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2023 (1) TMI 828 - AT - Income TaxAddition on account of margin @ 11% on the transaction of reimbursement of expenses - addition of delayed recovery on the transaction as per order of TPO - assessee has contended that no services were rendered in lieu of these expenses incurred by the assessee on behalf of the AE being payment of statutory dues etc. which involved no services to be rendered by the assessee at all - CIT-A deleted additions - HELD THAT:- Revenue has been unable to controvert before us the fact that all the expenses made by the assessee on behalf of the AE involved no services to be rendered by the assessee but was merely meeting the expenses of statutory dues/fees/charges of the AE. Revenue has also not disputed the fact that all the expenses were made out of advances given by the AE to the assessee. CIT(A), has given detailed finding with respect to both the aspects ,noting that all the payments made by the assessee on behalf of its AE were majorly on account of fees/duty to be paid to the government for the project which clearly did not involve any rendering of services by the assessee. DR was unable to clarify the nature of services which the AO/TPO found the assessee to have rendered while making these payments on behalf of the assessee. We agree with the Ld.CIT(A) therefore that in such circumstances there arises no question at all of making any adjustment to the reimbursements of any operational profit element therein. Even with respect to the findings of the Ld.CIT(A) that all expenses of the AE were met out of advances given by the AE to it, we find that the findings of the Ld.CIT(A) are exhaustive and detailed, pointing out the fact that the AE has throughout the year maintained sufficient advances with the assessee to the tune of Rs. 12 Crs odd and even when the assessee has made any payments on its behalf during the year the same were immediately reimbursed. CIT(A) has noted that details to this effect were before the AO/TPO also who had made no adverse observations with respect to the same. Even before us no infirmity was pointed out by the Ld. DR on the factual findings of the Ld.CIT(A) as above. We find no infirmity in the order of the CIT(A) holding that in the light of the fact where there is no finding of nature of the services rendered by the assessee to the AE while meeting the expenses of the AE and further on account of the fact that all these expenses were made out of advances given by the AE to the assessee, there was no reason to make any adjustment to the ALP of the international transactions of reimbursement of expenses either on account of profit element or the interest element. In view of above, the grounds of appeal Nos. (a) and (b) raised by the Revenue are dismissed. Preliminary expenses written off as per the provisions of Section 35D - assessee had claimed deduction to the extent of 1/5th as per Section 35D relating to expenses incurred on incorporation of the company and 1/5th of the expenditure incurred during the impugned year on increase in share capital of the company - AO had denied the entire claim to the effect that expenditure incurred on increase in share capital was a capital expenditure not entitled to deduction - HELD THAT:- DR was unable to controvert the factual finding of the learned CIT(A) to the effect that the amount claimed by the assessee under Section 35D pertained to preliminary expenses incurred on the incorporation of the company; 1/5th of which the assessee had been claiming consistently in the preceding years. We see no reason to disagree with the learned CIT(A) that the said claim of the assessee was allowable as per law. The decision of the Hon’ble Apex Court in the case of Brooke Bond India [1997 (2) TMI 11 - SUPREME COURT] relates only to expenditure incurred on increase in share capital which not being the fact pertaining to the impugned expense before us, the said decision has been rightly held as not applicable to the same by the CIT(A). We uphold the order of the learned CIT(A) allowing the claim of expenses under Section 35D of the Act. The ground of appeal No. (c) is accordingly dismissed. Rate of depreciation applicable on certain assets which as per the Revenue quality as office equipments entitled to rate of depreciation @ 10% while as per the assessee they quality as plant and machinery entitled for rate of depreciation @ 15% - CIT(A), after considering the nature of assets, held that they qualify as plant and machinery entitled for depreciation @ 15% - HELD THAT:- DR was unable to controvert the factual finding with respect to the nature of assets on which the issue of rate of depreciation applied that they were in the nature of machineries being vacuum cleaner, water dispenser, EPBAX installation etc. Clearly, the same are not in the nature of “furniture and fittings” to which 10% rate of depreciation is applicable. CIT(A) has taken note of the provisions of Section 32A of the Act relating to investment allowance as well as to the provisions of Section 32(iia) of the Act relating to the additional deprecation on plant and machinery which rule out the allowance or additional depreciation on old plant and machinery and while doing so provide an exemption to office appliances. CIT(A) has derived that office appliances qualify as plant and machinery for depreciation @ 15%. DR has been unable to point out any infirmity in this finding of the learned CIT(A). CIT(A) has relied on the decision of Park Devis (India) Limited [1994 (12) TMI 46 - BOMBAY HIGH COURT] which has laid down the proposition that even office appliances qualify as plant and machinery for depreciation @ 15%. DR has been unable to distinguish the said case before us. In view of the above, we do not find any infirmity in the order of the learned CIT(A) holding the assessee entitled to depreciation @ 15% on office equipments. This ground of appeal of the Revenue is accordingly dismissed.
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