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TMI Blog2020 (3) TMI 1418X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order'), in pursuance of the directions issued by Dispute Resolution Panel - 2 ('Hon'ble DRP'), Mumbai, on the following grounds : On the facts and circumstances of the case and in law, the Learned AO, based on the directions of the Hon'ble DRP has: General Ground 1. The learned AO/Hon'ble DRP erred in determining the total taxable income of the Appellant for AY 2011-12 at Rs 85,35,18,207 instead of the income offered by the Appellant for the subject AY under normal provisions of the Act in its income-tax return. 2. The learned AO has erred in passing a draft assessment order in the case of the Appellant in lieu of the final assessment order given that the Appellant is an Indian Company in whose case the Transfer Pricing order passed under section 92CA(3) of the Act for the subject AY has not resulted in any variation to the income or loss returned for the subject AY. Transfer Pricing Grounds 3. The learned AO has erred in making a reference of the Appellant's case to the learned TPO, pursuant to which the learned TPO erred in proposing a transfer pricing adjustment of Rs 213,35,00,600 for the purchase of a customer contract. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. The learned AO has erred in initiating penalty proceedings under Section 271(1)(c) of the Act." 3. The facts in brief are that that assessee i.e. WNS Global Services Private Limited, hereinafter referred to as WNS India. The assessee filed its return of income on 30.11.2011 declaring total income at Rs Nil, which was processed u/s. 143(1) of the Act. Subsequently, the case was selected for scrutiny and statutory notices were duly issued and served upon the assessee. It is engaged in the business of providing information technology enabled business process outsourcing servicing, including data processing and transmission of data. During the year under consideration, the assessee carried out the said business activities through various units registered with Software Technology Park of India (STP)/ Special Economic Zone of India (SEZ). 4. Ground no. 1 is general in nature and does not require any adjudication. 5. The issue raised in Ground nos. 3 and 4 relates to transfer pricing adjustment. The Assessing Officer on verification of audit report filed by the assessee in Form No.3CEB noticed that during the year the assessee had transactions with its associate concerns and accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he MSA. Further pursuant to the purchase of MSA, the 15:85 arrangement between WCIL and WNS Sri Lanka was terminated and new agreement was entered into by the assessee with WNS Sri Lanka under which WNS Sri Lanka operated on a cost plus mark-up basis. 6. The learned TPO determined the ALP based on incremental benefit approach. He determined the ALP by considering only incremental value earned by WNS India by replacing actual billings for the period 1.4.2011 to 31.03.2014. Accordingly, by passing an order u/s. 92CA(3) of the Act on 30.01.2015 made an adjustment of Rs 171,93,20,475/- to the ALP on account of purchase of business rights (MSA for Rs 4,91,61,75,000/- by the assessee. During the year the Assessing Officer noted that the payment was made by the assessee company to the AE on account of capital expenditure to buy business rights and the payment is capitalized in the financial year 2011-12 relevant to A.Y. 2012-13 and the depreciation has been claimed in the year 2012-13. Accordingly, no transfer pricing adjustment is to be made to the income of the assessee while computing the assessed income during the year. Being aggrieved by the order of the TPO assessee filed appeal be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75.87 37.83 49.86 Total 302.3 233.72 68.58 29.34 8.21 Similar overvaluation of revenues is also seen for the earnings / revenue attributable to Srilanka. A comparison of the actuals with the projected revenues is revealing and thus is tabulated below:- S.No. Financial Year Projected Revenues (In Million USD) Actual Revenues (In Million USD) Difference (In Million USD) % Overvaluation with Actuals as Base % Overvaluation with Projected Revenues as Base 1 2011-12 13.25 12.18 1.07 8.78 8.07 2 2012-13 15.05 11.5 3.55 30.86 23.58 3 2013-14 17.06 11.38 5.68 49.91 33.29 Total 45.36 35.06 0.3 29.37 22.70 8.22 The DRP has noted that the revenues of Srilanka are over-projected by more than 49% for the F.Y. 2013-14, if the actual revenue earned is used as a base. 8.23 It is also a matter of record that before entering into the tripartite agreement, the services were provided to Aviva Group by the assessee company and the revenues were being shared between the Indian company and the Mauritius AE in the ratio of 85:15. Thus, to compute the ALP of this transaction, the appropriate approach will be to compute the incremental revenue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purchase of MSA from the associate concern viz. WCIL. The learned AR submitted that the assessee in its transfer pricing study has followed Comparable Uncontrolled Price (CUP) as the most appropriate method with the value determined under the valuation report given by an independent valuer as a valid CUP. In defence of this arguments, the learned AR relied on the following decisions: i) Tecumseh Products India (P) Ltd. vs. ACIT ITA 1686/Hyd/2010 and ii) Social Media India Ltd. vs. ACIT 28 ITR (T) 212 The learned AR further submitted that TPO is duty bound to determine the ALP of international transactions by adopting one of the methods prescribed under the act and cannot deviate therefrom. He further argued that no provision under the Act empower the TPO to determine the ALP on estimate basis that too by entertaining doubts with regard to business expediency of payment and in process stepping into the shoes of the AO for making disallowance u/s. 37(1). He further relied on the decision of Hon'ble Delhi High Court in the case of Li & Fung India (P) Ltd. v. CIT [2014] 361 ITR 85, wherein it has been held that Section 92C(1) states that "ALP in relation to an international tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t participant approach i.e. determination of fair value of a market based measurement is not an entity specific measurement. Accordingly, the learned AR contended the projected revenue and projected operating EBIT from unexpired period of the MSA was considered to determine the price payable by WNS India to WCL. The learned AR also referred and relied on the decision of Hon'ble Apex Court in the case of G L Sultania and Anr. Vs. SEBI & Ors (AIR 2007 SC 2172), wherein the Apex court while dealing with objections related to the issue on valuation has clearly held that "unless it is shown that some well accepted principle of valuation has been department from without any reason, or that the approach adopted is patently erroneous or relevant factors have not been considered by the valuer or that the valuation was made on a fundamentally erroneous basis or that the valuer adopted a demonstrable wrong approach or a fundamental error going to the root of the matter, this court would not interfere with the valuation of an expert." The learned AR therefore submitted that valuation of intangible requires expertise and knowledge in the domain of valuation principles, markets and business nice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as the ALP and no adjustment to the value of the international transaction be made in the present case. The learned AR relied on the decision of the Tribunal in the case of DCIT vs. Calance Software (P.) Ltd. (ITA 5023/Del/2012). 11. The learned AR also contended that the projections cannot be substituted by actuals and hindsight ought not to affect a valuation report. The learned AR submitted that the value determined as of a specific point of time is a function of facts that existed and events anticipated as at that point of time of undertaking the valuation. Because factual evidence from subsequent events that occurred would not have been available to a willing buyer and willing seller at a effective valuation date, it is only what would have been reasonable anticipated viz a viz the future, which is presumed by the parties at that point of time. The learned AR submitted as a hindsight is not available to a buyer and seller in the open market transaction, it should be admissible in reaching a valuation conclusion in notional market transactions. Accordingly, where the valuation has been carried out based on management's projections, the same should be considered as reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by WCIL from Aviva Singapore while 15% of the revenue was retained by WCIL. Pursuant to the purchase of MSA, the assessee became the primary entity servicing the contract and, accordingly, 100% of the revenues in respect of this MSA accrued to the assessee from Aviva Singapore. Given the above scenario, the learned AR submitted that it is quite evident that 15% of the total billings to Aviva Singapore which would have otherwise been retained by WCIL should also now additionally be considered as the incremental earnings for the assessee, which are directly resulting from the purchase of the MSA. The total incremental earnings on this account amounts to USD 61.39 million (calculation thereof is placed at page 802 of the paper-book). 