Control Risks India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 979/DEL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7018 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I2
• Next Hearing Date: 30-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 17-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAUSHALENDRA TIWARI
• Keywords: Related party transaction; Transfer pricing; Business expenditure; Opportunity of being heard; International transaction; Additional evidence; Wholly owned subsidiary; Revenue expenditure
• Section: 143(3); 234B; 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I-2 NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH.PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A .NO.-979/DEL /2015 (ASSESSMENT YEAR-2010-11) CONTROL RISKS INDIA PVT.LTD., 604, COPIA CORPORATE SUITES, JASOLA COMPLEX, NEW DELHI-110025. PAN-AADCC3008J (APPELLANT) VS DCIT, CIRCLE-6(2), NEW DELHI ( RESPONDENT) A SSESSEE BY SH.AJAY VOHRA, SR.ADV., SH. NEERAJ JAIN, ADV. & MS. DEEPIKA AGARWAL, CA R EVENUE BY SH.KAUSHALENDRA TIWARI, SR.DR ORDER PER DIVA SINGH, JM THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A SSAILING THE CORRECTNESS OF THE ORDER DATED 31/12/2014 OF THE ASSESSING OFFICER UND ER SECTION 143(3) R.W.S 144C OF THE INCOME TAX ACT, 1961 PURSUANT TO THE DIRECTIONS GIV EN BY THE DISPUTE RESOLUTION PANEL (HEREINAFTER REFERRED TO AS DRP) DATED 17.09.2014 . THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THE PRESENT APPEAL:- 1. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN L AW IN COMPLETING THE ASSESSMENT UNDER SECTION 144C READ WITH SECTION 143(3) OF THE INCOME- TAX ACT, 1961 (THE ACT) AT AN INCOME OF RS. 1,83, 22,823 AS AGAINST INCOME OF RS. 1,51,35,030 RETURNED BY THE APPELLANT. 2. THAT THE ASSESSING OFFICER/TPO ERRED ON FACTS AND I N LAW IN MAKING DATE OF HEARING 30.06.2016 DATE OF PRONOUNCEMENT 27.09.2016 I.T.A .NO.-979/DEL/2015 PAGE 2 OF 21 AN ADDITION OF RS. 30,43,842 ALLEGEDLY ON ACCOUNT O F DIFFERENCE IN THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF PROVISION OF RISK CONSULTANCY SERVICES ON THE BASIS OF THE ORDER PASS ED UNDER SECTION 92CA(3) OF THE ACT BY THE TPO. 2.1 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN REJEC TING THE TRANSFER PRICING DOCUMENTATION ALLEGING THAT THE AP PELLANT HAS NOT PROVIDED COMPLETE INFORMATION/DOCUMENTS FOR THE PUR POSE OF DETERMINATION OF ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACT IONS. 2.2 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN INAD VERTENTLY CHARACTERIZING THE BUSINESS OF THE APPELLANT, AS PR OVIDER OF FINANCIAL ADVISORY SERVICES AND ALSO ERRED IN COMPARING THE APPELLANT WITH THE COMPANIES ENGAGED IN THE BUSINESS OF STOCK BROKING AND TRADING OF SHARES. 2.3 THE DRP/TPO ERRED ON FACTS AND IN LAW IN REJECTED T HE INTERNAL TNMM APPLIED BY THE APPELLANT IN THE TRANSFER PRICI NG DOCUMENTATION ALLEGEDLY HOLDING THAT: (I) THE SEGMENTAL ACCOUNTS ARE NOT AVAILABLE IN THE ANNUAL REPORT. (II) THE INTERNAL TNMM, APPLIED BY THE APPELLANT, I S A ORT OF CUP AND ACCORDINGLY, STRICTLY COMPARABILITY IS REQUIRED FOR APPLYING CUP CAN BE APPLIED (III) THE SERVICES PROVIDED TO THE ASSOCIATED ENTER PRISES AND NONASSOCIATED ENTERPRISES ARE NOT IDENTICAL. (IV) THE DETAILS OF SERVICES AND BILLING STRUCTURE OF THE ASSOCIATED ENTERPRISES AND NON-ASSOCIATED ENTERPRISES IS NOT PROVIDED BY T HE APPELLANT 2.4 THAT THE TPO ERRED ON FACTS AND IN LAW IN REJECTIN G FOLLOWING COMPARABLE COMPANIES ALLEGEDLY HOLDING THEM TO BE F UNCTIONALLY NOT COMPARABLE TO THE APPELLANT: 2.5 THAT THE TPO ERRED ON FACTS AND IN LAW IN REJECTING KNIGHT WATCH SECURITY LTD. ALLEGEDLY HOLDING THAT THE ANNUAL REP ORT OF THE COMPANY IS NOT AVAILABLE IN PUBLIC DOMAIN. 2.6 THAT THE DRP ERRED ON FACTS AND CIRCUMSTANCES OF T HE CASE IN NOT ADJUDICATING THE OBJECTION OF THE APPELLANT WITH RE GARD TO SELECTION OF COMPARABLE COMPANIES, NAMELY, TOPS SECURITY LTD. AN D KNIGHT WATCH SECURITY LTD. 2.7 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN INCL UDING THE FOLLOWING COMPANIES IN THE SET OF COMPARABLE COMPAN IES FOR THE PURPOSE OF BENCHMARKING ANALYSIS NOT APPRECIATING THE FACT THA T THEY ARE FUNCTIONALLY NOT COMPARABLE TO THE APPELLANT: A) PUSHPAK FINANCIAL SERVICES LTD. B) APITCO LTD. C) HCCA BUSINESS SERVICES LTD. D) TSR DARASHAW LTD. 2.8 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN CONSI DERING PUSHPAK FINANCIAL SERVICES LTD. AS COMPARABLE NOT A PPRECIATING THE FACT THAT THE COMPANY IS NOT SATISFYING THE FILTER OF EM PLOYEE COST APPLIED BY THE TPO HIMSELF. 2.9 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN CONSI DERING APITCO LTD. AND GLOBAL PROCUREMENT CONSULTANTS LTD. AS COM PARABLE COMPANIES NOT APPRECIATING THE FACT THAT THE INFORMATION IN R ESPECT OF RELATED PARTY TRANSACTIONS IS NOT AVAILABLE IN THE ANNUAL REPORT OF THE COMPANIES AND I.T.A .NO.-979/DEL/2015 PAGE 3 OF 21 ACCORDINGLY, NOT SATISFYING THE FILTER OF RELATED P ARTY TRANSACTIONS APPLIED BY THE TPO HIMSELF 2.10 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN NOT E XCLUDING APITCO LTD. AND GLOBAL PROCUREMENT CONSULTANTS LTD. FROM T HE FINAL SET OF COMPARABLE COMPANIES, NOT APPRECIATING THE FACT THA T CENTRAL INVESTIGATION & SECURITY SERVICES LTD. HAS BEEN EXCLUDED BY THE T PO HIMSELF ON SIMILAR BASIS. 2.11 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN CONSI DERING HCCA BUSINESS SERVICES LTD. AS COMPARABLE NOT APPRECIATI NG THE FACT THAT THE TPO HIMSELF REJECTED ISSSDB SECURITY SERVICES LTD. WHICH IS ENGAGED IN PROVIDING SIMILAR SERVICES. 2.12 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN NOT ALLOWING APPROPRIATE RISK ADJUSTMENT TO ESTABLISH COMPARABIL ITY ON ACCOUNT OF THE APPELLANT BEING A LOW-RISK-BEARING CAPTIVE SERVICE PROVIDER AS OPPOSED TO THE COMPARABLE COMPANIES WHO WERE INDEPENDENT SERVI CE PROVIDERS. 