SUTHERLAND GLOBAL SERVICES PRIVATE LIMITED ,CHENNAI vs. DCIT , CHENNAI

At the outset, the Ld. AR for the assessee submitted that in respect of ground of appeal raised in Form 36 – Ground Nos.1,2, 3A, 4,5.1, 5.3, 5.4, 5.5, 6, 7, 10,11, 13 and 14 are not pressed and hence the same are dismissed.

The first issue which requires to be adjudicated pertaining to ground No.3(B) is concerned, is regarding downward adjustments made by theTPO of Rs.36,45,90,284/- which has been confirmed by theDRP. It is the case of the assessee that the overall addition of Rs.36.45 Crores was made out of which Rs.21,88,11,560/- relief has been already received by the assessee on account of MAP proceedings concerning transactions with USA. The balance amount in dispute is now only Rs.14,57,78,724/-. The Ld. AR further submitted that on this unresolved amount also the same ratio analysis be applied and that corresponding relief be granted. The Ld.AR also submitted that this issue is no more res integra as the same has been decided by this Hon’ble Tribunal in Assessee’s own case in IT(TP)A.No.70/Chny/2022 vide order dated 07.05.2025 at Para 6. 5. The Ld. DR fairly accepted that the issue is covered by Assessee’s own case, however, the Ld. DR submitted that he would like to place reliance upon the order of lower authorities as far as decisions of lower authorities qua non- US countries was concerned.

We have heard the arguments of both the parties and perused the material on record. The issue is covered by the decision in Assessee’s own case in IT(TP)A.No.70/Chny/2022 vide order dated 07.05.2025. The relevant extract is reproduced: “6.0 We have heard rival submissions in the light of material available on records. We have noted that majorly the amounts of adjustments have been got covered by the MAP proceedings. The only issue left now is regarding an adjustment of about Rs.11 Crores

Respectfully following the above decision, we hereby direct the TPO to examine whether the international transaction of the Assessee with non-US entities are similar in nature as contended by the assessee and if it is found to be correct, then the TPO may give same treatment to be given to the subject international transaction as resolved under MAP in the case of US companies. The TPO is directed to pass appropriate after affording an opportunity of hearing to the assessee and in accordance with law. The ground of appeal No.3.B raised by the assessee is therefore partly allowed.

The next issue which requires to be adjudicated is ground No.5.2 regarding downward adjustments made by theTPO of Rs.13,21,87,264/- towards Inter-Company support services/ Outsourcing paid to USA, Canada, Phillipines, Egypt, Bulgaria, UAE, Malaysia, UK, Morocco etc. In this regard, the Ld.AR for the Assessee submitted that similar issue i.e. Management fee and Corporate Cross Charges was resolved under MAP and pleaded that this issue may also be remitted to the file of the TPO for re-adjudication in light of the resolution under MAP. The Ld.AR also submitted that similar directions were issued by this Hon’ble Tribunal in Assessee’s own case in IT(TP)A.No.70/Chny/2022 vide order dated 07.05.2025 at Para 6. 9. The Ld.DR submitted that unlike the earlier issue, this issue is not specifically covered by MAP and therefore, the Ld.DR contended that in the :-4-:

We have heard the rival submissions and perused the material on record. Since the main issue in relation to transfer pricing adjustment for BPO services to non-US entities has been remanded back to the TPO for re-adjudication in light of resolution under MAP, we feel that this issue could also be re-examined by the TPO in light of MAP resolution for Management fee and Corporate Cross Charges. Accordingly, we hereby direct the TPO to call for necessary evidence and decide the issue in accordance with law. Needless to say, the TPO should afford sufficient opportunity to the Assessee before deciding the matter. Accordingly, this ground no.5.2 is partly allowed.

The next issue raised by the assessee through ground of appeal No.8 is regarding a disallowance of a sum of Rs.20,35,48,890/- u/s.40(a)(i) of the Act. The Ld. AR for the assessee argued that the amount pertained to cost to cost reimbursement of connectivity charges. The Ld. AR submitted that the AO had held that evidence to prove cost to cost reimbursement was not furnished and therefore concluded that connectivity/bandwidth charges are in the nature of royalty as held by Madras High Court in the case of Verizon Communications reported in 30 taxmann.com 70. The DRP has confirmed the same. The AR contended that the order of AO and DRP on the issue is also not very clear and has been passed in a summary and cryptic manner. It was accordingly requested that the matter particularly in the light of MAP proceedings be considered for remitting back to the AO for re-adjudication.

The Ld.DR submitted that in the absence of evidence to prove cost to cost reimbursement, the connectivity/bandwidth charges should be held as taxable and appropriate taxes should have been withheld.

We have heard the rival contentions and perused the material on record. Our attention was also invited to the decision of this Hon’ble Tribunal in Assessee’s own case wherein it was held as under:

Respectfully following the aforesaid decision, we direct theAO to call for evidence/submissions by issuing notices to the Assessee and then decide the issue in accordance with law. Accordingly, this issue is allowed for statistical purposes.

The next issue raised by the assessee through grounds of appeal No.9 is regarding the disallowance of bad debts amounting to Rs.2,51,28,661/- by theAO invoking provisions of section 36(1)(vii) of the Act. The ld. AR contended that the disallowance has been made by the AO without bringing any detailed reasoning on record. The DRP has also confirmed the findings of the AO. It was stated that the law of the land, as laid down by Hon’ble apex court in the case of TRF Ltd, now it is crystal clear in as much as every bad debts claimed by an assessee and which fulfils all other accounting conditions are to be allowed in the year in which it is claimed.

The learned DR relied on the order of the lower authorities.

We have heard the rival contentions and perused the material on record. Our attention was also invited to the decision of this Hon’ble Tribunal in Assessee’s own case wherein it was held as under:

0 Thus, we have noted that the allowance of bad debts is required to be made in the year in which it is claimed by an assessee. We have, however noted that the impugned allowance is subject to filing of necessary evidences in this regard by the assessee qua disclosure of income in earlier years. We have also noted that Ld.AO has given a categorical finding that the assessee was found

Respectfully following the aforesaid decision, we direct the AO to call for evidence/submissions by issuing notices to the Assessee and then decide the issue in accordance with law. The assessee is at liberty to file all the details deemed necessary for the purpose. Thus, this issue is allowed for statistical purposes.

The assessee has raised ground No.12 for short grant of TDS credit. The Ld.AR has also filed copies of Form 26AS. The Ld. DR fairly accepted that TDS credit ought to be granted as available. Since it is factual issue which needs verification, we direct the AO to verify the same and allow the TDS credit in :-8-:

The assesseehas filed 4 additional grounds for consideration of our adjudication. Out of the 4 additional, the 1st additional grounds of appeal is in relation to limitation as per Roca Bathroom and the 2nd issue is in relation to DIN issue. The ld. AR has not pressed these grounds and as such they are dismissed. In so far as additional grounds of appeal No.3 is concerned it is in relation deduction for ESOP expenses and 4th additional ground of appeal is in relation double disallowance in respect of BPO services. Reliance has been placed by the Ld.AR, upon Rule 11 of the Tribunal rules mandating admission of any issue/ground during the course of proceedings which was not contested before the lower authorities. The Ld.AR for the assessee has also placed reliance upon the decision of the Hon’ble Apex Court in the case of Jute

We have considered rival submissions in light of material brought on record. As regards admission of the additional grounds, we have noted that Rule 11 of the ITAT rules provide for admission of any ground /issue, during proceedings before the tribunal, which was not contested before the lower authorities. So far as admission of additional ground is concerned, the law is fairly settled in view of decision of Hon’ble Supreme Court in the case of Jute :-9-:

We find that additional ground no.3 in relation to deduction of ESOP expenses, this Hon’ble Tribunal in Assessee’s own case has remitted the matter to the file of the AO for adjudication in accordance with law. The relevant excerpt is as under: “18.0 As far as additional ground no.3 is concerned, we have noted that the same concerns assessee’s claim qua ESOP’s which was not made before the Ld. AO in the Return of Income filed. It is the case of the assessee that it is legally entitled for impugned claim u/s 37(1) of the Act. In support of its contentions, the assessee has filed a detailed paper book. We are of the considered view that in the interest of justice, it would be appropriate to remit the matter to the Ld.AO. Accordingly, the Ld. AO is directed to adjudicate the matter after giving due opportunity of being heard and by passing a speaking order. The decision to remit it back to the Ld. AO is taken in view of the fact that an Assessing Officer is the fulcrum of assessment proceedings. He possess the first right and responsibilities to examine facts of a case before arriving at his decision qua determination of taxable income in a particular case. We have noted with respectful deference the decision of Hon’ble Apex Court in the case of TIN box 249 ITR 216 on the subject matter. The Ld. AO shall give opportunities of being heard to the assessee and it shall be bounden upon the assessee to comply with the notices issued by the Ld. AO. Any noncompliance on the part of the assessee would be adversely viewed. The assessee is at liberty to produce all or any other evidence deemed relevant in support of its claims before the Ld. AO during the adjudication proceedings. Accordingly, the additional ground of appeal no.3 raised by the assessee is therefore allowed for statistical purposes.”

Respectfully following the aforesaid decision, we direct the AO to call for evidence/submissions by issuing notices to the Assessee and then decide the issue in accordance with law. Accordingly, this issue is allowed for statistical purposes.

The next additional ground of appeal No.4 is in relation to double disallowance of BPO services (Inter Co. support Services). The Ld. AR pleaded that the TPO/AO may be directed to verify and allow. The Ld. DR fairly accepted that if there is double disallowance, the duplicative disallowance will have to be deleted.

We have perused the material on record and direct the TPO/AO to verify the orders and delete the duplicate disallowance in relation to BPO services (Inter Co. Support Services). Accordingly, this additional ground of appeal No.4 is allowed for statistical purposes.

In the result, the appeal of the assessee is partly allowed.