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2015 (7) TMI 243 - AT - Income TaxDisallowance of depreciation on ITG Networking equipments - reducing the rate of depreciation from 60% claimed by the assessee to 25% - Held that:- It is noticed that similar issue came up for consideration before the Tribunal in the assessee’s own case for the immediately preceding assessment year, i.e., 2006-07. [2014 (12) TMI 757 - ITAT DELHI] wherein the Tribunal has accepted the applicability of higher rate of depreciation by relying on the case DCIT vs. Data Craft India Ltd. [2010 (7) TMI 642 - ITAT, MUMBAI]. The Hon’ble Delhi High Court in the case CIT vs. BSES Yamuna Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT ] has approved similar view by holding that depreciation on computer peripherals should be allowed at 60% instead of the regular rate of depreciation applicable to machinery. No distinguishing feature was pointed out by the ld. DR in the facts of the instant year vis-à-vis the preceding year. - Decided in favour of assessee. Disallowance of depreciation on company owned vehicles - Held that:- The Delhi Bench of the Tribunal in DCIT vs. Haryana Oxygen Ltd. [1999 (12) TMI 107 - ITAT DELHI-D] as held that the use of cars by directorsemployees of a company cannot be characterized as user for non-business purpose and, hence, no part of such car expenses can be disallowed. The Hon’ble Gujarat High Court in Sayaji Iron and Engineering Company vs. CIT (2001 (7) TMI 70 - GUJARAT High Court ) has held that once the directors of the assessee company are entitled to use the vehicles of the company for personal use as per the terms and conditions of their appointment, it cannot be said that there was a personal use of cars. The Hon’ble High Court further held that such user of vehicles by the employees of the company cannot even be considered as ‘non-business user”. There are innumerable judgments on this point holding that there can be no disallowance of depreciation or other expenses on maintenance of the vehicles used by the directors/employees by treating it as personal user or non-business user of the company. We fail to see any rationale in treating the amount of depreciation on cars as for personal use, when admittedly these have been provided to employees. A company is a separate legal entity distinct from its directors or employees. As such, there can be no question of treating the use of vehicles by the directors/employees as a personal use by the company.- Decided in favour of assessee. Disallowance of running and maintenance expenses of the vehicles used by the employees of the assessee company - Held that:- The analogy which applies for not making any disallowance on account of depreciation for personal or nonbusiness use, equally applies for not making any disallowance on account of running and maintenance expenses of the vehicles used by the employees of the company. Similar view has been taken by the tribunal in assessee’s own case for the preceding year. Following the same, we, order for the deletion of the addition.- Decided in favour of assessee. Transfer pricing adjustment - determination of ALP of the international transaction of ‘Provision of marketing support services - selection of comparables - Held that:- TSR Darashaw (Segmental) company has three segments, which inter alia include: ‘Pay Roll and Trust Fund activity (Pay Roll).’ It is this segment which has been considered by the assessee as comparable. This company on an overview is a broking and investment banking house. Its other segments are : ‘Registrar and Transfer Agent activity (R&D)’ and ‘Records management activity (Records).’ The segment of ‘Pay Roll’ was considered by the assessee as comparable in its TP study report and the same is now assailed. Under the ‘Pay Roll’ segment, this company undertakes pay roll and employee trust fund administration and management. When we compare the nature of pay roll activity undertaken by this company with the marketing support services rendered by the assessee to its AEs, we find that both are way apart from each other. There can be no logical comparison between a specific pay roll services rendered by a company to its clients with the marketing support services rendered by the assessee to its AEs. This company is, therefore, directed to be excluded from the final set of comparables. TCE Consulting Engineers Ltd. is engaged in the provision of engineering services, such as, operation and design engineering, upgradation & renovation services, surveys & field investigation services. This company is operating only in one segment, namely, engineering consultancy services. It is axiomatic that there can be no comparison of this company with the assessee’s international transaction of rendering marketing support services. The Hon’ble Delhi High Court in CIT VS. Verizon India (P.) Ltd. [2013 (7) TMI 699 - DELHI HIGH COURT] has held that Marketing services provided by companies cannot be compared with Engineering services provided by assessee. This company has also been held by the tribunal to be incomparable in its order for the immediately preceding assessment year passed in the case of the assessee itself. As such, this company is also directed to be excluded from the list of comparables. Vimta Labs Ltd. is not functionally comparable with the assessee. Spectrum of the services rendered by this company covers analytical food and drugs; clinical reference lab services to address the specialties and central lab services for clinical trials; clinical trials phase-I-IV and BA/BE studies; pre-clinical safety assessments; and environmental assessments. A cursory look at the nature of services provided by this company divulges that the same is functionally dissimilar from the assessee. How a company conducting clinical trials on foods and drugs can be considered as comparable with the assessee undertaking marketing support services, is anybody’s guess. This company being in the nature of business totally alien to that of the assessee, cannot be considered as a comparable. Similar view has been taken by the Tribunal in the case of the assessee for the immediately preceding assessment year. We, therefore, direct the exclusion of this company from the list of comparables. WAPCOS company operates in two segments, namely, `Consultancy & engineering products’ and ‘Lumpsum turnkey projects’. It is noticed that the TPO has considered only `Consultancy and engineering products segment’ for the purposes of comparison and has not taken into consideration the other segment of `Lumpsom turnkey projects’. The company, under the alleged comparable segment, provides consultancy services, such as, pre-feasibility report of hydroelectric projects, field investigation drilling of tube wells, etc. From the above description of the activities performed by the company under this segment, it is vivid that the same is engaged in providing engineering and consultancy services, which can be no match to the assessee’s marketing support services. Similar view has been taken by the Tribunal in the case of the assessee for the immediately preceding assessment year. This company is also directed to be excluded from the list of comparables. IDC Ltd., and ICRA Management Consulting Services Ltd. - A careful perusal of the nature of business done by IDC (India) Ltd. transpires that this company is an Information technology research and advisory firm. This company earns all its income in the form of research and survey. We fail to appreciate as to how this company can be considered as comparable with the international transaction of `Provision of marketing support services’ rendered by the assessee to its AE. Similar is the position regarding ICRA Management Consulting Services Ltd., which is providing ‘Advisory services.’ Despite this clear mismatch of the functional profile of the assessee’s international transaction of `Provision of marketing support services’ with the IT research/Advisory services provided by these two companies, we are unable to accept the contention of the ld. DR to order a de novo adjudication. It is patent that the assessee in the instant appeal is aggrieved against the inclusion of the afore discussed four companies from a total set of six companies. It has no issue with the inclusion of IDC Ltd., and ICRA Management Consulting Services Ltd. The Revenue is not in appeal before us. In such circumstances, we are unable to remedy the situation to the advantage of the Revenue inasmuch as it is the TPO who has accepted the comparability of these two companies with the assessee’s marketing support services. As such, our hands are tied to hold that the two surviving companies in the final list of comparables which are, in fact, not comparable, be also excluded and a fresh determination of the ALP be done.
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