TaxTMI 
TaxTMI 
2020 (10) TMI 24
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.... assessee against the assessment order passed u/s 143 (3) read with Section 144C of The Income Tax Act, 1961[ The Act] dated 5/12/2016 passed by The Additional Commissioner Of Income Tax, Special Range - 8, New Delhi (The Learned Assessing Officer/ AO ) wherein the returned income of Rs. 1,132,764,007 370 filed by the assessee on 29/11/2012 is assessed at Rs. 1,515,053,700/-. The assessee has raised following grounds of appeal.- "1. That the assessing officer erred on facts and in law in completing assessment under section 144C read with section 143(3) of the Income-tax Act ("the Act") at an income of Rs. 151,50,53,700 as against the returned income of Rs. 113,27,64,370 under normal provisions of the Act. Transfer Pricing issue: 2. That the assessing officer/DRP erred on facts and in law in making an adjustment of Rs. 11,70,02,000 to the arm's length price of the 'international transaction' of provision of IT enabled services on the basis of the order passed under section 92CA(3) of the Act by the Transfer Pricing Officer ('TPO'). 2.1 That the DRP/TPO erred on facts and in law in not appreciating that the appellant being a routine back office support serv....
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....in rejecting the contention of the assessee regarding risk adjustment, allegedly holding that the computation of risk adjustment provided by the assessee is vague and without any basis. Corporate Tax Issues: Disallowance of Management Services Fees 3. That on the facts and in the circumstances of the case and in law, the DRP/ assessing officer erred in disallowing under section 40(a)(i) of the Act, expenditure of Rs. 20,03,73,067 incurred on account of management services fees, allegedly on the ground that the appellant failed to deduct tax at source therefrom under section 195 of the Act. 3.1 That the DRP/assessing officer erred on facts and in law in holding payment made to Groupe Steria SCA ('Steria France') towards management services fees to be in nature of fees for Technical services ('FTS') in terms of Article 13 of India-France Double Tax Avoidance Agreement ('the DTAA'). 3.2 That the DRP/ assessing officer erred on facts and in law in erroneously relying upon the order of the Authority of the Advance Ruling ('AAR') without appreciating that the findings of AAR are perverse in light of the favorable order passed by the jurisdicti....
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....Rs. 9,84,43,288 4.2 That the DRP / assessing officer erred on facts and in law in not appreciating that both the 'export turnover' and total turnover have to be computed on the same basis for the purpose of computing deduction under section 10AA of the Act. 4.3 That the DRP/ assessing officer erred, while making the purported adjustment from "the export turnover", following the assessment order for preceding assessment years, without appreciating that the said issue has already been decided by the ITAT in favour of the appellant in assessment year(s) 2003-04 to 2009-10. 5. That the DRP / assessing officer erred on facts and in law in not allowing deduction under section 10AA of the Act in respect of expenses disallowed under section 40(a) of the Act to the extent of Rs. 10,01,22,742, computed by apportioning the aggregate disallowance of Rs. 20,03,73,067 to Noida-4 unit on the basis of turnover. 5.1 That the DRP/ assessing officer erred on facts and in law in not appreciating that disallowance of deduction under section 10AA of the Act cannot be made with respect to increased profits on account of statutory disallowances. Disallowance of....
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....which cannot be adjudicated in isolation of the other grounds of the appeal, hence, the additional ground may also be heard and disposed of along with the other grounds of appeal. 5. The assessee submitted that the aforesaid additional ground of appeal raises a purely a legal issue and therefore it should be admitted and adjudicate on merits. The assessee relied upon the decision of the honourable Supreme Court in case of National thermal Power Co Ltd versus Commissioner of income tax 229 ITR 383 and also the decision of June Corporation of India versus CIT 187 ITR 688. Along with the additional ground, the assessee submitted that they chart wherein it is stated that assessee has filed the return of income on 29/11/2012 and the draft assessment order thereon was passed on 30 March 2016. The DRP issued its direction on 22 November 2016 and the due date for passing final assessment order u/s 153 (1) read with Section 153 (4) of the act was 31st of March 2016 whereas the final assessment order has been passed on 5 December 2016. Therefore it was submitted that this is a purely legal issue, which should be admitted. 6. The learned authorised representative vehemently supported th....
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.... 11. Ground number 1 of the appeal is general in nature, no specific arguments for advanced, the specific arguments related to each of the ground, which comprised in ground number one dealt with separately, this ground is dismissed. 12. Ground number 2 of the appeal is against the adjustment of Rs. 117,002,000 to the arm's-length price of the international transaction of IT enabled services. In substance, in ground number 2.3 of the appeal the assessee objected to the comparables included by the learned that transfer pricing officer namely (1) E Clerx services Ltd, (2) Infosys BPO Ltd, (3) TCS E serve Ltd, (4) informed technologies Ltd and (5). B N R Udyog limited (segment). The ground number 2.1 - 2.8 are various sub grounds of the transfer pricing adjustment. However they revolve around the above five comparables only. 13. The assessee is engaged in the business of software development, maintenance and IT enabled services. It filed its return of income on 29/11/2012 declaring income of Rs. 1,132,764,370/-. The brief profile of the assessee shows that it is a subsidiary of a UK company. It provides system integration, enterprise solutions, software develop....
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....me were considered to be at arm's-length. The learned transfer pricing officer rejected the comparability analysis of the assessee, applied its own filter, applied various judicial precedents, considered the objection of the assessee, applied the working capital adjustment, selected 10 comparable companies and found working capital adjusted profit level indicator of OP/OC average at 28.53%. Thereafter, he proposed an adjustment of Rs. 117,002,000 to the IT enabled services. He did not make/proposed any adjustment to software services. Accordingly order u/s 92CA (3) of the income tax act 1961 was passed on 29 January 2016 by The Joint Commissioner Of Income Tax, Transfer Pricing Officer 3 (1), New Delhi[ The ld TPO] 15. The learned assessing officer passed draft assessment order on 30 March 2016 determining total income of the assessee at Rs. 114,46,78,666/- against the returned income by the assessee of Rs. 113,27,64,370/-. Over and above, the above stated transfer pricing adjustment of Rs. 117,002,000 to the ITeS segment of the assessee, the learned assessing officer made a. disallowance u/s 40 (a) (i) of Rs. 200,373,067/- for non-deduction of tax on remuneration for m....
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.... Ltd 303 CTR 284(Page 503 of Case Law Paper book - Transfer Pricing) upheld the exclusion of Wipro Ltd. on the basis that the company has a significant brand presence and brand value of an entity has a significant role in the ability to garner profits and negotiate contracts. The said decision of the Hon'ble High Court has been upheld by the Hon'ble Supreme Court in SLP (CC) No. 32469/2018.(Page 504 of Case Law Paper book - Transfer Pricing). Similarly in the case of M/S AVAYA INDIA PVT. LTD.(ITA No. 532/2019) (Page 420 of Case Law Paper book - Transfer Pricing; para 21 onwards), the Hon'ble Delhi High Court rejected companies having high brand value as comparable to captive service provider. 19. It is submitted that (2) TCS E serve Ltd. enjoys benefits associated with the brand name 'TATA' as has been held by the Hon'ble Delhi High Court in the case of PCIT vs B.C. Management Services (P.) Ltd 403 ITR 45 (Delhi) (Page 204-205 of Case Law Paper book - Transfer Pricing; para 13 onwards), wherein the Hon'ble High Court upheld the exclusion of this company on account of the brand value associated with 'TATA' brand. The Hon'ble Delhi Bench of the Tribunal in the appellant's own case....
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....to the brand of the comparables with the brand of the assessee, assessee enjoys a global brand. He therefore submitted that this comparable couldn't be excluded. 21. With respect to TCS E serve Ltd, he referred to page number eight of the direction of the learned DRP and stated that it has been held that TCS E serve Ltd is also engaged in low-end ITeS services and therefore it was held to be functionally comparable. He further stated that the turnover was also not considered as criteria for excluding any comparable. 22. With respect to the other judicial precedent relied upon by the learned authorised representative it was submitted that it cannot be held that if comparable X is found to be functionally different then assessee Y, then it should be excluded in case of assessee A. He further submitted that judicial precedent for the comparability analysis couldn't be applied in such a manner. 23. We have carefully considered the rival contention and perused the orders of the lower authorities. There is no dispute on the functional profile of the assessee. The only dispute is with respect to selection of only two comparable companies namely Infosys BPO Ltd and TCS E serve Ltd....
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....vices and being a part of the Infosys Group, 'Infosys', it thus enjoys significant brand presence and brand value plays a significant role in its ability to generate profit. The Hon'ble Delhi High Court in the case of Pr. CIT Vs. Oracle (OFSS) BPO Services Pvt. Ltd. in ITA No.124/2018 upheld the exclusion of entity on the basis of significant brand presence on entity on the basis of significant brand presence and brand value of an entity. This decision of the Hon'ble High Court of Delhi was later upheld by the Hon'ble Apex Court in SLP (CC) No.32469/2018. On identical lines, the Hyderabad Bench of ITAT in the case of Hyundai Motors India Engineering. Vs. ITO in ITA NO.1850/Hyd/2012 directed the exclusion of Infosys BPO Ltd. from the final set of comparables by holding that, "....'presence of a brand commands premium price and Steria (India) Ltd. Vs. ACIT the customers would be willing to pay, for the services/produced of the company. Infosys BPO is a established player who is not a only a market lead but also a company employing sheet breath in terms of economies of scale and diversity and geographical dispersion of customers. The presence of the aforesaid f....
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....e, it is imperative to analyze the functions, Assets and Risks of comparable for each year to decide for its inclusion or exclusion. In view of our above findings, we have perused the standalone financial statements of Infosys BPO Ltd for the financial year 2011 - 12. On careful appraisal of the details of the expenses in note number 2.16 at page number 17 of the balance sheet, it shows that it has incurred an expenditure of brand building and advertisement expenditure of Rs. 55,381,916/- during the year compared to Rs. 20,256,326/- in the immediately preceding year. On appraisal of the statement of profit and loss account at page number 6 of the annual report the revenue from business process management services is Rs. 1312 crores whereas the turnover of the assessee is Rs. 626 crores. Therefore, we do not find multiple- X difference in the turnover of the company to exclude this company on the issue of turnover. However there is a brand expenditure incurred by Infosys BPO Ltd and therefore in pricing of the products of that comparable company brand plays an important part. The learned departmental representative though argued that appellant has also a bigger global brand however;....
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....ith respect to the transfer pricing adjustment proposed by the learned that transfer pricing officer included by the learned assessing officer in the assessment order, therefore ground number 2 along with all its sub grounds are allowed as directed above. 31. Now coming to ground number 3 of the appeal which is against the disallowance of management services fees u/s 40 (a) (i) of the act of Rs. 200,373,067/- incurred on account of management services fee on which no tax is been deducted, the learned authorised representative submitted that this issue is squarely covered in favour of the assessee by the following judicial precedents:- i. HC against AAR ruling reported in 386 ITR 390 [Pg 811-823] ii. HC for AY 2010-11 in ITA No. 762/2017 [Pg 805-807] iii. HC for AY 2011-12 in ITA No. 380/2017 [Pg 808-810] iv. Tribunal for AY 2015-16 in ITA No. 6687/Del/2019 [Pg 133-174 of CL PB] 32. The learned authorised representative took us through all the judgments stated above submitted in the case law paper book at various pages to show that the issue is covered in favour of the assessee. 33. The learned departmental representative relied upon the ....
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....s", then the question of the petitioner having to deduct tax at source from payment for the managerial services, would not arise. It is, therefore, not necessary for the court to further examine the second part of the definition, viz., whether any of the services envisaged under article 13(4) of the Indo-UK Double Taxation Avoidance Agreement are "made available" to the petitioner by the Double Taxation Avoidance Agreement with France. 20. Mr Ganesh, learned senior counsel made a reference to the decision of the Income-tax Appellate Tribunal in Deputy CIT v. ITC Ltd. [2002] 82 ITD 239 (Kolkata), where the Protocol separately executed between the India and France which formed part of the Double Taxation Avoidance Agreement between the two countries was interpreted. It was held by the Income-tax Appellate Tribunal, and in the view of this court correctly, that the benefit of the lower rate or restricted scope of fee for technical services under the Indo-French Double Taxation Avoidance Agreement was not dependent on any further action by the respective Governments. It was held that the more restricted scope of fee for technical services as provided for in a Double Taxation A....
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....red as under : (i) The payment made by the petitioner to Steria France for the managerial services provided by the latter cannot be taxed as fee for technical services ; and (ii) The said payments are not liable to withholding of tax under section 195 of the Act. 25. Consequently, the further orders passed on November 21, 2014 against the petitioner under sections 201(1) and 201(1A) of the Act are hereby set aside." 36. Further, the learned authorised representative has submitted that this issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessee's own case for assessment year 2015 - 16 in ITA number 6687/Del/2019, as well as the decision of the honourable High Court for assessment year 2010 - 11 and 11 - 12. Therefore respectfully following decision of Coordinate bench where those orders were rendered following decision of Honourable High court, We hold that assessee is not liable to deduct tax at source on the above payment and therefore disallowance u/s 40 (a) (i) is not warranted . Thus, ground number 3 of the appeal of the assessee is allowed. 37. Ground number 4 of the appeal is against partial dis....
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....w/enhance the deduction by disallowance u/s 40 (a) of the act of Rs. 200,373,067. As we have already deleted the above disallowance as per ground, number 3 of the appeal of the assessee, ground number 5 does not survive and hence it is dismissed. 41. Ground number 6 is with respect to the disallowance of foreign-exchange loss of Rs. 55,854,852 on account of unrealized foreign exchange forward contracts entered into for hedging the export proceeds against the currency fluctuation holding the same to be contingent in nature. The brief facts of the case show that in the profit and loss account of this year the assessee has debited foreign-exchange fluctuation expenses of Rs. 19,005 crores. The assessee was asked about the details of such foreign expenses and it was found that assessee has booked the loss on account of Mark to market exchange fluctuation on forward cover contracts amounting to Rs. 24,59,04,852/- . The learned assessing officer noted that assessee has entered into several forward contracts in respect of foreign-exchange which have not been closed or match order till the end of the financial year 2011 - 12 and such forward contracts in respect of foreign-exchange has ....
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....by SIL on SL UK for the fee will be raised in two parts: 3.3.1 "MTP" invoice in arrears on a monthly basis for the services rendered for the month. The fees payable on the invoice will be based on the "Management Transfer Price" (MTP) charge out rates for each employee of SIL and 3.3.2. "Top-up* invoice raised on a periodic basis to charge a fee necessary to ensure that SIL makes the stated fixed return noted in clause 3.2 above for the period concerned. 3.3.2(1) For determining Top-up Invoice: "Cost" is defined as total gross cost excluding any foreign exchange currency loss/gain. The total cost is for this purpose will be cost related to related party transaction for determination of arm's length under transfer price legislation. 3.3.2(2) For determining Top-up invoice: "Revenue" is defined as inclusive of (a) Revenue as per clause 3.3.1 (b) Foreign exchange currency gain/loss if any (c) Other income earned out of regular business operations and (d) Top-up value to arrive at agreed return. Non-operational and other income, if any will be excluded for determining revenue for the purpose of determining the agreed return." From the....
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.... Rs. 19,00,50,000, thereby sustaining the disallowance of Rs. 5,58,54,486. In doing so, it was stated that assessing officer grossly erred in not appreciating that in case where loss is suffered in relation to foreign exchange contracts, the revenue element recognized is inclusive of the cost incurred along with mark up and the amount of foreign exchange loss suffered, which altogether, is reimbursed by the group company. However, where gain arises in foreign exchange contract, the amount of gain is reduced from the cost incurred by the assessee company and accordingly, only the net amount is reimbursed by the group company. On the contrary, had the appellant debited the amount of gross loss to profit and loss account being Rs. 24,59,04,852 (without setting off gains that would have been credited separately), then the assessing officer would have, in accordance with the directions of DRP, allowed the claim of the applicant in toto. Thus, it is respectfully submitted that the partial relief granted to the appellant deserves to be allowed in whole on the basis of submissions stated herein above. In accordance with the agreement entered into, the rates charged by the assessee compa....
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....sed by the group company (Rs. 134 in the present example - Rs. 100 + 14 + 20). However, where gain arises in foreign exchange contract, the amount of unrealized gain accruing or arising is reduced from the cost incurred by the appellant company and accordingly only, the net amount is reimbursed by the group company (Rs. 108 in the present example - Rs. 100 + 14 - 6). It would be appreciated from the illustrations stated above, that in either case, whether there is exchange fluctuation loss suffered by the appellant or gain earned thereon, there is no impact on the profit and loss account, since loss, if any, is recouped by the appellant and benefit of gain is passed on to the group company. Without prejudice, Ld AR submitted that although gains accruing on foreign currency transactions are also recovered from the group company having no impact on the Profit and loss account as stated supra. 43. On merits he submitted that appellant, in the previous year relevant to the assessment year 2012-13, followed the strategy of hedging foreign currency denominated export realizations by taking forward covers. Since these forward covers were taken by the appellant from various banks, the c....
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....atured as at the balance sheet date. In view of the above, loss arising on outstanding forward contracts of foreign currency, on mark to market basis, is an accrued/ascertained liability as at the end of the relevant year and, was therefore, allowable as business deduction, in accordance with the mercantile system of accounting. However, the assessing officer disallowed the MTM losses of Rs. 24,59,04,852 . Attention in this regard, is invited to AS-11, on 'Effect of Changes in Foreign Exchange Rates' as issued by the ICAI, which mandates the manner of recognizing profit or loss arising from foreign currency transactions in the nature of forward exchange contracts. Para 11 of AS-11, inter alia, lists the criteria for reporting foreign exchange transactions at subsequent balance sheet dates as under: 11. At each balance sheet date: (a) foreign currency monetary items should be reported using the closing rate. However, in certain circumstances, the closing rate may not reflect with reasonable accuracy the amount in reporting currency that is likely to be realised from, or required to disburse, a foreign currency monetary item at the balance sheet date, e.g., where th....
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....n by the assessee company are covered under the year under consideration and the accounting treatment accorded by the assessee company has been adopted on a consistent basis in light of the aforesaid accounting principles. In terms of the aforesaid Accounting Standard, where a forward exchange contract intended for trading purposes is recorded, the premium or discount on the contract is ignored and at each balance sheet date, the value of the contract is marked to its current market value and the gain or loss on the contract is recognized in the profit and loss account for the year under consideration. In accordance with the aforesaid, the assessee provided for loss of Rs. 24,59,04,852 suffered on account of fall in value of foreign currency loss as on the balance sheet date. He , in this regard, invited us to following extracts of the Notes forming part of the audited financial statements: "2.1 Significant Accounting Policies ....... (h) Foreign currency translation ......... (iv) Forward exchange contracts not intended for trading or speculation purposes The premium or discount arising at the inception of forward exchange cont....
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....ontract is recognized as income or as expense for the year. "The law may, therefore, now be taken to be well settled that where profit or loss arises to an assessee on account of appreciation or depreciation in the value of an asset, on conversion into another currency, such profit or loss would, ordinarily, be trading profit or loss if the asset is held by the assessee on revenue account or as part of circulating capital embarked in the business. But, if on the other hand, the asset is held as a capital asset or as fixed capital, such profit or loss would be of capital nature." (v) kind attention, in this regard, is further invited to the decision the Supreme Court in the matter of CIT v. Woodward Governor India (P) Ltd.: 312 ITR 254 (SC), wherein while affirming the decision of High Court, the Hon'ble Supreme Court has held that loss suffered by the assessee in respect of a revenue liability on account of exchange difference as on the balance sheet would be an item of expenditure allowable under section 37(1) in the year of accrual. (vi) Similar view has been taken by the Supreme Court in the decision of Oil & Natural Gas Corporation Ltd. vs. CIT: 322 ITR 180 wh....
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....cision of apex court in the case of Woodward Governor India (P.) Ltd. (supra) and special bench decision in the case of Bank of Bahrain and Kuwait (supra) decided the issue in favour of the assessee. (xii) Reliance in this regard is further placed on the following decisions wherein loss on account of "marked to market" arising as a result of revaluation of the un-matured forward contracts entered into the normal course of business at the end of the accounting period was held to be allowable as a business deduction: - Indusind Bank Ltd vs. ACIT: ITA No. 931/Mum/2004 (Mum) - ACIT vs. H. Dipak and Co : ITA No. 7629/Mum/2011 (Mum) - ADIT vs. British Bank of Middle East : 44 SOT 109 (URO) (Mum) - ADIT vs. Development Bank of Singapore: 46 SOT 122 (URO) (Mum) - JCIT vs. Dena Bank : 139 TTJ 81 (Mum) - Shinhan Bank vs. DDIT : 54 SOT 140 (Mum) - Societe Generale vs. DDIT : 21 ITR (Trib) 606 (Mum) - Dresdner Bank AG Commerzbank, AG vs. ADIT : 57 SOT 203 (Mum) - DCIT v. Nitrex Chemicals India Ltd: ITA No. 756/Del/2009 dated 03.08.2015 (Del) - Perfect Circle India Ltd v. DCIT: ITA No. 7241/Mum/20....
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....e, viz., 31.3.2012, the assessee incurred losses, in view of adverse exchange fluctuations. Such losses, under the mercantile system of accounting would be allowable deduction notwithstanding that the same have not been actually paid. The contention of the assessing officer that such loss represented notional loss is, it is respectfully submitted, erroneous and contrary to the decisions of the Supreme Court discussed supra, particularly the decision in the case of Woodward Governor (supra). 49. He submitted that in the impugned order, it is respectfully submitted, reliance is placed on the CBDT Instruction No. 3/ 2010 to disallow the aforesaid MTM loss on account of unrealized exchange of forward cover reinstatement, holding it to be a contingent loss. Instruction No. 3/2010, dated 23.03.2010 is an internal directive issued by CBDT to the assessing officers providing guidelines on allowability of marked to market loss on account of foreign currency derivatives. As per the aforesaid instruction, in respect of mark to market losses, i.e., unrealized losses, debited to the profit and loss account, the assessing officers have been instructed to disallow the same while computing the ....
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....nue expenditure. The aforesaid decision of Hyderabad Tribunal has been affirmed by Andhra Pradesh High Court in ITA No. 284/2014 vide order dated 23.04.2014. Reference in this regard is also invited to the decision of the Chennai Bench of Tribunal in the case of ACIT v. Lanco Tanjore Power Co Ltd in ITA No. 1322/Mds/2012 wherein loss arising to the assessee out of marking to market, the amounts due to it, netted with amount due from it, based on foreign exchange contract cover was held to be allowable deduction. In this context, it was held as under: "9............Thus, for a contract to be a foreign exchange derivative contract, its value should be derived from price movement in one or more underlying assets. Here, what the assessee had obtained was only a cover for the amount of foreign currency in respect of the fluctuations that could happen. It could never be categorized as a foreign exchange derivative contract. Being not a foreign exchange derivative contract, in our opinion, CBDT Instruction No.03/2010 mentioned above, was not at all applicable. As against this, Hon'ble Apex Court in the case of Woodward Governor India P. Ltd. (supra) has clearly held that loss in ....
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.... - DIT v. Escorts Cardiac Diseases Hospital: 300 ITR 75 (Del.) - CIT v. P. KhrishnaWarrier: 208 ITR 823 (Ker) - CIT v Harishchandra Gupta 132 ITR 799 (Ori) - CIT v. SewaBharti Haryana Pradesh: 325 ITR 599 (P&H) - CIT v. Rajasthan Breweries Limited.: ITA 889/2009 (Del) - SLP dismissed. 53. Therefore he submitted that department having accepted that the deduction in respect of MTM losses is allowable in the preceding year(s), the same stand ought not to be changed/ modified, during the year under consideration, even on the principle of consistency, particularly, when no new fact/ information has been brought on record for the same. 54. In response to this, the learned departmental representative vehemently supported the orders of the lower authorities. He further referred to the instructions issued by central board of direct taxes on this issue. He submitted that Mark to market loss cannot be said to be definite liability. It crystallized only when it actually materializes. Therefore, he submitted that this liability claimed by the assessee is neither ascertained nor definite but a contingent. 55. As in one of the grounds of appeal....
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....ions of Rs. 626.655 crores as per the audited financial statements includes cost-to-cost recovery of net foreign exchange loss of Rs. 19 crores (which in turn includes the MTM loss of Rs. 24.59 crores incurred by the appellant). The profit computation can also be cross verified from the segment-wise profit computation forming part of the Transfer Pricing Documentation of the appellant (copy enclosed herewith as Annexure 5, also placed at Page 484 of Merit PB-I). 5. In addition to the above, the appellant further wishes to place on record party-wise break up of revenue earned by the appellant, which comprises break up of MTP (Management Transfer Price) and LTP (Legal Transfer Price)/ true-up values of invoices raised on AEs. On sample basis, the appellant is furnishing invoice wise break up and corresponding invoices raised on Steria Ltd., UK, revenue wherefrom comprises 81% of the total revenue for the year. Refer Annexure 6. In view of the aforesaid, it is respectfully submitted that on account of the cost-to-cost recovery of MTM loss (included in the net foreign exchange loss) incurred by the appellant, there is no impact on Profit and Loss account of the appell....
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....wherefrom comprises 81% of the total revenue for the year. All these evidences need to be closely examined by the learned assessing officer to follow the direction of the learned dispute resolution panel. The direction of the learned dispute resolution panel is to only disallow the excess sum debited by the assessee in the books which is not been recovered. In view of this with respect to the submission of the assessee made during the course of hearing before us we set aside the whole issue before the learned that assessing officer with a direction to the assessee to show that the amount of loss that has been disallowed has also been recovered by the assessee from its associated enterprise. The learned assessing officer may examine the same and if it is found already been recovered by the assessee from its associated enterprise, to delete the disallowance. In view of this, ground number 6 of the appeal is allowed accordingly. 58. The ground numbers 7 - 11 are also raised against the disallowance of Mark to market loss. As we have discussed while deciding ground number 6 of the appeal of the assessee, setting aside the issue back to the file of the learned assessing officer with ....
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....loss making company incurring losses in financial years 2011-12 and 2012-13. 2.6 That the DRP/TPO erred on facts and in law in incorrectly computing the operating profit margin of CG-VAK Software & Exports at 18.61% as against the correct operating margin of 12.48%, considering provision for doubtful debts as non-operating. 2.7 That the DRP/TPO erred on facts and in law in not allowing appropriate risk adjustment to establish comparability on account of the appellant being a low- risk-bearing captive service provider as opposed to the comparable companies who were independent software service provider. 2.8 That on the facts and in the circumstances of the case and in law, the DRP erred in rejecting the contention of the appellant regarding risk adjustment, allegedly holding that the appellant failed to demonstrate risks undertaken by the appellant vis-a-vis comparable companies and provide any computation of risk adjustment claimed. Corporate Tax Issues: Disallowance of deduction under section 10AA 3. That the DRP/ assessing officer erred on facts and in law in restricting deduction allowable to the appellant under section 10AA ....
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....e average profit level indicator was 18.30% and thereafter proposed an adjustment of Rs. 279,058,181. The assessee filed an objection before the learned Dispute Resolution Panel who gave its direction on 2/3/ 2017 directing the assessing officer/transfer pricing officer to exclude from the comparability analysis two comparable companies , (1) Infosys Limited and (2) R Systems Ltd from the final set of comparables. Accordingly, the arm's-length price of the international transaction of IT services was determined by selecting 14 comparable companies whose average profit level indicator was 16.89%. Against this assessee is in appeal before us. 63. The first contention of the assessee is that there is an incorrect computation of operating profit margin of the assessee as foreign exchange income amounting to Rs. 77,507,000 is considered as a non-operating income. The learned dispute resolution panel directed the learned transfer-pricing officer to consider forex gain or losses arising from the fluctuation as operating income on expenditure both in the case of the appellant company as well as in the case of the comparable companies. However the learned that transfer pricing officer co....
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....e and whether it is borne by the assessee or it is on the associated enterprise. The learned transfer pricing officer after proper examination of the facts and decide issue on merits with respect to the forex loss. 66. The assessee has challenged the inclusion of following comparable companies (1) Larsen and Toubro InfoTech Ltd, (2) mind tree Ltd. It also contest that the comparable companies selected by the assessee in case of CAT Technologies Ltd has been wrongly excluded from the comparability analysis. 67. With respect to the Larsen and Toubro InfoTech Ltd the contention of the learned authorised representative is that that it has a strong brand value, the segmental information used does not have the allocation case are available/disclosed in the annual report, it is not functionally comparable as it also since products. 68. The learned departmental representative vehemently stated that this comparable company has been considered by the assessee in its transfer pricing study report at serial number three wherein the margin of this company on the basis of weighted average operating profit/operating cost was considered at 24.32%. It is stated that it is the comparable of....
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....enue from operation. The details of the same have been given in note number M showing that revenue is further bifurcated from overseas and domestic. As per significant accounting policies A - 2 (revenue recognition) it does not have any sale of software or product. Merely because in the operating expenses, it has some cost of what out items for resale of Rs. 27 crores, it cannot be said that it is also thus engaged in the sale of the products. This is also the finding of the learned dispute resolution panel at page number 5 of the direction. Therefore, we do not find any functional dissimilarity between the assessee and this comparable company. 71. The second argument of the assessee is with respect to the segmental information used by the learned transfer-pricing officer. It was submitted that the TPO has considered the industrial cluster segment as comparable for the purpose of the benchmarking analysis. However, the learned authorised representative submitted that there are certain unallocated expenditure and such information is not available in the public domain and therefore in the absence of the availability of the appropriate allocation to this company cannot be regard....
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.... interest is included as a part of the cost of inventories where it is so required as per AS 16, Borrowing Costs, read with AS 2, Valuation of Inventories and those inventories are part of segment assets of a particular segment, such interest is considered as a segment expense. In this case, the amount of such interest and the fact that the segment result has been arrived at after considering such interest is disclosed by way of a note to the segment result; (c) losses on sales of investments or losses on extinguishment of debt unless the operations of the segment are primarily of a financial nature; (d) income-tax expense; and (e) general administrative expenses, head-office expenses and other expenses that arise at the enterprise level and relate to the enterprise as a whole. However, costs are sometimes incurred at the enterprise level on behalf of a segment. Such costs are part of segment expense if they relate to the operating activities of the segment and if they can be directly attributed or allocated to the segment on a reasonable basis." Therefore, all the expenses, which does not qualify as pertaining to a particular segment, are required to ....
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.... he submitted that the above company should be excluded. The learned departmental representative repeated the same arguments, which he did make with reference to Infosys BPO Ltd and TCS E, serve Ltd for assessment year 2012 - 13. 73. We have carefully considered the rival contention on this point with respect to the comparable. This issue was never raised by the assessee before the lower authorities as it is evident from the direction of the learned dispute resolution panel as well as of the order of the learned TPO. However it is, true that at page number S - 623 this company has discussed about the branding of its own business. However it nowhere states that it is using 'Larsen and Toubro' brand but it is developing its own 'L and T InfoTech' brand, which normally everybody does. Therefore, it is not the case of the assessee that it is using an l & T brand and it has any added advantage. In view of this we find that Larsen and Toubro InfoTech Ltd cannot be excluded as it is functionally comparable by the assessee as well as the learned that TPO both. 74. The second comparable challenged is Mind tree Ltd stating that this company is functionally different as it is engaged in....
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....number 1 offers IT services. At point number 2.8 in revenue recognition it is also mentioned that the company derives its revenue primarily from software services. In its segmental report also speaks about that the company's operations predominantly relate to providing IT services and PE services. Therefore it is apparent that this company is not engaged in any sale of products further we do not find any mention in the standalone report that assessee has acquired any patents. This is also supported by the note number 3.4.1 wherein it has fixed assets and where the intellectual property is merely Rs. 607 million out of the total assets of Rs. 5820 millions. The learned dispute resolution panel has also given its finding at page number five - six of its direction, which also justifies inclusion of this comparable company. As in the standalone financial statement submitted before us we do not find any of the arguments of the learned authorised representative sustainable and supported by the information contained in the standalone financial statements we do not find any infirmity in the order of the learned that TPO/DRP in including the above comparable company. Thus, we confirm the fi....
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....ss making company. The standalone financial statement submitted before us of this comparable also shows that it is incurred losses though in financial year ended on March 2013 as well as on the year ended on March 2012 however no other data with respect to the earlier years were shown by the learned transfer pricing officer to show that it is a persistent loss making company. Therefore the rejection of this comparable by the TPO and DRP is not valid. Therefore, as it is functionally comparable, we direct the learned TPO to include this company in the comparability analysis. 80. The last challenge to the comparability analysis is with respect to the operating profit margin of one of the comparable C G Vak software and exports. The assessee's claim is that TPO has incorrectly computed the operating margin at 18.61% as against the correct margin after considering the provision for bad and doubtful debts should be 12.48%. We find that provision for bad and doubtful debt cannot be considered as non-operating expenditure as it results from the sale of services and part of the operating business of the assessee. Therefore, the learned TPO is directed to compute the correct operating ma....
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....arely covered in assessee's own case for assessment year 2004 - 05 and 2005 - 06, we direct the learned assessing officer to exclude the above sum from the total turnover of the assessee. Accordingly, ground number 3 is allowed. 86. Ground number 4 is with respect to the granting short credit of advance tax paid to the extent of Rs. 9,770,469 to the assessee. On careful consideration of the rival arguments raised before us we direct the assessing officer to consider the credit of advance tax paid to the assessee of the above sum after proper verification. Accordingly, ground number 4 of the appeal is allowed. 87. Ground number 5 is with respect to levy of interest u/s 234B and 234B of the act, which are consequential in nature, and therefore ground number five of the appeal is dismissed. 88. In the result ITA number 3992/Del/2017 for assessment year 2013 - 14 of the assessee is partly allowed. 89. Now we come to appeal of the assessee for assessment year 2014 - 15 in ITA number 5745/del/2018 filed by the assessee against the order of the learned that assessing officer passed u/s 143 (3) read with Section 144C of The Income Tax Act on 18 July 2018 determining total incom....
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....er/TPO erred on facts and in law in not allowing appropriate risk adjustment to account for the differences in the risk profile of the appellant, a low risk captive service provider and the comparable companies selected by the TPO. 9. That the assessing officer/TPO erred in rejecting the contention of the assessee regarding risk adjustment, allegedly holding that the computation of risk adjustment provided by the assessee is vague and without any basis. Corporate Tax Issues: Disallowance of deduction under section 10AA 10. That the DRP/ assessing officer erred on facts and in law in restricting deduction allowable to the appellant under section 10AA of the Act at Rs. 22,97,37,129 as against Rs. 23,12,73,820 claimed by the appellant in aggregate for Noida SEZ 2 and SEZ 3 unit. 10.1 That the DRP/ assessing officer erred on facts and in law in not excluding foreign currency expenditure in the nature of telecommunication charges of Rs. 1,15,22,112 [Rs. 87,75,804 and Rs. 25,46,308 respectively] from the 'total turnover' of Noida SEZ 2 and SEZ 3 unit, for the purpose of computing deduction under section 10AA of the Act. 10.2 That the ....
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.... India-UK DTAA. 11.5 That the DRP/ assessing officer erred on facts and in law in not appreciating that the said services provided by Steria France does not 'make available' technical knowledge, experience, or skill to the appellant, in order to be taxed as FTS in terms of Paragraph 7 of the Protocol read with Article 13 of the India-UK DTAA. 11.6 Without prejudice, the DRP / assessing officer erred on facts and in law in not appreciating that the said transaction could not be held as FTS in terms of performance rule in terms of Paragraph 7 of the Protocol read with Article 13(5) of India _ Israel DTAA and Article 12(5) of the India - Finland DTAA. 11.7 That the DRP / assessing officer erred on facts and in law in not appreciating that there was no involvement of use of technology/ technical services and the said services were provided through telephone, fax, email, etc., without any visit to India by the personnel of Steria France. 11.8 That the DRP / assessing officer erred on facts and in law in not appreciating that since the payments made to Steria France were not in the nature of FTS and accordingly, not chargeable to tax in India, ther....
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....additions made by the learned assessing officer in general. The specific issues raised by assessee in other grounds would cover this ground. Therefore, this ground is dismissed, as it is general in nature. 94. The only dispute in the transfer pricing adjustment is with respect to the arm's-length price of the IT software services having the international transaction value of Rs. 2,986,940,932/- which is benchmarked by the assessee adopting the Transactional Net Margin Method as the Most Appropriate Method Selecting the Profit Level Indicator of Operating Profit/Total Cost of eight comparable companies, whose Arithmetic mean on weighted average basis taking multiple year data was found to be 12.76% whereas the margin of the appellant was 18.64%, assessee submitted that its international transaction of provision of IT services is at arm's-length. 95. The learned transfer-pricing officer disturbed the comparability analysis of the assessee and selected 20 comparable companies whose profit level indicator of OP/OC was 30.66 % and proposed an adjustment of Rs. 302,750,765/- as per order passed u/s 92CA (3) of The Income Tax Act on 16 October 2017. 96. The learned assessing offi....
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....5% 99. The mainly assessee challenges the inclusion of the following comparables:- i. ABM Knowledge ware Ltd ii. Wipro Ltd iii. Third ware Solution Limited iv. Mindtree Limited v. Tata Technologies Limited vi. Persistent System vii. Sasken Technologies Ltd (Seg.) viii. Cybercom Datamatics Information Solution Ltd ix. Larsen & Toubro Infotech (seg) 100. In case of ABM Knowledge ware Ltd; he submitted that company fails the export sales filter. The TPO has applied the filter of rejecting the companies where export income is less than 75% of total sales. In this regard, it is submitted that ABM Knowledge ware has nil income from exports. (Page 12 of annual report paper book). Accordingly, it is submitted that the company does not satisfy the filters applied by the TPO and therefore ought to be excluded from the set of comparable companies. 101. The learned departmental representative submitted that no such submission was made before the lower authorities objecting that it fails the export filter. He further submitted that the assessee challenges based on only in two lines in annual report that th....
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.... company has separately capitalized patents, trademarks and technical knowhow in its balance sheet (Pg 123 of the annual report).Therefore it needs to be excluded. 104. The learned departmental representative submitted that appellant is objected to being functionally dissimilar and owning substantial intangibles. He submitted that it was not challenge before the learned dispute resolution panel. He further stated that it has been challenged year for the first time and therefore it should not be considered. He otherwise submitted that it might also be set aside so that decision of the lower authorities is available and ITA T does not become the first authority to decide it. 105. We have carefully considered the rival contention and perused the orders of the lower authorities. For comparability analysis, only the standalone annual report of the comparable companies required to be verified. The annual accounts of this comparable are furnished by the assessee at page number 324 - 361. It is considered. Merely because assessee has not challenged the same before the learned dispute resolution panel, when it is not the comparable selected by the assessee, we are of the view that it ....
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....rom which it is not possible to determine whether the it has revenue from sale of products or revenue from sale of services, especially when this comparable is selected by the TPO, we are afraid that such a comparable can be retained for the comparability analysis. Therefore, for the reason of inconsistency in annual accounts of Third ware Solutions Limited , we direct the learned transfer-pricing officer to exclude this comparable from the comparability analysis. 109. With respect to Mind Tree Limited ld AR submitted that this company is functionally different as it is engaged in development and sale of software products and only intangibles. It is submitted that the company is undertaking a wide range of activities in the domain of analytics and information management, application development and maintenance, business process management, business technology consulting, cloud, digital business's, independent testing, infrastructure management services, mobility, product engineering and SAP services (Pg 76 of annual report). At page 30 of the annual report it is stated that the CTO of the company leads the technology thrust through platforms and products for non-linear revenue g....
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....ort of the comparable. Therefore, we confirm the order of the learned DRP & TPO for including the Mind tree Ltd as comparable company. 112. In case of Tata Technologies Limited it was submitted that as per the related party schedule contained in the audited financial statements, the company has entered into the following transactions with its related parties which is 87.68% of the its revenue: Particulars Amount (in Rs Crore) Pg No. of AR Purchase of products 0.16 Sale of products 47.68 Services received 29.54 Services rendered 699.65 Total RPT 777.03 Sales 886.18 RPT/Sales 87.68% In view of the previously mentioned, since the company fails the RPT filter i.e. the related party transactions of the company are more than 25% of its revenue, the company ought to be excluded from the set of final comparable companies. 113. The learned departmental representative submitted that appellant has challenged that in that the RPT filter fails. He submitted that certain challenges been made for the first time and therefore same should not be entertained however he st....
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....ersistent Systems Ltd cannot be regarded as an appropriate comparable for the purpose of benchmarking analysis. 116. The learned departmental representative vehemently supported the order of the learned dispute resolution panel and the learned transfer-pricing officer and submitted that they have discussed the functionality of this company in detail and therefore this company is functionally comparable. 117. We have carefully considered the rival contentions and perused the standalone financial statement of the above company placed in the paper book at page number 110 - 153 (annual report page number 156 - 198). In its revenue stream as per page no 166 of Standalone Financial statements its revenue recognition shows that:- "Income from software services Revenue from time and material engagements is recognized on time proportion basis as and when the services are rendered in accordance with the terms of the contracts with customers. In case of fixed price contracts, revenue is recognized based on the milestones achieved as specified in the contracts, on proportionate completion basis. Revenue from royalty is recognized in accordance with the terms of the rele....
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....rther, the argument of the intangible assets owned by that company has been taken up for the first time. The argument of the segment allocation keys not known is also not relevant. He submitted that it is not the case of the assessee that segmental information given by that comparable company is not in accordance with the relevant rules of disclosure by the government. He further submitted that the margin selected by the assessee earlier was based on multiple year data and when transfer-pricing officer adopted single year data which is not disputed by the assessee, this company becomes functionally dissimilar for assessee. 121. We have carefully considered the rival contentions and standalone annual financial statements (abridged) submitted by the assessee. It requires to be noted First that this comparable company was selected by the assessee accepting segmental information given in the annual accounts taking the multiple year data and considering the weighted average PLI of the comparable of OP/OC at the rate 7.45%. Subsequently, when the transfer-pricing officer held that multiple year data couldn't be allowed, the same segment of the same comparable companies profit level in....
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....d by assessee, to submit the standalone financial statement of the comparable company and direct the learned Transfer Pricing Officer to deal with the argument of the assessee, that it has a significant intangibles and decide inclusion or otherwise of this comparable. Accordingly, we set aside this examination, as relevant data are not produced before us, to the learned transfer-pricing officer. 122. In case of Caybercom Datamatcis Pvt Ltd ld AR submitted that as per the annual report, the company acts as consultants and advisors on information / internet system and surveyors of information services (Pg ______ of annual report paper book). Further, the company is engaged in the business of development, testing, implementation, migration of home grown and other applications, marketing and manufacturing of various information and technology products and services. Accordingly, it is submitted that the nature of services provided by this company is different from the software services provided by the appellant and therefore, this company cannot be regarded as an appropriate comparable for benchmarking analysis. However, the TPO has considered this company as comparable on the basis ....
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....bro' and therefore cannot be regarded as comparable to the appellant, a captive service provider. In the annual report, the company has stated that the brand of the company has been increasing across the globe (Pg _____of annual report paper book). It is submitted that the TPO has considered Industrial Cluster Segment as comparable for the purpose of benchmarking analysis. However, it is submitted that the information required for allocation of common expenses is not available in the public domain. Accordingly, it is submitted that in the absence of availability of appropriate allocation keys, this company cannot be regarded as an appropriate comparable. It is submitted that the company is engaged in provision of services as well as sale of products. At page S-1227 (Pg _____of annual report paper book) of the annual report it is stated that the company won awards for innovative products like Sapphire and Campus Next. Further, the company has recorded a sum of Rs. 54.82 crores towards cost of bought out items for resale, which substantiates the contention of the appellant that the company is engaged in sale of software products (pg _________ of annual report paper book). It is furth....
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....is comparable company has been correctly included. However, we note that for this year assessee has also challenged this comparable on one more different account, which is required to be dealt with. Assessee has stated as reason in stating that it has entered into a restructuring activity during the year as according to the financial statements, the company transferred its product engineering services business to a group company and therefore it should be excluded. The standalone financial statements are submitted before us as per page number 46 - 82 of the paper book. The assessee's reliance on pages number S1225 of the annual report wherein the directors report is available. The Directors' report says that this company has initiated and completed the transfer of its product engineering services business unit to another company effective from January 1, 2014. Therefore, it is apparent that the revenue of that division was included in the revenue of the comparable company from 1 April 2013 to 31 December 2013. On careful reading of note number AB, AD it is apparent that the details of the discontinued businesses are provided. This argument was raised by the assessee before the lear....
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....income tax act. The appellant had, during the year under consideration, claimed deduction under section 10AA of the Act aggregating to Rs. 23,12,73,820 in respect of profits derived from its unit(s) - Noida SEZ 2 and SEZ 3. The said claim was supported by the report of accountant duly certified by an independent auditor in Form 56F. During the relevant previous, the appellant, in its unit(s) - Noida SEZ 2 and SEZ 3 unit, had incurred foreign currency expenditure of Telecommunication Charges amounting to Rs. 1,15,22,112: Particulars Noida SEZ Unit 2 Noida SEZ Unit 3 Total (in INR) Telecommunication charges 89,75,804 25,46,308 1,15,22,112 Total 1,15,22,112 The appellant, for computing allowable deduction under section 10AA of the Act, reduced such telecommunication charges from 'export turnover' as well as 'total turnover' of each of the units. The assessing officer, however, recomputed the deduction allowable under section 10AA of the Act from Rs. 23,12,73,820 to Rs. 22,97,37,129 on the ground that telecommunication charges needs to be reduced from the value of 'export turnover' but not from 'total turnover' for the purpose of computing deduction und....
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....e bench, following the order of the honourable High Court, decided the issue in favour of the assessee holding that assessee is not required to deduct any tax at source u/s 195 of the act on management fees paid to the France entity and therefore disallowance for non-deduction of tax invoking the provisions of Section 40 (a) (i ) is not sustainable. This issue is also decided by in case of the assessee for assessment year 2012 - 13 and 2013 - 14 by this order wherein the disallowance is deleted. For similar reasons given therein, we also direct the learned assessing officer to delete the above disallowance for non-deduction of tax. In view of this ground number 11 is allowed. 134. Ground number 12 along with its sub grounds is challenging the disallowance of payment made to Steria France of Rs. 100,197,482/- u/s 40 (a) (i) of the act for non-deduction of tax at source u/s 195 of the act on purchase of computer software licenses. During the course of assessment proceedings, the assessee furnished details in this regard showing payment of Rs. 100,197,482 Under the head repairs and maintenance (others) to the group company on which tax deduction at source has not been made. However....
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....f the entire copyright, or rights Under a copyright in a specified geographical region has been conveyed, it would be an assignment, but when the right to use has been given it would be a license, which is nothing but a right in respect of a copyright. What is taxed as royalties is the amount received as a consideration for use or the right to use and not outright purchase of the right to use an asset. Royalty is thus a consideration, including a lump sum consideration, for the transfer of all or any right (including the granting of a license) in respect of a copyright, patent, trademark, design and model, or secret formula et cetera. In order to acquire the limited right to use the software, one does not require the copyright, one merely requires to become a lawful possessor of the computer program. The license usually gives licensee the same limited right to bona fide use which Section 52 of the Copyright act otherwise allowed to and since the granting of license involves granting of right to use the copyright, consideration for use of copyright is covered in both income tax act and DTAA. Clearly what is licensed in these transactions is the copyright and other intellectual prope....
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....imited by Shares, incorporated under the laws of France. Steria France had negotiated with external suppliers and subscribes centralized purchases from them, in the interest of all its group affiliates. The objective for undertaking centralized purchases is to bargain competitive prices for the Steria Group's purchase requirements. Under the terms of the Agreement entered by the appellant, Steria France would purchase material (hardware or software) or services and thereafter resale within the Group entities for subsidiaries' local needs. Such resale, as per the Agreement, is done without rendering additional services and without adding any markup. Apropos the aforesaid Agreement, the appellant has purchased certain software licenses from Steria France in the course of the year. The licenses, as per the invoice, are as under: - Paulo Alto & Wildfire -Software License charge - Messaging 360 One - Call Windows - Antivirus + Tactem - IBM License cost - Active Directory costs - Microsoft Maintenance - One IT Catalogue - Desktop Services SCCM The aforesaid payments, not b....
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....e Apex Court. After considering the appellant's rejoinder dated 17.04.2018, the DRP upheld the aforesaid disallowance on the ground that Department's SLP against favorable decision of the jurisdictional Delhi High Court in the case of DIT v. Infrasoft Ltd.: 39 taxmann.com 88 is pending before the Apex Court. The aforesaid disallowance made the assessing officer/DRP is unsustainable and unwarranted for the reasons elaborated hereunder: - The payments do not get covered in terms of Article 13 of India France DTAA, which deals with taxability of royalty paid by an Indian resident to French resident. The definition of royalty under the India-France DTAA is much narrower in scope than the definition under the Act. - In the present case, the software purchased by the appellant are standardized and not customized products and in terms of the contracts with the external suppliers/ Steria France of such software. The appellant acquires a non-exclusive, non-transferable right to distribute the software and is prohibited from copying, modifying or further development of the software. Therefore, the purchase of software by the appellant in terms of the Agree....
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.... xxxxxx 5.18 Accordingly, respectfully following the ratio of the judgment of the Hon'ble Delhi High Court in DIT vs. Infra Soft Ltd (supra), we are of the considered the opinion that tax was not required to be deducted at source in respect of the payment made to Steria France for the purchase of computer software license/s and therefore, in view of the above cited judgment we direct the AO/TPO to delete the disallowance. (emphasis supplied) In view of the position taken by the Hon'ble Tribunal in appellant's own case for the other assessment year and the legal position laid down by the jurisdictional Delhi High Court, it is respectfully submitted that since the payments made under the agreement were to acquire software products or purchase of copyrighted article and not to exploit/use the copyright itself, the said payments did not fall within the meaning of royalty under Article 13 of the India France DTAA. Therefore, the disallowance made by the DRP/ assessing officer in terms of provisions of section 40(a)(i) of the Act is not warranted." 136. The learned authorised representative therefore submitted that issue is squarely covered in favour of the asses....