TMI Blog2022 (11) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... loated by the assessee s parent company - Disallowance u/s 40(a)(ia) or u/s 37 - HELD THAT:- As noted by the D.R.P that in the said report of the A.O he had constantly harped upon the point that the assessee was not able to substantiate that the amounts were paid to employees as perquisites on which TDS has been deducted. Once the addition is sustained by the D.R.P and made by the A.O for non-deduction of TDS the provisions for addition and confirming the disallowance should have been u/s 40(a)(ia) of the Act and not u/s 37 of the Act as has been invoked by the A.O and sustained by the ld. D.R.P. In view thereof, we set aside the findings of the ld. D.R.P on this issue and allow this ground of appeal of the assessee. Ground is allowed. - ITA No. 270/PUN/2021 - - - Dated:- 9-9-2022 - Shri R.S. Syal, Vice President And Shri Partha Sarathi Chaudhury, Judicial Member For the Appellant : Shri Madhur Agarwal (through virtual) For the Respondent : Shri Kalika Singh (through virtual) ORDER PER SHRI PARTHA SARATHI CHAUDHURY, JM : This appeal preferred by the assessee emanates from the findings of the ld. D.R.P. dated 21-04-2021 for A.Y. 2016-17 as per the foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are development services (i.e. rejecting companies having turnover less than INR 1 crore and higher than INR 800 crores) and INR 1 crore to INR 350 crores in case of provision of ITeS (i.e. rejecting companies having turnover less than INR I crore and higher than INR 350 crores) applied by the Appellant for identifying the comparable companies. 4. Selecting inappropriate qualitative filters and applying certain filters on selective basis Erred in selecting following inappropriate qualitative filters and also applying certain filters on selective basis: Rejection of companies with less than 75% earnings from exports as against 25% earnings from export filter applied by the Appellant; Rejection of companies with different accounting year; Rejection of companies with forex spending greater than 75% of operating cost; Rejection of companies having employee cost less than 25% of the total cost; Rejection of companies having gross intangibles greater than 50% of operating revenue: and Rejection of companies with less than 75% earnings from exports as against 25% earnings from export filter applied by the Appellant; Rejection of companies with different accounti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persistent loss making. Erred in rejecting Sundaram Business Services Ltd from the final set of comparable companies in IT enabled services segment by stating that the said company had incurred persistent loss, i.e. loss for 3 consecutive years. without appreciating the fact that the aforesaid company is not a persistent loss making company. 11. Non consideration of the directions of the Hon'ble DRP in relation to consideration of the rectified operating margins and working capital adjusted operating margins of the comparable companies pertaining to provision of software development services segment. Erred on facts and in law by not giving effect to the directions of the DRP issued under section 144C of the Act in relation to consideration of rectified operating margins and working capital adjusted operating margins of the comparable companies pertaining to provision of software development services segment while passing the final assessment order under section 143(3) read with section 144C(13) read with section 144B of the Act. 12. Non-consideration of adjustment for differences on account of functional and risk profile of comparable companies vis-a-vis the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und of appeal 17. Deduction in respect of education cess On the facts and circumstances of the case and in law, the Appellant prays that the liability for education cess on Income-tax paid for the year ought to be allowed as a deduction while computing the total income. 2. At the very outset, the ld. Counsel for the assessee, submitted that with respect to grounds No. 1 to12 in the original grounds of appeal, they have been adjudicated as per the Advanced Pricing Agreement ( APA ) entered between the assessee and the CBDT dated 15-12-2021. That after the outcome of APA the assessee has filed Modified Grounds of Appeal before the Tribunal. Now, in APA as per clause (2) the terms of the agreement have been spelt out as follows: The agreement shall apply to consecutive five years commencing from previous year 2015-16 to previous 2019-20 (relevant to assessment years 2016-17 to 2020-21) (hereinafter referred to as APA years . The Agreement shall also apply to consecutive four years commencing from previous year 2011-12 to 2014-15 (relevant to assessment years 2012-13 to 2015-16) (hereinafter referred to as Rollback years ). The covered transactions are given at para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of ESOP expenses 3,50,51,094 3. Simultaneously, BMC India had also filed an application for Advance Pricing Agreement ( APA ) with the Central Board of Direct Taxes ( CBDT ) and covered following international transactions: 1. Provision of software development services )including professional services) 2. Provision of Information Technology enabled services; 3. Provision of sales support services; 4. Allocation of communication cost; and 5. Reimbursement of expenses. 4. The same has reached a conclusion and BMC India has signed an agreement with CBDT on 15 December 2021 (copy of the signed APA application is enclosed as Attachment 3 at page no 18 to Page no 53). The Agreement is applicable to consecutive nine years commencing from FY 2011-12 to FY 2019- 20 (relevant to AY 2012-13 to AY 2020-21) and the captioned assessment year is covered in the APA agreement. 5. Further, BMC India would like to highlight the fact that 26 associated enterprises ('AEs') have been covered under signed APA and 2 AEs namely BMC Finland LE ('BMC Finland') and BMC Software GMBH, Austria ('BMC Austria') have been erroneo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition for adjudication of the Hon'ble Bench. Kindly refer Attachment 2 for modified ground of appeal. 4 Therefore, as per the submissions of the assessee, the quantum of transfer pricing additions after Advance Pricing Agreement is Rs. 3,080/- only as against the total quantum pricing additions of Rs. 44,64,51,873/- as per the original grounds. In this regard, the assessee filed a modified ground of appeal as follows: I Grounds of objection in respect of transfer pricing adjustment 1. General ground challenging the transfer pricing adjustment of INR 3,080/- consequential to non-consideration/acceptance of comparability analysis as documented in the transfer pricing study report. Erred in making transfer pricing adjustment to Appellant s international transactions in the nature of provision of software develo0pment services not considering/accepting the comparability analysis documented in the Transfer Pricing study report for benchmarking analysis. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above ground of appeal, at any time before or at the time of hearing of the appeal, so as to enable the Honourable ITAT to decide this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee has not furnished any documentary evidence by way of authentic technical literature in support of its claim that PRI lines are in the nature of standard facilities. The ratio of the decision of the Hon'ble Supreme Court cannot be considered to be applicable to the facts of the assessee's case, as the assessee failed to substantiate its claim that PRl lines are in the nature of standard facilities. 16.7 In view of the above the contentions advanced by the assessee to state that the payments made for the use of PRl lines do not fall under the scope of fees for technical services and consequently they are not liable for TDS uls. 194J are considered to be unsubstantiated. We are therefore of the view that the A.O. has rightly treated the said payments as fees for technical services liable for TDS uls.194J and has rightly disallowed the said expenditure uls.40(a)(ia) in view of the failure of the assessee to make TDS. Hence, this ground of objection is rejected. 7. We find that this issue is squarely covered in favour of the assessee by the order of Pune Tribunal in assessee s own case in ITA No. 2038/PUN/2018 for A.Y. 2015-16, order dated 07-06-2022 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 1 (SC). Resultantly, on the merits also, the Revenue would have no ground to succeed. Respectfully following the aforesaid decision, we direct the A.O/T.P.O to delete the addition on lease line charges from the hands of the assessee. Accordingly, this ground of appeal of the assessee is allowed. 8. In the aforestated decision, the Tribunal relied on the decision of Hon ble Bombay High Court in the case of Lee Murihead (P) Ltd. (2020) 119 taxmann.com 499 (Bom). Further, we find that in the said decision, the Hon ble Bombay High Court had referred to the decision of Hon ble Supreme Court in the case of CIT Vs. Kotak Securities Ltd. (2016) 67 taxman.com 356 (SC) while providing relief to the assessee. This decision of Hon ble Apex Court has been placed before us in the paper book filed at page 1112 onwards. In view of the aforestated judicial pronouncement where the addition on lease line charges have been deleted, respectfully following the same, on the same parity of reasoning this ground of appeal of the assessee is allowed and the A.O/T.PO is directed to delete addition on lease line charges from the hands of the assessee. Ground No. 13 is allowed. 9. The next gro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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