Appeal details
Counselvise Citation
[2021] 107 COUNSELVISE.COM (IT) 2909 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 year(s) 6 month(s) 21 day(s)
Appellant
Respondent
Appeal Type
Income Tax (Transfer Pricing) Appeal
Pronouncement Date
25-10-2021
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
B
Assessment Year
2009-2010
Appeal Filed On
03-04-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES B, BANGALORE BEFORE SHRI GEORGE GEORGE K, JM AND SHRI B.R.BASKARAN, AM IT(TP)A NO.197/BANG/2014 : ASST.YEAR 2009-2010 THE DY.COMMISSIONER OF INCOME- TAX, CIRCLE 7(1)(1) / 12(4) BANGALORE. V. M/S.TESCO BENGALURU PVT.LTD. (FORMERLY KNOWN AS TESCO HINDUSTAN SERVICE CENTRE PVT.LTD.) NO.81 & 82 EPIP AREA WHITEFIELD, BENGALURU-560 066 PAN : AABCT8915B. (APPELLANT) (RESPONDENT) IT(TP)A NO.262/BANG/2014 : ASST.YEAR 2009-2010 M/S.TESCO BENGALURU PVT.LTD. (FORMERLY KNOWN AS TESCO HINDUSTAN SERVICE CENTRE PVT.LTD.) NO.81 & 82 EPIP AREA WHITEFIELD, BENGALURU-560 066. V. THE DY.COMMISSIONER OF INCOME-TAX, CIRCLE 7(1)(1) / 12(4) BANGALORE. (APPELLANT) (RESPONDENT) REVENUE BY : SRI.MANUJUNATH KARKIHALLI, CIT-DR ASSESSEE BY : SMT.TANMAYEE RAJKUMAR, ADVOCATE DATE OF HEARING : 21.10.2021 DATE OF PRONOUNCEMENT : 25.10.2021 O R D E R PER GEORGE GEORGE K, JM THESE CROSS APPEALS ARE DIRECTED AGAINST FINAL ASSESSMENT ORDER DATED 31.01.2014 PASSED U/S143(3) R.W.S. 144C OF THE I.T.ACT. THE RELEVANT ASSESSMENT YEAR IS 2009- 2010. FIRST, WE SHALL ADJUDICATE THE ASSESSEES APPEAL. IT(TP)A NO.262/BANG/2014 (ASSESSEES APPEAL) 2. THE ASSESSEE IN ITS GROUNDS OF APPEAL HAD RAISED SEVEN GROUNDS RELATING TO TRANSFER PRICING ADJUSTMENT AND SIX IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 2 GROUNDS RELATING TO CORPORATE TAXATION. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND WITH REGARD TO TRANSFER PRICING ADJUSTMENT, NAMELY, GROUND NO.8 VIDE ITS APPLICATION DATED 29.11.2020. THE LEARNED AR DURING THE COURSE OF HEARING SUBMITTED THAT IF ADDITIONAL GROUND IS ADJUDICATED, THE OTHER GROUNDS RELATING TO TP ADJUSTMENT BECOMES ACADEMIC. THE ADDITIONAL GROUND RAISED READS AS FOLLOW:- GROUND 8 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, HAVING REGARD TO THE SIMILARITY OF FUNCTIONS PERFORMED, ASSETS EMPLOYED, AND RISKS ASSUMED BY THE APPELLANT IN RENDERING THE SERVICES TO ITS ASSOCIATED ENTERPRISES (AES) SITUATED IN THE UNITED KINGDOM (UK) AND IN COUNTRIES OTHER THAN IN THE UK, THE ARMS LENGTH PRICE AGREED BETWEEN THE COMPETENT AUTHORITIES OF UK AND INDIA IN THE MUTUAL AGREEMENT PROCEDURE INVOKED UNDER THE INDIA-UK DTAA, OUGHT TO BE APPLIED TO THE TRANSACTIONS ENTERED INTO BY THE APPELLANT WITH ITS AES SITUATED IN COUNTRIES OTHER THAN IN THE UK. 2.1 THE ISSUE RAISED IN THE ADDITIONAL GROUND IS ON ACCOUNT OF SUBSEQUENT MUTUAL AGREEMENT PROCEDURE (MAP) RESOLUTION. THE ADDITIONAL GROUND RAISED GOES TO THE ROOT OF THE ISSUE, HENCE THE SAME IS ADMITTED AND WE PROCEED TO ADJUDICATE THE SAME. 3. THE BRIEF FACTS RELATING TO THE TP ADJUSTMENT ISSUE ARE AS FOLLOWS: THE ASSESSEE IS A PRIVATE LIMITED COMPANY, ENGAGED IN THE BUSINESS OF PROVIDING BUSINESS PROCESS SERVICES AND IT SERVICES TO ITS ASSOCIATED ENTERPRISES (AES). FOR THE ASSESSMENT YEAR 2009-2010, THE ASSESSEE HAD UNDERTAKEN VARIOUS INTERNATIONAL TRANSACTIONS WITH ITS AES. INSOFAR AS SOFTWARE DEVELOPMENT SERVICES AND ITE SERVICES, THE TRANSFER PRICING OFFICER (TPO) HAD MADE TP ADJUSTMENT. THE TOTAL TP IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 3 ADJUSTMENT MADE BY THE TPO WAS A SUM OF RS.26,59,09,540, I.E., RS.17,81,44,147 IN THE SOFTWARE DEVELOPMENT SERVICES (SWD) SEGMENTS AND RS.8,77,65,393 IN ITES SEGMENTS. PURSUANT TO THE TPOS ORDER PASSED U/S 92CA OF THE I.T.ACT, DRAFT ASSESSMENT ORDER WAS PASSED ON 06.03.2013. 3.1 AGGRIEVED, THE ASSESSEE FILED ITS OBJECTION BEFORE THE DISPUTE RESOLUTION PANEL (DRP). THE DRP VIDE ITS DIRECTIONS DATED 12.12.2013, GRANTED PARTIAL RELIEF TO THE ASSESSEE. PURSUANT TO THE DIRECTIONS OF THE DRP, THE A.O. PASSED THE FINAL ASSESSMENT ORDER DATED 31.01.2014 IN WHICH THE TP ADJUSTMENT WAS RE-WORKED OUT TO RS.22,20,11,439. 3.2 AGGRIEVED BY THE FINAL ASSESSMENT ORDER, THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED AR SUBMITTED THAT INSOFAR AS GROUND NOS.1 TO 7 ARE CONCERNED, MOST OF THE ISSUES ARE COVERED IN FAVOUR OF THE ASSESSEE. IT WAS SUBMITTED THAT IN SWD SEGMENT, BASED ON VARIOUS TRIBUNAL ORDERS, COMPANIES SUCH AS BODHTREE CONSULTING LIMITED, TATA ELXIS LIMITED, PERSISTENT SYSTEMS LIMITED, L & T INFOTECH LIMITED, INFOSYS TECHNOLOGIES LIMITED AND SASKEN COMMUNICATIONS TECHNOLOGIES LIMITED HAS TO BE EXCLUDED AS THEY ARE NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE AND ALSO ON ACCOUNT OF TURNOVER FILTER. IT WAS FURTHER SUBMITTED THAT THE FINAL LIST OF COMPARABLES IN THE SWD SEGMENTS AFTER EXCLUSION OF THE ABOVE COMPANIES WOULD BE AS FOLLOWS:- (I) AKSHAY SOFTWARE TECHNOLOGIES LTD. (II) R S SOFTWARE (INDIA) LTD. IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 4 (III) MINDTREE LIMITED (IV) ZYLOG SYSTEMS LIMITED (V) THINKSOFT GLOBAL SERVICES PVT.LTD. (VI) FCS SOFTWARE SOLUTIONS PVT.LTD. 3.2.1 IT WAS FURTHER SUBMITTED THAT THE ARITHMETICAL MEAN OF THE WORKING CAPITAL MARGIN OF THE ABOVE COMPANIES WOULD FALL BELOW THE ASSESSEES NCP MARGIN FOR PROVISION OF SOFTWARE DEVELOPMENT SERVICES. CONSEQUENTLY, THE INTERNATIONAL TRANSACTION OF PROVISION OF SOFTWARE DEVELOPMENT SERVICES BY THE ASSESSEE TO ITS AES FOR THE RELEVANT ASSESSMENT YEAR CAN BE CONCLUDED AS BEING AT ARMS LENGTH. FURTHER, THE LEARNED AR SUBMITTED THAT AS REGARDS THE ITE SEGMENT, MANY OF THE COMPARABLES SELECTED BY THE TPO / DRP HAS TO BE EXCLUDED BASED ON VARIOUS ORDERS OF THE ITAT BANGALORE BENCH ON ACCOUNT OF FUNCTIONAL DISSIMILARITY AND TURNOVER FILTER. IT WAS SUBMITTED THAT SUBSEQUENT TO EXCLUSION, ONLY FOUR COMPANIES WOULD BE REMAINING IN THE FINAL LIST OF COMPARABLES, WHICH ARE AS FOLLOWS:- (I) ADITYA BIRLA MINACS WORLDWIDE LTD (II) MICROLAND LTD. (III) ALLSEC TECHNOLOGIES LTD. (IV) INFORMED TECHNOLOGIES LTD. 3.2.2 IT WAS SUBMITTED THAT THE ARITHMETICAL MEAN OF WORKING CAPITAL ADJUSTMENT MARGINS OF THE ABOVE COMPANIES WOULD FALL BELOW THE ASSESSEES NCP MARGIN FOR PROVISION OF ITE SERVICES. CONSEQUENTLY, THE INTERNATIONAL TRANSACTION OF IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 5 PROVISION OF ITE SERVICES BY THE ASSESSEE TO ITS AE CAN BE CONCLUDED AS BEING AT ARMS LENGTH. 3.2.3 ALTERNATIVELY, THE LEARNED AR BY PLACING RELIANCE ON THE ADDITION GROUND NO.8 SUBMITTED THAT DURING THE PENDENCY OF APPEAL BEFORE THE TRIBUNAL, THE ASSESSEE HAD FILED APPLICATION UNDER ARTICLE 27 OF THE INDO-UK DOUBLE TAXATION AGREEMENT (DTA) FOR INITIATION OF MUTUAL AGREEMENT PROCEDURE (MAP) BETWEEN INDIA AND UNITED KINGDOM (UK) COMPETENT AUTHORITIES WITH RESPECT TO PROVISION OF SWD SERVICES AND ITE SERVICES PROVIDED TO THE AES BASED IN UK. IT WAS SUBMITTED THAT AS THE ASSESSEE HAS ACCEPTED THE TERMS OF MAP RESOLUTION UNDER INDIA-UK DTAA, WHICH CONSTITUTE ALMOST 83% OF THE TOTAL OPERATING REVENUE, THE SAME MAP RATE COULD BE ADOPTED FOR INTERNATIONAL TRANSACTION WITH NON-UK AES AS WELL. IN THIS CONTEXT, RELIANCE IS PLACED ON THE ORDERS OF THE TRIBUNAL IN THE CASE OF CGI INFORMATION SYSTEMS & MANAGEMENT CONSULTANTS (P.) LTD. V. DCIT REPORTED IN (2017) 81 TAXMANN.COM 169 (BANGALORE TRIBUNAL) AND J.P.MORGAN SERVICES (P.) LTD. V. DCIT REPORTED IN (2016) 70 TAXMANN.COM 228 (MUMBAI TRIBUNAL). 3.3 THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT IN THE CASE RELIED ON BY THE ASSESSEE, MORE THAN 90% OF THE TOTAL TRANSACTION WAS SETTLED UNDER MAP RESOLUTION. IT IS IN THIS CONTEXT, THE TRIBUNAL HELD THAT THE INTERNATIONAL TRANSACTION ENTERED WITH OTHER GEOGRAPHICAL JURISDICTION CAN ALSO ADOPT THE SAME NET MARGIN AS SETTLED IN THE MAP RESOLUTION. IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 6 3.4 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. SUBSEQUENT TO THE FILING OF THE PRESENT APPEAL, THE ASSESSEE HAD OPTED FOR MAP PROCEEDINGS PURSUANT TO ARTICLE 27 OF INDO-UK DTAA WITH RESPECT TO TRANSFER PRICING ADJUSTMENT FROM REVENUE EARNED BY THE ASSESSEE FROM ITS AES LOCATED IN UK. THE COMPETENT AUTHORITY OF INDIA ALONG WITH COMPETENT AUTHORITY OF UK AFTER HAVING EXAMINED THE FACTS OF THE CASE AND ISSUES INVOLVED HAVE ARRIVED AT A RESOLUTION WITH RESPECT TO THE ASSESSMENT OF INCOME OF THE ASSESSEE IN TERMS OF SECTION 90 OF THE I.T.ACT R.W. ARTICLE 27 OF THE INDO-UK DTA AND RULE 44H OF THE I.T.RULES, 1962. THE RESOLUTION OF THE COMPETENT AUTHORITY WAS ACCEPTED BY THE ASSESSEE. THE QUANTUM OF TP ADJUSTMENT SETTLED UNDER THE UK MAP FOR BOTH SWD SEGMENTS AND ITE SEGMENTS WAS AT 15%. IN THE ANNUAL ACCOUNT OF THE ASSESSEE THERE IS NO DISTINCTION BETWEEN THE UK TRANSACTION WITH THE OTHER JURISDICTIONAL TRANSACTION. SIMILARLY, IN THE ORDERS PASSED BY THE INCOME TAX AUTHORITIES ALSO NO DISTINCTION HAS EVER BEEN MADE BETWEEN UK AND OTHER JURISDICTIONAL TRANSACTIONS. EVEN BEFORE US, NO DISTINCTION IN FACTS AND NATURE OF TRANSACTIONS HAS BEEN BROUGHT ON RECORD. THIS HAS BEEN PENDING FOR A LONG TIME AND TO PUT QUIETUS TO THE WHOLE ISSUE, WE ARE OF THE CONSIDERED VIEW THAT THE MARGIN OF TP ADJUSTMENT SETTLED UNDER THE UK MAP SHOULD BE ADOPTED ACROSS THE BOARD FOR ASSESSEES INTERNATIONAL TRANSACTION WITH AES SITUATED IN OTHER JURISDICTION (SINCE THE INTERNATIONAL