TMI Blog2019 (10) TMI 1477X X X X Extracts X X X X X X X X Extracts X X X X ..... being reproduced for the sake of brevity. The Tribunal further noted that though the benefit test could not be applied to determine the Arm's Length Price of International Transaction but the matter was restored back to the Assessing Officer/TPO to examine as to whether the payment was based on the agreement and the same adheres to arms length price or not. Following the same parity and reasoning, we hold that the benefit tax could not be applied in the hands of the assessee. However, we remit the issue back to the file of Assessing Officer/TPO to carry out the comparability analysis with direction to confront the assessee with benchmarking analysis adopted and the comparables applied and also to look into the comparables selected by the assessee and decide the issue in accordance with law, after allowing a reasonable opportunity of hearing to the assessee. Disallowance made on account of Circuit Accruals - HELD THAT:- Assessee following recognized method wherein the actual expenditure incurred against the accrual/provisions for the year is accounted for in the subsequent year. This approach adopted by the assessee in recognizing the provision of circuit accruals was not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Tribunal order vide page 16 to 18 and the same are not reproduced for the sake of brevity. Disallowance of annual revenue share based license fee - HELD THAT:- Hon ble High Court in the case of CIT vs Bharti Hexacom Limited [ 2013 (12) TMI 1115 - DELHI HIGH COURT] wherein held that the Revenue share based license fee was an allowable revenue expenditure u/s 37(1) of the Act. Similar proposition is also being laid down by the Tribunal in assessee s own case in Assessment Year 2014-15 under which are being referred but not being reproduced for the sake of brevity. Since the issue stands covered by the Jurisdictional High Court, we find no merit in the disallowance made in the hands of the assessee on this account. Hence, we direct the Assessing Officer to allow the claim of the assessee. TDS u/s 194I - Non -deduction of tax on lease line expenses - HELD THAT:- We hold that there was no requirement to deduct tax at source u/s 194I of the Act. Non-granting complete credit of taxes deducted at source - HELD THAT:- As assessee pointed out that even an application u/s 154 of the Act was pending before the Assessing Officer in this regard. We direct the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent proceedings to erroneously assume that 'no benefit' has been conferred upon the Appellant from the international transactions pertaining to a ding of intra-group services and thereafter re-determining the AEP of the said transaction as 'NIL'; 1.5. disregarding the receipt of services by the Appellant from its AEs which is contrary to the facts of the present year as well as to the stand taken by the Ld.TPO in prior year despite no change in the nature of services involved. Further, the Ld. TPO erred in contending that the services received are duplicative and stewardship in nature, ignoring the documentation and evidences submitted by the Appellant; which contradicts his own contention that the services have actually not been received; 1.6. arbitrarily challenging the veracity of the contractual service agreement disregarding the actual conduct of the Appellant in the availing of intra-group services from AEs basis the elaborate documentary evidences submitted as part of assessment proceedings. 2. TP adjustment with respect to payment of royalty That on the facts and circumstances of the case, and in law, the Ld. AO (following the directions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c basis. 3.2. On the facts, in circumstances of the case and in law, the Ld. AO failed to appreciate that the Appellant follows mercantile system of accounting and accrues circuit charges on scientific basis. 3.3. On the facts, in circumstances of the case and in law, the Ld. AO/DRP failed to appreciate that as per the accounting standards notified under section 145(2) of the Act, the Appellant was required to make provision for circuit accruals for the subject financial year. 3.4. On the facts, in circumstances of the case and in law, the Ld. AO/DRP erred in not appreciating that the Appellant produced evidences to the extent of more than 99.50% for utilisation/reversal made in subsequent years and no adverse finding has been given by Ld.AO/DRP on the same. 3.5. On the facts, in circumstances of the case and in law, the Ld. AO/DRP erred in ignoring the claim of reversals of circuit accruals of INR 10,88,55,005 made in the subsequent years, submitted before the Ld. AO/DRP. 3.6. Without prejudice to the above, on the facts, in circumstances of the case and in law, where any disallowance is made in respect of the aforesaid accruals for the year under consideration, ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, the Ld. AO/DRP erred in disallowing the legitimate business expenditure being in the nature of support service expenses of INR 10,22,08,983 paid to AT T' Communication Services India Private Limited ('ACSL). 5.2. On the facts, in circumstances of the case and in law, the Ld. AO/DRP erred in not taking cognizance of the submissions made by Appellant and the documentary and circumstantial evidence/ proof produced by the Appellant, which duly substantiate that support services were rendered by ACSI to the Appellant company. 5.3. On the facts, in circumstances of the case and in law, the Ld.AO/DRP erred ignoring that the aforesaid disallowance on account of support service expenditure has been deleted by the Hon'ble ITAT tor assessment years 2008-09, 2009-10, 2010-11 and 2011-12. 6. Disallowance of annual revenue share based license fee 6.1. On the facts, in the circumstances of the case and in law, the Ld. AO/DRP erred n disallowing an amount of INR 44,57,84,302 (being disallowance of expense debited in AY 2015-16 amounting to INR 62,97,33,498 less credit of 1NR 5,24,77,792 being 12th part of disallowance in AY 2015-16 and credit of INR 13.14,71,401 cumul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal. The Appellant praxes that appropriate relief be granted based on the said grounds of weal and the facts and circumstances of the case. 3. The Ld. AR for the assessee at the outset pointed out that the issues raised in the grounds of present appeal are squarely covered by the orders of Tribunal starting from Assessment Year 2009-10 onwards. He further pointed out that similar issues have been adjudicated by the Tribunal in ITA No.7001/Del/2018 relating to Assessment Year 2014-15, vide order dated 18.07.2019. 