DCIT, CIRCLE-10(1), NEW DELHI vs. GENPACT INDIA NOW MERGED WITH GENPACT INDIA PVT. LTD.), HARYANA

Before us, learned counsel appearing for the assessee submitted that the issue is squarely covered by the decision of the Tribunal in assessee’s own case in assessment year 2011-12. Though, learned Departmental Representative agreed that the Tribunal had decided the issue in favour of the assessee in assessee’s own case in assessment year 2011-12, however, he relied upon the observations of the Assessing Officer.

We have considered rival submissions and perused the materials on record. It is observed, while considering identical nature of dispute in assessee’s own case in assessment year 2011- 12, the Coordinate Bench in & 4251/Del/2016 has upheld the claim of the assessee, with the following observations: “7.5 At the outset, the entire argument of the ld. CIT(DR) need not be gone into at all in view of the fact that the ld. AO himself had treated the said mentioned receipts as only ‘business income’ and not ‘income from other sources’, which is evident from the computation of total income, enclosed in page 20 of the assessment order. Once it is 3 | P a g e

Facts being identical, respectfully following the decision of the Coordinate Bench, we uphold the decision of learned first appellate authority on the issue. Grounds are dismissed.

In ground no. 4, the Revenue has raised the issue of alleged allowance of claim of deduction under section 10A and 10AA of the Act in respect of income of Rs.2,42,02,481/- from Foreign Exchange Gain & Forward Contract Gain.

We have considered rival submissions and perused the materials on record. As could be seen from the observations of learned first appellate authority in paragraph 9.2.1 of the impugned order, in the computation of income, the foreign exchange gain of non-eligible undertaking amounting to Rs.2,45,02,481/- was netted off against similar loss of eligible

Having verified the aforesaid factual position, learned first appellate authority has given a categorical finding that the Assessing Officer has wrongly added exchange gain even after the assessee has offered it to tax. The Revenue has failed to bring on record any material to controvert the aforesaid factual finding of learned first appellate authority. In view of the aforesaid, we uphold the decision of learned first appellate authority by dismissing the ground.

In ground no. 5, the Revenue has challenged the decision of learned first appellate authority in allowing 95% of the cost recoveries to be set off against the expenses.

In course of assessment proceedings, the Assessing Officer noticed that in the year under consideration, the assessee has received an amount of Rs. 7,43,44,446/- from its sister concern towards cost recovery on account of reimbursement of professional charges, pay-roll expenses, rental charges etc. He further noticed

At the time of hearing, both the parties agreed that the issue is squarely covered by the decision of the Coordinate Bench in assessee’s own case in assessment year 2011-12.

Having considered rival submissions, we find, while deciding identical issue in assessee’s own case in assessment year 2011-12 (supra), the Coordinate Bench has held as under: “6.6 At the outset, we find that the ld. AO had not disputed the basic fact that recovery of expenses is nothing but reimbursement of expenses on actual cost to cost. Non deduction of tax at source on the expenses incurred was never the case of the ld. AO. Hence the ld. CIT DR cannot make out a fresh case before this Tribunal. This matter is very well settled by the decision of the Special Bench of Mumbai Tribunal in the case of Mahindra & Mahindra Ltd. reported in 122 ITD 216 (Mum.)(SB), wherein it was categorically held that ld. DR while arguing the case before Tribunal can only support the order of ld. AO and cannot make out a new case by pointing out flaws, if any, in the order of ld. AO. Hence, the argument advanced by the ld. CIT(DR) on the aspect of applicability of provisions of section 40(a)(ia) of the Act stands dismissed. 6.7 We find from the order of the ld. CIT(A) for A.Y. 2002-03, reproduced supra, which has been followed by the ld. CIT(A) in successive years and which, in turn, has been followed by the ld. CIT(A) for the year under consideration, that the cost recoveries made by the assessee represent pure cost recovery only without any element of profit in it. We find that ld. CIT(DR) before us had sought to argue that the order of the ld. CIT(A) for A.Y. 2002-03 is perverse. This, in our considered opinion, is completely an absurd argument in view of the fact that if there is any grievance for the Revenue against the observations made by the ld. CIT(A) for A.Y. 2002-03, the Revenue should have contested before the appropriate forum for A.Y. 2002-03. We find that the observations of ld. CIT(A) for A.Y. 2002-03 had been followed successively by all the ld. CIT(A) in assessee’s own case up to A.Y. 2011-12, which is the year under consideration before us. If that be the case, then entire order of ld. CIT(A) for A.Y. 2011-12 also would become perverse, according to the ld. CIT(DR), which situation cannot be entertained by this Tribunal. It would also be relevant to note that both assessee as well as the revenue are in appeal before us against the very same order of the ld. CIT(A). In fact on perusal of the details of ld. CIT(A) for A.Y. 2002-03, reproduced supra, we find that wherever details were filed by the assessee, the ld. CIT(A) had resorted to estimate 5% of the cost recovery as not attributable to Section 10A unit and consequently denied deduction u/s 10A thereon. Wherever details were not filed, no relief has been granted by the ld. CIT(A) for A.Y. 2002-03. While this is so, how the order of ld. CIT(A) could be termed as perverse for A.Y. 2002-03. In this regard, it would be relevant to ascertain, whether details of cost recoveries in the sum 7 | P a g e

Facts being identical, respectfully following the decision of the Coordinate Bench, we uphold the finding of learned first appellate authority. Ground raised is dismissed.

In ground no. 6, the Revenue has raised the issue of allowance of customer discount amounting to Rs. 1,94,92,305/-.

Briefly the facts are, during the year under consideration, the assessee and its customers have mutually agreed that discount is to be provided by the assessee to its customers based on the revenue earned by the assessee from its respective customers. Accordingly, the assessee made a provision of Rs.5,77,32,259/- towards discount to its customers as per the prevailing industrial practice and debited it to the profit and loss account. Out of the amount of Rs.5,77,32,259/-, Rs. 1,94,92,305/- pertained to undertakings eligible for deduction under section 10 of the Act. While completing the assessment, the Assessing Officer disallowed entire claim of the assessee alleging that they are not ascertained liabilities and the amount of Rs.1,94,92,305/- pertaining to 10A units was added back to the total export turnover. Being aggrieved with the aforesaid decision of the Assessing Officer, the assessee preferred an appeal before the first appellate authority. Relying upon certain judicial precedents, learned Commissioner (Appeals) allowed the claim of the assessee.

Before us, it is a common point between the parties that the issue is squarely covered by the decision of the Coordinate Bench in assessee’s own case in assessment year 2011-12 (supra). Having 9 | P a g e considered rival submissions, we find while deciding identical nature of dispute in assessee’s own case in assessment year 2011- 12, the Coordinate Bench has upheld similar decision of learned first appellate authority with the following observations: “9.5 We find that the ld. AO in page 2 para 3 of the assessment order has stated that the ld. TPO had accepted the entire export price of the assessee to be at Arm’s Length Price (ALP) and had not suggested any adjustments thereon. Hence, the entire revenue shown by the assessee (which comprises gross revenue minus discount of Rs. 28,04,22,899/-) has been accepted to at arm’s length. Further, the ld. CIT(A) in A.Y. 2007-08 vide his order dated 16.04.2014 has categorically held that a provision for customer discount has been made by the assessee on a scientific basis and as per the prevailing industry practice revenue earned during the year. It was observed that the said discounts were not provided on ad hoc or universal basis. Instead, specific end customers were identified based on various criterions like customer relationship, brand recognition, contract longevity, contract revenue etc. and only thereafter the discount purchases were agreed to be provided to these end customers based on commercial negotiations and the agreed discount purchases were applied to the current year revenues to these identified end customers. Hence, the liability had duly crystallized during the year. This categorical finding has been followed by the ld. CIT(A) for the year under consideration also. Hence, assessee’s case squarely falls within the ratio decidendi of Hon’ble Supreme Court in the case of Bharat Earth Movers Ltd. reported in 245 ITR 428 (SC) and the Hon’ble Jurisdictional High Court in the case of Insilco Ltd. reported in 320 ITR 322 (Del.) 9.6 The ld. AR before us relied on the CBDT Circular no. 12 of 2022 dated 16.06.2022 wherein vide question no. 4 in response to a specific query raised, the CBDT had replied that discounts allowed to customers would only represent lesser realization of sale price. Though the Circular has been issued in the context of applicability of deduction of TDS u/s 194R of the Act pursuant to the amendment brought in by the Finance Act, 2022 w.e.f. 01.07.2022, the analogy that discount is only a lesser realization of sale price has been accepted and agreed by the CBDT. Drawing support from this Circular and considering the fact that the export sale price declared by the assessee has been accepted to be at arm’s length price (ALP) by the ld. TPO in the order passed by him u/s 92CA(3) of the Act dated 27.01.2015 and also considering the fact that the provision of 10 | P a g e discount has been made on a rational basis as detailed supra, we do not find any infirmity in the order of ld. CIT(A) deleting the disallowance made thereof by the ld. AO. Accordingly, ground no. 8 raised by the Revenue is dismissed.”

Facts being identical, respectfully following the aforesaid decision of the Coordinate Bench, we uphold the finding of learned first appellate authority on this issue. Ground raised is dismissed.

We have considered rival submissions and perused the materials on record. it is a common point between the parties that the issue is squarely covered by the decision of the Coordinate Bench in assessee’s own case in assessment year 2011-12 (supra). While deciding identical issue in assessee’s own case in the order referred to above, the Tribunal has held as under: “10.1 We have heard rival submissions and perused the materials on record. The assets like printers, routers along with other accessories/ peripherals form one integrated system and would be of no use independently of each other. Therefore, all such facilities from part of computers and hence eligible for depreciation at the rate applicable for computers. This issue is duly covered by the decision of the Hon’ble Jurisdictional High Court in the case of BSES Yamuna Powers in of 2010 dated 31.08.2010 and in the case of Orient Ceramics reported in 200 Taxman 64 (Del). In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, ground no. 9 raised by the Revenue is dismissed.”

Facts being identical, respectfully following the decision of the Coordinate Bench, we uphold the order of learned first appellate authority on the issue raised. Ground is dismissed.

In ground no. 8, the Revenue has challenged the deletion of addition of Rs.534,48,00,000/- made by the Assessing Officer on account of non-deduction of tax at source on payment made to 12 | P a g e Genpact Mauritius Bhopal SEZ, Genpact Mauritius Kolkata SEZ and Genpact Mauritius Hyderabad SEZ.

Briefly the facts are, during the year under consideration the assessee had acquired shares of the Genpact Infrastructure (Bhopal) Private Limited, Genpact Infrastructure (Kolkata) Private Limited and Genpact Infrastructure (Hyderabad) Private Limited from the entities noted in the ground raised

We have considered rival submissions and perused the materials on record. It is patent and obvious that the Assessing Officer has made the disallowance on the ground that the payment made by the assessee towards purchase of shares is taxable as capital gain in India at the hands of the seller entities. As rightly observed by learned first appellate authority, in terms with Article 13(4) of India – Mauritius DTAA, capital gain arising at the hands of the resident of Mauritius is taxable in Mauritius.

Before us, the assessee has further submitted that while completing the assessment in case of the seller entities, capital gain has not been assessed to tax. Keeping in view the aforesaid factual and legal position, we do not find any infirmity in the decision of learned first appellate authority. Ground raised

We have heard the parties and perused the materials on record. As could be seen, the aforesaid receipts were not treated as part of export turnover while computing deduction under section 10A of the Act. In this context, the Departmental Authorities have referred to Explanation 2(iv) to section 10A of the Act. However, it is observed, while deciding identical issue in assessee’s own case in assessment year 2011-12 (supra), the Coordinate Bench has held as under: “5.1 We have heard the rival submissions and perused the materials available on record. The assessee is engaged in the business of providing Information Technology Enabled Services such as data entry, data processing services, data conversion, business support and billing services to its customers. During the year under consideration, the assessee company had claimed deduction u/s 10A/10AA of the Act amounting to Rs. 378,22,79,469/-. During the year under consideration, the assessee incurred telecommunication expenses in foreign currency amounting to Rs. 23,19,55,704/-. Out of this, the amount pertaining to undertakings eligible for claiming deduction under Section 10A and 10AA of the Act was Rs. 6,20,38,757/- and Rs. 3,24,95,309/- respectively. The above amount included expenses paid to various service providers for landline, mobile connectivity, dial com connectivity, payments made for mail server and various other charges. During the year under consideration, assessee has been reimbursed a sum of Rs 42,61,89,516/- and Rs 60,25,09,242/- on account of migration / on- the-job-training activities relating to undertakings claiming deduction under Section 10A and 10AA of the Act respectively. It is submitted that under the overall ambit of IT/IT Enabled Services, assessee also provides business process outsourcing services to customers located 15 | P a g e outside India as well as customers located in India. Provision of business process outsourcing services involve carrying out certain back-office operations of the customers through employees employed and operating out of the STPI and SEZ units of the assessee in India. For carrying out back-office operations of the customers from India, adequate on-the-job training is required to be provided to the assessee's employees in order to enable them to understand the operations of the customers and help in migrating those operations from overseas customer locations to STPI and SEZ units located in India. In order to effect the migration of customer operations from overseas locations to India, some of the employees of the assessee having requisite experience and skill are selected to undergo on-the- job training at overseas customer locations. The expenses incurred by the assessee on such on-the-job training or migration activities are reimbursed by the assessee’s customers which, are netted-off against the respective expense items. 5.2 The learned AO by referring to the definition of export turnover as provided in Section 2(iv) of Section 10A of the Act, reduced the telecommunication expenses incurred in foreign currency relating to – reimbursement received by the assessee on account of migration/ on- the-job training activities from the export turnover and correspondingly did not reduce the same from the ambit of total turnover, thereby reducing the claim of deduction u/s 10A/10AA of the Act. This issue is no longer resintegra in view of the decision of the Hon’ble Supreme Court in the case of CIT vs. HCL Technologies Ltd reported in 404 ITR 719 (SC), wherein it was held that the items that are subject matter of reduction from export turnover in the numerator need to be reduced in the denominator from the ambit of total turnover also as admittedly total turnover is nothing but the sum total of export turnover and domestic turnover. Hence, the export turnover reflected in the numerator cannot be different from the export turnover figure reflected in the denominator. Hence, for the purpose of computing the deduction u/s 10A/10AA/10B/80HHC/80HHE etc. all items that were sought to be excluded from export turnover need to be excluded from total turnover also in order to bring parity. Respectfully following the said decision, ground nos. 1 to 3 raised by the assessee are allowed and ground nos. 5 and 6 raised by the Revenue are dismissed.”

Facts being identical, respectfully following the decision of the Coordinate Bench, we hold that once the receipts are excluded from the export turnover, they have to be excluded from total turn over

In ground no. 4, the assessee has challenged 5% disallowance of cost-to-cost recoveries from sister concerns from being set off against the expenses of eligible units for claiming deduction under section 10A of the Act.

Having considered rival submissions, we find, while deciding identical issue in assessee’s own case for the assessment year 2011-12 (supra), the Coordinate Bench has upheld the decision of learned first appellate authority.

In view of the aforesaid, we dismiss the ground raised