SHL ( INDIA) P.LTD,MUMBAI vs. DCIT 3(3), MUMBAI

(AY 2008-09) 3. First of all we take up assessee’s appeal in for assessment year 2008-09 as lead case.

As per the facts of the present case, the assessee is engaged in the business of manpower recruitment & management consultancy. The return of income for the year under consideration was electronically furnished on 29.09.08 disclosing total income at Rs. 93,94,226 /- under normal provisions of the I.T. Act. The book profit of Rs. 43,41,407/- was computed under of provisions of section 115JB of the I.T. Act. The return was processed u/s 143(1) of the I.T. Act. Subsequently, the case was selected for scrutiny and after serving statutory notice, the order of assessment was completed u/s 143(3) of the I.T. Act thereby making additions /disallowance. While framing the order of assessment, the AO noticed that there was increase in the expenditure of license fee and technology support and break up and all the expenses are related with associate concern.

Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties partly allowed the appeal of the assessee. Aggrieved by the order of Ld. CIT(A), the assessee as well as revenue have filed their respective appeals. However at present, we are dealing with the appeal filed by the assessee.

At the very outset, Ld. AR drawn our attention to the application filed by the assessee for admission of additional evidence and the same are reproduced below:-

Ground I - Disallowance of expenditure claimed by the Company on account of license fees. 1.1. The Applicant had submitted a copy of the agreement dated 01 December 2004 entered into by it with SHL UK (please refer to pages 46 - 80 of Paper Book I) before the Hon'ble CIT(A) vide submission dated 13 August 2011 (please refer to pages 35 —45 of Paper Book I). This has been duly discussed by the Hon'ble C11(A) at page number 19 of its order dated 24 February 2012. The Hon'ble CIT(A) has stated in his order that the aforesaid agreement is "not compiçtely authenticated" as the person named Mr. DP (the name of the person being Mr. David Price) has signed on behalf of the Applicant Company as well as other entities included in the agreement. 1.2. The Applicant wishes to put forth before the Hon'ble Bench that the above mentioned point was never put forth by the Hon'ble CIT(A) to the Applicant during the course of the appellate proceedings. Accordingly, the Applicant was never granted an opportunity to provide its explanation / information on it. the Applicant wishes to respectfully submit the following documents evidencing that Mr. David Price has signed the agreement under discussion on behalf of the Applicant Company in the capacity of its director. Further, he was also a director in SHL (UK) Ltd. and hence the agreement was signed by him on behalf of SHL (UK) Ltd. as well. a) Minutes of the board meeting on 12 September 2003 wherein Mr. David Price is appointed as director of SHL (India) Pvt. Ltd. b) Minutes of the board meeting on 29 July 2005 wherein Mr. David Price resigned as director of SHL (India) Pvt. Ltd.

Ground II - Disallowance of expenditure claimed by the Company on account of technological support charges and subscription. 2.1. The Hon'ble CIT(A) had noted that the expenditure towards technology support charges of Rs. 1,46,08,103 has been apportioned to the Applicant Company considering the head count in India to have taken as 15. However, because the list of employees submitted by the Applicant company is only 14, he held that the entire expenditure could not be allowed. The Hon'ble CIT(A) never gave the Applicant an opportunity to explain why the number of employees has reduced from 15 to 14 and how this has a bearing on the allowability of the expenditure. In this regard, the Applicant wishes to state that one of the employees might have left the organisation during the year, the exact details of which are not available with the Applicant. 2.2. Further, during the course of the proceedings before the Hon'ble CIT(A), it was explained that the difference in the technology support charges was majorly on account of one-time charges incurred towards implementation of ERP software being SUN accounting systems and Salesforce.com (refer page 40 of Paper Book I). To support this contention, the Applicant wishes to submit a sample of the email correspondence between the personnel of SHL UK Ltd to various users of the accounting package (including India) evidencing the information / usage of the function 'account balance enquiry' in the SUN accounting system (enclosed at pages ig--255.

For Ground I. II and III i.e. for disallowance of license fees, technology support charges and subscription and regional recharge : Regarding the orders of the AO, TPO and DRP for the subsequent years: 3.1. In AY 2012-13, the department has accepted that SHL Group Limited (the parent company of SHL (UK) Ltd.) has rendered various intra-group services such as IT services, business support services including legal, finance and human resource services, and R&D services to the Applicant along with the grant of the license to market, distribute, rent and deliver the SHL Solutions to client in India to the Applicant. 3.2. The profile of the Applicant has been described as follow by the TPO in the order dated 21 December 2015 passed for AY 2012-13: Taxpayer's profile, The Assessee, as per TP Study report, provides Sill products (psychometric test) and solutions (`SHL Solutions') to the client in India in various industries viz., banking, Insurance, Retail, manufacturing, etc., and also perform R&D and business support. The assessee does not own any of the IF associates with the SHL solutions to its clients. The assessee also provides product consulting, training, one-to-one assessment and group assessment through qualified psychologist which includes science-based assessments, benchmark data, technologies and consultancy services to help organisation assess, select and develop the right people for the right roles. [Please refer para 3 page 1 of the Transfer Pricing Order] The limited dispute relevant for AY 2012-13 is with regard to the arm's length price paid by the Applicant to the group companies. 3.3. It is submitted that the department has accepted in AY 2012-13 that the Applicant has received services from its group entities is a relevant factor which has to be considered for AY 2008-09 because the fundamental facts have remained the same. 3.4 The Applicant craves leave to refer to and rely upon the following documents: The order of the Transfer Pricing Officer dated 21 December 2015 for AY 2012-130 0(4 The final Assessment order dated 31 January 2017 for AY 2012- 13. It is submitted that the said document could not be relied upon before the Hon'ble CIT(A) because it was received subsequent to the passing of the Order by the Hon'ble CET(A) for AY 2008-09. 3.5. For the sake of completeness, it is stated that in AY 2013-14 and AY 2014-15.the learned AO has disallowed the payments by the Applicant to its group concerns without appreciating that in AY 2012-13, similar payments were treated as allowable expenditure by the AO and there is no change in the facts and circumstances of this case. PRAYER: It is humbly submitted that the aforesaid documents go to the root of the matter and are necessary to be considered by the Hon'ble Tribunal to appreciate the dispute between the parties in the proper perspective. The Applicant prays that the Hon"ble Tribunal may be pleased to admit the aforesaid evidence and decide the appeal.

On the other hand Ld. DR opposed the said application.

We have heard the counsels for both parties and we have also perused the material placed on record as well as orders passed by the revenue authorities. We find that Ld. CIT(A) in its order has held that the agreement dated 01.12.14 entered into by the assessee with SHL UK is ‘not completely authenticated’ as the person named Mr. D.P. (Mr. David Price) has signed on behalf of the applicant company as well as other entities include in the agreement. Now by virtue of the present application, assessee wants to place on record the agreement evidencing that Mr. David Price had signed on behalf of the applicant company in the capacity of director. The assessee also wants to prove that Mr. David Price was also director of SHL UK.

In the net result, the appeal filed by the assessee stands allowed for statistical purposes.

In the net result, both the appeals filed by the assesses as well as revenue is allowed Order pronounced in the open court on 6th December, 2017 Sd/- Sd/- (Rajendra) (Sandeep Gosain) लेखासदस्य / Accountant Member न्याययकसदस्य / Judicial Member मुंबई Mumbai;यदनांकDated : 06.12.2017 Sr.PS. Dhananjay