MAVENIR INDIA PVT. LTD. (earlier known as Comverse Network System India Pvt. Ltd.), GURGAON V. DCIT, CIRCLE- 3(1), GURGOAN

ITA 801/DEL/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 2111 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: I1
• Assessment Year: 2016-2017
• Appeal Filed On: 27-06-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Transfer pricing; Opportunity of being heard; Principle of natural justice; International transaction; TDS
• Section: 143(3); 92D; 10AA; 234B; 133(6); 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘I-1’, NEW DELHI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBERR ITA No. 801/Del/2021 Assessment Year: 2016-17 Mavenir India Pvt. Ltd., (earlier known as Comverse Network System India Pvt. Ltd.), 14 th Floor, Tower B, Building No. 5, DLF Cyber City. Gurgaon, Haryana. PIN: 1220 02 Vs. DCIT, Circle-3(1), Gurgaon (Haryana) PAN :AABCC3425B (Appellant) (Respondent) ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER: Captioned appeal has been filed by the assessee, assailing the final assessment order dated 04.04.2021, passed under Section 143(3) read with sections 143(3A) and 143(3B) of the Income-Tax Act, 1961, pertaining to Appellant by S/Shri GC Srivastava, Adv., Mayank Patawari, CA & Kalrav Melhotra, Adv. Respondent by Shri Surender Pal, CIT (DR) Date of hearing 26.04.2022 Date of pronouncement 1705.2022 2 ITA No.801/Del/2021 assessment year 2016-17, in pursuance to directions of learned Dispute Resolution Penal ( DRP). 2. The Registry has pointed out delay of 25 days in filing the present appeal. Assessee has filed letter dated 09.07.2021 seeking condonation of delay on the ground that due to prevailing situation arising out of COVID-19, the appeal could not be filed in time. Further, the assessee has referred to the order dated 27.04.2021 of the Hon'ble Supreme Court in M.A. No.665/2021, wherein, the Hon’ble Apex Court taking note of the challenge faced by the litigants across the country on account of Covid-19, had extended the period of limitation in filing petitions/applications/suits/appeals etc. Thus, it was submitted, the delay in filing the appeal may be condoned. 3. Learned Departmental Representative did not oppose condonation of delay. 4. Keeping in view the contents of the petition filed by the assessee seeking condonation of delay and the order of the Hon'ble Supreme Court, referred to above, we are satisfied that the delay in filing the appeal was due to reasonable cause. Accordingly, we condone the delay of 25 days and admit the appeal for adjudication on merit. 5. The assessee has raised the following grounds: “1. On the facts and circumstances of the case, & in law the assessment order passed by the Additional / Joint / Deputy / Assistant Commissioner of Income Tax/ Income-tax Officer, National e-Assessment Centre (‘the 3 ITA No.801/Del/2021 Ld. AO’) under Section 143(3) read with section 143(3A) & 143(3B) of the Income tax Act, 1961 (‘the Act’) is erroneous and bad in law; Grounds of objections relating to Transfer Pricing Matters 2. On the facts and circumstances of the case, & in law the reference made by the Ld. AO to the Assistant Commissioner of Income Tax, Transfer pricing officer - 1(3X1) (‘the Ld. TPO’) suffers from jurisdictional error. 3. On the facts and circumstances of the case, & in law the Ld. TPO / Ld. AO, following the directions of the Hon’ble Dispute Resolution Panel (‘the Hon’ble DRP’) has erred in enhancing the income of the Appellant by Rs. 18,234,701 holding that the Appellant’s international transaction pertaining to provision of software development services, professional services and maintenance services (‘ lectively referred as ‘SWD’) to its Associated Enterprises (‘AE’) does not satisfy the arm’s length principle envisaged under the Act and in doing so, have grossly \erred in: 3.1. not appreciating that none of the conditions set out in section 92C(3) of the Act are satisfied in the present case and disregarding the ALP as determined by the Appellant in the Transfer Pricing (‘TP’) documentation maintained by it in terms of Section 92D of the Act read with Rule 10D of the Income Tax Rules, 1962 (‘the Rules’); 3.2. rejecting comparability analysis undertaken by the Appellant in the TP documentation and in conducting a fresh comparability analysis based on application of the additional/ revised filters in determining the ALP; 3.3. not providing the search strategy and accept-reject reasons of the fresh economic analysis conducted by Ld. TPO which tantamount to choosing ad hoc companies as comparable; 3.4. including certain companies in the final set of comparable that are not comparable to the Appellant in terms of functions performed, assets employed and risks assumed; 3.5. excluding certain companies on arbitrary/ frivolous grounds even though they are comparable to the Appellant in terms of functions performed, assets employed and risks assumed; 4 ITA No.801/Del/2021 3.6. rejecting certain additional companies proposed/ identified by the Appellant even though they are comparable in terms of functions performed, assets employed and risks assumed; 3.7.computing the mark-ups of comparable companies based on erroneous computation methodology; and 3.8. ignoring the business/ commercial reality that the Appellant undertakes minimal business risks as against comparable companies that are full-fledged risk taking entrepreneurs, and by not allowing a risk adjustment to the Appellant on account of this fact, thereby disregarding the law, international guidance and judicial precedents in this regard. 