3. THAT THE DRP/AO ERRED ON FACTS AND IN LAW IN DISALL OWING AN AMOUNT OF RS.1,43,951 ON ACCOUNT OF INTEREST ON LAT E DEPOSIT OF TDS ALLEGEDLY HOLDING THE SAME TO BE OF PENAL NATURE. 4. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN L AW IN LEVYING INTEREST U/S 234A, 234B AND SECTION 234D OF THE ACT . THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR VARY, ANY OF THE AFORESAID GROUNDS OF APPEAL BEFORE OR AT THE TIME O F HEARING OF THE APPEAL. 2. ADDRESSING THE GROUNDS RAISED, IT WAS SUBMITTED BY THE LD.AR THAT CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE ALTHOU GH THE ASSESSEE IS CONFIDENT THAT IT WOULD SUCCEED IN ITS PRAYER FOR SEEKING INCLUSION O F COMPARABLES WHICH HAVE NOT BEEN INCLUDED AND ALSO SEEKING THE EXCLUSION OF COMPARAB LES WHICH HAVE BEEN WRONGLY INCLUDED AND THUS AS FAR AS THE ADDITION SUSTAINED BY WAY OF MAKING AN ADJUSTMENT IS CONCERNED THE JUDICIAL PRECEDENT IS PREDOMINANTLY IN ITS FAVOUR. HOWEVER, IT WAS HIS SUBMISSION THAT IT WOULD BE APPROPRIATE TO SEEK TO FIRST PRESS FOR ADJ UDICATION ON THE ISSUES ADDRESSED BY GROUND NO. 1 AND 2.2 AND IF IT IS CONSIDERED THE IS SUE WOULD NEED TO BE RESTORED BACK TO THE FILE OF THE TPO. 3. THE SAID REQUEST MADE RIGHT AT THE OUTSET WAS OBJEC TED TO BY THE LD. SR.DR WHO SUBMITTED THAT THE SAID ISSUE HAS BEEN AGITATED BY THE ASSESSEE EVEN BEFORE THE DRP AND I.T.A .NO.-979/DEL/2015 PAGE 4 OF 21 IT HAS NOT BEEN DECIDED IN ASSESSEES FAVOUR. ACCOR DINGLY IT WAS HIS STAND THAT THE ISSUE NEED NOT BE RESTORED AND THE ASSESSEE BE DIRECTED TO ARGUE ALL ITS GROUNDS. 4. RESPONDING TO THE SAID OBJECTION THE LD. SR. ADVOC ATE RELYING UPON THE CHART OF ISSUES FILED, STATED THAT IN THE PECULIAR FACTS AN D CIRCUMSTANCES OF THE CASE, HE WOULD HAVE NO OBJECTION TO ADDRESS THE COMPARABLES WHICH ARE SOUGHT TO BE INCLUDED BY THE TPO AND THE COMPARABLES THE EXCLUSION OF WHICH HAS BEEN SOU GHT BY THE ASSESSEE. HOWEVER, IN ORDER TO BE FAIR TO THE REVENUE AS WELL AS TAX PAYE R IT WAS HIGHLIGHTED THAT WRONG CHARACTERISATION OF THE TAXPAYER WOULD IMPACT THE S UBSEQUENT YEARS ALSO AND SINCE THIS WOULD BE A CONTINUING ISSUE IN THE SUBSEQUENT YEARS ALSO THE POSITION ON FACTS SHOULD BE ADDRESSED IN THE INITIAL YEARS ITSELF. THUS IN THE CIRCUMSTANCES IT WAS CLARIFIED THAT FIRST HIS ENDEAVOUR WOULD BE ON THE BASIS OF MATERIAL ON REC ORD TO SHOW THAT THERE IS FLAW IN THE CHARACTERIZATION OF THE ASSESSEE AS A RESULT OF THI S THE ENTIRE EXERCISE OF SELECTION OF COMPARABLES HAS BECOME SKEWED. IN THE EVENTUALITY THE ISSUE IS CONSIDERED TO BE NOT ALLOWABLE, IT WAS STATED THAT HE IS READY TO ADDRES S THE COMPARABLES AND IS CONFIDENT THAT HE WOULD BE ABLE TO DEMONSTRATE THAT THE COMPARABLE S RETAINED BY THE TAX AUTHORITIES AND EXCLUDED BY THEM ON FACTS AND LAW IS CONTRARY TO AC CEPT JUDICIAL PRECEDENTS. THUS, IT WAS HIS SUBMISSION THAT THE ARGUMENT THAT THE ENTIRE EX ERCISE OF SELECTION OF COMPARABLES WOULD STAND DEMOLISHED. 5. CONSIDERING THE SUBMISSIONS MADE BY THE LD.AR, THE LD. SR.DR SUBMITTED THAT HE WOULD HAVE NO OBJECTION TO THE PRAYER FOR REMAND SU BJECT TO THE ASSESSEE DEMONSTRATING HOW CHARACTERISATION OF THE TAXPAYER HAS WRONGLY BE EN DONE. I.T.A .NO.-979/DEL/2015 PAGE 5 OF 21 6. IN THE SAID BACKGROUND THE LD. AR INVITED ATTENTIO N TO THE TPOS ORDER DATED 27.01.2014 PLACED AT PAGES 55 TO 146 OF THE APPEAL SET FILED. ATTENTION WAS INVITED TO SPECIFIC PAGE 66 SO AS TO HIGHLIGHT THAT THE TPO HA S CONSIDERED THAT THE TAXPAYER WAS ENGAGED IN PROVIDING INVESTMENT AND OTHER FINANCIA L ADVISORY. REFERRING TO THE SAID PAGE AND THE DISCUSSION WHICH CARRIES ON TO PAGE 67 IT WAS HIS SUBMISSION THAT AS A RESULT OF NON-APPRECIATION OF THE ASSESSEES ACTIVITY THE COM PARABLE SELECTION PROCESS OF THE TPO IS FULL OF FLAWS. AS AN ILLUSTRATION, ATTENTION WAS I NVITED TO APPEAL SET PAGE 126 INTERNAL PAGE 73 OF THE TPOS ORDER WHEREIN THE FOLLOWING COMPARA BLE COMPANIES HAVE BEEN SELECTED BY THE TPO:- SL NO. NAME OF THE COMPANY OP/OC 1 ICRA MANAGEMENT CONSULTING SERVICES LTD. 1.94 2 AJCON GLOBAL SERVICES LTD. 32.88 3 FUTURE CAP. INV. 17.61 4 LADDERUP CORPORATE ADVISORY PVT. LTD. 15.07 5 PUSHPAK FINANCIAL SERVICES LTD. 76.72 6 APITCO LTD. 40.09 7 CYBER MEDIA RESEARCH LTD. 14.85 8 GLOBAL PROCUREMENT 37.19 9 HCCA BUSINESS SERVICES PVT. 20.05 10 TSR DARASHAW LTD. 41.15 29.75 6.1. REFERRING TO THE COMPANIES MENTIONED AT SERIAL NO. 3 AND 5, IT WAS SUBMITTED THAT THEIR VERY NAMES NAMELY FUTURE INVESTMENT AND PU SHP FINANCIAL SERVICES SUGGESTS THAT THEY WERE DEALING IN STOCKS AND SHARES. SIMILARLY T HE COMPANY MENTIONED AT SL.NO. 10 TSR DARASHAW LIMITED IS AGAIN DEALING IN STOCKS AND SH ARES. THEIR SELECTION WHEN CONSIDERED WITH THE PROFILE OF THE ASSESSEE IT WAS SUBMITTED I S INCORRECT. THE REMAINING COMPANIES WHICH HAVE BEEN WRONGLY INCLUDED NAMELY APTICO LTD. AND HCCA BUSINESS SERVICES PVT. AT SL.NO.6 AND 9 ADDRESSED VIDE GROUND NO.2.7, IT WAS SUBMITTED CAN ALSO RELYING UPON I.T.A .NO.-979/DEL/2015 PAGE 6 OF 21 JUDICIAL PRECEDENT BE EXCLUDED. HOWEVER THIS STOP GAP PRAYER IN THE LONG RUN WOULD NEITHER BE IN THE INTERESTS OF THE ASSESSEE NOR THE TAX AUTHORITIES AS NATURE OF ASSESSEES BUSINESS NEEDS TO BE APPRECIATED. ADDRESSING THE NATURE OF ASSESSEES ACTIVITY, IT WAS SUBMITTED THAT THE ASSESSEE IS NOT IN PURE FINANCIA L SERVICES AS IT PROVIDES A WIDE RANGE OF CONSULTANCY SERVICES, FORENSIC, CRISIS AND SECURITY RELATED SERVICES ETC. THUS SINCE THE CHARACTERIZATION ITSELF IS INCORRECT IN THE CIRCUM STANCES THE ASSESSEE IS CONFIDENT THAT IN FACT EACH OF THE COMPARABLE SELECTED, IT CAN BE SUC CESSFULLY DEMONSTRATED AS HAVING BEEN WRONGLY SELECTED. THUS THE PRAYER FOR RESTORING THE ISSUE BACK FOR A PROPER APPRECIATION HAS BEEN MADE. 6.2. THE ISSUE OF WRONG CHARACTERISATION OF THE TAXPAY ER BY THE TPO, IT WAS SUBMITTED WAS AGITATED BEFORE THE DRP. THE FOLLOWING SPECIFI C GROUND OF OBJECTIONS WERE RAISED IN (IV) AND (V) :- (IV) THAT THE ASSESSING OFFICER /TPO ERRED ON FACTS A ND IN LAW IN INADVERTENTLY CHARACTERIZING THE BUSINESS OF THE AS SESSEE, AS PROVIDER OF FINANCIAL ADVISORY SERVICES AND ALSO ERRED IN COMPA RING THE ASSESSEE WITH COMPANIES ENGAGED IN THE BUSINESS OF STOCK BROKING AND TRADING OF SHARES. (V). THAT THE ASSESSING OFFICER /TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THE FACT THAT THE ASSESSEE WAS ENGAGED IN PROVIDING CRISIS AND SECURITY CONSULTANCY AS IS EVIDENT FROM THE ART ICLES OF ASSOCIATION OF THE ASSESSEE. 