Tax Tribunal: Appeal partly allowed for AY 2015-16, allowed for AY 2016-17. Issues remitted for review.

The Tribunal partly allowed the appeal for AY 2015-16 for statistical purposes and allowed the appeal for AY 2016-17. The Tribunal remitted the issue of downward adjustment towards management fees paid to AE back to the AO/TPO for re-examination. It upheld the addition towards billing in excess of revenue, rejected the refund of excess DDT paid, denied the deduction of cess paid in computing business income, and quashed the proceedings for AY 2016-17 due to procedural irregularity.

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Issues Involved:
1. Downward adjustment towards management fees paid to AE.
2. Addition towards billing in excess of revenue.
3. Refund of excess Dividend Distribution Tax (DDT) paid over and above the DTAA rate.
4. Deduction of cess paid in computing business income.
5. Procedural irregularity and breach of time limit for completion of proceedings.

Summary:

1. Downward Adjustment towards Management Fees Paid to AE:
The first issue involves the downward adjustment of Rs. 3,78,78,968/- towards management fees paid to AE. The Tribunal found that the issue is covered in favor of the assessee by the ITAT's decision in the assessee's own case for earlier assessment years. The Tribunal remitted the issue back to the AO/TPO to re-examine the management fees paid to AE in light of various evidences filed by the assessee, following the TNMM method adopted by the assessee.

2. Addition towards Billing in Excess of Revenue:
The second issue concerns an addition of Rs. 52,31,62,000/- on account of billing in excess of revenue. The AO added this amount to the total income, arguing that the assessee follows mercantile system of accounting and income accrues when bills are raised. The Tribunal upheld the AO/DRP's decision, stating that revenue should be recognized as and when income accrues and arises to the assessee, irrespective of receipt.

3. Refund of Excess DDT Paid over and above the DTAA Rate:
The assessee sought a refund of excess DDT paid over the DTAA rate. The Tribunal rejected this ground, following the ITAT Special Bench decision in the case of Total Oil India Pvt. Ltd., which held that non-resident shareholders cannot take advantage of the lower tax rate prescribed in DTAA where DDT is applicable.

4. Deduction of Cess Paid in Computing Business Income:
The assessee claimed deduction of cess paid in computing business income. The Tribunal rejected this ground, following the Supreme Court's decision in JCIT v. Chambal Fertilizers & Chemicals Ltd., which held that cess on income tax paid is not deductible while computing income from business.

5. Procedural Irregularity and Breach of Time Limit for Completion of Proceedings:
For AY 2016-17, the assessee argued that the TPO's order dated 01.11.2019 was beyond the timeline prescribed under section 153(1) & (4) of the Act, rendering the draft assessment order, DRP directions, and final assessment order null and void. The Tribunal agreed, following the ITAT Chennai decision in M/s. Verizon Data Services India Pvt. Ltd., and quashed the TPO's order, draft assessment order, DRP directions, and final assessment order.

Conclusion:
The appeal for AY 2015-16 was partly allowed for statistical purposes, and the appeal for AY 2016-17 was allowed. The Tribunal's order was pronounced on May 10, 2023, in Chennai.

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