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2019 (8) TMI 552 - AT - Income TaxTransfer pricing adjustment relating to intra group services - HELD THAT:- The assessee company provided network connectivity services to customers of its AEs, For rendering services, the assessee availed support services from AEs for which it entered into a Services Agreement dated 01.07.2011 with Interwise Asia Pacific Pte Ltd. As per the said agreement, Interwise Asia Pacific Pte Ltd. shall render the aforesaid services to the assessee on cost plus markup. During the year under consideration, out of the many services for which it had entered into agreement, only one service namely Global Customer Services Center was availed. The assessee submitted the list of the tickets processed along with nature of problem resolved and the relevant evidence was also submitted before the Assessing Officer. Thus, the facts are identical in the present Assessment year as well to that of earlier Assessment Years i.e. 2009-10, 2010-11, 2011- 12, 2012-13 and 2013-14. Since the issue is identical in the present assessment year by assessee’s own order, Ground Nos. 1 to 1.6 are allowed. Transfer pricing adjustment with respect to payment of royalty - HELD THAT:- In the present Assessment Year, it is observed that the benefit test cannot be applied to determine the ALP of international transaction. TPO only has to examine as to whether the payment based on the agreement adheres to the arm’s length principle or not. Thus, the issue is identical therefore we direct the TPO to determine ALP of the royalty payment in accordance with law. Needless to say the assessee be given opportunity of hearing by following principles of natural justice. Ground nos. 2 to 2.7 partly allowed for statistical purposes Disallowance on account of circuit accruals - HELD THAT:- In the present Assessment Year also as like [2017 (9) TMI 1257 - ITAT DELHI] the assessee is following the same method of accruing circuit charges. Since the year-end circuit accruals created by the assessee represent accruals towards normal business expenditure incurred by the assessee for the relevant assessment year and recorded in accordance with the matching principle, deduction in respect therefore should be allowed. The assessee company produced documentary evidence of utilization/reversal of the expenses represented by year-end circuit accruals, which shows that even the balance accruals have also been created on a reasonable basis and hence, no disallowance in this regard can be made against the assessee. Thus, the issue is identical to the earlier Assessment Years and therefore Ground Nos. 3 to 3.6 are allowed. Disallowance on account of year end accruals - HELD THAT:- In the present Assessment Year also the assessee company is following the mercantile system of accounting and since the year end accruals created by the assessee represent accruals towards normal business expenditure incurred by the assessee for the financial year relevant to the present assessment year, deduction in respect thereof has to be allowed to the assessee. The facts are identical in the present Assessment year as well to that of earlier Assessment Year which is decided by the Tribunal in A,Y. 2010-11. [2017 (9) TMI 1257 - ITAT DELHI] Disallowance on account of support services - HELD THAT:- In the present assessment year also AT&T Communication Services India Pvt. Ltd. (ACSI) which is a group company of the assessee and the assessee company entered into support service agreement, and activities performed by ACSI under support service agreement are essential and integral part. Support services cost of ₹ 8.25 crores which was allocated by ACSI to the assessee towards support services rendered by the ACSI to assessee company. The assessee company submitted all the invoices and the related evidences before the Assessing Officer. But the same was not taken into account by the Assessing Officer. Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer by giving opportunity of hearing to the assessee by following principles of natural justice. Thus, Ground Nos. 6 to 6.3 are partly allowed for statistical purpose. Disallowance on account of annual share based license fee - HELD THAT:- It is pertinent to note here that the annual revenue share based license fee incurred by the assessee is a business expenditure allowable u/s 37 of the Income Tax Act, 1961. This expenditure was incurred by the assessee company towards maintenance and usage of the telecom license, and not for acquiring a right to operate telecommunication services and thus would not attract the provisions of Section 35ABB of the Act. The assessee’s case is squarely covered by the decision of Hon'ble Delhi High Court in the case of CIT vs. Bharti Hexacom Limited [2010 (8) TMI 332 - SUPREME COURT] - It is also important to note that in one of the preceding year on same facts, the DRP allowed the claim of the licence fees on revenue basis u/s 37(1) of the Act. Thus, the issue is identical and therefore Ground Nos. 6 to 6.3 are allowed. TDS u/s 194I - Disallowance on account of non-deduction of tax on lease line expenses - HELD THAT:- Lease line charges were paid to the telecom service provider for faster connectivity services through dedicated lease line. As such the payment had been made for availing facility of connectivity services from vendors required for transmission of data and is not for use of any asset involved in provision of such facility covered under Section 194I - The assessee company is not in possession as well as not in control of the equipments which were used for providing internet and communication facilities, therefore, there was a clear absence of the element of leasing of equipments, as a fall out of which the applicability of the provisions of Section 194I stood excluded. Thus, the nature of payment is not at all related to any equipment, therefore, assessee is not require to deduct tax at source under the statutory provisions of Section 194I of the Act. Disallowance on account of notional foreign exchange loss - HELD THAT:- In the present year, the assessee company has given break up of foreign exchange loss of ₹ 1.29 crores which is claimed in return of income as a tax deductible expense. The loss is on account of exchange fluctuation in debtors, creditors, and other items which are revenue in nature. Therefore, such loss is allowable expenditure u/s 37(1) of the Act. But the Assessing officer has not taken into account the submissions and the evidences provided by the Assessee during the assessment proceedings. Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer
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