6.3. ATTENTION WAS INVITED TO ANNEXURE TO THE COPY OF R EPLY DATED 16/01/2014 BEFORE THE TPO WHICH INCLUDED COPY OF DISTRIBUTORS & SALES AGR EEMENT DATED 06.01.2010 ENTERED INTO BETWEEN THE SUBSIDIARIES OF CONTROL RISKS GROUP HOL DING LTD. (GROUP COMPANIES). SPECIFIC PAGE 233 TO 249 WAS REFERRED TO AND SPECIFIC EMPHAS IS WAS LAID ON PARA B OF THE SAME IN ORDER TO EMPHASIZE THE NATURE OF THE ACTIVITY. I.T.A .NO.-979/DEL/2015 PAGE 7 OF 21 6.4. FOR READY- REFERENCE, THE RELEVANT EXTRACT FROM TH E SAID PAGE IS REPRODUCED HEREUNDER:- DISTRIBUTION AND SALES AGREEMENT THIS AGREEMENT IS MADE ON 6TH JANUARY 2010. BETWEEN:- 1. THE COMPANIES LISTED IN SCHEDULE 1 TO THIS AGREE MENT (SELLER); AND 2. THE COMPANIES LISTED IN SCHEDULE 2 TO THIS AGREE MENT (SERVICE PROVIDER) BACKGROUND A. THE SELLERS AND SERVICE PROVIDERS LISTED IN SCHE DULES 1 AND 2 ARE ALL DIRECT AND INDIRECT SUBSIDIARIES OF CONTROL RISKS G ROUP HOLDINGS LIMITED (CRGHL). B. SERVICE PROVIDERS ARE ENGAGED IN THE PROVISION O F CRISIS AND SECURITY CONSULTANCY, OUTSOURCED SECURITY MANAGEMEN T, CRISIS RESPONSE, INVESTIGATIVE SERVICES, FORENSICS AND OTH ER RISK MANAGEMENT CONSULTANCY SERVICES ( THE CONSULTANCY SERVICES) IN THE TERRITORY IN WHICH THEY OPERATE (TERRITORY). (EMPHASIS PROVIDED) 6.5. ATTENTION WAS ALSO INVITED TO PAGES 32 TO 84 OF TH E PAPER BOOK WHICH IS THE TRANSFER PRICING DOCUMENTATION. SPECIFIC ATTENTION WAS INVIT ED TO PAGE 38 AND 39 OF THE SAME SO AS TO HIGHLIGHT THE OBJECTIVE AND THE COMPANY OVERVIEW WHICH WOULD THROW LIGHT ON THE ACTIVITIES OF THE TAX PAYER. THE RELEVANT EXTRACTS OF THE SAME ARE REPRODUCED HEREUNDER FROM THE SAID PAGES IN THE PAPER BOOK:- II. OVERVIEW OF GROUP OBJECTIVE THE DOCUMENTATION REQUIREMENTS OF THE INCOME TAX RU LES (THE RULES) OBLIGES AN ASSESSEE TO, INTER ALIA, PROVIDE DESCRIP TION OF ITS OWNERSHIP STRUCTURE, PROFILE OF THE MULTINATIONAL GROUP OF WH ICH THE ASSESSEE ENTERPRISES IS A PART, DESCRIPTION OF THE BUSINESS OF THE ASSESSEE AND THAT OF THE ASSOCIATED ENTERPRISES WITH WHOM THE ASSESSE E HAS DONE INTERNATIONAL TRANSACTION. BOARD DESCRIPTION OF I NTERNATIONAL TRANSACTIONS ENTERED INTO WITH THE ASSOCIATED ENTERPRISES, ETC. THIS PART OF THE STUDY PROVIDES AN OVERVIEW OF CRIP L AND THE GROUP OF WHICH IT IS A PART. GROUP OVERVIEW CONTROL RISKS GROUP HOLDINGS LIMITED (CRGHL) (FORME D IN 1975) CRGHL IS AN INDEPENDENT, SPECIALIST RISK CONSULTANC Y WITH 34 OFFICES ON FIVE CONTINENTS. THE GROUP PROVIDES ADVICE AND SER VICES THAT ENABLE COMPANIES, GOVERNMENTS AND INTERNATIONAL ORGANIZATI ONS TO ACCELERATE I.T.A .NO.-979/DEL/2015 PAGE 8 OF 21 OPPORTUNITIES THROUGH EXPANSION ABROAD, AND MANGE S TRATEGIC AND OPERATIONAL RISKS. CRGHL HAS A GOOD REPUTATION IN THE INDUSTRY FOR OFF ERING A COMPREHENSIVE RANGE OF CONSULTING SERVICES THAT ASSIST CLIENTS IN CLUDING: ASSISTING CLIENTS IN EVALUATING THE EXPANSION OF TH EIR OPERATIONS INTO A PARTICULAR DEVELOPING COUNTRY; PROVIDING ADVICE ON THE SECURITY OF THEIR ASSETS AN D EMPLOYEES; PROTECTING THE PHYSICAL ASSETS AND EMPLOYEES OF A C OMPANY OPERATING IN DIFFICULT ENVIRONMENTS; RESPONDING TO PARTICULAR INCIDENTS SUCH AS A HOSTAG E SITUATION, KIDNAPPING ETC. CRGHL HAS A CLIENT BASE THAT INCLUDES INVESTMENT BA NKS, LARGE MULTINATIONALS, GOVERNMENTS, NON-GOVERNMENTAL ORGAN IZATIONS AND INSURANCE UNDERWRITERS. CRGHL HAS RESOURCES IN EACH OF THE COUNTRIES IN WHI CH IT OPERATES, HOWEVER, IN AREAS WHERE CONTROL RISKS GROUP DOES NO T HAVE DEDICATED OFFICES THEY WILL GAIN INFORMATION THROUGH THE USE OF SUB-CONTRACTORS. CRGHL TRACKS A NUMBER OF DIFFERENT SECTORS AND THER EFORE ITS UNIQUE BUSINESS HAS NO SIGNIFICANT COMPETITOR WITH AN EQUI VALENT BREADTH OF SERVICES OR GEOGRAPHIC FOOTPRINT. HOWEVER, ITS CLO SEST COMPETITORS ARE KROLL (PART OF MARCH AND MCLENNAN GROUP), RISK ADVISORY G ROUP, LIVE GROUP AND, IN ASIA PACIFIC-HILL & ASSOCIATES. CRIPL WAS INCORPORATED IN AUGUST, 2007 FOR OFFERIN G A COMPREHENSIVE RANGE OF CONSULTANCY SERVICES THAT ASSIST CLIENTS T O MANAGE POLITICAL, SECURITY, OPERATIONAL AND INTEGRITY RISKS AT EVERY STAGE OF AN INVESTMENT. 6.6. IT WAS HIS SUBMISSION THAT NO DOUBT THE SOCIO- POL ITICAL ENVIRONMENT OF A COUNTRY WOULD IMPACT THE FINANCIALS HOWEVER THE TAXPAYER IS NOT DEALING OR TRADING IN SHARES AS CONSIDERED BY THE TPO. AS A RESULT OF THIS INCORRE CT FACTUAL APPRECIATION, IT WAS SUBMITTED THE TPO HAS DRAWN A WRONG CONCLUSION AND HAS PROCEE DED TO SELECT THE COMPARABLE. ON ACCOUNT OF THIS MISTAKE WHICH HAS OCCURRED IT WAS S UBMITTED REMAND WAS REQUESTED FOR. IN ORDER TO FACILITATE THE CORRECT APPRECIATION OF FAC TS, IT WAS HIS SUBMISSION THAT THE ASSESSEE HAS FILED A PETITION UNDER RULE 29 SEEKING PERMISSI ON TO PLACE ADDITIONAL EVIDENCE ON RECORD. 6.7. READING FROM THE SAID PETITION, IT WAS HIS SUBMISSI ON THAT THE TPO HAS INADVERTENTLY CONSIDERED THE BUSINESS OF THE ASSESSEE AS A PROVID ER OF FINANCIAL ADVISORY SERVICES AND HAS I.T.A .NO.