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2015 (10) TMI 2607 - AT - Income TaxTPA - determine the ALP of the AMP expenses - Held that:- In the present case, the ld. Counsel of the assessee s well as ld. DR failed to enlighten us towards any material divulging the AMP functions performed by the assessee as well as comparables adopted by the TPO to determine the ALP of the AMP expenses at our end. Therefore, there is lack of relevant facts before us on this issue. Under above noted facts and circumstances, we find it appropriate to set aside impugned order and restore the matter back to the file of TPO/AO for determining the ALP of the international transaction of the AMP spend by the assessee during the relevant financial period afresh in accordance with the manner as laid down by Hon’ble High Court in the case of Hon’ble Delhi High Court in the case of Sony Ericsson Mobile Communications India Pvt. Ltd. vs CIT [2015 (3) TMI 580 - DELHI HIGH COURT]. Allowance of depreciation - Held that:- We note that on combined reading of section 32(1), 2(11) and 43(6)(c) of the Act, the depreciation is computed on closing written down value following block of asset concept. We cannot ignore that when an asset is placed in block of asset, individual asset comprising within the block received through individual identity and therefore, the existence and use of individual asset fall within a block of assets is not of any relevance for the purpose of adjudication of the claim of the assessee for depreciation on plant and machinery. In the case of CIT vs Oswal Agro Mills Ltd. (2010 (12) TMI 947 - Delhi High Court) it was held that assets forming part of block of asset attracts depreciation of entire block of assets even if not used in the relevant financial year. In this case, undisputedly, DRP allowed depreciation of plant and machinery for AY 2007-08, however, the AO did not give effect to this order. In the second appal before the ITAT, the issue was decided in favour of the assessee by Tribunal. We further note that for AY 2008-09, the DRP allowed depreciation on plant and machinery during the course of rectification proceedings vide order dated 12.3.13 and for AY 2009-10, the AO himself accepted and allowed depreciation in the assessment order passed u/s 143(3) of the Act dated 28.2.2014. In view of above, depreciation on plant and machinery should be allowed to the assessee for AY 2006-07 and thus, ground no. 3 of the assessee is allowed Addition u/s 40 - Held that:- We hold that the AO/DRP was not right in making disallowance in regard to the payment of royalty made by the assessee under TCA and the payment of royalty should be allowed as a revenue allowance/expenditure. However, we may point out that the issue of payment of royalty was not before the Tribunal for AY 2005-06, therefore, we decline to accept the submission of the ld. Counsel of the assessee that the issue is covered in favour of the assessee Provisions for doubtful debts and doubtful advances - Held that:- The assessee added provision for doubtful debts to the taxable income of the assessee as per Note no. 1 to the Notes of accounts, therefore, when consistently, the assessee has not claimed provisions for doubtful debts and doubtful advances, then when the amount is reversed, it should not be added back to the taxable income of the assessee. At this juncture, we note that ld. DR during the argument, has fairly submitted that the department has no serious objection if the issue is restored to the file of AO/DRP for examination and verification of the assessee’s claim after considering explanation and documentary evidence of the assessee in this regard. Ld. Counsel of the assessee submitted that the assessee has no reservation if the matter is restored to the file of AO/DRP for fresh adjudication after allowing due opportunity of hearing for the assessee and without being prejudiced from its earlier DRP and assessment order. Technical fee paid to DIL under TCA ought to be allowed - revenue expenditure OR capital expenditure - Held that:- The assessee’s right to use license was being hedged with all sorts of conditions in the TCA and the TCA with DIL entered into on the same date primarily facilitated in improving the technical aspect of manufacturing but it did not essentially form part of revenue earning apparatus viz. plant and machinery of the assessee. The Coordinate Bench of the Tribunal in the order in assessee’s own case for AY 2006-07 explicitly held that the expenditure incurred for acquiring technology which becomes part and parcel of revenue earning apparatus can only be said to be capital field but only where the technology only facilitated in improving manufacturing process, it could not be said to be part and parcel of capital structure of the company. On the basis of foregoing discussion, we respectfully follow the order of the Tribunal on this issue in favour of the assessee and hold that the technical fee paid by the assessee to DIL under TCA ought to be allowed as revenue expenditure. Refund form custom department - Held that:- Since the assessee could not submit and furnish any reply, submissions and documentary evidence on this issue, therefore, the department has no serious objection if the issue is restored to the file of AO/DRP for a fresh verification and examination of the assessee’s claim. In view of above, we clearly note that during the draft assessment proceedings, the assessee could not submit relevant explanation, submission and documentary evidence supporting to its claim regarding refund from custom department and in absence of the same, the AO presumed that the AO has nothing to say in this regard and he made impugned addition without considering the totality of the facts and circumstances, therefore, we are inclined to hold that the assessee was not provided due opportunity to explain his claim during the proceedings before the lower authorities, therefore, agreeing with the contention of both the sides, we find it appropriate to restore this issue to the file of AO for a fresh adjudication and after providing due opportunity of hearing to the assessee and without being prejudiced with the earlier order or the DRP directions. Credit while computing tax payable on assessed income as against advance tax deposited/taxes deducted at source - Held that:- The issue is pertaining to the verification of credit for advance tax deposited/tax deducted at source and the same may be sent to the AO for re-calculation and verification. Accordingly, ground no. 8 of the assessee is allowed by directing the AO to give credit against the advance tax deposited/tax deducted at source during the relevant financial period. Accordingly, ground no. 8 of the assessee is deemed to be allowed for statistical purposes.
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