TMI Blog2015 (11) TMI 1766X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 (8) TMI 58 - DELHI HIGH COURT] holding that the depreciation on computer accessories and peripherals such as, printer, scanners and server was to be allowed @ 60% the same being part of computer system. TPA - Comparable selection - Held that:- Since the OP/OC of each comparable affected the average margin, on the basis of which addition is made, therefore, computation of correct OP/OC of each comparable is of paramount importance. We, therefore, restore this issue to the file of ld. TPO to examine the assessee’s contention. Ground is allowed for statistical purposes. Misc. income as operating income in computing the operating margins of Mahindra Acres Consulting Engineers Ltd. and Rites Ltd. - Held that:- The assessee’s reliance is on the decision of the ITAT in the case of M/s bobst India Pvt. Ltd. Vs. ACIT [2014 (2) TMI 1347 - ITAT PUNE], in which it has been held that any item of income or expenditure, which is not linked to the international transactions under review has to be excluded from the computation of net operating profits and operating revenues. We find that this plea has not been taken before CIT(A) and, therefore, we refrain from making any comment on this a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d OP/OC of 9.11%. 5. Ld. TPO examined the calculation of PLI of comparables on the basis of current years data, vis a vis the assessee s mode of computation. There being differences in these workings, based on the financial of the comparable companies, ld. TPO rejected the assessee s contentions and worked out the calculation of OP/OC of the comparables using the following definitions as per capitaline plus database: Operational Income (OI)=[Net Sales]+ [Export Incentives]+ [Import Entitlements]+[Sale of Scrap]+ [Provision Written Back]+ [Miscellaneous Income]+[Stock Adjustments] Operational Expenses (OE)=[Raw Materials]+ [Power Fuel Cost]+ [Other Manufacturing Expenses]+ [Employee Cost]+ [Selling and Administration Exp.]+ [Loss on forex transactions]+ [Other Miscellaneous Expenses]+ (Depreciation] Operation Profit (OP)=OI-OE 6. OP/OC of the Comparables of the assessee with FY 2003-04 data is reproduced below: S. No Co Name Year End Net Sales OP TC OP/TC% 1 Besant Raj Intl 200403 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome? ii. Whether Provision for doubtful debts/ bad debts/ provision made be treated as operating expense? 13.2. In this respect, it is interesting to note that TPO has treated provision written back as operating income, however provision created during the year has been considered as non operating by the TPO in his order. In my view the TPO has totally failed in applying the Matching Concept, which is one of the primary principles of Accounting. In this respect, I quote the recent judgment of M/s Sony India (P) Limited Vs. DCIT (I.T.A.Nos.1181/Del/2005, 1257/Del/2007 1656/Del/2007), wherein the Delhi Tribunal held that creation. of unpaid liability and write back is normal incident of business operations . Based on this judgment, I hold that provision written back should be considered as operating income and provisions created during the year should be treated as operating expenditure instead of non operating expenditure as done by the TPO. 13.3 In view of the above, I hold that in case of Engineers India Ltd., Mahindra Acres Consulting Engineers Ltd., Priya Intl. Ltd. and Rites Ltd., provision made j Bad debts should be considered as operating expenses in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r assessee had paid ₹ 17,78,441/- on account of interest to NOIDA Authority towards the allotment of plot to the assessee and claimed the same as deduction. Before AO, the assessee s explanation was that it had capitalized the cost of the premises in the books and the interest accrued on the deferred installments towards the premium of the premises amounting to ₹ 17,78,441/-, had been treated as revenue expenditure. The AO, however, did not accept the assessee s contention observing that since interest was paid towards the capital asset, the same had to be capitalized to the cost of the land and could not be allowed as revenue expenditure. 16. Before ld. CIT(A) the assessee had, inter alia, submitted that the assessee had been allotted the land including super structure by NOIDA on lease for a period of 90 years for which the assessee was required to pay upfront 30% of the premium/cost of the said premises and the balance 70% was payable in 10 equal half yearly instalments along with interest @ 12% per annum. It was pointed out that the expenditure was incurred to facilitate the project of establishing the development centre for manufacture and export of software. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble companies is to be used for comparability analysis, which was not available to the assessee company at the time of filling its return of Income. 2. Without prejudice to Objection 1 above, the financial information of the company viz. Esquires Engineers Consultants ought to be considered in the final comparable company set in view of the fact that its current year data is available. 3. (a) That on the facts and circumstances of the case and in law, the Ld CIT(A) erred in not directing the Ld AO/TPO to consider certain 'operating' expenses, which have been wrongly classified as 'non- operating for the purpose of comparability analysis done in the order passed by the Ld TPO 3. (b) That on the facts and circumstances of the case and in law, the Ld CIT(A) erred in not directing the Ld AO/TPO to disregard certain non-operating' expenses, which have been wrongly classified as 'operating' expenses for the purpose of comparability analysis done in the order passed by the Ld TPO 21. As far as ground no. 1 is concerned, the issue is no more res-integra and it is well settled law that only current year s financial information of comparable companies is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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