2018 (4) TMI 1826 - ITAT DELHI - Income Tax

Head Note / Extract:
TP Adjustment - adjustment to the price of International transaction of provision of engineering and design services - cost incurred toward AE and non-AE transaction - amount received by the assessee corresponding to the man-hours utilised by the AE - cost allocated towards utilized man-hours of AE transactions according to the matching principle of revenue & expenses - HELD THAT:- We cannot take different yardsticks for measuring cost incurred toward AE and non-AE transaction by same set of manpower. Taking committed man-hours in the case of AE, which also included unutilized man-hours, would distort the allocation key. Thus, the basis of allocation of the cost towards the AE transaction should be on man-hours utilized only and not on man-hours which have been committed by the AE for payment. TPO should have only computed the cost allocated towards utilized man-hours of AE transactions according to the matching principle of revenue & expenses - total cost incurred by the assessee is for total man-hours utilized, both for the AE as well as non-AE transactions, and thus, while allocating the cost to the AE transactions, non-utilized manhours cannot be included. Since the man-hours utilized for the AE are 5695 and man-hours utilized for non-AE are 2,77,730, the total man-hours utilized would be (5695 + 2,77,730 =) 2,83,425 and the ratio of man-hours utilized by the AE to the total man-hours utilized would be (5695/283425)X 100 = 2%. Since the amount received by the assessee corresponding to the man-hours utilised by the AE has been worked out by the Ld. TPO which being less than the arm’s length price computed no adjustment to the price of International transaction of provision of engineering and design services is required. - Decided in favour of assessee. Depreciation on intangibles - HELD THAT:- As decided in assessee's own case [2015 (11) TMI 1218 - DELHI HIGH COURT] the issue has been decided in favour of the assessee following the judgment of Smifs Securities Limited reported in [2012 (8) TMI 713 - SUPREME COURT]