AC NIELESEN ORG-MARG P. LTD, MUMBAI V. ADDL CIT RG 6(1), MUMBAI

ITA 8799/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3226 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 29-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 28-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Keywords: Sale consideration of property below Jantri Value; Transfer pricing; International transaction; Earning of tax free income; Wholly owned subsidiary; Corroborative evidences; Tax effect
• Section: 143(3); 14A; 92

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -KBENCH MUMBAI , . . , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND C .N. PRASAD,JUDICIAL MEMBER ./I.T.A./8799/MUM/2011, /ASSESSMENT YEAR: 2007-08 M/S. NIELSEN (INDIA) PRIVATE LIMITED (FORMERLY KNOWN AS M/S. ACNIELSON ORG- MARG PRIVATE LIMITED) 6 TH FLOOR, BLOCK C, GODREJ IT PARK, 02 GODREJ BUSINESS DISTRICT, LBS MARG, PHIROJSHANAGAR, VIKHROLI (W) MUMBAI-400 079. PAN:AAACM 9279 L VS. ADDL. RANGE-6(1) AAYAKAR BHAVAN, 4 TH FLOOR, M.K.MARG MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI N.K. CHAND ASSESSEE BY: S/SHRI SAURABH SOPARKAR & BANDISH SOPARKAR / DATE OF HEARING: 25.04.2016 / DATE OF PRONOUNCEMENT: 27.05.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) !' PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 24.10.2011 OF THE ASSES SING OFFICER (AO), PASSED UNDER SECTION 143(3) READ WITH SECTION 144C (13) OF THE ACT,THE ASSESSEE HAS FILED THE PRESENT APPEAL.DURING THE COURSE OF HEARI NG BEFORE US, THE AUTHORISED REPRESENTATIVE (AR)STATED THAT THE ASSESSEE WAS NOT INTERESTED IN PURSUING GROUND NUMBER SIX, CONSIDERING THE SMALLNESS OF THE TAX EFFECT.THEREFORE, SAME STANDS DISMISSED AS NOT PRESSED. 2. ASSESSEE-COMPANY IS A WHOLLY OWNED SUBSIDIARY OF VA LCON, WHICH IS PART OF THE AC NIELSEN GROUP. IT IS ENGAGED IN THE BUSIN ESS OF PROVIDING CUSTOMISED MARKET RESEARCH SERVICES INCLUDING QUANTITATIVE AND QUALITATIVE CONSUMER STUDIES, PRINT MEDIA MEASUREMENT SERVICES AND RETAI L MEASUREMENT SERVICES WHICH INCLUDES RETAIL TRACKING, MODELING AND ANALYT ICS AND CATEGORY MANAGE - MENT.IT FILED ITS RETURN OF INCOME ON 29/10/2007, D ECLARING TOTAL INCOME AT RS. 18.12 CRORES.THE AO COMPLETED THE ASSESSMENT ON 24/ 10/2011,DETERMINING THE INCOME OF THE ASSESSEE AT RS. 33.77 CRORES. 8799/M/11(07-08)ACNIELSEN 2 2.1. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THA T THE ASSESSEE HAD ENTERED INTO 36 INTERNATIONAL TRANSACTIONS (IT.S) W ITH ITS ASSOCIATED ENTERPRISES (AE.S).THE IT.S PERTAINED TO MARKET RESEARCH SERVIC E TO AE, RECEIPT OF MARKET RESEARCH SERVICE FROM THE AE, BPO SERVICES RENDERED TO AE AND PAYMENT OF GENERAL SERVICES AGREEMENT(GCA).TO DETERMINE THE AR MS LENGTH PRICE (ALP),HE MADE A REFERENCE TO THE TRANSFER PRICING O FFICER (TPO),AS PER THE PROVISIONS OF SECTION 92 OF THE ACT. 2.2. THE TPO FOUND THAT DURING THE YEAR THE ASSESSEE HAD PAID RS. 11.14 CRORES TO ITS AE,THAT THE SAID PAYMENT WAS MADE IN VIEW OF BUSINESS SUPPORT SERVICES RECEIVED FROM THE AE. IT WAS CLAIMED THAT ABOVE-MEN TIONED PAYMENT WAS IN THE NATURE OF INTRA-GROUP SERVICES PAYMENT. THE ASSESSE E SUBMITTED TO GENERAL SERVICES AGREEMENTS BEFORE THE TPO.HE FOUND THAT TH E FIRST WAS SIGNED ON 02/06/203 AND ITS SPECIFIED A MARK UP OF 5% IN ACCO RDANCE WITH ARTICLE 4, WHEREAS THE SECOND AGREEMENT WAS SIGNED ON 28/11/20 07 AND WAS STATED TO BE EFFECTIVE FROM 01/01/2007.HE FOUND THAT THE ASSESSE E HAD PAID EURO 113315+ 339945+USD103385 UNDER THE HEAD REGIONAL GSA(BUSINE SS SUPPORT SERVICES) FOR CLIENT SERVICES.HE FURTHER FOUND THAT UNDER THE HEADS FINANCE(EURO 19,000+ 5700+ US DOLLAR 45, 713) AND IT (EURO 48, 851+ EURO 146552 PLUS US DOLLAR 18,759)THE ASSESSEE HAD MADE PAYMENTS TO ITS AE. THE TPO DIRECTED THE ASSESSEE TO JUSTIFY THE ALP IN RESPECT OF THE GSA CHARGES PAID TO ITS AE AND TO SUBMIT THE GROSS ALLOCATION B ASE, COMPUTATION OF ALLOCATION BASE, KEY OF ALLOCATION AND THE BASIS OF THE KEY OF ALLOCATION.THE TPO EXAMINED THE REGIONAL EXPENSES ALLOCATION OF RS.9.01 CRORES. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DATED 25/09/2010, 11/10 /2010,12/10/2010 AND 19/ 10/2010,THE TPO HELD THAT THE IT WAS BASED UPON COM PONENTS OF COSTS,THAT THE ASSESSEE HAD NOT DISCLOSED THE BASIS FOR THE ALLOCA TION,THAT NO DETAILS OF SPECIAL MARKETING SUPPORT WAS BROUGHT ON RECORD TO SHOW THA T SPECIALIST MARKETING AND COMPLICATION SUPPORT SERVICE HAVE BEEN PROVIDED BY THE AE TO THE TAXPAYER, THAT 8799/M/11(07-08)ACNIELSEN 3 THE COST ALLOCATION INCLUDED EXPENSES ON REGIONAL I NFORMATION TECHNOLOGY TEAM CONSISTING OF HUNDREDS OF EMPLOYEES LOCATED IN NEW ZEALAND AUSTRALIA AND INDIA AND 140 PEOPLE IN OTHER COUNTRIES, THAT THE A SSESSEE HAD NOT BROUGHT ANY EVIDENCE ON RECORD REGARDING EMPLOYEES LOCATED IN I NDIA, THAT NO CUSTOMISED RESEARCH WAS CONDUCTED FOR THE YEAR FOR THE ASSESSE E BY THE REGIONAL CENTRE, THAT IT HAD PAID CERTAIN AMOUNTS TOWARDS BUSINESS SUPPOR T SERVICES TO ITS AES, THAT THE TOTAL ALLOCATION COULD NOT BE ACCEPTED TO BE IN DIA SPECIFIC,THAT THE SUBMISSION OF INTRA-GROUP INVOICES COULD NOT BE CON STRUED AS SUFFICIENT COMPLIA -NCE TO SHOW THAT PAYMENTS MADE FOR GSA SERVICES WE RE AT ARMS LENGTH, THAT ACTUAL WORKING FOR GENERAL COSTS INCURRED AND ITS C OMPONENTS WERE NOT PRODUCED FOR VERIFICATION, THAT IT WAS NOT PROVED THAT THE A SSESSEE HAD REALLY BENEFITED OUT OF THE SERVICES OF THE REGIONAL TEAM, THAT NO ONE W OULD PAY ANY AMOUNT WITHOUT KNOWING THE ACTUAL BASIS AND ALSO THE ACTUAL ALLOCA TION FIGURES IN A THIRD-PARTY SITUATION,THAT THE ASSESSEE HAD ITS OWN CLIENT/SERV ER SYSTEM,THAT TOTAL ALLOCATION COULD NOT BE ACCEPTED TO BE INDIA SPECIFIC. HE HELD THAT ADJUSTMENT HAD TO BE MADE IN THE TP ORDER.ACCORDINGLY,HE MADE AN ADJUSTM ENT OF RS. 4.50 CRORES (50% OF RS. 9.01 CRORES).HE CALCULATED THE ALP AS U NDER: PAYMENT OF GSS CHARGES -RS. 11.14 CRORES ADJUSTMENT -RS. 4.50 CRORES ARMS LENGTH VALUE OF GSA -RS. 6.63 CRORES. 2.3. IN RESPONSE TO THE SHOW CAUSE REGARDING BPO SERVICE S BENCH-MARKING, THE ASSESSEE STATED THAT DURING THE YEAR UNDER REVIEW T HE TURNOVER FROM RRC AND EUREKA DIVISION WAS RS. 21.77 CRORES, ITS OPERATING COSTS WERE RS. 13.24 CRORES, THAT THE RESULTANT OPERATING PROFIT WAS 8.53 CRORES ,THAT THE OPERATING PROFIT/ OPERATING COST WAS 64.39%.THE TPO FURNISHED THE ASS ESSEE THE DETAILS OF COMPU -TATION OF MARGINS(PLI)-ITES CONDUCTED BY THE DEPAR TMENT WHEREIN EVEREST OPERATING PROFIT/OPERATING COST WAS WORKED OUT AT 3 3.09%. REFERRING TO THE COMPETITION OF MARGIN,THE ASSESSEE CONTENDED THAT O PERATING PROFIT/OPERATING 8799/M/11(07-08)ACNIELSEN 4 COST,SHOWN BY IT, WAS FAR MORE FAVOURABLE IN COMPAR ISON TO THE 33.09%, THAT NO ADDITION WAS CALLED FOR TO THE INCOME FROM BPO OPER ATIONS. THE TPO OBSERVED THAT THE ASSESSEE HAD NOT PROVIDED SEGMENTAL DATA W ITH SUPPORTING EVIDENCES. HE DID NOT ACCEPT THE COST ALLOCATION BETWEEN VARIOUS SEGMENTS. HE OBSERVED THAT THE COMPUTATION OF OPERATING COSTS PERTAINING TO BP O WAS THE KEY POINT IN DETERMINATION OF OPERATING PROFIT FROM THE SEGMENT IN QUESTION,THAT ,THAT GSA COST ALLOCATION WAS ITSELF WAS MORE THAN RS.11 CROR ES,THAT THE ASSESSEE HAD NOT SPECIFIED AS TO HOW MUCH COST OF THE INDIRECT COST HAD BEEN TAKEN INTO ACCOUNT FOR ARRIVING AT THE OPERATING COST (13.25CRORES), T HAT THE SEGMENTAL PROFIT SHOWN FOR THE TP PURPOSES WAS NOT SUPPORTED BY EVIDENCES, THAT THE SHEET SUBMITTED BY THE ASSESSEE WAS A PHOTOCOPY AND WAS NOT AT ALL LEG IBLE, THAT THE SEGMENTAL RESULTS AS PER AUDITED FINANCES AND AS PER TP WERE NOT RECONCILED AS FAR AS COST ALLOCATION BETWEEN VARIOUS SEGMENTS WAS CONCERNED, THAT THE ASSESSEE WAS SHOWING THE PROFIT MARGIN VALUE @61.1% TO 64.39%, T HAT IN THE TP STUDY THE REVENUE FROM BPO WAS SHOWN AT RS.21.40CRORES,THAT IN THE LETTER DATED 26.10. 10 THE REVENUE FROM BPO WAS SHOWN AT RS.21.77CRORE S, THAT OPERATING COST PERTAINING TO BPO SECTOR COULD NOT BE ASCERTAINED W ITH REASONABLE CERTAINITY. SO,HE PROCEEDED TO DETERMINE THE OPERATING COST IN THE RATIO OF TURN OVER.HE DETERMINED THE ALP FOR THE BPO SEGMENT ON THE BASIS OF TNMM AS PER THE 25 COMPARABLE COMPANIES AVERAGE PLI (OP TO TC %).FINA LLY,HE HELD THAT THE AVERAGE PLI FOR THE SEGMENT WAS TO BE TAKEN AT 33. 09%.HE SELECTED THE FOLLOWING COMPARABLES: SN. COMPANY NAME SALES(RS.CR.) OP/TC % 1. ACCENTIA TECHNOLOGIES LTD. 16.57 38.26% 2. ADITYA BIRLA MINACS WORLDWIDE LTD 197.06 11.98% 3. ALLSEC TECHNOLOGIES LTD. 113.28 27.31% 4. APEX KNOWLEDGE SOLUTIONS PVT. LTD. 4.92 20.48% 5. APPOLLO HEALTHSTREET LTD. 47.84 -13.55% 6. ASIT C. MEHTA FINANCIAL SERVICES LTD. 6.09 24.21 % 7. BODHTREE CONSULTING LTD.