WNS GLOBAL SERVICES P.LTD,MUMBAI vs. ASST CIT 10(2), MUMBAI

आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in ITA No.7377/Mum/2010 for A.Y.2006-07 preferred by the order against the final assessment order passed by the Assessing Officer dated 22/09/2010 u/s.143(3) r.w.s. 144C(13) of the Income Tax Act, hereinafter referred to as Act, pursuant to the directions of the ld. Dispute Resolution Panel (DRP in short) u/s.144C(5) of the Act dated 18/08/2010 for the A.Y.2006-07.

2 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd.,

“The following Grounds of Appeal are independent of, and without prejudice to, one another: 1. On the facts and circumstances of the case, and in law, the learned Assessing Officer ('AO') erred in proposing and the Dispute Resolution Panel ('DRP') further erred in upholding the disallowance of deduction under Section 10A of the Income tax Act, 1961 ('the Act1) of Rs. 551,793,451 in respect of the profits earned by the eligible units of the Appellant Company viz. Mumbai -1, Pune -1 and Pune - II units in view of erstwhile deleted provisions of Section 10A(9) of the Income-tax Act, 1961 ('Act'). It is prayed that the learned AO be directed to allow deduction under Section 10A of the Act of Rs. 551,793,451 in respect of the profits earned by the three eligible units of the Appellant Company viz. Mumbai -1, Pune -1 and Pune - || units. 2. On the facts and circumstances of the case, and in law, the learned AO erred in proposing and the DRP further erred in upholding the disallowance of depreciation amounting to Rs. 25,765,238 on intangible assets acquired by the Appellant Company. It is prayed that the learned AO be directed to allow depreciation of Rs. 25,765,238 claimed on intangible assets acquired by the Appellant Company. 3. Without prejudice to ground no. 2 above, on the facts and circumstances of the case and in law, it is prayed that the learned AO be directed to allow deduction under Section 10A of the Act in respect of addition made to the income of Appellant Company on account of disallowance of depreciation on intangible assets. 4. On the facts and circumstances of the case and in law, the learned AO has erred in proposing and the DRP further erred in upholding the disallowance of professional expenses, electricity charges and miscellaneous charges amounting to Rs. 657,078 on an ad hoc basis. It is prayed that the learned AO be directed to allow deduction of the aforesaid expenses.

3 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., The Appellant prays that the proceedings initiated by the TPO under Section 92CA of the Act on the basis of the said reference be held as void ab initio and thus the order passed by the learned TPO under Section 92CA(3) of the Act be cancelled. 7. On the facts and in the circumstances of the case and in law, the learned AO has erred in confirming / following and the DRP further erred in upholding the order of the learned AO / TPO that the international transactions of the Appellant with its Associate Enterprise ('AE') are not at arm's length and in thereby confirming the adjustment of Rs. 41,01,71,389 made to the value of the said international transaction. The Appellant prays that the transfer pricing additions made by the learned AO on the basis of the order passed by the TPO under Section 92CA(3) of the Act be deleted. 8. On the facts and in the circumstances of the case and in law, the learned AO has erred in confirming the learned TPO's holding and the DRP further erred in upholding the price charged or paid by the Appellant for its international transactions with the AEs was not determined in accordance with provisions of Sections 92C(1) and (2) of the Act and, consequently not appreciating the fact that none of the conditions set out in Section 92C(3) of the Act are satisfied in the case. The Appellant prays that the transfer pricing additions made by the AO be deleted. 9. On the facts and in the circumstances of the case and in law, the learned AO/ TPO/DRP has by not accepting the tested party selected by the Appellant Company and disregarding the guidance provided under: • The Income-tax Rules, 1962, • The Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations issued by Organization for Economic Cooperation and Development; • Various judicial and other precedents; and • Section 1.482-5 of the US transfer pricing regulations. The Appellant prays that due consideration be given to the explanations provided in respect of the selection of tested party and that the adjustments made by the AO/ TPO due to the non-acceptance of the tested party selected by the Appellant Company be deleted. 10. On the facts and in the circumstances of the case and in law, the learned AO/ TPO / DRP erred in aggregating the international transactions of Payment of marketing and management fees, Receipt of contract revenue and Reimbursement of cost in respect of Travelocity contract. The Appellant prays that the book value of the said transactions be held to be the arm's length price of the transactions, and the additions made by the AO / TPO be deleted.

4 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., 11. On the facts and in the circumstances of the case and in law, the learned AO has erred in confirming the learned TPO's holding and the DRP further erred in upholding that the Appellant's international transaction of receipt of contract revenues and payment of marketing and management fees were not on an arm's length basis and thereby confirming the adjustment of Rs. 33,81,53,110 as a proposed addition.

The Appellant prays that the aforesaid addition be deleted. 12. On the facts and in the circumstances of the case and in law, the learned AO has erred in confirming the learned TPO's holding and the DRP further erred in upholding the computation of arm's length price for interest on receivables at Rs.7,20,18,279 instead of Rs. Nil. The Appellant prays that the aforesaid addition be deleted. The Appellant craves leave to add, alter, amend or withdraw all or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing.”

3.1. Reference u/s.92CA(1) of the Act was sent to the ld. Transfer Pricing Officer (Ld. TPO) for determination of arm’s length price (ALP in short) of international transactions carried out by the assessee. The ld. TPO issued notice u/s.92CA(2) of the Act.

5 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., 3.2. The assessee is engaged in the business of providing variety of information technology enabled business process outsourcing services including back office administrative services and call centre services to customers primarily in the pharmaceutical and insurance industry. It also provides offshore processing services to leading companies in the insurance / pharmaceutical and market research industries. WNS India (assessee herein) is 100% held by WNS Mauritius Ltd., which inturn is 100% held by WNS Holdings Ltd., Jersey. Warburg Pincus Group holds 73% in WNS Holdings Ltd.

3.3. The details of international transactions entered into by the assessee during the year under consideration and the most appropriate method adopted (MAM) thereon for benchmarking the said transactions are as follows:- Sr. Name of the AE Nature of Amount (Rs.) Method No. Transaction Used 1. WNS Global Services Payment of marketing 26,46,48,242 TNMM (UK) Ltd., UK and management fees 2. WNS North America Inc Payment of marketing 41,02,61,224 TNMM USA and management fees 3. WNS Global Services Receipt of contract 2,02,13,97,720 TNMM (UK) revenue in respect of contacts executed by WNS UK on behalf of the company 4. -do- Provision of IT 8,86,66,794 TNMM enabled services in connection with Town and Country Assistance business unit 5. WNS North America, Inc Receipt of contract 1,96,47,06,387 TNMM revenue in respect of contracts executed by WNS NA on behalf of the company 6. WNS Global Services Reimbursement made 6,89,67,402 At Cost (UK) Ltd., UK for lease line charges paid by WNS UK on