15. The learned AR further submitted that WCIL was also sub contracting some portion of the work under the MSA to delivery centers in Sri Lanka under the 15:85 revenue sharing arrangements. Thus, prior to purchase of the MSSA by the assessee from WCIL, the profits from the operations of the Sri Lanka delivery centers did not accrue to the assessee. Based on the above, the learned AR submitted that 85% of the client billings for the work done by WNS Sri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e customer base acquired by the assessee cannot be termed as knowhow, patent, copyright or trademark or franchise as these are enforceable rights while in the instant case is of commercial rights not having the similar nature. It also cannot be considered as license or business or commercial right of similar nature, as it does not relate to any intellectual property, whereas section 32(1 )(ii) contemplate depreciation in respect of those license or right which relate to intellectual property. The section 32(1)(ii) contemplates business or commercial right relating to intellectual property and not to all categories of business or commercial right. The learned DR while reiterating the facts before the Bench as has been done by the learned AR submitted that so far as consideration of USD 110 millions paid by WNS India to WCIL for acquisition of customer rights, learned DR submitted that there is no merit in the arguments of the learned AR that any fault or infirmity have been found by the TPO/DRP with the valuation and he heavily relied on the order of the TPO and adjustment made and the order of the DRP, who has dealt with the issue in a detailed manner as is apparent from pages 3 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the hands of the transferor of the business by claiming to be a slump sale transaction. This has been done by invoking the provisions of Explanation 3 to section 43(1) of the Act dealing with actual cost. The Tribunal observed that it is nothing but a colourful device adopted with an intention to avoid tax. The learned DR submitted that depreciation is allowable and admissible on the actual cost as defined u/s. 143(1) of the Act. 19. The Legislature has prefixed the word 'actual' to the word 'cost' in section 43(1) which suggests that the intention of the Legislature was to curb the malpractices and tendencies to inflate capital costs for obtaining higher depreciation while not burdening the other with any material tax liability and to exclude collusive, inflated and fictitious cost. The learned DR countering the argument of the learned AR that hindsight has been used. The purpose of using hindsight is that it is giving the actual price rather than conjecturing the price subject to certain assumptions. The learned DR submitted that it is very rare that these data were not available, makes an alibi for the assessee. He further submitted that since it was laced wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained. We further note that the DRP has also erred in not following any of the prescribed method and agreed with the incremental benefit approach adopted by the TPO by taking the actual figures up to A.Y. 2014-15 and for subsequent year directing the TPO to deflate the projected revenue figures by applying average rate of 22.68%. The case of the assessee is supported by the decision of the Hyderabad Bench of the Tribunal in the case of Tecumseh Products India (P) Ltd. vs. ACIT ITA (supra). The relevant para is reproduced as under: "... This being so, the value paid by Assessee duly supported by valuation report cannot be ignored. In case of any doubt on the matter, the best way is to refer the machinery to the valuation officer under the IT Act. Without doing so, the TPO or the DRP has no base to determine the value at Nil and consequently denying the depreciation claim of the assesses while at the same time, the payment of custom duty and countervailing duty are considered as value of cost. ..." "The learned counsel in the course of arguments relied on the decision of the coordinate bench of IT A T, Mumbai in the case of Ballast Nedam Dredging (supra) to submit that in the abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Arm's length. " In the case of Firmenich Armatics India (P) Ltd. vs. DCIT [2018] 96 Taxmann.com 649, the Co-ordinate Bench has held that TPO is duty bound to determine arm's length price of international transaction by adopting one of the methods prescribed under statute and cannot deviate from restrictions/conditions imposed under statute. It further held that there is no provisions under the Act empowering TPO to determine arm's length price on estimate basis, that too, by entertaining doubts with regard to business expediency of payment and in process stepping into shoes of the AO for making disallowance u/s. 37(1) of the Act. The Hon'ble Delhi High Court in the case of Li & Fung India (P) LTd. vs. CIT [2014] 361 ITR 85, has held that section 92C(1) states that "ALP in relation to an ""international transaction could be determined by any of the methods provided in the said sub-section which is "most appropriate" having regard to the nature of transactions or class of transaction or class of associated persons or functions performed by such persons or such other relevant facts which may be prescribed by the Board..." The Hon'ble Court further emphasized that Revenue mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d revenue and projected operating from the unexpired period of the MSA was considered to determine the price payable by WNS India to WCIL and, therefore, the TPO/DRP cannot resort to their own estimate in determining the arm's length price. The case of the assessee is supported by the decision of the Hon'ble Supreme Court in the case of G L Sultania & Anr. Vs. SEBI & Ors. (AIR 2005 SC 2172), wherein the Apex Court while dealing with the objection related to the issue on valuation has clearly held as under: "80.... It appears to us that the appellant expects this Court to act as an expert itself. This, we are forbidden from doing. Unless it is shown that some well accepted principle of valuation has been departed from without any reason, or that the approach adopted is patently erroneous or relevant factors have not been considered by the valuer or that the valuation was made on a fundamentally erroneous basis or that the valuer adopted a demonstrably wrong approach or a fundamental error going to the root of the matter, this court would not re with the valuation of an expert. ..." 22. We find merit in the contention of the learned AR that valuation of an intangible requires expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to subscribe to the conclusion reached by the learned DRP/TPO. 24. We further note that WCIL had paid Aviva Singapore an incentive payment of GBP 80 million for securing contract with Aviva Singapore with a minimum business of 3000 Full Time Employees for the entire contract period of 8 years and 4 months and the unamortized portion of the MSA incentive payment as on the date of purchase of MSA by the assessee was USD 106.83 million and the assessee was to be benefitted by the higher hourly charge outs agreed with Aviva Singapore. This payment is akin to the cost incurred by the assessee in acquiring/securing customer contract with Aviva at the first place and remains to be attributable over the unexpired period of the MSA. Thus, we find merit in the argument of the learned AR that unamortised value of USD 106.83 million for remaining number of months being the payment to Aviva Singapore ought to be a valid CUP benchmarking to determine arm's length price of the transaction. On this score, USD 110 million paid by the assessee to WCIL is at arm's length standard and consequently, no adjustment to the value of international transaction is required to be made. 25. On the issue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation. For valuation of an intangible asset, only the future projections alone can be adopted and such valuation cannot be reviewed with actuals after 3 or 4 years down the line. Accordingly, the grounds raised by assessee are allowed." 26. We are also of the view that in case the actual working of the contract/hindsight is to be treated as genuine for valuation then transfer of customer relationship by WCIL to the assessee and renewal/extension of contract apart from the MSA incentive payment for the unamortized period must be taken into account for determining the ALP. In this case, we note that the total incremental benefit in respect of extension of the contract with Aviva Singapore would be USD 57.61 million. The assessee has signed the extension of MSA in November 2014 as against the renewal in November 2016 and the contract was renewed up to March 2022. In our opinion, this hindsight post the valuation date has to be considered if the TPO/DRP has determined the arm's length price on actual results. On this issue also we do not find the approach of TPO in determining the value of the international transaction based on incremental benefit from purchase of MSA as correct unle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amendment of clarificatory nature and such deletion should be considered to have been omitted retrospectively. In original scrutiny assessment proceedings, the assessment was completed under section 143(3) of the Act vide order dated 17/3/2006 allowing this claim and accordingly the assessee was granted the deduction under section10A of the Act. In the order of re-assessment for assessment year 2003-04, passed under section 143(3) r.w.s. 263 of the Act vide order dated 23/12/2008, pursuant to revisionary proceedings, the assessee's claim for deduction under section 10A of the Act was disallowed by applying the provisions of sub-section (9) of section 10 of the Act. This finding was upheld by the CIT(A) in the impugned order and the matter is before us for consideration. 