TEMASEK HOLDINGS ADVISORS INDIA P.LTD, MUMBAI V. ASST CIT CIR 3(3), MUMBAI

ITA 6504/MUM/2012

• Counselvise Citation: 650419914 RSA 2012
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Next Hearing Date: 07-06-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 25-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Transfer pricing; Business expenditure; Double taxation relief; International transaction; Advance ruling
• Section: 11; 143(3); 5(2)

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI . , , ! ! ! ! '# $% '# $% '# $% '# $% , ,, , & & & & ' ' ' ' BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 4203/MUM./2012 ( &) * !+* / ASSESSMENT YEAR : 200708 ) . / ITA NO. 6504/MUM./2012 ( &) * !+* / ASSESSMENT YEAR : 200809 ) TEMASEK HOLDINGS ADVISORS (I) P. LTD. 12, 3 NORTH AVENUE, MAKER MAXITY BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI 400 020 .. ,- / APPELLANT ) V/S DY. COMMISSIONER OF INCOME TAX CIRCLE3(3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... ./,- / RESPONDENT , ./ PERMANENT ACCOUNT NUMBER AACCM4000H 1! 2 3 / ASSESSEE BY : MR. PORUS KAKA A/W MR. DIWESH CHAWLA &) *4# 2 3 / REVENUE BY : MR. AJIT KUMAR JAIN MR. MAHESH KUMAR )! 2 # / DATE OF HEARING 05.06.2013 $ 5+ 2 # / DATE OF ORDER 30.08.2013 $ $ $ $ / ORDER '# $% '# $% '# $% '# $% , ,, , & & & & 6 6 6 6 / PER AMIT SHUKLA, J.M. THE AFORESAID APPEALS HAVE BEEN PREFERRED BY THE AS SESSEE FOR THE ASSESSMENT YEAR 200708, WHEREIN THE ASSESSEE HAS C HALLENGED THE ORDER TEMASEK HOLDINGS ADVISORS (I) P. LTD. 2 DATED 23 RD FEBRUARY 2012, PASSED BY THE LEARNED COMMISSIONER (APPEALS) VII, MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED U NDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) AND FOR THE ASSESSMENT YEAR 200809, WHEREIN THE ASSESSEE HAS CHALLENGED THE FI NAL ASSESSMENT ORDER PASSED IN PURSUANCE OF DIRECTIONS OF THE DISPUTES R ESOLUTION PANELII, MUMBAI, (DRP), AS CONTAINED IN ITS ORDER DATED 29 TH JULY 2012. SINCE THE ISSUES RAISED BY THE ASSESSEE IN BOTH THE APPEALS A RE COMMON, THEREFORE, AS A MATTER OF CONVENIENCE, THESE APPEALS WERE HEARD T OGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. WE FIRST PROCEED TO DISPOSE OFF THE ASSESSEES APPEAL IN ITA NO.4203/MUM./ 2012 , FOR THE ASSESSMENT YEAR 200708. 2. THE MAIN ISSUE INVOLVED IN THIS APPEAL, RELATES TO DISALLOWANCE OF EXPENDITURE U/S 40 (A) (IA) FOR SUMS AGGREGATING TO ` 3,93,03,905, CLAIMED BY THE ASSESSEE TOWARDS REIMBURSEMENT OF COST OF SA LARY AND OTHER EXPENSES MADE BY THE ASSESSEE TO ITS HOLDING COMPANY AT SING APORE. 3. FACTS IN BRIEF, AS CULLED OUT FROM THE MATERIAL ON RECORD AND THE ARGUMENTS ADVANCED BY THE PARTIES ARE THAT THE ASSE SSEE, TEMASEK HOLDINGS ADVISORS INDIA PVT. LTD. (FOR SHORT THAIPL ), IS WHOLLY OWNED (100%) SUBSIDIARY OF TEMASEK HOLDING PTE. LTD. (FOR SHORT THPL ), WHICH IS AN ASIA INVESTMENT FIRM BASED AT SINGAPORE. THE ASSESSEE RE NDERS INVESTMENT ADVISORY SERVICES TO THPL, SINGAPORE, WHICH INCLUDE S IDENTIFYING AND ANALYZING POTENTIAL INVESTMENT PARTICULARS IN INDIA , EVALUATING POLITICAL AND TEMASEK HOLDINGS ADVISORS (I) P. LTD. 3 ECONOMIC SCENARIO FOR THE INVESTMENT PURPOSE IN IND IA AND MONITORING AND MAKING RECOMMENDATION TO THPL IN RESPECT OF SPECIFI ED INVESTMENT IN INDIA, SPECIFICALLY FOR UNLISTED COMPANIES. ALL THESE SERV ICES ARE PROVIDED BY THE ASSESSEE COMPANY TO THE SINGAPORE COMPANY AND NOT V ICEVERSA. FOR RENDERING THESE SERVICES, THE SINGAPORE COMPANY IS PAYING MARKUP OF 21% , BESIDES REIMBURSEMENT OF CERTAIN EXPENSES ON ACTUAL BASIS. DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAS RECEIVED S UM OF ` 19,99,69,794, AS 21% MARKUP FOR RENDERING INVESTMENT ADVISORY SERVI CES AND REIMBURSEMENT OF COST AGGREGATING TO RS. 3,93,03,905, THE BREAKUP OF WHICH IS GIVEN HEREUNDER: SR. NO. PARTICULARS AMOUNT ( ` ) 1. SALARIES OF SECONDED EMPLOYEES 3,42,08,892 2. EXPENSES OF SECONDED EMPLOYEES (I.E., MEALS, TRAVELLING, ACCOMMODATION, TRAINING, ETC.) 10,14,273 3. BUSINESS PROMOTIONS, INFORMATION TECHNOLOGY EXPENSES, PROFESSIONAL FEES, ETC. 40,80,740 3,93,03,905 4. SINCE, THE AFORESAID PAYMENTS WERE IN THE NATURE O F INTERNATIONAL TRANSACTION, THE ASSESSING OFFICER, HAD REFERRED TH E MATTER TO THE TRANSFER PRICING OFFICER (FOR SHORT TPO ), UNDER SECTION 92CA(1), WHEREIN THE TPO, AFTER ANALYZING THE TRANSFER PRICING STUDY REPORT S UBMITTED BY THE ASSESSEE AND AFTER CALLING FOR THE VARIOUS DETAILS AND CLARI FICATIONS INCLUDING THAT OF THE DETAILS AND NATURE OF REIMBURSEMENT OF EXPENDITURE, ACCEPTED THE ARMS TEMASEK HOLDINGS ADVISORS (I) P. LTD. 4 LENGTH PRICE (FOR SHORT ALP ) OF THE SAID TRANSACTIONS, VIDE ORDER DATED 27 TH OCTOBER 2010, PASSED UNDER SECTION 92CA(3). THE LEA RNED COUNSEL FOR THE ASSESSEE HAS POINTED OUT BEFORE US, THE RELEVANT PO RTIONS OF TRANSFER PRICING STUDY REPORT, SPECIFICALLY WITH REGARD TO REIMBURSE MENT OF EXPENSES AND ALSO VARIOUS LETTERS ALONG WITH THE REQUISITE DETAILS FU RNISHED BEFORE THE TPO, TO SHOW THAT ALL THE DETAILS RELATING TO THESE TRANSAC TIONS WERE FURNISHED BEFORE THE TPO, WHO, AFTER DETAIL SCRUTINY, HAD ACCEPTED T HE TRANSACTION AT ALP. 5. IT WAS WITH REGARD TO THE REIMBURSEMENT OF COST AGG REGATING TO ` 3,93,03,905, PAID TO THE SINGAPORE COMPANY BY THE A SSESSEE, THE MAJOR PORTION OF WHICH INCLUDED SALARIES OF SECONDED EMPL OYEES OF 3,42,08,892, THE ASSESSING OFFICER OBSERVED THAT THESE PAYMENTS HAVE BEEN MADE, WITHOUT DEDUCTING TDS UNDER SECTION 195 OF THE ACT. IN RESP ONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER, IT WAS SUBM ITTED BY THE ASSESSEE THAT, THPL HAS SECONDED TWO EMPLOYEES NAMELY, MR. ANUJ MA HESHWARI AND MR. MANISH KEJARIWAL, TO THE ASSESSEE TO ASSIST THE ASS ESSEE TO RENDER INVESTMENT ADVISORY SERVICES TO THPL. SINCE, THE SA ID EMPLOYEES WERE ON THE PAY ROLL OF THPL, THEREFORE, THE SALARY OF THESE EM PLOYEES WAS PAID BY THEM. THE THPL, IN TURN, RECHARGES THE SALARY TO THE ASSE SSEE WHICH IS TO BE REIMBURSED BY THE ASSESSEE. AS THE SALARY WAS PAID TO THESE EMPLOYEES IN RESPECT OF SERVICES RENDERED BY THEM IN INDIA, THE OVERSEAS COMPANY THPL HAS DEDUCTED TAXES THEREON IN ACCORDANCE WITH THE P ROVISIONS OF SECTION 192 AND DEPOSITED THE SAME TO THE INDIAN GOVERNMENT TRE ASURY. BESIDES THIS, THERE WERE CERTAIN OTHER EXPENSES INCURRED ON BEHAL F OF THE ASSESSEE BY THE TEMASEK HOLDINGS ADVISORS (I) P. LTD. 5 THPL, THE SAME WERE ALSO REIMBURSED BY THE ASSESSEE . THESE EXPENSES WERE IN THE NATURE OF EXPENDITURE INCURRED BY THE SECOND ED EMPLOYEES, BUSINESS PROMOTION, PROFESSIONAL FEES AND INFORMATION TECHNO LOGY, ETC. IN SUPPORT OF THIS CONTENTION, VARIOUS DOCUMENTS LIKE (I) COPIE S OF SECONDMENT AGREEMENT ENTERED BETWEEN THE ASSESSEE AND THE THPL FOR THE DEPUTATION OF THE EMPLOYEES; (II) REPRESENTATION LETTER FROM THE ASSESSEE THAT SERVICES HAVE BEEN RENDERED BY THE DEPUTED / SECONDED EMPLOY EE TO THE ASSESSEE, ONLY (III) AFFIDAVIT FROM THE DEPUTED / SEDONDED EM PLOYEES STATING THAT THEY HAVE PROVIDED SERVICES TO THE ASSESSEE COMPANY IN I NDIA FOR THEIR INDIAN OPERATIONS, DURING THE ASSESSMENT YEAR 200708; AND (IV) A COPY OF FORM 16 AND FORM12BA IN RESPECT OF THESE TWO EMPLOYEES ISSUED BY THE THPL. BASED ON THESE DOCUMENTS, IT WAS SUBMITTED THAT THE TAX HAS ALREADY BEEN DEDUCTED BY THE THPL UNDER SECTION 192, THE SAME SH OULD NOT BE SUBJECT TO DOUBLE TAXATION I.E., WHEN THE REIMBURSEMENT IS MAD E BY THE ASSESSEE TO THPL. BESIDES THIS, IT WAS ALSO SUBMITTED THAT THE PROVISIONS OF SECTION 195 WILL NOT APPLY IN THIS CASE FOR THE REASON THAT THE SUM REIMBURSED BY THE ASSESSEE TO THE THPL IS NOT IN THE NATURE OF INCOME CHARGEABLE UNDER THE PROVISIONS OF THE ACT AND IT IS MAINLY A REIMBURSEM ENT OF EXPENSES AND THE SAME CANNOT BE SUBJECT TO TDS PROVISIONS U/S 195. I N SUPPORT OF THIS CONTENTION, A CATENA OF CASE LAWS WERE ALSO RELIED UPON WHICH HAS BEEN ELABORATED IN THE LETTER DATED 1 ST SEPTEMBER 2010, FILED BEFORE THE ASSESSING OFFICER. VARIOUS REPLIES OF THE ASSESSEE HAVE ALSO BEEN SUMMARIZED BY THE ASSESSING OFFICER AT PAGE3 AND 4 OF THE ASSESSMENT ORDER. TEMASEK HOLDINGS ADVISORS (I) P. LTD. 6 6. THE ASSESSING OFFICER, REJECTED THE ENTIRE CONTENTI ON RAISED BY THE ASSESSEE ON THE GROUND THAT THE SECONDMENT AGREEMEN T BETWEEN THE ASSESSEE COMPANY AND THE PARENT COMPANY IN RESPECT OF THE TWO EMPLOYEES NAMELY MR. ANUJ MAHESHWARI AND MR. MANISH KEJARIWAL , ARE UNREGISTERED AND DATE AND PLACE WHERE THESE AGREEMENTS WERE MADE HAS NOT BEEN MENTIONED. ON THIS PREMISE, HE CAME TO THE CONCLUSION THAT THE SE AGREEMENTS ARE COLOURABLE DEVICE WITH AN INTENTION OF AVOIDING TAX LIABILITIES ON THE EXPENSES WHICH ARE CLAIMED TO BE REIMBURSED. THEREAFTER, HE ANALYSED THE AGREEMENT AND DEDUCED THE FOLLOWING FACTS: 4.6 A CAREFUL PERUSAL OF AGREEMENTS REVEAL FOLLOWI NG FACTS: A) MANISH KEJARIWAL, WHO IS REFERRED TO AS SECONDED EM PLOYEE, IS, IN FACT, A MANAGING DIRECTOR AND COUNTRY HEAD OF AS SESSEE COMPANY AND SHALL PROVIDE SERVICE IN INDIA FOR A PERIOD OF THREE YEARS. HE IS A WHOLE TIME DIRECTOR AND RESPONSIBLE FOR DAY TO DAY AFFAIRS OF MANAGEMENT AND CONDUCT OF BUSINESS OF ASSESSEE COMP ANY. THE STATUTORY REPORTS INCLUDING ANNUAL REPORTS, DOCUMEN TS ETC. WERE SIGNED BY MR. MANISH KEJARIWAL AS A SENIOR MANAGING DIRECT OR OF THE COMPANY. B) ASSESSEE COMPANY IS RESPONSIBLE FOR PROVIDING ALL L OCAL BENEFITS AMENITIES SUCH AS HOUSING, CONVEYANCE TO SAID EMPLO YEES AND SHALL WITHHOLD TAXES IN ACCORDANCE WITH INDIAN INCOME TAX LAWS. AGREEMENT IS REQUIRED TO BE APPROVED FROM APPROPRIATE AUTHORI TIES TO THE GOVT. OF INDIA BEFORE PAYMENTS UNDER THE TERMS OF AGREEMENT; HOWEVER, NO APPROVAL FROM GOVT. OF INDIA IS ACCORDED TO THE ASS ESSEE COMPANY. FURTHER, NO TAX ON INCOME CHARGEABLE TO TAX IS WITH HELD AT THE TIME OF MAKING PAYMENT BY THE ASSESSEE COMPANY. C) THE RELATIONSHIP OF THPL AND ASSESSEE COMPANY IS TH AT OF INDEPENDENT CONTRACTORS AND AGREEMENT SHALL BE GOVE RNED IN ACCORDANCE WITH THE LAWS OF INDIA. ACCORDINGLY, AMO UNT WHICH IS REIMBURSED IS NOTHING BUT A CONTRACTUAL PAYMENT. D) THE ADVICE TO BE RAISED BY THPL ON ASSESSEE COMPANY IS ON MONTHLY BASIS SUCH AS MONTHLY REMUNERATION OR SALAR Y FOR SERVICES PROVIDED BY MANAGING DIRECTOR AND OTHER EMPLOYEES I N INDIA. THE ASSESSEE COMPANY IS BENEFICIARY OF SUCH EXPENDITURE AS IT HAS INHERENT CHARACTER OF SALARY. FURTHER, BY EXPENDING SAID AMO UNT, ASSESSEE HAS TEMASEK HOLDINGS ADVISORS (I) P. LTD. 7 EARNED ITS BUSINESS INCOME AND ACCORDINGLY THE SAME IS BUSINESS EXPENDITURE OF THE ASSESSEE COMPANY. E) BY PAYING AMOUNT ON INFORMATION TECHNOLOGY, PROFESS IONAL FEES, BUSINESS PROMOTION, ACCOMMODATION, TRAVELING, ETC. ASSESSEE COMPANY GETS BENEFITS FOR ITS BUSINESS IN INDIA AS SERVICES BY THE EMPLOYEES ARE PROVIDED TO ASSESSEE COMPANY IN INDIA. IT APPEARS T HAT ASSESSEE COMPANY IS MAKING THE PAYMENTS AS MENTIONED IN THE ABOVE TABLE THROUGH THPL WITH THE INTENTION OF SURPASSING AND A VOIDING THE PROVISIONS OF INCOME TAX ACT. BY SUCH PROVISIONS OF THE ACT, THE ASSESSEE COMPANY ITSELF IS BOUND TO DEDUCT TAXES AT SOURCES AND DEPOSIT THE SAME IN GOVT. TREASURY. 7. BASED ON HIS AFORESAID CONCLUSION, HE HELD THAT THE SAID PAYMENTS MADE BY THE ASSESSEE, CLEARLY ATTRACTS PROVISIONS O F CHAPTERXVIIB OF THE ACT AND ADMITTEDLY THE ASSESSEE HAS NEITHER DEDUCTE D THE TAX NOR DEPOSITED THE SAME TO THE GOVERNMENT TREASURY; THEREFORE, ENT IRE EXPENDITURE CLAIMED ON THESE REIMBURSEMENT OF EXPENSES HAS TO BE DISALL OWED U/S 40(A)(IA). HE ALSO PLACED RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN KANCHAN GANGA SEA FOODS V/S CIT, [2010] 325 ITR 540 (SC), WHEREIN IT WAS HELD THAT NONRESIDENT COMPANY HAVING RECEIVED THE CHARTER FEE OF FISHING VESSELS FROM THE ASSESSEE IN THE SHAPE OF 85% OF TH E FISH CATCH IN INDIA AS PER THE TERMS AND CONDITIONS OF THE AGREEMENT BETWE EN THEM, THE INCOME EARNED BY THE NONRESIDENT COMPANY WAS CHARGEABLE T O TAX UNDER SECTION 5(2) AND, THEREFORE, THE ASSESSEE WAS LIABLE TO DED UCT TAX UNDER SECTION 195 ON THE PAYMENT MADE TO THAT COMPANY. ACCORDINGLY, H E HELD THAT THE AMOUNT OF ` 3,93,03,905, IS DISALLOWABLE UNDER SECTION 40(A)(I A). 8. BEFORE THE LEARNED COMMISSIONER (APPEALS), THE ASSE SSEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER W HICH HAVE BEEN INCORPORATED BY THE LEARNED COMMISSIONER (APPEALS) FROM PAGE4 TO 13 OF TEMASEK HOLDINGS ADVISORS (I) P. LTD. 8 THE APPELLATE ORDER. BESIDES THIS, IT WAS SUBMITTED THAT THERE IS NO REQUIREMENT UNDER THE LAW OR UNDER ANY OTHER PROVIS ION THAT SECONDMENT AGREEMENT REQUIRES ANY APPROVAL FROM THE GOVERNMENT OF INDIA. FURTHER, EXECUTED COPY OF THE SECONDMENT AGREEMENT (WHICH WA S FILED BEFORE THE ASSESSING OFFICER), CONTAINING FULL SIGNATURES WAS ALSO FILED BEFORE THE LEARNED COMMISSIONER (APPEALS). THE OTHER IMPORTANT FACTS W HICH WERE HIGHLIGHTED BEFORE THE LEARNED COMMISSIONER (APPEALS) WERE WITH REGARD TO THE NATURE OF SERVICES RENDERED BY THE SECONDED EMPLOYEES IN INDI A, ALONG WITH REPRESENTATION LETTER FROM THE ASSESSEE FOR THE SER VICE RENDERED BY THE EMPLOYEES TO THE ASSESSEES AND THE AFFIDAVITS OF TH E TWO EMPLOYEES CONFIRMING THESE SERVICES PROVIDED. THE FACT THAT T HE THPL HAS ALREADY DEDUCTED THE TDS ON THE SALARY PAID TO THE SECONDED EMPLOYEES UNDER SECTION 192 WAS STRONGLY EMPHASIZED. IN SUPPORT OF THE SAME, COPY OF FORM 16 AND FORM12A ISSUED TO THE SECONDED EMPLOYEES WA S ALSO FURNISHED. THIS FACT HAS BEEN NOTED BY THE LEARNED COMMISSIONER (AP PEALS) AT PAGE5 / PARA1.12. POINT BY POINT REBUTTAL OF ASSESSING OFF ICERS FINDING WAS SUBMITTED BEFORE THE LEARNED COMMISSIONER (APPEALS) AND ALSO THE FACTS EMERGING FROM THE SECONDED AGREEMENT WHICH WERE E LUCIDATED AS UNDER: SUPERVISION, DIRECTION AND CONTROL OF THE DEPUTED E MPLOYEES IS WITH THE APPELLANTS BOARD OF DIRECTORS (REFER PARA 2.2. OF PAGE I OF THE AGREEMENT). THPL DOES NOT BEAR ANY RESPONSIBILITY OR RISK FOR T HE RESULTS PRODUCED BY THE WORK OF THE DEPUTED EMPLOYEES (REFER PARA 3 ON PAGE 2 OF THE AGREEMENT). THE SALARY COST OF THE DEPUTED EMPLOYEES IS BORNE B Y THE APPELLANT AND THE COST OF THE DEPUTED EMPLOYEES IS CHARGED BACK BY TH PL TO THE APPELLANT AT ACTUAL BASIS WITHOUT ANY MARKUP (REFER PARA 2.1 OF PAGE 2 OF THE AGREEMENT). TEMASEK HOLDINGS ADVISORS (I) P. LTD. 9 THE SALARY COST OF THE DEPUTED EMPLOYEES IS BORNE B Y THE APPELLANT AND THE COST OF THE DEPUTED EMPLOYEES IS CHARGED BACK BY TH PL TO THE APPELLANT AT ACTUAL BASIS WITHOUT ANY MARKUP (REFER PARE 2.1 OF PAGE 2 OF THE AGREEMENT). THE DECISION OF THE HON'BLE SUPREME COURT IN KANCHA N GANGA SEA FOODS (SUPRA) WAS ALSO ANALYSED AND DISTINGUISHED B ESIDES RELYING UPON VARIOUS CASE LAWS, WHICH HAS BEEN INCORPORATED BY T HE CIT(A) ALSO. 9. THE LEARNED COMMISSIONER (APPEALS) TOOK NOTE OF THE FOLLOWING DOCUMENTS WHICH WERE FILED BY THE ASSESSEE FOR ARRI VING AT HIS CONCLUSION: (I) LETTER OF APPOINTMENT OF MR. ANUJ MAHESHWARI AND MR . MANISH KEJARIWAL, BY THE SINGAPORE COMPANY; (II) COPY OF SECONDMENT AGREEMENT OF BOTH THESE EMPLOYEE S; (III) COPY OF FORM16 WHEREIN TAX WAS DEDUCTED BY SINGAPO RE COMPANY UNDER SECTION 192, IN CASE OF BOTH THE SECO NDED EMPLOYEES; (IV) COPY OF AFFIDAVIT OF BOTH THE SECONDED EMPLOYEES FI LED BEFORE HIM; (V) COPY OF BANK ACCOUNT OF THE ASSESSEE COMPANY WITH D BS BANK FOR THE PERIOD FROM 1 ST OCTOBER 2007 TO 30 TH OCTOBER 2007, WHEREIN THE ENTIRE REMITTANCE OF ` 7,81,71,354 MADE TO SINGAPORE COMPANY WAS REFLECTED; AND TEMASEK HOLDINGS ADVISORS (I) P. LTD. 10 (VI) COPY OF 22 TAX INVOICES RAISED BY SINGAPORE COMPANY IN THE NAME OF THE ASSESSEE COMPANY; RELATING TO THESE EXPENDITURES. 10. FROM THESE DETAILS, THE LEARNED COMMISSIONER ( APPEALS) DEDUCED VARIOUS INFERENCES, WHETHER RELEVANT OR NOT, THE SA ME SHALL BE DISCUSSED ABOVE. (I) FIRST OF ALL, HE NOTED THE DATES OF LETTER OF APPOI NTMENT GIVEN TO THESE EMPLOYEES AND THE DATE OF APPOINTMEN T MENTIONED THEREIN AND THE ACTUAL DATE OF JOINING. F ROM THESE DETAILS, WHAT INFERENCE HE WANTED TO DRAW HAS NOT B EEN CLARIFIED AT ALL IN THE APPELLATE ORDER. (II) HE, FURTHER NOTED THAT THE SECONDMENT AGREEMENT SUGGESTED THAT THE SINGAPORE COMPANY WILL RAISE ADV ICE ON THE ASSESSEE FOR THE PAYMENT TO BE MADE BY THE INDIAN C OMPANY TO THE SINGAPORE COMPANY AND THE SAME SHALL BE RAIS ED EVERY MONTH I.E., ADVICE WOULD BE RAISED EVERY MONTH TO W HICH THE ASSESSEE HAS TO MAKE THE PAYMENT. SUCH A CONDITION AS ENUMERATED IN PARA2.1 TO 2.3 OF THE AGREEMENT WAS NOT ADHERED TO AS NO COMPLIANCE WAS MADE BY THE ASSESSE E ON THESE CONDITIONS. TEMASEK HOLDINGS ADVISORS (I) P. LTD. 11 (III) THE SECONDMENT AGREEMENT NEITHER HAS DATES NOR SIGNATURE OF THE PERSONS WHO HAVE SIGNED, NOR HAVE DEPICTED THE PLACE WHERE SUCH AGREEMENT WAS ENTERED INTO; (IV) IN SOME OF THE TAX INVOICES WHICH WAS RAISED BY THE SINGAPORE COMPANY FROM THE MONTH OF JUNE 2006 TO MA RCH 2007, TAX INVOICE HAS BEEN DRAWN FOR FUNDING FOR TH E MONTH OF NOVEMBER 2006; (V) NONE OF THE TAX INVOICES SHOWS ANY STAMP OF RECEIPT OF THE ASSESSEE COMPANY TO DEPICT THAT WHEN AND BY WHA T MODE THE SAME WAS RECEIVED TO THE ASSESSEE; (VI) SIGNATORY PERSONS OF SINGAPORE COMPANY ARE NOT KNOW N AND WHO HAS SIGNED, AS IN SOME OF THE INVOICES, SAM E PERSON HAS SIGNED IN OTHER INVOICES THE NAME AND DESIGNAT ION OF THE PERSON ARE NOT EVIDENT; (VII) NONE OF THE TAX INVOICE SHOWS THAT THESE DETAILS WE RE RAISED FOR SERVICES RENDERED BY BOTH THE SECONDED E MPLOYEES. SOME OF THE INVOICES HAVE NOT BEEN FILED; (VIII) HE ALSO MENTIONED SOME INVOICES OF VARIOUS DATES WH ICH HAVE NOT BEEN FILED, OTHER DETAILS OF DATE OF REMIT TANCE, DETAILS OF FORM16 ALONG WITH BSR CODE HAS BEEN ELABORATED BY HIM. TEMASEK HOLDINGS ADVISORS (I) P. LTD. 12 11. HOWEVER, FROM THESE NOTES ESPECIALLY WHICH HAS BEEN ELABORATED BY THE LEARNED COMMISSIONER (APPEALS) FROM POINT NO.IX TO XV AS GIVEN IN PARA4.6 OF THE APPELLATE ORDER, WHAT INFERENCE HE WANTED TO DRAW HAS NOT BEEN MADE CLEAR. APPARENTLY, IT SEEMS THAT HE WANTE D TO DEMONSTRATE THAT MONTHWISE PAYMENT HAS NOT BEEN MADE BY THE ASSESSEE AS PER THE TAX INVOICES RAISED BY THE SINGAPORE COMPANY AND THE PA YMENTS HAVE BEEN MADE ON LATER DATES. ANOTHER MOST IMPORTANT FACT WH ICH HAS BEEN NOTED BY HIM IS THE DISCREPANCY IN THE FIGURE OF DEBTORS AS ON 31 ST MARCH 2006, 31 ST MARCH 2007 AND 31 ST MARCH 2008. FROM THESE FACTS, HE HAS NOTED CERTAIN INFERENCES WHICH HAS BEEN ELABORATED IN PARA4.7 TO PARA4.11 OF THE APPELLATE ORDER. THE SUM AND SUBSTANCE OF HIS INFER ENCE DRAWN FOR TAKING ADVERSE CONCLUSION AGAINST THE ASSESSEE AS ELABORAT ED INPARA 4.7 ARE (I) THAT THE ASSESSEE HAS FAILED TO PROVE OR SUBSTANTIA TE THAT THE AFORESAID PAYMENTS ARE ACTUALLY REIMBURSEMENT O F EXPENSES; (II) THAT THE MONTHLY PAYMENTS HAVE NOT BEEN DONE IN ACCORDANCE WITH THE TAX INVOICE RAISED FROM TIME TO TIME; (III) THE MAJOR THRUST HAS BEEN GIVEN BY THE LEARNED COMMISSIONER (APPEALS) ON THE DISCREPANCY IN THE FI GURES UNDER THE HEAD DEBTORS, WHICH AS PER THE AUDITED BALANCE SHEET AS ON 31 ST MARCH 2007, THPL SINGAPORE HAS BEEN SHOWN DEBTOR OF ` 8,22,01,415, WHEREAS AS PER THE TEMASEK HOLDINGS ADVISORS (I) P. LTD. 13 AUDITED BALANCE SHEET AS ON 31 ST MARCH 2008, THPL HAS BEEN SHOWN DEBTOR OF ` 14,48,17,685. PAYMENT MADE TO RELATED PARTIES COVERED UNDER SECTION 40(A)(2)(B) H AS BEEN SHOWN TO HAVE BEEN MADE TO THPL SINGAPORE OF ` 99,20,022, AS ON 31 ST MARCH 2006, ` 8,22,01,415 AS ON 31 ST MARCH 2007 AND ` 6,38,77,792 AS ON 31 ST MARCH 2008. THUS, THE TOTAL PAYMENT MADE ON ACCOUNT OF REIMBURSEMENT EXPENSES FROM THE FINANCIAL YEAR 2005 -06 TO 2007-08, HAS BEEN SHOWN AT ` 15,59,99,229; AND (IV) THE ASSESSEE HAS FAILED TO GIVE ANY DOCUMENTARY EVI DENCE OR BASIS OF WORKING OUT SUCH LIABILITY OF REIMBURSE MENT OF EXPENSES TOWARDS THEIR PARENT COMPANY THPL. 12. HE AGAIN REITERATED THE DISCREPANCY IN THE BALANCE SHEET AS ON 31 ST MARCH 2007 AND 31 ST MARCH 2008 REGARDING DEBTORS AND CURRENT LIABILITI ES AND POINT OUT THAT THERE IS A DIFFERENCE OF ` 2,62,16,270 UNDER THE DEBTORS AND ` 6,46,46,761 UNDER THE HEAD CURRENT LIABILITIES WHIC H REMAINED UNEXPLAINED. FROM THIS, HE DEDUCED THAT THERE HAS BEEN ALTERATIO N OF FIGURES AND WAS DONE SOLELY WITH THE INTENTION TO CREATE PREDATED LIABI LITY WHICH WAS NOT THERE ON 31 ST MARCH 2007. 13. THE AFORESAID ALLEGED DISCREPANCY HAS BEEN NOTED BY HIM TIME AND AGAIN IN THIS ORDER. FROM THE DISCREPANCY OF DATE O F APPOINTMENT AND DATE OF JOINING OF THE SECONDED EMPLOYEES, HE INFERRED THAT THEIR CONSENT IS AT THE TEMASEK HOLDINGS ADVISORS (I) P. LTD. 14 DISPOSAL OF THE ASSESSEE COMPANY AND BOTH THESE PER SONS WERE WORKING IN INDIA AND, THEREFORE, ANY SUCH KIND OF LIABILITY IN CURRED ON BEHALF OF THESE EMPLOYEES, THE SAME WAS TO BE BORNE BY THE ASSESSEE COMPANY AND IF ANY REIMBURSEMENT WAS TO BE BORNE BY THE ASSESSEE, THEN THE SAME SHOULD HAVE BEEN DONE ON MONTHLY BASIS WHICH HAS NOT BEEN DONE AND HELD THAT THERE IS NO JUSTIFICATION OR EVIDENCE FOR DEFERRING THE PAYM ENT. ON THIS BASIS, HE HELD THAT THERE IS NO JUSTIFICATION FOR SUCH QUANTIFICAT ION OF REIMBURSEMENT OF EXPENSES BY THE ASSESSEE COMPANY AND ALSO THAT BOTH THESE EMPLOYEES WERE WORKING IN INDIA AND THERE WAS NO NECESSITY TO INCU R SUCH EXPENSES BY THE PARENT COMPANY AND IN ANY CASE DEFERMENT OF REIMBUR SEMENT OF EXPENSES CANNOT BE JUSTIFIED. ON THESE BASIS, HE HAS TRIED T O JUSTIFY THE ASSESSING OFFICERS ACTION OF INVOKING THE SECTION 40(A)(IA) AND CONFIRM THE DISALLOWANCE. HE HAS FURTHER PLACED RELIANCE ON THE FOLLOWING DECISIONS: I) DANFOSS INDUSTRIES PVT. LTD. V/S CIT, AAR NO.606/20 02; AND II) AT&S INDIA PVT. LTD. V/S CIT, AAR NO.670/2005. IN BOTH THE AFORESAID DECISIONS, REFERENCE H AS BEEN MADE TO THE HON'BLE SUPREME COURT DECISION IN TRANSMISSION CORPORATION OF A.P. LTD. V/S CIT, [1999] 239 ITR 587 (SC). THE AAR RULING IN CASE OF VERIZON DATA SERVI CES INDIA PVT. LTD. V/S CIT, AAR NO.865/2010, WAS HEAVILY RELIED UPON HIM. TEMASEK HOLDINGS ADVISORS (I) P. LTD. 15 IN HIS CONCLUSION, HE HAS ALSO JUSTIFIED THE ASSESSING OFFICERS RELIANCE FOR FOLLOWING THE DECISION OF THE HON'BLE SUPREME C OURT IN KANCHANGANGA SEA FOODS (SUPRA). 14. BEFORE US, THE LEARNED SR. COUNSEL, MR. PORUS KAKA, AFTER REFERRING TO THE VARIOUS FACTS AND CONTENTIONS RAISED BEFORE THE AUTHORITIES BELOW, ALONG WITH THE MATERIAL PLACED ON RECORD, SUBMITTED THAT IT IS NOT A CASE WHERE SINGAPORE COMPANY HAS RENDERED ANY SERVICES TO INDI A FOR WHICH PAYMENT HAS BEEN RECEIVED BY THE INDIAN SUBSIDIARY. HERE, T HE SERVICES HAS BEEN RENDERED BY THE INDIAN COMPANY TO THE SINGAPORE COM PANY FOR WHICH IT HAS RECEIVED PAYMENT WITH A MARKUP OF 21% ALONG WITH T HE COST. THE MAIN ISSUE HERE IS THAT THE TWO SECONDED EMPLOYEES WHO A RE THE EMPLOYEES OF THE SINGAPORE COMPANY HAVE BEEN SECONDED TO INDIAN COMP ANY ON THE TERMS AND CONDITIONS MENTIONED IN THE SECONDMENT AGREEMEN T. THESE TWO EMPLOYEES ARE WORKING EXCLUSIVELY FOR THE INDIAN CO MPANY UNDER THE SUPERVISION AND CONTROL OF THE BOARD OF INDIAN COMP ANY. BEING EMPLOYEE OF THE SINGAPORE COMPANY, THE SALARY AND THE REIMBURSE MENT OF THE EXPENSES HAS BEEN PAID BY THE SINGAPORE COMPANY FOR WHICH IN VOICES HAS BEEN RAISED FOR BEING REIMBURSED BY THE INDIAN COMPANY. THE LEA RNED COMMISSIONER (APPEALS) HAS TAKEN NOTE OF VARIOUS DETAILS, MOST O F THEM ARE WHOLLY IRRELEVANT FOR THE PURPOSE OF ADJUDICATION OF THIS ISSUE AND THE MOST IMPORTANT POINT WHICH BOTH THE AUTHORITIES HAVE MIS SED THAT THE SINGAPORE COMPANY WHICH HAS PAID SALARY, HAD DEDUCTED THE TDS ON THE GROSS SALARY U/S 192 AND HAS DEPOSITED THE TAX INTO THE GOVERNME NT OF INDIA ACCOUNT. TEMASEK HOLDINGS ADVISORS (I) P. LTD. 16 THIS FACT, THOUGH NOTED BY THE ASSESSING OFFICER AN D BY THE COMMISSIONER (APPEALS) BUT HAVE NOT GIVEN ANY COGNIZANCE TO THIS FACTS. ONCE THE TDS HAS BEEN DEDUCTED ON THE SALARY, THEN THERE IS NO REQUI REMENT UNDER THE LAW TO DEDUCT TDS AGAIN ON ACCOUNT OF REIMBURSEMENT OF SUC H SALARY. HE DREW OUR ATTENTION TO THE COPY OF FORM16 ISSUED IN CASE OF ANUJ MAHESHWARI AND MR. MANISH KEJARIWAL WHICH HAS BEEN PLACED IN THE PAPER BOOK AT PAGE13 TO 15 AND 26 TO 28 RESPECTIVELY. HE ALSO DREW OUR ATTENTI ON TO THE VARIOUS SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AS WE LL AS THE LEARNED COMMISSIONER (APPEALS) REITERATING THESE FACTS. AS REGARDS VARIOUS REMARKS MADE BY THE LEARNED COMMISSIONER (APPEALS), THAT TH ERE IS NO MENTION OF THE DATE IN THE SECONDMENT AGREEMENT HE POINTED TH AT THE OPENING LINE OF THE AGREEMENT ITSELF PROVIDES THE DATE OF THE AGREE MENT WHICH MEANS THAT THE AGREEMENT HAS BEEN ENTERED ON THE SAID DATE ITS ELF. FOR E.G., IN CASE OF ANUJ MAHESHWARI, THE SECONDMENT AGREEMENT WAS DATED 7 TH SEPTEMBER 2006, AND IN CASE OF MR. MANISH KEJARIWAL, IT WAS E NTERED ON 1 ST MAY 2004. SECONDLY, BEFORE THE COMMISSIONER (APPEALS), A COPY OF DULY SIGNED AGREEMENT WAS FILED WHICH HAS BEEN NOTED BY THE LEA RNED COMMISSIONER (APPEALS) ALSO, ALONG WITH THE AFFIDAVIT OF THESE T WO EMPLOYEES. THUS, IT CANNOT BE HELD THAT THE SECONDMENT AGREEMENT IS SHA M OR NOT GENUINE. REGARDING THE ASSESSING OFFICERS ALLEGATION THAT N O PERMISSION HAS BEEN OBTAINED FROM THE GOVERNMENT OF INDIA FOR THE SECON DMENT AGREEMENT, HE SUBMITTED THAT THERE IS NO SUCH PROVISION IN THE LA W OR ELSEWHERE FOR GETTING ANY APPROVAL OF THE AGREEMENT ENTERED INTO BETWEEN TWO PARTIES FOR TRANSFER OF ITS EMPLOYEES. INSOFAR AS THE DATE OF APPOINTMEN T LETTER AND THE DATE OF TEMASEK HOLDINGS ADVISORS (I) P. LTD. 17 JOINING ARE CONCERNED, HE SUBMITTED THAT THERE IS N O DISCREPANCY AND WHAT INFERENCE THE LEARNED COMMISSIONER (APPEALS) WANTS TO DRAW, HAS NOT BEEN MADE CLEAR AND IN ANY CASE IT HAS NO BEARING ON THE ISSUE INVOLVED HERE. REGARDING DISCREPANCY IN THE FIGURES OF DEBTORS AND CURRENT LIABILITY IN THE AUDITED BALANCE SHEET AS ON 31 ST MARCH 2007 AND 31 ST MARCH 2008, HE POINTED OUT THAT IN FACT THERE IS NO DISCREPANCY AT ALL AND HE POINTED OUT TO RECONCILIATION GIVEN AT PAGE91 OF THE PAPER BOOK. BASED ON THIS RECONCILIATION STATEMENT, HE POINTED OUT THE RESPEC TIVE FIGURES IN BOTH THE BALANCE SHEETS AND SUBMITTED THAT THERE IS NO DISCR EPANCY AT ALL. IF SUCH RECONCILIATION IS TAKEN A NOTE OF, THEN THE ENTIRE BASIS OF THE COMMISSIONER (APPEALS)S CONCLUSION BECOMES NONEST. 15. DRAWING OUR ATTENTION TO THE SECONDMENT AGREEMENT, MR. PORUS KAKA SUBMITTED THAT AS PER THE TERMS OF THE AGREEMENT, THESE EMPLOYEES CONTINUED TO BE EMPLOYEES OF THE SINGAPORE COMPANY AND THEY WERE SECONDED TO INDIA FOR SUCH PERIOD OF TIME AS UNDERS TOOD BY THE PARTIES AND WERE UNDER THE SUPERVISION AND CONTROL OF THE BOARD OF DIRECTORS OF THE, INDIAN COMPANY. AS PER THE TERMS OF PAYMENT, INDIAN COMPANY WAS OBLIGED TO REIMBURSE THE SINGAPORE COMPANY, THE PORTION OF COMPENSATION AND OTHER BENEFITS INCURRED BY THE SINGAPORE COMPANY FROM TIM E TO TIME ON THE SECONDED EMPLOYEES. THERE WAS A SPECIFIC CONDITION IN CLAUSE 10, THAT, EITHER OF THE PARTY CAN TERMINATE THIS AGREEMENT OF THE EMPLOYEES. ONCE IT IS NOT DISPUTED THAT TWO PERSONS WERE SECONDED EMPLOYE ES AND THEY HAVE BEEN DEPUTED TO INDIA AS PER THE TERMS OF SECONDMENT AGR EEMENT, THEN THE TEMASEK HOLDINGS ADVISORS (I) P. LTD. 18 PAYMENT OF SALARY TO THEM AND REIMBURSEMENT MADE BY THE INDIAN COMPANY TO THE SINGAPORE COMPANY CANNOT BE DISPUTED. THE TA X ADVICE RAISED BY THE SINGAPORE COMPANY ALSO CORROBORATE THIS FACT. 16. NOW, THE ISSUE WHETHER THE REIMBURSEMENT OF SALARY AND OTHER EXPENSES OF THESE TWO EMPLOYEES CAN BE SUBJECT TO T DS UNDER SECTION 195, MR. PORUS KAKA SUBMITTED THAT FIRST OF ALL WHAT IS TAXABLE UNDER SECTION 195, SHOULD BE IN THE NATURE OF INCOME CHARGEABLE TO TAX UNDER THE ACT. THE REIMBURSEMENT OF SALARY CANNOT BE SUBJECTED TO TAX UNDER SECTION 195 AND SECONDLY, THESE EMPLOYEES HAVE NOT DONE ANY SERVICE S FOR THE SINGAPORE COMPANY AND THIS IS NOT EVEN THE ALLEGATION OF THE ASSESSING OFFICER AS WELL AS THE LEARNED COMMISSIONER (APPEALS), THAT THESE T WO EMPLOYEES HAVE DONE ANY SERVICES FOR THE SINGAPORE COMPANY. ONCE T HESE SERVICES OF THE SECONDED EMPLOYEES HAVE BEEN RENDERED IN INDIA FOR THE INDIAN COMPANY, THEN, THE ONLY WAY OF DEDUCTING THE TDS IS UNDER SE CTION 192, WHICH HAS BEEN DONE IN THIS CASE AND THERE IS NO DISPUTE ON T HIS FACT. ONCE THE TDS HAS BEEN DEDUCTED UNDER SECTION 192, THEN THERE IS NO P ROVISION TO DEDUCT TDS UNDER SECTION 195 ALSO. THERE IS ANOTHER IMPORTANT ANGLE IN THIS CASE HE SUBMITTED, THAT ALL THE PAYMENTS INCLUDING REIMBURS EMENT OF EXPENSES BETWEEN THE PARENT COMPANY AND THE INDIAN COMPANY W AS SUBJECT MATTER OF REFERENCE TO THE TPO WHO HAS FOUND THAT THESE TR ANSACTIONS ARE AT ALP AND THERE COULD NOT BE ANY QUESTION THAT THESE REIMBURS EMENTS OF EXPENSES ARE FOR ANY PAYMENT FOR GETTING ANY KIND OF SERVIC ES FROM SINGAPORE COMPANY. EVEN UNDER THE EXPLANATION 2 TO SECTION 9( 1)(VII), IF THE TEMASEK HOLDINGS ADVISORS (I) P. LTD. 19 CONSIDERATION WHICH IS THE INCOME OF THE RECIPIENT, CHARGEABLE UNDER THE HEAD SALARY , THE SAME WILL NOT BE TERMED AS FEES FOR TECHNICAL SERVICES (FTS). THUS, THIS CANNOT BE A CASE OF FTS ALSO. IN SUPPORT OF HIS CONTENTION AND ON THE FACTS OF THE CASE, HE RELIED UPON CATENA OF DECISIONS AND ALSO FILED SYNOPSIS OF SUCH DECISIONS ALONG WITH COPY OF THE J UDGMENT. A LIST OF SUCH DECISIONS ARE AS UNDER: I) ABBEY BUSINESS SERVICES INDIA PVT. LTD. V/S DCIT, 5 3 SOT (BNGL.) 401; II) ACIT V/S CMS (I) OPERATIONS & MAINTENANCE CO. P . LTD. (CMS INDIA), 135 ITD 386 (CHENNAI); III) ITO V/S CMS (I) OPERATIONS & MAINTENANCE CO. P. LTD . ITA NO.1264/MDS./2012; IV) ITO V/S ARIBA TECHNOLOGIES (I) PVT. LTD., ITA NO.61 6/BNGL./2011; V) DIT V/S HCL INFOSYSTEM LTD., 274 ITR 261 (DEL.); VI) HCL INFOSYSTEMS LTD. (HCL), 76 TTJ 505 (DEL.); VII) DOLPHIN DRILLING LTD. V/S ACIT, 29 SOT 612 (DEL.); VIII) CHOLAMANDALAM MS GENERAL INSURANCE CO. LTD. RE (AAR ) 309 ITR 356; IX) DDIT V/S TEKMARK GLOBAL SOLUTIONS LLC (TEKMARK), 38 SOT 7; X) CIT V/S KARISTORZ ENDOSCOPY INDIA P. LTD., ITA NO.1 3 OF 2008 (DEL.); XI) ACIT V/S KARISTORZ ENDOSCOPY INDIA P. LTD., ITA NO. 2929/DEL./2009 (DEL.); AND XII) IDS SOFTWARE SOLUTIONS (I) P. LTD. (IDS INDIA) V/S ITO (IT), 32 SOT 25 (BNGL.). 17. REGARDING REIMBURSEMENT OF OTHER EXPENSES, HE SUBMI TTED THAT APART FROM REIMBURSEMENT OF EXPENSES, AS PER THE DETAILS RAISED BY THESE SECONDED EMPLOYEES, THERE WERE TWO OTHER EXPENSES W HICH WERE INCURRED BY THE SINGAPORE COMPANY FOR THE INDIAN OPERATION, ONE WAS INFORMATION TECHNOLOGY EXPENSES WHICH CONSISTED OF SUBSCRIPTION OF FACTIVA WHICH IS FOR TEMASEK HOLDINGS ADVISORS (I) P. LTD. 20 ACCESS OF DATA BASE AND EQUINIX CHARGES WHICH IS FO R EMAIL SYSTEM. THE OTHER PART CONSISTED OF PROFESSIONAL FEES MADE TO L UTHRA & LUTHRA LAW FIRM, EARNEST AND YOUNG PVT. LTD. AND JYOTI SAGAR ASSOCIA TES. ALL THESE EXPENSES WERE FOR THE INDIAN COMPANY FOR THE INDIAN OPERATIO N ONLY, THEREFORE, THERE CANNOT BE ANY DISPUTE FOR REIMBURSING THE SAME TO T HE SINGAPORE COMPANY WHICH HAS INCURRED THESE EXPENSES ON BEHALF OF THE INDIAN COMPANY. THE DETAILS OF THESE EXPENSES WERE SUBMITTED BEFORE US AT THE TIME OF HEARING AS REQUIRED BY THE BENCH. IN SUPPORT OF HIS CONTENTION THAT REIMBURSEMENT OF EXPENSES CANNOT CONSTITUTE INCOME AND NO TDS IS REQ UIRED TO BE DEDUCTED UNDER SECTION 195, HE REFERRED TO PLETHORA OF DECIS IONS INCLUDING THAT OF CIT V/S SIEMENS AKEIONGESELLSCHAFT, [2009] 310 ITR 320 (BOM.). COMING TO THE DECISION OF THE HON'BLE SUPREME COURT IN KANCHANGAN GA SEA FOOD (SUPRA), HE SUBMITTED THAT THE SAID JUDGMENT CANNOT BE HELD TO BE APPLICABLE ON THE FACTS OF THE ASSESSEES CASE BECAUSE IN THAT CASE T HE ISSUE WAS WITH REGARD TO THE PAYMENT OF HIRE CHARGES OF VESSELS TO NONRE SIDENT BY WAY OF ADJUSTMENT OF FISH CATCH. THE HON'BLE SUPREME COURT HAS DISCUSSED THE SCOPE OF TOTAL INCOME UNDER SECTION 5(2) OF THE NON RESIDENT WHICH INCLUDES ALL INCOME FROM WHATEVER SOURCE DERIVED, RECEIVED O R DEEMED TO HAVE BEEN RECEIVED IN INDIA OR WHICH ACCRUES OR IS DEEMED TO ACCRUE TO NONRESIDENT IN INDIA. IN THE PRESENT CASE, THE ISSUE RELATES TO RE IMBURSEMENT OF SALARY WHICH HAS BEEN PAID BY THE OVERSEAS COMPANY ON BEHA LF OF THE ASSESSEE. 18. PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE , MR. MAHESH KUMAR, REBUTTING THE ARGUMENTS OF THE LEARNED SR. C OUNSEL, SUBMITTED THAT TEMASEK HOLDINGS ADVISORS (I) P. LTD. 21 THE ENTIRE FULCRUM OF THE CASE IS, WHETHER THE PAYM ENT MADE TO THE SINGAPORE COMPANY IS ON ACCOUNT OF REIMBURSEMENT OF SALARY OR NOT. HE STRONGLY CONTENDED THAT THIS IS NOT A CASE OF A SAL ARY AT ALL AS THERE IS NO EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE ASSESSEE AND THE SECONDED EMPLOYEES. IT IS A CLEAR CUT CASE FOR FEES FOR TECH NICAL SERVICES UNDER THE DOMESTIC LAW I.E., SECTION 9(1)(VII) AND ALSO UNDER THE TREATY ARTICLE12(4). WITHOUT PREJUDICE, IF IT IS NOT A SALARY OR FTS, TH EN IT IS A CASE FOR A SERVICE P.E., HENCE, THE PAYMENT MADE HAS TO TAXED IN INDIA . FIRSTLY, HE SUBMITTED THAT THERE IS NO REIMBURSEMENT OF EXPENSES AT ALL B UT PAYMENT ON ACCOUNT OF FEES FOR TECHNICAL SERVICES. IN THE PRESENT CASE, T HERE IS AN AGREEMENT BETWEEN THE SINGAPORE COMPANY AND THE ASSESSEE COMP ANY WITH REGARD TO INVESTMENT ADVISORY SERVICES TO THE INDIAN COMPANY, FOR WHICH THE PAYMENT IS BEING MADE TO THE SINGAPORE COMPANY. IN THE ABSE NCE OF ANY EMPLOYEE EMPLOYER RELATIONSHIP, THE ASSESSEE COMPANY DOES NO T HAVE ANY LIABILITY TO PAY THE SALARY TO THESE EMPLOYEES AND, THEREFORE, T HERE IS NO QUESTION OF REIMBURSEMENT. HE REFERRED TO THE APPOINTMENT LETTE R OF BOTH THE EMPLOYEES AND SUBMITTED THAT THE PRIVITY OF CONTRACT IS BETWE EN THE SINGAPORE COMPANY AND THE EMPLOYEE AND THE RIGHT OF TERMINATION ALSO LIES WITH THE SINGAPORE COMPANY. BY WAY OF SECONDMENT AGREEMENT, THESE EMPL OYEES HAVE BEEN PLACED IN INDIA FOR RENDERING SERVICES FOR THE INDI AN COMPANY. IN SUPPORT OF HIS CONTENTION THAT IN CASE THERE IS NO EMPLOYEREM PLOYEE RELATIONSHIP BETWEEN THE SECONDED PERSON AND THE ASSESSEE COMPAN Y THEN THE PAYMENT MADE TO THEM CANNOT BE TREATED AS SALARY, HE STRONG LY RELIED UPON THE DECISION OF THE TRIBUNAL, MUMBAI BENCH DECISION IN ACIT V/S PETROLEUM INDIA TEMASEK HOLDINGS ADVISORS (I) P. LTD. 22 INTERNATIONAL, ITA NO.8086/MUM./2003 AND C.O. NO.6/ MUM./2009, ORDER DATED 28 TH SEPTEMBER 2012, WHEREIN THE TRIBUNAL HAS REFERRED TO THE DECISION OF THE HON'BLE SUPREME COURT IN EMIL WEBBE R V/S CIT, [1993] 200 ITR 483 (SC). HE FURTHER SUBMITTED THAT THE NATURE OF DUTIES IN THE SECONDMENT AGREEMENT HAS NOT BEEN GIVEN AND ON A PE RUSAL OF FORM16 OF THE TWO EMPLOYEES, IT IS NOT CLEAR AS TO WHAT IS TH E ALLOCATION OF SALARY AMOUNT AND WHAT PURPOSE THE REIMBURSEMENT HAS BEEN MADE. FOR EXAMPLE IN CASE OF MR. MANISH KEJARIWAL, HE HAS SPENT APPRO XIMATELY 47% OF HIS TIME IN INDIA, AND NO DETAILS OF ALLOCATION OF SALARY AM OUNT AND THE QUANTIFICATION OF REIMBURSEMENT AND THE PURPOSE OF REIMBURSEMENT H AS BEEN PROVIDED. AFFIDAVIT FILED BY THE EMPLOYEES ALSO DOES NOT SPEC IFY THE TIME SPENT IN INDIA. HE ALSO PLACED STRONG RELIANCE ON THE DECISION OF V ERIZON DATA SERVICE INDIA PVT. LTD. V/S CIT, WHEREIN THE AUTHORITY OF ADVANCE RULING HAS DECIDED THE SIMILAR NATURE OF CLAIM AGAINST THE ASSESSEE. THIS DECISION HAS ALSO BEEN RELIED UPON BY THE ASSESSING OFFICER AS WELL AS THE LEARNED COMMISSIONER (APPEALS). THIS DECISION HAS NOW BEEN AFFIRMED BY T HE MADRAS HIGH COURT ALSO IN A WRIT PETITION FILED BY THE ASSESSEE. IN T HIS JUDGMENT, HE SUBMITTED THAT THE AAR HAS HELD THAT THE REIMBURSEMENT BY THE ASSESSEE OF THE SECONDED EMPLOYEES REPRESENTS INCOME OF THE ASSESSE E AND ACCORDINGLY, CHARGEABLE TO TAX WITHIN THE PROVISIONS OF SECTION 195. HE FURTHER PLACED RELIANCE ON AAR RULING IN THE CASE OF CENTRICA INDI A OFFSHORE PVT. LTD. V/S CIT, IN AAR NO.856/2010. HERE ALSO, THE ASSESSEE WA S A SUBSIDIARY OF THE OVERSEAS ENTITY FOR COORDINATING THE SERVICE OF VAR IOUS VENDORS IN INDIA FOR WHICH THE ASSESSEE WAS PAID COST PLUS 15% BY THE OV ERSEAS COMPANY. THE TEMASEK HOLDINGS ADVISORS (I) P. LTD. 23 OVERSEAS ENTITY DEPUTED THE SECONDED EMPLOYEE TO RE NDER THE SERVICE IN INDIA AND ALL THESE SERVICE BENEFITS WERE GIVEN BY THE OVERSEAS ENTITY WHO REMAINED THE EMPLOYEE OF THE ORIGINAL EMPLOYER. ON THESE FACTS, THE AAR HAS GIVEN THE RULING AGAINST THE ASSESSEE AFTER DISCUSS ING THE ISSUE IN DETAIL. HE ALSO REFERRED TO THE RELEVANT PARAGRAPH OF THE SAID DECISION. SIMILAR RELIANCE WAS PLACED ON THE AAR RULING IN CASE OF AT&S INDIA PVT. LTD., AAR NO.670/2005 AND DANFOSS INDUSTRIES PVT. LTD. V/S CI T, AAR NO.606/2002, WHEREIN IT WAS HELD THAT PAYMENTS MADE IN PURSUANCE OF SECONDMENT AGREEMENT CANNOT BE SAID TO BE REIMBURSEMENT OF EXP ENDITURE AND SUCH A PAYMENT HAS TO BE MADE AFTER WITHHOLDING THE TAX UN DER SECTION 195. HE FURTHER SUBMITTED THAT EVEN FROM THE PLAIN READING OF EXPLANATION (2) TO SECTION 9(1)(VII), MANAGERIAL AND CONSULTANCY SERVI CES ARE TREATED AS FEE FOR TECHNICAL SERVICES . THESE SECONDED EMPLOYEES BY DOING ADVISORY AND MANAGERIAL SERVICE, FOR THE INDIAN COMPANY WHICH IN TURN ARE PROVIDING SERVICES TO SINGAPORE COMPANY IS NOTHING BUT RENDER ING OF SERVICES. THE PHRASE IN EXPLANATION (2) INCLUDING THE PROVISIONS OF SERVICE OF TECHNICAL O R OTHER PERSONNEL , IS MEANT FOR THE EMPLOYEES SENT TO RENDER SERVICE ONLY. THIS WILL INCLUDE THE SECONDED EMPLOYEES BECAUSE IT IS THROUGH THESE PERSONNEL SERVICES HAVE BEEN RENDERED, THEREFORE, I T IS A CLEAR CUT CASE OF FEE FOR TECHNICAL SERVICES. 19. SIMILARLY, HE SUBMITTED THAT THE SAID PAYMENT IS TA XABLE UNDER THE TREATY ALSO, BECAUSE THE ARTICLE 12(4)(B) OF THE IN DIA SINGAPORE DTAA TAKES INTO CONSIDERATION THE PAYMENTS TO ANY PERSON IN CO NSIDERATION FOR SERVICES TEMASEK HOLDINGS ADVISORS (I) P. LTD. 24 OF A MANAGERIAL, TECHNICAL OR CONSULTANCY NATURE. E VEN THE MAKE AVAILABLE CLAUSE IS ALSO ATTRACTED IN THIS CASE. IN THE COURS E OF RENDERING ADVISORY SERVICES, THESE TWO PERSONS ARE MAKING AVAILABLE TH E EXPERTISE TO THE INDIAN COMPANY AND ALSO TO THE OTHER EMPLOYEES OF THE INDI AN COMPANY. IN SUPPORT OF THIS CONTENTION, HE HAS STRONGLY RELIED UPON THE FOLLOWING DECISIONS: I) SHELL INDIA MARKETS PVT. LTD. AAR NO.833/2009 II) MERSEN INDIA PVT. LTD. AAR NO.1074/2010 III) PERFETTI VAN MILLE HOLDING V.V., AAR NO.869/2010 RELYING ON THESE JUDGMENTS, THE LEARNED DEPARTMENTA L REPRESENTATIVE STRONGLY CONTENDED THAT THE SERVICES RENDERED BY TH ESE TWO SECONDED EMPLOYEES AMOUNTING TO MAKING AVAILABLE CONSULTANCY AND MANAGERIAL SERVICES TO THE ASSESSEE. 20. HIS SECOND LIMB AND ALTERNATE ARGUMENT WAS THAT THI S IS A CASE OF SERVICE P.E. FOR THE REASON THAT THESE TWO EMPLOYEE S WERE SENT BY THE SINGAPORE COMPANY TO WORK IN INDIA WITH THE ASSESSE E COMPANY AND THEY HAVE RENDERED SERVICES ON BEHALF OF THE SINGAPROE C OMPANY TO THE ASSESSEE. HENCE, THIS IS A CASE OF A SERVICE P.E. AND THE PAY MENT MADE IS NOT ON ACCOUNT OF SALARY BUT FOR THE SERVICES. IN SUPPORT OF THIS CONTENTION, HE RELIED UPON AAR RULING IN THE CASE OF CENTRICA INDIA OFFSH ORE PVT. LTD. 21. REGARDING THE TPOS ACCEPTANCE OF TRANSACTIONS AT A LP, HE SUBMITTED THAT THE TPO IS NOT SUPPOSED TO LOOK INTO THE OTHER NATURE OF TRANSACTIONS OR TEMASEK HOLDINGS ADVISORS (I) P. LTD. 25 REIMBURSEMENT OF EXPENSES BECAUSE BEFORE HIM, THE M ATTER IS WHETHER THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE A.E. A RE AT ARMS LENGTH OR NOT. HE ALSO DISTINGUISHED THE VARIOUS CASE LAWS AS RELI ED UPON BY THE LEARNED SR. COUNSEL. REGARDING REIMBURSEMENT OF VARIOUS OTHER E XPENSES, HE STRONGLY RELIED UPON THE ASSESSING OFFICERS FINDINGS AND SU BMITTED THAT THESE ARE NOT IN THE NATURE OF REIMBURSEMENT BUT THE PAYMENT MADE FOR SERVICES BY THE OTHER PARTY. ONCE THE SERVICE WAS RENDERED IN THE I NDIAN COMPANY, IT WAS THE EXPENDITURE OF THE INDIAN COMPANY AND ANY PAYME NT TOWARDS REIMBURSEMENT OF EXPENSES TOWARDS OVERSEAS COMPANY CANNOT BE TREATED AS MERE REIMBURSEMENT OF EXPENSES. 22. IN THE REJOINDER, LEARNED SR. COUNSEL, MR. PORUS KA KA, SUBMITTED THAT THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS) IN THE YEAR 200809 HAVE ACCEPTED THAT THE PAYMENT MADE TO THES E EMPLOYEES ARE IN THE NATURE OF SALARY. THE SECONDMENT AGREEMENT CREA TES THE OBLIGATION FOR THE PAYMENT OF SALARY AND THE LIABILITY TO REIMBURS E IS UNDER THE SECONDMENT AGREEMENT ONLY. REBUTTING THE DECISION OF PETROLEUM INDIA INTERNATIONAL (SUPRA), HE SUBMITTED THAT THE TRIBUNAL WAS EXAMINI NG THE ISSUE OF THE EMPLOYEREMPLOYEE RELATIONSHIP UNDER SECTION 40(A)( III) AND WHETHER THERE IS ANY EMPLOYEEEMPLOYER RELATIONSHIP BETWEEN THE A SSESSEE AND THE SECONDED PERSON. THERE WAS NO ISSUE OF SECTION 195 OR FTS. SIMILARLY, THE DECISION EMIL WEBBERS CASE, THE HON'BLE SUPREME CO URT HELD THAT IF THE INCOME ACCRUES IN INDIA AND THERE IS NO EMPLOYEEEM PLOYER RELATIONSHIP, THEN IT IS INCOME FROM OTHER SOURCES. HE FURTHER AN ALYSED THE JUDGMENT OF TEMASEK HOLDINGS ADVISORS (I) P. LTD. 26 THE HON'BLE SUPREME COURT AND SUBMITTED THAT IT IS NOT APPLICABLE AT ALL FOR THE ISSUE INVOLVED HERE. 23. COMING TO THE AAR RULING IN VERIZON (SUPRA), HE SUB MITTED THAT, ON A PERUSAL OF PAGE8 OF THE ORDER, IT IS NOT CLEAR AS TO WHO WAS RENDERING THE SERVICE, WHETHER THE EMPLOYEE OR THE U.S. COMPANY. THERE IS AN INHERENT CONTRADICTION WITH REGARD TO THE RENDERING OF SERVI CES. IN THE PRESENT CASE, NO SERVICE WAS RENDERED BY WAY OF SECONDMENT AGREEM ENT. HE FURTHER SUBMITTED THAT THE MADRAS HIGH COURT HAS NOT AFFIRM ED THE DECISION OF THE AAR, RATHER IT WAS A CASE OF WRIT PETITION AND NOT APPEAL WHEREIN THE SCOPE IS ENTIRELY DIFFERENT AND THE COURT HAS ITSELF CLARIFI ED THAT IT IS NOT SITTING AS A COURT OF APPEAL AND THE SAID CASE WAS BASED PURELY ON FACTS. THE HIGH COURT HAS NOT EXPRESSED ANY VIEW, THEREFORE, IT CANNOT BE HELD THAT ANY LAW HAS BEEN LAID DOWN BY THE AAR WHICH HAS BEEN AFFIRMED B Y THE HIGH COURT. REGARDING OTHER DECISIONS OF THE AAR CITED BY THE L EARNED DEPARTMENTAL REPRESENTATIVE, HE SUBMITTED THAT SOME OF THE DECIS IONS HAVE BEEN DISTINGUISHED AND NOT FOLLOWED BY THE TRIBUNAL IN I BS SOFTWARE SOLUTION INDIA PVT. LTD., BANGALORE BENCH, IN ITA NO.87/BAL./2008. HE ALSO DISTINGUISHED EACH AND EVERY DECISION RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT MOST OF THEM ARE DISTINGUISHABL E EITHER ON FACTS OR THE RATIO IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. REGARDING THE ARGUMENT OF MAKING AVAILABLE OF TECHNOLOGY, HE SUBM ITTED THAT IN THE PRESENT CASE, THE SERVICES HAVE BEEN RENDERED BY TH E INDIAN COMPANY TO THE SINGAPORE AND THE ASSESSEE IS NOT PAYING ANY AMOUNT TO THE SINGAPORE TEMASEK HOLDINGS ADVISORS (I) P. LTD. 27 COMPANY, OTHER THAN REIMBURSEMENT OF EXPENSES WHICH CAN GO TO SHOW THAT THE ASSESSEE HAS RECEIVED ANY MANAGERIAL CONSULTANC Y OR TECHNICAL SERVICE FROM THE SINGAPORE COMPANY. SO, ONCE THE FOREIGN CO MPANY IS NOT RENDERING THE SERVICE, IT CANNOT BE A CASE OF FTS ALSO. IN AN Y CASE, ONCE IT IS A SALARY, THEN IT CANNOT BE TAXED AS FTS. REGARDING THE SERVI CE P.E., HE SUBMITTED THAT IT IS NEITHER THE CASE OF THE ASSESSING OFFICER NOR OF THE LEARNED COMMISSIONER (APPEALS), THEREFORE, THE SAME CANNOT BE ARGUED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. FURTHER, THESE TWO EMPLOYEES ARE WORKING IN INDIA FOR THE INDIAN COMPANY WHO IN TURN ARE RENDERING SERVICES TO SINGAPORE COMPANY FOR WHICH INDIA IS RECEIVING R EMUNERATION AT THE MARKUP OF 21% PLUS REIMBURSEMENT OF COST. HENCE, I T IS NEITHER A CASE OF FTS NOR A CASE OF SERVICE P.E. ONCE THESE TWO CONTE NTIONS FAILED, THEN IT IS A CLEAR CUT CASE OF A SALARY PAID TO THE EMPLOYEES FO R WHICH TDS HAS DULY BEEN DEDUCTED UNDER SECTION 192 AND THE SAME HAS BEEN DE POSITED WITH THE GOVERNMENT OF INDIA TREASURY AND, HENCE, NO DISALLO WANCE CAN BE MADE. 24. WE HAVE GIVEN OUR ANXIOUS CONSIDERATION TO THE ENTI RE GAMUT OF THE ARGUMENTS PLACED BY BOTH THE PARTIES AND ALSO THE R ELEVANT FINDINGS OF THE ASSESSING OFFICER AS WELL AS THE LEARNED COMMISSION ER (APPEALS). BEFORE ADJUDICATING THE ISSUE INVOLVED, WE BRIEFLY REITERA TE THE PRELIMINARY FACTS OF THE CASE. THE ASSESSEE WHICH IS A WHOLLY OWNED SUBS IDIARY OF SINGAPORE COMPANY THPL RENDERS INVESTMENT ADVISORY SERVICE TO THPL WHICH INCLUDES IDENTIFYING AND ANALYZING POTENTIAL INVESTMENTS PAR TICULARS IN INDIA EVALUATING POLITICAL AND ECONOMIC SCENARIO FOR THE INVESTMENT IN INDIA AND TEMASEK HOLDINGS ADVISORS (I) P. LTD. 28 ALSO TO MONITOR AND MAKE RECOMMENDATION IN RESPECT OF SPECIFIED INVESTMENT IN INDIA. BASED ON THIS ADVISE, THE THPL MAKES INVE STMENT IN INDIA. FOR RENDERING THESE SERVICES, THE THPL, PAYS A MARKUP OF 21% BESIDES REIMBURSEMENT OF CERTAIN EXPENSES ON ACTUAL BASIS. THE SERVICES ARE BEING PROVIDED BY THE INDIAN COMPANY TO THE SINGAPORE COM PANY AND NOT VICE VERSA. THIS ASPECT HAS TO BE KEPT IN MIND IN THE PR ESENT CASE. THE SINGAPORE COMPANY HAS SECONDED TWO EMPLOYEES ONE, MR. ANUJ MA HESHWARI AND OTHER MR. MANISH KEJARIWAL TO THE ASSESSEE COMPANY IN IND IA TO ASSIST THE ASSESSEE TO RENDER INVESTMENT ADVISORY SERVICE TO THPL, SING APORE. AS PER THE SECONDMENT AGREEMENT ENTERED INTO THE THPL AND THE ASSESSEE COMPANY, THE SALARY OF THESE TWO EMPLOYEES WAS TO BE PAID BY THE THPL, AND THE ASSESSEE COMPANY HAD TO REIMBURSE THE COST OF SALAR Y AND OTHER EXPENSES RELATING TO THEIR EMPLOYMENT WHICH HAS BEEN PAID BY THE THPL. SINCE THE SALARY WAS PAID BY THE THPL, IT HAS DEDUCTED TAX UN DER SECTION 192, AND HAS DEPOSITED THE SAME IN THE INDIAN GOVERNMENT TREASUR Y. IN SUPPORT OF THIS, FORM16 AND OTHER DETAILS HAVE BEEN PLACED IN THE P APER BOOK WHICH HAS BEEN EXTENSIVELY REFERRED BY THE LEARNED SR. COUNSE L. BEING AN INTERNATIONAL TRANSACTION I.E., REIMBURSEMENT OF THE EXPENSES TO THE THPL BY THE ASSESSEE COMPANY, THIS ISSUE WAS SUBJECT MATTER OF THE REFER ENCE UNDER TRANSFER PRICING INCLUDING THE PAYMENT OF 21% MARKUP FOR RE NDERING INVESTMENT ADVISORY SERVICE. THE TPO HAS FOUND THESE TRANSACTI ONS AT ALP. 25. NOW COMING TO THE OBSERVATION OF THE ASSESSING OFFI CER, IT IS NOTICED THAT THE ASSESSING OFFICER HAS TAKEN AN ADVERSE VIE W REGARDING THE TEMASEK HOLDINGS ADVISORS (I) P. LTD. 29 REIMBURSEMENT OF THE SALARY BY THE ASSESSEE COMPANY TO THE THPL ON THE GROUND THAT TDS UNDER SECTION 195 HAS NOT BEEN DEDU CTED, HENCE, DISALLOWANCE UNDER SECTION 40(A)(IA) HAS TO BE MADE . THE MAIN REASON FOR DISALLOWING THESE EXPENSES WAS THAT THE SECONDMENT AGREEMENTS WERE UNREGISTERED AND DATE AND PLACE IN THE SAID AGREEME NTS HAVE NOT BEEN MENTIONED AND, THEREFORE, THESE AGREEMENTS ARE COLO URABLE DEVICE WITH AN INTENTION OF AVOIDING TAX LIABILITY ON THE EXPENSES WHICH HAVE BEEN CLAIMED TO BE REIMBURSED. SUCH A REASONING OF THE ASSESSING OFFICER IS WHOLLY VITIATED FOR THE REASON THAT FIRSTLY, AN AGREEMENT BETWEEN T HE TWO PARTIES NEED NOT NECESSARILY BE REGISTERED AS THERE IS NO PROVISION UNDER THE LAW THAT SUCH SECONDMENT AGREEMENT ENTERED INTO BETWEEN THE TWO P ARTIES NEEDS TO BE REGISTERED UNDER SOME INDIAN STATUTORY LAW OR ANY A PPROVAL FROM THE GOVERNMENT OF INDIA IS REQUIRED. HE HAS ALSO NOT RE FERRED TO ANY SUCH PROVISION THROUGH WHICH SUCH APPROVAL IS NEEDED; SE CONDLY, BEFORE THE LEARNED COMMISSIONER (APPEALS), THE SIGNED AGREEMEN T WAS DULY FILED AND IN THE SAID AGREEMENTS, DATE HAS ALREADY BEEN MENTIONE D IN THE OPERATING PART OF THE AGREEMENT. IF THE ASSESSING OFFICER HAD ANY DOUBT ABOUT THE AUTHENTICITY OF THE AGREEMENT, HE COULD HAVE VERY W ELL REQUIRED THE ASSESSEE TO SUBSTANTIATE THE SAME. THIS PREMISE OF THE ASSES SING OFFICER FOR COMING TO THE CONCLUSION THAT THE SECONDMENT AGREEMENT IS A C OLOURABLE DEVICE CANNOT BE UPHELD. THE SECOND REASON GIVEN BY HIM IS THAT T HE RELATIONSHIP BETWEEN THE THPL AND THE ASSESSEE COMPANY IS THAT OF INDEPE NDENT CONTRACTORS AND AGREEMENT SHALL BE GOVERNED IN ACCORDANCE WITH THE LAWS OF INDIA AND, ACCORDINGLY, THE AMOUNT REIMBURSED IS NOTHING BUT A CONTRACTUAL PAYMENT. TEMASEK HOLDINGS ADVISORS (I) P. LTD. 30 EVEN IF THE RELATIONSHIP BETWEEN THE ASSESSEE AND T HE THPL ARE THAT OF INDEPENDENT CONTRACTOR AND REIMBURSEMENT OF SALARY IS SOME KIND OF A CONTRACTUAL PAYMENT, THEN ALSO, IT DOES NOT STRENGT HEN THE CASE OF THE ASSESSING OFFICER, BECAUSE THE THPL HAS PAID THE SA LARY AS PER THE SECONDMENT AGREEMENT AND THAT TOO AFTER WITHHOLDING THE TAX AS PER THE PROVISIONS OF SECTION 192 OF INDIAN INCOME TAX ACT AND SUCH A PAYMENT OF SALARY HAS BEEN REIMBURSED AS PER THE SECONDMENT AG REEMENT ONLY. THE BASIC CONDITION UNDER THE LAW FOR DEDUCTING THE TAX ON SUCH PAYMENT (WHICH IS NOTHING BUT SALARY) AND DEPOSITING THE SAME IN T HE GOVERNMENT OF INDIA TREASURY STANDS FULFILLED. HENCE, THIS REASONING GI VEN BY THE ASSESSING OFFICER HAS NO RELEVANCE AT ALL. THE THIRD REASONING GIVEN BY THE ASSESSING OFFICER WAS THAT THE ASSESSEE COMPANY IS BENEFICIARY OF SUC H EXPENDITURE AS IT HAS INHERENT CHARACTER OF SALARY AND BY EXPENDING THE S AID AMOUNT, THE ASSESSEE HAS EARNED ITS BUSINESS INCOME AND, ACCORDINGLY, TH E SAME IS BUSINESS EXPENDITURE OF THE ASSESSEE. FIRST OF ALL, THE ASSE SSEE COMPANY IS NOT A BENEFICIARY OF THIS EXPENDITURE BECAUSE THE SECONDE D EMPLOYEES HAVE BEEN PAID SALARY BY THPL WHO ARE WORKING IN INDIA FOR TH E ASSESSEE COMPANY AND THE ASSESSEE IS MERELY REIMBURSING THE SAME. BY REN DERING THIS SERVICE TO THE THPL, THE ASSESSEE IS EARNING BUSINESS INCOME A ND SALARY PAID IS CERTAINLY A BUSINESS EXPENDITURE ON WHICH TDS HAS A LREADY BEEN DEDUCTED AS THE LIABILITY TO WITHHOLD THE TAX ON SALARY FALLS W ITHIN THE PURVIEW OF SECTION 192 ONLY, WHICH HAS BEEN DONE IN THIS CASE. THERE C ANNOT BE A DOUBLE DEDUCTION OF TDS ONCE AT THE TIME OF PAYMENT OF THE SALARY AND AGAIN ON THE REIMBURSEMENT MADE BY THE ASSESSEE TO THE THPL. THU S, THERE WAS NO TEMASEK HOLDINGS ADVISORS (I) P. LTD. 31 REQUIREMENT FOR DEDUCTING THE TAX AT THE TIME OF RE IMBURSEMENT, WHEN ALREADY TAX HAS BEEN DEDUCTED AT THE TIME OF PAYMEN T OF SALARY. 26. ON THE ISSUE OF REIMBURSEMENT OF OTHER EXPENSES LIK E INFORMATION TECHNOLOGY, THE PROFESSIONAL FEES, ACCOMMODATION AN D TRAVELING EXPENSES OF THE EMPLOYEES, ETC., THE ASSESSING OFFICER HAS HELD THAT BY PAYING THIS AMOUNT, THE ASSESSEE COMPANY GETS BENEFIT FOR ITS B USINESS IN INDIA AS SERVICE PROVIDED BY THE EMPLOYEES IN INDIA AND, THE REFORE, BY NOT PAYING TAXES ON SUCH PAYMENT, THE ASSESSEE IS TRYING TO AV OID THE PROVISIONS OF INCOME TAX ACT BY NOT DEDUCTING THE TDS. INSOFAR AS THE REIMBURSEMENT OF EXPENSES ON ACCOUNT OF BUSINESS PROMOTION, TECHNOLO GY EXPENDITURE, PROFESSIONAL FEES, ETC., THESE PAYMENTS WERE MADE B Y THE THPL ON BEHALF OF THE INDIAN COMPANY AND THE SAME HAS BEEN REIMBURSED BY THE ASSESSEE COMPANY. FROM THE BREAKUP OF THE EXPENSES, AS SUBM ITTED BY THE LEARNED SR. COUNSEL, IT IS SEEN THAT FIRSTLY, INSOFAR AS THE EXPENDITURE RELATING TO SEC ONDED EMPLOYEES, THESE RELATE TO MEALS, TRAVELING, ACCOMM ODATION, TRAINING, ETC., WHICH ARE IN THE NATURE OF EXPENSES FOR WHICH TDS IS NOT REQUIRED TO BE DEDUCTED UNDER ANY PROVISIONS OF LAW; SECONDLY, BUSINESS PROMOTION EXPENSES RELATES TO TH E AMOUNT OF ` 1,271, WHICH IS A CREDIT CARD EXPENDITURE OF MR. A NUJ MAHESHWARI, WHICH AGAIN IS NOT LIABLE FOR DEDUCTING TDS; TEMASEK HOLDINGS ADVISORS (I) P. LTD. 32 THIRDLY, THE INFORMATION TECHNOLOGY EXPENDITURE REP RESENTS SUBSCRIPTION TO FACTIVA FOR AVAILING DATA BASE AND EQUINIX CHARGES WHICH ARE FOR EMAIL SYSTEM. THESE ARE NOT LIABLE F OR TDS BECAUSE THEY ARE NEITHER FOR TECHNICAL SERVICES NOR FOR ANY PROFESSIONAL SERVICES; AND LASTLY; COMING TO THE REIMBURSEMENT OF EXPENSES FOR PROFESSIONAL FEES, ON A PERUSAL OF THE DETAILS OF PROFESSIONAL P AYMENTS, IT IS SEEN THAT FOLLOWING AMOUNTS HAVE BEEN PAID TO THE P ROFESSIONALS FOR RENDERING SERVICES TO THE ASSESSEE IN INDIA: (I) LUTHRA & LUTHRA LAW FIRM ` 12,32,543 (II) ESTATE AND YOUNG PVT. LTD. ` 15,98,831 (III) JYOTI SAGAR ASSOCIATES ` 34,328 ` 28,65,702 ======== THESE PAYMENTS HAVE BEEN MADE BY THE THPL ON BEHAL F OF THE ASSESSEE COMPANY WHICH HAS BEEN REIMBURSED. THE VER Y NATURE OF THE PAYMENT SHOWS THAT THEY ARE FOR RENDERING PROFESSIO NAL SERVICES, FOR WHICH TDS PROVISIONS ARE ATTRACTED UNDER THE ACT. IT DOES NOT MAKE ANY DIFFERENCE WHETHER THE PAYMENT WAS MADE BY THPL AND REIMBURSED BY THE ASSESSEE AS THE WITHHOLDING OF TAX WAS REQUIRED UNDER THE LAW O N THESE PAYMENTS. HOWEVER, THIS ASPECT HAS NOT BEEN EXAMINED AT ALL E ITHER BY THE ASSESSING OFFICER OR BY THE LEARNED COMMISSIONER (APPEALS), THEREFORE, WE ARE OF THE OPINION THAT TO THE EXTENT OF EXAMINING T HE PROFESSIONAL PAYMENTS, TEMASEK HOLDINGS ADVISORS (I) P. LTD. 33 THE MATTER NEEDS TO BE RESTORED BACK TO THE FILE OF THE A.O. FOR DECIDING THE ISSUE AFRESH IN ACCORDANCE WITH LAW. WE ORDER ACCOR DINGLY. 27. THUS, MOST OF THE REASONS GIVEN BY THE ASSESSING OF FICER AS HIGHLIGHTED ABOVE ARE EITHER IRRELEVANT OR UNSUSTAINABLE ON THE FACTS AND IN LAW SPECIFICALLY WITH REGARD TO REIMBURSEMENT OF SALARY AND OTHER EXPENSES. THE DECISION OF THE HON'BLE SUPREME COURT IN KANCHAN GA NGA SEA FOOD (SUPRA) ALSO, IS NOT APPLICABLE AS THE ISSUE INVOLVED IN TH AT CASE WAS ENTIRELY DIFFERENT. IT WAS MORE ON THE ACCRUAL OF INCOME BY NONRESIDENT AND WHETHER IT WAS CHARGEABLE TO TAX UNDER SECTION 5(2) OR NOT AND CONSEQUENTLY, THERE WAS ANY LIABILITY TO DEDUCT TDS UNDER SECTION 195. THIS IS NOT THE CASE HERE AS THE ASSESSEE, ON THE PAYMENT OF SALARY, HAS DEDU CTED TDS UNDER SECTION 192. THE ASSESSING OFFICER HAS MISSED THIS CRUCIAL POINT WHICH WAS PLACED BEFORE HIM AND EVEN RECORDED BY HIM IN HIS ORDER TH AT THE SALARY PAID TO THE SECONDED EMPLOYEES HAS ALREADY BEEN SUBJECTED TO TD S UNDER SECTION 192. ONCE, HE HIMSELF HOLDS THAT IT IS A SALARY, THEN TH E ONLY PROVISION FOR TAXING THE SAME IS UNDER SECTION 192, WHICH HAS BEEN DISCH ARGED. THERE CANNOT BE A DOUBLE TAXATION, ONE UNDER SECTION 192 AND AGAIN UNDER SECTION 195. 28. NOW COMING TO THE FINDINGS RECORDED BY THE LEARNED COMMISSIONER (APPEALS), FROM THE DISCUSSIONS MADE ABOVE, IT IS S EEN THAT HE HAS TRIED TO EXPAND THE CONTROVERSY BY PLACING VARIOUS ASPECTS W HICH ARE NOT OF MUCH RELEVANCE TO THE CONTROVERSY INVOLVED. ONE OF THE M AJOR REASONINGS GIVEN BY THE LEARNED COMMISSIONER (APPEALS) FOR DRAWING AN A DVERSE INFERENCE IS THAT THERE ARE DISCREPANCY IN FIGURES OF DEBTORS AND CUR RENT LIABILITIES IN THE TEMASEK HOLDINGS ADVISORS (I) P. LTD. 34 AUDITED FINANCIAL ACCOUNTS FOR THE YEAR ENDING 31 ST MARCH 2007 AND 31 ST MARCH 2008. BEFORE US, THE LEARNED SR. COUNSEL HAS SUBMITTED THAT SUCH AN OBSERVATION OF THE LEARNED CIT(A) IS MISPLACED BECA USE THERE IS NO DISCREPANCY AS SUCH AND THE ONLY DIFFERENCE WAS ON ACCOUNT OF PRESENTATION OF FINANCIAL STATEMENT ON THE NET BASIS AND GROSS B ASIS. THE RECONCILIATION SUBMITTED BY HIM AT PAGE91 OF THE PAPER BOOK, HOWE VER, MAKES IT VERY CLEAR WHICH, FOR THE SAKE OF READY REFERENCE, IS RE PRODUCED HEREIN BELOW: DEBTORS AND CURRENT LIABILITIES AS PER BOOKS OF ACCOUNT FOR THE F.Y. ENDED 31.3.2007 DEBTORS TEMASEK HOLDINGS P. LTD. (THPL) 144,817,685 CURRENT LIABILITIES SUNDRY CREDITORS THPL 62,616,270 OTHER CREDITORS 14,64,581 PROVISION OF EXPENSES 536,255 OTHER STATUTORY DUES 29,656 64,646,762 PRESENTATION IN THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 ST MARCH 2007 (NET BASIS) DEBTORS ( ` 144,817,685 RECEIVABLES FROM THPL LESS ` 62,616,270 PAYABLE TO THPL) 82,201,415 CURRENT LIABILITIES SUNDRY CREDITORS (OTHER CREDITORS) 1464581 PROVISION OF EXPENSES 536255 OTHER STATUTORY DUES 29656 2030492 PRESENTATION IN THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 ST MARCH 2008 (ON GROSS BASIS) DEBTORS (ON GROSS BASIS) 144,817,685 CURRENT LIABILITIES (ON GROSS BASIS AS PER THE BOOKS OF ACCOUNT) 64,646,762 TEMASEK HOLDINGS ADVISORS (I) P. LTD. 35 FROM THE ABOVE, IT IS AMPLY CLEAR THAT THE DIFFEREN CE IS MAINLY ON ACCOUNT OF PRESENTATION OF FINANCIAL STATEMENT ONLY , AS FOR THE YEAR ENDING 31 ST MARCH 2007, THE ASSESSEE HAS SHOWN THE FIGURE ON N ET BASIS WHEREAS FOR THE YEAR ENDING 31 ST MARCH 2008, IT IS ON GROSS BASIS. THIS CANNOT BE A SUBJECT MATTER OF ADVERSE OPINION FOR THE ISSUE INV OLVED. IT IS NOT UNDERSTOOD AS TO HOW THIS, IN ANY WAY, STRENGTHENS THE CASE OF THE DEPARTMENT OR HAS AN ADVERSE EFFECT ON THE ASSESSEES CASE. 29. THE OTHER MAIN RESERVATION OF THE LEARNED COMMISSIO NER (APPEALS) HAD BEEN THAT THE THPL HAD BEEN RAISING THE TAX ADVISE ON MONTHLY BASIS WHEREAS THE ASSESSEE HAS BEEN REIMBURSING THE SAME AFTER A GAP OF LONG TIME. THIS AGAIN, DOES NOT MAKE ANY SENSE SO LONG A S THE ASSESSEE HAS REIMBURSED THE PAYMENT BASED ON ADVISE RAISED BY TH E THPL, WHICH IS MOSTLY ON ACCOUNT SALARY PAID TO THE SECONDED EMPLO YEES AND OTHER EXPENSES. THE LEARNED COMMISSIONER (APPEALS) HAS AL SO MADE OBSERVATIONS ABOUT THE LETTER OF APPOINTMENTS AND DISCREPANCY IN THE DATES AND THE SECONDMENT AGREEMENT. IN THIS RESPECT, WE HAVE ALRE ADY HELD THAT THESE DISCREPANCIES ARE WHOLLY IRRELEVANT FIRSTLY, THE SI GNED DOCUMENTS WERE FILED BEFORE HIM AND SECONDLY THE DATE HAVE ALREADY BEEN MENTIONED IN THE OPERATING LINE OF THE SECONDMENT AGREEMENT AND THER E NEED NOT BE A FIXTURE OF DATE ON THE LAST PAGE OF THE AGREEMENT ALSO. IN ANY CASE, THESE DISCREPANCIES DO NOT HAVE ANY RELEVANCE, ONCE IT HA S NOT BEEN DOUBTED THAT REIMBURSEMENT OF PAYMENT IS ON ACCOUNT OF SALARY ON LY. THE ONLY CONCLUSION DRAWN BY THE LEARNED COMMISSIONER (APPEALS) IS THAT THE LIABILITY TO PAY TEMASEK HOLDINGS ADVISORS (I) P. LTD. 36 SALARY WAS OF THE INDIAN COMPANY AND THEY SHOULD HA VE WITHHELD THE TAX AND IT IS IN THE NATURE OF PAYMENT ON WHICH TDS WAS TO BE DEDUCTED AND NON DEDUCTION OF TDS JUSTIFIES THE DISALLOWANCE UNDER S ECTION 40(A)(IA). HE ALSO HAS REFERRED TO VARIOUS AAR RULING WHICH HAS ALSO B EEN RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE BEFORE US. INSO FAR AS THE DECISION OF THE AAR RULING IN VERIZON DATA SERVICE INDIA PVT. L TD. (SUPRA), WHICH CAN BE SAID TO HAVE SOME RELEVANCE FOR THE ISSUES INVOLVED IN THIS CASE, IT IS SEEN FROM CLOSE EXAMINATION OF FACTS THAT THE SAME CANNO T BE APPLIED HERE IN THE PRESENT CASE. IN CASE OF VERIZON, INDIAN COMPANY WA S EXPORTING THE SERVICE FROM ITS PARENT COMPANY AT USA RELATING TO DEVELOPM ENT AND MAINTENANCE OF TELEPHONE SOFTWARE SOLUTION AND CERTAIN INFORMATION TECHNOLOGY ENABLE SERVICES. FOR THE PURPOSE OF RENDERING THE SERVICES IN INDIA, THE U.S. COMPANY HAD SENT THREE EMPLOYEES OF AFFILIATE COMPA NY GTEOC OF U.S. PARENT COMPANY, THE SALARY OF THESE EMPLOYEES WERE PAID BY GTEOC WHICH WAS REIMBURSED BY THE ASSESSEE. ONE OF THE MAIN FUN CTIONS OF THE EMPLOYEES WAS TO LIAISE BETWEEN THE ASSESSEE AND TH E PARENT COMPANY TO SUPERVISE AND PROVIDE DIRECTIONS ON THE MANNER IN W HICH ACTIVITIES OF THE APPLICANT SHOULD BE CARRIED OUT. HERE ALSO, THE ISS UE WAS THAT THE REIMBURSEMENT OF SALARY BY THE INDIAN COMPANY TO TH E GTEOC, WHETHER AMOUNTS TO PAYMENT ON WHICH TDS WAS TO BE DEDUCTED UNDER SECTION 195. THE GTEOC HAD ALREADY DEDUCTED TDS UNDER SECTION 1 92. THE BASIC DIFFERENCE IN THIS CASE WITH THAT OF THE PRESENT CA SE OF THE ASSESSEE IS THAT THE SERVICES RENDERED BY THE INDIAN COMPANY WAS FOR THE PURPOSE OF U.S. COMPANY FOR OPERATIONS IN INDIA AND THROUGH THE SEC ONDED EMPLOYEES THE TEMASEK HOLDINGS ADVISORS (I) P. LTD. 37 U.S. COMPANY WAS RENDERING SERVICES IN INDIA. THUS, THE SERVICES WERE RENDERED BY U.S. COMPANY ONLY THROUGH THE INDIAN CO MPANY, WHEREAS, IN THE PRESENT CASE THE INDIAN COMPANY IS RENDERING SE RVICE FOR SINGAPORE COMPANY ON A MARKUP AND THE SINGAPORE COMPANY WAS NOT RENDERING ANY SERVICE IN INDIA THROUGH THE INDIAN COMPANY. IT WAS ON THIS BACKGROUND, THE AAR HELD THAT THE SERVICES WHICH ARE RENDERED BY TH E GTEOC ARE LIABLE TO BE TAXED IN INDIA. IN THIS CASE, SINGAPORE COMPANY IS NOT RENDERING ANY SERVICE IN INDIA EITHER THROUGH SECONDED EMPLOYEES OR THROUGH INDIAN COMPANY. THIS DISTINCTION ITSELF MAKES THIS DECISIO N INAPPLICABLE ON FACTS OF THE PRESENT CASE. THE AAR HELD THAT SUCH A NATURE O F RENDERING OF MANAGERIAL SERVICES BY THE SECONDED EMPLOYEES COMES WITHIN THE AMBIT OF ARTICLE 12(4) OF THE DTAA WHEREIN THE MANAGERIAL AN D CONSULTANCY SERVICES ARE ALSO INCLUDED IN THE FEES FOR INCLUDED SERVICES . THUS, THIS DECISION AT THE VERY THRESHOLD CANNOT BE APPLIED HERE. THE MADRAS H IGH COURT IN THE WRIT PETITION FILED BY THE ASSESSEE AGAINST THE AAR RULI NG HAS CATEGORICALLY HELD THAT THEY ARE AGREEING WITH THE CONTENTION OF THE R EVENUE ON THE FACTUAL FINDINGS RENDERED AND IN THE WRIT JURISDICTION, THE COURT DOES NOT SIT AS COURT OF APPEAL. IT WAS IN THIS BACKGROUND THAT THE HIGH COURT HAS DISMISSED THE WRIT PETITION FILED BY THE ASSESSEE. THUS, NO OPINI ON HAS BEEN GIVEN BY THE HIGH COURT WHICH CAN BE SAID TO HAVE PERSUASIVE VAL UE IN THIS CASE. 30. NOW COMING TO THE DECISION OF DANFOSS INDUSTRIES PV T. LTD. [2004] 268 ITR 001, AS RELIED UPON BY THE LEARNED COMMISSIONER (APPEALS) AS WELL AS THE LEARNED DEPARTMENTAL REPRESENTATIVE, IT IS SEEN THAT THE FACTS OF THE CASE TEMASEK HOLDINGS ADVISORS (I) P. LTD. 38 ARE ENTIRELY DIFFERENT. IN THIS CASE, THE OVERSEAS COMPANY WAS RENDERING SERVICES THROUGH ITS SUBSIDIARY IN INDIA UNDER SERV ICE AGREEMENT AND SERVICE FEE WAS PAYABLE BY THE INDIAN COMPANY TO THE OVERSE AS COMPANY. IT WAS IN THIS CONTEXT IT WAS HELD THAT ANY PAYMENT INCLUDING REIMBURSEMENT OF EXPENDITURE, TDS UNDER SECTION 195 HAS TO BE DEDUCT ED. ADMITTEDLY, THIS IS NOT THE ISSUE BEFORE US. THUS, THE RELIANCE PLACED BY THE LEARNED COMMISSIONER (APPEALS) ON THESE TWO DECISIONS ARE A PPLICABLE. ALL OTHER DECISIONS RELIED AND REMARKS MADE BY THE LEARNED CO MMISSIONER (APPEALS) IN COMING TO ITS CONCLUSION FOR CONFIRMING THE DISALLO WANCE ARE EITHER NOT VERY RELEVANT OR ARE DIVORCED FROM THE ACTUAL ISSUE WHIC H WAS THE SUBJECT MATTER OF THE ADJUDICATION. 31. NOW COMING TO THE ARGUMENTS OF THE LEARNED DEPARTME NTAL REPRESENTATIVE THAT THE PAYMENTS MADE BY THE INDIAN COMPANY ON ACCOUNT OF REIMBURSEMENT OF SALARY OF TWO EMPLOYEES AND OTH ER COSTS, IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES , BEING RENDERING OF MANAGERIAL AND CONSULTANCY SERVICES WITHIN THE AMBIT OF SECTION 9( 1)(VII) OF THE ACT AND ALSO UNDER ARTICLE 12(4)(B) OF THE INDIA SINGAPORE DTAA. HERE IN THIS CASE, AS STATED EARLIER, THE SINGAPORE COMPANY THPL IS NOT R ENDERING ANY SERVICE TO THE INDIAN COMPANY I.E., THE ASSESSEE, RATHER IT IS A VICEVERSA. THE TWO SECONDED EMPLOYEES ARE WORKING FOR INDIAN COMPANY A ND ONLY FOR THE INDIAN OPERATION. THEY ARE NOT RENDERING SERVICES ON BEHAL F OF THE SINGAPORE COMPANY, THEREFORE, THERE IS NO QUESTION OF RENDERI NG OF MANAGERIAL OR CONSULTANCY SERVICES BY THE SINGAPORE COMPANY EITHE R DIRECTLY OR THROUGH TEMASEK HOLDINGS ADVISORS (I) P. LTD. 39 THE SECONDED EMPLOYEES. HENCE, PROVISIONS OF SECTIO N 9(1)(VII) DO NOT GET ATTRACTED IN THIS CASE. ONCE IT IS A SALARY, THEN I T CANNOT BE A CASE OF FTS AS IT IS NEITHER THE CASE OF THE ASSESSING OFFICER NOR OF THE COMMISSIONER (APPEALS) THAT IT IS IN THE NATURE OF FTS. EVEN THE MAKE AVAILABLE CLAUSE AS STIPULATED IN ARTICLE12(4) IS ALSO NOT APPLICABLE BECAUSE THE SINGAPORE COMPANY IS NEITHER RENDERING ANY SERVICES TO THE IN DIAN COMPANY NOR THEY ARE MAKING AVAILABLE ANY KIND OF TECHNICAL KNOWLEDG E, EXPERIENCE, SKILL OR PROCEEDS TO THE INDIAN COMPANY. NONE OF THE JUDGMEN TS RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE CAN BE MADE APP LICABLE ON THE FACTS OF THE ASSESSEES CASE. ALSO THERE IS NO MERIT IN THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT IT IS A CASE OF SE RVICE P.E. FIRSTLY, IT IS NEITHER THE CASE OF THE ASSESSING OFFICER NOR OF TH E COMMISSIONER (APPEALS) AND SECONDLY, THE SERVICE P.E. WOULD BE APPLICABLE ONLY WHEN SINGAPORE COMPANY IS RENDERING ANY KIND OF SERVICES IN INDIA THROUGH ITS SECONDED EMPLOYEES. THUS, NONE OF THE ARGUMENTS OF THE LEARN ED DEPARTMENTAL REPRESENTATIVE IS TENABLE EITHER ON THE FACTS OR IN LAW. 32. WE REITERATE THAT IN THE PRESENT CASE, THE SINGAPOR E COMPANY IS AVAILING THE SERVICES RENDERED BY THE INDIAN COMPAN Y I.E., THE ASSESSEE, FOR WHICH IT HAS BEEN MAKING PAYMENT AT A MARKUP OF 21 %. THE SINGAPORE COMPANY HAS SENT TWO SECONDED EMPLOYEES UNDER THE S ECONDMENT AGREEMENT WHO ARE UNDER THE CONTROL AND SUPERVISION OF THE INDIAN COMPANY FOR THE PURPOSE OF RENDERING SERVICES IN INDIA FOR THE INDIAN COMPANY AND FOR THE INDIAN OPERATION. SINCE THE SECONDED PERSONS WE RE THE EMPLOYEES OF TEMASEK HOLDINGS ADVISORS (I) P. LTD. 40 SINGAPORE COMPANY, THE PAYMENT OF SALARY AND COST O F THE EXPENDITURE IN TERMS OF APPOINTMENT LETTER HAS BEEN BORNE BY THE S INGAPORE COMPANY. WHILE DOING SO, IT HAS WITHHELD THE TAXES AND DEPOS ITED THE SUM UNDER THE PROVISIONS OF SECTION 192 OF THE ACT WITH THE GOVER NMENT OF INDIA TREASURY. THUS, THE PAYMENT OF SALARY HAS ALREADY BEEN SUBJEC TED TO TDS. THE INDIAN COMPANY WHICH IS RENDERING SERVICES FOR SINGAPORE C OMPANY HAS UTILIZED THE SERVICES OF THESE SECONDED EMPLOYEES FOR THEIR INDI AN OPERATION. THE CONCEPT OF SECONDMENT EMPLOYEE IS THAT AN EMPLOYEE IS TEMPORARILY TRANSFERRED TO ANOTHER JOB TO A DIFFERENT PARTY, FOR A DEFINED PER IOD OF TIME OR FOR SPECIFIC PURPOSE AND MAY BE TO THE MUTUAL BENEFIT OF THE PAR TIES. THIS CONCEPT IS PREVALENT IN MOST PART OF THE WORLD, WHERE ONE COMP ANY TRANSFERS ITS EMPLOYEES UNDER THE SECONDMENT AGREEMENT TO THE OTH ER COMPANY AND IN MOST OF THE CASES UNDER CONTROL AND SUPERVISION OF THE OTHER COMPANY. THE SALARY CAN BE PAID EITHER BY THE FIRST COMPANY TO W HOM THE SECONDED EMPLOYEES BELONG OR THE OTHER COMPANY WHICH ARE AVA ILING THE SERVICES OF SECONDED EMPLOYEE. IN THE PRESENT CASE, THE SECONDM ENT AGREEMENT CLEARLY PROVIDES THAT THESE TWO EMPLOYEES WILL WORK FOR THE ASSESSEE COMPANY UNDER THEIR SUPERVISION AND UNDER THE CONTROL OF THE BOAR D OF DIRECTORS OF THE INDIAN COMPANY. THEIR SERVICES CAN BE TERMINATED BY THE EITHER PARTY AND THE SALARY WHICH IS BORNE BY THE EMPLOYER COMPANY I .E., SINGAPORE COMPANY, THE ENTIRE COST OF SALARY WOULD BE REIMBURSED BY TH E ASSESSEE COMPANY AS PER THE ADVICE RAISED FROM TIME TO TIME. THUS, WE A RE UNABLE TO SUSTAIN THE FINDINGS OF THE ASSESSING OFFICER AS WELL AS OF THE LEARNED COMMISSIONER (APPEALS) ON THE ISSUE OF REIMBURSEMENT OF SALARY, REIMBURSEMENT OF TEMASEK HOLDINGS ADVISORS (I) P. LTD. 41 EXPENDITURE RELATING TO THE SECONDED EMPLOYEES, EXP ENDITURE RELATING TO INFORMATION TECHNOLOGY, EXPENDITURE AND BUSINESS PR OMOTION. ACCORDINGLY, THE DISALLOWANCE UNDER SECTION 40(A)(IA) ON ACCOUNT OF THESE EXPENSES STANDS DELETED. 33. HOWEVER, WITH REGARD TO THE PROFESSIONAL FEES, WE F IND THAT THESE EXPENDITURES HAVE BEEN INCURRED FOR THE PURPOSE OF INDIAN COMPANY FOR ITS OPERATION IN INDIA AND THESE PAYMENTS WERE MADE BY THE SINGAPORE COMPANY WHICH HAS BEEN REIMBURSED BY THE INDIAN COM PANY. WE HAVE ALREADY HELD THAT THE PAYMENT OF PROFESSIONAL FEE D OES ATTRACT WITH HOLDING OF TAX UNDER THE PROVISIONS OF THE ACT AND THAT THIS I SSUE HAS NOT BEEN PROPERLY DEALT WITH EITHER BY THE ASSESSING OFFICER OR BY TH E LEARNED COMMISSIONER (APPEALS) BECAUSE BOTH THESE AUTHORITIES WERE DEALI NG MOSTLY WITH THE REIMBURSEMENT OF SALARY ISSUE, THEREFORE, WE SET AS IDE THE ISSUE OF REIMBURSEMENT OF EXPENDITURE TOWARDS THE PAYMENT OF PROFESSIONAL FEE AND THE MATTER IS RESTORED BACK TO THE FILE OF THE ASSE SSING OFFICER TO EXAMINE IT AFRESH AND IN ACCORDANCE WITH THE PROVISIONS OF LAW . 34. WE ARE NOT DISCUSSING THE VARIOUS JUDGMENTS RELIED UPON BY THE EITHER PARTY BECAUSE INSOFAR AS THE JUDGMENTS RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE ARE CONCERNED, ON A PER USAL OF THESE JUDGMENTS, IT IS SEEN THAT THEY ARE NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE AT ALL AND IN CASE OF JUDGMENTS RELIED UPON BY THE LEARNED SR. COUNSEL, THEY ARE NOT REQUIRED IN VIEW OF OUR ABOVE CONCLUSI ON. HENCE, WE CONFINE OUR DECISION SANS THE JUDGMENTS RELIED UPON BY THE EITHER PARTY. THUS, TEMASEK HOLDINGS ADVISORS (I) P. LTD. 42 GROUND NO.1, AS RAISED BY THE ASSESSEE IS TREATED A S PARTLY ALLOWED FOR STATISTICAL PURPOSES. 35. GROUND NO.2, DEALS WITH THE DISALLOWANCE MADE UNDER SECTION 14A. 36. LEARNED COUNSEL FOR THE ASSESSEE CONTENDED BEFORE U S THAT HE DID NOT WISH TO PRESS THIS GROUND, TO WHICH, THE LEARNED DE PARTMENTAL REPRESENTATIVE, ALSO DID NOT OBJECT TO THE SUBMISSI ON MADE BY THE LEARNED COUNSEL. CONSEQUENTLY, THIS GROUND IS DISMISSED AS NOT PRESSED . 37. 4 #7 &) *4# 2 &) * !+* 200708 2 82 9:; ' !# < ) 1# => ? 37. IN THE RESULT, ASSESSEES APPEAL FOR ASSESSMENT YEAR 200708 IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. WE NOW PROCEED TO DISPOSE OFF THE ASSESSEES APPEAL IN ITA NO.6504/MUM./2012, FOR THE ASSESSMENT YEAR 200809 . 38. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE, CHA LLENGING THE FINAL DRAFT ASSESSMENT ORDER DATED 25 TH SEPTEMBER 2012, PASSED UNDER SECTION 143(3) / 144C(13) IN PURSUANCE OF THE DIRECTIONS OF THE DRP. IN THIS APPEAL, THE ASSESSEE HAS MAINLY RAISED TWO ISSUES IN ITS GR OUNDS OF APPEAL, FIRSTLY, DISALLOWANCE UNDER SECTION 40(A)(IA) OF AN EXPENDIT URE OF ` 10,41,90,731, ON ACCOUNT OF REIMBURSEMENT OF SALARY COST OF THE SECO NDED EMPLOYEES AND OTHER EXPENSES ON THE GROUND THAT THE DRP HAS TREAT ED THE REIMBURSEMENT OF EXPENDITURE AS FEES FOR TECHNICAL SERVICES AS PER THE ARTICLE12 OF INDO TEMASEK HOLDINGS ADVISORS (I) P. LTD. 43 SINGAPORE DTAA AND SECONDLY, TRANSFER PRICING ADJUS TMENT OF ` 80,23,972 IN THE ARMS LENGTH PRICE (ALP) ON THE INTERNATIONAL T RANSACTIONS OF INVESTMENT ADVISORY SERVICES. AS FAR AS THE FIRST ISSUE IS CON CERNED, THAT IS DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE EXPENDITURE, THE FAC TS AND THE ISSUES INVOLVED ARE EXACTLY SIMILAR TO THE ASSESSMENT YEAR 200708, WHICH HAS BEEN DISCUSSED IN DETAIL IN THE APPEAL DECIDED HEREIN AB OVE. THE ONLY DIFFERENCE BEING THAT IN THIS YEAR THE DRP HAS TREATED THE REI MBURSEMENT OF THESE EXPENSES AS FEES FOR TECHNICAL SERVICES AS PER THE ARTICLE12 OF INDO SINGAPORE DTAA. 39. BOTH THE PARTIES HAVE MADE THEIR ELABORATED SUBMISS IONS IN SUPPORT OF VARIOUS DECISIONS WHICH WERE COMMON FOR BOTH THE AP PEAL (I.E., FOR ASSESSMENT YEARS 200708 AND 200809). THE RELEVANT DIRECTIONS OF THE DRP ON THIS SCORE ARE AS UNDER: ( I) THE ASSOCIATED ENTITY, FOREIGN COMPANY, TEMASEK HOLDINGS IS AN INVESTMENT COMPANY WHICH IS AN ACTIVE SHAREHOLDER A ND INVESTOR IN FINANCIAL SERVICES, TELECOMMUNICATIONS & MEDIA, TECHNOLOGY, T RANSPORTATION, INDUSTRIALS, LIFE-SCIENCES, CONSUMER, REAL ESTATE, ENERGY & RESO URCES AND ALL ITS EMPLOYEES ARE ENGAGED IN SUCH ACTIVITY. IN THE INSTANT CASE, THE IMPUGNED REIMBURSEMENTS HAVE BEEN MADE BY THE ASSESSEE TO TH E FOREIGN COMPANY IN R ESPECT OF INVESTMENT ADVISORY SERVICES RECEIVED FRO M THE LATTERS EMPLOYEES, WHICH ARE PURELY FEES FOR TECHNICAL SERVICES AS PER ARTICLE 12 OF THE INDIA- SINGAPORE DTAA. THE DEPUTED EMPLOYEES HAVE WORKED FOR THE ASSESSEE (EXCLUSIVELY) AND HAVE RENDERED INVESTMENT ADVISORY SERVICES TO THPL. HENC E, EFFECTIVELY THE PAYMENTS HAVE BEEN MADE BY THE ASSESSEE FOR TAXABLE SERVICES RECEIVED FROM THPL, SINGAPORE. HENCE, THE ASSESSEE WAS REQUIRED T O WITHHOLD TDS WHILE MAKING THE IMPUGNED PAYMENTS TO FOREIGN COMPANY THP L. 40. THE DRP HAS ALSO DISTINGUISHED THE JUDGMENTS RELIED UPON BY THE ASSESSEE AND HAS RELIED UPON THE SAME SET OF DECISI ONS WHICH WERE RELIED TEMASEK HOLDINGS ADVISORS (I) P. LTD. 44 UPON BY THE ASSESSING OFFICER AND THE COMMISSIONER (APPEALS) IN THE ASSESSMENT YEAR 200708. 41. AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSIONS A ND THE DIRECTIONS OF THE DRP, WE ARE OF THE OPINION THAT THE PAYMENT OF SALARY BY THE SINGAPORE COMPANY TO THE SECONDED EMPLOYEES WHO WERE EMPLOYED AND WORKING FOR THE ASSESSEE COMPANY AND THE COST OF SALARY AND EXP ENDITURE THAT HAVE BEEN REIMBURSED BY THE INDIAN COMPANY TO THE SINGAPORE C OMPANY, DO NOT FALL WITHIN THE REALM OF FEES FOR TECHNICAL SERVICES EITHER UNDER ARTICLE12(4) OF THE DTAA OR UNDER SECTION 9(1)(VII) OF THE ACT. AS DISCUSSED IN DETAIL IN THE ASSESSMENT YEAR 200708, THE ASSESSEE COMPANY IS RE NDERING INVESTMENT ADVISORY SERVICES TO THE SINGAPORE COMPANY FOR WHIC H THE PAYMENT IS MADE BY THE SINGAPORE COMPANY AT A MARKUP OF 21%. THE S ECONDED EMPLOYEES WHO HAVE BEEN DEPUTED TO THE ASSESSEE COMPANY ARE W ORKING IN INDIA UNDER THE CONTROL AND SUPERVISION OF THE INDIAN COMPANY A ND ARE RENDERING THEIR SERVICES PURELY FOR THE INDIAN COMPANY. THE SINGAPO RE COMPANY HAS NOTHING TO DO WITH THE SECONDED EMPLOYEES EXCEPT FOR PAYING THEIR SALARY AFTER DEDUCTING TDS UNDER SECTION 192 ON RAISING THE ADVI CE OF SUCH A PAYMENT TO THE INDIAN COMPANY WHICH, IN TURN, IS REIMBURSING T HE SAID SALARY AND EXPENSES TO THE SINGAPORE COMPANY. THE REIMBURSEMEN T OF EXPENSES BEING PURELY IN THE FORM OF SALARY AND THE COST INCURRED BY THE EMPLOYEES DO NOT FALL WITHIN THE AMBIT OF FEE FOR TECHNICAL SERVICES . THE ARTICLE12(4)(B) OF THE INDOSINGAPORE DTAA PROVIDES FOR MAKE AVAILABLE CLAUSE WHEREBY ANY PAYMENT IN CONSIDERATION OF SERVICES OF A MANAGERIA L TECHNICAL CONSULTANCY IN TEMASEK HOLDINGS ADVISORS (I) P. LTD. 45 THE NATURE MAKES AVAILABLE ANY TECHNICAL KNOWLEDGE, EXPERIENCE SKILL, KNOWHOW, OR PROCESS WHICH ENABLES THE PERSON ACQUIR ING THE SERVICES TO APPLY THE TECHNOLOGY CONTAINED THEREIN. HERE THE SE RVICES ARE BEING RENDERED BY THE INDIAN COMPANY TO THE SINGAPORE COMPANY AND THE SECONDED EMPLOYEES ARE WORKING FOR THE INDIAN COMPANY FOR IT S INDIAN OPERATION. FOR ALL PRACTICAL PURPOSES, THE ASSESSEE COMPANY IS THE ECONOMIC EMPLOYER OF THE SECONDED EMPLOYEES WHO ARE RENDERING SERVICES P URELY FOR THE ASSESSEE COMPANY. THERE IS NO MAKE AVAILABLE OF ANY KIND OF TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL OR PROCESS BY THE SINGAPORE COMPA NY TO THE ASSESSEE COMPANY THROUGH THESE SECONDED EMPLOYEES, WHICH IS PURELY A CASE OF PAYMENT OF SALARY AND REIMBURSEMENT OF SALARY. ALL THE JUDGMENTS WHICH HAVE BEEN RELIED UPON BY THE LEARNED DEPARTMENTAL R EPRESENTATIVE ARE NOT APPLICABLE ON THE PECULIAR FACTS OF THE CASE AND TH E DECISION OF VERIZON DATA SERVICES (SUPRA), AS RELIED UPON HEAVILY BY THE LEA RNED DEPARTMENTAL REPRESENTATIVE IS ALSO NOT APPLICABLE AS DISCUSSED IN OUR EARLIER PART OF THIS ORDER. THUS, IN VIEW OF OUR FINDINGS GIVEN IN THE A SSESSMENT YEAR 200708, SUCH REIMBURSEMENT OF SALARY AND EXPENDITURE INCURR ED BY THE EMPLOYEES ARE NEITHER IN THE NATURE OF FEE FOR TECHNICAL SERVICES NOR IN THE NATURE OF ANY PAYMENT FOR WHICH TAX HAS TO BE WITHHELD UNDER SECTION 195. SINCE THE TAX HAS ALREADY BEEN DEDUCTED UNDER SECTION 192 AND THE SAME HAS BEEN DEPOSITED TO THE GOVERNMENT OF INDIA TREASURY, THER EFORE, THERE IS NO FURTHER REQUIREMENT FOR DEDUCTING TAX UNDER SECTION 195 IN THE PRESENT CASE. THUS, GROUND NO.1, AS RAISED BY THE ASSESSEE IS TREATED A S ALLOWED. TEMASEK HOLDINGS ADVISORS (I) P. LTD. 46 42. THE SECOND ISSUE INVOLVED HERE IN THIS APPEAL IS TR ANSFER PRICING ADJUSTMENT OF ` 8,02,32,972, ON THE INTERNATIONAL TRANSACTIONS REL ATING TO INVESTMENT ADVISORY SERVICES. 