TRANSACTION WITH ASSESSEES AES IN UK COMPRISES ALMOST 83% OF THE TOTAL REVENUE). THIS PROPOSITION FINDS SUPPORT IN THE ORDER OF THE ITAT MUMBAI BENCH IN THE IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 7 CASE OF J.P.MORGAN SERVICES PVT. LTD. V. DCIT (SUPRA), WHICH HAS BEEN FOLLOWED BY THE CO-ORDINATE BENCH OF THE BANGALORE TRIBUNAL IN THE CASE OF CGI INFORMATION SYSTEMS & MANAGEMENT CONSULTANTS PVT. LTD. V. DCIT (SUPRA). IN THIS REGARD, THE RELEVANT PARAGRAPH NO.3.6 OF THE ORDER IN THE CASE OF J.P.MORGAN SERVICES PVT. LTD. V. DCIT IS REPRODUCED BELOW:- 3.6 WE HAVE GONE THROUGH THE ARGUMENTS MADE BY BOTH THE SIDES AND ALSO THE MATERIAL PLACED BEFORE US FOR OUR CONSIDERATION. IT IS NOTED THAT LETTER DATED 9TH APRIL 2015 IN FNO.480/13/2010-FTD-1 HAS BEEN ISSUED IN THE CASE OF THE ASSESSEE COMPANY UNDER MAP PROCEEDINGS FOR A.Y.2006-07 TO 2010-111 BY THE DCIT(OSD), APA-I ON BEHALF OF THE FOREIGN TAX AND TAX RESEARCH DIVISION -I, CENTRAL BOARD OF DIRECT TAXES, NEW DELHI WHEREIN IT HAS BEEN CONFIRMED THAT FOR A.Y.2006-07, FOR US RELATED TRANSACTIONS, THE MARGIN HAS BEEN DETERMINED AT 14.38% AS AGAINST MARGIN OF 21.58%, AS WAS DETERMINED BY THE TRANSFER PRICING OFFICER (TPO). IT HAS BEEN FURTHER CLARIFIED BY WAY OF NOTE IN THE SAID LETTER THAT APPORTIONMENT BETWEEN US AND NON-US ALP AND TP ADJUSTMENT HAD BEEN MARGINED OUT BY THE APA SECTION (OF FT AND TR DIVISION) ON THE BASIS OF US AND NON-US REVENUE. IT IS FURTHER NOTED FROM THE PERUSAL OF THE ANNUAL ACCOUNTS OF THE ASSESSEE COMPANY THAT AGGREGATE TURNOVER HAS BEEN SHOWN AT RS.47,30,521/-, AND NO DISTINCTION HAS BEEN MADE BETWEEN THE US AND NON-US TRANSACTIONS. SIMILARLY IN THE ORDERS PASSED BY THE LOWER AUTHORITIES ALSO NO SUCH DISTINCTION AS EVER BEEN MADE BY ANY OF THE AUTHORITIES. UNDER THESE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, WHATEVER MARGIN HAS BEEN DETERMINED FOR THE 96% OF THE TRANSACTIONS, SAME MARGIN SHOULD BE DETERMINED FOR THE REMAINING 4% TRANSACTIONS AS WELL. IT IS WORTH NOTING THAT, EVEN BEFORE US, NO DISTINCTION IN FACTS OR NATURE OF TRANSACTIONS HAS BEEN BROUGHT OUT ON RECORD. THEREFORE, IN OUR CONSIDERATE VIEW, MARK-UP OF 14.38% SHOULD BE DETERMINED FOR THE REMAINING 4% TRANSACTIONS PERTAINING TO NON-US ENTITIES AS WELL. THE ASSESSEE GETS PART RELIEF ACCORDINGLY. IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 8 3.4.1 FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL IN THE CASE OF J.P.MORGAN SERVICES PVT. LTD. V. DCIT (SUPRA), WE HOLD THE MARGIN ADOPTED FOR UK TRANSACTION, WHICH CONSTITUTES ALMOST 83% OF THE TOTAL REVENUE SHALL BE ADOPTED IN OTHER JURISDICTIONAL TRANSACTIONS AS WELL. WE NOTICED THAT THE ASSESSEE HAD SHOWN OPERATING / NET MARGIN OF 15.21% FOR ITE SEGMENTS AND 15.38% IN SWD SEGMENTS. THEREFORE, IN THE FACTS OF THE GIVEN CASE, WE HOLD THAT NO TRANSFER PRICING ADJUSTMENT IS REQUIRED. CORPORATE TAX ISSUES GROUND NO.1 : DISALLOWANCE OF REIMBURSEMENT RECEIVED : 4. ACCORDING TO THE LEARNED AR, THE ASSESSEE HAD RECEIVED CERTAIN AMOUNTS AS REIMBURSEMENT FROM ITS AES TOWARDS EXPAT SALARIES AMOUNTING TO RS.1,69,72,923. IT WAS SUBMITTED THAT THE A.O. UNDER MISTAKEN IMPRESSION THAT THESE WERE EXPENSES CLAIMED DISALLOWED THE SAME ON THE GROUND OF NON- DEDUCTION OF TAX AT SOURCE. BEFORE THE DRP THE ASSESSEE CONTENDED THAT THESE WERE INFACT RECOVERY OF EXPENSES AND NOT EXPENSES CLAIMED. THE DRP DIRECTED THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE. THE ASSESSING OFFICER PASSED FINAL ASSESSMENT ORDER BY MAKING DISALLOWANCE ON THE GROUND THAT NO DETAILS WERE AVAILABLE ON RECORD. IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 9 4.1 AGGRIEVED, THE ASSESSEE HAS RAISED THIS ISSUE BEFORE THE TRIBUNAL. THE LEARNED AR SUBMITTED THAT THE A.O. HAS MISCONCEIVED THE AMOUNT RECEIVED BY THE ASSESSEE AS EXPENDITURE AND DISALLOWED THE SAME. IT WAS STATED THAT SINCE THESE ARE RECOVERIES AND NOT EXPENSES CLAIMED, THE A.O. MAY BE DIRECTED TO DELETE THE DISALLOWANCE. IT WAS FURTHER STATED THAT THE DETAILS ARE ON RECORD AT PAGES 578 TO 592, 774 TO 775 AND 806 TO 812 OF THE PAPER BOOK. THEREFORE, THE CONCLUSION OF THE A.O. THAT NO DETAILS ARE AVAILABLE ON RECORD IS FACTUALLY INCORRECT. 4.2 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE DRP VIDE ITS ORDER DATED 12.12.2013 HAD DIRECTED THE ASSESSING OFFICER TO VERIFY WHETHER THE CLAIM OF THE ASSESSEE THAT THE ABOVE MENTIONED SUM REPRESENTS REIMBURSEMENT OF EXPENSES RECEIVED BY THE ASSESSEE-COMPANY FROM ITS AES TOWARDS EXPAT SALARY PAID. PURSUANT TO DRPS DIRECTIONS, THE A.O. DECIDED THE ISSUE AGAINST THE ASSESSEE BY HOLDING THAT THE ASSESSEE HAS NOT PLACED ANY MATERIAL ON RECORD TO SHOW ITS REIMBURSEMENT OF EXPENDITURE TOWARDS EXPAT SALARY. FURTHER THE A.O. MENTIONED THAT AS PER PROVISIONS OF SECTION 144C(13) OF THE I.T.ACT, NO FURTHER OPPORTUNITY CAN BE ALLOWED TO THE ASSESSEE. THE ASSESSEE HAS VERY ELABORATELY DETAILED THE NATURE OF REIMBURSEMENT EXPENSES (REFER PAGES 578 TO 592 OF THE PAPER BOOK FILED BY THE ASSESSEE). THE ASSESSEE HAS ALSO FURNISHED THE DETAILS SUCH AS THE REIMBURSEMENT LEDGER ALONG WITH SAMPLE INVOICES (REFER PAGES 806 TO 812 OF THE PAPER BOOK). THE EXPLANATION OF IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 10 NATURE OF REIMBURSEMENTS, LEDGER COPIES OF REIMBURSEMENT OF EXPENSES, SAMPLE INVOICES ARE ALSO PART OF ASSESSMENT RECORDS. THEREFORE, THE ASSESSING OFFICERS STATEMENT THAT THE DETAILS ARE NOT AVAILABLE ON RECORD, IS NOT CORRECT. THEREFORE, WE RESTORE THE ISSUE TO THE FILES OF THE A.O. THE A.O. IS DIRECTED TO EXAMINE THE DETAILS WHICH ARE PLACED ON RECORD SUCH AS THE REIMBURSEMENT LEDGER, SAMPLE INVOICES ETC. THE A.O. SHALL ALSO CONSIDER THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER WITH REGARD TO REIMBURSEMENT / RECOVERY OF EXPENSES, WHICH ARE PLACED AT PAGES 577 TO 592 OF THE PAPER BOOK FILED BY THE ASSESSEE. ACCORDINGLY, GROUND NO.1 RAISED IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO.2 : DISALLOWANCE OF VEHICLE RENTAL EXPENSES : 5. DURING THE YEAR THE ASSESSEE HAD PAID AN AMOUNT OF RS.1,72,70,569 AS LEASE RENTALS. THE BREAKUP OF THE PRINCIPAL AND THE INTEREST PORTION ARE AS FOLLOWS:- PRINCIPAL PORTION OF LEASE RENTALS RS.1,35,51,343 INTEREST PORTION OF LEASE RENTALS RS.37,19,226 5.1 ACCORDING TO THE ASSESSEE, VEHICLES WERE PROCURED FOR THE BUSINESS PURPOSES AND THE LEASE RENTALS WERE CLAIMED AS DEDUCTION. 5.2 THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE GROUND THAT THE VEHICLES HAVE BEEN PURCHASED FOR PERSONAL BENEFIT OF THE EMPLOYEES AND NOT FOR THE USE OF THE ASSESSEE-COMPANY. THE DRP UPHELD THE ORDER OF THE ASSESSING OFFICER IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 11 5.3 AGGRIEVED, THE ASSESSEE HAS RAISED THIS ISSUE BEFORE THE TRIBUNAL. IT WAS SUBMITTED THAT THE ASSESSEE HAS PROCURED THE VEHICLES UNDER LEASE FOR THE USE OF ITS EMPLOYEES FOR BUSINESS PURPOSES. IT WAS STATED THAT BEING A LEASE THE ASSESSEE HAD CLAIMED DEDUCTION OF LEASE RENTAL PAID. IT WAS SUBMITTED THAT CIRCULAR NO.2 /2001 DATED 09.,02.2001 ISSUED BY THE CBDT CLARIFIES THAT IN CASE OF A FINANCE LEASE THE OWNER OF THE ASSET IS ENTITLED TO THE DEPRECIATION. THEREFORE, THE ASSESSEE HAD ACCORDINGLY CLAIMED DEDUCTION OF LEASE RENTALS PAID AS REVENUE EXPENDITURE. IT WAS STATED THAT THE DETAILS AND SUBMISSIONS ARE PLACED ON RECORD FROM PAGES 777 TO 779 AND 813 TO 876 OF THE PAPER BOOK SUBMITTED BY THE ASSESSEE. ALTERNATIVELY IT WAS SUBMITTED THAT THE INTEREST ON LEASE RENTAL IS TO BE ALLOWED AS A REVENUE EXPENDITURE. IT WAS SUBMITTED BY THE LEARNED AR THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-2009 AND 2010-2011 HAS ALLOWED THE CLAIM OF THE ASSESSEE IN ITS ENTIRETY (FOR A.Y. 2008-2009, THE ORDER OF ITA IN MP NO.145/BANG/2016 DATED 28.04.2017 AND FOR A.Y. 2010-2011 IN IT(TP)A NO.191/BANG/2015 DATED 25.01.2017). 5.4 THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE INCOME TAX AUTHORITIES. 5.5 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AN IDENTICAL ISSUE WAS CONSIDERED BY THE BANGALORE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-2011 (SUPRA). IN THE CASE CONSIDERED BY THE TRIBUNAL FOR ASSESSMENT YEAR 2010-2011, THE A.O. HAD IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 12 DISALLOWED VEHICLE LEASE RENTALS ON THE GROUND THAT PAYMENTS WERE MADE TOWARDS PURCHASE OF VEHICLES. THE DRP FOR ASSESSMENT YEAR 2010-2011 ALLOWED INTEREST PORTION OF THE LEASE RENTALS AND DISALLOWED PRINCIPAL PORTION. BOTH THE REVENUE AS WELL AS ASSESSEE HAD CHALLENGED THE DIRECTIONS OF THE DRP ON THE SAID ISSUE. THE TRIBUNAL, ALLOWED ASSESSEES APPEAL AND DISMISSED THE REVENUES APPEAL. THE RELEVANT FINDING OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-2011(SUPRA), READS AS FOLLOWS:- 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE HAS TAKEN VEHICLES ON FINANCE LEASE AND IS PAYING THE LEASE RENTALS TO THE LESSOR. THE VEHICLES ARE USED IN THE COURSE OF BUSINESS AS PROVIDED TO THE EMPLOYEES OF THE ASSESSEE. THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE VEHICLES ARE FOR PERSONAL USE OF THE EMPLOYEES. AT THE OUTSET WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENGG. CO. VS. CIT (SUPRA) IN PARAS 9 & 10 AS UNDER :. 