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2019 (10) TMI 2 - AT - Income TaxTransfer pricing adjustment made with respect to exports to associated enterprises - MAM selection - TPO separated few transactions out of total turnover and applied CUP method as most appropriate method - HELD THAT:- As decided in M/S. AMPHENOL INTERCONNECT INDIA P. LTD. [2018 (3) TMI 536 - BOMBAY HIGH COURT] after analyzing the issues at length has held that CUP method would not be the most appropriate method in view of various adjustments, which would have to be made due to differences in FAR, in order to arrive at the arm's length price of finished goods. The Hon’ble High Court notes that the Tribunal had taken into account the fact that for overwhelming majority of exports to associated enterprises, the TPO has accepted the TNMM method for arriving at the arm's length price and hence, there was no reason why for balance of export of finished goods, TNMM method should not be applied. Similar direction was also given in respect of imports of finished goods, which were sold to third parties and the associated enterprises and by applying FAR analysis, it was held that where the finished goods were customized goods and the geographical differences, volume differences, timing differences, risk differences and functional differences were there, then CUP method would not be the most appropriate method to determine arm's length price. The TNMM method was held to be most appropriate method. In the totality of the above said facts and circumstances, where the issue stands covered by the order of jurisdictional High Court in the case of assessee itself, there is no merit in the orders of authorities below in making aforesaid transfer pricing adjustment in the hands of assessee both with respect to exports to associated enterprises and with respect to imports from associated enterprises. Majority of transactions have been accepted to be at arm's length price by the TPO by applying TNMM method, only in respect of few transactions, the TPO had applied CUP method. There is no merit in the order of TPO in this regard and reversing the final order passed by Assessing Officer, we allow the claim of assessee and direct the Assessing Officer to delete the transfer pricing adjustment made in the hands of assessee. The grounds of appeal No.2 and 3 are thus, allowed. Non allowance of additional depreciation on tools purchased by the assessee - HELD THAT:- CIT(A) has considered the scheme of the Act and has pointed out that as far as Finance Act, 2002 was concerned, then the scope of additional depreciation was where capacity of the unit has been increased by minimum 25% and if the assessee fulfills such requirement, then additional depreciation was to be allowed. However, the said conditions have been withdrawn by the Finance Act, 2005 and the relevant Explanatory Note has been referred by the CIT(A) while deciding the appeal in assessment year 2011-12. The aim under the Finance Act, 2005 while allowing the additional depreciation under section 32(1)(iia) of the Act was extended to new industrial undertaking on additional investments. Once the earlier basis of allowing additional depreciation for the units where the capacity had to be increased for about 25% is no more and now additional depreciation is to be allowed on additional investments and where the plant includes tools, the assessee is entitled to the claim of additional depreciation under section 32(1)(iia) of the Act on the aforesaid tools purchased by assessee. Consequently, we direct the Assessing Officer to allow the claim of assessee of additional depreciation under section 32(1)(iia) - Decided in favour of assessee
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