2022 (2) TMI 1500 - AT - Income Tax

TP Adjustment - adjustment to the taxpayer on account of accelerated depreciation charged in their books of account - HELD THAT - We are of the opinion that the issue is covered by the decision of this Tribunal in the case of Outsource Partners International (P) Ltd. 2017 (10) TMI 1434 - ITAT BANGALORE wherein it has been held that the depreciation adjustment is to be granted whereby the rates of depreciation is different vis- -vis the comparable companies. Whether adjustment should be made in the hands of the tested party i.e. the assessee or the comparable companies decision in the case of Pangea 3 Legal Database Systems (P) Ltd. 2017 (3) TMI 267 - ITAT MUMBAI held that where rates of depreciation were different in case of assessee and comparable companies Rule 10B(1) permits an adjustment in the hands of the tested party also and depreciation adjustment has to be allowed. CIT(Appeals) followed the ratio laid down by the above decisions of the ITAT and we do not find any infirmity in the order of the CIT(Appeals) on this issue. Accordingly the grounds raised by the revenue are rejected.

Summary

The Appellate Tribunal ITAT Bangalore, consisting of Shri Chandra Poojari and Smt. Beena Pillai, addressed an appeal by the revenue against the CIT(Appeals)-2, Bengaluru's order dated 31.7.2019 concerning the assessment year 2004-05. The revenue challenged the CIT(A)'s decision to grant adjustments for accelerated depreciation, arguing errors in the admission of additional depreciation as evidence, the profit margin not being at arm's length, and the consideration of multi-year data.The Tribunal referenced the case of Outsource Partners International (P) Ltd. [2017] 87 taxmann.com 332 (Bang. Trib.), which established that depreciation adjustments should be granted when depreciation rates differ between the assessee and comparable companies. Additionally, the Mumbai Tribunal's decision in Pangea 3 & Legal Database Systems (P) Ltd. v. ITO [2017] 79 taxmann.com 303 (Mum Trib.) supported adjustments in the hands of the tested party under Rule 10B(1).The Tribunal found no error in the CIT(A)'s order, which adhered to these precedents, and thus rejected the revenue's grounds. Consequently, the revenue's appeal was dismissed. The judgment was pronounced on February 17, 2022.