TMI Blog2018 (8) TMI 656X X X X Extracts X X X X X X X X Extracts X X X X ..... SHRI KUL BHARAT, JUDICIAL MEMBER For The Assessee : Sh. Ajay Vohra, Sr. Adv., Sh. Neeraj Jain, Adv., Sh. Abhishek Aggarwal, CA For The Department : h . H.K. Choudhary, CIT (DR) ORDER PER KUL BHARAT : JM These two appeals by the Assessee are directed against the impugned Orders dated 16.01.2017 26.10.2017 passed by the AO u/s. 143(3) read with section 144C of the Income-tax Act, 1961 (for short the Act ) in consonance with the orders passed by the Ld. DRP/TPO qua the assessment years 2012-13 2013-14 respectively. Since the issues are common and connected, these are being consolidated and disposed of by this common order for the sake of convenience, by first dealing with assessment year 2012-13. 2. The Assessee has raised the following grounds in respect of assessment year 2012-13:- 1. That the assessing officer erred on facts and in law in completing the assessment under section 144C read with section 143(3) of the Income-tax Act (the Act) at income of Rs. Nil after adjusting brought forward business losses of ₹ 54,37,55,822, as against returned income of Rs. Nil after setting off of brought forward losses of ₹ 4,87,99,289. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited vi. Spry Resources Pvt. Limited vii. Zylog System Limited. 2.5 That on the facts and in the circumstances of the case and in law, the DRP/ TPO erred in rejecting the contention of the appellant regarding risk adjustment, allegedly holding that in absence of robust and reliable data, both for the assessee and for the comparables, risk adjustment cannot be considered for enhancing comparability. 2.6 Without prejudice, that the assessing officer/TPO erred on facts and in law in not giving effect to the direction of the DRP to restrict adjustment in the arm s length price of international transaction of software development services only to the international transaction undertaken with the associated enterprise and not to the entire turnover of the appellant. 3. That the assessing officer/ DRP erred on facts and in law in making an ad-hoc disallowance of interest expenses of ₹ 1,20,16,720 allegedly holding that the interest paid on short term loans which are invested in acquisition of fixed assets shall be capitalized along with the fixed assets. 3.1 That the assessing officer/ DRP erred on facts and in law in not appreciating that the fixed assets were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel of the assessee has taken us through the earlier order of the Tribunal pertaining to assessment year 2007-08 and submitted that similar issue travelled upto the stage of Hon ble Delhi High Court and the Hon ble Delhi High Court in ITA No. 44/2018 (Page no. 45-46 PB) vide order dated 15.04.2015 has ruled that ITAT s reasoning is in accord with Rule 10B(1)(e)(ii) of the Income Tax Rules. Ld. Counsel of the assessee further taken us through the Tribunal s order in assessee s own case passed in ITA No. 4776/Del/2011 (AY 2007-08) (Page no. 47 66 PB) and further decision of the Tribunal in Assessment Year (2008-09) passed in ITA No. 284/Del/2013 (Page No. 70-98 PB) and stated that similar issue has been restored to the AO for fresh computation. 4.2 On the other hand, Ld. CIT(DR) supported the order of the AO/TPO. 4.3 We have heard the rival contentions and perused the records. We find that the TPO/AO has rejected the internal TNMM Method, but the Hon ble Delhi High Court vide its order dated 15.04.2015 passed in ITA No. 44/2015 has affirmed the view of the Tribunal in Assessment Year 2009-10 by observing as under:- The second question is whether the adjustment directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd for the purpose of determining the arm s length price in respect of the international transactions undertaken with the associated enterprise by making internal comparison of profitability from the international transactions with unrelated parties after allocating respective revenues and expenses to both the segmental. The AO/TPO were directed to provide reasonable opportunity of being heard to the assessee while the assessee was directed to furnish all the details and particulars to enable the AO/TPO to make internal comparison of the profitability from the internal transactions with associated enterprise and unrelated parties undertaken by the assessee in the similar functional and economic growth. 14. There is no dispute that the facts and circumstances in the present assessment year are similar to the facts and circumstances as obtaining in the preceding assessment years. The revenue has not placed before us any material so as to enable us to take a different view in the matter. In view of these facts and circumstances, respectfully following the order for earlier assessment years noted above, we restore this matter to the file of the AO/TPO with similar directions as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borrowing to the date of put to use is to be capitalized as part of actual cost of asset. In other words, no interest is required to be capitalized for the period after such assets are put to use. Therefore the interest expenditure on the utilization of borrowed funds for the acquisition of new assets, from the date of its acquisition till the date when, the asset is put to use, is to be disallowed. Inother words, the interest paid on the capital borrowed for acquisition of an asset for extension- of-existing business, shall not be allowed, as deduction, from the date on which the capital was borrowed for acquisition of the asset till the date on which the asset was first put to use. 37. Here admittedly an amount of ₹ 11.7 crore was borrowed for acquisition of assets for expansion of existing business; therefore the interest accrued on the borrowed fund from the date on which the capital was borrowed for acquisition of the asset till the date on which the asset was put to use shall be disallowed. Therefore in order to apply the proviso to Section 36(l)(iii) of the Act to the facts of the present case, that is in other words, before disallowing the interest expenditure o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is to be charged on the tax at the returned income. We hold and direct accordingly. This ground is allowed. 7. In the result, the appeal is allowed for statistical purposes. ASSESSMENT YEAR 2013-14 8. The Assessee has raised the following grounds in respect of assessment year 2013-14:- 1. That the assessing officer erred on facts and in law in completing the assessment under section 144C read with section143(3) of the Income-tax Act (the Act) at income of ₹ 29,46,55,100 as against returned income of Rs. Nil after setting off of brought forward losses of ₹ 25,00,07,902. 2. That the assessing officer erred on facts and in law in making adjustment of ₹ 9,86,08,398 to the income of the appellant on account of the alleged difference in the arm s length price of the international transaction of provision of software development services undertaken during the previous year on the basis of order passed by Transfer Pricing Officer ( TPO ) under section 92CA(3) of the Act. 2.1 That the Dispute Resolution Panel ( DRP )/TPO erred on facts and in law in disregarding the internal benchmarking undertaken by the appellant for determining the arm s lengt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es only to the international transaction undertaken with the associated enterprise and not to the entire turnover of the appellant. 3. That the assessing officer/ DRP erred on facts and in law in making an disallowance of interest expenses of ₹ 4,18,226 allegedly holding that the interest paid on short term loans which are invested in acquisition of fixed assets shall be capitalized along with the fixed assets. 3.1 That the assessing officer/ DRP erred on facts andin law in not appreciating that the fixed assets were acquired by the assessee out of its own funds and accordingly, no interest expenses shall be aggregated with the value of fixed assets. 3.2 Without prejudice, the assessing officer erred on facts and in law in allegedly considering the interest expense of ₹ 73,91,619 paid on loans aggregating to ₹ 22.50 crores, without appreciating that the total purchases of fixed assets made during the year was only for ₹ 9.89 crores. 4. That the assessing officer erred on facts and in law in allowing set-off of brought forward losses from the assessed income for ₹ 5,43,79,729 as against actual brought forward losses claimed in the return of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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