9. IN OUR OPINION, AS THE DIRECTORS OF THE ASSESSEE WERE ENTITLED TO USE THE VEHICLES OF THE ASSESSEE-COMPANY FOR THEIR PERSONAL USE AS PER THE TERMS AND CONDITIONS ON WHICH THEY WERE APPOINTED, IT WAS NOT PROPER ON THE PART OF THE AO TO DISALLOW 1/6TH OF THE EXPENDITURE INCURRED BY THE ASSESSEE ON MAINTENANCE OF ITS VEHICLES. SEC. 309 OF THE COMPANIES ACT, 1956, PROVIDES THE MODALITY FOR DETERMINING THE REMUNERATION PAYABLE TO DIRECTORS, INCLUDING ANY MANAGING OR FULL-TIME DIRECTOR. SUCH REMUNERATION IS PAYABLE EITHER AS STATED IN THE ARTICLES OF ASSOCIATION OF THE COMPANY OR IN ACCORDANCE WITH THE RESOLUTION OR IF PROVIDED BY ARTICLES, BY A SPECIAL RESOLUTION WHICH MIGHT BE PASSED BY THE COMPANY IN THE GENERAL MEETING. THIS PAYMENT OF REMUNERATION IS SUBJECT TO OVERALL LIMITS OF MANAGERIAL REMUNERATION LAID DOWN IN S. 198 OF THE ACT. WHAT IS MORE MATERIAL FOR THE PURPOSE OF THE PRESENT CONTROVERSY IS EXPLANATION TO S. 198 OF THE COMPANIES ACT WHICH PERMITS AND PROVIDES THAT 'REMUNERATION' SHALL INCLUDE (A) ANY EXPENDITURE INCURRED IN PROVIDING ANY RENT-FREE ACCOMMODATION, ETC., (B) ANY EXPENDITURE INCURRED IN PROVIDING ANY OTHER BENEFIT OR AMENITY FREE OF CHARGE OR AT A CONCESSIONAL RATE, (C) ANY EXPENDITURE WHICH WOULD HAVE BEEN INCURRED BY THE DIRECTOR BUT FOR SUCH EXPENDITURE HAVING BEEN INCURRED BY THE COMPANY, (D) ANY EXPENDITURE INCURRED BY THE COMPANY FOR THE PURPOSE OF ANY INSURANCE ON THE LIFE, ETC. THEREFORE, IT IS CLEAR THAT THE EXPENDITURE INCURRED BY THE ASSESSEE- COMPANY ON MAINTENANCE OF VEHICLES WHICH WERE AVAILABLE TO THE DIRECTORS FOR THEIR PERSONAL USE WOULD FALL WITHIN THE MEANING OF 'REMUNERATION' AS IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 13 DEFINED IN THE EXPLANATION TO S. 198 OF THE COMPANIES ACT, AND ONCE SUCH REMUNERATION IS FIXED AS PROVIDED IN S. 309 OF THE COMPANIES ACT, IT IS NOT POSSIBLE TO STATE THAT THE ASSESSEE COMPANY INCURRED AN EXPENDITURE FOR THE PERSONAL USE OF THE DIRECTORS I.E., EVEN IF THERE WAS ANY PERSONAL USE BY THE DIRECTORS, THE SAME WAS AS PER THE TERMS AND CONDITIONS OF SERVICE AND INSOFAR AS THE ASSESSEE-COMPANY WAS CONCERNED IT WAS A BUSINESS EXPENDITURE AND NOT DISALLOWABLE AS SUCH. 9.1. THERE IS ONE MORE ASPECT OF THE MATTER WHICH REQUIRES TO BE CONSIDERED. THE ASSESSEE WHICH IS A PRIVATE LIMITED COMPANY IS A DISTINCT ASSESSABLE ENTITY AS PER DEFINITION OF 'PERSON' UNDER S. 2(31) OF THE ACT. THEREFORE, IT CANNOT BE STATED THAT WHEN THE VEHICLES ARE USED BY THE DIRECTORS, 'EVEN IF THEY ARE PERSONALLY USED BY THE DIRECTORS' THE VEHICLES ARE PERSONALLY USED BY THE COMPANY, BECAUSE A LIMITED COMPANY BY ITS VERY NATURE CANNOT HAVE ANY 'PERSONAL USE. THE LIMITED COMPANY IS AN INANIMATE PERSON AND THERE CANNOT BE ANYTHING PERSONAL ABOUT SUCH AN ENTITY. THE VIEW THAT WE ARE ADOPTING IS SUPPORTED BY THE PROVISION OF S. 40(C) AND S. 40A(5) OF THE ACT. 9.2. IT IS PERTINENT TO NOTE THAT EXCEPT FOR THE ASSESSMENT YEAR IN QUESTION, FOR NO OTHER ASSESSMENT YEAR THE EXPENDITURE IN QUESTION HAS BEEN DISALLOWED. WE SEE NO REASON FOR THE TRIBUNAL TO TAKE A DIFFERENT VIEW FOR THIS ASSESSMENT YEAR ESPECIALLY WHEN IT IS AN UNDISPUTED FACT THAT IN THE PAST ALL SUCH DISALLOWANCES WERE DELETED BY THE TRIBUNAL AND THE SAID DECISION WAS NOT CHALLENGED. 9.3. THE TRIBUNAL HAS, IN OUR VIEW UNFORTUNATELY, UPHELD THE ORDER OF CIT(A) WHEREIN TRIBUNALS EARLIER ORDERS IN ASSESSEES OWN CASE HAVE BEEN DISTINGUISHED BY GIVING REASONS WHICH ARE, TO SAY THE LEAST, UNWARRANTED. THE EARLIER ORDERS OF THE TRIBUNAL ARE DISTINGUISHED BY STATING THAT EVEN IF THERE IS NO PERSONAL USER OF CARS BY THE COMPANY IT WOULD YET BE USER FOR 'NON-BUSINESS PURPOSE'. AS ALREADY STATED HEREINBEFORE ONCE THE EXPENDITURE IN QUESTION IS IN TERMS AS PROVIDED IN SS. 309 AND 198 OF THE COMPANIES ACT, 1956, THERE CANNOT BE ANY 'NON BUSINESS' PURPOSE INSOFAR AS THE ASSESSEE-COMPANY IS CONCERNED. 9.4. IN RELATION TO THE AFORESAID APPROACH OF THE CIT(A) AND THE TRIBUNAL WE CANNOT DO BETTER THAN REITERATE WHAT MADRAS HIGH COURT HAS STATED IN THE CASE OF CIT VS. L.G. RAMAMURTHI & ORS. 1977 CTR (MAD) 416 : (1977) 110 ITR 453 (MAD) : TC 8R.129: 'NO TRIBUNAL OF FACT HAS ANY RIGHT OR JURISDICTION TO COME TO A CONCLUSION ENTIRELY CONTRARY TO THE ONE REACHED BY ANOTHER BENCH OF THE SAME TRIBUNAL ON THE SAME FACTS. IT MAY BE THAT THE MEMBERS WHO CONSTITUTED THE TRIBUNAL AND DECIDED ON THE EARLIER OCCASION WERE DIFFERENT FROM THE MEMBERS WHO DECIDED THE CASE ON THE PRESENT OCCASION. BUT WHAT IS RELEVANT IS NOT THE PERSONALITY OF THE OFFICERS PRESIDING OVER THE TRIBUNAL OR PARTICIPATING IN THE HEARING BUT THE TRIBUNAL AS AN INSTITUTION. IF IT IS TO BE CONCEDED THAT SIMPLY BECAUSE OF THE CHANGE IN THE PERSONNEL OF THE OFFICERS WHO MANNED THE TRIBUNAL, IT IS OPEN TO THE NEW OFFICERS TO COME TO A CONCLUSION TOTALLY CONTRADICTORY TO