER HAS NOT YET REACHED FINALITY, THE DRP DECLINES TO INTERFERE WITH THE AOS ORDER AND, THEREFORE, FOR STATISTICAL PURP OSES THE DISALLOWANCE OF THE AO IS UPHELD. (EMPHASIS PROVIDED) 11.1. IT IS SEEN THAT THE CO-ORDINATE BENCH IN ITA NO.5855/DEL/2010 VIDE ITS ORDER DATED 18.12.2014 IN 2006-07 ASSESSMENT YEAR DISCUSSED THE ISSUE IN PARA 7 & 8 AND ALLOWED THE SAME IN FAVOUR OF THE ASSESSEE AS WOULD BE EVIDENT FROM THE FOLLOWING EXTRACT OF THE SAID ORDER:- 7. GROUND NO.5 IS AGAINST THE DISALLOWANCE OF RS.78,25,822/- TOWARDS RUNNING AND MAINTENANCE EXPENSES OF THE VEHICLES USED BY THE EMPLOYEES OF T HE ASSESSEE COMPANY. THE AO, FOLLOWING THE DIRECTION OF THE DISPUTE RESOLUTION PANEL (DRP), HELD THAT 50% O F RUNNING AND MAINTENANCE EXPENSES OF THE VEHICLES WE RE TO BE DISALLOWED FOR NON-BUSINESS PURPOSE. I.T.A .NO.-6417/DEL/2012 PAGE 30 OF 34 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND T HAT THIS ISSUE IS SQUARELY COVERED BY THE ABOVE REFERRE D JUDGMENTS OF THE HONBLE GUJARAT HIGH COURT AND THE TRIBUNAL ORDER PASSED BY THE DELHI BENCH. THE SAME ANALOGY WHICH APPLIES FOR NOT MAKING ANY DISALLOWAN CE ON ACCOUNT OF DEPRECIATION FOR PERSONAL OR NON BUSI NESS USE, EQUALLY APPLIES FOR NOT WARRANTING ANY DISALLOWANCE ON ACCOUNT OF RUNNING AND MAINTENANCE EXPENSES OF THE VEHICLES USED BY THE EMPLOYEES OF T HE COMPANY. WE, THEREFORE, ORDER FOR THE DELETION OF T HE ADDITION. 11.2. THE ISSUE CAME UP FOR CONSIDERATION IN 2007-08 ASSESSMENT YEAR AGAIN AND THE CO-ORDINATE BENCH VID E ORDER DATED 30.06.2015 IN ITA NO.5766/DEL/2011 AGAIN TAKING THE FACTS AND CIRCUMSTANCES AS IDENTICAL CONCLUDED THE ISSUE IN A SSESSEES FAVOUR AS WOULD BE EVIDENT FROM THE FOLLOWING PARA:- 4. THE NEXT ISSUE IS AGAINST THE DISALLOWANCE OF DEPRECIATION ON COMPANY OWNED VEHICLES AMOUNTING TO RS.1,85,45,102/-. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND IT AS AN UNDISPUTED FACT THAT THE COMPANY PROVIDED VEHICLES TO ITS EMPLOYEES FOR THEIR USE FOR WHICH THE PURCHASE PRICE WAS PAID BY THE COMPANY TO THE EXTENT IT DID NOT EX CEED THE FIXED BENCHMARK. THE MAJOR REASON GIVEN BY THE AO I.T.A .NO.-6417/DEL/2012 PAGE 31 OF 34 FOR DISALLOWING DEPRECIATION IS THE PERSONAL USE OF VEHICLES BY THE EMPLOYEES OF THE COMPANY. THE DELHI BENCH OF THE TRIBUNAL IN DCIT VS. HARYANA OXYGEN LT D. (2001) 76 ITD 32 (DEL) HAS HELD THAT THE USE OF CAR S BY DIRECTORS EMPLOYEES OF A COMPANY CANNOT BE CHARACTERIZED AS USER FOR NON-BUSINESS PURPOSE AND, HENCE, NO PART OF SUCH CAR EXPENSES CAN BE DISALLOW ED. THE HONBLE GUJARAT HIGH COURT IN SAYAJI IRON AND ENGINEERING COMPANY VS. CIT (2002) 253 ITR 749 (GUJ ) HAS HELD THAT ONCE THE DIRECTORS OF THE ASSESSEE COMPANY ARE ENTITLED TO USE THE VEHICLES OF THE COM PANY FOR PERSONAL USE AS PER THE TERMS AND CONDITIONS OF THEIR APPOINTMENT, IT CANNOT BE SAID THAT THERE WAS A PERSONAL USE OF CARS. THE HONBLE HIGH COURT FURTHE R HELD THAT SUCH USER OF VEHICLES BY THE EMPLOYEES OF THE COMPANY CANNOT EVEN BE CONSIDERED AS NON-BUSINESS USER. THERE ARE INNUMERABLE JUDGMENTS ON THIS POIN T HOLDING THAT THERE CAN BE NO DISALLOWANCE OF