4. On the facts and circumstances of the case, & in law the Ld. TPO / Ld. AO, following the directions of the Hon’ble Dispute Resolution Panel (‘the Hon’ble DRP’) has erred in enhancing the income of the Appellant by Rs. 14,859,894 holding that the Appellant’s international transaction pertaining to provision of sales and post-sales support services to its AE does not satisfy the arm’s length principle envisaged under the Act and in doing so, have grossly erred in: 4.1. not appreciating that none of the conditions set out in section 920(3) of the Act are satisfied in the present case and disregarding the ALP as determined by the Appellant in the TP documentation maintained by it in terms of Section 92D of the Act read with Rule 10D of the Rules; 4.2. rejecting comparability analysis undertaken by the Appellant in the TP documentation and in conducting a fresh comparability analysis based on application of the additional/ revised filters in determining the ALP; 4.3. not providing the search strategy and accept-reject reasons of the fresh economic analysis conducted by Ld. TPO which tantamount to choosing ad hoc companies as comparable; 4.4. including certain companies in the final set of comparable that are not comparable to the Appellant in terms of functions performed, assets employed and risks assumed; 5 ITA No.801/Del/2021 4.5. excluding certain companies on arbitrary/ frivolous grounds even though they are comparable to the Appellant in terms of functions performed, assets employed and risks assumed; 4.6. rejecting certain additional companies proposed/ identified by the Appellant even though they are comparable in terms of functions performed, assets employed and risks assumed; 4.7. computing the mark-ups of comparable companies based on erroneous computation methodology; and 4.8. ignoring the business/ commercial reality that the Appellant undertakes minimal business risks as against comparable companies that are full-fledged risk taking entrepreneurs, and by not allowing a risk adjustment to the Appellant on account of this fact, thereby disregarding the law, international guidance and judicial precedents in this regard. 5. On the facts and circumstances of the case, & in law the Ld. TPO / Ld. AO has erred in enhancing the income of the Appellant by Rs. 6,213,464 holding that the international transaction pertaining to availing of management services do not satisfy the arm’s length principle envisaged under the Act and in doing so, have grossly erred in: 5.1 rejecting comparability analysis undertaken by the Appellant in the TP documentation; 5.2. holding that the Appellant did not receive any tangible benefit in lieu of the services availed; thereby challenging the commercial wisdom of the Appellant in making payment for services availed; 5.3. disregarding the elaborate documentary evidence submitted as part of assessment proceedings to erroneously assume that ‘no benefit’ has been conferred upon the Appellant from the impugned international transactions pertaining to availing of support services and management services and thereafter re-determining the ALP of the said transaction as ‘NIL’; 5.4. Arbitrarily rejecting TNMM and selecting Comparable Uncontrolled Price (‘CUP’) method as the most appropriate method to benchmark the impugned international transaction and determining the arm’s length price of the impugned transaction as 6 ITA No.801/Del/2021 Nil, without identifying any controlled transactions/ without duly establishing suitability thereof; Grounds of objections relating to Corporate Tax Matters 6. On the facts and circumstances of the case, and in law the Ld. AO/ Ld. DPR has erred in making an addition of Rs 26,383,589 by denying deduction claimed by the Appellant under section 10AA of the Act; 6.1. On the facts and circumstances of the case, and in law the Ld. AO/ Ld. DRP has erred in disregarding the details filed by the Appellant that the formative conditions prescribed under section ioAA(4) of the Act have been satisfied in the year of formation; 6.2. On the facts and circumstances of the case, and in law the Ld. AO/ Ld. DRP has erred in disregarding the fact that the disallowance under section 10AA of the Act in the year of formation has been deleted and thus, no disallowance is warranted in the subject year; 6.3. On the facts and circumstances of the case, and in law the Ld. AO has erred in alleging that the Appellant failed to submit details pertaining to section 10AA of the Act despite several opportunities; 6.4. On the facts and circumstances of the case, and in law the evidences placed and the material available on record have not been properly and judicially considered by the Ld. AO/ Ld. DRP and the additions have been made ignoring such evidence/material on record, which is against the principles of natural justice; 6.5. On the facts and circumstances of the case, and in law the Ld. AO has erred in making such huge addition in absolute