THE CONCLUSION WHICH HAD BEEN IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 14 REACHED BY THE EARLIER OFFICERS MANNING THE SAME TRIBUNAL ON THE SAME SET OF FACTS. IT WILL NOT ONLY SHAKE THE CONFIDENCE OF THE PUBLIC IN JUDICIAL PROCEDURE AS SUCH, BUT IT WILL ALSO TOTALLY DESTROY SUCH CONFIDENCE. THE RESULT OF THIS WILL BE CONCLUSIONS BASED ON ARBITRARINESS AND WHIMS AND FANCIES OF THE INDIVIDUALS PRESIDING OVER THE COURTS OR THE TRIBUNALS AND NOT REACHED OBJECTIVELY ON THE BASIS OF THE FACTS PLACED BEFORE THE AUTHORITIES. IF A BENCH OF A TRIBUNAL ON THE IDENTICAL FACTS IS ALLOWED TO COME TO A CONCLUSION DIRECTLY OPPOSED TO THE CONCLUSION REACHED BY ANOTHER BENCH OF THE TRIBUNAL ON AN EARLIER OCCASION, THAT WILL BE DESTRUCTIVE OF THE INSTITUTIONAL INTEGRITY ITSELF. THAT IS THE REASON WHY IN A HIGH COURT, IF A SINGLE JUDGE TAKES A VIEW DIFFERENT FROM THE ONE TAKEN BY ANOTHER JUDGE ON A QUESTION OF LAW, HE DOES NOT FINALLY PRONOUNCE HIS VIEW AND THE MATTER IS REFERRED TO A DIVISION BENCH. SIMILARLY IF A DIVISION BENCH DIFFERS FROM THE VIEW TAKEN BY ANOTHER DIVISION BENCH IT DOES NOT EXPRESS DISAGREEMENT AND PRONOUNCE ITS DIFFERENT VIEWS, BUT HAS THE MATTER POSTED BEFORE A FULL BENCH FOR CONSIDERING THE QUESTION. IF THAT IS THE POSITION EVEN WITH REGARD TO A QUESTION OF LAW, THE POSITION WILL BE A FORTIORI WITH REGARD TO A QUESTION OF FACT. IF THE TRIBUNAL WANTS TO TAKE AN OPINION DIFFERENT FROM THE ONE TAKEN BY AN EARLIER BENCH, IT SHOULD PLACE THE MATTER BEFORE THE PRESIDENT OF THE TRIBUNAL SO THAT HE COULD HAVE THE CASE REFERRED TO A FULL BENCH OF THE TRIBUNAL CONSISTING OF THREE OR MORE MEMBERS FOR WHICH THERE IS PROVISION IN THE IT ACT ITSELF.' WE ARE IN RESPECTFUL AGREEMENT WITH THE AFORESAID VIEW. 10. IN THE CIRCUMSTANCES, IN OUR OPINION, THE TRIBUNAL WAS WRONG WHILE DISALLOWING 1/6TH OF THE TOTAL CAR EXPENDITURE AND DEPRECIATION CLAIMED BY THE ASSESSEE ON THE ACCOUNT OF THE PERSONAL USE OF THE CARS WHICH WERE USED BY THE DIRECTORS. WE, THEREFORE, ANSWER THE QUESTION IN THE NEGATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. FURTHER THE DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF MINDA CORPORATION LIMITED VS. DCIT (2016) 69 TAXMANN.COM 317 (DELHI-TRIB.) HAS DEALT WITH AN IDENTICAL ISSUE IN PARAS 5.1 TO 5.6 AS UNDER : 5.1 AFTER HAVING HEARD RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT AS-19 ON ACCOUNTING FOR 'LEASES' ISSUED BY THE ICAI IS ONLY APPLICABLE FOR ACCOUNTING THE LEASE TRANSACTION IN THE BOOKS OF ACCOUNTS. IT IS A SETTLED LAW THAT TREATMENT IN THE BOOKS OF ACCOUNTS IS NOT DETERMINATIVE OF LIABILITY TOWARDS INCOME-TAX FOR THE PURPOSE OF THE ACT. THE LIABILITY UNDER THE ACT IS GOVERNED BY PROVISIONS OF THE ACT AND IS NOT DEPENDENT ON THE TREATMENT FOLLOWED FOR THE SAME IN THE BOOKS OF ACCOUNTS. FOR ABOVE PROPOSITION, REFERENCE IS MADE TO SUTLEJ COTTON MILLS LTD. V. CIT [1979] 116 ITR 1 (SC) AND KEDARNATH JUTE MFG. CO. LTD. V. CIT [1971] 82 ITR 363 (SC). AS-9 ON ACCOUNTING FOR LEASES CLASSIFIES LEASE TRANSACTIONS FOR ACCOUNTING PURPOSES AS UNDER: (I) FINANCE LEASE (II) OPERATING LEASE IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 15 5.2 FINANCE LEASE, IN AS-19, IS DESCRIBED AS A LEASE THAT TRANSFERS SUBSTANTIALLY ALL THE RISKS AND REWARDS IN RESPECT OF OWNERSHIP OF AN ASSET; TITLE MAY OR MAY NOT BE TRANSFERRED UNDER SUCH LEASE. AN OPERATING LEASE, ON THE OTHER HAND, IS DESCRIBED AS A LEASE OTHER THAN A FINANCE LEASE. THE AFORESAID ACCOUNTING STANDARD PROVIDES THAT UNDER THE FINANCE LEASE, THE LESSEE SHOULD RECOGNIZE THE ASSET IN ITS BOOKS AND SHOULD CHARGE DEPRECIATION ON THE SAME. IN THE CASE OF OPERATING LEASE, THE ACCOUNTING STANDARD PROVIDES THAT THE LESSEE SHOULD RECOGNIZE THE LEASE PAYMENTS AS AN EXPENSE IN THE PROFIT AND LOSS ACCOUNT AND THE LESSOR SHOULD RECOGNIZE THE ASSET GIVEN ON LEASE AND CHARGE DEPRECIATION IN RESPECT OF THE SAME. THE AFORESAID DISTINCTION BETWEEN FINANCE LEASE AND OPERATING LEASE IS NOT RECOGNIZED UNDER THE ACT. UNDER THE PROVISIONS OF THE ACT, DEPRECIATION IS ADMISSIBLE UNDER SECTION 32 OF THE ACT ONLY TO THE 'OWNER' OF THE ASSET. LEASE CHARGES PAID FOR THE USE OF THE ASSET, WITHOUT ACQUIRING ANY OWNERSHIP RIGHTS IN THE SAME, ARE ALLOWABLE AS REVENUE EXPENDITURE UNDER SECTION 37 OF THE ACT. 5.3 THE CIRCULAR NO.2 OF 2001 DATED 09.02.2001 (247 ITR (ST.) 53) ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES (CBDT) HAS OPINED THAT THE AFORESAID ACCOUNTING STANDARD ISSUED BY ICAI CREATING DISTINCTION BETWEEN FINANCE LEASE AND OPERATING LEASE WILL HAVE NO IMPLICATIONS UNDER THE PROVISIONS OF THE ACT. THE RELEVANT EXCERPT OF THE SAID CIRCULAR ARE REPRODUCED HEREIN BELOW:- 