TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 937
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.... 2.1 The Ld. AO erred in passing the assessment order without considering the fact that time limit for completion of the assessment u/s 153 has been lapsed and therefore that the order passed is erroneous and bad-in-law. 2.2 The Ld. AO ought to have appreciated that the order dated 09.10.2024 passed under section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Act is beyond the time limit prescribed under section 153 of the Act and therefore that the assessment order is invalid ab initio. 2.3 The Ld. AO ought to have appreciated the fact that the time limit for the completion of assessment u/s 153 has lapsed on 31.12.2023 and that the order passed u/s 143(3) r.w.s 144C(13) is invalid and bad in law. 3. The Ld. DRP ought to have appreciated that the TPO erred in making upward adjustment of Arm's Length Price for Rs. 10,10,03,573/- towards receipt of consultancy services from AE. Technical ground 3.1 The Ld. DRP ought to have appreciated that the TPO had erred in not following the procedure laid down under the provisions of Section 92C of the Act relating to the Comp....
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....ught to have appreciated that the AO has erred in not considering the eligible TDS credit of Rs.31,77,966/ -. Technical ground 5.1 The Ld. DRP ought to have appreciated that the AO has erred in allowing TDS Credit only to the extent of Rs.54,35,524/- instead of eligible TDS of Rs.86,13,491/- which is reflected in Form 26AS. 6. The appellant may add or alter or amend or modify or substitute or delete and / or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal. General ground 3. Ground No. 1 is general in nature and does not require any specific adjudication. 4. Ground No.2 is regarding the validity of the assessment order passed by the Assessing Officer being barred by limitation. The learned Counsel for the assessee has submitted that the Assessing Officer has passed the assessment order on 09/10/2024 which is beyond the time limit prescribed u/s 153 of the Act and therefore, the same is invalid and void ab initio. 5. On the other hand, the learned DR has submitted that the order is passed within the limitation as prescribed u/s 144C(3) of the I.T. Act. B....
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....osed by the TPO/Assessing Officer and rejected the objections of the assessee. Consequently, the Assessing Officer passed the final assessment order dated 09/10/2024 which is challenged in the present appeal. 8. Before the Tribunal, the learned Counsel for the assessee has submitted that the assessee is serving its clients in the USA and other regions partly through its AE which is 100% subsidiary of the assessee. These services of the AE are availed by the assessee under the terms of Master Service Agreement dated 02/01/2015. During the year under consideration, the assessee has generated revenue from operations of I.T. services to the tune of Rs.69,33,13,704/ -. The payments were made against the invoices/bills raised by the AEs for the services rendered in respect of the services provided by the assessee to its clients in USA. The learned Counsel for the assessee has further submitted that in order to mitigate and reduce the cost of providing the services directly from India to its clients in USA by sending its employees to the USA, the assessee has taken a decision of utilizing the service of the AE for onsite service to the clients in USA. However, the assessee still provid....
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....mitted that the assessee has provided the services to the clients and entered into an agreement with Advance America for providing the fund application, support and maintenance service on 24/7 basis monitoring and production support service. An agreement with the Advance America is placed at page Nos. 535 to 555 of the paper book and as per the said service agreement, the assessee was under obligation to provide real time support service on 24/7 basis along with the training and also maintaining the date end to end which requires the physical presence of the personnel at the site of the clients. Thus, he has pointed out that the services provided by the AE under the Masters Service Agreement/space agreement are necessary and inevitable. The AE has raised the invoices on the basis of the number of hours spent on the clients for rendering the services on behalf of the assessee. Further, the assessee charged the clients for the number of manhours both off and on site services. He has referred to the invoices raised by the assessee to its clients at page Nos. 687 to 698 of the paper book II and submitted that these invoices are raised based on the services rendered at onsite through it....
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....he preceding year and even for the immediately preceding year i.e. 2020-21. 10. On the other hand, the learned DR has submitted that the TPO has issued a show cause notice to the assessee to submit the proof of services rendered by the AE to the assessee against which the assessee has made this payment of Rs. 10,10,03,573/ -. He has referred para 6.2 of the order of the TPO and submitted that the assessee has failed to produce any physical proof to show that the AE has rendered the service to the assessee. Further, this is a factual issue of rendering of the services by the AE and therefore, the principle of res judicata cannot be applied on this issue. The TPO has applied the test to determine if a charge for activity is justified and whether the activity is performed for which the payment is made. He has relied upon the orders of the authorities below and submitted that the TPO has specifically pointed out that the assessee has not produced the work order to establish that the services were actually rendered by the AE. As per the Masters Space Agreement between the assessee and the AE, the assessee was required to issue work order for the services of the AE and on execution of....
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....t projects undertaken by the assessee. The major client of the assessee in US from whom the revenue is generated is M/s. Advance America, a NBFC. The assessee has also given the details of the revenue generated by it for the last 4 years including the revenue from the client "Advance America" as under: Financial Year Total Revenue from IT services Revenue generated from the client- Advance America 2017-18 Rs. 1,37,28,26,154/- Rs. 33,96,33,021/- 2018-19 Rs. 1,67,45,53,954/- Rs. 34,21,73,364/- 2019-20 Rs. 1,34,81,91,482/- Rs. 30,08,22,942/- 2020-21 Rs. 1,27,39,06,652/- Rs. 70,24,92,867/- 13. Thus, the assessee has been consistently generating revenue from its USA client M/s Advance America and during the year under consideration, the revenue earned from the said client is more than doubled of the preceding year. Therefore, it is a matter of record that the assessee has provided the services to its clients "Advace America" during the year and generated a revenue of more than Rs.70 crores. The assessee has also given the details of the payment made to the AE for providing consultancy and support services as well as payment to the other co....
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....e project undertaken by the assessee and the same project is continued for the year under consideration, then the providing of service by the AE in respect of the execution of the projects of software development services to the US client through its AE for the onsite service as well as 24/7 support service is part and parcel of the agreement between the assessee and its clients as well as the Master Agreement with its AEs. Therefore, the determination of ALP at Nil by the Assessing Officer is highly arbitrary and unjustified and beyond the jurisdiction of the TPO. The claim of deduction towards the payment to the AE if it is not against the actual rendering of services can be questioned only by the Assessing Officer. The Pune Bench of the Tribunal in the case of Renishaw Metrology Systems Ltd vs. DCIT (Supra) has considered an identical issue in para 9 & 10 as under: "9. We have heard the rival contentions and perused the record. In similar circumstances on identical facts, this Tribunal in assessee's own case for A.Y. 2009-10 reversed the order of DRP and directed the AO to accept the value of management services as claimed by the assessee. Similarly, this Tribunal i....
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....es were routine in nature and were neither asked for nor given by associated enterprise and the TPO benchmarked the said transaction at Nil and made an upward adjustment of Rs. 2.18 crores. 16. The learned Authorized Representative for the assessee pointed out that last year the TPO had accepted the said transaction to be at arm's length price. The Assessing Officer had disallowed the said payment under section 37(1) of the Act. However, the DRP deleted the addition, against which no appeal has been filed by Revenue. Our attention was drawn to the order of Tribunal in this regard. He also pointed out that the assessee had filed detailed letter to the TPO explaining the need for availing management services dated 6- 5-2011 along with several enclosures and also documents were filed evidencing the said provision of services. However, the TPO does not give any cogent reason in holding that no services were provided and in determining the arm's length price at Nil. 17. The learned Departmental Representative for the Revenue placed reliance on the orders of authorities below. 18. We have heard the rival contentions and perused the record. The issue whi....
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....al in assessee's own case for A.Y. 2010-11 following the order in A.Y. 2009-10 in assessee's own case and also followed in the succeeding year i.e. A. Y. 2011-12, the order of CIT(A) is set aside and direct the AO to accept the management services fees as claimed by the assessee. Thus, ground No. 2 raised by the assessee is allowed." 16. Accordingly, in the facts and circumstances of the case, as well as in view of the material brought on record, we find that the payment made by the assessee to the AE against the invoices raised by the AE and under the agreement between the assessee and the AE for the services rendered by the AE in respect of the execution of assessee's projects of providing software development service, support service and onsite service to the client in the USA cannot be denied only on the ground that the assessee failed to produce the work order to the AE a 100% subsidiary of the assessee. Hence, the adjustment made by the Assessing Officer/TPO is not justified and the same is deleted. 17. Ground No.4 is regarding the disallowance made on account of delayed payment of employees contribution to PF & ESI. The learned Counsel for the assessee has ....