haste, based on presumption, assumptions, conjectures and surmises without giving adequate opportunity to Appellant to support its claim and such an assessment violated the principle of natural justice and assessment order is bad in law; 7. On the facts and circumstances of the case and in law, the Ld. AO has erred in not granting the entire credit of TDS claimed in the return of income 7 ITA No.801/Del/2021 8. On the facts and circumstances of the case and in law, the Ld. AO has erred in computing the interest under section 234A, 234B and 234C of the Act. 9. On the facts and circumstances of the case and in law, the Ld. AO has erred in proposing to initiate penalty proceedings under section 27i(i)(c) of the Act mechanically and without recording any adequate reasons for such initiation”. 6. Ground Nos. 1 and 2 being of general nature, do not require specific adjudication. 7. In ground Nos. 3 and 4 along with their sub-grounds, assessee has challenged the addition made on account of transfer pricing adjustment made to the price of the international transaction pertaining to sales and support services provided to the Associated Enterprises (AE). Though, in these grounds, a number of issues have been raised by the assessee, however, at the time of hearing, Shri G.C. Srivastava, learned counsel appearing for the assessee, submitted that the real dispute between the parties is only in relation to certain comparables selected by the assessee and erroneous margin computation in case of some other comparables. 8. In view of the aforesaid submissions of the learned counsel for the assessee, we will confine our decision to selection of certain comparables specifically objected by the assessee before us. Before we deal with the issue, it is necessary to briefly recapitulate the relevant facts. The assessee, previously known as Comverse Network System India Pvt. Ltd., is a resident company. 8 ITA No.801/Del/2021 Assessee is a part of Comverse Network System India Pvt. Ltd., which provides digital communication solution for communication service providers, enterprises and application providers worldwide. Assessee’s parent company offers various communication solutions, including, voicemail, visual voicemail, call completion, short messaging services (SMS) and various other kind of services. Whereas, the assessee company being a captive service provider provides sales support services including services related to promotion and marketing the products of the group companies and identifying potential customers in India. The assessee also provides post sales support services including installation and test run the equipment and the existing network, post-communication maintenance, including, warranty, extended warranty and post warranty services for products sold directly by the overseas associated enterprises (AEs) to customers in India. Of course, the assessee provides software development services and management services. During the year under consideration, the assessee reported Revenue in the following segments: i) Provisions of sales and support sales services Rs.153,18,017; ii) Provision of software development services Rs.62,34,676; iii) Provision of professional services Rs.24,02,52,405; iv) Provision of management services Rs.53,82,969; & v ) Availing of management services Rs.62,13,464. 9 ITA No.801/Del/2021 9. Assessee benchmarked all these transactions with the AEs by adopting transactional net margin method (TNMM) as the most appropriate method. However, the benchmarking done by the assessee was not accepted by Transfer Pricing Officer (TPO). Though, he accepted TNMM as the most appropriate method, however, he found various deficiencies in the benchmarking of the assessee. The TPO was of the view that the assessee has improperly applied qualitative and quantitative filters resulting in selection of incomparables as comparables, whereas, comparables have been left out. After rejecting the benchmarking done by the assessee, the TPO proceeded to search for new comparables by applying certain additional filters. In the process, the TPO shortlisted 12 companies as comparables with average margin of 18.405%. Applying the said margin to the operating cost, he determined the ALP of price charged for sales and post sales services at Rs.16,95,07,289, which resulted in an upward adjustment of Rs.1,63,27,273. 10. While doing so, the TPO clubbed various services provided by the assessee to the following three segments: i) Software Development Services; 10 ITA No.801/Del/2021 ii) Management Services; & iii) All other services; 10. As far as sales and Post Sales Service segment is concerned, which is the dispute in these grounds, the TPO selected 12 comparables. Before learned DRP, assessee objected to some of the comparables selected by the TPO. 11. After considering the submissions of the assessee, learned DRP excluded some of the comparables selected by the TPO while retaining others. Before us, the assessee has challenged selection of the following four comparables: i) Killick Agencies & Marketing Ltd.; ii) Febulka Advertising Pvt. Ltd.; iii) Info Edge India Ltd.; & iv) Interacted Man Power Solution Pvt. Ltd. 12. Hereinafter, we will deal with acceptability or otherwise of each of the aforesaid comparables. I. Killick Agencies & Marketing Ltd. : 13. Drawing our attention to the annual report of the company placed in the paper book, learned counsel submitted, the company is functionally different from the assessee as it is engaged in totally 11 ITA No.801/Del/2021 different set of activities. He submitted, unlike the assessee, this company is not a service provider and acts as agent for various foreign principals for sale of dredgers, dredging equipment, steerable rudder propellers etc. 14. Drawing our attention to the P & L account, he submitted more than 94% of its operational income was in form of commission income from its agency function. He submitted, the annual report does not provide segmental details of products, commission services and after sales support services. Thus, he submitted, the company cannot be treated as comparable. In support of such contention, he relied upon the following decisions: i) Bergen Engines India Pvt. Ltd. Vs. ACIT – ITA No.7802/Del/2017 dated 27.4.2020; ii) Hyundai Rotem Co. Vs. ACIT – ITA No.7569/Del/2019 dated 02.03.2020; & iii) Veolia India Pvt. Ltd. Vs. DCIT – ITA No,6770/Del/2015 dated 11.10.2019. 15. Strongly relying upon the observations of TPO and learned DRP, learned Departmental Representative submitted, TNMM requires broad comparability. He submitted, minor functional variation in case of comparables would not be of any significance. 12 ITA No.801/Del/2021 Drawing our attention to the functional profile of the assessee as well as of the comparable, learned Departmental Representative submitted, the DRP has carefully analyzed the facts and has concluded that the company is functionally similar to the assessee. He submitted, it cannot be said the DRP has not applied its mind properly to assessee’s objections, as accepting assessee’s contentions some of the comparables selected by TPO have been excluded. Thus, he submitted, the company may be retained as comparable. 16. We have considered rival submissions and perused the material on record. 17. After analyzing the functional profile of the comparable qua the assessee, we find, the company is more or less into earning commission income being an agent of certain overseas entities specialized in manufacturing and sale of dredgers, dredging equipments, rudder propellers etc. Whereas, assessee provides sales and support services including warranty and maintenance services. Therefore, due to significant differences in the functional profile of the assessee and the selected comparable, we hold that this company cannot be treated as comparable to the assessee. Accordingly, 13 ITA No.801/Del/2021 assessing officer is directed to exclude this company from the list of comparables. II. Febulka Advertising Pvt.Ltd. : 18. Objecting to this company being selected as a comparable, learned counsel for the assessee submitted, audited final report of the company is not available in public domain. He submitted, though, TPO himself rejected comparables by applying the filter of non- availability of financial information in public domain, nevertheless, he has selected the company. Without prejudice, he submitted, from whatever information available on record, it is evident that this company is purely an advertising agency which aims at brand building of its customers. Further, he submitted that this company has shown super normal profit, the reason for which is not available. Thus, he submitted, this company cannot be treated as comparable. 19. Learned Departmental Representative strongly relied upon the observations of TPO and learned DRP. 20. We have considered rival submissions and perused the material on record. 14 ITA No.801/Del/2021 21. It is observed, in course of proceedings before the TPO, assessee had specifically objected to selection of this company as a comparable due to insufficient information available in public domain regarding the financials of the company. In other words, it is the contention of the assessee that audited annual report of the company is not available in public domain. On perusal of the impugned orders of the TPO and learned DRP, it is very much clear, they have not addressed the aforesaid specific objection of the assessee. Thus, when the audited financial statement of the company is not available on public domain, it will not be safe to include the company as a comparable. More so, when there is no material on record to suggest the source from which the TPO has obtained the information regarding this company and the authenticity of such information. It doesn’t appear on record that the TPO has made any independent inquiry with this company either by issuing notice under section 133(6) of the Act or in any other manner. 22. In view of the aforesaid, we exclude this company from the list of comparables. 