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2017 (7) TMI 995 - AT - Income TaxUpward adjustment of arm’s length price of assessee’s international transaction - selection of comparable - Held that:- Assessee company is a wholly owned subsidiary of Ciena Corporation, USA, and engaged in provision of software development and marketing software services to its overseas group company. Assessee is a 100% EOU under the Software Technology Park Scheme incorporated on June 27, 2005 and commenced its operation w.e.f. April 10, 2006. Assessee company is remunerated on cost plus basis for providing services, namely, contractual software development and marketing software services, thus companies with functional dissimilarity and extra ordinary events impacting profitability of the comparable company nee to be deselected from final list of comparable. Depreciation disallowance on the assets purchased from AE - Held that:- Coordinate Bench dealt with the issue in detail on the identical facts for AY 2009-10, and held that in case of service provider, the ALP of import of capital equipment, the depreciation cost of which is recharged with a markup cannot be determined to be nil because it is a tax neutral transaction and revenue is dependent upon the cost incurred (which includes depreciation). Thus the value as recorded in the books of account is to be upheld and deletion of addition made by disallowing or reducing the amount of depreciation on the assets purchased from AE is not sustainable. Not only this, TPO for FY 2010-11 and FY 2007-08 has upheld that the price charged for import of capital equipment complies with the arm’s length standard and the assessee has brought on record the order of TPO for FY 2010-11 and FY 2007-08 holding that the price charged for import of capital equipment complies with the arm’s length standard which is available as Appendix 2 and Appendix 3 annexed with the synopsis. So, in these circumstances, we hereby delete the addition on this account made by disallowing or reducing the amount of depreciation on the assets purchased from the AE
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