DEPRECIATION OR OTHER EXPENSES ON MAINTENANCE OF TH E VEHICLES USED BY THE DIRECTORS/EMPLOYEES BY TREATIN G IT AS PERSONAL USER OR NON-BUSINESS USER OF THE COMPAN Y. WE FAIL TO SEE ANY RATIONALE IN TREATING THE AMOUNT OF DEPRECIATION ON CARS AS FOR PERSONAL USE, WHEN ADMITTEDLY THESE HAVE BEEN PROVIDED TO EMPLOYEES. A COMPANY IS A SEPARATE LEGAL ENTITY DISTINCT FROM IT S DIRECTORS OR EMPLOYEES. AS SUCH, THERE CAN BE NO QUESTION OF TREATING THE USE OF VEHICLES BY THE DIRECTORS/EMPLOYEES AS A PERSONAL USE BY THE COMPAN Y. I.T.A .NO.-6417/DEL/2012 PAGE 32 OF 34 SIMILAR ISSUE HAS ALSO BEEN DECIDED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE PRECEDING YEAR IN I TS FAVOUR. THE RELEVANT DISCUSSION HAS BEEN MADE IN PA RAS 5 AND 6 OF THE TRIBUNAL ORDER. WE, THEREFORE, ORDER FOR THE DELETION OF DISALLOWANCE OF DEPRECIATION ON SUC H VEHICLES. 11.3. THE ISSUE IT IS SEEN WAS AGITATED BY THE REVENUE BE FORE THE HONBLE HIGH COURT IN 2006-07 ASSESSMENT YEAR AND HAS HELD AS UNDER:- IN THE HIGH COURT OF DELHI AT NEW DELHI ITA 504/2015 PR.COMMISSIONER OF INCOME TAX-6........APPELLANT THROUGH: MR.KAMAL SAWHNEY, SENIOR STANDING COUNSEL WITH MR.SHIKHAR GARG, ADVOCATE. VERSUS MICROSOFT CORPORATION PVT.LTD...........RESPONDENT THROUGH CORAM DR.JUSTICE S.MURALIDHAR MR.JUSTICE VIBHU BAKHRU ORDER 12.10.2015 1. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 18 TH DECEMBER 2014 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL (ITAT) IN ITA NO.5855/DEL/2010 FOR THE ASSESSMENT YEAR (AY) 2006-07. I.T.A .NO.-6417/DEL/2012 PAGE 33 OF 34 1A.THE MAIN ISSUE FOR CONSIDERATION IN THIS APPEAL IS WHETHER THE ITAT WAS CORRECT IN ALLOWING THE DEPRECIATION CLAIM UNDER SECTION 32 OF THE FOREIGN ASSESSEE COMPANY IN RELATION TO CERTAIN VEHICLES REGISTERED UNDER ITS NAME, BUT GIVEN TO ITS EMPLOYE ES FOR THEIR USE. 2. THE ITAT HAS IN THE IMPUGNED ORDER, WHILE REJECTING THE REVENUES CONTENTION RELIED UPON THE DECISION OF THE GUJARAT HIGH COURT IN SAYAJI IRON A ND ENGINEERING COMPANY V. CIT (2012) 253 ITR 749 (GUJ. ) WHERE IT WAS HELD THAT ONCE THE DIRECTORS OF THE ASSESSEE COMPANY ARE ENTITLED TO USE THE VEHICLES O F THE COMPANY FOR THEIR PERSONAL USE AS PER THE TERMS AND CONDITIONS OF THEIR APPOINTMENT, IT CANNOT BE SAID THAT THE SAME WAS A PERSONAL EXPENDITURE. IN OTHER WORD S, IT CONTINUES TO BE BUSINESS EXPENDITURE AND IS NOT DISALLOWABLE AS SUCH. THE COURT IS NOT PERSUADED T O HOLD A DIFFERENT VIEW IN THE MATTER. 3. NO SUBSTANTIAL QUESTION OF LAW ARISES. THE APPE AL IS DISMISSED. 12. IN THESE PECULIAR FACTS AND CIRCUMSTANCES, THE GROU NDS RAISED BY THE ASSESSEE HAS TO BE ALLOWED. ACCORDINGLY IN TERMS OF THE ABOVE DECISIONS, THE APPEAL OF THE ASSESSEE IS PARTLY ALL OWED AS MOST OF THE ISSUES HAVE NOT BEEN AGITATED IN THE PRESENT APPEAL . 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. I.T.A .NO.-6417/DEL/2012 PAGE 34 OF 34 THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 09 TH OF FEBRUARY, 2016. SD/- SD/- (N.K.SAINI) (DIVA SINGH) ACCOUNTANT MEMBER JU DICIAL MEMBER DATED: 09/02/2016 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI