Barclays Global Service Centre Private Limited (formerly: Barclays Technology Centre India Private Limited), Pune V. Deputy Commissioner of Income Tax, Pune

ITA 700/PUN/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8622 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 24-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: EMANATE FROM
• Assessee Lawyers: AND OTHER
• Keywords: Depreciation; Transfer pricing; Double taxation relief; International transaction; Retrospective amendment; Non-deduction of tax; Revenue expenditure; TDS
• Section: 10AA; 40(a)(ia); 194J; 13; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH C, PUNE VIRTUAL COURT BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER . / ITA NO.601/PUN/2017 / ASSESSMENT YEAR : 2012-13 DCIT, CIRCLE-1(1), PUNE VS. M/S. BARCLAYS TECHNOLOGY CENTRE INDIA PVT. LTD., 3 RD FLOOR, BLOCK-C, PANCHASHIL TECH PARK, OFF AIRPORT ROAD, YERAWADA, PUNE 411 006 PAN : AADCB1173D APPELLANT RESPONDENT . / ITA NO.700/PUN/2017 / ASSESSMENT YEAR : 2012-13 BARCLAYS GLOBAL SERVICE CENTRE PRIVATE LIMITED (EARLIER KNOWN AS BARCLAYS TECHNOLOGY CENTRE INDIA PRIVATE LIMITED, GROUND TO 7 TH FLOOR, WING-3, CLUSTER A, EON FREE ZONE, MIDC KNOWLEDGE PARK, KHARADI, PUNE 411 014 PAN : AADCB1173D VS. DCIT, CIRCLE-1(1), PUNE APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : THESE TWO CROSS APPEALS - ONE BY THE ASSESSEE AND OTHE R BY THE REVENUE EMANATE FROM THE ORDER DATED 29-12-2016 P ASSED BY THE LD. CIT(A) IN RELATION TO THE ASSESSMENT YEAR 2012-1 3. ASSESSEE BY SHRI RAJENDRA AGIWAL REVENUE BY SHRI MAHADEVAN A.M. KRISHNAN DATE OF HEARING 12-01-2021 DATE OF PRONOUNCEMENT 12-01-2021 ITA NOS.601 & 700/PUN/2017 BARCLAYS GLOBAL SERVICE CENTRE PRIVATE LIMITED 2 2. THE FIRST ISSUE RAISED BY THE ASSESSEE IN ITS APPEAL IS AG AINST THE CONFIRMATION OF DISALLOWANCE OF LEASED LINE CHARGES (LINK SERVICE COST) ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURC E. FIRST GROUND OF THE REVENUES APPEAL IS ALSO INTERCONNECTED WITH TH E SAME. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESS EE IS AN INDIAN PRIVATE LIMITED COMPANY ENGAGED IN PROVIDING SOFTWARE SOLUTION SERVICES TO BARCLAYS GROUP WORLDWIDE. IT HAS ONE UNDERTAKING APPROVED AS A 100% EXPORT ORIENTED UNIT ELIGIBLE FOR DEDUCTION U/S.10B OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED `THE ACT); ANOTHER UNIT WITHIN THE AREA OF SPECIAL ECONOMIC ZONE (SEZ) ENTITLED TO DEDUCTION U/S.10AA OF THE ACT ; AND STILL ANOTHER UNIT IN DOMESTIC TARIFF AREA (DTA) IN MUMBAI . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSIN G OFFICER (AO) OBSERVED THAT THE ASSESSEE PAID A SUM OF RS.2,41,82,749/- AS LEASED LINE CHARGES TO VARIOUS VENDO RS IN INDIA, WHICH WERE CLAIMED AS DEDUCTION. ON BEING CALLED UP ON TO EXPLAIN AS TO WHY NO DEDUCTION OF TAX AT SOURCE WAS MADE IN TERMS OF SECTION 194J OF THE ACT, IT WAS SUBMITTED THAT THE AMOUNT PA ID WAS NOT IN THE NATURE OF FEES FOR PROFESSIONAL OR TECHNICAL SERVICES OR ROYALTY ETC. IN THE HANDS OF RECIPIENT WARRANTING ANY DE DUCTION ITA NOS.601 & 700/PUN/2017 BARCLAYS GLOBAL SERVICE CENTRE PRIVATE LIMITED 3 OF TAX AT SOURCE. THE AO FOUND THAT THE ASSESSEE WAS ENGAGED IN SOFTWARE DEVELOPMENT AND PRODUCTION OF SOFTWARE PRODUCTS. INTERNET WITH HIGH BANDWIDTH WAS REQUIRED FOR SUCH WORK. A DEDICATED LEASE LINE FOR INTERNET SERVICE WAS TAKEN FROM SU PPLIER. THE PAYMENT WAS HELD BY THE AO TO BE IN THE NATURE OF FEES FOR TECHNICAL SERVICES REQUIRING DEDUCTION OF TAX AT SOURCE U/S 19 4J OF THE ACT. HAVING NOT DONE SO, THE AO INVOKED SECTION 40(A)(IA ) OF THE ACT. HE NOTICED THAT OUT OF SUCH SUM OF RS.2.41 CROR E, AN AMOUNT OF RS.55,46,411/- WAS INCURRED AGAINST SEZ UNIT. THE AO OPINED THAT THE ENHANCED CLAIM OF DEDUCTION U/S.10AA DUE TO DISALLOWANCE U/S 40(A)(IA) ON THIS COUNT WILL NOT BE AVAILABLE TO THE ASSESSEE DESPITE THE JUDGMENT OF HONBLE BOMBAY HIGH C OURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD. (2011) 330 ITR 175 (BOM.) . THE LD. CIT(A) APPROVED THE STAND OF THE AO, IN PRINCIPLE, BY HOLDING THE AMOUNT PAID BY THE ASSESSEE WAS IN THE NATURE OF `ROYALTY UNDER THE TERMS OF EXPLANATION 6 TO SEC TION 9(1)(VI) OF THE ACT, INSERTED BY THE FINANCE ACT, 2012 W.R. E.F. 01- 06-1976. THAT IS HOW, HE HELD THAT THE ASSESSEE WAS OBLIGE D TO DEDUCT TAX AT SOURCE ON PAYMENT OF RS.2.41 CRORE. HE, HOWEVER, HELD THAT THE DISALLOWANCE OF THE LEASED LINE CHARGES FOR A SU M OF RS.55,46,411/-, PERTAINING TO THE SEZ UNIT OF THE ASSESSEE, WOULD ITA NOS.601 & 700/PUN/2017 BARCLAYS GLOBAL SERVICE CENTRE PRIVATE LIMITED 4 MAKE THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S.10AA AT THE ENHANCED INCOME. WHEREAS, THE ASSESSEE IS AGGRIEVED B Y THE SUSTENANCE OF DISALLOWANCE U/S.40(A)(IA) TO THE TUNE OF RS. 2.41 CRORE, THE REVENUE HAS CHALLENGED THE SUCCOUR PROVIDED BY THE LD. CIT(A) IN ALLOWING DEDUCTION U/S.10AA AT THE ENHANCED PROF IT BECAUSE OF THE DISALLOWANCE OF RS.55.46 LAKH PERTAINING TO THE ELIGIBLE UNIT. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS THROUGH VIRTUAL COURT AND METICULOUSLY SCANNED THE RELEVANT MATERIAL ON RECORD. THE MOOT QUESTION IS IF THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SO URCE ON THE AMOUNT OF LEASED LINE CHARGES PAID BY IT TO VARIOUS V ENDORS IN INDIA SO AS TO WARRANT DISALLOWANCE U/S 40(A)(IA) OF THE A CT? THE AO HAS INVOKED THIS PROVISION IN THE HUE OF SECTION 194 J OF THE ACT. SECTION 194J REQUIRES DEDUCTION OF TAX AT SOURCE, INTER ALIA, ON `ROYALTY. EXPLANATION TO SECTION 194J STATES THROUGH CLAUSE (BA) THAT ROYALTY SHALL HAVE THE SAME MEANING AS I N EXPLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9. EXPLANATION 2 TO SECTION 9(1)(VI) DEFINES THE TERM ROYALTY TO MEAN CONSIDERATION FOR CERTAIN THINGS AS SET OUT IN CLAUSES ( I) TO (VI). CLAUSES (I) TO (III) OF EXPLANATION 2 REFER TO THE TERM `PROCESS. EXPLANATION 6 TO SECTION 9(1)(VI) INSERTED BY THE ITA NOS.601 & 700/PUN/2017 BARCLAYS GLOBAL SERVICE CENTRE PRIVATE LIMITED 5 FINANCE ACT, 2012, CLARIFIES THE AMBIT OF THE EXPRESSION `P ROCESS AS USED IN EXPLANATION 2 TO SECTION 9(1)(VI). THUS EXPLANATIO NS 5 AND 6, IN THE PRESENT CONTEXT, ARE JUST EXTENSIONS OF THE EXPLANATION 2 TO SECTION 9(1)(VI), WHICH TAKE US TO SECTION 1 94J OF THE ACT. 5. THE FINANCE ACT, 2012 HAS INSERTED EXPLANATIONS 4, 5 AND 6 TO SECTION 9(1)(VI) W.R.E.F. 01-06-1976 DEFINING INCOME B Y WAY OF ROYALTY. EXPLANATION 6 STATES THAT THE EXPRESSION `PROCESS INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDED TRANSMISSION BY SATELLITE (INCLUDING UP-LINKING, AMPLIFICATION, CONVERSION FOR DOWN-LINKING OF ANY SIGNAL), CABLE, OPTIC FIBRE OR BY ANY OTHER SIMILAR TECHNOLOGY, WHETHER OR NOT SUCH PROCESS IS SECRET. THUS, WITH THE INSERTION OF EXPLANATION 6 CLARIFYING THE SCOPE OF THE EXPRESSION PROCESS AS USED IN EXPLANATION 2 TO SECTION 9(1)(VI), IT BECOMES PALPABLE THAT IF ANY CHARGE IS PAID FOR TRANSMISSION BY CABLE, OPTIC FIBRE OR BY ANY OTHER SIMILAR TECHNOLOGY, IT WILL GET COVERED WITHIN THE DEFINITION OF INCOME B Y WAY OF ROYALTY. EXPRESSION 5 FURTHER CLARIFIES THAT THE POSSESSION OR CONTROL OF THE PROPERTY WITH THE PAYER IS NO MORE RELEVANT. ITA NOS.601 & 700/PUN/2017 BARCLAYS GLOBAL SERVICE CENTRE PRIVATE LIMITED 6 6. LEASED LINE IS A DEDICATED COMMUNICATION CHANNEL THAT EASILY INTERCONNECTS TWO OR MORE SITES ENSURING UNINTERRUPTED DATA FLOW FROM ONE POINT TO ANOTHER. IT IS A DEDICATED, FIXED-BAND WIDTH DATA CONNECTION, WHICH ALLOWS USERS TO HAVE A RELIABLE, HIGH- QUALITY INTERNET CONNECTION. AS PER THE ASSESSEES SUBMISSION BEFORE THE LD. CIT(A), AS CAPTURED ON PAGE 9 OF THE IMP UGNED ORDER, IT: `ENTERED INTO AN ARRANGEMENT WITH THIRD PARTY VENDO RS FOR PROVIDING DIGITAL SUBSCRIBER LINE FACILITY I.E. BROADBAND COMMUNICATION TECHNOLOGY USED FOR CONNECTING TO THE INTERNET, ETHERNET LEASED LINE .. THESE FACILITIES ENABLES THE APPELLANT TO ACCESS A STANDARD COMMUNICATION LINE FOR HIGHLY SECURED COMMUNICATION. IT IS A DEDICATED LINE PROVIDED TO THE APPELLANT. THUS THE ASSESSEE PAID FOR SECURING A DEDICA TED LINE FOR FLOW OF ITS DATA, WHICH IS NOTHING BUT LEASED LINE CHARGES. WHEN WE CONSIDER EXPLANATIONS 5 AND 6 READ WITH EXPLANATION 2 TO SECTION 9(1)(VI), IT BECOMES GRAPHICALLY CLEAR THAT THE LEAS ED LINE CHARGES PAID FOR TRANSMISSION BY ANY TECHNOLOGY, GET C OVERED WITHIN THE DEFINITION OF ROYALTY BY THE FINANCE ACT 2012 W.R.E.F. 01-06-1976 COVERING THE ASSESSMENT YEAR UNDER CONSIDERATION. ITA NOS.601 & 700/PUN/2017 BARCLAYS GLOBAL SERVICE CENTRE PRIVATE LIMITED 7 7. WE HAVE NOTED ABOVE THAT THE ASSESSEE IS AN INDIAN COMPANY AND IT MADE PAYMENT OF LEASED LINE CHARGES TO VARIOUS VENDO RS IN INDIA, AS HAS ALSO BEEN NOTED BY THE AO BY REPRODUCING REPLY OF THE ASSESSEE IN PARA 7.1 OF HIS ORDER. IN VIEW OF THE F ACT THAT A RESIDENT PAID LEASED LINE CHARGES TO ANOTHER RESIDENT, THE MA TTER ENDS BY EXAMINING THE AMBIT OF THE TERM ROYALTY UNDER THE ACT ITSELF AND THERE IS NO NEED TO EXAMINE VARIOUS DTAAS WHICH H AVE BEEN LOOKED INTO BY THE TRIBUNAL IN CERTAIN DECISIONS FOR HOLD ING THAT LEASED LINE CHARGES ARE NOT `ROYALTY IN THE LIGHT OF THE DEFINITION OF THE TERM ROYALTY AS USED IN THE RESPECTIVE DTA AS. 8. HAVING HELD THAT THE PAYMENT OF LEASED LINE CHARGES AMOUNTING TO RS.2.41 CRORE AMOUNTED TO ROYALTY AND THE S AME IS COVERED U/S.194J, THE NEXT POINT REQUIRING CONSIDERATION IS AS TO WHETHER THE ASSESSEE COULD HAVE LEGALLY DEDUCTED TAX AT SOUR CE FROM THE PAYMENTS MADE DURING THE F.Y. 2011-12 CORRESP ONDING TO THE A.Y. 2012-13 UNDER CONSIDERATION? 9. AT THIS JUNCTURE, WE WANT TO RECORD THAT TAXABILITY O F LEASED LINE CHARGES IN THE HANDS OF THE PAYEE IS ONE ASPECT AND DEDUCTION OF TAX AT SOURCE THERE FROM BY THE PAYER IS ANOTHER. THER E IS NO DOUBT THAT THE RETROSPECTIVE AMENDMENT BY INSERTION OF ITA NOS.601 & 700/PUN/2017 BARCLAYS GLOBAL SERVICE CENTRE PRIVATE LIMITED 8 EXPLANATIONS 4 TO 6 TO SECTION 9(1)(VI) MADE BY THE FINANCE ACT 2012 ALBEIT WITH RETROSPECTIVE EFFECT FORM 01-06-1976 HAVE RENDERED THE AMOUNT CHARGEABLE TO TAX AS `ROYALTY IN THE H ANDS OF THE RECIPIENT. BUT THE POSITION REGARDING DEDUCTION OF TAX AT SOURCE BY THE PAYER IS LITTLE DIFFERENT. TDS CONTEMPLATES MAKIN G DEDUCTION BEFORE MAKING THE PAYMENT. ONCE AN AMOUNT IS PAID AS PER THE LAW PREVAILING AT THE RELEVANT TIME NOT REQUIRING ANY DEDUCTION OF TAX AT SOURCE, ANY LATER RETROSPECTIVE AMENDME NT COVERING THE AMOUNT UNDER A SPECIFIC TAXING PROVISION CANN OT BRING THE HANDS OF CLOCK BACK SO AS TO REQUIRE THE PAYER TO DEDUCT TAX AT SOURCE. LIABILITY TO DEDUCT TAX AT SOURCE CAN BE FASTENE D ONLY UNDER THE LAW PREVAILING AT THE TIME OF PAYMENT. IF NO LIABILITY EXISTS AT THE TIME OF PAYMENT, ANY SUBSEQUENT RETROSPECTIVE AMENDMENT CANNOT BE ENFORCED AGAINST THE PAYE R. ONCE THERE IS NO LIABILITY TO DEDUCT TAX AT SOURCE AT THE MATERIA L TIME, THE FORTIORI IS THAT THERE CAN BE NO QUESTION OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT. 10. REVERTING BACK TO THE FACTUAL PANORAMA, IT IS OBVIOUS THAT THE FINANCE BILL, 2012 BECAME THE FINANCE ACT, 2012 SOMEWHER E AFTER THE CLOSE OF THE F.Y. 2011-12. AS OPPOSED TO THAT, THE FINANCIAL YEAR CORRESPONDING TO THE A.Y. UNDER CONSIDERATIO N ITA NOS.601 & 700/PUN/2017 BARCLAYS GLOBAL SERVICE CENTRE PRIVATE LIMITED 9 CAME TO AN END BEFORE THAT. ERGO, IT IS OVERT THAT WHEN THE PAYMENT OF LEASED LINE CHARGES WAS MADE, NO EXISTING PROVIS ION AT THAT TIME MADE THE ASSESSEE CLEARLY LIABLE TO DEDUCT TAX AT SOU RCE. SINCE THE LEASED LINE CHARGES GOT THE FINAL DRESSING UP AS `ROYALTY U/S 9(1)(VI) OF THE ACT AFTER THE CLOSE OF THE RE LEVANT FINANCIAL YEAR, WE HAVE NO HESITATION IN HOLDING THAT - EVEN THOUGH THE AMOUNT BECAME CHARGEABLE TO TAX AS ROYALTY IN THE HANDS OF THE RECIPIENT UNDER THE ACT FOR THE YEAR UNDER CONSIDERATION - BUT THE SAME DID NOT FASTEN AN OBLIGATION TO DEDUCT TAX AT SOURCE AS THE ASSESSEE COULD NOT HAVE ACTIVATE D ITS SIXTH SENSE TO ASCERTAIN BEFOREHAND THAT AN OBLIGATION TO DED UCT TAX AT SOURCE WAS IN OFFING. AS THE SCOPE OF ROYALTY CA ME TO BE EXPANDED AFTER THE CLOSE OF THE FINANCIAL YEAR WHEN THE ASS ESSEE HAD ALREADY PAID LEASE LINE CHARGES, WE HOLD THAT THE SAME COULD NOT HAVE TRIGGERED DEDUCTION OF TAX AT SOURCE SO AS TO WAR RANT ANY DISALLOWANCE U/S.40(A)(IA) OF THE ACT. THUS, GROUND NO.1 BY THE ASSESSEE IS ALLOWED. 11. IN VIEW OF OUR DECISION IN ALLOWING DEDUCTION OF RS .2.41 CRORE IN ENTIRETY, THERE CAN BE NO QUESTION OF MAKING ANY SEPARATE DISALLOWANCE IN RESPECT OF 10AA UNIT. THE FINDING RENDERED BY THE LD. CIT(A) IN SUSTAINING THE DISALLOWANCE AND SIMULTANEOUSLY ITA NOS.601 & 700/PUN/2017 BARCLAYS GLOBAL SERVICE CENTRE PRIVATE LIMITED 10 ALLOWING DEDUCTION U/S 10AA AT THE RESULTANT ENHANCED INCOME HAS, THUS, BECOME ACADEMIC. THUS, THE GROUND OF THE A SSESSEE IS ALLOWED AND THAT OF REVENUE IS DISMISSED AS INFRUCTUOUS. 12. GROUND NO.2 OF THE ASSESSEES APPEAL IS AGAINST THE DISALLOWANCE OF EXPENDITURE ON PURCHASE OF RSA TOKENS AMOUNTING TO RS.25,00,344/-. 13. THE FACTUAL MATRIX OF THIS GROUND IS THAT THE ASSESSEE PURCHASED RSA TOKENS WORTH RS.25.00 LAKH AND CLAIMED THE SAME AS REPAIR EXPENSES IN ENTIRETY. THE AO DID NOT ALLOW THE DEDUCTION DESPITE THE ASSESSEES CONTENTION THAT THE RSA TOKENS WERE USED IN RENDERING SERVICES TO ITS ASSOCIATED ENTERPRISE AND WERE CHARGED AT A MARK UP AT 15% ALONG WITH OTHER COSTS IN CURRED BY IT IN RENDERING SERVICES. THE AO TREATED THE SAME AS CAP ITAL EXPENDITURE. AFTER ALLOWING DEDUCTION TOWARDS DEPRECIATION ALLOWANCE, THE AO MADE AN ADDITION OF RS.22,07,044/-. NO RELIEF WAS ALLOWED BY THE LD. CIT(A). 14. HAVING HEARD BOTH THE SIDES IN THE BACKDROP OF THE RELE VANT MATERIAL ON RECORD, IT IS SEEN THAT THE ASSESSEE WAS GETTING REMUNERATED BY ITS AE AT COST PLUS 15%. THE ASSESSEE SPECIFICALLY STATED BEFORE THE AO THAT THE COST OF RSA TOKENS W AS ITA NOS.601 & 700/PUN/2017 BARCLAYS GLOBAL SERVICE CENTRE PRIVATE LIMITED 11 REPAID BY ITS AE WITH 15% MARK UP AND SUCH AMOUNT WAS CONSIDERED AS PART OF INCOME OF THE YEAR UNDER CONSIDERA TION. ONCE THE AMOUNT OF EXPENDITURE, DEBITED TO THE PROFIT AND LOSS ACCOUNT, GETS SPECIFICALLY CREDITED TO THE PROFIT AND LOSS ACCOU NT WITH A CERTAIN MARK-UP, THERE CAN BE NO QUESTION OF DISALLOWIN G THE EXPENDITURE SO CHARGED WHILE CONTINUING TO TREAT THE AMOUN T CREDITED AS INCOME. NOTWITHSTANDING THAT, THE LD. AR HAS PLACE D ON RECORD A COPY OF THE ORDER PASSED BY THE TRIBUNAL IN THE CASE OF AMDOCS DEVELOPMENT CENTRE INDIA PVT. LTD. VS. JCIT (ITA NO.69/PUN/2018) DEALING WITH THE SIMILAR ISSUE. VIDE ORDER DATED 27-11-2018, THE TRIBUNAL HAS HELD THAT RSA TOKENS ARE IN THE NATURE OF REVENUE EXPENDITURE AND HENCE DEDUCTIBLE. WE, THEREFORE, ORDER TO DELETE THE DISALLOWANCE OF RS.22.07 LAKH SUSTAINED IN THE FIRST APPEAL. 15. HAVING FOUND THAT FIRST GROUND OF REVENUES APPEAL HAS BECOME INFRUCTUOUS BECAUSE OF OUR DECISION ON GROUND NO .1 OF THE ASSESSEES APPEAL, THE ONLY OTHER ISSUE WHICH SURVIVE S IN THE REVENUES APPEAL IS AGAINST THE INCLUSION OF INFOSYS TECHN OLOGIES LTD. IN THE DETERMINATION OF THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION. ITA NOS.601 & 700/PUN/2017 BARCLAYS GLOBAL SERVICE CENTRE PRIVATE LIMITED 12 16. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESS EE DECLARED AN INTERNATIONAL TRANSACTION OF PROVISION OF SOFTWARE SERVICES TO BARCLAYS BANK PLC. WITH TRANSACTED VALUE OF RS.580.43 CRORE. IT BENCHMARKED THE INTERNATIONAL TRANSAC TION UNDER THE TRANSACTIONAL NET MARGIN METHOD (TNMM). CERTAIN COMPANIES WERE CHOSEN AS COMPARABLE TO DEMONSTRATE THAT TH E ASSESSEES MARGIN WAS AT THE ALP. THE TPO MADE CERTAIN INCLUSIONS IN/EXCLUSIONS FROM THE LIST OF COMPARABLES, WHICH LED TO THE TRANSFER PRICING ADJUSTMENT. THE LD. CIT(A) DIRECTED, INTER ALIA, TO EXCLUDE INFOSYS TECHNOLOGIES LTD. FROM THE LIST OF COMPARABLES, AGAINST WHICH THE REVENUE HAS COME UP IN AP PEAL BEFORE THE TRIBUNAL. 17. HAVING HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD, IT IS SEEN THAT THE INTERNATIONAL TRANSACTION IS THAT OF `PROVISION OF SOFTWARE SERVICES FOR W HICH THE ASSESSEE WAS COMPENSATED AT COST PLUS 15%. THE ASSE SSEE IS ACTING AS A CAPTIVE UNIT TO ITS AE FOR RENDERING SOFTWARE SERV ICES. IN CONTRAST, THE INFOSYS TECHNOLOGIES LTD. IS A GIANT COM PANY RENDERING ON-SHORE AND OFF-SHORE SERVICES AT A VERY HIG H SCALE. THIS COMPANY WAS ALSO INCLUDED BY THE TPO IN HIS ORDER FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2010-11, WHICH THE LD. ITA NOS.601 & 700/PUN/2017 BARCLAYS GLOBAL SERVICE CENTRE PRIVATE LIMITED 13 CIT(A) DIRECTED TO EXCLUDE. THOUGH THE REVENUE PREFERRE D APPEAL AGAINST THE ORDER PASSED BY THE LD. CIT(A) FOR SU CH EARLIER YEAR BUT CHOSE NOT TO ASSAIL THE EXCLUSION OF INFOSYS TECHN OLOGIES LTD. IT IS FURTHER SEEN THAT THE HONBLE DELHI HIGH COURT IN CIT VS. AGNITY INDIA TECHNOLOGIES PVT. LTD. (2013) 219 TAXMAN 26 (DELHI) HAS ORDERED TO EXCLUDE INFOSYS FROM THE LIST OF COMPARABLES OF AGNITY INDIA TECHNOLOGIES PVT. LTD., A CAPTIVE SERVICE PROVIDER, LIKE THE ASSESSEE UNDER CONSIDERATION. IN VIEW OF THE FOREGOING DISCUSSION, WE ARE SATISFIED THAT THE LD. CI T(A) WAS JUSTIFIED IN EXCLUDING THIS COMPANY FROM THE LIST OF COMPARABLES. 18. THE LD. AR STATED THAT THE ASSESSEE HAS RAISED ADDITIONA L GROUNDS OF APPEAL FOR INCLUSION/EXCLUSION OF VARIOUS COMPA NIES BECAUSE OF ABUNDANT CAUTION. SUCH GROUNDS WERE ALSO STA TED TO BE NOT ADJUDICATED BY THE LD. CIT(A) AS RELIEF WAS ALLOWED ON THE EXCLUSION OF INFOSYS. THE LD. AR STATED THAT IF THE DEPARTME NTAL GROUND CHALLENGING THE EXCLUSION OF INFOSYS IS DISMISSED, TH EN THE ADDITIONAL GROUNDS RAISED BY IT WOULD LOSE ITS SIGNIFICANCE. ITA NOS.601 & 700/PUN/2017 BARCLAYS GLOBAL SERVICE CENTRE PRIVATE LIMITED 14 19. IN VIEW OF OUR DECISION UPHOLDING THE EXCLUSION OF INFOSYS TECHNOLOGIES LTD., THESE ADDITIONAL GROUNDS RAISED BY THE ASS ESSEE ARE DISMISSED AS HAVING BECOME ACADEMIC IN NATURE. 20. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AN D THAT OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JANUARY, 2021. SD/- SD/- ( S.S.VISWANETHRA RAVI) (R.S. SYAL) JUDICIAL MEMBER VIC E PRESIDENT PUNE; DATED : 12 TH JANUARY, 2021 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-13, PUNE 4. 5. 6. THE PR.CIT-V, PUNE , , / DR C, ITAT, PUNE; / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE ITA NOS.601 & 700/PUN/2017 BARCLAYS GLOBAL SERVICE CENTRE PRIVATE LIMITED 15 DATE 1. DRAFT DICTATED ON 12-01-2021 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 12-01-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *