THOMSON REUTERS INDIAN SERVICE PVT LTD.,BANGALORE V. DY CIT CIRCLE- 12(4), BANGALORE

ITTPA 266/BANG/2014

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The case involves multiple appeals and cross objections related to the Transfer Pricing Adjustments and claims under section 10A of the Income Tax Act, 1961, for the Assessment Year 2009-10. The primary issues revolved around the comparability of certain companies for Transfer Pricing purposes and the eligibility of the assessee to claim deductions under section 10A for its units. The Tribunal examined the functions performed, assets employed, and risks assumed by the assessee in relation to the international transactions and the units for which deductions were claimed. The Tribunal's decision was influenced by precedents and interpretations of relevant sections of the Income Tax Act, particularly concerning the treatment of goodwill and the application of Transfer Pricing methods.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 37456 (ITAT-MUMBAI)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 25-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Other Referred Cases: CIT vs Smifs Securities Ltd, CIT v/s Agnity India Technologies Private Limited, CIT v/s Tata Power Solar Systems Ltd, DCIT vs Quark Systems Private Limited, CIT vs EVALUESERVE SEZ (Gurgaon) Pvt Ltd, ACIT vs Pfizer Ltd, ACIT vs Dosti Reality Ltd, ACIT vs United Breweries Ltd, ACIT vs Dow Chemical International (P.) Ltd., ACIT vs Tally Solutions Pvt. Ltd., ACIT vs Cosmic Global Ltd., ACIT vs Accentia Technologies Ltd., ACIT vs Infosys BPO Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GAURAV BATHAM
• Assessee Lawyers: DHANESH BAFNA
• Keywords: Set aside; Capital asset; Revised return; Revenue expenditure; Transfer pricing; International transaction; Business expenditure; Question of law; Depreciation; Cost of acquisition; Capital Gains; TDS; Valuation report; Wholly owned subsidiary; Scheme of amalgamation
• Section: 143(3); 142(1); 143(2); 195; 154; 32; 22; 133(6); 234B; 2; 40(a)(ia); 10B; 194J; 20; 101

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER IT(TP)A No.231/Bang./2014 (Assessment Year : 2009–10) ACIT, Circe-12(4), 14/3, 4th Floor, Rastrothana Bhavan, (Opp. RBI) Nrupathunga Road, Bangalore – 560001 ……………. Appellant v/s M/s. Thomson Reuters India Services Pvt. Ltd., Pinnacle No.15, Bahai’s Bhavan Road, (formerly, Commissariat Road), Bangalore - 560025 PAN – AAACW1663L ……………. Respondent IT(TP)A No.266/Bang./2014 (Assessment Year : 2009–10) M/s. Thomson Reuters India Services Pvt. Ltd., Pinnacle No.15, Bahai’s Bhavan Road, (formerly, Commissariat Road), Bangalore - 560025 PAN – AAACW1663L ................ Appellant Vs. DCIT, Circe-12(4), 14/3, 4th Floor, Rastrothana Bhavan, (Opp. RBI) Nrupathunga Road, Bangalore – 560001 …………………. Respondent CO No.22/Mum./2020 In IT(TP)A No.266/Bang./2014 (Assessment Year : 2009–10) ACIT, Circe-12(4), 14/3, 4th Floor, Rastrothana Bhavan, (Opp. RBI) ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 2 Nrupathunga Road, Bangalore – 560001 …………. Cross Objector (Original Respondent) Vs. M/s. Thomson Reuters India Services Pvt. Ltd., Pinnacle No.15, Bahai’s Bhavan Road, (formerly, Commissariat Road), Bangalore - 560025 PAN – AAACW1663L ……………. Respondent (Original Appellant) Assessee by : Shri Dhanesh Bafna Ms. Ridhhi Maru Ms. Chandani Shah Revenue by : Shri Gaurav Batham, CIT-DR Date of Hearing – 05/12/2024 Date of Order – 25/02/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The cross-appeal by the assessee and Revenue and the Cross Objection by the Revenue have been filed challenging the impugned order dated 31/01/2014, passed under section 143(3) r.w. section 144C(13) of the Income Tax Act, 1961 (“the Act”), pursuant to the directions dated 12/12/2013, issued by the Dispute Resolution Panel, Bangalore, (“learned DRP”), issued under section 144C(5) r.w. section 144(8) of the Act for the Assessment Year 2009- 10. 2. The brief facts of the case are that the assessee is engaged in the business of software development and information support services. For the year under consideration, the assessee filed its return of income on ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 3 30/09/2009, declaring a total income of Rs.27,81,46,799/- after claiming deduction under section 10A of the Act. The assessee filed its revised return of income on 19/06/2010, declaring a total income of Rs.17,91,11,890/-. The return filed by the assessee was selected for scrutiny and statutory notices under sections 143(2) and 142(1) of the Act were issued and served on the assessee. Pursuant to the reference by the Assessing Officer (“AO”) under section 92CA(1) of the Act, the Transfer Pricing Officer (“TPO”) proposed a total Transfer Pricing Adjustment of Rs.68,95,54,409/- vide order dated 21/01/2013, passed under section 92CA(3) of the Act. In conformity, the AO passed the draft assessment order dated 25/03/2013, under section 143(3) r.w. section 144C(1) of the Act after making various additions/disallowances. While deciding the assessee’s objections against the additions/disallowances made by the TPO/AO, the learned DRP vide its directions dated 12/12/2013, granted partial relief to the assessee. In conformity with the directions issued by the learned DRP, the AO passed the impugned final assessment on 31/01/2014 under section 143(3) r.w. section 144C(13) of the Act. Being aggrieved, the assessee and the Revenue are in appeal before us. IT (TP) A No. 266/Bang./2014 Assessee’s Appeal – A.Y. 2009-10 3. Vide its letter dated 17.06.2020, the assessee raised the following revised grounds of appeal: - “General 1. That the order of the learned Additional Commissioner of Income-tax, ('Assessing Officer' or 'AO\"), which is in conformity with the directions of the Dispute Resolution Panel, Bangalore (DRP') to the extent prejudicial to the Appellant, is bad in law, contrary to the facts and circumstances of the case and liable to be quashed. [corresponding to original ground no. 1] ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 4 Transfer Pricing Related 2. The learned AO/Dispute Resolution Panel ('DRP) erred on facts and in law in not appreciating the fact that the Appellant had prepared the Transfer Pricing (TP') documentation bona fide and in good faith in compliance with the Income- tax Act, 1961 (the Act') and Income-tax Rules, 1962 (the Rules) and in upholding the rejection of the TP documentation by the learned Additional Commissioner of Income-tax (Transfer Pricing) -III, Bangalore (“TPO\"). [corresponding to original ground no. 2] 3.The learned AO/DRP erred in law and on facts in (i) disregarding application of multiple year/ prior year data as used by the Appellant in the TP documentation, that was available as on the date of preparing the TP documentation and (ii) holding that only current year (i.e. financial year 2008- 09) data for comparable companies should be used. [corresponding to original ground no. 3] 4. The learned AO/DRP erred on facts and in law in upholding the act of the learned TPO: (a) in conducting a fresh benchmarking analysis using current year data and substituting the Appellant's analysis with fresh benchmarking analysis based on his own conjectures and assumptions (b) in rejecting the comparability analysis of the Appellant in the TP documentation and in submissions provided during the assessment proceedings, and confirming the comparability analysis as adopted by the learned TPO in the TP order, which is based on inappropriate application of filters, modification of filters considered by the Appellant and application of inconsistent comparability criteria. [corresponding to original ground no. 4] 5. That the learned AO erred in not giving effect to the direction of the DRP that the working capital adjustment should be computed at actual figures without any cap, and thus, consequently () erroneously upheld the working capital adjusted mean mark-up on cost of the comparable companies as incorrectly computed in the TP order and (i) arbitrarily upheld the rejection of Thinksoft Global Services Ltd. and FCS Software Solutions Ltd by the TPO as comparables only for the reason that they were having a working capital impact of more than 4%. [corresponding to original ground no. 5l 6. That the learned AO erred in not giving effect to the direction of the DRP to look into the rectification petition filed by the Appellant under section 92CA(s) read with section 154 of the Act in relation to the arithmetical error in the computation of the arm's length price by the learned TPO. [corresponding to original ground no. 6] 7. The learned AO/DRP erred in law and on facts in ignoring the limited risk profile of Appellant as detailed in the TP documentation and in upholding the conclusion of the learned TPO by not allowing appropriate adjustments under Rule 10B of the Rules to account for differences in risk profile between the Appellant and comparable companies, by wrongly characterising the risk profile of the Appellant. [corresponding to original ground no. 7) ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 5 8. Consequent to above grounds, the learned AO/DRP erred in law and on facts in rejecting comparables considered by the Appellant in its TP study but including fresh comparables based on fresh search despite reliance on various judicial precedents that support exclusion of such comparables considered by the TPO. In doing do, i. In case of provision of software development services, the learned TPO/ DRP erred in including following companies in the comparable set which are not comparable to the Appellant in functions, asset base and risk profile: * Bodhtree Consulting Limited * Tata Elxsi Ltd * Sasken Communication Technologies Ltd. * Persistent Systems Ltd. * Larsen & Toubro Infotech Ltd. * Infosys Technologies Ltd. ii. In case of provision of information technology enabled services, the learned TPO/ DRP erred in including following companies in the comparable set which are not comparable to the Appellant in functions, asset base and risk profile: * Infosys BPO Limited * Accentia Technology Limited * Cosmic Global Limited * Eclerx Services Limited [corresponding to original ground no. 8] Other than Transfer Pricing Related 9. (a) That on the facts and circumstances of the case, the learned Assessing Officer and the learned DRP erred in denying deduction under section 10A of the Act in respect of UB Plaza Software Technology Parks of India ('STPI) Unit. (b) That the learned Assessing Officer failed to appreciate that no new undertaking was formed and the Company was continuing the business of the existing undertaking already eligible to claim deduction under section 10A of the Act. (c) That the learned Assessing Officer has erred in considering that the Company has commenced a 'new business' from UB Plaza Unit. (d) That the learned Assessing Officer erred in holding that the unit was formed by acquisition of previously used assets and thereby the Unit does not fulfill the conditions for claiming deduction under section 10A(2) of the Act. (e) That the learned Assessing Officer failed to appreciate the fact that deduction under section 10A of the Act is undertaking specific and not assessee specific. (f) That the learned Assessing Officer erred in applying the provisions of sub-section 7A to section 10A of the Act in the Company's case. (g) That the learned Assessing Officer erred in holding that continuance of tax holiday under section 10A is only restricted to a case of amalgamation or a demerger. ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 6 (h) That the learned Assessing Officer and the learned DRP erred in not relying on Circular No 1, dated January 17, 2013 which has clarified that slump sale would not result into any splitting or reconstruction of existing business and the claim for deduction under section 10A of the Act cannot be denied on a mere ground of change in ownership. [corresponding to original ground no. 9] 10 (a) That on the facts and circumstances of the case, the learned Assessing Officer and the learned DRP erred denying deduction under section 10A of the Act in respect of Titanium STPI Unit. (b) That the learned Assessing Officer and the learned DRP failed to appreciate that Titanium unit is a newly established undertaking and has received STPI approval and hence is eligible for deduction under section 10A of the Act. (c) That the learned Assessing Officer and the learned DRP erred in holding that since the Titanium unit is an extension of UB Plaza unit no deduction could be allowed under section 10A of the Act to Titanium unit as UB Plaza unit itself is not eligible for deduction under section 10A of the Act. (d) That the learned Assessing Officer and the learned DRP failed to appreciate the fact that Titanium unit is a new unit in its entirety and fulfills all the conditions prescribed for claiming deduction under section 10A of the Act. That the learned Assessing Officer and the learned DRP failed to appreciate the fact that deduction under section 10A of the Act is undertaking specific and not assessee specific. (e) That the learned Assessing Officer and the learned DRP erred in not relying on Circular No 1, dated January 17, 2013 which has clarified that slump sale would not result into any splitting or reconstruction of existing business and the claim for deduction under section 10A of the Act cannot be denied on a mere ground of change in ownership . [corresponding to original ground no. 10] 11 (a) That on the facts and circumstances of the case, the learned Assessing Officer and the learned DRP erred in denying deduction under section 10A of the Act in respect of unit acquired from Reuters India Private Limited (RIPL). (b) That the learned Assessing Officer and the learned DRP erred in holding that the since the Appellant has acquired only the STP unit from RIPL under slump sale basis, it does not fulfill the conditions for claiming deduction under clause ii) to section 10A(2) of the Act. (c) That the learned Assessing Officer and the learned DRP erred in not relying on Circular No 1, dated January 17 2013 which has clarified that slump sale would not result into any splitting or reconstruction of existing business and the claim for deduction under section 10A of the Act cannot be denied on a mere ground of change in ownership. ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 7 [corresponding to original ground no. 11] 12. (a) That on the facts and circumstances of the case, the learned AO and the learned DRP erred in denying the claim for depreciation on goodwill under section 32 of the Act in respect of undertaking acquired from Thomson Business Information India Private Limited (TBI) and RIPL. (b) That on the facts and circumstances of the case, the learned Assessing Officer and the learned DRP erred in denying the claim for depreciation on goodwill under section 32 of the Act in respect of undertaking acquired from Thomson Business Information India Private Limited (TBI) and RIPL. (c) That the learned Assessing Officer failed to appreciate that as the time limit for filing the revised return of income for AY 2009-10 had elapsed post the order of the Hon'ble Supreme Court in the case of CIT vs Smifs Securities Ltd (348 ITR 302)(SC), the claim was made during the course of assessment proceedings. [corresponding to original ground no. 12] 13. That the learned Assessing Officer has incorrectly considered advance tax as Rs. 97,000,000 instead of Rs. 97,700,000. [corresponding to original ground no. 13] 14. That the learned Assessing Officer erred in consequently levying interest under section 234B of the Act. [corresponding to original ground no. 14] 15. That the learned Assessing Officer erred in levying interest under section 234D of the Act. [corresponding to original ground no. 15] 16. That the Appellant craves leave to add to and / or to alter, amend, rescind, modify, the grounds herein above or produce further documents before or at the time of hearing of this Appeal. [corresponding to original ground no. 16]” 4. Grounds No.1 is general in nature and therefore, needs no separate adjudication. 5. Grounds No.2-5, raised in assessee’s appeal, were not pressed during the hearing. Accordingly, the same are dismissed as not pressed. 