TMI Blog2018 (3) TMI 1761X X X X Extracts X X X X X X X X Extracts X X X X ..... required to verify the Additional plea is the examination of the existing material available on the records of the Assessing Officer. Therefore, in our view, there was no justification on the part of the DRP not to admit such a plea. Margin of assessee s manufacturing segment is liable to be adopted at 5.33% as against 2.62% considered by the TPO. Once it is compared with the margin of the comparables adopted by the TPO at 8.07%, the difference, in our view, is within the variation of + 3% permissible in terms of the second proviso to Sec. 92C(2) of the Act and, therefore, necessity of any adjustment to the stated value of international transactions is obviated. Therefore, on the basis of Grounds of assessee is allowed and the Assessing Officer is directed to delete the addition made to the returned income on account of transfer pricing adjustment. Claim of amortisation of premium paid for leasehold land - HELD THAT:- The issue is liable to be decided against the assessee in view of the precedents in assessee s own case [ 2011 (3) TMI 1630 - ITAT MUMBAI] Disallowance of depreciation - depreciation in respect of addition to fixed assets of that year was disallowed since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee partly allowed - ITA NO. 5959/MUM/2017 - - - Dated:- 23-3-2018 - SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER For the Appellant : Shri Jehangir D. Mistry, Shri Niraj Sheth Shri Ketan Ved For the Respondent : Shri Jayant Kumar Shri V. Jenardhanan ORDER PER G.S. PANNU, AM : The captioned appeal by the assessee is directed against the order dated 23.08.2017 passed by the Assessing Officer u/s 143(3) r.w.s 144C(13) of the Income Tax Act, 1961 (in short the Act ) giving effect to the directions of Dispute Resolution Panel-II, Mumbai (DRP) dated 26.07.2017. 2. In its appeal, assessee has raised the following Grounds of appeal :- 1 : 0 Re.: Adjustment of ₹ 19,21,38,016/- to the manufacturing segment: 1 : 1 The Assessing Officer (AO)/ the Dispute Resolution Panel (DRP)/ the Transfer Pricing Officer (TPO) have erred in making an upward adjustment of ₹ 19,21,38,016/- to the total income of the Appellant by holding that the international transactions aggregated under manufacturing segment of the Appellant were not at an arm's length. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment Year 2006-07: 3 : 1 The AO / DRP has erred in disallowing depreciation of ₹ 20,75,940/- out of the total depreciation of ₹ 21,83,10,119/- claimed by the Appellant during the year. 3 : 2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the Appellant is entitled to claim the depreciation of ₹ 20,75,940/- and the stand taken by the AO / DRP in this regard is incorrect, erroneous and not in accordance with law. 3 : 3 The Appellant submits that the AO be directed to allow depreciation as claimed by it and to re-compute its total income accordingly. 4 : 0 Re.: Disallowance of depreciation claimed @ 60% on computer software: 4 : 1 The AO / DRP has erred in restricting the depreciation allowable on software purchased by the Appellant during the year under consideration to 25% as against 60% claimed by the Appellant. 4 : 2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject it is entitled to claim depreciation @ 60% on the computer software and the stand taken by the AO / DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of Sec. 92B of the Act with its associate enterprises. In order to compute income arising from such international transactions in terms of Sec. 92(1) of the Act, the Assessing Officer made a reference as per Sec. 92CA(1) of the Act to the Transfer Pricing Officer (TPO) for determination of the arm s length price (ALP) of such international transactions. The TPO computed the ALP of the international transactions relating to the manufacturing segment at an amount higher than the stated value by a sum of ₹ 19,21,38,016/- in an order passed u/s 92CA(3) of the Act dated 31.10.2016. The draft assessment order passed by the Assessing Officer on 26.12.2016, based on such a transfer pricing adjustment, was carried before the DRP wherein assessee raised various objections. The DRP vide order dated 26.07.2017 rejected such objections and accordingly, the Assessing Officer has retained the addition of ₹ 19,21,38,016/- on account of transfer pricing adjustment in the final assessment order also. In this background, assessee is in appeal before us. 5. It is noted from the order of the TPO that assessee had entered into varied international transactions in the manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.62% Thus, the arithmetic mean of the margins of the comparables computed at 8.07% was compared with assessee s margin of 2.60%; and, since assessee s margin was beyond the + 3% permissible variation, an adjustment of ₹ 19,21,38,016/- was worked out which was required to be made to the stated value of the tested international transactions aggregated under the manufacturing segment. The order passed by TPO u/s 92CA(3) of the Act dated 31.10.2016 determining an adjustment of ₹ 19,21,38,016/- formed the basis for the Assessing Officer to propose an addition of the aforesaid sum in the draft assessment order dated 26.12.2016. The assessee raised varied objections against the above adjustment before the DRP, including an Additional Ground raised in the course of proceedings, which was to the effect that assessee s margin at 2.62% was wrongly computed by TPO by erroneously including an amount of ₹ 9,06,80,292/- representing fixed assets written-off as a part of operating costs. All the Grounds raised by the assessee have been dismissed by the DRP, including the Additional Ground. Thus, an amount of ₹ 19,21,38,016/- was added t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by fixed assets written-off was a part of operating costs . 