TATA CONSULTANCY SERVICES LTD,MUMBAI vs. ADDL CIT LARGE TAX PAYER UNIT, MUMBAI

per annum by following the decisions of Coordinate Bench and

Bombay High Court in Everest Kanto Cylinder (2015) 58

taxmann.com 254 (Bom). The ld DR further submitted that the

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 45 - decision of Tribunal in AY 2009-10 and Bombay High Court in

Everest Kanto Cylinder (Supra) is not acceptable to him as such rate

is decided on the basis of facts for 2008-09, it cannot be taken as

universal rate to be applied in all the cases and for subsequent

years. Further the case law does not deal with the performance/

lease guarantee but deal with financial guarantee. 48. On the other hand the ld AR for the assessee submits that these grounds of appeal are covered by the decision of Tribunal in AY

2009-10, wherein the Tribunal followed the decision of Bombay

High Court in Everest Kanto Cylinders (supra) and coordinate bench

in WNS Global Services (P) ltd Vs ITO [2019] 103 taxmann.com 75

and directed the AO to charge guarantee commission @ 0.5% per

annum for performance of lease as well as financial guarantee. The

ld AR for the assessee further submits that the guarantee whether

granted for performance or lease or financial lease are all

effectively in the nature of financial guarantee only. The ld AR for

the assessee further submitted that ground No. 13 of revenues

appeal is similar to the ground No.11raised by revenue in appeal for

2009-10. The ground relates to the decision of CIT(A) in restricting

the charge of guarantee commission only on 34% i.e. onsite portion

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 46 - of the contract which was performed by AEs. The Revenue has

wrongly mentioned 48% in place of 34% which is correct percentage

of onsite work in 2010-11 as against 48% in AY 2009-10. The

CIT(A) followed the same approach as in AY 2009-10 and held that

the assessee can’t be charged by any guarantee commission on the

portion of work performed by assessee itself. The said ground of

revenue was dismissed in AY 2009-10. 49. We have considered the rival submissions of the parties and have

gone through the orders of the lower authorities. We have also

deliberated on the decision of Tribunal in AY 2009-10. We have

noted that as per para 13 of TPSR, the assessee not benchmarked the

transactions of corporate guarantees commissions. The TPO after

serving the show cause notice and considering the reply of the

assessee concluded that the guarantee provided by the assessee on

behalf of its AEs would fall within the meaning of international

transaction as defined under section 92B of the Act. The TPO

benchmarked the guarantee commissions @ 1.75% on the basis of

information received from State Bank of India. And on financial

guarantee the TPO charged commission @ 3% per annum and

suggested adjustment of Rs.38.47 Crore. The ld CIT(A) reduced the

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 47 - guarantees commissions by following the order of CIT(A) for AY

2009-10. The financial guarantee commissions were reduced to

0.77% per annum and performance guarantee commissions to 1.14%

per annum. We have seen that on similar grounds related to the

issue of various corporate guarantees the Tribunal in AY 2009-10

passed the following order;

“43. We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. Insofar as the contention of learned Sr. Counsel for the assessee that provision of guarantee is not an international transaction as per section 92B of the Act, we are unable to accept such contention. In our considered opinion, after introduction of Explanation–(i)(c) to section 92B of the Act, with retrospective effect from 1st April 2002, provision of guarantee to AEs has to be considered as an international transaction. Different Benches of the Tribunal have also expressed similar view on the issue. Therefore, we hold that the provision of guarantee to the AEs is an international transaction. In fact, the aforesaid view has been expressed by the Co–ordinate Bench in WNS Global Services Pvt. Ltd. (supra). Therefore, following the aforesaid decision of the Co– ordinate Bench and the decision of the Hon'ble Jurisdictional High Court in Everest Canto Cylinders Ltd. (supra), we direct the Assessing Officer to charge guarantee commission @ 0.5% per annum both on performance / lease guarantee as well as financial guarantee.”

