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2018 (7) TMI 2111 - AT - Income TaxDepreciation on website development cost - @25% or 60% - HELD THAT:- Assessee is entitled to claim of depreciation @ 60% as relying on own case [2012 (3) TMI 330 - ITAT DELHI] TP Adjustment - benchmarking adopted by the assessee and the approach followed by the CIT (A) for the international transactions of the assessee at arm’s length - assessee has chosen Transactional Net Margin Method [TNMM) being the most appropriate method with profit level indicator of Net Cost Plus (NCP) i,e: Net Profit/Total Expenses i.e. comparison has been done at net level - HELD THAT:- We are of the opinion that the selection of most appropriate method by the TPO of resale price method is incorrect as resale price method is inapplicable to the facts of the assessee. Apart therefrom, while determining the arm's length price, the TPO has benchmarked the margin of profit earned in subagent segment with the margin of profit earned by the assessee from its direct customers. In doing so, TPO has failed to appreciate that AE of the assessee is not the customer of the assessee, and it is assessee who is the acting as subagent of the AE and in respect of such transactions, assessee has also been remunerated. Since the direct customer segment and subagent segment are materially different as such, the margin of profit earned by the assessee in respect of transactions entered with its AE is not comparable with the margin of profit earned by the assessee with its direct customers. Further, if the approach of the TPO is to be applied then the effect of the comparison would be that assessee will receive 15,90 percent of the total gross profit earned by the AE, and in such circumstances proper adjustment would be to allocate the proportionate operating expenses incurred by the AE, and in such circumstances, the effect would be that there would be downward adjustment to the book value of international transactions of the assessee, which itself contravenes the section 92(3) of Income Tax Act. In summary, appeal of the revenue in relation to the benchmarking adopted by the assessee and the approach followed by the CIT (A) for the international transactions of the assessee is arm’s length and the grounds raised by the Revenue are dismissed
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