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2015 (4) TMI 548 - AT - Income TaxTransfer pricing adjustment - Payment of export commission and Payment of royalty for export to the Associated Enterprises - Held that:- Similar issues were raised in appeals by the assessee determination of ALP in respect of Export commission has been restored to the file of AO/TPO with certain directions and the payment of royalty for exports to AE has been accepted at arm’s length price. No distinguishing feature has been brought to our notice in the facts of the instant year vis-à-vis those of the above referred earlier two years. We adopt the same reasons for the year under consideration as well and, accordingly, remit the international transaction of `Payment of export commission’ to the file of AO/TPO for a fresh determination as per the guidelines given in our above referred order and delete the addition on account of `Payment of royalty’ in respect of exports made to the AEs. - Decided in favour of assessee for statistical purposes. Disallowance of depreciation on Foreign exchange (forex) loss on the payment of model fees, which was capitalized by the assessee as part of the cost of Intangible assets - AO invoked the provisions of section 40(a)(i) to disallow the proportionate amount of depreciation on Intangible asset towards the additional cost paid by the assessee due to change in the foreign currency rate - Held that:- Whether there is a forex loss or gain, deduction of tax at source u/s 195 is contemplated only at the first stage of the credit of income to the account of the payee. The higher or lower liability due to foreign exchange loss or foreign exchange gain is inconsequential in so far as deduction of tax at source u/s 195 is concerned. Once there is no default on the part of the assessee in making deduction of tax at source on the additional amount paid due to foreign exchange loss, there can be no question of making any disallowance u/s 40(a)(i) of the Act. Section 32 of the Act provides for depreciation, inter alia, on intangible assets acquired on or after the 1st day of April, 1998, which are owned, wholly or partly, by the assessee and used for the purposes of the business or profession. It provides that depreciation shall be allowed in the case of any block of assets, at such percentage on the written down value thereof as may be prescribed. Section 43A of the Act is a special provision consequential to changes in rate of exchange of currency. The interpretation as suggested by the Revenue in not considering the adjusted cost as the cost of acquisition of capital asset for allowing depreciation, results into distortion of the provisions of section 43A, which is impermissible. It, therefore, follows that there can be no question of adopting unadjusted cost of acquisition of asset for allowing depreciation by invoking the provisions of section 40(a)(i) of the Act inasmuch as the depreciation is allowable with reference to the adjusted cost of acquisition of the asset in terms of section 43A. - Decided in favour of assessee.
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