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2016 (8) TMI 1470 - HC - Income TaxTP Adjustment - comparable selection - Whether the ITAT was justified in concluding that the Assessee is involved in the research and development activity and not provision of market support services? - HELD THAT:- The Court is of the considered view that the ITAT did not have sufficient material before it to come to the conclusion that HRDI was into core R&D activity. That finding of the ITAT would only cause confusion before the CIT(A) in the remand proceedings. On the other hand there was sufficient material in the form of the remand report of the TPO for AY 2005-2006 as well as DRP‟s order for 2007-2008 to show that HRDI was not into core R&D activity. Accordingly Question (i) is answered in the negative by holding that the ITAT was not justified in concluding that HRDI was involved in R&D activity and not provision of market support services. The order of the CIT(A), which was reversed by the ITAT, is restored. ITAT in remanding the matter to the CIT (A) on the issue of appropriate comparables - HELD THAT:- As already noticed the ITAT overlooked the fact that the TPO in his remand report had accepted three comparables suggested by HRDI. The DRP in its order dated 12th July, 2011, gave cogent reasons why ITDC should be included as a comparable. This is consistent with the conclusion reached by the CIT(A). Consequently, Question (ii) is also answered in the negative, i.e., in favour of the Assessee and against the Revenue and it is held that the ITAT was not justified in remanding the matter to the CIT (A) on the issue of appropriate comparables. ITAT remanding the matter concerning disallowance of 50% of depreciation on fixed assets acquired from the liaison office of the parent company - physical transfer of the asset - HELD THAT:- Physical transfer of the assets took place in June, 2003 when the assets were shifted from New Delhi to Gurgaon where both the LO of HRDJ and HRDI shared a common office. Thereafter there was no occasion for any further physical transfer of the assets. As far as legal transfer of the assets was concerned it could not have taken place unless approvals from the RBI were obtained both for transfer of the assets which approval was granted on 13th July, 2004 and for closure of LO which was granted on 30th September, 2004. Till then the Assessee had physical possession of the assets. Therefore, it could not be said that during the AY in question the assets had been put to use for less than 180 days. CIT(A) was fully justified in accepting the plea of HRDI for grant of 100% depreciation on the assets transferred to it from the LO of HRDJ. Consequently Question (iii) is answered in the negative, i.e., in favour of the Assessee and against the Revenue. It is held that the ITAT was not justified in remanding the matter concerning disallowance of 50% of depreciation on fixed assets acquired from the liaison office of the parent company.
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