-979/DEL/2015 PAGE 9 OF 21 ERRED CONSEQUENTLY IN COMPARING THE ASSESSEE WITH C OMPANIES ENGAGED IN THE BUSINESS OF STOCK-BROKING AND COMPANIES HAVING DIFFERENT REVENU E STREAMS SUCH AS REVENUE FROM SALE OF SHARES AND BROKERAGES WHEREAS THE ASSESSEE ON TH E OTHER HAND IS A COMPANY WHICH PROVIDES CRISIS AND SECURITY CONSULTANCY, OUTSOURCE D SECURITY MANAGEMENT, CRISIS RESPONSE, INVESTIGATOR SERVICES, FORENSICS AND OTHER RISK MAN AGEMENT CONSULTANCY SERVICES AND THIS FACT IS EVIDENCE FROM THE DISTRIBUTION AND SALE AGR EEMENT DATED 06/01/2010 ENTERED INTO BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES. CO PY OF THE RE-DACTED AGREEMENT WITH A CLIENT WAS ATTACHED AS ADDITIONAL EVIDENCE. ADDRES SING THE EVIDENCE RELIED UPON, IT WAS HIS SUBMISSION THAT THE ASSESSEE IS FILING REDACTED COP IES OF CERTAIN AGREEMENTS AS AN ILLUSTRATION TO BRING OUT THE INTENSIVE SEARCH FOR RELEVANT INFORMATION. ADDRESSING THE PECULIAR REQUIREMENTS OF ITS CLIENTS UNDERTAKEN AS AN ILLUSTRATION. IT WAS SUBMITTED THAT A PERUSAL OF THE SAME WOULD SHOW THAT INVESTIGATION A BOUT THE CORRECTNESS OF ALLEGATIONS BY A WHISTLE BLOWER WAS TO BE UNDERTAKEN AND WAS TO BE CARRIED OUT ON THE BASIS OF DISCREET ENQUIRIES WITH SOURCES IN THE INDUSTRY; ON THE BASI S OF GROUND INTERVIEWS INTO THE BACKGROUND OF THE COMPANY WHERE INVESTMENT WAS CONT EMPLATED BY A FOREIGN CLIENT INTO THE BACKGROUND OF THE COMPANY WITH WHOM INTERACTION S WERE CONTEMPLATED TO ENSURE THAT THERE ARE NO UNDISCLOSED COMMERCIAL, LEGAL, ETHICAL OR REGULATORY ISSUES FROM INTERNATIONAL REGULATORY AND COMPLIANCE PERSPECTIVE INCLUDING UK BRIBERY ACT AND US FCPA ETC. THE ADDITIONAL EVIDENCE SOUGHT TO BE PLACED ON RECORD I T WAS SUBMITTED WOULD ENABLE THE TAX AUTHORITIES TO APPRECIATE THE CORRECT FACTS. FOR TH E SAID PURPOSE THE FOLLOWING DOCUMENTS WERE SOUGHT TO BE FURTHER PLACED ON RECORD OVER AND ABOVE A COPY OF THE DISTRIBUTION AND SALES AGREEMENT ALREADY ON RECORD:- I.T.A .NO.-979/DEL/2015 PAGE 10 OF 21 1. ENGAGEMENT LETTERS ALONG WITH SCOPE OF SERVICES PROVIDED BY THE APPLICANT TO THIRD PARTIES ARE ENCLOSED AS ANNEXURE 1. 2. INVOICES RAISED BY THE APPLICANT ON THE ASSOCIAT ED ENTERPRISE AND UNRELATED THIRD PARTIES ARE ENCLOSED AS ANNEXURE 2. 6.8. REFERRING TO THESE DOCUMENTS AND THE PRAYER MADE O N FACTS, IT WAS SUBMITTED THAT THESE MAY BE ADMITTED AS THESE ARE CRUCIAL AND RELE VANT FOR DETERMINING THE ISSUE BEFORE THE TAX AUTHORITIES. RELIANCE WAS PLACED UPON THE DECISION OF THE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF CIT VERSUS TEXT HUNDRED INDIA PRIVATE LIMITED 239 C TR 263 (DELHI) PLEADING THAT PROCEDURES RELATING TO FILING OF ADDI TIONAL EVIDENCE IS HANDMAID OF JUSTICE AND JUSTICE SHOULD NOT BE ALLOWED TO BE CHO KED ONLY BECAUSE OF SOME INADVERTENT ERROR OR ORAL OMISSION ON THE PART OF THE PARTIES A ND THE EVIDENCE MAY BE TAKEN INTO CONSIDERATION. RELIANCE IS ALSO PLACED ON CIT VS. HEWLETT PACKARD INDIA: 314 ITR 55 (DEL HC); CIT VS. CHANDRA KANT SAHU BHAI: 202 TAXMAN 262 (DEL HC); CIT VS. BETTERWAYS FINANCE: ITA 995 OF 2009 (DEL HC); JATIA INVESTMENT CO V. CIT: 206 ITR 718 (CAL HON'BLE HC); ELECTRA (JAIPUR) LTD. VS. IAC: 26 ITD 236 (DEL ITAT); AND Y.W.C. A OF INDIA VS. IAC: 29 ITD 620 (DEL ITAT). 6.9. ACCORDINGLY, IT WAS HIS SUBMISSION THAT BY ALLOWIN G THE PRAYER OF THE ASSESSEE, THE ISSUE MAY BE REMANDED. 7. CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES O F THE CASE THE LD. SR. DR WHO INITIALLY HAD SUBMITTED THAT THE FRESH EVIDENCE MAY NOT BE TAKEN INTO CONSIDERATION. HOWEVER, CONSIDERING THE FACT THAT THE EVIDENCE ON RECORD WOULD ASSIST THE REVENUE IN CORRECTLY CHARACTERISING THE TAXPAYER AND THE ISSUE IS NOT TO BE DECIDED AT THIS STAGE AND HAS TO GO BACK, IT WAS HIS SUBMISSION THAT HE WOULD HAVE NO OBJECTION IF IT IS ADMITTED AND RESTORED TO THE TPO. I.T.A .NO.-979/DEL/2015 PAGE 11 OF 21 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND ON CONSIDERING THE COMPARABLES SELECTED AND ON CONSIDERING THE DISCUSSION CARRIED OUT BY THE TPO IN HIS ORDER THAT THE CONCLUSIONS D RAWN QUA THE CHARACTERIZATION NEED TO BE RE-ADDRESSED. WE FIND FROM THE DISCUSSION CARRI ED OUT IN INTERNAL PAGE 12 PARA 5.4 OF THE TPO THAT A GENERAL DISCUSSION OF THE EMPLOYEE P ROFILE FOR PROVIDING BUSINESS SERVICES LIKE ACCOUNTING, REPORTING, MARKET SUPPORT ETC. HAS BEEN UNDERTAKEN AND IN PARA 5.5 THE TPO HAS PROCEEDED TO CONSIDER THAT THE SERVICE IS F INANCIAL ADVISORY SERVICES AND NOT A ROUTINE SERVICE BUT A HIGH END SERVICE. WE FIND TH AT INSTEAD OF SPECIFICALLY ADDRESSING THE EMPLOYEE PROFILE OF THE TAX PAYER THE TPO HAS PROCE EDED ON A GENERAL DISCUSSION SO AS TO JUSTIFY THE CONCLUSION DRAWN RIGHT AT THE OUTSET IN PARA 5.1 THAT THE TAXPAYER IS ENGAGED IN PROVIDING INVESTMENT AND OTHER FINANCIAL ADVISORY T O ITS AE. THE SAID CONCLUSION, IT IS FOUND IS OBLIVIOUS TO THE PROFILE ADDRESSED IN PARA 1 BY THE TPO HIMSELF. THE SAME IS REPRODUCED HEREUNDER FOR READY-REFERENCE:- 1. TAXPAYERS PROFILE CONTROL RISK INDIA PVT. LTD. THE COMPANY IS A 100% SUBSIDIARY OF CONTROL RISKS GROUP HOLDING LTD., LONDON. DURING THE FINAN CIAL YEAR 2009-10, CONTROL RISK INDIA PRIVATE LIMITED FOR THE PURPOSE OF BUSIN ESS OF CONSULTING BUSINESS INTELLIGENCE SERVICES, FRAUD INVESTIGATION, ETC. ENTERED INTO THE CROSS BORDER TRANSACTION WITH ITS OFFSHORE AFFILIATES. (EMPHASIS PROVIDED) 8.1. WHEN THE ABOVE FACTUAL NARRATION IS CONSIDERED IN THE LIGHT OF THE CONCLUSION DRAWN AND THE OBJECTIONS POSED BEFORE THE DRP WHEN READ ALONGWITH THE COPY OF DISTRIBUTORS & SALES AGREEMENT DATED 06.01.2010 SPECIFIC PARA B OF THE SAME WHICH HAS BEEN EXTRACTED IN THE EARLIER PART OF THIS ORDER IT WOULD SHOW THAT THE ASSESSEE IS ENGAGED IN THE PROVISION OF CRISIS AND SECURITY CONSULTANCY, OUTSOURCED SECU RITY MANAGEMENT, CRISIS RESPONSE, INVESTIGATIVE SERVICES, FORENSICS AND OTHER RISK MA NAGEMENT CONSULTANCY SERVICES ( THE I.T.A .NO.