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2020 (1) TMI 1008 - AT - Income TaxTP Adjustment - comparable selection - Whether Ace software Exports Ltd. margin computed by the TPO is correct in the given facts and circumstances - HELD THAT:- We find that the issue is factual in nature and accordingly we set aside to the file of the TPO to work out the actual margin of Ace software and adjudicate the issue accordingly. Whether the comparable namely Rolta needs to be rejected in the given facts and circumstances - Whether the comparable namely Geometric should be included in the list of comparable - The financial statement of Rolta India Ltd was for the entire group which was used as comparable in the case of the assessee company. In our considered view the consolidated financial statements cannot be compared with the assessee. It is because the consolidated financial statement of Rolta India Ltd. also contain the information/financial result of the entire group. As such, the provisions of the Act requires that only the Indian company of Rolta group can be considered as one of the comparable for working out the ALP of the assessee. Thus company namely Rolta India Ltd. cannot be considered as comparable. Accordingly, we reverse the finding of the learned DRP and direct the TPO not treat this company as the comparable for the purpose of working out the ALP of the assessee with respect to the transactions carried out with its associated enterprises. As, we have rejected Rolta India Ltd as one of the comparable, we do not find any reason to adjudicate the issue for the inclusion of Geometric Software Solution Co Ltd. Hence, the ground of appeal of the assessee is partly allowed for statistical purposes. ALP adjustment in relation to Reimbursement of management fees expenses - HELD THAT:- Regarding the ad hoc disallowance of management fee expenses, we note that there is no power under the provisions of the Act which allows to the TPO to make the disallowance on ad hoc basis. As such the law is fairly clear and requires the TPO to determine the arm length price of the international transaction with the AE. As such there is no power available to the TPO to make the ad hoc disallowance while computing the income under the head business and profession. See M/S. FLAKT (INDIA) LTD. (NOW KNOWN AS M/S SOLYVENT FLAKT INDIA LTD.) [2016 (6) TMI 557 - ITAT CHENNAI]. We hold that the TPO has erred by making the disallowance on ad hoc basis. Accordingly we delete the addition made by the authorities below. We are also conscious to the fact that the assessee in the said facts and circumstances will get double benefit. First of all the assessee did not furnish the basic requirements as desired by the Income Tax Department and at the same time it has not been penalized. But, the provisions of law is supreme which requires that the TPO to determine the ALP of the transactions referred by the AO. The TPO as such cannot make the disallowance on ad hoc basis. In view of the above and after considering the facts in totality, the ground of appeal raised by the assessee is partly allowed. Restrict adjustments if any to the amount of international transactions only - HELD THAT:- Adjustment in determining the income shall be limited to the extent of international transactions entered between the associated enterprises. Accordingly, we direct the AO if any adjustment needs to be made then it should be limited to the extent of international transaction between the associate enterprises. In this regard we find support and guidance from the judgment of Mumbai Tribunal in case of Phoeinx Macano (India Pvt Ltd) 2014 (1) TMI 1023 - ITAT MUMBAI - Thus we direct the TPO to make the addition for the adjustments if any limited to the extent of international transactions between the specified persons. We order accordingly. Hence the ground of appeal of the assessee is allowed. Benefit of adjustment of + 5% to be given while determining the Arm Length Price. See Globle Ventedge Pvt Ltd v/s DCIT [2009 (12) TMI 668 - ITAT DELHI] Benefit to the assessee for the deduction under section 10B allowed. See M/S TYCO VALVES & CONTROL INDIA PVT LTD. [2013 (1) TMI 540 - ITAT AHMEDABAD] Full depreciation charged by assessee on asset costing less than ₹ 5000/- - HELD THAT:- Both the parties and perused the materials available on record. The issue in the present case relates whether the assessee has claimed 100% deduction in respect of the assets costing less than ₹ 5,000.00 or it has claimed depreciation thereon as per the provisions of law. In this regard, we note that the learned DRP has given a direction to allow the claim of the assessee after necessary verification. We find no infirmity in the direction of the learned DRP in view of the fact that the issue involved is factual in nature. Accordingly we hold that no separate adjudication is required in the given facts and circumstances. Thus, we dismiss the ground of appeal raised by the assessee.
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