AT & T GLOBAL NETWORK SERVICES (INDIA) PVT. LTD., NEW DELHI V. ADDL. CIT, SPECIAL RANGE- 1, NEW DELHI

ITA 7001/DEL/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8281 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I1
• Assessment Year: 2014-2015
• Appeal Filed On: 02-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: IN LAW IN ENHANCING INCOME OF
• Keywords: Related party transaction; Transfer pricing; Business expenditure; Opportunity of being heard; Principle of natural justice; International transaction; Additional evidence; Question of law; Initiation of penalty proceedings; Non-deduction of tax; Commercial expediency; Revenue expenditure; Capital expenditure; TDS; Set aside
• Section: 271(1)(c); 143(3); 92B; 142(1); 234B; 37(1); 37

Judgement Text

1 ITA NO. 7001/DEL/2018 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I-1 NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 7001/DEL/20 18 (A.Y. 2014-15) AT & T GLOBAL NETWORK SERVICES (INDIA) PRIVATE LIMITED MOHAN DEV HOUSE, TOLSTOY MARG, NEW DELHI - 110001 (APPELLANT) VS . ADDITIONAL COMMISSIONER OF INCOME TAX SPECIAL RANGE-1 NEW DELHI (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED AGAINST THE ORDER DATED 28.09. 2018 PASSED BY ADDITIONAL COMMISSIONER OF INCOME TAX, SPECIAL BENC H-1, NEW DELHI U/S 144C READ WITH SECTION 143(3) OF THE INCOME TAX ACT, 196 1 FOR ASSESSMENT YEAR 2014-15. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. TP ADJUSTMENT WITH RESPECT TO RECEIPT OF INTRA- GROUP SERVICES THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AN D IN LAW, THE LD. AO (FOLLOWING THE DIRECTIONS OF THE LD. DRP), ERRED ON FACTS AND IN LAW IN ENHANCING THE INCOME OF THE APPELLANT BY INR 20,39, 45,028/- HOLDING THAT THE INTERNATIONAL TRANSACTION PERTAINING TO RECEIPT OF INTRA-GROUP SERVICES DO NOT SATISFY THE ARMS LENGTH PRINCIPLE ENVISAGED UNDER THE INCOME-TAX ACT, 1961 APPELLANT BY SH. KANCHUN KAUSHAL, AR RESPONDENT BY SH. SANJAY I. BARA, CIT-DR DATE OF HEARING 15.07.2019 DATE OF PRONOUNCEMENT 18.07.2019 2 ITA NO. 7001/DEL/2018 (THE ACT), AND IN DOING SO HAVE GROSSLY ERRED IN: 1.1 DISREGARDING THE JUDICIAL PRONOUNCEMENT/ FINDING OF THE HONBLE ITAT IN APPELLANTS OWN CASE FOR AY 2009-10, AY 201 0-11 AND AY 2011-12 WHEREIN THE HONBLE ITAT HAS CONCLUDED THE MENTIONE D ISSUE IN FAVOUR OF THE APPELLANT. 1.2 REJECTING THE COMBINED TRANSACTION APPROACH OF BENC HMARKING ADOPTED BY THE APPELLANT IN ITS TP DOCUMENTATION (I .E. AGGREGATING AVAILING OF INTRA-GROUP SERVICES WITH PROVISION OF NETWORK SUPP ORT SERVICES) AND PROCEEDING TO DETERMINE THE ARMS LENGTH PRICE OF I NTERNATIONAL TRANSACTION PERTAINING TO AVAILING OF INTRA-GROUP SERVICES FROM ITS AES ON A STANDALONE BASIS; 1.3 ARBITRARILY APPLYING COMPARABLE UNCONTROLLLED PRICE (CUP) METHOD AS THE MOST APPROPRIATE METHOD AS AGAINST TRANSACTI ONAL NET MARGIN METHOD (TNMM) APPLIED BY THE APPELLANT IN ITS TRANSFER P RICING DOCUMENTATION; 1.4 DISREGARDING THE ELABORATE DOCUMENTARY EVIDENCE SUB MITTED AS PART OF ASSESSMENT PROCEEDINGS TO ERRONEOUSLY ASSUME THA T NO BENEFIT HASD BEEN CONFERRED UPON THE APPELLANT FROM THE INTERNATIONAL TRANSACTIONS PERTAINING TO AVAILING OF INTRA-GROUP SERVICES AND THEREAFTER RE- DETERMINING THE ALP OF THE SAID TRANSACTION AS NIL; 1.5 DISREGARDING THE RECEIPT OF SERVICES BY THE AP PELLANT FROM ITS AES WHICH IS CONTRARY TO THE FACTS OF THE PRESENT YEAR AS WELL A S TO THE STAND TAKEN BY THE LD.TPO IN PRIOR YEAR DESPITE NO CHANGE IN THE NATUR E OF SERVICES INVOLVED. FURTHER, THE LD. TPO ERRED IN CONTENDING THAT THE S ERVICES RECEIVED ARE DUPLICATIVE AND STEWARDSHIP IN NATURE, IGNORING THE DOCUMENTATION AND EVIDENCES SUBMITTED BY THE APPELLANT; WHICH CONTRAD ICTS HIS OWN CONTENTION THAT THE SERVICES HAVE ACTUALLY NOT BEEN RECEIVED; 1.6 ARBITRARILY CHALLENGING THE VERACITY OF THE CON TRACTUAL SERVICE AGREEMENT DISREGARDING THE ACTUAL CONDUCT OF THE APPELLANT IN THE AVAILING OF INTRA-GROUP SERVICES FROM AES BASIS THE ELABORATE DOCUMENTARY E VIDENCES SUBMITTED AS PART OF ASSESSMENT PROCEEDINGS. 3 ITA NO. 7001/DEL/2018 2 . TP ADJUSTMENT WITH RESPECT TO PAYMENT OF ROYAL TY THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AN D IN LAW, THE LD. AO (FOLLOWING THE DIRECTIONS OF THE LD. DRP), ERRED ON FACTS AND IN LAW IN ENHANCING THE INCOME OF THE APPELLANT BY INR 8,37,4 3,883/- AND HOLDING THAT THE INTERNATIONAL TRANSACTION PERTAINING TO PAYMENT OF ROYALTY DOES NOT SATISFY THE ARM'S LENGTH PRINCIPLE ENVISAGED UNDER THE ACT, AND IN DOING SO HAVE GROSSLY ERRED IN: 2.1. REJECTING THE COMBINED TRANSACTION APPROACH OF BENC HMARKING ADOPTED BY THE APPELLANT IN ITS TP DOCUMENTATION (I.E. AGGREGA TING PAYMENT OF ROYALTY, AVAILING OF INTRA-GROUP SERVICES WITH PROVISION OF NETWORK SUPPORT SERVICES) AND PROCEEDING TO DETERMINE THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTION PERTAINING TO PAYMENT OF ROYALTY FROM I TS AES ON A STANDALONE BASIS BV REJECTING TNMM AS THE MOST APPROPRIATE MET HOD; 2.2. HOLDING THAT THE APPELLANT DID NOT RECEIVE TANGIBLE BENEFIT IN LIEU OF THE PAYMENT OF ROYALTY THEREBY CHALLENGING THE COMMERCI AL WISDOM OF THE APPELLANT IN MAKING PAYMENT FOR ROYALTY AND PASSING THE ORDER IN CONTRAST WITH THE RECENT JUDICIAL PRONOUNCEMENTS IN THIS REG ARD; 2.3. ERRONEOUSLY HOLDING THAT THE APPELLANT IS INCURRING LOSSES AT THE NET LEVEL AND THAT AS PER THE FACTS OF THE CASE OF THE APPELL ANT, NO INDEPENDENT PARTV WOULD HAVE MADE A PAYMENT FOR ROYALTY; 2.4. DISREGARDING THE JUDICIAL PRONOUNCEMENT/ FINDING OF THE HON'BLE 1TAT IN APPELLANT'S OWN CASE FOR THE AY 2009-10 AND MERELY PLACING RELIANCE ON PAST YEAR ORDERS PASSED BY THE DRP; 2.5. ARBITRARILY REJECTING THE SUPPLEMENTARY ANALYSIS USING COMPARABLE UNCONTROLLED PRICE ('CUP') METHOD TO BENCHMARK THE PAYMENT OF ROYALTY TRANSACTION SUBMITTED BY THE APPELLANT WITHOUT GIVI NG ANY COGENT REASONS; 2.6. UNDERTAKING FRESH BENCHMARKING ANALYSIS USING ROYAL TVSTAT DATABASE AND SELECTING AGREEMENTS WHICH ARE NOT COMPARABLE TO TH E ROYALTY PAYMENT MADE BY THE APPELLANT TO ITS AES. 4 ITA NO. 7001/DEL/2018 2.7. NOT PROVIDING THE DETAILED SEARCH PROCESS ALONGWIT H BACKUP DOCUMENTATION SUCH AS ACCEPT-REJECT MATRIX TO PROVI DE APPELLANT AN OPPORTUNITY TO EVALUATE THE APPROPRIATENESS OF THE BENCHMARKING ANALYSIS. 3. DISALLOWANCE OF CIRCUIT ACCRUALS 3.1 ON THE FACTS, IN CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. AO /DRP ERRED IN MAKING A DISALLOWANCE OF RS. 61,11,589 ON ACCOUNT OF CIRCUIT ACCRUALS CREATED TOWARDS BANDWIDTH AND LAST MILE SE RVICES AVAILED BY THE APPELLANT COMPANY, IGNORING THAT THE ACCRUALS WERE BASED ON A REASONABLE AND SCIENTIFIC BASIS. 3.2 ON THE FACTS, IN CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. AO FAILED TO APPRECIATE THAT THE APPELLANT FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING AND ACCRUES CIRCUIT CHARGES ON SCIENTIFIC BASIS. 3.3 ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/ DRP FAILED TO APPRECIATE THAT AS PER THE ACCOUNTING STA NDARDS NOTIFIED UNDER SECTION 145(2) OF THE ACT, THE APPELLANT WAS REQUIR ED TO MAKE PROVISION FOR CIRCUIT ACCRUALS FOR THE SUBJECT FINANCIAL YEAR. 3.4 ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/DRP ERRED IN NOT APPRECIATING THAT THE APPELLATN PRODUC ED EVIDENCES TO THE EXTENT OF MORE THAN 98% FOR UTILIZATION/REVERSAL OF CIRCUI T ACCRUALS DONE IN SUBSEQUENT YEARS AND NO ADVERSE FINDING HAS BEEN GI VEN BY THE LD. AO/DRP ON THE SAME. 3.5 WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, WHERE ANY DISALLOWANCE IS MADE IN RESPE CT OF THE AFORESAID ACCRUALS FOR THE YEAR UNDER CONSIDERATION, DEDUCTIO N IN RESPECT OF THE DISALLOWED AMOUNT SHOULD BE ALLOWED IN THE SUBSEQUE NT YEAR(S) IN WHICH SUCH ACCRUALS WERE REVERSED OR UTILIZED. 3.6 ON THE FACTS, IN CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. AO/ DRP ERRED IN IGNORING THAT THE AFORESAID DISALLOWANCE O F CIRCUIT ACCRUALS HAS BEEN DELETED BY THE HONBLE ITAT IN APPELLANTS OWN CASE FOR ASSESSMENT YEARS 2009-10, 2010-11 AND 2011-12.] 4. DISALLOWANCE OF YEAR-END ACCRUALS 5 ITA NO. 7001/DEL/2018 4.1 ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/DRP ERRED IN MAKING A DISALLOWANCE OF RS. 8,94,42,969 O N ACCOUNT OF YEAR-END ACCRUALS REPRESENTING ACCRUALS CREATED TOWARDS NORM AL BUSINESS EXPENDITURE INCURRED BY THE APPELLANT IGNORING THAT THE ACCRUAL S WERE BASED ON A REASONABLE BASIS. 4.2 ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/DRP FAILED TO APPRECIATE THAT AS PER THE ACCOUNT ING STANDARDS NOTIFIED UNDER SECTION 145(2) OF THE ACT, THE APPELLANT WAS REQUIRED TO MAKE PROVISION FOR ALL LIABILITIES/EXPENSES FOR THE SUBJECT FINANC IAL YEAR. 4.3 ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/DRP ERRED IN NOT APPRECIATING THAT THE APPELLANT PRODUCED EVIDENCES TO THE EXTENT OF MORE THAN 77% FOR UTILIZATION/REVERSA L MADE IN SUBSEQUENT YEARS AND NO ADVERSE FINDING HAS BEEN GIVEN BY LD. AO/DRP ON THE SAME. 4.4 WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AN D CIRCUMSTANCES OF THE CASE, THE LD. AO GROSSLY ERRED IN MAKING EXCESS DIS ALLOWANCE OF RS. 61,11,859. THE LD. AO ERRED IN COMPUTING THE DISALL OWANCE AT RS. 8,94,42,969 INSTAD OF RS. 8,33,31,110 (I.E. TOTAL A CCRUAL OF RS. 37,43,09,016 LESS DETAILS SUBMITTED OF RS. 24,97,62,018 LESS ADD ITIONAL EVIDENCES OF RS. 4,12,15,888) 4.5 WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS, I N CIRCUMSTANCES OF THE CASE AND IN LAW, WHERE ANY DISALLOWANCE IS MADE IN RESPECT OF THE AFORESAID ACCRUALS FOR THE YEAR UNDER CONSIDERATION, DEDUCTIO N IN RESPECT OF THE DISALLOWED AMOUNT SHOULD BE ALLOWED IN THE SUBSEQUE NT YEAR(S) IN WHICH SUCH ACCRUALS WERE REVERSED OR UTILIZED. THEREFORE, ANY DISALLOWANCE ON ACCOUNT OF YEAR-END ACCRUAL IS UNJUSTIFIED. 5. DISALLOWANCE OF SUPPORT SERVICE EXPENDITURE 5.1 ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/DRP ERRED IN DISALLOWING THE LEGITIMATE BUSINESS EXPEND ITURE BEING IN THE NATURE OF SUPPORT SERVICE EXPENSES OF RS. 8,25,71,385 PAID TO AT&T COMMUNICATION SERVICES INDIA PRIVATE LIMITED ('ACSI'). 6 ITA NO. 7001/DEL/2018 5.2 ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEI. AO/DRP ERRED IN NOT TAKING COGNIZANCE OF THE SUBMIS SIONS MADE BY APPELLANT AND THE DOCUMENTARY AND CIRCUMSTANTIAL EVIDENCE/ PR OOF PRODUCED BY THE APPELLANT, WHICH DULY SUBSTANTIATE THAT SUPPORT SER VICES WERE RENDERED BY ACSI TO THE APPELLANT COMPANY. 5.3 ON THE FACTS, IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.AO/DRP ERRED IN IGNORING THAT THE AFORESAID DISA LLOWANCE ON ACCOUNT OF SUPPORT SERVICE EXPENDITURE HAS BEEN DELETED BY THE HON'BLE 1TAT FOR ASSESSMENT YEARS 2009-10, 2010-11 AND 2011-12. 6. DISALLOWANCE OF ANNUAL REVENUE SHARE BASED LICENSE FEE 6.1. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/DRP ERRED IN DISALLOWING AN AMOUNT OF RS. 57,74,87,020 (BEING DISALLOWANCE OF RS. 62,56,10,938 IN AY 2014-15 LESS CREDIT OF RS. 4 ,81,23,918 FOR AY 2014- 15) UNDER THE HEAD LICENCE FEES DEBITED TO PROFIT & LOSS ACCOUNT BY HOLDING THAT ANNUAL LICENSE FEE IS NOT ALLOWABLE AS A REVEN UE EXPENDITURE AND IT SHOULD BE AMORTISED UNDER SECTION 35ABB OF THE ACT. 6.2. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/DRP ERRED IN NOT FOLLOWING THE JUDGMENT OF THE HON'BLE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF BHARTI HEXACOM LTD. [2014] 265 CTR 130 (DELHI) WHEREIN IT WAS HELD THAT ANNUAL REVENUE SHARE BASED LICENSE FEE PAID BY THE TELECOM OPERATORS IS REVENUE EXPENDITURE, ALLOWABLE UNDER S ECTION 37(1) OF THE ACT AND NOT A CAPITAL EXPENDITURE AMORTIZABLE UNDER SECTION 35ABB OF THE ACT. 6.3. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/DRP ERRED IN IGNORING THAT THE AFORESAID DISALLOWANCE H AS BEEN DELETED BY THE HON'BLE ITAT IN APPELLANT'S OWN CASE FOR ASSESSMENT YEAR 2010-11. 7 ITA NO. 7001/DEL/2018 7. DISALLOWANCE OF LEASE LINE CHARGES ON ACCOUNT OF NO N-DEDUCTION OF TAX AT SOURCE 7. 1 ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO/DRP ERRED IN MAKING DISALLOWANCE UNDER SECTION 40(A)(I) OF THE ACT ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE ON LEASE LINE EXPENS ES OF RS 12,66,08,117 INCURRED BY APPELLANT, COMPLETELY IGNORING THE FACT THAT THE IMPUGNED PAYMENTS WERE MADE TO RESIDENT PARTIES. 8. DISALLOWANCE OF FOREIGN EXCHANGE LOSS 8.1 ON THE FACTS, IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. AO GROSSLY ERRED IN MAKING DISALLOWANCE OF RS. 1,29,47 ,531 ON ACCOUNT OF FOREIGN EXCHANGE LOSS ARISING ON REVENUE ACCOUNT. 9. NON-GRANT OF CREDIT FOR TAXES DEDUCTED AT SOURCE 9.1 ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN NOT GRANTING CREDIT OF TAXES DEDUCTED AT SOURCE TO THE APPELLANT. 10. LEVY OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT 10.1 ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN INCORRECTLY CHARGING INTEREST UNDER SECTION 234B AND 234C OF TH E ACT. 11. INITIATION OF PENALTY PROCEEDINGS 11.1 ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTI ON 271(1)(C) OF THE ACT AGAINST THE APPELLANT ON ACCOUNT OF THE ABOVE ADJUS TMENTS MADE IN THE IMPUGNED FINAL ASSESSMENT ORDER. ALL ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EAC H OTHER. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUT E ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 8 ITA NO. 7001/DEL/2018 THE APPELLANT PRAYS THAT APPROPRIATE RELIEF B E GRANTED BASED ON THE SAID GROUNDS OF APPEAL AND THE FACTS AND CIRCUMSTANCES O F THE CASE. 3. THE ASSESSEE COMPANY WAS INCORPORATED IN INDIA O N 25.10.2005 WITH AN OBJECTIVE TO PROVIDE TELECOMMUNICATION SERVICES IN INDIA AND HAS OBTAINED INTERNATIONAL LONG DISTANCE (ILD), NATIONAL LONG DI STANCE (NLD) AND INTERNET SERVICE PROVIDER (ISP) LICENSE FROM THE DEPARTMENT OF TELECOMMUNICATION (DOT). PURSUANT TO THE NLD/ILD LICENSES GRANTED BY THE DOT , AGNS COMMENCED INTERNATIONAL AND NATIONAL LONG DISTANCE SERVICES D URING F.Y. 2007-08 I.E. A.Y. 2008-09. THE ASSESSEE ENTERED INTO SERVICE AGREEMEN TS WITH ITS CUSTOMERS IN INDIA FOR PROVISION OF END-TO-END TELECOM CONNECTIV ITY SERVICES TO SUCH CUSTOMERS FOR TRANSMISSION OF DATA FROM SOURCE LOCA TIONS IN INDIA TO DESTINATION LOCATIONS WITHIN/OUTSIDE INDIA AS PER THE TERMS AND CONDITIONS IN THE RESPECTIVE LICENSES. THE ASSESSEE COMPANY FILED RETURN OF INCO ME ON 28.11.2014 DECLARING AN INCOME OF RS. 2,76,72,33,820/- UNDER NORMAL PROV ISIONS OF THE INCOME TAX ACT, 1961. THE CASE WAS SELECTED FOR SCRUTINY. NOTI CE U/S 143(2) OF THE ACT WAS ISSUED ON 01.09.2016. SUBSEQUENTLY, NOTICE U/S 142( 1) OF THE ACT ALONG WITH QUESTIONNAIRE WAS ISSUED ON 01.09.2016. FRESH NOTIC E U/S 142(1) WAS ISSUED ON 11.07.2017. IN COMPLIANCE THERETO CA OF THE ASSESSE E COMPANY ATTENDED THE ASSESSMENT PROCEEDINGS FROM TIME TO TIME AND FILED NECESSARY DETAILS WHICH WAS EXAMINED AND PLACE ON RECORD BY THE ASSESSING OFFIC ER. DURING THE PREVIOUS YEAR UNDER CONSIDERATION THE ASSESSEE ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRISES WITHIN THE MEANING OF S ECTION 92B OF THE ACT. THE DETAILS OF SAID TRANSACTIONS WERE MENTIONED IN FORM NO. 3CEB FILED BY THE ASSESSEE. THE CASE WAS REFERRED TO THE TRANSFER PRI CING OFFICER AS PER PROVISIONS OF SECTION 92CA(1) OF THE ACT AFTER TAKING STATUTOR Y APPROVAL FROM THE COMMISSIONER OF INCOME TAX FOR COMPUTATION OF ARMS LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTIONS. SUBSEQUENTLY, AN OR DER U/S 92CA(3) OF THE ACT WAS PASSED BY TRANSFER PRICING OFFICER (TPO) ON 25. 10.2017 WHEREIN AN ADJUSTMENT OF RS. 28,76,88,911/- ATTRIBUTABLE TO D IFFERENCE IN ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS ENTERED BY THE ASSESSEE WITH ASSOCIATED 9 ITA NO. 7001/DEL/2018 ENTERPRISES HAS BEEN MADE. S.NO. NATURE OF INTERNATIONAL TRANSACTION ALP DETERMINED BY TAXPAYER (RS.) ALP DETERMINED BY THIS OFFICE (RS.) ADJUSTMENT U/S. 92CA(RS.) 1. INTRA GROUP SERVICE 20,39,45,028 NIL 20,39,45,028 2. PAYMENT OF ROYALTY 29,12,83,073 20,75,39,190 8,37,43,883/ - TOTAL 28,76,88,911/ - THE ASSESSING OFFICER ACCORDINGLY ENHANCE THE INC OME OF THE ASSESSEE BY 28,76,88,911/-. AGAINST THE DRAFT ORDER THE ASSESSE E COMPANY FILED OBJECTION BEFORE DRP. THE DRP VIDE ITS ORDER DATED 20.08.201 8 DISPOSED OF THE OBJECTIONS. THE DRP REJECTED THE OBJECTIONS FILED B Y THE ASSESSEE AGAINST TRANSFER PRICING ADJUSTMENT PROPOSED IN THE DRAFT A SSESSMENT ORDER. THUS, THE ASSESSING OFFICER MADE ADDITION OF RS. 28,76,88,911 /- ON ACCOUNT OF ARMS LENGTH PRICE DETERMINED BY THE TPO. THE ASSESSING O FFICER FURTHER MADE ADDITION OF RS. 61,11,589/- ON ACCOUNT OF CIRCUIT A CCRUALS. THE ASSESSING OFFICER MADE ADDITION OF RS. 8,94,42,969/- ON ACCOU NT OF OTHER THAN CIRCUIT ACCRUALS. THE ASSESSING OFFICER MADE DISALLOWANCE O F RS. 8,25,71,385/- IN RESPECT OF SUPPORT SERVICE EXPENDITURE. THE ASSESSI NG OFFICER ALSO MADE DISALLOWANCE OF RS. 57,74,87,020/- IN RESPECT OF LI CENSE FEE. THE ASSESSING OFFICER ALSO MADE ADDITION OF RS. 12,66,08,117/- TO WARDS LEASE LINE EXPENSES. THE ASSESSING OFFICER FINALLY MADE DISALLOWANCE OF RS. 1,29,47,531/- ON ACCOUNT OF FOREIGN EXCHANGE LOSS. THUS, THE ASSESSI NG OFFICER ASSESSED INCOME OF RS. 3,85,335,887/-. 4. AS REGARDS GROUND NOS. 1 TO 1.6 RELATING TO TRAN SFER PRICING ADJUSTMENT RELATING TO INTRA GROUP SERVICES, THE LD. AR SUBMIT TED THAT THE SAID ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10, 2010-11, 2011-12, 2012-13 AND 2013-14. THE TRIBUNAL DISCUSSED 10 ITA NO. 7001/DEL/2018 THE FACTS, MATERIAL, AND EVIDENCES IN DETAIL AND UP HELD THAT THE ASSESSEE SATISFIED THE NEED, BENEFIT AND RENDITION DAYS. THE TRIBUNAL UPHELD TNMM TO BE THE MOST APPROPRIATE METHOD. 5. THE LD. DR RELIED UPON THE ORDER OF THE TPO, DRP AND ASSESSING OFFICER. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIAL AVAILABLE ON RECORD. THE TRIBUNAL IN ASSESSMENT YEA R 2013-14 HELD AS UNDER :- 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS AND PE RUSED THE ORDERS OF THE ASSESSING OFFICER/TPO/DRP. WE FIND THE ASSESSEE, IN THE INSTANT CASE, HAS BENCHMARKED THE COST PAID BY THE ASSESSEE FOR GCSC SERVICES USING COMBINED TRANSACTION APPROACH AND USING TNMM METHOD AS THE MOST APPROPRIATE METHOD WITH OPERATING PROFIT/OPERATING COST AS PROFIT LEVEL INDICATOR. SINCE THE OP/TC WAS 23.15% WHICH WAS SI GNIFICANTLY HIGHER THAN THE ARITHMETIC MEAN OF OP/TC OF 6.35% EARNED BY COM PARABLE COMPANIES, THE ASSESSEE CONSIDERED THE TRANSACTION TO BE AT ARMS LENGTH. WE FIND THE TPO REJECTED THE AGGREGATION APPROACH ADOPTED BY THE AS SESSEE UNDER TNMM AND ADOPTED CUP AS THE MOST APPROPRIATE METHOD IN THE A BSENCE OF COMPARABLE DATA. THE TPO FURTHER HELD THAT THE ASSESSEE WAS N OT ABLE TO PROVE THE RECEIPT OF THE BENEFITS AND DEMONSTRATE THE ARMS L ENGTH NATURE. THE TPO ACCORDINGLY DETERMINED THE ALP OF THE AFORESAID SER VICES AT NIL ON AD HOC BASIS WHICH HAS BEEN UPHELD BY THE DRP. 11. WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 WHE REIN THE TRIBUNAL, AFTER CONSIDERING THE FACTS, MATERIAL EVIDENCES, ET C., HELD THAT THE ASSESSEE SATISFIES THE NEED BENEFIT AND RENDITION TEST. THE TRIBUNAL ALSO UPHELD THE TNMM TO BE THE MOST APPROPRIATE METHOD. THE RELEVA NT OBSERVATIONS OF THE TRIBUNAL FROM PARA 49 ONWARDS READ AS UNDER:- 49. ON APPRECIATION OF THE ABOVE FACTS IT IS APPAR ENT THAT LOOKING AT THE NATURE OF THE BUSINESS OF THE ASSESSEE AND THE KIND OF INDUSTRY THE ASSESSEE OPERATES IN, THE ASSESSEE HAS JUSTIFIED TH AT SUCH SERVICES ARE 11 ITA NO. 7001/DEL/2018 REQUIRED. IT IS NOT THE CASE OF THE LD TPO THAT ASS ESSEE IS HAVING THIS SERVICES THEREFORE THEY ARE DUPLICATIVE IN NATURE O R ARE IN NATURE OF SHAREHOLDERS' SERVICES. IT IS PERTINENT TO NOTE THA T REQUIREMENT OF THE SERVICES SHOULD BE JUDGED FROM THE VIEWPOINT OF THE APPELLANT AS A BUSINESSPERSON. WE AGREE WITH THE ARGUMENT OF THE A SSESSEE THAT IF THE NETWORK RELATED PROBLEMS PREVENT THE CUSTOMERS FROM USING ITS SERVICES, THE ASSESSEE IS BOUND TO SUFFER REPUTATIONAL DAMAGE AND POTENTIAL LOSS TO BUSINESS. ADDRESSING THE CUSTOMER'S PROBLEMS PROMPT LY AND BY A SPECIALIZED TEAM (WHICH MAY BE AN AE) SHOULD SATISF Y THE BENEFIT TEST, AS THE ASSESSEE RECEIVED AN ECONOMIC BENEFIT TO MAINTA IN ITS BUSINESS OPERATION. THEREFORE IN THIS REGARD WE ARE OF THE V IEW THAT ASSESSEE HAS SUBSTANTIATED THAT THESE SERVICES ARE REQUIRED BY I T FOR ITS BUSINESS SUSTAINABILITY. THE ONLY ALLEGATION WHICH TPO / DRP MADE WAS THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE NEED TES T BY WAY OF APPROPRIATE DOCUMENTATION AND HELD THAT THE ASSESSE E SHOULD HAVE AVAILED THESE SERVICES FROM AN INDEPENDENT THIRD PA RTY IN INDIA RATHER THAN FROM ITS AE. AFTER GOING THROUGH THE FACT AND SUBMI SSIONS PLACED ON RECORD WE ARE OF THE VIEW THAT THE ASSESSEE HAS SATISFIED THE NEED/BENEFIT TEST FOR AVAILING THESE SERVICES FROM ITS AE. REGARDING THE RENDITION OF THE SERVICES BY THE AE, THE APPELLANT SUBMITTED BEFORE THE TPO, THE COPY OF INTER- COMPANY AGREEMENTS, TICKETS PROCESSED BY GCSC, SAMP LE LIST OF PROJECT ASSIGNMENT ON WHICH GCSC TEAM ASSISTED THE ASSESSEE , LIST OF DEALS ON WHICH GSE PRESALES TEAM ASSISTED THE ASSESSEE. THE ASSESSEE ALSO EXPLAINED THE ALLOCATION KEY WITH DETAILS OF TEAMS SPREAD ACROSS DIFFERENT COUNTRIES, COPIES OF INVOICES ETC. FOR THE PURPOSES OF SUBSTANTIATING THE SERVICES RENDERED BY THE ASSESSEE IT HAS SUBMITTED THE DETAILS OF ALL THE SERVICE RENDERED BY THE AE TO THE ASSESSEE AS IN TH E PAPER BOOK SAME ARE PLACED ON SAMPLE BASIS. THEREFORE, ASSESSEE HAS PLA CED SUBSTANTIAL MATERIAL EVIDENCING THE RECEIPT OF THE SERVICES. RE GARDING THE RECEIPT OF THE SERVICES FROM AE, THE ASSESSEE CAN BE ASKED TO MAIN TAIN AND PRODUCE THE EVIDENCE OF RECEIPT OF SERVICES, WHICH A BUSINESSPE RSON KEEPS AND 12 ITA NO. 7001/DEL/2018 MAINTAINS REGARDING SERVICES RELATED FROM THE THIRD PARTY. THE BURDEN CANNOT BE HIGHER ON THE ASSESSEE FOR EVIDENCING THE RECEIPT OF SERVICES OF HIGHER LEVEL MERELY BECAUSE THE SERVICES HAVE BEEN RENDERED BY ITS AE. AGAINST THESE EVIDENCE PLACED BY THE ASSESSEE BEFOR E THE LOWER AUTHORITIES LD. DRP HAS MERELY STATED THAT ASSESSEE HAS NOT BEE N ABLE TO PROVIDE SUFFICIENT EVIDENCE AND THAT THE AE HAS PROVIDED SU CH SERVICES TO THE ASSESSEE. WE FAILED TO UNDERSTAND WHAT SUFFICIENT EVIDENCE' WAS AND WHAT WAS LACKING IN THE CASE OF THE ASSESSEE. WE CO ULD NOT FIND ANY INSTANCES PLACED WHERE THE TPO / DRP HELD THAT THE EVIDENCE PLACED BY THE ASSESSEE ARE NOT SUBSTANTIATED BY RENDITION OF SERVICE BY THE AE. THE ASSESSEE HAS ALSO RELIED ON THE HON'BLE DELHI TRIBU NAL IN THE CASE OF GE MONEY FINANCIAL SERVICES PVT LTD. VS ACIT IN ITA NO . 5882/DEL-2010 AND TNS INDIA PVT. LTD. V. ACIT : (2014) 32 ITR (TRIB.) 44 (HYD. )WHEREBY ON SIMILAR FACTS THE HON'BLE DELHI TRIBUNAL HAS REJECT ED THE PLEA OF THE REVENUE AND HAS HELD THAT FOR RECEIPT OF SERVICES, RENDERING OF SERVICES MUST BE SEEN FROM THE VIEW POINT OF THE ASSESSEE AN D FURTHER ASSESSEE CANNOT BE ASKED TO KEEP AND MAINTAIN EVIDENCES OF S ERVICES RENDERED BY AE HIGHER THAN WHICH IS EXPECTED FROM A BUSINESSMAN RECEIVING SERVICES FROM AN UNRELATED PROVIDER. RESPECTFULLY THE FOLLOW ING THE DECISION OF THE COORDINATE THE BENCH WE ARE OF THE VIEW THAT THE AS SESSEE HAS JUSTIFIED THE RECEIPT OF THE SERVICES AND SATISFIED THE RENDITION TEST. REGARDING THE BENEFIT TEST, THE ASSESSEE SUBMITTED THAT OWING TO THE NATURE OF INDUSTRY IT OPERATES IN IT REQUIRES SPECIALIZED KNOWLEDGE AND E XPERIENCE IN ORDER TO PROVIDE SEAMLESS SERVICES TO CUSTOMERS. IT HAS INHE RENT RISKS AND ADVANTAGES THAT CAN BE EFFECTIVELY HARNESSED ONLY T HROUGH SHARING OF RESOURCES AND EFFICIENCIES THAT ARE INBUILT IN-SCAL E. ACCORDINGLY, AVAILABILITY OF SUPPORT IN TERMS OF STRATEGY, DATA USAGE AND ADM INISTRATION IS ESSENTIAL AND INDISPENSABLE FOR THE ASSESSEE IN ORDER TO ACHI EVE COST EFFICIENCY AND NORMAL FUNCTIONING OF ITS BUSINESS OPERATIONS. FOR THIS REASON, THE ASSESSEE IS AVAILING SUCH ESSENTIAL SERVICES FROM I TS AES. FOR THIS PURPOSE, THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH ITS AE. THESE FUNCTIONS 13 ITA NO. 7001/DEL/2018 OR SERVICES, IF NOT AVAILED FROM THE AES, WOULD HAV E TO BE UNDERTAKEN BY THE ASSESSEE ITSELF. HOWEVER, DUE TO VERY NATURE OF NETWORK CONNECTIVITY SERVICES AND IN ORDER TO ACHIEVE BETTER ECONOMIES O F SCALE AND SYNERGIES, THESE FUNCTIONS ARE CENTRALIZED WITHIN THE AE OF TH E ASSESSEE WHICH RENDERS SUCH SERVICES. IT IS, THEREFORE, CLEAR THAT SUCH SERVICES CONFER A BENEFIT ON THE ASSESSEE. WHILE EXAMINING THE ARM'S LENGTH NATURE OF THE IMPUGNED INTERNATIONAL TRANSACTION, THE LEARNED TPO HAS APPLIED COST- BENEFITS TEST AND ATTEMPTED TO MAP THE BENEFITS REC EIVED AGAINST PAYMENT MADE FOR SUCH SERVICES. WHILE HE HAS CONCURRED WITH THE ASSESSEE'S CONTENTIONS REGARDING RECEIPT OF BENEFITS IN RESPEC T OF SEVERAL SERVICES, FOR CERTAIN OTHER SERVICES, HE HAS ERRONEOUSLY BELIEVED THAT NO BENEFITS HAVE BEEN RECEIVED AND RE-DETERMINED THE ALP ON THAT BAS IS, WITHOUT APPRECIATING THAT THE SAME HAVE BENEFITTED THE ASSE SSEE AND ACCORDINGLY, WARRANT A PAYMENT. 50. THE ASSESSEE HAS ALSO ARGUED THAT THE TPO IS ON LY EMPOWERED TO DETERMINE THE ALP OF INTERNATIONAL TRANSACTION. IT WAS ARGUED THAT THERE IS NO LEGAL REQUIREMENT OR MANDATE FOR ANY TAXPAYER TO NECESSARILY UNDERTAKE A COST-BENEFITS ANALYSIS AND A MERE ABSENCE OF SUCH ANALYSIS SHOULD NOT NECESSARILY LEAD TO A PRE-CONCEIVED NOTION THAT NO BENEFITS HAVE BEEN RECEIVED BY THE ASSESSEE AND SHOULD NOT FORM A BASI S TO DISALLOW THE SAID PAYMENT. WE ALSO HASTEN TO ADD THAT THAT FOR DETERM INATION OF ALP , THE BENEFIT TO THE USER MUST ARISE OTHERWISE, IT FAILS THE BASIC TEST OF DETERMINING ALP. IF THERE IS NO BENEFIT TO THE USER NATURALLY NOBODY WOULD PAY FOR THE SERVICES AND HENCE ALP OF SUCH TRANSACT ION IS ALWAYS NIL BECAUSE THEY ARE WORTHLESS. SUCH IS NOT THE CASE HE RE. TO SUPPORT ITS CONTENTION, THE ASSESSEE HAS RELIED UPON THE DECISI ON OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS CUSHMAN AND WAKEFI ELD (INDIA) PVT LTD. (ITA 475/ 2012), WHEREIN, IT WAS HELD THAT THE AUTHORIT Y OF THE TPO IS TO CONDUCT A TP ANALYSIS TO DETERMINE THE ALP AND NOT TO DETERMINE WHETHER THE TAX PAYER DERIVES A BENEFIT FROM THE SERVICE. T HE HON'BLE DELHI HIGH COURT HAS OPINED THAT THE DETERMINATION OF BENEFIT TO THE TAX PAYER IS NOT IN 14 ITA NO. 7001/DEL/2018 THE DOMAIN OF THE TPO. IN THIS REGARD, THE APPELLAN T ALSO PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRECEDENTS TO BRING HOME THE POINT THAT THE BENEFIT TEST NEEDS TO BE SATISFIED FROM THE VIEW POINT OF A SSESSEE AND BUSINESS PRUDENCE : A. ERICSSON INDIA PRIVATE LIMITED VS DY CIT [ITA NO . 5141/DEL/2011 (DELHI ITAT)] B. CIT V. EKL APPLIANCES LTD . [2012] 345 ITR 241 (DELHI) C. HIVE COMMUNICATION PVT. LTD. (ITA NO.306/2011) D. COMMISSIONER OF INCOME TAX VS. CUSHMAN AND WAKEF IELD (INDIA) P. LTD . (269 CTR 16) (DEL.) 51. THE ABOVE DECISIONS UNANIMOUSLY HOLDS THAT IN R EACHING THE CONCLUSION THAT WHETHER AN INDEPENDENT ENTITY WOULD HAVE PAID FOR SUCH SERVICES NEITHER THE REVENUE NOR THE COURT MUST QUESTION THE COMMERCIAL WISDOM OF THE ASSESSEE OR REPLACE ITS OWN ASSESSMENT OF THE C OMMERCIAL VIABILITY OF THE TRANSACTION. THE JUDICIAL PRECEDENTS ALSO STIPU LATE THAT THE DUTY OF THE LD. TPO IS RESTRICTED TO DETERMINE THE ALP OF THE I NTERNATIONAL TRANSACTION AND THAT HE CANNOT REPLACE HIS VIEWS WITH THE VIEWS OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE BINDING PRECEDENT CITED ABOVE WE ARE OF THE VIEW THAT BENEFIT TEST FOR DETERMINATION OF ARMS LENGTH PRICE IS TO BE VIEWED FROM THE PERSPECTIVE OF THE ASSESSEE AND BUSINESSMAN AND NOT FROM THE PERSPECTIVE OF REVENUE. IN THIS CASE APPELLANT HAS DEMONSTRATED THE BENEFIT WHICH IT IS EXPECTED TO DERIVE FROM THE VARIOUS SER VICES RENDERED BY ITS AE AND LD. TPO HAS ERRED IN REPLACING WITH ITS OWN JUD GMENT OF THE BENEFIT DERIVED BY THE ASSESSEE, WE REJECT THIS APPROACH. 