15 ITA No.801/Del/2021 III. Info Edge India Ltd.: 23. Objecting to selection of this company, learned counsel for the assessee submitted, the company is functionally dissimilar, as, primarily it is in the business of internet based service delivery operating in four service verticals, such as, matrimony, recruitment, real estate and education through various web portals. He submitted, the company derives revenue from subscription based activity, owns significant intangible and has significant advertising expenses. Further, he submitted, the company has incurred research and development expenses and has shown huge turnover of Rs.717.61 crores for the year which is 46.84 times higher than the turnover of the assessee. Thus, he submitted, since, the company doesn’t provide sales and sales support services like the assessee, it cannot be treated as comparables. In support, he relied upon the following decisions: i) Mentor Graphics (Sale & Service) Pvt. Ltd. Vs. DCIT ( ITA No.2526/Del/2016) dated 30.10.2019; ii) Rolls Royce India Pvt. Ltd. (ITA No.658/Del/2017) dated 30.10.2019; iii) Outotec India Pvt. Ltd. ( ITA No. 320/Del/2016) dated 23.10.2019. 16 ITA No.801/Del/2021 24. Learned Departmental Representative strongly relied upon the observations of the TPO and learned DRP. 25. We have considered rival submissions and perused the material on record. 26. Upon going through the functional profile of the company as mentioned in the annual report, we find that this company is providing internet based services relating to recruitment, matrimony and education etc. Whereas, the assessee provides sales and post sales support services to the products sold by its AE. 27. Considering the huge difference in the functional profile between this comparable and the assessee, it will fail the functionality test, hence, cannot be considered as a valid comparable. 28. In view of the aforesaid, we exclude this company from the list of comparables. IV. Interactive Manpower Solution : 29. Objecting to the selection of this company as comparable, learned counsel for the assessee submitted, it is functionally dissimilar, as, it operates as an offshore recruitment service company which deals in 17 ITA No.801/Del/2021 various services, such as recruitment and administrative services, accounting support and bespoke one off creative solutions. Thus, he submitted, this company is not providing marketing support services like the assessee. Without prejudice, he submitted, this is an exceptional year of operation for the company as its profit has increased by almost 102.15%. He submitted, it also owns substantial intangibles. Thus, he submitted, the company cannot be treated as comparable. 30. Learned Departmental Representative strongly relied upon the observations of the TPO and learned DRP. 31. We have considered rival submissions and perused the material on record. 32. On a perusal of the annual report of the company placed in the paper book, it is noticed that this company provides offshore recruitment and staffing solutions. These activities of the company certainly cannot be compared to the sales and post sales services provided by the assessee. It is also observed that the company has reported huge increase in its profit margin. Therefore, without properly analyzing the factors leading to abnormal increase in profit margin, it would not be safe to include this company as a comparable. 18 ITA No.801/Del/2021 In any case of the matter, fact remains that the company is functionally dissimilar to the assessee. For this reason alone, it cannot be included as comparable. 33. Before parting, we must observe, though, learned Departmental Representative has contended before us that TNMM requires broad comparability and minor differences in the functional profile may not be relevant, however, it needs to be observed, in case of Avenue Asia Advertising Vs. DCIT (2017) 398 ITR 120 (Del), the Hon'ble Delhi High Court while deliberating on the issue of comparability under TNMM has observed as under: “20. A perusal of the above decision reveals that the following steps ought to be undertaken in identification of comparable pricing method is adopted. • Comparable transactions must be selected on the basis of a similarity with the controlled transaction/entity. • Rule 10B(2) of the Income Tax Rules, 1962 ought to be borne in mind while choosing the factors of comparability in respect of uncontrolled transactions. • Even while adopting the TNMM method, the standard for selection of the comparable transactions/entities cannot be diluted. • Wide deviation in the Profit Level Indicator (‘PLI’) would require further investigation/analysis. 19 ITA No.801/Del/2021 • For comparison of transaction, factors such as the nature of capital, resources used, the risk assumed, etc. ought to be considered. Broadly, therefore, the dictum by this Court was that though in the TNMM method there is sufficient tolerance, mere broad functionality is by itself insufficient.” 34. Therefore, by simply saying that TNMM allows broad comparability, a company having significant functional differences, cannot be treated as comparable. In this context, we must observe, not only before the TPO but before learned DRP, the assessee had raised specific issue based objections against the afore-stated comparables. However, neither the TPO nor learned DRP have dealt with the specific objections of the assessee. Rather, the objections of the assessee have been rejected by making general observations. In the aforesaid scenario, revenue’s stand cannot be supported. Thus, in ultimate analysis, we hold that the aforesaid companies being not- comparable to the assessee should be excluded. 35. Having held so, we will now deal with assessee’s objections regarding three more comparables selected by the TPO which are, Sasken Network Engineering Ltd., Himachal Futuristic 20 ITA No.801/Del/2021 Communications Ltd. and Cameo Corporate Services Ltd. As regards, these three comparables, the assessee, per se, does not dispute that they are functionally similar. The only contention of the learned counsel for the assessee is, TPO has incorrectly computed the margin of these comparables by disregarding the working given by the assessee. 36. Having considered rival submissions, we direct the assessing officer to examine the working of margin computation of the comparables stated to have been furnished by the assessee and correctly compute the margin of these three comparables after providing due opportunity of being heard to the assessee. 37. In ground No. 5, assessee has challenged the addition of Rs.62,13,464, being the transfer pricing adjustment made to the ALP of payment made to the AE towards availing of management services. 38. Briefly, facts are that during the year under consideration, assessee had paid an amount of Rs.62,13,464 to the AEs towards cost of management services. Further, in the TP study report, assessee benchmarked the transactions under TNMM and claimed it to be at arm’s length. Noticing this, the TPO called upon the assessee to 21 ITA No.801/Del/2021 furnish all necessary details relating to the nature of services availed and the benefits derived etc. 39. After perusing the detailed submissions of the assessee, the TPO held that the assessee could not establish on record that any of the benefits stated to have been received are tangible or real. He observed, under a comparable uncontrolled transaction, no such payment would have been made by an unrelated party. He observed, it is only an arrangement to change the tax base without any economic substance in the transaction. Thus, he ultimately held that the ALP of the transaction has to be determined at nil. The aforesaid decision of the assessing officer was also upheld by learned DRP. 40. Before us, both the parties agreed that while deciding identical issue in assessment year 2014-15, the Tribunal has restored the issue to the assessing officer for reconsideration. Thus, it was submitted by the parties that the issue may be restored back to the assessing officer. 41. We have considered rival submissions and perused the material on record. 42. It is observed that identical dispute between the parties arose in assessment years 2012-13, 2013-14. When the issue ultimately came 22 ITA No.801/Del/2021 up for consideration before the Tribunal in ITA Nos. 408 & 7328/Del/2017, the Tribunal restored the matter back to the assessing officer. Following the aforesaid decision, the Tribunal again restored the issue in assessment year 2014-15 to the assessing officer for reconsideration while deciding assessee’s appeal in ITA No.6133/Del/20128 in order dated 31.12.2018. For ease of reference, the relevant observations of the Tribunal are reproduced hereunder: 5. We have considered the submissions of both the parties and perused the material available on the record. It is noticed that a similar issue having ITA No. 6133/Del/2018 Mavenir India Pvt. Ltd. identical facts was a subject matter of the assessee's appeals for the preceding assessment years 2012-13 and 2013-14 in ITA Nos. 408 & 7328/Del/2017 respectively wherein the matter has been restored to the file of the TPO. The relevant findings have been given in paras 14 to 22 of the order dated 31.07.2018 which read as under: "14. Before us, the ld. AR vehemently stated that the TPO did not give any justification in rejecting the comparables of the assessee. It is the say of the Id. AR that in the cases of comparables, Nu Tek India Limited and Teracom Limited, the TPO has simply mentioned that these are functionally different. The Id. AR continued by stating that in the cases of Himachal Futuristic Communications Ltd and Tele-communications Consultants India Limited, the TPO has contradicted himself in as much as he rejected these comparables by taking filters which he himself has considered for selection of comparables. 15. In its rebuttal, the Id. DR pointed out that there is nothing wrong in rejecting these comparables as the assessee does not have any turn key project as was in the case of Himachal Futuristic Communications Ltd. 16. In so far as comparables used by the TPO, the Id. AR pointed out that each comparable is functionally different to which the Id. 23 ITA No.801/Del/2021 DR pointed out that if the application of TNMM is expanded, then the comparables used by the TPO also deserve to be included if the comparables used by the assessee have to be considered. It is the say of the Id. DR that if the TNMM is used at entity basis, then all the services qualify as comparable. At this stage, the Id. Counsel drew out attention to the decision of the coordinate bench in assessee's own case in A.Y 2008-09 in ITA No. 6334/DEL/2012 wherein the findings read as under: "6. We find that in view of our direction to exclude the comparables chosen the TPO and one comparable chosen by the assessee as well as exclusion of the remaining two comparables by the TPO not challenged by the assessee before us, has left with no comparable in the sales and post sale support segment for determination of arm's length price. In view of the above ITA No. 6133/Del/2018 Mavenir India Pvt. Ltd. facts and circumstances, we restore the matter to the TPO for carrying out a fresh search and selection of comparables having functions similarity to the segment of sales and post sales support and compute the adjustment accordingly as per law. Needless to mention that the assessee shall be provided sufficient opportunity of hearing." 17. We find that the facts of the year under consideration appear to be similar to the facts of A.Y 2008-09. In our considered opinion, the comparables selected by the assessee and also by the TPO are functionally different from the functions of the assessee. In the light of findings given in A.Y 2008-09, we are of the view that both the assessee and TPO must carry out fresh search for selection of comparables having functions, similarity in the segment sales and post sales support. We, accordingly, restore this issue to the file of the TPO with the above directions. The TPO is directed to decide the issue afresh after giving reasonable opportunity of being heard to the assessee. 18. In so far as provision of management and support services are concerned, we find that the assessee has given complete details of the technical services utilised by it from its AE and the same are exhibited at pages 704 to 708 of the paper book. Details of management services have also been given by the assessee. We find that the TPO/DRP has nowhere considered the details submitted by the assessee. 24 ITA No.801/Del/2021 19. Before us, the Id. DR pointed out that in so far as management services are concerned, the assessee has not brought anything on record to suggest what type of services were given by the AEs for which the assessee had made the payments. 20. In so far as technical services are concerned, the Id. DR fairly conceded that the details were furnished but not properly appreciated by the TPO. 21. Considering the facts in totality, we are of the considered view that this issue also needs fresh adjudication. We, accordingly, restore this issue to the file of the TPO. The TPO is directed to decide the issue afresh after considering the detailed submissions/documentary evidences furnished by the assessee. The assessee is directed to furnish the details of services utilised by it ITA No. 6133/Del/2018 Mavenir India Pvt. Ltd. for which it has made the payments to its AEs. The assessee is further directed to demonstrate what benefits it has received from its AEs. The TPO is directed to consider the same and decide the issue afresh after giving reasonable opportunity of being heard to the assessee. 22. As mentioned elsewhere, the issue relating to provisions of management and support services is common in ITA Nos. 7328 & 408/DEL/2017. Both these appeals are disposed of accordingly." 6. So, respectfully following the aforesaid referred to order dated 31.07.2018 in ITA Nos. 408 & 7328/Del/2017 for the assessment years 2012- 13 & 2013-14 respectively, the issues raised in the present appeal are remanded back to the file of the TPO to be decided as has been directed in the said order. 43. Facts being identical, following the consistent view of the Tribunal in assessee’s own case, as discussed above, we restore the issue to the assessing officer for considering afresh keeping in view the earlier directions of the Tribunal. 25 ITA No.801/Del/2021 44. In ground No. 6, assessee has challenged the disallowance of deduction claimed under Section 10AA of the Act. 45. Briefly, the facts are that in the return of income filed for impugned assessment year, the assessee had claimed deduction of Rs.2,63,83,589 under Section 10AA of the Act. 46. In course of assessment proceedings, assessing officer called upon the assessee to furnish relevant details relating to the deduction claimed and also to justify that it is eligible for such deduction. As alleged by the assessing officer, the assessee expressed its inability to furnish complete details/information called for. Thus, holding that the assessee has not fulfilled the conditions of section 10AA of the Act, assessing officer disallowed the deduction claimed under Section 10AA of the Act. Following its decision in assessee’s own case in assessment year 2015-16, learned DRP upheld the disallowance made by the assessing officer. 47. Before us, learned counsel for the assessee submitted that in assessment year 2015-16, assessee, for the first time, had claimed deduction under Section 10AA of the Act in respect of its unit set up in Special-Economic Zone (SEZ). He submitted, though, the 26 ITA No.801/Del/2021 departmental authorities disallowed the deduction claimed by the assessee, however, by virtue of order passed by the Tribunal, assessee was allowed deduction. However, he fairly submitted that the Tribunal quashed the assessment order on a legal issue. Therefore, the issue relating to assessee’s claim of deduction under Section 10AA of the Act was not decided on merits. Nevertheless, he submitted, fulfillment of conditions for claiming deduction under Section 10AA of the Act has to be examined in the first year of claim. He submitted, once assessee’s claim of deduction in the first year has been allowed, the eligibility of the assessee to claim such deduction, cannot be examined in the subsequent years. Thus, he submitted the deduction claimed should be allowed. 