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2022 (6) TMI 1357 - AT - Income TaxTP adjustments - determination of Net Cost Margin - Determining effective NCP margin for provision of the software development services - TPO was of the view that the sub-contracting charges formed part of the operating cost of the Assessee for provision of SWD services and thus cannot be excluded from either its cost base or operating revenues as it would not give a correct picture of the profit margin earned by it - HELD THAT:- Determination of net cost margin excluding the sub-contract charges is decided against the assessee by the Tribunal in assessee’s own case for the AY 2011-12 [2016 (9) TMI 1458 - ITAT BANGALORE] as held outsourcing cost in software development services activity is part and parcel of cost of providing the service to the AE and cannot be separated from the operating cost and operating revenue of the said segment of services. Accordingly, the cost of software development services cannot be treated in this fashion as claimed by the assessee. Hence we do not find any merit in the contention raised by the assessee on this issue.we see no reason to interfere with the decision of the lower authorities and hence these grounds of the assessee are dismissed. Comparability analysis adopted by TPO for determination of ALP - HELD THAT:- We direct the AO/TPO to apply 15% RPT filter in respect of all the comparables. Interest on the average outstanding trade receivables - TPO Rejected the contentions of the Assessee and computed the TP adjustment on the basis of average receivables and considered the interest rate at LIBOR+400 basis points - HELD THAT:- As relying on judgment of AMD (India) Pvt. Ltd [2018 (8) TMI 2094 - KARNATAKA HIGH COURT] we hold that the treatment of interest on deferred receivables is rightly considered as an independent international transaction and benchmarked separately by the revenue authorities. Calculation of interest - Considering the fact that the average receivable days is 83 and that the TPO in assessment year 2018-19 has allowed 90 days credit for the assessee, we are of the view that it is reasonable to allow 90 days credit for the purpose of calculating interest on receivables. We are also of the opinion that the interest rate to be adopted is LIBOR rate + 2%, taking a consistent view as held in the aforesaid order of the Tribunal, following the judgment of Aurionpro Solutions Ltd [2017 (6) TMI 1087 - BOMBAY HIGH COURT] We direct the AO to recompute the interest on delayed payments accordingly. Reduction in amount of income-tax depreciation claimed on computer peripherals - HELD THAT:- In the year under consideration, the assessee has produced the list of assets with the details of date of purchase. We notice that the AO while computing the disallowance had not taken into consideration the date of put to use of the asset. We also notice that in assessee’s own case [2020 (5) TMI 407 - ITAT BANGALORE] the coordinate bench of the Tribunal has allowed the rate of depreciation based on the nature of assets. Given this, we remit the issue back to the AO to verify the nature of asset and allow depreciation considering the principle laid down by the coordinate bench of the Tribunal in assessee’s own case (supra) and the date of asset being put to use. This ground is allowed in favour of the assessee for statistical purposes. Depreciation on leasehold improvements included in the block of 'furniture and fixtures' - Denial of depreciation as assessee had not furnished the invoices & bills supporting the expenditure and that the assessee had not provided evidence for completion of the work - HELD THAT:- We notice that the AO has considered the entire WDV while computing disallowance and not the current year additions to the assets which is not the right way to compute the disallowance. In our considered view, the computation of disallowance should be restricted to the additions made during the year. We therefore set aside the issue and restore it to the AO with a direction for proper verification of additions made to assets in the year under consideration based on the evidences submitted by the assessee for the purpose determination of disallowance in accordance with law. Accordingly this issue is remitted to the AO for fresh decision, after giving opportunity of being heard to the assessee.
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