4. The Ld. DR for the Revenue pointed out that the issues were decided in the earlier years, but certain factual aspects needs to be considered. 5. We shall refer to the submissions made by both the AR and DR while deciding the grounds of appeal in the paras below. 6. Briefly in the facts and circumstances of the case, the assessee for the year under consideration had furnished the return of income declaring total income of ₹ 301.37 crores. The assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that there were no change in the facts of the case as in earlier years i.e Assessment Years 2009-10, 2013-14 2014-15. The DRP rejected the same. The Assessing Officer in the final assessment order thus, upheld the said adjustment of ₹ 29.15 crores. 7. The Assessing Officer in the draft assessment order and also in final assessment order made certain disallowance on account of corporate issues. First such addition made in the hands of the assessee was on account of Circuit Accruals amounting to ₹ 10,95,20,722/-. The basis for the said disallowance was similar disallowance being made in Assessment Year 2014-15. The Assessing Officer observed that the assessee company had made reversal to the tune of 87.15 % of the total accrual in Financial Year ending 31.03.2016 31.03.2017 for expenses booked in Financial Year ending 31.03.2015. He was of the view that the assessee was deliberately shifting its tax liability of current assessment year to subsequent years by creating fictitious and contingent liability which could not be allowed. Hence, the addition of ₹ 10,95,20,722/-. 8. Other addition made in the hands of the assessee was on account of the accrual o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 18.09.2017 (d) ITA No.5535/Del/2016 and 7115/Del/2017 relating to Assessment Years 2012-13 and 2013-14, vide order dated 27.05.2019 (e) ITA No.7001/Del/2018 relating to Assessment Year 2014-15, vide order dated 18.07.2017. 12. The Tribunal while deciding the issue of Intra Group services availed by the assessee had held that Transactional Net Margin Method was the most appropriate method to be applied for benchmarking the said services and had deleted the adjustment made in the hands of the assessee. The findings of the Tribunal in Assessment Year 2014-15 with regard to the aforesaid issue are in paras 4 to 6 at pages 09 to 16 of the order of the Tribunal. We are referring to the aforesaid findings of the Tribunal but for the sake of brevity, are not reproducing the same. The facts of the present case are identical to the facts in the earlier years and following the same parity and reasoning, we allow the claim of the assessee. Hence, Ground Nos. 1 to 1.6 raised by the assessee in this appeal are allowed. 13. Now coming to the issue raised in Ground Nos. 2 to 2.7 in this appeal against the transfer pricing adjustment of payment of royalty. The assessee had entered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is whether benefit test is to be applied or not, while benchmarking the payment of royalty. We find that the Tribunal in the earlier years has allowed the claim of the assessee and has held that the benefit test cannot be applied. Such is the view taken from Assessment Year 2009-10 onwards. The relevant findings of the Tribunal in this regard are reproduced in the order of the Tribunal relating to Assessment Year 2014-15 at paras 17 18 which are being referred, but not being reproduced for the sake of brevity. The Tribunal further noted that though the benefit test could not be applied to determine the Arm's Length Price of International Transaction but the matter was restored back to the Assessing Officer/TPO to examine as to whether the payment was based on the agreement and the same adheres to arms length price or not. Following the same parity and reasoning, we hold that the benefit tax could not be applied in the hands of the assessee. However, we remit the issue back to the file of Assessing Officer/TPO to carry out the comparability analysis with direction to confront the assessee with benchmarking analysis adopted and the comparables applied and also to look into th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment Year 2014-15 relying on the orders of the Tribunal in the case of the assessee in earlier years had allowed the claim of the assessee vide paras 13 to 15 at pages 23 to 25 (part) of its order. Following the same parity of reasoning, we hold that the said expenditure is duly allowable in the hands of the assessee. We are referring to the findings of the Tribunal at pages 23 to 25. For the sake of brevity, the same are not reproduced. Thus, Ground Nos. 4 to 4.6 raised by the assessee in this appeal are allowed. 17. Next disallowance made in the case of the assessee is support service expenses which is raised vide Ground Nos. 5 to 5.3. The assessee had incurred the said expenditure of support services totaling to ₹ 10.22 crores which was paid to the group company. The assessee claims that it had availed the said services from the group company in different fields of operation, which was necessary and imperative for carrying on its business. No mark up was charged on the said services provided by the AE. The availment of the support services from the AE was through support services agreement. The assessee claims that the allocation of cost of ₹ 10.22 crores is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee drew our attention to the provision of section 35BB of the Act and pointed out that the said section talks of the expenditure incurred on obtaining and acquiring the licences. However, where for maintaining the services, regular charges were paid, the same were to be allowed as expenditure in the hands of the assessee and not capitalized and amortized u/s 35BB of the Act. The Ld.AR for the assessee also pointed out that this issue is also covered by the order of the Tribunal which in turn had followed the ratio laid down by the Hon ble High Court in the case of CIT vs Bharti Hexacom Limited [2014] 265 CTR 130 (Delhi). 20. We find that the issue stand squarely covered by the dictate of the Hon ble High Court in the case of CIT vs Bharti Hexacom Limited (Supra) wherein Hon ble High Court held that the Revenue share based license fee was an allowable revenue expenditure u/s 37(1) of the Act. Similar proposition is also being laid down by the Tribunal in assessee s own case in Assessment Year 2014-15 under paras 19 to 21 at pages 27 to 29 of the order, which are being referred but not being reproduced for the sake of brevity. Since the issue stands covered by the Jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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