TaxTMI 
TaxTMI 
2023 (12) TMI 1503
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.... in law and liable to be quashed. GROUNDS RELATING TO TRANSFER PRICING - LEGAL ISSUES 2. The learned AO has erred in making a reference for the determination of the Arm's Length Price of the international transactions to the TPO without demonstrating as to why it was necessary and expedient to do so. 3. The lower authorities have erred in passing the Order without demonstrating that the Appellant had any motive of tax evasion. GROUNDS RELATING TO TP ADJUSTMENT IN SOFTWARE DEVELOPMENT SEGMENT 4. The lower authorities have erred in: (i) Modifying the segmental results of the Appellant without appreciating the facts and circumstances of the case. The Appellant submits that segmental results as given in TP study report should be adopted. (ii) Treating Service tax refund received as non-operating in nature without appreciating that when Service tax was paid, same was considered as operating in nature. Accordingly, refund received should also be considered as operating in nature; and (iii) Treating Miscellaneous income consisting of insurance money received on damage of laptops as non-operating in nature without ....
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....owing comparables: ● Black Pepper Technologies Pvt Ltd ● Harbinger Systems Pvt Ltd ● Infobeans Technologies Limited ● Mindtree Consulting Limited ● Nihilent Limited 9. The lower authorities have erred in: (i) Not making proper adjustment for enterprise level and transactional level differences between the Appellant and the comparable companies; and (ii) Not recognizing that the Appellant was insulated from risks, as against comparables, which assume these risks and therefore have to be credited with a risk premium on this account. GROUNDS RELATING TO TP ADJUSTMENT IN MARKETING SUPPORT SEGMENT 10. The learned AO has erred in making transfer pricing adjustment of Rs. 2,77,85,446/- towards international transactions for marketing support segment. 11. The learned DRP has erred in confirming the action of the TPO in: i) Conducting a fresh transfer pricing analysis despite absence of any defects in the transfer pricing analysis submitted by the Appellant; ii) Adopting inappropriate filters like one sided turnover filter, 25% RPT filter, etc, i....
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....terest on receivables is not required. 15. Without prejudice to above, the lower authorities have erred in: i) Adopting 6 months LIBOR at 2.224% without appreciating that the correct LIBOR rate is 1.661%; ii) Not adopting only LIBOR as arm's length interest rate; iii) Adopting mark-up of 450 basis point. The mark-up adopted is excessive. iv) Adopting 30 days as reasonable credit period without considering any comparables; and v) The Appellant submits that credit period should be based on any reasonable basis or based on the debtor turnover ratio of final comparables CORPORATE TAX 16. The DRP/learned AO have erred in making addition of Rs. 19,73,554/- on the ground that interest on Income Tax Refund for AY 2009-10 is appearing in Form 26AS without appreciating that the Appellant has not received such interest on Income Tax refund and entire refund of AY 2009-10 is set off against demand of other years. 17. The DRP/learned AO have erred in making disallowance of Rs. 97,67,868/- towards ESOP expenditure, on the grounds that same is notional expenditure and capital in nature. OTHER GROUND ....
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.... Rs.2,77,85,446/- Notional Interest on Trade Receivables Interest rate at 6.724% PA Rs.3,33,37,897/- Total Rs.21,90,61,746/- 4. Consequently, the AO passed the final assessment order u/s 143(3) r.w.s 144C(13) of the Act dated 29.07.2022 incorporating the TP adjustment as per TP OGE to DRP directions and corporate tax adjustments as per the Draft assessment order. (Aggrieved by the final assessment order, the assessee is in appeal before the Tribunal. 5. Ground Nos.1, 2 & 3 are general in nature. Ground No 4- Relating to Segmental Results Ground 4(i) - Allocation of costs on turnover basis 6. The ld. AR submitted that the TPO has modified segmental profit and loss account by allocating all costs in the ratio of turnover of both the segments. No reason for rejection of assessee's segmental profit and loss account is provided either by TPO or DRP. Neither any reason for adopting sales as a basis of allocation has been detailed in the orders of lower authorities. He submitted that such modification of segmental P&L account is bad in law and it should be adopted as given in the TP Report. In this regard, the Appellant submits as follows. ....
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....same was credited to the profit and loss account. The refund of service tax related to FY 2011-12, FY 2012-13, FY 2013-14 & FY 2014-15 were written off and formed part of operating cost. Since cost was considered as operating while computing the operating margins for FY 2017-18, the assessee considered service tax refund received as operating in nature and reduced the same from operating cost. Reliance in this regard in placed on the decision of the Coordinate bench in the case of M/s Global E-Business Operations Pvt. Ltd. (TS-796-ITAT-2022 Bang-TP) - Para 5.1 wherein it was held that "if service tax payment or provisions considered as an operating expenditure related to ITES segment on same analogy the refund of service tax relating to the ITES segment to be considered as operating income". 9.1 The ld. AR further submits that service tax refund is an export incentive given by the Government. The incentive is directly linked to operations of the assessee of rendering services to AEs. There is direct nexus and therefore, same should be considered as part of operating revenue. Reliance is placed on the following cases wherein it is held that export incentive should be considered a....
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....int 1 the rental expenses included in cost base by the assessee would be INR 101,236 (inclusive of Service Tax). 3.3 Service Tax Refund receipt by the Appellant - The ld. A.R. further submitted that the Assessee being an Export service provider filed claims for Service Tax refund on input services for multiple earlier years. The Appellant accounted for Service Tax Refund only upon actual receipt thereof. The said amount was credited to P&L by debiting the Bank. As can be inferred from the Financial Statements (FS) that on April 1, 2016 (at the beginning of FY 2016-17) there was no assets in the books of the assessee towards Service Tax Refund receivable. 3.4 The ld. A.R. submitted that during FY 2016-17 the assessee received multiple Service tax Refunds for earlier periods totalling to INR 201,899,422. Further, some more Service Tax refund amounting to INR 276,491,677 (Refund application amount INR 282,417,014) for earlier periods were received beyond March 2017 but before finalising the statutory financials of FY 2016-17. 3.5 The above amounts of Service Tax Refunds received were accounted in the Financial Statements (FS) of year ended March 2017 as belo....