'UNDER THE INCOME-TAX ACT, IN ALL LEASING TRANSACTIONS, THE OWNER OF THE ASSET IS ENTITLED TO THE DEPRECIATION IF THE SAME IS USED IN THE BUSINESS, UNDER SECTION 32 OF THE INCOME-TAX. THE OWNERSHIP OF THE ASSET IS DETERMINED BY THE TERMS OF THE CONTRACT BETWEEN THE LESSOR AND THE LESSEE. . . . . . . . . IT HAS COME TO THE NOTICE OF THE BOARD THAT THE NEW ACCOUNTING STANDARD ON 'LEASES' ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA REQUIRE CAPITALIZATION OF THE ASSET BY THE LESSEES IN FINANCIAL LEASE TRANSACTION. BY ITSELF, THE ACCOUNTING STANDARD WILL HAVE NO IMPLICATION ON THE ALLOWANCE OF DEPRECIATION ON ASSETS UNDER THE ACT.' 5.4 THUS, THE CBDT'S VIEW ON THE TREATMENT OF FINANCE LEASE IS NOT ALIGNED TO THE ACCOUNTANT'S PERSPECTIVE OF A FINANCE LEASE. FOR ACCOUNTING PURPOSES, ALTHOUGH THE LESSEE SHOWS THE ASSET IN HIS BALANCE SHEET, CHARGES DEPRECIATION IN ACCOUNTS AND EVEN MAKES IMPAIRMENT PROVISION, YET THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEPRECIATION UNDER THE ACT, WHICH IS ALLOWED TO THE LEGAL OWNER OF THE ASSET. FURTHERMORE, NOT ONLY THE INTEREST/ FINANCE/ OTHER CHARGES COMPONENT IN THE LEASE PAYMENTS, BUT THE ENTIRE LEASE PAYMENTS ARE TREATED AS A DEDUCTIBLE EXPENSE AND NO DEDUCTION IS ALLOWED FOR THE IMPAIRMENT PROVISION. IN THE HANDS OF THE LESSOR, THE ENTIRE 'LEASE RENTALS' AND NOT MERELY THE FINANCE CHARGES COMPONENT THEREOF IS TAXED AS INCOME. THE LESSOR, WHO IS THE LEGAL OWNER OF THE ASSET, IS ENTITLED TO CLAIM DEPRECIATION UNDER THE PROVISIONS OF THE ACT. 5.5 THE AFORESAID LEGAL POSITION FINDS SUPPORT FROM THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ICDS LTD. V. CIT [2013] 350 ITR IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 16 527/212 TAXMAN 550/29 TAXMANN.COM 129, WHEREIN THE HON'BLE COURT HELD THAT THE LESSOR IS THE OWNER OF THE LEASED PROPERTY IN CASE OF FINANCE LEASE, ENTITLED TO DEPRECIATION OF THE SAME. THE PERTINENT OBSERVATION OF THE HON'BLE COURT IS REPRODUCED HEREUNDER : 'THE REVENUE'S OBJECTION TO THE CLAIM OF THE ASSESSEE IS FOUNDED ON THE LEASE AGREEMENT. IT ARGUED THAT AT THE END OF THE LEASE PERIOD, THE OWNERSHIP OF THE VEHICLE IS TRANSFERRED TO THE LESSEE AT A NOMINAL VALUE NOT EXCEEDING ONE PER CENT OF THE ORIGINAL COST OF THE VEHICLE, MAKING THE ASSESSEE IN EFFECT A FINANCIER. HOWEVER THE REVENUE'S CONTENTION CANNOT BE ACCEPTED. AS LONG AS THE ASSESSEE HAS A RIGHT TO RETAIN THE LEGAL TITLE OF THE VEHICLE AGAINST THE REST OF THE WORLD, IT WOULD BE THE OWNER OF THE VEHICLE IN THE EYE OF LAW. A SCRUTINY OF THE SALE AGREEMENT CANNOT BE THE BASIS OF RAISING QUESTION AGAINST THE OWNERSHIP OF THE VEHICLE. THE CLUES QUA OWNERSHIP LIE IN THE LEASE AGREEMENT ITSELF, WHICH CLEARLY POINT IN FAVOUR OF THE ASSESSEE' 5.6 THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF RAJSHREE ROADWAYS V. UNION OF INDIA [2003] 263 ITR 206/129 TAXMAN 663 UPHELD THE ASSESSEE'S CLAIM OF ALLOW ABILITY OF LEASE RENTALS PAID AS LESSEE OF THE TRUCKS AS A REVENUE EXPENDITURE UNDER SECTION 37(1) OF THE ACT, EVEN THOUGH THE LEASE WAS CATEGORIZED AS FINANCE LEASE. THUS IT IS CLEAR THAT THE TRIBUNAL HAS DECIDED THIS ISSUE BY FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ITDS VS. CIT REPORTED IN 350 ITR 527 AS WELL AS DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF RAJSHREE ROADWAYS VS. UNION OF INDIA (SUPRA). FOLLOWING THE DECISION OF HON'BLE GUJARAT HIGH COURT AS WELL AS HON'BLE SUPREME COURT (SUPRA), WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY ALLOW THE CLAIM OF THE ASSESSEE REGARDING LEASE RENTALS AS AN ALLOWABLE REVENUE EXPENDITURE. IT COVERS BOTH THE GROUNDS OF THE ASSESSEE AS WELL AS REVENUES APPEAL. CONSEQUENTLY THE GROUND NO.2 OF THE REVENUES APPEAL IS DISMISSED AND GROUND II OF THE ASSESSEE'S APPEAL IS ALLOWED. 5.5.1 IN VIEW OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-2011, WHICH IS IDENTICAL TO THE FACTS OF THE INSTANT CASE, WE ALLOW GROUND NO.2 RAISED BY THE ASSESSEE. GROUND NO.3 : LIABILITIES NO LONGER REQUIRED WRITTEN BACK: 6. IT WAS SUBMITTED THAT ANY ENHANCEMENT OF INCOME WOULD BE ELIGIBLE FOR DEDUCTION U/S 10A OF THE I.T.ACT. IN THIS CONTEXT RELIANCE IS PLACED ON THE JUDGMENT OF THE HONBLE IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 17 JURISDICTIONAL HIGH COURT IN THE CASE OF CIT & ANR. V. MPACT TECHNOLOGIES SERVICES PVT.LTD. (JUDGMENT DATED 11.07.2018) PASSED IN ITA NO.228/2013. IT WAS FURTHER CONTENDED BY THE LEARNED AR BY PLACING RELIANCE ON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. HEWLETT PACKARD GLOBAL SOFT LTD. REPORTED IN (2017) 87 TAXMANN.COM 182 (KAR.)