6. In Ground No.6, the assessee has sought implementation of the directions issued by the learned DRP , whereby the AO was directed to dispose off the rectification application filed by the assessee under section 154 of the Act. During the hearing, the learned Authorized Representative (“learned AR”) ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 8 submitted that the rectification filed by the assessee on 05/02/2013 pertaining to the correction of the arithmetical error in the computation of Arms’ Length Price (“ALP”) is still pending consideration. Accordingly, we direct the AO/TPO to decide the rectification application filed by the assessee under section 154 of the Act. Accordingly, Ground No.6, raised in assessee’s appeal, is allowed for statistical purposes. 7. Ground No.7, raised in assessee’s appeal, pertaining to non-granting of risk adjustment was not pressed during the hearing. Accordingly, the same is dismissed as not pressed. 8. The issue arising in Ground No.8(i), raised in assessee’s appeal, pertains to Transfer Pricing Adjustment in relation to the international transaction of “Provisions of Software Development Services”. 9. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is a 100% subsidiary of Worldscope Disclosure LLC, US, which is held by Thomson Reuters Holding BV, Netherlands. The assessee is engaged in contract IT enabled Services (“ITeS”) in the area of information support services including content acquisition, data cleansing and editorial, data storage and retrieval and also provides contract software development services. The assessee has a service agreement with Thomson Financial Inc., US, for undertaking activities of rendering remote data processing in the field of financial database and contract software development. The assessee is compensated on a total cost plus a markup basis for the services provided. During the year under consideration, the ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 9 assessee entered into the following international transactions with its associated enterprises: - Sr. No. Transaction Amount paid (Rs.) Amount received (Rs.) 1. Receipt for Software Development Service 155,23,19,423 2. Receipt for ITeS 377,22,52,411 3. Reimbursement of expenses 6,81,07,251 10. For benchmarking the international transaction of “Provision of Software Development Services”, the assessee adopted the Transactional Net Margin Method (“TNMM”) as the most appropriate method with the Profit Level Indicator (“PLI”) of Operating Profit to Total Cost (“OP/TC”). By considering itself the tested party, the assessee identified 17 comparable companies with an adjusted average margin of 11%. As the assessee computed its own PLI at 14%, accordingly, it claimed that the international transaction of “Provision of Software Development Services” is at ALP . 11. During the transfer pricing assessment proceedings, the TPO by applying additional filters rejected 12 comparable companies selected by the assessee finding them to be not satisfying one or the other filter. The TPO also introduced 6 new comparable companies, i.e. Kals Information Systems Ltd., R.S. Software (India) Ltd., Tata Elexi Ltd. (Segmental), Sasken Communication Technologies Ltd., Zylog Systems Ltd., and Infosys Ltd., claiming them to be satisfying all the filters. By rejecting the contentions raised by the assessee against the selection of new filters as well as the companies included/excluded, the TPO, vide order dated 21.01.2013 passed under section 92CA(3) of the Act, arrived at a set of following 11 comparable ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 10 companies for benchmarking the international transaction of “Provision of Software Development Services”:- Sl. No. Name of the Comparable Sales (in Rs.) Cost Margin 1 Kals Information Systems Ltd. 2,14,04,686 In Rs.) 13.89% 2 Akshay Software Technologies Ltd 12,23,21,483 1,87,93,813 8.11% 3 Bodhtree Consulting Ltd 16,05,75,212 11,31,49,350 62.27% 4 RS Software (India) Ltd. 1,49,57,12,634 9,89,56,821 9.97% 5 Tata Elxsi Ltd (segmental) 3,78,43,03,000 1,36,01,02,589 20.28% 6 Sasken Communication Technologies Ltd 4,05,31,20,000 3,14,63,15,000 27.91% 7 Persistent Systems Ltd 5,19,69,10,000 3,18,69,97,000 41.40% 8 Zylog Systems Limited 7,34,93,51,475 3,67,52,70,000 7.81% 9 Mindtree Ltd (seg) 7,93,22,79,326 6,81,69,98,160 5.52% 10 Larsen and Toubro infotech 19,50,83,81,374 5,74,06,73,058 24.72% 11 Infosys Ltd 2,02,64,00,00,000 15,64,12,76,626 45.61% AVERAGE MEAN Sales (in Rs.) 24.32% 12. Since the average OP/TC of the aforesaid comparable companies selected by the TPO was 24.32%, therefore the TPO by applying the arm’s length margin and giving the benefit of working capital adjustment, inter-alia, proposed an upward adjustment of Rs.13,99,14,584/-, in respect of international transaction of “Provision of Software Development Services”. 13. During the hearing, the learned AR submitted that if the four companies, i.e. Infosys Ltd., Tata Elexi Ltd. (Segmental), Persistent Systems Ltd. and Bodhtree Consulting Ltd., are directed to be excluded, then the international ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 11 transaction of “Provision of Software Development Services” will be at arm’s length and the entire transfer pricing adjustment made in respect thereof will be deleted. Accordingly, in view of the submissions made by the learned AR, we have confined our findings in Ground No.8(i) only in respect of the aforesaid 4 comparable companies. Further, the other issues raised in Ground No.8(i) are treated as not pressed and are kept open for adjudication if they arise in the assessee’s case in the future. 14. During the hearing, the learned Departmental Representative (“learned DR”), at the outset, submitted that the assessee is a software product company, and therefore, the companies selected by the TPO are comparable to the assessee, as the same are also software product companies. 15. Before adjudicating each comparable under challenge, it is necessary to decide whether the assessee is a software product company or provides contract software development services. In this regard, it is pertinent to note the functions performed by the assessee in relation to the international transaction of “Provision of Software Development Services”, which are stated in the transfer pricing study as follows: – “2 Technology - Software development services 4.3.59 The functions currently performed under the technology team can be broadly classified under two heads (a) application development and b) technical support to other departments. a) Application Development 4.3.60 Application Development in relation to various in-house applications for all locations worldwide under the Thomson Reuters Financial umbrella is done at various offices of Thomson Reuters worldwide including Thomson India. 4.3.61 The application development staff is involved in various stages of the Software Development Life Cycle. The software product development life cycle ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 12 with the role of Thomson India and other Group companies in Thomson is as depicted in Figure 6.” 4.3.62 The role of Thomson India in the development cycle is explained below: i) Requirement analysis and project approval 4.3.63 In the requirement analysis stage, the basic business document prepared by the Business Group under the conceptualization stage is converted into a Statement of Work. Based on the conceptualization undertaken by the Group, Thomson India would be involved in requirement analysis to a limited extent in terms of providing time estimates for the modules of the project in which it would be involved. 4.3.64 Thomson India team would also be involved in terms of providing inputs for assessing the technical feasibility, proposing workarounds and arriving at estimates during the approval process of the project. ii) Architecture 4.3.65 At the architecture level, the functional specification would have to be translated into architecture document. Thomson India technology team, based on availability of the required skills, are involved in the preparation of technical specification and architecture documentation. The architecture documentation requires approval of Thomson Financial in all cases iii) Design and Coding 4.3.66 Once the architecture document is prepared, the development team engages in low-level design. The design is reviewed and approved by Thomson Financial. This is followed by the actual coding progress. 4.3.67 Every developer runs automated unit tests on completion of each module. These tests are aimed at checking the functionality. The coding is completed and verified by the development team. In certain cases the development team conducts certain quality tests as well. ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 13 iv) Quality Assurance (QA) 4.3.68 The QA team performs isolated testing based on the defined parameters. These parameters would be based on criteria such as functionality, security and performance and conflict check. The parameters for the testing are defined during the requirement analysis stage during which the QA team starts building tests cases. 4.3.69 QA sign off is done to state that the test requirements are met. The development cycle comes to an end once the QA sign off is completed and the project moves into production. At this stage, Thomson Financial would approve the development and it is ready for release. b) Technical Support 4.3.70 Technical support involves providing technical infrastructure to all the departments, application supports, infrastructure, hardware and software support, database maintenance, etc. 4.3.71 The typical cycle of services provided by Thomson India includes input of data by analysts in the Data Repositories and transferring of the data through web related services to Group Companies, which are finally provided to the Global Customer's Segment Group for deployment. In this cycle, Thomson India's general Content Technology Group (CTG) and Technology Operations group provides technology support to data analysts and to data repositories. c) Product Support/Management 4.3.72 Thomson India product management team supports management of products relating to the following segments of Thomson Financial Investment Banking, Investment Management, Institutional Equities and Retail Wealth management. 4.3.73 The product managers in Thomson India support the segment or lead product managers in Thomson Financial in activities such as writing functional requirements, cases, prioritizing bugs and providing commercial support. The activities also include undertaking upgrade in -features of existing products, maintenance of existing products and performing test automation for products. It also undertakes testing of the products, which typically are a longer cycle vis-à-vis development It also provides on call support in terms of clarifying on usage of the product and providing preliminary technical help on the products to customers.” 16. Further, it is also relevant to note the assets employed and risks assumed by the assessee in relation to the international transaction of ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 14 “Provision of Software Development Services”, which are stated in the transfer pricing study as follows: – “4.4 Assets Employed 4.4.1 Any business requires assets (tangible or intangible) without which it cannot carry out its activities. Intangibles play a significant role in the functioning of a business and are accordingly more important. An understanding of the assets employed and owned by Thomson India provides an insight into the resources deployed by Thomson India and their contribution to the business processes/economic activities of Thomson India. Tangibles owned by Thomson India 4.4.2 The following routine tangibles are owned by Thomson India as at March 31. 2009: Table 2: Assets Owned By Thomson India as on March 31, 2009 Type of Fixed Assets Gross Block (INR) Leasehold Improvements Computer Systems Computer Software Office Equipment Plant and Machinery Furniture and Fixtures Motor Vehicles 261,800,322 1,022,775,,943 171,472,398 441,991,011 32,257,848 52,310,211 8,478,880 Total 1,991,036,613 Intangibles ” 4.4.3 Thomson India does not undertake any Research and Development on its account that leads to the development of non routine intangibles. Thomson India uses the trademarks, process, the to the development of Know-how, technical data software, operating/ quality standards etc. developed owned by Thomson Reuters. 4.4.4 Thomson India has acquired goodwill resulting due to the transfer of the U enabled and software development business segments of Thomson Business India and acquisition of IT enabled services segment of RIPL, However, Thomson India does not any non-routine intangibles. Table 3: Intangible assets owned as on March 31, 2009 Type of Fixed Assets Gross Block (INR) Goodwill 492,445,108 ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 15 Total 492,445,108 4.5 Risks Assumed 4.5.1 Market risk: Thomson India does not have any exposure to market risk as it renders services exclusively for Thomson Reuters and is compensated irrespective of the success or failure of its activity. 4.52 Product & Technology risk: Thomson India does not have ultimate customer interface and provides services to Thomson Reuters, hence does not bear any risk account of any liability arising in terms of product or technology. 4.5.3 Credit risk: Thomson India is assured of its payment from Thomson Reuters and hence does not bear any risk of non-payment for services provided 4.5.4 Foreign exchange risk: Thomson India invoices Thomson Reuters in foreign currency for its services. However, foreign exchange gain / loss are included in the revenue/cost base as case in determining the contractual markup. 17. From the perusal of the functions performed, assets employed and risks assumed by the assessee in relation to the international transaction of “Provision of Software Development Services”, it is evident that the assessee is engaged in providing contract software development services to its associated enterprises, playing a very limited role in the software development life cycle for existing software of the associated enterprises and does not develop any products of its own. It is further evident that the applications/software products are conceptualised, owned, marketed, and distributed by the associated enterprises and the assessee carries out only a portion of the work as outsourced by the associated enterprise under its supervision. Further, all the activities of the assessee are based on instructions and guidance provided by the associated enterprises, all of which are subject to review and approval by the associated enterprise. The aforesaid conclusion is also supported by the scope of work of the assessee under the Service ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 16 Agreement dated 31/03/2006 entered into between the assessee and Thomson Financial LLC, which reads as follows: – “Software development Engage either directly or through subcontractors in the development of, enhancements to or local tailoring of existing or projected products owned by TFLLC as from time to time requested under the TFLLC instruction.” Hence, we do not find any merits in the submission of the learned DR that the assessee is a software product company. (i) Infosys Ltd. 18. The first comparable challenged by the assessee is Infosys Ltd. This company was included as comparable by the TPO vide order passed under section 92CA(3) of the Act on the basis that the brand does not necessarily increase the profit margin and it only increases the revenue earned. The TPO further held that it has not applied the turnover filter. Before the learned DRP , the assessee submitted that the turnover of Infosys Ltd is 30 times the turnover of the assessee. Further, the assessee submitted that Infosys Ltd has earned brand-related profits and owns significant intangibles. The learned DRP vide its directions rejected the objections filed by the assessee on the basis that the turnover has no linkage with the margins of Infosys Ltd. Further, the learned DRP held that there is no basis in the argument that profits derived by Infosys Ltd predominantly pertain to the brand. Being aggrieved, the assessee has challenged the inclusion of this company as comparable. 19. During the hearing, the learned AR submitted that the coordinate bench of the Tribunal in assessee’s own case for the assessment year 2007-08 held ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 17 Infosys Ltd to be not comparable to the assessee with respect to the software development segment. On the other hand, the learned DR vehemently relied upon the order passed by the lower authorities. 