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 48 - 50. On the basis of aforesaid factual discussion and considering the decision of Tribunal in appeal for AY 2009-10 on identical grounds

of appeal, wherein all the contentions has been considered by the

Tribunal, while affirming the order of ld CIT(A). No variation in

facts nor any contrary law is brought to our notice, hence, we

uphold the order of ld CIT(A) on this ground of appeal. In the result

the grounds of appeal raised by the assessee are dismissed and the

ground of appeal raised by assessee is partly allowed. 51. Ground No. 17 in revenue’s appeal and ground No. 6 in assessee’s appeal relates to TP adjustment on account of interest free loans to

AEs. The ld DR for the revenue submits that during the TP

proceedings, the TPO noted that the assessee provided loan to its

AEs without charging any interest. On show cause, the assessee

contended that these are quasi capital. The TPO after considering

the submissions of the assessee suggested adjustment on account of

these loans by charging interest @11% per annum and suggested

adjustment of Rs. 41.04 Crore. The ld CIT(A) granted partial relief

to the assessee by reducing the rate of interest to LIBOR plus 300

bps by following the order for AY 2009-10. The Tribunal in AY

2009-10 restored the issue to the file of AO for de novo adjudication

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 49 - as per the ratio in case of DLF Hotels Holdings Ltd (ITA No.

6336/Delhi/2012 dated 30.06.206). The ld. DR for the revenue

submits that following the order of Tribunal these issues may be

restored to the file of AO with similar direction. 52. On the other hand the ld AR for the assessee submits that so far as issue

related with TP adjustment on account of the interest free loans to AEs are

concerned, the ld DR has not given any comments. The Tribunal in appeal

for AY 2009-10 has restored the similar issue to the file of AO. The assessee

prays that this issue may be restored to AO with similar direction and they

may be given opportunity of hearing before passing the order in this year as

well. So far as issue related with the adjustment on account of subscriptions

of equity shares of AE is concerned, the ld CIT(A) has followed the decision

of jurisdiction High Court in Vodafone India Services (P) ltd Vs UOI [2014]

50 taxmann.com 300(Bom.) and held that share subscription is a capital

subscription is a capital account transaction, therefore, no transfer pricing

adjustment is warranted on such transactions. The decision of Bombay High

Court has been accepted by the Government of India as per its press release dated 28th January 2015.

gone through the orders of the lower authorities. We have also

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 50 -

deliberated on the decision of Tribunal in AY 2009-10. So far as

issue related with the adjustment on interest free loan to AEs is

concerned, the similar issue in AY 2009-10, has been restored by

Tribunal to the file of AO with the following order;

“37. We have considered rival submissions and perused the material on record. We have also carefully gone through the case law cited before us. Notably, right from the stage of transfer pricing proceeding itself the assessee has taken a stand that loans and advances to the AEs are in the nature of quasi equity, hence, cannot be treated as loan simpliciter. It is relevant to observe, the transfer pricing adjustment made on account of interest is in respect of loans advanced to four overseas AEs. From the details available on record, it is noticed that major portion of loans advanced to TCS Ibero America, is for acquisition of downstream subsidiary and about 20% of the advance was for working capital. Money advanced to TCS FNS Pty. Ltd., Australia, was purely for acquisition of downstream subsidiary. Similarly, advance to TCS Asia Pacific Pty. Ltd., is for acquisition of downstream subsidiary. Only the advance made to TCS Morocco is for working capital requirement. It is further noted, major part of advances made to TCS Ibero America, TCS FNS Pty. Ltd. and TCS Morocco have been converted to equity subsequently. It is also a fact on record that before learned Commissioner (Appeals), the assessee has filed a detailed written submission on 27th March 2014, elaborately discussing the nature of advance made to the AEs and the purpose for which such advances were made. It was submitted by the