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....ed that the assessee has followed a consistent approach of adding the service tax cost as incurred in the cost base for cost plus billing. The Transfer Pricing Officer (TPO) had consistently accepted the treatment in earlier years' transfer pricing assessment. Accordingly, the TPO should not change the approach in current year when the same cost has been reversed due to receipt of service tax refund. 3.11 Further, he submitted that the service tax refund receivable is arising in the normal course of business operations and has a direct nexus to the export of services undertaken by the Assessee. In the TP order, learned TPO has adopted export service filter to identify the companies comparable to the business of the Assessee. The application of such filter would result in set of companies which are also exporter of services, such companies would also be similarly claiming a refund of the service tax on such input services. 3.12 The ld. A.R. submitted that several judicial precedents have held that any expenses or provision for expenses if those are related to business activity would be considered "Operating Expenses". Further, he submitted that if there is any ....
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....f remeasurement loss on defined benefit plans has been disclosed below the profit line in its profit and loss account for the F.Y. 2016- 17. This item has been specifically classified under the head other comprehensive income that will not be classified to profit and loss in subsequent periods. This itself explains that this item of laws will not be part of profit and loss account of the assessee. Therefore, the nature of this item is not directly related to the operating part of the assessee and hence TPO has correctly treated service tax refund as non-operating income. 4.2 The ld. D.R. submitted that in the Transfer Pricing (TP) study done by the Transfer Pricing Officer (TPO), he has excluded the other income of the assessee as well as all the comparables while working out the operating margins. This action is uniform and as such the assessee and the comparables are on the same footing. The assessee has itself shown 'service tax refund' as non- operating income in its financials and so the same has been excluded by the TPO. 4.3 The ld DR further submitted that now in this case assessee is arguing that the income, which it shown as non-operating, is actu....
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.... profit in its TP study for that year. Now in the year under consideration, it has received the refund and thus its cost is effectively reduced and to that extent its profit received on cost plus basis gets reduced if such refund has been taken into account by the assessee while reporting its cost to the AE (as argued in written submission by the assessee). So naturally in one year it has already benefitted by showing higher profit and in the year under consideration (in year of refund) it has received lesser profits from AE so the same only can be considered. The actual operating income is what it has received and the same cannot be artificially inflated now by adding service tax refund to its operating income. 4.7 He stated that the reliance of the assessee on the decisions in the cases of AMD India Private Ltd and. Toyota Kirloskar Motors Pvt Ltd is misplaced as the issue of treatment of 'service tax refund' was never under consideration in either of those cases. The issue adjudicated was the treatment of provisions. In AMD India too, the TPO had never commented specifically that the provision was being disallowed the same related to service tax refund. The issu....
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....nd of the service tax cannot be considered as part of the Operating income of the assessee. The reliance placed by the assessee on various judgements misplaced. In our opinion, if service tax payment or provisions considered as an operating expenditure related to ITES segment on same analogy the refund of service tax relating to the ITES segment to be considered as operating income. In other words, if the service tax payment/provisions relate to the ITES segment and that has gone into the computation of income in any assessment year, refund of same relating to the ITES segment is to be considered as operating profit. With this observation, we remit this issue to the file of AO/TPO for fresh consideration. 6.3 In the above judgment, it has been observed that if service tax payment or provisions considered as an operating expenditure related to ITES segment on same analogy, the refund of service tax relating to the ITeS segment to be considered as operating income. Respectfully following the above judgment in assessee's own case, we are allowing this ground raised by the assessee in the above terms." 11.1 Following the above decision, we also hold that refund of servi....
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.... case for AY 2017-18 via IT(TP)A No.153/Bang/2022 (para 10.6 on pg. 1165 of Paper Book II-Case law Compilation), wherein it was held that RPT > 15% of sales is an appropriate filter. 14.2 Further, the Appellant relies on the decision in the case of AMD India Pvt Ltd v ACIT IT(TP)A No. 775/Bang/2022 for AY 2018-19 (Page 9 to 12 of the decision) wherein it is held that RPT ratio of 15% should be applied on aggregate basis. 14.3 Following other decisions are also relied upon: - Etisalat Software Solutions (P.) Ltd v DCIT [2022] 144 taxmann.com 162 (Bangalore - Trib.) for AY 2017-18 - ANSR Global Corporation (P.) Ltd vs ACIT [2022] 139 taxmann.com 283 (Bangalore - Trib.) for AY 2016-17 - Autodesk India (P.) Ltd. [2018] 96 taxmann.com 263 (Bangalore - Trib.) 14.4 Therefore, based on above, the ld. AR submits that the RPT filter of 15% over sales should be applied on an aggregate basis. 15. The ld. DR relied on the orders of the lower authorities and he submitted that the TPO has given detailed reason for adopting RPT filter @ 25% and the DRP has relied don various decisions of different Benches of Tribunal and in those decisions RPT filter has been....
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....s RPT expenses by sales for all the comparable companies. 9.6 The issue regarding adoption of 15% RPT filter was considered by the coordinate Bench of the Tribunal in the case of Barracuda Networks India Pvt Ltd. in paras 21 to 22 wherein it was noted that the Hon'ble High Court of Karnataka in PCIT v. Yodlee Infotech P. Ltd. in ITA NO.685/2017 dated 28.6.2018 had upheld the application of 15% RPT filter. Similarly, 15% RPT filter was upheld in the decision cited by the ld. AR in the case of Autodesk India (P) Ltd. [2018] 96 taxmann.com 263 (Bang. Trib). It is ordered accordingly. Ground No.5(ii) is allowed." 16.1 Following the above decision in assessee's own case for AY 2017-18, we allow this ground of the assessee in the same terms. Ground No.6(iii) - Comparables selected by the TPO 17. Exclusion of Black Pepper Technologies is not pressed. 18. The ld. AR submitted that in final set of comparables, the TPO has retained companies even though they are not comparables in terms of functions performed, assets utilized, risks assumed, etc. In this regard, the Appellant submits that following companies selected by the TPO should be excluded from the list of....
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....r which the assessee sought reasons for rejection of this company. However, the learned TPO included this company in the final list of comparables which was upheld by the DRP. The Appellant seeks exclusion of this company based on the following reasons: Reasons for rejection Reference & case laws Functionally Different 1.The Company is functionally different as it is much larger company engaged in diversified activities and not a pure software development company. 2.The Company has global brand image and owns intangible assets worth Rs.130 crores. 3. There is vast difference between the profile of Infosys and the Appellant. 1. Submission at Pg 946-955 of PB I. 2.The Appellant relies on the following decisions of the Honourable ITAT wherein, it was held that Infosys Ltd is functionally different: ● In the case of AMD India Pvt Ltd v ACIT IT(TP)A No. 775/Bang/2022 for AY 2018-19 (Page 23 of the decision). ● M/s. Huawei Technologies India Pvt. Ltd. vs ACIT, Bengaluru for AY 2018-19 (TS-855-ITAT-2022 Bang-TP) (Para 18 on pg 1243 of PB-II-Case law Compilation) ● M/s. Yahoo Softwar....
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.... (Para 5 at Page 1497 of PB-II Case law Compilation). ● ADP Pvt. Ltd., Hyderabad vs DCIT-1(1), Hyderabad for AY 2016-17 [2022] 135 taxmann.com 44 (Hyderabad - Trib.) (Para 6.2 & 6.3 on Pg 1508-1509 PB-II Case Law Compilation) 5. The Company has acquired PARX Werk AG along with its fully owned subsidiary PARX Consulting GmbH in FY 2017-18 and therefore should be rejected. 1. Submission at Pg 914-915 of PB I. 19. The ld. DR relied on the order of the lower authorities and submitted that the lower authorities have examined the issue in detail and they have applied the FAR analysis. According to the FAR analysis the above companies are comparable with the assessee company. During the course of proceedings before the DRP, the assessee could not controvert the findings of the TPO. 20. Considering the rival submissions, there is no dispute on the facts of the case that the company is engaged in SWD services. During the course of hearing, the ld. AR relied on the judgment of AMD India Pvt. Ltd. in IT(TP)A No.775/Bang/2022 dated 11.09.2023 which is engaged in similar line of business and for the same AY, the above three companies have been excluded from the com....
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.... exclusion of these companies should be directed to be examined afresh by the DRP. 29. We have considered the rival submissions. In the case of Agilis Information Technologies India (P) Ltd., (supra), this Tribunal considered the comparability of the 3 companies which the Assessee seeks to exclude from the final list of comparable companies chosen by the TPO. The functional profile of the Assessee and that of the Assessee in the case of Agilis Technologies India (P) Ltd., is identical in as much as the said company was also involved in providing SWD services to its AE and the TPO had chosen some comparable companies which were also chosen by the TPO in the case of the Assessee for the purpose of comparability. In the aforesaid decision the Tribunal held on the comparability of the 3 companies which the Assessee seeks to exclude as follows: (a) Infosys Ltd., was excluded from the list of comparable companies by following the decision of the Hon'ble Delhi High Court in the case of CIT v. Agnity India Technologies (2013) 36 taxmann.com 289 (Delhi). The discussion is contained in paragraphs 4.5 to 4.7 of the Tribunal's order. The Tribunal accepted that Infosys....
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....ubmissions advanced by both sides in the light of records placed before us. 17.7 He placed reliance on the decision of Coordinate Bench of this Tribunal in case of OLF (India) Software Pvt. Ltd. vs. ACIT (supra) wherein this Tribunal following its decision in case of LSI India research development (P.) Ltd. vs. DCIT reported in [2021] 124 taxmann.com 83, excluded Persistent Systems Ltd., L&T Infotech Ltd., Thirdware Solutions and Infosys Ltd. by observing as under: "3.2 This Tribunal in LSI India research development (P.) Ltd. v. DCIT (supra) observed in respect of persistent systems, L & T Infotech, Thirdware Solutions, Infosys Ltd. as under: 16. As far as the challenge by the assessee on exclusion of aforesaid 5 companies in ground No. 2(f), the ld. counsel for the assessee has brought to our notice a decision of Bangalore Bench of ITAT for the very same Assessment Year 2014-15 in the case of LG Soft India (P.) Ltd. v. DCIT [IT(TP) Appeal No. 3122 (Bang.) of 2018, dated 28-5-2019]. In this order rendered in a case of assessee rendering SWD services such as the assessee, the Tribunal excluded 3 out of 5 companies referred to in the earlier paragraph and ....
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....rict supervision and instructions by the AE's. Further we note that turnover criteria has to be applied with an upper limit which is not been considered by the Ld. TPO. The TPO has applied less than 1 crore turnover limit to eliminate the comparables however it failed to apply upper limit considering the functions performed assets owned and risk assumed by assessee under this segment for the year under consideration." 17.8 Before us, the Ld.AR has not been able to place anything on record contrary to the above observation. We therefore respectfully following the above view, direct the Ld.AO/TPO to exclude Persistent Systems Ltd., L&T Infotech Ltd., Thirdware Solutions and Infosys Ltd. from the final list." 11.9 Respectfully following the above decisions of the coordinate Bench of the Tribunal in assessee's own case for AY 2012-13 and SanDisk India Device Design Centre Pvt. Ltd. (AY 2016-17), we direct exclusion of these 3 companies i.e., Larsen & Toubro Ltd., Persistent Systems Ltd. & Infosys Ltd. from the final list of comparables." 16.3 In the income tax proceedings for determining the ALP of international transactions with its AE, FAR analysis ....
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....on) Aptus Software Labs Private Limited 21.1 The TPO proposed this company as a comparable. The assessee sought reasons for rejection of this company. However, the TPO included this company in the final list of comparables which was upheld by the DRP. The Appellant seeks exclusion of Aptus Software Labs Pvt. Ltd based on the following reasons: Reasons for rejection Reference & case laws Functionally Different The Company is functionally different as it is engaged in rendering of Network operations center (NOC) 24X7 services, Cloud computing services, Infrastructure Management services and product engineering services. 1. Submission & website extracts at Pg 904-907 of PB I. Relevant Extracts of Annual Report at Pg 1815-1821 of PB IV. 2. In the case of AMD India Pvt Ltd v ACIT IT(TP)A No. 775/Bang/2022 for AY 2018-19 (Page 29 to 30 of the decision), this company is remitted to TPO. Employee Cost filter The Company fails employee cost filter of minimum 25% as applied by the TPO for FY 2015-16 (16.04%) 1. Relevant extract of submission at Pg 908 of PB I. Cybage Software Private Limited 21.2 The TPO proposed this company ....
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....Services Pvt Ltd. vs DCIT, Bengaluru (TS-239-ITAT-2023 Bang-TP for AY 18-19)(Para 11.6-11.6.6 at Pg 1285-1288 of PB-II-Case law Compilation) ● M/s.Tangoe India Softek Services Private Limited vs The Assessment Unit, NFLA, (TS- 199-ITAT-2023 Bang-TP) for AY 18-19 ● Appellant's own case for AY 2015-16 in IT(TP)A No.2347/Bang/2019, (Para 14.3 on Pg 1208-1210 of PB-II Case law Compilation) ● M/s Radisys India Limited vs DCIT (TS-823-ITAT- 2022Bang-TP) for AY 2017-18 (Para 8.2-8.4 on Pg 1460-1463 of PB II-Case law Compilation) ● ADP Pvt. Ltd., Hyderabad vs DCIT-1(1), Hyderabad (TS-63- ITAT-2022 Hyd) for AY 2016- 17 (Para 7.4 on Pg 1510 of PB II-Case law Compilation). Mindtree Consulting Limited 21.4 The TPO proposed this company as comparable for which the assessee sought reasons for rejection of this company. However, the learned TPO included this company in the final list of comparables which was upheld by the DRP. The Appellant seeks exclusion of this company based on the following reasons: Reasons for rejection Reference & case laws Functionally Different 1. The company is functionally different as it ....
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....ctionally different: ● In the case of AMD India Pvt Ltd v ACIT_IT(TP)A No. 775/Bang/2022 for AY 2018-19 (Page 23-25 of the decision), this company is rejected as comparable. ● M/s. Subex Ltd. vs DCIT, Bengaluru TS-853-ITAT-2022 Bang-TP-for AY 2017-18 (Para 12 & 12.1 on Page 1429-1430 of PB-II-Case law Compilation). ● Etisalat Software Solutions (P.) Ltd v DCIT [2022] 144 taxmann.com 162 (Bangalore -Trib.) for AY 2017-18 (Para 23-25 on pg 1390 of PB II of Case Law Compilation) Since, profile of this company remains same for all the 3 years, ratio of decision of earlier year is applicable. Substantial Onsite Operations 2. The Company has substantial onsite revenue for all 3 FYs i.e., FY 2017-18 (40.57%), FY 2016-17 (43.34%) & FY 2015-16 (43.64%). Thus, Nihilent has different business model when compared to Appellant. 1. Submission at Pg 935-936 of PB I. Tata Elxsi Limited 21.6 The TPO proposed this company as comparable for which the assessee sought reasons for rejection of this company. However, the learned TPO included this company in the final list of comparables which was upheld by the DRP. The Appel....
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....pg 1366-1368 of of PB-II-Case law Compilation). Functionally Different 2. The Company is functionally different as it is engaged in rendering only "software testing services" which is not comparable to the "software development services" rendered by the Appellant. 3. The Company renders services such as Quality Assurance, Quality Engineering, Digital Innovation, Automated Solutions and Transformations. 1. Submission and website extracts at Pg 944-946 of PB I. 2. The Appellant relies on the following decisions of the ITAT wherein, it was held that Threesixty Logica Testing Services Ltd is functionally different: ● In the case of AMD India Pvt Ltd v ACIT IT(TP)A No. 775/Bang/2022 for AY 2018-19 (Page 42-45 of the decision), this company is rejected as comparable. ● M/s. NTS Technology Services Pvt Ltd. vs DCIT, Bengaluru (TS-239 ITAT-2023 Bang-TP) for AY 18-19 (Para 11.7-11.7.5 at Page 1288-1290 of PB-II-Case law Compilation). Wipro Ltd 21.8 The TPO proposed this company as comparable for which the assessee sought reasons for rejection of this company. However, the learned TPO included this company in the final lis....
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.... Functionally Different 1. The Company is functionally different as it is engaged in the business of electronics and semiconductor design services. 1. Reliance is placed on the following decision of Coordinate Bench, wherein Elveego is excluded on the ground that it is functionally different. ● In the case of AMD India Pvt Ltd v ACIT IT(TP)A No. 775/Bang/2022 for AY 2018-19 (Page 30-31 of the decision), this company is rejected as comparable. ● NTS Technology Services Pvt Ltd v DCIT, Circle 3(1)(1) Bengaluru (TS-239-ITAT-2023 Bang-TP) for AY 2018-19 (para 11.2 on page 2640 of PB IV-Case law Compilation) ● Sprinklr India Pvt Ltd. vs DCIT, Circle 6(1)(1) Bengaluru (TS-25- ITAT-2023 Bang-TP) for AY 2018-19 (Para 12C at Pg 2732- 2733 of PB IV of Case Law Compilation). 22. The ld. DR relied on the order of the lower authorities and submitted that the lower authorities have examined the issue in detail and they have applied the FAR analysis. Aaccording to the FAR analysis the above companies are comparable with the assessee company. During the course of proceedings before the DRP, the assessee could not controvert the findings of the TPO....
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....s learning and innovation. Our service offerings include: Consulting: Nihilent partners with businesses in transforming their organizations with solutions using a holistic design-thinking led approach to problem solving. Our suite of consulting-led offerings include customer driven digital transformation, industry transformation and organizational change management services We have deep expertise and several person-years or experience in strategy alignment and execution, organizational design and process restricting, balanced scorecards, customer loyalty evaluation among others. Analytics : We help enterprises answer complex business questions of the day by getting them to make sense of all the data they have. Our leading-edge analytics solutions include predictive analytics techniques like fraud analytics, churn analytics, market basket analysis among others, data visualization and dashboards, and data enrichment and insight offerings including sentiment analysis, data abstraction, deep learning & artificial intelligence. Technology : Our technology-driven service offerings help business achieve greater agility in the digital era and enable systems to be....
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.... 18.3 On going through the above activity, the company is functionally different from the assessee. Further, we note from the financial statements that the revenue is generated from sale of services but not from sale of products. We therefore direct the AO/TO exclude this company from the comparables. Cybage Software Pvt. Ltd The ld. AR submitted that The Company is functionally different as it is engaged in diversified activities and deals with other computer related activities. The Company has abnormally high margin. Reliance is placed on assessee's own case for AY 2016- 17 (supra) where this company was excluded on the ground of functional differences as it is rendering software services as well as developing software products. He also relied on the decision in Etisalat Software Solutions (P.) Ltd, 144 taxmann.com 162 (Bangalore - Trib.) for AY 2017-18 and submitted that since profile of this company remain same for all the 3 years, ratio of decision of earlier year is applicable. 19.1 The ld. DR relied on the orders of the lower authorities and vehemently argued that the assessee is a software development company and the ld. DRP has examined the ....
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....ls and decide the inclusion in accordance with law." 19.3 We note further that in Textual Information "36" the company is engaged in Software Development Services. Since in the above judgement the issue has been remitted back to the AP/TPO, accordingly. Following the above decision, we remit this issue to the AO/TPO for verification in the same terms and the assessee is directed to furnish necessary documents to substantiate its claim. The decision relied by the ld. AR in assessee's own case for AY 2016-17 and decision in Etisalat Software Solutions (P.) Ltd (supra) for 2017-18 is not applicable in present facts of the case as discussed above. Aptus Software Labs Pvt. Ltd. The ld. AR made the following submissions for exclusion of this company. ................... The ld. DR relied on the orders of lower authorities. Considering the rival submissions, the ld. AR seeks exclusion of this company on the basis of functional dissimilarity as well as that it does not employee cost filter for AY 2015-16 as applied by the TPO. However, we note that in the case of NTS Technologies Ltd. (supra) for the very same AY 2018-19, the coordi....
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....ved as under :- 11.2.1 The Ld.AR submitted that this company is engaged in the business of electronics and semiconductor design services which is no way comparable to the captive software development activities as provided by the assessee. It is submitted that the company specialises in the design of Analog, Mixed-Signal and RF Integrated Circuits, and that no segmental details are available. 11.2.2 It is also submitted that, this company invested significantly in intangible assets, during the financial years 2016- 16, 2016-17 and 2017-18. She thus submitted that this comparable is functionally not similar with that of the assessee. Reliance was placed on the decision of Coordinate Bench of this Tribunal in case of Sprinklr India Pvt. Ltd. (supra). The Ld.DR relied on the orders passed by the authorities below We have perused the submissions advanced by both sides in the light of records placed before us. ..................... 11.2.3 We note that in case of Sprinklr India Pvt. Ltd. (supra), this comparable was excluded by observing as under: "C.3. We note that this company is in the business of Chip and semiconductor de....
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.... the overview of Mindtree Ltd., it cannot be considered as functionally comparable. In the assessee's own case for AY 2016-17 this company was excluded by the coordinate Bench of the Tribunal. Therefore, AO/TPO is directed to exclude this company. Acewin Agritek Ltd. The ld. AR referred to the following written submissions for exclusion of this company which is as under :- ............. 24.1 The ld. DR relied on the orders of lower authorities. 24.2 Considering the rival submissions, this company has been excluded in the case of NTS Technology Services Pvt Ltd (supra) by the coordinate Bench of the Tribunal and observed as under :- 11.5 Acewin Agritech Ltd. 11.5.1 The Ld.AR submitted that this company is engaged in software development and information technology outsourcing company, wherein the core business of this company is Enterprise Application Development, Mobile Applications Development, Cloud Enablement, UI Development and DevOps Implementation. In addition, she submitted that this company is developing on the leading Blockchain platforms and widening its service offerings and domains more specifically in He....
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....y reject this comparable and direct the Ld.AO/TPO to exclude from the final list.............................. " 24.3 Respectfully following the above decision, we direct the AO/TPO to exclude this company from the comparables list. Tata Elxsi Ltd. The ld. AR referred to the following written submissions for exclusion of this company which is as under :- ........... 26. The ld. DR relied on the orders of lower authorities. 26.2 Considering the rival submissions, we note from financial statements at page No.1913, corporate information is that the company provides product design and engineering services to the consumer electronics, communications & transportation industries and systems integration and support services for enterprise customers. It also provides digital content creation for media and entertainment industry. The assessee is a captive services provider, therefore functional different from comparable company. Further, this company was excluded in the assessee's own case for AY 2016-17 observing as under :- "40.32 The Id. AR submitted that the Company is functionally different as it is engaged in Embedded p....
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....so earns revenue from sale of third party software products and hardware. No segmental details are not available. 11.7.2 She submitted that this company has invested significantly in intangible assets during the financial years 2015-16, 2016-17 and 2017-18. 11.7.3 It is submitted that this company has incurred significant marketing expenditure and this company has significant RPT transactions during the year. It was thus submitted that the comparable may be excluded. 11.7.4 The Ld.AR placed reliance on the decision of Coordinate Bench of this Tribunal in case of Altair Engineering India Pvt. Ltd. vs. ACIT in IT(TP)A No. 1025/Bang/2022 by order dated 09.01.2023. The Ld.DR on the contrary relied on the orders passed by the authorities below. We have perused the submissions advanced by both sides in the light of records placed before us. 11.7.5 From the annual reports filed by the Ld.AR in the paper book, we note that this company derives 100% income from writing, modifying, testing of computer program to meet the needs of a particular client excluding webpage and designing. In the annual report, the revenue recognition by this com....
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....obal brand image and has businesses spread across border and cannot compared to captive service provider like Appellant. 1. Submission at Pg 878-880 of PB I. 2. Reliance is also placed on the following decisions wherein Tech Mahindra Ltd is held to be functionally different: ● M/s. Radisys India Ltd. (formerly known as Radisys India Pvt. Ltd.), Vs The DCIT, Circle - 3(1)(1), Bengaluru (IT(TP)A No. 739/Bang/2022) for AY 2018-19 (Para 8.3.2 to 8.3.5 on Pg 1801- 1802 of PB-III-Case Law Compilation) Substantial Onsite Operations 5. The Company has substantial onsite revenue for all 3 FYs i.e., FY 2017-18 (65.32%), FY 2016-17 (65.66%) & FY 2015-16 (64.75%). Thus, Tech Mahindra Ltd has different business model when compared to Appellant. 1. Submission at Pg 877-878 of PB I. 6. The Company has acquired and sold subsidiaries during FY 2017-18. 1. Submission at Pg 881 of PB I. 25. The ld. DR relied on the order of the lower authorities. 26. Considering the rival submissions, we note that this company has been excluded from the list of comparables in the case of M/s. Radisys India Ltd. in (IT(TP)A No. 739/Bang/2022) for AY 2018-19 b....
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.... ● M/s. Sprinklr India Pvt Ltd vs DCIT circle-6(1)(1), Bengaluru for AY 2018-19 [TS-25-ITAT 2023(Bang)-TP] (Para 12.4 12.4.2 at Page 1339-1340 of PB II-Case law Compilation) ● ADP Pvt. Ltd., Hyderabad vs DCIT-1(1), Hyderabad for AY 2016-17 (TS-63-ITAT-2022 Hyd) (Para 10 & 10.2 at Page 1513 of PB-II-Case law Compilation) 28. The ld. DR relied on the order of lower authorities. 29. After considering the rival submissions, we note that this company has been considered by the coordinate Bench in the case of Sprinklr India Pvt. Ltd. in IT(TP)A No. 713/Bang/2022 dated 11.1.2023 and directed to be excluded from comparables by observing as under :- "12.4. Thirdware Solutions Ltd .: It is submitted by the Ld.AR that this company has multiple activities and segmental financials are not available. The Ld.AR submitted that, in the absence of segmental details, this company cannot be selected. He relied on the decision of coordinate bench of this Tribunal in case of Yahoo Software Development India Pvt. Ltd vs. JCIT reported in (2020) 115 taxmann.com and 3DPLM Software Solutions Ltd. vs. DCIT reported in (2014) 42 taxmann.com 333. 12.4.1. The Ld. DR....
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....79; In the case of AMD India Pvt Ltd v ACIT IT(TP)A No. 775/Bang/2022 for AY 2018-19 (Page 45-46 of the decision), the ITAT remanded this company to TPO for fresh consideration. ● M/s. Etisalat Software Solutions Pvt. Ltd. vs DCIT Circle 2 (1)(1), Bengaluru. (IT(TP)A No. 224/Bang/2023) for AY 18-19 (Para 5.4.1 -5.4.2 at Page 1709-1710 of PB-III- Case law Compilation). ● M/s. Radisys India Ltd. vs DCIT Circle - 3(1)(1), Bengaluru. (IT(TP)A No. 739/Bang/2022) for AY 2018-19 (Para 4.2.3 of Page 1796 of PB-III-Case law Compilation). (Submission at Pg 839-841 of PB I). 32. The ld. DR relied on the orders of the lower authorities. 33. After hearing both the sides, this issue is considered and remitted back to AO/TPO in the case of AMD India Pvt. Ltd. (supra) at para No.29.1 for fresh consideration. Following the above decision, we remit this issue to AO/TPO for fresh consideration and decision as per law in the same terms. 34. During the course of hearing, the ld. AR did not press the issue of inclusion of Athena Global Technologies Ltd., Data Collection Infotech (India) P Ltd., Evoke Technologies P. Ltd. KALS Information Systems Ltd., Sankhya Infot....
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....TP ADJUSTMENT IN MARKETING SUPPORT SEGMENT - Grounds 11 & 12 41. Ground No.11(i) is general in nature. Ground No.11(iii) - Comparables selected by the TPO 42. The assessee is also engaged in Marketing Support Services. As per Master Service Agreement placed at page 337 of PB, clause A(ii)(b). "this activity comprises of advertising and sales promotion on behalf of Metric Stream to promote the products of Metric Stream". The assessee is compensating for the services rendered on cost + 11% on monthly basis. Metric Stream, USA formulates the overall marketing strategy and is responsible for marketing the products/services .. As per page 303 of PB, the functions performed in relation to Marketing Sales & Support services by assessee is as under :- "7.21 The sales and marketing services provided by the Company principally involves assisting MetricStream USA in identifying potential customers. The work also involves educating potential users on the benefits and features of MetricStream USA's range of products. MetricStram India organized seminars, conferences in India and arranges for speakers, books hall and allied activities. The sales and marketing depar....
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....R submitted that in final set comparables, the TPO has retained companies even though they are not comparables in terms of functions performed, assets utilized, risks assumed, etc. He further submitted that Axience Consulting Pvt. Ltd., Cheil India P. Ltd., Dun & Bradstreet Information Services India P. Ltd., Lintas India P. Ltd., Majestic Research Services & Solutions Ltd. and Pressman Advertising Ltd. are covered by the judgment of coordinate Bench of the Tribunal in the case of AMD India P. Ltd. (supra). He further submitted that these companies are not engaged in the functions performed by assessee company. However, the learned TPO included these companies in the final list of comparables which was upheld by the DRP. Therefore, these companies do not pass the FAR analysis and filed written synopsis as follows :- Axience Consulting Pvt. Ltd. Reasons for rejection Reference & case laws Functionally Different 1. The Company is functionally different as it primarily renders Consultancy and advisory services in the field of finance, market research and business administration. 1. Relevant extract of submission at Pg 1004-1006 of PB I. 2. ....
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.... PB I. 2. Reliance is place on following decision, wherein Dun & Bradstreet Information Services India Pvt. Ltd. is held functionally not comparable: ● In the case of AMD India Pvt Ltd v ACIT IT(TP)A No. 775/Bang/2022 for AY 2018-19 (Page 47-54 of the decision), the ITAT has rejected this comparable. ● M/s.Tivo Tech Pvt. Ltd vs ACIT [TS-35-ITAT-2023(Bang)-TP] for AY 2018-19 (Para 9(ii) of Pg 1569- 1570 PB II- Case Law Compilation). ● Levi Strauss (India) Pvt. Ltd. vs DCIT Circle 4(1)(1) IT(TP)A Nos. 926 & 927/Bang/2022 for AY 2017- 18 & 2018-19 (Para 16.4 of Page 1751-1752 of PB III- Case Law Compilation) ● M/s. Radisys India Ltd. vs DCIT Circle - 3(1)(1), Bengaluru. (IT(TP)A No. 739/Bang/2022) for AY 2018-19 (Para 12.8.1 of Page 1805-1806 of PB-III-Case law Compilation). Lintas India Private Limited Reasons for rejection Reference & case laws Substantial related party transactions 1. The Company has substantial RPT for FY 2017-18 (20.24%), FY 2016-17 (23.70%) & FY 2015-16 (46.67%) and thus fails RPT filter. 1. Submission at Pg 1018-1019 of PB I (Computation of RPT is given at Pg 34 of....
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....Bang)-TP] for AY 2018-19 (Para 9(v) of Pg 1573- 1574 of PB II- Case Law Compilation). ● M/s.EIT Services India Pvt. Ltd vs DCIT [TS-60-ITAT-2023(Bang)-TP] for AY 2017-18 (Para 6 of Pg 1591- 1593 of PB II- Case Law Compilation). ● Radisys India Limited, Bangalore (TS-823-ITAT-2022 Bang-TP) for AY 2017-18 (Para 13 to 13.2 of Pg 1467-1468 of PB II Case Law Compilation) ● Epson India Pvt. Ltd. vs DCIT, Circle-2(1)(1), Bengaluru (IT(TP)A No.821/Bang/2022) AY 2017-18 (Para 19 & 20 of Pg 1615 of PB II Case Law Compilation) Pressman Advertising Limited Reasons for rejection Reference Functionally Different 1.The Company is functionally different as it engaged into Advertising, Public Relation, Design and Digital services. 1. Submission at Pg 1009-1011 of PB I. 2. Reliance is placed on the following decisions of Coordinate bench wherein the ITAT held that the Company's main stream of revenue is for providing services pertaining to advertisement on radio, television and public relation and cannot be compared to business support services: ● In the case of AMD India Pvt Ltd v ACIT IT(TP)A No. 775/B....
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....Ltd. v. Dy. CIT [2023] 146 taxmann.com 226 (Nang. - Trib.), wherein on functional dissimilarly for the assessment year 2015-16 and 2016-17, this company came to be excluded. The Ld.DR relied on the orders passed by the authorities below. We have perused the submissions advanced by both sides in light of records placed before us. We note that the background of the company as described in the annual report at page 4548 of paper book under note 26 reveals that this company is in the business of providing consultancy and advisory services in the field of finance, market research and business administration to corporate and non-corporates. Further the revenue from operations have been segmented under one heading at page 4540 without giving any segmental details. The only bifurcation of revenue in schedule 20 at page 4546 gives is service charges (local) and service charge (export). From the above it is clear that all the revenue earned by this company from consultancy and advisory charges in the field of market research, business administration and finance are clubbed together. The assessee before us is only providing marketing services to its AEs in respect o....
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....ny is mentioned to be credit reporting services. At page 4662, we note that this company is engaged primarily in the business of providing risk management and sales and marketing solutions. The background of the company also describes to be providing learning and economic insight services. The company offers a wide suite of information solutions and its services are used extensively by banks, financial institutions, multi nationals, corporate entities, public sector undertaking, exporters and importers. It also describes itself to be in the field of market analysis, locate prospects and incurs revenue from new and existing customers. The sales and marketing solutions offered by this company also include sale of data and related services. In our considered opinion, these functions cannot be compared with the limited services rendered by assessee to its AEs. We accordingly direct this comparable to be excluded. (iii) Pressman Advertising Ltd. It is submitted that the primary business activity of Pressman is providing advertising services, selling of space for advertisement in print media. It has earned revenue solely from advertising services (such as corpo....
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.... Accordingly, we direct this comparable to be excluded from the final list. (iv) Lintas India Pvt. Ltd. It is submitted that Lintas is engaged in providing advertising services and as per its revenue recognition policy, the company earns revenue from advertisement published or displayed or aired, retainer fees, client agency commission, etc. which are different from the services rendered by the Assessee. Therefore, this company ought to be excluded from the final list of the comparables. The Ld. DR relied on the orders passed by the authorities below. We have perused the submissions advanced by both sides in light of records placed before us. We note that this company is providing advertising services and the principle business activity has been described at page 4868 of the paper book in the annual report to be advertising and marketing communications. The revenue recognition by this company has been mentioned to be an advertising agency catering services to much number of clientele. We therefore do not find this comparable to be functionally similar with that of assessee who is a captive service provider. Accordingly, this comparable....
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.... is said to be first Indian market research company to be listed on BSE on SME platform and is engaged in providing market research services offering a wide range of qualitative and quantitative research services. The only segment under which the revenue is revealed is under sale of services in note 17 at page 5409 of the paper book. In our view this company cannot be held to be functionally similar with that of assessee. Accordingly, we direct this comparable to be excluded from the final list. (vi) Cheil India Pvt. Ltd. It is submitted that Cheil is engaged in providing digital solutions, analytical solutions (data analytics) which are not akin to the services rendered by the Assessee. It derives its income primarily from advertising, communication, publicity and merchandising and undertakes consultancy services and training. It is submitted that an advertising agency undertakes functions such as attracting clients who are advertisers, developing an advertising strategy, creation of advertisements by a creative team consisting of writers, designers and copy writers. They also undertake research activities to understand a client's market situation, c....
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.... The Appellant seeks exclusion of this company based on the following reasons: Reasons for rejection Reference Functionally Different 1. The Company is functionally different as it primarily renders Public Relations Services. 2. The company has expertise in the field of corporate reputation building, media relations, strategic communications, issues and crises communications, IPO and capital markets, investor relations, public affairs and organizing PR events. 1. Relevant extract of website and submission is at Pg 1022-1024 of PB I. Relevant Extracts of Annual Report at Pg 1822 of PB IV. 46. The ld. DR relied on the orders of the lower authorities. 47. After hearing both the sides, we note from the annual report of the company the name and description of main products/services is Public Relation Services and classified under the NIC Code 74140 and 99.26% revenue is coming under this activity. The ld. AR of the assessee has relied on the website of the company. Considering the above, this company cannot be considered as comparable with the functions performed by the assessee company as a captive service provider. Accordingly, this company is exclu....
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.... exact nature of business activity carried out by this company after obtaining information u/s. 133(6) of the Act and decide the issue as per law. Focus Suites Solutions & Services Limited 51. The TPO proposed this company as comparable for which the assessee sought reasons for rejection of this company. However, the learned TPO included this company in the final list of comparables which was upheld by the DRP. The Appellant seeks exclusion of this company based on the following reasons: Reasons for rejection Reference Functionally Different 1. The Company is functionally different as it provides database management services, predictive analytic services and related technology services and solutions. 2. The Company operates in data acquisition and data analytics field generally known as data mining and not market research services. 1.Extract of website and submission at Pg 1011-1013 of PB I. 2. Relevant Extracts of Annual Report at Pg 1843 of PB IV. Extraordinary event 1.During FY 2016-17, the company has acquired 100% equity share capital in Pure Online Panel Research Services Pvt Ltd and Genpop Consumer Research Pvt Ltd.....
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....xmann.com 161 (Bangalore - Trib.) for AY 2016-17 (Para 25- 28 on pg 1630-1631 of PB II- Case Law Compilation) 55. The ld. DR relied on the orders of the lower authorities. 56. After hearing both the sides, we note that this issue has been considered by the coordinate Bench in the case of Levi Strauss (India) Pvt. Ltd. [2023] 153 taxmann.com 683 (Bangalore - Trib.) and it is observed as under :- "10.1 The Ld.AR submitted that Ugam Solutions Pvt. Ltd., Axience Consulting Pvt. Ltd. and Platinum Advertising Pvt. Ltd. has already been excluded in assessee's own case for A.Y. 2016-17 in Levi Strauss (India) (P.) Ltd.'s case (supra) by observing as under: "Ugam Solutions Private Limited (assessee seeking exclusion) [Ground 5(b)] 23. The assessee is seeking exclusion of the above company for the reason that the said company is functionally different from the assessee. The assessee submits that Ugam 24. Solutions Private Limited is engaged in provision of managed analytics services. It provides services to Global Market Research firms and the services include research operations, technology infrastructure transition, data warehousing, aggreg....
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....d No 11(iv)- Comparables & Additional Comparables selected/proposed by the Appellant 57. Out of inclusions sought in the Grounds of Appeal, following companies are not pressed: a) Hindustan Field Services Pvt Ltd; b) Cyber Media Research & Services Ltd; and c) ICRA Management Consulting Services Ltd. 58. With respect to inclusion of comparables for marketing segment, the assessee submits as follows :- Companies Arguments of lower authorities Contention of Appellant HT Mobile Solutions Ltd TPO & DRP The TPO rejected this company on the ground that the financial data is not available (Pg 127 of Appeal Papers). The DRP rejected this company on the ground that it does not appear in the search matrix of the TPO. (Pg 74-75 of Appeal Papers). 1. The financial data relating to the company is available in the public domain. 2.The company is functionally similar as it providing digital marketing services and enterprise solutions to brands and businesses. The company also provides services such as mobile marketing, social media marketing, advertising, mobile CRM and loyalty campaigns. 3.The company passes all filters applied by....
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....e companies are remitted back to the TPO for fresh consideration in the case of AMD India Pvt Ltd v ACIT IT(TP)A No. 775/Bang/2022 for AY 2018-19 (Page 56-57 of the decision). 59. The ld. DR relied on the orders of the lower authorities. 60. After hearing both the sides, we note from the order of DRP that the above companies were not appearing in the search matrix of TPO, therefore the DRP had rejected. We remit this issue to the AO/TPO for fresh consideration and decision as per law. Ground No.12 - Incorrect computation of Confluence Integrated Services Pvt. Ltd 61. The ld. AR submits that the TPO has computed incorrect margin of Confluence Integrated Services Pvt. Ltd. The variation is due to incorrect treatment by the TPO of certain items such as bad debts, interest on TDS, bank charges etc. The corrected margins of the comparable is furnished by the assessee as under :- SL No. Name of the Company Margins as per TP Order Corrected Margins 1 Confluence Integrated Services Pvt. Ltd 16.66% -2.12% 62. After hearing both the patties, we direct the TPO/AO to verify and adopt the correct margin of the above comparable. GROUNDS RELATING TO NOTIO....
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....TP)A No. 739/Bang/2022) for AY 2018-19 (Page 1813 of PB- III-Case law Compilation) ● M/s. Etisalat Software Solutions Pvt. Ltd., vs DCIT Circle 2(1)(1), Bengaluru (IT(TP)A No. 224/Bang/2023) for AY 2018-19 (Page 1706 of PB-III-Case law Compilation) ● Millipore (India) Ltd [2017] 80 taxmann.com 12 (Bengaluru - Trib); and ● Avnet India (P.) Ltd [2016] 65 taxmann.com 187 (Bangalore - Trib.) Ground No 15-Methodology adopted by the TPO - Arm's Length Interest Rate 65. Without prejudice to the above, the Appellant submits that the TPO has adopted incorrect LIBOR to compute the notional interest. The learned TPO has adopted 6-month LIBOR at 2.224% + 450 basis points for determining arm's length interest rate at 6.724% after allowing 30 days of credit period. 65.1 In this regard, the Appellant submits that TPO has adopted 6- month LIBOR at 2.224% whereas the correct 6-monyh LIBOR for USD is 1.661% (Pg 1117 of PB-I). Further, only LIBOR without basis points should be adopted as a basis for benchmarking (Pg 1064-1066 of PB-I). In support the above contention, the Appellant relies on the following decisions: ● Huawei....
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....d on the orders of the lower authorities. 68. Considering rival submissions and case laws relied by both the sides, we note that various coordinate Benches of ITAT has decided that interest on receivable is a separate internasal transaction. On going through the Master Agreement placed at page No.337 to 342 of PB and page 338 of PB, the credit period is 60 days from the date of invoice. This issue was considered by the coordinate Bench of the Tribunal in the case of AMD India (P) Ltd. (supra) wherein it was observed as under :- 36.2 Considering the rival submissions, we note that in assessee's own case for AY 2016-17 & 2017-18 (supra), similar issue was decided in assessee's own case by coordinate Bench of the Tribunal as under :- "23.5 We have heard both the parties and perused the material on record. After considering the order of the lower authorities, we are of the view that the notional interest on receivable is an international transaction, therefore this argument of the assessee is rejected. The TPO has applied 6 months LIBOR + 300 basis points whereas the ld. DRP has directed for applying SBI fixed deposit rate. During the course of hearing, it ....
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....xpenditure u/s 37(1) of the Act. 70.1 The Karnataka High Court in CIT v Biocon Ltd [2020] 121 taxmann.com 351 (Para 10 of PB II-Case Law Compilation) confirmed the decision of the Special Bench Honourable ITAT in Biocon Ltd v DCIT [2013] 35 taxmann.com 335 (Bangalore - Trib.) (SB) and recognized that ESOP is simply one of the modes of compensating the employees for their services and is a part of their remuneration. The High Court observed that the primary object to issue shares at discount is not to waste capital but to earn profits by securing consistent services of the employees and therefore, the same cannot be construed as short receipt of capital. Following decisions are also relied upon: ● Aricent Technologies (Holdings)Limited vs Addl. CIT, Special Range-1, New Delhi TS-17-ITAT-2022 DEL ● M/s. Global E-Business Operations Pvt. Ltd. (TS-796-ITAT-2022 Bang-TP) 70.2 Further, the stock compensation is a cross charge made by the parent company. The sum so reimbursed by the Appellant is claimed as deduction and question of notional expense does not arise. The ESOP cost is part of operating cost for TP mark-up. Copy of agreement which states tha....
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.... the options granted under ESOP." 72.1 This issue is considered by the coordinate Bench in the case of Novo Nordisk India (P) Ltd. [2014] 42 taxmann.com 168 (Bang. Trib.) and it was held as under :- "18. We have considered the rival submissions. It is clear from the facts on record that there was an actual issue of shares of the parent company by the assessee to its employees. The difference, between the fair market value of the shares of the parent company on the date of issue of shares and the price at which those shares were issued by the assessee to its employees, was reimbursed by the assessee to its parent company. This sum so reimbursed was claimed as expenditure in the profit & loss account of the assessee as an employee cost. The law by now is well settled by the decision of the Special Bench of the ITAT Bangalore in the case of Biocon Ltd. v. Dy. CIT [2013] 35 taxmann.com 335 and other connected appeals, by order dated 16.07.2013, wherein it was held that expenditure on account of ESOP is a revenue expenditure and had to be allowed as deduction while computing income. The Special Bench held that the sole object of issuing shares to employees at a discounted pr....