(SEG.) 2.94 29.58% 8. CALIBER POINT BUSINESS SOLUTIONS LTD. 39.30 21.2 6% 9. COSMIC GLOBAL LTD. 4.28 12.40% 10. DATAMATICS FINANCIAL SERVICES LTD.(SEG.) 2.92 5 .07% 11. ECLERX SERVICES LTD. 86.12 103.72% 8799/M/11(07-08)ACNIELSEN 5 12. FLEXTRONICS SOFTWARE SYSTEMS LTD.(SEG.) 21.41 1 4.54% 13. GENESYS INTERNATIONAL CORPORATION LTD. 19.17 13 .35% 14. HCL COMNET SYSTEM & SERVICES LTD. (SEG.) 260.18 44.99% 15. ICRA TECHNO ANALYTICS LTD.(SEG.) 7.23 12.24% 16. INFORMED TECHNOLOGIES INDIA LTD. 4.08 35.56% 17. INFOSYS BPO LTD. 649.56 66.14% 18. ISERVICES INDIA PVT. LTD. 16.29 50.27% 19. MAPLE ESOLUTIONS LTD. 12.21 34.05% 20. MOLD-TEK TECHNOLOGIES LTD. 11.40 113.49% 21. R SYSTEMS INTERNATIONAL LTD.(SEG.) 17.34 20.18% 22. SPANCO LTD.(SEG.) 35.00 25.81% 23. TRITON CORP LTD. 53.37 34.93% 24. VISHAL INFORMATION TECHNOLOGIES LTD. 30.60 51.1 9% 25. WIPRO LTD.(SEG.) 939.78 29.70% AVERAGE 33.09% HE REWORKED THE IT, IN THE BPO SEGMENT AS UNDER : PARTICULARS AMOUNT(RS.) TOTAL OPERATING COST OF THE ASSESSEE COMPANY 1,248 ,591,404 OPERATING COST AS IT PERTAINS TO BPO SEGMENT(#) 192 ,012,762 ARMS LENGTH OPERATING MARGIN RATIO 33.09% ARMS LENGTH OPERATING MARGIN 63,537,023 ARMS LENGTH SALES VALUE IN RESPECT OF BPO SERVICES 255,549,786 ACTUAL SALES VALUE IN BPO SEGMENT 206,750,103 ADJUSTMENT REQUIRED 48,799,683 THUS,HE PROPOSED AN ADJUSTMENT OF RS.9.38CRORES(RS. 4.50CRORES AND RS.4.87 CRORES) TO THE TOTAL INCOME OF THE ASSESSEE.THE AO INCLUDED THE ABOVE FIGURE IN THE DRAFT ORDER. 2.4. AGGRIEVED BY THE ORDER OF THE AO AND THE DRAFT ORDE R OF THE AO,THE ASSESSEE OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL (DRP ).BEFORE IT,THE ASSESSEE CONTENDED THAT THE ASSESSEE HAD FILED SEGMENTAL ACC OUNTS BEFORE THE TPO THOUGH SAME WERE NOT AUDITED. ON 29/0/2011,THE ASSESSEE FI LED AUDITED STATEMENT. THE DRP DIRECTED THE TPO TO FILE A REMAND REPORT IN THA T REGARD. IN RESPONSE TO THE REMAND REPORT,THE ASSESSEE ARGUED THAT THE TP PROVI SIONS WERE ANTI-AVOIDANCE LEGISLATION,THAT THE TPO HAD TO PROVE THE TAX AVOID ANCE HAD IN FACT TAKEN PLACE BEFORE MAKING ANY TP ADJUSTMENT, THAT IT HAD NOT SH IFTED PROFIT OUTSIDE INDIA,THAT THE ASSESSEE WAS ELIGIBLE TO CLAIM HUNDRED PERCENT DEDUCTION OF ITS PROFITS UNDER SECTION 10 A OF THE ACT. AFTER CONSIDERING THE AVAILABLE MATERIAL,THE DRP HE LD THAT DURING THE TP PROCEEDINGS IT HAD TO BE SEEN THAT WHETHER THE CHAR GES PAID BY THE ASSESSEE FOR 8799/M/11(07-08)ACNIELSEN 6 INTRA-GROUP SERVICES WERE AT ARMS-LENGTH UNDER COM PARABLE CIRCU -MSTANCES,THAT IT HAD TO BE SEEN WHETHER THE ASSESSEE WOULD GET A NY ECONOMIC OR COMMERCIAL VALUE, THAT THE EXPECTED BENEFIT HAD TO BE SUFFICIE NTLY DIRECT AND SUBSTANTIAL,THAT THE TAXPAYER HAD TO PROVE THAT THE SERVICES WERE RE NDERED,THAT ONE IMPORTANT ASPECT OF INTRA GROUP SERVICES WAS THE QUANTIFICATI ON OF SUCH SERVICES IN TERMS OF ACTUAL EXPENDITURE INCURRED AND COMMENSURATE BENEFI TS DERIVED THEREFROM TO CONFORM TO THE ARM'S LENGTH PRINCIPLE,THAT THE ARM' S LENGTH CHARGE WAS NOT ONLY A FUNCTION OF THE PRICE AT WHICH A SUPPLIER WAS PREPA RED TO PERFORM THE SERVICE (OR THE COST OF PROVIDING THE SERVICE)BUT WAS ALSO A FU NCTION OF THE VALUE THE RECIPIENT OF THE SERVICE,THAT THE DETERMINATION OF AN ARM'S LENGTH CHARGE MUST TAKE INTO CONSIDERATION THE AMOUNT THAT AN ARM'S LE NGTH ENTITY WOULD BE PREPARED TO PAY FOR SUCH A SERVICE IN COMPARABLE CIRCUMSTANC ES,THAT IF THE SERVICES HAD ACTUALLY BEEN RENDERED THE LEVEL OF DOCUMENTATION A ND THE EVIDENCE WOULD HAVE SHOWN THAT A TANGIBLE AND DIRECT BENEFIT WAS DERIVE D BY THE ASSESSEE IN PAYING THE ABOVE AMOUNTS TO THE AE.S,THAT JUST BY DESCRIBI NG VARIOUS SERVICES,IT WOULD NOT SUFFICE TO JUSTIFY THE PRICE CHARGED IN INTRA G ROUP SERVICES,THAT THE ASSESSEE HAD TO PROVE WITH PROPER DOCUMENTATION AND EVIDENCE THAT THE SERVICES WERE ACTUALLY RENDERED AND PAYMENT COMMENSURATE WITH THE BENEFIT DERIVED THERE FROM,THAT WHEN EXPENDITURE WAS INCURRED FOR THE BEN EFIT OF THE GROUP AS A WHOLE NO CHARGING OF SUCH EXPENDITURE WAS REQUIRED AT IN DIVIDUAL LEVEL,THAT IN SUCH A SITUATION THE BENEFIT OF INCURRING OF EXPENDITURE W OULD BE AVAILABLE TO ALL THE MEMBERS OF THE GROUP,THAT IF THE BENEFIT WAS REMOTE OR FOR THE BENEFIT OF ENTIRE GROUP THE SAME SHOULD NOT BE CHARGED,THAT UNLESS IT WAS SHOWN THAT TANGIBLE AND DIRECT BENEFIT WAS DERIVED BY SUCH PAYMENT OR THAT THE PAYMENT MADE WAS COMMENSURATE WITH THE BENEFIT THAT WAS DERIVED OR E XPECTED TO BE DERIVED WHEN PARTIES WOULD DEAL WITH EACH OTHER AT ARM'S LENGTH THE APL OF SUCH PAYMENT FOR INTRA GROUP SERVICES WOULD BE TREATED AS EITHER NIL OR TO THE EXTENT IT WAS SHOWN THAT THE BENEFIT ACTUALLY DERIVED FROM SUCH PAYMENT ,THAT THE ASSESSEE DID NOT PROVE BEFORE THE TPO OR BEFORE THE DRP THAT THE PAY MENY,FOR THE SO CALLED 8799/M/11(07-08)ACNIELSEN 7 SERVICES RENDERED BY THE AES,WOULD BE AT ARM'S LENG TH,THAT THE TPO WAS LIBERAL AND HAD ALLOWED 50% AS ALP IN RESPECT OF REGIONAL COST ALLOCATION,THAT NO SERVICES WERE RENDERED DURING THE FY.2006-07,THAT THE ALP SHOULD HAVE BEEN RS.NIL,THAT THE ASSESSEE HAD ITS OWN CLIENT SERVICE TEAM AND,THAT NO DETAILS OF SPECIFIC ALLOCATION HAD BEEN PROVIDED,THAT THE ALLO CATION OF COST COULD NOT BE ACCEPTED TO BE INDIA SPECIFIC.WITH REGARD TO REGION AL CLIENT SERVICE TEAM,THE DRP OBSERVED THAT INDIA HAD ITS OWN CLIENT SERVICE TEAM,THAT THERE WAS NO RATIONALE FOR MAKING THE PAYMENT.FINALLY,THE DRP HE LD THAT NO ADMINISTRATIVE SERVICES WERE RENDERED BY THE AE.S TO THE ASSESSEE AND THEREFORE THE ALP WOULD BE ZERO. THE DRP FURTHER HELD THAT THE TPO WAS JUSTIFIED IN REJECTING THE SEGMENTAL RESULTS,THAT HE HAD CORRECTLY APPLIED TNMM AND HAD CONSIDERED INDIAN COMPARA -BLES WHICH WERE FUNCTIONALLY SIMILAR AND WORKING U NDER COMPARABLE ECONOMIC CIRCUMSTANCES,THAT THE ASSESSEE DID NOT SHOW AS TO HOW THE EARLIER YEAR DATA HAD AN INFLUENCE ON THE PRICE FOR MARGIN IN THE CURRENT YEAR,THAT THE TPO WAS CORRECT IN USING THE DATA PERTAINING TO FY.2006-07, THAT HE HAD CORRECTLY APPLIED THRESHOLD LIMIT OF 25% IN APPLYING RELATED PARTY TR ANSACTIONS FILTER.FINALLY, THE DRP UPHELD THE ORDER OF THE TPO/AO.WITH REGARD TO B PO SERVICES THE DRP HELD THAT THE COST ALLOCATION WAS NOT CORRECTLY PLA CED BEFORE HIM, THAT THE SEGMENTAL ACCOUNTS FURNISHED BY THE ASSESSEE WERE NOT RECONCILED, THAT HE PROCEEDED TO DETERMINE THE ALP FOR THE BPO SEGMENT ON THE BASIS OF TNMM, THAT AS COMPARED TO 25 COMPARABLES HE DETERMINED TH E AVERAGE PLI OF 33.09%, THAT UPWARD ADJUSTMENT OF RS. 4.87 CRORES,MADE WITH REGARD TO B PO SERVICES PAYMENT RECEIVED,WAS JUSTIFIABLE. 2.5. BEFORE US,THE AR ARGUED THAT THE AO HAD FAILED TO APPRECIATE THAT THE EXISTENCE OF A INTER-GROUP AGREEMENT,COST-ALLOCATIO N REPORT AND MAINTENANCE OF A CONTEMPORANEOUS DOCUMENTATION PROVIDED GOOD SUPPORT ING TO DEMONSTRATE ARM'S LENGTH NATURE OF THE SERVICE CHARGES,THAT THE ASSESSEE HAD MAINTAINED ALL 8799/M/11(07-08)ACNIELSEN 8 RELEVANT DOCUMENTS, CORRESPONDENCE, BACK-UP CALCULA TIONS INCLUDING INVOICES / DEBIT NOTES,RECONCILIATION STATEMENT FOR INDIA,THAT THE RATIO ANALYSIS OF REGION WISE COST VIS-A-VIS REVENUE,CONFIRMATION LETTER FRO M THE AE ON GSA FEES, DETAILS OF EMPLOYEES RENDERING CENTRALIZED SERVICES AND OTHER DETAILS DEMONSTRA -TED THAT SERVICES WERE ACTUALLY RECEIVED AND SCIEN TIFIC ALLOCATION KEYS WERE USED,THAT THE ASSESSEE HAD APPLIED TNMM AT THE ENTI TY LEVEL,THAT THERE WAS NO NEED TO BENCHMARK THE TRANSACTION SEPERTELY,THAT CO ST ALLOCATION METHOD WAS FURNISHED DURING TP PROCEEDINGS,THAT THE TPO/AO HAD FAILED TO APPRECIATE THE EMAILS AND OTHER DOCUMENTS SUBMITTED BY ASSESSEE EV IDENCING THE RENDERING OF SERVICES BY AE,THAT THE TPO /AO OUGHT TO HAVE APPRE CIATED THE BENCHMARKING EXERCISE OF THE APPELLANT AND SHOULD HAVE CONSIDERE D THE SAME.WITH REGARD TO BPO SERVICES THE AR ARGUED THAT THAT THE TPO/AO HAD FAILED TO APPRECIATE THE SUPPORTING AND RECONCILIATION PROVIDED BY THE ASSES SEE AND THAT HE REJECTED THE AUDITED SEGMENTAL ACCOUNTS, THAT THE TPO' S APPROA CH OF ALLOCATING COST BASED ON REVENUE IS NOT JUSTIFIED,THAT HE ERRED IN APPLYI NG THE SEARCH FILTERS AND HENCE THE COMPARABLE COMPANIES PROPOSED BY HIM WERE NOT A CCEPTABLE,THAT THE BPO SERVICES RENDERED BY ASSESSEE WERE ADEQUATELY REMU NERATED..HE REFERRED TO THE PG.207-214,471-484,488-89,493,684-1012 OF THE PB.TH E DR SUPPORTED THE ORDER OF THE DRP AND CONTENDED THAT IT.S WERE TO B E ANALYSED SEPARATELY. 