Tribunal decision favors assessee, directs deletion of additions, re-examination of Transfer Pricing, and dismissal of Revenue's appeal.

The Tribunal allowed the assessee's appeal in part, directing the deletion of additions related to unearned revenue and provision for liquidated damages, among others. The Tribunal also directed re-examination of Transfer Pricing adjustments and upheld the exclusion of certain comparables for determining the Arm's Length Price. The Revenue's appeal was dismissed on various grounds, and the Tribunal provided specific directions for verification and deletion of certain additions. Overall, the Tribunal's decision favored the assessee on several issues while dismissing the Revenue's contentions.

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Issues Involved
1. Addition on account of unearned revenue.
2. Disallowance of provision for liquidated damages.
3. Disallowance out of expenditure in foreign currency.
4. Disallowance out of technical training expenditure.
5. Transfer Pricing (TP) adjustment.
6. Disallowance of expenses for molds and tooling, project equipment and components written off, and repair and maintenance expenses.
7. Exclusion of certain comparables for determining the ALP of international transactions.
8. Disallowance of TDS recoverable written off.
9. Disallowance of utilization from provision for foreseeable losses.

Detailed Analysis

1. Addition on account of unearned revenue
The Tribunal found that a similar issue was considered in the assessee's own case for the Assessment Year (AY) 2010-11, where it was held that the unearned revenue, which was offered for tax in subsequent years, should not be added. Respectfully following this precedent, the Tribunal directed the Assessing Officer (AO) to delete the addition of Rs. 62,84,26,537/-. Ground No. 2 was allowed.

2. Disallowance of provision for liquidated damages
A similar issue was considered in AY 2010-11, where the Tribunal held that the provision for liquidated damages, being a definite and ascertained liability, should be allowed as a business expenditure. Following this precedent, the Tribunal directed the AO to delete the addition of Rs. 13,95,98,167/-. Ground No. 3 was allowed.

3. Disallowance out of expenditure in foreign currency
The Tribunal found that if the school fees of employees' children, paid by the assessee, were treated as perquisites in the hands of the employees, it should be considered as part of salaries. The issue was restored to the AO to verify this treatment. Ground No. 4 was allowed for statistical purposes.

4. Disallowance out of technical training expenditure
The Tribunal noted that the amount of Rs. 18.94 crores was a contra entry inadvertently shown under the head "details of expenditure in foreign currency." The issue was restored to the AO to verify the ledger accounts and delete the addition if found correct. Ground No. 5 was allowed for statistical purposes.

5. Transfer Pricing (TP) adjustment
The Tribunal considered the TP adjustments for marketing support services, telecom technical services, and warranty support services. For marketing and warranty support services, the Tribunal followed the decision from AY 2009-10, directing the AO/TPO to re-examine the issue based on new documentary evidence. For telecom technical services, the Tribunal noted that these should be clubbed with warranty support services for benchmarking. The TP adjustment was directed to be deleted. Ground No. 6 was allowed.

6. Disallowance of expenses for molds and tooling, project equipment and components written off, and repair and maintenance expenses
The Tribunal noted that similar disallowances made in AY 2009-10 were deleted by the DRP, and the Revenue did not appeal against this decision. Therefore, the Tribunal upheld the DRP's findings for the current year, dismissing Ground Nos. 1 to 3 of the Revenue's appeal.

7. Exclusion of certain comparables for determining the ALP of international transactions
The Tribunal noted the existence of an Advance Pricing Agreement (APA) between the assessee and CBDT, covering the transactions for the rollback years, making the Revenue's grievance regarding the exclusion of comparables infructuous. The appeal of the Revenue was dismissed.

8. Disallowance of TDS recoverable written off
The Tribunal followed its earlier decision in AY 2008-09, remanding the issue to the AO to verify whether the assessee had recognized the income and subsequently written off the TDS receivable. Ground No. 3 was allowed for statistical purposes.

9. Disallowance of utilization from provision for foreseeable losses
The Tribunal noted that the assessee had consistently followed a practice of adding back provisions in the year they were created and claiming deductions in the year of actual loss. The Tribunal directed the AO to allow the deduction for the write-off, as the write-back had been accepted as part of the income. Ground No. 5 was allowed.

Conclusion
- ITA No. 909/DEL/2016: Allowed in part for statistical purposes.
- ITA No. 6376/DEL/2017: Dismissed.
- CO No. 188/DEL/2016: Dismissed.
- ITA No. 1655/DEL/2016: Allowed in part for statistical purposes.

The order was pronounced in the open court on 28.01.2020.

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