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PER KULDIP SINGH, JUDICIAL MEMBER :
Since common questions of facts and law have been raised in both the aforesaid appeals, the same are being disposed off by way of consolidated order to avoid repetition of discussion.
ITA No.4048/Del./2013 2. The Appellant, M/s. Transcend MT Services Pvt. Ltd. (formerly known as Heartland Information and Consultancy Services Pvt. Ltd.)(in relation to Heartland Bangalore Transcription and Services Pvt. Ltd. (HBTS)) (hereinafter referred to as ‘the taxpayer - HBTS’) by filing the present appeal being sought to set aside the impugned order dated 30.04.2013, passed by the AO in consonance with the orders passed by the ld. DRP/TPO under section 143 (3) read with section 144C of the Income-tax Act, 1961 (for short ‘the Act’) qua the assessment year 2006-07 on the grounds inter alia that :-
“On the facts and in the circumstances of the case and in law, the Hon'ble Dispute Resolution Panel ('DRP'), the Transfer Pricing Officer ("TPO") and consequently the Assessing Officer ('AO') have erred: .
Transfer Pricing Adjustments
1 In making an adjustment of INR 17,403,385 to the value of the international transaction of provision of medical transcription services.
1.1 In determining the above adjustment have, in particular erred in:
1.1.1 Using financial information of the comparable companies relating to the financial year ('FY') 2005-06 although such information was not available when the assessee maintained documentation as per the requirement of the act;
1.1.2 Rejecting certain functionally comparable companies, on grounds such as: a. Persistent loss making companies; and b. Highly unpredictable profitability
1.1.3 Retaining certain super profit making companies as functionally comparable companies;
1.1.4 Retaining Vishal Information Technologies Limited as a functionally comparable company; 1.1.5 Rejecting B T Technet for non-availability of financial information for FY 2005-06 although the annual report of the same was made available during the proceedings before the Hon'ble DRP;
1.1.6 Retaining comparable companies with significant related party transactions;
1.1.7 Not granting comparability adjustments on account of difference in working capital requirement, risk assumed by the appellant vis a vis the comparable companies and in ignoring the quantification of above adjustments for such differences;
1.1.8 Not following the order of the Hon'ble ITAT with respect to the applicability of proviso to section 92C(2) of the Act;
1.1.9 Not correctly computing the margins of some comparables;
1.1.10 Not correctly computing the margin of Nucleus Net Soft and GIS India Limited;
1.1.11 Ignoring the fact that the appellant is a STPI unit which is entitled to tax holiday and consequently there is no motivation for shifting profits through transfer pricing mechanism.
In not passing a speaking 'order.
3. Without prejudice to the grounds above, if the transfer pricing adjustment is sustained then the ld. AO has erred in levying interest under section 234B of the Act to the extent the addition is made based on the updated financial data for the comparable companies.”
ITA No.4501/Del./2013
The Appellant, M/s. Transcend MT Services Pvt. Ltd. (formerly known as Heartland Information and Consultancy Services Pvt. Ltd.)(in relation to Heartland Bangalore Transcription and Services Pvt. Ltd. (HDTS)) (hereinafter referred to as ‘the taxpayer - HDTS’) by filing the present appeal being sought to set aside the impugned order dated 31.05.2013, passed by the AO in consonance with the orders passed by the ld. DRP/TPO under section 143 (3) read with section 144C of the Income-tax Act, 1961 (for short ‘the Act’) qua the assessment year 2006-07 on the grounds inter alia that :-
“On the facts and in the circumstances of the case and in law, the Hon'ble Dispute Resolution Panel ('DRP'), the Transfer Pricing Officer ("TPO") and consequently the Assessing Officer ('AO') have erred: .
Transfer Pricing Adjustments 1 In making an adjustment of Rs.1,60,81,312 to the value of the international transaction of provision of medical transcription services.
