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2023 (6) TMI 75 - AT - Income TaxTP Adjustment - specified domestic transaction of project management and supervision - Capitalized expenditure - effect of omission of the clause (i) of Section 92BA - adjustment being disallowance of depreciation - HELD THAT:- We carefully find that that provision of section 40A (2) applies only with respect to the ‘expenditure’ incurred by the assessee, which are otherwise allowable to the assessee. Here it is not the ‘expenditure’ but depreciation ‘allowance’ claimed by the assessee , therefore, it is not hit by provisions of Section 40A (2) of the act. As also enquired whether AO has any power to substitute ‘Actual cost’ of an assets by the arm’s-length price of purchase or acquisition of a capital asset u/s 32 Vis a Vis of Section 43(1) of the act in similar situation. On careful perusal of provisions of section 32 as well as the ‘actual cost’ u/s 43 (1) for the purpose of claiming of the depreciation, we could not find any provision by which the ‘actual cost’ incurred by the assessee, if acquired from or created from the associated enterprises can be substituted by the Arm’s length price of purchase of such assets. We hold that AO is incorrect in determining the arm’s-length price of specified domestic transaction after omission of clause (i) of Section 92BA - Hence, the action of the learned transfer-pricing officer in determining the arm’s-length price of project management and supervision fees at Rs Nil and consequent disallowance of depreciation there on is not correct. Ground of the appeal of the assessee is allowed. Disallowance of depreciation on toll road - HELD THAT:- As decided in own case [2018 (5) TMI 2064 - ITAT MUMBAI] held that the claim of the assessee for depreciation on license to collect toll being an ‘intangible asset’ is falling within the scope of Section 32 (1) (ii) of the act. Assessee was allowed depreciation on road constructed by it under built operates and transfer basis [BOT] was considered as an ‘intangible asset’. The coordinate bench also allowed the depreciation to the assessee at the rate of 25% thereon. Therefore, AO is directed to delete the disallowance of depreciation on toll roads - Ground of the appeal of the assessee is allowed. Correct head of income - interest on fixed deposits placed under the debt service obligation created by the lenders - income from business OR income from other sources - HELD THAT:- As relying on assessee own case [2018 (5) TMI 2064 - ITAT MUMBAI] following the decision of Lok Holdings [2008 (1) TMI 365 - BOMBAY HIGH COURT] upheld the order of the learned CIT – A holding it to be interest income chargeable under the head business income. Therefore direct AO to consider interest income on fixed deposit as business income. - Ground of the appeal of the assessee is allowed. Short grant of tax credit - HELD THAT:- We direct the assessee to submit the proof before the learned assessing officer about such credit available to the assessee and whether corresponding income has been recorded in the books of account of the assessee for the respective year or not, thereafter, the learned AO may examine the same and decide the issue in accordance with the law. Accordingly, ground is allowed.
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