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2015 (1) TMI 1430 - ITAT MUMBAITP Adjustment - adjustment in respect of the international transaction pertaining to the transaction of business support services - TPO did not accept TNMM method and applied internal CUP being the price/commission received by GESA from HLAG under 1993 agreement - HELD THAT:- Purchase price of the goods exported cannot be applied as CUP for sale price charged to the AE. Accordingly considering the price received by GESA as CUP is contrary to the transfer pricing regulation. We do not rule out the CUP as most appropriate method for determination of ALP of international transaction in question. However, the comparable uncontrolled price must be a proper uncontrolled price in compliance of provisions of transfer pricing. There is one more fallacy in the TPO’s order regarding bifurcating the international transactions into two segments for determining the ALP. TPO accepted the price charged by the assessee in respect of services provided through subagency, but while computing the ALP it had ignored the CUP and took the price charged by the assessee as ALP. Further, the services provided by the assessee on its own were compared with CUP. Therefore, two separate ALP were determined by the TPO for the same service provided by the assessee to AE. Even if the CUP is adopted as most appropriate method ALP cannot be more than price received by GESA. Whereas the TPO has taken into consideration the price charged by the assessee with 10% mark-up. Hence, the computation of ALP is otherwise not based on correct uncontrolled price. We may clarify that the international transaction in question should be considered as one and price received by the assessee in total has to be compared with the ALP. The assessee received the price for providing the service as per the agency agreement. Therefore, the service provided by the assessee to the AE are closely interlinked and price of one part is dependent on the price of the other part. Therefore, the entire services provided by the assessee has to be treated as one international transaction for the purpose of determining the ALP. Depreciation on computer hardware - assessee claimed depreciation @ 60% on computer including printer, scanner and electronic token display system all part of block of asset of computer - AO held that the peripherals item do not fall under the definition of computer and allowed depreciation only @ 15% - HELD THAT:- Allowability of depreciation @ 60% on the computer accessories and peripherals is no more res-integra. In the case of BSES Yamuna Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] we allow the claim of depreciation on printer, scanner, electronic token display system @ 60%. Depreciation on software - HELD THAT:- We allow the claim of 60% of depreciation on software. Proportionate disallowance of depreciation on computer and software, based on the number of employees of the assessee - HELD THAT:- It is clear from the directions of the DRP that the proportionate disallowance of depreciation was directed only in respect of software cost allocated by AE and not on any other asset. Therefore, the AO has not followed the directions correctly while passing the impugned order whereby he disallowed the proportionate depreciation on the entire computer block of asset. Proportionate disallowance based on the number of employees is concerned, we are of the view that the personal computers in any establishment/organization are not restricted to the number of employees at any given point of time. The strength of the employees may vary depending upon the capacity at which the company is working. Further, keeping extra computer for meeting any emergent situation of non-functional computer or under repair computer is not an unusual practice. Therefore, when the number of computer is not disputed then software installed on the existing computer cannot be treated as excess or not for business use of the assessee. Hence, we do not find any logic or substance in the directions of the DRP in restricting the depreciation of software licence to the extent of number of employees working with the assessee. Accordingly, the orders of the authorities below qua this issue are set aside and claim of the assessee is allowed in full. Interest u/s 234D - AR has submitted that there is a calculation mistake in computing interest under section 234D - HELD THAT:- We direct the AO to verify the alleged working mistake in computation of interest under section 234D.
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