ATT Global Network Services India Private Limited vs Assistant Commissioner of Income Tax Circle-1(1) Delhi

“1.

The order u/s.264 r.w.s. 143(3) and 144C(13) dated 30 June 2024 is bad in law.

2.

Transfer pricing additions with respect to Support Services (Refer Annexure for detailed ground)

3.

Transfer pricing additions with respect to payment of royalty (Refer Annexure for detailed ground)”

“1.

The Appellant is a company incorporated under the Companies Act, 1956 and is engaged in providing long distance telecommunication services pursuant to the International Long Distance (ILD), National Long Distance (NLD) and Internet Service Provider (ISP) licenses granted by the Department of Telecommunications (DoT). The Appellant commenced commercial operations on April 6, 2007.

2.

The Appellant has filed its original return of income on 30 November 2018 declaring, income of INR 2,81,73.73.220 (Pg. 1 of appeal set)

3.

The case was selected for scrutiny and a reference was made to Ld. Transfer Pricing Officer ('Ld. TPO') u/s 92CA of the Income-tax Act, 1961 (the Act) for computation of arm's length price (ALP) The Ld. TPO vide order u/s 92CA(3) dated 29 January 2021 proposed an addition of INR 16,61,69.521 on account of 'Availing of support services and INR 1,93,25,264 on account of 'Payment of Royalty (Pg. 291 of appeal set).

4.

Thereafter, the National e-Assessment Centre ("NeAC) issued a draft assessment order dated 19 April 2021 (draft order') and the same was communicated to the Appellant vide email dated April 20, 2021 (PB Vol-1 1-13).

5.

On the very same day, the Appellant received another mail wherein a final assessment order under section 143(3) r.w.s. 144C(3)/144B of the Act dated 20 April 2021 (1 AO order) was passed (PB Vol-1 14-149).

6.

The first AO order, as mentioned above, was passed before the expiration of 30 day period from the date of the draft order and without any acceptance from Appellant on the proposed variations in draft order in violation of section 144C(3) of the Act.

7.

The Appellant filed its objections before the Dispute Resolution Panel ('Ld. DRP') against the draft order. The Ld. DRP vide directions dated 7 December 2021 (DRP directions) held in para 5.8.1 at P.B. Vol-1 169 that since the objections were filed in time, it is mandatory for the Ld. AO to pass a final order in conformity with the DRP directions u/s 144C(13) of the Act. Hence, the order so passed by the Ld. AO pursuant to the DRP directions will have the effect of final order.

8.

Thereafter, Ld. AO issued the assessment order dated 22 February 2022 ('2nd AO order) wherein total income of the Appellant was computed at INR 3,46.75.93.109 and demand of INR 34.47.25.324 was raised as under (refer PB Vol-1 Pg. No.172-184):

9.

However, the department did not serve/ communicate the and AD order to the Appellant, infact, Use very existence of such order what even not known to the department itself as is evident from the subsequent events as explained below.

10.

An application under section 264 of the Act dated 30 May 2022 (P.B. Vol-1 185-190) was filed by the Appellant with a prayer to quash the first AO order considering DRF's specific directions and the fact that no final assessment order was passed pursuant to DIRI's directions (as Appellant was never served with any final order post DRP's directions).

11.

The Ld. PCIT, pursuant to the petition filed by the Applicant, passed an order u/s 264 dated 19 March 2024 holding that a final assessment order has not been passed in conformity with the DRP directions even after multiple communications by Appellant. Thus, the AO was directed to pass such an order in conformity with DRP directions in terms of section 144C(13) of the Act (para 4 at PB Vol-1 194)

12.

The Ld. AO, pursuant to the order u/s 264 issued by the PCIT, passed an order dated 30 June 2024 (3rd AO order) in pursuance to the DRP directions wherein total income of the Appellant was computed at INR 300,28,68,005 and demand of INR 52,57,50,467 was raised (PB Vol-1 198).

13.

Therefore, there is a duplication of assessment for the same AY Le., AY 2017-18 by two different authorities, one dated 22 February 2022 passed by National Faceless Assessment Center (NFC) while the other dated 30 June 2024 passed by the jurisdictional AO i.e., Id. ACIT, Circle 1(1), Delhi which is impermissible as also held in the following supporting case laws:

(a)

CIT v. S.S. Ahluwalia [2014] 46 taxmann.com 169 (Mag.) - There cannot be and the Ac does not envisage two assessments for the same year by different officers.

(b)

Burger Paints India Ltd. v. Asstt. CIT [2000] 246 ITR 133 (Cal.) two assessment cannot be made at different places upon the same person in respect of the same income.

14.

It is submitted by the Appellant that the 3rd AO order dated 30 June 2024 has resulted in duplicate triplication of assessment for the same AY and therefore deserves to be quashed at the very threshold.”

1.

On the facts and circumstances of the case & in law, the final assessment order under section 143(3) r.w.s. 144C(13) and 1448 of the Income-tax Act, 1961 (the Act') dated 22 February 2022 passed by the National Faceless Assessment Centre ('Ld. AO) and the directions under section 1440(5) of the Act dated 7 December 2021 are erroneous and bad in law.

2.

On the facts and circumstances of the case & in law, the Ld. AO erred in determining the assessed income of the Appellant at INR 346,75,93,109 as against the returned income of INR 281.73.73.220 declared by the Appellant.

3.

On the facts and circumstances of the case & in law, the directions passed by the Ld. DRP under section 144C(5) of the Act dated 7 December 2021 for further enquiry by the Ld. AO is in gross violation of provisions of section 1440(8) of the Act, thereby, rendering such directions as invalid, beyond jurisdiction and vitiating the entire subsequent assessment as being null and void.

4.

On the facts and circumstances of the case & in law, the final assessment order dated 22 February 2022 having been made without complying with the specific binding mandates and directions passed by Ld. DRP dated 7 December 2021, is erroneous, without jurisdiction and deserves to be held as null and void-ab-initio.

5.

On the facts and circumstances of the case & in law, the final assessment order under section 143(3) r.w.s. 144C(13) and 1448 of the Act dated 22 February 2022 is barred by the time limitation provided under section 144C(13) of the Act and hence, deserves to be held as void-ab-initio, bad in law and time-barred.

6.

On the facts and circumstances of the case & in law, the final assessment order under section 143(3) r.w.s. 144C(13) and 1448 of the Act dated 22 February 2022 and Ld. DRP's directions under section 144C(5) of the Act dated 7 December 2021 are barred by the time limitation provided under section 153 of the Act and hence, deserves to be held as void-ab-initio, bad in law and time-barred.

7.

On the facts and circumstances of the case & in law, the final assessment order under section 143(3) r.w.s. 144C(13) and 1448 of the Act dated 22 February 2022 along with consequential notice of demand under section 156 of the Act dated 22 February 2022 are invalid, bad in law, non-est, a nullity in the eyes of law and non-enforceable in absence of service of the order to the Appellant.

8.

On the facts and circumstances of the case & in law, the final assessment order under section 143(3) T.W.5. 144C(13) and 144B of the Act dated 22 February 2022 along with consequential notice of demand under section 156 of the Act dated 22 February 2022 passed by the Ld. AO was never served on the Appellant and accordingly, it vitiates the complete proceedings.

9.

On the facts and circumstances of the case & in law, the Ld. DRP erred in issuing the directions under section 144C(5) of the Act dated 7 December 2021 without quoting a validly authenticating document identification number ('DIN') in conformity with para-2 and para-3 of Circular No. 19/2019 dated 14 August 2019 read with ITD FAQs and thus, the said directions and consequential final assessment order dated 22 February 2022 deserves to be held as invalid, bad in law and be deemed to have never been issued.

Transfer Pricing (TP) Grounds:

TP adjustment with respect to receipt of Intra- Group Services:

10.

On the facts and circumstances of the case & in law, the Ld. AO/ Learned Transfer Pricing Officer ('Ld. TPO') (in pursuance to the directions of the DRPJ erred in enhancing the income of Appellant by INR 16,61,69,521 holding that the international transaction pertaining to receipt of intra-group grossly erred in:

10.1

rejecting the combined transaction approach of benchmarking adopted by the Appellant in its TP documentation (i.e. aggregating availing of intra-group services with provision of network support services) and proceeding to determine the arm’s length price of international transaction pertaining transaction pertaining to availing of intra-group services from its AEs on a standalone basis;

10.2

disregarding the elaborate erroneously assume that 'no benefit has been conferred upon the Appellant from the international ate documentary evidence submitted as part of assessment proceedings to transactions pertaining to availing of intra-group services and thereafter re-determining the ALP of the said transaction as 'NIL, and

10.3.

not following the favourable orders of the Hon'ble ITAT in Appellant's own case for the immediately preceding years Le., AY 2009-10 to 2016-17 which are binding otherwise in abuence of there being any change in facts in current year vis-à-vis preceding years.

TP adjustment with respect to payment of royalty

11.

On the facts and circumstances of the case & in law, the Ld. AO/Ld. TPO (in pursuance to the directions of the DRP) erred in in enhancing the income of the Appellant by INR 193.25.264 and holding that the international transaction pertaining to payment of royalty does not satisfy the arm's length principle envisaged under the Act, and in doing so have grossly erred in:

11.1

rejecting the combined transaction approach of benchmarking adopted by the Appellant in its TP documentation (Le, aggregating payment of royalty, availing of intra-group services with provision of network support services) and proceeding to determine the arm's length price of international transaction pertaining to payment of royalty from its AEs on a standalone basis by rejecting TNMM as the most appropriate method:

11.2

holding that the Appellant did not receive tangible benefit in lieu of the payment of royalty thereby challenging the commercial wisdom of the Appellant in making payment for royalty:

11.3.

arbitrarily rejecting the supplementary analysis using CUP method to benchmark the payment of royalty transaction submitted by the Appellant without giving any cogent reasons;

11.4.

undertaking fresh benchmarking analysis using Royaltystat database and selecting agreements which are not comparable to the royalty payment made by the Appellant to its AEs;

11.5.

not providing the detailed search process along with backup documentation such as accept-reject matrix to provide Appellant an opportunity to evaluate the appropriateness of the benchmarking analysis:

11.6.

erroneously computing arm's length price as arithmetic mean of the royalty rates of eleven. comparable agreements instead of applying the range concept as prescribed under Rule 10CA of the Income-tax Rules, 1962; and

Corporate Tax Grounds:

Disallowance of Support Service Cost:

12.

On the facts and circumstances of the case & in law, the Ld. AO/ DRP erred in disallowing support service cost of INR 9,95.38,487 paid to AT&T Communication Services India Private Limited (ACSI) under section 37(1) of the Act despite the said expense being a legitimate business expenditure incurred during the ordinary course of its business.

13.

On the facts and circumstances of the case & in law, the Ld. AO/ DRP erred in not taking cognizance of the submissions made and the documentary and circumstantial evidence/ proof produced by the Appellant, which duly substantiate that support services were rendered by ACSI to the Appellant company.

14.

On the facts and circumstances of the case & in law, the Ld AO/ DRP erred in ignoring / not following the favourable orders of the Hon'ble ITAT in Appellant's own case on this issue for immediately preceding years i.e. AY 2008-10 to 2016-17 which are binding otherwise in absence of there being any change in facts in current year vis-à-vis preceding years.

Disallowance of license fee

15.

On the facts and circumstances of the case in law, the Ld. AO ought to have allowed the license fee as per the provisions of the section 34ABB of the Act in view of the directions of the Hon’ble Supreme Court in the case of CIT v. Bharti Hexacom Ltd in Civil Appeal No(s) 11128 OF 2016.

16.

On the facts and circumstances of the case & in law, the Ld. AO ought not to have applied the consequential interest on license fee disallowed in view of the decision of Hon’ble Supreme Court in the case of Bharti Hexacom Ltd. (supra) in miscellaneous application no. 218 of 2024 with respect to waiver of interest.

Denial of Deduction of Donation under section BOG of the Act

17.

On the facts and circumstances of the case & in law, the Ld. AO/ DRP erred in denying deduction under section 80G of the Act amounting to INR 83,39,103 without appreciating the submissions and supporting receipts pertaining towards donation to trust/ institutions placed on record.

Non-grant of credit of excess Dividend Distribution Tax paid:

18.

On the facts and circumstances of the case & in law, the Ld. AO ought to have allowed refund of February 2022 following the specific and binding mandatory DRP directions under section 1440(5) excess dividend distribution tax (DDT) of INR 9,91,22,987 in the final assessment order dated 22 of the Act dated 7 December 2021.

19.

Without prejudice to the above, on the facts and circumstances of the case & in law, the Appellant ought to be allowed refund of excess dividend distribution tax (DDT) of INK 9,91,22,087 along with consequential interest on its dividend payout to its shareholders.

Additional claim for deduction of road taxes and VAT on motor vehicles taken on leasti

20.

On the facts and circumstances of the case & in law, the LI. AD ought to have allowed road tax of INR 12,09,023 and value added tax of INR 8,98,362 on motor vehicles in the final assessment order dated 22 February 2022 following the specific and binding mandatory DRP directions under section 144C(5) of the Act dated 7 December 2021.

21.

Without prejudice, on the facts and circumstances of the case & in law, the Appellant ought to be allowed an expense towards road tax of INR 12,09,023 and value added tax of INR 8,98.362 on motor vehicles totaling to INR 21,07,385 as business expenditure under section 37(1) read with section 43B of the Act on payment basis.

Adjustment of book profits under section 115JB:

22.

On the facts and circumstances of the case & in law, the Ld. AO erred in computing the book profits at INR 2,74,72,78,553 as against the book profits of INR 2,67.53.16,021 as per Appellant's returned income without appreciating that none of the additions made in the impugned order are falling under the ambit of any specific adjustment prescribed under section 115.JB of the Act.

Short-grant of credit for taxes deducted at source:

23.

On the facts and circumstances of the case & in law, the Ld. AO grossly erred in not granting complete credit of taxes deducted at source to the Appellant.

Levy of interest under section 234B and 234C of the Act:

24.

On the facts and circumstances of the case & in law, the Id. AO erred in charging interest under section 2346 and 234C of the Act.

Initiation of penalty proceedings:

25.

On the facts and circumstances of the case & in law, the Ld AO erred in initiating penalty proceedings under section 270A of the Act.

All the above grounds are without prejudice to each other. The Appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.

“5.

Next comes the assessee’s second substantive ground challenging the learned lo wer authorities’ action making the transf er pricing adjustment relating to it’s receipt of intra group services amounting to Rs.21,61,52,391/- thereby adopting the arm’s length price thereof as “Nil” only. Both the parties are very much ad idem during the course of hearing that the instant issue is a recurring one which had arisen f or the f irst time in assessment year 2009-10 wherein the tribunal’s order dated 18.09.2017 restored it back to the Transfer Pricing Off icer (“TPO”) in paras 52 to 53 at pages 74 to 76 in the paper book.

6.

Learned counsel f urther seeks to buttress to the assessee’s point that the some of the intervening assessment years also involve the very issue travelling upto the tribunal which accepted the assessee’s stand by f ollo wing A.Y. 2009-10’s above findings.

7.

The Revenue on the other hand highlights the f acts that once the f irst and foremost assessment year 2009-10 has witnessed remand directions, the subsequent orders of the tribunal not considering the same would not f orm binding precedent.

8.

We have given our thoughtf ul consideration to the f oregoing vehement rival submissions. We f ind merit in the Revenue’s stand in principle as once the instant issue is to be remanded back going by A.Y. 2009-10’s f indings, the same could not be allo wed f or computation purposes at this stage being a pre-mature exercise. We thus accept the assessee’s instant second ground herein f or statistical purposes only at this stage; to be adjudicated af resh by the learned TPO, as per our directions in the f irst and f oremost assessment year 2009-10. Needless to say, he shall indeed consider all the intervening developments as well as assessee’s evidence as per law. Ordered accordingly.”

“8.

We next advert to the assessee’s second substantive ground raising “royalty” adjustment issue in transf er pricing proceedings. We make it clear f irst of all that the assessee is indeed very f air during the course of hearing in not challenging the impugned adjustment in principle. Learned counsel’s sole plea is that the lo wer authorities herein have not computed the impugned adjustment going by Rules 10CA(7) proviso r. w.s. sub-rule (8) thereof prescribing such a transf er pricing adjustment going by the “percentile method”. That being the limited issue raised, we hereby direct the learned Transf er Pricing Off icer to consider the assessee’s instant sole plea and f inalize his consequential computation as per law in very terms. The assessee’s second substantive ground is partly allo wed f or statistical purposes.”

“9.

Next comes the third substantive issue between the parties relating to “corporate tax” wherein the learned lo wer authorities have disallo wed the assessee’s support services expenditure to the tune of Rs.9,31,97,824; in the course of draft assessment and upheld in the DRP’s directions. We notice that the instan t issue is very much a recurring one which stands accepted by this tribunal learned co-ordinate bench earlier order dated 18.09.2017 in assessment year 2009-10. We adopt the above learned co-ordinate bench detailed discussion mutatis mutandis to accept the assessee’s instant third substantive ground in very terms. Necessary computation shall f ollo w as per law.”

“10.

So f ar as the assessee’s f ourth substan tive ground raising the issue of annual revenue share-based license f ee as in the nature of a revenue expenditure claim is concerned, both the le arned representatives are very much ad ide m that the same is no more res in tegra in light of CIT Vs. Bharti Hexacom Limited (2024) 162 taxmann.co m 669 (SC) holding that it has to be amor tized under Section 35ABB of the Act. That be ing the case, we are of the cons idered vie w that the learned Assessing Off icer requires to f inalize his consequential “amortization” computation as per law in very terms. It is f urther made clear that it shall be the assessee’s risk and respons ible only to plead and prove all the relevan t f acts in consequential proceedings. Allo wed for statistical purposes.”

“7.

We have given our thoughtful consideration to the submissions advanced at the Bar. We find that since the judgment of this Court is dated 16.10.2023, and having regard to the Telecom Policy, which commenced from the year 1999, the payment of interest for the period of which the tax demand is now to be met in respect of these cases stands waived.”

“11.

Coming to the assessee’s next substantive ground claiming section 80G deduction of CSR expenditure, the Revenue’s vehement contention bef ore us is that the same lacks the element of “voluntariness” so as to be treated as an eligible deduction. We f ind in this f actual backdrop that the instant issue is more res integra in light of M/s Goldman Sachs Services pvt. Ltd. [(TS-331-ITAT-2020 (Bang.)], FNF India Pvt. Ltd. [(TS-6-ITAT-2021 (Bang.)], Allegis Services (India) Pvt. ltd. Vs. ACIT, Bangalore (ITA No. 1693/Bang./2019) and First American (India) Pvt. Ltd. Vs. ACIT, Bangalore (ITA No. 1762/Bang/2019) holding that such a “CSR” expenditure also qualif ies section 80G deduction. This assessee’s sixth ground succeeds in very terms.

“6.

The Ground Nos. 4 to 8 raised by the assessee are challenging the action of the Learned NFAC in confirming the action of the Learned AO by rejecting the refund claim of excess dividend distribution tax paid by the assessee by not adhering to the lesser rate of tax on dividend provided in accordance with Article 11 of India- United Kingdom (UK) Double Taxation Avoidance Agreement (DTAA).

6.1

We have heard the rival submissions and perused the materials available on record. The short issue in dispute is assessee company had paid dividend to its non-resident shareholder. The assessee company had suffered dividend distribution tax at the rate of 20,36 percent in terms of section 1150 of the Act. For the dividends paid to non-resident shareholder, the assessee wanted to claim the benefit of reduced rate of tax of 10 percent as provided in Article 11 of India UK DTAA on the pretext that treaty provisions would override the domestic law. Accordingly, the plea of the assessee was that dividend distribution tax is liable only at the rate of 10 percent in respect of non-resident shareholder as against 20.36% remitted by the assessee. Hence the assessee is seeking refund of excess dividend distribution tax paid which was denied to the assessee by placing reliance on the decision of Special Bench of Mumbai Tribunal in the case of DCIT vs Total Oil India Private Limited reported in 104 ITR (T) 1 (Mumbai-Trib) (SB). Learned AR before us submitted that this Special Bench of Tribunal decision has been reversed by the Hon'ble Bombay High Court in Tax Appeal No. 6 of 2024 dated 28-11-2025 reported in 181 taxmann.com 301 (Bom HC). We find that the Hon'ble Bombay High Court had held that where a resident company paid dividend to its UK parent company, since such payment was in nature of dividend covered under definition of 'dividend' under Article 11 of India-UK DTAA and section 115-0, assessee was entitled to restrict tax rate on dividends distributed by it to its UK parent company to 10 per cent under Article 11. Respectfully following the said decision of Hon'ble Bombay High Court, we direct the Learned AO to refund the excess dividend distribution tax paid by the assessee company. Accordingly, the Ground Nos.4 to 8 raised by the assessee are allowed.”

“12.

Next comes the assessee’s seventh ground claiming road tax and value added tax paid; on assets taken on lease, as revenue expenditure which has been declined in the learned lo wer authorities’ respective f indings.”

13.

Learned CIT-DR vehemently argues that the assessee has paid the impugned charges to make the corresponding leased assets as operational ones and to put them to use which were not claimed in the return, and, theref ore, both the lo wer authorities have rightly declined it’s impugned claim. We f ind no reason to accept the Revenue’s contention. We make it clear first of all that the assessee’s lease rent charges have already been accepted as revenue expenditure. So f ar as the Revenue’s objection is that it had not raised the impugned claim f irst time in the return, we quote para 4 of the hon’ble apex court landmark decision Goetze (India) Ltd. vs. CIT (2006) 284 ITR 323 (SC) that even an appellate authority under the provision of the Act, could entertain a ne w claim in absence of a revised return. We thus deem it as a f it case to accept the assessee’s instant seventh ground and direct the learned Assessing Off icer to f rame his consequential computation as per law af ter allo wing the assessee’s impugned road tax and “VAT” as leased assets in very terms.”