2.6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE ASSESSEE HAD FILED, BEFORE THE TPO,DE TAILS OF GSA FEES,DEBIT-NOTES BASED ON PROJECTED REVENUE AND TRUE CALCULATION BAS ED ON ACTUAL REVENUE AND THE INVOICES COPIES RAISED BY THE AE.S,VIDE ITS LETTER DATED 24/09/2010 (PG. 363-65 OF THE PB),THAT THE COST ALLOCATION REPORT(PG.373-4 70 OF THE PB)WAS ALSO FURNISH -ED,THAT THE DETAILED BREAKUP OF GSA CHARGES,SERVIC E-WISE,WAS ALSO MADE AVAILABLE TO THE TPO,THAT THE COST ALLOCATION METHO DOLOGY WAS EXPLAINED IN DETAILS.WITH REGARD TO PASS-THROUGH-COST (PTC) IT I S FOUND THAT NO MARKUP WAS CHARGED, THAT MARKUP WAS CHARGED FOR NON-PAS-THROUG H-COSTS AT THE RATE OF 10% 8799/M/11(07-08)ACNIELSEN 9 COST PLUS MARKUP AND 5% COST-PLUS MARKUP FOR THE PE RIOD UP TO DECEMBER 2006 AND FROM JANUARY,2007 RESPECTIVELY,THAT THE AE HAD ADOPTED SAME ALLOCATION METHODOLOGY FOR THE ASSESSEE AS IT WOULD ADOPT FOR ITS OTHER GROUP COMPANIES (PG.500-507 OF THE PB).WE FIND THAT THE ASSESSEE HA D RECEIVED SERVICES UNDER THE HEADS I).INFORMATION-TECHNOLOGY,II).FINANCE, II I).COMMUNICA-TION,IV).HUMAN- RESOURCES,V).CLIENT SERVICE AND VI).LEGAL FROM THE AE,THAT IT HAD SUBMITTED EVIDENCE IN CONNECTION WITH THE VARIOUS SERVICES RE CEIVED AND KEY BENEFITS DERIVED FROM THE EMAIL CORRESPONDENCE(PG. 684-1012 OF THE PB),THAT IT HAD MADE DETAILED PRESENTATION BEFORE THE DRP(PG.583-60 0 OF THE PB).AFTER MENTIONING THE FACTS ABOUT BPO,WE WOULD FURTHER DEL IBERATE UPON THE ISSUE OF FILING OF EVIDENCES BY THE ASSESSEE DURING THE TP A ND DRP-HEARING. COMING BACK TO FACTS OF THE CASE WE WANT TO MENTION THAT THE TPO DISALLOWED 50% OF THE REGION ALLOCATION EXPENSES AMOUNTING TO RS. 4.50 CRORES ON THE GROUND THAT THERE WAS NO PROPER BASIS OF ALLOCATION AND BACKUP CALCULATIONS WERE NOT SHARED,THAT THE DRP HAD INCREASED THE DISA LLOWANCE TO HUNDRED PERCENT OF THE REGIONAL ALLOCATION EXPENSES. 2.7. WITH REGARD TO BPO SERVICES,WE FIND THAT THE ASSESS EE HAD SET UP AN IN- HOUSE REGIONAL RESOURCE CENTRE(RCC) DIVISION IN MUM BAI TO STANDARDISE THE OFFICE PROCESSES,THAT ONE MORE DIVISION I.E.EUREKA WAS SET UP IN BARODA IN YEAR 2005,THAT IT BECAME OPERATIONAL FROM THE YEAR 2006,THAT THE RCC DIVISION WOULD PROVIDE SERVICES TO ITS AE.S SUCH AS DATA-PRO CESSING, DATA CHARTING,REPORT WRITING SERVICES,SPECIAL ORDER QUANTITATIVE ANALYSI S AND ANALYSIS OF PAST DATA AS PART OF KNOWLEDGE MANAGEMENT ACTIVITIES OF VARIOUS COUNTRIES.THE EUREKA DIVISION PROVIDED SERVICES SUCH AS DATA CODING FOR CUSTOMISED RESEARCH STUDIES ETC.,THAT THE ASSESSEE UNDERTOOK LOW-END BPO SERVIC ES AND DIVIDED WORK AS PER THE REQUIREMENTS AND SPECIFICATIONS OF THE AE.S.,TH AT THE ASSESSEE HAD SELECTED TNMM AS MOST APPROPRIATE METHOD AND ITS MARKUP(OP/O C)WAS 64.39% AS COMPARED TO MARKUP OF 28.05% OF THE COMPARABLES,THA T IT CLAIMED THAT IT WAS 8799/M/11(07-08)ACNIELSEN 10 AT ARMS LENGTH,THAT THE TPO IGNORED THE BENCHMARKI NG STUDY OF THE ASSESSEE AND PROPOSED NEW COMPARABLE SEARCH AND DETERMINED T HE MARKUP OF 33.09%, THAT HE HELD THAT THE ASSESSEE HAD NOT PROVIDED SEG MENTAL DATA AND SUPPORTING EVIDENCES. AS STATED IN EARLIER PARAGRAPH,NOW WOULD LIKE TO DI SCUSS THE DETAILS THAT WERE FURNISHED IN ADDITION TO THE DOCUMENTS MENTIONED AT PARAGRAPH NO.2.6.WE FIND THAT DETAILS OF INFLUENCER SURVEY CARRIED OUT BY TH E AE IN CASE OF WIPRO INFOTECH WAS SHARED WITH THE ASSESSEE ALONG WITH THE DETAILS OF OTHER PROJECTS UNDERTAKEN BY THE IT FOR COMPANIES LIKE P&G CADBURY (REGIONAL AAC).DETAILS OF SERVICE PROVIDED UNDER THE HEAD FINANCE INCLUDED INSTALLATI ON OF HYPERION SMARTVIEW FOR HFM TRAINING,DISCUSSIONS REGARDING HFM TRAINING AND ACCOUNT MAPPING, DISCUSSIONS REGARDING BUDGETING,COMMUNICATIONS REGA RDING HFM MIGRATION AND ELIMINATION OF MONTH LAG AND HFM TRAINING MATER IALS,COMMUNICATION OF UPDATED AP USER LIST FOR HFM/CCU3 APPLICATION AND D ISCUSSION ON CLIENT CONCERNS,DESIGN RECOMMENDATIONS/CHANGES,TECHNOLOGY CONSTRAINTS,FINANCIALS FOR THE STAFFING APPROVALS FOR GBS INDIA.IN THE FIELD OF LEGAL SERVICES THE AE PROVIDED SERVICES INCLUDING ADVICE FOR QUERY RELATI NG TO DATABASE BUILDING,REVI- EWING AND SUGGESTING CHANGES FOR COKE(INDIA)TRADESA MPLING AGREEMENT,REVIE - WING AND SUGGESTING CHANGES FOR A DRAFT MOU BETWEEN INDIA PLAZA (EARLIER