20. We have considered the submissions of both sides and perused the material available on record. From the perusal of the annual report of Infosys Ltd for the financial year 2008-09, forming part of the paper book from pages 1116-1209, we find that the company has a turnover of Rs. 20,264 crores from software services and products and incurred expenditure on brand building, selling and marketing, advertisement and sales promotion. Further, the company made an addition of Rs. 12 crore to its intangible assets, during the year. From the annual report, we further find that the company has developed its own software solution namely “Finacle”, Digital Convergence Platform, and Shopping Trip 360. Further, there is no separate segment information between software products and software services. On the other hand, we find that the assessee has a total turnover of Rs. 155 crores from contract software development services. Further, no expenditure has been incurred on brand building, selling and marketing, advertisement and sales promotion, and it also does not undertake any research and development on its own account. From the schedule of assets of the assessee, it is evident that it does not own any intangible assets. 21. We find that the Hon’ble Delhi High Court in CIT v/s Agnity India Technologies Private Limited, reported in (2013) 36 taxmann.com 289 (Delhi), while considering the comparability of Infosys Ltd with contract software development service provider, observed as follows: – ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 18 “5. The Tribunal has observed that the assessee was not comparable with Infosys Technologies Ltd., as Infosys Technologies Ltd. was a large and bigger company in the area of development of software and, therefore, the profits earned cannot be a benchmarked or equated with the respondent, to determine the results declared by the respondent-assessee. In paragraph 3.3 the Tribunal has referred to the difference between the respondent-assessee and Infosys Technologies Ltd. For the sake of convenience, we are reproducing the same:- \"Basic Particular Infosys Technologies Ltd. Agnity India Risk Profile Operate as full-fledged risk taking entrepreneurs Operate at minimal risks as the 100% services are provided to AEs Nature of Services Diversified-consulting, application design, development, re- engineering and maintenance system integration, package evaluation and implementation and business process management, etc. (refer page 117 of the paper book) Contract Software Development Services. Revenue Rs.9,028 Crores Rs.16.09 crore Ownership of branded/proprietary products Develops/owns proprietary products like Finacle, Infosys Actice Desk, Infosys iProwe, Infosys mConnect, Also, the company derives substantial portion of its proprietary products (including its flagship banking product suite 'Finacle') Onsite v. Offshore - As much as half of the software development services rendered by Infosys are onsite (i.e., services performed at the customer's location overseas). And offshore (50.20%) (Refer page 117 of the paper book) than half of its service, income from onsite services. The appellant provides only offshore services (i.e., remotely from India) Expenditure on Advertising/Sales promotion and brand building Rs. 61 crore Rs. Nil (as the 100% services are provide to AEs) Expenditure on Research & Development Rs. 102 crores Rs. Nil Other 100% offshore (from India)\" 6. Learned counsel for the Revenue has submitted that the Tribunal after recording the aforesaid table has not affirmed or given any finding on the differences. This is partly correct as the Tribunal has stated that Infosys Technologies Ltd. should be excluded from the list of comparables for the reason latter was a giant company in the area of development of software and ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 19 it assumed all risks leading to higher profits, whereas the respondent-assessee was a captive unit of the parent company and assumed only a limited risk. It has also stated that Infosys Technologies Ltd. cannot be compared with the respondent-assessee as seen from the financial data etc. to the two companies mentioned earlier in the order i.e. the chart. In the grounds of appeal the Revenue has not been able to controvert or deny the data and differences mentioned in the tabulated form. The chart has not been controverted.” 22. We find that the coordinate bench of the Tribunal in assessee’s own case in M/s Thomson Reuters India Services Private Ltd v/s ACIT, in IT(TP)A No. 1206/Bang./2011, for the assessment year 2007-08, vide order dated 06/04/2017, directed the exclusion of Infosys Ltd., finding the same to be not comparable to the assessee. Thus, having considered the functions performed, assets employed and risks assumed by both entities, we are of the considered view that being a contract software development service provider, the assessee cannot be compared with the company as giant in its operations as Infosys Ltd. Accordingly, we direct the TPO/AO to exclude Infosys Ltd while benchmarking the international transaction pertaining to “Provision of Software Development Services”. (ii) Persistent Systems Ltd 23. The next comparable challenged by the assessee is Persistent Systems Ltd. This company was selected as a comparable by the assessee in its transfer pricing study report. During the transfer pricing assessment proceedings, the assessee sought exclusion of this company, inter-alia, on the basis that it is functionally different and has intangible assets. However, the TPO vide order passed under section 92CA(3) of the Act did not accept the submissions of the assessee and considered Persistent Systems Ltd as a comparable on the basis that software development services have been rendered to independent ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 20 software vendors, and therefore, is functionally comparable. The learned DRP vide its directions rejected the objections filed by the assessee. Being aggrieved, the assessee has challenged the inclusion of this company as comparable. 24. During the hearing, the learned AR submitted that the coordinate bench of the Tribunal in assessee’s own case for the assessment year 2007-08 held Persistent Systems Ltd to be not comparable to the assessee with respect to the software development segment. On the other hand, the learned DR vehemently relied upon the order passed by the lower authorities and submitted that Persistent System Ltd was comparable selected by the assessee in its transfer pricing study report. 25. We have considered the submissions of both sides and perused the material available. From the perusal of the annual report of Persistent Systems Ltd for the financial year 2008-09, forming part of the paper book from pages 972-1081, we find that the company earns its revenue from the sale of software services and products. However, from the segmental information available on page 1041 of the paper book, we find that there are no segmental bifurcations of the revenue earned from the sale of software services and the sale of software products. Thus, in the absence of relevant segment information of Persistent System Ltd, which is comparable to the assessee's international transaction under consideration, we are of the considered view that Persistent System Ltd. cannot be considered for benchmarking the international transaction pertaining to “Provision of Software Development Services”. We also find that the coordinate bench of the Tribunal in the ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 21 assessee’s own case for the assessment year 2007-08, cited supra, directed the exclusion of Persistent System Ltd., finding the same to be not comparable to the assessee. 26. Insofar as the submission of the learned DR that the assessee is seeking exclusion of its own comparable, it is pertinent to note that the Special Bench of the Tribunal in DCIT v/s Quark Systems Private Limited, reported in [2010] 38 SOT 307 (Chd.) (SB), held that there is no estoppel on the taxpayer from pointing out that a particular company has been wrongly taken as a comparable. We further find that the aforesaid decision rendered by the Special Bench of the Tribunal has been affirmed by the Hon’ble Punjab and Haryana High Court in CIT v/s Quark Systems Private Limited, reported in [2011] 244 CTR 542 (P&H). Similarly, it was held by the Hon’ble Jurisdictional High Court in CIT v/s Tata Power Solar Systems Ltd, reported in [2017] 245 Taxman 93 (Bombay). Accordingly, we direct the TPO/AO to exclude Persistent System Ltd. while benchmarking the international transaction pertaining to “Provision of Software Development Services”. (iii) Tata Elexi Ltd. (Segmental) 27. The next comparable challenged by the assessee is Tata Elexi Ltd. The relevant segment of this company was considered as comparable by the TPO vide order passed under section 92CA(3) of the Act on the basis that it is all the activities of the company are related to software development services and only the relevant segment is considered for benchmarking the international transaction. Before the learned DRP , the assessee submitted that the relevant segment of the company which is considered comparable to the ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 22 assessee by the TPO is engaged in rendering services which are related to high-end hardware and software development activities, which differ from the routine software development activities undertaken by the assessee. The learned DRP vide its directions rejected the objections filed by the assessee. Being aggrieved, the assessee has challenged the inclusion of this company as comparable. 28. During the hearing, the learned AR submitted that the coordinate bench of the Tribunal in assessee’s own case for the assessment year 2007-08 held Tata Elexi Ltd to be not comparable to the assessee with respect to the software development segment. On the other hand, the learned DR vehemently relied upon the order passed by the lower authorities. 29. We have considered the submissions of both sides and perused the material available on record. From the perusal of the annual report of Tata Elexi Ltd for the financial year 2008-09, forming part of the paper book from pages 916-971, we find that under the Software Services Development segment, the company is engaged in Product Design Services under which it provides full-service software, hardware, system design and development programs. Further, the company is also engaged in Innovative Design and Engineering under which it provides end-to-end brand and product design services for FMCG, transportation, consumer electronics and appliances, digital user experience and medical devices. Apart from the above, the company also has a Visual Computing Lab Division. As per the Director’s Report of the company, under the Software Development Services segment, the company has businesses such as Product Design Services (Design and ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 23 Development of Hardware and Software), Innovation Design and Engineering (Mechanical Design with a focus on Industrial Design) and Visual Computing Lab Division (Animation and Special Effects). Further, in the Segment Reporting, there is no further sub-classification of the revenue earned from aforesaid businesses under the Software Development Services segment, thus there is no clarity as to how much revenue was earned by the company only from Software Development Services. Since this company is earning revenue from various streams, therefore, in the absence of relevant segmental information, this company cannot be said to be functionally comparable to the assessee. We find that the coordinate bench of the Tribunal in Cisco Systems (India) Private Ltd v/s DCIT, reported in (2014) 50 taxmann.com 280 (Bang- Trib.), after considering the response received from the company under section 133(6) of the Act that Tata Elexi Ltd. cannot be considered as comparable to any other software services company because of its complex nature, directed exclusion of the same. We also find that the coordinate bench of the Tribunal in the assessee’s own case for the assessment year 2007-08, cited supra, directed the exclusion of Tata Elexi Ltd.(segmental) finding the same to be not comparable to the assessee. In the year under consideration, there is no change in the functional profile of Tata Elexi Ltd.(segmental) as compared to the preceding year. Accordingly, we are of the considered view that Tata Elexi Ltd.(segmental) is not functionally comparable to the assessee. Hence, we direct the TPO/AO to exclude Tata Elexi Ltd.(segmental) while benchmarking the international transaction pertaining to “Provision of Software Development Services”. ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 24 (iv) Bodhtree Consulting Ltd. 30. The next comparable challenged by the assessee is Bodhtree Consulting Ltd. This company was selected as a comparable by the assessee in its transfer pricing study report. During the transfer pricing assessment proceedings, the assessee sought exclusion of this company, inter-alia, on the basis that its margins are highly fluctuating and thus, cannot considered comparable to the assessee. However, the TPO vide order passed under section 92CA(3) of the Act did not accept the submissions of the assessee and considered Bodhtree Consulting Ltd. as a comparable on the basis that this company has been consistently used as a comparable for the past 4 years by the TPO. Further, unless there is a specific reason for fluctuation in margins, the company cannot be excluded for comparability. The learned DRP vide its directions rejected the objections filed by the assessee. Being aggrieved, the assessee has challenged the inclusion of this company as comparable. 31. We have considered the submissions of both sides and perused the material available on record. From the perusal of the annual report of Bodhtree Consulting Ltd. for the financial year 2008-09, forming part of the paper book from pages 879-915, we find that the company has only one segment, namely software development, and being a software solutions company, it is engaged in end-to-end web solutions, off-shoring data management, data warehousing, software consultancy, design and development of solutions, using the latest technologies. Further, the company has declared the income under the head of export sales and domestic sales, apart from other income, which includes exchange fluctuation income, interest ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 25 on bank fixed deposits, miscellaneous income, etc. Since this company is earning revenue from various streams, therefore, in the absence of relevant segmental information, this company cannot be said to be functionally comparable to the assessee. Further, as regards the submission of the learned DR that the assessee is seeking exclusion of its own comparable, as noted in the foregoing paragraphs, there is no estoppel on the taxpayer from pointing out that a particular company has been wrongly taken as a comparable. Accordingly, we direct the TPO/AO to exclude Bodhtree Consulting Ltd. while benchmarking the international transaction pertaining to “Provision of Software Development Services”. 32. To sum up, we direct that the four companies, i.e. Infosys Ltd., Tata Elexi Ltd. (Segmental), Persistent Systems Ltd. and Bodhtree Consulting Ltd., be excluded while benchmarking the international transaction of “Provision of Software Development Services”. Ground No.8(i), raised in assessee’s appeal, is decided accordingly. 33. The issue arising in Ground No.8(ii), raised in assessee’s appeal, pertains to Transfer Pricing Adjustment in relation to the international transaction of “Provision of ITeS”. 34. The brief facts of the case pertaining to this issue, as emanating from the record, are: As per the transfer pricing study report, the functions performed by the assessee in relation to the international transaction of “Provision of ITeS” are as follows: – ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 26 “Content Operations: a) Public Filings: This department is responsible for sourcing 'raw materials' for the production department of the AE. Functions of this team include data acquisition of financial documents which are then indexed and scanned. The sourcing of financial documents is generally done from Securities and Exchange Commission (SEC), Free Edgar.com and Global Access. The documents are saved in a depository by setting navigational guides (tags) which are merely headings indicating the content of that portion of the document. In this manner, the Appellant's team carries out low- end services of making data available on the internal databases of Thomson Reuters group. b) Company Fundamentals: This team serves the Markets division of TR by collecting information on the financials of the companies. The data is only populated and is put in the database by the Appellant whereas the quality check of the data is undertaken by the system itself. This team is also involved in real time data feed which involves quick feeding and uploading of data into databases for immediate access for end customers. Eg. Pricing feeds, exchange rates, etc. This activity involves very little or almost no value addition. The teams are divided into various Content Sets/sub-teams based on the kind of content/data to be collected by them such as Ownership, Research, Securities, Earnings and Quantitative, Entity management, Depository. The Appellant's role across all the teams is essentially collation and storing of data for the purpose of AE's databases and does not carry out any research of its own, rather it collects data from publicly available sources only. Few examples of the content sets/teams are given below:  Ownership Content: This team collects data from various sources and classifies it according to regulatory requirement. For example, abstracting data about Insider trading from Insider Forms filed with SEC, maintaining unique Personal Identification Number (PIDs) for insiders, processing mutual fund portfolios, collecting data from fund managers and brokers regarding financial position of funds and updating fund manager profiles to be populated in the databases owned by TR group.  Entity Management Content: This team maintains disclosure database by giving effect to all corporate actions. The data is collected through the guidance reports and financial statements already available in public domain. No data is collected afresh.  Depository content: This team places navigational tags on all the SEC Edgar filings to enable client's access to the relevant information on the database. c) News Team: The news team covers company announcements, domestic market coverage, economic forecasts, and provides monthly reports on stock exchanges to be populated in the database owned by TR group. Customer Service Group: This group provides low-end help-desk support, defines and administers user access rights, and supports front-end teams in resolving customer queries. ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 27 Cash Application Activity: This team matches invoices against payments made by customers and tracks outstanding amounts. Editorial Operations: The editorial operations support Thomson Scientific business by compiling information related to journals, indexing patents, and capturing drug-related information for populating Thomson Reuters databases. Global data management: This team collects data from various teams, conducts data cleaning and filters out data for arriving at comparables (apple to apple data points). The output of the activities performed by this team goes into data feeds and analytics.” 35. For benchmarking the international transaction of “Provision of ITeS”, the assessee adopted the TNMM as the most appropriate method with the PLI of OP/TC. By considering itself the tested party, the assessee identified 14 comparable companies with an adjusted average margin of 9%. As the assessee computed its own PLI at 10%, accordingly, it claimed that the international transaction of “Provision of ITeS” is at ALP . 36. During the transfer pricing assessment proceedings, the TPO by applying additional filters rejected 12 comparable companies selected by the assessee finding them to be not satisfying one or the other filter. The TPO also introduced 6 new comparable companies, i.e. Aditya Birla Minacs Worldwide Ltd., Microland Ltd. (both segments), Allsec Technologies Ltd., Accentia Technologies Ltd., Informed Technologies India Ltd., and Eclerx Services Ltd., claiming them to be satisfying all the filters. By rejecting the contentions raised by the assessee against the selection of new filters as well as the companies included/excluded, the TPO, vide order passed under section ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 28 92CA(3) of the Act, arrived at a set of following 8 comparable companies for benchmarking the international transaction of “Provision of ITeS”:- ITES FINAL COMPARABLES AY 09-10 Sl. No. Name of the Company Margin 1 Infosys B P O Ltd. 24.41% 2 Aditya Birla Minacs Worldwide Ltd. 23.86% 3 Microland Ltd. (both segments) 1.53 % 4 Allsec Technologies Ltd. -16.63% 5 Accentia Technologies Ltd. 46.40% 6 Informed Technologies India Ltd. 22.61% 7 Cosmic Global Ltd. 40.61% 8 Eclerx Services Ltd. 57.46% AVERAGE PLI 25.03% 37. Since the average OP/TC of the aforesaid comparable companies selected by the TPO was 25.03%, therefore the TPO by applying the arm’s length margin and giving the benefit of working capital adjustment, inter-alia, proposed an upward adjustment of Rs.54,96,39,825/-, in respect of international transaction of “Provision of ITeS”. 38. During the hearing, the learned AR sought the exclusion of four companies, i.e. Eclerx Services Ltd., Cosmic Global Ltd., Accentia Technologies Ltd., and Infosys BPO Ltd. Accordingly, in view of the submissions made by the learned AR, we are confining our findings in Ground No.8(ii), only in respect of the aforesaid four companies. (a) Eclerx Services Ltd. 39. The first comparable challenged by the assessee is Eclerx Services Ltd. This company was included as comparable by the TPO vide order passed under section 92CA(3) of the Act on the basis that the company is functionally comparable and satisfies all the filters. The TPO further held that once the ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 29 company’s services fall in the definition of ITeS, there is no reason to exclude the same on the basis that they are the nature of KPO. The learned DRP vide its directions rejected the objections filed by the assessee. Being aggrieved, the assessee has challenged the inclusion of this company as comparable. 40. We have considered the submissions of both sides and perused the material available on record. From the perusal of the annual report of Eclerx Services Ltd for the financial year 2008-09, forming part of the paper book from pages 1374-1435, we find that the company has claimed itself to be a Knowledge Process Outsourcing (“KPO”) company providing data analytics and data process solutions to global enterprise clients. It is further claimed that the company supports core and complex activities for its clients using proprietary processes and scalable offshore delivery models. We further find that the company provides clients with a unique blend of consulting services in process outsourcing by combining people, process re-engineering and automation. It is also evident from the perusal of the annual report that the company provides end-to-end support through the trade life-cycle, including trade confirmation, settlements, transaction maintenance, risk analytics and reporting. It is also claimed that over the last year, the company has also invested in developing a buy-side platform to provide end-to-end trading support to asset managers and hedge funds including interfacing with the exchanges, clearing houses, custodians and administrators. Further, the company also provides sales and marketing support services to leading global manufacturing, retail, travel and leisure companies. The company also provides specialist middle office and back office support to the capital market ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 30 business of leading global banks. On the other hand, the functions performed by the assessee across various teams under the Content Operations have similar functions essentially involving content acquisition, i.e. sourcing and compilation of data, data cleansing and editorial, data storage and retrieval in the instructed form for use by the associated enterprises in its multiple products/services offerings. Thus, it is evident that the functions of the assessee are not as diverse and specialised in nature as performed by Eclerx Services Ltd. 41. As regards the contention of the TPO that once the company falls within the definition of ITeS, then there is no reason to exclude the same on the basis that they are the nature of KPO, we find that the Hon’ble Delhi High Court in Rampgreen Solutions Private Ltd v/s CIT, reported in [2015] 60 taxmann.com 355 (Delhi), observed as follows: – “ 31. ….. ITeS encompasses a wide spectrum of services that use Information Technology based delivery. Such services could include rendering highly technical services by qualified technical personnel, involving advanced skills and knowledge, such as engineering, design and support. While, on the other end of the spectrum ITeS would also include voice-based call centers that render routine customer support for their clients. Clearly, characteristics of the service rendered would be dissimilar. Further, both service providers cannot be considered to be functionally similar. Their business environment would be entirely different, the demand and supply for the services would be different, the assets and capital employed would differ, the competence required to operate the two services would be different. Each of the aforesaid factors would have a material bearing on the profitability of the two entities. Treating the said entities to be comparables only for the reason that they use Information Technology for the delivery of their services, would, in our opinion, be erroneous.” 42. Thus, in view of the aforesaid observations of the Hon’ble Delhi High Court would do not find any merits in the aforesaid findings of the TPO in selecting Eclerx Services Ltd. as comparable to the assessee. We also find that ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 31 the coordinate bench of the Tribunal in the assessee’s own case for the assessment year 2007-08, cited supra, directed the exclusion of Eclerx Services Ltd. finding the same to be not comparable to the assessee. Therefore, having considered the functional profile of the assessee vis-à-vis Eclerx Services Ltd., we are of the considered view that both are not functionally comparable. Accordingly, we direct the TPO/AO to exclude Eclerx Services Ltd. while benchmarking the international transaction pertaining to “Provision of ITeS”. (b) Cosmic Global Ltd. 43. The next comparable challenged by the assessee is Cosmic Global Ltd. This company was selected as a comparable by the assessee in its transfer pricing study report. During the transfer pricing assessment proceedings, the assessee sought exclusion of this company, inter-alia, on the basis that it is functionally different from the assessee as it has major revenues from transaction services. However, the TPO vide order passed under section 92CA(3) of the Act did not accept the submissions of the assessee and considered Cosmic Global Ltd. as comparable on the basis that it is functionally comparable and qualifies all the filters of the TPO. The learned DRP vide its directions rejected the objections filed by the assessee. Being aggrieved, the assessee has challenged the inclusion of this company as comparable. 44. We have considered the submissions of both sides and perused the material available on record. From the perusal of the annual report of Cosmic Global Ltd for the financial year 2008-09, forming part of the paper book from ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 32 pages 1310–1327, we find that the company has significant payment, i.e. Rs.3,00,25,326/-, towards translation charges, which constitutes 57.31% of the total operating expenditure of Rs. 5,24,15,463. Thus, the above payment signifies that the company has an outsourcing model which is different from that of the assessee. We find that the Hon’ble Jurisdictional High Court in PCIT v/s PTC Software India Private Limited, reported in (2019) 101 taxmann.com 117 (Bom.), for the assessment year 2009-10 upheld the exclusion of Cosmic Global Ltd., by observing as follows: – “(II) Cosmic Global Ltd., (i) The impugned order of the Tribunal records the fact that Cosmic Global Ltd., had outsourced its services to vendors just as M/s. Vishal Technologies Ltd., had done. In the above facts, the impugned order held that Cosmic Global Ltd., is not functionally comparable and, therefore, could not be included amongst the comparables to determine the ALP of the Respondent's transactions. (ii) The aforesaid finding of fact by the Tribunal has not been shown to be perverse. In fact, the reasons indicated in the impugned order to hold that Vishal Technologies Ltd., is not a comparable, would equally apply to M/s. Cosmic Global Ltd., (iii) Thus, the sub-question (II) as proposed does not give rise to any substantial question of law. Thus, not entertained.” 45. Further, as regards the submission of the learned DR that the assessee is seeking exclusion of its own comparable, as noted in the foregoing paragraphs, there is no estoppel on the taxpayer from pointing out that a particular company has been wrongly taken as a comparable. Therefore, respectfully following the decision of the Hon’ble Jurisdictional High Court (cited supra), we direct the TPO/AO to exclude Cosmic Global Ltd. while benchmarking the international transaction pertaining to “Provision of ITeS”. ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 33 (c) Accentia Technologies Ltd. 46. The next comparable challenged by the assessee is Accentia Technologies Ltd. This company was included as comparable by the TPO vide order passed under section 92CA(3) of the Act on the basis it is functionally comparable and satisfies all the filters of the TPO. The learned DRP vide its directions rejected the objections filed by the assessee. Being aggrieved, the assessee has challenged the inclusion of this company as comparable. 47. We have considered the submissions of both sides and perused the material available on record. From the perusal of the annual report of Accentia Technologies Ltd. for the financial year 2008-09, forming part of the paper book from pages 1210-1276, we find that the company is engaged in Healthcare Receivables Cycle Management services and Software Products for Business Process Outsourcing. Under the Healthcare Receivables Cycle Management services, the company provides services, such as medical transcription, medical coding, billing, and receivable management (collection). Thus, it is evident that Accentia Technologies Ltd. develops its own software and renders medical transcription services, while the assessee, as noted in the foregoing paragraph, compiles data from various publicly available sources, which is used as an input by the associated enterprises in its various products and databases, which are created, maintained and owned by the associated enterprises. We find that for a similar reason, the Hon’ble Jurisdictional High Court upheld the exclusion of Accentia Technologies Ltd., vide its judgment in PTC Software India Private Limited (supra). Therefore, respectfully following the decision of the Hon’ble Jurisdictional High Court ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 34 (cited supra), we direct the TPO/AO to exclude Accentia Technologies Ltd. while benchmarking the international transaction pertaining to “Provision of ITeS”. (d) Infosys BPO Ltd. 48. The next comparable challenged by the assessee is Infosys BPO Ltd. This company was selected as a comparable by the assessee in its transfer pricing study report. During the transfer pricing assessment proceedings, the assessee sought exclusion of this company, inter-alia, on the basis that it is functionally not comparable and provides high-end integrated services. However, the TPO vide order passed under section 92CA(3) of the Act did not accept the submissions of the assessee and considered Infosys BPO Ltd. as comparable on the basis that it is functionally comparable and there is no linkage of turnover and margins. The learned DRP vide its directions rejected the objections filed by the assessee. Being aggrieved, the assessee has challenged the inclusion of this company as comparable. 49. During the course of hearing, learned AR submitted that Infosys BPO Ltd is engaged in high end software services and owns IPs. The learned AR further submitted that Infosys BPO Ltd has a high brand value and operates on a huge economic upscale and able to command and generate better profits. Learned AR also submitted that even if assessee has taken Infosys BPO Ltd as a comparable in its transfer pricing study report, considering the vast differences with the tested party, Infosys BPO Ltd should be excluded. On the other hand, learned DR vehemently relied upon the orders passed by the lower authorities. ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 35 50. We have considered the rival submissions and perused the material available on record. We find that the Hon’ble Delhi High Court in PCIT vs EVALUESERVE SEZ (Gurgaon) Pvt Ltd., in ITA No. 241 of 2018, vide judgment dated 26/02/2018, dismissed the appeal filed by the Revenue and upheld the conclusion reached by the coordinate bench of the Tribunal in, inter-alia, excluding Infosys BPO Ltd as a comparable on the basis of its high brand value and consequent higher profitability. The relevant observations of the Hon’ble Delhi High Court, in the aforesaid judgment, are reproduced as follows: - “5. This Court notices that as far as the exclusion of three comparables – M/s. TCS E-Serve Limited; M/s. TCS E-Serve International Limited and M/s. Infosys BPO Ltd. is concerned, the ITAT was cognizant of and took note of the circumstances that these entities had a high brand value and, therefore, were able to command greater profits; besides, they operated on economic upscale. This approach cannot be faulted having regard to the decision of this Court in Pr. Commissioner of Income Tax v. B.C. Management Services Pvt. Ltd. 2018 (89) Taxman.com 68 (Del), which reads as follows: “13. The exclusion of second comparable ICRA Techno Analytics Ltd. was on the basis that it had engaged itself in processing and providing software development and consultancy and engineering services/web development services. The reasons for execution were functional dissimilarities and that segmental data were unavailable. Again the findings of the ITAT are reasonable and based on record. The third comparable that the AO/TPO excluded is TCS E-serve. The ITAT observed that though there is a close functional similarity between that entity and the assessee, however, there is a close connection between TCS E-serve and TATA Consultancy Service Ltd. which was high brand value; that distinguished it and marked it out for exclusion. The ITAT recorded that the brand value associated with TCS Consultancy reflected impacted TCS E-serve profitability in a very positive manner. This inference too in the opinion of Court, cannot be termed as unreasonable. The rationale for exclusion is therefore upheld. The assessee was aggrieved by the inclusion of Accentia a Software Development Company. The Revenue is aggrieved by the exclusion of Accentia from the TP analysis. The DRP had directed its deletion. We observe that the ITAT has noticed the unavailability of the segmental data so far as these comparables are concerned. Furthermore, the functionality of this entity was concerned, it is different from that of the assessee; Accentia was engaged in KPO services in the healthcare sector. 14. In view of the above findings, this Court is of the opinion that no substantial question of law arises. The appeals are dismissed.” ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 36 51. Further, as regards the submission of the learned DR that the assessee is seeking exclusion of its own comparable, as noted in the foregoing paragraphs, there is no estoppel on the taxpayer from pointing out that a particular company has been wrongly taken as a comparable. Thus, respectfully following the aforesaid decision of Hon’ble Delhi High Court in EVALUESERVE SEZ (Gurgaon) Pvt Ltd. (supra), we direct the TPO/AO to exclude Infosys BPO Ltd for benchmarking the international transaction of “Provision of ITeS”. 52. To sum up, we direct that the four companies, i.e. Eclerx Services Ltd., Cosmic Global Ltd., Accentia Technologies Ltd., and Infosys BPO Ltd., be excluded while benchmarking the international transaction of “Provision of ITeS”. As a result, Ground No.8(ii), raised in assessee’s appeal, is allowed. 53. The issue arising in Ground No.10, raised in assessee’s appeal, pertains to the denial of deduction claimed under section 10A of the Act in respect of the UB Plaza Unit. 54. The brief facts of the case pertaining to this issue emanating from the records are: The UB Plaza Unit at Bangalore was earlier owned by M/s. Thomson Information India Pvt. Ltd., which was acquired on slum sales prices by the assessee through a business transfer agreement dated 05/06/2005. While filing the return of income for the assessment year 2007-08, the assessee claimed a deduction under section 10A of the Act in respect of profits derived from the UB Plaza Unit. However, the AO, while completing the assessment denied the deduction claimed under section 10A of the Act on the ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 37 basis that the UB Plaza Unit has not satisfied the conditions stipulated under the section. Similarly, in subsequent assessment year 2008-09, the deduction claimed was denied by the AO on a similar basis as adopted in the earlier assessment year. Following the same approach, in the year under consideration, the AO vide draft assessment order denied the deduction claimed by the assessee under section 10A of the Act in respect of the UB Plaza Unit. The learned DRP, vide its direction, rejected the objectives filed by the assessee. In conformity with the learned DRP’s direction, the AO passed the impugned final assessment order denying the deduction claimed under section 10A of the Act in respect of the UB Plaza Unit. Being aggrieved the assessee is in appeal before us. 55. We have considered the submissions of both sides and perused the material available on record. In the present case, there is no dispute regarding the fact that the deduction under section 10A was claimed in respect of profits derived from the UB Plaza Unit for the first time by the assessee while filing its return of income for assessment year 2007-08, which was disallowed by the AO on the basis that the conditions as laid down in section 10A are not fulfilled by the assessee. Since the objections filed by the assessee against the aforesaid disallowance were also rejected by the learned DRP , the assessee filed the appeal before the Tribunal. We find that the coordinate bench of the Tribunal in assessee’s own case in M/s. Thomson Reuter India Services Pvt. Ltd. v/s ADIT, in IT(TP)A No.1206/Bang/2011, for the assessment year 2007-08, vide order dated 06/04/2017 held that deduction under section 10A cannot be denied to the UB Plaza Unit, which is otherwise ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 38 undisputedly an eligible unit merely on the basis that it was acquired by the assessee vide a slump sale. The coordinate bench further held that deduction under section 10A of the Act is undertaking/unit specified and therefore, an undertaking otherwise eligible for deduction under section 10A cannot be denied only because its owner has changed. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as follows: - “17. The assessee submitted that it acquired the UB Plaza Unit, which is registered with the STPI authorities, from TBIIPL with effect from 01.07.2005 pursuant to a Business Transfer Agreement dated 15.06.2005 on a slump sale basis. UB Plaza Unit was, admittedly, a eligible unit for deduction u/s 10A from its formation, i.e. on 24.03.2004, and TBIIPL had been allowed the deduction u/s.10A from the first year of its formation till the period it held the Unit, i.e. till 30.06.2005. Once it acquired the UB Plaza Unit, it claimed deduction u/s 10A for the balance period of eligibility, i.e. from assessment year 2006-07 onwards. Pertinently, its claim for deduction u/s 10A for the said Unit for the immediately preceding year, being the first year after the Unit's acquisition, was allowed by the A 0 vide the assessment order dated 13.09.2010. Accordingly, it claimed in its return of income for the present a y Rs. 10,25,52,834/- as the deduction u/s 10A. Despite, the AO disallowed its claim on the ground that it did not fulfill the conditions necessary for claiming deduction u/s 10A(2)(iii) and also on the ground that the provisions of Section 10A(7A) are applicable only in the cases of an amalgamation or demerger and thus do not apply in cases of a slump sale. The DRP upheld the disallowance in its entirety.” 18. The assessee submitted that it is now a well-settled position in law that the deduction u/s 10A is undertaking / unit specific and that, therefore, an undertaking otherwise eligible for deduction u/s 10A cannot be denied only because its ownership has changed. Further, as regards the AO's action in denying the deduction on the ground that the condition stated in Section 10A (2)(iii) has not been fulfilled, it is submitted that the word \"formed\" in the said clause is of crucial importance. Once a unit has been held to be eligible in the year of its formation, then the deduction under the said section cannot be denied. Further, since section 10A is an incentive provision, its provisions have to be interpreted in a beneficial or purposive manner so as to give effect to the benefit sought to be conferred thereby on assessee. It is now settled-law that the provisions of an incentive provision have to be construed liberally and that, furthermore in cases where there is an ambiguity in the wording of a section, such a provision would have to be interpreted in such a manner so as to favour of the assessee. 19. Further, as far as section 10A (7A) is concerned that there is nothing in law to suggest that an undertaking which is sold on slump sale basis can be denied the benefit of deduction u/s 10A. In fact, the CBDT, having regard to ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 39 the true purport and intention behind the said section, has vide its Circular No. 1/2013 dated 17.01.2013, categorically clarified that the claim of deduction under the section cannot be denied purely because of change in ownership due to a slump sale. The assessee placed reliance on the said CBDT Circular. Reliance is also placed on the decision of the Hon'ble High Court of Bombay in CIT v. Sonata Software Ltd., reported in [2012] 21 taxmann.com 23 (Bombay), as well as the decisions of this Hon'ble Tribunal in Woco Motherson Elastomer Ltd. v. DCIT, reported in [2013] 36 taxmann.com 534 (Delhi - Trib.), and ITO v. Veto Electropowers, reported in [2012] 20 taxmann.com 279 (Jaipur)]. 20. We have considered the rival submissions and find merit in the assessee's plea. Deduction u/s 10A cannot be denied to the UB Plaza Unit, which is otherwise undisputedly an eligible unit, merely on the ground that it was acquired via a slump sale. Deduction u/s 10A is undertaking / unit specific and that, therefore, an undertaking otherwise eligible for deduction u/s 10A cannot be denied only because its owner has change. The AO has rightly allowed the deduction in the earlier year. The AO is directed to allow the deduction for the balance period of eligibility. 56. Since the year under consideration is the 3rd year of claim of deduction under section 10A of the Act by the assessee in respect of the UB Plaza Unit, which has been allowed by the coordinate bench in the first year of claim, in absence of any change in facts and law, respectfully following the decision cited supra, the AO is directed to allow the deduction claimed under section 10A of the Act in respect of the UB Plaza Unit in the year under consideration. As a result, Ground No.9, raised in the assessee appeal, is allowed. 57. The issue arising in Ground No.10, raised in assessee’s appeal, pertains to the denial of deduction claimed under section 10A of the Act in respect of the Titanium STPI Unit. 58. The brief facts pertaining to this issue records are: In the assessment year 2008-09, the assessee claimed deduction under section 10A of the Act in respect of the Titanium Unit, Bangalore, which was an extension of the newly acquired UB Plaza Unit. However, the AO denied the deduction claimed ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 40 by the assessee under section 10A of the Act in respect of the Titanium Unit, in the assessment year 2008-09, on the basis that the assessee has failed to establish that the unit is a separate unit, by furnishing fixed asset schedule of the unit. Further, the AO held that the assessee has failed to furnish separate approval from STPI. In the year under consideration, the AO following the approach adopted in the earlier year denied the deduction claimed by the assessee under section 10A of the Act. The learned DRP , vide its directions, rejected the objections filed by the assessee. In conformity with the learned DRP’s directions, the AO passed the impugned final assessment order denying the deduction claimed under section 10A of the Act in respect of the Titanium Unit, Bangalore. 59. We have considered the submissions of both sides and perused the material available on record. We find while deciding a similar issue in assessee’s own case in M/s. Thomson International Services Pvt. Ltd. v/s DCIT, in IT(TP)A 1565/Bang/2012, for the assessment year 2008-09, vide order dated 28/09/2017, the coordinate bench of the Tribunal allowed the deduction claimed under section 10A in respect of the Titanium Unit on the basis that it is an extension of the UB Plaza Unit in respect of which deduction under section 10A was allowed by the coordinate bench of the Tribunal in the assessment year 2007-08. Accordingly, the coordinate bench allowed the deduction claimed by the assessee under section 10A of the Act in respect of the Titanium Unit, Bangalore. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as follows: - ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 41 “6. Regarding ground no. 8 of assessee's appeal, it was submitted by Id. AR of assessee that the AO discussed this issue on page no. 8 of the assessment order. He pointed out that as per the AO, the Titanium Unit of the assessee company is extension of UB Plaza Unit and since deduction u/s.10A was disallowed by AO in respect of UB Plaza Unit, he disallowed the claim of deduction u/s. 10A in respect of Titanium Unit also. He submitted that in view the tribunal order in Assessment Year 2007-08 as per which the assessee iS eligible for deduction u/s. 10A in respect of UB Plaza Unit, deduction should be allowed for Titanium Unit also. He also submitted that in para 12.5 of the assessment order, it is also an objection of the AO that the assessee company had not been able to establish that the Titanium Unit is a separate unit by furnishing a Asset Schedule of the Titanium Unit to establish that it fulfills the provisions of section 10A(2) of the I.T. Act, 1961 along with a separate approval from the Software Technology Park of India [STPI] to establish that it is a separate and independent unit for the purpose of the claim of deduction u/s. 10A of the I.T. Act, 1961. At this juncture, a query was made by the bench regarding stand of the assessee as to whether the Titanium Unit is extension of UB Plaza Unit or a separate unit because if it is extension of UB Plaza Unit then the deduction for this unit will also be allowable up to the year up to which deduction is allowable for UB Plaza Unit and if it is a separate unit then the assessee has to establish that this unit fulfills all the requirements of section 10A of the I.T. Act, 1961.In this regard, the Id. AR of assessee submitted that on page no. 662 of paper book is a separate certificate issued by STPI in respect of Titanium Unit and the AO has been confused by this mention in the said certificate that this approval is for expansion of STPI facility. He submitted that as per this certificate, it is an expansion of STPI facility by establishing a new unit and not it is an expansion of UB Plaza Unit. Ld. DR of revenue supported the assessment order. 