3.5.3 Sub-section (9) of section 10A of the Act was omitted from the statute by Finance Act, 2003,w.e.f. 1/4/2004. Para 102 of the Finance Minister's speech while presenting the Union Budget for 2003-04 has been perused and we find that the statement of intent of the legislature for omitting sub-section (9) of section 10A of the Act was that the concessions extended to the IT Sector under sections 10A & 10B of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statute book as completely as if it had never been passed, and the statute must be considered as a law that never existed. To this Rule, an exception is engrafted by the provisions of Section 6(1). If a provision of a statute is unconditionally omitted without a saving clause in favour of pending proceedings, all actions must stop where the omission finds them, and if final relief has not been granted before the omission goes into effect, it cannot be granted afterwards. Savings of the nature contained in Section 6 or in special Acts may modify the position. Thus the operation of repeal or deletion as to the future and the past largely depends on the savings applicable. In a case where a particular provision in a statute is omitted and in its place another provision in a statute is omitted and in its place another provision dealing with the same contingency is introduced without a saving clause in favour of pending proceedings then it can be reasonably inferred that the intention of the Legislature is that the pending proceeding for the same purpose may be initiated under the new provision." 8. Admittedly, in the instant case, there is no saving clause or provision introduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2004-05, the bench could not have adjudicated on the matter, as the present appeal for assessment year 2003-04 was not before it. In respect of the Tribunal's order dated 17/6/2009 the CIT's order under section 263 of the Act for assessment year 2003-04(supra), the bench has only upheld the CIT(A)'s assumption of jurisdiction under section 263 and not adjudicated on the assessee's claim for deduction under section 10A of the Act." Since the issue is identical to the one as decided by the co-ordinate Bench in assessee's own case, respectfully, following the said order allow the ground raised by the assessee. 31. The issue raised in ground no.6 is against the DRP in holding that deduction u/s 10A of the Act after setting off the losses of certain STP/SEZ units against the profits of the STP/SEZ units of the assessee. 32. At the outset, learned counsel for the assessee submitted that the issue is squarely covered by the decision of the co-ordinate Bench in assessee's own case for A.Ys 2005-06 to 2008-09, vide order dated 16.01.2019. The learned AR therefore, prayed that the issue may kindly be decided in favour of the assessee. He also pointed out that the DRP has issued direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer while completing assessment under section 143(3) of the Act also allowed assessee's claim of depreciation. However, learned Commissioner of Income Tax revised the assessment order under section 263 of the Act. Subsequently, while deciding assessee's appeal against the said 29 WNS Global Services Pvt. Ltd. order the Tribunal quashed the order passed under section 263 of the Act and restored the assessment order. Thus, in effect, assessee's claim of depreciation in respect of intangible asset became final. In any case of the matter, there is no dispute that by acquiring M/s. Town and Country Assistance Ltd. the assessee has also acquired contractual rights which, no doubt, is a valuable commercial right. Therefore, it comes within the meaning of intangible asset as per section 32(1)(ii) r/w Explanation 3(b) of the Act. Hence, depreciation claimed by the assessee is allowable. The decisions relied upon by the learned Sr. Counsel for the assessee also supports our aforesaid view. Accordingly, we uphold the decision of the learned Commissioner (Appeals) by dismissing the grounds raised." Respectfully, following the said order, we set aside the order of the DRP and allow the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he export of goods. Reliance in this regard, is placed on the judgment of CIT Vs. Shah Originals 327 ITR 19 (Bom), wherein it was held that exchange fluctuation in the EEFC account as well as the interest which has arisen as a result of the deposits maintained in the EEFC account, cannot be regarded as being part of the profits derived by the assesses from the export of goods or merchandise, therefore, cannot be included in the profit of business, while calculating deduction under s. 80HHC, The relevant portion of the judgment is reproduced below:- "11, The assessee admittedly in the present case received the entire proceeds of the export transaction. The RBl has granted a facility to certain categories of exporters to maintain a certain proportion of the export proceeds in an EEFC account. The proceeds of the account are to be utilized for bona fide payments by the account holder subject to the limits and the conditions prescribed. An assesses who is an exporter is not under an obligation of law to maintain the export proceeds in the EEFC account but, this is a facility which is made available by the Reserve Bank. The transaction of export is complete in all respects upon the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " 16.2 Reliance in this regard is also placed, on the following judgments of the Hon'ble Supreme Court: - (a) Cambay Electric Supply Co. Vs. CIT i 13 ITR 84 (SC) (b) CIT vs. Sterling Foods [1999] 237 ITR 579 (SC) (c) Pandian Chemicals Ltd. 262 ITR 278 (SC) 16.3 Also reliance is placed on the judgment of Hon'ble Madras High Court in the case of CIT vs. Eastern Sea Foods Exports P. Ltd. 215 ITR 64 (Mad.) Further, reliance is also placed on the judgment of Hon'ble Madras High Court in the case of India Cement International Vs. ITO [2009], 185 Taxman 51 (Mad.)., which has been followed by Hon'ble ITAT Mumbai in the case of Larsen & Tubro Infotech Limited Vs DCIT (2012) 19 ITR(Trib) 361 (Mum 'G' Bench). 16.4 On the same issue, the Hon'ble Mumbai ITAT in the case of Lionbridge Technologies P Ltd Vs ACIT in ITA No. 1952/Mum/ 2010 has decided in favour of the Revenue. In view of these facts, the DRP is of the view that no direction needs to be issued on this issue. 16.5 Further, the DRP has noted that the AO has not made any variation to the returned income on this issue. On the claim of the assesses company that the principle of consistency should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er hand, relied on the orders of the AO and learned DRP. He submitted that since such a huge gain is derived from the activities which are post export therefore, they should not be allowed to form part of the profit derived from export activity for the purpose of deduction u/s. 10A of the Act. On the issue of consistency, the AO submitted that year is different and the principle of res judicata is not applicable in the income-tax proceedings. 40. We have heard both the parties and perused the material available on record. We observe that during the year the assessee has made net foreign exchange gain of Rs 63,50,36,264/- on settlement of derivative contracts, which were entered into by the assessee. We find that the AO for A.Y. 2009-10, 2010-11 and 2012-13, in the assessee's own case, has treated profit/loss from forex derivative contracts as part of the export activity for deduction u/s. 10A of the Act. However, during the year, the AO treated the said gain differently. In other words, while computing deduction u/s. 10A, the AO did not treat the said gain as part of the profit from export activity for the purpose of deduction u/s. 10A. However, during the year the AO treated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct is part of the profit from export activity and eligible for deduction u/s. 10A. Besides, Hon'ble Bombay High Court has held in a series of decisions referred to by learned counsel for the assessee namely CIT vs. Gem Plus Jewellery India Ltd., PCIT vs. Jindal Drugs Ltd. and CIT vs. Symantec Software (P) Ltd. , that loss or gain derived from forward contracts entered into by an assessee engaged in export activity should be eligible for deduction. Accordingly, we set aside the order of the DRP on this issue and direct the AO to treat the forex gain as part of the profit for deduction u/s. 10A of the Act. Ground raised by the assessee is allowed. 42. The grievance of the assessee in ground no.9 is that the AO did not set off brought forward business losses and unabsorbed depreciation pertaining to earlier years to the tune of Rs. 189,06,58,168/- against the assessed total income for the assessment year under consideration and carry forward of the balance business loss and unabsorbed depreciation to future years as per the provisions of the Act. 43. After hearing the parties and on perusal of the material available on record, we find that the learned DRP has directed the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act. 6. erred in enhancing the disallowance of depreciation amounting to Rs 122,90,43,750 on intangible assets acquired from WNS Capital Investments Private Limited, Mauritius by the Appellant contending that the business rights acquired by the Appellant do not fall under the definition of intangible assets under Section 32(1) of the Act. 7. (a) The learned AO/Hon'ble DRP erred in holding that the loss from forex derivative contracts form part of the export activity of the Appellant and thus the profits derived from eligible units should be computed after considering the loss from forex derivative contracts. (b) On the facts and circumstances of the case and without prejudice to the position adopted by the Appellant in the tax return, the learned AO/Hon'ble DRP erred in adopting inconsistent approach by not following their respective orders for AY 2011-12 wherein it was held that the profits derived by eligible STP units (under section 10A of the Act) should be computed without considering the gain from forex derivative contracts. (c) Without prejudice to the position adopted by the Appellant in the tax return, the learned AO/Hon'ble DRP erred in not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being commercial rights within the meaning of section 32(1)(ii) of the Act and eligible for depreciation. Accordingly , we hold that depreciation is to be allowed to assessee. The AO is directed accordingly by setting aside the order of DRP on this issue. 47. Ground nos. 5 and 6 pertain to disallowance of depreciation on intangible assets amounting to Rs 1,23,36,29,409/-. During the year the assessee has claimed depreciation on two commercial rights. One, the rights acquired by the assessee of Town & Country Assistance Limited , an UK based company, from WNS Global Services (UK) Pvt Ltd [WNS UK] vide agreement dated 13.01.2004 for consideration of GBP 17,50,000. Secondly, business and commercial rights were acquired by WNS India from WNS Capital Investment Limited [WCIL] in respect of MSA entered into between WCIL and Avival Global Services Private Limited (Aviva Singapore). The assessee has claimed depreciation @25% on same on Written Down Value basis amounting to Rs 45,85,659/- in relation to the commercial rights acquired from WNS UK and Rs 1,22,90,43,750/- qua the commercial rights acquired from WCIL in terms of section 32(1)(ii) of the Act and accordingly, added the same to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Commissioner (Appeals) by dismissing the grounds raised.' From the perusal of the above, it is clear that the commercial rights acquired by the assessee are in the nature of intangible asset as per section 32(1)(ii) read with Explanation 3(b) of the Act and depreciation is allowable on the said rights. Accordingly, we allow the grounds raised by the assessee. Grounds are allowed. 49. The issue in ground no.7 is identical to ground no.8 as decided by us in the appeal for A.Y. 2011-12 above. Facts and circumstances being same, our finding therein will mutatis mutandis apply for this year as well. The AO is directed to treat the loss/gain from forex derivative contracts as part of export activity for the purpose of calculation of deduction u/s. 10A of the Act. Accordingly, loss incurred of Rs 41,64,19,647/- shall be considered while computing deduction u/s. 10A of the Act. Ground is allowed. 50. With regard to Ground no.8, facts in brief are that during the year assessee earned dividend income from Mutual Funds amounting to Rs 2,09,64,709/- which was claimed as exempt u/s. 10(35) of the Act. The assessee incurred direct expenses in relation to the said income amounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and meet working capital requirements. Hence, the interest expenses of Rs 3.84 crores should not be considered for the purpose of computing disallowance under Rule 8D(2)(ii) of the Rules. iii) Interest on loan from related party of Rs 3.17 crores: The assessee had borrowed funds of Rs 22.55 cr from WNS Business Consulting Pvt. Ltd during the merger process in 2009 and, therefore, the interest should not be considered for the purpose of computing disallowance under Rule 8D(2)(ii). iv) Other interest of Rs.0.06 crores: This amount was on account of delayed payment of TDS and other payments and, therefore, they cannot be attributable to any particular source of income and also required to be excluded while computing disallowance under Rule 8D(2)(ii) of the Rules. 51.2. Further the learned AR relied on the decision of the co-ordinate Bench in the case of REI Agro Ltd. vs. DCIT 160 TTJ 107 (Cal), wherein the Bench has held that if any interest expenditure, which is directly relatable to any particular income or receipt, such receipt expenditure is not to be considered under Rule 8D(2)(ii). He also submitted that the assessee's own funds were far more than the investments made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to do. The case of the assessee is squarely covered by the decision of the jurisdictional High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. (supra), wherein the Hon'ble Court has held that satisfaction of the Assessing Officer has to be objectively arrived at after considering all relevant facts and circumstances and books of accounts of the assessee. In the case of Maxopp Investment Ltd. & Ors. vs. CIT (supra), Hon'ble Delhi High Court has held that provisions of section 14A Rule 8D would be triggered only if Assessing Officer records a finding that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. This decision has been further upheld by the Hon'ble Apex Court in 91 taxmann.com 154 (2018). We, therefore, respectfully following the ratio laid down by the Apex Court and Bombay High Court as discussed above , set aside the order of the DRP and direct the Assessing Officer to delete the disallowance. We are not dealing with the other contentions of the assessee, as we have already allowed the ground on first plea. 54. In respect of Ground no.9, we note that the issue in this ground is qua not allowing the set o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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