TMI Blog2019 (11) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee, prima facie, is acceptable if one has to strictly go by the meaning of tax , defined under section 2(43) of the Act, as it only refers to tax paid under the provisions of the Act. Pertinently, unlike section 91 read with Explanation (iv), section 90 does not provide for inclusion of tax levied by any State/ local authority of that country within the expression income tax . In view of the aforesaid, we direct the Assessing Officer to verify whether the State taxes paid by the assessee overseas are eligible for any relief under section 90 of the Act and if it is not found to be so, assessee s claim of deduction should be allowed. In view of our decision above, no separate adjudication of grounds no.1.2 is required. TDS u/s 195 - Disallowance of expenditure incurred for purchase of software by invoking the provisions of section 40(a)(i) - HELD THAT:- Further enquiry is required to be made by the Assessing Officer to factually verify the nature of transaction relating to acquisition of software product for trading purpose to find out whether it is sale of copyrighted article simpliciter or sale of copyright. In case, the payment made by the assessee is foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the AEs - HELD THAT:- After considering the submissions of the parties and examining the material on record, we are convinced that various submissions made by the assessee before learned Commissioner (Appeals) have not at all been dealt with. The primary contention of the assessee that the advance made to the AEs is in the nature of quasi equity and falls within shareholder s activity has not been properly addressed by the Departmental Authorities keeping in view the ratio laid down in the relevant case laws. It also requires deliberation whether it can be considered as an international transaction under section 92B r/w Explanation 1(c). Since, the aforesaid legal and factual aspects have not been considered properly, we are inclined to restore the issue to the file of the Assessing Officer for de novo adjudication after due opportunity of being heard to the assessee. The Assessing Officer must examine all relevant facts to find out the exact nature of the advances made to the AEs. He should also examine the applicability of the ratio laid down in the case of DLF Hotel Holdings Ltd. [ 2016 (11) TMI 1031 - ITAT DELHI] and any other case laws which may be cited before him. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the nature of payment viz. commission has also not been disputed by the Revenue. That being the case, since the commission paid to the non resident agents is not chargeable to tax in India at their hands, there is no necessity for the assessee to withhold tax under section 195(1) of the Act on such payment. Accordingly, we uphold the decision of learned Commissioner (Appeals) on this issue. Comparable selection - HELD THAT:- learned Commissioner (Appeals) has taken pains to examine in detail the alternative benchmarking done by the assessee with foreign comparables and after detailed analysis has shortlisted the final comparables to be considered for comparability analysis. No convincing argument or evidence has been brought on record by the learned Departmental Representative to persuade us to disturb the finding of learned Commissioner (Appeals) on these issues. In view of the aforesaid, we do not find any merit in the grounds raised by the Revenue on the issues. Accordingly, grounds are dismissed. - ITA no.5713/Mum./2016, IT(TP)A no.5823/Mum./2016 - - - Dated:- 30-10-2019 - Shri Saktijit Dey, Judicial Member And Shri N.K. Pradhan, Accountant Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Counties are not covered under the tax treaties / conventions with USA and Canada. Thus, it was submitted, the deduction claimed by the assessee is not disallowable under section 40(a)(ii) of the Act. The Assessing Officer, however, did not find merit in the submissions of the assessee. He observed, the expression tax under section 40(a)(ii) of the Act would encompass all taxes levied on the profit or gains of the business or profession and is not limited to tax levied on total income computed under the provisions of Indian Income Tax Act. Referring to various judicial precedents in this context, the Assessing Officer ultimately disallowed the deduction claimed on account of State taxes paid overseas. Though, the assessee challenged the aforesaid disallowance before learned Commissioner (Appeals), however, he also sustained the disallowance noticing that while deciding identical issue in assessee s own case in assessment year 2005 06, the Tribunal has upheld such disallowance. 