FABMALL)AND ACNOM,REVIEW OF DRAFT ACN-EIKONA CONTRA CT FOR MONTHLY MEDIA MONITORING SERVICES AND ASSISTANCE IN INTEGRA TION OF ACNOM'S DATA INTO THE BUSINESS INTELLIGENCE MODEL DEVELOPED BY BRIT ANNIA INDUSTRIES.IN THE FIELDS OF HR AND INFORMATION TECHNOLOGY ALSO SERVICES WERE PROVIDED BY THE AE AND DOCUMENTARY EVIDENCES WERE PRODUCED BY THE ASSESSEE FOR AVAILING SUCH SERVICES.PG.624 OF THE PB GIVES DETAILS OF TOP 5 C LIENTS SERVED BY ASSESSEE WITH THE SUPPORT OF REGIONAL CLIENT SERVICE TEAM AND THU S PROVES AS TO HOW THE SERVICES RECEIVED FROM THE REGIONAL CENTER BENEFIT TED THE ASSESSEE.WE FIND THAT WHILE MAKING SUBMISSIONS BEFORE THE DRP ON 29.06.20 11,THE ASSESSEE HAD FILED ANNEXURE 1 AND IT HAD FURNISHED THE DETAILS OF REND ERING OF SERVICES. THEREFORE, 8799/M/11(07-08)ACNIELSEN 11 WE DO NOT AGREE WITH THE TPO/DRP THAT DETAILS OF ACTUAL SERVICES RENDERED WERE NOT MADE AVAILABLE.IN THE SUBMISSION MADE ON12 .10.2010 AND 29.06.2011 DETAILS OF ACTUAL EXPENDITURE INCURRED BY AC NIESLE N CORP UNDER REGIONAL AREA GSA CHARGES WERE FURNISHED TO THE DEPARTMENTAL AUTH ORITIES. 2.8. IT IS NOT DENIED BY THE TPO/DRP THAT EXPENSES INCUR RED BY ACNIELSEN CORPORATION WERE NOT ALLOCATED TO ALL THE GROUP ENT ITIES ON THE BASIS OF REVENUE.THE ASSESSEE HAD MADE A CLAIM THAT ACNIELSE N ASIA PACIFIC HAS PREPARED A MASTER FILE TO DETERMINE AN ARM'S LENGTH MARK-UP TO BE CHARGED FOR THE INTRA-GROUP SERVICES.BOTH THE AUTHORITIES HAS N OT COMMENTED UPON THE SAID EVIDENCE AND ALLEGED ERRORS,IF ANY,OF THE METHOD AP PROVED BY THE GROUP.IN SHORT,THE ASSESSEE HAD PROVED WITH DOCUMENTARY EVID ENCES THAT CHARGES PAID BY THE ASSESSEE WERE AT ARMS LENGTH AND THAT OTHER A RMS LENGTH ENTITY WAS PREPARED TO PAY FOR SUCH SERVICES IN COMPARABLE CIR CUMSTANCES. 2.9. WE ARE NOT AGREEABLE TO THE PROPOSITION,ADVANCED BY THE TPO/DRP,THAT WHEN EXPENDITURE IS INCURRED FOR THE BENEFIT OF THE GROUP AS A WHOLE NO CHARGE OF SUCH EXPENDITURE IS REQUIRED. SERVICES RENDERED BY AE HELP NOT ONLY THE GROUP AS A WHOLE,BUT ALSO HELPS OTHERS.THEREFORE, T HERE IS NOTHING WRONG IN CHARGING COST FOR SUCH SERVICES.AS THE COST INCURRE D BY THE AE HAD BEEN ALLOCATED TO ALL THE GROUP COMPANIES ON THE BASIS O F THE REVENUE AND DETAILED WORKINGS WAS SHARED WITH THE TPO AND DRP,SO,IT CAN NOT BE HELD THAT REQUISITE INFORMATION WAS NOT MADE AVAILABLE.IT IS OTHER THIN G THAT BOTH OF THEM DID NOT TAKE NOTICE OF THE DETAILS FILED,AS DISCUSSED EARLI ER.WE ARE UNABLE TO UNDERSTAND THE LOGIC BEHIND THE ARGUMENT OF BOTH THE AUTHORITI ES THAT IF THE ASSESSEE HAD ITS OWN CLIENT SERVICE TEAM THEN WHY COSTS OF CLIENT SE RVICE TEAMS WAS INCLUDED. ACCORDING TO US,IT IS GROSS VIOLATION OF THE LAMAN -REKHA DRAWN BY THE BASIC AND FUNDAMENTAL TAXATION JURISPRUDENCE.NO AUTHORITY IS REQUIRED TO HOLD THAT THE JURISDICTION OF THE AO U/S.37 OF THE ACT AND THAT O F THE TPO U/S.92CA ARE 8799/M/11(07-08)ACNIELSEN 12 DISTINCT.THE AUTHORITY OF THE TPO IS TO CONDUCT A T P ANALYSIS TO DETERMINE THE ALP AND NOT TO DETERMINE WHETHER OR NOT THERE IS A SERVICE FROM WHICH THE ASSESSEE BENEFITS. SO,WHEN THE TPO HOLDS THAT THE A SSESSEE DID NOT BENEFIT FROM THESE SERVICES IT AMOUNTS TO DISALLOWING EXPENDITUR E.SUCH A DECISION IS OUTSIDE THE AUTHORITY OF THE TPO.THE DECISION AS TO WHETHER THE EXPENDITURE WAS LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURP OSES OF THE BUSINESS IS A FACT DETERMINATION OR VERIFICATION AND THAT EXERCIS E IS TO BE UNDERTAKEN BY THE AO.THAT DETERMINATION IS NOT AND CANNOT BE MADE BY THE TPO.THE HONBLE DELHI HIGH COURT IN THE CASE OF EKL APPLIANCES LTD. (345 ITR 241) HAS HELD AS UNDER: IT IS NOT OPEN TO THE TRANSFER PRICING OFFICER TO QUESTION THE JUDGMENT OF THE ASSESSEE AS TO HOW IT SHOULD CONDUCT ITS BUSINESS AND REGARD ING THE NECESSITY OR OTHERWISE OF INCURRING THE EXPENDITURE IN THE INTEREST OF ITS BU SINESS. IT IS ENTIRELY THE CHOICE OF THE ASSESSEE AS TO FROM WHOM IT CONTEMPLATES TO SOURCE ITS TECHNOLOGY OR TECHNICAL KNOW- HOW AND AS TO WHAT STEPS SHOULD BE TAKEN TO MEET TH E COMPETITION PREVALENT IN THE MARKET AND TO STAVE OFF THE COMPETITORS. THIS IS TH E DOMAIN OF THE BUSI NESSMAN AND THE TRANSFER PRICING OFFICER HAS NO SAY IN THE MATT ER. AS HELD BY THE SUPREME COURT IN S. A. BUILDERS