-979/DEL/2015 PAGE 12 OF 21 CONSULTANCY SERVICES) IN THE TERRITORY IN WHICH T HEY OPERATE (TERRITORY). WHEN ALL THIS IS CONSIDERED IN THE CONTEXT OF THE COPY OF AGREEMENT FILED U/RULE 29 OF THE ITAT RULES THERE APPEARS TO BE NO DOUBT WHATSOEVER THAT THE TAX AUTH ORITIES HAVE NOT CORRECTLY APPRECIATED THE ACTIVITY OF THE TAX PAYER AS A RESULT THEREOF T HE CHARACTERIZATION I.E THE FAR ANALYSIS ITSELF IS FLAWED. FOR READY-REFERENCE, WE EXTRACT THE ANNEXURE I U/RULE 29 FOR READY- REFERENCE:- WE UNDERSTAND THAT IN ACQUIRED THE BUSINESS OF A ND THE OF BRAND. AT THE TIME, WAS ONE OF THE LEADING INDIAN MANUFACTURERS OF EQUIPMENT. AS PART OF THE ACQUISITION THE TWO PROM OTERS OF THE COMPANY ( ) AND ( ) ALSO JOINED THE NEWLY FORMED COMPANY AND THE RESIDUAL BUSINESS OF THE ERSTWHILE WAS SPUN OFF AS .CONTROL RISKS WAS INFORMED THAT DURING THE ACQUISITION THE PROMOTERS SIGNED A NON-C OMPETE AGREEMENT WITH STATING THAT WOULD NOT ENTER THE B USINESS FOR A THREE YEAR PERIOD FOLLOWING THE ACQUISITION AND THE TWO PROMOTERS FOR FIVE YEARS. IN A WHISTLE BLOWER MADE ALLEGATIONS THAT ( ) SU PPLIER TO AND A COMPANY REPORTEDLY OWNED BY A MEMBER OF FAMILY, WA S MANUFACTURING EQUIPMENT. THE WHISTLE BLOWER, IN SPEAKING OF THE OTHER SUPP LIERS UNDERSTOOD THAT HAD BEEN PLACING ORDERS FOR SUB-ASSEMBLIES USE D IN THE MANUFACTURING OF FROM OTHER SUPPLIERS. INITIAL RESEARCH ON THE MINISTRY OF CORPORATE AFFAI RS (MCA) DID NOT REVEAL A LISTING FOR THIS COMPANY; HOWEVER WE NOTE THAT SOLE PROPRIETORSHIP AND PARTNERSHIP FIRMS ARE NOT REQUIRED TO REGISTER WITH THE MCA. COMMISSIONED CONTROL RISKS TO UNDERTAKE RE SEARCH INTO AND TO ESTABLISH ANY INITIAL EVIDENCE RELATING TO THIS MATTER. RESEARCH INDICATED AND IS MANUFACTURING AND PERHAPS EXPORTIN G EQUIPMENT, WHILE MCA RECORDS REVEALED AND BOTH AND HOLD DIRECTOR PO SITIONS IN AT LEAST SOME OF THE GROUP OF COMPANIES. AS A RESULT BOTH PARTIES MAY BE IN BREACH OF THE NON-COMPETE AGREEMENT SIGNED WITH. SUBSEQUENTLY WOULD NOW LIKE TO ACQUIRE FURTHER EVID ENCE LINKING TO THE FOLLOWING SUMMARIZES CONTROL RISKS PROPOSED AP PROACH ( THE SERVICES). TO ACCEPT THIS APPROACH AND INSTRUCT CONTROL RISKS TO PROCEED WITH THIS ASSIGNMENT, PLEASE SIGN AND RETURN A COPY OF THE CLIENT ACCEPTA NCE FROM ATTACHED AT THE END OF THIS DOCUMENT. ALL OF CONTROL RISKS RESEARCH IS CONDUCTED IN STRI CT CONFIDENCE SO AS NOT TO JEOPARDIZES THE CLIENT, THE SUBJECT OF OUR RESEARCH , OR ANY OTHER PARTY. CONTROL RISKS AGREES TO MAINTAIN THE CONFIDENTIALLY OF ALL CONFIDENTIAL OR PROPRIETARY INFORMATION RECEIVED FROM THE CLIENT. I.T.A .NO.-979/DEL/2015 PAGE 13 OF 21 SCOPE CONTROL RISKS PROPOSES A PHASED APPROACH TO THIS IN VESTIGATION, AS DETAILED BELOW. DISCREET ENQUIRIES CONTROL RISKS WILL PERFORM DISCREET SOURCE ENQUIRES TO PROVIDE GREATER CONTEXT TO INFORMATION UNCOVERED IN THE FIRST PHASES; TO FILL IN GAPS IN THE PUBIC RECORD; AND TO ESTABLISH ANY LINKS BETWEEN AND WE WOULD CONDUCT DISCREET ENQUIRIES WITH SOURCE WIT HIN HE INDUSTRY AND THE BUSINESS COMMUNITY TO OBTAIN INFORMATION RELATING TO AND THEIR FAMILY MEMBERS AND THEIR BUSINESS PRACTICES. FURTHER, WE UNDERSTAND THAT MAY NOT HAVE MANUFACTURING CAPABILITIES AND THAT IT MAY BE SOURCING THE EQUIPMENT FROM. WE SHALL ATTEMPT TO CORROBORATE THIS. ON THE-GROUND INTERVIEWS CONTROL RISKS WILL DEPLOY CONSULTANTS AT TO INTERV IEW EMPLOYEES AND SUPPLIERS TO DEVELOP GREATER CONTEXT AROUND THE ALLEGATIONS AND THE FINDINGS TO DATE. CONTROL RISKS UNDERSTANDS THE SENSITIVITIES AROUND THE INVESTIGATION AND IS HAPPY TO WORK WITH THE CLIENT TO DEVELOP A RELEVANT AND A PPROPRIATE REASON FOR THESE ENQUIRIES. (EMPHASIS PROVIDED) 8.2. THE ASSESSEE HAS ALSO PLACED THE FOLLOWING DOCUMEN T IN SUPPORT OF ITS (NON- FINANCIAL) PRE-INVESTMENT BACKGROUND DUE DILIGENCE REDACTED DOCUMENT WITH A CLIENT:- INTRODUCTION AND BACKGROUND THIS PROPOSAL FOLLOWS EMAILS BETWEEN. GROUP DEVELO PMENT MANAGER AND CONTROL RISKS. CONTROL RISKS UNDERSTANDS THE CLIENT IS CONSIDERING AN INVESTMENT INTO IN INDIA IS FOUNDED AND MANAGED BY AND . AS SUCH, THE CLIENT WOULD LIKE CONTROL RISKS TO UNDERTAKE IN-DEPTH RESEARCH INTO THE BACKG ROUND OF THE COMPANY AND ITS KEY PRINCIPALS TO ENSURE THERE ARE NO UNDISCLOSED COMMERCIAL, LEGA L, ETHICAL OR REGULATORY ISSUES IN RELATION TO THEIR B ACKGROUNDS. CONTROL RISKS RESEARCH WOULD ALSO FOCUS ON ANY ISSUES OF CO NCERN FROM AN INTERNATIONAL REGULATORY AND COMPLIANCE PERSPECTIVE , INCLUDING THE RECENTLY PASSED UK BRIBERY ACT. THE CLIENT HAS INDICATED THAT WHICH ARE NOT REQUIR ED TO REGISTER WITH INDIA'S COMPANIES HOUSE, THE MINISTRY OF CORPORATE AFFAIRS. AS SUCH, CORPORATE FILINGS INCLUDING INCORPORATION DETAILS AND FINANCIAL INFOR MATION ARE NOT AVAILABLE IN THE PUBLIC DOMAIN. HOWEVER, CONTROL RISKS UNDERSTANDS THAT THE CLIENT HAS INITIATED THE FINANCIAL DUE DILIGENCE PROCESS AND M AY HAVE ADDITIONAL BACKGROUND INFORMATION. THE FOLLOWING SUMMARISES CONTROL RISKS' PROPOSED AP PROACH ('THE SERVICES'). TO ACCEPT THIS APPROACH AND INSTRUCT CONTROL RISKS TO PROCEED WITH THIS ASSIGNMENT, I.T.A .NO.-979/DEL/2015 PAGE 14 OF 21 PLEASE SIGN AND RETURN A COPY OF THE CLIENT ACCEPTA NCE FORM ATTACHED AT THE END OF THIS DOCUMENT. ALL OF CONTROL RISKS' RESEARCH IS CONDUCTED IN STRI CT CONFIDENCE SO AS NOT TO JEOPARDISE THE CLIENT, THE SUBJECTS OF OUR RESEARCH , OR ANY OTHER PARTY. CONTROL RISKS AGREES TO MAINTAIN THE CONFIDENTIALITY OF ALL CONFIDENTIAL OR PROPRIETARY INFORMATION RECEIVED FROM THE CLIENT. SCOPE FOR THIS ASSIGNMENT, CONTROL RISKS PROPOSES A MULTI -PHASED APPROACH. THE FIRST PHASE WILL INVOLVE COMPREHENSIVE PUBLIC R ECORD RESEARCH TO IDENTIFY THE PROFILE OF THE SUBJECTS AND ESTABLISH THE EXISTENCE OF ANY IMMEDIATE RED FLAGS. IN THE SECOND PHASE CONTROL RISKS WILL UNDERTAKE D ISCREET SOURCE ENQUIRIES TO BUILD ON AND DEVELOP INFORMATION OBTAINED DURING THE FIRST PHASE AND FOCUS ON THE REPUTATION AND BUSINESS PRACTICES OF THE PRI NCIPALS. PHASE ONE: PUBLIC RECORD RESEARCH THE EXACT CONTENT OF OUR FINAL REPORT WILL DEPEND I N PART ON THE ISSUES IDENTIFIED IN THE COURSE OF OUR RESEARCH, BUT WE WOULD EXPECT TO COVER THE FOLLOWING AREAS: OBTAIN ANY AVAILABLE CORPORATE FILINGS, NOTING THAT AS A PROPRIETORSHIP OR PARTNERSHIP FIRM THERE MAY NOT BE ANY PUBLICLY-AVAI LABLE DOCUMENTS. IDENTIFY RELEVANT CIVIL LITIGATION, BANKRUPTCIES OR JUDGMENTS INVOLVING THE COMPANY OR KEY PRINCIPALS. IN ADDITION CONTROL RISKS WOULD SEEK TO ASCERTAIN WHETHER THEY HAVE BEEN INVOLVED IN CRIMINAL OR REGULATORY INVESTIGATIONS. CONTROL RISKS NOTES THAT THE AVAILABILITY OF SUCH INFORMATION IN THE PUBLIC RECORD IN INDIA VARI ES AND IS NOT COMPREHENSIVE. PLEASE NOTE THAT IN INDIA, IT IS NOT POSSIBLE TO SEARCH BY AN INDIVI DUAL'S NAME FOR DIRECTORSHIPS OR SHAREHOLDINGS; HOWEVER CONTROL RISKS WILL SEEK TO ESTABLISH OTHER CORPORATE INTERESTS FOR THE PRIN CIPAL THROUGH MEDIA RESEARCH IN CONJUNCTION WITH CORPORATE-RECORDS FOR ANY PRE-ESTA BLISHED CORPORATE ENTITIES. UNDERTAKE THOROUGH SEARCHES OF ENGLISH AND LOCAL LANGUAGE MED IA ARCHIVES AND SPECIALIST CORPORATE DATABASES IN ORDER TO ESTABLISH THE PUBLIC PROFILE OF THE PRINCIPALS AND THE EXISTENCE OF ANY NEGATIVE ALLEGATIONS. IDENTIFICATION OF ANY ISSUES OF REPUTATIONAL O R REGULATORY CONCERN FOR THE CLIENT PRESENTED BY THE PRINCIPAL'S (RACK RECORD, A CTIVITIES AND REPUTATION, INCLUDING; ALLEGATIONS OF ILLEGAL OR UNETHICAL BUSINESS ACTIVI TIES SUCH AS INVOLVEMENT IN CORRUPTION, FRAUD OR ABUSE OF POSITI ON; EVIDENCE OF IMPROPER RELATIONSHIPS WITH GOVERN MENT OFFICIALS OR INDIVIDUALS OF INFLUENCE; DESIGNATION ON FINANCIAL 'BLACKLISTS' MAINTAINED BY DOMESTIC OR INTERNATIONAL AGENCIES; PHASE TWO: DISCREET SOURCE ENQUIRIES CONTROL RISKS WILL PERFORM DISCREET SOURCE ENQUIRIE S TO PROVIDE GREATER CONTEXT TO INFORMATION UNCOVERED IN PHASE 1; TO FILL IN GAPS I N (HE PUBLIC RECORD; AND TO ESTABLISH THE REPUTATION AND TRUSTWORTHINESS OF THE PRINCIPALS. I.T.A .NO.-979/DEL/2015 PAGE 15 OF 21 ALTHOUGH THE SCOPE OF OUR ENQUIRIES WOULD DEPEND IN PART ON ANY ISSUES IDENTIFIED IN PHASE I, WE WOULD EXPECT TO COVER THE FOLLOWING KEY AREAS IN PHASE II: IDENTIFY AND ASSESS THE IMPACT OF ANY ALLEGATIONS OF UNETHICAL O R ILLEGAL BUSINESS PRACTICES, MAJOR BUSINESS DISPUTES, OR CONTROVERSI ES SURROUNDING THE PRINCIPALS, WHICH ARE NO? PART OF T HE PUBLIC RECORD. ASSESS THE PROFESSIONAL REPUTATION AND PERCEIVED IN TEGRITY OF THE PRINCIPALS, INCLUDING THEIR TRACK RECORD WITH OTHER PARTNERS, ASSOCIATES AND SUPPLIERS . HAVE THEY BEEN INVOLVED IN ANY DISPUTES / LITIGAT ION? IF SO, WHAT WAS THEIR APPROACH AND WHAT WAS THE OUTCOME? HAVE THERE BEEN ANY ALLEGATIONS OR INSTANCES OF BRIBE SOLICITATION OR PAYMENT? IF SO, WHAT WAS THE NATURE OF ANY SUCH ALLEGATIONS OR INSTANCES? THIS IS PARTICULARLY IMPORTANT IN THE CONTEXT OF EXTRA-TERRITORIAL LEGISLATION, INCLUDING THE UK BRIBERY ACT AND US FCPA. CONDUCT DISCREET ENQUIRIES WITH REGULATORY AGEN CIES AND GOVERNMENT AUTHORITIES IN INDIA TO ESTABLISH WHETHER THE SUBJE CTS HAVE COME UNDER INVESTIGATION, INCLUDING FOR FINANCIAL IRREGULARITIES, WHERE POSS IBLE. IN ADDITION CONTROL RISKS WILL SEEK TO: CONFIRM OR REFUTE ANY ALLEGATIONS IDENTIFIED IN PHASE I. IDENTIFY ANY SIGNIFICANT COMMERCIAL, POLITICAL OR FAMILY CONNECTIONS MAINTAINED BY THE PRINCIPALS AND (HEIR IMPORTANCE T O UBM. OTHER LINES OF ENQUIRY MAY EMERGE DURING THE COURSE OF OUR INVESTIGATION, AND WOULD BE DISCUSSED WITH (HE CLIENT AS REQUIRED. METHODOLOGY PUBLIC RECORDS PUBLIC RECORDS INCLUDE PRESS ARTICLES, CORPORATE FI LINGS, COURT RECORDS, THE RECORDS OF CENTRAL AND LOCAL GOVERNMENT DEPARTMENTS AND STA TUTORY BODIES. (EMPHASIS PROVIDED) 8.3. ACCORDINGLY, CONSIDERING THE RATIO OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN TEXT HUNDRED INDIA PRIVATE LIMITED (CITED SUPRA), WE FIND THAT THE ASSESSEE HAS SUCCESSFULLY DEMONSTRATED THAT SINCE THE VERY NATUR E OF ASSESSEES BUSINESS ACTIVITY HAS NOT BEEN CORRECTLY UNDERSTOOD THE CONCLUSION DRAWN FOR CHARACTERISATION OF THE ASSESSEE SUFFER FROM A FUNDAMENTAL ERROR WHEREIN THE TPO HAS UNDERS TOOD THE ASSESSEE ON CONSIDERING THE TP REPORT FILED AS BEING ENGAGED IN PROVIDING INVES TMENT AND OTHER FINANCIAL ADVISORY SERVICES TO ITS AE. WHEREAS THE PECULIAR FACTS OF TH E CASE AS EVIDENT FROM THE EVIDENCE PLACED BEFORE THE TPO AND THE TAX AUTHORITIES READ ALONG WITH THE FRESH EVIDENCE SOUGHT TO BE PLACED IN THE PROCEEDINGS BEFORE US WHOSE FILING HAS NOT BEEN OBJECTED TO BY THE I.T.A .NO.-979/DEL/2015 PAGE 16 OF 21 REVENUE DEMONSTRATES TO THE CONTRARY. WE FIND THAT THE TAXPAYER NO DOUBT UNDERTAKES FINANCIAL SERVICES BUT THESE ARE NOT ACTIVITIES EN GAGED IN STOCK BROKING; TRADING; DEPOSITARIES ETC. THESE ARE IN THE CONTEXT OF FOREN SIC, INVESTIGATIVE, RISK ASSESSMENTS ETC. REQUIRING APPRECIATION OF SOCIO-POLITICAL AND GEOPO LITICAL STUDIES WHICH NECESSARILY IMPACT THE FINANCIALS AND MAY BE INCORPORATED IN THE FINAN CIAL COMPARATIVE INFORMATION PROVIDED BY VARIOUS OTHER TAXPAYERS HOWEVER WHEN COUPLED WITH T HE FORENSIC SERVICES WHICH THE TAXPAYER DEFINITELY RENDERS WHICH IS EVIDENT FROM T HE EXTRACT OF THE REDACTED AGREEMENTS ENTERED INTO BY THE ASSESSEE COMPANY WITH ITS CUSTO MERS THE NATURE OF THE ACTIVITY IMPACTING ITS FAR NEEDS TO BE ADDRESSED. IT IS SEE N THAT EVEN IF THE NATURE OF ACTIVITIES IMPACT THE ULTIMATE DECISION-MAKING QUA THE FINANCI AL INFORMATION PROVIDED HOWEVER, BY NO STRETCH OF IMAGINATION THE ASSESSEE CAN BE COMPARED WITH COMPANIES WHO ARE TRADING IN SHARES AND INVESTMENTS. ACCORDINGLY HOLDING THE FR ESH EVIDENCES AS RELEVANT AND CRUCIAL TO DETERMINE THE ISSUES, THE FRESH EVIDENCE IS ADMITTE D. SUPPORT IS DRAWN FROM THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS TEXT HUNDRED INDIA PVT. LTD. (CITED SUPRA). THE FOLLOWING EXTRACT OF THE SAID DECISION IS REPRODUCED HEREUNDER:- 13. THE AFORESAID CASE LAW CLEARLY LAYS DOWN A NE AT PRINCIPLE OF LAW THAT DISCRETION LIES WITH THE TRIBUNAL TO ADMIT ADDITION AL EVIDENCE IN THE INTEREST OF JUSTICE ONCE THE TRIBUNAL AFFIRMS THE O PINION THAT DOING SO WOULD BE NECESSARY FOR PROPER ADJUDICATION OF THE M ATTER. THIS CAN BE DONE EVEN WHEN APPLICATION IS FILED BY ONE OF THE P ARTIES TO THE APPEAL AND IT NEED NOT TO BE A SUO MOTTO OF THE TRIBUNAL. THE AFORESAID RULE IS MADE ENABLING THE TRIBUNAL TO ADMIT THE ADDITION AL EVIDENCE IN ITS DISCRETION IF THE TRIBUNAL HOLDS THE VIEW THAT SUCH ADDITIONAL EVIDENCE WOULD BE NECESSARY TO DO SUBSTANTIAL JUSTI CE IN THE MATTER. IT IS WELL SETTLED THAT THE PROCEDURE IS H ANDMADE OF JUSTICE AND JUSTICE SHOULD NOT BE ALLOWED TO BE CHO KED ONLY BECAUSE OF SOME INADVERTENT ERROR OR OMISSION ON TH E PART OF ONE OF THE PARTIES TO LEAD EVIDENCE AT THE APPROPRIATE STAGE. ONCE IT IS FOUND THAT THE PARTY INTENDING TO LEAD EVIDENCE BFORE THE TRIBUNAL FOR THE FIRST TIME WAS PREVENTED BY SUFFICIENT CAUSE TO LEAD SUCH AN EVIDENCE AND THAT THIS EVIDENCE WOULD HAVE MATERIAL BEARING ON THE ISSUE WHICH I.T.A .NO.