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2016 (9) TMI 1546 - AT - Income TaxDisallowance u/s 14A - HELD THAT:- We find that the Hon’ble High Court of Delhi in case of Chem Investment Ltd., Vs CIT [2015 (9) TMI 238 - DELHI HIGH COURT] has held that section 14A will not apply if no exempt income is received or receivable during the relevant previous year. - Decided against revenue Allowance of a depreciation adjustment - HELD THAT:- Following the ratio of the above said decision in the case of Market Tools Research Pvt. Ltd. [2013 (12) TMI 414 - ITAT HYDERABAD] we hold that DRP erred in directing to exclude depreciation from the cost of the Tax Payer as well as comparables. Hence, we direct the AO to rework depreciation. TP Adjustment - comparable selection - HELD THAT:- Companies functionally dissimilar with that of assessee need to be deselected from final list. Since the Assessee’s margin of 26.12% is higher than the arithmetical mean of the margins of the comparables, that is 14.01%, the international transaction of provision of software development services by the Assessee to its AE in FY 2009-10 can be concluded as being at arm’s length. Section 40(a)(ia) application to depreciation allowance under Section 32 - assessee had capitalized software expenses and appropriate income tax depreciation was claimed u/s 32 - HELD THAT:- We are of the opinion that the issue is squarely covered by the decision in the case of Kawasaki Microelectronics Inc. Vs DICT (International Taxation) [2015 (9) TMI 9 - ITAT BANGALORE] where it has been held that once the assessee has capitalized payment in question though the assessee has not deducted tax at source on such payment, section 40 (a) (1) cannot be invoked for disallowance of depreciation.
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