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2015 (6) TMI 959 - AT - Income TaxTransfer pricing adjustment - determination of arm’s length price by TPO - wrong selection of comparable - Held that:- In the case of Sundaram Finance Distribution Ltd., we find that the main objection of assessee is that the said comparable was included because assessee had supplied the same and the second objection is that in the said comparable there was no staff. As far as first objection is concerned, we are in agreement with the assessee’s counsel that merely because the said comparable was provided by assessee, the same could not be included without proper examination to account for the differences. The assessee is well within his right to demonstrate that a comparable supplied by it in the transfer pricing analysis was not correct and had to be excluded. This right of the assessee is not curtailed in any manner, whatsoever, in the rules. Adjustment of net profit margins of comparable uncontrolled transaction for material differences - Held that:- The comparable uncontrolled transaction has earned much more profit than the assessee. Further Tribunal has also observed that the cost of outsourcing had been included in other heads of the expenditure in respect of wages employee cost. In the present case, these aspects have not at all been considered by TPO. If the business module adopted by Sundaram Finance Distribution Ltd. materially affected the profit then the same had to be adjusted. We, therefore, consider it in the interest of justice that the matter may be restored back to the file of AO for examining the assessee’s plea afresh. Issue regarding ICC International, we find that assessee has demonstrated, as noted earlier, that it had earned super profits during the year because of increase in supply on account of government scheme. We find that TPO has considered the assessee’s objection regarding exclusion of high margin comparables in para 8.7 of his order and the DRP in para 7.1. They have merely, inter-alia, observed that comparables cannot be rejected simply because they are loss or high profit making comparables. However, they have not considered that if certain extra ordinary factors materially affected the profit in a particular year then that aspects had to be taken into consideration and due adjustment was required to be made to the net profit margin for brining the comparable on the same platform at which the assessee was performing its functions. Admittedly the assessee’s objections in regard to ICC International, as noted earlier, have not been considered by DRP and, therefore, we consider it in the interest of justice that this issue should also be restored to the file of TPO for fresh consideration Depreciation on data base - 25% or 15% - Held that:- As decided in assessee's own case so far as the question about admissibility of depreciation of Acquired Business Database is concerned, this issue is covered in favour of the assessee by the judgment of Hon’ble Delhi High Court in the case of CIT vs. Hindustan Coca Cola Beverages Pvt. Ltd. (2011 (1) TMI 138 - Delhi High Court ), wherein, their Lordships, inter-alia, have observed that “It is worth noting, the scope of sec. 32 has been widened by the Finance (No. 2) Act, 1998 whereby depreciation is not allowed on intangible assets acquired on or after 1st April, 1998. As per section 32(1)(ii), depreciation is allowable in respect of know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature.” In view of these discussions as also bearing in mind the entirety of the case, we are of the considered opinion that the CIT(A) ought to have allowed the depreciation on the entire payment of ₹ 12 crores towards Acquired Business Database. We, therefore, reject the appeal filed by the AO against partial relief granted by the CIT(A) and uphold the grievance of the assessee in this regard - Decided in favour of assessee Depreciation on computers - Held that:- The issue now stands covered by the judgment of this Court in the case of CIT vs. BSES Yamuna Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT], wherein it was held that the depreciation at the rate of 60 per cent on such items shall be allowed. - Decided in favour of assessee Disallowance of written off certain sundry advances - DRP directed to delete addition - Held that:- The directions of ld. DRP are very clear and unambiguous and, therefore, the AO clearly misconstrued the same. We, therefore, restore this issue to the file of AO for reconsideration and to give effect to these directions of ld. DRP, as reproduced earlier. - Decided in favour of assessee
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