TMI Blog2018 (1) TMI 1394X X X X Extracts X X X X X X X X Extracts X X X X ..... ] has held that computer accessories and peripherals such as printers, scanners and server, etc. form an integral part of computer system and hence they are entitled to depreciation at higher rate of 60%. Thus we hold that the assessee is entitled to depreciation at the rate of 60% on computer peripherals. The ground raised by the assessee is allowed. Deduction u/s 10A on the income enhanced on account of disallowances made in the assessment order. It has been held in various decisions that whenever there is enhancement of income by the Assessing Officer on account of disallowance of expenses, the profit goes up and the enhanced profit is entitled to deduction u/s 10A of the I.T. Act. Therefore, the ground raised by the assessee is allowed. - ITA No.244/Del/2012 (A. Y. 2007-08) - - - Dated:- 22-1-2018 - SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER Appellant by : Shri Ravi Sharma, Adv. Shri Anubhav Rastogi, Adv. Respondent by : Shri Sanjay I. Bara, CIT-DR O R D E R PER R. K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 28.10.2011 passed by the Assessing Officer u/s 143(3)/144 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not comparable and considering certain other comparables, the TPO finally selected the following comparables and determined adjustment of ₹ 26,026,695/- as per the following calculation :- S.No. Name OP/TC (%) 1 Alphageo (India) Ltd. 40.64 2 L T Valdel Engs. (P) ltd. 22.43 3 M J B India Gas Turbine Services Ltd. 7.11 4 Mahindra Consulting Engineers Ltd. 2.71 5 Mahindra Engineering Services Ltd. 36.31 6 Mitcon Consulting Services Ltd. 36.32 7 Oil Field Instrumentation (India) Ltd. 74.83 8 Stup Consultation (P) Ltd. 25.07 9 T C E Consultation (P) Ltd. 20.99 10 Accuspeed Engineering Ltd. 2.34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ₹ 3,09,95,020/-. 7. The assessee approached the DRP who gave partial relief on account of reducing insurance charges from export turnover for calculating deduction u/s 10A and allowed depreciation at the rate of 60% on some of the parts of the computer peripherals. The rest other additions made by the Assessing Officer were sustained. 8. Aggrieved with such order of the DRP/Assessing Officer/TPO, the assessee is in appeal before the Tribunal by raising the following grounds :- That on the facts and circumstances of the case, and in law. 1. The Assessing Officer passed in pursuance of the directions issued by the Learned Dispute Resolution Panel ( Ld. DRP ) is a vitiated order as the Ld. DRP erred both on facts and in law in confirming the addition made by the Ld. Assessing Officer ( Ld. AO') to the Appellant s income by issuing an order without appreciation of facts and law; 2. The Ld. DRP erred in confirming the addition of ₹ 2,60,26,695 to the income of the Appellant by holding that the international transactions do not satisfy the arm s length principle envisaged under the Act. In doing so, the Ld. DRP has grossly erred in agreeing with the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g leaseline expenses amounting to INR 232,264 from business income for computing profits eligible for deduction under section 10 of the Act. 3.1 The Ld. AO erred in not appreciating that leaseline expenses written back amounting to ₹ 232,264 were not considered for the purpose of computation of business profits eligible for deduction under section 10A in previous year 2005-06. 4. The Ld. AO erred in allowing the depreciation on computer peripherals at the rate of 15 per cent, which is the rate allowable for general plant and machinery, instead of at the rate of 60% per cent. 5. Without prejudice to the above grounds, the Ld. AO has, erred in not allowing deduction under section 10A of the Act on the income enhanced on account of disallowances made in the assessment order passed under section 143(3) of the Act. 6. The Ld. AO has erroneously considered income from business and profession as INR 28,358,727 instead of INR 27,268,942 while computing the taxable income of the Appellant. 7. The Ld. AO has erred in initiating penalty proceedings u/s 271(1)(c) of the Act mechanically and without recording any adequate satisfaction for such initiation. 8. The Ld. AO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are all software driver activities and the assessee is not required to go to the site. Referring to page 260 of the Paper Book, he drew the attention of the Bench to the clause relevant to information technology. Referring to page 4 of the Annual Report compilation, he drew the attention of the Bench to the following clause :- Our presence India s largest private sector company to offer seismic data acquisition, data processing, data interpretation services, reservoir studies and topographic survey services. 14. He submitted that the above activities are not comparable with that of the assessee company which is engaged in engineering design services. Referring to the decision of the Tribunal in the case of Flour Daniel India (P.) Ltd. vs. DCIT reported in 78 taxmann.com 138, he submitted that under identical circumstances, the Tribunal at para 5.9 of the order has directed the Assessing Officer to exclude M/s Alphageo from the set of comparables. He accordingly submitted that following the same ratio Alphageo India Limited should be excluded from the list of comparables. 15. So far as Mahindra Engineering Design and Development company is concerned, he submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. He submitted that the technical consultancy services are not functionally comparable to that of the assessee and, therefore, TCE Consulting Engineers Ltd. cannot be considered as comparable. He submitted that although it was submitted before the DRP that the above company is not comparable, however, the DRP has not given any comments as to why the above company should be considered as comparable. He accordingly submitted that the above five companies be excluded from the final set of comparables. 19. Ld. DR on the other hand submitted that since the order of the TPO is very cryptic on the issue of the comparables and the DRP has not given any observations, therefore, this matter may be restored to the file of the Assessing Officer/TPO for adjudication of the transfer pricing adjustment issue. 20. We have considered the rival arguments made by both the sides, perused the orders of the TPO/AO/DRP and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. So far as adjustment of the arm s length price of the international transaction is concerned, the argument of the ld. counsel for the assessee is that the same is N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The Tribunal apart from holding that the above companies are functionally different has also given a finding about the net fixed assets/sales ratio and difference in the asset between the assessee and that of the comparable. We, therefore, restore the issue relating Alphageo India Ltd. to the file of the Assessing Officer/TPO with the direction to give an opportunity to the assessee to substantiate the above details and decide the inclusion/exclusion of the same in the light of the decision of the Tribunal. 22. So far as the comparable i.e. Mahindra Engineering Design and Development company is concerned, it is the submission of the ld. counsel for the assessee that RPT is 31.0% and, therefore, the same should be excluded from the list of comparables. The various Benches of the Tribunal are taking the consistent view that where the RPT are more than 25%, the comparable should be excluded. Since this aspect has never been argued before the Assessing Officer and the TPO/DRP, therefore, it was not verified by the authorities below. Therefore, we deem it proper to restore this issue to the file of the Assessing Officer/TPO with the direction to verify the RPT transactions. If the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. 27. After hearing both the sides, we find the Assessing Officer rejected the claim of depreciation at the rate of 60% on computer peripherals such as UPS, Switches, Computer racks etc. and allowed 15% depreciation on the same treating these items as plant and machinery. The DRP in the order upheld the disallowance of depreciation proposed by the Assessing Officer in respect of UPS, switches, microwave, radio, camera, cable. They, however, directed the Assessing Officer to allow depreciation at the rate of 60% on items like switches, cables parts and connectors which are connected with a computer system. It is the submission of the ld. counsel for the assessee that the computer accessories and peripherals being integral part of computer system are eligible for depreciation at higher rate of 60%. We find merit in the argument of the ld. counsel for the assessee. The Hon ble Delhi High Court in the case of CIT vs. BSES Yamuna Powers Ltd. reported in 358 ITR 47 has held that computer accessories and peripherals such as printers, scanners and server, etc. form an integral part of computer system and hence they are entitled to depreciation at higher rate of 60%. The Delhi Bench o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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