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2011 (8) TMI 1083 - ITAT PUNEDepreciation on leasehold land - Depreciable Asset u/s 32 or not? - Assessee said leasehold rights in the land are entitled to depreciation - A.O disagreed on the basis that the Act does not envisage depreciation on land or the leasehold rights over the land, thus disallowed the depreciation - HELD THAT:- The depreciation even under the amended Sec. 32 is allowable only on the restricted categories of tangible/intangible assets which are specifically enumerated in the Section - Under these circumstances, we fully concur with the submission of the assessee that the provisions of the Act cannot be interpreted to mean that leasehold rights granting such type of ownership over land etc., would also qualify as intangible assets for the purpose of depreciation under the Act - Decision against Assessee. Depreciation on Intangible assets u/s 32(1)(ii) - Assessee was allowed to use brandname for a period of 3 years. The A.O. disallowed the depreciation claim u/s 32(1)(ii) because though the agreement mentions about knowhow, in the Balance sheet of the transferor company it was not disclosed - HELD THAT:- Following the ratio laid down in the case of AMWAY INDIA ENTERPRISES. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 1(1), NEW DELHI. [2008 (2) TMI 454 - ITAT DELHI-C], we come to the conclusion that in the present case, since the assessee had purchased the user of brand name, trademark, logo for 3 years, we hold that the expenditure incurred in this regard as valued by the approved valuer is capital expenditure on which the claimed depreciation was allowable. We accordingly direct the A.O to allow the claimed depreciation on the above assets - Decision in favour of Assessee. Method for determination of ALP in respect of Exports - Assessee adopted comparable Un-controlled price method (CUP) for determining (ALP) in respect of Exports transaction undertaken with the AE. TPO held such method is not applicable for determining ALP, thus adopted Cost Plus Method(CPM) - HELD THAT:- . In our view, the Ld TPO was not justified in comparing the gross margin in export segment vis-à-vis gorss margins in domestic segment. There are various differences in the functions performed and the risk assumed in these two segments and therefore, the same cannot be considered as comparable cases for determining the ALP. There is no marketing risk in the export segment, no risk of bad debts, no product liability risk in export segments whereas the assessee has to bear all these risks in the domestic segment. Thus, we are of the view that it is very difficult to make suitable adjustments for these differences, hence the CMA Method is not appropriate method. On the basis that the assessee had a Joint Facility Arrangement or a Long Term Buy and Supply Arrangement with its AE, we find that there was no sufficient reasons with the Ld TPO to reject CUP method - Decision in favour of Assessee.
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