6 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., behalf of the company 7 -do- Reimbursement made 1,83,32,671 At Cost for expenses paid by WNS UK on behalf of the company 8. WNS North America Reimbursement made 6,41,87,580 At Cost Inc., USA for lease line charges paid by WNS NA on behalf of the company 9. -do- Reimbursement made 4,10,70,798 At Cost for expenses paid by WNS NA on behalf of the company 10. -do- Reimbursement of 16,40,48,343 At Cost agent error and customer resource charges incurred by WNS NA on behalf of the company 11. WNS Global Services Reimbursement 76,60,891 At Cost (UK) Ltd., UK received for expenses paid by the company on behalf of WNS UK 12. WNS North America Reimbursement 83,61,725 At Cost Inc., USA received for expenses paid by the company on behalf of WNS NA 13. WNS Customer Solutions Reimbursement 35,11,823 At Cost Private Ltd., Sri Lanka received for expenses paid by the company on behalf of WNS CS

3.4. The ld. TPO on going through the TP study report of the assessee and after inclusion and exclusion of certain comparables, arrived at the final list of following 13 comparables as under:-

Sr. Comparable Companies PBIT(OP)/TC (%) No. 1 Ace Software Exports Ltd., 7.72 2 Allsec Technologies Ltd., 28.51 3 Apex Knowledge Solutions Pvt. Ltd. 20.48

7 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., 4 Asit C Mehta Financial Services Ltd 34.52 (earlier known as Nucleus Netsoft & GIS (India) Ltd.,) 5 Cosmic Global Ltd., (Seg.) 16.03 6 Datamatics Financial Services Ltd., 24.00 7 Flextronics Software Systems Ltd. (Seg) 14.54 8 Goldstone Infratech Ltd.(Seg) (earlier 29.01 known as Goldstone Teleservices Ltd.,) 9 Maple eSolutions Ltd., 32.66 10 R Systems International Ltd., (seg) 15.11 11 Spanco Ltd., Seg (earlier known as 20.66 Spanco Telesystems & Solutions Ltd.,) 12 Transworks Information Services Ltd., 19.56 13 Pentasoft Technologies Ltd., (Seg.) 9.36 Average 21.03

3.5. From the aforesaid table, the ld. TPO arrived at the average margin of comparables @21.03% as against the margin of 12.29% declared by the assessee. The ld. TPO sought to make an adjustment of Rs.34,81,53,110/- in respect of receipt of contract revenues and payment of marketing and management fees as under:-

A Sale Turnover Rs.4,34,59,17,558 B Profit before tax Rs.46,52,22,822/- C Add Donation Rs. 6,71,303/- D Add Loss on sale of asset Rs. 2,60,726/- E Add Foreign exchange loss, Rs.1,24,49,568 net F Less other income Rs.28,60,097

8 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., G PBIT Rs.47,57,44,322 H Total Costs (A-f) Rs.3,87,01,73,236 I OP/TC 12.29% J Arm’s length margin on Total 21.03% Costs K Arm’s length profit margin Rs.81,38,97,432/- (H*J) L Difference Rs.33,81,53,110/-

3.6. This order of the ld. TPO was adopted by the ld. AO in the draft Assessment Order, which was upheld by the ld. DRP. Accordingly, the same was added by the ld. AO in the final assessment order. Aggrieved, the assessee is in appeal before us.

“1. Receipt of contract revenues from WNS North America Inc (“WNS NA‟) and WNS Global Services (UK) Limited („WNS UK‟); 2. Payment of marketing and management fees by WNS India to WNS NA and WNS UK; 3. Provision of IT enabled, services by WNS India to WNS UK-Town and Country Assistance Limited business unit („T & CA BU‟)‟ 4. Reimbursement of cost by WNS India to WNS NA in respect of Travelocity contract.”

9 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., 4.1. Out of these 4 items, the ld. AR stated that except Travelocity contract mentioned in point 4 above, all the other disputes are covered by the Advance Pricing Agreement (APA) with CBDT. The ld. AR also drew our attention to page No.217 of the paper book containing the Advance Pricing Agreement u/s.92CC of the Act dated 03/08/2015 between assessee and CBDT. The details of international transactions settled in APA are as under:-

Sr. Nature of covered Name of the AEs Years under the APA for No. transactions which the covered transactions shall be entered into 1. Provision of marketing  WNS North America Inc (‘WNS NA’) - - The transactions with WNS and support service by  WNS Global Services (UK) Ltd., (‘WNS NA, WNS UK and WCIL AEs and WNS India Mauritius shall be entered into UK’) where WNS India is for all 5 years covered under  WNS Global Services Netherlands entrepreneur the APA (i.e. for a period from Cooperative U.A (WNS Netherlands) 1 April 2013 to 31 March  WNS Capital Investment Ltd (WCIL 2018) Mauritius) - The transaction with WNS Netherlands shall be entered into for the period from 1st April 2013 to 31 March 2015 as WNS Netherland’s contract with the client is expiring with effect from 1 April 2015 2. Reimbursement of client  - The transaction with WNS WNS Customer Solutions billings to WNS India in (Singapore) Private Limited (WNS Singapore shall be entered into respect of a specific for the period from 1 April 2013 Singapore) contract executed by to 31 March 2014 as WNS WNS Customer Singapore’s contract with the Solutions (Singapore) client is expiring with effect Private Limited (‘WNS from 1 April 2014 Singapore’)  3. Provision of BPO and WNS UK (Assistance Unit); -These transactions shall be IT services by WNS entered into for all 5 years BPO service India to its AEs covered under the APA (i.e. for  WNS Global services (private) a period from 1 April 2013 to 31 Limited (‘WNS Sri Lanka’)- BPO

10 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd.,

service March 2018)  WNS UK (BizAps Unit)- IT Service  4. Provision of BPO WNS Sri Lanka - The transaction shall be services by WNS Sri entered into for all 5 years Lanka to WNS India covered under the APA (i.e. for a period from 1 April 2013 to 31 March 2018)

4.2. He drew our attention to the most appropriate method accepted under the APA for the various transactions carried out by the assessee as under:-

Sr. Nature of international Most Appropriate Transfer ALP No. transactions Pricing Method 1 Provision of marketing Transactional Net Margin Methods with Operating profit margin of not and support service by AEs as the tested parties and operating more than 5% for WNS AEs to WNS India profit margin as PLI Netherlands and not more than where WNS India is 8% for WNS NA, WNS UK and entrepreneur WNS Mauritius 2 Reimbursement of client Other method The AE would only be entitled billings to WNS India in to retain cost incurred by it and respect of a specific remit everything else back to the contract executed by Applicant WNS Customer Solutions Limited (‘WNS Singapore’) 3 Provision of BPO and Transactional Net Margin Methods with Operating Profit margin of not IT services by WNS Applicant as the tested parties and less than 18% India to its AEs operating profit margin as PLI 4 Provision of BPO Transactional Net Margin Methods with Operating profit margin of not services by WNS Sri AE as the tested parties and operating more than 15% Lanka to WNS India profit margin as PLI where WNS India is entrepreneur

4.3. Apart from this, he also drew our attention to the order passed by this Tribunal in assessee’s own case for A.Y.2005-06 in ITA No.396/Mum/2011

11 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., (Assessee appeal) and ITA No.631/Mum/2011 (Revenue Appeal) dated 16/01/2019 and for A.Y.2008-09 in ITA No. 7378/Mum/2012 dated 16/01/2019 wherein the transfer pricing disputes other than issue of notional interest on outstanding receivables are fully covered in assessee’s own case.

4.4. Per contra, the ld. DR accepted to the fact that the transfer pricing disputes other than notional interest on outstanding receivables, raised by the assessee in its grounds are covered by the order of this Tribunal dated 16/01/2019. The functions performed, the assets employed and risks undertaken in respect of international transactions carried out during the year remain the same with those prevailing in A.Y.2005-06. Hence, we deem it fit to reproduce the relevant portion of the order passed by this Tribunal in A.Y.2005-06 in ITA No.631/Mum/2011 dated 16/01/2019 as under:-

“8. We have considered rival submissions and perused materials on record. As could be seen from the order of the Transfer Pricing Officer, primarily relying upon his decision in assessment year 2004-05, he has held that the assessee has to be treated as tested party and all international transactions have to be aggregated for bench marking purpose. However, it is observed, while deciding identical issue in assessee's own case for the assessment year 2004-05, the Tribunal has upheld learned Commissioner (Appeals)'s decision in treating the AEs as the tested party on the following observations: — "15. While deleting the addition made by TPO disregarding the benchmarking approach, CIT(A) observed as under:— i. The Appellant has changed the business model to increase its turnover which require the risk free environment to its marketing companies i.e., its A.Es as risks and rewards from customers are passed on to the Assessee under the new business model. ii. The two business models of the Appellant are entirely different in functional analysis: a. In Business Model I, the risks and rewards is with the Appellant. The A.Es which are remunerated on a cost plus fees are insulated from the risks which is borne by the Appellant as entrepreneur. The AEs render only marketing and management services and are least complex party in the transaction.

12 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd.,

b. In Business Model 2, the major risks are borne by WNS UK. It functions as the entrepreneur, it bears the risk and the appellant is only a captive service provider bearing limited risks. iii. In Business Model I, the AEs were least complex parties and they were rightly used as tested party for the marketing and management fees paid to the AEs on cost plus basis, unlike in Business Model 2. iv. Each international transaction has to be benchmarked separately and the assessee has different functional profiles for the two business models, one as an entrepreneur and the other as a captive service provider. v. Such different transactions cannot be clubbed together as laid down in : a. Aztec Software & Technology Services Ltd. v. Asstt. CIT [2007] 107 ITD 141 (Bang) (SB) b. Development Consultants (P.) Ltd. v. Dy. CIT[2008] 115 TTJ 577 (Kol.) c. Star India Pvt. Ltd. v. ACIT [IT Appeal No. 3585 (Mum.) of 2006

13 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., interfere in the findings of CIT(A) which resulted into deletion of addition made on account of international transaction." 10. The learned Departmental Representative having not brought any material difference in fact in the impugned assessment year, respectfully following the decision of the Tribunal as referred to above, we uphold the decision of the learned Commissioner (Appeals) with regard to the issues raised in this ground. Furthermore, as brought to our notice by the learned Sr. Counsel for the assessee, the Transfer Pricing Officer himself in the orders passed in assessee's own case for assessment years 2011-12 to 2014-15, has not only accepted the AEs as the tested party but also accepted the foreign comparables proposed by the assessee. Even, in the advance pricing agreement dated 3rd August 2015, the Department has accepted the AEs as the tested parties insofar as it relates to fees paid towards management and marketing services rendered by them. 11. As regards the contention of the learned Departmental Representative that the learned Commissioner (Appeals) has not properly considered the comparability of the foreign comparables on account of different financial years, it is relevant to observe, the Transfer Pricing Officer never rejected the foreign comparables proposed by the assessee on the issue of different financial year ending. In fact, the Transfer Pricing Officer has not at all gone into far analysis of the foreign comparables proposed by the assessee since he treated the assessee as the tested party and, therefore selected separate sets of comparables. Therefore, we are unable to accept the submissions of the learned Departmental Representative for restoring the issue to the Assessing Officer/Transfer Pricing Officer for reconsideration. In view of the aforesaid, we uphold the order of the learned Commissioner (Appeals) on these issues by dismissing the grounds raised. 12. In ground No.3, the Department has challenged the decision of the learned Commissioner (Appeals) in holding that the contract migration cost should not be considered for calculating the operating margin. 13. Brief facts are, in course of proceedings before him, the Transfer Pricing Officer noticed that the assessee has paid an amount of Rs. 90,44,55,398 to WNS N.A. in respect of Travelocity contract. After verifying the details, he found that WNS N.A. has entered into a contract with Travelocity.com L.P. to outsource their back office and contract centre operation. The aforesaid contract entered into in January 2004, was to subsist for a period of seven years. However, Travelocity desired that certain non-core operations and functions currently performed internally be performed and managed by a third party experienced in such operations and functions to achieve economic efficiencies and other advantages from outsourcing. Thus, it was agreed between WNS N.A. and Travelocity that WNC N.A. would reimburse Travelocity for the cost associated with the use of Travelocity assets and Travelocity personnel during the migration period. These costs to be incurred by WNS N.A. have been passed on to the assessee, because, WNS N.A. had entered into back-to-back contract with the assessee wherein all the functions/rewards/risks associated with the contract were passed on to the assessee. Thus, it was submitted by the assessee that as the Travelocity contract is with a third party, the transaction has to be treated at arm's length since the costs have been passed on to the assessee on back-to-back basis. It was submitted, the assessee has claimed these costs as reimbursement paid to WNS N.A., hence, not a part of

14 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., international transaction to be bench marked. The Transfer Pricing Officer, however, did not find merit in the submissions of the assessee and held that since the cost incurred by the assessee in respect of Travelocity contract is inter related with the main function of the assessee and the contract receipts by the assessee is towards provisions of ITES, the cost incurred has to be benchmarked on an aggregate basis along with the provisions of ITES services. Being aggrieved with the aforesaid decision of the Transfer Pricing Officer, the assessee preferred appeal before the first appellate authority. 14. The learned Commissioner (Appeals) after considering the submissions of the assessee in the context of facts and material on record observed that the Travelocity contract was a very prestigious contract and was the single largest contract secured by the group in the U.S. market. For securing this contract, it was agreed by the American AE as well as the assessee that till the time all processes are fully migrated to India, whatever costs are incurred by Travelocity would be reimbursed. The learned Commissioner (Appeals) observed, since the reimbursement of cost was a pre-condition of the contract, the assessee and the AE had to take a commercial decision to agree to such term in order to secure the contract. The learned Commissioner (Appeals) observed, though initially the assessee had to incur the migration cost, however, in subsequent years, the contract generated good profit for the assessee. Thus, the learned Commissioner (Appeals) relying upon his decision on identical issue in assessment year 2004-05, held that the migration cost relating to Travelocity contract being an exceptional and onetime cost, should not be treated as part of operating cost for computing the profitability of the assessee. 15. The learned Departmental Representative relying upon the observations of the Transfer Pricing Officer submitted, learned Commissioner (Appeals) without properly analysing the issue has held that the migration cost will not form part of the operating cost. He submitted, if the learned Commissioner (Appeals) was unable to accept the benchmarking of the Transfer Pricing Officer, he himself should have done the correct benchmarking. The learned Departmental Representative submitted, learned Commissioner (Appeals)'s reasoning for excluding the migration cost is not on sound basis. 16. The learned Sr. Counsel for the assessee submitted, from assessment year 2004- 05 onwards all the contracts were assigned to the assessee and the assessee became the major entrepreneur, whereas, the AEs were only supporting the assessee. He submitted, earlier the assessee was only rendering BPO services to British Airways which completely changed after assignment of all contracts to the assessee. He submitted, since the Travelocity contract was a big contract and the assessee initially did not have the infrastructure to execute the work, it asked the AEs to do the work and reimbursed the cost as onetime expenditure. The learned Sr. Counsel submitted, while deciding identical issue arising in assessee's own case for assessment year 2004-05, the Tribunal has allowed the claim of the assessee. 17. We have considered rival submissions and perused materials on record. Notably, identical issue came up for consideration before the Tribunal in assessee's own case for assessment year 2004-05. The Tribunal while deciding the issue in the order referred to above, has held that the cost incurred by the assessee is purely in the nature of reimbursement without any mark-up. Hence, cannot be treated as part of operating cost. Thus, the Tribunal ultimately upheld the decision of the learned

15 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., Commissioner (Appeals) on the issue. There being no difference in fact brought to our notice by the learned Departmental Representative in the impugned assessment year, respectfully following the decision of the Tribunal in assessee's own case as referred to above, we uphold the decision of the learned Commissioner (Appeals) on the issue. The ground raised is dismissed.”

4.5. Considering the same, the ground Nos.6-11 raised by the assessee are allowed.

5.1. We have heard rival submissions and perused the materials available on record. The ld. AR stated that this issue is a carry forward issue from A.Y.2003-04 onwards and this Tribunal in A.Y.2003-04 in assessee’s own case in ITA No.4520/Mum/2013 dated 17/02/2016 has already decided this issue in favour of the assessee. For the sake of convenience, the relevant portion of the Tribunal order adjudicating this issue is reproduced as under:-

16 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., forth an alternate claim that it be granted deduction under section 80HHE of the Act in case the claim under section 10A of the Act was not allowed. The case was taken up for scrutiny and the assessment was completed under section143(3) of the Act vide order dated 17/3/2006 allowing the assessee deduction claimed under section 10A of the Act. 2.2 Subsequently, the CIT-10, Mumbai in exercise of revisionary powers passed an order under section263 of the Act dated 20/11/2007, set aside the assessee's claim for deduction under section10A of the Act and directed the Assessing Officer to re-examine the assessee's claim in the light of the provisions of section 10A(9) of the Act. In this order under section 263 of the Act, the CIT also rejected the assessee's claim for deduction under section80HHE of the Act. On appeal by the assessee, the Co-ordinate bench of this Tribunal vide order in ITA ITA No. 4520/MUM/2013 (Assessment Year : 2003-04) No.348/Mum/2008 dated 17/6/2009 upheld the assumption of jurisdiction by the CIT(A) under section 263 of the Act on the ground that the Assessing Officer had not examined the assessee's claim for deduction under section10A of the Act in the light of the provisions of section 10A(9) of the Act for re-examination thereof. In respect of the CIT's rejection of the assessee's alternate claim for deduction under section 80HHE of the Act to be granted, the Co-ordinate bench modified the order of the CIT to the extent that while re-assessing the income, the Assessing Officer shall look into the alternate claim of the assessee in respect of deduction under section 80HHC in accordance with law. In short, the Co-ordinate bench allowed the assessee partial relief. 2.3 In the meanwhile an order of re-assessment for assessment year 2003-04 passed under section143(3) r.w.s. 263 was passed on 23/12/2008 disallowing the assessee's claim for deduction both under section 10A of the Act as well as the assesssee's alternate claim for deduction under section 80HHE of the Act and consequently determining the income of the assessee at Rs.31,89,13,930/-. 2.4 Pursuant to the order of the Co-ordinate bench of this Tribunal in ITA No.348/Mum/2008 dated 17/6/2009, in the matter of the assessee's appeal against the CIT's order under section 263 of the Act dated 20/11/2007, the Assessing Officer took up fresh assessment proceedings. After hearing the assessee in the matters of its claim for deduction under section10A of the Act and alternate claim for deduction under section 80HHE of the Act, the Assessing Officer concluded the assessment rejecting the assessee's claim for deduction under section 10A but allowed the assessee's alternate claim for ITA No. 4520/MUM/2013 (Assessment Year : 2003-04) deduction under section 80HHE(4) of the Act amounting to Rs.16,59,23,129/-. The assessment was accordingly completed under section 143(3) r.w.s. 254 of the Act vide order dated 23/12/2010. 2.5 On appeal by the assessee, the CIT(A) rejected the assessee's claim for deduction under section10A of the Act on the ground that sub-section (9) to section 10A of the Act being omitted by Finance Act, 2003 w.e.f. 1/4/2004,

17 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., the provisions of Section 10A(9) of the Act were in the force for assessment year 2003-04. Holding thus, the CIT(A) dismissed the assessee's appeal vide the impugned order dated 1/3/2013 3.1 Aggrieved by the order of the CIT(Appeals)-22, Mumbai, the assessee is in appeal before the Tribunal raising the following ground:- "1. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals)-22, Mumbai has erred in upholding the order of the learned Income Tax Officer -10(2)(4), Mumbai and disallowing the claim of deduction under section 10A of the Act of INR 31,89,63,890/- in respect of the Appellant's STP Units in the light of the erstwhile provisions of section 10A(9) of the Act." 3.2.1 The Ld. Representative for the assessee reiterated the submissions put forward before the authorities below that by virtue of the omission of section 10A(9) of the Act from the statute by Finance Act, 2003 w.e.f. 1/4/2004. Section 10A of the Act should be read as if the provisions of sub- section(9) thereof never existed on the statute book since the omission of sub- section (9) of section 10(A) of the Act was made without a saving clause In these circumstances, the Ld. Representative for the assessee submitted that the deduction under section10A of the Act was correctly claimed by the assessee in respect ITA No. 4520/MUM/2013 (Assessment Year : 2003-04) of its Mumbai Unit-I and Pune Unit-1&2 and ought to have been allowed. 3.2.2 The Ld. Representative for the assessee submitted that the amendment made by Finance Act, 2003 omitting section 10A(9) of the Act is curative in nature and requires to be applied retrospectively as the same is supported by legislative history as well as legislative intent while moving the amendment whereby the aforesaid provisions were deleted. In this regard the Ld. Representative for the assessee drew the attention of the bench to the Finance Minister's speech presenting the Union Budget for 2003-04 and particularly to para 102 thereof, wherein it was stated that "...... it is proposed that the concession extended to IT under section 10A and 10B of the Income Tax Act will continue as originally envisaged. As per law such companies as are currently covered by these tax exemptions lose the benefits upon change in their ownership or shareholding. This is not logical. I am, therefore, removing these restrictions, the benefit of such tax exemptions will remain even in case of amalgamation or de-merger." 3.2.3 In this regard it was submitted that this issue in the case on hand is squarely covered in favour of the assessee by the decision of the Bangalore Bench of the Tribunal in the case of G E Thermometrics India Pvt. Ltd. in ITA Nos. 257 & 258/Bang/2008 for assessment year 2003-04 and 2004-05. It is contended that in this decision, the Bangalore Bench with regard to the effect of the deletion of section 10B(9) of the Act ( which is pari-materia to the provisions of section 10A(9) of the Act) at para 11 of its order has held that even though the Finance Act, 2003 mentions that the aforesaid sub-section(9) is omitted with effect from ITA No. 4520/MUM/2013 (Assessment Year : 2003-04) 1st April 2004, in view of the fact that the said omission is different from repeal, the saving clause provided in section 6 of the General Clauses