48. Learned Departmental Representative submitted, since, the deduction claimed by the assessee has to be examined subject to fulfillment of conditions under Section 10AA of the Act, the issue may be restored back to the assessing officer. 49. We have considered rival contentions and perused material on record. 27 ITA No.801/Del/2021 50. It is evident, while the assessing officer has disallowed assessee’s claim of deduction under Section 10AA of the Act on the reasoning that assessee failed to furnish the complete details called for, learned DRP upheld the disallowance by relying upon its decision in assessment year 2015-16. 51. On perusal of material on record, it is observed, in assessment year 2015-16 assessee’s claim of deduction was rejected on the ground that assessee had not set up any new unit/project in terms with the conditions enshrined under Section 10AA of the Act. The departmental authorities have held that the nature of work undertaken by the SEZ unit is the same as the existing unit. Further, the employee and fixed assets details do not demonstrate that they were exclusively for the SEZ unit. 52. On perusing the directions of learned DRP in assessment year 2015-16, it is further observed that learned DRP has recorded a factual finding that compared to the investment made in fixed assets in the SEZ unit, the investment made in existing unit was more than double. Thus, ultimately, the departmental authorities have concluded that the 28 ITA No.801/Del/2021 SEZ unit is nothing but an extension of the existing unit, hence, not eligible to claim deduction under Section 10AA of the Act. 53. Undisputedly, the fact whether the assessee had fulfilled the conditions of Section 10AA of the Act was never decided by the Tribunal, since, the appeal of the assessee was decided on a legal ground and the assessment order was quashed. Therefore, the allegation of the departmental authorities that the SEZ unit is nothing but an extension of the existing unit, by splitting up or even otherwise, requires to be examined. More so, when the Assessing Officer has alleged that assessee failed to furnish the complete details. The contention of learned counsel for the assessee that the fulfillment of conditions of section 10AA of the Act cannot be examined in this assessment year, as, assessee’s claim was allowed in assessment year 2015-16, the initial year of claim, in our view, is unacceptable. This is so because, in assessment year 2015-16 the departmental authorities, no doubt, had rejected assessee’s claim of deduction due to alleged non-fulfillment of conditions of section 10AA of the Act. The issue was never examined by the Tribunal on merits while deciding assessee’s appeal for assessment year 2015-16.Therefore, it cannot be 29 ITA No.801/Del/2021 said that fulfillment of conditions of Section 10AA of the Act was examined in assessment year 2015-16. 54. Since, the assessing officer has alleged that the assessee has failed to furnish complete details/information to evaluate the fulfillment of conditions of eligibility of claim of section 10AA of the Act and since learned DRP has simply relied upon its own decision in assessment year 2015-16 without verifying the facts, we are inclined to restore the issue to the assessing officer for fresh adjudication after verifying the fact whether the assessee has fulfilled the conditions of section 10AA of the Act. Needless to mention, before deciding the issue, assessing officer must afford reasonable opportunity of hearing to the assessee. This ground of appeal is allowed for statistical purposes. 55. In ground No.7, assessee has raised the issue of non-grant of TDS credit. 56. Having considered the submissions of the parties, we direct the assessing officer to verify assessee’s claim based on material on record and allow TDS credit in accordance with law. 30 ITA No.801/Del/2021 57. Ground No.8 being consequential and ground No. 9 being pre- mature at this stage, are dismissed. 58. In the result, the appeal is partly allowed. Order pronounced in the open court on 17 th May, 2022 Sd/- Sd/- (ANADEE NATH MISSHRA) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 17 th May, 2022. Mohan Lal Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Sl. No. Particulars Date 1. Date of dictation (Order drafted through Dragon software): 28.04.2022 2. Date on which the draft of order is placed before the Dictating Member: 3. Date on which the draft of order is placed before the other Member: 04.05.2022 4. Date on which the approved draft of order comes to the Sr. PS/PS: 06.05.2022 5. Date of which the fair order is placed before the Dictating Member for pronouncement: 6. Date on which the final order received after having been singed/pronounced by the Members: 17.05.2022 7. Date on which the final order is uploaded on the website of ITAT: 19.05.2022 8. Date on which the file goes to the Bench Clerk 19.05.2022 9. Date on which files goes to the Head Clerk: 10. Date on which file goes to the Assistant Registrar for 31 ITA No.801/Del/2021 signature on the order: 11. Date of dispatch of order: