TMI Blog2015 (10) TMI 2049X X X X Extracts X X X X X X X X Extracts X X X X ..... on which depreciation has been allowed, then for the balance amount of ₹ 19,85,707/- also on the same reasoning it has to be held as ‘capital expenditure’, on which the assessee should be liable for depreciation u/s 32. Such a claim cannot be disallowed merely on the ground that assessee had not deducted TDS and therefore is to be disallowed u/s 40(a)(ia). Such a direction of the DRP cannot be sustained in law, firstly, the disallowance under the provisions of section 40(a)(ia) can be invoked only in the cases where the assessee is claiming ‘revenue expenditure’ and not where it has been held to be disallowable as ‘capital expenditure’ and secondly, if provision of 40(a)(ia) is to be invoked then the entire expenditure has to be first treated as revenue expenditure and then it has to be examined, whether it attracts TDS provisions. Thus, there is inherent inconsistency in the finding of the DRP. Accordingly, on these facts we hold that depreciation should be allowed on the balance amount of ₹ 19,85,707/- also as has been done/allowed for the sum of ₹ 55 lakhs.- Decided in favour of assessee. Transfer pricing adjustment - international transaction of import of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17.10.2011, passed by Dy. Commissioner of Income-tax -8(2), Mumbai in pursuance of directions dated 30.09.2011 given by the Dispute Resolution Panel II(DRP) u/s 144C(5). In various grounds of appeals, the assessee has challenged the following issues :- (i) The Ld. Assessing Officer has erred in law and on facts in rejecting the books of account, trading results and thereby making the best judgment assessment u/s 144; (ii) The Ld. Assessing Officer has erred in law and on facts in disallowing R D expenses in respect of product adaptability and demonstration expenses for sums aggregating to ₹ 74,40,373/-; (iii) The Ld. Assessing Officer has erred in law and on facts in not granting depreciation u/s 32 in respect of compensation received which has been treated as capital expenditure; (iv) The Ld Assessing Officer/TPO has erred in law and on facts in making the transfer pricing adjustment of ₹ 15,40,31,031/- on account of international transaction of import of seeds made by the assessee from its AE; (v) The Ld. Assessing Officer has erred in law and on facts in making an addition on account of fall in gross profit margin. 2. The assessee is engaged in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the research carried out by the assessee is to develop pest resistant; deriving/extracting high yielding vegetable hybrid seeds with value added traits, which are suitable to all climatic zones of India. For these purpose continued R D expenses are incurred on yearly basis and are recurring in nature. Similar issue has come for consideration before the Tribunal in AY 2003-04 and in AY 2006- 07 which was decided in favour of the assessee. In the assessment year 2006-07, the Tribunal had set aside this issue following the directions of the DRP. In pursuance thereof, the Assessing Officer has allowed these expenditures in all the earlier years this issue stands decided in favour. Accordingly, in this year also the said expenditure should be allowed. 4. Ld. DR, on the other hand, relied upon the order of the DRP and submitted that past direction of the DRP, the Assessing Officer has asked for the details, which the assessee did not furnish, hence adverse view has been taken by the Assessing Officer. 5. After considering the rival submissions and also perusal of the impugned order and the material placed on record, we find that the issue of R D expenses are recurring in nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been held to be capital expenditure on which depreciation has been allowed, then for the balance amount of ₹ 19,85,707/- also on the same reasoning it has to be held as capital expenditure , on which the assessee should be liable for depreciation u/s 32. Such a claim cannot be disallowed merely on the ground that assessee had not deducted TDS and therefore is to be disallowed u/s 40(a)(ia). Such a direction of the DRP cannot be sustained in law, firstly, the disallowance under the provisions of section 40(a)(ia) can be invoked only in the cases where the assessee is claiming revenue expenditure and not where it has been held to be disallowable as capital expenditure and secondly, if provision of 40(a)(ia) is to be invoked then the entire expenditure has to be first treated as revenue expenditure and then it has to be examined, whether it attracts TDS provisions. Thus, there is inherent inconsistency in the finding of the DRP. Accordingly, on these facts we hold that depreciation should be allowed on the balance amount of ₹ 19,85,707/- also as has been done/allowed for the sum of ₹ 55 lakhs. Thus, ground no. 3 as raised by the assessee is treated as allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the transaction is determined as under: S.No Particulars As per Assessee (From 3CEB) ALP determined by Department 1 Sales 472,770,617 472,770,617 2 OP/OI - 12.44% 20.14% 3 Operating Profit ( OP) -58,815,029 95,216,002 4 Operating Costs (OC) 531,585,646 377,554,615 None-AE costs 312,160,467 312,160,467 AE costs (Purchases) 219,425,179 65,394,148 5 Difference between ALP of operating Cost and value of international Transaction 154,031,031 9. Shri Rajan Vora, submitted that, so far as the TP adjustments are concerned, similar issue was also inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that if such an addition is to be deleted following the earlier year s order, then the entire GP addition should be sustained. In either way addition needs to be confirmed. 12. We have heard the rival contentions of the parties and also material on record. The entire transfer pricing adjustment has been made after rejecting the assessee s method of benchmarking the transaction; that is Resale Price Method and instead by adopting TNMM as MAM by the TPO. This selection of most appropriate method of TNMM by the department has been found to be inappropriate by the Tribunal in the earlier years and assessee s RPM has been accepted. As a result of adopting RPM as MAM, similar adjustments made in the earlier assessment years stands deleted. Thus, as a matter of judicial precedence and without there being any change of material facts and circumstances, we also direct the TPO/Assessing Officer to adopt RPM as most appropriate method for benchmarking the transaction of import of seeds to its AE and carry out comparability analysis for benchmarking the assessee s gross margin and determined the appropriate ALP. 13. Now here in this case, a huge addition on account of GP additio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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