LTD. V. CIT (APPEALS) [2007] 289 ITR 26 (SC) THE REVENUE CANNOT JUSTIFIABLY CLAIM TO PLACE ITSELF IN THE ARM CHAIR OF BUSINESSMAN OR IN THE POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECID E HOW MUCH IS THE REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF T HE CASE. 22. EVEN RULE 10B(1)(A) DOES NOT AUTHORISE DISALLOW ANCE OF ANY EXPENDITURE ON THE GROUND THAT IT WAS NOT NECESSARY OR PRUDENT FOR THE ASSESSEE TO HAVE INCURRED THE SAME OR THAT IN THE VIEW OF THE REVENUE THE EXPENDI TURE WAS UNREMUNERATIVE OR THAT IN VIEW OF THE CONTINUED LOSSES SUFFERED BY THE ASSESS EE IN HIS BUSINESS, HE COULD HAVE FARED BETTER HAD HE NOT INCURRED SUCH EXPENDITURE. THESE ARE IRRELEVANT CONSIDERATIONS FOR THE PURPOSE OF RULE 10B. WHETHER OR NOT TO ENTER INTO THE TRANSACTION IS FOR THE ASSESSEE TO DECIDE........SO LONG AS THE EXPENDITURE OR PAYMENT HAS BEEN DEMONSTRATED TO HAVE BEEN INCURRED OR LAID OUT FOR THE PURPOSES OF BUSINESS, IT IS NO CONCERN OF THE TRANSFER PRICING OFFICER TO DISALLOW THE SAME ON ANY EXTRANEOUS REASONING. AS PROVIDED IN THE OECD GUIDE LINES, HE IS EXPECTED TO EXAMINE THE INTERNATIONAL TRANSACTION AS HE ACTUALLY FINDS THE SAME AND THEN MAKE SUITABLE ADJUSTMENT BUT A WHOLESALE DISALLOWANCE OF THE EXPE NDITURE, PARTICULARLY ON THE GROUNDS WHICH HAVE BEEN GIVEN BY THE TRANSFER PRICI NG OFFICER IS NOT CONTEMPLATED OR AUTHORISED. IN THE CASE UNDER CONSIDERATION ACTUALLY THE TPO HA D DRP HAVE COMPLETELY TAKEN OVER THE ROLE OF THE AO.INSTEAD OF DECIDING T HE ALP OF THE IT.S REPORTED BY THE ASSESSEE,THEY HAVE DECIDED THE ISSUE OF ALLO WABILITY OF EXPENDITURE 8799/M/11(07-08)ACNIELSEN 13 INCURRED BY IT.THEREFORE,IN OUR OPINION,THEIR ORDER ARE NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT.AS FAR AS COMPARABLES OF BPO SERVICES ARE CONCERNED IT IS ENOUGH TO SAY THAT THE TPO AND THE DRP HAD NOT DEAL T WITH THE OBJECTIONS RAISED BY THE ASSESSEE ABOUT THE COMPARABLES SELECTED BY T HE TPO(PG.601-10 OF THE PB).WE DO NOT FIND EVEN A SINGLE WORD ABOUT THE OBJ ECTION OF THE ASSESSEE WITH REGARD TO THE COMPARABLES.THE TPO IS AUTHORIZED TO SELECT THE COMPARABLES,BUT IT IS HIS DUTY NOT ONLY TO MENTION THE METHODOLOGY OF SELECTION PROCESS AND TO MEET THE OBJECTIONS RAISED BY THE ASSESSEE ABOUT TH E SELECTION PROCESS OR THE SELECTED COMPARABLES. CONSIDERING THE ABOVE,WE HOLD THAT THE ASSESSEE HAD PRODUCED ALL THE NECESSARY DOCUMENTS AND THAT THE TPO AND THE DRP DID NOT CONS IDER THE SAME WHILE PASSING/ISSUING THE ORDER/DIRECTIONS.THEREFORE, IN THE INTEREST OF JUSTICE,WE ARE OF THE OPINION THAT THE MATTER SHOULD BE RESTORED B ACK TO THE FILE OF THE DRP WHO WOULD DECIDE THE BOTH THE ISSUES AFRESH AFTER AFFOR DING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE.OBJECTIONS RAISED BY THE ASSESSEE,WITH REGARD TO COMPARABLES HAVE TO BE DEALT CASE BY CASE.EFFECTIVE GROUND DEALING WITH TP ADJUSTMENTS(GOA 1&2)ARE DECIDED IN FAVOUR OF THE AS SESSEE,IN PART. 3. THE NEXT GROUND OF APPEAL IS ABOUT DISALLOWANCE MAD E U/S. 14A OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD SHOWN INVESTMENT IN SHARES OF RS.5.55CRORES IN ITS BALANCE SHEET, THAT IT HAD SHOWN DIVIDEND INCOME OF RS.1.89CRORES AND THAT THE SAME WAS CLAIMED TO BE EXEMPT,THAT IT HAD NOT DISALLOWED ANY EXPENDITURE A GAINST THE EXEMPT INCOME. REFERRING TO PROVISIONS OF SECTION 14A OF THE ACT,H E HELD THAT ALL THE EXPENSES CONNECTED WITH THE EXEMPT INCOME HAD TO BE DISALLO WED REGARDLESS OF WHETHER THEY WERE DIRECT OR INDIRECT FIXED OR VARIABLE, MAN AGERIAL OR FINANCIAL, THAT THE DISALLOWANCE WAS TO BE MADE AS PER PROVISIONS OF SE C.14A R.W.R 8D OF THE INCOME TAX RULES (RULES).HE MADE DISALLOWANCE OF RS .2.78 LAKHS TOWARDS 8799/M/11(07-08)ACNIELSEN 14 EXPENDITURE IN RELATION TO INCOME NOT INCLUDIBLE IN THE TOTAL INCOME, IN THE DRAFT ORDER. 3.1 .AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE FILE D OBJECTIONS BEFORE THE DRP.BEFORE IT, THE ASSESSEE ARGUED THAT IT HAD NOT INVESTED BORROWED FUNDS FOR MAKING INVESTMENTS, THAT DISALLOWANCE MADE BY THE A O WAS NOT AS PER THE PROVISIONS OF LAW.WITHOUT PREJUDICE, IT WAS CONTEND ED THAT DISALLOWANCE UNDER RULE 8D SHOULD BE RESTRICTED TO RS.28,880/- AND NOT TO 0.5% OF THE ENTIRE INVESTMENT.THE DRP HELD THAT THE AO HAD DULY FOLLOW ED THE PROCEDURE LAID DOWN UNDER RULE 8D, THAT NO INTERFERENCE WAS REQUIR ED IN THE MATTER. 