43. AS STATED EARLIER IN THE APPEAL FOR THE ASSESSMENT YEAR 200708, THE ASSESSEE IS PROVIDING INVESTMENT ADVISORY SERVICE T O THPL, SINGAPORE, WHICH INCLUDES IDENTIFYING AND ANALYZING POTENTIAL INVEST MENT PARTICULARS IN INDIA, EVALUATING POLITICAL AND ECONOMIC SCENARIO FOR THE INVESTMENT IN INDIA AND MONITORING AND MAKING RECOMMENDATION TO THPL FOR MA KING SPECIFIED INVESTMENT HERE IN INDIA. FOR RENDERING THE INVESTM ENT ADVISORY SERVICE, THE SINGAPORE COMPANY IS PAYING MARKUP OF 21% AND REIM BURSEMENT OF COST. THE WORKING OF THE PLI (PROFIT LEVEL INDICATOR) WAS AS UNDER: 1. SALES ( ` ) INCOME FROM ADVISORY SERVICES 286546335 OTHER INCOME 599582 287145917 2. EXPENDITURE 236815152 44. IN ITS TRANSFER PRICING REPORT, THE ASSESSEE, AFTER VARIOUS PROCESSES OF SEARCH AND FILTRATION, SHORTLISTED NINE COMPARABLES AND BENCH MARKED ITS TRANSACTION USING TNMM AS THE MOST APPROPRIATE METH OD WITH PLI AS THE OPERATING PROFIT TO THE TOTAL COST MARGIN IN THE FO LLOWING MANNER: TEMASEK HOLDINGS ADVISORS (I) P. LTD. 47 SR.NO. NAME OF THE COMPANY OP/TC MARGIN (%) 1. ACCESS INDIA ADVISORS LTD. 45.96% 2. ICRA MANAGEMENT CONSULTING SER. LTD. 5.35% 3. ICRA ONLINE LTD. 7.49% 4. IDC INDIA LTD. 13.88% 5. INFORMED TECHNOLOGIES LTD. 6.86% 6. KINETIC TRUST LTD. 3.54% 7. BESANT RAJ INTERNATIONAL LTD. NC 8. CAPITAL TRUST LTD. (SEG.) NC 9. CRISIL LTD. (SEG.) NC 10. ARITHMETIC MEAN 13.85% THUS, OUT OF NINE, SIX COMPARABLES WERE FINALLY TA KEN FOR BENCH MARKING THE ALP. 45. ACCORDINGLY, IT WAS CLAIMED THAT THE ASSESSEES MAR GIN OF 21% AND ACTUAL REIMBURSEMENT OF COST IS BETTER THAN THE SIX COMPARABLES WHEREIN THE AVERAGE MEAN MARGIN IS OF 13.85%. THE TPO, WHOM THE MATTER WAS REFERRED UNDER SECTION 92CA(1), REJECTED THE ASSESSEES ALL THE SIX COMPARABLES, AFTER HOLDING THAT THESE COMPANIES DO NOT OFFER THE INVES TMENT ADVISORY SERVICES. HE CARRIED OUT HIS OWN SEARCH AND SHORTLISTED ELEVE N COMPARABLES WHICH HAVE BEEN ELABORATED AT PAGE3 OF THE TPOS ORDER. AFTER INVITING THE OBJECTIONS OF THE ASSESSEE, HE EXCLUDED THE THREE C OMPARABLES AND EIGHT COMPARABLES WERE SHORTLISTED WITH THE AVERAGE PLI W ORKED OUT AT 54.88% OF OP/TC. THE FINAL LIST OF COMPARABLES WITH THE OPERA TING PROFIT MARGIN WERE AS UNDER: TEMASEK HOLDINGS ADVISORS (I) P. LTD. 48 SL.NO. NAME OF PARTY O.P. SALES % OP / TC % 1. SUNDARAM ASSET MGT. CO. LTD. 30.48 43.83 2. ICRA LTD. 50.52 102.08 3. DEUTCHE ASSET MGT. INDIA LTD. 9.24 10.18 4. RELIGARE COMMODITIES LTD. 0.82 0.82 5. BGIL FILMS & TECHNOLOGIES LTD. 4.73 4.96 6. BRESCON CORPORATE ADVISORS LTD. 49.52 98.10 7. SHRIYAM BROKING INTERMEDIARY LTD. 52.88 112.21 8. TWENTY FIRST CENTURY SHARES & SECURITIES LTD. 40.06 66.84 MEAN 29.78 54.88 46. ACCORDINGLY, THE UPWARD ADJUSTMENT WAS MADE BY THE TPO IN THE FOLLOWING MANNER: 3.5 AS THE ASSESSEES PLI AT 21% IS WAY BELOW THE A VERAGE PLI OF THE COMPARABLES AT 54.88%, THE ALP IS DETERMINED AS UNDER: THE VALUE OF THE TRANSACTION INCLUDING THE REIMBURSEMENT = ` 28,65,46,335 TOTAL COST = ` 23,68,15,152 THE ALP VALUE OF THE TRANSACTION @ 54.88% = ` 36,67,79,307 105% OF THE TRANSACTION VALUE = ` 30,08,73,651 95% OF THE TRANSACTION VALUE = ` 27,22,19,018 AS THE ALP LIES OUTSIDE THE +/ 5% LIMIT OF THE VAL UE OF TRANSACTION, THEREFORE, AN ADJUSTMENT OF ` 8,02,32,972 (DIFFERENCE BETWEEN ` 36,67,79,307 AND ` 28,65,46,335) IS MADE TO THE TRANSACTION. 47. THE DRP HAS AFFIRMED THE ENTIRE ADJUSTMENT MADE BY THE TPO AND ALSO THE COMPARABLES SHORTLISTED BY HIM. TEMASEK HOLDINGS ADVISORS (I) P. LTD. 49 48. THE LEARNED SR. COUNSEL, MR. PORUS KAKA, SUBMITTED THAT THERE IS NO DISPUTE ABOUT THE FUNCTIONAL ANALYSIS BUT ONLY THE COMPARABLES REJECTED BY THE TPO AS SELECTED BY THE ASSESSEE AND IN PLACE FR ESH COMPARABLES INTRODUCED BY THE TPO. HE SUBMITTED THAT THE APPROA CH OF THE TPO FOR REJECTING THE ASSESSEES COMPARABLES AND THE MANNER IN WHICH FRESH COMPARABLES WERE SHORT LISTED BY THE TPO IS WHOLLY ERRONEOUS RIGHT FROM THE SELECTION PROCESS TO FUNCTIONAL COMPARABILITY. IN T HE EARLIER ASSESSMENT YEAR I.E., ASSESSMENT YEAR 200708 AND IN SUBSEQUENT ASS ESSMENT YEAR I.E., 200910, THE TPO BY AND LARGE HAS NOT ONLY ACCEPTED THE SAME SET OF COMPARABLES BUT ALSO THE MARGIN OF 21% WAS FOUND TO BE AT ALP. IN THIS YEAR ONLY, WHY THOSE COMPARABLES HAVE NOT BEEN FOUND TO BE COMPARABLE HAS NOT BEEN MENTIONED BY THE TPO. ONE OF THE MAIN ALLEGATI ONS MADE BY THE TPO IS THAT WHILE MAKING A SEARCH IN PROWESS DATA , THE ASSESSEE HAS NOT ENTERED THE KEY WORD INVESTMENT ADVISORY SERVICES INSTEAD THE ASSESSEE SHOULD HAVE CARRIED OUT ITS SEARCH FROM CAPITAL LINE DATA BASE. THEREFORE, THE ASSESSEES COMPARABLES ARE NOT PROPER AND, THEREFOR E, FRESH COMPARABLES SHOULD BE SEARCHED. THE LEARNED SR. COUNSEL SUBMITT ED THAT SUCH AN OBJECTION OF THE TPO IS NOT CORRECT BECAUSE ULTIMAT ELY THE TPO HIMSELF HAS MADE THE SELECTION OF THE COMPARABLES USING PROWESS DATA . IN SUPPORT OF THIS, HE POINTED OUT THE SELECTION OF THE COMPARABL ES AND THEIR FINANCIAL DATA ANNEXED IN THE PAPER BOOK FROM PAGE555 TO 564, WHE REIN IT HAS BEEN MENTIONED THAT THEY HAVE BEEN SELECTED FROM PROWESS DATA . REGARDING TPOS ALLEGATIONS THAT KEY PHRASE INVESTMENT ADVISORY SERVICES HAS NOT BEEN ADOPTED BY THE ASSESSEE FOR SEARCHING THE COMP ARABLES IS ALSO NOT TEMASEK HOLDINGS ADVISORS (I) P. LTD. 50 TENABLE BECAUSE THERE IS NO SUCH KEY PHRASE INVESTMENT ADVISORY SERVICES IN PROWESS DATA . THUS, THE ENTIRE BASIS OF THE TPO FOR REJECTING T HE ASSESSEES COMPARABLES AND INTRODUCING FRESH COMPAR ABLES IS NOT ONLY BASELESS BUT ALSO ERRONEOUS. THEREAFTER, THE LEARNE D SR. COUNSEL, MR. KAKA, DREW OUR ATTENTION TO THE DATA OF THE SIX COMPARABL ES SELECTED BY THE ASSESSEE FOR BENCH MARKING ITS TRANSACTIONS AND SUB MITTED THAT NOT ONLY THESE COMPANIES ARE FUNCTIONALLY COMPARABLE AS THEY ALL ARE ENGAGED IN THE INVESTMENT ADVISORY SERVICES SOMEHOW OR THE OTHER, BUT ALSO THEIR RELEVANT FINANCIAL DATA ARE ALSO COMPARABLE. MOST OF THESE C OMPARABLES HAVE BEEN ACCEPTED BY THE TPO IN THE EARLIER YEAR AND ALSO IN THE SUBSEQUENT YEARS AND, THEREFORE, THE SAME SET OF COMPARABLES CANNOT BE REJECTED WITHOUT ANY PROPER BASIS OR SUBSTANTIAL CHANGE IN THE FUNCTION AND FINANCIAL DATA PARTICULARLY IN THIS YEAR. FIRST OF ALL, THE TPO HA S TO HAVE SOME BASIS FOR REJECTING THE ASSESSEES COMPARABLES AND THEN ONLY HE CAN PROCEED FOR CARRYING OUT FRESH SEARCH OF COMPARABLES. IN SUPPOR T OF THIS CONTENTION, MR. KAKA, STRONGLY RELIED UPON THE DECISION OF THE DELH I HIGH COURT IN CIT V/S MANTOR GRAPHICS PVT. LTD., ITA NO.1114/2008 ORDER D ATED 4 TH APRIL 2013 AND ALSO THE DECISION OF THE TRIBUNAL, MUMBAI BENCH, IN CARLYLE INDIA ADVISORIES PVT. LTD. V/S ACIT, ITA NO.7901/MUM./2011, ORDER DA TED 4 TH APRIL 2012. HE INFORMED BEFORE US THAT THIS DECISION HAS ALSO BEEN AFFIRMED BY THE BOMBAY HIGH COURT, VIDE ORDER DATED 22 ND FEBRUARY 2013. ONE BY ONE, HE DISCUSSED ALL THE 6 COMPARABLES ADOPTED BY THE ASSESSEE AND H OW THEY ARE FUNCTIONALLY COMPARABLE FOR THE PURPOSE OF COMPARABILITY ANALYSI S IN THIS CASE VISAVIS THE DOCUMENTS PLACED IN THE PAPER BOOK. HE SUBMITTE D THAT IN THE CASE OF TEMASEK HOLDINGS ADVISORS (I) P. LTD. 51 CARLYLE INDIA ADVISORIES (SUPRA) ONE OF THE COMPARA BLES IDC INDIA LTD. WAS FOUND TO BE FUNCTIONALLY COMPARABLE IN THE CASE OF INVESTMENT ADVISORY SERVICES AND IT WAS HELD THAT MERCHANT BANKERS AND INVESTMENT BANKERS CANNOT BE COMPARED WITH THE INVESTMENT ADVISORY SER VICES. THE MOST IMPORTANT THING IS THAT THE ASSESSEES INCOME IS NO T DEPENDENT UPON SUCCESSFUL TRANSACTIONS AS THE ASSESSEE GETS ITS MA RKUP ON ADVISE ONLY. HE FURTHER SUBMITTED THAT ALL THE COMPARABLES SHORTLIS TED BY THE TPO ARE EITHER SHARE BROKERS OR INVESTMENT BANKERS, THEREFORE, NON E OF THE COMPARABLES ARE FUNCTIONALLY COMPARABLE TO THE ASSESSEE. ONE BY ONE HE DISTINGUISHED ALL THE COMPARABLES SHORTLISTED BY THE TPO. 49. PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE , MR. AJIT JAIN, SUBMITTED THAT, INSOFAR AS THE COMPARABLES CHOSEN B Y THE TPO, HE STRONGLY RELIED UPON THE SELECTION OF THE COMPARABLES MADE B Y HIM. SUCH COMPARABLES HAVE ALSO BEEN APPROVED BY THE DRP, THE REFORE, THE SAME SHOULD BE ADOPTED FOR BENCH MARKING THE ASSESSEES TRANSACTION. WITHOUT PREJUDICE, HE SUBMITTED THAT THE COMPARABLES CHOSEN BY THE ASSESSEE, BARRING ONE OR TWO COMPARABLES, ALL THE OTHER COMPA RABLES ARE EITHER FUNCTIONALLY NON COMPARABLE OR THEIR SOURCE OF INCO ME ARE FROM OTHER THAN THE INVESTMENT ADVISORY SERVICES. REGARDING ACCESS INDIA ADVISORS LTD., HE DID NOT GIVE MUCH COMMENT. HOWEVER, REGARDING ICRA MANAGEMENT CONSULTANCY SERVICES LTD., HE SUBMITTED THAT THE NA TURE OF SERVICES PROVIDED BY THIS COMPANY ARE ENTIRELY DIFFERENT AND CANN OT BE SAID TO BE COMPARABLE TO THE ASSESSEES CASE. DRAWING OUR ATTE NTION TO THE ANNUAL TEMASEK HOLDINGS ADVISORS (I) P. LTD. 52 DIRECTORS REPORT OF THE SAID COMPANY, HE SUBMITTED THAT THIS COMPANY IS ENGAGED IN VARIOUS OTHER ACTIVITIES LIKE IN GOVERNM ENT INFRASTRUCTURE, ENERGY, BANKING AND FINANCIAL SERVICES, CORPORATE ADVISORY, SKILL DEVELOPMENT AND OTHERS. THUS, AT THE FUNCTIONAL LEVEL ITSELF, THIS COMPANY CANNOT BE COMPARED WITH THAT OF THE ASSESSEES COMPANY. REGARDING ICRA ONLINE LTD. HE SUBMITTED THAT THE SEGMENTAL REPORTING OF THE SAID COMPANY SHOWS THAT THEY ARE ENGAGED IN INFORMATION SERVICES, OUTSOURCED SER VICES AND SOFTWARE SERVICES. THESE SERVICES CANNOT BE SAID TO BE COMPA RABLE WITH THE INVESTMENT ADVISORY SERVICES. THUS, THIS COMPANY HA S RIGHTLY BEEN REJECTED BY THE TPO. REGARDING IDC INDIA LTD., HE DID NOT MA KE ANY COMMENT AND RELIED UPON THE REJECTION MADE BY THE TPO. REGARDIN G INFORMATION TECHNOLOGY LTD., HE SUBMITTED THAT ITS MAIN INCOME IS FROM DATA OUTSOURCING CHARGES I.E., BPO AND, THEREFORE, THIS COMPANY HAS TO BE EXCLUDED FROM THE COMPARABILITY ANALYSIS. LASTLY, COMING TO THE KINET IC TRUST LTD., HE SUBMITTED THAT THIS COMPANY IS REGISTERED AS NBFC WITH THE RB I AND AGAIN IT IS NOT COMPARABLE TO THE ASSESSEE. 50. THUS, WITHOUT PREJUDICE, EVEN IF OUT OF SIX COMPARA BLE COMPANIES CHOSEN BY THE ASSESSEE COMPANY, ONLY TWO COMPANIES ARE INCLUDED IN THE COMPARABILITY ANALYSIS THEN THE AVERAGE MARGIN COME S TO 30% AS THE MARGIN OF ACCESS INDIA ADVISORIES INDIA LTD. IS 45.96% AND THE MARGIN OF IDC LTD. IS 13.88%. GOING BY THE ASSESSEES OWN COMPARABLES WHI CH CAN BE SAID TO BE SOME FUNCTIONALLY COMPARABLE, THEN ALSO THE DIFFERE NCE COMES TO 9% AND THE UPWARD ADJUSTMENT TO THE TUNE OF 9% IN THE ASSESSEE S MARGIN SHOULD BE TEMASEK HOLDINGS ADVISORS (I) P. LTD. 53 MADE. REGARDING INCLUSION OF MOST OF THE COMPARABLE S IN THE SUBSEQUENT YEARS, HE SUBMITTED THAT THE ANNUAL REPORTS OF SUCH COMPANIES ARE NOT AVAILABLE BEFORE US AND, THEREFORE, THE SAME CANNOT BE SAID TO BE COMPARABLE IN THIS ASSESSMENT YEAR. 51. IN THE REJOINDER, THE LEARNED SR. COUNSEL, SUBMITTE D THAT INSOFAR AS THE ICRA MANAGEMENT COMPANY IS CONCERNED, THIS COMPANY IS MOSTLY INTO INVESTMENT ADVISORY SERVICES FOR VARIOUS SECTORS AN D, THEREFORE, THE SAME IS LIABLE TO BE ACCEPTED. MOREOVER, THE TPO IN THE ASS ESSMENT YEARS 200708 AND 200910, HAS HIMSELF ACCEPTED THE SAID COMPARAB LE FOR COMPARABILITY ANALYSIS THEN FOR THE ASSESSMENT YEAR 200809, IT C ANNOT BE HELD THAT THE SAME IS FUNCTIONALLY NOT COMPARABLE. THEREFORE, THI S COMPANY SHOULD BE HELD TO BE A GOOD COMPARABLE WITHOUT ANY MATERIAL ON REC ORD. REGARDING ICRA ONLINE LTD., HE SUBMITTED THAT VARIOUS SERVICES CAR RIED ON BY THIS COMPANY MOSTLY RELATES TO THAT OF FINANCIAL ADVISORY AND AL L ITS ACTIVITIES IN FACT ARE DIRECTLY RELATED TO ASSESSEES LINE OF BUSINESS. MO REOVER, THIS COMPARABLE HAS ALSO BEEN ACCEPTED BY THE TPO AFTER CALLING FOR ALL THE RELEVANT RECORDS NOT ONLY IN THE ASSESSMENT YEAR 200708, BUT ALSO IN TH E ASSESSMENT YEAR 200910. REGARDING INFORMATION TECHNOLOGY LTD., HE SUBMITTED THAT THE BPO SERVICES OF THE COMPANY ARE ONLY FOR THE PURPOSE OF PROVIDING DATA AND ANALYSIS OF FINANCIAL FUNDAMENTALS OF THE INDIAN CO MPANIES TO THE FOREIGN COMPANY FOR INVESTMENT PURPOSES. THEREFORE, THIS CO MPANY IS HAVING A SIMILAR FUNCTION WITH THAT OF THE ASSESSEE COMPANY. THEREFORE, THE SAME IS A GOOD COMPARABLE. LASTLY, ON KINETIC TRUST LTD., HE SUBMITTED THAT THE MAIN TEMASEK HOLDINGS ADVISORS (I) P. LTD. 54 BUSINESS ACTIVITIES OF THIS COMPANY ARE CORPORATE C ONSULTANT AND FINANCIAL SERVICE. THEREFORE, THIS COMPANY IS AGAIN QUITE A G OOD COMPARABLE. IN SUPPORT OF HIS CONTENTION, HE TOOK US TO RELEVANT D ATA AND FINANCIALS OF THESE COMPANIES FORMING PART OF THE VOLUMINOUS PAPER BOOK . 