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2019 (6) TMI 1489 - ITAT MUMBAIDisallowance of depreciation on assets leased (finance lease) - AO has disallowed depreciation claim merely on the ground that as per AS-19 issued ICAI, in finance lease the risk and rewards incidental to ownership of the asset transferred to the assessee - CIT-A deleted the disallowance - HELD THAT:- Assessee continued to have ownership of the asset even after leave and license agreement with Reliance Industries Ltd and the assessee has claimed depreciation for earlier two years. In fact, it has been accepted by the Department in assessment proceedings. The assessee further explained that the lessee did not claim depreciation on the leased asset. Considering over all facts of this case and also by following the ratio of ICDS [2013 (1) TMI 344 - SUPREME COURT] we are of the considered view that the assessee is entitled for depreciation on the leased asset as per provisions of section 32(1)(ii) - CIT(A) after considering relevant facts has rightly deleted additions made by the AO towards disallowance of depreciation, hence, we are inclined to uphold the findings of the ld CIT(A) and reject the ground taken by the Revenue. TP Adjustment - inclusion of Allsec Technologies Ltd., as comparable - It is an admitted fact that the Allsec Techonlogy Ltd. has incurred losses for past three financial years - HELD THAT:- CIT(A) has recorded categorical finding to the effect that the PBIT margins for the aforesaid years have turned negative on account of charges towards depreciation and amortization which is a normal cost which arises during the course of business operations and not on account of some extraordinary factors. The Ld. CIT(A) further stated that for the previous year ended 31st March, 2007, the company had positive PBIT - once comparable is similar to the functions carried out by the assessee, then consistent loss of one or two years is not good ground for rejection of company for comparables. See JOY ALUKKAS INDIA PVT. LTD. [2014 (6) TMI 80 - KERALA HIGH COURT]. Exclusion of Eclerx Services Ltd. as comparable - As in Maersk Global Service Centres [2015 (1) TMI 917 - ITAT MUMBAI] had taken similar view and excluded Eclerx Services Ltd. from the list of comparable where the taxpayer is engaged in providing captive services to its AE in the area of ITeS service. The Id. CIT(A), after considering relevant facts has rightly rejected Eclerx Services Ltd. from the list of comparables and we are inclined to uphold the findings of the ld. CIT(A) and reject ground taken by the Revenue. Comparable for international transaction of provision of business support services to AEs - exclusion of TVS-E Services Ltd. - HELD THAT:- TVSE Services Ltd. is providing warranty management services for leading IT brands, break fix services for credit cards terminals and e-auction services which is mainly an electronic sector. Therefore, we are of the considered view that the ld. CIT(A) was rightly in rejection of TVS-E Services Ltd. from the final set of comparables, because the same cannot be compared with functions carried out by the assessee to its AE, hence, we reject the ground taken by the assessee. Inclusion of Aptico Ltd. as comparable - This company cannot be comparable to the assessee which is mainly engaged in providing business support services to its AE in the area of evaluation and recommendation for finalization of contracts for procurement of goods and services and also back office support in matters relating to accounting, taxation, insurance, HR & Administration. Further, this company has been considered in the light of business support services related services to AE by various Tribunal including case of Rolls-Royce India (P.) Ltd. [2016 (4) TMI 1178 - ITAT DELHI] where it was held that Apitco Ltd. cannot be comparable on account of functional in comparability. Therefore, we are of the considered view that the ld. CIT(A) was incorrect in inclusion of Apitco Ltd. in the final set of comparables. ICRA Management Consulting Services Ltd. as comparable - ICRA Management Consulting Services Ltd. is mainly involved in multi-line management and development in the field of risk management, process improvement, public policy and transaction advisory services. We further noted that the assessee is a captive service provider to its AE which cannot be considered to a company which is involved in various kind of services including several complex services in the area of policy advisory and PPP transaction. TPO as well as the Ld. CIT(A) was erred in considering ICRA Management Consulting Services Ltd. as comparable for the purpose of determination of ALP of international transaction.
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