7. On the other hand, the ld. DR opposed the plea of the assessee by referring to the discussion made by the DRP. According to him, the DRP had brought out that the Additional objection raised by the assessee could not be entertained as it was raised at the fag end of the proceedings; that in the absence of details of the assets written-off, the claim could not be verified. The ld. DR also referred to an observation of the DRP that in the absence of the relevant details, it was not clear as to whether any depreciation on such assets was allowed in this year or not. For all the above reasons, the plea of the assessee has been opposed by the ld. DR. 8. In reply, the learned representative pointed out that the Additional objection raised before the DRP does not require any additional/fresh evidence and that it was possible to decide the matter on the basis of available material on record. Further, it is pointed out that the Assessing Officer has himself not taken note of the amount of fixed assets written-off while computing the total income in the assessment order. In other words, according to the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arithmetic mean has been arrived at by the TPO at 8.07%. In response, the appellant had furnished a working of the margin of each of the four comparables to point out that even after considering the element of fixed assets written-off as non-operating costs in each of the four cases, the margin remains the same. The working so produced was also sought to be backed-up by the Annual Reports of the four comparable concerns, whose copies have also been placed in the Paper Book. On this aspect, there is no dispute. 10. Considering all these aspects, in our view, the DRP erred in not considering the Additional plea sought to be raised by the assessee. The DRP, in our view, wrongly noted that the new plea would require admission of any fresh evidence. In fact, all that is required to verify the Additional plea is the examination of the existing material available on the records of the Assessing Officer. Therefore, in our view, there was no justification on the part of the DRP not to admit such a plea. The other objections referred by the ld. DR before us are also not germane and, in any case, the same have been effectively met out by the learned representative before us. Thus, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent years. Before us, it was pointed out that the lead year of dispute on this aspect was Assessment Year 2001-02, wherein the Tribunal in assessee s own case vide ITA No. 8939/Mum/2004 dated 19.11.2008 decided the issue against the assessee. In Assessment Year 2004-05 also, vide ITA No. 461/Mum/2009 dated 16.03.2011 the said issue has been decided against the assessee. The learned representative for the assessee quite fairly conceded that the issue is liable to be decided against the assessee in view of the precedents in assessee s own case. Thus, on this aspect, assessee fails and Ground of appeal no. 2 is dismissed. 14. In Ground of appeal no. 3, the dispute pertains to depreciation of ₹ 20,75,940/- disallowed by the Assessing Officer out of total depreciation claim of ₹ 21,83,10,119/-. The facts relevant to the partial disallowance of depreciation are as follows. It was noted by the Assessing Officer that in Assessment Year 2006-07, depreciation in respect of addition to fixed assets of that year was disallowed since assessee had failed to produce supporting documents for verification. The Assessing Officer also noted that appeal of the assessee against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced on the judgment of the Hon'ble Bombay High Court in the case of CIT vs M/s. Saraswat Infotech Ltd., ITA(L) No. 1243 of 2012 dated 15.01.2013, wherein depreciation on computer software has been held to be allowable @ 60%. Considering the judgment of the Hon'ble Bombay High Court in the case of M/s. Saraswat Infotech Ltd. (supra), we hereby allow assessee s claim of depreciation @ 60% on computer software. Thus, on this aspect, assessee succeeds. 20. The last Ground in this appeal is with regard to disallowance of Provisions for legal and professional fee of ₹ 93,50,000/- and Power and fuel expenditure of ₹ 47,62,500/-. In this context, the relevant discussion contained in para 10.4 of the assessment order reveals that the Provision for expenses, included Provision for legal and professional expenses of ₹ 93,50,000/- and Power and fuel expense of ₹ 47,62,500/-. It is further noted by the Assessing Officer that in the absence of any basis of estimation of the above Provisions, it could not be proved that the corresponding services have been received by the assessee during the year under consideration. Thus, in the absence of supporting ev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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