52. THUS, ALL THESE COMPANIES SELECTED BY THE ASSESSEE ARE GOOD COMPARABLES FOR BENCH MARKING THE MARGIN RECEIVED B Y THE ASSESSEE FROM ITS A.E. FOR THE PURPOSE OF DETERMINATION OF THE ALP. 53. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE RE LEVANT MATERIAL RELIED UPON BY THE EITHER PARTY BEFORE US AND ALSO THE ORDER OF THE TPO. THE ASSESSEE WHICH IS MAINLY ENGAGED IN RENDERING OF IN VESTMENT ADVISORY SERVICES TO ITS PARENT COMPANY AT SINGAPORE HAS REC EIVED MARKUP OF 21%. THIS MARGIN OF 21% HAS BEEN BENCHED MARKED BY USING TNMM AS THE MOST APPROPRIATE METHOD WITH PLI AS OPERATING PROFIT TO OPERATING COST. AFTER DETAIL PROCESS OF SELECTION IN PROWESS DATA AND SELECTION CRITERIA, IT HAD SELECTED SIX COMPARABLES IN ITS TRANSFER PRICING ST UDY REPORT WITH AVERAGE MARGIN OF 13.85% . SINCE THIS MARGIN WAS LOWER THAN ASSESSEES MARGI N OF 21% AND, HENCE, IT WAS DECLARED THAT ITS MARGIN ON THE TRANSACTION CARRIED OUT WITH ITS PARENT COMPANY WAS AT ALP. THE TPO, HO WEVER, OUT RIGHTLY REJECTED THE ASSESSEES COMPARABLES, FIRSTLY, ON TH E GROUND THAT THEY ARE NOT IN INVESTMENT ADVISORY SERVICES AND SECONDLY THE AS SESSEE HAS NOT CARRIED OUT SEARCH BY USING THE KEY PHRASE INVESTMENT ADVISORY SERVICES . HE WAS OF THE OPINION THAT THE DATA SHOULD HAVE BEEN ACCES SED FROM THE CAPITAL LINE DATA BASE . NO PROPER REASONING HAS BEEN GIVEN BY THE TPO AS TO WHY DATA TEMASEK HOLDINGS ADVISORS (I) P. LTD. 55 FROM PROWESS IS NOT RELIABLE AND THE CAPITAL LINE DATA SHOULD HAVE BEEN TAKEN. ON A PERUSAL OF HIS OWN SEARCH FOR SELECTION OF COMPARABLES, IT IS SEEN THAT HE HIMSELF HAS SELECTED THE COMPARABLES USING THE PROWESS DATA WHICH IS EVIDENT FROM THE FINANCIALS TAKEN BY THE TPO OF HIS COMPARABLES WHICH ARE APPEARING FROM PAGE555 TO 564 OF THE PAPER BOOK SU BMITTED BEFORE US. HE HAS ALSO NOT ESTABLISHED THAT BY ENTERING THE KEY P HRASE INVESTMENT ADVISORY SERVICE , THE SELECTION OF THE FUNCTIONALLY SIMILAR COMPANI ES ARE AVAILABLE FROM THE DATA. BE THAT AS IT MAY, THE SEL ECTION OF EIGHT COMPARABLES BY THE TPO, AS HAVE BEEN INCORPORATED IN THE FORGOI NG PARAGRAPHS, IT IS SEEN THAT THESE COMPANIES ARE EITHER ENGAGED AS A BROKIN G COMPANY OR MERCHANT BANKER OR ASSET MANAGEMENT COMPANY. IN CASE OF STOC K BROKING COMPANIES, THE MAIN FUNCTIONS ARE MARKETING AND PROSPECTING FO R NEW CLIENTS, EXECUTION AND SETTLEMENT OF THE TRANSACTION AND TRADING OF SH ARES WHICH ARE MOSTLY ON OWN ACCOUNT OR ON BEHALF OF THE CUSTOMERS. THE RISK ASSUMED IS FAR MORE THAN THE COMPANIES WHICH ARE PURELY ENGAGED IN INVE STMENT ADVISORY SERVICES. THE ASSETS EMPLOYED ARE ALSO SIGNIFICANT. IN COMPARISON TO THIS, THE COMPANY WHICH IS ENGAGED IN INVESTMENT ADVISORY SER VICES, ONLY GIVES ADVISE AND ARE FOR DIFFERENT FROM THE ACTIVITIES CARRIED O UT BY THE STOCK BROKERS. OUT OF EIGHT COMPARABLES, THREE COMPARABLES CHOSEN BY T HE TPO VIZ. (I) RELIGARE COMMODITIES LTD., (II) SHRIYAM BROKING INTERMEDIARY LTD., AND (III) TWENTY FIRST CENTURY SHARES AND SECURITIES LTD. ARE PURELY STOCK BROKING COMPANY AND, THEREFORE, THE SAME ARE NOT COMPARABLE ON FAR ANALYSIS WITH THAT OF THE ASSESSEE COMPANY AND CANNOT BE HELD AS FUNCTION ALLY COMPARABLE. THE COMPANIES WHICH ARE ENGAGED IN THE ASSET MANAGEMENT ARE BASICALLY TEMASEK HOLDINGS ADVISORS (I) P. LTD. 56 RESPONSIBLE FOR MOBILIZING THE FUNDS FROM THE INVES TORS BY MARKETING THE SCHEME. THEIR MAIN FUNCTIONS ARE SALES AND MARKETIN G, INVESTMENT AND MANAGEMENT OF THE FUNDS MOBILIZED UNDER VARIOUS SCH EMES. THEY ARE RESPONSIBLE FOR PROVIDING MANAGEMENT AND ADMINISTRA TIVE SERVICES MOSTLY TO THE MUTUAL FUNDS AND TO DEPLOY SUCH FUNDS. THE RISK IS ALSO ASSUMED BY SUCH COMPANIES IN THE FORM OF SERVICE LIABILITIES, REGUL ATORY AND REPUTATIONAL RISK. MOREOVER, THE ASSET MANAGEMENT COMPANIES ARE ALSO R EGULATED ENTITIES WHICH ARE REQUIRED TO BE LICENSED BY SEBI. THUS, TH ESE COMPANIES ALSO FAIL THE TEST OF FAR ANALYSIS WITH THE INVESTMENT ADVISO RY COMPANIES. THUS, SUNDARAM ASSET MANAGEMENT COMPANY, DEUTCHE ASSET MA NAGEMENT INDIA LTD. AND RELIGARE COMMODITIES LTD., AS SELECTED BY THE TPO, CANNOT BE COMPARED WITH THE ASSESSEE COMPANY. LASTLY, THERE A RE FEW COMPANIES WHICH ARE DOING ENTIRELY DIFFERENT ACTIVITIES VIZ. ICRA LTD., WHICH IS A CREDIT RATING AGENCY IN INDIA AND BGIL FILMS AND TECHNOLOG IES LTD., WHICH IS MAINLY ENGAGED IN PRODUCTION OF DISTRIBUTION OF MOVIES. BO TH THESE COMPANIES UNDER ANY PARAMETER OR YARDSTICK CANNOT BE SAID TO BE FUN CTIONALLY COMPARABLE WITH THAT OF THE ASSESSEE COMPANY. LASTLY, BRESON CORPOR ATE FINANCE LTD., ARE MOSTLY INTO MAKING INVESTMENT IN THE COMPANIES USIN G ITS OWN FUND AND IT IS A LEADING PLAYER IN DISTRESS AND SPECIAL SITUATION ADVISOR AND INVESTMENT COMPANY. THE OVER ALL FUNCTION AS PER THE PROFILE O F THE COMPANY, CANNOT BE SAID TO HAVE MUCH FUNCTIONAL SIMILARITY WITH THAT O F THE ASSESSEE COMPANY. ACCORDINGLY, NONE OF THE COMPARABLES AS SELECTED BY THE TPO CAN BE SAID TO BE COMPARABLE ON FAR ANALYSIS AND, THEREFORE, NONE OF THE COMPARABLES CAN TEMASEK HOLDINGS ADVISORS (I) P. LTD. 57 BE INCLUDED FOR THE COMPARABILITY ANALYSIS FOR BENC H MARKING THE TRANSACTIONS CARRIED ON BY THE ASSESSEE UNDER TNMM. 54. COMING TO THE ASSESSEES COMPARABLES, IT IS SEEN TH AT SOME OF THEM HAVE BEEN FOUND TO BE PROPER COMPARABLE BY THE TPO HIMSELF IN THE ASSESSMENT YEAR 200708 AND ALSO IN THE ASSESSMENT YEAR 200910. WITHOUT ANY PROPER REASON OR CHANGE IN THE FUNCTION ALITY AND ANY FINANCIAL DATA, IT CANNOT BE HELD THAT THE SAME COMPANIES ARE NOT COMPARABLE IN THE INTERMEDIARY PERIOD OF THE ASSESSMENT YEAR 200809. THE TPO HAS TO BRING SOME MATERIAL ON RECORD TO SHOW THAT WHY THESE COMP ARABLES WHICH WERE GOOD COMPARABLE IN THE EARLIER YEAR ALSO IN AND SUC CEEDING YEAR, CANNOT BE COMPARED IN THIS YEAR. THUS, THREE COMPARABLES VIZ. ICRA MANAGEMENT CONSULTING SERVICES LTD., ICRA ONLINE LTD. AND IDC INDIA LTD., CANNOT BE REJECTED OUT RIGHTLY. COMING TO THE FUNCTIONAL PROF ILES OF ALL THE SIX COMPARABLES, IT IS SEEN THAT (I) ICRA MANAGEMENT CONSULTANT LTD. THIS COMPANY IS ENGAGED IN OPERATIONS OF ADVISORY S ERVICES AND IS OFFERING CONSULTATION SERVICE IN THE AREA OF STR ATEGY, RISK MANAGEMENT, OPERATIONS, IMPROVEMENT REGULATORY ECON OMICS AND TRANSACTIONS ADVISORY. FROM THE VARIOUS FIELDS OF ACTIVITIES AS SEEN FROM THE DIRECTORS REPORT, IT IS SEEN THAT TH IS COMPANY IS PROVIDING MANAGEMENT AND ADVISORY SERVICES FOR VARI OUS TYPES OF INDUSTRIES. ALL ITS REVENUE IS GENERATED FROM CONSU LTATION FEES. TEMASEK HOLDINGS ADVISORS (I) P. LTD. 58 THUS, THIS COMPANY IS GIVING CONSULTATION IN VARIOU S TYPES OF INDUSTRIES THROUGH INVESTMENT ADVISORS. THUS, THIS COMPANY IS A GOOD COMPARABLE MORE SO WHEN IT HAS BEEN ACCEPTED B Y THE TPO IN THE EARLIER YEAR AS WELL AS IN THE SUCCEEDING YE AR; II) ICRA ONLINE LTD. THE ASSESSEE HAS TAKEN ITS SEGMENTAL DETAILS OF OUT SOURCE SERVICES WHICH MOSTLY CONSISTS OF INVESTMENT ADVISO RY SERVICES ONLY. THUS, GOING BY THE SEGMENTAL DETAILS ONLY, WH ICH IS INVESTMENT ADVISORY COMPANY ONLY, IT IS CONSIDERED TO BE A GOOD COMPARABLE AND MOREOVER ON THE BACKGROUND THAT THIS COMPANY HAS BEEN FOUND TO BE A GOOD COMPARABLE IN THE EARLI ER YEARS AS WELL AS IN THE SUCCEEDING YEARS BY THE TPO, THE SAM E HAS RIGHTLY BEEN INCLUDED AS GOOD COMPARABLE FOR COMPARABILITY ANALYSIS. III) ACCESS INDIA ADVISORS LTD. THIS COMPANY IS INTO MANAGEMENT CONSULTING AND REND ERING BUSINESS ADVISORY SERVICES. THIS COMPANY MOSTLY FOC USES ON INWARD INVESTMENT IN INDIA, WHICH IS QUITE SIMILAR TO THE ACTIVITIES CARRIED OUT BY THE ASSESSEE COMPANY. GOING BY ITS P ROFILE AND ITS FUNCTIONS ALONG WITH REVENUE GENERATED FROM SUCH AC TIVITIES, IT IS SEEN THAT IT IS QUITE A GOOD COMPARABLE. MOREOVER, THE LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT HAD ANY OBJECTI ON FOR INCLUDING THIS COMPARABLE FOR THE COMPARABILITY ANA LYSIS. TEMASEK HOLDINGS ADVISORS (I) P. LTD. 59 ACCORDINGLY, THE SAID COMPANY HAS RIGHTLY BEEN INCL UDED IN THE LIST OF COMPARABLES; IV) IDC INDIA LTD. THIS COMPANY IS ALSO ENGAGED IN ADVISORY AND CONSUL TANCY AND SERVICES FOR THE PURPOSE OF INVESTMENT MADE IN VARI OUS SECTORS. THIS COMPANY WAS ALSO FOUND TO BE A GOOD COMPARABLE IN CARLYLE INDIA ADVISORIES PVT. LTD. FOR RENDERING SIMILAR KI ND OF FUNCTION. MOREOVER, THIS COMPANY HAS ALSO BEEN FOUND TO BE GO OD COMPARABLE BY THE TPO IN THE ASSESSMENT YEARS 2007 08 AND 200910 (X) II (V) INFORMED TECHNOLOGIES LTD . THIS COMPANY MOSTLY OFFERS RANGE OF DATA MANAGEMENT SERVICES TO THE FINANCIAL SECTOR IN U.S.A. IT COLLECTS AND ANALYSES DATA ON F INANCIAL FUNDAMENTALS, CORPORATE GOVERNANCE AND CAPITAL MARK ET. IT OUTSOURCE SERVICES I.E., BPO SERVICES CONSISTING OF FINANCIAL DATA BASE AND BACK OFFICE ACTIVITIES FOR RESEARCH AND AD VISORY REPORTS. THUS, THE DATA OUTSOURCING CHARGES ARE MOSTLY RELAT ED TO ANALYSING OF DATA BASED ON WHICH ADVISE IS GIVEN FO R THE INVESTMENT PURPOSE IN INDIA. MOREOVER, THIS COMPANY HAS BEEN ACCEPTED BY THE TPO IN THE YEAR 200910 ALSO. THUS, IT IS A GOOD COMPARABLE. TEMASEK HOLDINGS ADVISORS (I) P. LTD. 60 V) KINETIC TRUST LTD. THIS COMPANY THOUGH REGISTERED AS A NBFC BUT IS MAI NLY ENGAGED IN CORPORATE CONSULTANCY AND FINANCIAL SERV ICES WHICH ALSO INCLUDE INVESTMENT ADVISORY SERVICE. MOREOVER, THIS COMPANY HAS ALSO BEEN ACCEPTED TO BE A GOOD COMPARA BLE BY THE TPO IN THE ASSESSMENT YEAR 200910. THUS, THIS COMPANY HAS RIGHTLY BEEN INCLUDED BY THE ASSESSEE FOR COMPA RABILITY ANALYSIS. 55. THUS, ALL THE SIX COMPANIES SHORTLISTED BY THE ASSE SSEE ARE QUITE GOOD COMPARABLES LOOKING TO THE OVER ALL FUNCTIONS AND A LSO THAT THE SAME HAVE BEEN FOUND TO BE SO BY THE DEPARTMENT IN THE PRECED ING AND SUCCEEDING YEARS. ACCORDINGLY, THE ENTIRE ADJUSTMENT MADE BY T HE TPO CANNOT BE SUSTAINED AS THE MARGIN OF THE ASSESSEE @ 21% IS AT ARMS LENGTH LOOKING TO THE AVERAGE MARGIN OF THE SIX COMPARABLES. ACCORDIN GLY, THE ADJUSTMENTS MADE BY THE TPO ARE DELETED. THUS, THE GROUND NO.2 , RAISED BY THE ASSESSEE IS TREATED AS ALLOWED. 56. IN GROUND NO. 3, THE ASSESSEE HAS RAISED THAT WHILE COMPUTING THE ALP, VARIATION OF +/ 5% SHOULD BE ALLOWED. THIS GROUND HAS NOW BECOME PURE LY ACADEMIC IN VIEW OF OUR DECISION GIVEN ABOVE THAT A SSESSEES MARGINS ARE AT ARMS LENGTH PRICE. ACCORDINGLY, THE GROUND NO.3, R AISED BY THE ASSESSEE IS TREATED AS INFRUCTUOUS. 57. 4 #7 &) *4# 2 &) * !+* 200809 2 !# < ) 1# => ? TEMASEK HOLDINGS ADVISORS (I) P. LTD. 61 57. IN THE RESULT, ASSESSEES APPEAL FOR THE ASSESS MENT YEAR 200809 IS TREATED AS ALLOWED. 58. &) *E $!F, &) *4# 2 &) * !+* 200708 2 82 9:; ' !# < ) 1# => ! &) *4# 2 &) * !+* 200809 2 !# < ) 1# => ? 58. TO SUM UP, ASSESSEES APPEAL FOR A.Y. 200708 I S TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND ASSESSEES APP EAL FOR A.Y. 200809 IS TREATED AS ALLOWED. $ 2 5+ G H)7 30 TH AUGUST 2013 2 I ? ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST 2013 SD/- . .. . B. RAMAKOTAIAH ACCOUNTANT MEMBER SD/- '# '# '# '# $% $% $% $% & & & & AMIT SHUKLA JUDICIAL MEMBER MUMBAI, H) H) H) H) DATED : 30 TH AUGUST 2013 $ 2 .&#'J KJ+# / COPY OF THE ORDER FORWARDED TO : (1) &) *4# / THE ASSESSEE; (2) 1! / THE REVENUE; (3) L () / THE CIT(A); (4) L / THE CIT, MUMBAI CITY CONCERNED; (5) J!OI .&#&) , , / THE DR, ITAT, MUMBAI; (6) IP* Q / GUARD FILE. /J# .&# / TRUE COPY $) / BY ORDER . 1. RS / PRADEEP J. CHOWDHURY !4T &)1 R! / SR. PRIVATE SECRETARY 9 / = 1 / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI