AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (7) TMI 951
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....sessee is a private limited company engaged in rendering human resources consulting services, pay roll outsourcing services. It is also having a captive services unit for rendering services of consulting and human resource outsourcing (HRO) business to Hewitt Affiliate. It is also involved in development and export of computer software and business process outsourcing (BPO) services to Hewitt Affiliates. 3.1 Assessment for the AY 2007-08 was originally made on 31.10.2011 under section 143(3) r.w.s 144C of the Act on total income of Rs. 42,17,42,170/- as against the 'nil' income declared in the return filed on 31.10.2007. Subsequently, the assessment was set aside under section 263 of the Act. Consequent thereto, the Ld. AO made fresh assessment determining total income at Rs. 49,47,46,450/- under section 143(3) r.w.s 263 of the Act on 23.02.2015 disallowing therein deduction of Rs. 7,30,04,275/- under section 10A and restricting the claim of deduction at Rs. 53,55,75,131/- as against Rs. 60,85,79,406/- claimed by the assessee. 3.2 For AY 2008-09 the original assessment was made under section 143(3) r.w.s 144C of the Act on total income of Rs. 53,53,01,615/- as against the income ....
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....es to 10A eligible units as its income is exempt and allocated disproportionately higher expenses to non 10A eligible units to reduce their taxable income. Accordingly, the Ld. AO made disallowance of certain expenses claimed under non 10A units considering it to be based on wrong allocation methodology. 6.1 The Ld. DR raised common contentions with regard to corporate overhead charges and management fee. He took out the relevant extract of the agreement relating to expenses claimed under the aforesaid two heads of expenses. According to him, perusal of agreement pertaining to corporate overhead charges shows that it talks of delivery of services (Global Corporate Services and Global Business Services) for Affiliates (i.e. the assessee company). As regards management fee, the agreement shows that it talks of delivery of services (regional management functions, finance functions, human resource, marketing, sales and strategy, learning and development and information technology) for Affiliates (i.e. the assessee company). The contention of the Ld. DR is that these services are meant for capacity building of resources so that they can deliver required services to third parties. If su....
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....ness of captive units (BPO division) was directly dependent on the business of non 10A units. 7. In his written submission for both the years the Ld. AR reiterated the same arguments and contentions which were advanced and raised before the Ld. CIT(A). It has been stated that the assessee in its non 10A units provides (a) consulting services to clients located in India and abroad through its Global Sourcing Division; Talent and Organisation Consultancy Division ("TOC"); Talent and Organisation Consultancy Analytic Division ("TOCA"); Talent and Organisation Consultancy (Global Services) Division; and Retired Fund Management Division ("RFM") and (b) pay roll outsourcing services to the affiliates and clients through its Multi-Process Human Resources Outsourcing Division ("MP HRO") and Human Resource Outsourcing Division ("HRO"). In its 10A units the assessee has (a) Technology Development Centre Division ("TDC") engaged in the development and export of software to Hewitt Affiliates, acting in the capacity of captive service provider of Consulting and HRO businesses owned by Hewitt Affiliates and is an approved 10A unit. (b) Business Process Outsourcing Services ("BPO") rendering, in....
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....g these services. 7.3.1 The methodology adopted by the assessee is that cost of regional resources serving consulting division and human resource outsourcing division are first transferred to Asia Pacific Headquarter. Thereafter, these costs (plus mark-up) are charged to various group entities which are utilising services of these regional resources (including the assessee) based on their revenue contribution from consulting division and human resource outsourcing division. 7.3.2 It is submitted that the cost incurred (including mark-up) by Hewitt Associates LLC has been charged to Hewitt group companies (including the assessee) based on their revenue from consulting and human resource outsourcing divisions only (i.e. non 10A units). Thus, the assessee contended that only the costs (including mark-up) relating to consulting (TOC, TOAC and RFM) from Asia Pacific Headquarter divisions have been invoiced to the assessee. Accordingly, the same has been duly accounted for in consulting division's P & L Account. 7.3.3 It is, thus submitted that the charges made by Hewitt Associates LLC to the assessee under Regional Headquarters Services Agreement has been calculated after considering....
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....p companies (including the assessee) based on their revenue from consulting and human resource outsourcing divisions only (i.e. non 10A units). 7.5.2 The Ld. AR submitted that the charge made by Hewitt Associates LLC to the assessee under Corporate Service Agreement has been calculated after considering revenue from non 10A units only and no revenue of captive units (i.e. 10A units) has been considered for calculating charge under Corporate Service Agreement. 7.5.3 It has been the contention of the Ld. AR that the aforesaid charges were allocated based on actual consumption of related services by the businesses viz. Consulting and human resource outsourcing division. Software development services and BPO services segments are not availing these services. Accordingly, question of receiving any benefit and corresponding charge does not arise. 7.5.4 It is, thus, submitted that charge under Corporate Service Agreement amounting to Rs. 3,44,35,160/- in AY 2008-09 has been made to the assessee for consulting and human resource outsourcing division only and therefore has been duly accounted for in consulting and human resource outsourcing division's P & L Account. These expenses accoun....