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 51 -

assessee that the advances made to the AEs were as a part of business strategy and not simply to help the AEs with capital infusion. The assessee has advanced detailed argument stating that advances made to the AEs is a shareholder activity and not advancement of loan. In this context, the assessee has referred to OECD Transfer Pricing Guidelines as well as UK and Australian Regulations. It is evident from the impugned order of the learned Commissioner (Appeals), though, he sketchily referred to some of the submissions made by the assessee, however, he has not at all dealt with them in an effective manner. The learned Commissioner (Appeals), though, has observed that the loans advanced were not merely for downstream acquisition but for a variety of purpose including working capital requirement and other business uses, however, he has not elaborated as to for what other purpose loans were advanced. Without properly dealing with the factual aspect of the issue, learned Commissioner (Appeals) has jumped to the legal aspect and has held that the amount advanced by the assessee is in the nature of loan and has to be benchmarked as such. After considering the submissions of the parties and examining the material on record, we are convinced that various submissions made by the assessee before learned Commissioner (Appeals) have not at all been dealt with. The primary contention of the assessee that the advance made to the AEs is in the nature of quasi equity and falls within shareholder’s activity has not been properly addressed by the Departmental Authorities keeping in view the ratio laid down in the relevant case laws. It also requires deliberation whether it can be considered as an international transaction under section

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 52 - 92B r/w Explanation–1(c). Since, the aforesaid legal and factual aspects have not been considered properly, we are inclined to restore the issue to the file of the Assessing Officer for de novo adjudication after due opportunity of being heard to the assessee. The Assessing Officer must examine all relevant facts to find out the exact nature of the advances made to the AEs. He should also examine the applicability of the ratio laid down in the case of DLF Hotel Holdings Ltd. (supra) and any other case laws which may be cited before him. The assessee must be afforded reasonable opportunity of being heard. Ground is allowed for statistical purposes. “ 54. Considering the order of the Tribunal in AY 2009-10, the ground

No. 6 in revenues appeal is restored to the file of AO with similar

direction. No doubt the AO before passing the order afresh shall

grant opportunity of hearing to the assessee.

regard to excessive valuation paid for shares of AE. The ld AR for

the assessee vehemently submitted before us that the ld CIT(A) while

granting relief to the assessee has followed the decision of jurisdiction High

Court in Vodafone India Services (P) ltd Vs UOI [2014] 50 taxmann.com

300 (Bom.) wherein it was held that share subscription is a capital

subscription is a capital account transaction, therefore, no transfer pricing

adjustment is warranted on such transactions. We have noted that the ld

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 53 - CIT(A) in his order has relied on the order of Bombay High Court in

Vodafone India Services (supra) and CBDT instruction No. 5/2015 accepting

the order of Bombay High Court. No contrary facts or law is brought to our

notice to deviate from the order of ld CIT(A) is brought to our notice, hence,

we affirm the order of ld CIT(A) on this issue. Resultantly the ground of

appeal raised by the revenue is dismissed. 56. Last issue in assessee’s appeal left for adjudication relates to legal issues with

regard to reference to TPO without proper application of mind, no intention

of shifting of profit etc that is ground No. 4. Considering the facts that all

transfer pricing grounds of appeal are basically decided in favour of the

assessee, thus, in our view the discussions on this (these) ground of appeal have become academic. 57. In the result, appeal of the assessee as well as revenue both are partly

allowed.

(Appeals for AY 2008-09 being ITA No. 3263/M/2017 by assessee ITA No. 3746/M/2017 by Revenue) 58. At the outset of hearing the ld. AR for the assessee submits that all the

grounds of appeal raised by the assessee as well as by revenue are identical to

the grounds of appeal raised by them in AY 2010-11. The ld. AR for the

assessee filed his short written synopsis; however, the ld. DR adopted the

similar submissions as submitted in AY 2010-11. Ground No. 1&2 in

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 54 - assessee’s appeal relates to the disallowance of State tax and Interest paid in

overseas countries. We have noted that part of this ground of appeal so far as

it relates to the disallowance of State Taxes is concerned, is identical to the

Ground No.1 in appeal for AY 2010-11, which we have allowed in preceding

paras of this order by following the order for AY 2009-10. Thus, following

the principles of consistency this part of ground of appeal is allowed with

similar directions.

ld. AR for the assessee submitted that the payments made on account of

interest in delay in payments of Federal or State taxes overseas which is

compensatory in nature should be allowed as business expenditure under

section 37(1). Considering the submissions of the ld AR for the assessee, we

are of the view that the general principle of allowability that the expenditure

cannot be overlooked and that the accepted principle is that only those

expenditure can be allowed which are attributable to the business activity as

well as laid out wholly and exclusively for the purposes of the business.

Thus, we direct the AO to allow the interest on delayed payment of State tax

or Federal Taxes being compensatory in nature. In the result these grounds of

appeal are allowed.

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 55 - 60. Ground No. 3 in assessee’s appeal relates to disallowance under section

40(a)(i) on account of expenditure on imported software. We have noted that

this ground of appeal is identical to the ground No. 1 of appeal raised by

revenue in AY 2010-11, which we have dismissed by following the order of

Tribunal for AY 2009-10, therefore, following the principles of consistency

this ground of appeal is allowed with similar directions. In the result this

ground of appeal is allowed. 61. Additional grounds of appeal raised by the assessee vide application dated

10.01.2020, with regard to deduction of education cess, is also identical with

the additional ground of appeal raised by assessee in appeal for AY 2010-11,

which we have admitted and restored to the file of AO, therefore, following

the principles of consistency this ground of appeal is also admitted and

restored to the file of AO with similar directions. In the result this ground of

appeal is allowed for statistical purpose.

under section 40(a)(i) on account of non-deduction of TDS on expenditure on

imported software. We have noted that this ground of appeal is identical to

the ground No. 1 of appeal raised by revenue in AY 2010-11, which we have

dismissed by following the order of Tribunal for AY 2009-10, therefore,

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 56 - following the principles of consistency this ground of appeal is dismissed

with similar directions. In the result this ground of appeal is dismissed. 63. Next ground of appeal that is ground No. 2 in revenue’s appeal relates to

deduction under section10A in respect of units on which deduction under

section 80HHC was allowed in past. The ld. DR for the revenue supported

the order of the AO. 64. On the other hand the ld AR for the assessee submits that nothing in section

10A prohibits assessee from claiming deduction in respect of profits of an

undertaking, where deduction under section 80 HHE has been claimed in

past. The claim for deduction is claimed in respect of residual years

remaining in the block 10 years and there is no attempt to extent the period of

10 years of tax holidays by exercising option to claim deduction under

section 10 instead of continuing under section 80HHE. The claim of assessee

was duly supported by Audit Certificate and date of commencement of

manufacture / production has been taken as the initial date and not the date of

commencement of claim under section 10A. the ld AR fof the assessee

further submits that CBDT vide Circular No. 1/2005 dated 06.01.2005,

clarifies that undertaking set up in Domestic Tariff area and deriving profit

from export of computer software and which is subsequently converted in to

export oriented unit (EOU) shall be eligible for a deduction under section10B

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 57 - for the remaining period of 10 consecutive years beginning with the

assessment year relevant year relevant to the previous year in which

undertaking begins to manufacture or produce computer software as a DTA

unit. In other alternative submissions it was submitted that in case the

assessee is eligible to claim deduction under two alternative sections, the

assessee would be allowed deduction under such as section which is more

beneficial to the assessee. Finally, the ld AR for the assessee submits that

similar deduction under section 10A was allowed to the assessee by Bombay

High Court in AY 2005-06 in ITA No. 1778 of 2016 and by Tribunal in AY

2009-10.

gone through the orders of the lower authorities. We have also

deliberated on the decision of Tribunal in AY 2005-06 and 2009-10.

The assessee claimed deduction in respect of two units, (i) Chennai

Sholinganallur STP and (ii) Delhi Noida I STP. The assessee claimed that its

claim is duly supported by Audit Certificate and date of commencement of

manufacture / production has been taken as the initial date and not the date of

commencement of claim under section 10. the assessee relied on the CBDT

vide Circular No. 1/2005 dated 06.01.2005, which clarifies that undertaking

set up in Domestic Tariff area and deriving profit from export of computer

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 58 - software and which is subsequently converted in to export oriented unit

(EOU) shall be eligible for a deduction under section10B for the remaining

period of 10 consecutive years beginning with the assessment year relevant

year relevant to the previous year in which undertaking begins to

manufacture or produce computer software as a DTA unit. The AO during

the assessment disallowed the deduction under section 10 A by

taking view that commencement of unit (eligible for benefit of

setion10A) is not available to the assessee. the AO also held that by

opting out of 80HHE and claiming deduction under section 10A, the

assessee is trying to claim which in not available to the unit in the

light of phasing out of section 80HHE form AY 2001-02. The ld

CIT(A) allowed relief to the assessee by noting that claim was to the

assessee by CIT(A)in AY 2005-06, which has been upheld by

Tribunal in ITA No. 6820/Mum/2010. We have noted that in appeal

for AY 2009-10 the Tribunal allowed the similar deduction under

section 10A by passing the following order;

“ 53. We have considered rival submissions and perused the material on record. As noted, identical issue arising in assessee’s own case for the assessment year 2005–06 came up for consideration before the Tribunal in ITA no.6820/Mum./2010 dated 4th November 2015. While deciding the issue, the Tribunal held that since both, section 80HHE and section 10A of

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 59 -

the Act entitle the assessee for benefit, the assessee would legitimately be entitled to the benefit of that provision of law which enables a larger benefit being earned by him. It is also noticed that the aforesaid decision of the Tribunal has been upheld by the Hon'ble Jurisdictional High Court while deciding Revenue’s appeal in ITA no. 1778/2016, vide judgment dated 18th March 2019. The observation of the Hon’ble Jurisdictional High Court on the issue is as under:–

"6] Section 80HHE of the Act pertains to deduction in respect of profits from export of computer software etc. Sub-section (5) of section 80 HHE provides that where deduction under said section is claimed and allowed in respect of the profits of the business referred in sub-section (1) for any assessment year, no deduction shall be allowed in relation to such profits under any other provision of the Act for the same or any other assessment year. What subsection (5) of section 80 HHE thus prohibits is the claim of deduction allowed under section 80HHE under any other provision, be it in the same assessment year or in other assessment year. In the present case, it is not even the ground of the revenue that the deduction under section 10A of the Act claimed by the assessee in the present year is in relation to profit for which the assessee was granted deduction under section 80HHE. Sub-section 5 of section 80 HHE of the Act, therefore, in the present case would have no applicability. We are fortified in our view by a division bench judge ent of Delhi High Court in the case of Commissioner Income Tax Vs. Damco Solutions Pvt. Ltd., reported in 200 Taxman page 26 in which it was observed as under:-

"2. This stand of the Assessing Officer was repelled by the CIT (A) holding that the purpose of subsection (5) of section 80HHE was to avoid double benefit and that would not mean that if the assessee for a particular assessment year wanted relief only under section 10A of the Act that would be denied to the assessee. The

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 60 -

only embargo was not to give relief under both the provisions."

7] Coming to the revenue’s second objection to the assessee’s claim of deduction under section 10A of the Act, we may recall, that the assessee had admittedly started manufacturing computer software for export prior to 1st April 2001, when section 10A was substituted by the Finance Act of 2000. It was under this amendment that the profit and gains derived by an undertaking from export of computer software came to be covered for deduction under section bA. The revenue contends that this benefit would not be available to an industry which was already existing and engaged in such activity. However, the interpretation of the revenue would render the first proviso to subsection (1) of section 10A wholly redundant. This proviso reads as under:- "10A(1)Provided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to deduction referred to in this subsection only for the unexpired period of the aforesaid ten consecutive assessment years. As per this proviso, therefore, while computing total income of the undertaking for any assessment year, the profit and gain which had not been included prior to the introduction of Finance Act, 2000, such an undertaking would be entitled to deduction as per sub-section (1) only for the unexpired period of 10 consecutive assessment years. In plain terms, therefore, this proviso would apply to an industry which was already in existence, engaged in manufacturing and export of computer software when the said amendment was made in section 10A. However, such an industry would be eligible to claim that deduction in relation to profit and gain arising out of such activity only for remainder of the period of 10 assessment

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 61 -

years, which could be claimed for consequent assessment years alone. 9] If the revenue's interpretation of sub-section (1) of section 10 were to be accepted, then, this proviso would be rendered redundant. "10] Coming to the revenue's contention in relation to the computation of benefit of section 10A of the Act, this issue is squarely covered by the judgment of Supreme Court in the case of Commissioner of Income Tax Vs. HCL Technologies, reported in 404 ITR 719, in which the Court held that the total turnover for the purpose of section 10 of the Act cannot be understood as defined for the purpose of section 80 HHE. It was further held that thus the expenses which are to be excluded from the export turnover, would also have to be excluded for the purpose of computing total turnover. 2. Thus, respectfully following the decision of the Co–ordinate Bench and the decision of the Hon'ble Jurisdictional High Court in assessee’s own case as referred to above, we uphold the decision of learned Commissioner (Appeals) on the issue. This ground is dismissed. 66. Considering the decision of Bombay High Court in ITA No. 1778 of 2016

which was followed by Tribunal in AY 2009-10 as extracted above, thus,

respectfully following the same, the grounds of raised by the revenue is

dismissed.

relates to disallowance under section 40 (a) (i) on account on non deduction

of TDS on expenditure on commission to non-resident. We have noted that

this ground of appeal is identical to the ground No. 5 to 6 of revenue’s appeal

for AY 2010-11, which we have dismissed on the basis of decision of

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 62 - Tribunal for AY 2009-10. Hence, following the principles of consistency

these grounds of appeal are dismissed. 68. Next grounds of appeal in revenue’s appeal i.e. ground No. 7 to 9 relates to

method of computation of deduction under section 10A. We have noted that

this ground of appeal is identical to the ground No. 7, 8 & 9 of revenue’s

appeal for AY 2010-11, which we have dismissed on the basis of decision of

Tribunal for AY 2009-10. Hence, following the principles of consistency

these grounds of appeal are dismissed. 69. Next grounds of appeal in revenue’s appeal i.e. ground No. 10 relates to

disallowance of deduction under section 10A/ 10AA. The ld. DR for the

revenue supported the order of AO. 70. On the other hand the ld. AR for the assessee submits that this ground of appeal is completely covered by the CBDT Circular No.1/2013 dated 17th

January 2013 and the same has been accepted by the department in

subsequent years.

gone through the orders of the lower authorities. Considering the

submissions of the ld AR for the assessee that the assessee was

allowed deduction under section10A/10AA in subsequent years and that this issue is covered by the CBDT Circular No.1 /2013 date 17th

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 63 - January 2013, wherein it was clarified that the software developed abroad

at a client’s place would be eligible for benefits under the respective

provisions, because these would amount to ‘deemed export’ and tax benefits

would not be denied merely on this ground. It was also clarified that the

benefits under these provisions can be availed of only by the units or

undertakings set up under specified schemes in India, it is necessary that

there must exist a direct and intimate nexus or connection of development of

software done abroad with the eligible units set up in India and such

development of software should be pursuant to a contract between the client

and the eligible unit. CBDT also clarified that Circular No. 694, dated 23-11-

1994 stands further clarified. We have also noted that ld CIT(A) while

passing the impugned order followed various CBDT Circulars and granted

relief to the assessee. In the result this ground of appeal is dismissed.

Ground No. 12 to 15 in revenue’s appeal relates to provision of software

consultancy services. The basic and primary issue in these grounds of appeal

is if the GP/Sales is the appropriate PLI or not. We have noted similar

grounds of appeal was raised by the revenue in appeal for AY 2010-11 vide

ground No. 9 to 12, which we have dismissed in earlier part of this order, by

following the order of Tribunal for AY 2009-10. Thus, following the

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 64 - principles of consistency these grounds of appeal are dismissed with similar

observation. 73. Ground No. 17 & 18 in revenues appeal and ground No. 9.3 in assessee’s

appeal relates to provision of various guarantees. We have seen that these

grounds of appeal are identical as ground No.13 to 16 in revenues appeal and

7.3 in assessee’s appeal for AY 2010-11, which we have decided in earlier

paras of this order. Thus, following the principles of consistency these

grounds of appeal are by revenue is dismissed with similar observation and

the ground in assessee’s appeal is partly allowed. 74. Ground No. 16 in revenue’s appeal relates to charging of guarantee fee on

the entire amount. The ld. DR for the revenue supported the order of the

AO/TPO. 75. On the other hand the ld. AR for the assessee for the performance guarantee

submits that part of the activity was performed by the assessee itself while

the remaining services were rendered by AE. If the performance guarantee is

treated as chargeable services, the charges should be levied only on the

component of services performed by the AE. With regard to lease guarantee,

the ld. AR submits that part of the premises (40% during the year) was

occupied by the assessee. Thus, if the lease guarantee is treated as chargeable

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 65 - services, the charges should be levied only for the balance 60% during the

year under consideration. 76. We have considered the rival submissions of the parties and have gone

through the order of the lower authorities. The TPO suggested the adjustment

by taking view that provision of guarantee results in measurable and material

credit enhancement for the borrower. The TPO noted that Allahabad Bank id

charging guarantee fee at 2.4%, the TPO applied mark up of .6% to cover up

risk and treated 3% for financial guarantee at arm’s length. Before, ld

CIT(A) the assessee made exhaustive written submissions as recorder by ld

CIT(A). The ld CIT(A) granted relief to the assessee by holding that lease

guarantee is similar to performance guarantee. The ld CIT(A) noted that 58%

of the premises for which guarantee was given was occupied by the assessee

and the fee if payable be restricted to remaining amount as the assessee has

shown evidenced to that effect as no guarantee fee can be levied to the self

occupied property. Before, us the ld. AR for the assessee vehemently

submitted that if the performance guarantees is treated as chargeable services,

the charges should be levied only on the component of services performed by

the AE and if the lease guarantee is treated as chargeable services, the

charges should be levied only for the 60% during the year under

consideration. We find convincing force in the submission of the ld AR for

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 66 - the assessee and accept the same. In the result this ground of appeal is

dismissed. 77. Ground No.10 in assessee’s appeal relates to corporate guarantee rate. The ld

AR for the assessee submits that guarantee fee rate determined in case of

performance guarantee is found at the arm’s length in case of undertaking by

ld CIT(A). 78. On the other hand the ld. DR for the revenue supported the order of the lower

authorities.

through the order of tax authorities below. We have noted that this ground of

appeal is identical to the ground No. 7.3 of appeal by assessee in AY 2010-

11, wherein we have restricted the guarantee commission to 0.5% by

following the order of Tribunal in AY 2009-10, therefore, following the

principles of consistency this ground of appeal is partly allowed with similar

directions. 80. Ground No. 8 in assessee’s appeal relates to provision of inter-company

loans. We have noted that this ground of appeal is identical to the ground No.

6 of appeal by assessee in AY 2010-11, wherein we have restored the issue to

the file of AO, therefore, following the principles of consistency this ground

of appeal is partly allowed with similar directions.

ITA Nos. 3263 & 3746/Mum/2017, 794 & 1207/Mum/2018. Tata Consultancy Services Ltd., Mumbai (AY 2008-09 &2010-11) - 67 - 81. Now a last ground of appeal in assessee’s is ground No. 6, which relates to

alleged procedural irregularity in making reference to TPO. Considering the

fact that we have allowed all TP related grounds of appeal in favour of the

assessee, hence, this ground and all remaining parts of various grounds of

appeal by assessee have become infructuous. 82. In the result the appeal of the assessee in AY 2008-09 is partly allowed and

the appeal of the revenue is dismissed. Order pronounced in open court on 18th August 2020.

Sd/- Sd/- ( PAWAN SINGH ) (RAJESH KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 18/08/2020 SK, PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / The CIT(A) 4. आयकर आयु�त(अपील) / Concerned CIT 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//

उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Mumbai