3.2. BEFORE US,THE AR STATED THAT PROVISIONS OF RULE 8D WERE NOT APPLICABLE IN THE YEAR UNDER CONSIDERATION,THAT INVESTMENT WAS MA DE IN THE FOUR AE.S, THAT THE STRATEGIC INVESTMENT MADE BY THE ASSESSEE WAS NOT C ONSIDERED BY THE AO.HE REFERRED TO THE MATTER OF STRIDES ARCOLED LTD. (138 ITD323).THE DR LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 3.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN OUR OP INION PROVISION OF RULE 8D CANNOT BE APPLIED FOR THE YEAR UNDER APPEAL,AS H ELD BY THE HONBLE BOMBAY HIGH COURT AS IN THE CASE OF GODREJ BOYCE MFG LTD.( 328ITR81).HOWEVER,A REASONABLE DISALLOWANCE COULD BE MADE.IT IS A FACT THAT THE ASSESSEE HAD MADE INVESTMENT IN THE AE.S.,THAT THE AO HAD NOT PROVED THAT INTEREST FREE FUNDS WERE USED BY THE ASSESSEE TO MAKE THE INVESTMENTS.CONSID ERING THESE FACTS WE ARE OF THE OPINION THAT THE MATTER NEEDS FURTHER VERIFICAT ION.THEREFORE, IN THE INTEREST OF JUSTICE,WE ARE RESTORING BACK THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION.HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. 4. FOURTH GROUND OF APPEAL PERTAINS TO ADDITION MADE O N ACCOUNT OF MIS-MATCH OF AIR DATA AMOUNTING TO RS.17.30LAKHS.DURING THE A SSESSMENT PROCEEDINGS, 8799/M/11(07-08)ACNIELSEN 15 THE AO HANDED OVER A COPY OF AIR INFORMATION, AS GE NERATED FROM THE SYSTEM AND ASKED IT TO RECONCILE THE ACCOUNT.AS PER THE AO THE ASSESSEE WAS ABLE TO RECONCILE ALL THE ITEMS EXCEPT ONE ITEM OF RS.17,32 ,053/- RECEIVED UNDER THE HEAD RENT.THE AO ADDED THE AMOUNT IN QUESTION TO TH E TOTAL INCOME OF THE ASSESSEE WHILE PREPARING THE DRAFT ORDER. THE ASSES SEE FILED OBJECTIONS BEFORE THE DRP IN THAT REGARD.THE DRP UPHELD THE ORDER OF THE AO. 4.1. BEFORE US,THE AR STATED THAT ASSESSEE HAD NOT MADE ANY TRANSACTION WITH THE PARTIES IN THE AIR.HE RELIED UPON THE CASES OF ANS LAW ASSOCIATES (ITA/5181/M/2012 DT.5.12.14), S.GANESH(ITA527/MUM/1 0 AY06-07),THREAD NEEDLE INVESTMENT FUND ICVC ASIA FUND (27 TAXMANN32 1).THE DR STATED THAT THE ISSUE COULD BE DECIDED ON MERITS. 4.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IN THIS CASE THE ADDITION WAS MADE ONLY O N THE BASIS OF AIR REPORT, THAT THE ASSESSEE HAD SPECIFICALLY MENTIONED THAT THE EN TRIES DID NOT PERTAIN TO IT.IN OUR OPINION,THE AO SHOULD HAVE MADE FURTHER INVESTI GATION BEFORE MAKING THE ADDITION.IF THE DISPUTED AMOUNT PERTAINED TO RECEIP T OF RENT IT WAS NOT DIFFICULT FOR THE AO TO FIND OUT THE FACTS.BUT, HE CHOSE NOT TO MAKE ANY ENQUIRY AND MADE THE ADDITION.WE ARE OF THE OPINION THAT ONLY ON THE BASIS OF AIR INFORMATION NO ADDITION SHOULD BE MADE-SPECIALLY WHEN THERE IS NO OTHER MATERIAL WITH THE AO TO DEMONSTRATE THAT THE ASSESSEE HAD RECEIVED INCOM E MORE THAN WHAT WAS DECLARED BY IT.IN THE CASE UNDER CONSIDERATION,IT I S FOUND THAT EXCEPT FOR THE INFORMATION AVAILABLE IN THE FORM OF AIR THE AO HAD NOTHING IN HIS POSSESSION TO PROVE THAT THE ASSESSEE HAD RECEIVED THE AMOUNT IN QUESTION.THE CASES CITED BY THE AO SUPPORT THE VIEW TAKEN BY US.GROUND NO.4 IS DECIDED IN FAVOUR OF THE ASSESSEE. 8799/M/11(07-08)ACNIELSEN 16 5. LAST GROUND OF APPEAL IS ABOUT DISALLOWING THE DEDU CTION OF RS.18.41 LAKHS U/S.10A OF THE ACT.BEFORE US, IT WAS STATED THAT TH E ASSESSEE SUO-MOTU HAD EXCLUDED THE DISPUTED AMOUNT FROM THE TURN OVER WHI LE COMPUTING THE DEDUCTION U/S. 10A OF THE ACT, THAT THE AO/DRP ERRED IN DISAL LOWING THE SAME AMOUNT,THAT THE ASSESSEE SUFFERED DOUBLE DISALLOWANCE. WE ARE O F THE OPINION THAT THE MATTER SHOULD BE REEXAMINED BY THE AO AND THE AMOUNT IN QU ESTION SHOULD NOT BE DISALLOWED TWICE.GROUND,RAISED BY THE ASSESSEE STAN DS PARTLY ALLOWED. AS A RESULT,APPEAL F ILED BY THE ASSESSEE STANDS PARTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH MAY, 2016. 27 , 2016 SD/- SD/- ( . . / C.N. PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 27.05.2016. JV.SR.PS. # $ / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / !'#$ 2. RESPONDENT / %&#$ 3. THE CONCERNED CIT(A)/ ' !' ( , 4. THE CONCERNED CIT / ' ( 5. DR K BENCH, ITAT, MUMBAI / %* , ' , . ! . . 6. GUARD FILE/ - &' % //TRUE COPY// / BY ORDER, ' / ' DY./ASST. REGISTRAR !' !* , /ITAT, MUMBAI.