(FB) THAT PROFITS AND GAINS OF 100% EU INCLUDING INCIDENTAL INCOME (INCOME FROM OTHER SOURCES) BY WAY OF INTEREST ON BANK DEPOSITS OR STAFF LOANS WOULD BE ENTITLED TO 100% EXEMPTION / DEDUCTION U/S 10A / 10B OF THE I.T.ACT. WITHOUT PREJUDICE, IT WAS SUBMITTED THAT THE ASSESSING OFFICER IS WRONGLY CONSIDERED THE AMOUNT OF LIABILITY NO LONGER REQUIRED WRITTEN BACK AS RS.35,35,556 AS AGAINST RS.35,25,556. 6.1 THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS DULY HEARD. 6.2 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE DRP IN HIS ORDER DATED 12.12.2013 HAD DIRECTED THE A.O. TO VERIFY WHETHER THE PROVISIONS FOR LIABILITY MADE IN THE LAST FINANCIAL YEAR 2007-2008 IS RELATABLE TO THE BUSINESS OF THE ASSESSEE OR NOT. IF THE PROVISIONS FOR LIABILITIES MADE IN THE LAST FINANCIAL YEAR IS RELATABLE TO THE BUSINESS OF THE ASSESSEE AND THE SAME IS WRITTEN BACK DURING THE YEAR 2008-2009, IT WILL INCREASE THE BUSINESS INCOME OF THE ASSESSEE. IT WAS FURTHER DIRECTED BY THE DRP THAT SUCH INCREASE IN INCOME WOULD BE ENTITLED FOR DEDUCTION U/S 10A I.T.ACT. THE A.O., HOWEVER, REJECTED THE CLAIM OF THE ASSESSEE IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 18 BY HOLDING THAT THE ASSESSEE HAS NOT PLACED ANY EVIDENCE ON RECORD. IT WAS STATED BY THE A.O. THAT AS PER THE PROVISIONS OF SECTION 144C(13) OF THE I.T.ACT, NO FURTHER OPPORTUNITY CAN BE ALLOWED TO THE ASSESSEE. WE NOTICE THAT THE RELEVANT DETAILS OF ABOVE ISSUE ARE PLACED ON RECORD AT PAGES 788 TO 798 OF THE PAPER BOOK FILED BY THE ASSESSEE. THE SAME IS FORMING PART OF THE ASSESSMENT RECORDS. THEREFORE, IT IS NOT CORRECT ON THE PART OF THE A.O. TO STATE THAT NO DETAILS ARE PRODUCED. THEREFORE, WE DIRECT THE A.O. TO EXAMINE THIS ISSUE AFRESH AND ALSO FOLLOW THE DICTUM LAID DOWN BY THE JUDGMENTS OF THE HONBLE JURISDICTIONAL HIGH COURT REFERRED SUPRA. IT IS ORDERED ACCORDINGLY. HENCE, GROUND NO.3 IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO.4 : SHORT GRANT OF TDS : 7. IT WAS SUBMITTED THAT THE TOTAL TAX CREDIT AVAILABLE TO THE ASSESSEE WAS RS.1,73,74,280. HOWEVER, THE ASSESSING OFFICER HAS GIVEN CREDIT FOR ONLY RS.1,73,68,650. IT WAS STATED THAT THE DRP HAS GIVEN DIRECTION TO THE A.O. TO EXAMINE THE CORRECT TAX CREDIT TO BE GIVEN TO THE ASSESSEE. HOWEVER, THE A.O. HAS NOT EXAMINED THE SAME WHILE PASSING THE FINAL ASSESSMENT ORDER. 7.1 THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS DULY HEARD. 7.2 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE DRP IN ITS ORDER DATED 12.12.2013 HAD DIRECTED THE ASSESSING OFFICER TO VERIFY AND GIVE CREDIT FOR IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 19 THE ENTIRE AMOUNT OF TDS AFTER DUE VERIFICATION. ON PERUSAL OF THE FINAL ASSESSMENT ORDER, IT IS SEEN THAT THE A.O. HAS NOT EXAMINED THIS ISSUE. THEREFORE, WE RESTORE THE ISSUE TO THE FILES OF THE A.O. THE A.O. IS DIRECTED TO EXAMINE AND GIVE DUE CREDIT OF TDS. IT IS ORDERED ACCORDINGLY. HENCE, GROUND NO.4 IS ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NOS.5 AND 6 ARE ONLY CONSEQUENTIAL AND NO ADJUDICATION IS CALLED FOR, HENCE, THE SAME ARE DISMISSED. IT(TP)A NO.197/BANG/2014 : REVENUES APPEAL : 9. THE DEPARTMENT HAS RAISED NINE GROUNDS OF APPEAL. GROUND NO.1 AND 9 ARE GENERAL IN NATURE AND NO ADJUDICATION IS CALLED FOR, HENCE WE DISMISS THE SAME. GROUND NOS.2 AND 3 IS REGARDING CORPORATE TAX ISSUE. IN GROUNDS NO.2 AND 3, REVENUE CHALLENGES THE ACTION OF THE DRP IN DIRECTING THE A.O. TO EXCLUDE CERTAIN EXPENDITURE, BOTH FROM THE EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER, WHILE COMPUTING DEDUCTION U/S 10A OF THE I.T.ACT. THE ABOVE ISSUE IS NO LONGER RES INTEGRA AS IT IS SETTLED BY THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF CIT V. HCL TECHNOLOGIES LTD. REPORTED IN (2018) 404 ITR 719 (SC) WHEREIN IT WAS CATEGORICALLY HELD THAT WHEN CERTAIN EXPENDITURE IS EXCLUDED FROM THE EXPORT TURNOVER WHILE CALCULATING DEDUCTION U/S 10A OF THE I.T.ACT, THE SAME NEEDS TO BE EXCLUDED ALSO FROM THE TOTAL TURNOVER. IN VIEW OF THE ABOVE JUDGMENT OF THE HONBLE APEX COURT, GROUND NOS.2 AND 3 ARE REJECTED. IT(TP)A NOS.197 & 262/BANG/2014. M/S.TESCO BENGALURU PVT.LTD. 20 9.1 IN GROUND NOS.4 TO 8, THE ISSUE RAISED IS WITH REGARD TO TRANSFER PRICING ADJUSTMENT. IN VIEW OF OUR DISCUSSION IN PARA 3.4 TO 3.4.1 (SUPRA), THESE GROUNDS ARE RENDERED INFRUCTUOUS AND WE DISMISS THE SAME. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 25 TH DAY OF OCTOBER, 2021 . SD/ - ( B.R.BASKARAN ) SD/ - ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE; DATED : 25 TH OCTOBER, 2021. DEVADAS G* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE DRP, BENGALURU. 4. THE CIT-III, BENGALURU. 5. THE DR, ITAT, BENGALURU. 6. GUARD FILE. ASST.REGISTRAR/ITAT, BANGALORE