7. We have considered the rival submissions. So we find that regarding Titanium Unit, the AO has proceeded mainly on this basis that this unit is expansion of UB Plaza Unit. But as per the assessee, this is a separate independent unit. We also find that as per para no. 12.5 of assessment order, this is not the only objection of the AO that separate approval from STPI is not made available. The main objection is this that the assessee had not been able to establish that the Titanium Unit is a separate unit by furnishing the asset schedule of this unit. Before us also, such asset schedule of the Titanium Unit has not been furnished. In the absence of that, we find no merit in the claim of the assessee that this is a separate independent unit. But the disallowance of the deduction u/s. 10A in the present year is not justified because as per the AO, this is an extension of UB Plaza Unit and it has been held by us and by the coordinate bench in Assessment Year 2007-08 that UB Plaza Unit is eligible for deduction u/s. 10A and therefore, Titanium Unit is also eligible for deduction u/s. 10A in the present year although the first year of such deduction for this unit should also be same as that of UB Plaza Unit. Accordingly, we hold that in the present year, deduction is allowable to assessee u/s. 10A for Titanium Unit also on this basis that this unit is expansion of UB Plaza Unit. Ground no. 8 is partly allowed.” 60. During the hearing, the learned DR could not show any reason to deviate from the aforesaid order and no change in facts and law was alleged in the ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 42 relevant assessment year. Since the year under consideration is the second year of the claim of deduction under section 10A of the Act in respect of the Titanuim Unit, Bangalore, therefore respectfully following the decision of the coordinate bench cited supra, the AO is directed to allow the deduction claimed by the assessee under section 10A with respect to the Titanium Unit, Bangalore. Accordingly, Ground No.10, raised in assessee’s appeal, is allowed. 61. The issue arising in Ground No.11, raised in assessee’s appeal, pertains to the denial of deduction claimed under section 10A of the Act with respect to the unit acquired from Reuters India Pvt. Ltd. 62. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the Financial Year 2008-09, the assessee took over the business relating to ITeS from Reuters India Pvt. Ltd. (“RIPL”) as a concern on slump sale basis pursuant to business transfer agreement dated 09/09/2008, w.e.f 01/04/2008. As per the assessee, the RIPL unit is eligible to claim deduction under section 10A of the Act in respect of profits derived from the export of computer software. During the assessment proceedings, the assessee submitted that the said unit had claimed deduction under section 10A of the Act in the hands of RIPL for the first time in the assessment year 2005-06. Since the ultimate transfer of the unit under the business transfer agreement took place on 01/09/2008, RIPL claimed a deduction under section 10A of the Act for the period of 01/04/2008 to 30/10/2008, and the assessee claimed a deduction for the balance period, i.e., from 01/09/2008 to 31/03/2009. During the assessment proceedings, the assessee was asked to explain whether the newly acquired unit has satisfied all the requirements ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 43 stipulated under section 10A of the Act. In response, the assessee submitted that the deduction under section 10A of the Act is qua the undertaking and not qua the taxpayer. It was further submitted that the unit is otherwise eligible for deduction under section 10A of the Act and the same should not be denied on the basis that the undertaking has now a new owner. The AO, vide draft assessment order, disagreed with the submission of the assessee and held that the unit acquired from RIPL does not satisfy all the conditions stipulated in section 10A of the Act and the newly acquired unit is formed by the splitting up of a business already in existence. Accordingly, the AO denied the deduction claimed under section 10A of the Act in respect of RIPL unit acquired by the assessee during the year under consideration. The learned DRP , vide its directions, rejected the objections filed by the assessee. In conformity with the learned DRP’s directions, the AO passed the impugned final assessment order denying the deduction claimed by the assessee under section 10A of the Act with respect to the RIPL Unit. Being aggrieved, the assessee is in appeal before us. 63. We find that while considering a similar issue pertaining to the claim of deduction under section 10A of the Act in respect of a unit acquired from RIPL, the coordinate bench of the Tribunal in assessee’s own case in M/s. Thomson Reuters International Services Pvt. Ltd. v/s DCIT, in ITA No.2053/Mum/2016, for the assessment year 2011-12, vide order dated 03/08/2018, observed as follows: - “The AO also declined assessee's claim under Section 10A in respect unit acquired from Reuters India Pvt. Ltd. The order of the AO was confirmed by the CIT(A). Assessee is in further appeal before us. ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 44 10. We have considered the rival contention and four that during A.Y. 2009- 10 the assessee has taken over the business relating to IT enabled services from Reuters India Pvt. Ltd. (in short 'RIPL’) as a going concern on slump sale basis. The AO declined assessee's claim by observing that acquisition of STPI unit of RIPL under slump sale arrangement would result in splitting up or reconstruction of business already in existence, since non-STPI unit is not transferred. The AO also observed that the unit was formed by acquisition of previously used assets and there by the unit does not fulfil the conditions for claiming deduction under Section 10A(2) of the Act. We found that deduction of RIPL unit is covered on the principlein assessee's own case based on deductions for UB Plaza unit in A.Y. 2007-08 (acquired through slump sale) vide order dated 06.04.2017. Following the reasoning given by the Tribunal in its order dated 06.04.2017, we do not find any merit for declining the claim in respect of unit acquired from RIPL Unit.” 64. During the hearing, the learned DR could not show any reason to deviate from the aforesaid order and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present appeal is recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of the Tribunal. Accordingly, respectfully following the decision cited supra in assessee’s own case, we direct the AO to allow the deduction claimed under section 10A of the Act with respect to the unit acquired from RIPL. As a result, Ground No.11, raised in assessee’s appeal, is allowed. 65. Ground No.12, raised in assessee’s appeal, pertains to the denial of the claim of depreciation on goodwill. 66. In its cross-objections, being CO No.22/Mum./2020, the Revenue has raised the grounds which also pertain to the assessee’s claim of depreciation on goodwill and therefore, the same are dealt along with Ground No.12 raised in assessee’s appeal. The grounds raised by the Revenue in its cross- objections are as follows: - ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 45 “1. On the facts and circumstances of the case the Hon'ble Tribunal may kindly consider the Explanation 7 of Section 43(1) and Explanation 2 to Section 43(6)(c) of the IT Act. The Act clearly lays down that the actual cost of the block of asset (intangible block in this case) in the hands of the amalgamated company would be the written down value in the immediate preceding year. In the case of amalgamating company. If the W.D.V. of the intangible block of asset was zero in the books of the amalgamating company, the actual cost would remain zero in the hand of the amalgamated company. 2. On the facts and circumstances of the case the Hon'ble Tribunal may kindly consider the case of United Breweries Ltd. ITA No. 722/Bang/2014, 801/Bang/2014 and 1065/Bang/2014, in the order dated 30.09.2016, Para- 11 onwards. The Hon'ble ITAT did consider the case of CIT V/S. Smiff Securities Ltd. and held that Hon'ble SC only ruled on the issue as to whether goodwill falls in the category of intangible assets or any other business or commercial rights of similar nature, but not whether depreciation is available on 'goodwill' in case of amalgamation.\" 67. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the assessment proceedings, the assessee made a fresh claim of deduction, i.e., depreciation on goodwill, in respect of the acquisition of the UB Plaza Unit during the financial year 2005-06, and in respect of the unit acquired from RIPL, during the financial year 2008-09, on the basis that the Hon’ble Supreme Court in CIT v/s Smifs Securities Ltd., reported in 340 ITR 302 (SC), has held that depreciation is allowable on goodwill. The assessee further contended that as the decision of the Hon’ble Supreme Court was delivered after filing the return of income, it was forced to file its claim in the form of a letter at the time of assessment proceedings. The AO, vide draft assessment order, disagreed with the submissions of the assessee and held that as per the details furnished by the assessee, goodwill of Rs. 2,01,93,589/- arose in the books of the assessee during the financial year 2005-06 on account of the assessee taking over the business of Thomson Business Information India Private Limited, w.e.f. 15/06/2005. However, the assessee did not claim any depreciation on goodwill under the Act for the ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 46 assessment year 2006-07 and subsequently. Further, it was noted that the difference between the consideration paid and the value of net assets was treated as goodwill by the assessee. The AO held that since depreciation on goodwill was not claimed in the first year of acquisition, it is not possible to arrive at the correctness of allowability of depreciation on goodwill claim by the assessee in the year under consideration. The AO further held that the difference between the consideration paid and net assets acquired cannot be considered goodwill at face value without ascertaining: - A) Whether there was any valuation of the assets acquired at the time of taking over of the unit undertaken by the assessee or the seller. B) Whether there was any valuation of goodwill, stated to have been acquired by the assessee at the time of taking over of the unit, undertaken by the assessee or the seller. C) Whether the seller has shown any asset in the form of goodwill in its books of account prior to the sale of the undertaking. D) Whether the seller has accounted any consideration for goodwill on account of sale of the undertaking to the assessee 68. Thus, it was held that in the absence of any specific valuation of all the assets, liabilities and goodwill of the merging unit, depreciation cannot be claimed on the amount of goodwill, whatever is accounted by the assessee in the books of account. The AO also held that goodwill is made up of many components, and therefore, the difference between the consideration paid and the value of the assets acquired cannot be considered goodwill for the purpose of allowing depreciation under the Act. And, in the present case, it is merely a book entry made by the assessee under the head “goodwill” in their books of account. The AO further held that there was no cost of acquisition on account of goodwill, in as much as, in the business transfer agreement there ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 47 was no mention of any value assigned to the goodwill. The AO also placed reliance upon the decision of the Hon’ble Supreme Court in Goetze India Limited v/s CIT, reported in 284 ITR 323, to support its conclusion that the assessee cannot make any claim of deduction by way of a letter without revising the return. Accordingly, the AO denied the claim of depreciation on goodwill under section 32 of the Act. 69. The learned DRP , vide its directions, rejected the objections filed by the assessee by placing reliance upon the decision of the Hon’ble Supreme Court in Goetze India Limited (supra). The AO, vide impugned final assessment order, reiterated the findings as rendered in the draft assessment order, and denied the depreciation claimed on goodwill by the assessee. Being aggrieved, the assessee is in appeal before us and the Revenue has raised the cross objections. 70. We have considered the submissions of both sides and perused the material available on record. The assessee took over the business relating to ITeS from Thomson Business Information India Private Limited as a going concern on a slump sale basis, pursuant to an agreement dated 15/06/2005. The difference between the purchase consideration and net assets taken over by the assessee, i.e. Rs. 2,01,93,589/-, was recognised as goodwill in the financial statement, during the financial year 2005-06, by the assessee. Further, during the financial year 2008-09, the assessee took over the business relating to ITeS from Reuters India Private Limited as a going concern on a slump sale basis, pursuant to an agreement dated 09/09/2008. Similar to the earlier transaction, the difference between the purchase consideration ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 48 and net assets taken over by the assessee, i.e. Rs. 47,22,51,519/-, was recognised in the financial statement as goodwill, during the financial year 2008-09, by the assessee. By placing reliance upon the decision of the Hon’ble Supreme Court in Smifs Securities Ltd (supra), the assessee for the first time during the year under consideration claimed that the amount paid towards the acquisition of goodwill would be covered within the definition of “intangibles” as per the provisions of the Act, and the assessee is eligible to claim depreciation on such goodwill. It is evident from the record that the AO vide draft assessment order as well as the impugned final assessment order not only rendered findings on the merits but also placed reliance upon the decision of the Hon’ble Supreme Court in Goetze India Limited (supra) to deny the claim of the assessee at the very threshold since the assessee made the claim of depreciation on goodwill by way of a letter without revising its return of income. 71. We, at the outset, find that the Hon'ble Supreme Court in Goetze India Ltd. (supra) and the Hon'ble Jurisdictional High Court in CIT Vs. Pruthvi Brokers and Shareholders Pvt. Ltd., reported in [2012] 349 ITR 336 (Bom.) has held that the appellate authority can entertain a fresh claim made by the assessee, even if such a claim was not made in return of income or by way of revised return of income. Therefore, we are proceeding to consider the claim of the assessee on merits. 72. In the present case, in order to support its claim of depreciation on goodwill, the assessee has placed on record before us the relevant extracts of notes to accounts, for the financial years 2005-06 and 2008-09, disclosing the ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 49 details of goodwill. Apart from the above, the assessee has also placed on record the detailed calculation of depreciation amounting to Rs.12,01,92,672/- claimed in the assessment year 2009-10 in respect of goodwill arising on the purchase of business under the slump sale basis from Thomson Business Information India Private Limited and Reuters India Private Limited. We find that these details were also furnished during the assessment proceedings. However, the AO, vide draft assessment order, rejected the claim that the difference between the consideration paid and net assets acquired can be considered as goodwill, in the absence of a valuation report. As per the assessee, the Business Valuation Reports in respect of aforesaid two slump sale transactions were furnished doing the proceedings before the learned DRP . However, as is evident from the directions issued by the learned DRP , the assessee’s objections were rejected at the very threshold by placing reliance upon the decision of the Hon’ble Supreme Court in Goetze India Limited (supra). Further, the AO, vide the final assessment order, reiterated the findings as rendered in the draft assessment order. Thus, it cannot be denied that the valuation report so furnished was not examined at any stage by the lower authorities. 73. We find that the issue of whether the assessee is entitled to claim depreciation on goodwill which arose on account of merger/amalgamation, being the excess amount of consideration over the value of net assets of the entity acquired, came up for consideration before various Courts/Tribunals. We find that the Hon’ble Delhi High Court in Triune Energy Services Private Limited v/s DCIT, reported in [2016] 237 Taxman 230 (Delhi), by referring to ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 50 Accounting Standard 10, held that consideration paid in excess of the value of tangible assets is classifiable as goodwill eligible for depreciation. We further find that recently the coordinate bench of the Tribunal in Dow Chemical International (P .) Ltd. v/s DCIT, reported in [2024] 169 taxmann.com 290 (Mumbai - Trib.), vide order dated 25/11/2024, after consideration of various submissions/decisions and after detailed analysis of various provisions of the Act, as are relied upon by the Revenue in the present case, concluded that the taxpayer is entitled to claim depreciation on goodwill under section 32 of the Act arising on account of amalgamation. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as follows: – “15. There is no dispute regarding the fact that the amalgamation was accounted by the assessee in its books as per the \"Purchase Method\" as prescribed by Accounting Standard-14. We find that due disclosure in this regard was also made by the assessee in its audited financial statements for the year under consideration as noted on page 118 of the paper book. The lower authorities disallowed the depreciation claim by the assessee on the aforementioned intangible assets and accordingly, the assessee is in appeal before us. The primary contention of the assessee is that the goodwill recognised by the assessee in the process of amalgamation of the amalgamating company with the assessee company falls within the ambit of the expression \"business or commercial rights of similar nature\" under section 32(1)(ii) of the Act. In this regard, the assessee placed reliance upon the decision of the Hon'ble Supreme Court in Smifs Securities Ltd. (supra). 16. From the perusal of the decision in Smifs Securities Ltd. (supra), we find that the following question, inter-alia, came up for consideration before the Hon'ble Supreme Court: - \"Question No.[b]: \"Whether goodwill is an asset within the meaning of Section 32 of the Income Tax Act, 1961, and whether depreciation on 'goodwill' is allowable under the said Section?\" 17. While answering the question in favour of the assessee, the Hon'ble Supreme Court in Smifs Securities Ltd. (supra), observed as follows: - \"2 . It was further explained that excess consideration paid by the assessee over the value of net assets acquired of YSN Shares and Securities Private Limited [Amalgamating Company] should be considered as goodwill arising on amalgamation. It was claimed that the extra consideration was paid towards the reputation which the Amalgamating Company was enjoying in order to retain its existing clientele. ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 51 3. The Assessing Officer held that goodwill was not an asset falling under Explanation 3 to Section 32(1) of the Income Tax Act, 1961 ['Act', for short]. We quote hereinbelow Explanation 3 to Section 32(1) of the Act: \"Explanation 3.-- For the purposes of this sub-section, the expressions 'assets' and 'block of assets' shall mean-- [a] tangible assets, being buildings, machinery, plant or furniture; [b] intangible assets, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature.\" 4. Explanation 3 states that the expression 'asset' shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading the words 'any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicates that goodwill would fall under the expression 'any other business or commercial right of a similar nature'. The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b). 5. In the circumstances, we are of the view that 'Goodwill' is an asset under Explanation 3(b) to Section 32(1) of the Act. 6. One more aspect needs to be highlighted. In the present case, the Assessing Officer, as a matter of fact, came to the conclusion that no amount was actually paid on account of goodwill. This is a factual finding. The Commissioner of Income Tax (Appeals) ['CIT(A)', for short] has come to the conclusion that the authorised representatives had filed copies of the Orders of the High Court ordering amalgamation of the above two Companies; that the assets and liabilities of M/s. YSN Shares and Securities Private Limited were transferred to the assessee for a consideration; that the difference between the cost of an asset and the amount paid constituted goodwill and that the assessee-Company in the process of amalgamation had acquired a capital right in the form of goodwill because of which the market worth of the assessee-Company stood increased. This finding has also been upheld by Income Tax Appellate Tribunal ['ITAT', for short]. We see no reason to interfere with the factual finding. 7. One more aspect which needs to be mentioned is that, against the decision of ITAT, the Revenue had preferred an appeal to the High Court in which it had raised only the question as to whether goodwill is an asset under Section 32 of the Act. In the circumstances, before the High Court, the Revenue did not file an appeal on the finding of fact referred to hereinabove. 8. For the afore-stated reasons, we answer Question No.[b] also in favour of the assessee.\" 18. Thus, from the perusal of the aforesaid findings of the Hon'ble Supreme Court, we find that in the facts of Smifs Securities Ltd. (supra), the excess consideration paid by the taxpayer over the value of net assets acquired of the amalgamating company was considered as goodwill arising on account of amalgamation. It is further evident that the AO in the aforesaid decision concluded that no amount was actually paid on account of goodwill. However, in further appeal, the learned CIT(A) concluded that the difference between the cost of an asset and the amount paid constituted goodwill and the taxpayer in the process of amalgamation has acquired a capital right in the form of goodwill because of which the market worth of the taxpayer stood increased. It is evident from the perusal of the aforesaid decision that the aforesaid finding of the learned CIT(A) was upheld by the Tribunal and in further appeal, the Revenue restricted its challenge only qua the question as ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 52 to whether the goodwill is an asset under section 32 of the Act and whether depreciation on \"goodwill\" is allowable under the said section. Therefore, it is evident from the record that the method of calculation of goodwill on which depreciation was claimed in Smifs Securities Ltd. (supra), i.e. the difference between the value of net assets acquired and consideration paid, is similar to the instant case. Thus, at the outset, we are of the considered view that the Revenue having once accepted the computation of goodwill in one case and not challenged its correctness, it will not be opened to the Revenue to challenge its correctness in the case of the other assessee without just cause. In support of the aforesaid conclusion, gainful reference can be made to the decision of the Hon'ble Supreme Court in Berger Paints India Ltd. v. Commissioner of Income-tax [2004] 135 Taxman 586/266 ITR 99 (SC). 19. As regards the submission of the Revenue that the amount of Rs. 67,52,67,157 is merely the difference between the purchase consideration and the net assets acquired of the amalgamating company and the goodwill was nothing but a balancing factor while merging the accounts of the amalgamating company into the accounts of the assessee, we find that the \"Purchase Method\" of accounting for amalgamation as per Accounting Standard-14 requires the amalgamated company to account for the amalgamation by incorporating the assets and liabilities at their existing carrying amounts or by allocating the consideration to individual identifiable assets and liabilities of the amalgamating company on the basis of their fair values at the date of amalgamation. As noted in the foregoing paragraphs, the identifiable assets and liabilities may include assets and liabilities not recorded in the financial statements of the amalgamating company. Thus, following the \"Purchase Method\" of accounting for amalgamation as per Accounting Standard-14, the assessee sought a valuation report dated 04/07/2016 to estimate the fair value of identified intangible assets, i.e. Dealer Network and Customer Relationships (\"Identified Intangible Assets\") and major tangible fixed assets i.e. land, buildings and plant and machinery (\"Specified Tangible Fixed Assets\") as per the Indian Accounting Standards for the purpose of purchase price allocation exercise as at 31/03/2015, i.e. the valuation date. As noted in the foregoing paragraphs, Accounting Standard-14 further requires that any excess of the amount of the consideration over the value of net assets of the amalgamating company acquired by the amalgamated company should be recognised in the amalgamated company's financial statements as goodwill on amalgamation. Therefore, even though there is no intangible asset under the head \"goodwill\" in the books of the amalgamating company on the date of acquisition by the assessee and the goodwill was not already recorded in the books of the amalgamating company which was valued by the independent merchant banker, it is pertinent to note that the value of the goodwill arose in light of the principles of Accounting Standard-14 followed by the assessee to account for the amalgamation in its accounts. Further, it is reiterated that in the Scheme of Amalgamation, approved by the Hon'ble High Court, both parties agreed that any excess of the fair value of shares issued by the assessee company as consideration over the value of net assets of the amalgamating company shall represent goodwill and be treated as such in the assessee's financial statement prepared consequent upon such amalgamation. Thus, once goodwill has been recognised by the assessee in its financial statement, pursuant to the amalgamation, we are of the considered view that it is entitled to claim depreciation on the same under section 32(1)(ii) of the Act ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 53 in light of the decision of the Hon'ble Supreme Court in Smifs Securities Ltd. (supra). 20. As regards the anticipated advantages/benefits/profitability to its business which is attributable to the goodwill, the assessee vide submission dated 15/04/2024 placed on record the sales and profitability of the assessee, pre-amalgamation and post-amalgamation, along with relevant extracts of the balance sheet and profit and loss account for the relevant period, which are summarised as follows: - Sales & Profitability of DCIPL pre-merger is as under: Assessment Year Sales (Rs. in mn) EBITDA (Rs. in mn) 2015-16 19,564.80 1,820.79 2014-15 18,845.05 1,623.57 2013-14 16,430.82 1,439.92 Sales & Profitability of DCIPL (amalgamated entity) post-merges is as under: Assessment Year Sales (Rs. in mn) EBITDA (Rs. in mn) 2018-19 42,168.63 4,023.65 2017-18 36,342.78 3,509.68 2016-17 28,981.43 2,461.71 21. Therefore, from the aforenoted comparative analysis of sales and profitability of the assessee, pre-amalgamation and post-amalgamation, it is clearly evident that the sales as well as EBITDA of the assessee increased in the assessment years 2016-17, 2017-18 and 2018-19, i.e. post amalgamation. 22. As regards the reliance placed by the Revenue upon the sixth proviso to section 32(1) of the Act, we are of the considered view that the sixth proviso to section 32(1) of the Act presupposes that there exists a depreciable asset in the block of the amalgamating company which is transferred on amalgamation and depreciation is allowable to both the amalgamating company and the amalgamated company on the same asset. Accordingly, the said proviso provides a mechanism for splitting depreciation on such asset transferred by the amalgamating company between the amalgamating and amalgamated company, in a manner that the aggregate depreciation should not exceed the threshold provided in the said proviso. We find that the Hon'ble Karnataka High Court in Padmini Products (P.) Ltd. v. Deputy Commissioner of Income Tax, Circle 12(2), Bengaluru [2020] 121 taxmann.com 237/277 Taxman 22 (Karnataka) held that fifth proviso (now sixth proviso) to section 32(1)(ii) of the Act restricts aggregate deduction by the predecessor and successor and if in a particular year there is no aggregate deduction, the provisions of the proviso shall not be applicable. It was further held that until and unless it is the case of aggregate deduction, the proviso has no role to play. Thus, adverting to the facts of the instant case, since the amalgamating company did not have any goodwill recorded in its books of accounts or as part of a block of depreciable assets, prior to amalgamation, therefore the question of claim of depreciation on goodwill by the amalgamating company does not arise in the instant case. Accordingly, we are of the considered view that the provisions of the sixth proviso to section 32(1) of the Act are not applicable to the facts of the present case since the ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 54 goodwill did not exist in the books of the amalgamating company but has arisen in the process of amalgamation. 23. Further, the Revenue has placed reliance upon the provisions of Explanation 7 to section 43(1) of the Act which provides that when a capital asset is transferred by an amalgamating company to the amalgamated company, the actual cost of the transferred capital asset in the hands of the amalgamated company is to be taken to be the same as it would have been if the amalgamating company had continued to hold the capital asset for the purpose of its own business. Further, reliance has also been placed upon the provisions of Explanation 2(b) to section 43(6) of the Act, which lays down a similar principle as Explanation 7 to section 43(1) of the Act and provides that actual cost of the block of assets in the case of amalgamated company shall be the Written Down Value of the block of assets in the case of amalgamating company for the immediately preceding previous year as reduced by the amount of depreciation actually allowed in relation to the said preceding previous year. Thus, from the careful perusal of the aforesaid provisions, it is evident that the same pre-supposes either the existence of a block or the value of goodwill forming part of such block or the asset has actual cost to the amalgamating company. However, in the instant case, as noted above, the goodwill arising on account of amalgamation was neither reflected as an asset nor was part of the block of assets belonging to the amalgamating company. We find that while considering the applicability of the provisions of the sixth proviso to section 32(1), Explanation 7 to section 43(1) and Explanation 2(b) to section 43(6) of the Act in a similar factual matrix wherein the goodwill as claimed by the taxpayer represents the difference between the purchase consideration and value of the net assets acquired on amalgamation, the coordinate bench of the Tribunal in Urmin Marketing (P.) Ltd. v. Deputy Commissioner of Income Tax, Cir 4(1)(1), Ahmedabad [2020] 122 taxmann.com 40 (Ahmedabad - Trib.) held that since the taxpayer had not acquired any goodwill from the amalgamating company, therefore these provisions are not applicable. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as follows: - 24. Therefore, respectfully following the aforesaid decision of the coordinate bench of the Tribunal in Urmin Marketing (P.) Ltd. (supra), we are of the considered view that provisions of the sixth proviso to section 32(1), Explanation 7 to section 43(1) and Explanation 2(b) to section 43(6) of the Act have no applicability to the facts of the present case. 25. As regards the reliance placed by the Revenue on the provisions of section 49(1)(iii)(e) and section 55(2)(a)(ii) of the Act, it is pertinent to note that these provisions form part of the Chapter dealing with \"Capital Gains\" and section 47 of the Act specifically excludes transfer of capital assets, pursuant to a scheme of amalgamation, from the purview of section 45 of the Act. Therefore, we are of the view that these provisions have no relevance to the facts of the present case. 26. The Revenue, vide its written submissions, has relied upon certain judicial pronouncements, which have been dealt with hereunder: - a) We find that the decision in Borkar Packaging (P.) Ltd. v. Assistant Commissioner of Income-tax [2010] [2010] 131 TTJ 99 (Panaji), was rendered by the coordinate bench of the Tribunal prior to the decision ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 55 of the Hon'ble Supreme Court in Smifs Securities Ltd. (supra), and therefore the same is no longer a good law. b) From the perusal of the paragraph of the decision of the coordinate bench of the Tribunal in ACIT v. Pfizer Ltd. [IT Appeal No. 2108 (Mum.) of 2018, dated 22-9-2023], placed reliance upon by the Revenue, we find that the coordinate bench restored the issue to the file of the AO to examine the actual cost of the goodwill and to allow the depreciation on it if the same is allowable in accordance with law. Further, apart from merely quoting the paragraph from the aforesaid decision, the Revenue has not placed any submission as to how the same is relevant to the present case. In any case, we have already dealt with the issue of applicability of the provisions of Explanation 7 to section 43(1) of the Act in the foregoing paragraphs. c) In Millennium Engineers and Contractors Ltd. v. Dy. CIT [IT Appeal No. 668 (Pun.) of 2022, dated 30-10-2023], the resultant consideration paid/payable by the taxpayer under the approved scheme was even much less than the value of net assets acquired by it. Therefore, the coordinate bench vide order dated 30/10/2023 concluded that there was no scope for the purchase of goodwill by excess payment of purchase consideration. Thus, it is clearly evident that the facts of the aforesaid case are completely different from the facts under consideration before us. d) The decision in the case of ACIT v. Dosti Reality Ltd. [IT Appeal No. 2043 (Mum.) of 2022, dated 13-4-2023], is also distinguishable on facts as the \"pooling of interest\" method was followed to account for the amalgamation in the books of the amalgamated entity as compared to \"Purchase Method\" adopted in the present case. e) Lastly, the decision in the case of United Breweries Ltd. v. Additional Commissioner of Income-tax, Range-12, Bangalore [2016] 76 taxmann.com 103 (Bangalore - Trib.) , relied upon by the lower authorities, the value of goodwill in the books of the amalgamating company was only Rs.7.45 crore which has been shown by the taxpayer at Rs.62.30 crore and accordingly, it was held that the taxpayer has failed to justify the valuation of goodwill at Rs.62.30 crore. However, there is no dispute regarding the value of goodwill in the present case. We find that for a similar reason the coordinate bench of the Tribunal in Aricent Technologies (Holdings) Ltd. v. Deputy Commissioner of Income-tax, Circle-1 (1), New Delhi ITA No.90/Del/2013/ [2019] 109 taxmann.com 47 (Delhi - Trib.) distinguished the aforesaid decision in United Breweries Ltd. (supra). Thus, we are of the considered view that the reliance placed on the aforesaid decision is misplaced. 27. Further, the reference in the impugned order to the amendment made vide Finance Act, 2021 is also of no help to the Revenue as the said amendment in relation to the allowance of depreciation on goodwill is effective from 01/04/2021 and would accordingly apply to the assessment year 2021-22 and subsequent assessment years. This aspect is evident from page 71 of the Memorandum Explaining the Provisions in the Finance Bill, 2021. Even the decision of the coordinate bench of the Tribunal in I & B Seeds (P.) Ltd. v. Deputy Commissioner of Income-tax [2022] 142 taxmann.com 274 (Bangalore - Trib.) held that amendment in section 32(1) by Finance Act, 2021 to the effect that no depreciation was allowable on goodwill would take ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 56 effect from 01/04/2021 and would be applicable from assessment year 2021- 22 and subsequent years. 28. Therefore, in view of the facts and circumstances of the present case, legal position and judicial pronouncements as noted above, we are of the considered view that the assessee is entitled to claim depreciation on goodwill arising on account of amalgamation under section 32 of the Act. Accordingly, the AO is directed to allow the claim of the assessee. As a result, the impugned order on this issue is set aside and ground no.1 raised in assessee's appeal is allowed.” 74. Thus, having carefully considered the aforesaid decisions, we, at the outset, do not find any merits in the findings of the AO that the difference between the consideration paid and the value of the assets acquired cannot be considered as goodwill for the purpose of allowing depreciation under the Act. It is further evident that, in the aforesaid decisions, the conclusion in favour of the taxpayer was reached after due examination of the materials placed on record which were also considered by the lower authorities. However, in the present case, it is evident that neither the AO nor the learned DRP considered the details filed by the assessee, as one of the reasons for rejecting the assessee’s claim was that the same was made by way of a letter instead of filing the revised return of income by placing reliance on the decision in Goetze India Limited (supra). We further find that vide letter dated 25/06/2021, the Revenue requested for verification of factual details with respect to the claim of depreciation on goodwill. Therefore, having considered the facts and circumstances of the present case, we are of the considered view that this issue be restored to the file of the jurisdictional AO for de novo adjudication, in light of the decisions cited supra, after examining the details filed by the assessee. Since this issue is restored to the AO for consideration afresh, it is needless to mention that the AO can seek any other information ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 57 from the assessee for complete adjudication of this issue and the assessee can also furnish any other documents in support of its claim. We order accordingly. As a result, the impugned final assessment order on this issue is set aside and Ground No. 12, raised by the assessee is allowed for statistical purposes. As regards the grounds raised by the Revenue in its cross objections, we find that the same were answered against the Revenue by the decision of the coordinate bench of the Tribunal in Dow Chemical International (P .) Ltd. (supra). Accordingly, respectfully following the aforesaid decision, the grounds raised by the Revenue in its cross objections are dismissed. 75. Ground No.13, raised in assessee’s appeal, pertains to an error in considering the amount of advance tax paid by the assessee. 76. Having considered the submission of both sides, we restore this issue to the file of the Jurisdictional AO to consider the correct amount of advance tax paid by the assessee, after necessary verification of the record. As a result, Ground No.13, raised in assessee’s appeal, is allowed for statistical purposes. 77. Grounds No.14 and 15, raised in assessee’s appeal, pertain to the levy of interest under sections 234B and 234D of the Act, which are consequential in nature. Therefore, the same needs no separate adjudication. 78. In the result, the appeal by the assessee is partly allowed for statistical purposes. IT (TP) A No. 231/Bang./2014 Revenue’s Appeal – A.Y. 2009-10 79. In this appeal, the Revenue has raised the following grounds: - ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 58 “1. The directions of the Dispute Resolution Panel are opposed to law and facts of the case. 2. On the facts and in the circumstances of the case the Dispute Resolution Panel erred in law in directing the AO to exclude the reimbursement of specific expenditure both from the export turnover as well as from total turnover for the purpose of computation of deduction u/s 10A, without appreciating the fact that the statute allows exclusion of such expenditure only from export turnover by way of specific definition of export turnover as envisaged by Sub- clause (4) of Explanation 2 below Sub-section (8) of Section 10A and the total turnover has not been defined in this Section. 3. On the facts and in the circumstances of the case the Dispute Resolution Panel erred in directing the AO to compute deduction us 10A in the above manner by placing reliance on the decision of Hon'ble High Court of Karnataka in the case of M/s Tata Elsi Ltd., which has not become final since the same has not been accepted by the Department and SLPs are pending before the Hon'ble Supreme Court. 4. On the facts and in the circumstances of the case, the DRP erred in directing the AO to allow depreciation on the software items without appreciating that the same is contrary to the provisions of Section 40(a)(ia) and Section 194J as the claim of depreciation is in the nature of business expenditure. 5. For these and other grounds that may be urged at the time of hearing, it is prayed that the directions of the Dispute Resolution Panel in so far as it relates to the above grounds may be reversed.” 80. Ground No.1 raised in Revenue’s appeal is general in nature. Therefore, the same needs no separate adjudication. 81. The issue arising in Grounds No.2 and 3, raised in Revenue’s appeal, pertains to the exclusion of communication expenses and travel expenses from both export turnover as well as the total turnover while computing deduction under section 10A of the Act. 82. Having considered the submissions of both sides and perused the material available on record, we find that this issue is now decided in favour of the taxpayer by the Hon’ble Supreme Court in CIT v/s HCL Technologies Ltd, reported in [2018] 404 ITR 719 (SC). Accordingly, respectfully following ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 59 the aforesaid decision, we do not find any infirmity in the directions of the learned DRP in excluding the communication expenditure and travel expenditure from the total turnover also to the extent it was excluded from the export turnover. As a result, the impugned final assessment order on this issue is upheld and Grounds No. 2 and 3, raised in Revenue’s appeal, are dismissed. 83. The issue arising in Ground No.4, raised in Revenue’s appeal, pertains to the deletion of disallowance on software items under section 40(a)(ia) of the Act. 84. The brief facts of the case pertaining to this issue, as emanating from the record, are: Upon perusal of the details furnished by the assessee, during the assessment proceedings, it was noticed that the assessee has claimed depreciation @60%/30% depending upon the number of days of usage, which amounted to Rs. 1,27,90,656. Accordingly, the assessee was asked to show cause why the depreciation be not disallowed by invoking the provisions of section 40(a)(ia) of the Act. The AO, vide draft assessment order, disagreed with the submissions of the assessee and held that the depreciation claimed by the assessee on computer software is considered for disallowance for non- deduction of TDS on payment made towards such purchases. Since the assessee failed to deduct tax at source as required under section 194J of the Act, the AO disallowed the depreciation under section 40(a)(ia) of the Act. The learned DRP, vide its directions, held that section 40(a)(ia) of the Act is not applicable for disallowing the depreciation claimed on computer software. In conformity with the directions issued by the learned DRP , the AO passed ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 60 the impugned final assessment order deleting the disallowance made under section 40(a)(ia) of the Act in respect of depreciation claimed by the assessee on computer software. Being aggrieved, the Revenue is in appeal before us. 85. Having considered the submissions of both sides and perused the material available on record, we find that in PCIT v/s Tally Solutions Pvt. Ltd., reported in [2021] 123 taxmann.com 21 (Karn.), The following question of law came up for consideration before the Hon’ble Karnataka High Court: – \"Whether, on the facts and in the circumstances of the case, the Tribunal was right in deleting the disallowance made under section 40(a)(ia) in respect of depreciation on intellectual property rights by relying upon the decisions which has not reached finality and without appreciating that the Assessing Officer rightly invoked provisions of section 40(a)(ia) of the Act as the assessee had failed to deduct tax on payments made in respect of purchase of software as required under section 195 of the Act?\" 86. While deciding the issue in favour of the taxpayer, the Hon’ble Karnataka High Court, in the aforesaid decision, observed as follows: – “10. Thus, from close scrutiny of section 40(a)(i) of the Act, it is axiomatic that an amount payable towards interest, royalty, fee for technical services or other sums chargeable under this Act shall not be deducted while computing the income under the head profit and gain of business or profession on which tax is deductible at source; but such tax has not been deducted. The expression 'amount payable' which is otherwise an allowable deduction refers to the expenditure incurred for the purpose of business of the assessee and therefore, the said expenditure is a deductible claim. Thus, section 40 refers to the outgoing amount chargeable under this at and subject to TDS under Chapter XVII-B. The deduction under section 32 is not in respect of the amount paid or payable which is subjected to TDS; but is a statutory deduction on an asset which is otherwise eligible for deduction of depreciation. Section 40(a)(i) and (ia) of the Act provides for disallowance only in respect of expenditure, which is revenue in nature, therefore, the provision does not apply to a case of the assessee whose claim is for depreciation, which is not in the nature of expenditure but an allowance. The depreciation is not an outgoing expenditure and therefore, provisions of Section 40(a)(1) and (ia) of the Act are not applicable. In the absence of any requirement of law for making deduction of tax out of expenditure, which has been capitalized and no amount was claimed as revenue expenditure, no disallowance under section 40(a)(i) and (ia) of the Act would be made. It is also pertinent to note that depreciation is a statutory deduction available to the assessee on asset, which is wholly or partly owned ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 61 by the assessee and used for business or profession. The depreciation is an allowance and not an expenditure, loss or trading liability. The Commissioner of Income Tax (Appeals) has held that the payment has been made by the assessee for an outright purchase of Intellectual Property Rights and not towards royalty and therefore, the provision of section 40(a)(ia) of the Act is not attracted in respect of a claim for depreciation. The aforesaid finding has rightly been affirmed by the tribunal. The findings recorded by the Commissioner of Income Tax (Appeals) as well as the tribunal cannot be termed as perverse. In view of preceding analysis, the substantial question of law framed by a bench of this court is answered against the revenue and in favour of the assessee.” 87. We find that the learned DRP while issuing the directions to the AO to delete the disallowance of depreciation on computer software made under section 40(a)(ia) of the Act, followed the aforesaid decision of the Hon’ble Karnataka High Court. Thus, in the absence of any contradictory decision on this issue being placed on record, we do not find any infirmity in the directions issued by the learned DRP . As a result, the impugned final assessment order on this issue is upheld and Ground No. 4, raised in Revenue’s appeal, is dismissed. 88. In the result, the appeal by the Revenue is dismissed. 89. To sum up, the appeal by the assessee is partly allowed for statistical purposes, while the appeal and cross objection by the Revenue are dismissed. Order pronounced in the open Court on 25/02/2025 S Sd/-/ - -AMARJIT SINGH ACCOUNTANT MEMBER Sd/-S- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 25/02/2025 prabhat ITA No.231, 266/Bang./2014 & CO No.22/Mum./2020 (A.Y. 2009-10) 62 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. True Copy By Order Assistant Registrar ITAT, Mumbai "