TMI Blog2016 (8) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... t is concerned, it is not necessary that book value and market value of the capital asset are at par. As observed that the DRP while dealing with the objections of the assessee in respect of valuation of capital asst has not properly appreciated the facts and circumstances. The DRP has merely examined one aspect of the transaction relating to pricing of capital asset i.e. the price paid by assessee to acquire old machine viz-a-viz price of new model of same machine. The DRP has failed to take holistic view of the transaction. Thus we set aside the findings of the authorities below on this issue and direct the Assessing Officer to delete the addition made on account of adjustment in the value of capital asset - Decided in favour of assessee. - ITA No. 91/PN/2013 - - - Dated:- 6-5-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : Shri Manoj Pardasani For The Revenue : Shri Avadesh Kumar ORDER PER VIKAS AWASTHY, JM : This appeal by the assessee is directed against the assessment order dated 12-10-2012 passed u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) for the assessment year 2008-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The ld. AR further contended that the ground no. 2 raised in the appeal assailing the findings of lower authorities in respect of payment of divisional recharge and ground no. 4 relating to payment of royalty are withdrawn. Thus, in view of the above statement made by the ld. AR the only issue that is to be adjudicated is in ground no. 3 which reads as under: 3. Transfer Pricing Purchase of Capital Assets [INR 16,952,440] 3.1 On the facts and in law, the Ld. TPO, the Ld. AO and the Hon. DRP erred in disregarding the transfer pricing documentation maintained by the Appellant and erroneously and inappropriately applied the CUP Method by using the written down value ( WDV ) of the assets in the books of the AE and adding an adhoc mark-up to the WDV to determine the arm s length price as INR 15,343,891 instead of INR 32,296,331 as paid by the Appellant and thereby proposing an addition to taxable income to the extent of INR 16,952,440. 3.2 On the facts and in law, the Ld. TPO, the Ld. AO and the Hon. DRP erred in disregarding the Valuation Certificates issued by independent Chartered Engineers which were used as the basis to determine the arm s length price. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufactured from the said machine. The capital goods cannot be sold or purchased at written down value. The actual sale price of the capital goods can either be higher or lower than the written down value. If the TPO had any doubt over the pricing of the machine he should have referred the matter to Departmental Valuation Officer (DVO) for determining the value of machine. However, no effort was made by the TPO or the Assessing Officer to seek expert opinion and determine the accurate price of the machine. The TPO in assessment year 2009-10 has accepted the valuation of capital asset made by the same Independent Chartered Engineer who had determined the value of machine in the assessment year under appeal. In support of his submissions the ld. AR placed reliance on the following decisions : i. Asstt. Commissioner of Income Tax Vs. M/s. Koch Chemical Technology Group (India) Limited in ITA No. 8091/Mum/2011 for the assessment year 2007-08 decided on 30-09-2015. ii. Tecumseh Products India (P.) Ltd. Vs. Assistant Commissioner of Income Tax, 41 taxmann.com 385 (Hyderabad Trib.); iii. DCIT Vs. C-Dot Alcatel-Lucent Research Centre Pvt. Ltd. in ITA No. 3071/Del/2013 for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchased by the assessee from its AEs. The assessee in support of his submissions has placed reliance on the valuation certificate issued by an Independent Chartered Engineer at UK whereas the Revenue has placed reliance on the valuation made by TPO by extrapolating the arithmetic mean of operating margin of the companies manufacturing similar machine in India and applying CUP method to markup the import price at ALP. 7. The contention of the ld. AR is that the authorities below have disbelieved the valuation certificate issued by an independent Chartered Engineer, whereas the same has been accepted by the customs authorities and even in the subsequent assessment year i.e. assessment year 2009-10 the valuation certificate issued by the same Chartered Engineer has been accepted by the TPO. We are of the considered view that if the TPO was not satisfied with the valuation certificate given by an independent Chartered Engineer at UK, the TPO should have referred the matter to DVO who is an expert to determine the value of such capital assets. The TPO has erred in extrapolating the average arithmetic mean of operating profit of companies manufacturing similar machines in India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (F) (i) As briefly stated above, Assessee has imported certain machinery (old as well as new machinery) from TPC USA. The purchase price of these machineries was based on fair market value and supported by an independent valuer s report M/s SGS Global Trade Solutions Inc., who certified second hand machinery procured by Assessee. As Assessee submitted before the authorities, the comparative analysis of the machinery prepared indicates that purchase price paid to M/s TPC USA is lower than the value determined by M/s SGS Global Trade Solutions. Assessee paid customs duty and also countervailing duty and the valuation was accepted by the authorities at the time of import. Though TPO as well as DRP were of the opinion that the machinery does not have any value, we do not understand on what basis they have come to this opinion. There is no dispute with the fact that the machinery was imported and used in Assessee s business for manufacturing of its compressors / parts, so, there is no dispute with reference to usage of second hand machinery. It is also not the case of the revenue that machinery imported was kept idle and Assessee unnecessarily paid the amount to the AE. This being so, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id down under the statute. The Transfer Pricing Officer not being an expert to determine the value of machineries and there being no other material brought on record by him to demonstrate that he made enquiry of any kind to ascertain the fair market value of machineries, he could not have quantified the value of the machineries at 50% of the value shown by the assessee. The DRP, in our view, has also sustained the disallowance without proper application of mind and in a mechanical manner. The Tribunal further remarked that since the TPO failed to make reference to the DVO for valuation of asset and made 50% disallowance of purchase value of machinery in an arbitrary manner, there is no point in remitting the issue back to the TPO and give him second innings. The observations of the Tribunal in this regard are as under: 7.2 We may observe, the learned Departmental Representative had submitted before us that at this stage also, the matter can be remitted back to the file of the Transfer Pricing Officer for making a reference to the DVO for valuation of assets. However, we are unable to accept such contention of the learned Departmental Representative for the simple re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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