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2020 (11) TMI 563 - AT - Income TaxTP Adjustment - Comparable selection - application of turnover filter - HELD THAT:- We notice that the co-ordinate bench has considered the issue of application of turnover filter in the case of Tavant Technologies India P Ltd [2020 (8) TMI 712 - ITAT BANGALORE] as relying on AUTODESK INDIA PRIVATE LTD [2018 (7) TMI 1862 - ITAT BANGALORE], thus comparables Larsen & Toubro Infotech Ltd,Mindtree Limited (seg.), Persistent systems Ltd and Tech Mahindra Ltd (seg.) whose turnover is more than 200 crores and hence they cannot be considered as good comparable companies and need to be excluded. Provision for bad and doubtful debts as an operating expenditure - HELD THAT:- No dispute that if the provision for doubtful debts is taken as operating expenses in the hands of the assessee, then the said expenditure has to be taken so in the case of comparable companies also.The Tribunal accepted the submission of the assessee and accordingly it has held that it is a non-operating in nature - As relying on BROCADE COMMUNICATIONS SYSTEMS PRIVATE LIMITED case [2020 (6) TMI 584 - ITAT BANGALORE] and ROLLS-ROYCE INDIA PVT. LTD. VERSUS DCIT, NEW DELHI [2015 (12) TMI 516 - ITAT DELHI] we direct the AO/TPO to consider Provision for doubtful debts as an operating expense. Transfer pricing adjustment relates to the claim of working capital adjustment and risk adjustment - TPO has granted working capital adjustment of 1.70% by making his own calculations - HELD THAT:- In E VALUE SERVE. COM AND VICA-VERSA [2016 (9) TMI 1363 - ITAT DELHI] held that insisting on daily balances of working capital requirements to compute working capital adjustment is not proper as it will be impossible to carry out such exercise and that working capital adjustment has to be based on the opening and closing working capital employed. Hence the reasoning given by Ld DRP to reject the working capital adjustment is liable to be set aside. Accordingly we direct AO/TPO to allow working capital adjustment Claim of risk adjustment - we notice that the assessee did not raise any objection before Ld DRP regarding denial of the same. Hence we decline to adjudicate this ground. Additional depreciation on computers claimed u/s 32(1)(iia) - assessee claimed additional depreciation @ 20% on the new computers purchased - AO took the view that the assessee is developing computer software and it cannot be taken as an article or thing. He took the view that the computers are office equipment and separate rate of depreciation is allowed under the depreciation schedule - HELD THAT:- Additional depreciation prescribed u/s 32(1)(iia) is admissible to an assessee engaged in the business of manufacture or production of any article or thing etc. Hence, in order to claim this additional depreciation, an assessee should first satisfy the condition that he is engaged in the business of manufacture or production of any article or thing. The conditions for allowing additional depreciation u/s 32(1)(iia) was different at that point of time, when the case of Startronics & Enterprises (P) Ltd [1994 (10) TMI 325 - ITAT AHMEDABAD]was decided by the Tribunal and High Court. Under the old provisions, the condition of “manufacture or production of article” was not available. However, the additional depreciation was not available to a machinery or plant installed in any office premises. Hence the Hon'ble High Court was required to consider the question as to whether the “computers” used for development of software would fall under the category of “office equipment” or not. Under the current provisions of sec.32(1)(iia), the first condition that should be satisfied is that an assessee should be engaged in the business of manufacture or production of an article or thing. We have agreed with the view expressed by Ld DRP that the development of computer software would not fall under that category, for the reasons discussed above - we hold that the assessee would not be entitled to Additional Depreciation prescribed u/s 32(1)(iia) of the Act. Accordingly, we confirm the order passed by Ld DRP. Disallowance u/s 40(a)(i) - lease line charges and payroll processing fee paid by the assessee for non-deduction of tax at source - HELD THAT:- AO has not made addition of above said payments in the final assessment order. Hence this addition does not arise out of the impugned final assessment order. Accordingly, we decline to admit this ground.
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