-979/DEL/2015 PAGE 17 OF 21 NEEDS TO BE DECIDED BY THE TRIBUNAL AND ENDS OF JUS TICE DEMAND ADMISSION OF SUCH AN EVIDENCE, THE TRIBUNAL CAN PAS S AN ORDER TO THAT EFFECT. (EMPHASIS PROVIDED) 8.4. WE FURTHER FIND OUR CONCLUSION SUPPORTED BY A DECI SION OF THE CO-ORDINATE BENCH IN THE CASE OF UCB INDIA PVT. LTD VS. ACIT, CIRCLE 7(3 ), MUMBAI, 121 ITD 131, WHEREIN IT IS HELD AS UNDER: IN ALL FAIRNESS, THE ASSESSEE SHOULD NOT BE PINNED DOWN TO HIS SUBMISSIONS IN THE FIRST ROUND OF TRANSFER PRICING PROCEEDINGS. IT SHOULD BE APPRECIATED THAT TRANSFER PRICING REGULAT IONS ARE RELATIVELY NEW PROVISIONS AND THE CASE DOES REQUIRE SPECIAL CO NSIDERATION. THE ASSESSEE IS FREE TO SUPPORT HIS CASE IN ANY MANNER IT DEEMS FIT BY FILING ANY ADDITIONAL EVIDENCE OR DOCUMENT BEFORE THE A.O. FURTHER INFORMATION MAY BE GATHERED FROM THE PARENT COMPANY, IF POSSIBL E. FRESH METHODS MAY BE ADOPTED TO PROVE ALP. OUR INTENTION IS THAT, THE A SSESSEE SHOULD NOT BE SHUT OUT IN THE SECOND ROUND OF PROCEEDINGS, ON THE GROUND T HAT, CERTAIN DOCUMENTS WERE NOT FILED IN THE FIRST ROUND OR CERTAIN METHOD WAS NOT ADOPTED ORIGINALLY. (EMPHASIS PROVIDED) 9. ACCORDINGLY IN VIEW OF THE ABOVE DETAILED REASONIN G ON FACTS AND LAW, THE ISSUE IS RESTORED TO THE FILE OF THE TPO TO CARRY OUT A FAR A NALYSIS OF THE ASSESSEE AFTER CHARACTERIZING ITS ACTIVITY ON THE BASIS OF EVIDENC E ON RECORD AND THEN PROCEED TO SELECTING COMPARABLES AS PER RULES AND IN ACCORDANCE WITH LAW . NEEDLESS TO SAY THAT THE ASSESSEE SHALL BE AFFORDED A REASONABLE OPPORTUNITY OF BEING HEARD. 10. ADDRESSING GROUND NO. 3, THE LD. AR SUBMITTED THAT THE ISSUE HAS BEEN CONSIDERED BY THE ASSESSING OFFICER AT INTERNAL PAGE 3 MARKED AS PAGE 10 AND 11 OF THE APPEAL SET:- DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE C OMPANY CLAIMED INTEREST EXPENSES AMOUNTING TO RS. 10,17,083/- ON ACCOUNT L ATE DEPOSIT OF SERVICE TAX AND TDS VIDE THIS OFFICE LETTER DATED 18/2/2014 THE ASSESSEE COMPANY WAS REQUESTED TO PROVIDE THE DETAILS OF SERVICE TAX AN TDS AND ALSO SHOW CAUSE AS TO WHY THESE EXPENSES SHOULD NOT BE DISALLOWED BEING P ENAL IN NATURE. IN RESPONSE THE ASSESSEE COMPANY VIDE LETTER DATED 26/2/2014 SU BMITTED AS UNDER:- THE ASSESSEE COMPANY HAS PAID INTEREST OF RS.10,17 ,083/- ON ACCOUNT OF LATE DEPOSIT OF SERVICE TAX ACCOUNTING TO RS.73,132 /- AND LATE DEPOSIT OF TDS I.T.A .NO.-979/DEL/2015 PAGE 18 OF 21 AMOUNTING TO RS.1,43,951/-. IT SHOULD NOT BE ADDED TO THE INCOME BECAUSE IT IS NOT PENAL IN NATURE INTEREST WAS PAID SUO MOUO. ASS ESSEE HAS MADE LATE PAYMENT OF SERVICE TAX AND ACCORDINGLY IT HAS PAY I NTEREST U/S 75 OF THE FINANCE ACT 1994 UNDER SERVICE TAX PROVISIONS. THE ;AMOUNT OF INTEREST PAID FOR DELAYED PAYMENT OF SERVICE TAX IS COMPENSATORY IN NATURE AN D HAS THE SAME CHARACTER AT SERVICE TAX AND IT IS NOT IN NATURE OF ANY PENALTY OR FINE ALLOWABLE AS EXPENSES U/S 37 OF THE INCOME TAX ACT 1961. THE SUBMISSION OF THE ASSESSEE HAS BEEN CONSIDERED BY NOT ACCEPTABLE FULLY. THE INTEREST PAID ON LATE DEPOSIT OF SERVIC E TAX IS ACCEPTED AND ALLOWED. HOWEVER, THE INTEREST PAID ON LATE DEPOSIT OF TDS A MOUNTING TO RS.1,43,951/- NOT ALLOWABLE. HENCE, ADDED TO THE INCOME. IN THIS CASE A DRAFT OF THE PROPOSED ORDER OF ASSE SSMENT WAS PASSED AND SENT TO THE ASSESSEE. THE ASSESSEE FILED OBJECTION S BEFORE THE DISPUTE RESOLUTION PANEL (DRP) AGAINST THE VARIATION PROPOS ED TO BE MADE IN THE DRAFT ORDER. THE DISPUTE RESOLUTION PANEL HAS IN PARA 11 4 OF ITS ORDER DATED 14/11/2014 WHILE HOLDING THAT THE CLAIM OF INTEREST U/S 201(1A) IS NOT AN ALLOWABLE DEDUCTION HAS HELD THE FOLLOWING:- THE INTEREST U/S 201(A) HAS BEEN LEVIED HOLDING T HE TAXPAYER TO BE IN DEFAULT AND THEREFORE IT CANNOT BE SAID THAT IT WAS MERELY COMPENSATORY IN NATURE. THE EXPLANATION BELOW SECTION 37(1) WAS INTRODUCED RETR OSPECTIVELY TO CLARIFY THE POSITION WHERE OTHERWISE DISALLOWABLE EXPENDITURE W ERE CLAIMED AS DEDUCTION U/S 37(1) AND NOT TO ALLOW THE CLAIMS IN THE SITUATION BEFORE THE PANEL. WHEN THE TAX ITSELF IS OTHERWISE NOT ALLOWABLE EITHER U/S 37(1) OR U/S 40(A)(II), INTEREST THERE UPON CANNOT BE ALLOWED. IN ANY CASE, TDS IS MADE O N ACCOUNT OF RATE OR TAX LEVIED ON THE PROFITS OR GAINS OF ANY BUSINESS OR P ROFESSION ON THE TRANSACTION COVERED THEREIN AND THEREFORE ON THIS ACCOUNT ALSO INTEREST U/S 201(A) OF THE ACT IS NOT ALLOWABLE IN DEDUCTION. UNDER THESE FACTS, THE PANEL HOLDS THAT THE SAID CLAIM OF INTEREST U/S 201(A) IS NOT AN ALLOWABLE DE DUCTION. IN VIEW OF THE ABOVE, DISALLOWANCE OF RS.1,43,951/- PROPOSED IN THE DRAFT ORDER IS BEING MADE IN THE FINAL ASSESSMENT ORDER. -ADDITION RS.1,43,951/- 11. ADDRESSING THE FACTS IT WAS HIS SUBMISSION THAT THE SE ARE PAYMENTS TO THE VENDORS AND SECTION 40(A)(I) DOES NOT APPLY. THE PAYMENT OF INTEREST IT WAS SUBMITTED IS COMPENSATORY IN NATURE AND NOT IN THE NATURE OF A PENALTY AND SINCE IT HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSE SSEE, THE SAME MAY BE ALLOWED. 12. THE LD.SR.DR RELIED UPON THE ORDER AND SAID THAT A SPEAKING ORDER HAS BEEN PASSED BY THE DRP. I.T.A .NO.