Addl. CIT, Special Range- 1 , New Delhi v. Aricent Technologies (Holdings) Ltd., New Delhi

ITA 5026/DEL/2018 | 2011-2012
Pronouncement Date: 29-11-2019 | Result: Dismissed

Appeal Details

RSA Number 502620114 RSA 2018
Assessee PAN AACCK8280B
Bench Delhi
Appeal Number ITA 5026/DEL/2018
Duration Of Justice 1 year(s) 4 month(s) 11 day(s)
Appellant Addl. CIT, Special Range- 1 , New Delhi
Respondent Aricent Technologies (Holdings) Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2019
Appeal Filed By Department
Order Result Dismissed
Bench Allotted I1
Tribunal Order Date 29-11-2019
Assessment Year 2011-2012
Appeal Filed On 18-07-2018
Judgment Text
-1 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-1 NEW DELHI) !'#$% !'#$% !'#$% !'#$% &'& &'& &'& &'& ( ( ( ( BEFORE MS. SUSHMA CHOWLA JUDICIAL MEMBER & SHRI PRASHANT MAHARISHI ACCOUNTANT MEMBER ) )) ) / ITA NO. 1308/DEL/2015 *%% *%% *%% *%% / ASSESSMENT YEAR: 2010-11 ARICENT TECHNOLOGIES HOLDINGS LTD. 5 JAIN MANDIR MARG (ANNEX) CONNAUGHT PLACE NEW DELHI-110002. PAN-AACCK8280B ........... + /APPELLANT VS DCIT CIRCLE-3(1) NEW DELHI. . -+ / RESPONDENT ) )) ) / ITA NO. 4913/DEL/2018 *%% *%% *%% *%% / ASSESSMENT YEAR: 2011-12 ARICENT TECHNOLOGIES (HOLDINGS) LTD. 5 JAIN MANDIR MARG CONNAUGHT PLACE NEW DELHI-110001. PAN-AACCK8280B ........... + /APPELLANT VS DCIT CIRCLE-3(1) C.R.BUILDING NEW DELHI. . -+ / RESPONDENT 2 ITA NO S.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 ) )) ) / ITA NO.5026/DEL/2018 *%% *%% *%% *%% / ASSESSMENT YEAR: 2011-12 ADDL. CIT SPECIAL RANGE-1 ROOM NO.-159A 1 ST FLOOR C.R.BUILDING NEW DELHI. .......... + /APPELLANT VS ARICENT TECHNOLOGIES (HOLDINGS) LTD. 5 JAIN MANDIR MARG CONNAUGHT PLACE NEW DELHI-110001. PAN-AACCK8280B . -+ / RESPONDENT + ./& / APPELLANT BY : SH. AJAY VOHRA SR.ADV. & SH. NEERAJ JAIN ADV. -+ ./& / RESPONDENT BY : SH. SANJAY I.BARA CIT DR ) )) ) / ITA NOS.7637/DEL/2018 & 1944/DEL/2017 *%% *%% *%% *%% / ASSESSMENT YEARS: 2014-15 & 2012-13 ARICENT TECHNOLOGIES (HOLDINGS) LTD. 5 JAIN MANDIR MARG (ANNEX) CONNAUGHT PLACE NEW DELHI-110001. PAN-AACCK8280B ........... + /APPELLANT VS ADDL. CIT SPECIAL RANGE-1 ROOM NO.-159A 1 ST FLOOR C.R.BUILDING NEW DELHI. . -+ / RESPONDENT ) )) ) / ITA NO. 7112/DEL/2017 *%% *%% *%% *%% / ASSESSMENT YEAR: 2013-14 ARICENT TECHNOLOGIES (HOLDINGS) LTD. 5 JAIN MANDIR MARG CONNAUGHT PLACE NEW DELHI-110001. PAN-AACCK8280B ........... + /APPELLANT VS 3 ITA NO S.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 JCIT SPECIAL RANGE-1 C.R.BUILDING NEW DELHI. . -+ / RESPONDENT + ./& / APPELLANT BY : SH. AJAY VOHRA SR. ADV. SH. NEERAJ JAIN ADV. SH . RAMIT KATYAL CA SH. ANSHUL SACHAR CA & S H. KARAN JAIN CA -+ ./& / RESPONDENT BY : SH. SANJAY I BARA CIT DR *.'0' / DATE OF HEARING : 16.09.2019 & 17.09.2019 12.'0' / DATE OF PRONOUNCEMENT: 29.11.2019 &! &! &! &! / ORDER PER SUSHMA CHOWLA JM: OUT OF THIS BUNCH OF APPEALS ONE APPEAL IS FILED B Y THE ASSESSEE AGAINST THE ORDER OF ASSESSING OFFICER U/S 143(3) R .W.S. 144C OF THE INCOME TAX ACT 1961 (IN SHORT ACT) DATED 31.12.2 014 RELATING TO ASSESSMENT YEAR 2010-11. FURTHER BOTH THE ASSESSEE AND THE REVENUE HAVE FILED CROSS-APPEALS AGAINST THE ORDER OF ASSESSING OFFICER U/S 143(3) R.W.S. 144C DATED 21.04.2015 REL ATING TO ASSESSMENT YEAR 2011-12. FURTHER THE ASSESSEE IS I N APPEAL AGAINST SEPARATE ORDERS OF THE ASSESSING OFFICER DATED 31.0 1.2017/ /13.10.2017/ 22.10.2018 U/S 144C(1) R.W.S 143(3) RE LATING TO ASSESSMENT YEARS 2012-13 TO 2014-15 RESPECTIVELY. 4 ITA NO S.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 2. THIS BUNCH OF APPEALS RELATING TO SAME ASSESSEE ON SIMILAR ISSUES WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.1308/DEL/2015 [ASSESSEES APPEAL] ASSESSMENT YEAR: 2010-11 3. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL RELATING TO ASSESSMENT YEAR 2010-11:- 1. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN COMPLETING THE ASSESSMENT UNDER SECTION 144C/143(3) OF THE INCOME-TAX ACT 1961 ('THE ACT) AT AN INCOME OF RS . 120 22 91 210 UNDER THE NORMAL PROVISIONS OF THE AC T AS AGAINST INCOME OF RS. 114 65 96 393 RETURNED BY THE APPELLA NT. 2. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN MAKING ADJUSTMENT OF RS. 5 56 94 818 TO THE ARMS L ENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE APPELLANT WITH ITS ASSOCIATED ENTERPRISE ON THE BASIS OF THE ORDER PASSED UNDER SECTION 92CA(3) OF THE ACT BY THE TRANSFER PRICING OFFICER (TPO) READ WITH DIRECTIONS OF DISPUTE RESOLUTION PANEL ( DRP) PASSED UNDER SECTION 144C(5) OF THE ACT. 2.1 THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS A ND IN LAW IN DETERMINING THE ARMS LENGTH PRICE OF THE INTERNATIO NAL TRANSACTIONS OF PAYMENT OF CORPORATE CHARGES AMOUNT ING TO RS. 3 66 31 346 AT NIL ALLEGEDLY HOLDING THAT: (I) THE SERVICES RENDERED BY THE ASSOCIATED ENTERPR ISE ARE STEWARDSHIP IN NATURE (II) EXPENDITURE INCURRED BY THE APPELLANT ARE DUPL ICATIVE AND REPETITIVE IN NATURE (III) THERE IS NO RECORD AS TO THE SATISFACTION OF THE TAXPAYER ABOUT THE BASIS OF THE ALLOCATION OF SUCH EXPENDITU RE. (IV) THE SERVICES CLAIMED TO HAVE BEEN CARRIED OUT HAVE NOT BEEN SUBSTANTIATED FOR THE BENEFIT WARRANTING ANY C OMPENSATION. 5 ITA NO S.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 (V) THE APPELLANT HAS QUALIFIED STAFF IN INDIA AND HAS INCURRED EXPENSES ON SIMILAR HEADS IN INDIA (VI) THE APPELLANT HAS NOT FURNISHED THE AGREEMENT REPORT ON THE COST ALLOCATION FOR INTER GROUP SERVICES FOR TH E RELEVANT ASSESSMENT YEAR 2.2 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THE FACT THAT THE ASSOCIATED ENTERPRIS E WHILE ALLOCATING THE CORPORATE CHARGES TO THE APPELLANT H AS DULY EXCLUDED THE COST IN THE NATURE OF STEWARDSHIP EXPE NDITURE. 2.3 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE ALLOCATION OF EXPENDITURE BY THE ASSOCIATED ENTERPRISE WAS DULY SUPPORTED BY A GLOBAL TRANSFER PRICING REPORT PREPARED BY AN INDEPENDENT CONSULTANT NAMELY DELO ITTE TAX LLP USA. 2.4 WHILE ALLEGEDLY HOLDING THAT NO BENEFIT WAS RE CEIVED BY THE ASSESSEE FROM PAYMENT OF CORPORATE CHARGES THE DRP ERRED ON FACTS AND IN LAW IN SUMMARILY DISREGARDING THE C ORRELATION BETWEEN SERVICES RECEIVED FROM THE ASSOCIATED ENTER PRISE AND INCREASE IN THE REVENUE AND PROFITS OF THE APPELLAN T. 2.5 THAT THE ASSESSING OFFICER/DRP GROSSLY MISUNDE RSTOOD AND MISINTERPRETED THE FACTS OF THE COST ALLOCATION AGREEMENT ENTERED INTO BETWEEN THE APPELLANT AND ITS AE. 2.6 THAT THE DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT PAYMENT MADE BY THE APPELLANT TO ITS ASSOCIATE D ENTERPRISE ON ACCOUNT OF CORPORATE CHARGES REPRESENTS ACTUAL COST INCURRED BY THE ASSOCIATED ENTERPRISE ON BEHALF OF THE APPEL LANT. 2.7 THAT THE DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THE ADDITIONAL EVIDENCES SUBMITTED IN THE FORM OF A FFIDAVITS OF EMPLOYEES OF THE ASSOCIATED ENTERPRISE RENDERING VA RIOUS SERVICES TO THE APPELLANT. 2.8 THAT THE ASSESSING OFFICER/ DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE EXPENDITURE ON THE PAY MENT FOR SERVICES RECEIVED FROM THE ASSOCIATED ENTERPRISE WA S WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE APPE LLANT. 2.9 THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS A ND IN LAW IN NOT APPRECIATING THAT THE EXPENDITURE ON THE PAYMEN T FOR SERVICES RECEIVED FROM THE ASSOCIATED ENTERPRISE WAS VALIDLY BENCHMARKED ALONG WITH OTHER CLOSELY LINKED TRANSACTIONS APPLYI NG TNMM AS 6 ITA NO S.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 MOST APPROPRIATE METHOD AND THAT NO ADVERSE INFEREN CE COULD BE DRAWN ON THIS ACCOUNT. THAT THE ASSESSING OFFICER/ DRP ERRED ON FACTS AND IN LAW IN COMPUTING ADJUSTMENT ON ACCOUNT OF INTERNATIONAL TRANSACTION OF PAYMENT MADE FOR SERVICES RECEIVED FROM THE ASSO CIATED ENTERPRISE WITHOUT APPLYING ANY PRESCRIBED METHODS. 3. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN MAKING AN ADDITION OF RS. 14 75 217 ON ACCOUNT OF T HE ALLEGED DIFFERENCE IN INTEREST CHARGED ON FOREIGN CURRENCY LOAN OF USD 9 00 000 EXTENDED TO THE ASSOCIATED ENTERPRISE BY A PPLYING THE INTEREST RATE OF 13.25%. 3.1 THAT THE ASSESSING OFFICER / DRP ERRED ON FACTS AND IN LAW IN DISREGARDING THE FACT THAT THE LOAN WAS ADVANCED BY THE APPELLANT TO ITS ASSOCIATED ENTERPRISE IN FOREIGN D ENOMINATED CURRENCY AND ACCORDINGLY LOAN AVAILABLE IN THE INT ERNATIONAL MARKET WITH INTEREST RATE COMPUTED CONSIDERING LIBO R RATES SHALL BE APPLIED FOR BENCHMARKING. 3.2 WITHOUT PREJUDICE THE ASSESSING OFFICER / TPO ERRED ON FACTS AND IN LAW IN NOT GIVING EFFECT TO THE DIRECT IONS OF THE DRP TO CONSIDER BASE RATE OF SBI FOR COMPUTING THE ARMS LE NGTH RATE OF INTEREST AND INSTEAD CONSIDERING PLR OF SBI. 4. THAT THE ASSESSING OFFICER/TPO ERRED ON FACTS AN D IN LAW IN MAKING AN ADJUSTMENT OF RS. 1 75 88 255 BY ALLEGEDL Y RE- CHARACTERIZING THE OUTSTANDING RECEIVABLES FROM THE ASSOCIATED ENTERPRISE AS IN THE NATURE OF INTERNATIONAL TRANSA CTION OF UNSECURED LOANS. 4.1 THAT THE ASSESSING OFFICER/TPO ERRED ON FACTS A ND IN LAW IN NOT APPRECIATING THAT DELAY IN RECEIPT OF RECEIVABL E DOES NOT CONSTITUTE AN INTERNATIONAL TRANSACTION IN TERMS OF SECTION 92B OF THE ACT BUT IS A CONSEQUENCE OF AN INTERNAL TRANSAC TION UNDERTAKEN IN THE FORM OF SALES MADE TO ASSOCIATED ENTERPRISE AND THEREFORE IS NOT REQUIRED TO BE BENCHMARKED S EPARATELY. 4.2 WITHOUT PREJUDICE THE ASSESSING OFFICER/TPO E RRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE APPEL LANT HAS RECEIVED RECEIVABLES FROM UNRELATED PARTIES WITH SI MILAR DELAY OF PERIOD AND ACCORDINGLY THE DELAY IN RECEIPT OF RECE IVABLES FROM UNRELATED PARTIES SHOULD BE CONSIDERED AS A VALID C UP FOR THE PURPOSE OF BENCHMARKING. 7 ITA NO S.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 4.3 THAT THE ASSESSING OFFICER/TPO ERRED ON FACTS A ND IN LAW IN NOT APPRECIATING THE SINCE THE OPERATING PROFIT MAR GIN EARNED BY THE APPELLANT IS HIGHER THAN THE COMPARABLE COMPANI ES THE APPELLANT HAS ALREADY FACTORED THE COST OF INTEREST IN ITS PRICING WHILE PROVIDING SOFTWARE DEVELOPMENT SERVICES TO IT S ASSOCIATED ENTERPRISE. 4.4 THAT THE ASSESSING OFFICER/TPO ERRED ON FACTS A ND IN LAW IN NOT APPRECIATING THAT SINCE THE MARGIN EARNED BY TH E APPELLANT IS HIGHER THAN THE MARGIN EARNED BY THE COMPARABLE COM PANIES AFTER MAKING ADJUSTMENT ON ACCOUNT OF WORKING CAPIT AL REQUIREMENTS NO ADDITION ON ACCOUNT OF NOTIONAL IN TEREST FOR DELAY IS RECEIPT OF RECEIVABLES IS OTHERWISE WARRAN TED. 4.5 WITHOUT PREJUDICE THAT THE DRP/TPO ERRED ON F ACTS AND IN LAW IN DISREGARDING THE FACT THAT THE INVOICE FOR S ERVICES WERE RAISED BY THE ASSESSEE TO ITS ASSOCIATED ENTERPRISE IN FOREIGN DENOMINATED CURRENCY AND ACCORDINGLY ARMS LENGTH INTEREST RATE SHALL BE COMPUTED CONSIDERING LIBOR RATES APPLICABL E ON FOREIGN DENOMINATED LOANS. 4.6 WITHOUT PREJUDICE THE ASSESSING OFFICER/ TPO ER RED IN NOT GIVING EFFECT TO THE DIRECTIONS OF THE DRP TO CONSI DER BASE RATE OF SBI FOR COMPUTING THE ARMS LENGTH RATE OF INTEREST AND INSTEAD CONSIDERING PLR OF SBI. 5. THAT THE DRP ERRED ON FACTS AND IN LAW IN NOT AD JUDICATING THE CLAIM OF ALLOWANCE OF DEPRECIATION UNDER SECTIO N 32(1)(I) OF THE ACT ON THE DIFFERENCE BETWEEN THE AGGREGATE BOOK VA LUE OF INVESTMENT IN THE EQUITY SHARES OF FLEXTRONICS SOFT WARE SYSTEMS LIMITED (FLEXTRONICS) IN THE BOOKS OF THE APPELLA NT AND FUTURE SOFTWARE LIMITED (FSL) IN THE BOOKS OF FLEXTRONIC S AND THE AGGREGATE FACE VALUE OF SHARE CAPITAL OF FLEXTRONIC S HELD BY THE APPELLANT AND FSL HELD BY FLEXTRONICS ACCOUNTED AS GOODWILL AMOUNTING TO RS. 26 75 57 10 570 PURSUANT TO AMALGA MATION OF FLEXTRONICS AND FSL WITH THE APPELLANT. 5.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW PURSUANT TO THE DECISION OF SUPREME COURT IN T HE CASE OF CIT VS. SMIFS SECURITIES LTD.: (2012) 348 ITR 302 DEPR ECIATION OUGHT TO BE ALLOWED IN TERMS OF SECTION 32(1)(I) OF THE A CT IN RESPECT OF GOODWILL PURSUANT TO AMALGAMATION OF FLEXTRONICS AND FSL WHILE COMPUTING THE TAXABLE INCOME OF THE APPELLANT 5.2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW CONSIDERATION RECEIVED BY THE APPELLANT FOR TR ANSFER OF CERTAIN CUSTOMER RELATIONSHIPS TO ARICENT TECHNOLOG IES MAURITIUS 8 ITA NO S.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 LIMITED OUGHT NOT TO BE INCLUDED IN THE TAXABLE INC OME OF THE APPELLANT AND THE AFORESAID SHOULD INSTEAD BE REDUC ED FROM THE AMOUNT OF GOODWILL ON WHICH DEPRECIATION OUGHT TO B E ALLOWED UNDER SECTION 32(1)(I) OF THE ACT. 5.3 THAT THE DRP ERRED ON FACTS AND IN LAW IN NOT A DJUDICATING THE AFORESAID CLAIM ON THE GROUND OF APPEALTHAT THE CLAIM WAS NOT MADE BY FILING A REVISED RETURN 5.4 THAT THE DRP ERRED IN LAW IN DIRECTING THAT THE NEW PLEA OF THE APPELLANT CANNOT BE CONSIDERED BY THE PANEL WIT HOUT APPRECIATING THAT THE ADDITIONAL GROUND OF APPEALRA ISED BY THE APPELLANT OUGHT TO HAVE BEEN CONSIDERED BY THE DRP IN TERMS OF SUB-SECTION (2) TO RULE 10 OF THE INCOME-TAX (DISPU TE RESOLUTION PANEL) RULES 2009. 6. THAT WHILE COMPUTING THE TAX AND INTEREST LIABI LITY ON THE ASSESSED INCOME THE ASSESSING OFFICER ERRED ON FAC TS AND IN LAW IN NOT GIVING THE CREDIT OF TAX DEDUCTED AT SOURCE AMOUNTING TO RS. 15 657 340. 7. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN LEVYING INTEREST UNDER SECTION 234A 234B AND SECTI ON 234C OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD AMEND ALTER OR VARY ANY OF THE AFORESAID GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL AND CONSIDER EACH OF THE GROU NDS AS WITHOUT PREJUDICE TO THE OTHER GROUNDS OF APPEAL. 4. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. HENCE THE SAME IS DISMISSED. 5. THE ISSUE IN GROUND OF APPEAL NOS. 2 TO 2.11 IS AGAINST THE TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF PAYMENT O F CORPORATE CHARGES. 9 ITA NO S.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 6. BRIEFLY IN THE FACTS RELATING TO THE ISSUE THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF PRODUCTION OF COMPUT ER SOFTWARE PRODUCTS AND PROVISION OF SOFTWARE DEVELOPMENT SERV ICES FOR COMMUNICATION INDUSTRY. THE ASSESSEE WAS ENGAGED I N THE DEVELOPMENT OF PACKAGED SOFTWARE AND PROVIDING SOFT WARE CONSULTANCY SERVICES AND OTHER ANCILLARY PRODUCTS AND SERVICES PRIMARILY FOR USE IN TELECOMMUNICATIONS INDUSTRY. THE ASSESSEE HAD E NTERED INTO VARIOUS INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIA TED ENTERPRISES (IN SHORT AE) AND ONE OF THE SAID TRANSACTION WAS PAY MENT OF CORPORATE CHARGES OF RS.3 66 31 346/-. THE CASE OF THE ASSES SEE WAS THAT THE AE WAS ALLOCATING THE SAID CORPORATE CHARGES AMONG THE GROUP COMPANIES ON THE BASIS OF COST PLUS 5% MARK UP. TH E ASSESSEE FURTHER CLAIMS THAT THE SAID PAYMENT OF CORPORATE CHARGES OF RS.3.66 CRORES WAS INCLUDED IN THE COST BASE FOR THE PURPO SE OF BENCHMARKING THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY ASSESS EE. THE ASSESSEE APPLIED TRANSACTIONAL NET MARGIN METHOD AS THE MOST APPROPRIATE METHOD AND OP/OC AS THE PROFIT LEVEL INDICATOR (IN SHORT PLI). THE MARGIN OF THE ASSESSEE WORKED OUT TO 25.54%. THE C OMPARABLES WHICH WERE SELECTED HAD MEAN MARGIN OF 14.79% AND H ENCE THE INTERNATIONAL TRANSACTION OF PAYMENT OF CORPORATE C HARGES WAS BENCHMARKED BY THE ASSESSEE TO BE AT ARMS LENGTH. 7. THE ASSESSING OFFICER MADE REFERENCE TO THE TRAN SFER PRICING OFFICER (IN SHORT TPO) TO DETERMINE THE ARMS LENG TH PRICE OF THE 10 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 AFORESAID INTERNATIONAL TRANSACTION. THE TPO IN TH E TP PROCEEDINGS SHOW-CAUSED THE ASSESSEE IN ORDER TO ANALYSIS THE A RMS LENGTH PRICE OF THE AFORESAID INTERNATIONAL TRANSACTION. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE THE TPO OBSERVED THAT THERE WAS NO EVIDENCE THAT THE SERVICES HAD ACTUALLY BEEN PRO VIDED AND ALSO THE ASSESSEE HAD FAILED TO DEMONSTRATE THE NEED FOR SUC H SERVICES AS ALSO THE RECEIPT OF THE SAME. THE TPO ALSO STATED THAT THE ASSESSEE HAD FAILED TO ESTABLISH THAT ITS AES HAD SPECIFIC DEDIC ATED SERVICE CENTRE FOR THE ASSESSEE. HE THUS HELD THAT FROM THE DETAILS A VAILABLE IT WAS CLEAR THAT THE ASSESSEE HAD NOT BEEN ABLE TO PROVE THAT H E HAD ACTUALLY RECEIVED SERVICES OF SAME VALUE THAT CALLED FOR C OST ALLOCATION. IN VIEW THEREOF HE REJECTED THE TRANSACTIONAL NET MAR GIN METHOD APPROACH APPLIED BY THE ASSESSEE AND WAS OF THE VIE W THAT THE SAID TRANSACTION HAD TO BE BENCHMARKED SEPARATELY BY APP LYING COMPARABLE UNCONTROLLED PRICE (IN SHORT CUP) METH OD. SINCE THE ASSESSEE AS PER THE TPO HAD NOT RECEIVED ANY ECONO MIC AND COMMERCIAL BENEFITS FOR MAKING THE AFORESAID PAYMEN TS THE TPO HELD THE ARMS LENGTH PRICE OF THE ALLEGED SERVICES TO BE NIL. THE ASSESSING OFFICER ISSUED THE DRAFT ASSESSMENT ORDER IN THIS R EGARD AGAINST WHICH THE ASSESSEE FILED OBJECTION BEFORE THE DISPU TE RESOLUTION PANEL (IN SHORT DRP) WHO IN TURN DISMISSED THE SAME. T HE ASSESSING OFFICER THUS PASSED FINAL ASSESSMENT ORDER DATED 3 1.12.2014 AND MADE AN UPWARD ADJUSTMENT OF RS.3 66 31 346/-. 11 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 8. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF A SSESSING OFFICER/ DRP/TPO. 9. THE LD.AR FOR THE ASSESSEE POINTED OUT THAT THE ORDER OF THE TPO WAS INCORRECT AS FOR THE PURPOSE OF DETERMINATI ON OF ARMS LENGTH PRICE OF ANY INTERNATIONAL TRANSACTION IT CANNOT B E A CRITERIA AS TO WHETHER OR NOT THE SERVICES HAD RESULTED IN ANY BEN EFIT TO THE ASSESSEE. FURTHER REFERRING TO THE ORDER OF THE DR P IT WAS POINTED OUT BY THE LD.AR THAT VIDE PARA 6.6.19 AT PAGE 25 OF T HE ORDER THE PANEL SAYS THAT THERE IS NO AGREEMENT BETWEEN THE PARTIES . HOWEVER IN PARA 6.6.5 AT PAGE 19 THE PANEL HAD OBSERVED THAT THERE WAS AN AGREEMENT BETWEEN THE PARTIES AND AT PAGE 20 THEY DID REFER TO THE ALLEGED AGREEMENT. HE FURTHER POINTED OUT THAT THE ISSUES RAISED STAND COVERED BY THE ORDER OF THE TRIBUNAL IN ASSES SEES OWN CASE IN ITA NO.90/DEL/2013 & 2671/DEL/2014 RELATING TO ASSE SSMENT YEARS 2008-09 & 2009-10 VIDE CONSOLIDATED ORDER DATED 26 .07.2019. THE LD.AR FOR THE ASSESSEE TOOK US THROUGH THE VARIOUS ASPECTS OF THE ISSUES WHICH HAVE BEEN DELIBERATED UPON BY THE TRIB UNAL. 10. THE LD.DR FOR THE REVENUE POINTED OUT THAT THE ASSESSEE IN TP STUDY REPORT HAD CLUBBED THE INTERNATIONAL TRANSACT ION OF PAYMENT OF CORPORATE CHARGES WITH OTHER TRANSACTIONS OF PROVIS ION OF SOFTWARE SERVICES AND SOFTWARE DEVELOPMENT SERVICES. THE AS SESSEE HAD APPLIED TRANSACTIONAL NET MARGIN METHOD AND ON THIS COMBINE D APPROACH 12 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 HAD BENCHMARKED THE INTERNATIONAL TRANSACTION AT AR MS LENGTH. IT WAS FURTHER POINTED OUT BY THE LD. DR FOR THE REVEN UE THAT THE LAW ALLOWED TO BENCHMARK THE TWO TRANSACTIONS IF THE S AME WERE CLOSELY LINKED; BUT THE ASSESSEE HAS TO DEMONSTRATE THE SAM E. REFERRING TO THE ORDER OF TPO AT PAGE 7 THE LD. DR FOR THE REVE NUE POINTED OUT THAT FROM THE NATURE OF SERVICES IT WAS CLEAR THAT THESE WERE NOT SERVICES IN THE FIELD OF SOFTWARE SERVICES. IN SUC H CIRCUMSTANCES THE SAID TRANSACTION HAD TO BE BENCHMARKED SEPARATELY. HE THEN POINTED OUT THAT ONLY QUESTION WHICH ARISES IS WHETHER THER E WAS ANY RENDITION OF SERVICES AND INCASE THE ANSWER IS YES THEN NO ADJUSTMENT TO BE MADE BUT IN CASE THE ANSWER IS N O THEN THE TPO HAS TO LOOK INTO THE SAME. REFERRING TO THE ORDER OF THE TRIBUNAL IN PARA 81 THE LD. DR FOR THE REVENUE STATED THAT FOR THIS YEAR THE EVIDENCES HAVE BEEN FILED AS ADDITIONAL EVIDENCES. 11. THE LD.AR FOR THE ASSESSEE IN RE-JOINDER POINTE D OUT THAT THE DRP AT PAGES 13 & 14 HAD LOOKED INTO THE SCOPE OF S ERVICES AND ALL THE SERVICES RECEIVED BY THE ASSESSEE WERE INTEGRAL LY AND INEXTRICABLY LINKED TO THE BUSINESS OF THE ASSESSEE. SINCE THE INTRA GROUP SERVICES PROVIDED BY THE AE WERE LINKED TO THE SOFTWARE SERV ICES PROVIDED BY THE ASSESSEE HENCE THE SAME HAVE TO BE BENCHMARKED ACCORDINGLY. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST ISSUE WHICH ARISES IN THE PRESENT APPEAL IS AGAINST THE 13 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 TRANSFER PRICING ADJUSTMENT MADE ON ACCOUNT OF PAYM ENT OF CORPORATE CHARGES. IN THE FACTS OF THE CASE THE ASSESSEE CO MPANY DURING THE YEAR UNDER CONSIDERATION WAS ENGAGED IN THE BUSINES S OF PRODUCTION OF COMPUTER SOFTWARE PRODUCTS AND PROVISION OF SOFT WARE DEVELOPMENT SERVICES FOR COMMUNICATION INDUSTRY THROUGH VARIOU S 100% EOU UNITS SET UP IN SOFTWARE TECHNOLOGY PARKS IN GURGAO N AND BANGLORE. THE ASSESSEE HAD ENTERED INTO VARIOUS INTERNATIONAL TRANSACTIONS WITH ITS AE AND THE ISSUE WHICH WAS RAISED VIDE GROUND OF APPEAL NOS.2 TO 2.1 ARE AGAINST THE BENCHMARKING OF INTERNATIONAL T RANSACTION OF PAYMENT OF CORPORATE CHARGES AT RS.3.66 CRORES. TH E CLAIM OF THE ASSESSEE WAS THAT IT WAS RECEIVING THE INTRA GROUP SERVICES FROM ITS AES WHICH WERE ALLOCATED AMONG THE GROUP COMPANIES ON THE BASIS OF REPORT PREPARED BY AN INDEPENDENT CONSULTANT AND TH E SAID SERVICES WERE CHARGED ON THE BASIS OF COST PLUS 5% MARK UP. THE ASSESSEE HAD IN TP STUDY REPORT CONSIDERED THE PAYMENT OF CO RPORATE CHARGES AS COST BASE. IT HAD FURTHER APPLIED TRANSACTIONAL NET MARGIN METHOD AS THE MOST APPROPRIATE METHOD WITH PLI OF OP/OC. THE MARGIN OF THE ASSESSEE WORKED OUT TO 25.54% AS AGAINST THE ME AN MARGINS OF COMPARABLES SELECTED BY THE ASSESSEE AT 14.79%. T HE TPO HOWEVER WAS OF THE VIEW THAT THE ASSESSEE HAD FAILED TO EST ABLISH ITS CASE OF RECEIPT OF ECONOMIC AND COMMERCIAL BENEFITS FROM SU CH PAYMENT AND ALSO EVIDENCE OF INCURRING SUCH EXPENDITURE BY THE AE AND THUS THE TPO ADOPTED THE ARMS LENGTH PRICE FOR THE AFORESAID TRANSACTION AT 14 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 NIL. THE DRP CONFIRMED THE DETERMINATION OF ARM'S LENGTH PRICE BY THE TPO ON THE GROUND THAT THE ASSESSEE TALKS OF AG REEMENT BUT NO AGREEMENT BETWEEN THE PARTIES WAS FILED. ONE MORE ASPECT WHICH HAS BEEN CONSIDERED BY THE TPO AND WHICH HAS NOT BEEN D ISTURBED BY THE DRP IS THAT THE ASSESSEE HAS FAILED TO DEMONSTRATE THE BENEFIT ARISING ON THE AVAILMENT OF SUCH SERVICES FROM THE AE. 13. WE FIND THAT SIMILAR APPROACH WAS ADOPTED BY TH E ASSESSING OFFICER IN BENCHMARKING THE INTERNATIONAL TRANSACTI ON OF PAYMENT OF CORPORATE CHARGES IN ASSESSMENT YEAR 2009-10. THE TRIBUNAL IN ITA NO.2671/DEL/2014 RELATING TO ASSESSMENT YEAR 2009- 10 WITH LEAD ORDER IN ITA NO.90/DEL/2013 VIDE ORDER DATED 26.07 .2019 HAD ADDRESSED THIS ISSUE AND NOTED THE CASE OF THE REVE NUE AND THE CONTENTION OF THE ASSESSEE WHICH ARE SIMILAR TO TH E ISSUE RAISED IN THE PRESENT APPEAL. THE TRIBUNAL LOOKED INTO THE EVIDE NCES FILED BY THE ASSESSEE TO SUBSTANTIATE ITS CASE OF RENDITION OF S ERVICES BY THE AE WHICH IS AVAILED BY THE ASSESSEE AGAINST WHICH PA YMENT AS MADE ON COST PLUS 5% MARK UP. IT WAS POINTED OUT THAT THE AE WAS PROVIDING SIMILAR SERVICES TO THE GROUP COMPANIES AND THE EXP ENDITURE WAS ALLOCATED ON THE BASIS OF REPORT OF AN INDEPENDENT VALUER ON COST PLUS 5% MARK UP. THE FIRST ISSUE IS WHETHER IT IS OPEN TO THE ASSESSEE TO DECIDE AS TO AVAIL THE SERVICE OR NOT? THE SAID IS SUE STANDS DECIDED BY THE HONBLE DELHI HIGH COURT IN REEBOK INDIA COMPAN Y 374 ITR 118 (DEL.) WHICH HAS ALSO BEEN APPLIED BY THE TRIBUNAL IN PARA 81 AT PAGE 15 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 51 OF THE ORDER TO COME TO THE FINDINGS THAT WHERE THE EXPENDITURE HAS BEEN INCURRED FOR BUSINESS PURPOSES THE ASSESS ING OFFICER CANNOT QUESTION REQUIREMENT AND QUANTUM OF EXPENDIT URE. 14. NOW COMING TO THE NEXT ASPECT AND THE ISSUE WHE THER THE REVENUE AUTHORITIES CAN GO INTO THE ASPECT AS TO TH E NECESSITY FOR THE ASSESSEE TO INCUR THE AFORESAID EXPENDITURE. THIS ISSUE ALSO STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F HONBLE DELHI HIGH COURT IN CIT VS LUMAX INDUSTRIES LTD. (ITA NO.102/2 014). COMING TO THE NEXT ASPECT OF THE ISSUE RAISED AS TO WHETHER T HE ASSESSEE DERIVES ANY BENEFIT FROM THE SERVICES OR NOT. THE ISSUE ST ANDS COVERED BY THE ORDER OF THE HONBLE DELHI HIGH COURT IN CIT VS CUS HMAN & WAKEFIELD (INDIA) PVT.LTD. (ITA NO.475/2012) WHEREIN IT HAS B EEN OPINED THAT THE DETERMINATION OF BENEFIT TO THE TAXPAYER WAS NOT IN THE DOMAIN OF THE ASSESSING OFFICER. THE TRIBUNAL IN PARA 81 AT PAGE S 51 TO 55 HAS DELIBERATED UPON THE AFORESAID ISSUES AND ALSO THE RELEVANT FINDINGS OF THE HONBLE DELHI HIGH COURT AND WE ARE REFERRIN G TO THE SAME AND NOT REPRODUCING THE SAME FOR THE SAKE OF GRAVITY. 15. NOW COMING TO THE NEXT APPROACH OF THE TPO IN T REATING THE PAYMENT OF CORPORATE CHARGES WHICH WAS INCLUDED BY THE ASSESSEE AS PART OF OPERATING EXPENSES BUT WHICH WAS BENCHMARK ED BY THE ASSESSING OFFICER/DRP/TPO SEPARATELY. THE TRIBUNAL IN ASSESSMENT YEAR 2009-10 HAD CONSIDERED THIS ASPECT ALSO AND RE LYING ON DIFFERENT 16 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 DECISIONS OF HONBLE DELHI HIGH COURT AND ALSO THE DECISION OF CO- ORDINATE BENCH OBSERVED AS UNDER:- 85. THE UNDISPUTED FACT IS THAT THE OPM OF THE ASS ESSEE IS @ 27.36% WHEREAS THAT OF ALL THE COMPARABLE COMPANIES IS @ 1 4.24%. AS MENTIONED ELSEWHERE THE AE WAS CREATED AS A SPV FOR THE PURPOSE OF GIVING SERVICES TO THE GROUP COMPANIES FOR WHICH TH E AE HAS CHARGED COST + 5% AS A MARKER AND THE ASSESSEE IS MAKING SU CH PAYMENT IN LIEU OF RECEIVING VIDE SCOPE OF SERVICES FROM ITS A E. WE ARE OF THE CONSIDERED VIEW THAT THESE ARE ALL INTER LINKED TRA NSACTIONS AND THEREFORE SHOULD NOT BE EVALUATED ON A SEPARATE BA SIS. THIS IS ALSO SUPPORTED BY PARA 1.42 AND 1.43 OF THE OECD GUIDELI NES WHICH PROVIDE FOR EVALUATION OF COMBINED TRANSACTIONS WHERE SUCH TRANSACTIONS ARE CLOSELY LINKED OR CONTINUES AND CANNOT BE EVALUATE SEPARATELY. 86. THIS FURTHER FINDS SUPPORT FROM THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF SONY ERICSON MOBILE & OTHERS I N ITA NO.16/2014 WHEREIN THE HONBLE HIGH COURT AFFIRM THE BENCHMARK ED OF CLOSELY LINKED TRANSACTION. THE HONBLE HIGH COURT HELD AS UNDER :- 91. IN CASE THE TESTED PARTY IS ENGAGED IN SINGLE LINE OF BUSINESS THERE IS NO BAR OR PROHIBITION FROM APPLY ING THE TNM METHOD ON ENTITY LEVEL BASIS. THE FOCUS OF THIS MET HOD IS ON NET PROFIT AMOUNT IN PROPORTION TO THE APPROPRIATE BASE OR THE PLI. IN FACT WHEN TRANSACTIONS ARE INTERCONNECTED COMBINE D CONSIDERATION MAY BE THE MOST RELIABLE MEANS OF DET ERMINING THE ARMS LENGTH PRICE. THERE ARE OFTEN SITUATIONS WHER E CLOSELY LINKED AND CONNECTED TRANSACTIONS CANNOT BE EVALUAT ED ADEQUATELY ON SEPARATE BASIS. SEGMENTATION MAY BE M ANDATED WHEN CONTROLLED BUNDLED TRANSACTIONS CANNOT BE ADEQ UATELY COMPARED ON AN AGGREGATE BASIS. THUS TAXPAYER CAN AGGREGATE THE CONTROLLED TRANSACTIONS IF THE TRANSACTIONS MEE T THE SPECIFIED COMMON PORTFOLIO OR PACKAGE PARAMETERS. FOR COMPLEX ENTITIES OR WHERE ONE OF THE ENTITIES IS NOT 'PLAIN VANILLA DIS TRIBUTOR IT SHOULD BE APPLIED WHEN NECESSARY AND APPLICABLE COM PARABLES ON FUNCTIONAL ANALYSIS WITH OR WITHOUT ADJUSTMENTS ARE AVAILABLE. OTHERWISE THE TNM METHOD SHOULD NOT BE ADOPTED OR APPLIED ON ACCOUNT OF BEING AN INAPPROPRIATE METHOD . FURTHER THE HONBLE DELHI COURT IN THE CASE OF SONY ERICSSON MOBILE (SUPRA) ALSO HELD THAT IF THE INDIAN ENTITY HAS SATISFIED TRANSACTIONAL NET MARGIN METHOD (TNMM) I.E. AS LO NG AS THE OPERATING MARGINS OF THE INDIAN ENTERPRISE ARE HIGHER THAN TH E OPERATING MARGINS OF COMPARABLE COMPANIES NO FURTHER/SEPARATE COMPEN SATION FOR AMP EXPENSES IS WARRANTED. THE HONBLE COURT HELD AS UN DER: '101. HOWEVER ONCE THE ASSESSING OFFICER/TPO ACCEP TS AND ADOPTS TNM METHOD BUT THEN CHOOSES TO TREAT A PART ICULAR 17 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 EXPENDITURE LIKE AMP AS A SEPARATE INTERNATIONAL TR ANSACTION WITHOUT BIFURCATION/SEGREGATION IT WOULD AS NOTICE D ABOVE LEAD TO UNUSUAL AND INCONGRUOUS RESULTS AS AMP EXPENSES IS THE COST OR EXPENSE AND IS NOT DIVERSE. IT IS FACTORED IN TH E NET PROFIT OF THE INTER-LINKED TRANSACTION. THIS WOULD BE ALSO IN CONSONANCE WITH RULE 10B(L)(E). WHICH MANDATES ONLY ARRIVING A T THE NET PROFIT MARGIN BY COMPARING THE PROFITS AND LOSS ACC OUNT OF THE TESTED PARTY WITH THE COMPARABLE. THE TNM METHOD PR OCEEDS ON THE ASSUMPTION THAT FUNCTIONS ASSETS AND RISK BEIN G BROADLY SIMILAR AND ONCE SUITABLE ADJUSTMENTS HAVE BEEN MAD E ALL THINGS GET TAKEN INTO ACCOUNT AND STAND RECONCILED WHEN COMPUTING THE NET PROFIT MARGIN. ONCE THE COMPARABL ES PASS THE FUNCTIONAL ANALYSIS TEST AND ADJUSTMENTS HAVE BEEN MADE THEN THE PROFIT MARGIN AS DECLARED WHEN MATCHES WITH THE COMPARABLES WOULD RESULT IN AFFIRMATION OF THE TRAN SFER PRICE AS THE ARMS LENGTH PRICE. THEN TO MAKE A COMPARISON O F A HORIZONTAL ITEM WITHOUT SEGREGATION WOULD BE IMPERM ISSIBLE. 87. THE COORDINATE BENCH IN THE CASE OF M/S. BG EXP LORATION AND PRODUCTION INDIA LTD. VS. DCIT (ITA NO. 1170/DEL/20 15) WHEREIN THE TRIBUNAL HAS DELETED THE ADJUSTMENT ON ACCOUNT OF P AYMENT MADE FOR INTRA GROUP SERVICES. THE TRIBUNAL HELD AS UNDER : - 72. ON THE EXAMINATION OF THE VOLUME AND US DETAIL S SUBMITTED BY THE ASSESSEE. THE LD. DISPUTE RESOLUTION PANEL H AS COME TO THE CONCLUSION THAT ASSESSEE HAS RECEIVED THE SERVI CES AND THOSE SERVICES ARE USEFUL SERVICES.. WITH RESPECT TO THE CLUBBING OF THE TRANSACTION IT WAS HELD THAT WHEN THE TRANSACTIONS ARE CLOSELY INTERRELATED IT IS BUT NATURAL TO CLUB SUCH TRANSAC TION AND BENCHMARKED IT TOGETHER. THE LD. DISPUTE RESOLUTION PANEL AT PAGE NO. 30 31 HAS CONSIDERED THE SUSPECT AND AG REED WITH THE CONTENTION OF THE ASSESSEE THAT INTRA GROUP SER VICES RECEIVED FROM ITS ASSOCIATED ENTERPRISE ARE CLOSELY LINKED T O THE MAIN BUSINESS ACTIVITY OF THE ASSESSEE COMPANY PLACING R ELIANCE ON THE US REGULATIONS OECD REGULATIONS AND OECD DRAFT NOTES ON COMPARABILITY. IN VIEW OF THIS WE DO NOT FIND ANY I NFIRMITY AND NONE WAS POINTED OUT BEFORE US BY THE LD. DEPARTMEN TAL REPRESENTATIVE IN THE ORDER OF THE LD. DISPUTE RESO LUTION PANEL. CONSEQUENTLY AFTER VERIFYING THAT ASSESSEE HAS DEM ONSTRATED NEED FOR THOSE SERVICES BENEFIT DERIVED FROM THOSE SERVICES EVIDENCE OF RECEIPT OF SUCH SERVICES AND SUBMITTING THAT THOSE SERVICES ARE NEITHER DUPLICATIVE IN NATURE AND NOR ARE SHARE HOLDER ACTIVITIES THE DRP DIRECTED THE LD. TRANSFE R PRICING OFFICER TO DELETE THE ADJUSTMENT PROPOSED WITH RESPECT TO T HE INTRA GROUP SERVICES OF RS. 3329766244/- DESERVES TO BE UPHELD . THE JUDICIAL PRECEDENTS CITED BEFORE US ALSO SUPPORTS T HE VIEW THAT THE NEEDED TEST THE BENEFIT TEST ARE ALSO REQUIRED TO BE VIEWED FROM THE PERSPECTIVE OF A BUSINESSPERSON AND NOT FR OM THE PERSPECTIVE OF THE REVENUE. FURTHER NO EVIDENCES H AVE BEEN LED BEFORE US BY REVENUE STATING THAT THESE SERVICES AR E DUPLICATIVE 18 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 IN NATURE AND ALSO SERVES ONLY THE INTEREST OF THE SHAREHOLDER. ACCORDING TO THE INFORMATION SUPPLIED BY THE ASSESS EE AND EXAMINED BY THE LD. DISPUTE RESOLUTION PANEL DOES N OT GIVE ANY SUCH INDICATION. FURTHER REGARDING NON-SHARING OF T HE COST BY THE JOINT-VENTURE PARTNERS WE HAVE GIVEN OUR FINDINGS W HILE DECIDING THE APPEAL OF THE ASSESSEE THAT SUCH AN ACTION OF T HE JOINT- VENTURE PARTNERS CANNOT BE THE REASON TO DETERMINE THE ARM'S LENGTH PRICE OF THE SERVICES WHICH IS BEEN RECEIVED BY THE ASSESSEE AT NIL. IN VIEW OF THIS WE UPHOLD THE FIND ING OF THE LD. DISPUTE RESOLUTION PANEL HOLDING THAT TRANSACTIONS OF INTRA GROUP SERVICES ARE INTERLINKED THEREFORE THEY SHOULD BE BENCHMARKED TOGETHER BY ADOPTING TNMM AS THE MOST APPROPRIATE M ETHOD HENCE DIRECTING THE LD. TRANSFER PRICING OFFICER T O DELETE THE ADJUSTMENT PROPOSED OF RS.3329766244/-. IN THE RESU LT GROUND OF APPEALNO. 1 TO 3 OF THE APPEAL OF THE REVENUE AR E DISMISSED.' 88. IT WOULD NOT BE OUT OF PLACE TO REFER TO THE DE CISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF MAGNETI MARELI POWE RTRAIN INDIA PVT. LTD. (ITA NO.350/2014) WHEREIN THE HONBLE HIGH COU RT HELD THAT TECHNICAL KNOW HOW FEE PAID BY THE ASSESSEE IS TO B E BENCHMARKED APPLYING TNMM AT THE ENTITY LEVEL. THE SAID DECISIO N HAS BEEN AFFIRMED BY THE HONBLE SUPREME COURT IN ITA NO.15244/2017. 89. CONSIDERING THE JUDICIAL DECISIONS DISCUSSED HE RE IN ABOVE IN THE LIGHT OF THE UNDER LYING FACTS IN THE ISSUE WE HOLD THAT TNMM IS THE MOST APPROPRIATE METHOD FOR THIS INTERNATIONAL TRA NSACTION AND SINCE THE OPM OF THE ASSESSEE IS HIGHER THAN THE OPM OF T HE COMPARABLE COMPANIES WE ARE OF THE CONSIDERED VIEW THAT THE B ENEFIT AND THE NECESSITY TEST APPLIED BY THE TPO/ DRP IS UNCALLED FOR AND ACCORDINGLY DIRECT THE TPO/ AO TO DELETE THE ADDITION OF RS.483 97589/- GROUND OF APPEALNO.5.1 TO 5.6 ARE ALLOWED. 16. IN VIEW OF THE ABOVE SAID RATIO LAID DOWN WE HOLD THAT WHERE THE ASSESSEE HAD DEMONSTRATED THE NEED FOR THE SERVICES AND HAD ALSO PRODUCED EVIDENCE OF AVAILMENT OF SUCH SERVICES AND HAD ALSO ESTABLISHED THE BENEFIT DERIVED FROM THE SAID SERVI CES AND WHERE THOSE SERVICES WERE NEITHER DELIBERATIVE IN NATURE NOR WERE SHAREHOLDER ACTIVITIES THEN THE SAID AVAILMENT OF THE INTRA-GROUP SERVICES BEING INTER LINKED WITH THE OTHER INTERNAT IONAL TRANSACTION THEN THE SAME SHOULD BE BENCHMARKED ON AGGREGATE B ASIS BY 19 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 ADOPTING THE TRANSACTIONAL NET MARGIN METHOD AS THE MOST APPROPRIATE METHOD. CONSEQUENTLY WE REVERSE THE O RDERS OF THE AUTHORITIES BELOW AND DELETE THE UPWARD ADJUSTMENT OF RS.3.66 CRORES. THUS GROUND OF APPEAL NOS. 2 TO 2.11 RAISED BY THE ASSESSEE IN THIS APPEAL ARE ALLOWED. 17. NOW COMING TO THE NEXT ISSUE OF TRANSFER PRICI NG ADJUSTMENT OF RS.14 75 217/- MADE ON ACCOUNT OF INTEREST ON FOREI GN CURRENCY LOAN EXTENDED TO THE AE. THE ASSESSEE HAS RAISED GROUND OF APPEAL NOS. 3 TO 3.2 IN THIS REGARD. 18. BRIEFLY IN THE FACTS RELATING TO THE ISSUE THE ASSESSEE DURING THE FINANCIAL YEAR 2009-10 HAD EARNED INTEREST INCOME O F RS.4 16 801/- IN RESPECT OF LOAN OF USD 9 00 000 EXTENDED TO ITS AES-ARICENT JAPAN LTD & ARICENT TECHNOLOGIES (BEIJING) LTD. THE INTE REST ON THE SAID LOANS ADVANCED WAS CHARGED LIBOR + 1.5%. THE CASE OF THE ASSESSEE WAS THAT THE RATE OF INTEREST WHICH WAS CHARGED BY IT FROM ITS AE WAS COMPARABLE TO THE RATE OF INTEREST IN THE INTERNATI ONAL MARKET. THE TPO HOWEVER APPLIED THE COMPARABLE UNCONTROLLED PR ICE METHOD TO BENCHMARK THE AFORESAID INTERNATIONAL TRANSACTION A ND HE APPLIED RATE OF 14.88% BEING THE PRIME LENDING RATE AND MA DE AN ADJUSTMENT OF RS.14 75 217/-. THE DRP UPHELD THE AFORESAID AD JUSTMENT BUT APPLIED THE RATE OF INTEREST AT 13.25%. THE ASSESSI NG OFFICER 20 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 ACCORDINGLY PASSED THE ASSESSMENT ORDER AGAINST WH ICH THE ASSESSEE IS IN APPEAL BEFORE US. 19. THE LD.AR FOR THE ASSESSEE POINTED OUT THAT THE LOAN TO THE AES WAS EXTENDED AS PER THE APPROVAL GRANTED BY RESERVE BANK OF INDIA (IN SHORT RBI) WHICH ALSO SPECIFIED THE RATE OF INTER EST TO BE CHARGED. FURTHER IT WAS POINTED OUT THAT WHERE THE TRANSACTI ON OF LENDING LOAN TO THE AE WAS A FOREIGN CURRENCY THEN THE COMPARAB LE TRANSACTION TO BE CONSIDERED WAS THE FOREIGN CURRENCY LENDING RATE S IN CASE COMPARABLE UNCONTROLLED PRICE METHOD HAVE TO BE APP LIED. IT IS ALSO POINTED OUT BY THE LD.AR FOR THE ASSESSEE THAT SIMI LAR ISSUES AROSE BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2008-09 (SUP RA) AND THE ADJUSTMENT MADE BY THE TPO HAS BEEN DELETED BY HOLD ING THAT THE RATE OF INTEREST AT LIBOR PLUS SHOULD BE APPLIED. 20. THE LD. DR FOR THE REVENUE FAIRLY POINTED OUT T HAT THE PRIME LENDING RATE OF FOREIGN LOANS COULD NOT BE APPLIED BUT LIBOR RATE IS TO BE APPLIED ALONGWITH BASIS POINT. 21. WE FIND THAT THE ISSUE RAISED VIDE GROUND OF AP PEAL NOS.3 TO 3.6 IS IN RELATION TO THE TRANSFER PRICING ADJUSTMENT M ADE ON ACCOUNT OF FOREIGN CURRENCY LOAN ADVANCED BY THE ASSESSEE. TH E ASSESSEE HAD ADVANCED SAME LOAN AS IN THE EARLIER YEARS AND HAD CHARGED INTEREST BY APPLYING LIBOR +150 BASIS POINT. THE ASSESSING OFFICER/DRP/TPO HOWEVER APPLIED THE PRIME LENDING RATE OF 14.88% W HICH WAS REDUCED 21 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 TO 13.25% FINALLY. HOWEVER THE CASE OF THE ASSESS EE BEFORE US IS THAT IT HAD ADVANCED FOREIGN EXCHANGE LOAN TO ITS AE AND THE PRIME LENDING RATE CANNOT BE APPLIED IN SUCH CIRCUMSTANCES. WE F IND MERIT IN THE PLEA OF THE ASSESSEE AND HOLD THAT WHERE THE TRANSA CTION IS IN FOREIGN CURRENCY THEN THE RATE OF INTEREST IS TO BE APPLIE D IS LIBOR PLUS. IN THE PRESENT CASE IT MAY ALSO BE POINTED OUT THAT T HE LOAN WAS ADVANCED AFTER TAKING PERMISSION OF THE RBI AND EVE N THE RATE OF INTEREST WAS APPROVED. IN SUCH FACTS AND CIRCUMST ANCES WE FIND NO MERIT IN THE ORDERS OF THE AUTHORITIES BELOW AND HO LD THAT NO TRANSFER PRICING ADJUSTMENT NEEDS TO BE MADE IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF INTEREST ON FOREIGN CURRENCY LOAN WHEREI N THE ASSESSEE HIMSELF HAD CHARGED INTEREST @ LIBOR + 150 BASIS PO INTS. SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSMENT YEARS 2008-09 & 2009-10 ALSO. THUS GROUND OF APPEAL NOS . 3 TO 3.2 RAISED BY THE ASSESSEE ARE ALLOWED. 22. THE ISSUE RAISED IN GROUND OF APPEAL NOS. 4 TO 4.6 IS AGAINST THE TRANSFER PRICING ADJUSTMENT MADE ON ACCOUNT OF RE-C HARACTERIZING THE INTER-COMPANY RECEIVABLES AS UNSECURED LOAN EXTENDE D BY THE ASSESSEE TO ITS AES. 23. BRIEFLY IN THE FACTS RELATING TO THE ISSUE THE ASSESSEE HAD RAISED INVOICES ON ACCOUNT OF PROVISION OF SERVICES TO ITS AES. SOME OF THE SAID PAYMENTS WERE NOT RECEIVED BY THE ASSESSEE. T HE TPO NOTED THAT 22 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 THE RECEIVABLES WERE OUTSTANDING FOR LONG PERIOD. HE ALLOWED CREDIT OF 30 DAYS TREATING THE SAME TO BE NORMAL PERIOD WITH IN WHICH THE AMOUNT DUE SHOULD HAVE BEEN PAID BY THE DEBTORS. H E RE- CHARACTERIZED THE AMOUNT DUE FROM REGULAR DEBTORS WHICH WAS OUTSTANDING AND TREATED THE SAME AS DEEMED LOAN. HE THEN IMPUTED NOTIONAL INTEREST ON THE DELAY IN RECEIPT OF RECEIV ABLE @ 14.88% AND PROPOSED AN ADJUSTMENT OF RS.22.62 CRORES. THE DRP UPHELD THE ADJUSTMENT MADE BY THE TPO BUT DIRECTED THE TPO TO IMPUTE INTEREST @ 11.75% AND ALLOW SET OFF IN RESPECT OF DELAYED PA YMENTS BY THE ASSESSEE TO ITS AES. THE TPO ACCORDINGLY MADE AN A DJUSTMENT OF RS.8.72 CRORES AGAINST WHICH THE ASSESSEE IS IN AP PEAL BEFORE US. 24. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE REGULAR DEBTORS WHICH WERE OUTSTANDING FOR PERIOD MORE THAN 30 DAYS WERE TREATED AS DEEMED LOANS BY THE TPO. IT WAS POINTED OUT THAT T HE DELAY OF REMITTANCE COULD NOT BE RE-CHARACTERIZED AS UNSECUR ED LOAN ADVANCED TO THE AES AND THEN IMPUTE NOTIONAL INTEREST THEREO N. THE LD.AR POINTED OUT THAT WHERE THE ASSESSEE WAS FOLLOWING C ONSISTENT METHOD WITH REGARD TO THE RECEIVABLES THEN THERE COULD NO T BE ANY DEEMING ADJUSTMENT IN THE HANDS OF THE ASSESSEE. ANOTHER A SPECT WHICH IS RAISED BY THE ASSESSEE WAS THAT THE SAID TRANSACTI ON WAS PART OF THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESS EE AND IF TRANSACTIONAL NET MARGIN METHOD WAS APPLIED AS MOST APPROPRIATE METHOD AND THE PLI WAS SATISFIED THEN THERE WAS NO QUESTION OF 23 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 SEGREGATING THE TRANSACTION OF RECEIVABLES. THE LD .AR FOR THE ASSESSEE POINTED OUT THAT THE HONBLE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 HAS DELETED SIMILAR ADJUST MENT MADE ON ACCOUNT OF INTEREST ON RECEIVABLE. 25. THE LD.DR FOR THE REVENUE PLACED RELIANCE ON TH E ORDERS OF THE ASSESSING OFFICER/DRP/TPO. 26. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT GROUNDS OF APPEAL IS AGAINST THE ADJUSTMENT MADE ON ACCOUNT OF NOTIONAL INTEREST DUE ON THE OUTSTANDING RECEIVABLES. THE TPO HAD NOTED THE REG ULAR TRADE DEBTORS WHICH WERE OUTSTANDING AND HAD TREATED THE SAME AS DEEMED LOAN INCASE THE SAID OUTSTANDINGS WERE NOT PAID WITHIN PERIOD OF 30 DAYS. THE TRANSACTION HAD BEEN ASSUMED BY THE TPO REJECT ING THE CONSISTENT APPROACH APPLIED BY THE ASSESSEE. FIRST OF ALL WE HOLD THAT THERE IS NO MERIT IN THE DEEMING ADJUSTMENT MADE BY THE ASSESSING OFFICER/TPO IN THIS REGARD. IN ANY CASE WHERE THE OPERATING PROFIT MARGIN SHOWN BY THE ASSESSEE FROM ITS TRANSACTIONS WITH ITS AES WAS HIGHER THAN THE MEAN MARGINS OF THE COMPARABLE COMP ANIES THEN NO SEPARATE ADJUSTMENT COULD BE MADE ON ACCOUNT OF IMP UTING INTEREST ON OUTSTANDING RECEIVABLES. IN ANY CASE THE AFORE SAID RECEIVABLES HAVE BEEN RECEIVED BY THE ASSESSEE AS AND WHEN DUE AND THE SAME COULD NOT BE RE-CHARACTERIZED AS UNSECURED LOAN. A CCORDINGLY WE 24 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 REVERSE THE ORDER OF THE AUTHORITIES BELOW AND DELE TE THE ADJUSTMENT MADE ON ACCOUNT OF DELAY IN RECEIPT OF RECEIVABLES. THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2009-10 HAD DELETED THE AFORESAID ADDITION AND ALSO HELD THAT THERE IS NO M ERIT IN RESORTING TO EXPLANATION (1)(C) TO SECTION 92B OF THE ACT. APPL YING THE SAID RATIO WE DIRECT THE ASSESSING OFFICER/TPO TO DELETE THE A DDITION OF RS.8.72 CRORES. THE GROUND OF APPEAL NOS.4 TO 4.6 ARE THUS ALLOWED. 27. THE ISSUE RAISED IN GROUND OF APPEAL NOS. 5 TO 5.3 IS AGAINST THE CLAIM OF DEPRECIATION OF GOODWILL ARISING OUT OF A MALGAMATION IN ASSESSMENT YEAR 2008-09. 28. THE LD.AR FOR THE ASSESSEE FAIRLY POINTED OUT T HAT THE ASSESSEE HAD NOT MADE THE AFORESAID CLAIM IN THE RETURN OF I NCOME AND THE DRP DID NOT ADJUDICATE THE SAME AS NO CLAIM WAS MADE IN RETURN OF INCOME. THE ASSESSING OFFICER ALSO IN THE FINAL AS SESSMENT ORDER APPLIED THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN GOETZE (INDIA) LTD. [2006] 284 ITR 323 (SC). 29. THE LD.AR FOR THE ASSESSEE POINTED OUT THAT THE DEPRECIATION WAS CLAIMED IN THE ACCOUNTS FROM ASSESSMENT YEAR 20 08-09; BUT IN TERMS OF INCOME TAX NO SUCH CLAIM WAS MADE. THE L D.AR FOR THE ASSESSEE FURTHER POINTED OUT THAT RATIO LAID DOWN B Y THE HONBLE SUPREME COURT IN GOETZE INDIA LTD.(SUPRA) HAS BEEN EXPLAINED BY HONBLE DELHI HIGH COURT IN JAI PARABOLIC SPRINGS L TD. [2008] 306 ITR 25 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 42 (DEL) AND THE RATIO OF HONBLE APEX COURT DOES NOT APPLY TO THE APPELLATE AUTHORITIES. HE THUS POINTED OUT THAT DRP HAD ERRED IN NOT ENTERTAINING THIS GROUND OF APPEAL. HE FURTHER POI NTED OUT THAT THE ISSUE NOW STANDS COVERED BY THE ORDERS OF TRIBUNAL IN ASSESSMENT YEARS 2008-09 & 2009-10 WHEREIN THE ISSUE HAS BEE N CONSIDERED AT LENGTH. THE LD.AR FOR THE ASSESSEE ALSO RAISED ANO THER ISSUE VIDE GROUND OF APPEAL NO. 5.2 OF APPEAL WHICH WAS THEN N OT PRESSED BY HIM. 30. THE LD.DR FOR THE REVENUE ON THE OTHER HAND POI NTED OUT THAT SINCE DEPRECIATION ON GOODWILL WAS CLAIMED BY THE A SSESSEE VIDE ADDITIONAL GROUND OF APPEAL THE DRP HAD NOT ADMITT ED THE SAME. HE POINTED OUT THAT THE AMALGAMATION SCHEME WAS APPROV ED BY THE HONBLE HIGH COURT BUT THE VALUATION OF ASSETS WAS NOT APPROVED. 31. THE LD.AR FOR THE ASSESSEE IN THE RE-JOINDER PO INTED OUT THAT SIMILAR PLEA WAS RAISED BEFORE THE TRIBUNAL AND THE ISSUE HAS BEEN DECIDED VIDE PARA 52 OF TRIBUNALS ORDER. HE ALSO POINTED OUT THAT THE SAID ISSUE OF GOODWILL WAS NOT ARISING FOR THE FIRS T TIME. 32. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH IS RAISED IN GROUND OF APPEAL NOS. 5 & 5.1 IS AGAINST THE ALLOWABILITY OF DEPRECIATION OF GOODWILL. 26 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 33. COMING TO THE ISSUE IN HAND THE TRIBUNAL IN AS SESSMENT YEAR 2008-09 (SUPRA) HAD ADMITTED THE ADDITIONAL GROUND OF APPEAL VIDE PARAS 34 TO 41 AND THEN ADJUDICATED THE ISSUE ON ME RITS VIDE PARA 42 ONWARDS. THE FIRST ASPECT WHICH WAS DECIDED BY THE TRIBUNAL WAS THAT ALL THE FACTS IN RELATION TO CREATION OF GOODW ILL WERE AVAILABLE ON RECORD. THEREAFTER LOOKING INTO THE ASPECTS OF AM ALGAMATION OF TWO COMPANIES WITH ASSESSEE UNDER SCHEME OF ARRANGEME NT AND AMALGAMATION W.E.F 01.04.2007 WHICH WAS APPROVED B Y THE HONBLE HIGH COURT AND AFTER TAKING NOTE OF SALIENT FEATURE S OF THE AMALGAMATION IN PARAS 47 TO 50 AT PAGE 25 TO 33 OF THE ORDER WHEREIN TRIBUNAL ALSO TOOK NOTE OF THE METHODOLOGY APPROVED AS PART OF SCHEME OF AMALGAMATION FOR COMPUTATION OF GOODW ILL ARISING ON AMALGAMATION OF TWO CONCERNS OF THE ASSESSEE COMPAN Y OBSERVED THAT THE SAID METHODOLOGY WAS APPROVED BY TAX AUDIT OR OF THE ASSESSEE COMPANY. IN PARA 52 ONWARDS THE CONTENTI ON OF THE DRP WAS NOTED AND ONE OF THE CONTENTIONS WAS THAT EXERC ISE HAD TO BE CARRIED OUT TO DETERMINE THE VALUATION OF THE ASSET S AND VIDE PARA 53 IT WAS HELD THAT THE SAID CONTENTION OF THE LD.DR W AS NOT ACCEPTABLE AND IT WAS OBSERVED AS UNDER:- 53. THIS CONTENTION OF THE DR IS NOT ACCEPTABLE AS THE HONBLE HIGH COURT IN ITS ORDER GIVING EFFECT TO THE SCHEME OF AMALGAMATION MENTIONED ELSEWHERE HAS CLEARLY STATED THAT THE DIFFERENCE IN THE NET ASSET VALUE OF FSSL AND FSL A ND THE CONSIDERATION PAID BY THE ASSESSEE SHALL BE TOWARDS GOODWILL. 27 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 34. THE TRIBUNAL VIDE PARAS 54 TO 63 DEALT WITH ALL OTHER ASPECTS OF THE ISSUES AND THE ARGUMENTS OF THE DRP ON DIFFEREN T FACETS OF GOODWILL ACQUIRED IN BUSINESS RECONSIDERATION AND H ELD THAT THE ASSESSEE TO BE ENTITLED TO CLAIM DEPRECIATION ON GO ODWILL AS PER THE RATES APPLICABLE FOR THE YEAR UNDER CONSIDERATION. WE ARE REFERRING TO THE FINDINGS OF THE TRIBUNAL IN PARAS 54 TO 63 BUT NOT REPRODUCING THE SAME FOR THE SAKE OF BREVITY. HOWEVER FOLLOWING S AME PARITY OF REASONING WE ALLOW THE CLAIM OF THE ASSESSEE OF DE PRECIATION ON GOODWILL. THE GROUND OF APPEAL NOS. 5 & 5.1 ARE THU S ALLOWED. GROUND OF APPEAL NO.5.2 IS DISMISSED AS NOT PRESSED AND GR OUND OF APPEAL NOS. 5.3 & 5.4 ALSO STAND ALLOWED. 35. THE ASSESSEE HAS RAISED GROUND OF APPEAL NO.6 A GAINST ITS CLAIM OF CREDIT OF TAX DEDUCTED AT SOURCE. THE LD.AR FOR THE ASSESSEE POINTED OUT THAT THE ASSESSING OFFICER HAS FAILED T O ALLOW THE CREDIT OF TDS ON THE SUBSEQUENT TDS CERTIFICATES RECEIVED BY THE ASSESSEE. HE FAIRLY SUBMITTED THAT THE CREDIT BE ALLOWED ON VERIFICATION. WE FIND MERIT IN THE PLEA OF THE ASSESSEE AND DIRECT THE AS SESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE ON DUE VERIFICATION . THE GROUND OF APPEAL NO.6 IS THUS ALLOWED FOR STATISTICAL PURPOSE S. 36. NOW COMING TO GROUND OF APPEAL NO.7 RAISED BY T HE ASSESSEE WHERE THE ASSESSEE IS AGGRIEVED BY THE LEVY OF INTE REST U/S 234A 234B & 234C OF THE ACT. 28 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 37. THE LD.AR FOR THE ASSESSEE POINTED OUT THAT FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD FILED RETURN OF INC OME ON 14.10.2010 AND THE SAME WAS FILED WITHIN DUE DATE AS THE CIRC ULAR NO.225/72/2010-ITA.II DATED 27.09.2010 HAD EXTENDE D THE DUE DATE OF FILING OF RETURN OF INCOME. HENCE THERE WAS NO DELAY IN FILING THE SAID RETURN OF INCOME. INTEREST U/S 234A OF THE ACT IS CHARGEABLE INCASE THE RETURN OF INCOME HAVE NOT BEEN FILED ON TIME. BUT WHERE THE RETURN OF INCOME HAS BEEN FILED IN TIME THEN T HERE IS NO QUESTION OF CHARGING ANY INTEREST U/S 234A OF THE ACT. THE ASSESSING OFFICER MAY VERIFY THE STAND OF THE ASSESSEE AND IN CASE TH E ASSESSEE HAD FILED THE RETURN OF INCOME WITHIN EXTENDED PERIOD OF FILI NG THE RETURN OF INCOME THEN NO INTEREST U/S 234A OF THE ACT IS TO B E CHARGED. 38. NOW COMING TO THE NEXT CHARGE OF INTEREST U/S 2 34B OF THE ACT WHERE THE CASE OF THE ASSESSEE IS THAT IT IS TO BE CHARGED ON ASSESSED INCOME AND THE INTEREST U/S 234C OF THE ACT IS TO B E CHARGED ON THE RETURNED INCOME. THERE IS NO DISPUTE ABOUT THE PRO VISIONS OF SECTION 234B & 234C OF THE ACT. THE INTEREST CHARGEABLE U/ S 234B & 234C IS CONSEQUENTIAL; HENCE THE ASSESSING OFFICER IS DIRE CTED TO VERIFY THE STAND OF THE ASSESSEE. GROUND OF APPEAL NO.7 IS TH US ALLOWED FOR STATISTICAL PURPOSES. 39. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. 29 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 ITA NO.4913/DEL/2018 [ASSESSEES APPEAL] & ITA NO.5026/DEL/2018 [REVENUES APPEAL] ASSESSMENT YEAR: 2011-12 40. NOW COMING TO THE CROSS-APPEAL FILED BY THE ASSESSE E AND THE REVENUE RELATING TO ASSESSMENT YEAR 2011-12. 41. FOLLOWING GROUNDS OF APPEAL ARE RAISED BY THE A SSESSEE AND REVENUE RESPECTIVELY IN CROSS-APPEALS :- ITA NO.4913/DEL/2018 1.1. THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN UPHOLDING ADDITION TO THE EXTENT OF RS 3 76 37 933 BEING 20% OF THE AMOUNT PAID BY THE APPELLANT TOWARDS CORPORATE CHARGES TO THE ASSOCIATED ENTERPRISES HOLDING SUCH SERVICES TO BE IN THE NATURE OF SHAREHOLDER ACTIVITY. 1.2. THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN TREATING 20% OF THE AMOUNT OF PAYMENT I MADE TOWARDS CORPORA TE CHARGES AS SHAREHOLDER ACTIVITIES AND HOLDING THEM TO BE OF NO ECONOMIC AND COMMERCIAL VALUE TO THE BUSINESS OF THE APPELLA NT. 1.3. THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE EXPENDITURE ON THE PAYMENT FO R SERVICES RECEIVED FROM THE ASSOCIATED ENTERPRISE WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE APPE LLANT. 1.4. THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE ASSOCIATED ENTERPRISE HAS ALR EADY REDUCED THE AMOUNT INCURRED TOWARDS SHAREHOLDER ACTIVITY FR OM THE COST ALLOCATED TO THE APPELLANT AND ACCORDINGLY NO COST ATTRIBUTABLE TO SHAREHOLDER ACTIVITY HAS BEEN ALLOCATED TO THE APPE LLANT. 1.5. THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE APPELLANT HAD BENCHMARKED THE IMPUGNED TRANSACTION IN ITS TP DOCUMENTATION IN ACCORDANCE W ITH PROVISIONS OF SECTION 92C(1) OF THE INCOME-TAX ACT 1961 (THE ACT) AND THERE WAS NO OCCASION TO RE-DETERMINE THE ARMS LENGTH PR ICE (ALP) THEREOF IN THE ABSENCE OF SATISFACTION OF ANY OF TH E CONDITIONS SPECIFIED UNDER SECTION 92C(3) OF THE ACT. 1.6. THAT THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THE DETAILS OF BENEFITS RECEIVED WHICH WERE FURNISHED BY THE APPELLANT DURING THE COURSE OF ASS ESSMENT 30 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 PROCEEDINGS; AND FURTHER NOT PROVIDING AN OPPORTUNI TY OF BEING HEARD TO FURNISH ITS REBUTTAL OR ADDITIONAL DETAILS /EVIDENCE IN SUPPORT OF ITS ARGUMENTS SPECIFICALLY IN THE ABSEN CE OF ANY FINDING TO THIS EFFECT BY THE LEARNED TPO IN HIS OR DER UNDER SECTION 92CA(3) OF THE ACT. 1.7. THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN ARBITRARILY HOLDING MARKETING STRATEGY AND IP RELATED SERVICES AS SHAREHOLDER ACTIVITY WITHOUT PROVIDING ANY JUSTIFIC ATION OR COGENT REASONS. 1.8. THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THERE WAS NO ALLEGATION IN THE OR DER PASSED BY THE TPO UNDER SECTION 92CA(3) OF THE ACT THAT THE S ERVICES RENDERED BY THE ASSOCIATED ENTERPRISES ARE IN THE N ATURE OF SHAREHOLDER ACTIVITY. 1.9. THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN HOLDING THAT THE AFORESAID SERVICES ARE IN THE NATURE OF SH AREHOLDER ACTIVITY WITHOUT PROVIDING ANY OPPORTUNITY OF BEING HEARD TO THE APPELLANT TO FURNISH ITS REBUTTAL OR ADDITIONAL DET AILS/EVIDENCE IN SUPPORT OF ITS ARGUMENTS SPECIFICALLY IN THE ABSEN CE OF ANY FINDING TO THIS EFFECT BY THE LEARNED TPO IN HIS OR DER UNDER SECTION 92CA(3) OF THE ACT. 1.10. THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN DETERMINING THE ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION ON PAYMENT OF CORPORATE CHARGES ON AN ADHOC AND ARBITR ARY BASIS WITHOUT APPLYING ANY OF THE METHODS PRESCRIBED UNDE R SECTION 92C OF THE ACT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN NOT ENTERTAINING THE C LAIM OF DEDUCTION OF RS.2 77 79 494 UNDER SECTION 43B OF TH E ACT IN RESPECT OF LEAVE ENCASHMENT AND GRATUITY PAID BEFOR E THE DUE DATE OF FILING OF RETURN MERELY ON THE GROUND OF AP PEALTHAT THE SAID CLAIM HAD NOT BEEN MADE BY WAY OF REVISED COMP UTATION OF INCOME. 2.1. THAT THE LD. CIT(A) GROSSLY ERRED IN NOT APPRE CIATING THAT HE WAS DUTY BOUND TO SUO MOTO ALLOW CLAIMS WHICH ARE A LLOWABLE TO ASSESSEE BUT NOT CLAIMED AT ALL EITHER IN THE RETUR N OF INCOME OR DURING THE ASSESSMENT PROCEEDINGS. 2.2 THAT THE LD. CIT(A) GROSSLY ERRED IN NOT APPREC IATING THAT THE CLAIM MADE BEFORE THE LD. ASSESSING OFFICER WAS MERELY A MODIFICATION OF ORIGINAL CLAIM MADE IN THE RETURN O F INCOME AND 31 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 WAS NOT ALTOGETHER A NEW CLAIM MADE DURING THE COUR SE OF ASSESSMENT PROCEEDINGS. 2.3 WITHOUT PREJUDICE THAT ON THE FACTS AND CIRCUM STANCES OF THE CASE AND IN LAW THE LD. ASSESSING OFFICER MAY BE DIRECTED TO ALLOW DEDUCTION OF RS. 2 77 79 494 UNDER SECTION 43 B OF THE ACT IN RESPECT OF LEAVE ENCASHMENT AND GRATUITY PAID BY EXERCISING THE POWER CONFERRED UNDER SECTION 254 OF THE ACT. 3. THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN NOT ADJUDICATING ON ADDITION OF RS.19 12 401 ON ACCOUNT OF OUTSTANDING SUNDRY CREDIT BALANCES COMPLETELY IGNOR ING THE FACT THAT THE LD. ASSESSING OFFICER HAS NOT DELETED THE SAID ADDITION ON MERITS VIDE RECTIFICATION ORDER DATED 26.05.201 7 PASSED UNDER SECTION 154/143(3) OF THE ACT. 3.1. THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN NOT ALLOWING THE ADDITION MADE ON ACCOUNT OF SUNDRY CRE DIT BALANCES OUTSTANDING FROM PAST THREE YEARS COMPLETELY IGNORI NG THE FACTS OF THE PRESENT CASE. THE APPELLANT CRAVES LEAVE TO ADD AMEND ALTER FO RGO DELETE RESCIND OR WITHDRAW THE ABOVE GROUNDS OF AP PEAL EITHER BEFORE OR DURING THE HEARING BEFORE THE HONBLE TRI BUNAL. FURTHER THE AFORESAID GROUNDS ARE MUTUALLY EXCLUSIVE AND WI THOUT PREJUDICE TO EACH OTHER. ITA NO.5026/DEL/2018 1. WHETHER THE HONBLE CIT(A) ERRED IN DIRECTED TH E TPO TO APPLY TNMM IN RESPECT TO TRANSACTION FOR CORPORATE CHARGES PAYMENT WITHOUT GIVING COGENT REASONS AS TO HOW THI S METHOD IS THE MOST APPROPRIATE METHOD FOR BENCHMARKING THIS T RANSACTION IN SPITE OF THE FACT THAT TPO IN THE ORIGINAL ORDER HAD GIVEN ELABORATE REASONS FOR REJECTING TNMM AS MAM FOR THI S TRANSACTION? 2. WHETHER THE HONBLE CIT(A) ERRED IN DIRECTION TH E TPO TO ALLOW 20% DEDUCTION ON ACCOUNT OF CORPORATE MANAGEM ENT SUPPORT SERVICES IN SPITE OF THE FACT THAT TPO HAS ALREADY REDUCED THE EXPENSES TO THE LEVEL OF ARMS LENGTH? 3. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND MODIFY ALTER ADD OR FOREGO ANY GROUND(S) OF APPEA L AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 32 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 42. THE GROUND OF APPEAL NOS.1 TO 1.10 RAISED BY TH E ASSESSEE IN THIS APPEAL ARE AGAINST THE TRANSFER PRICING ADJUST MENT MADE ON ACCOUNT OF PAYMENT OF CORPORATE CHARGES. IT WAS AL SO POINTED OUT BY THE LD.AR FOR THE ASSESSEE THAT IN THE APPEAL FILED BY THE REVENUE THE ISSUE WAS ALSO IN RELATION TO THE TRANSACTION OF P AYMENT OF CORPORATE CHARGES. 43. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SELECTED TRANSACTIONAL NET MARGIN METHOD AS THE MOST APPROPR IATE METHOD OP/OC AS PLI. THE OPERATING MARGINS OF THE ASSESSE E WERE 22.75% AS COMPARED TO THE MEAN MARGINS OF THE COMPARABLE COMP ANIES SELECTED AT 13.35% AND HENCE WERE CONSIDERED TO BE AT ARMS L ENGTH. THE TPO DID NOT DISPUTE THE RENDITION OF SERVICES BY THE AE S BUT REJECTED THE TRANSACTIONAL NET MARGIN METHOD AND BENCHMARKED TH E INTERNATIONAL TRANSACTION OF PAYMENT OF CORPORATE CHARGES BY COMP ARING THE RATIO OF LEGAL AND PROFESSIONAL FEE OF 0.37% INCURRED BY THE COMPARABLE COMPANIES WITH THE RATIO OF 1.26% IN THE CASE OF TH E ASSESSEE AND MADE AN ADJUSTMENT OF RS.13 31 14 451/- BEING THE A LLEGEDLY EXCESS EXPENDITURE INCURRED BY THE ASSESSEE. 44. THE CIT(A) ACCEPTED THAT TRANSACTIONAL NET MARG IN METHOD WAS THE MOST APPROPRIATE METHOD TO BE APPLIED BUT DISA LLOWED 20% CORPORATE CHARGES HOLDING THEM IN THE NATURE OF SHA RE HOLDER 33 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 ACTIVITIES. THE CIT(A) OBSERVED THAT THE ASSESSEE HAD NOT PROVIDED ANY DETAILS WHETHER ANY DEDUCTION WAS MADE IN THE NATUR E OF SHAREHOLDER ACTIVITY. 45. THE LD.AR FOR THE ASSESSEE POINTED THAT THE AE HAD ALREADY REDUCED THE AMOUNT ATTRIBUTABLE TO SHAREHOLDER ACTI VITY AND HENCE THE ADJUSTMENT SUSTAINED BY THE CIT(A) WAS BAD IN L AW. 46. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE GROUND OF APPEAL OF APPEAL RAISED BY THE ASSESS EE AND THE REVENUE IS IN APPEAL AGAINST THE BENCHMARKING OF TH E AFORESAID TRANSACTION OF PAYMENT OF CORPORATE CHARGES BY APPL YING TRANSACTIONAL NET MARGIN METHOD AS THE MOST APPROPR IATE METHOD. WE HAVE ALREADY ADJUDICATED THE ISSUE OF BENCHMARKI NG OF THE INTERNATIONAL TRANSACTION OF PAYMENT OF CORPORATE C HARGES IN THE PARAS ABOVE AND FOLLOWING THE SAME PARITY OF REASONING W E FIND NO MERIT IN THE GROUND OF APPEAL RAISED BY THE REVENUE HENCE T HE SAME ARE DISMISSED. 47. NOW COMING TO THE DISALLOWANCE RETAINED BY THE CIT(A) AT 20% OF THE TOTAL EXPENSES; WE FIND NO MERIT IN THE SAME AS THE SAID AMOUNT ATTRIBUTABLE TO SHAREHOLDER ACTIVITY HAS ALREADY BE EN REDUCED BY THE AE WHILE ALLOCATING THE COST TO THE ASSESSEE. ACCO RDINGLY THERE IS NO MERIT IN DISALLOWING 20% OF THE AFORESAID EXPENDITU RE. THUS WE ALLOW 34 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 THE CLAIM OF THE ASSESSEE. THE GROUND OF APPEAL NO S.1 TO 1.10 STAND ALLOWED. 48. THE ISSUE IN GROUND OF APPEAL NOS.2 TO 2.3 IS A GAINST THE CLAIM OF DEDUCTION U/S 43B OF THE ACT IN RESPECT OF LEAVE ENCASHMENT AND GRATUITY PAID BEFORE THE DUE DATE OF FILING OF RET URN OF INCOME AMOUNTING TO RS.2.78 CRORES. 49. BRIEFLY IN THE FACTS RELATING TO THE ISSUE THE ASSESSEE HAD FILED REVISED RETURN OF INCOME AND NOT CLAIMED THE DEDUC TION U/S 43B OF THE ACT. HOWEVER DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE CLAIM WAS MADE FOR THE AFORESAID DEDUCTION IN RESP ECT OF LEAVE ENCASHMENT AND GRATUITY PAID BEFORE THE DUE DATE O F FILING OF RETURN OF INCOME. THE SAID AMOUNT WAS PAID ON 31.07.2011 AND THE SAME WAS CLAIMED TO BE ALLOWABLE U/S 43B OF THE ACT. TH E ASSESSING OFFICER DID NOT ALLOW THE CLAIM OF THE ASSESSEE IN VIEW OF NO CLAIM BEING MADE IN THE RETURN OF INCOME AND APPLIED THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN GOETZE (INDIA) LTD. [2006] 284 ITR 323 (SC). THE CIT(A) UPHELD THE ORDER OF THE ASSESSING OFFICER AG AINST WHICH THE ASSESSEE IS IN APPEAL. 50. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE HONBLE DELHI HIGH COURT IN CIT VS JAI PARABOLI C SPRINGS LTD. [2008] 306 ITR 42 (DEL) HAS EXPLAINED THAT THE TRIB UNAL HAS THE POWER TO ADJUDICATE THE FRESH CLAIM RAISED FOR THE FIRST TIME AND HAS ALSO 35 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 EXPLAINED THE RATIO OF THE DECISION OF HONBLE SUPR EME COURT IN GOETZE INDIA LTD. (SUPRA). IN VIEW THEREOF WE ADJUDICATE THE CLAIM OF THE ASSESSEE U/S 43B OF THE ACT. AS PER PROVISO TO THE SAID SECTION INCASE ANY AMOUNT WHICH IS DUE TO BE PAID TO WHIC H PROVISION OF SECTION 43B OF THE ACT ARE ATTRACTED THEN NO DISAL LOWANCE IS TO BE MADE U/S 43B OF THE ACT INCASE THE ASSESSEE DEPOSI TS THE SAID AMOUNT BEFORE THE DUE DATE OF FILING OF RETURN OF I NCOME. THE ASSESSEE BEFORE US IS AGGRIEVED BY THE DISALLOWANCE MADE ON ACCOUNT OF THE LEAVE ENCASHMENT OF RS.90 79 494/- AND GRATUITY OF RS.1.87 CRORES. THE ASSESSEE HAD DISCHARGED ITS LIABILITY ON 31.07. 2011 AND THIS FACT WAS ALSO VERIFIED AND CERTIFIED BY THE AUDITOR AS R EPORTED IN ANNEXURE (J) TO THE TAX AUDIT REPORT. HOWEVER INADVERTENTL Y THE ASSESSEE DID NOT CLAIM THE SAID DEDUCTION IN THE RETURN OF INCOM E FILED FOR THE YEAR UNDER CONSIDERATION. WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE AFORESAID CLAIM SUBJECT TO VERIFICATION BY THE ASSE SSING OFFICER. ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO ALL OW THE CLAIM OF THE ASSESSEE ON VERIFICATION. 51. NOW COMING TO THE LAST ISSUE RAISED VIDE GROUND OF APPEAL NOS. 3 & 3.1 IS AGAINST THE ADDITION OF RS.19 12 401/- B EING SUNDRY CREDIT BALANCES OUTSTANDING FROM PAST THREE YEARS. 52. BRIEFLY IN THE FACTS OF THE CASE THE ASSESSING OFFICER HAD MADE AN ADDITION OF RS.19 12 401/- ON ACCOUNT OF ALLEGED STATIC CREDITORS. 36 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 THE ADDITION MADE BY THE ASSESSING OFFICER IS OF RS .19 12 401/-. THE CASE OF THE ASSESSEE BEFORE US IS THAT THERE IS TOT ALING ERROR AND AMOUNT TOTALS TO RS.11 92 401/-. THE SAID CREDIT B ALANCES AS PER THE ASSESSEE WERE ENFORCEABLE AND RECOVERABLE BY THE CR EDITORS AND WERE REFLECTED AS PAYABLE IN THE BOOKS OF ACCOUNTS OF TH E ASSESSEE AND HENCE THE ASSESSING OFFICER COULD NOT MAKE THE AFO RESAID ADDITION U/S 41(1) OF THE ACT UNLESS IT IS ESTABLISHED THA T THE LIABILITY HAD SEIZED TO EXIST. 53. THE CIT(A) VIDE PARA 5.15 & 5.16 OBSERVED THAT THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE TAXPAYER BY THE HONB LE DELHI HIGH COURT IN CIT VS DALMIA FINANCE LTD. ITA NO.833/2010 RELYING UPON THE ORDER OF HONBLE SUPREME COURT IN CIT VS SUGAUL I SUGAR WORKS LTD. [1993] 236 ITR 518. HOWEVER IT WAS OBSERVED BY THE CIT(A) THAT THE ASSESSING OFFICER HAD RECTIFIED THE ABOVE ADDIT ION U/S 154/143(3) OF THE ACT AND HENCE NO GRIEVANCE REMAINS WITH THE ASSESSEE. 54. THE LD.AR FOR THE ASSESSEE POINTED OUT THAT THE RECTIFICATION WAS CARRIED OUT FOR MAT PURPOSES AND NOT FOR INCOME TAX PURPOSES. 55. THE LD. DR PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 56. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. APPLYING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN CIT VS 37 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 SUGAULI SUGAR WORKS LTD. (SUPRA) WHERE THE CREDITOR S ARE OUTSTANDING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THEY H AVE NOT BEEN REVERSED THEN SUCH OUTSTANDING BALANCE OF CREDITOR S CANNOT BE TREATED AS INCOME OF THE ASSESSEE. THE CIT(A) HAS FAIRLY POINTED OUT THAT THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE . HOWEVER WHILE DECIDING THE ISSUE REFERENCE WAS MADE TO THE RECTI FICATION ORDER U/S 154 OF THE ACT WHICH IS IN RESPECT OF THE COMPUTAT ION OF BOOK PROFITS UNDER THE MAT PROVISION AND NOT THE INCOME UNDER TH E INCOME TAX ACT. ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE IN ENTIRETY AND DELETE THE ADDITION OF RS.19 12 401/- AS THIS IS THE ADDITION MADE IN THE HANDS OF ASSESSEE. THE GROUND OF APPEAL NOS. 3 TO 3.1 ARE THUS ALLOWED. 57. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AN D THE APPEAL OF THE REVENUE IS DISMISSED. ITA NO.1944/DEL/2017 [ASSESSEES APPEAL] ASSESSMENT YEAR: 2012-13 58. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF AP PEAL RELATING TO ASSESSMENT YEAR 2012-13:- 1. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN COMPLETING THE ASSESSMENT UNDER SECTION 144C(1) R.W .S. 143(3) OF THE INCOME-TAX ACT 1961 (THE ACT) AT AN INCOM E OF RS.440 00 17 750 AS AGAINST THE INCOME OF RS. 196 9 8 53 050 RETURNED BY THE APPELLANT. 38 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 CORPORATE TAX ISSUES 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE DEPRECIATION SHOULD BE ALLOWED IN TERMS OF SECTION 32(1 )(II) OF THE ACT IN RESPECT OF INTANGIBLE ASSET IN THE NATURE OF GOODWILL AMOUNTING TO RS. 2675 57 10 570 ARISING UPON AMALGA MATION OF FLEXTRONICS SOFTWARE LIMITED (FLEXTRONICS) AND FUTU RES SOFTWARE LIMITED (FSL) INTO THE APPELLANT PURSUANT TO THE SC HEME OF AMALGAMATION APPROVED BY THE HONBLE DELHI HIGH COU RT VIDE ORDER DATED 16.05.2007. 2.1 THAT THE DRP/ ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN DISALLOWING THE DEPRECIATION OF RS. 211 64 18 51 2 UNDER SECTION 32(1 )(I) OF THE ACT ON WRITTEN DOWN VALUE OF GOODWILL OF RS. 846 56 74 048 ARISING OUT OF AMALGAMATION OF FL EXTRONICS AND FSL INTO THE APPELLANT ON THE GROUND OF APPEALT HAT THE APPELLANT DID NOT ASSIGN FAIR VALUE TO OTHER ASSETS WHILE COMPUTING GOODWILL. 2.2 THAT THE DRP/ ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN RELYING ON THE ITAT RULING OF DCIT VS. TOYO ENGI NEERING LTD. ITA NO. 3279/ MUM/2008 WITHOUT APPRECIATING THAT TH E SAME WAS REVERSED BY THE HONBLE MUMBAI BENCH OF THE TRI BUNAL. 2.3. THAT THE DRP ERRED ON FACTS AND IN LAW IN HOLD ING THAT THE AMALGAMATED COMPANY CANNOT CLAIM DEPRECIATION ON AS SETS ACQUIRED UNDER AMALGAMATION THAT IS MORE THAN THE D EPRECIATION ALLOWABLE TO THE AMALGAMATING COMPANY IN TERMS OF 5 TH PROVISO TO SECTION 32(1) OF THE ACT. 2.4. THAT THE DRP ERRED ON FACTS AND IN LAW IN HOLD ING THAT THE SUPREME COURT IN THE CASE OF CIT VS. SMIFS SECURITI ES LTD.; 348 ITR 302 HAS MERELY HELD THAT GOODWILL IS AN INTANGI BLE ASSET ELIGIBLE FOR DEPRECIATION UNDER SECTION 32 OF THE A CT AND THE SUPREME COURT HAS NOT DWELLED INTO THE ASPECT OF AP PLICABILITY OF 5TH PROVISO TO SECTION 32(1) OF THE ACT TO THE DEPR ECIATION TO BE CLAIMED ON GOODWILL ARISING UNDER AMALGAMATION. 2.5. THAT THE DRP/ ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE GOODWILL REPRESENTS DI FFERENCE BETWEEN THE AGGREGATE BOOK VALUE OF INVESTMENT IN T HE EQUITY SHARES OF FLEXTRONICS IN THE BOOKS OF THE APPELLANT AND FSL IN THE BOOKS OF FLEXTRONICS AND THE AGGREGATE FACE VAL UE OF SHARE CAPITAL OF FLEXTRONICS HELD BY THE APPELLANT AND FS L HELD BY FLEXTRONICS ACCOUNTED AS GOODWILL AMOUNTING TO RS.2675 57 10 570 PURSUANT TO AMALGAMATION OF FLEXT RONICS AND FSL WITH THE APPELLANT. 39 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 2.6. THAT THE DRP/ ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE GOODWILL DEPRECIATION CLAIM COULD NOT HAVE BEEN PART OF TAX AUDIT REPORT IN FORM 3CD SINCE THE CLAIM WAS MADE PURSUANT TO THE DECISION OF SUPREME COURT IN THE CASE OF CIT VS. SMIFS SECURITIES LTD.: (2012) 3 48 ITR 302. AS PER SUPREME COURT THE DEPRECIATION OUGHT TO BE ALLO WED IN TERMS OF SECTION 32(1 )(II) OF THE ACT IN RESPECT OF GOO DWILL PURSUANT TO AMALGAMATION OF FLEXTRONICS AND FSL WITH THE APPELL ANT WHILE COMPUTING THE TAXABLE INCOME OF THE APPELLANT. 2.7. THAT THE DRP/ ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN DENYING DEPRECIATION ON GOODWILL BY RELYING UPON THE DECISION OF THE BANGALORE TRIBUNAL IN THE CASE OF UNITED BRE WERIES LTD. VS. ADIT: 722/BANG/2014 WHEREIN IT HAS BEEN HELD T HAT DEPRECIATION ON ENHANCED VALUE OF GOODWILL IS BARRE D IN TERMS OF SIXTH PROVISO TO SECTION 32(1 )(II) OF THE ACT. 2.8. WITHOUT PREJUDICE THAT ON THE FACTS AND CIRCU MSTANCES OF THE CASE AND IN LAW CONSIDERATION AMOUNTING TO RS.43 36 58 490 RECEIVED BY THE APPELLANT FOR TRANS FER OF CERTAIN CUSTOMER RELATIONSHIPS TO ARICENT TECHNOLOGIES MAUR ITIUS LIMITED (ATML) WAS CAPITAL IN NATURE AND PART OF GOODWILL AND OUGHT NOT TO BE CONSIDERED AS PART OF TAXABLE INCOME OF T HE APPELLANT. 2.9. WITHOUT PREJUDICE THAT THE DRP ERRED ON FACTS AND IN LAW IN NOT ADMITTING THE CUSTOMER CONTRACTS FILED AS AD DITIONAL EVIDENCE IN TERMS OF RULE 9 OF THE INCOME TAX (DISP UTE RESOLUTION PANEL) RULES 2009 ALLEGEDLY HOLDING THA T THE APPELLANT FAILED TO DISCHARGE THE PRIMARY ONUS CAST UPON IT. 2.10. WITHOUT PREJUDICE THAT THE DRP/ ASSESSING OF FICER ERRED ON FACTS AND IN LAW IN FAILING TO APPRECIATE THAT THE CUSTOMER RELATIONSHIPS/ CONTRACTS TRANSFERRED TO ATML WERE I NTANGIBLE ASSETS WHICH WAS REDUCED FROM THE GOODWILL ELIGIBLE FOR DEDUCTION UNDER SECTION 32(1 )(II) OF THE ACT AND T HEREFORE THE SAID AMOUNT OUGHT TO BE REDUCED WHILE COMPUTING THE TAXABLE INCOME OF THE APPELLANT. 3. THAT THE DRP/ ASSESSING OFFICER ERRED ON FACTS A ND IN LAW IN MAKING ADDITION OF RS.2 65 46 256 ALLEGEDLY HOLD ING THAT THE APPELLANT HAD RECEIVED INTEREST UNDER SECTION 244A OF THE ACT ON THE INCOME TAX REFUND OF RS.24 77 65 100 DURING THE YEAR UNDER CONSIDERATION. 3.1. THAT THE DRP/ ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE APPELLANT DID NOT RECE IVE ANY INTEREST 40 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 UNDER SECTION 244A OF THE ACT FROM THE GOVERNMENT T REASURY DURING THE YEAR UNDER CONSIDERATION. 4. THAT THE DRP/ ASSESSING OFFICER ERRED ON FACTS A ND IN LAW IN DISALLOWING EXPENSE TO THE EXTENT OF RS.60 51 35 1 WHILE COMPUTING LONG TERM CAPITAL GAIN FROM SALE OF LAND ON THE GROUND OF APPEALTHAT THE SAME WERE NOT INCIDENTAL FOR SALE OF LAND. 4.1. THAT THE DRP/ ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN FAILING TO APPRECIATE THAT THE EXPENSES OF RS.60 51 351 WERE INCURRED BY THE APPELLANT TOWARDS LEGAL CHARGES PAI D TO THE LEGAL ADVISORS IN RESPECT OF SALE OF LAND. 4.2 THAT THE DRP ERRED ON FACTS AND IN LAW IN HOLDI NG THAT THE APPELLANT FAILED TO FILE THE SUPPORTING DOCUMENTS A S ADDITIONAL EVIDENCES WITHOUT APPRECIATING THAT THE NECESSARY S UPPORTING DOCUMENTS WERE DULY PLACED ON RECORD IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. 5. THAT THE DRP/ ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN DISALLOWING THE LOSS ON SALE OF SHARES OF ARICEN T JAPAN LIMITED ON THE GROUND OF APPEALTHAT THE VALUATION R EPORT OF CHARTERED ACCOUNTANT SUFFERED FROM AMBIGUITY. 5.1. THAT THE DRP/ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT VALUATION REPORT OBTAINED BY ARICENT JAPAN LIMITED FROM A TECHNICAL EXPERT WAS BINDING ON THE ASSESSING OFFICER. 5.2. THAT THE DRP/ ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT VALUATION REPORT OBTAINED BY ARICENT JAPAN LIMITED FROM A TECHNICAL EXPERT WAS AS PER TH E GUIDELINES ISSUED BY THE RESERVE BANK OF INDIA IN RELATION TO TRANSFER OF SHARES BY A RESIDENT TO A NON-RESIDENT. 6. THAT THE DRP/ ASSESSING OFFICER ERRED ON FACTS A ND IN LAW IN MAKING ADDITION OF RS.8 84 112 ON ACCOUNT OF INT EREST ON LATE DEPOSIT OF TDS WITHOUT APPRECIATING THAT SUCH INTER EST IS AN ALLOWABLE EXPENDITURE UNDER SECTION 37(1) OF THE AC T. 7. THAT THE DRP ERRED ON FACTS AND IN LAW IN ALTERN ATIVELY DISALLOWING U/S 37(1) THE PAYMENT OF CORPORATE CHA RGES AMOUNTING TO RS 29 69 39 832. 41 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 TRANSFER PRICING ISSUES 8. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN MAKING ADJUSTMENT OF RS. 31 79 46 069 TO THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY T HE APPELLANT WITH ITS ASSOCIATED ENTERPRISE ON THE BASIS OF THE ORDER PASSED UNDER SECTION 92CA(3) OF THE ACT BY THE TRANSFER PR ICING OFFICER (TPO) READ WITH DIRECTIONS OF DISPUTE RESOLUTION PANEL (DRP) PASSED UNDER SECTION 144C(5) OF THE ACT. 8.1. THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AND IN LAW IN DETERMINING THE ARMS LENGTH PRICE OF THE INTERN ATIONAL TRANSACTIONS OF PAYMENT OF CORPORATE CHARGES AMOUNT ING TO RS. 29 69 39 832 AT NIL ALLEGEDLY HOLDING THAT: (I) THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THE BE NEFITS THAT IT HAD DERIVED FROM THE SERVICES PURPORTEDLY PROVID ED BY THE EXPATS. (II) THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE A S TO THE COST BENEFIT ANALYSIS WITH REGARD TO THE INDEPENDEN T LOCAL EMPLOYEES. (III) NO DOCUMENTATION HAS BEEN PRODUCED BY THE AS SESSEE TO SUPPORT ITS CLAIM FOR THE RECEIPT OF SERVICES. (IV) THE BENCHMARKING DONE BY THE ASSESSEE IS NOT IN ACCORDANCE WITH THE LAW. 8.2 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THE FACT THAT THE ASSOCIATED ENTERPRIS E WHILE ALLOCATING THE CORPORATE CHARGES TO THE APPELLANT H AS DULY EXCLUDED THE COST IN THE NATURE OF STEWARDSHIP EXPE NDITURE. 8.3 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE ALLOCATION OF EXPENDITURE BY THE ASSOCIATED ENTERPRISE WAS DULY SUPPORTED BY A GLOBAL TRANSFER PRICING REPORT PREPARED BY AN INDEPENDENT CONSULTANT NAMELY DELO ITTE TAX LLP USA. 8.4 WHILE ALLEGEDLY HOLDING THAT NO BENEFIT WAS RE CEIVED BY THE ASSESSEE FROM PAYMENT OF CORPORATE CHARGES THE DRP ERRED ON FACTS AND IN LAW IN SUMMARILY DISREGARDING THE C ORRELATION BETWEEN SERVICES RECEIVED FROM THE ASSOCIATED ENTER PRISE AND INCREASE IN THE REVENUE AND PROFITS OF THE APPELLAN T. 42 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 8.5 THAT THE ASSESSING OFFICER/DRP GROSSLY MISUNDE RSTOOD AND MISINTERPRETED THE FACTS OF THE COST ALLOCATION AGREEMENT ENTERED INTO BETWEEN THE APPELLANT AND ITS AE. 8.6 THAT THE DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT PAYMENT MADE BY THE APPELLANT TO ITS ASSOCIATE D ENTERPRISE ON ACCOUNT OF CORPORATE CHARGES REPRESENTS ACTUAL COST INCURRED BY THE ASSOCIATED ENTERPRISE ON BEHALF OF THE APPEL LANT. 8.7 THAT THE DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THE ADDITIONAL EVIDENCES SUBMITTED IN THE FORM OF A FFIDAVITS OF EMPLOYEES OF THE ASSOCIATED ENTERPRISE RENDERING VA RIOUS SERVICES TO THE APPELLANT. 8.8 THAT THE ASSESSING OFFICER/ DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE EXPENDITURE ON THE PAY MENT FOR SERVICES RECEIVED FROM THE ASSOCIATED ENTERPRISE WA S WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE APPE LLANT. 8.9 THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE EXPENDITURE ON THE PAY MENT FOR SERVICES RECEIVED FROM THE ASSOCIATED ENTERPRISE WA S VALIDLY BENCHMARKED ALONG WITH OTHER CLOSELY LINKED TRANSAC TIONS APPLYING TNMM AS MOST APPROPRIATE METHOD AND THAT N O ADVERSE INFERENCE COULD BE DRAWN ON THIS ACCOUNT. 8.10 THAT THE TPO/ DRP ERRED ON FACTS AND IN LAW I N COMPUTING ADJUSTMENT ON ACCOUNT OF INTERNATIONAL TRANSACTION OF PAYMENT MADE FOR SERVICES RECEIVED FROM THE ASSOCIATED ENTE RPRISE WITHOUT APPLYING ANY PRESCRIBED METHODS. 9. THAT THE TPO/ DRP ERRED ON FACTS AND IN LAW IN PROPOSING AN ADDITION OF RS. 2 39 616 ON ACCOUNT OF INTEREST CHARGED ON LOAN GIVEN TO ASSOCIATED ENTERPRISE BY APPLYING THE INTEREST RATE OF 3.12% (LIBOR +150 BASIS POINTS). 9.1 THAT THE TPO/ DRP ERRED ON FACTS AND IN LAW IN FAILING TO APPRECIATE THAT THERE WAS A STATUTORY RESTRICTION O N THE ASSOCIATED ENTERPRISE IN ACCRUING INTEREST IN CHINA WHEN THE ENTITY HAS APPLIED FOR REPAYMENT OF LOAN. 10. THAT THE TPO/DRP ERRED ON FACTS AND IN LAW IN PROPOSING AN ADJUSTMENT OF RS. 2 07 66 621 ON ACCOUNT OF INTE REST ON RECEIVABLES DUE FROM ASSOCIATED ENTERPRISE BY APPLY ING INTEREST RATE OF LIBOR + 400 BASIS POINTS. 43 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 10.1 THAT THE TPO/DRP ERRED ON FACTS AND IN LAW BY ALLEGEDLY CONSIDERING THE DELAY IN RECEIPT OF RECEIVABLES FRO M THE ASSOCIATED ENTERPRISE IS IN THE NATURE OF UNSECURED LOANS. 10.2 THAT THE TPO/DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT DELAY IN RECEIPT OF RECEIVABLE IS NOT AN INTERNATIONAL TRANSACTION PER SE UNDER SECTION 92 B OF THE ACT BUT IS A CONSEQUENCE OF AN INTERNAL TRANSACTION UND ERTAKEN IN THE FORM OF SALES MADE TO ASSOCIATED ENTERPRISE. 10.3 WITHOUT PREJUDICE THE TPO/DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE APPELLANT HAS RECEIVED RECEIVABLES FROM UNRELATED PARTIES WITH SIMILAR DELAY OF PERIOD AND ACCORDINGLY THE DELAY IN RECEIPT OF RECEIVABLES FRO M UNRELATED PARTIES SHOULD BE CONSIDERED AS A VALID CUP FOR THE PURPOSE OF BENCHMARKING. 10.4 THAT THE TPO/DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT SINCE THE OPERATING PROFIT MARGIN EARNED BY THE ASSESSEE IS HIGHER THAN THE COMPARABLE COMPANIES T HE ASSESSEE HAS ALREADY FACTORED THE COST OF INTEREST IN ITS PRICING WHILE PROVIDING SOFTWARE DEVELOPMENT SERVICES TO IT S ASSOCIATED ENTERPRISE. 10.5 THAT THE DRP ERRED ON FACTS AND IN LAW BY HOL DING THAT THE WORKING CAPITAL ADJUSTMENT DOES NOT ADDRESS THE MIS PRICING WHERE THE INTEREST FREE RECEIVABLES ARE OUTSTANDING BEYOND THE AVERAGE COLLECTION PERIOD. 10.6 WITHOUT PREJUDICE THE TPO/DRP ERRED ON FACTS AND IN LAW IN FAILING TO APPRECIATE THAT THE IMPACT OF WORKING CAPITAL OF THE ASSESSEE VIS-A-VIS ITS COMPARABLES HAS ALREADY BEEN FACTORED IN THE PRICING/PROFITABILITY OF THE ASSESSEE WHICH IS MORE THAN THAT WORKING CAPITAL ADJUSTED MARGIN OF THE COMPARABLES COMPANIES. 10.7 WITHOUT PREJUDICE THAT THE TPO ERRED ON FACTS AND IN LAW IN FAILING TO APPRECIATE THAT NO ADJUSTMENT IS WARR ANTED IF COMPLETE SET OFF IS GIVEN FOR INTEREST ON PAYABLES DUE TO ALL ASSOCIATED ENTERPRISES. 10.8. WITHOUT PREJUDICE THAT THE TPO FAILED TO APP RECIATE THAT NO ADJUSTMENT WAS MADE ON ACCOUNT OF INTEREST DUE FROM ASSOCIATED ENTERPRISE IN ASSESSMENT YEAR 2011-12 AN D ASSESSMENT YEAR 2013-14. 44 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 59. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSE E IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. HENCE THE SAME IS DISMISSED. 60. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSE E AGAINST THE CORPORATE ISSUE OF NON-ALLOWANCE OF DEPRECIATION ON GOODWILL. 61. THE LD.AR FOR THE ASSESSEE AT THE OUTSET POINTE D OUT THAT THE ISSUE RAISED VIDE PRESENT GROUNDS OF APPEAL IS SIMI LAR TO THE ISSUE RAISED VIDE GROUND OF APPEAL NOS. 5 TO 5.3 OF APPEA L IN ASSESSMENT YEAR 2010-11. 62. WE HAVE ALREADY ADJUDICATED THE ISSUE IN PARAS ABOVE WHILE DECIDING THE APPEAL FOR ASSESSMENT YEAR 2010-11 AND FOLLOWING THE SAME PARITY OF REASONING WE ALLOW GROUND OF APPEAL NOS. 2 TO 2.7 OF THE ASSESSEE. GROUND OF APPEAL NOS. 2.8 TO 2.10 AR E NOT PRESSED HENCE DISMISSED AS NOT PRESSED. 63. THE ISSUE RAISED VIDE GROUND OF APPEAL NOS. 3 T O 3.1 IS AGAINST THE ADDITION OF RS.2.65 CRORES BEING THE INTEREST R ECEIVED U/S 244A OF THE ACT. THE CASE OF THE ASSESSEE BEFORE US IS THA T THOUGH THE ASSESSING OFFICER VIDE PARAS 8.2 & 8.3 OF THE ASSES SMENT ORDER ADDED THE INTEREST RECEIVED U/S 244A OF THE ACT IN THE HA NDS OF THE ASSESSEE BUT NO SUCH INTIMATION HAD BEEN ISSUED TO THE ASSES SEE. THE LD.AR POINTED OUT THAT THE LIMITED ISSUE RAISED IS THAT T HE SAME MAY BE VERIFIED BY THE ASSESSING OFFICER AND IF CORRECT TH E SAME MAY BE 45 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE. ACCOR DINGLY WE DIRECT THE ASSESSING OFFICER TO VERIFY THE REQUISITE DETAI LS U/S 244A OF THE ACT AND ALSO INTIMATE TO THE ASSESSEE ABOUT THE SAME AN D BRING IT TO TAX IN THE HANDS OF THE ASSESSEE. HENCE GROUND OF APP EAL NOS. 3 & 3.1 RAISED BY THE ASSESSEE ARE ALLOWED AS INDICATED. 64. NOW COMING TO GROUND OF APPEAL NOS. 4 TO 4.2 WHEREIN THE ISSUE RAISED IS AGAINST THE DISALLOWANCE OF EXPENSE S TOTALING TO RS.60 51 351/- WHILE COMPUTING THE INCOME FROM LON G TERM CAPITAL GAINS ON SALE OF LAND ON THE GROUND THAT THE SAME WERE NOT INCIDENTAL TO SALE OF LAND. THE CASE OF THE ASSESSEE IS THAT THE SAID EXPENDITURE WERE TOWARDS LEGAL CHARGES PAID TO THE LEGAL ADVISO RS FOR THE TRANSACTION OF SALE OF LAND. THE ASSESSEE IS ALSO AGGRIEVED BY THE OBSERVATION OF THE DRP IN HOLDING THAT THE ASSESSEE HAD FILED THE SUPPORTING DOCUMENTS AS ADDITIONAL EVIDENCE THOUGH THE SAME WERE FILED ON RECORD DURING ASSESSMENT PROCEEDINGS. 65. BRIEFLY IN THE FACTS RELATING TO THE ISSUE THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD DECLARED INCOME FROM L ONG TERM CAPITAL GAINS TOTALING TO RS.136.94 CRORES. THE ASSESSEE H AD CLAIMED LEGAL EXPENSES TOTALING TO RS.4.58 CRORES. THE ASSESSING OFFICER ALLOWED THE BROKERAGE FEE PAID BY THE ASSESSEE TOTALING TO RS.3 .98 CRORES BUT THE BALANCE EXPENDITURE WAS DISALLOWED IN THE H ANDS OF THE ASSESSEE. THE LD.AR FOR THE ASSESSEE HAS TAKEN US THROUGH THE 46 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 DETAILS OF THE EXPENDITURE BOOKED BY THE ASSESSEE A ND POINTED OUT THE EVIDENCES IN THIS REGARD WERE FILED BOTH BEFORE TH E ASSESSING OFFICER & DRP. HE FURTHER POINTED OUT THAT THE EXPENSES WERE INCURRED FOR THE PURPOSE OF CARRYING ON THE BUSINESS AND WERE BOOKED AS EXPENDITURE AGAINST THE SALE OF ASSET AND THE SAME MAY BE ALLOW ED IN THE HANDS OF THE ASSESSEE. 66. THE LD.DR FOR THE REVENUE POINTED OUT THAT THE EXPENDITURE INCURRED BY THE ASSESSEE HAVE NOT BEEN VERIFIED BY EITHER BY THE AUTHORITIES BELOW AND THE SAME MAY BE DIRECTED TO B E VERIFIED. 67. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE DETAILS OF LEGAL EXPENSES WHICH HAVE NOT BEEN ALLOWED IN THE H ANDS OF THE ASSESSEE. THE EXPENDITURE COMPRISES OF HOUSE TAX P AYMENT OF RS.30 LAKHS AGAINST THE BILL OF RS.26 26 296/-. THE SAI D EXPENDITURE IS ALLOWABLE IN THE HANDS OF THE ASSESSEE U/S 37(1) OF THE ACT AND WE DIRECT THE ASSESSING OFFICER TO VERIFY THE PAYMENT AND ALLOW THE SAME. THE ASSESSEE HAS ALSO INCURRED LEGAL CONSULTANCY CH ARGES RELATING TO THE SALE OF BANGLORE LAND WHICH ARE ALSO ALLOWABLE AS AN EXPENDITURE U/S 48(1) OF THE ACT. THE STAND OF THE ASSESSEE MA Y BE VERIFIED AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE SAME U/S 48(1) OF THE ACT. 68. NOW COMING TO THE BALANCE EXPENDITURE WHICH WA S IN RELATION TO JWALA LAND TRANSACTION AGAINST WHICH THE ASSESS EE DECLARED 47 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 INCOME FROM LONG TERM CAPITAL GAINS. WE FIND NO ME RITS IN THE ORDERS OF THE AUTHORITIES BELOW IN DISALLOWING THE SAME WH ERE THE EXPENDITURE CONNECTED WITH THE TRANSFER OF LAND TH E SAME IS TO BE ALLOWED AS DEDUCTION U/S 48(I) OF THE ACT. GROUND OF APPEAL NOS. 4 TO 4.2 RAISED BY THE ASSESSEE ARE THUS ALLOWED. 69. THE ISSUE RAISED IN GROUND OF APPEAL NOS. 5 TO 5.2 IS AGAINST THE DISALLOWANCE OF LOSS ON SALE OF SHARES OF ARICENT-J APAN LTD. 70. BRIEFLY IN THE FACTS OF THE ISSUE RAISED THE A SSESSEE HAD DECLARED LONG TERM CAPITAL LOSS OF RS.69 60 313/- O N ACCOUNT OF SALE OF SHARE INVESTMENTS. THE ASSESSING OFFICER ASKED ASS ESSEE TO FILE DETAILS OF HOW THE SAID SHARES HAD BEEN VALUED FOR THE PURPOSE OF DETERMINATION OF THE SALE CONSIDERATION. THE ASSES SING OFFICER NOTED THAT THE ASSESSEE HAD ENTERED INTO AN EQUITY PURCHA SE AGREEMENT DATED 25.08.2011 AS PER WHICH 800 SHARES PURCHASED BY THE ASSESSEE AT A PRICE OF JPY 50 000 MILLION WERE SOLD AT A PRI CE OF JPY 35 MILLION. THE ASSESSEE IN SUPPORT PRODUCED THE VALUATION REPO RT AND JUSTIFIED THE CAPITAL LOSS DECLARED AT RS.69 60 313/-. THE A SSESSING OFFICER IN THE DRAFT ASSESSMENT ORDER OBSERVED AS UNDER:- 11.3. THE PURPOSE OF DCF ANALYSIS IS SIMPLY TO EST IMATE THE MONEY AS INVESTOR WOULD REVISED FROM AN INVESTMENT ADJUSTMENT FOR TIME VALUE OF MONEY. DISCOUNTED CASH FLOW MODE LS ARE AS GOOD AS THEIR IMPORTS. THEREFORE ESTIMATION OF NE T CASH FLOW IS BASED ON THE DATA PROVIDED BY THE MANAGEMENT AND NO T ON THE COMPARABLE DATA. HENCE IT SUFFERS FROM AMBIGUITY. 48 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 71. THE LONG TERM CAPITAL LOSS OF RS.69 60 313/- W AS DISALLOWED IN THE HANDS OF THE ASSESSEE. THE DRP UPHOLDING THE O RDER OF THE ASSESSING OFFICER OBSERVED THAT THE BOOK VALUE METH OD WOULD BE APPROPRIATE METHOD FOR VALUING THE SHARES OF THE CO MPANIES WHICH WAS ITES COMPANY AND DCF MODELS CANNOT BE APPLIED. THE ASSESSING OFFICER THUS PASSED FINAL ASSESSMENT ORDE R MAKING THE AFORESAID ADDITION IN THE HANDS OF THE ASSESSEE. 72. THE ASSESSEE IS IN APPEAL BEFORE US IN THIS REG ARD. 73. AFTER TAKING US THROUGH THE FACTUAL ASPECTS TH E LD.AR FOR THE ASSESSEE POINTED OUT THAT THERE ARE NO PROVISION UN DER ACT TO SUBSTITUTE THE ACTUAL CONSIDERATION WITH NOTIONAL V ALUE. HE FURTHER STATED THAT SECTION 50C(A) WERE INSERTED BY FINANC E ACT 2017 W.E.F 01.04.2018 AND PRIOR TO THIS THERE WERE NO POWERS W ITH THE ASSESSING OFFICER TO SUBSTITUTE THE VALUE OF ACTUAL CONSIDERA TION. HE FURTHER REFERRED TO THE AGREEMENT PLACED AT PAGE 265 OF THE PAPER BOOK AND IT WAS BROUGHT TO OUR NOTICE THAT THE SHARES OF THE SA ID COMPANY OF JAPAN WERE SOLD BY THE ASSESSEE TO CYPRUS COMPANY A ND THE SALE CONSIDERATION WAS DULY MENTIONED IN THE AGREEMENT A T PAGE 268 OF THE PAPER BOOK. HE POINTED OUT THAT THE VALUATION REPO RT WERE FOR RBI PURPOSE COPY OF WHICH IS PLACED AT PAGES 400 TO 40 4 OF THE PAPER BOOK UNDER WHICH THE SHARES WERE VALUED @ RS.40 42 4 PER SHARE. IT WAS STRESSED BY THE LD.AR FOR THE ASSESSEE THAT THE SAID REPORT DOES 49 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 NOT GIVE ANY POWER TO THE ASSESSING OFFICER TO SUBS TITUTE OF VALUE OF ACTUAL CONSIDERATION. 74. THE LD.DR FOR THE REVENUE ON THE OTHER HAND POI NTED OUT THAT ONLY QUESTION WHICH REMAINS IS FAIR MARKET VALUE OF THE SHARES. HE FAIRLY SUBMITTED THAT THE SALE CONSIDERATION CANNOT BE DISTURBED BUT IT WAS NOT CLEAR HOW THE ASSESSEE HAD ARRIVED AT THOSE FIGURES. 75. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS THE COM PUTATION OF CAPITAL GAIN ON SALE OF SHARES OF ARICENT-JAPAN LTD. THE A SSESSEE HAD ACQUIRED 800 SHARES IN AE ARICENT-JAPAN JPY 50 000 MILLION. THE TOTAL COST OF ACQUISITION WAS RS.1.54 CRORES. THES E SHARES WERE HELD BY THE ASSESSEE AS ON 01.04.2011. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD ENTERED INTO EQUITY PURCHASE AGREEMENT DATED 25.08.2011 UNDER WHICH THE SAID 800 SHARES WERE SOLD @ RS.40 424 EACH I.E. FOR A CONSIDERATION OF R S.2.15 CRORES. EVIDENCE OF SALE OF THE SHARES IS THE EQUITY PURCHA SE AGREEMENT DATED 25.08.2011 COPY OF WHICH IS PLACED AT PAGES 265 ON WARDS ON THE PAPER BOOK FILED BY THE ASSESSEE. THE ASSESSING OF FICER HAS DISALLOWED THE LOSS CLAIMED BY THE ASSESSEE ON THE GROUND THAT THE METHOD ADOPTED BY THE ASSESSEE FOR VALUING ITS SHAR ES ON THE DATE OF SALE SUFFERS FROM AMBIGUITY. THE QUESTION WHICH AR ISES BEFORE US IS WHETHER THE ASSESSING OFFICER WHILE COMPUTING THE I NCOME FROM 50 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 CAPITAL GAINS ON TRANSFER OF CAPITAL ASSETS HAS THE POWER NOT TO ACCEPT THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUIN G ON THE TRANSFER OF ASSETS. THE COURTS HAVE TIME AND AGAIN HELD THAT TH ERE IS NO POWER WITH THE AO TO SUBSTITUTE THE ACTUAL CONSIDERATION WITH ANY NOTIONAL CONSIDERATION OR FAIR MARKET VALUE OF THE ASSET. 76. ANOTHER ASPECT WHICH NEEDS TO BE SEEN IS THAT T HE SAID TRANSACTION OF SALE OF SHARES WAS REPORTED BY THE A SSESSEE IN FORM NO.3CEB AND TRANSFER PRICING REPORT. THE TPO HAS A NALYZED THE INTERNATIONAL TRANSACTION UNDERTAKEN BY THE ASSESSE E AND HAD ACCEPTED THE SAID TRANSACTION AT ARMS LENGTH AND D ID NOT PROPOSE ANY ADJUSTMENT. IN SUCH FACTS AND CIRCUMSTANCES THE A SSESSING OFFICER CANNOT MAKE ANY ADJUSTMENT/ADDITION BY NOT ACCEPTIN G THE SALE CONSIDERATION RECEIVED BY THE ASSESSEE. THE REFER ENCE TO THE VALUATION REPORT WHICH WAS FILED BY THE ASSESSING O FFICER BEFORE THE RBI CANNOT BE THE BASIS FOR REWORKING THE CAPITAL G AINS IN THE HANDS OF THE ASSESSEE WHERE THE ASSESSEE HAD ENTERED INT O EQUITY PURCHASE AGREEMENT DATED 25.08.2011 WHEREIN 800 SHARES WERE SOLD BY THE ASSESSEE AT A PRICE OF JPY 35 MILLION. ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO ALLOW THE LOSS CLAIMED BY THE ASSESSEE ON THE SALE OF SHARES OF ITS AE ARICENT-JAPAN. GROUND OF APPE AL NOS.5 TO 5.2 RAISED BY THE ASSESSEE ARE ALLOWED. 51 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 77. THE ISSUE IN GROUND OF APPEAL NO.6 IS AGAINST T HE DISALLOWANCE OF INTEREST PAID ON LATE DEPOSIT OF TDS AMOUNTING T O RS.8 84 112/-. THE LD.AR POINTED OUT THAT THE INTEREST PAID BY THE ASSESSEE WAS COMPENSATORY AND HENCE DEDUCTIBLE IN THE HANDS OF THE ASSESSEE. HE ALSO POINTED OUT THAT THE SAID INTEREST WAS NOT COV ERED U/S 40(A)(II) OF THE ACT. 78. THE LD.DR FOR THE REVENUE PLACED RELIANCE ON TH E ORDER OF THE ASSESSING OFFICER AT PAGE 18 OF THE ASSESSMENT ORDE R. 79. BRIEFLY IN THE FACTS RELATING TO THE ISSUE THE ASSESSEE HAD PAID INTEREST AMOUNTING TO RS.8 84 112/- ON LATE DEPOSIT OF TDS ON THE FOREIGN REMITTANCES U/S 195 OF THE ACT. THE ASSESS EE CLAIMED THE SAID EXPENDITURE AS ALLOWABLE U/S 37(1) OF THE ACT BEIN G COMPENSATORY AND NOT PENAL IN NATURE. HOWEVER THE SAID PLEA OF THE ASSESSEE WAS NOT ACCEPTED BY THE AUTHORITIES BELOW. HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 80. THE LD.AR FOR THE ASSESSEE POINTED OUT THAT INT EREST PAID ON LATE DEPOSIT OF TAX BY THE RECIPIENT WAS COMPENSATORY A ND DEDUCTIBLE IN THE HANDS OF THE ASSESSEE. HE ALSO POINTED OUT THA T THE SAID INTEREST WAS NOT COVERED UNDER THE PROVISIONS OF SECTION 40( A)(II) OF THE ACT. 81. THE LD.DR PLACED RELIANCE ON THE ORDER OF THE A SSESSING OFFICER IN PARA 13 AT PAGE 18 OF THE ORDER. 52 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 82. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE HAD PAID INTEREST AMOUNTING TO RS.8 84 112/- ON LATE DEDUCTION OF TDS UNDER THE PROVISION OF SECTION 40( A)(II) OF THE ACT. ANY SUM PAID ON ACCOUNT OF ANY RATE OF TAX LEVIED I S NOT TO BE ALLOWED AS A DEDUCTION. ALSO THE INTEREST PAID ON LATE DE POSIT OF TAX IS NOT AN ALLOWABLE EXPENDITURE IN THE HANDS OF THE ASSESSEE. HENCE WE DISMISS THE CLAIM OF THE ASSESSEE. GROUND OF APPEA L NO.6 RAISED BY THE ASSESSEE IN THIS APPEAL IS DISMISSED. 83. GROUND OF APPEAL NO.7 IS NOT PRESSED BY THE ASS ESSEE HENCE THE SAME IS DISMISSED AS NOT PRESSED. 84. THE ISSUE RAISED IN GROUND OF APPEAL NOS. 8 TO 8.10 IS AGAINST THE TRANSFER PRICING ADJUSTMENT MADE ON ACCOUNT OF PAYMENT OF CORPORATE CHARGES. THE SAID ISSUE IS SIMILAR TO TH E ISSUE RAISED IN GROUND OF APPEAL NOS.2.1 TO 2.11 IN ASSESSMENT YEAR 2010-11 AND FOLLOWING THE SAME PARITY OF REASONING WE ALLOW TH E CLAIM OF THE ASSESSEE. HENCE GROUND OF APPEAL NOS. 8 TO 8.10 A RE ALLOWED. 85. NOW COMING TO THE ISSUES RAISED VIDE GROUND OF APPEAL NOS.9 TO 9.1 WHICH IS AGAINST THE TRANSFER PRICING ADJUSTMEN T OF RS.2 39 616/- MADE ON ACCOUNT OF INTEREST ON FOREIGN CURRENCY LOA N EXTENDED TO THE AE. 86. BRIEFLY IN THE FACTS RELATING TO THE ISSUE THE ASSESSEE HAD ADVANCED LOAN TO ARICENT CHINA. AS WAS THE PRACTIC E BEFORE REPAYING 53 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 THE CHINESE ENTITY HAD TO SEEK PERMISSION FROM THE AUTHORITIES FOR REPAYING THE LOAN AND THE CHINESE LAWS PROHIBITED A CCRUING OF FURTHER INTEREST ONCE DOCUMENTS FOR THE REPAYMENT OF LOANS WERE SUBMITTED. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE H AD NOT RECEIVED ANY INTEREST ON THE SAID OUTSTANDING LOAN. THE ASS ESSEE THUS DID NOT ACCOUNT FOR ANY INTEREST ON THE SAID LOANS IN ITS B OOKS OF ACCOUNTS. THE EXPLANATION OF THE ASSESSEE WAS THAT IN VIEW OF THE PROVISIONS OF RULE 10B(2)(D) OF THE ACT NO SUCH INTEREST COULD B E PROVIDED IN THE BOOKS OF ACCOUNTS. HOWEVER THE TPO DID NOT ACCEPT THE PLEA OF THE ASSESSEE AND MADE TRANSFER PRICING ADJUSTMENT OF RS .2 39 616/- ON ACCOUNT OF INTEREST DUE ON FOREIGN CURRENCY LOAN EX TENDED TO THE AE AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 87. THE LD.AR FOR THE ASSESSEE REFERRED TO THE LOAN AGREEMENT EXECUTED IN MARCH 2008 AND AS PER CLAUSE 8 THE SA ID LOAN WAS REPAYABLE IN MARCH 2011. ON 01.04.2011 THE AE MO VED AN APPLICATION BEFORE THE CHINESE AUTHORITIES SEEKING PERMISSION FOR REPAYMENT OF THE AFORESAID LOAN. THE LD.AR FOR TH E ASSESSEE PLACED RELIANCE ON THE ON THE DECISION OF DELHI BENCH OF T RIBUNAL IN DCIT VS M/S TMW ASPF I CYPRUS HOLDING COMPANY LTD. IN ITA NO.879/DEL/2016) RELATING TO ASSESSMENT YEAR 2011-1 2 ORDER DATED 09.08.2019. 54 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 88. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES BEFORE US IS AGAINST THE TRA NSFER PRICING ADJUSTMENT MADE IN THE HANDS OF THE ASSESSEE ON ACC OUNT OF INTEREST DUE FROM ARICENT-CHINA ON THE LOANS ADVANCED TO IT. THE ASSESSEE HAD ADVANCED THE SAID LOANS TO ARICENT-CHINA UNDER THE LOAN AGREEMENT OF MARCH 2008 AND AS PER CLAUSE 8 THE S AID LOAN WAS REPAYABLE AFTER A PERIOD OF THREE YEARS. THE AE IN CHINA MOVED AN APPLICATION FOR REPAYMENT OF THE SAID LOAN AND AS P ER THE LAWS OF CHINA ONCE THE APPLICATION IS MOVED FOR REPAYMENT OF LOAN NO INTEREST WOULD ACCRUE TILL THE TIME PERMISSION IS GIVEN BY THE AUTHORITIES TO MAKE THE AFORESAID REPAYMENT. UNDER THE INTERNATIONAL TRANSACTIONS REPORTED FOR BENCHMARKING THE ASSESSEE HAD ACCOUNTED FOR THE AMOUNT REMITTED BY ARICENT-CHINA WHICH IS NOT IN DISPUTE. THE ONLY ISSUE WHICH ARISES IS WHETHER ANY INTEREST HAD ACCRUED ON THE AFORESAID LOAN DURING THE PERIOD WHEN THE APPLI CATION FOR REPAYMENT WAS UNDER PROCESS. ONCE THE LAW OF CHIN A PROVIDE NO ACCRUAL OF INTEREST IN THE CONTRACTING STATE THEN T HERE IS NO MERIT IN HOLDING THE ACCRUAL OF INCOME IN THE HANDS OF THE A SSESSEE. ACCORDINGLY THE ORDERS OF THE AUTHORITIES BELOW IN THIS REGARD ARE REVERSED. WE ALSO HOLD THAT IN THE ABSENCE OF ANY ACCRUAL OF INTEREST INCOME NO ADJUSTMENT COULD BE MADE ON ACCOUNT OF A LLEGED ACCRUAL OF INTEREST ON THE LOAN ADVANCED TO THE AE. 55 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 89. ANOTHER ASPECT WHICH NEEDS TO BE CONSIDERED IS UNDER THE DTAA BETWEEN INDIA AND CHINA. FOR TAXING THE INTEREST I NCOME IT IS NECESSARY THAT THE INTEREST SHOULD ARISE IN THE CON TRACTING STATE AND AS WELL AS PAID TO THE RESIDENT OF OTHER STATE. TH E SAID ISSUE STANDS COVERED BY THE DECISION OF DELHI BENCH OF TRIBUNAL IN DCIT VS M/S TMW ASPF I CYPRUS HOLDING COMPANY LTD. (SUPRA) IN P ARA 20 OF THE ORDER DATED 09.08.2019 WHICH READS AS UNDER:- 20. THE AFORESAID PARA ENVISAGES THAT FOR TAXING T HE INTEREST INCOME IN THE HANDS OF A NON-RESIDENT IT IS NECESS ARY THAT THE INTEREST SHOULD ARISE IN A CONTRACTING STATE I.E. TWIN CONDITIONS OF ACCRUAL AS WELL AS THE PAYMENT ARE TO BE SATISFIED. IF THERE IS NO ACCRUAL OR ACTUAL PAYMENT RECEIVED THEN SAME IS TO BE DECIDED WITHIN THE SCOPE OF ARTICLE 11(1). WHAT THE TPO/AO HAVE SOUGHT TO TAX IS THAT ASSESSEE WAS SUPPOSED TO RECEIVE IN TEREST OF 18% IF THE CONTINGENT EVENT WOULD HAVE ARISEN I.E. IF IN THE EVENT THE OPTION WAS EXERCISED BY THE ASSESSEE TO SELL ITS CO NVERTED SHARES TO THE PROMOTERS OF INVESTEE COMPANY AT AN OPTION P RICE THEN IT WOULD HAVE GIVEN THE RETURN OF 18%. THUS ENTIRE ED IFICE OF THE TPO/AO WAS BASED ON FIXATION OF CONTINGENT EVENT WH ICH ASSESSEE WAS SUPPOSED TO RECEIVE. IT IS ALSO MATTER OF RECORD NO SUCH CONVERSION WAS ACTUALISED AND ASSESSEE REMAINE D INVESTED EVEN DURING THE YEAR UNDER CONSIDERATION. THE TRANS FER PRICING ADJUSTMENT HAS BEEN MADE ON THIS HYPOTHETICAL AMOUN T OF INTEREST RECEIVABLE. WHETHER SUCH NOTIONAL INCOME C AN BE BROUGHT TO TAX EVEN UNDER THE TRANSFER PRICING PROVISION H AS BEEN DEALT BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF VOD AFONE INDIA SERVICES (P) LTD. VS. UNION OF INDIA (SUPRA) WHERE IN THEIR LORDSHIPS HAVE HELD THAT EVEN INCOME ARISING FROM I NTERNATIONAL TRANSACTION MUST SATISFY THE TEST OF INCOME UNDER T HE ACT AND MUST FIND ITS HOME IN ONE OF THE CHARGING PROVISION S. HERE IN THIS CASE NOWHERE THE TPO/AO HAS BEEN ABLE TO ESTABLISH THAT NOTIONAL INTEREST SATISFY THE TEST OF INCOME ARISIN G OR RECEIVED UNDER THE CHARGING PROVISION OF INCOME TAX ACT. IF INCOME IS NOT TAXABLE IN TERMS OF SECTION 4 THEN CHAPTER X CANNO T BE MADE APPLICABLE BECAUSE SECTION 92 PROVIDES FOR COMPUTI NG THE INCOME ARISING FROM INTERNATIONAL TRANSACTIONS WITH REGARD TO THE ALP. ONLY THE INTEREST INCOME CHARGEABLE TO TAX CAN BE S UBJECT MATTER OF TRANSFER PRICING IN INDIA. MAKING ANY TRANSFER P RICING 56 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 ADJUSTMENT ON INTEREST WHICH HAS NEITHER BEEN RECEI VED NOR ACCRUED TO THE ASSESSEE CANNOT BE HELD TO BE CHARGE ABLE IN TERMS OF THE INCOME TAX ACT READ WITH ARTICLE 11(1) OF DT AA. HERE IT CANNOT BE THE CASE OF ACCRUAL OF INTEREST ALSO BEC AUSE NONE OF THE INVESTEE COMPANIES HAVE ACKNOWLEDGE THAT ANY INTERE ST PAYMENT IS DUE ALBEIT THEY HAVE BEEN REQUESTING FOR WAIVIN G OF INTEREST OF EVEN COUPON RATE OF 4% LEAVE ALONE THE RETURN OF 1 8% WHICH WAS DEPENDENT UPON SOME FUTURE CONTINGENCIES. ASSESSEE DESPITE ALL ITS EFFORTS HAS ACCEDED TO SUCH REQUEST. FURTHER I N THE INDIA CYPRUS DTAA WHEREIN SIMILAR PHRASE HAS BEEN USED PE RTAINING TO FTS AND ROYALTY IN INDIA CYPRUS DTAA HONBLE BO MBAY HIGH COURT HELD THAT ASSESSMENT OF ROYALTY OR FTS SHOULD BE MADE IN THE YEAR IN WHICH AMOUNT HAVE ACTUALLY RECEIVED AND NOT OTHERWISE. THE COORDINATE BENCH OF MUMBAI ITAT IN T HE CASE OF PRAMERICA ASPF II CYPRUS HOLDING LTD. VS. DCIT (SUP RA) ON EXACTLY SIMILAR SET OF FACTS ADDITION ON ACCOUNT O F NOTIONAL INTEREST WAS MADE; THE TRIBUNAL HAS HELD THAT THE I NTEREST INCOME IN QUESTION CAN ONLY BE TAXED ON PAYMENT /RECEIPT B ASIS. THE RELEVANT OBSERVATION HAS ALREADY BEEN INCORPORATED ABOVE. THE HONBLE BOMBAY HIGH COURT HAS CONFIRMED THE SAID FI NDING. SIMILAR VIEW HAS BEEN TAKEN BY THE ITAT CHENNAI BEN CH IN THE CASE OF DCIT VS. INZI CONTROL INDIA LIMITED (SUPRA) . THUS IN VIEW OF ARTICLE 11(1) WE HOLD THAT ONLY THE INTEREST WH ICH HAS ACTUALLY BEEN RECEIVED CAN ONLY BE SUBJECT MATTER OF TAXATIO N AND NO TP ADJUSTMENT CAN BE MADE ON SOME HYPOTHETICAL RECEIVA BLE AMOUNT WHICH WAS CONTINGENT UPON CERTAIN EVENT WHICH HAS A CTUALLY NOT BEEN TAKEN PLACE DURING THE YEAR. THUS THE ORDER O F THE DIRECTION OF THE DRP IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 90. FOLLOWING THE SAME PARITY OF REASONS WE DELETE THE TP ADJUSTMENT MADE ON ACCOUNT OF ACCRUAL OF INTEREST. GROUND OF APPEAL NOS. 9 TO 9.1 RAISED BY THE ASSESSEE ARE THUS ALLO WED. 91. THE LAST ISSUE RAISED IN GROUND OF APPEAL NOS. 10 TO 10.8 IS AGAINST THE TRANSFER PRICING ADJUSTMENT MADE OF RS. 2.04 CRORES ON ACCOUNT OF RE-CHARACTERIZING THE INTER-COMPANY RECE IVABLES AS UNSECURED LOANS EXTENDED BY THE ASSESSEE TO ITS AE. THE ISSUE RAISED HEREIN IS SIMILAR TO ISSUE RAISED VIDE GROUND OF AP PEAL NOS. 4 TO 4.6 IN 57 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 ASSESSMENT YEAR 2010-11. FOLLOWING THE SAME PARITY OF REASONING WE DELETE THE AFORESAID TRANSFER PRICING ADJUSTMENT MA DE IN THE HANDS OF THE ASSESSE. GROUND OF APPEAL NOS. 10 TO 10.8 ARE THUS ALLOWED. 92. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ITA NO.7112/DEL/2017 [ASSESSEES APPEAL] ASSESSMENT YEAR: 2013-14 93. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF AP PEAL RELATING TO ASSESSMENT YEAR 2013-14:- 1. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN COMPLETING THE ASSESSMENT UNDER SECTION 144C(1) R.W .S. 143(3) OF THE INCOME-TAX ACT 1961 (THE ACT) AT AN INCOM E OF RS.297 48 60 850 AS AGAINST THE INCOME OF RS.119 58 24 310 RETURNED BY THE APPELLANT. CORPORATE TAX ISSUES 2. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT ALLOWING DEPRECIATION OF RS.158 73 13 884 CLAIMED U NDER SECTION 32(1 )(I) OF THE ACT ON WRITTEN DOWN VALUE OF GOODW ILL OF RS.634 92 55 536 ARISING OUT OF AMALGAMATION OF FLE XTRONICS SOFTWARE LIMITED (FLEXTRONICS) AND FUTURES SOFTWARE LIMITED (FSL) INTO THE ASSESSEE ON THE SOLE GROUND OF APPEA LTHAT APPELLANT HAS NOT ASSIGNED FAIR VALUE TO OTHER ASSE TS WHILE COMPUTING GOODWILL. 2.1 THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE GOODWILL REPRESENTS DIFFERENC E BETWEEN THE AGGREGATE BOOK VALUE OF INVESTMENT IN THE EQUITY SH ARES OF FLEXTRONICS SOFTWARE SYSTEMS LIMITED (FLEXTRONICS ) IN THE BOOKS OF THE APPELLANT AND FUTURE SOFTWARE LIMITED (FSL ) IN THE BOOKS OF FLEXTRONICS AND THE AGGREGATE FACE VALUE OF SHAR E CAPITAL OF FLEXTRONICS HELD BY THE APPELLANT AND FSL HELD BY F LEXTRONICS ACCOUNTED AS GOODWILL AMOUNTING TO RS.2675 57 10 57 0 PURSUANT TO AMALGAMATION OF FLEXTRONICS AND FSL WIT H THE APPELLANT. 58 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 2.2 THAT THE DRP/ ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN RELYING ON THE ITAT RULING OF DCIT VS. TOYO ENGI NEERING LTD. ITA NO. 3279/ MUM/2008 WITHOUT APPRECIATING THAT TH E SAME WAS REVERSED BY THE HONBLE MUMBAI BENCH OF THE TRI BUNAL. 2.3 THAT THE DRP/ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN OBSERVING THAT TAX AUDIT REPORT DOES NOT MENTION ANY ASSET AS GOODWILL NOR ANY DEPRECIATION ALLOWABLE THEREOF WI THOUT APPRECIATING THAT THE GOODWILL DEPRECIATION CLAIM H AD BEEN DULY REFLECTED UNDER THE HEAD INTANGIBLE ASSETS IN THE TAX AUDIT REPORT.. 2.4 THAT THE DRP ERRED ON FACTS AND IN LAW IN FOLLO WING ITS ORDER FOR THE PRECEDING YEAR WHEREIN IT HAS BEEN AL LEGED THAT THE AMALGAMATED COMPANY COULD NOT CLAIM DEPRECIATION ON ASSETS ACQUIRED UNDER AMALGAMATION THAT IS MORE THAN THE D EPRECIATION ALLOWABLE TO THE AMALGAMATING COMPANY. 2.5 THAT THE DRP ERRED ON FACTS AND IN LAW IN FOLLO WING ITS ORDER FOR THE PRECEDING YEAR WHEREIN IT HAS BEEN HE LD THAT THE SUPREME COURT IN THE CASE OF CIT VS. SMIFS SECURITI ES LTD.: 348 ITR 302 HAS MERELY HELD THAT GOODWILL IS AN INTANGI BLE ASSET ELIGIBLE FOR DEPRECIATION UNDER SECTION 32 OF THE A CT AND THE SUPREME COURT HAS NOT DWELLED INTO THE ASPECT OF AP PLICABILITY OF 5TH PROVISO TO SECTION 32(1) OF THE ACT TO THE DEPR ECIATION TO BE CLAIMED ON GOODWILL ARISING UNDER AMALGAMATION. 2.6 THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN NOT ADMITTING ENHANCED CLAIM OF DEPRECIATION OF RS.158 73 13 884 UNDER SECTION 32(1 )(I) OF THE ACT AS AGAINST RS. 1 22 72 31 644 CLAIMED IN THE RETURN OF INCOME ON THE GROUND OF A PPEALTHAT THE SAID CLAIM HAD BEEN MADE BY WAY OF APPLICATION DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS AND NOT BY REVISIN G ITS RETURN OF INCOME. 2.7 THAT THE ASSESSING OFFICER GROSSLY ERRED IN NOT APPRECIATING THAT HE WAS DUTY BOUND TO SUO-MOTU ALLOW CLAIM WHIC H ARE ALLOWABLE TO APPELLANT BUT NOT CLAIMED AT ALL IN TH E RETURN OF INCOME 2.8 THAT THE ASSESSING OFFICER GROSSLY ERRED IN NOT APPRECIATING THAT THE CLAIM FOR ENHANCEMENT OF DEPRECIATION WAS ONLY MODIFICATION OF ORIGINAL CLAIM MADE IN THE RETURN O F INCOME AND WAS NOT ALTOGETHER A NEW CLAIM MADE DURING THE COUR SE OF ASSESSMENT PROCEEDINGS. 59 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 2.9 THAT THE DRP I ASSESSING OFFICER ERRED ON FACT S AND IN LAW IN DENYING DEPRECIATION ON GOODWILL BY RELYING UPON THE DECISION OF THE BANGALORE TRIBUNAL IN THE CASE OF UNITED BRE WERIES LTD. VS. ADIT: 722/BANG/2014 WHEREIN IT HAS BEEN HELD T HAT DEPRECIATION ON ENHANCED VALUE OF GOODWILL IS BARRE D IN TERMS OF SIXTH PROVISO TO SECTION 32(1 )(II) OF THE ACT. 2.10 WITHOUT PREJUDICE THE ASSESSING OFFICER HAS ERRED IN FACTS AND IN LAW IN INADVERTENTLY DISALLOWING RS.163 81 1 8 105 AS AGAINST RS.122 72 31 644 CLAIMED AS DEPRECIATION ON GOODWILL BY THE APPELLANT IN THE RETURN OF INCOME. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW CONSIDERATION AMOUNTING TO RS. 54 27 737 RECEI VED BY THE APPELLANT FOR TRANSFER OF CERTAIN CUSTOMER RELATION SHIPS TO ARICENT TECHNOLOGIES MAURITIUS LIMITED IS CAPITAL BY NATURE (PART OF GOODWILL) AND OUGHT NOT TO BE CONSIDERED AS PART OF TAXABLE INCOME OF THE APPELLANT. 3.1 THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN FAILING TO APPRECIATE THAT THE CUSTOMER RELATIONSHI PS/ CONTRACTS TRANSFERRED TO ATML WERE INTANGIBLE ASSETS WHICH HA D BEEN REDUCED FROM THE GOODWILL ELIGIBLE FOR DEDUCTION UN DER SECTION 32(1 )(II) OF THE ACT AND THEREFORE THE SAID AMOUN T OUGHT TO BE REDUCED WHILE COMPUTING THE TAXABLE INCOME OF THE A PPELLANT. TRANSFER PRICING ISSUES 4. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN MAKING ADJUSTMENT OF RS. 13 54 90 701 TO THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF PAYMENT OF CORP ORATE CHARGES UNDERTAKEN BY THE APPELLANT WITH ITS ASSOCIATED ENT ERPRISE ON THE BASIS OF THE ORDER PASSED UNDER SECTION 92CA(3) OF THE ACT BY THE TRANSFER PRICING OFFICER (TPO) READ WITH D IRECTIONS OF DISPUTE RESOLUTION PANEL (DRP) PASSED UNDER SECTI ON 144C(5) OF THE ACT. 4.1 THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS A ND IN LAW IN DETERMINING THE ARMS LENGTH PRICE OF THE INTERNATI ONAL TRANSACTIONS OF PAYMENT OF CORPORATE CHARGES AMOUNT ING TO RS.13 54 90 701 AT NIL ALLEGEDLY HOLDING (I) THE APPELLANT HAS NOT BEEN ABLE TO PROVE THE B ENEFITS THAT IT HAD DERIVED FROM THE SERVICES PURPORTEDLY PROVID ED BY THE EXPATS. 60 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 (II) THE APPELLANT HAS NOT FURNISHED ANY EVIDENCE AS TO THE COST BENEFIT ANALYSIS WITH REGARD TO THE INDEPENDEN T LOCAL EMPLOYEES. (III) NO DOCUMENTATION HAS BEEN PRODUCED BY THE AS SESSEE TO SUPPORT ITS CLAIM FOR THE RECEIPT OF SERVICES. (IV) THE BENCHMARKING DONE BY THE APPELLANT IS NOT IN ACCORDANCE WITH THE LAW. 4.2 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THE FACT THAT THE ASSOCIATED ENTERPRIS E WHILE ALLOCATING THE CORPORATE CHARGES TO THE APPELLANT H AS DULY EXCLUDED THE COST IN THE NATURE OF STEWARDSHIP EXPE NDITURE. 4.3 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE ALLOCATION OF EXPENDITURE BY THE ASSOCIATED ENTERPRISE WAS DULY SUPPORTED BY A GLOBAL TRANSFER PRICING REPORT PREPARED BY AN INDEPENDENT CONSULTANT NAMELY DELO ITTE TAX LLP USA. 4.4 WHILE ALLEGEDLY HOLDING THAT NO BENEFIT WAS RE CEIVED BY THE APPELLANT FROM PAYMENT OF CORPORATE CHARGES TH E DRP ERRED ON FACTS AND IN LAW IN SUMMARILY DISREGARDING THE C ORRELATION BETWEEN SERVICES RECEIVED FROM THE ASSOCIATED ENTER PRISE AND INCREASE IN THE REVENUE AND PROFITS OF THE APPELLAN T. 4.5 THAT THE ASSESSING OFFICER/DRP GROSSLY MISUNDE RSTOOD AND MISINTERPRETED THE FACTS OF THE COST ALLOCATION AGREEMENT ENTERED INTO BETWEEN THE APPELLANT AND ITS AE. 4.6 THAT THE DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT PAYMENT MADE BY THE APPELLANT TO ITS ASSOCIATE D ENTERPRISE ON ACCOUNT OF CORPORATE CHARGES REPRESENTS ACTUAL COST INCURRED BY THE ASSOCIATED ENTERPRISE ON BEHALF OF THE APPEL LANT. 4.7. THAT THE DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THE EVIDENCES SUBMITTED IN THE FORM OF AFFIDAVITS O F EMPLOYEES OF THE ASSOCIATED ENTERPRISE RENDERING VARIOUS SERVICE S TO THE APPELLANT. 4.8 THAT THE ASSESSING OFFICER/ DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE EXPENDITURE ON THE PAY MENT FOR SERVICES RECEIVED FROM THE ASSOCIATED ENTERPRISE WA S WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE APPE LLANT. 61 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 4.9 THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE EXPENDITURE ON THE PAY MENT FOR SERVICES RECEIVED FROM THE ASSOCIATED ENTERPRISE WA S VALIDLY BENCHMARKED ALONG WITH OTHER CLOSELY LINKED TRANSAC TIONS APPLYING TNMM AS MOST APPROPRIATE METHOD AND THAT N O ADVERSE INFERENCE COULD BE DRAWN ON THIS ACCOUNT. 4.10 THAT THE TPO/ DRP ERRED ON FACTS AND IN LAW I N COMPUTING ADJUSTMENT ON ACCOUNT OF INTERNATIONAL TRANSACTION OF PAYMENT MADE FOR SERVICES RECEIVED FROM THE ASSOCIATED ENTE RPRISE WITHOUT APPLYING ANY PRESCRIBED METHODS. 5 THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT GRANTING MAT CREDIT CLAIMED UNDER SECTION 115JAA OF THE ACT 6 THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN GRANTING CREDIT OF PREPAID TAXES AT RS. 56 05 00 62 0 AS AGAINST RS. 61 81 48 133 CLAIMED IN THE INCOME TAX RETURN. 7. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT. 94. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSE E IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. HENCE THE SAME IS DISMISSED. 95. THE ISSUE RAISED IN GROUND OF APPEAL NOS. 2 TO 2.10 AND 3 TO 3.1 IS AGAINST THE DISALLOWANCE OF DEPRECIATION ON GOOD WILL. WE HAVE ALREADY ADJUDICATED THIS ISSUE IN PARAS ABOVE WHILE DECIDING GROUND OF APPEAL NOS.5 TO 5.1 RAISED IN ASSESSMENT YEAR 20 10-11 AND FOLLOWING THE SAME PARITY OF REASONING WE ALLOW GR OUND OF APPEAL NOS. 2 TO 2.10 AND 3 TO 3.1. 96. THE NEXT ISSUE RAISED IN GROUND OF APPEAL NOS. 4.1 TO 4.10 IS AGAINST THE TRANSFER PRICING ADJUSTMENT OF RS.13.54 CRORES MADE ON 62 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 ACCOUNT OF PAYMENT OF CORPORATE CHARGES. THE SAID ISSUE HAS ALSO BEEN ADJUDICATED BY US UNDER GROUND OF APPEAL NOS. 2.1 TO 2.11 OF ASSESSMENT YEAR 2010-11. FOLLOWING THE SAME PARITY OF REASONING WE ALLOW THE CLAIM OF THE ASSESSEE. THUS GROUND OF A PPEAL NOS. 4.1 TO 4.10 ARE ALLOWED. 97. THE NEXT ISSUE RAISED IN GROUND OF APPEAL NO.5 IS AGAINST THE ORDER OF THE ASSESSING OFFICER IN NOT GRANTING MAT CREDIT CLAIMED U/S 115JJA OF THE ACT. THE ASSESSING OFFICER IS DIRECT ED TO VERIFY THE CLAIM OF THE ASSESSEE AFTER ALLOWING REASONABLE OPP ORTUNITY OF HEARING TO THE ASSESSEE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. THUS GROUND OF APPEAL NO.5 RAISED BY THE ASSESSEE IS ALL OWED. 98. SIMILARLY THE ISSUE RAISED IN GROUND OF APPEAL NO.6 IS THAT THE ASSESSEE IS AGGRIEVED BY NON GRANT OF PART OF TDS C LAIMED BY THE ASSESSEE IN THE RETURN OF INCOME. THE ASSESSING OF FICER IS DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE AFTER ALLOWING REA SONABLE OPPORTUNITY OF HEARING AND DECIDE THE ISSUE. HENCE GROUND OF APPEAL NO.6 RAISED BY THE ASSESSEE IS ALLOWED. 99. THE LAST ISSUE RAISED IN GROUND OF APPEAL NO.7 IS AGAINST THE CHARGING OF INTEREST U/S 234B OF THE ACT IS CONSEQ UENTIAL; HENCE THE SAME IS DISMISSED. 100. IN THE RESULT THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. 63 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 ITA NO.7637/DEL/2018 [ASSESSEES APPEAL] ASSESSMENT YEAR: 2014-15 101. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF A PPEAL RELATING TO ASSESSMENT YEAR 2014-15:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE IMPUGNED ORDER PASSED BY THE ASSESSING OFFICER (LD. AO) IS BARRED BY LIMITATION IN TERMS OF SECTION 153 R.W.S 144C OF THE ACT AND THEREFORE IS LIABLE TO BE QUASHED. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. AO HAS ERRED IN PASSING THE ASSESSMENT ORDER UNDER SECTION 143(3) READ WITH SECTION 144C OF THE INCOME TAX ACT 1961 (THE ACT) AFTER CONSIDERING THE ADJUSTMENTS MADE BY THE LEARNED TRANSFER PRICING OFFICER (LD. TPO) IN HIS ORDER P ASSED UNDER SECTION 92CA(3) OF THE ACT PASSED IN ACCORDANCE WIT H THE DIRECTIONS PROVIDED BY THE HONBLE DISPUTE RESOLUTI ON PANEL (HONBLE DRP). EACH OF THE GROUND OF APPEALIS REFERRED TO SEPARATE LY WHICH MAY KINDLY BE CONSIDERED INDEPENDENT OF EACH OTHER. CORPORATE TAX ISSUES THAT THE LD. AO ERRED ON FACTS AND IN LAW IN NOT AL LOWING DEPRECIATION OF RS.1 19 04 85 413 CLAIMED UNDER SEC TION 32(1 )(I) OF THE ACT ON WRITTEN DOWN VALUE OF GOODWILL OF RS.4 76 19 41 652 ARISING OUT OF AMALGAMATION OF FL EXTRONICS SOFTWARE LIMITED (FLEXTRONICS) AND FUTURES SOFTWARE LIMITED (FSL) INTO THE ASSESSEE ON THE GROUND OF APPEALTHAT APPELLANT HAS NOT ASSIGNED FAIR VALUE TO OTHER ASSETS WHILE C OMPUTING GOODWILL. 2.1 THAT THE LD. AO ERRED ON FACTS AND IN LAW IN NO T APPRECIATING THAT THE GOODWILL REPRESENTS DIFFERENC E BETWEEN THE AGGREGATE BOOK VALUE OF INVESTMENT IN THE EQUITY SH ARES OF FLEXTRONICS IN THE BOOKS OF THE APPELLANT AND FSL I N THE BOOKS OF FLEXTRONICS AND THE AGGREGATE FACE VALUE OF SHARE C APITAL OF FLEXTRONICS HELD BY THE APPELLANT AND FSL HELD BY F LEXTRONICS ACCOUNTED AS GOODWILL AMOUNTING TO RS.26 75 57 10 5 70 PURSUANT TO AMALGAMATION OF FLEXTRONICS AND FSL WIT H THE APPELLANT. 64 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 2.2 THAT THE LD. AO ERRED ON FACTS AND IN LAW IN A LLEGING THAT THE ASSESSE WAS UNCLEAR ON THE VALUATION OF GOODWIL L AND HAD FAILED TO ASCRIBE A CORRECT VALUE TO GOODWILL I.E. THE FAIR VALUE OF NET ASSETS. 2.3 THAT THE HONBLE DRP/ LD. AO ERRED ON FACTS AN D IN LAW IN RELYING ON THE ITAT RULING OF DCIT VS. TOYO ENGINEE RING LTD. ITA NO. 3279/ MUM/2008 WITHOUT APPRECIATING THAT THE SA ME WAS REVERSED BY THE HONBLE MUMBAI BENCH OF THE TRIBUNA L. 2.4 THAT THE HONBLE DRP ERRED ON FACTS AND IN LAW IN FOLLOWING ITS ORDER FOR THE PRECEDING YEAR WHEREIN IT HAS BEEN ALLEGED THAT THE AMALGAMATED COMPANY COULD NOT CLAI M DEPRECIATION ON ASSETS ACQUIRED UNDER AMALGAMATION THAT IS MORE THAN THE DEPRECIATION ALLOWABLE TO THE AMALGAM ATING COMPANY. 2.5 THAT THE LD. AO ERRED ON FACTS AND IN LAW IN N OT ADMITTING ENHANCED CLAIM OF DEPRECIATION OF RS. 1 19 04 85 41 3 UNDER SECTION 32(1 )(I) OF THE ACT AGAINST RS. 92 04 23 7 34 CLAIMED IN THE RETURN OF INCOME. 2.6 WITHOUT PREJUDICE THE LD. AO HAS ERRED IN FAC TS AND IN LAW IN INADVERTENTLY 1 DISALLOWING RS.92 36 46 122/ - AS AGAINST RS.92 04 23 734 CLAIMED AS DEPRECIATION ON GOODWILL BY THE APPELLANT IN THE RETURN OF INCOME. 4. THAT THE LD. AO ERRED ON FACTS AND IN LAW IN NOT ALLOWING THE DEDUCTION OF R; 6 58 83 328 CLAIMED ON ACCOUNT OF REIMBURSEMENT PAID TO THE PARENT COMPANY TOWARDS ES OP FOR GRANTING STOCK OPTIONS TO EMPLOYEES ASSESSES. 4.1 THAT THE LD. AO ERRED ON FACTS AND IN LAW IN PR OPOSING TO HOLD THAT EMPLOYEES SECTION 37 OF THE ACT ALLEGING THAT THE SAME WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PUR POSE OF THE BUSINESS OF THE ASSESSEE COMPANY. 4.2 THAT THE LD. AO ERRED ON FACTS AND IN LAW ALLE GING THAT THE EXPENDITURE CLAIMED DID NOT REPRESENT A CRYSTALLIZE D LIABILITY AND BEING WITHOUT ANY OBJECTIVE EVIDENCE FOR JUSTIFICAT ION THE SAME WAS NOT ALLOWABLE AS DEDUCTION. 4.3 THAT THE LD. AO ERRED ON FACTS AND IN LAW IN H OLDING THAT ESOP IS A PART OF SALARY AND SINCE THE ASSESSEE DID NOT DEDUCT ANY TAX AT SOURCE ON PAYMENT TO THE GROUP COMPANY THE AMOUNT CLAIMED WAS DISALLOWABLE UNDER SECTION 40(A) OF THE ACT. 65 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 4.4 WITHOUT PREJUDICE THAT THE LD. AO FAILED TO A PPRECIATE THAT: (A) TAX WAS NOT DEDUCTIBLE ON MERE ISSUANCE O F OPTIONS AND (B) NO DISALLOWANCE IN ANY CASE CAN BE MADE UNDER SECTION 40(A) OF THE ACT ON ACCOUNT OF ALLEGED NON-DEDUCTIO N OF TAX ON PAYMENTS MADE IN THE NATURE OF EMOLUMENTS TO EMPL OYEES. 4.5 THAT THE LD. AO ERRED ON FACTS AND IN LAW IN F AILING TO APPRECIATE THAT THE ASSESSEE HAD MERELY REIMBURSED THE EXPENSES TO ITS GROUP COMPANY AND THE SAME WAS NOT SUBJECT TO DEDUCTION OF TAX AT SOURCE. 4.6 THAT THE LD. AO ERRED ON FACTS AND IN LAW IN T REATING THE AMOUNT OF DISCOUNT A SHORT CAPITAL RECEIPT AND THE ENTIRE EXPENDITURE TO BE IN THE NATURE OF CAPITAL EXPENDIT URE. 5. THE LD. AO/TPO/HONBLE DRP HAVE ERRED IN LAW AND ON FACTS OF THE CASE BY DELINKING THE INTER-COMPANY RE CEIVABLES ARISING FROM THE PRIMARY INTERNATIONAL TRANSACTION I.E. PROVISION OF SOFTWARE DEVELOPMENT SERVICES (MAIN SERVICE TRA NSACTION) AND PROCEEDING TO BENCHMARK THE SAME AS A SEPARATE TRANSACTION WITHOUT APPRECIATING THE FACT THAT THE MAIN SERVICE TRANSACTION WAS ALREADY ACCEPTED BY THE REVENUE TO BE AT ARMS LENGTH. 5.1 THE LD. AO/TPO/ HONBLE DRP ERRED IN FACTS AND IN LAW BY RE-CHARACTERIZING THE INTER-COMPANY RECEIVABLES AS UNSECURED LOAN EXTENDED BY THE APPELLANT TO ITS ASSOCIATED EN TERPRISES (AES). 5.2 THE LD. AO/TPO/ HONBLE DRP ERRED IN FACTS AND IN LAW BY NOT APPRECIATING THAT THE APPELLANT IS A DEBT FR EE COMPANY AND THEREFORE IT IS NOT JUSTIFIABLE TO PRESUME' TH AT BORROWED FUNDS HAVE BEEN UTILIZED TO PASS ON THE FACILITY TO ITS AES. 5.3 THE BENCHMARKING METHODOLOGY ADOPTED BY THE L D. AO/TPO/HONBLE DRP FOR DETERMINING THE ARMS LENGTH PRICE OF THE ALLEGED TRANSACTION OF INTEREST ON INTER-COMPAN Y RECEIVABLES IS NOT IN ACCORDANCE WITH THE PROVISION OF SECTION 92C( 1) OF THE ACT. 5.4 WITHOUT PREJUDICE TO ABOVE THE LD. AO /TPO/HO NBLE DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE APPELLANT DOES NOT CHARGE INTEREST FROM THIRD PARTY CUSTOMER ON DELAYED PAYMENTS WHICH ACTS AS AN INTERNAL COMPARABLE UNCON TROLLED PRICE (CUP) METHOD. 66 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 5.5 WITHOUT PREJUDICE TO THE ABOVE FOR THE BENCHM ARKING THE ALLEGED TRANSACTION OF INTER-COMPANY RECEIVABLES T HE MARK-UP OF 400 POINTS ON LIBOR RATE DETERMINED BY THE LD. TPO/ HONBLE DRP LACK ANY TECHNICAL ANALYSIS AND COGENT REASONIN G. 5.6 WITHOUT PREJUDICE TO ABOVE THE LD. AO/TPO/HON BLE DRP ERRED IN FACTS AND IN LAW BY NOT CALCULATING THE AD JUSTMENT ON THE NET OUTSTANDING BALANCE (I.E. RECEIVABLES MINUS PAYABLES) INSTEAD OF GROSS OUTSTANDING RECEIVABLES. 5.7 THE LD. AO/TPO/HONBLE DRP HAVE ERRED IN NOT APPRECIATING THAT WORKING CAPITAL ADJUSTMENT TAKES INTO ACCOUNT THE DIFFERENCE IN WORKING CAPITAL INTENSITIES OF TH E COMPARABLE COMPANIES VIS-A-VIS THE APPELLANT WHICH INEVITABLY CONSIDERS F'E IMPACT OF RECEIVABLES AND PAYABLES ARISING FROM MAI N SERVICE TRANSACTION 6. WITHOUT PREJUDICE THAT THE AO/DRP ERRED ON FACT S AND IN LAW IN INCORRECTLY ALLOWING CREDIT OF TDS OF RS 11 87 62 498 AS AGAINST THE CREDIT OF RS.15 01 53 517 CLAIMED BY TH E APPELLANT. 7. WITHOUT PREJUDICE THAT THE AO/DRP ERRED ON FACT S AND IN LAW IN CHARGING INTEREST OF RS.1 00 45 784 UNDER SE CTION 234A OF THE ACT. THE ASSESSING OFFICER HAS ERRED IN LAW AND ON FACTS IN LEVYING INTEREST UNDER SECTIONS 234A AND 234B OF THE ACT. 102. THE GROUND OF APPEAL NOS.1 & 1.1 RAISED BY TH E ASSESSEE ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATI ON. HENCE THE SAME ARE DISMISSED. 103. THE GROUND OF APPEAL NOS. 2 TO 2.6 RAISED BY T HE ASSESSEE IS AGAINST THE DISALLOWANCE OF DEPRECIATION ON GOODWIL L. WE HAVE ALREADY ADJUDICATED THIS ISSUE IN PARAS ABOVE WHILE DECIDIN G GROUND OF APPEAL NOS.5 TO 5.1 IN ASSESSMENT YEAR 2010-11 AND FOLLOWI NG THE SAME PARITY OF REASONING WE ALLOW GROUND OF APPEAL NOS. 2 TO 2.6 RAISED BY THE ASSESSEE. 67 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 104. THE ISSUE RAISED IN GROUND OF APPEAL NOS. 4 TO 4.6 IS AGAINST THE DISALLOWANCE OF ESOP EXPENSES OF RS.6.58 CRORES. 105. BRIEFLY IN THE FACTS OF THE ISSUE RAISED THE ASSESSEE HAD CLAIMED SUM OF RS. 6.58 CRORES AS DEDUCTION ON ACCOUNT OF R EIMBURSEMENT OF ESOP EXPENSES TO THE PARENT COMPANY. THE ASSESSEE WAS ASKED TO PROVIDE THE DETAILS OF TAX DEDUCTED AT SOURCE AND P ROOF OF DEPOSIT OF THE SAME. THE ASSESSEE IN REPLY POINTED OUT THAT T HE SAID AMOUNT WAS PAID TOWARDS ESOP ON WHICH NO TAX WAS DEDUCTED . THE ASSESSING OFFICER SHOW-CAUSED THE ASSESSEE TO EXPLA IN WHY THE DEDUCTION ON ACCOUNT OF SALARY MAY NOT BE DISALLOW ED SINCE IT WAS NOT AN ALLOWABLE EXPENDITURE. THE EXPLANATION OF T HE ASSESSEE IN THIS REGARD WAS AS UNDER:- I. ESOP EXPENSE REPRESENTS REVENUE COST PAID BY TH E ASSESSEE TO ITS PARENT COMPANY IN RELATION TO THE A WARD OF SHARES TO ITS EMPLOYEES. EMPLOYEES COVERED UNDER THE REST RICTED STOCK UNITS AND STOCK OPTIONS HAVE BEEN GRANTED THE AWARD WHICH ENTITLES THEM TO RECEIVE SHARES OF ARICENTS (THE UL TIMATE HOLDING COMPANY OF ASSESSEE COMPANY) AFTER COMPLETION OF TH E VESTING PERIOD. II. IT IS A MERE REIMBURSEMENT WHICH THE ASSESSEE COMPENSATED THE PARENT COMPANY FOR GRANTING THE STO CK OPTIONS OR RSU TO THE ASSESSEES EMPLOYEES. III. IT IS AN ALTERNATIVE TO DIRECT INCENTIVE IN CA SH TO THE EMPLOYEES AND IS INTENDED FOR ACHIEVING INCREASED L EVEL OF PARTICIPATION AND RETENTION. IV. IT IS AN EXPENDITURE INCURRED TO COMPENSATE EM PLOYEES IN LIEU OF SERVICES RENDERED. V. IT IS A PERQUISITE. VI. IT IS A DEDUCTIBLE BUSINESS EXPENDITURE U/S 37( 1). 68 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 106. THE ASSESSING OFFICER ON THE OTHER HAND DID NO T ALLOW THE CLAIM OF THE ASSESSEE ALLEGING AS UNDER:- (A) EMPLOYEES COMPENSATION EXPENSE CLAIMED BY THE APPELLANT WAS NOT ALLOWABLE UNDER SECTION 37 OF THE ACT SINCE THE SAME WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR TH E PURPOSE OF THE BUSINESS OF THE APPELLANT COMPANY. (B) EXPENDITURE CLAIMED DID NOT REPRESENT A CRYSTAL LIZED LIABILITY AND BEING WITHOUT ANY OBJECTIVE EVIDENCE FOR JUSTIFICATION THE SAME WAS NOT ALLOWABLE AS DEDUCTION. (C) ESOP IS A PART OF SALARY AND SINCE THE APPELLAN T DID NOT DEDUCT ANY TAX AT SOURCE ON PAYMENT TO THE GROUP CO MPANY THE AMOUNT CLAIMED WAS DISALLOWABLE UNDER SECTION 40(A) OF THE ACT. 107. THE ASSESSING OFFICER THUS DISALLOWED THE SAID EXPENDITURE IN THE HANDS OF THE ASSESSEE WHICH DISALLOWANCE WAS C ONFIRMED BY THE DRP AND BY THE ASSESSING OFFICER IN THE FINAL ASSES SMENT ORDER. 108. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF THE ASSESSING OFFICER. 109. IT WAS POINTED OUT BY THE LD.AR FOR THE ASSESS EE THAT THE FAIR MARKET VALUE OF THE SHARES WAS USD 0.77 DOLLARS PER SHARE AND OPTIONS WERE EXERCISED AT USD 0.01 PER SHARES. THE DIFFERENCE WAS REIMBURSED TO THE AE IN CAYMAN ISLAND. SINCE THE L IABILITY ACCRUED /CRYSTALLIZED DURING THE YEAR AND AS THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING THEN THE SAME IS TO BE ALLOWED AS A 69 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 DEDUCTION U/S 37(1) OF THE ACT. IN THIS REGARD REL IANCE WAS PLACED ON THE FOLLOWING DECISIONS:- [I] CIT VS M/S PVP VENTURES LTD. 211 TAXMAN 554 (MA DRAS HIGH COURT); [II] CIT VS LEMON TREE HOTELS LTD. 104 TAXMANN.COM 26 (DELHI HIGH COURT); AND [III] BIOCON LIMITED VS DCIT 155 TTJ 649 (BANGLORE) (SPECIAL BENCH) 110. IT WAS ALSO POINTED OUT THAT THE ASSESSING OFF ICER HAS PLACED RELIANCE ON THE DECISION OF SPECIAL BENCH BUT U/S 1 92 R.W.S 17(2) WHEN THE OPTION IS EXERCISED BY THE EMPLOYEE THEN TAX IS TO BE DEDUCTED AT SOURCE. 111. THE LD.DR FOR THE REVENUE PLACED RELIANCE ON T HE ORDER OF THE ASSESSING OFFICER AND DRP WITH SPECIAL REFERENCE TO PAGE 24 OF THE ORDER OF THE DRP. 112. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS WIT H REGARD TO CLAIM OF THE EXPENSES ON ACCOUNT OF REIMBURSEMENT PAID TO T HE PARENT COMPANY TOWARDS ESOP FOR GRANTING STOCK AUCTIONS TO THE ASSESSEES EMPLOYEES. SHARE INCENTIVE PLAN FOR THE EMPLOYEES OF ARICENT GROUP WAS FLOATED AND UNDER THE SCHEME AS PART OF THE EM PLOYEE COMPENSATION MEASURE AN OPTION TO PURCHASE THE SHA RES AFTER THE COMPLETION OF THE VESTING PERIOD WAS GRANTED TO THE EMPLOYEES OF THE 70 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 COMPANY AT A DISCOUNTED PRICE TO THE FAIR MARKET VA LUE OF THE SHARE. THE DIFFERENCE BETWEEN THE FAIR MARKET VALUE OF THE SHARES AND THE AMOUNT PAID BY THE EMPLOYEE ON ACTUAL EXERCISE OF O PTION REPRESENTED EMPLOYEE COMPENSATION EXPENSES. SINCE THE OPTION W AS GRANTED TO THE EMPLOYEES DURING THE RELEVANT ASSESSMENT YEAR A ND ASSESSEE REIMBURSED THE SAID AMOUNT TO THE GROUP COMPANY AS THE LIABILITY HAD ACCRUED/CRYSTALLIZED AND THE SAME WAS RECOGNIZE D IN THE YEAR ITSELF AS THE ASSESSEE WAS FOLLOWING MERCANTILE SYS TEM OF ACCOUNTING. THE AFORESAID EXPENSE WAS CLAIMED AS DEDUCTION U/S 37(1) OF THE ACT. IT MAY BE POINTED OUT HEREIN ITSELF THAT THE AFORES AID PAYMENT TO THE ARICENT CAYMAN HAS BEEN ACCEPTED BY THE TPO TO BE A T ARMS LENGTH. 113. WE HOLD THAT THE AFORESAID PAYMENT UNDER THE E SOP SCHEME WHEREIN THE REIMBURSEMENT WAS PAID TO THE PARENT CO MPANY TOWARDS ESOP FOR GRANTING STOCK OPTIONS TO ASSESSEES EMPLO YEES IS IN THE NATURE OF EMPLOYEES COMPENSATION AND IS DEDUCTIBLE AS THE EXPENDITURE INCURRED WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. 114. WE FURTHER FIND THAT THE ISSUE STANDS COVERED BY THE DECISION OF HONBLE MADRAS HIGH COURT IN CIT VS M/S PVP VENTURE S LTD. (SUPRA) WHEREIN IT WAS HELD THAT THE AMOUNT OF DIFFERENCE BETWEEN THE MARKET VALUE OF THE SHARES ISSUED UNDER EMPLOYEES STOCK OP TION SCHEME AND THE VALUE AT WHICH THEY WERE ALLOTTED TO THE EM PLOYEES WHICH WAS 71 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 DEBITED TO THE P&L ACCOUNT IN ACCORDANCE WITH SEBI GUIDELINES IS AN ASCERTAINED LIABILITY AND THUS ALLOWABLE AS REVEN UE EXPENDITURE UNDER SECTION 37(1) OF THE ACT. 115. THE SAID PROPOSITION HAS BEEN APPLIED BY THE H ONBLE HIGH COURT IN CIT VS LEMON TREE HOTELS LTD. (SUPRA) AND THE CLAIM OF ESOP EXPENDITURE HAS BEEN ALLOWED AS EXPENDITURE U /S 37 OF THE ACT. 116. FURTHER THE SPECIAL BENCH IN BIOCON LTD. VS D CIT (SUPRA) HELD THAT DISCOUNT ON ISSUE OF ESOP I.E. THE DIFFERENCE BETWEEN THE MARKET PRICE OF SHARES ON DATE OF EXERCISE WAS DEDU CTIBLE AS BUSINESS EXPENDITURE SINCE THE SAME REPRESENTS CONSIDERATIO N/COMPENSATION FOR SERVICES RENDERED BY EMPLOYEES. THE SPECIAL BE NCH OBSERVED THAT THE COMPANY INCURS OBLIGATION OF ISSUING SHARES AT A DISCOUNTED PRICE ON A FUTURE DATE IN LIEU OF SERVICES RENDERED BY TH E EMPLOYEES WHICH IS ALLOWABLE AS DEDUCTION UNDER SECTION 37(1) OF TH E ACT. THE SPECIAL BENCH FURTHER HELD THAT THE SAID DISCOUNT WAS AN AS CERTAINED LIABILITY SINCE THE EMPLOYER INCURRED OBLIGATION TO COMPENSAT E THE EMPLOYEES OVER THE VESTING PERIOD NOTWITHSTANDING THE FACT T HAT THE EXACT AMOUNT OF DISCOUNT WHICH IS QUANTIFIED ONLY AT THE TIME OF EXERCISING THE OPTIONS. 117. FOLLOWING THE SAME PARITY OF REASONING WE HO LD THAT THE SAID EXPENSES ARE ALLOWABLE AS A BUSINESS EXPENDITURE IN THE HANDS OF THE ASSESSEE. 72 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 118. NOW COMING TO THE SECOND ASPECT OF THE CASE TH AT WHETHER AFORESAID PAYMENT REQUIRES TAX DEDUCTION OR NOT. T HE REQUIREMENT TO DEDUCT TAX WOULD ARISE WHEN THE EMPLOYEE EXERCISES THE OPTION GRANTED UNDER ESOP AND IT WOULD BE TREATED AS PERQU ISITE IN THE HANDS OF THE EMPLOYEE ON ACTUAL ALLOCATION/TRANSFER OF SUCH SHARES WHICH IS PROVIDED U/S 17(2)(VI) OF THE ACT. FURTHE R EVEN THE PROVISION OF SECTION 192 OF THE ACT MANDATE THE DEDUCTION OF TAX AT SOURCE ON ACTUAL PAYMENT WHICH IS ALLOTMENT OF SHARES IN THE CASE OF ESOP AND NOT PRIOR TO THAT. HENCE THERE WAS NO REQUIREMENT TO DEDUCT TAX AT SOURCE BY THE ASSESSEE WHILE REIMBURSING THE AMOUNT TO ITS AE DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY WE DIRE CT THE ASSESSING OFFICER TO ALLOW THE SAID EXPENSE TOTALING TO RS.6. 58 CRORES. GROUND OF APPEAL NOS. 4 TO 4.6 ARE THUS ALLOWED. 119. THE ISSUE RAISED IN GROUND OF APPEAL NO.5 BY T HE ASSESSEE IS AGAINST THE TRANSFER PRICING ADJUSTMENT OF RS.3.90 CRORES ON ACCOUNT OF INTEREST ON RECEIVABLES. THE SAID ISSUE IS SIMI LAR TO GROUND OF APPEAL NOS. 4 TO 4.6 OF ASSESSMENT YEAR 201-111. F OLLOWING THE SAME PARITY OF REASONING WE DELETE THE TRANSFER PRICING ADJUSTMENT AND ALLOW THE CLAIM OF THE ASSESSEE. GROUND OF APPEAL NO.5 RAISED BY THE ASSESSEE IN THIS APPEAL IS THUS ALLOWED. 120. THE ISSUE RAISED IN GROUND OF APPEAL NO.6 IS A GAINST INCORRECTLY ALLOWING CREDIT OF TDS. THE ASSESSING OFFICER IS DI RECTED TO VERIFY THE 73 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 CLAIM OF THE ASSESSEE AFTER ALLOWING REASONABLE OPP ORTUNITY OF HEARING TO ASSESSEE. HENCE GROUND OF APPEAL NO.6 RAISED B Y THE ASSESSEE IS ALLOWED. 121. THE LAST ISSUE RAISED IN GROUND OF APPEAL NO.7 IS AGAINST THE CHARGING OF INTEREST U/S 234A OF THE ACT. THE LD.A R FOR THE ASSESSEE POINTED OUT THAT THE DUE DATE OF FILING OF INCOME W AS EXTENDED TO 30.11.2014 AND THE ASSESSEE HAD FILED THE RETURN OF INCOME ON 29.11.2014. HENCE NO INTEREST IS CHARGEABLE U/S 2 34A OF THE ACT. WE FIND MERIT IN THE PLEA OF THE ASSESSEE AND DIREC T THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE IN THIS REGARD AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER ALLOWING OPPORTU NITY OF HEARING TO THE ASSESSEE. GROUND OF APPEAL NO.7 RAISED BY THE A SSESSEE IS THUS ALLOWED. 122. IN THE RESULT THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF NOVEMBER 2019. SD/- SD/- (PRASHANT MAHARISHI) (SUSH MA CHOWLA) &' &' &' &' /ACCOUNTANT MEMBER /JUDICIAL MEMBER / * DATED : 29 TH NOVEMBER 2019 . * AMIT KUMAR * 74 ITA N OS.1308/DEL/2015; 4913 & 5026/DEL/2018; 7637/DEL/2018; 7112 & 1944/DEL/2017 &!. '$3&$'4 COPY OF THE ORDER IS FORWARDED TO : 1. + / THE APPELLANT 2. -+ / THE RESPONDENT 3. 5 6 7 / THE CIT(A) 4. 8 5 / THE PR. CIT 5. 6. $9: '* / DR ITAT DELHI :;%<4 GUARD FILE. &!* &!* &!* &!* / BY ORDER -$' ' // TRUE COPY // # =>? ASSISTANT REGISTRAR ITAT DELHI