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2016 (3) TMI 215 - AT - Income TaxTransfer pricing adjustment - most appropriate method - method of ascertaining the ALP - Held that:- What the TPO has done is to reject the benchmarking done by the assessee and make adhoc ALP additions in the value of international transactions. Such a course of action is not permissible under the scheme of transfer pricing law. Even when a method of ascertaining the ALP is, for good and sufficient reasons, rejected by the TPO, he has to select the most appropriate method, out of the recognised methods under rule 10AB and 10B, and then apply the same. Such an exercise has not been carried out on the facts of this case. The Transfer Pricing Officer has simply made adhoc adjustments, but then, as we have stated earlier, such adhoc adjustments are not permissible. Not only the Transfer Pricing Officer wrongly rejected the ascertainment of arm’s length price by the assessee, the Transfer Pricing Officer ended up deciding the arm’s length price on the basis of a method, method if it can be said to be, not recognized under the scheme of transfer pricing envisaged by the statute. Learned CIT(A) was in error in not reversing the action of the Transfer Officer. In view of the above discussions, and bearing in mind entirety of the case, we vacate the orders of the authorities below on this point, and direct the Assessing Officer to delete the impugned ALP adjustments - Decided in favour of assessee Addition of interest @14% p.a computed on the delayed realization of amounts of trade debts receivable on account of services rendered from various associated enterprises - Held that:- Once the assessee has contended that the interest is not being charged from anyone, including, of course, the non AEs, and that contention is not disputed to be factually incorrect, it cannot be open to the TPO to make adjustment in the case of delays in realization from the AEs. The treatment being accorded to the AEs and non AEs is the same, and, in such a situation, ALP adjustment cannot be made for delay in realization of monies from the AE. The consideration as to how the assessee would have received interest if money was given to an outsider is irrelevant because it is not a case of extending loan or placing deposit, rather it is a case of amount becoming due as a result of commercial transaction. In any event, when international transactions have been benchmarked on the basis of TNMM, and interest on delay in realization of amounts is only incidental to such transactions rather than a standalone transaction, such an adjustment cannot be made independently. Additions deleted - Decided in favour of assessee Addition of expenditure incurred towards software charges - revenue v/s capital expenditure - Held that:- Since it is an annual payment by the assessee and since the benefit of this payment does not go beyond the year, it is inherently a revenue expense in nature, and allowable, as such, to the assessee. The question of software expenses being in the nature of capital asset is relevant only when the payment is for acquiring the software. That is not the case here. It is a payment for the annual licence fees, and not the software itself. The expense is, therefore, clearly revenue in nature. We, accordingly, delete the impugned disallowance. As the relief has been allowed as revenue expenditure, the assessee will not be entitled to any depreciation on software - Decided in favour of assessee
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