52. HOWEVER FOR DETERMINATION OF ARMS LENGTH PRICIN G, THE ASSESSEE HAS ADOPTED TNMM AS THE MOST APPROPRIATE METHOD. THE TP O HAS REJECTED TNMM AS THE MOST APPROPRIATE METHOD AND APPLIED THE CUP METHOD. FOR THIS TPO HAS NOT GIVEN ANY REASONING. IN FACT, TPO AND DRP HAS NOT BROUGHT OUT ANY DATA ON RECORD FOR BENCH MARKING OF INTRA GROUP TRANSACTION AND TREATING THE VALUE OF SERVICES AS N IL BY APPLYING THE CUP METHOD WHICH IS AGAINST THE BASIC PRINCIPLES OF TP REGULATIONS. DATA 15 ITA NO. 7001/DEL/2018 AVAILABILITY S THE LIFE LINE OF ANY METHOD ADOPTED IN COMPARABILITY ANALYSIS. IF THERE IS NO DATA AVAILABLE IN THAT PARTICULARS M ETHOD THEN COMPARABILITY ANALYSIS UNDER THAT METHOD FAILS. IN A SCENARIO WHE RE NO DATA IS AVAILABLE TO APPLY THE DIRECT METHODS, ONE HAS TO RESORT TO R ESIDUARY METHODS FOR BENCHMARKING A TRANSACTION / GROUP OF TRANSACTION S UCH AS TNMM'. CONSIDERING ALL THESE FACTORS THE APPELLANT ADOPTED TNMM TO BENCHMARK THE TRANSACTION. IN THE ABSENCE OF ANY JUSTIFICATIO N BY DRP/TPO FOR APPLICATION OF CUP, WE JUSTIFY THE USE OF TNMM AS T HE MOST APPROPRIATE METHOD. 53. IN VIEW OF THE ABOVE FINDINGS, WE HOLD THAT FOR INTRA GROUP SERVICES (WHERE THE EVIDENCES HAVE BEEN FURNISHED), THE ASSE SSEE HAS SATISFIED THE NEED, BENEFIT AND RENDITION TEST. HOWEVER WE WOULD ALSO LIKE TO MENTION THAT OUT OF SEVEN SERVICES THE ASSESSEE HAS NOT FUR NISHED EVIDENCES FOR FOLLOWING THREE SERVICES NAMELY- COUNTRY SERVICES, INFORMATION TECHNOLOGY, PROJECT MANAGEMENT. IN THE ABSENCE OF ANY EVIDENCES , THE TEST OF NECESSITY, NEED AND RENDITION CANNOT BE COMMENTED U PON AND THE ASSESSEE IS GIVEN AN OPPORTUNITY TO FURNISH THE EVI DENCES FOR THESE THREE SERVICES BEFORE THE AO/TPO FOR NECESSARY VERIFICATI ON. THE LD TPO MAY EXAMINE THEM AND DECIDE THE ISSUE WITH RESPECT TO T HOSE SERVICES IN ACCORDANCE WITH LAW. WITH RESPECT TO THE METHOD AS THE LD TPO HAS NOT EXAMINED THE COMPARABILITY ANALYSIS UNDER THE TNMM METHOD OF INTRA GROUP SERVICES, HE MUST EXAMINE THE COMPARABILITY A NALYSIS OF IGS ( INTRA GROUP SERVICES) AND DETERMINE ALP. 12. SINCE THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR HAS ONLY ENTERED INTO AGREEMENT FOR ONE SERVICE ONLY, NAMELY GLOBAL CUSTOMER SERVICE CENTRE, THEREFORE, FOLLOWING THE DECISION OF THE TRIBUNAL I N ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 WHICH HAS BEEN FOLLOWED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2010-11 AN D 2011-12 AND IN ABSENCE OF ANY DISTINGUISHABLE FEATURES BROUGHT BEF ORE US BY THE REVENUE, WE HOLD THAT THE ADDITION MADE BY THE ASSESSING OFF ICER/TPO AND UPHELD BY THE DRP IS NOT SUSTAINABLE. WE ACCORDINGLY SET ASI DE THE ORDER OF THE 16 ITA NO. 7001/DEL/2018 ASSESSING OFFICER/TPO AND DIRECT THEM TO DELETE THE ADDITION. THE TRANSFER PRICING GROUNDS RAISED BY THE ASSESSEE ARE ACCORDIN GLY ALLOWED. IN THE PRESENT ASSESSMENT YEAR , THE ASSESSEE COM PANY PROVIDED NETWORK CONNECTIVITY SERVICES TO CUSTOMERS OF ITS A ES, FOR RENDERING SERVICES, THE ASSESSEE AVAILED SUPPORT SERVICES FROM AES FOR WHICH IT ENTERED INTO A SERVICES AGREEMENT DATED 01.07.2011 WITH INTERWISE ASIA PACIFIC PTE LTD. AS PER THE SAID AGREEMENT, INTERWISE ASIA PACIFIC PTE LTD. SHALL RENDER THE AFORESAID SERVICES TO THE ASSESSEE ON COST PLUS MAR KUP. DURING THE YEAR UNDER CONSIDERATION, OUT OF THE MANY SERVICES FOR WHICH I T HAD ENTERED INTO AGREEMENT, ONLY ONE SERVICE NAMELY GLOBAL CUSTOMER SERVICES CENTER WAS AVAILED. THE ASSESSEE SUBMITTED THE LIST OF THE TIC KETS PROCESSED ALONG WITH NATURE OF PROBLEM RESOLVED AND THE RELEVANT EVIDENC E WAS ALSO SUBMITTED BEFORE THE ASSESSING OFFICER. THUS, THE FACTS ARE IDENTICA L IN THE PRESENT ASSESSMENT YEAR AS WELL TO THAT OF EARLIER ASSESSMENT YEARS I. E. 2009-10, 2010-11, 2011- 12, 2012-13 AND 2013-14. SINCE THE ISSUE IS IDENTIC AL IN THE PRESENT ASSESSMENT YEAR BY ASSESSEES OWN ORDER, GROUND NOS . 1 TO 1.6 ARE ALLOWED. 7. AS REGARDS GROUND NOS. 2 TO 2.7 RELATING TO TRAN SFER PRICING ADJUSTMENT WITH RESPECT TO PAYMENT OF ROYALTY, THE LD. AR SUBM ITTED THAT THE SAME IS PARTIALLY COVERED IN FAVOUR OF THE ASSESSEE IN ASSE SSMENT YEAR 2009-10 WHEREIN TRIBUNAL DIRECTED TPO NOT TO QUESTION ON BENEFIT AN D TO COMPUTE ALP. THE LD. AR FURTHER SUBMITTED THAT FRESH BENCH MARKING ANALY SIS WAS UNDERTAKEN BY THE TPO, WHEREIN ROYALTY RATE WAS DETERMINED AT 2.8 5% INSTEAD OF 4% OF SALES. THE LD. AR FURTHER SUBMITTED THAT NON-COMPARABLE RO YALTY AGREEMENT HAS BEEN CONTESTED BEFORE THIS TRIBUNAL IN THIS PARTICULAR Y EAR BY THE ASSESSEE. THE LD. AR FURTHER SUBMITTED THAT THE DIRECTION GIVEN IN AS SESSMENT YEAR 2009-10 WERE FOLLOWED BY THE TRIBUNAL IN ASSESSMENT YEARS 2 010-11 AND 2013-14. 8. THE LD. DR RELIED UPON THE ORDER OF TPO, DRP AND ASSESSING OFFICER. 17 ITA NO. 7001/DEL/2018 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIAL AVAILABLE ON RECORD. THE TRIBUNAL IN ASSESSMENT YEA R 2013-14 HELD AS UNDER :- 60. GROUND OF APPEAL NO.1 TO 1.06 RELATES TO TRANS FER PRICING ADJUSTMENT RELATING TO INTRA GROUP SERVICES. AFTER HEARING BOT H THE SIDES WE FIND THAT THE ABOVE GROUNDS RELATING TO INTRA GROUP SERVICES ARE IDENTICAL TO GROUND OF APPEAL NO.1 TO 1.7 IN ITA NO.5535/DEL/2016. WE HAV E ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE HAVE B EEN ALLOWED. FOLLOWING SIMILAR REASONINGS, THE ABOVE GROUNDS BY THE ASSESS EE ARE ALLOWED. SO FAR AS THE TP ADJUSTMENT ON ACCOUNT OF PAYMENT OF ROYALTY IS CONCERNED, AS PER GROUND OF APPEAL NO.1.7 TO 1.10 WE FIND, THE TRIBUN AL IN ASSESSEES OWN CASE FOR A.Y. 2009-10 HAS OBSERVED AS UNDER:- 65. WE THEREFORE ACCEPT THE PLEA OF ASSESSEE AND H OLD THAT THE LD TPO IS ONLY DUTY BOUND TO DETERMINE THE ALP OF THE ROYALTY PAYMENTS. 66. WITH RESPECT TO ANALYSIS UNDER CUP METHOD BY TH E LD TPO, WE FULLY AGREE WITH HIM IN REJECTING INTERNAL CUP AS IT PERT AINS TO RELATED PARTY TRANSACTIONS WHICH ARE BETWEEN ITS FELLOW AES. WE A LSO AGREE WITH HIM IN REJECTING EXTERNAL CUP DATA AS THE ASSESSEE HAS NOT SUBMITTED ANY DATA REGARDING SIMILARITY IN TERMS AND CONDITIONS OF THE ROYALTY AGREEMENTS. HE ALSO RIGHTLY HELD THAT EVEN FROM THE LIMITED DATA S UBMITTED ARE FOR DIFFERENT INDUSTRIES/ GEOGRAPHICAL LOCATION /DURATION AND AMO UNTS. NO ANALYSIS OF THE ROYALTY AGREEMENTS BETWEEN THE VARIOUS PARTIES AND THE ACCOMPANYING CIRCUMSTANCES AND CONDITIONS THEREIN HAS BEEN DONE BY ASSESSEE. WE ALSO AGREE THAT EVEN A MINOR DIFFERENCE IN ROYALTY AGREE MENT MAY HAVE A SIGNIFICANT EFFECT ON THE ROYALTY RATES. 67. ACCORDING TO US THE ROYALTY PAYMENTS NEEDS TO B E TESTED ON THE BASIS OF FACTUM AND QUANTUM BOTH ASPECTS. IT ALSO NEEDS T O BE LOOKED AT THE FUNCTIONS TO BE PERFORMED BY THE PARTIES FOR ROYALT Y PAYMENTS. IT ALSO NEES TO BE LOOKED IN TO NATURE OF THE USE OF THE INTANGI BLES WHICH ARE COVERED IN LICENSE AGREEMENT WITH AT&T CORP, PURSUANT TO WHICH IT WAS GRANTED THE RIGHT TO USE LICENSED MARKS IN MARKETING MATERIAL F OR PUBLICITY, ADVERTISING, 18 ITA NO. 7001/DEL/2018 SIGNS, PRODUCT BROCHURES, INSTRUCTION MANUALS AND I N OTHER FORM OF ADVERTISING. THESE INTANGIBLES, WHICH ARE LICENSED TO AGNS INDIA, ARE KEY VALUE DRIVERS FOR THE BUSINESS AND BENEFIT IT BY EN ABLING IT TO EXPAND ITS PRESENCE IN THE MARKETPLACE. WHAT WOULD BE THE DURA TION OF PAYMENTS OF SUCH LICENSE ROYALTY IS ALSO DETERMINATIVE OF THE F ACTOR OF THE PAYMENTS AS IT CANNOT ALSO CONTINUE FOR AN INDEFINITE PERIOD. I T MAY ALSO HAPPEN THAT INDIA BRAND BECAUSE O CONSUMER MAY BECOME BIGGER TH AN AE'S BRAND. 68. AS THE ASSESSEE HAS ADOPTED THE TNMM WHICH IS C RUDE METHOD OF BENCHMARKING ROYALTY PAYMENTS AND LD TPO HAS DISREG ARDED THE TRANSACTION ONLY ON THE BENEFIT ANALYSIS AND HAS AL SO REJECTED THE CUP BENCHMARKING OF THE ASSESSEE , WE ARE OF THE VIEW T HAT THIS ISSUE NEEDS TO BE SET ASIDE TO THE FILE OF THE LD TPO TO DETERMINE THE ALP OF THE ROYALTY PAYMENTS AFRESH AFTER EXAMINING THE METHOD, COMPARA BILITY AND THEN ALP AFRESH. ASSESSEE IS ALSO DIRECTED TO SUPPORT ITS AL P DETERMINATION AFRESH AFTER SUBMITTING THE DETAILED ANSWER TO ALL THE QUE STIONS RAISED BY THE LD TPO IN PARA NO 9 OF HIS ORDER EXCEPT THE BENEFIT TE ST. HENCE THIS GROUND NO 8 OF THE APPEAL IS ALLOWED WITH ABOVE DIRECTIONS. 60.1 RESPECTFULLY FOLLOWING THE DECISION OF THE TRI BUNAL, WE HOLD THAT THE TPO CANNOT APPLY BENEFIT TEST AND IS ONLY REQUIRED TO DETERMINE THE ALP OF THE ROYALTY PAYMENT. ACCORDINGLY, WE RESTORE THE ISSUE TO THE FILE OF THE TPO TO DETERMINE THE ALP OF THE ROYALTY PAYMENT IN ACCORDA NCE WITH THE LAW AND AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THESE GROUNDS OF APPEAL NO.1.7 TO 1.10 ARE ALLOWED FOR STATISTICAL PURPOSES. IN THE PRESENT ASSESSMENT YEAR, IT IS OBSERVED THA T THE BENEFIT TEST CANNOT BE APPLIED TO DETERMINE THE ALP OF INTERNATI ONAL TRANSACTION. THE TPO ONLY HAS TO EXAMINE AS TO WHETHER THE PAYMENT BASED ON THE AGREEMENT ADHERES TO THE ARMS LENGTH PRINCIPLE OR NOT. THUS, THE ISSUE IS IDENTICAL THEREFORE WE DIRECT THE TPO TO DETERMINE ALP OF THE ROYALTY PAYMENT IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THE ASSESSEE B E GIVEN OPPORTUNITY OF 19 ITA NO. 7001/DEL/2018 HEARING BY FOLLOWING PRINCIPLES OF NATURAL JUSTICE. GROUND NOS. 2 TO 2.7 PARTLY ALLOWED FOR STATISTICAL PURPOSES. 10. AS REGARDS GROUND NOS. 3 TO 3.6 RELATING TO DIS ALLOWANCE ON ACCOUNT OF CIRCUIT ACCRUALS, THE LD. AR SUBMITTED THAT THE SAM E IS COVERED IN ASSESSEES FAVOUR VIDE ORDER PASSED IN ASSESSMENT YEAR 2009-10 , 2010-11, 2011-12, 2012-13 AND 2013-14 AS WELL AS 2008-09. 11. THE LD. DR RELIED UPON THE ORDERS OF TPO/DRP/AO . 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE TRIBUNAL IN ASSESSMENT YEA R 2013-14 HELD AS UNDER :- 17. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FI ND THE ASSESSING OFFICER MADE A DISALLOWANCE OF RS.40,02,308/- ON ACCOUNT OF CIRCUIT ACCRUALS CREDITED TOWARDS BAND WIDTH AND LAST MILE SERVICES AVAILED B Y THE ASSESSEE ON THE GROUND THAT THE ASSESSEE DID NOT FILE THE REQUISITE SUPPORTING DOCUMENTS. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING AND ACCRUES CIRCUIT CHARGES ON SCIENTIFIC BASIS. IT IS ALSO HIS SUBMISSION THAT AS PER THE A CCOUNTING STANDARDS NOTIFIED U/S 145(2) OF THE ACT, THE ASSESSEE IS REQUIRED TO MAKE PROVISION FOR CIRCUIT ACCRUALS FOR THE SUBJECT FINANCIAL YEAR. IT IS ALS O HIS SUBMISSION THAT THE ASSESSEE HAS PROVIDED EVIDENCE TO THE EXTENT OF ALM OST 98% OF THE EXPENSES REPRESENTED BY YEAR END CIRCUIT ACCRUALS FOR UTILIZ ATION/REVERSAL OF CIRCUIT ACCRUALS MADE IN SUBSEQUENT YEAR AND NO ADVERSE FIN DING HAS BEEN GIVEN BY THE ASSESSING OFFICER/DRP. WE FIND MERIT IN THE AR GUMENTS ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE. WE FIND IDENTICAL IS SUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10. WE FIND THE TRIBUNAL HAS DISCUSSED THE ISSUE AT PARA 34 AND 35 OF THE ORDER AND HELD THAT THE CIRCUIT ACCRUALS ARE CREDITED ON SCIENTIFIC BAS IS AND THUS NEEDS TO BE ALLOWED IN THE YEAR OF CREATION ON ACCRUAL BASIS. THE RELEVANT OBSERVATION IN THE ORDER OF THE TRIBUNAL READS AS UNDER:- 20 ITA NO. 7001/DEL/2018 34. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT IONS AND PERUSED THE ORDER OF THE LD TPO/ AO/ DRP . THE ASSESSEE HAS EXP LAINED THE BASIS OF CREATING THE PROVISIONS FOR CIRCUIT ACCRUALS, WHICH IS CALCULATED AUTOMATICALLY AND SCIENTIFICALLY BY THE SOFTWARE. A S SUBMITTED ASSESSEE HAS BEEN FOLLOWED THIS BASIS ON A GLOBAL BASIS. AS EXPLAINED BY THE APPELLANT, THE PROCESS IS SCIENTIFIC IN A WAY THAT AS AND WHEN A REQUEST FOR NEW CIRCUITS IS PLACED BY THE CUSTOMER TO APPELLANT , THE REQUEST IS CREATED IN FAVOUR OF THIRD PARTY VENDOR WHO IN TURN IS REQU IRED TO PROVIDE SERVICE. SUCH REQUESTS ARE CONVERTED INTO ORDERS BY THE CUST OMER ACCESS PROVISIONING TEAM WHO ACT AS PRIMARY INTERFACE WITH THE VENDORS WITH REGARD TO ORDERING AND DELIVERY OF THE CIRCUITS. OR DER IS PLACED WITH THE VENDOR TO DELIVER CIRCUIT AT A PARTICULAR ADDRESS A ND AT A PARTICULAR TIME. ACCORDINGLY, VENDOR DELIVERS THE CIRCUIT (ALONG WIT H NECESSARY HARDWARE AND SOFTWARE). POST SUCH DELIVERY, THE ORDER GETS C LOSE AND THE INVENTORY OF CIRCUIT USAGE IS RECORDED IN GAIM( GLOBAL ACCESS IN VENTORY MANAGEMENT SYSTEM) . GAIM CONTAINS VARIOUS DETAILS RELATING TO THE CIRCUIT, SUCH AS CIRCUIT ID NUMBER, ACTIVATION DATE, TARIFF CODES (R ENTAL, USAGE, ONE TIME CHARGE), EXPECTED MONTHLY COST, LOCATION OF CIRCUIT , ETC. ONCE THE ORDER IS CLOSED, THE LIABILITY TO PAY THE VENDOR ARISES. INV OICE RECEIVED BY THE VENDOR ARE ENTERED INTO GAIM MANUALLY OR UPLOADED FROM ELE CTRONIC FILES. THEREAFTER, INVOICES ARE VALIDATED IN GAIM BEFORE P AYMENT. DURING INVOICE VALIDATION, GAIM AUTOMATICALLY COMPARES THE INVOICE /BILL DATA TO THE CIRCUIT INVENTORY AND EXPECTED COSTS. AS GAIM WORKS ON CALE NDAR YEAR BASIS I.E. FROM JANUARY TO DECEMBER, THE ACCRUALS FOR THE PERI OD STARTING FROM JANUARY TO MARCH ARE EXCLUDED / ADDED ON PROPORTION ATE BASIS. ASSESSEE FURTHER EXPLAINED THAT THE VALIDATION PROCESS ALSO IDENTIFIES ANY DISCREPANCIES WHICH HAVE TO BE RESOLVED VIA THE DIS PUTE MANAGEMENT PROCESS BEFORE THE INVOICE CAN BE APPROVED FOR PAYM ENT. THE VALIDATION CHECKS INCLUDE: CIRCUIT ID EXISTS IN INVENTORY FOR VENDOR; 21 ITA NO. 7001/DEL/2018 INVOICE DATE IS AFTER CIRCUIT ACTIVATION DATE; SERVICE PERIOD IS BEFORE CIRCUIT CEASE DATE; INVOICE TARIFF CODE MATCHES ORDER TARIFF CODE INVOICE COST IS NOT VARYING MORE THAN USD 100 VIS- -VIS THE EXPECTED COST INVOICE NUMBER IS UNIQUE FOR VENDOR THE INVOICES FOR WHICH VALIDATION IS COMPLETED WIT H NO DISCREPANCIES OR FOR WHICH THE DISCREPANCIES IDENTIFIED, THE SAME ARE LO GGED / RESOLVED VIA DISPUTE MANAGEMENT PROCESS, ARE APPROVED FOR PAYMEN T. THE ASSESSEE ALSO EXPLAINED THE LOGIC USED BY GAIM TO CALCULATE THE CIRCUIT ACCRUAL FOR BOTH ACTIVE AND CEASED CIRCUITS TAKING INTO ACCOUNT THE ACTIVATION DATE AND THE CEASE DATE I.E. NO ACCRUALS WILL BE POSTED PRIO R TO THE ACTIVATION DATE OR AFTER THE CEASE DATE. FOR THE CURRENT AND PRIOR PER IOD GAIM WILL LOOK AT EACH TARIFF CODE FOR EACH CIRCUIT TO DETERMINE IF T HERE IS ANY INVOICE COST AND CIRCUIT ACCRUALS ARE BOOKED ACCORDINGLY. PRIOR YEAR EXPENSES ARE TRACKED EACH MONTH AND MATCHED AGAINST THE PRIOR YEAR ACCRU AL BALANCE BROUGHT FORWARD MANUALLY. ACCORDINGLY, ONLY THE CURRENT YEA R ACCRUAL BALANCES ARE BOOKED IN THE PROFIT AND LOSS ACCOUNT. 35. WE FIND THAT THE PROCESS EXPLAINED IS ENTIRELY AUTOMATED PROCESS WHICH CAPTURES THE DETAILS VIS--VIS EACH CIRCUIT, AMOUNT TO BE BOOKED AGAINST EACH CIRCUIT AND THE ACCRUAL TO BE CREATED. FURTHER, ASSESSEE HAS BEEN CREATING THE PROVISION ON AN YEAR ON YEAR BASI S IN ACCORDANCE WITH THE MERCANTILE SYSTEM OF ACCOUNTING IN ACCORDANCE W ITH ACCOUNTING STANDARD ISSUED BY THE ICAI OTHERWISE CORRECT EXPEN DITURE WOULD NOT BE CAPTURED AS PER THE MATCHING PRINCIPLE. THE ASSESSE E HAS ALSO DEMONSTRATED THROUGH EVIDENCES THAT THE PROVISION S O CREATED IS EITHER REVERSED OR EXPENSED OFF IN THE SUBSEQUENT YEAR. TH E ASSESSEE HAS ALSO BEEN ABLE TO SUBMIT EVIDENCES FOR MOST OF THE REVER SALS BEFORE THE LOWER AUTHORITIES. IT IS ALSO NOT THE CLAIM OF THE REVENU E THAT THE AMOUNT OF PROVISIONING MADE BY THE ASSESSEE IS INCORRECT OR N OT BASED ON PROPER 22 ITA NO. 7001/DEL/2018 DOCUMENTATION AND ESTIMATIONS. WE ALSO FIND THAT TH E LOWER AUTHORITIES ALLOW THE ENTIRE CLAIM OF EXPENDITURE IN THE NEXT Y EAR WHEN SUCH REVERSALS ARE MADE. THUS, WE ARE OF THE VIEW THAT THIS PRACTI CE OF DISALLOWING THE CLAIM OF CIRCUIT ACCRUAL IN THE YEAR OF CREATION AN D ALLOWING IT IN THE NEXT YEAR IS NOTHING BUT A TIMING DIFFERENCE. THE FACT T HAT THE EXPENSES ARE ALLOWED IN THE SUBSEQUENT YEAR ALSO PROVES THAT THE LOWER AUTHORITIES HAVE NOT DISPUTED THE INCURRENCE OF SUCH EXPENSES. HENCE , IN ACCORDANCE WITH THE MERCANTILE PROVISIONS IT SHOULD BE ALLOWED IN T HE YEAR OF CREATION ITSELF. THE ASSESSEE HAS ALSO DRAWN REFERENCE TO THE PRINCI PLES LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF M/S ROTORK CONTRO LS INDIA (P) LTD (314 ITR 62) AND M/S BHARAT EARTH MOVERS (245 ITR 428). ACCORDING TO US THE PROVISION FOR CIRCUIT ACCRUALS IS MADE IN COMPLIANC E OF ACCOUNTING STANDARDS ISSUED BY THE INSTITUTE OF CHARTERED ACCO UNTANTS OF INDIA AND ALSO ON A PROPER SCIENTIFIC BASIS BACKED BY DOCUMEN TATION. THEREFORE , WE HOLD THAT THE CIRCUIT ACCRUALS ARE CREATED ON SCIEN TIFIC BASIS AND THUS NEEDS TO BE ALLOWED IN THE YEAR OF CREATION ON ACCRUAL BA SIS. IN THE RESULT THE GROUND NO. 6 OF THE APPEAL IS ALLOWED. 18. SINCE THE FACTS OF THE INSTANT CASE ARE IDENTI CAL TO THE FACTS OF THE CASE DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 WHICH HAS BEEN FOLLOWED IN SUBSEQUENT ASSES SMENT YEARS I.E., ASSESSMENT YEAR 2010-11 AND 2011-12, THEREFORE, IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE, WE HOLD TH AT THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING ADDITION ON ACCOUNT OF C IRCUIT ACCRUALS. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO DELETE T HE ADDITION. THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS ACCORDINGLY ALLOWED. IN THE PRESENT ASSESSMENT YEAR ALSO THE ASSESSEE I S FOLLOWING THE SAME METHOD OF ACCRUING CIRCUIT CHARGES. SINCE THE YEAR- END CIRCUIT ACCRUALS CREATED BY THE ASSESSEE REPRESENT ACCRUALS TOWARDS NORMAL B USINESS EXPENDITURE INCURRED BY THE ASSESSEE FOR THE RELEVANT ASSESSMEN T YEAR AND RECORDED IN 23 ITA NO. 7001/DEL/2018 ACCORDANCE WITH THE MATCHING PRINCIPLE, DEDUCTION I N RESPECT THEREFORE SHOULD BE ALLOWED. THE ASSESSEE COMPANY PRODUCED DOCUMENTA RY EVIDENCE OF UTILIZATION/REVERSAL OF THE EXPENSES REPRESENTED BY YEAR-END CIRCUIT ACCRUALS, WHICH SHOWS THAT EVEN THE BALANCE ACCRUALS HAVE ALS O BEEN CREATED ON A REASONABLE BASIS AND HENCE, NO DISALLOWANCE IN THIS REGARD CAN BE MADE AGAINST THE ASSESSEE. THUS, THE ISSUE IS IDENTICAL TO THE EARLIER ASSESSMENT YEARS AND THEREFORE GROUND NOS. 3 TO 3.6 ARE ALLOWE D. 13. AS REGARDS GROUND NOS. 4 TO 4.5 RELATING TO DIS ALLOWANCE ON ACCOUNT OF YEAR END ACCRUALS, THE LD. AR SUBMITTED THAT THE IS SUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE VIDE TRIBUNAL ORDER IN ASSES SMENT YEARS 2010-11, 2011- 12, 2012-13 AND 2013-14 AS WELL AS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES SISTER CONCERN FOR ASSESSMEN T YEAR 2010-11 . 14. THE LD. DR RELIED UPON THE ORDER OF TPO/ DRP/ A O. 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE TRIBUNAL IN A.Y. 2012-13 H ELD AS UNDER:- 24. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FI ND THE ASSESSING OFFICER IN THE INSTANT CASE, DISALLOWED AN AMOUNT OF RS.1.39 C RORES ON ACCOUNT OF NON- SUBMISSION OF SUPPORTING DOCUMENTS RELATING TO THE YEAR ENDING PROVISIONS OF OUTSTANDINGS. IT IS THE SUBMISSION OF THE LD. COUN SEL FOR THE ASSESSEE THAT WHEN THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCO UNTING AND ACCOUNTS ALL ITS EXPENSES PERTAINING TO THE YEAR IN ACCORDANCE W ITH THE MATCHING PRINCIPLE AND WAS ABLE TO SUBSTANTIATE WITH EVIDENCE TO THE SATISFACTION OF THE ASSESSING OFFICER IN CASE OF MORE THAN 95% OF THE E XPENSES REPRESENTED BY YEAR END ACCRUALS, THEREFORE, NO DISALLOWANCE IS CA LLED FOR. WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11. WE FIND THE TRIBUNAL VIDE ITA NO.105 9/DEL/2015, ORDER DATED 24 ITA NO. 7001/DEL/2018 18 TH SEPTEMBER, 2017, HAS DISCUSSED THE ISSUE AND DELET ED THE ADDITION BY OBSERVING AS UNDER:- 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT IONS AND ALSO PERUSED THE FACTS OF THE CASE. THE ASSESSEE HAS EXPLAINED T HE BASIS OF CREATING THE PROVISIONS FOR YEAR-END ACCRUALS. AS EXPLAINED BY T HE APPELLANT, WE NOTE THAT THE ASSESSEE HAS BEEN CREATING THE PROVISION O N ANY YEAR ON YEAR BASIS IN ACCORDANCE WITH THE MERCANTILE SYSTEM OF A CCOUNTING OTHERWISE CORRECT EXPENDITURE WOULD NOT BE CAPTURED AS PER TH E MATCHING PRINCIPLE. THE ASSESSEE HAS DEMONSTRATED THROUGH EVIDENCES THA T THE PROVISION SO CREATED IS EITHER REVERSED OR EXPENSED OFF IN THE S UBSEQUENT YEAR. THE ASSESSEE HAS ALSO BEEN ABLE TO SUBMIT EVIDENCES FOR MOST OF THE REVERSALS BEFORE THE LOWER AUTHORITIES. WE ALSO FIND THAT THE LOWER AUTHORITIES ALLOWED THE ENTIRE CLAIM OF EXPENDITURE IN THE NEXT YEAR WHEN SUCH REVERSALS ARE MADE. THUS, THIS PRACTICE OF DISALLOW ING THE CLAIM OF YEAR END ACCRUAL IN THE YEAR OF CREATION AND ALLOWING IT IN THE NEXT YEAR IS NOTHING BUT A TIMING DIFFERENCE. IT ALSO PROVES THA T THE AO IS NOT DISPUTING THE CLAIM OF EXPENSES RATHER JUST DEFERRING THE CLA IM TO NEXT YEAR. HENCE, IN ACCORDANCE WITH THE MERCANTILE PROVISIONS IT SHOULD BE ALLOWED IN THE YEAR OF CREATION ITSELF. 25. WE FIND THE ABOVE DECISION HAS AGAIN BEEN FOLLOWED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12. SINCE THE FACTS OF THE IMPUGNED ASSESSMENT YEAR ARE IDENTICAL TO THE FACTS OF THE CASE DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11 AND 2011- 12, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR PRECEDING THREE ASSESSMENT YEARS, WE H OLD THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT J USTIFIED. ACCORDINGLY, THE SAME IS DIRECTED TO BE DELETED. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. IN THE PRESENT ASSESSMENT YEAR ALSO THE ASSESSEE C OMPANY IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND SINCE THE YEAR END ACCRUALS CREATED BY THE 25 ITA NO. 7001/DEL/2018 ASSESSEE REPRESENT ACCRUALS TOWARDS NORMAL BUSINESS EXPENDITURE INCURRED BY THE ASSESSEE FOR THE FINANCIAL YEAR RELEVANT TO THE PRESENT ASSESSMENT YEAR, DEDUCTION IN RESPECT THEREOF HAS TO BE ALLOWED TO T HE ASSESSEE. THE FACTS ARE IDENTICAL IN THE PRESENT ASSESSMENT YEAR AS WELL TO THAT OF EARLIER ASSESSMENT YEAR WHICH IS DECIDED BY THE TRIBUNAL IN A,Y. 2010- 11. THEREFORE, GROUND NOS. 4 TO 4.5 ARE ALLOWED. 16. AS REGARDS GROUND NOS. 5 TO 5.3 RELATING TO DIS ALLOWANCE ON ACCOUNT OF SUPPORT SERVICES, THE LD. AR SUBMITTED THAT THE ISS UE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE VIDE TRIBUNALS ORDER FOR AS SESSMENT YEAR 2009-10, 2010-11 AND 2013-14. 17. THE LD. DR RELIED UPON THE ORDER OF THE TPO, DR P AND ASSESSING OFFICER. 18. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE TRIBUNAL IN A.Y. 2013-14 H ELD AS UNDER :- 30. AFTER HEARING BOTH THE SIDES, WE FIND THE ASS ESSEE HAS INCURRED SUPPORT SERVICE EXPENDITURE OF RS.11,87,48,765/- PA ID TO ITS GROUP COMPANY I.E., AT&T COMMUNICATION SERVICES INDIA PVT. LTD. (ACSI) FOR SUPPORT SERVICES RENDERED BY IT. THE ASSESSING OFFICER DISALLOWED T HE SUPPORT SERVICES CHARGES OF RS.11.87 CRORES ON ACCOUNT OF NON-SUBMISSION OF SUPPORTING DOCUMENTS. WE FIND IDENTICAL ISSUE WAS DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 IN ITA NO.2538/DEL/2014 , ORDER DATED 18.09.2017. WE FIND THE TRIBUNAL HAS DISCUSSED THE ISSUE AT PARA 75 AND 76 OF THE ORDER AND THE APPEAL OF THE REVENUE HAS BEEN DISMISSED BY OBSERVING AS UNDER: 75. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT IONS AND PERUSED THE FACTS OF THE CASE. THE FACTS OF THE CASE AS EXPLAIN ED BY THE APPELLANT ARE THAT, ACSI, A GROUP COMPANY OF APPELLANT AND AN ENT ITY IN OPERATIONS FOR MORE THAN 10 YEARS BY THEN, WAS HAVING DEVELOPED SU PPORT SERVICES 26 ITA NO. 7001/DEL/2018 FUNCTIONS. ACCORDINGLY, SINCE SUCH FUNCTIONS WERE A LREADY HOUSED IN ACSI, APPELLANT ENTERED INTO A SUPPORT SERVICES AGREEMENT WITH ACSI FOR PROVISION OF THE AFORESAID SUPPORT SERVICES TO APPE LLANT. WE HAVE GONE THROUGH THE SUBMISSION OF THE ASSESSEE AND FIND THA T NECESSARY EVIDENCES IN THE FORM OF THE SUPPORT SERVICE AGREEMENT, INVOI CES, THE DETAILS OF PAYMENTS MADE AND THE BANK STATEMENTS EVIDENCING TH E PAYMENT THEREOF HAVE BEEN FURNISHED BY THE ASSESSEE TO PROVE THE GE NUINENESS OF THE EXPENSES. WE FIND THAT NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE DEPARTMENT TO DISPUTE THE SAID CLAIM. RATHER, THE D EPARTMENT'S CLAIM IS MERELY BASED ON SUSPICION AS ALSO NOTED BY THE DRP WHILE DELETING THE ABOVE DISALLOWANCE. WE ALSO FIND THAT EVEN OTHERWIS E, BOTH ACSI AND APPELLANT ARE PROFIT MAKING ENTITIES AND HENCE, THE RE WAS NO TAX INCENTIVE FOR THE PARTIES TO DEFLATE THE REVENUES EARNED BY A PPELLANT. THE DECISION WAS TOTALLY BASED ON COMMERCIAL CONSIDERATIONS. BY TRANSFERRING THE COST FROM ACSI TO APPELLANT NO ADDED TAX ADVANTAGE IS BE ING AVAILED BY APPELLANT. WE ARE ALSO OF THE VIEW THAT COMMERCIAL EXPEDIENCY OF A PARTICULAR EXPENDITURE INCURRED BY A BUSINESSMAN SH OULD BE EXAMINED FROM THE PERSPECTIVE OF THE BUSINESS PERSON AND NO THIRD PARTY, INCLUDING THE TAX AUTHORITIES, IS ENTITLED TO QUESTION THE CO MMERCIAL REASONING/JUSTIFICATION OF THE EXPENDITURE SO INCUR RED. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING JUDICIAL PRECEDEN TS FURNISHED BY THE ASSESSEE: I. CIT V. PANIPAT WOOLLEN & GENERAL MILLS CO LTD (1 03 ITR 66) (SC) II. CIT V. SALES MAGNESITE (P) LTD [1995) 214 ITR 1 III. BINODIRAM BALCHAND VS. COMMISSIONER OF INCOME TAX (48 1TR 548) IV. CALCUTTA LANDING AND SHIPPING CO LTD VS. CIT (6 5 ITR 1) (CAL HIGH COURT) V. CIT VS B DALMIA CEMENT LTD (254 ITR 377) 76. RESPECTFULLY FOLLOWING THE PRINCIPLES LAID DOWN IN THE AFORESAID JUDICIAL PRECEDENTS, WE FIND THAT WHERE THE APPELLANT HAS AC TUALLY INCURRED THE AFORESAID SUPPORT SERVICES COST AND NO EVIDENCE HAS BEEN BROUGHT BY THE 27 ITA NO. 7001/DEL/2018 DEPARTMENT TO CONTROVERT THE SAME, SUCH EXPENDITURE CANNOT BE DISALLOWED MERELY ON SUSPICION. WE AFFIRM THE FINDING OF THE L D DRP ON THIS ISSUE. IN VIEW OF THE ABOVE, THE APPEAL OF THE REVENUE ON THI S GROUND IS DISMISSED. 31. SINCE THE ASSESSEE HAD NOT SUBMITTED THE REQUIS ITE DETAILS BEFORE THE ASSESSING OFFICER, THEREFORE, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO SUBMIT THE DETAILS AND DECIDE THE ISSUE IN THE LIGHT OF THE DE CISION OF THE TRIBUNAL FOR A.Y. 2009-10 AS REPRODUCED ABOVE. THIS GROUND BY THE AS SESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. IN THE PRESENT ASSESSMENT YEAR ALSO AT&T COMMUNICA TION SERVICES INDIA PVT. LTD. (ACSI) WHICH IS A GROUP COMPANY OF THE AS SESSEE AND THE ASSESSEE COMPANY ENTERED INTO SUPPORT SERVICE AGREEMENT, AND ACTIVITIES PERFORMED BY ACSI UNDER SUPPORT SERVICE AGREEMENT ARE ESSENTIAL AND INTEGRAL PART. SUPPORT SERVICES COST OF RS. 8.25 CRORES WHICH WAS ALLOCATE D BY ACSI TO THE ASSESSEE TOWARDS SUPPORT SERVICES RENDERED BY THE ACSI TO AS SESSEE COMPANY. THE ASSESSEE COMPANY SUBMITTED ALL THE INVOICES AND THE RELATED EVIDENCES BEFORE THE ASSESSING OFFICER. BUT THE SAME WAS NOT TAKEN I NTO ACCOUNT BY THE ASSESSING OFFICER. THEREFORE, IT WILL BE APPROPRIAT E TO REMAND BACK THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER BY GIVING OPPORTU NITY OF HEARING TO THE ASSESSEE BY FOLLOWING PRINCIPLES OF NATURAL JUSTICE. THUS, G ROUND NOS. 6 TO 6.3 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. 19. AS REGARDS GROUND NOS. 6 TO 6.3 RELATING TO DIS ALLOWANCE ON ACCOUNT OF ANNUAL SHARE BASED LICENSE FEE, THE LD. AR SUBMITTE D THAT THE ISSUE IS SQUARELY COVERED BY THE TRIBUNALS ORDER IN ASSESSMENT YEAR 2010-11, 2012-13 AND 2013-14. 20. THE LD. DR RELIED UPON THE ORDER OF THE TPO, DR P AND ASSESSING OFFICER. 21. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL 28 ITA NO. 7001/DEL/2018 AVAILABLE ON RECORD. THE TRIBUNAL IN A.Y. 2012-13 A ND 2013-14 HELD AS UNDER :- 35. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FI ND IDENTICAL ISSUED HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11. WE FIND THE TRIBUNAL IN ITA NO.1059/DEL/2 015, ORDER DATED 18 TH SEPTEMBER, 2017, HAS DISCUSSED THE ISSUE AND ALLOWE D THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER:- 21. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT IONS AND ALSO PERUSED THE FACTS OF THE CASE AS WELL AS THE DECISIONS RELI ED UPON BY THE APPELLANT. WE AGREE WITH THE CONTENTION OF THE ASSESSEE THAT T HE EXPENSE OF RS. 24,55,13,201/- INCURRED TOWARDS REVENUE SHARE BASED LICENSE FEE FOR MAINTENANCE AND USAGE OF TELECOM LICENSE PAYABLE TO DEPARTMENT OF TELECOM IS A RECURRING FEE PAID BY THE LICENSE HOLD ER ON PERIODIC BASIS TOWARDS MAINTENANCE AND USE OF THE LICENSE AND THE BENEFIT OF THE SAME DOES NOT EXTEND BEYOND THE CLOSE OF THE YEAR. FURTH ER, IT IS ALSO RELEVANT TO NOTE HERE BENEFIT OF THE REVENUE SHARE BASED LICENS E FEES PAID DURING ONE FINANCIAL YEAR CANNOT BE EXTENDED TO THE SUBSEQUENT FINANCIAL YEAR, FOR WHICH LICENSE FEE IS TO BE PAID SEPARATELY UPON THE ADJUSTED GROSS REVENUES OF SUCH SUBSEQUENT YEAR. THEREFORE, PAYMEN T OF THE AFORESAID ANNUAL FEE CANNOT BE SAID TO CONFER ANY RIGHT OF AN ENDURING NATURE UPON APPELLANT. WE ARE CONVINCED THAT THE APPELLANT'S CA SE IS SQUARELY COVERED BY THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHARTI HEXACOM LIMITED [2014] 265 CTR 130 (DELHI) OTHER CA SE LAWS RELIED UPON BY THE APPELLANT AS CITED ABOVE. THE LD. DR COULD N OT CONTROVERT THAT HOW THIS ISSUE IS NOT SQUARELY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT.IT IS ALSO IMPORTANT TO NOTE THAT IN THE IMME DIATELY SUCCEEDING YEAR ON SAME FACTS, THE DRP HAS ALLOWED THE CLAIM OF THE LICENCE FEES ON REVENUE BASIS U/S 37(1) OF THE ACT. IN VIEW OF THE ABOVE FACTS AND RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT WE ALLOW THE CLAIM OF THE ASSESSEE. IN THE RESULT T HE GROUND NO. 4 OF THE APPEAL IS ALLOWED. 36. MERELY BECAUSE THE REVENUE HAS FILED SLP AGAINS T THE ORDER OF THE DELHI HIGH COURT, THE SAME CANNOT, IN OUR OPINION, BE A GROUND TO TAKE A CONTRARY VIEW THAN THE VIEW TAKEN BY THE HON'BLE HI GH COURT UNLESS AND UNTIL 29 ITA NO. 7001/DEL/2018 THE SAME IS REVERSED OR STAYED BY THE HON'BLE APEX COURT. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11, THE DISALLOWANCE MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF ANNUAL REVENUE SHARE BASED LICENCE FE E IS DELETED. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. IT IS PERTINENT TO NOTE HERE THAT THE ANNUAL REVEN UE SHARE BASED LICENSE FEE INCURRED BY THE ASSESSEE IS A BUSINESS EXPENDIT URE ALLOWABLE U/S 37 OF THE INCOME TAX ACT, 1961. THIS EXPENDITURE WAS INCURRED BY THE ASSESSEE COMPANY TOWARDS MAINTENANCE AND USAGE OF THE TELECOM LICENS E, AND NOT FOR ACQUIRING A RIGHT TO OPERATE TELECOMMUNICATION SERVICES AND THU S WOULD NOT ATTRACT THE PROVISIONS OF SECTION 35ABB OF THE ACT. THE ASSESSE ES CASE IS SQUARELY COVERED BY THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHARTI HEXACOM LIMITED [2014] 265 CTR 130 (DELHI) OTHER CA SE LAWS RELIED UPON BY THE APPELLANT AS CITED ABOVE. THE LD. DR ALSO COULD NOT CONTROVERT THAT HOW THIS ISSUE IS NOT SQUARELY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT. IT IS ALSO IMPORTANT TO NOTE THAT IN ONE OF THE PRECEDING YEAR ON SAME FACTS, THE DRP ALLOWED THE CLAIM OF THE LICENCE FEE S ON REVENUE BASIS U/S 37(1) OF THE ACT. THUS, THE ISSUE IS IDENTICAL AND THEREF ORE GROUND NOS. 6 TO 6.3 ARE ALLOWED. 22. AS REGARDS GROUND NO. 7.1 RELATING TO DISALLOWA NCE ON ACCOUNT OF NON- DEDUCTION OF TAX ON LEASE LINE EXPENSES, THE LD. AR SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE VIDE TRIBUNA LS ORDER IN ASSESSMENT YEAR 2012-13 AND 2013-14. 23. THE LD. DR RELIED UPON THE ORDERS OF TPO, DRP A ND ASSESSING OFFICER. 24. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE TRIBUNAL FOR A.Y. 2012-13 HELD AS UNDER :- 30 ITA NO. 7001/DEL/2018 42. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HA VE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASS ESSING OFFICER DISALLOWED AN AMOUNT OF RS.6,50,79,639/- PAID BY THE ASSESSEE ON ACCOUNT OF LEASELINE EXPENSES WHICH WERE PAID TO OTHER TELECOM OPERATORS FOR PROVISION OF TELECOM CONNECTIVITY SERVICE REQUIRED FOR TRANSMISSION OF D ATA ON THE GROUND THAT THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 194I OF THE ACT. IT IS THE SUBMISSION OF THE LD. COUNSEL F OR THE ASSESSEE THAT THE LEASELINE CHARGES ARE PAID TO THE TELECOM SERVICE P ROVIDER FOR FASTER CONNECTIVITY SERVICE THROUGH DEDICATED LEASELINE AN D, THEREFORE, SUCH PAYMENT HAS BEEN MADE FOR AVAILING THE FACILITY OF CONNECTI VITY SERVICES FROM VENDORS REQUIRED FOR TRANSMISSION OF DATA AND IS NOT FOR US E OF ANY ASSET INVOLVED IN PROVISION OF SUCH FACILITY COVERED U/S 194I OF THE IT ACT. IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE WAS NEITHER IN POSSESSION NOR CONTROL OF THE EQUIPMENTS WHICH W ERE USED FOR PROVIDING INTERNET AND COMMUNICATION FACILITIES AND, THEREFOR E, THERE WAS A CLEAR ABSENCE OF THE ELEMENT OF LEASING OF EQUIPMENTS AND , THEREFORE, THE PROVISIONS OF SECTION 194I CANNOT BE APPLIED. WE FIND MERIT I N THE ABOVE ARGUMENT OF THE LD. COUNSEL. WE FIND IDENTICAL ISSUE HAD COME UP B EFORE THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF GLOBAL ONE INDIA (P) LTD.(SUPRA). WE FIND THE TRIBUNAL AT PARA 9 TO 11 OF THE ORDER HAS DECIDED T HE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER:- 9. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE A.O. DISALLOWED PAYMENTS MADE FOR LEASE LINES, AS THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE U/S 40(A)(I)(A). THE A.O. DISALLOWED THE SAM E BY HOLDING THAT LEASE LINES WERE, TECHNICALLY SPEAKING, EQUIPMENT AND PAY MENT FOR TAKING THESE LINES ON LEASE, IS COVERED U/S 194-I AND THAT THE A SSESSEE HIMSELF HAS DESCRIBED THE PAYMENT HAS BEEN MADE TOWARDS LEASE L INES. THE LD. COUNSEL RELIED ON THE DECISION OF THE DELHI HIGH CO URT IN THE CASE OF ASIA SATELLITE TELE COMMUNICATION CO. 332 ITR 340(DEL)C AND SUBMITTED THAT 31 ITA NO. 7001/DEL/2018 THE ISSUE IS COVERED IN HIS FAVOUR. HE RELIED ON TH E DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF 'VODAFONE S.R.LTD.' 135 TTJ 182 AND SUBMITTED THAT SUCH PAYMENTS ARE NOT FOR THE USE OF EQUIPMENT AND, THEREFORE, NOT LIABLE TO TDS U/S 194-I. 9.1. ON THE ADDITIONAL GROUND OF DEDUCTION U/S 80 IA(IV), HE SUBMITTED THAT ANY DISALLOWANCES MADE BY THE A.O. WOULD GO TO INCREASE THE INCOME AND CONSEQUENTLY THE ASSESSEE WOULD BE ELIGIBLE FOR DEDUCTION U/S 80 IA ON SUCH INCREASED PROFITS. HE RELIED ON THE ORDER I N THE CASE OF 'GEM PLUS JEWELLERY INDIA PVT. LTD.' (2011) REPORTED IN 330 ITR 175 (BOM) IN SUPPORT OF HIS CONTENTIONS. FOR LEVY OF INTEREST U/S 234C, HE RECORDED THAT SUCH INTEREST IS LEVIED ONLY ON RETURNED INCOME AND NOT ON ASSESSED INCOME. 9.2. IN REPLY, THE LD.D.R., THOUGH NOT LE AVING HIS GROUND, SUBMITTED THAT HE RELIES ON THE ORDER OF THE A.O. AND THE REA SONING THEREOF FOR DISALLOWANCE MADE U/S 40A(I)(A) OF THE ACT. 9.3. ON THE ADDITIONAL GROUNDS THE LD.D.R. SUBM ITTED THAT THE A.O. MAY BE DIRECTED TO EXAMINE THE SAME, IF THE TRIBUNAL CH OSE TO ADMIT THESE GROUNDS. 10. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSI DERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON A PERUSAL OF THE P APERS ON RECORD AND ORDERS OF THE AUTHORITIES BELOW, CASE LAWS CITED, W E HOLD AS FOLLOWS. 11. WE FIRST TAKE UP CORPORATE TAX ISSUES WHI CH IS GROUND NO.5 FOR THE A.Y. 2007-08. THE ASSESSEE IS A LICENSED INTERNET P ROVIDER. DURING THE YEAR IT PROCURED, DOMESTIC HALF CIRCUIT FACILITY TO ITS CUSTOMERS FROM TELECOM SERVICE PROVIDERS LIKE BSNL, MTNL, AND INTERNATIO NAL HALF CIRCUIT FACILITY FROM FLAG, ATLANTIC, AT FRANCE. THESE ARE STANDARD FACILITIES PROVIDED FOR TRANSMISSION OF DATA BY THOSE ORGANISATIONS. THE IS SUE IS WHETHER TAX SHOULD BE DEDUCTED AT SOURCE U/S 194 I FROM PAYMENT S MADE FOR USE OF SUCH STANDARD FACILITIES. THE HON'BLE DELHI HIGH CO URT, IN THE CASE OF ASIA SATELLITE VS. CIT, REPORTED IN 332 ITR 340 AND THE HON'BLE MADRAS HIGH COURT, IN THE CASE OF SKYCELL COMMUNICATIONS LTD. V S. DCIT, REPORTED IN 351 ITR 53 (MADRAS) HAVE ADJUDICATED THE ISSUE IN F AVOUR OF THE ASSESSEE. 32 ITA NO. 7001/DEL/2018 RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT PAYME NTS MADE TOWARDS USE OF STANDARD FACILITY, WHEN THE LESSEE IS NOT HA VING ANY DOMAIN OR CONTROL OR POSSESSORY RIGHTS OVER SUCH FACILITY, CA NNOT BE CATEGORIZED AS USE OF ASSETS FOR THE PURPOSE OF THE ACT. 11.1. RESPECTFULLY FOLLOWING THE ORDER OF THE JURIS DICTIONAL HIGH COURT ON THIS ISSUE, WE ALLOW THIS GROUND OF APPEAL OF THE A SSESSEE. IN THE RESULT GROUND NO.5 FOR THE A.Y. 2007-08 IS ALLOWED. 42.1 WE FIND MUMBAI BENCH OF THE TRIBUNAL IN THE CA SE OF ALOK INDUSTRIES LTD. (SUPRA) HAS ALSO DECIDED AN IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER:- 16. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PART IES AND PERUSED THE MATERIALS ON RECORD. UNDISPUTEDLY, THE ASSESSEE HAS PAID THE AMOUNT IN QUESTION TO SIFY LTD. TOWARDS USE OF INTERNET/LEASE LICENSE CHARGES. AS COULD BE SEEN, IN A NUMBER OF JUDICIAL PRECEDENTS, SOME OF WHICH HAVE BEEN CITED BEFORE US, IT HAS BEEN HELD THAT PAYMENT MADE TOWARDS BROADBAND/LEASE LINE CHARGES IS NOT IN THE NATURE O F ROYALTY SO AS TO ATTRACT THE PROVISIONS OF SECTION 194J. SINCE, THE SERVICES RENDERED ARE NOT IN THE NATURE OF TECHNICAL SERVICE AS ENVISAGED U/S . 194J, THE LD. CIT(A) HAS ATTEMPTED TO ROPE IN THE PAYMENT U/S. 194I BY R EFERRING TO THE DEFINITION OF 'PROCESS' AS PROVIDED UNDER EXPLANATI ON (6) TO SECTION 9(1)(VI). HOWEVER, THE SAID AMENDMENT WAS MADE BY FINANCE ACT , 2012 W.R.E.F. 01.6.1976. THUS, AS PER EXISTING PROVISION, WHEN TH E ASSESSEE MADE THE PAYMENT THERE WAS NO LIABILITY TO DEDUCT TAX AT SOU RCE BY TREATING IT AS ROYALTY. THE AMENDMENT MADE WITH RETROSPECTIVE EFFE CT CANNOT FASTEN LIABILITY ON THE ASSESSEE. THAT BEING THE CASE ASSE SSEE CANNOT BE TREATED AS ASSESSEE IN DEFAULT. THE DECISIONS RELIED UPON B Y THE LD. AR SUPPORT THIS VIEW. AS FAR AS THE OBSERVATION OF THE LD. CIT (A) THAT THE PAYMENT MADE OTHERWISE IS COVERED U/S. 194I, WE MUST OBSERV E IN CASE OF HERO MOTO CORP. LTD. (SUPRA)AND GLOBAL INDIA (SUPRA), TH E TRIBUNAL HAS HELD THAT THE BROADBAND/LEASE LINE FACILITIES PROVIDED BY THE SERVICE PROVIDER FOR TRANSMISSION OF DATA DOES NOT COME IN THE CATEGORY OF PAYMENT MADE 33 ITA NO. 7001/DEL/2018 TOWARDS RENT FOR EQUIPMENT, PLANT AND MACHINERY. TH EREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF THE ITAT, WE SET ASIDE T HE ORDER OF THE LD. CIT(A) ON THIS ISSUE. GROUNDS RAISED ARE ALLOWED. 