2019 (6) TMI 38 - ITAT DELHI

TP adjustment - support service in the nature of global customers support centre from its AEs - HELD THAT:- We find the assessee, in the instant case, has benchmarked the cost paid by the assessee for GCSC services using combined transaction approach and using TNMM method as the most appropriate method with Operating Profit/Operating Cost as profit level indicator. Since the OP/TC was 23.15% which was significantly higher than the arithmetic mean of OP/TC of 6.35% earned by comparable companies, the assessee considered the transaction to be at arm’s length. We find the TPO rejected the aggregation approach adopted by the assessee under TNMM and adopted CUP as the most appropriate method in the absence of comparable data. The TPO further held that the assessee was not able to prove the receipt of the benefits and demonstrate the arm’s length nature. The TPO accordingly determined the ALP of the aforesaid services at nil on ad hoc basis which has been upheld by the DRP.

Tribunal in assessee’s own case [2017 (9) TMI 1257 - ITAT DELHI] after considering the facts, material evidences, etc., held that the assessee satisfies the need benefit and rendition test. The Tribunal also upheld the TNMM to be the most appropriate method. In absence of any distinguishable features brought before us by the Revenue, we hold that the addition made by the Assessing Officer/TPO and upheld by the DRP is not sustainable.

Disallowance of circuit accruals - non-submission of supporting documents - liability incurred/crystalised and estimated expense based on the orders placed for various circuits - HELD THAT:- It is the submission of the ld. counsel for the assessee that the assessee follows mercantile system of accounting and accrues circuit charges on scientific basis. It is also his submission that as per the accounting standards notified u/s 145(2) of the Act, the assessee is required to make provision for circuit accruals for the subject financial year. It is also his submission that the assessee has provided evidence to the extent of almost 98% of the expenses represented by year end circuit accruals for utilization/reversal of circuit accruals made in subsequent year and no adverse finding has been given by the Assessing Officer/DRP. We find merit in the arguments advanced by the ld. counsel for the assessee.

The facts of the instant case are identical to the facts of the case decided by the tribunal in assessee’s own case [2017 (9) TMI 1257 - ITAT DELHI] , therefore, in absence of any contrary material brought to our notice, we hold that the Assessing Officer is not justified in making addition on account of circuit accruals.

Disallowance of year end accruals - HELD THAT:- We find the Assessing Officer in the instant case, disallowed an amount of ₹ 1.39 crores on account of non-submission of supporting documents relating to the year ending provisions of outstandings. It is the submission of the ld. counsel for the assessee that when the assessee follows mercantile system of accounting and accounts all its expenses pertaining to the year in accordance with the matching principle and was able to substantiate with evidence to the satisfaction of the Assessing Officer in case of more than 95% of the expenses represented by year end accruals, therefore, no disallowance is called for.

Since the facts of the impugned assessment year are identical to the facts of the case decided by the Tribunal in assessee’s own case [2017 (9) TMI 1153 - ITAT DELHI] , therefore, respectfully following the decision of the Tribunal in assessee’s own case for preceding three assessment years, we hold that the disallowance made by the Assessing Officer is not justified.

Disallowance of output service tax in “Other current liabilities” - HELD THAT:- It appears that the Assessing Officer has not properly appreciated the accounting entries in their due perspective. The marginal heading of section 43B clearly states that certain deductions to be allowed on actual payment. This means that if the assessee has claimed deductions, the same can be disallowed u/s 43B of the Act. However, in the case in hand, the assessee has not claimed any deduction as the input service tax and the output service tax have never been routed through the P&L Account.

Respectfully following AT & T COMMUNICATION SERVICES (INDIA) P. LTD. VERSUS DCIT [2018 (11) TMI 130 - ITAT DELHI] , we restore the issue to the file of the Assessing Officer with a direction to grant an opportunity to the assessee to explain the entries and the Assessing Officer shall decide the issue as per fact and law, after giving due opportunity of being heard to the assessee.

Disallowance of support service expenditure - paid to its group company - HELD THAT:- The decision was totally based on commercial considerations. By transferring the cost from ACSI to appellant no added tax advantage is being availed by appellant. We are also of the view that commercial expediency of a particular expenditure incurred by a businessman should be examined from the perspective of the business person and no third party, including the tax authorities, is entitled to question the commercial reasoning/justification of the expenditure so incurred.

Since the assessee had not submitted the requisite details before the Assessing Officer, therefore, we restore this issue to the file of the Assessing Officer with a direction to give an opportunity to the assessee to submit the details and decide the issue in the light of the decision of the Tribunal [2017 (9) TMI 1257 - ITAT DELHI] as reproduced above.

Disallowance of annual revenue share based licence fee - maintenance and usage of the telecom licence payable to the Department of Telecom - HELD THAT:- Tribunal in assessee’s own case [2017 (9) TMI 1153 - ITAT DELHI] has held that the contention of the assessee that the expense incurred towards revenue share based license fee for maintenance and usage of telecom license payable to Department of Telecom is a recurring fee paid by the license holder on periodic basis towards maintenance and use of the license and the benefit of the same does not extend beyond the close of the year. Further, it is also relevant to note here benefit of the revenue share based license fees paid during one financial year cannot be extended to the subsequent financial year, for which license fee is to be paid separately upon the adjusted gross revenues of such subsequent year. Therefore, payment of the aforesaid annual fee cannot be said to confer any right of an enduring nature upon appellant. - The ground raised by the assessee is accordingly allowed.

Disallowance of lease line charges on account of non-deduction of TDS - HELD THAT:- It is the submission of the ld. counsel for the assessee that the leaseline charges are paid to the telecom service provider for faster connectivity service through dedicated leaseline and, therefore, such payment has been made for availing the 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 u/s 194I. It is also the submission of the ld. counsel for the assessee that the assessee was neither in possession nor control of the equipments which were used for providing internet and communication facilities and, therefore, there was a clear absence of the element of leasing of equipments and, therefore, the provisions of section 194I cannot be applied.

The various other decisions GLOBAL ONE INDIA P. LTD. VERSUS ACIT [2014 (4) TMI 787 - ITAT DELHI] , ALOK INDUSTRIES LIMITED VERSUS DY. CIT, (TDS) 1 (1) , MUMBAI [2017 (8) TMI 740 - ITAT MUMBAI] and CIT VERSUS M/S. VODAFONE SOUTH LTD., [2016 (8) TMI 422 - KARNATAKA HIGH COURT], relied on by the ld. counsel for the assessee also support its case. In view of the above discussion, we hold that the assessee is not liable for withholding tax u/s 194I of the Act on account of payment of leaseline charges to other telecom operators for provision of telecom connectivity services required for transmission of data. Accordingly the Assessing Officer is directed to delete the disallowance.

Disallowance of foreign exchange loss - assessee had suo motu disallowed a portion of loss as capital in nature and balance claimed as revenue loss - genuineness of the loss - additional evidences - HELD THAT:- It is the submission of the ld. counsel for the assessee that the additional evidences filed now will substantiate the genuineness of the loss. Considering the totality of the facts of the case and in the interest of justice, we admit the additional evidences filed before the Bench at the time of hearing and restore the issue to the file of the Assessing Officer with a direction to go through the same and decide the issue as per fact and law after giving due opportunity of being heard to the assessee.

Non-grant of credit for TDS - HELD THAT:- We remit this issue to the file of the Assessing Officer with a direction to grant proper credit of TDS after giving an opportunity of being heard to the assessee.