TMI Blog2018 (10) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... -10-2018 - SHRI N. K. SAINI, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER For The Appellant : Mrs. Rashmi Chopra, Adv, Sh. Amit Srivastava, Adv, Sh.Ankul Goyal, Adv For The Respondent : Sh. Sanjay I. Bara, CIT DR ORDER PER SUCHITRA KAMBLE, JM This appeal is filed by the assessee against the Assessment Order dated 30/11/2012 passed by the Assessing Officer u/s 144C read with Section 143(3) of the Income Tax Act, 1961. 2. The grounds of appeal are as under:- 1. That on the facts and circumstances of the case and in law, the impugned order of assessment framed by the learned Assistant Commissioner of Income-tax, Circle 13(1), New Delhi (hereinafter referred to as the learned AO ) pursuant to the directions of the Hon ble Dispute Resolution Panel - II (hereinafter referred to as the Hon ble DRP ) under section 143(3) read with section 144C of the Income-tax Act, 1961 ( Act ), is a vitiated order having been passed in violation of principles of natural justice and is otherwise arbitrary and is thus bad in law and void ab-initio. 2. That on the facts and circumstances of the case and in law, the Hon ble DRP/ learned AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) Hemisphere Consulting Pte. Ltd, Singapore (Rs 34,473) b) Fitch Design Pte Limited, Singapore (Rs 2,78,199) c) Barlworld Optimus UK (Rs 7,58,555) qualify as Fee for Technical Services ( FTS ) under the provisions of Article 12 of India - Singapore DTAA and Article 13 of India - UK DTAA, respectively, without appreciating that the underlying services do not qualify as FTS under the restrictive provisions of the DTAA. 3.3. Without prejudice, on the facts and circumstances of the case and in law, the Hon ble DRP/ learned AO has erred in making a disallowance amounting to ₹ 17,17,572 in respect of payment to Nokia Siemens Networks MEA-FZ, LLC, UAE under section 40(a)(i) of the Act, without appreciating that the said amount is not chargeable to tax in India as FTS in the absence of any specific clause related to FTS under the provisions of India - UAE DTAA. 3.4. That on the facts and circumstances of the case and in law, the Hon ble DRP/ learned AO has erred in making a disallowance amounting to ₹ 5,38,977 in respect of payment to Nokia Hungary KFT, under section 40(a)(i) of the Act, without appreciating that the said amount is not chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of the case and in law, the learned TPO/ Hon ble DRP has grossly erred in not accepting the economic analysis of certain international transactions of the Appellant and redetermining the ALP which is not in accordance with the provisions of the Act read with the Income Tax Rules, 1962 ( the Rules ). 5.3. That, on the facts and the circumstances of the case and in law, the learned TPO/ Hon ble DRP has erred in rejecting certain comparables selected by the Appellant for international transaction related to provision of software development services to associated enterprises and additionally selecting certain new set of comparables for the determination of the ALP by adopting flawed approach and certain arbitrary filters. 5.4. That on the facts and circumstances of the case and in law, the learned TPO/ Hon ble DRP has erred by not accepting the combined transaction approach followed by the Appellant for the international transactions related to Network s division for arm s length analysis and instead conducting separate analysis for certain international transactions of Networks division namely provision of marketing support services, warranty services and other supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to a tax holiday under section 10A of the Act on its profits earned from the provision of software services to associated enterprises and hence didn t have an ulterior motive of shifting profits outside India. 5.11. That without prejudice, on the facts and circumstances of the case and in law, the learned AO/ TPO/ Hon ble DRP has erred in not allowing the benefit of downward adjustment of 5 percent, as provided in the Proviso to section 92C of the Act, from the ALP of the international transactions as determined by them. 6. Without prejudice, on the facts and circumstances of the case and in law, the Hon ble DRP/ learned AO has erred in granting short credit in respect of TDS claimed by the Appellant in its return of income. 7. That on the facts and circumstances of the case and in law, the learned AO has erred in initiating penalty proceedings under section 271 (1 )(c) of the Act. 8. That on the facts and circumstances of the case and in law, the learned AO has erred in levying interest under section 234B and section 234D of the Act. 9. That, without prejudice to ground 8 above, on the facts and circumstances of the case and in law, the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation claimed on certain items characterized as computers by the assessee (viz. UPS, LAN/WAN equipment, catalyst switches, network equipments, etc.) from 60% to 15%, by treating the same as Plant and Machinery and thus, disallowing depreciation amounting to ₹ 19,33,295 to the assessee. The Ld. AR submitted that this issue is covered by the Tribunal decision for Assessment Year 2008-09 in ITA No.333/DEL/2013 M/s Nokia Siemens Networks India vs. ACIT dated 16.02.2018). The Ld. DR relied upon the Assessment Order. 7. We have heard both the parties and perused all the relevant material available on record. It is found that the issue is identical in nature to that of M/s Nokia Siemens Networks India (supra) for A.Y. 2008-09 and no distinguishing factors were pointed out by the Ld. DR during the hearing. The Tribunal for A.Y. 2008-09 in case of M/s Nokia Siemens Networks India (supra) held as under:- 5. Coming to Ground No. 2 and 2.1, relating to the depreciation on computer peripherals, assessee claimed depreciation on the equipment like UPS, stabilizer, LAN/WAN, catalyst switches, network switches etc. at 60%. However learned AO disallowed such a claim to an extent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 wherein it was held that the Court was in agreement with the view of the tribunal that the computer peripherals such as printer, scanner etc. form an integral part of computer system. In fact the computer accessories and peripherals cannot be used without the computer. Consequently, as they are the part of the computer system, they are entitled to depreciation @ 60%. Respectfully following the above precedent, we set aside the order of the Assessing Officer and decide the issue in favour of the assessee. 9. It is the further argument of the learned AR that by order dated 14.2.2014 in CIT vs. Birlasoft Ltd. (SLP No. 20645 of 2012), the Hon ble Supreme Court dismissed the departmental appeal against the order of the Hon ble jurisdictional High Court in ITA No. 71 of 2010 wherein the Delhi High Court held that the depreciation on computer accessories and peripherals would be admissible at the rate of 60%. Lastly, he brought to our notice that the learned DRP while dealing with this aspect in assessee s own case for the AY 2009- 10 and 2010-11 followed this legal position and the department also accepted the same. 10. In view of the above legal position, we find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties and perused all the relevant material available on record. The additional claims taken before us were already submitted before the Assessing Officer vide submissions dated 04.10.2012, therefore, we are inclined to admit the claims. We remand back this issue to the file of the Assessing Officer for adjudication. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground Nos. 4, 4.1 and 4.2 are partly allowed for statistical purposes. 12. The Ld. AR submitted that Ground Nos. 5, 5.1 5.2 relating to Transfer Pricing issue are general and hence not pressed. Therefore, Ground Nos. 5, 5.1 and 5.2 are dismissed. 13. As regards to Ground No. 5.3 relating to Software Development Segment, the Ld. AR submitted that as far as the software development segment is concerned, the assessee s functionality is identical to that of the erstwhile entity. The Ld. AR relied upon the order of Tribunal in case of M/s Nokia Siemens Networks India (supra) for Assessment Year 2008-09 wherein it is held as under: 33. Assessee as a tested party has been characterized as provider of software development services to its AEs which had use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Helios Matheson Information Technology Ltd. Excluded 9. IGate Global Solutions Ltd. Excluded 10. Infosys Ltd. Excluded 11. K P I T Cummins Infosystem Ltd. Not disputed 12. Kals Information Systems Ltd. (Seg) Excluded 13. Lanco Global Systems Ltd. Excluded 14. Larsen Toubro Infotech Ltd. Excluded 15. Mindtree Ltd. Excluded 16. Persistent Systems Ltd. Excluded 17. Quintegra Solutions Ltd. Excluded 18. R S Software (India) Ltd. Not disputed 19. R Systems International (Seg) Excluded 20. Sasken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have heard both the parties and perused all the relevant material available on record. We are giving our findings for each comparables hereinafter. 16.1 Apitco Ltd.: This company is a government undertaking and engaged in turnkey implementation, preparation of reports and into core activities and also provides high end technical consultancy. The substantial contracts of this company are with the government institutions. There is no segmental data available of this company. This company also fails the TPO s own filter of export income of atleast 25% of total income. The assessee company is engaged in the business of manufacturing and trading of telecommunication network equipment and provision of related services such as network design, installation and commissioning. The company also provided support services to major telecom operators and IP service providers in India and to customers of its Associated Enterprises (AE). Further, the company also provided software development and certain network management support services. Thus, this company is functionally different from the assessee company. Therefore, we direct the TPO to exclude this comparable. 16.2 IDC (India) Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, we dismissed Ground Nos. 5.5, 5.6 and 5.7 as not pressed by the assessee. 19. As relates to Ground No. 5.8 regarding not making appropriate adjustments on account of working capital differences between the assessee vis- -vis the comparables companies while re-determining the ALP of the certain international transactions of the assessee, the Ld. AR submitted that the DRP has taken the cognizance of Tribunal s decision and the same should be given by the TPO/Assessing Officer. The Ld. DR relied upon the order of the TPO/AO. 20. We have heard both the parties and perused all the relevant material available on record. The Tribunal in case of M/s Nokia Siemens Networks India (supra) held as under: 129. In view of this legal and factual position, we consider it just and proper to direct the Ld. TPO to grant working capital adjustment to account for difference in working capital employed by the assessee and the comparable companies. Since there is case to allow working capital adjustment in assessee s case as held in case of M/s Nokia Siemens Networks India (supra). The issue is identical and hence we direct the TPO to grant working capital adjustment to account for di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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