4. Shri Porus Kaka, the leaned Sr. Counsel for the assessee submitted, the State taxes in respect of which the assessee claimed the deduction were paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of the State taxes paid overseas, the assessee is not eligible to claim relief under section 90 or 91 of the Act, it will not be covered under section 40(a)(ii) of the Act. On a perusal of provisions of sub section (43) of section 2 of the Act, it becomes clear that the term tax has been defined to mean any tax paid under the provisions of the Act. Section 40(a)(ii) of the Act says that any rate or taxes levied on the profits or gain in any business or profession would not be allowable as deduction. Explanation 1 to section 40(a)(ii) of the Act inserted by the Finance Act, 2006, w.e.f. 1st April 2006, further clarifies that any sum eligible for relief of tax either under section 90 or 91 of the Act would not be allowable as deduction under section 40(a)(ii) of the Act. It is the say of the assessee that the tax eligible for relief under section 90 of the Act are only those taxes which are levied by Federal / Central Government and not by any local authority of State, City or County. Thus, it is ineligible for any relief under section 90 of the Act. The aforesaid submissions of leaned Sr. Counsel for the assessee, prima facie, is acceptable if one has to strict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the provisions of section 40(a)(i) of the Act. 8. Brief facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee has claimed expenditure incurred in respect of purchase of software called upon the assessee to furnish the necessary details. On verifying the details furnished by the assessee, he found that the assessee had purchased software for its internal use amounting to ₹ 47,36,54,498, and for trading purpose amounting to ₹ 31,03,03,823. After perusing the details, the Assessing Officer was of the view that the amount paid towards acquiring software brought along with support service is in the nature of royalty as per section 9(i)(vi) of the Act. In this context, he referred to Explanation 3 to section 9(1)(vi) of the Act as well as CBDT Circular no.621 dated 9th December 2019. Having held so, the Assessing Officer observed that since the assessee had not deducted tax at source while making payment for purchases of software both for internal use as well as for trading purpose, the amount paid is liable for disallowance under section 40(a)(i) of the Act. Accordingly, he disallowed the entire amount of ₹ 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .397/2015 (Bom.); and ii) Channel Guide India Ltd., ITA no.1221/Mum./2006, dated 29.08.2012. 11. Further, he submitted, Explanation 4 to section 9(1)(vi) of the Act, does not apply to section 40(a)(i) of the Act which specifically refers to Explanation 2 to section 9(1)(vi) of the Act for the definition of royalty. For such submission, he relied upon the following decisions: i) NGC Networks India Pvt. Ltd. v/s CIT, ITA no.397/2015 (Bom.); and ii) Sonata Information Technology Ltd. v/s DCIT, 7 SOT 465 (Mum.). 12. The leaned Sr. Counsel for the assessee submitted, even the payment made towards purchase of software cannot be treated as royalty under the tax treaties as the definition of royalty therein is narrower than the definition in the Act. Referring to Article 12 of Indo US Tax Treaty, he submitted, the payment made for a copyrighted article is not covered within the meaning of royalty. He submitted, the technical explanation issued by US IRS for explaining the background and the rationale behind the drafting of the Indo US Tax Treaty clearly indicate that the license granted to the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h expenditure, the assessee has acquired assets of enduring benefit. Therefore, the expenditure incurred is capital in nature and the assessee would be entitled for depreciation on the cost of such assets. The Tribunal while deciding identical issue in assessee s own case for the assessment year 2005 06 in ITA no.7513/Mum./2010, dated 4th November 2015, the Tribunal has expressed similar view. Thus, following the aforesaid view of the Tribunal in assessee s own case, we uphold the decision of learned Commissioner (Appeals) on the issue. Insofar as the disallowance of expenditure incurred on acquiring software products for re sale / trading purpose, it is noted that the Assessing Officer has not at all deliberated on the factual aspect of the issue. Simply relying upon certain judicial precedents and the statutory provisions, he has concluded that the payment made by the assessee for acquiring these software is in the nature of royalty as per section 9(1)(vi) of the Act, hence, assessee is liable to deduct tax at source under section 195(2) of the Act. Whereas, learned Commissioner (Appeals) has improved upon the reasoning of the Assessing Officer b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he customers as it is. It has been submitted that while re selling / trading the software products, there is neither any transfer of right in copyright in favour of the assessee nor the assessee has transferred any right in the copyright. However, the learned Commissioner (Appeals) has recorded a categorical finding that the software products acquired by the assessee cannot be sold independently and can be sold by utilising in the package developed by it. In the aforesaid factual context, it requires examination whether the software products acquired by the assessee for trading purpose was sold as a chattel qua chattel or the assessee has made some value addition to it or has transferred the copyright relating to the software product along with the software product. No doubt, in assessee s own case for assessment year 2005 06, the Tribunal in ITA no.7513/Mum./2010, dated 23rd March 2017 (after recall of the original appeal order) while dealing with similar issue has held that the payment made by the assessee towards acquiring the software products is not royalty as the assessee has sold a copyrighted article and has not transferred any license or copyright. However, in the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , towards advertisement. After calling for necessary details, he found that the expenditure incurred are for advertising in newspapers/magazines, holding events/seminars, conferences, exhibitions, etc., advertising at airports, global campaign etc.. Thus, mostly, the expenditure incurred was for promotional/publicity activities of the assessee. After considering the submissions of the assessee in the context of facts and material on record, the Assessing Officer was of the view that out of the expenditure incurred of ₹ 1,88,28,573, towards advertisement in newspapers / magazines, expenditure to the extent of 50% can be treated as revenue and non brand building expenditure. Accordingly, out of the total expenditure, the Assessing Officer treated an amount of ₹ 38,75,11,510, as expenditure incurred towards brand building, hence, capital in nature. Having held so, the Assessing Officer observed that 1/5th of the expenditure amounting to ₹ 7.75 crore would be allowed in the current year and the balance 80% amount to ₹ 31,00,09,210, would be amortized over the period of next three years in equal proportion. The assessee challenged the aforesaid d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e produced the documentary evidences to demonstrate that the experience certainty campaign is nothing but advertisement expenditure incurred by the assessee. To support his contention, the learned Senior Counsel sought the permission of the Bench to furnish certain documents as additional evidence under rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. The leaned Sr. Counsel submitted, the additional evidences submitted by the assessee may be admitted and the issue may be restored back to the Assessing Officer for fresh consideration. 22. The learned Departmental Representative while relying upon the observations of the Assessing Officer with regard to the ground raised by the Revenue submitted that the issue relating to assessee s claim of deduction in respect of expenditure incurred towards experience certainty may be restored to the Assessing Officer for fresh adjudication in view of the additional evidence filed by the assessee. 23. We have considered rival submissions and perused the material on record. We have also carefully examined the case laws cited before us. On a detailed analysis of facts on record, we have n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished before us, we restore the issue to the Assessing Officer for de novo adjudication after providing reasonable opportunity of being heard to the assessee. We make it clear, our aforesaid direction is only with regard to the experience certainty expenditure of ₹ 5.28 crore. The decision of learned Commissioner (Appeals) on this issue is modified to this extent only. 24. As regards ground no.4, the leaned Sr. Counsel submitted that the assessee has already got the desired relief in the order passed by the Assessing Officer while giving effect to the first appeal order. Thus, he submitted, the ground has become academic. In view of the above, ground no.4, is dismissed. 25. Ground no.5, is not pressed, hence dismissed. 26. In ground no.6, corresponding to ground no.7 of Revenue s appeal, the assessee has claimed foreign tax credit in respect of income pertaining to section 10A/10AA of the Act eligible units in India. 27. Brief facts are, in the course of assessment proceedings the assessee furnished countrywise statement of tax paid in support of its claim of tax credit under section 90 and 91 of the Act amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o promote mutual economic relationship, trade and investment. Thus, he submitted, section 90 of the Act empowers the Central Government to enter into DTAA with the Government of any other country for granting relief in respect of cases where income tax is chargeable. He submitted, section 10A/10AA grants deduction from eligible income from the total profit. However, such income is chargeable to tax in India as per the provisions of section 4 and 5 of the Act. He submitted, the exemption under section 10A / 10AA of the Act is for a specified period and after expiry of that period such income would otherwise be chargeable to tax. Referring to article 25 of Indo U.S. DTAA, the leaned Sr. Counsel submitted, the condition mandated in the treaty is that if any income derived and tax paid in USA on such income then tax relief / credit shall be granted in India of such tax paid in USA. He submitted, the aforesaid article does not speak of any income tax being paid by the resident assessee under the Indian Income Tax Act as a condition precedent for claiming the benefit of tax credit under DTAA. He submitted, like article 25(2)(a) of India-USA DTAA, similar clause also appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the countries would qualify for tax credit, learned Commissioner (Appeals) has restricted the relief of foreign tax credit only in respect of tax paid in USA even in respect of income which is exempt under section 10A/10AA of the Act. The learned Commissioner (Appeals) has come to such conclusion by following the decision of the Hon ble Karnataka High Court in Wipro Ltd. (supra). The reasoning of the learned Commissioner (Appeals) on the issue is, as per the decision of Hon ble Karnataka High Court in Wipro Ltd. (supra), the foreign tax credit benefit under section 90(1)(a)(ii) of the Act would only be applicable under Indo US DTAA and would not be applicable to other DTAA countries and non DTAA countries. On a careful reading of the decision of the Hon ble Karnataka High Court in Wipro Ltd. (supra), it is noted, while dealing with identical issue the Hon ble Court held that in the cases covered under section 90(1)(a)(ii) of the Act, it is not the case of income being subjected to tax or the assessee has paid tax on the income. The provision applies to a case where the income of the assessee is eligible to tax under the Act as well as in the corresponding law in force in the othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary, would be dealt with at a later stage while dealing with grounds no.8, 9 and 10 of Revenue s appeal. 33. In ground no.9, the assessee has challenged the addition made on account of provision of interest free loans provided to the AEs. 34. Brief facts are, in the course of proceedings before him, the Transfer Pricing Officer noticed that the assessee has provided loan facilities to its AEs without charging any interest. He found that as on 1st April 2008, there was an outstanding loan of U.S. $ 92,50,000 against TCS, Singapore, part of which was re paid by the AE on 12th December 2008, and on 25th November 2008. When the Transfer Pricing Officer called upon the assessee to show cause why the adjustment in respect of interest chargeable on the interest free loan should not be made at appropriate market rate, it was submitted by the assessee that since the loan provided are in the nature of equity infusion, no interest has been charged. Further explaining, it was submitted that the objective of advancing the loan was mainly to acquire downstream companies and further infusion of capital by the AE to other companies as well as entering into joint v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Regulations. Referring to the commercial position of the AEs, learned Sr. Counsel submitted, in case of TCS Ibero America, loan was provided as continuous loss made in the downstream subsidiary restricted the ability to service a loan. Hence, the loan was subsequently converted to equity. He submitted, in case of TCS FNS Australia, debt equity ratio did not permit it to obtain third party funding. He submitted, TCS Morocco has been dormant ever since its incorporation and did not have any operation revenue or significant assets. He submitted, TCS Singapore was also in similar position and the loan was for acquisition of downstream subsidiary. He submitted, in all these cases, the assessee has taken strategic decision for acquisition of entities and had decided it to route it through its AEs and accordingly advanced loans to the AEs for further acquisition. Thus, he submitted, the advancement of loan to the AEs being a shareholder s activity, the adjustment made has to be deleted. In support of his contention, the learned Sr. Counsel placed strong reliance upon the decision of the Tribunal, Delhi Bench, in DLF Holdings Ltd. v/s DCIT, ITA no.6336/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned order of the learned Commissioner (Appeals), though, he sketchily referred to some of the submissions made by the assessee, however, he has not at all dealt with them in an effective manner. The learned Commissioner (Appeals), though, has observed that the loans advanced were not merely for downstream acquisition but for a variety of purpose including working capital requirement and other business uses, however, he has not elaborated as to for what other purpose loans were advanced. Without properly dealing with the factual aspect of the issue, learned Commissioner (Appeals) has jumped to the legal aspect and has held that the amount advanced by the assessee is in the nature of loan and has to be benchmarked as such. After considering the submissions of the parties and examining the material on record, we are convinced that various submissions made by the assessee before learned Commissioner (Appeals) have not at all been dealt with. The primary contention of the assessee that the advance made to the AEs is in the nature of quasi equity and falls within shareholder s activity has not been properly addressed by the Departmental Authorities keeping in view the ratio laid d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial guarantee, he fixed guarantee commission @ 3% per annum. 40. While deciding assessee s appeal on the issue, the learned Commissioner (Appeals) reduced the guarantee commission on performance and lease guarantee to 1.23% per annum i.e., the rate of fee paid by the assessee to the insurance company. Insofar as financial guarantee is concerned, learned Commissioner (Appeals) reduced the guarantee commission to 0.77% per annum relying upon the decision of the Tribunal in Asian Paints India Ltd. (supra). 41. Contesting the charging of guarantee commission, learned Sr. Counsel for the assessee submitted, the provision of corporate guarantee to the AEs does not come within the purview of international transaction as per section 92B of the Act as the guarantee transaction does not constitute purchase, sale or lease of either tangible or intangible property. It also does not have any bearing on the profits, income, losses or assets and does not include any cost apportionment. He submitted, guarantee also does not tantamount to lending or borrowing of money. It also does not constitute provision of intra group chargeable services. He submitted, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appeal being ITA no. 5713/Mum./2016 in the earlier part of this order, we have upheld the decision of learned Commissioner (Appeals) on the issue on the basis of our detailed reasoning therein. In view of the aforesaid, this ground is dismissed. 47. In ground no.2, the Revenue has challenged the decision of learned Commissioner (Appeals) in allowing assessee s claim of exemption under section 10A of the Act in respect of units for which deduction under section 80HHE of the Act was earlier claimed. 48. Brief facts are, during the assessment proceedings, the Assessing Officer noticed that the assessee has claimed deduction under section 10A of the Act in respect of a unit for which deduction under section 80HHC of the Act was claimed in the past. 49. The Assessing Officer observed, at the time when the unit was commenced, section 10A of the Act was not available and the assessee was claiming deduction under section 80HHE of the Act. He observed that after opting out of section 80HHE of the Act for the assessment year 2001 02, the assessee started claiming benefit under section 10A of the Act. Thus, holding that the assessee is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 80 HHE thus prohibits is the claim of deduction allowed under section 80HHE under any other provision, be it in the same assessment year or in other assessment year. In the present case, it is not even the ground of the revenue that the deduction under section 10A of the Act claimed by the assessee in the present year is in relation to profit for which the assessee was granted deduction under section 80HHE. Sub-section 5 of section 80 HHE of the Act, therefore, in the present case would have no applicability. We are fortified in our view by a division bench judge ent of Delhi High Court in the case of Commissioner Income Tax Vs. Damco Solutions Pvt. Ltd., reported in 200 Taxman page 26 in which it was observed as under:- 2. This stand of the Assessing Officer was repelled by the CIT (A) holding that the purpose of subsection (5) of section 80HHE was to avoid double benefit and that would not mean that if the assessee for a particular assessment year wanted relief only under section 10A of the Act that would be denied to the assessee. The only embargo was not to give relief under both the provisions. 7] Coming to the revenue s second objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the Court held that the total turnover for the purpose of section 10 of the Act cannot be understood as defined for the purpose of section 80 HHE. It was further held that thus the expenses which are to be excluded from the export turnover, would also have to be excluded for the purpose of computing total turnover. 2. Thus, respectfully following the decision of the Co ordinate Bench and the decision of the Hon'ble Jurisdictional High Court in assessee s own case as referred to above, we uphold the decision of learned Commissioner (Appeals) on the issue. This ground is dismissed. 3. In grounds no.3 and 4, the Revenue has challenged deletion of disallowance of commission paid to non residents under section 40(a)(i) of the Act. 4. Brief facts are, during the year under consideration the assessee paid commission to some non residents located in Denmark, Saudi Arabia, UAE and South Africa without withholding tax under section 195 of the Act. When the Assessing Officer called upon the assessee to explain why the commission paid should not be disallowed under section 40(a)(i) of the Act, the assessee submitted that these commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess connection in India or any PE in India has not been controverted by the Revenue. Further, the nature of payment viz. commission has also not been disputed by the Revenue. That being the case, since the commission paid to the non resident agents is not chargeable to tax in India at their hands, there is no necessity for the assessee to withhold tax under section 195(1) of the Act on such payment. Accordingly, we uphold the decision of learned Commissioner (Appeals) on this issue. 6. In grounds no.5 and 6, the Revenue has challenged the decision of learned Commissioner (Appeals) in directing the Assessing Officer to reduce the expenditure incurred in foreign currency both from export turnover as well as total turnover while computing deduction under section 10A / 10AA of the Act. 7. Brief facts are, while computing deduction under section 10A of the Act, the Assessing Officer held that the expenditure incurred in foreign currency while providing technical services outside India, which is basically salary paid to TCS employees stationed abroad should be reduced from the export turnover. Though, it was argued by the assessee that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that certain issues relating to transfer pricing adjustment including selection of tested parties insofar as it relates to provision of software consultancy services have in the meanwhile being resolved through Mutual Agreement Procedure (MAP) as per Article 27 of the Indo US and Article 25 of the Indo Netherland tax treaties. It was also submitted that both the parties have accepted the MAP resolution. However, as submitted by the learned Counsels appearing for the parties, the aforesaid MAP resolution would only apply in respect of international transactions with the AEs in USA and Netherland and would not apply to the international transactions with AEs located in other countries. Keeping the aforesaid factual position in perspective, we will proceed to resolve the issue at hand. 13. Brief facts are, the assessee provides consultancy services, develops and implements products for customers on all the matters covering implementation of computer software and hardware system, management and data processing and information system and data communication system. It has several subsidiaries in India and abroad. As stated by the assessee, its foreign su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him, the Transfer Pricing Officer selected some comparables and proceeded to compute the margin. By adopting the aforesaid PLI, the Transfer Pricing Officer computed the net cost plus margin of 6.42% and suggested an adjustment of ₹ 811.81 crore. It is relevant to observe, in course of transfer pricing proceeding, the assessee had furnished alternative benchmarking by considering the AEs as tested parties in their respective geographical locations with independent comparables. However, such benchmarking furnished by the assessee was completely ignored by the Transfer Pricing Officer. The adjustment made to the arm s length price was challenged before the first appellate authority. 14. Learned Commissioner (Appeals), after considering the submissions of the assessee, though, agreed with the Transfer Pricing Officer that the task performed by the AEs is less complex, hence, they have to be treated as tested parties, however, accepting assessee s contention on functional analysis he held that the appropriate PLI would be gross margin / sales (gross profit / sales). Further, learned Commissioner (Appeals) also held that the Transfer Pricing Officer was not justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e PLI, pass through cost and foreign comparables. 18. Learned Sr. Counsel for the assessee strongly supporting the decision of learned Commissioner (Appeals) on the issues contested by the Department submitted, the functional analysis depicts that the AEs are undertaking significant and risk bearing distribution functions, hence, have to be remunerated based on sales. He submitted, for determination of arm's length remuneration of AEs, it is not incentive compatible for AEs to generate business in most strategic markets under a cost plus contract. To put further emphasis on such contention, learned Sr. Counsel drew our attention to the extract from UK and U.S. transfer pricing guidelines wherein it is made clear that in such circumstances, remuneration should be based on sales verses costs. In this context, he also referred to para 2.27 and Para 2.35 of OECD guidelines. He also relied upon the following case laws: i) Mastek Ltd., [2012] 53 SOT 111 (Ahd.); ii) Development Consultants Pvt. Ltd. v/s DCIT, [2008] 115 TTJ 577 (Kol.); and iii) ITO v/s Loreal India Pvt. Ltd., ITA no.5423/Mum./2009, dated 25.04.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of outsourcing / sub contracting to the TCS should be considered for computing the margin; and (iii) whether the alternative benchmarking furnished by the assessee by treating the AEs as tested party with comparables in the same geographical locations is acceptable. On a careful perusal of the facts on record as well as submissions of the learned Counsel for the parties in the course of hearing as well as in the written note, we are of the view that the decision of learned Commissioner (Appeals) on the aforesaid issues are unassailable. As regards the issue of appropriate PLI, we are of the view that considering the nature of activity performed by the assessee as well as the AEs, it cannot be said that the A.Es are not bearing any risk. Rather the facts on record reveal that the AEs performed the role of risk bearing distributors. It is well brought out by learned Commissioner (Appeals) in his order that the AEs are bearing credit risk and risk of default by client. In fact, the assessee through proper evidences has demonstrated instances where the credit risk with reference to part cancellation of contract has been borne by the AEs without compensation from the assessee. The doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not properly considered. However, in course of appeal proceedings, the learned Commissioner (Appeals) examined them in detail and after a detailed analysis approved some comparables selected by the assessee and also added some new comparables. Whereas, the comparable selected by the Transfer Pricing Officer were not on the basis of any detailed search process. At least, no such analysis is either forthcoming from the order of the Transfer Pricing Officer or could be brought to our notice by learned Departmental Representative. On the contrary, on a thorough and careful reading of the impugned order of learned Commissioner (Appeals), we are of the view that learned Commissioner (Appeals) has taken pains to examine in detail the alternative benchmarking done by the assessee with foreign comparables and after detailed analysis has shortlisted the final comparables to be considered for comparability analysis. No convincing argument or evidence has been brought on record by the learned Departmental Representative to persuade us to disturb the finding of learned Commissioner (Appeals) on these issues. In view of the aforesaid, we do not find any merit in the grounds raised by the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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