AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2023 (3) TMI 809
X X X X Extracts X X X X
X X X X Extracts X X X X
....f technical and marketing support services to its AEs, reimbursement and recovery of expenses to/from its AEs. We shall discuss the functions performed under each of the segments while discussing the adjustment determined by the TPO. 3. In the TP study maintained for the year under consideration, the Assessee treated all the international transactions as being at arm's length. During the year, the Assessee also recovered certain advertisement expenses from Intel USA ("Intel") and Microsoft USA ("Microsoft"). Since the transactions were with unrelated parties, the assessee did not benchmark the same. During the course of assessment proceedings, reference was made to the Transfer Pricing Officer (TPO). The TPO passed an order dated 30.01.2014 under Section 92CA of the Income-tax Act, 1961 ("the Act") determining a TP adjustment aggregating to Rs. 14,50,39,631/-, comprising of the following: A. Adjustment determined by bifurcating the marketing and business support services segment into ITES segment (adjustment of Rs. 2,47,46,975/-) and MSS segment (adjustment of Rs. 2,75,92,656/-); and B. Adjustment of Rs. 9,27,00,000/- determined in respect of the warranty expen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rable companies while determining the arm's length price. 19. The learned AO / learned TPO / Hon'ble DRP erred in not considering provision of doubtful debts as non-operating item. 20. The learned AO / learned TPO / Hon'ble DRP erred in using data as at the time of assessment proceedings, instead of that available as on the date of preparing the TI documentation for comparable companies while determining arm's length price. 21. Business Support Services 21.1 The learned AO / learned TPO / Hon'ble DRP erred in arbitrarily arriving at segmental profit/loss with respect to business support services segment and bifurcating it in technical support services and marketing support services. 21.2 The learned AO / learned TPO / Hon'ble DRP erred in analyzing the business support services segment and accordingly, erred in not appreciating the fact that the services cannot be segregated as the activities of the same are intertwined. 22. Technical Support Services 22.1 The learned AO / learned TPO / Hon'ble DRP erred in arbitrarily arriving at segmental profit wish respect of technical support services se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rable by the learned AO/ learned TPO should be rejected: * Asian Business Exhibition & Conferences Limited; * HCCA Business Services Private Limited * Priya International Limited Housing Co. Ltd. 23.4 Without prejudice, the learned AO / learned TPO / Hon'ble DRP erred in excluding companies are functionally comparable to the assessee. Specifically, the Appellant believes that the IT(TP)A Nos.400 & 562/Bang/2015 Page 7 of 73 following companies should be accepted by the learned AO/learned TPO: * New Age Entertainment Limited * Concept Communication Limited * India infoline Marketing Services Limited * Marketing Consultants & Agencies Limited * Coloscemn Media Private Limited 23.5 The learned AO / learned TPO erred in not following the directions of the DRP and erred in not giving the relief for allowing working capital adjustment. 24. Warranty Cost 24.1 The learned AO / learned TPO / Hon'ble DRP erred in not following the directions given by the Hon'ble DRP and arbitrarily identifying the warranty cost recoverable and imposing a markup on the said warranty cost. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es. On the erroneous basis that what the Assessee does is merely dissemination of information using IT media, the TPO held that the services are in the nature of ITES. The ld AR also submitted that even if the services rendered are considered to be ITES, the services that are being classified as ITES are rendered by the Assessee to third party customers of the AE on behalf of the AE. Since the so called ITES are being rendered to third parties, it cannot be subject matter of TP assessment. The ld AR also submitted that the major post-sales support in relation to the warranty support and co-ordination, i.e., call centre support is not being provided by the Assessee directly to its AEs. The Assessee has outsourced these services to another Group Entity in India which is compensated at an arm's length mark-up of cost plus 15%. The ld AR drew our attention to the decision of this Tribunal in the Assessee's own case for the assessment year 2009-10 (Order dated 18.03.2022 passed in IT(TP)A Nos. 269 and 217/Bang/2014) and submitted that the above issue is squarely covered by this decision. 12. The ld DR supported the orders of lower authorities 13. We heard the rival submissions ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....4 reads as follows:- "Having considered the submissions, and on perusal of the details filed, we note that as per the Services Agreement entered between the assessee and Dell Global BV (Singapore branch) dated 01.01.2009, the assessee is required to prove certain technical support to the customers who purchase products from the assessee, to provide logistics support to ensure delivery of products and services to the customers and also provide marketing support and Sales promotion services. The technical services are provided to the customers of products, and as such cannot be compared to the function of provision of ITES service. Therefore. we are no in agreement with the TPO's view in comparing such services to call entre activity, and there is no information for the TPO to take such a view. Besides, we note that all these functions is provision of logistics support, marketing support and technical support have interrelation in the facts & circumstances of the case. Therefore, it would not be appropriate to segregate them into Technical Services & Marketing Supports services. Accordingly, the TPO's action in such segregated analysis is disapproved. The TPO is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....echnical support services include services in relation to products sold by DGBV which are under warranty period. In relation to warranty services, the cost of third party service provider and spares are borne by the Assessee, and recovered from DGBV. The warranty obligation as regards the sales made by the AEs directly in India is wholly on the AEs and the Assessee only provides co-ordination and support services as regards the same, for which it is compensated on cost plus 5%. The co-ordination and support services includes call centre support, cost for third party services for assistance to customers of the AEs, etc. The cost of spares and parts to be replaced under the warranty are borne by the AEs. 18. The TPO made an adjustment on the basis that the Assessee had not made any recovery towards the warranty services and the out of pocket warranty charges paid to third parties and the same was upheld by the DRP. 19. The ld AR submitted that the Assessee has in fact recovered the expenses incurred in respect of the warranty services, with a mark-up of 5%. Therefore, no further adjustment is warranted. The ld AR also submitted that the above issue is squarely covered by the de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....986 contending that income has accrued to the assessee during the current financial year and hence, should be assessed to tax during the current year. * The learned AO ought to have appreciated that as the contracts extend beyond the current year, the revenue accrues over the period of time which obligates the Company to render services. No cost incurred The learned AO has erred in contending that, the Company has deferred only revenue and no corresponding cost has been deferred. The learned AO ought to have appreciated the fact that the outflow of cost/resources would occur only in subsequent period when the actual service are rendered and no cost would be incurred in the current period which requires deferral. The learned AO and the Honourable DRP ought to have appreciated that recognizing the entire consideration as income during the current year would tantamount to taxing the gross receipts and not the profits or gains arising from such sale. Right to receive The Honourable DRP has erred in stating that the appellant has the right to receive the income as even when customers opt to cancel the contract, the unutilize....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s also rejected. In the final assessment order, the AO confirmed the addition. 26. Ld AR submitted that - * "The learned AO has erred in disallowing an amount of Rs. 1,248,869,986 contending the income has been accrued to the assessee during the current financial year and hence should be assessed to tax during the current year. * The learned AO ought to have appreciated the submission of the assessee that, contracts for services extending beyond the current financial year, only the proportionate revenue pertaining to the current year can be assessed to tax. The portion of revenue in relation to the services to be provided in future. the income would accrue only during such period and not in current financial year. * The above view has been upheld by many appellate authorities in various judicial precedents wherein it was held that, "Deposits or advances received by the assessee became trading, receipts when the assessee became entitled to appropriate the same to its income at the time of rendering the service- * The learned AO also ought to have appreciated the upward and downward movement in the deferred revenue account for various financial ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... learned AO has also alleged that, the liability created in respect of the deferred revenue is not disclosed in a transparent manner in the balance sheet and has been camouflaged under the head sundry creditors. The learned AO ought to have appreciated the fact that, the financial statements disclosures are guided by the provision as per Schedule VI of Companies Act 1956. The Company has followed the disclosure requirement as per the prescribed provision of Schedule VI to Companies Act 1956 prevailing, at the time of finalization of financial statements for FY 09-10. * Notwithstanding our above contention, we submit that should the said deferred revenue be taxed in the current year, corresponding relief ought to be provided in the future years where the same is offered to tax." 27. The working for deferred service income was provided before the DRP vide submissions dated 12th November 2014 giving the order-wise listing of the consideration deferred to subsequent year out of current year sales and the consideration deferred during the earlier years recognized as revenue during the current year on accrual basis containing, inter-alia, the following details were m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....yment. The right to receive the income vests with the assessee as soon as the services are purchased by customers. Since, the assessee employed mercantile system of accounting, income would accrue with receipt and it cannot be considered as advance income, which could be deferred for tax purpose." 32. However it is submitted that upon cancellation of the contract, the Assessee has to refund the entire consideration less cost of services already rendered. On perusal of a sample warranty terms (pages 2527- 2540, relevant page 2537, Volume 6 of the paperbook) we notice that the assessee would refund the money upon premature cancellation of warranty service. The extract of the clause in the agreement is reproduced below for reference:- "Cancellation. Subject to the applicable product and services return policy for Customer's geographic location, Customer may terminate this Service within a defined number of days of Customer's receipt of the Supported Product by providing Dell with written notice of cancellation. If Customer cancels this Service within that period, Dell will send Customer a full refund less the costs of support claims, if any, made under this Service....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s also important to note that, in case the contract is cancelled, the Assessee is liable to refund the consideration received originally, less cost of services already rendered. From the detailed working and sample invoices submitted before the DRP (pages 2294 and 2541 to 3192 of Volume 6 of the paperbook) that the when the services are rendered in a particular year, the revenue deferred to such year is recognized as revenue during such year (amortised) and offered to tax and therefore it is clear that the Assessee has been recognizing the revenue periodically on the basis of accrual and offered them to tax. 34. The coordinate bench of the Tribunal in the case in Schneider Electric IT Business India Pvt. Ltd. v. JCIT, LTU [ITA Nos. 299/Bang/2014 and 218/Bang/2014) dated 30.04.2019] has considered a similar issue and held that - "91. We have carefully considered the rival submissions. The first aspect which we would like to clarify is that it was not correct on the part of the AO to characterize the sum of Rs.5,38,22,153 as undisclosed income. The income is disclosed in the books of accounts but is not recognized for the purpose of income tax computation because of the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessment year in question. The Commissioner invoked section 263 and held that the entire amounts received in the previous year towards PWS Advances were trading receipts of the year directly connected with the business of servicing and repairs of tractors. He, accordingly, set aside the assessment. On appeal, the Tribunal upheld the Assessing Officer's action disagreeing with the finding of the Commissioner. On reference, the Hon'ble Punjab & Haryana High Court held as follows: "The taxability of income normally depends upon the system of accounting followed by the assessee. Even in the case of an assessee following the mercantile system of accounting, a mere claim, by the assessee in respect of an amount without the right to claim cannot form the basis for taxability. Where the assessee follows the cash system of accounting, the taxability is to be based on receipt basis and not on accrual basis. Receipt, either accrued or deemed, is not made a condition precedent to taxability. Profits or gains are taxable if they have accrued or have arisen or are, under the Act, deemed to have accrued or arisen to the assessee in the accounting year. Generally, income mus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d as an income of the assessee and is not eligible to tax. 95. The Mumbai ITAT in the case of IOT Infrastructure & Energy Services Ltd. (supra) had to deal with identical case. The facts of that case were that the Assessee had not offered for tax an amount being difference between progress billing as on 31-3- 2007 and cumulative revenue booked as per accounts as on 31-3- 2007 in respect of three contracts. The assessee explained to Assessing Officer that progress billing was inclusive of advances received from customers which amount did not reflect work performance. It was also explained that progress billing was done not only for amount of work done but also for mobilisation and other advances receivable by it as per terms of relevant contract and that mobilisation and other advances received by assessee by raising progress billings did not represent income of assessee at time of raising progress bills and same therefore had no effect whatsoever on income of assessee, which was recognised by method of percentage of completion. The Assessing Officer, however, held that amount due to customers as shown by assessee was nothing but understatement of its profits and added same....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... expenses. The ld AR also submitted that the DRP failed to take into consideration the details of expenditure to the extent of Rs.6,10,32,535 (at pages 2277-2279 & 8935-8937 Vol. 6 & 12 of PB). The ld AR further submitted that the supporting documents for the balance amount is submitted before the Tribunal in the form of additional evidence and prayed for the admission of the same. 38. The ld. DR supported the order of the lower authorities and objected to the admission of additional evidence. 39. We have considered the rival submissions and perused the material on record. We notice that the reason for disallowance of the expenditure by the lower authorities is that the assessee has failed to produce any evidence supporting the claim. The assessee has now submitted the additional evidence substantiating the claim of the expenditure which goes the root of the issue. For a proper adjudication of the issue and for substantial cause, the additional evidence is admitted and taken on record. We also notice that the DRP has not considered the evidences submitted by the assessee before the DRP. Therefore we remit this issue to the AO for verification of the evidence afresh and decisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ture of debts. The ld AR further submitted that the advances written off in assessee's case is in the nature of a business loss which is incurred in the normal course of business 43. The ld. DR supported the orders of the DRP. 44. We have considered the rival submissions and perused the material on record. The advances written off are towards fixed deposits which are no longer recoverable and the service tax not recoverable. We notice that the assessee has made submissions before the lower authorities in this regard. The contention of the AO / DRP treating this write off as bad debts is not right as these amounts are paid in the normal course of business and written off as it is no longer recoverable. In our considered view these are losses incurred in the normal course of business and cannot be termed as debts written off. Further the submission of the ld AR that the service tax amount as and when recovered is offered to tax has merits. It is submitted that the amount in the year under consideration is claimed basis the actual write off against the reversal of the provisions. The fact that provisions when created during the assessment year 2008-09 and 2009-10 are disallowed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... =A+B-C 129,25,47,831/- (ii) The methodology followed by the assessee in estimating the warranty cost and tracking the related expenses is briefly explained as under:- a. The assessee has a specialized warranty accounting team which tracks the incidents reported and associated cost of providing warranty services for each of the product; b. The total sales are divided into various categories of IT hardware products based on the warranty period attached to each such product. The faults are tracked on the basis of a unique identification number attached to each IT hardware so as to identify cases of faults; c. Thus, the warranty cost is nothing but the product of number of incidents reported and cost involved in servicing each unit under various categories of products; d. The system of tracking the faults and related warranty costs is extremely scientific with minimal margin of error as it is based on actual faults reported and costs incurred in servicing them. e. The assessee neither creates the provision customer wise nor the utilization of such provision for warranty would be tracked customer wise. The tracking is based on th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orted the order of the DRP. 51. We have considered the rival submissions and perused the material on record. We notice that issue of allowability of warranty expenses was considered by the Tribunal in assessee's own case for AY 2009-10 (supra) where it was held that - "12.5 We have heard rival submissions and perused the material on record. As regards the provision for warranty, the learned AR explained that the methodology followed by the assessee for estimating warranty cost is on a scientific basis and it is based on past years experience. The detailed explanation of the learned AR is recorded in para 12.2 (supra), hence, the same is not reiterated. The Tribunal in assessee's own case for assessment year 2002- 2003, 2003-2004 and 2005-2006 had dismissed the appeal of the Revenue and held that the provision of warranty claimed is based on scientific basis and held that it is entitled for deduction. The relevant finding of the Tribunal in assessee's own case Dell International Services India (P.) Ltd. v. Dy. CIT [2018] 89 taxmann.com 44 (Bang. - Trib.), reads as follows:- "21. We have given a very careful consideration to the rival submissions. The bas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cable to AY 2005-06 also. For the reasons stated above, we do not find any merit in ground No. 3 raised by the revenue and accordingly the same is dismissed." 12.5.1 Similar view has been held by the Tribunal in assessee's own case for assessment year 2002-2003 and 2003-2004 in ITA Nos.362 & 363/Bang/2007 (order dated 18-3-2016,). The relevant finding of the Tribunal reads as follows:- '5. Learned AR of the assessee submitted that in the earlier order, though the Hon'ble Tribunal held that provision for warranty was made following scientific method and the past history, still the matter was remanded to the AO for verification. He submitted that when the entire material is on record, it is not in the fitness of things, to remand the matter to the file of the AO. Our attention was drawn to the material on record wherein the methodology and basis of estimating warranty provision was made out which reads as under: "5. Warranty provisioning policy - Methodology and basis of estimating warranty cost: The company has submitted a detailed methodology of estimating the warranty provision before the AO vide its submission on 17-3-2006 for AY 20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....i.e. products sold in past for which warranty period has not expired and products sold during the year with a warranty commitment) for which warranty period has not expired. Thus, based on the above accounting methodology, as the reversals get adjusted with the provision required to be created in the subsequent years, it, in effect, leads to the same being credited to the profit and loss account in the subsequent year. In view of the parity of basis of provision for warranty for assessment years 2002-2003, 2003- 2004, 2005-2006 and the relevant assessment year, the ruling of the Tribunal in assessment years 2002-2003, 2003-2004, 2005- 2006 is squarely applicable for this assessment year also. 12.5.3 We noticed in the final assessment order, the A.O. had commented that the ITAT order in assessee's group case, namely, CIT v. Dell International Services India (P.) Ltd. (wrongly mentioned as assessee's group company) has been set aside by the Hon'ble High Court and restored to the Tribunal with a direction to examine the claim of warranty. In this background, it is necessary to recapitulate the background of the Tribunal order for assessment years 2002-2003 and 200....
X X X X Extracts X X X X
X X X X Extracts X X X X
....what is described in para 12.5.2 of the above order. Respectfully following the decision of the coordinate bench in assessee's own case we direct the AO to allow the provision made towards warranty. Since we have directed the AO to allow the entire provision made towards warranty, the alternate claim of the ld AR to consider the amount actually spent substantiated by evidences has become academic and does not warrant adjudication. Disallowance under section 40(a)(ia) of rebates given to customers (Ground No. 5) 53. During the assessment proceedings, the AO called for details of taxes deducted at source on various payments including an amount of Rs. 20,37,71,038/- was in the nature of rebate given to distributors. The assessee submitted before the AO that taxes were not liable to be deducted at source on the rebate given to distributors. The AO made an overall disallowance of Rs. 41,56,91,891/- (including the above amount of Rs. 20,37,71,038/- towards rebate) for want of evidence, and on the ground that Section 40(a)(ia) of the Act is applicable on the payments. On the assessee's submission that out of the amount of Rs. 41,56,91,891/-, an amount of Rs. 20,37,71,038/- represent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o-principal and therefore there is no tax is liable to be deducted at source. This is evident from a reading of the agreement at page 2063 of Volume 5. 55. The ld AR drew our attention to the various clauses of the agreement to substantiate that the transaction of the Assessee with its distributors in relation to rebate / discount is on principal-to-principal basis and hence the provisions of 194H are not applicable. Further the ld. AR relied on the following case laws in this regard - - Harihar Cotton Pressing Factory v. CIT (Reported in [1960] 39 ITR 594 (Bombay) - Ahmedabad Stamp Vendors Association v. UOI (Reported in [2002] 124 Taxman 628 (Gujarat)) - CIT v. Ahmedabad Stamp Vendors Association (Reported in [2012] 25 taxmann.com 201 (SC - Bharti Airtel Ltd. v. DCIT (Reported in [2014] 52 taxmann.com 31 (Karnataka) - CIT v. United Breweries Ltd. (Reported in [2017] 80 taxmann.com 123 (Andhra Pradesh and Telangana) - CIT v. Intervet India (P.) Ltd. (Reported in [2014] 49 taxmann.com 14 (Bombay - ACIT v. Acer India (P.) Ltd. (Order dated 05.10.2018 passed by this Hon'ble Tribunal in ITA No. 1940/Bang/2018) 56. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g reasonable opportunity of being heard to the assessee. This ground is allowed for statistical purposes. Disallowance of future lease rentals (Ground No. 6 ) 59. The Assessee is inter alia engaged in the business of giving computer systems on finance lease. In terms of Accounting Standard AS-19 dealing with the accounting for lease transactions, the principal amount of lease instalments to be received over the entire lease period was shown as sales made during the year in the financial statements. Further, the cost relating to such sales was debited to the Profit and Loss account in the year of such sale. Therefore, in accordance with the requirements of the said accounting standard, the company had recognized the entire principal amount of lease instalments as sales income and debited the cost incurred towards the same as cost of goods sold. 60. For the purpose of Income Tax, the principal amount of lease rental was offered to tax as and when the same accrued. Therefore, portion of principal amount of lease rentals which will accrue only in the subsequent years was reduced in the computation of income of the current year. 61. The AO concluded that the Assessee has acq....
X X X X Extracts X X X X
X X X X Extracts X X X X
....#39;ble Punjab & Haryana High Court in the case of Punjab Tractors Co-op Multipurpose Society Ltd. (supra) and the judgment of the Hon'ble Madras High Court in the case of Coral Electronics (P) Ltd. (supra). The learned AR, on directions from the Bench, had furnished primary entries for leasing. However, there is no clarity on the same. It is not clear how the A.O. has arrived at the figure of Rs. 5,89,52,591 to be disallowed in the current year and how it pertains to the future lease rentals. Therefore, in the interest of justice and equity, we restore the issue of taxation of future lease rentals (also raised in the ground 13), to the files of the A.O." 65. During the course of hearing the ld AR submitted the details of lease rentals (principal and interest) for the year under consideration along with scheme of entries in the books of accounts pertaining to lease rentals. On perusal of the details it is noticed that the said amount of Rs.7,58,53,797 relates to principal portion of the lease rentals, that relate to future years from FY 2010-11 onwards. Respectfully following the ratio laid down by the coordinate bench of the Tribunal in assessee's own case (supra), that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntire sum of provision created having suffered tax in the previous assessment year, ought to be allowed as a deduction during the year under consideration, on its reversal/incurring of the expenditure on which taxes were deducted at source. 68. The ld AR also submitted additional evidence with the breakup of the provisions and the subsequent payments / reversals along with the listing of invoices and the tax deducted at source. The ld AR prayed for the admission of the additional evidence. 69. The ld. DR supported the orders of the lower authorities. The ld DR submitted that the additional evidences should not be admitted as the assessee had sufficient opportunity to submit the supporting evidence to substantiate the claim of deduction which the assessee failed to furnish and therefore prayed that the additional evidences should not be accepted. 70. With regard to the disallowance made towards the provisions made the additional evidences now produced goes the root of the issue and the core reason for not allowing the deduction by the lower authorities. For a proper adjudication of the issue and for substantial cause, the additional evidence is admitted and taken on record ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....expenses ledger of the assessee. This needs to be verified to justify the claim of deduction of the said amount in the computation of assessment 2010-11 basis the disallowance done in the year 2009-10. The assessee has erroneously submitted before the CIT(A) / AO that the deduction is claimed u/s.40(a)(i) and hence the authorities disallowed the claim as the assessee did not produce the details of tax deducted. However the deduction as per the ld AR is done based on the fact that the provisions which are already disallowed in the previous assessment year is reversed and to avoid double disallowance the same is claimed as deduction in the computation. This fact has not been properly presented before the lower authorities. The lower authorities have to examine whether the year-end provision made on 31st March 2009 is fully reversed on 1st April 2009 and the expenses against which the provision was created is debited to the profit and loss account on payment after deducting TDS. This verification need to be carried out based on the journal entries and ledger copies produced by the assessee for the year under consideration which are submitted now in the form of additional evidence. If ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....intenance ledger (Sl.Nos.. 3, 5, 6 and 7 above), is towards quarterly amortization of Software Support and Maintenance services payable to Comsoft for a period of 24 months. The ld. AR also submitted that the assessee had classified the total Software support and Maintenance charges under prepaid expenses and had been amortizing such expenses on the basis of accrual on a periodical basis. The workings arrived from the payments agreed as per the schedule in the agreement for the purpose of amortization along with the ledger extract for the said line items showing the USD as well as INR amount of amortization was submitted to the DRP as well. (Page 2331 of Volume 6 read with pages 4255 to 4257 of Volume 8). The ld AR therefore submitted that the amount debited to repairs & maintenance represents payment made towards Software Support and Maintenance services which is revenue in nature ought to be allowed as a deduction. 76. In connection with the line item in Sl.No. 4 of the table, the ld. AR submitted that the said entry had been passed for reclassifying the amount from Advertisement account and the corresponding entry passed in the advertisement ledger account was furnished befor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....refore we are of the considered view that the levy of interest u/s.234A does not arise. The levy of interest by the AO in this regard is deleted. 82. Ground Nos.11 to 13 are with regard to levy of interest u/s. 234A, 234B & 234C that are consequential in nature and does not warrant separate adjudication. IT(TP)A No.400/Bang/2015 (Revenue's appeal) 83. We will now take up the appeal of the revenue. The revenue raised 6 grounds against the order of the CIT(A). 84. Ground No.1 raised by the revenue reads as follows 1. The ld DRP has erred in directing the AO to delete the additions made on account of suppression of income of sale of goods and services as under • Credit notes not considered • Standard warranty spares replacement • Goods in transit • Other items taxable both for service tax and sales tax • Internal consumption as per sales register and • Scrap sales considered for sales tax return 85. During the assessment proceedings, the Assessee was asked to submit the copies of Sales Tax and Service Tax returns for the purpose of comparing the revenue as per the sales tax/service ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e same ought to be adjusted against the current year's sales irrespective of the year in which the original sale is made. The refund/credit for sales tax discharged cannot be claimed on credit notes raised beyond a period of 6 months from the date of sale for VAT purposes and hence there would not be a reduction in the taxable turnover as per the VAT return. However, the sales tax law per se do not restrict raising credit note after six months from the date of sale. The contention of the AO, that the credit notes pertaining to the sales made in earlier years cannot be claimed as deduction against the sales made during FY 2009-10 is not tenable. Hence we see no reason to interfere with the decision of the DRP that the Assessee's contentions cannot be brushed aside basis VAT and sales tax returns, and the value of goods returned by customers ought to be reduced from the value of sales irrespective of the date of the original sale. Standard warranty replacement 91. Dell Global BV - Singapore Branch (DGBV) sells its products to its customers in India under standard warranty terms. As per the terms of warranty DGBV would have to supply goods/spare parts free of cost to its custome....
X X X X Extracts X X X X
X X X X Extracts X X X X
....once the proof of delivery received. The said treatment is in accordance with the principles of AS-9 and the revenue recognition policy of the Company as provided in Schedule 16 - Notes on accounts - Point 1(v) (a) (page 9368 of Volume 14 of the paperbook) which clearly provides that revenue from sale of computer systems and software licenses would be recognized only on delivery to customers. Thus, in line with the same, the Company has reversed the sales made in cases where the proof of delivery is not received as on 31st March 2010. Before the DRP, the Assessee submitted sample invoice copies and sample delivery challan/other documents evidencing the delivery of goods to the customers post 31st March 2010 for few sample orders under GIT (Please see page 2298-2300 of Volume 6 of the paperbook read with 3193-3656 of Volume 7 of the paperbook). As the above adjustment is in accordance with the accounting policy regularly followed by the Company, the same should be allowed for tax purpose also. Further, the cost related to such sales would also not be charged off to profit and loss account. An entry is passed on 31st March 2010 reversing the corresponding cost from the Cost of Materi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on dated 4.2.2014 at pages 1941-2024 of Volume 4 of the paper book. Considering these facts we hold that the DRP was right in directing deletion of the adjustment. Scrap sales considered for sales tax return 95. The Assessee in the financials credits the scrap sales to cost of materials used and discharges the VAT on the same. Therefore, the turnover disclosed in the VAT return is reduced shown as part of the reconciliation. It is submitted that once the scrap sales are credited to the cost of material used, no further addition is warranted. The Assessee submitted party wise details submitted for an amount of Rs.67,35,114 vide submission dated 4.2.2014 at pages 1671-1677 of Volume 4 of the paperbook. The DRP has accepted the submission of the assessee and we are therefore of the considered view that rightly directed deletion of the addition on this count Other items taxable both for service tax and sales tax: 96. The items considered under this head are as under: - Counter Veiling Duty part of turnover for VAT - Export turnover not part of sales tax return - Rejection of VAT refund claimed as deduction Counter Veiling Duty part of turnover ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsideration. This issue is accordingly allowed for statistical purposes. 101. Ground No.3 by the revenue is regarding disallowance of advances written off, which has already been decided in favour of the assessee while dealing with the assessee's appeal. Hence this ground is dismissed. 102. Ground No.4 of the revenue is regarding addition u/s. 69C of the Act. The brief facts of the issue are that during the FY 2009-10, the Assessee had debited a net amount of Rs. 13,34,17,000 to the profit and loss account towards travelling & conveyance. Party-wise details of gross amount paid or payable towards travelling & conveyance expenses and taxes withheld thereon along with sample TDS certificates were submitted to the AO for an amount of Rs. 13,49,73,565. 103. The AO disallowed the expenditure to the extent of Rs. 15,56,565/-, being excess over the amount debited to the profit and loss account as being unexplained expenditure under section 69C. 104. The DRP accepted the Assessee's contention that the gross amount debited to profit and loss account towards travelling and conveyance is Rs. 13,34,17,000/- and Rs. 15,56,565/- represents the amount grouped under other heads of expe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... are mainly sourced from outside India from Dell group entities and mainly sold in Indian domestic markets with small portion of exports. For the FY 2009-10 an amount of Rs. 15,49,68,827/- was debited to the profit and loss account which is a net result of all kinds of foreign exchange loss/gain during the year i.e. loss/gain on realization of foreign currency amounts on account of transactions in foreign currency as well as re-statement of foreign currency balances as on the period closure as per the prescribed accounting policy being consistently followed by the Assessee. According to the assessee, thus, the entire exchange loss has arisen on settlement/re-statement of foreign currency receivable and payable balances. Further, there were some forward contracts entered by the assessee to hedge the risk against the volatility of foreign currency. Such hedge has resulted in a gain of Rs. 9,10,11,994/- which has been offered to tax. 109. The AO proposed a disallowance of forex loss of Rs. 24,59,80,821/- on the ground that no evidence was provided to substantiate the same. The DRP, relying on the directions issued in the Assessee's own case for the assessment year 2009-10, allowed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the assessee. The ld. AR placed reliance on the Order dated 18.03.2022 passed by this Tribunal in the assessee's own case for AY 2009-10 in IT(TP)A Nos. 269/Bang/2014 and 217/Bang/2014. 113. We have considered the rival submissions and perused the material on record. It is noticed that this issue has been decided by the Tribunal in assessee's own case for AY 2009-10 in IT(TP)A Nos.269 & 217/Bang/2014 by order dated 18.3.2022 wherein it is held as under:- "23.5 We have heard rival submissions and perused the material on record. The net forex loss arising after set-off of the said gain on forward contract is as under: Nature of forex loss Amount (in Rs. ) Gain on forward exchange contracts (5,26,74,967) Realised and unrealized forex loss (Net) - on settlement/re-statement of forex transaction 116,36,27,892 Amount claimed as deduction 111,09,52,925 23.5.1 The AO's observation that the assessee had not offered any gain to tax is ex facie incorrect. AS-11 requires a foreign currency transaction to be initially recognized using the exchange rate as on the date of the transaction. However, at each balance sheet date, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pheld. 118. The ld. AR submitted that during the assessment proceedings, due to huge amount of transactions involved and considering the fact that year end provision for expenses would be classified as other liabilities, the details like names of each and every creditor in respect of all such transaction were not be readily available and could not be produced. Before the DRP, it was contended that in view of the Financial Statements having been audited and certified, the liabilities recognized would be in accordance with the accounting principles and cannot be considered as bogus purchases. The assessee also furnished party-wise details for a substantial amount of Rs. 409,727,673 before the DRP (pages 2340 - 2341 of Volume 6 read with pages 8895-8933 of Volume 12 of the paperbook). It was submitted that taking into account the aforesaid facts, the DRP rightly deleted the addition and no interference is warranted. 119. We have considered the rival submissions and perused the material on record. We notice that the assessee has produced the details relating major portion of the expenses to the tune of Rs. Rs. 409,727,673 to prove the genuineness of the expenditure. Considering t....