18 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., Act is not applicable. Therefore, section 10B of the Act should be read as though it never had sub-section(9) in it all in all the proceedings under the Act. It is submitted that since the facts of the case on hand are identical to those in the case of GE Thermometrics India Pvt. Ltd. (supra) rendered in the context of section 10B(9) of the Act, which is pari-materia to section 10A(9) of the Act, similarly, section 10A of the Act should also be read as if it never had sub-section(9). 3.2.4 The Ld. Representative for the assessee further submitted that the aforesaid decisions of the Co-ordinate bench in the case of GE Thermometrics India Pvt. Ltd. (supra) has been upheld by the Hon'ble Karnataka High Court vide order in ITA No.876 & 877/2008 dated 25/11/2014, wherein Revenue's appeal against the aforesaid order was dismissed and the substantial question of law was answered in favour of the assessee. 3.2.5 The Ld. Representative for the assessee submits that in view of the facts and circumstances of the case on hand and the judicial pronouncements relied upon, the orders of the authorities below in denying the assessee deduction under section 10A of the Act in respect of the assessee's STPI units at Mumbai and Pune in view of the erstwhile provisions of section 10A(9)of the Act be reversed and the assessee's claim for deduction under section10A of the Act be allowed. 3.3.1 Per contra, the Ld. Departmental Representative strongly supported the orders of the CIT(A) in disallowing the assessee's claim ITA No. 4520/MUM/2013 (Assessment Year : 2003-04) for deduction under section10A of the Act in respect of its STPI units, in view of the fact that its claim is hit by the provisions of sub-section (9) of section 10A of the Act which was repealed only w.e.f. 1/4/2004 and was, therefore, applicable for the year in question. Citing, inter-alia, the decision of the Hon'ble Apex Court in the case of Alladi Kuppuswamy (1977) (108 ITR 435) (SC), Ld. Departmental Representative contended that the plain language of the Act cannot be interpreted to read it down. It was further submitted that this issue has been held against the assessee by the decisions of the Co-ordinate Benches in the assessee's own case for assessment year 2004-05 in ITA No.2566/Mum/2009 and by the order of another Co-ordinate Bench of this Tribunal in ITA NO.348/Mum/2008 dated 17/6/2009 while adjudicating on an order under section 263 of the Act for assessment year 2003-04. 3.4.1 In rejoinder, the Ld. Representative for the assessee , while reiterating its earlier submissions (supra) submitted that the Co- ordinate Bench, while adjudicating the appeal in the assessee's case for assessment year 2004- 05(supra) has adjudicated the issue of the provisions of applicability of provisions of Sub-section (9) to section 10A of the Act for that year only and certainly has not rendered any finding in respect of the applicability of the provisions of sub-section(9) of section 10A in the context of the assessee's claim for deduction under section10A of the Act for assessment year 2003-04 as the present appeal was not before that bench for adjudication of this issue.

19 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., In this context, the Ld. Representative for the assessee contends that the averments of the Ld. Departmental Representative were factually ITA No. 4520/MUM/2013 (Assessment Year : 2003-04) erroneous and misleading. As regards Ld. Departmental Representative's submission that the said issue has been held against the assessee in the order of the Co-ordinate bench in its order on 263 proceedings for assessment year 2003-04(supra), the Ld. Representative for the assessee submitted that in this order also the submissions of the Ld. Departmental Representative are factually incorrect since the said order only upholds the assumption of jurisdiction by the CIT under section 263 of the Act and has not adjudicated on the assessee's claim for deduction under section 10A of the Act in the light of the provisions of sub-section (9) thereof. 3.5.1 We have heard the rival contentions and perused and carefully considered the material on record, including the judicial pronouncements cited. The issue before us for consideration and adjudication is whether the order of the authorities below were correct or not in disallowing the assessee's claim for deduction under section 10A of the Act amounting to Rs.31,89,63,,890/- in respect of the assessee's STPI units in Mumbai and Pune in the light of the erstwhile provisions of sub-section(9) of section 10A of the Act. 3.5.2 In the year under consideration WNS(Mauritius) Ltd. a wholly owned subsidiary of WNS Holdings acquired the entire share capital of the assessee from British Airways Ltd., U.K. In the return of income the assessee for assessment year 2003-04 the assessee had claimed deduction under section 10A of the Act; submitting that the amendment carried out by Finance Act, 2003, wherein section 10A(9) of the Act was deleted was an amendment of clarificatory nature and such deletion should be considered to have been omitted retrospectively. In ITA No. 4520/MUM/2013 (Assessment Year : 2003-04) original scrutiny assessment proceedings, the assessment was completed under section 143(3) of the Act vide order dated 17/3/2006 allowing this claim and accordingly the assessee was granted the deduction under section10A of the Act. In the order of re-assessment for assessment year 2003-04, passed under section 143(3) r.w.s. 263 of the Act vide order dated 23/12/2008, pursuant to revisionary proceedings, the assessee's claim for deduction under section 10A of the Act was disallowed by applying the provisions of sub-section (9) of section 10 of the Act. This finding was upheld by the CIT(A) in the impugned order and the matter is before us for consideration. 3.5.3 Sub-section (9) of section 10A of the Act was omitted from the statute by Finance Act, 2003,w.e.f. 1/4/2004. Para 102 of the Finance Minister's speech while presenting the Union Budget for 2003-04 has been perused and we find that the statement of intent of the legislature for omitting sub-section (9) of section 10A of the Act was that the concessions extended to the IT Sector under sections 10A & 10B of the Act are to be continued as originally envisaged. In this context, the present position as per law that such companies as currently covered by these tax exemption lose these benefits

20 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., upon change in ownership is not logical, and therefore, these restrictions are being removed so that the benefit of such tax exemptions will remain even in cases of amalgamation or demerger. In this regard, we refer to the judgment in the case of the Bangalore Bench of the ITAT in the case of GE Thermometrics India Pvt. Ltd. in ITA Nos. 257 & 258/Bang/2008 for assessment years 2003-04 and 2005-06, which we feel squarely covers the issue before us in favour of the assessee. In this order (supra) the ITA No. 4520/MUM/2013 (Assessment Year : 2003-04) Bench, in respect of the effect of deletion of section 10B(9) of the Act (which is pari-materia to section 10A(9) of the Act) at para 11 of its order has held that even though the Finance Act, 2003 mentions that the aforesaid sub-section (9) is omitted w.e.f. 1/4/2004; in view of the fact that the said omission is different from repeal, the saving clause provided in section 6 of the General Clauses Act is not applicable, therefore, section 10B of the Act is to be read as though it never had sub-section (9) in it at all in all proceedings of the Act. 3.5.4 In coming to this view we place reliance and draw support on the decision of the Hon'ble Karnataka High Court in the case of GE Thermometrics India Pvt. Ltd. in ITA Nos. 876/2008 dated 25/11/2014 for assessment year 2003-04 on Revenue's appeal against the order of the Co- ordinate Bench of the ITAT(supra). In para 4 of this order the substantial question of law before the Hon'ble High Court was: "Whether the Tribunal was correct in holding that in view of the omission of sub-section 9 to Section 10B of the Act, w.e.f. 01.04.2004, it should be understood that the said section never existed in the statute book and therefore the benefit claimed by the assessee u/s. 10B should be allowed?" Their Lordships at para 7 and 8 of their order (supra) have answered the question holding as under:- "7. The Apex Court in the case of KOLHAPUR CANESUGAR WORKS LTD. VS UNION OF INIDA reported in AIR 2000 SC 811 dealing with the effect of deletion of a provision in the statute is held at Para 38 as under:- "38. The position is well-known that at common law, the normal effect of repealing a statute or deleting a provision is to obliterate it from the statute book as completely as if it had never been passed, and the statute must be considered as a law that never existed. To this Rule, an exception is engrafted by the provisions of Section 6(1). If a provision of a statute is unconditionally omitted without a saving clause in favour of pending proceedings, all actions must stop where the omission finds them, and if final relief has not been granted ITA No. 4520/MUM/2013 (Assessment Year : 2003-04) before the omission goes into effect, it cannot be granted afterwards. Savings of the nature contained in Section 6 or in special Acts may modify the position. Thus the operation of repeal or deletion as to the future and the past largely depends on the savings applicable. In a case where a particular provision in a statute is omitted and in its place another provision in a statute is omitted and in its place another provision dealing with the same contingency is introduced without a saving clause in favour of pending proceedings then it can be reasonably inferred that the intention of

21 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., the Legislature is that the pending proceeding for the same purpose may be initiated under the new provision." 8. Admittedly, in the instant case, there is no saving clause or provision introduced by way of an amendment while omitting sub-section (9) of Section 10B. Therefore, once the aforesaid section is omitted from the statute book, the result is it had never been passed and be considered as a law that never exists and therefore, when the assessment orders were passed in 2006, the Assessing Officer was not justified in taking note of a provision which was not in the statute book and denying benefit to the assessee. The whole object of such omission is to extend the benefit under Section 10B of the Act irrespective of the fact whether during the period to which they are entitled to the benefit, the ownership continues with the original assessee or it is transferred to another person. Benefit is to the undertaking and not to the person who is running the business. We do not see any merit in these appeals. The substantial question of law is answered in favour of the assessee and against the revenue. Accordingly, the appeals are dismissed. 3.5.5 In the facts and circumstances of the case and taking into account the legal precedents, we are of the considered opinion that the aforesaid finding rendered by the Hon'ble Karnataka High Court in the case of GE Thermometrics India Pvt. Ltd. (supra) squarely applies to the case of the assessee; section 10B and 10A of the Act being pari-materia . Respectfully following the aforesaid decision of the Hon'ble Karnataka High Court in the case of GE Thermometrics India Pvt. Ltd. (supra) we hold that there being no saving clause or any amendment while omitting sub-section (9) of section 10A of the Act, the result is that it is to be read as having never been passed and had never existed on the statute. In this view of the matter, we reverse the order of the CIT(A) ITA No. 4520/MUM/2013 (Assessment Year : 2003-04) on this issue and direct the Assessing Officer to allow the assessee's claim for deduction under section 10A of the Act for assessment year 2003-04. It is accordingly ordered. 3.5.6 Before parting, we record that we have carefully perused the orders of the Co-ordinate benches of ITAT in ITA No.2566/Mum/2009 for assessment year 2004-05 and ITA No.348/Mum/2008 dated 17/06/2008 cited by the Ld. Departmental Representative. We find that contrary to this averments, these Co-ordinate benches have not adjudicated on the merits of the assessee's claim for deduction under section10A of the Act for assessment year 2003-04. In the Tribunal's order for assessment year 2004-05, the bench could not have adjudicated on the matter, as the present appeal for assessment year 2003-04 was not before it. In respect of the Tribunal's order dated 17/6/2009 the CIT's order under section 263 of the Act for assessment year 2003- 04(supra), the bench has only upheld the CIT(A)'s assumption of jurisdiction under section 263 and not adjudicated on the assessee's claim for deduction under section10A of the Act. 4. In the result, the assessee's appeal for assessment year 2003-04 is allowed.”

22 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., 5.2. In view of the above, we hold that assessee’s claim of deduction u/s.10A of the Act would not be hit by the provisions of Section 10A(9) of the Act. We find that in any case, the provisions of Section 10A(9) of the Act is not there for A.Y.2006-07 as it had already been omitted from 01/04/2004. Hence, for the year under consideration, the assessee would be governed by the provisions of Section 10A(1) of the Act. Accordingly, the ground No.1 raised by the assessee is allowed.

6.1. We have heard rival submissions and perused the materials available on record. We find that WNS(UK) acquired M/s. Town & Country Assistance Ltd., an U.K. based company. M/s. Town & Country Assistance Ltd., was engaged in providing customer service data management back office administration services etc. to its various clients. The assessee, WNS India acquired all the business of M/s. Town & Country Assistance Ltd., from WNS U.K. vide agreement executed in Mumbai on 13.01.2004 for a consideration of 1750000 pounds. The business acquired by WNS India i.e. the assessee, consisted of various contracts of M/s. Town & Country Assistance Ltd with third party clients. The amount paid by the assessee was capitalized in the books of accounts and the assessee termed it as an “intangible asset” and claimed depreciation @25%. During the previous year, assessee claimed depreciation of Rs.2,57,65,238/-. After taking into consideration, nature of rights acquired by the assessee and other facts, assessee was requested to explain why the depreciation should not be disallowed. We find that assessee vide letter dated 12/10/2009 made a detailed submission justifying its claim of depreciation on intangible assets. We find that the ld. AO observed that

23 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., assessee had acquired running business on a lumpsum payment and the acquisition is of the business as a whole and what the assessee has acquired is a capital asset but it does not have characteristics of intangible assets as mentioned in Section 32(1) of the Act. The ld. AO also observed that the right acquired by the assessee company may be commercially right but the same is different than the commercial right so as to fall within the definition of intangible assets as mentioned in Explanation -3 to Section 32 of the Act. With these observations, he proceeded to disallow the depreciation on intangible assets claimed by the assessee in the sum of Rs.2,57,65,238/-. This disallowance was upheld by the ld. DRP. Aggrieved by the final assessment order passed by the ld. AO in this regard, the assessee is in appeal before us.

6.2. We find that the issue in dispute is already covered by this order of this Tribunal in assessee’s own case for A.Y.2005-06 in ITA No.631/Mum/2011 (Revenue appeal) dated 16/01/2019. The relevant portion of the Tribunal order is reproduced hereunder:-

“35. In grounds No.8 and 9, the Department has challenged the decision of the learned Commissioner (Appeals) in allowing assessee's claim of depreciation on intangibles representing acquisition of business contract. 36. Brief facts are, during the assessment proceedings, the Assessing Officer while examining assessee's claim of depreciation noticed that the assessee by virtue of an agreement executed on 13th January 2004, with WNS U.K. has acquired a company, namely, M/s. Town and Country Assistance Ltd., earlier owned by WNS U.K. for a consideration of 17,50,000 pound. He also noticed that by acquiring the business of M/s. Town and Country Assistance Ltd., the assessee also acquired various contracts of the said company with third parties. He further noticed that the amount paid by the assessee for acquiring the aforesaid company from WNS U.K. was capitalised in the books of account and the assessee treated it as an intangible asset and also claimed depreciation @ 25% on such asset which worked out to Rs. 2,77,76,245. After calling upon the assessee to justify the claim of depreciation and examining assessee's submissions the Assessing Officer ultimately disallowed assessee's claim of depreciation by holding that the right acquired by the assessee is not in the nature of commercial right as mentioned in Explanation 3 to section 32 of the Act to treat it as an intangible asset. Being

24 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., aggrieved with the aforesaid decision of the Assessing Officer the assessee preferred appeal before the first appellate authority. 37. After considering the submissions of the assessee learned Commissioner (Appeals) held that the right acquired by the assessee on assignment of contract is an intangible asset and accordingly allowed assessee's claim of depreciation. 38. The learned Departmental Representative, though, fairly submitted that the issue has been decided in favour of the assessee by the Tribunal in assessment year 2004-05, however, he relied upon the observations of the Assessing Officer. 39. The learned Sr. Counsel for the assessee relied upon the findings of the learned Commissioner (Appeals). 40. We have considered rival submissions and perused materials on record. Insofar as factual aspect of the issue is concerned, there is no dispute that by virtue of acquisition of M/s. Town and Country Assistance Ltd., various contracts executed by the said concern with third party clients were assigned to the assessee. It is also a fact that such acquisition took place by virtue of an agreement executed on 13th January 2004. It is also a fact on record that in assessment year 2004-05, the assessee for the first time claimed depreciation by treating the capitalized value of the amount paid towards acquiring M/s. Town and Country Assistance Ltd., as an intangible asset and claimed depreciation @ 25%. Notably, the Assessing Officer while completing assessment under section 143(3) of the Act also allowed assessee's claim of depreciation. However, learned Commissioner of Income Tax revised the assessment order under section 263 of the Act. Subsequently, while deciding assessee's appeal against the said order the Tribunal quashed the order passed under section 263 of the Act and restored the assessment order. Thus, in effect, assessee's claim of depreciation in respect of intangible asset became final. In any case of the matter, there is no dispute that by acquiring M/s. Town and Country Assistance Ltd. the assessee has also acquired contractual rights which, no doubt, is a valuable commercial right. Therefore, it comes within the meaning of intangible asset as per section 32(1)(ii) r/w Explanation 3(b) of the Act. Hence, depreciation claimed by the assessee is allowable. The decisions relied upon by the learned Sr. Counsel for the assessee also supports our aforesaid view. Accordingly, we uphold the decision of the learned Commissioner (Appeals) by dismissing the grounds raised.”

6.3. We find that the aforesaid Tribunal order was subject matter of rectification proceedings in MA No.261/Mum/2019 dated 17/07/2019. For the sake of convenience, the said Miscellaneous Application order dated 17/07/2019 is reproduced hereunder:-

25 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., By way of this application the assessee seeks rectification of certain mistakes which have crept into the order dated 16th January 2019, passed in ITA no.631/Mum./2011. 2. Shri Porus Kaka, the learned Sr. Counsel for the assessee submitted, certain factual mistakes have crept into the order of the Tribunal. In this context, drawing our attention to the Para-36 of the WNS Global Services Pvt. Ltd. order, he submitted, by virtue of the agreement dated 13th January 2004, with WNS, U.K., the assessee has not acquired Town and Country Assistance Ltd., but has only acquired customer contracts. Thus, he submitted, the said mistake has to be rectified. Further, he submitted, in Para-40 of the appeal order, there is some factual mistake while referring to the order passed by the learned Commissioner under section 263 of the Act. Thus, he submitted, such mistakes being in the nature of mistake apparent on the face of record should be rectified. 3. The learned Departmental Representative did not oppose the submissions of the learned Sr. Counsel for the assessee. 4. Having considered the submissions of the parties in the context of the facts and material on record, we are of the view that certain factual mistakes have crept into the order of the Tribunal as referred to hereinbefore. Since, such mistakes are apparent from record, as envisaged under section 254(2) of the Act, we proceed to rectify them by substituting Para-36 and 40 of the appeal order with the following paragraph 36 and 40, which should form part of the appeal order. "36. Brief facts are, during the assessment proceedings, the Assessing Officer while examining assessee's claim of depreciation noticed that the assessee by virtue of an agreement executed on 13th January 2004, with WNS U.K., has acquired customer contracts from a company, formerly called M/s. Town and Country Assistance Ltd., now called WNS Global Services Pvt. Ltd. WNS U.K. for a consideration of 17,50,000 pound. He also noticed that by acquiring the business contracts, the assessee also acquired various contracts of the said company with third parties. He further noticed that the amount paid by the assessee for acquiring the aforesaid business contracts from WNS U.K. was capitalised in the books of account and the assessee treated it as an Intangible asset and also claimed depreciation @ 25% on such asset which worked out to Z 2,77,76,245. After calling upon the assessee to justify the claim of depreciation and examining assessee's submissions the Assessing Officer ultimately disallowed assessee's claim of depreciation by holding that the right acquired by the assessee is not in the nature of commercial right as mentioned in Explanation 3 to section 32 of the Act to treat it as an intangible asset. Being aggrieved with the aforesaid decision of the Assessing Officer the assessee preferred appeal before the first appellate authority.

26 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., "40. We have considered rival submissions and perused materials on record. Insofar as factual aspect of the issue is concerned, there is no dispute that by virtue of acquisition of customer contracts, various contracts executed by the said concern with third party clients were assigned to the assessee. It is also a fact that such acquisition took place by virtue of an agreement executed on 13th January 2004. It is also a fact on record that in assessment year 2004-05, the assessee for the first time claimed depreciation by treating the capitalized value of the amount paid towards acquiring customer contracts of M/s. Town and Country Assistance Ltd., as an intangible asset and claimed depreciation @ 25%. Notably, the Assessing Officer while completing assessment under section 143(3) of the Act also allowed assessee's claim of depreciation. However, learned Commissioner of Income Tax revised the assessment order under section 263 of the Act. Subsequently, while deciding assessee's appeal against the said order the Tribunal quashed the order passed under section 263 of the Act and restored the assessment order. Thus, in effect, assessee's claim of depreciation in respect of intangible asset became final. In any case of the matter, there is no dispute that by acquisition of customer contracts, the assessee has also acquired contractual rights which, no doubt, is a valuable commercial right. Therefore, it comes within the meaning of intangible asset as per section 32(1)(ii) r/w Explanation 3(b) of the Act. Hence, depreciation claimed by the assessee is allowable. The decisions relied upon by the learned Sr. Counsel for the assessee also supports our aforesaid view. Accordingly, we uphold the decision of the learned Commissioner (Appeals) by dismissing the grounds raised." 5. At this stage, we must make it clear, the rectification carried out by us will not have any impact on the decision taken by us on the issue of claim of depreciation. 6. In the result, misc. application is allowed to the extent indicated above.” 6.4. We also find that similar decision was rendered by this Tribunal in assessee’s own case for A.Y.2007-08 and A.Y.2009-10 also following the orders of the A.Y.2005-06. In view of the above, the ground Nos. 2 & 3 raised by the assessee are allowed.

7.1. We have heard rival submissions and perused the materials available on record. The assessee was called upon to furnish the details of professional charges, electricity charges and miscellaneous expenses by the ld. AO in the draft assessment proceedings. The assessee furnished

27 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., the details and out of the same, the ld. AO observed that assessee could not furnish the evidences in respect of the following expenses:-

Professional charges - Rs.1,71,808/- Electricity Charges - Rs.2,82,487/- Miscellaneous Expenses - Rs.2,02,783/- Total Rs.6,57,078/- ======== 7.2. The assessee submitted that given the nature of business of the assessee company spread across eight units / locations and voluminous number of transactions, certain details of expenses which are of small nature are clubbed under the head “others”. However, it pleaded that the entire expenses have been incurred wholly and exclusively for the purpose of its business only. It was also alternatively pleaded by the assessee that any disallowance of the aforesaid expenditure would only go to increase the profits eligible for deduction u/s.10A of the Act as admittedly these expenses were incurred only for the eligible units. The ld. AO however, did not heed to the aforesaid contentions of the assessee and proceeded to disallow a sum of Rs.6,57,078/- as assessee had failed to establish that they were incurred for the purpose of its business. This action of the ld. AO in the draft assessment was upheld by the ld. DRP and the ld. AO continued the said disallowance in the final assessment order also. Aggrieved, the assessee is in appeal before us.

7.3. We find that the ld. AR placed reliance on the order of this Tribunal in assessee’s own case in ITA No.396/Mum/2011 for A.Y.2005-06 dated 16/01/2019 wherein this Tribunal had restricted adhoc disallowance to 10% of the expenditure in para 58 of its order.

28 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., 7.4. We find that in ground No.5 raised before us, the assessee had stated that the aforesaid disallowance of administrative expenses would only go to increase claim of deduction u/s.10A of the Act. We find that this issue is covered by the Circular issued by the CBDT vide Circular No.37/2016 dated 02/11/2016 wherein it has been clarified that disallowance of certain expenses made on account of specific expenditure claimed in respect of eligible unit would only go to enhance the claim of deduction u/s.80IA of the Act. The said analogy would be very much applicable for the claim of deduction u/s.10A of the Act also. It is not in dispute that the aforesaid administrative expenses were incurred by the assessee company only in respect of its eligible units. Hence, there would be no purpose that would be served by making disallowance of certain expenses for want of evidences which were incurred in respect of eligible units. In view of the above, we direct the ld. AO to delete the disallowance of administrative expenses of Rs.6,57,078/- as it would be purely revenue neutral. Accordingly, the ground Nos. 4 & 5 of the assessee are allowed.

8.1. We have heard rival submissions and perused the materials available on record. We find that the ld. TPO observed that on perusal of the audited accounts of the assessee, the assessee company had sundry creditors outstanding from its two AEs i.e. WNS UK and WNS NA to the extent of Rs.234,92,95,246/-. The ld. TPO has observed that since assessee has granted extended credit period to its AEs for receiving its

29 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., trade debts and accordingly, showcaused the assessee as to why the notional interest on such receivables should not be imputed and why the arm’s length price adjustment should not be made for the same. The assessee vide letter dated 14/10/2009 submitted before the ld. TPO that there are several amounts that are due to its AEs and due from its AEs. The assessee submitted that both payables and receivables had arose during the course of its business and the same cannot be construed as any kind of loan or accommodation given to the AEs. It pointed out that in some cases, dues are received from its AE beyond its credit period and in some cases, dues are received by the assessee in advance from its AEs. The assessee submitted that credit period effectively allowed to its AEs is only 33 days which is within the usual industry norm. The ld. TPO however, disregarded the contentions of the assessee and observed that the renewed credit period that could be granted to its AEs would be 60 days and assessee in the instant case had allowed excess credit period of 148 days which was worked out by the ld. TPO in the following manner:-

Particulars Amount (Rs.) Debtors (AEs) as on March 31,2005 1,553,938,950 Debtors (AEs) as on March 31,2006 2,349,295,246 Loans and advances (AEs) as on March 31, 2005 428,297,442 Loans and advances (AEs) as on March 31, 2006 318,014,112 Average Debtors 2,324,772,875

Turnover (AEs) FY 2004-05 Rs.4,07,47,70,901/- Average Receivables during the year Rs.2,324,772,875/- Debit Turnover ratio (Times) 1.75 Debit Collection Period 365/1.75=208 days Excess Credit Period beyond 60 days 148 days

30 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd.,

8.2. Accordingly, the ld. TPO sought to impute the interest rate benchmarking at six months LIBOR + 250 basis points as on 31/03/2006 which comes to 7.64% (LIBOR rate of 5.14% + 2.5% basis points). The ld. TPO arrived at the arm’s length interest amount which should have been received by the assessee on its receivables from its AEs of Rs.7,20,18,279/- which is worked out as under:-

Average receivables during Rs.2,324,772,875/- the year Arm’s length interest rate 7.64% Annual interest amount Rs.17,76,12,648/- Interest amount for 148 Rs.7,20,18,279/- days

8.3. This adjustment was upheld by the ld. DRP and hence, the ld. AO in the final assessment order dated 22/09/2010 adopted the same. Aggrieved by the same, assessee is in appeal before us.

8.4. The ld. AR before us pleaded that net debit (i.e. receivables from AE (-) payables to AE) should be taken for computing the arm’s length interest. It is not in dispute that imputing interest cost on outstanding receivables would be construed as an international transaction within the meaning of Section 92B of the Act warranting benchmarking of the same. It is not in dispute that assessee has been making payment of marketing support services to its AEs with enormous delay. It is not in dispute that assessee has been receiving its dues from its two AEs with considerable delay. Hence, it would be just and fair to impute notional interest cost on net outstanding receivables (i.e. trade outstanding receivables from AEs – Trade outstanding payables to AEs) and impute interest cost thereon. The interest rate to be adopted thereon would be only LIBOR without any

31 ITA No.7377/Mum/2010 M/s. WNS Global Services Pvt. Ltd., basis points. Hence, the ld. TPO is directed to re-compute the notional interest on net outstanding receivables by applying LIBOR rates and make adjustment to ALP thereon accordingly. Hence, the ground No.12 raised by the assessee is allowed for statistical purposes.

Sd/- Sd/- (AMARJIT SINGH) (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 06/12 /2021 KARUNA, sr.ps Copy of the Order forwarded to : The Appellant 1. The Respondent. 2. The CIT(A), Mumbai. 3. CIT 4. DR, ITAT, Mumbai 5. 6. Guard file. //True Copy//

BY ORDER,

(Asstt. Registrar) ITAT, Mumbai