1.1 In determining the above adjustment have, in particular erred in:
1.1.1 Using financial information of the comparable companies relating to the financial year ('FY') 2005-06 although such information was not available when the assessee maintained documentation as per the requirement of the act;
1.1.2 Rejecting certain functionally comparable companies, on grounds such as: a. Persistent loss making companies; and b. Highly unpredictable profitability
1.1.3 Retaining certain super profit making companies as functionally comparable companies;
1.1.4 Retaining Vishal Information Technologies Limited as a functionally comparable company;
1.1.5 Rejecting B T Technet for non-availability of financial information for FY 2005-06 although the annual report of the same was made available during the proceedings before the Hon'ble DRP;
1.1.6 Retaining comparable companies with significant related party transactions;
1.1.7 Not granting comparability adjustments on account of difference in working capital requirement, risk assumed by the appellant vis a vis the comparable companies and in ignoring the quantification of above adjustments for such differences;
1.1.8 Not following the order of the Hon'ble ITAT with respect to the applicability of proviso to section 92C(2) of the Act;
1.1.9 Not correctly computing the margins of some comparables;
1.1.10 Not correctly computing the margin of Nucleus Net Soft and GIS India Limited;
1.1.11 Ignoring the fact that the appellant is a STPI unit which is entitled to tax holiday and consequently there is no motivation for shifting profits through transfer pricing mechanism.
Direct Tax Grounds
2. On the facts and in law, the ld. AO has erred in : Not following the directions dated 18th March 2.1 2013 issued under section 144C of the Act by the Hon’ble DRP and consequently not allowing the deduction under section 10A of the Act.
2.2 Not allowing the credit of taxes of Rs. 82,00,000 already paid by the appellant pursuant to the demand raised by the ld. AO vide notice of demand dated 27th October 2010 for the captioned assessment year.
2.3 Charging the interest under section 220 of the Act while passing the final assessment order dated 31st May 2013.
3 On facts and in law, the ld. AO has erred in computing the interest under section 234B of the Act.
4 On facts and in law, the ld. AO has erred in not passing a speaking order.
5 Without prejudice to the grounds above, if the transfer pricing adjustment is sustained then the ld. AO has erred in levying interest under Section 234B of the Act to the extent the addition is made based on the updated financial data for the comparable companies.”
Briefly stated the facts necessary for adjudication of the controversy at hand are : erstwhile Heartland Bangalore Transcription and Services Private Limited (HBTS), the taxpayer – HBTS was amalgamated with the Heartland Information and Consultancy Services Private Ltd. (HICS) w.e.f. April 1, 2008. So, the taxpayer - HBTS ceased to exist w.e.f 01.04.2008. Then the name of HICS was changed to M/s. Transcend MT Services Private Limited (TMTSPL).
The taxpayer – HBTS is a subsidiary of Heartland Asia (Mauritius) Limited with 99.99% of shareholding by Heartland Asia (Mauritius) Limited and 0.01% held by HCR Information Corporation USA. The taxpayer - HBTS is 100% export oriented unit registered under Software Technology Park Scheme (STP) of Department of Electronics, Government of India. The taxpayer - HBTS is into IT Enabled Back Office Medical Transcription services as part of its business operation, providing medical transcription services exclusively to HCR Information Corporation USA, the ultimate holding company of The taxpayer - HBTS.
During the year under assessment, assessee entered into international transactions with its Associated Enterprises as under:-
S.No. Nature of Method used by Value of transaction transaction Assessee Method PLI Receipt Paid 1 Medical TNMM OP/TC 14,94,04,081 - Transcription
The taxpayer - HBTS in order to benchmark its international transaction in its TP study selected Transactional Net Margin Method (TNMM) as Most Appropriate Method (MAM) as its Profit Level Indicator (PLI) (Operating Profit / Total Cost) at 10%.
The taxpayer - HBTS chosen 20 comparables for benchmarking the Arm’s Length Price (ALP) having average PLI of comparable at 10% and found its international transactions at arm’s length.
The taxpayer - HBTS in its TP study after selecting 20 comparables used weighted average margin of three years to arrive at the conclusion that the international transaction arrived at by the assessee with its Associated Enterprise (AE) at is arm’s length.
TPO, after finally selecting 13 comparables out of the total 20 comparables chosen by the assessee as per its TP study for benchmarking the international transaction, proceeded to determine the arm’s length price of provision of back office medical transcription services rendered of M/s. Heartland USA and HCRIC at Rs.16,61,10,174/- and book value of this international transaction at Rs.14,94,04,081/- and proposed to enhance the total income by Rs.1,67,06,093/- for AY 2006-07 to bring the international transaction at arm’s length price.
ITA NO.4501/DEL/2013 (HDTS)
(HDTS), the taxpayer – HDTS by adopting TNMM for benchmarking the international transaction chosen 20 comparables having arithmetic mean of 10% on total cost plus of multiple year data. The taxpayer – HDTS in its TP study also computed its own operating margin at 10% on total cost and found its international transaction with its AE qua medical transcription services at arm’s length. Undisputedly, the TPO accepted FAR characterization of the taxpayer – HDTS and TNMM as the most appropriate method based on with OP/TC as PLI but rejected 7 of the comparables chosen by the assessee and finally, selected 13 comparables and computed the difference of arms length revenue and book value of the revenue at Rs.1,67,06,093/-.
However, pursuant to the directions issued by the ld. DRP, TPO passed fresh order dated 22.12.2009 and calculated the margin of final list of comparables as under :-
Sl. Name of the Company Total Op. TC OP OP/TC No. Receipts INR (Crore) Per- INR (Crore) cent i. Ace Software Exports Ltd. 5.4982366 5.14295 0.35529 6.91 ii. Allsec Technologies Ltd. 9.22565 7.18254 2.04311 28.45 iii. CMC Ltd. (Segmental) 3.14249 3.07562 0.6687 2.17 iv. CS Software Enterprises Ltd. 11.5678198 9.87798 1.68984 17.11 v. Cosmic Global 3.1114891 2.68165 0.42983 16.03 vi. Goldstone Teleservices Ltd. 5.0271 3.8966 1.1305 29.01 vii. Indus Networks Ltd. 3.36 3.22 0.14 4.35 viii. Tata Services Ltd. 41.0292 38.7366 2.2926 5.92 ix. Vishal Information 25.64284 17.32306 8.31978 48.03 Technologies Ltd. x. Nucleus Netsoft & GIS India 6.0578376 4.1756645 1.8821731 45.07 Ltd. xi. Ask Me Info Hub Ltd. 4.71 4.5 0.21 4.67 (Shreejal) xii. Transworks Information 163.3007 136.6095 26.6912 19.54 Services Ltd. xiii. Tricom India Ltd. 23.70 14.80 8.90 60.14
Ld. TPO on the basis of his own analysis calculated the PLI for 13 comparables at 22.11% as against PLI of assessee at 10% and proceeded to compute the ALP as under :-
Average PLI (OP/TC) of the comparables = 22.11% Total cost of medical transcription services = 13,58,21,892/- Arm’s length revenue of the transaction = 13,58,21,892/- *122.11% = 16,58,52,112/- Book value of revenue = 14,94,04,081/-
Difference of arm’s length revenue & = 1,64,48,031/- Book value of revenue Percentage of adjustment to arm’s = 9.92% Revenue
Proviso to Sec. 92C (2) is not attracted as percentage of adjustment to arm’s length revenue is more than 5%. The international transactions reflected in form 3CEB pertaining to software services will be adjusted to bring it at arm’s length price. The other minor transactions are held to be at arm’s length price.”
The taxpayer carried the matter by way of raising objections before the ld. DRP, which have been disposed off. Feeling aggrieved, the taxpayer has come up before the Tribunal by way of filing the present appeals.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
GROUND NOS.1.1.1, 1.1.2 & 1.1.5 IN
Grounds No.1.1.1, 1.1.2 & 1.1.5 need no findings being general in nature and having not been pressed by the ld. AR for the taxpayer.
GROUND NOS.1, 1.1.3, 1.1.4, 1.1.6, 1.1.10 & 1.1.11 IN
Undisputedly, the TNMM as the Most Appropriate Method (MAM) based on OP/TC as the PLI applied by the assessee has been accepted by the TPO. It is also not in dispute that the TPO accepted the FAR characterization of the taxpayer. Out of 20 comparables chosen by the taxpayer, the ld. TPO rejected 13 comparables being functionally dissimilar, list of final set of comparables is as under :-
Sl. No. Name of the Comparables 1. Ace Software Export Ltd. 2. CS Software Enterprises Ltd. 3. Tata Services Ltd. 4. Tulsiyan Technologies Ltd. 5. Vishal Information Technologies Ltd. 6. Allsec Technologies Ltd. 7. Transworks 8. Ask Me Info Hub Ltd. 9. Nucleus Netsoft & GIS India Ltd. 10. Tricom India Ltd. 11. Goldstone Tele-services Ltd. 12. CMC SEG. 13. Indus Networks Ltd.
Ld. TPO computed the average PLI of the final 13 comparables selected for the international transactions at 22.30% as against PLI of the assessee at 10% and proceeded to compute the ALP of the international transactions as under :-
Average PLI (OP/TC) of the comparables = 22.30% Book value of medical transcription services = 16,26,34,428/- Total cost of medical transcription services = 14,77,65,769/- Arm’s length revenue of the transaction = 14,77,65,769/- *122.30% = 18,07,17,535/- Difference of arm’s length revenue & = 1,80,83,107/- Book value of revenue Percentage of adjustment to arm’s = 10.00% Revenue Proviso to Sec. 92C (2) is not attracted as percentage of adjustment to arm’s length revenue is more than 5%. The international transactions reflected in form 3CEB pertaining to software services will be adjusted to bring it at arm’s length price.”
The taxpayer taken weighted average because during TP study, data was not available, but during TP proceedings when the data got available average was calculated on the basis of current year’s data. Pursuant to the direction issued by ld. DRP, the TPO passed fresh TP order dated 25.04.2013 by computing the correct margin of the comparables as under :-
Average PLI (OP/TC) of the comparables = 21.84% Total cost of medical transcription services = 13,58,21,892/- Arm’s length revenue of the transaction = 13,58,21,892/- *121.84% = 16,54,85,393/- Book value of revenue = 14,94,04,081/- Difference of arm’s length revenue & = 1,60,81,312/- Book value of Revenue
Ld. DR relied upon the order of the TPO.
Now, in order to cut short the controversy at hand, the ld. AR for the assessee sought to exclude three comparables viz.
Vishal Information Technologies Ltd., Nucleus Netsoft & GIS India Ltd. and Tricom India Ltd. in both the appeals being & 4501/Del/2013 qua AY 2006-07. We would examine the suitability of all the aforesaid comparables vis-à-vis assessee company for benchmarking the international transaction one by one.
VISHAL INFORMATION TECHNOLOGIES LTD. (VISHAL) 20. The taxpayer sought exclusion of Vishal in both the appeals on the grounds inter alia that Vishal has different business model and it is functionally not comparable vis-à-vis the taxpayer.
Annual report and balance sheet of Vishal as on 31.0.2007, available at pages 579 to 586 of the paper book, shows that Vishal has the employee cost to sales ratio of 2% for FY 2005-06 vis-à-vis taxpayer which is at 67.57%. This fact goes to prove that Vishal outsourced its substantive work to third party vendors which make it functionally dissimilar.
Furthermore Vishal is into the business of Knowledge Process Outsourcing (KPO) as it provides services of data conversion, microfilming and microfilm scanning, data and document management, data processing, digital library management, etc. From the website extract brought on record by the taxpayer, available at page 412 of the paper book, it has also come on record that Vishal is into print on demand services and as such, is not comparable with the taxpayer.
Hon’ble Delhi High Court in Rampgreen Solutions (P.) Ltd. vs. CIT – (2015) 377 ITR 533 (Delhi), while examining the comparability of Vishal with Rampgreen Solutions (P.) Ltd., a similarly situated ITES provider to its AE, ordered to exclude Vishal on ground of expenditure on employment cost as it was a small fraction of proportionate cost incurred by the assessee and on the ground that Vishal used to outsourced most of its work from vendors and service providers.
Vishal has been excluded as a comparable for benchmarking the international transactions in taxpayer’s own case for AY 2005- 06 in available at pages 11 & 12, on ground of different business model as well as functional dissimilarity. So, we are of the considered view that Vishal is not a suitable comparable for benchmarking the international transaction entered into by the taxpayer with its AE for AY 2006-07.
NUCLEUS NETSOFT & GIS INDIA LTD. (NUCLEUS)
The taxpayer sought to exclude Nucleus from the final set of comparables for benchmarking its international transaction with its AE on the grounds inter alia that Nucleus has undergone extra ordinary event of amalgamation and merger during the relevant financial year; that it is outsourcing most of its work; that Nucleus is a high profit earning company with margin of 36.63% and that calculation of PLI of Nucleus by the TPO is also erroneous as 45.07% as against correct margin by excluding leave and licence fee at 36.63% and relied upon the decisions of Ameriprise India (P.) Ltd. vs. DCIT – (2015) 67 SOT 136 (Delhi – Trib.), American Express (India) (P.) Ltd. vs. DCIT – (2016) 177 TTJ 33 (Delhi – Trib.) and HSBC Electronic Data Processing India Ltd. vs. ACIT in ITA No.1624/Hyd./2010 for AY 2006-07.
The taxpayer has brought on record the annual report of Nucleus, available at page 391, which shows that in accordance with the scheme of amalgamation as detailed in Director’s report of assets and liabilities of the erstwhile Nucleus have been transferred to and vested in the company w.e.f. 01.04.2005. Consequently, result for the year ending 31.03.2006 includes the result of erstwhile NNGIS and are not comparable with those of the previous year ending 31.03.2005.
Furthermore Nucleus outsources most of its work/services to other vendors / service providers. Coordinate Bench of the Tribunal examined the comparability in Ameriprise India (P) Ltd. and American Express (India)(P.) Ltd. (supra), available at page 52 of the case laws paper book, wherein Nucleus has been ordered to be excluded as a comparable vis-à-vis Ameriprise India (P) Ltd. which is also a captive contract service provider engaged in IT Enabled Back Office service on ground of amalgamation by following M/s. HSBC Electronic Data Processing India Ltd. (supra) and Pr. CIT vs. IHG IT Services (India) Pvt. Ltd. in of 2016 (Hon’ble Punjab & Haryana High Court). Hon’ble Punjab & Haryana High Curt in IHG IT Services (India) Pvt. Ltd. (supra) ordered to exclude Nucleus from the final set of comparables vis-à-vis IHG IT Services on ground of outsourcing of its work by making following observations :-
6. The only contention regarding the exclusion of Nucleus Netsoft and GIS (India) Limited is that there is no reasoning. This, however, is not even a ground taken in the appeal filed before us. In any event, we perused the 22nd Annual Report for the year 2005-2006 of Nucleus Netsoft and GIS (India) Limited. Schedule 12 furnishes the operating & other expenses. The data processing charges are Rs.1.04 crores out of the total operating & other expenses of about Rs.2.41 crores. Thus, an amount of over 40% is outsourced. The finding of the Tribunal, therefore, cannot be held to be perverse.
So, we are of the considered view that because of amalgamation and outsourcing most of its work, the Nucleus cannot be a suitable comparable vis-à-vis the taxpayer for benchmarking the international transaction. AO/TPO is directed to recompute the margin accordingly.
TRICOM INDIA LTD. (TRICOM) 29. The taxpayer sought to exclude Tricom from the final set of comparables on the grounds inter alia that it has Related Party Transactions (RPT) to the tune of 61.86%; that the company has its own software product which provides to its BPO customers and hence having no intangibles and that it incurs considerable amount on R&D of software.
Perusal of the relevant page of annual report, available at pages 689 & 690, the taxpayer has RPT to the tune of RS.14,48,17,710/- in FY 2005-06 as against total sale of Rs.23,70,09,469/- which is 61.86%. Furthermore from the perusal of relevant page of the annual report available at page 60 of the compilation explains the functional profile of Tricom as, “Technology Absorption and Research & Development : Your company develops software to provide efficient Business Process Outsourcing services to its customers. The systems team of your company does continuous research and development for up gradation of the software in order to provide better services to its clientele. Your Company also develops software products to process the data required for providing BPO services to its customers. Your Company takes efforts to adapt latest technology and techniques, which helps it to be in competition.”
Coordinate Bench of the Tribunal in ITO vs. Business Process Outsourcing India (P.) Ltd. – (2014) 61 SOT 83 (Bangalore – Trib.) examined the comparability of Tricom vis-a- vis the assessee company ordered to exclude the same on ground of the fact that Tricom develops its own software whereas the assessee has no such software product intangibles. So, keeping in view the RPT of 61.86% and the fact that Tricom develops its own software product and own its own intangibles, it cannot be a suitable comparables vis-à-vis the taxpayer. So, we order to exclude the same. So, in view of the matter, grounds no.1, 1.1.3, 1.1.4, 1.1.6, 1.1.10 and 1.1.11 are determined in favour of the taxpayer GROUNDS NO.1.1.7 & 1.1.8 IN ITA NO.4501/DEL/2013
The ld. AR for the taxpayer contended that while comparing the margin earned by the comparable company vis-à-vis the taxpayer itself on account of working capital employed should also be factored into. Ld. TPO/DRP have not granted comparability adjustment on account of difference in working capital requirement, risk assumed by the taxpayer vis-à-vis comparable company and in ignoring the quantification of aforesaid adjustment for such differences. Issue as to the working capital adjustment has been examined by the coordinate Bench of the Tribunal in assessee’s own case for AY 2005-06 (supra) in taxpayer’s own case for AY 2005-06.
The ld. CIT (A) has granted working capital adjustment to the taxpayer in AY 2005-06 which order has been upheld by the coordinate Bench of the Tribunal by following the decision rendered by Bangalore Bench of the Tribunal in in TNT India Pvt. Ltd. vs. ACIT. So, following the decisions rendered by the coordinate Bench of the Tribunal in taxpayer’s own case for AY 2005-06, we are of the considered view that the taxpayer is entitled for working capital adjustment qua margin earned by the comparable companies vis-à- vis the taxpayer.
However, during the course of argument, the ld. AR for the taxpayer contended that in case aforesaid three comparables viz.
Vishal Information Technologies Ltd., Nucleus Netsoft & GIS India Ltd. and Tricom India Ltd. are excluded, the taxpayer does not need any working capital adjustment.
The ld. AR for the taxpayer further contended that the ld. DRP has not followed the order of the Tribunal passed in the first round of litigation in taxpayer’s own case as to the applicability of proviso to section 92C (2) of the Act.
Coordinate Bench of the Tribunal in taxpayer’s own case in first round of litigation qua AY 2006-07 in order dated 30.06.2011 has applied the proviso to section 92C (2) in favour of the taxpayer by returning following findings :-
6. We have heard both the parties and gone through the material available on record. From the order of the ld. DRP we find that the assessee has raised objections on various points on which the ld. DRP has not passed speaking order. The objections raised by the assessee have been summarily rejected. 5 per cent standard deduction has been denied on the ground that proviso to section 92C(2) of the Act has been amended though the said Amendment has been made by Finance (No.2) Act, 2009 with effect from 1/10/2009. Prior to this amendment as per proviso to section 92C(2) the assessee was eligible for 5 per cent of adjustments. Since the amendment has been made effective from 1/10/2009 it is held that the assessee will be eligible for 5 per cent of adjustment while computing arms length price. The assessing officer is directed accordingly.
When the issue as to the allowability to the taxpayer for 5% of adjustment has already been decided in favour of the taxpayer in first round of litigation and the matter was remanded on specific issues, the ld. DRP was under legal obligation to provide the benefit of proviso to section 92C(2) of the Act to the taxpayer. For ready reference, operative part of order passed by the coordinate Bench of the Tribunal in assessee’s own case in in first round of litigation in AY 2006-07 is reproduced for ready perusal as under :-
“6. We have heard both the parties and gone through the material available on record. From the order of the ld. DRP we find that the assessee has raised objections on various points on which the ld. DRP has not passed speaking order. The objections raised by the assessee have been summarily rejected. 5 per cent standard deduction has been denied on the ground that proviso to section 92C(2) of the Act has been amended though the said Amendment has been made by Finance (No.2) Act, 2009 with effect from 1/10/2009. Prior to this amendment as per proviso to section 92C(2) the assessee was eligible for 5 per cent of adjustments. Since the amendment has been made effective from 1/10/2009 it is held that the assessee will be eligible for 5 per cent of adjustment while computing arms length price. The assessing officer is directed accordingly. So, in view of the matter, grounds no.1.1.7 and 1.1.8 are determined in favour of the taxpayer.
GROUND NO.1.1.9 IN ITA NO.4501/DEL/2013
Ground No.1.1.9 in both the aforesaid appeals need no specific findings being general in nature and having not been pressed.
GROUND NO.2.1 IN ITA NO.4501/DEL/2013
The taxpayer has raised objection before ld. DRP as to disallowing deduction u/s 10A by the AO which was disposed off by the ld. DRP in favour of the taxpayer by returning following findings :-
“5.13 In the case of assessee, the conditions prescribed by Section 10A(2) of the I.T. Act have been satisfied by the eligible undertake at the time of formation. The eligible undertaking was transferred ‘as it is’ to the assessee and continues to function as before. Accordingly, the assessee is entitled to deduction under section 10A of the Act for the current assessment year.”
Since DRP has given categoric direction to the AO to allow deduction to the taxpayer u/s 10A, the AO was under judicial discipline to carry out the deductions. So, the AO is directed to comply with the directions issued by ld. DRP. Consequently, Ground No.2.1 is determined in favour of the taxpayer.
GROUND NO.2.2 IN ITA NO.4501/DEL/2013
AO is directed to examine the credit of taxes of Rs.82,00,000/- already paid by the taxpayer in accordance with the demand raised by the AO vide notice dated 27.10.2010 for the year under assessment and allow the same after due verification of the facts.
GROUND NO.2.3 IN ITA NO.4501/DEL/2013
The ld. AR for the taxpayer contended that this issue has already been decided in favour of the taxpayer in its own case for AY 2006-07 in ITA No.2136/Del/2014. Perusal of the order passed by the coordinate Bench in (supra) shows that identical issue was raised and has been decided in favour of the taxpayer by returning the following findings :-
“11. In the present case, the original assessment order 27.10.2010 was set aside by the ITAT vide its order dated 30.06.2011 and nothing was brought on record to substantiate that the said order dated 30.06.2011 was challenged by the department. Therefore, the said order attained finality. In compliance to the order of the ITAT, the DRP directed the AO vide order dated 26.02.2013 to complete the assessment. In compliance to the said directions, the AO passed the assessment order dated 30.04.2013 and re-framed the assessment. Therefore, as per the aforesaid Circular No. 334(F.No. 400/3/81-ITCC), dated 03.04.1982 which is binding on the department, the interest u/s 220(2) of the Act can be charged only after expiry of 35 days from the date of service of demand notice pursuant to such fresh assessment order dated 30.04.2013 and not the original assessment order dated 27.10.2010. We, therefore, considering the totality of the facts, direct the AO to levy the interest u/s 220(2) of the Act as per the above said direction given by the CBDT in Circular No. 334 dated 30.04.1982.”
Keeping in view the fact that this is a second round of litigation and in this case also, original assessment was completed on 27.10.2010 and as such, issue is entirely covered in favour of the taxpayer. So, the AO is directed to charge the interest u/s 220 of the Act by following the findings returned by the coordinate Bench of the Tribunal in (supra) after due verification.
GROUND NO.2 IN GROUND NO.4 IN
Ground No.2 in ITA No.4048/DEL/2013 and Ground No.4 in ITA No. 4501/DEL/2013 are general in nature and do not require any adjudication.
GROUND NO.3 IN GROUND NO.3 & 5 IN ITA NO.4501/DEL/2013
Ground No.3 in Grounds No.3 & 5 in qua levy of interest u/s 234B of the Act need no specific finding being consequential in nature.
Resultantly, both the appeals filed by the assessee are allowed. Order pronounced in open court on this 12th day of December, 2017.