ACIT, Gurgaon v. M/s. Agilent Technologies (International) Pvt. Ltd., Gurgaon

ITA 593/DEL/2009 | 2004-2005
Pronouncement Date: 28-07-2011 | Result: Dismissed

Appeal Details

RSA Number 59320114 RSA 2009
Assessee PAN AADCA4115C
Bench Delhi
Appeal Number ITA 593/DEL/2009
Duration Of Justice 2 year(s) 5 month(s) 11 day(s)
Appellant ACIT, Gurgaon
Respondent M/s. Agilent Technologies (International) Pvt. Ltd., Gurgaon
Appeal Type Income Tax Appeal
Pronouncement Date 28-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 28-07-2011
Date Of Final Hearing 22-07-2011
Next Hearing Date 22-07-2011
Assessment Year 2004-2005
Appeal Filed On 17-02-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI B.K. HALDAR ITA NOS. 592 & 593 /DEL/2009 ASSTT. YRS: 2003-04 & 2004-05 ASSTT. COMMISSIONER OF INCOME-TAX VS. M/S AGILENT TECHNOLOGIES GURGAON. (INTERNATIONAL) PVT. LTD. PLOT NO. 90D UDYOG VIHAR SECTOR-18 GURGAON. PAN/GIR NO. AADCA4115C ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : MS. GEETMALA MOHNANI CIT (DR) RESPONDENT BY : SHRI KANCHAN KAUSHAL CA O R D E R PER R.P. TOLANI J.M : THESE ARE REVENUES APPEALS AGAINST SEPARATE ORDERS OF CIT(A) RELATING TO A.Y. 2003-04 & 2004-05. COMMON GROUNDS RAISED FO R BOTH THE ASSESSMENT YEARS IN QUESTION EXCEPTING DIFFERENCE IN QUANTUM ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN ALLOWING TH E EXEMPTION OF RS. 2 08 42 919/- ( FOR A.Y. 2003-04) AND RS. 7 30 54 508/- (FOR A.Y. 2004-05) U/S 10A OF THE INCOME TAX ACT 1 961 DISREGARDING THE FACTS THAT THE ASSESSEE COMPANY FA ILED TO SATISFY ITS CLAIM U/S 10A AND IT WAS CONCLUSIVELY P ROVED THAT ASSESSEE COMPANY WAS NOT ELIGIBLE FOR ANY DEDUCTION FROM ITS BUSINESS INCOME U/S 10A OF THE INCOME TAX ACT 1961 WHICH HAD WRONGLY BEEN CLAIMED BY IT IN THE RETURN OF INC OME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING TH E ADDITION OF RS. 1 15 60 649/- (FOR A.Y. 2003-04) AND RS. 75 50 532/- (FOR A.Y. 2004-05) MADE BY THE ASSESSING OFFICER ON ACCO UNT OF ITA 592 & 593/DEL/09 ACIT VS. AGILENT TECHNOLOGIES 2 SHARED SERVICE COST EXPENSES DISREGARDING THE FACTS THAT THE ASSESSEE COMPANY HAD WRONGLY CLAIMED IT AS A DEDUCT ION IN THE PROFIT & LOSS ACCOUNT AS CONCLUSIVELY PROVED THAT N O SERVICES WERE PROVIDED BY M/S AGILENT INDIA (P) LTD. TO THE ASSESSEE COMPANY. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY W AS INCORPORATED ON 10- 10-2001 AND WAS REGISTERED AS STPI UNIT AT NOIDA UN DER THE SOFTWARE TECHNOLOGY PARKS SCHEME ON 8-4-2002. THE ASSESSEE C OMPANY PROVIDES IT ENABLED SERVICES RANGING FROM RESEARCH & DEVELOPMEN T FOR PRODUCTS FOR AGILENTS COMMUNICATIONS AND LIFE SCIENCES SOLUTION S ASIC DESIGN DEVELOPMENT AND TRANSACTION PROCESSING A VARIETY OF CORPORATE FUNCTIONS SUCH AS ENGINEERING SUPPORT FINANCE AND CUSTOMER C ALL CENTERS IN TERMS WITH INTER COMPANY SERVICE AGREEMENT DATED 15-4-2002 WIT H AGILENT TECHNOLOGIES INC. USA. 2.1. THE ASSESSEE FILED ITS RETURNS OF INCOME FOR T HE RESPECTIVE YEARS CLAIMING DEDUCTION U/S 10A WHICH WAS DISALLOWED BY THE AO ON THE GROUNDS: (1) THE ASSESSEE WAS PART OF AGILENT TECHNOLOGIES EUROP E BU GROUP WITH ULTIMATE HOLDING COMPANY BEING AGILENT TECHNOLOGIES INC. USA ALONG WITH OTHER COMPANY I.E. AGILENT TECHNOLOGIES INDIA PVT. LTD. BOTH THE INDIAN COMPANIES HAD COMMON DIRECTORS ON B OARD I.E. SHRI RAVI MALHOTRA AND SHRI KEWAL KHANNA. (2) THE TELEPHONIC AND EPBAX EQUIPMENT BILLS WERE IN TH E NAME OF M/S AGILENT INDIA PVT. LTD. CHANDIWALA NEW DELHI INDIC ATING THAT MACHINERY WAS NOT EXCLUSIVELY USED BY ASSESSEE STP UNIT BUT WAS ALSO USED BY AGILENT INDIA PVT. LTD. ITA 592 & 593/DEL/09 ACIT VS. AGILENT TECHNOLOGIES 3 (3) THE ASSETS WERE PURCHASED IN SEPTEMBER 2001 WHEREAS THE ASSESSEE CHOSE TO APPLY TO STP AUTHORITIES ON 5-4-2002 AND A SSETS WERE PUT TO USE SUBSEQUENTLY ON 1-5-2002. (4) THE ASSESSEE COMPANY WAS INCORPORATED ON 10-10-2001 AND THE MOU WAS EFFECTIVE FROM 1-10-2001. THE ASSESSEE COMPANY HAVING BEEN INCORPORATED ON 10-10-2001 I.E. TEN DAYS BEFORE MOU ROTATION OF ASSETS PURCHASED THROUGH A SISTER CONCERN IN THE GU ISE OF A TRUST BY ENTERING INTO A BOGUS MOU WAS A TAX EVASION TECHNI QUE WITH MOTIVE TO AVOID PAYMENT OF LEGIT TAXES. 2.2. APROPOS GROUND NO. 2 BRIEF FACTS ARE THAT THE ASSESSEE COMPANY AFTER INCORPORATION ENTERED INTO AN INTER COMPANY SERVI CES AGREEMENT (SHARED SERVICE AGREEMENT) IN APRIL 2002 WITH AGILENT INDI A WHEREBY ITS DIVISION NAMED AS GENERAL INFRASTRUCTURE ORGANISATION (GIO ) PROVIDED VARIOUS ADMINISTRATIVE AND LOGISTIC SERVICES TO BOTH AGILE NT INDIA AS WELL AS THE ASSESSEE COMPANY. PURPOSE OF THE SAID AGREEMENT IS STATED TO DERIVE THE BENEFIT OF THE EXISTING FACILITIES WITH AGILENT IND IA IN FORM OF QUALIFIED PERSONNEL APPROPRIATE FACILITIES ADEQUATE RESOURC ES AND ADMINISTRATIVE REQUIREMENT OF BUSINESS EXPERIENCE TO DISCHARGE IT S RESPONSIBILITIES UNDER THE SAID INTER COMPANY SERVICE AGREEMENT. THE AGREE MENT INTER ALIA PROVIDED THE SERVICES TO BE RENDERED BY AGILENT IND IA TO APPELLANT COMPANY AND THE BASIS OF CALCULATING REMUNERATION FOR THE S AME. AS PER THE TERMS OF THE AGREEMENT ASSESSEE COMPANY WAS REQUIRED TO CO MPENSATE AGILENT INDIA FOR THE COST OF SERVICES RENDERED BY IT PLUS A MARK -UP OF 10 PER CENT ON THE COSTS. AO DISALLOWED THESE SHARED SERVICES EXPENSES HOLDING IT TO BE A COLOURABLE DEVICE. 2.3. IN FIRST APPEAL CIT(A) ALLOWED THE ASSESSEES CLAIM U/S 10A BY OBSERVING AS UNDER: ITA 592 & 593/DEL/09 ACIT VS. AGILENT TECHNOLOGIES 4 4.2. THE AO WAS OF THE VIEW THAT THE MACHINERY WHI CH HAS BEEN ACQUIRED THROUGH AGILENT INDIA HAS BEEN USED B Y THAT COMPANY BEFORE TRANSFER TO THE ASSESSEE COMPANY. DU RING THE HEARING OF THE APPEAL ASSESSEE HAS FILED VARIOUS E -MAILS AND OTHER CORRESPONDENCE TO SUPPORT ITS CLAIM THAT IT IS ELIG IBLE FOR EXEMPTION U/S 10A OF THE ACT ON THE GROUND THAT ASS ETS WERE PURCHASED THROUGH AGILENT INDIA TO EXPEDITE ITS BUS INESS OF SETTING UP OF STP UNIT AT NOIDA. I HAVE GONE THROUG H THE COPIES OF INTERNAL CORRESPONDENCE THROUGH E-MAIL BETWEEN 13.6 .2001 AND 16.8.2001 REGARDING SETTING UP A NEW LEGAL ENTRY IN INDIA. THE APPROVAL TO SET UP THIS LEGAL ENTRY IN PRINCIPLE WA S ALLOWED ON 16.8.2001. THEREFORE IT WOULD BE INCORRECT TO REJE CT THE EXEMPTION ON THE TECHNICAL GROUNDS THAT THE MOU HAS BEEN ENTERED INTO PRIOR TO INCORPORATION OF THE COMPANY. THE VARIOUS OBJECTIONS RAISED BY THE AO AHS BEEN DEALT WITH IN PARA 2.8. ABOVE. 4.3. THE CONSIDERATION THAT HAS WEIGHED HEAVILY WIT H THE LD. AO TO CONCLUDE THAT THE ASSETS HAVE BEEN USED BY AG ILENT INDIA ARE THE BILLS IN RESPECT OF TELEPHONE AND EPABX WHI CH ARE INSTALLED AT CHANDIWALA I.E. AT THE PREMISES OF AGI LENT INDIA. IT HAS BEEN EXPLAINED BY THE LD. AR THAT THE INVOICE R EFERRED TO BY THE LD. AO IN THE ASSESSMENT ORDER FOR UPGRADATION OF PABX AT CHANDIWALA NEW DELHI RELATES TO THE INSTALLATION O F INTERFACE WHICH WAS REQUIRED TO ESTABLISH THE CONNECTIVITY OF THE APPELLANT COMPANY WITH AGILENT US AND AGILENT SINGAPORE FOR U SING VOICE SERVICES SUCH AS TELNET (I.E. PRIVATE VOICE NET WOR K OF AGILENT) AND VOICE MAIL (IN WHICH CALLER CAN LEAVE VOICE MES SAGE INCASE THE CALLED PERSON IS NOT AROUND AT DESK OR ALREADY ENGAGED IN ANOTHER CALL). FOR ESTABLISHING THE CONNECTIVITY BE TWEEN TWO PLACES INTERFACES ARE REQUIRED TO BE INSTALLED AT BOTH THE PLACES WITH THE MAIN EQUIPMENT I.E. EPABX SYSTEM. APART FR OM INSTALLATION OF EPABX SYSTEM AT GURGAON SITE INTER FACES WERE ALSO REQUIRED TO BE INSTALLED FOR EFFECTIVE CONNECT IVITY. AT THE TIME OF SETTING UP OF THE APPELLANT COMPANY IN 2002 FOR USING THE VOICE SERVICES SUCH AS TELNET AND VOICE MAIL AGILE NT INDIA INFRASTRUCTURE (I.E. TELNET AND VOICE MAIL SYSTEM) WAS USED BY GURGAON OFFICE TO REDUCE THE COST. FOR TELNET AND V OICE MAIL SERVICES REQUIRED HARDWARE SUCH AS INTERFACE CARDS ETC. WERE PURCHASED TO BE INSTALLED WITH EXISTING EPABX AND V OICE MAIL ITA 592 & 593/DEL/09 ACIT VS. AGILENT TECHNOLOGIES 5 SYSTEM OF AGILENT INDIA IN ORDER TO ESTABLISH THE CONNECTIVITY AND PROVIDE THESE SERVICES TO THE APPELLANT COMPANY AT GURGAON. THEREFORE THE OBSERVATIONS MADE BY THE LD. AO THAT THE PLANT OR MACHINERY (I.E. TELEPHONE AND EPABX SYSTEM REFERRED ABOVE) HANDED OVER UNDER THE MOU TO THE APPELLANT COMPANY WERE ALSO USED BY AGILENT INDIA ARE NOT BASED ON CORRECT APPR ECIATION OF FACTS. 4.4. THE LD. AO HAS NOT BROUGHT ANYTHING ON RECORD TO SUPPORT THAT THE MACHINERY WHICH HAS BEEN PURCHASED THROUGH THE AGENCY OF AGILENT INDIA WAS USED BY THEM BEFORE TRANSFERRI NG TO APPELLANT COMPANY. IN THIS CONNECTION THE OBSERVAT IONS MADE BY THE AUDITORS OF THE APPELLANT COMPANY AS WELL AS AG ILENT INDIA CANNOT BE IGNORED IN THE ABSENCE OF EVIDENCE TO THE CONTRARY. THE AUDITED FINANCIAL STATEMENTS OF AGILENT INDIA FOR T HE YEAR ENDED MARCH 31 2002 REFLECT THE FOLLOWING NOTE IN RESPECT OF THE ABOVE TRANSACTION (NOTE NO. 17 OF NOTES TO ACCOUNTS); DURING THE CURRENT YEAR THE COMPANY HAS ENTERED INTO A MEMORANDUM OF UNDERSTANDING (MOU) WITH AGILENT TECHNOLOGIES INC USA AND AGILENT TECHNOLOGIES INTERNATIONAL PRIVATE LIMITED (ATIPL) FOR THE PURCHASE OF ASSETS OF ATIPL ON THE BASIS OF ADVICE OF AGILENT TECHNOLOGIES INC USA AND THE ASSETS SHALL BE HELD UNDER TRUST BY COMPANY TILL THEY ARE DELIVERED TO ATIPL. ACCORDINGLY AN AMOUNT OF RS. 83 623 194 HAS BEEN SHOWN AS ASSETS HELD UNDER TRUST UNDER THE HEAD LOANS AND ADVANCES WHICH REPRESENTS ASSETS PURCHASED UNDER MOU TILL MARCH 31 2002. THE AUDITED FINANCIAL STATEMENT OF THE APPELLANT CO MPANY FOR FINANCIAL YEAR ENDED MARCH 31 2003 ALSO REFLECTED T HE FOLLOWING NOTE (NOTE NO. 4 OF NOTES TO ACCOUNTS) THE ADDITIONS TO FIXED ASSETS INCLUDE THE FOLLOWING ASSETS AMOUNTING TO RS. 93 399 866 TRANSFERRED BY AGILENT TECHNOLOGIES INDIA PRIVATE LIMITED (ATIPL) WHICH WERE HELD UNDER TRUST BY ATIPL. THE SAID ASSETS HAVE BEEN TRANSFERRED BY ITA 592 & 593/DEL/09 ACIT VS. AGILENT TECHNOLOGIES 6 ATIPL ON MAY 1 2002 AT COST IN PURSUANCE OF A MEMORANDUM OF UNDERTAKING (MOU) DATED OCTOBER 1 2001 ENTERED INTO BETWEEN AGILENT TECHNOLOGIES INC. USA ATIPL AND THE COMPANY. THE CONSIDERATION FOR THE SAME HAS BEEN DISCHARGED BY THE COMPANY. A CORRESPONDING NOTE IS REFLECTED IN THE AUDITED FI NANCIAL STATEMENT OF AGILENT INDIA FOR THE FINANCIAL YEAR E NDED MARCH 31 2003 AS UNDER (REFER NOTE NO. 15N OF THE NOTES T O ACCOUNTS OF SCHEDULE L OF THE