43. WE FIND THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF VODAFONE SOUTH LTD. (SUPRA), WHILE DECIDING AN IDENTICAL ISS UE, HAS OBSERVED AS UNDER:- 8. WE HAVE HEARD MR.K.V.ARAVIND, LEARNED COUNSEL A PPEARING FOR THE APPELLANTS - REVENUE IN ALL THE APPEALS. THE LEARNE D COUNSEL RELIED UPON TWO DECISIONS OF THE APEX COURT FOR CANVASSING THE CONTENTION THAT THE ROAMING CHARGES PAID BY THE ASSESSEE TO THE OTHER S ERVICE PROVIDER CAN BE SAID AS TECHNICAL SERVICES; ONE WAS THE DECISION OF THE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX, DELHI VS. BHART I CELLULAR LIMITED, REPORTED AT [2010] 193 TAXMAN 97 (SC); AND THE ANOT HER WAS THE DECISION OF THE APEX COURT IN THE CASE OF COMMISSIONER OF IN COME-TAX-4, MUMBAI VS. KOTAK SECURITIES LIMITED, REPORTED AT [2016] 67 TAX MANN.COM 356 (SC) AND IT WAS SUBMITTED THAT IF THE OBSERVATIONS MADE BY T HE APEX COURT IN THE ABOVE REFERRED DECISIONS ARE CONSIDERED, THE DECISI ON OF THE TRIBUNAL WOULD BE UNSUSTAINABLE AND CONSEQUENTLY, THE QUESTIONS MA Y ARISE FOR CONSIDERATION BEFORE THIS COURT IN THE PRESENT APPE ALS. 9. WE MAY RECORD THAT IN THE DECISION OF THE APEX C OURT IN THE CASE OF BHARTI CELLULAR LIMITED (SUPRA) THE APEX COURT AFTE R HAVING FOUND THAT WHETHER HUMAN INTERVENTION IS REQUIRED IN UTILIZING ROAMING SERVICES BY ONE TELECOM MOBILE SERVICE PROVIDER COMPANY FROM AN OTHER MOBILE SERVICE PROVIDER COMPANY, IS AN ASPECT WHICH MAY REQUIRE FU RTHER EXAMINATION OF THE EVIDENCE AND THEREFORE, THE MATTER WAS REMANDED BACK TO THE ASSESSING OFFICER. FURTHER, IN THE IMPUGNED ORDER O F THE TRIBUNAL, AFTER CONSIDERING THE ABOVE REFERRED DECISION OF BHARTI C ELLULAR LIMITED, THE TRIBUNAL HAS FURTHER NOT ONLY CONSIDERED THE OPINIO N, BUT FOUND THAT AS PER THE SAID OPINION THE ROAMING PROCESS BETWEEN PARTIC IPATING ENTITIES IS FULLY AUTOMATIC AND DOES NOT REQUIRE ANY HUMAN INTERVENTI ON. THEREFORE, WE DO NOT FIND THAT THE AFORESAID DECISION IN THE CASE OF BHARTI CELLULAR LIMITED, WOULD BE OF ANY HELP TO THE APPELLANTS - REVENUE. 10. IN THE ANOTHER DECISION OF THE APEX COURT, IN T HE CASE OF KOTAK SECURITIES LIMITED, THE MATTER WAS PERTAINING TO TH E CHARGES OF THE STOCK EXCHANGE AND THE APEX COURT, ULTIMATELY, FOUND THAT NO TDS ON SUCH PAYMENT WAS DEDUCTIBLE UNDER SECTION 194J OF THE AC T. BUT THE LEARNED COUNSEL FOR THE APPELLANTS REVENUE ATTEMPTED TO C ONTEND THAT IN 34 ITA NO. 7001/DEL/2018 PARAGRAPHS 7 AND 8 OF THE ABOVE REFERRED DECISION O F THE APEX COURT, IT HAS BEEN OBSERVED THAT IF A DISTINGUISHABLE AND IDENTIF IABLE SERVICE IS PROVIDED, THEN IT CAN BE SAID AS A TECHNICAL SERVI CES. THEREFORE, HE SUBMITTED THAT IN THE PRESENT CASE, ROAMING SERVICE S TO BE PROVIDED TO A PARTICULAR MOBILE SUBSCRIBER BY A MOBILE COMPANY IS A CUSTOMIZE BASED SERVICE AND THEREFORE, DISTINGUISHABLE AND SEPARATE LY IDENTIFIABLE AND HENCE, IT CAN BE TERMED AS TECHNICAL SERVICES. 11. IN OUR VIEW, THE CONTENTION IS NOT ONLY MISCONC EIVED, BUT IS ON NON EXISTENT PREMISE, BECAUSE THE SUBJECT MATTER OF THE PRESENT APPEALS IS NOT ROAMING SERVICES PROVIDED BY MOBILE SERVICE PROVIDE R TO ITS SUBSCRIBER OR CUSTOMER, BUT THE SUBJECT MATTER IS UTILIZATION OF THE ROAMING FACILITY BY PAYMENT OF ROAMING CHARGES BY ONE MOBILE SERVICE PR OVIDER COMPANY TO ANOTHER MOBILE SERVICE PROVIDER COMPANY. HENCE, WE DO NOT FIND THAT THE OBSERVATIONS MADE ARE OF ANY HELP TO THE REVENUE. 12. AS SUCH, EVEN IF WE CONSIDER THE OBSERVATIONS M ADE BY THE APEX COURT IN THE CASE OF BHARTI CELLULAR LIMITED, SUPRA, WHET HER USE OF ROAMING SERVICE BY ONE MOBILE SERVICE PROVIDER COMPANY FROM ANOTHER MOBILE SERVICE PROVIDER COMPANY, CAN BE TERMED AS TECHNIC AL SERVICES OR NOT, IS ESSENTIALLY A QUESTION OF FACT. THE TRIBUNAL, AFTER CONSIDERING ALL THE MATERIAL PRODUCED BEFORE IT, HAS FOUND THAT ROAMING PROCESS BETWEEN PARTICIPATING ENTITIES IS FULLY AUTOMATIC AND DOES NOT REQUIRE ANY HUMAN INTERVENTION. COUPLED WITH THE ASPECT THAT THE TRIB UNAL HAS RELIED UPON THE DECISION OF THE DELHI HIGH COURT FOR TAKING SUPPORT OF ITS VIEW. 13. IN OUR VIEW, THE TRIBUNAL IS ULTIMATELY FACT FI NDING AUTHORITY AND HAS HELD THAT THE ROAMING PROCESS BETWEEN PARTICIPATING COMPANY CANNOT BE TERMED AS TECHNICAL SERVICES AND, THEREFORE, NO TDS WAS DEDUCTIBLE. WE DO NOT FIND THAT ANY ERROR HAS BEEN COMMITTED BY THE T RIBUNAL IN REACHING TO THE AFORESAID CONCLUSION. APART FROM THE ABOVE, THE QUESTIONS ARE ALREADY COVERED BY THE ABOVE REFERRED DECISION OF THE DELHI HIGH COURT, WHICH HAS BEEN CONSIDERED BY THE TRIBUNAL IN THE IMPUGNED DEC ISION. 14. IN VIEW OF THE ABOVE, WE DO NOT FIND THAT ANY S UBSTANTIAL QUESTION OF LAW WOULD ARISE FOR CONSIDERATION. HENCE, THE APPEA LS ARE DISMISSED. 44. THE VARIOUS OTHER DECISIONS RELIED ON BY THE LD . COUNSEL FOR THE ASSESSEE ALSO SUPPORT ITS CASE. IN VIEW OF THE ABO VE DISCUSSION, WE HOLD THAT THE ASSESSEE IS NOT LIABLE FOR WITHHOLDING TAX U/S 194I OF THE ACT ON ACCOUNT OF PAYMENT OF LEASELINE CHARGES TO OTHER TELECOM OPERA TORS FOR PROVISION OF 35 ITA NO. 7001/DEL/2018 TELECOM CONNECTIVITY SERVICES REQUIRED FOR TRANSMIS SION OF DATA. ACCORDINGLY THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DIS ALLOWANCE. THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS ACCORDINGLY ALLOWED. IT IS PERTINENT TO NOTE THAT THE LEASE LINE CHARGES WERE PAID TO THE TELECOM SERVICE PROVIDER FOR FASTER CONNECTIVITY SERVICES T HROUGH DEDICATED LEASE LINE. AS SUCH THE PAYMENT HAD BEEN MADE FOR AVAILING FACILIT Y OF CONNECTIVITY SERVICES FROM VENDORS REQUIRED FOR TRANSMISSION OF DATA AND IS NOT FOR USE OF ANY ASSET INVOLVED IN PROVISION OF SUCH FACILITY COVERED UNDE R SECTION 194I OF THE ACT. THE ASSESSEE COMPANY IS NOT IN POSSESSION AS WELL AS NO T IN CONTROL OF THE EQUIPMENTS WHICH WERE USED FOR PROVIDING INTERNET A ND COMMUNICATION FACILITIES, THEREFORE, THERE WAS A CLEAR ABSENCE OF THE ELEMENT OF LEASING OF EQUIPMENTS, AS A FALL OUT OF WHICH THE APPLICABILIT Y OF THE PROVISIONS OF SECTION 194I STOOD EXCLUDED. THUS, THE NATURE OF PAYMENT IS NOT AT ALL RELATED TO ANY EQUIPMENT, THEREFORE, ASSESSEE IS NOT REQUIRE TO DE DUCT TAX AT SOURCE UNDER THE STATUTORY PROVISIONS OF SECTION 194I OF THE ACT. TH IS ISSUE IS IDENTICAL AND COVERED IN FAVOUR OF THE ASSESSEE, IN A.Y. 2012-13 AND 2013-14. ACCORDINGLY THE ASSESSING OFFICER IS DIRECTED TO DELETE THIS A DDITION. GROUND NO. 7.1 IS ALLOWED. 25. AS REGARDS GROUND NO. 8 RELATING TO DISALLOWANC E ON ACCOUNT OF NOTIONAL FOREIGN EXCHANGE LOSS, THE LD. AR SUBMITTED THAT TH E TRIBUNAL STATISTICALLY ALLOWED THE GROUND IN ASSESSMENT YEAR 2012-13 HAVIN G EXACTLY SIMILAR FACTS WITH THE DIRECTION TO THE ASSESSING OFFICER TO VERI FY THE DOCUMENTS FILED BEFORE THE TRIBUNAL DURING THE COURSE OF HEARING. THE LD. AR SUBMITTED THAT THE SAID DIRECTION WAS FOLLOWED FOR ASSESSMENT YEAR 2013-14 BY THE TRIBUNAL. 26. THE LD. DR RELIED UPON THE ORDERS OF TPO, DRP A ND ASSESSING OFFICER. 27. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE TRIBUNAL IN A.Y. 2013-14 H ELD AS UNDER :- 36 ITA NO. 7001/DEL/2018 55. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HA VE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSE SSING OFFICER DISALLOWED THE FOREIGN EXCHANGE FLUCTUATION LOSS OF RS.4,80,06 ,052/- ON THE GROUND THAT THE ASSESSEE FAILED TO DEMONSTRATE THE GENUINENESS OF THE LOSS. WE FIND THE DRP ALSO UPHELD THE ACTION OF THE ASSESSING OFFICER AND THE ASSESSING OFFICER, IN THE FINAL ORDER, HAS DISALLOWED THE SAME. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ADDITIONAL EVIDEN CES FILED NOW WILL SUBSTANTIATE THE GENUINENESS OF THE LOSS. CONSIDER ING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE INTEREST OF JUSTICE, WE ADMI T THE ADDITIONAL EVIDENCES FILED BEFORE THE BENCH AT THE TIME OF HEARING AND R ESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GO THROUG H THE SAME AND DECIDE THE ISSUE AS PER FACT AND LAW AFTER GIVING DUE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. GROUND OF APPEAL NO.9 OF THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PUR POSES. IN THE PRESENT YEAR, THE ASSESSEE COMPANY HAS GIVE N BREAK UP OF FOREIGN EXCHANGE LOSS OF RS. 1.29 CRORES WHICH IS CLAIMED I N RETURN OF INCOME AS A TAX DEDUCTIBLE EXPENSE. THE LOSS IS ON ACCOUNT OF EXCHA NGE FLUCTUATION IN DEBTORS, CREDITORS, AND OTHER ITEMS WHICH ARE REVENUE IN NAT URE. THEREFORE, SUCH LOSS IS ALLOWABLE EXPENDITURE U/S 37(1) OF THE ACT. BUT THE ASSESSING OFFICER HAS NOT TAKEN INTO ACCOUNT THE SUBMISSIONS AND THE EVIDENCE S PROVIDED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. THEREFO RE, IT WILL BE APPROPRIATE TO REMAND BACK THIS ISSUE TO THE FILE OF THE ASSESS ING OFFICER. NEEDLESS TO SAY, THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING. GROUN D NO. 8 IS ALLOWED. 28. AS REGARDS TO GROUND NO. 9, THE ASSESSING OFFIC ER IS DIRECTED TO GRANT CREDIT OF TAXES DEDUCTED AT SOURCE TO THE ASSESSEE AFTER VERIFYING THE SAME. THIS ISSUE IS REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPLE S OF NATURAL JUSTICE. GROUND 37 ITA NO. 7001/DEL/2018 NO. 9 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 29. AS REGARDS TO GROUND NOS. 10 AND 11 ARE CONSEQU ENTIAL, HENCE AT THIS JUNCTURE ARE NOT ADJUDICATED UPON. 30. IN RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JULY, 2019 . SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 18/07/2019 *BINITA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 38 ITA NO. 7001/DEL/2018 DATE OF DICTATION 15 .07.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 16 .07.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK