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2011 (2) TMI 68 - AT - Income TaxDepreciation - Capital Expenditure - comparison of margins between two companies - expenses of Rs. 1,20,94,000 towards WHO certification fee - assessee claimed the expenditure as revenue expenditure - AO and CIT(A) considered the same as capital expenditure - Held that: it is clear that the expenditure was not for any better working conditions or convenient manufacturing process but it was for recognition of the manufacturing facilities and quality of the product which is necessary for supply to the WHO as well as overseas market. - admissible depreciation on this amount allowed. Arm's Length Price (ALP) - The assessee has adopted ALP by comparing the export operating profits of the assessee company with the valuation of operating profits of the other companies which are taken as comparable companies selected by it. - TPO took the net cost + (Plus) margin earned in domestic sale of 65% to be the profit level indicator for computing the ALP of the international transaction relating to export. - Held that: the transfer pricing adjustment suggested by the TPO are not as per the provisions of law. At the same time, the assessee has also not adopted the correct method of determination of TNMM. Therefore, the issue is set aside to the file of the AO for fresh adjudication in accordance with law. Depreciation on motor car - 180 days - commercial vehicle - if such motor car is acquired within the prescribed period indicated in the items as in the instant case, then depreciation at the rate of 50% is to be allowed to the cost or written down value of the car. - it is not clear from the record whether this motor vehicle is falling under the commercial vehicle as prescribed in the Note 3A below Table 3 of Appendix-I. - matter remitted back to AO for limited purposes, or ascertaining whether the motor vehicle comes under the commercial vehicle or individual vehicle and then allow depreciation as per law. Royalty - dis allowance u/s 92CA(4) - the purchasing of the business of the Aventis Pharma Limited by the joint venture as per the terms and conditions between the parties does not acquire the technology for manufacturing of the vaccine which was in the possession of Chiron Behring GMBH. Therefore, as per the agreement the payment of royalty is required for the use of technical know-how by the assessee - royalty for use of technical know-how is required to be paid by the assessee is allowed - on the issue of ALP, since we have already remitted the issue of ALP of export to the AO, accordingly, the ALP of royalty is also required to be determined after due consideration and as per the provisions of law. Hence, the issue of ALP in respect of royalty is set aside to the file of the AO in terms of the above order in respect etc. to the AE.
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