AUDITED ACCOUNTS OF AGILENT IN DIA) DURING THE CURRENT YEAR THE COMPANY HAS TRANSFERRED ASSETS AMOUNTING TO RS. 93.40 MILLION TO AGILENT TECHNOLOGIES INTERNATIONAL PVT. LTD. (ATIPL) WHICH WERE HELD UNDER TRUST BY COMPANY. THE SAID ASSETS HAVE BEEN TRANSFERRED BY THE COMPANY ON MAY 1 2002 AT COST IN PURSUANCE OF A MEMORANDUM OF UNDERSTANDING (MOU) DATED OCTOBER 1 2001 ENTERED INTO BETWEEN AGILENT TECHNOLOGIES INC. USA ATIPL AND THE COMPANY. THEREFORE IN VIEW OF ABOVE NOTES TO ACCOUNTS OF BO TH THE LEGAL ENTITIES IT IS APPARENT THAT T HE ASSETS WERE NOT USED BY AGILENT INDIA PRIOR TO HANDING OVER THE SAME TO THE APPELLA NT COMPANY. THE ADDITIONAL EVIDENCE WAS FORWARDED TO THE ASSESS ING OFFICER AND NO ADVERSE COMMENTS HAVE BEEN RECEIVED. KEEPING IN VIEW THESE FACTS THE AO IS NOT JUSTIFIED IN DENYING THE EXEMPTION U/S 10A OF THE ACT. GROUND NO. 2 OF THE APPEAL IS ACCOR DINGLY ALLOWED. 2.4. CIT(A) APROPOS SECOND GROUND I.E. SHARED SERV ICES EXPENSES ALLOWED THE RELIEF BY FOLLOWING OBSERVATIONS: 5.8. I HAVE PERUSED THE FACTS AND CAREFULLY CONSID ERED THE SUBMISSIONS. THE SERVICES THAT HAVE BEEN OFFERED BY AGILENT INDIA TO THE APPELLANT COMPANY ARE VARIOUS ADMINIST RATIVE OR LOGISTICS SERVICES IN CONNECTION WITH THE WORKING O F THE ITA 592 & 593/DEL/09 ACIT VS. AGILENT TECHNOLOGIES 7 APPELLANT COMPANY AND HAVE NOTHING TO DO WITH THE S PECIALIZED ACTIVITIES UNDERTAKEN BY THE APPELLANT. THE AO HAS OBJECTED THAT THE AGREEMENT FOR SUCH SERVICES IS ON A PLANE PAPER . IN MY VIEW IT MAKES NO DIFFERENCE WHETHER THE AGREEMENT IS ON A PLANE PAPER A STAMP PAPER OR AN ORAL ONE SO LONG AS BOTH THE PARTIES AGREE TO THE TERMS OF THE AGREEMENT. IN THE PRESENT CASE THE AGREEMENT HAS BEEN SIGNED BY THE AUTHORIZED SIGNATO RIES OF THE BOTH THE COMPANIES AND THE RECIPIENT COMPANY I.E. A GILENT INDIA AHS ALREADY OFFERED THE INCOME FOR TAXATION. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE EXPENSE INCURRED ARE T OWARDS NON BUSINESS PURPOSES OR ARE IN THE NATURE OF CAPITAL E XPENDITURE. THERE IS NO SPECIFIC PROVISION FOR DISALLOWANCE OF SUCH EXPENSES IF THE TAX WAS NOT DEDUCTED AT SOURCE. KEE PING IN VIEW THESE FACTS IN MY CONSIDERED OPINION THE AO HAS E RRED IN DISALLOWING THE EXPENSES. THE AO IS DIRECTED TO DEL ETE THE ADDITION. AGGRIEVED REVENUE IS IN APPEAL BEFORE US. 3. LEARNED DR RELIED ON THE ORDER OF AO ON BOTH THE ISSUES. 4. LEARNED COUNSEL FOR THE ASSESSEE APROPOS GROUND NO.1 AT THE OUT SET CONTENDS THAT SIMILAR ISSUE CAME UP FOR CONSIDERATI ON OF AO FOR A.Y. 2005- 06 WHEREIN VIDE ITS DETAILED ORDER DATED 31-12-2008 THE AO HAS ALLOWED THESE CLAIMS. WHILE DOING SO THE AO HAS TAKEN NOTE OF THE ASSESSMENT ORDERS FOR A.Y. 2003-04 AND 2004-05 AND THE APPEALS FILED BY THE ASSESSEE BEFORE CIT(A). AFTER TAKING NOTE OF THESE FACTS ON PAGE 24 OF ITS ORDER THE AO HIMSELF IN PARA 4D AT PAGE 39 OF HIS ORDER HAS HELD AS UNDER: 4D. IT IS EVIDENT THAT THE NATURE OF BUSINESS OF TH E TWO SISTER CONCERNS AGILENT INDIA AND AGILENT INTERNATIONAL A RE DIFFERENT SINCE THE FORMER IS INVOLVED IN TRADING OF ANALYTIC AL TESTING AND MEASUREMENT EQUIPMENTS WHILE THE LATTER THE ASSESS EE IS IN THE BUSINESS OF DEVELOPMENT OF SOFTWARE AND IT ENABLED SERVICES. IT STANDS TO REASON THAT SINCE THE SISTER CONCERN AGILENT INDIA WAS ALREADY WELL-ESTABLISHED ITS SERVICES WERE TAK EN FOR PURCHASING MACHINERY ON BEHALF OF THE ASSESSEE UNDE R THE TERMS OF THE MOU FOR WHICH THE ASSESSEE COMPANY PAID A MA RK-UP ON THE COST FOR SERVICES RECEIVED. BESIDES EVEN THOU GH THE ITA 592 & 593/DEL/09 ACIT VS. AGILENT TECHNOLOGIES 8 ASSESSEE COMPANY AHS PAID FOR INSTALLING INTERFACE AT AGILENT INDIA IT CAN CLEARLY BE SEEN THAT SUCH WAS REQUIRE D FOR ESTABLISHING THE CONNECTIVITY OF THE ASSESSEE COMPA NY WITH AGILENT US AND AGILENT SINGAPORE FOR USING VOICE SE RVICES SUCH AS TELNET (I.E. PRIVATE VOICE NETWORK OF AGILENT ) AND VOICE MAIL (IN WHICH CALLER CAN LEAVE VOICE MESSAGE IN CA SE THE CALLED PERSON IS NOT AROUND AT DESK OR ALREADY ENGAGED IN ANOTHER CALL). MOREOVER IT IS IMPORTANT TO BEAR IN MIND THE OBSER VATIONS OF THE HONBLE SUPREME COURT AS POINTED OUT BY THE LD. CIT(A) IN THE BAJAJ TEMPO LTD. VS. CIT [1992] 196 ITR 0188 (S C) AND TEXTILE MACHINERY CORPORATION LTD. VS. CIT [1977] 1 07 ITR 195 (SC). THE ASSESSEE COMPANY COULD NOT BE SAID TO HAVE BEEN FORMED BY TRANSFER OF TELEPHONE AND EPABX SYSTEM SI NCE THE SAME ARE NOT MEANT FOR BEING USED IN THE MANUFACTUR ING PROCESS EMPLOYED BY AGILENT INTERNATIONAL SINCE IT IS ENGAG ED IN THE BUSINESS OF DEVELOPMENT OF COMPUTER SOFTWARE AND IT ENABLED SERVICES. IN LIGHT OF THE ABOVE THE ASSESSEE COMPA NY CANNOT BE SAID TO HAVE VIOLATED THE PROVISIONS OF SECTION 10A AND THUS NO ADVERSE VIEW IS BEING TAKEN IN THIS REGARD. 4.1. THUS AO AFTER DULY CONSIDERING ORDERS FOR A.Y . 2003-04 AND 2004-05 HELD THAT TRANSFER OF TELEPHONE AND EPABX SYSTEM W ILL NOT DISENTITLE THE ASSESSEE FOR BENEFIT U/S 10A AS THEY WERE NOT USE D FOR MANUFACTURING PROCESS OR IN THE BUSINESS OF DEVELOPMENT OF COMPUT ER SOFTWARE AND IT ENABLED SERVICES. SINCE THE AO HIMSELF HAS REALIZED THE INCONSISTENCY IN EARLIER ORDER AND ALLOWED THE CLAIM OF THE ASSESSEE ACCEPTING ITS PLEA CIT(A)S ORDER WAS FULLY JUSTIFIED. 4.2. LD. COUNSEL APROPOS GROUND NO. 2 CONTENDS TH AT: (A) THE AMOUNT WAS PAID BY WAY OF A WRITTEN AGREEMENT W HICH WAS SIGNED BY THE AUTHORIZED SIGNATORIES OF BOTH THE EN TITIES. BOARD RESOLUTION WAS DULY PASSED IN THE MEETING OF THE BO ARD OF DIRECTORS OF BOTH THE COMPANIES COPIES WHEREOF WERE FILED. ITA 592 & 593/DEL/09 ACIT VS. AGILENT TECHNOLOGIES 9 (B) DECISION REGARDING SHARED SERVICES BY EXISTING AGIL ENT INDIA TO AGILENT USA INTERNATIONAL WAS TAKEN BY AGILENT MANA GEMENT AT THE TIME OF SETTING UP AGILENT INTERNATIONAL. IN SUPPOR T ASSESSEE PRODUCED THE RELEVANT CORRESPONDENCE. (C) REMUNERATION PAID TO AGILENT INDIA HAS BEEN DULY O FFERED FOR TAXATION IN ITS RETURN OF INCOME. (D) THE SHARED SERVICES AGREEMENT WAS DULY IN THE NATUR E OF GENERAL ADMINISTRATIVE WHICH HAVE NO RELATION WITH THE TECH NICAL NATURE OF BUSINESS ACTIVITIES. THE SERVICES WERE ACTUALLY REN DERED BY THE ASSESSEE WHICH IS EVIDENT FROM THE FACT THAT IT DID NOT HAVE EMPLOYEES PERFORMING THESE SERVICES. ASSESSEE FILED LIST OF E MPLOYEES OF AGILENT INDIA TO SUPPORT ITS CLAIM THAT THE ASSESSE E DID NOT EMPLOY ITS WORK FORCE FOR THESE SERVICES. 4.3. AO IN ITS ORDER FOR A.Y. 2005-06 HAS EXPLAIN ED THE SHARED SERVICE AND HAS REFERRED TO THE DISALLOWANCE FOR A.Y. 2003- 04 AND 2004-05. IN THIS YEAR HOWEVER SHARED SERVICES HAVE BEEN ALLOWED BY AO BY FOLLOWING OBSERVATIONS: THE ASSESSEE COMPANY FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) [CIT(A)] FOR BOTH THE ASSESSMENT YEARS (I.E. 2003-04 AND 2004-05) ON THE GROUND OF ALLOWANCE OF SHARED SERVICE COST AS A DEDUCTIBLE EX PENSE UNDER SECTION 37(1). 5C. IN THIS REGARD THE ASSESSEE COMPANY HAS GOT CO MPLETE RELIEF IN RESPECT OF DISALLOWANCE OF SHARED SERVICE COST I N THE ORDER PASSED BY THE CIT(A). WHILE ALLOWING THE APPEAL OF THE COMPANY THE LD. CIT(A) HAS HELD AS UNDER: 1. THE SERVICES THAT HAVE BEEN OFFERED BY AGILENT INDIA TO THE COMPANY ARE VARIOUS ADMINISTRATIVE OR LOGISTICS SERVICES IN CONNECTION WITH THE WORKING O F THE ITA 592 & 593/DEL/09 ACIT VS. AGILENT TECHNOLOGIES 10 COMPANY AND HAVE NOTHING TO DO WITH THE SPECIALIZED ACTIVITIES UNDERTAKEN BY THE COMPANY. 2. IT MAKES NO DIFFERENCE WHETHER THE AGREEMENT IS ON A PLAIN PAPER STAMP PAPER OR AN ORAL ONE SO LONG A S BOTH THE PARTIES AGREE TO THE TERMS OF THE AGREEMENT. IN THE PRESENT CASE THE AGREEMENT HAS BEEN SIGNED BY THE AUTHORIZED SIGNATORIES OF BOTH THE COMPANIES AND TH E RECIPIENT COMPANY (I.E. AGILENT INDIA) HAS ALREADY OFFERED THE INCOME FOR TAXATION. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE EXPENSES INCURRED ARE TOWARDS NON- BUSINESS PURPOSES OR ARE IN THE NATURE OF CAPITAL EXPENDITURE. 5D. THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPA NY DOES NOT HAVE EMPLOYEES FOR DOING WORK RELATING TO ADMIN ISTRATION OF THE COMPANY FOR WHICH IT AHS TAKEN THE SERVICES OF THE SISTER CONCERN. THE LIST OF EMPLOYEES OF THE ASSESSEE COMP ANY AND OF THE EMPLOYEES OF AGILENT INTERNATIONAL WHO RENDERED SERVICES FOR THE ASSESSEE COMPANY WERE PERUSED BY THE UNDERS IGNED AND HAVE BEEN PLACED ON RECORD. THE WORK PROFILE OF THE FORMER IS IN SPECIALIZED AREAS RELATING TO SOFTWARE WHILE THE LA TTER IS IN MORE GENERAL DOMAIN. THE CONTRACT AGREEMENT AND THE BOAR D RESOLUTIONS RELATING TO THE CONTRACT AGREEMENT HAVE BEEN PUT ON RECORD. THE RECIPIENT COMPANY HAS ALREADY OFFERED T HE INCOME FROM THESE SERVICES FOR TAXATION. THE EXPENSES INCU RRED ARE RELATED TO THE BUSINESS OF THE ASSESSEE. THEREFORE AND IN LIGHT OF THE OBSERVATIONS OF THE LD. CIT(A) NO ADVERSE VIEW IS BEING TAKEN IN THIS REGARD. 4.4. LEARNED COUNSEL FURTHER CONTENDS THAT AOS ORD ER HAS BECOME FINAL INASMUCH AS NO ACTION U/S 263 HAS BEEN PROPOSED AND CONSIDERABLE PERIOD OF MORE THAN TWO AND HALF YEARS HAS ELAPSED SINCE AOS ORDER. 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H THE ENTIRE MATERIAL AVAILABLE ON RECORD. THE FACTS HAVE BEEN DETAILED A BOVE. AO BY DETAILED ORDER DATED 31-12-2008 FOR SUBSEQUENT YEAR I.E. A. Y. 2005-06 HAS CONSIDERED ALL THE ASPECTS OF BOTH THE ISSUES AND A FTER REFERRING TO ITA 592 & 593/DEL/09 ACIT VS. AGILENT TECHNOLOGIES 11 DISALLOWANCES OF BOTH THESE AMOUNTS IN A.Y. 2003-04 AND 2004-05 HELD THAT BOTH THE ITEMS WERE TO BE ALLOWED. WHILE DOING SO H E HAS CONCEDED TO CIT(A)S ORDER IN BOTH THESE YEARS. 6.1. IN OUR VIEW ONCE THE AO HIMSELF IN SUBSEQUENT YEAR HAS HELD THAT ASSESSEES CLAIM U/S 10A AND DEDUCTION OF COST OF S HARED SERVICES WAS PROPER OVERRULING OTHER REASONS ADOPTED BY HIM IN EARLIER YEARS THE SITUATION BECOMES SELF EXPLANATORY. WE SEE NO REASO N TO INTERFERE WITH THE ORDER OF CIT(A) ALLOWING THESE CLAIMS IN THE ASSESS MENT YEARS UNDER CONSIDERATION. WE HOLD THAT CLAIMS OF DEDUCTION U/S 10A AND THE EXPENDITURE OF SHARED SERVICES HAVE BEEN RIGHTLY ALLOWED BY CIT (A).WE UPHOLD THE ORDER OF CIT(A) FOR BOTH THE ASSESSMENT YEARS IN QUESTIO N. 6. IN THE RESULT REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 28-7-2011. SD/- SD/- (B.K. HALDAR ) ( R.P. TOLA NI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28 TH JULY 2011. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR