TaxTMI 
TaxTMI 
2020 (4) TMI 293
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2. The appellant company is, inter alia, engaged in the manufacturing and trading of telecommunication network equipment and other related services related to telecom equipment. The assessee is a wholly owned subsidiary of Nokia Siemens Networks BV. It is engaged in manufacturing and trading of telecommunication network equipments and network design, installation and commissioning. The assessee also manages networks for major telecom operators and provides software services to its associated enterprises ("AEs"). The appellant company also provides software development and certain network management support services. Further, NSN India rendered certain marketing support services to its AEs. With this background of the appellant's business profile, we will now take up the assessee's appeal in ITA No. 909/DEL/2016. ITA No. 909/DEL/2016 [Assessee's appeal for A.Y 2011-12] 3. Ground No. 1 is general in nature and needs no adjudication. 4. Ground No. 2 relates to the addition on account of unearned revenue amounting to Rs. 62,84,26,537/-. 5. Ground No. 3 relates to disallowance of provision of liquidated damages. 6. Ground No. 4 relates to disallowance out of exp....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... disallowance of a sum of Rs. 17,61,99,671/- towards provision for liquidated damages. During the year, the assessee has claimed provision for liquidated damages to the tune of Rs. 17,61,99,671/-. The assessee stated that in terms of the purchase order received from customers, liquidated damages @ 0.5% per week subject to a maximum of 0.7% or such other rate as per the relevant contract would be imposed for the late delivery of equipment. The stipulation in the purchase order clearly shows that the liability for liquidated damages is certain, accrued and is not dependent upon the happening of any event other than delay in deliveries. As the company defaulted in the delivery terms, the liquidated damages have been rightly considered as business expenditure. The company is following the method on a consistent basis. When the payment was actually made the accounts were adjusted with reference to any remission or waiver that the company may get in respect of damages payable for the late delivery and the same was brought to tax u/s 41(1) of the IT Act, 1961 by crediting the liquidated damages account. The AO held that the provision made for liquidity damages a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....et in respect of damages payable for the late delivery and the same was brought to tax u/s 41(1) of the Act by crediting the liquidated damages accounts. Therefore, the impugned amount was not only the provision but the actual amount of the liquidated damages pertaining to the period of delay falling within the previous year relating to the assessment year under consideration. The Ld. CIT(A) categorically stated that the assessee was following this method consistently. We, therefore, do not see any valid ground to interfere with the factual findings given by the Ld. CIT(A) and accordingly do not see any merit in the ground raised by the Department." 30. Respectfully following the findings of the coordinate bench, we direct for the deletion of the addition of Rs. 57,93,45,721/-. The Ground no. 3 is accordingly allowed." 30. On finding parity of the facts with the facts of the year under consideration, we find no reason to differ with the findings of the coordinate bench. Respectfully following the same, we direct the Assessing Officer to delete the addition of Rs. 13,95,98,167/-. Ground No. 3 with all its sub-grounds is allowed. Disallowance out of Expenditur....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... TP ADJUSTMENT 35. Facts on record show that while determining the aggregate TP adjustment of Rs. 91,60,15,553/- in respect of certain international transactions undertaken by the assessee during the year under consideration, namely, (a) provision of marketing support services (b) provision of telecom technical services, and (c) provision of warranty support services. 36. In so far as the items at (a) and (c) are concerned, we find that in A.Y 2010-11 [supra], the coordinate bench has considered these issues and have followed the decision given in A.Y 2009-10. The relevant findings read as under: "39. Ground no. 7 relates to the transfer pricing adjustments amounting to Rs. 1,17,24,04,607/-. The adjustments have been made in respect of the international transaction under taken by the appellant namely provision of marketing support services and provision of warranty support services. We find that a similar transfer pricing adjustment was made in AY 2009- 10 in respect of market support service segment and the matter travelled upto the Tribunal and the coordinate bench in ITA No. 2810/Del/2014 has decided this issue as under: "44. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....utive rollback years commencing from the previous year 2009-10 to previous year 2012-13. However, we find that the FAR analysis of the year under APA applicable from assessment year 2010-11 to be read as (2014-15) can also be used for the year under consideration since the TP adjustment is of a very small amount being 1.01 crores. Considering the facts in totality, we direct the TPO to accept the TSS segment as part of network division for bench marking the international transaction which means that this segment should be taken with the main network division of aggregated approach for bench marking." 42. Since, the facts of the case in hand are identical to the facts of AY 2009-10. Respectfully following the findings of the coordinate bench (supra), we direct accordingly. Ground no. 7 is allowed." 37. In so far as technical support services is concerned, the TPO has used the same comparables as for warrantee support services and has made computation of ALP on the same lines which is as under: Operating cost 5,12,26,035/- Arm's length margin 29.15 Arm's length price 6,61,58,424/- Price shown in the international transactions 5,27....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Rs. 3,45,94,107/-. 42. Before us, the ld. DR read the relevant clauses of the draft assessment order and placed strong reliance on the findings of the Assessing Officer. 43. Per contra, the ld. counsel for the assessee stated that in the immediately preceding year, similar disallowances were made in A.Y 2009-10 and the DRP directed the Assessing Officer to delete the disallowance and the Revenue did not prefer any appeal against the order of the DRP and, therefore, the findings given by the DRP has attained finality. 44. We have given thoughtful consideration to the orders of the authorities below and have also considered the directions of the DRP u/s 144C(5) of the Act dated 18.12.2014 for A.Y 2010-11. It is true that while making the disallowances, the Assessing Officer followed the findings given in A.Y 2010-11 and the DRP while deleting the disallowance have followed the directions given in A.Y 2010-11. Since the Revenue did not prefer any appeal for A.Y 2010-11, the directions of the DRP have attained finality. 45. Further, we find that the facts and circumstances and underlying issues are identical during the year under consideration also. Therefore, consider....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dentical issue has been considered by us in assessee's appeal hereinabove in ITA No. 909/DEL/2016 vide ground No. 2. For our detailed reasoning given therein, Ground No. 2 is allowed. 54. Ground No. 3 relates to disallowance of TDS recoverable written off. 55. During the course of scrutiny assessment proceedings, the Assessing Officer found that the assessee has claimed an amount of Rs. 9,09,12,903/- on account of bad debt and advance written off. The assessee was asked to justify its claim. In its reply, the assessee explained that an amount of Rs. 14.26 crores has been debited to the Profit and Loss Account under the head 'Bad debts and advances written off'. It was explained that the said write off comprises of: a) TDS receivables Rs. 9.09 crores. b) Security deposits and advances Rs. 5.17 crores. 56. The Assessing Officer was of the opinion that since the assessee is not a banking company and in order to claim bad debts, the assessee was required to satisfy the conditions of section 36(2) of the Act, failing which the TDS receivable and security deposits and advances are not in the nature of income declared in earlier year. The Assessing Officer furth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r Assessment Year 2008-09. The relevant findings of the co-ordinate bench read as under: "14. In view of the above factual and legal position, it has become necessary to verify whether the assessee had recognized the income as and when the services are rendered or goods are dispatched and subsequently, whether the assessee written off the difference amount of deficit payment and the amount under the TDS certificate issued, in their books of accounts. It would be conveniently verified by the learned AO and if he finds that initially the assessee recognized the total invoice amount and subsequently, identified the bad debt with reference to the deficit payment by the party and the amount under TDS certificate issued. On verification of compliance with these two conditions, learned AO will allow this expense. Ground Nos.3 and 3.1 are allowed for statistical purposes." 63. Respectfully following the findings of the co-ordinate bench [supra] we direct accordingly. Ground No. 3 is treated as allowed for statistical purposes. 64. Ground No. 4 relates to disallowance of provision for liquidated damages. 65. An identical issue has been considered by us in assessee's appeal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctions before the DRP but without any success. 72. Before us, the ld. counsel for the assessee stated that similar issue arose in Assessment Year 2004-05 and 2005-06 and the Tribunal has decided the issue in favour of the assessee in ITA No. 3202/DEL/2014 for Assessment Year 2004-05. The ld. counsel for the assessee drew our attention to the computation of income and pointed out the assessee has added back provision of Rs. 69.67 crores and then claimed a deduction for provision for forseeable loss utilized during the year amounting to Rs. 34.53 crores. It is the say of the ld. counsel for the assessee that the assessee has been consistently following a practice of first creating provision and in the year provision is created, it is added back in the computation of income and in the year when the actual losses are claimed, it is deducted in the computation of income. The ld. counsel for the assessee stated that this being the first year of actual claim of loss, the same should be allowed. 73. Per contra, the ld. DR strongly supported the findings of the TPO and stated that it is not known whether the claim has been actually verified by the Assessing Officer. 74. We have giv....