-979/DEL/2015 PAGE 19 OF 21 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND ON CONSIDERING THE SUBMISSIONS OF THE PARTI ES THAT IN THE FACTS AS BROUGHT ON RECORD, NO VARIATION IN THE ORDER IS CALLED FOR. A GREEING WITH THE FOLLOWING CONCLUSION ON FACTS AND LAW AS CONSIDERED BY THE DRP WHICH HAS BE EN FOLLOWED BY THE AO, WE REJECT THE GROUND OF THE ASSESSEE. THE RELEVANT EXTRACT OF THE DRPS ORDER IS REPRODUCED HEREUNDER FOR READY-REFERENCE:- 11.2. A PERUSAL OF THE DRAFT ASSESSMENT SHOWS THAT DURING THE YEAR UNDER CONSIDERATION THE TAXPAYER CLAIMED INTEREST EXPENSE S AMOUNTING TO RS.10,17,083/- ON ACCOUNT LATE DEPOSIT OF SERVICE T AX AND TDS. THE AO ACCEPTED THE ARGUMENT OF THE TAXPAYER THAT THE INTEREST UNDE R SECTION 75 OF THE FINANCE ACT 1994 FOR LATE PAYMENT OF SERVICE TAX IS COMPENS ATORY IN NATURE, HAS THE SAME CHARACTER AS SERVICE TAX AND IT IS NOT IN NATURE OF ANY PENALTY OR FINE ALLOWABLE UNDER SECTION 37 OF THE INCOME TAX ACT 1961. ACCORD INGLY, HE ALLOWED THE SAID INTEREST PAID ON LATE DEPOSIT OF SERVICE TAX. HOWEV ER, THE INTEREST PAID ON LATE DEPOSIT OF TDS AMOUNTING TO RS.1,43,951/- NOT ALLOW ED AND PROPOSED TO BE ADDED TO THE INCOME. 11.3. THE LD. AR OF THE TAXPAYER SUBMITTED THAT ACC ORDING TO THE PROVISIONS OF SECTION 37(1) OF THE ACT, ANY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS IS ALLOWABLE AS DEDUCTION, PRO VIDED THE SAME WAS NOT INCURRED FOR THE PURPOSE OF ANY OFFENCE OR WHICH IS PROHIBITED BY LAW. THE PAYMENT MADE BY TAXPAYER ON ACCOUNT OF INTEREST ON LATE DEPOSIT OF TDS WAS COMPENSATORY IN NATURE. THE SAME WAS NOT IN THE NAT URE OF. PENALTY FOR SAID DEFAULT. RELIANCE IN THIS REGARD IS PLACED ON THE D ECISION OF KARNATAKA HIGH COURT IN THE CASE OF CIT V ORIENTAL INSURANCE CO. LTD: 31 5 ITR 102, WHEREIN, IT HAS BEEN HELD THAT INTEREST PAID UNDER SECTION 201(1A) OF THE ACT FOR LATE DEPOSIT OF TDS IS COMPENSATORY TO GOVERNMENT TREASURY AND NOT PENAL IN NATURE. IT IS FURTHER SUBMITTED THAT THE INTEREST PARTAKES THE CHARACTER OF PRINCIPAL IN RESPECT OF WHICH THE SAME IS PAID. THE AMOUNT OF TDS, BEING PART OF A PARTICULAR PAYMENT IS ALLOWABLE AS DEDUCTION IN THE RETURN OF INCOME AS EXPENSES INCURRED FOR THE PURPOSES OF BUSINESS. THEREFORE, T HE AMOUNT OF INTEREST PAID IN RESPECT OF LATE DEPOSIT OF. TDS ALSO PARTAKES THE C HARACTER OF AN EXPENSE, WHICH IS ALLOWABLE AS EXPENDITURE UNDER SECTION 37(1) OF THE ACT. 11.4. THE PANEL HAS EXAMINED THE MATTER. HON'BLE SU PREME COURT IN THE CASE OF BHARAT COMMERCE & INDUSTRIES LTD. V. CIT [1998] 230 ITR 733/98 TAXMAN 151 (SC) HAS HELD THAT INTEREST PAID UNDER SECTION 215 FOR FAILURE TO PAY ADVANCE TAX UP TO STATUTORY PERCENTAGE WOULD NOT BE ALLOWABLE A S BUSINESS EXPENDITURE U/S 37(1) OF THE ACT. MOREOVER, WHERE TAXPAYER DECLARED INCOME UNDER VOLUNTARY DISCLOSURE SCHEME AND TAX WAS PAID IN INSTALLMENTS WITH INTEREST, INTEREST PAID WAS HELD NOT DEDUCTIBLE AS BUSINESS EXPENDITURE OR AS INTEREST ON BORROWED I.T.A .NO.-979/DEL/2015 PAGE 20 OF 21 CAPITAL. IN THE CASES OF CIT V. ASHOKA MILLS LTD. [ 1996] 88 TAXMAN 187 / 218 ITR 526 (GUJ.) AND CIT V. RAIPUR MANUFACTURING CO. LTD [1996] 135 CTR (GUJ.) 248, IT HAS BEEN HELD THAT INTEREST PAID UNDER SECTION 2 20(2) FOR LATE PAYMENT OF INCOME TAX IS NOT DEDUCTIBLE AS REVENUE EXPENDITURE . IN THE CASE OF ORIENT GENERAL INDUSTRIES LTD. V. CIT [1994] 209 ITR 490 ( CAL.), HON'BLE COURT HELD THAT INTEREST FOR DELAYED FILLING OF RETURN IN NOT DEDUC TIBLE U/S 37(1). THE COURT HELD THAT IT CANNOT BE SAID THAT INTEREST PAID FOR DELAY IN FILING THE RETURN HAS ANY CONNECTION WITH THE BUSINESS OF THE TAXPAYER. IF IN COME TAXES IS NOT A PERMISSIBLE DEDUCTION UNDER SECTION 37, ANY INTERES T PAYABLE FOR DEFAULT COMMITTED BY THE TAXPAYER, IN DISCHARGING ITS STATU TORY OBLIGATION UNDER THE INCOME TAX ACT WHICH IS CALCULATED WITH REFERENCE T O THE TAX OR INCOME, CANNOT BE ALLOWED AS A DEDUCTION. IN CERTAIN CASES, THE TAXPAYER HAD TAKEN LOAN/ BORR OWALS FOR PAYMENT OF THE TAXES AND THE ISSUE BEFORE THE COURTS WAS WHETHER I NTEREST PAID ON SUCH LOANS IS AN ALLOWABLE DEDUCTION OR NOT. IN THE CASE OF EAST INDIA PHARMACEUTICAL WORKS LTD. V. CIT [1997] 91 TAXMAN 185 / 224 ITR 627 (SC) , IT WAS HELD BY THE HON'BLE SUPREME COURT THAT INTEREST THAT IS PAID BY THE TAXPAYER ON ANY SUM BORROWED BY HIM FOR PAYMENT OF INCOME -TAX IS NOT D EDUCTIBLE FROM HIS NET INCOME. IN THE CASE OF ARUNA MILLS LIMITED VS. CIT [1957] 3 1 ITR 153 (BOM), THE BOMBAY HIGH COURT OBSERVED THAT IT WAS DIFFICULT TO UNDERSTAND HOW, WHEN A BUSINESS MAN COMMITS DEFAULT IN DISCHARGING HIS STA TUTORY OBLIGATION, THE CONSEQUENCES OF THAT COULD CONSTITUTE AN EXPENDITUR E EXCLUSIVELY INCURRED FOR THE PURPOSES OF HIS BUSINESS. THE INTEREST U/S 201(1A) HAS BEEN LEVIED HOLDING TH E TAXPAYER TO BE IN DEFAULT AND THEREFORE, IT CANNOT BE SAID THAT IT WA S MERELY COMPENSATORY IN NATURE. THE EXPLANATION BELOW SECTION 37(1) WAS INT RODUCED RETROSPECTIVELY TO CLARIFY THE POSITION WHERE OTHERWISE DISALLOWABLE E XPENDITURE WERE CLAIMED AS DEDUCTION U/S 37(1) AND NOT TO ALLOW THE CLAIMS IN THE SITUATION BEFORE THE PANEL. WHEN THE TAX ITSELF IS OTHERWISE NOT ALLOWABLE EITH ER U/S 37(1) OR U/S 40(A)(II), INTEREST THERE UPON CANNOT BE ALLOWED. IN ANY CASE, TDS IS MADE ON ACCOUNT OF THE 'RATE OR TAX LEVIED ON THE PROFITS OR GAINS OF ANY BUSINESS AND PROFESSION' ON THE TRANSACTION COVERED THEREIN AND THEREFORE, ON T HIS ACCOUNT ALSO INTEREST U/S 201 (1A) OF THE ACT IS NOT ALLOWABLE IN DEDUCTION. UNDER THESE FACTS, THE PANEL HOLDS THAT THE SAID CLAIM OF INTEREST U/S 201(1A) I S NOT AN ALLOWABLE DEDUCTION. 11.5. THIS GROUND OF OBJECTION IS DISPOSED OFF AC CORDINGLY. 12. THE TAXPAYER HAS CITED IN ITS SUBMISSION VARIOU S JUDICIAL PRONOUNCEMENTS WHICH HAVE BEEN CONSIDERED BY THIS PANEL AND ARE DI STINGUISHABLE FROM THE FACTUAL MATRIX IN THE CASE OF THE TAXPAYER. ACCORDI NGLY, A DETAILED DESCRIPTION OF SUCH ANALYSIS IS NOT BEING REPRODUCED IN THIS ORDER . I.T.A .NO.-979/DEL/2015 PAGE 21 OF 21 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 27 TH SEPTEMBER 2016. SD/- SD/- (PRASHANT MAHARISHI) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER *AMIT KUMAR/RESHMA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR, ITAT NEW DELHI