9911796707
TMI Blog2014 (10) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... specific adjudication. 3, In ground no. 2, the Assessing Officer has raised the following gfrievance: On the facts and circumstances of the case and in law, the learned CIT(A) has erred in deleting the addition of Rs. 1,59,446 made by the AO on account of replacement of software as capital expenditure. 4. So far as this issue is concerned, suffice to note that while the AO disallowed Rs. 2,00,000 paid towards purchase of financial accounting software and Rs. 27,780 for upgrading the MS Office XP software, and another Rs. 60,000 under the belief that this amount represents payment for software for which no bill is produced, on the ground that these software are new assets, he allowed depreciation in respect of the same. When the matter tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs. 60,000 made by the AO on account of software development charges paid to Partha Development Corporation. 9. This ground is clearly ill conceived inasmuch as the amount of Rs. 2,00,000 for financial accounting software was paid to Partha Development Corporation in two instalments - one of Rs. 1,40,000 and the other of Rs. 60,000. While the Assessing Officer took the entire amount of Rs. 2,00,000 for disallowance, he also made a separate addition of Rs. 60,000. This aspect of the matter has been highlighted in the CIT(A)'s order and no defects are pointed out in the said finding. In view of this uncontroverted factual finding, revenue's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit earned on imported books with profit earned on other books is incorrect because the latter is an entirely uncomparable activity on the facts of this case. It was pointed out that, apart from distributing books imported from the AEs, the assessee publishes Indian reprints of foreign books by paying royalty thereon, and that this activity cannot be compared with distribution of books. The very foundation of assessee' TP approach in applying RPM method, according to the TPO, was legally unsustainable inasmuch wrong comparable has been picked up. The TPO further noted that the assessee's submission that it has received 75.15% discount, on the UK cover price, from the AE whereas the assessee gives 30% discount, on its India cover price to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice. The Assessing Officer is aggrieved by the relief so given by the CIT(A) and is in appeal before us. 15. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 16. A plain look at the computations done by the TPO shows glaring inconsistencies. While the TPO has proceeded on the basis that the assessee has received 85.15% discount on published price of the books and allowed 30% discount on the same published price to the wholesale dealers, the figures reproduced above have a different story to share. Going by the business model as perceived by the TPO, which constitute foundation of the impugned ALP adjustment, for each purchase of Rs. 24. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it will be equivalent to 402.414869% (i.e. 100/ 24.85 X 100) of the purchases in the hands of the assessee. This approach, including the presumption underlying therein, is clearly erroneous. The computation of profit margins of the wholesale distributor, as computed by the AO, are, therefore, are also incorrect. The TPO has not adopted the profit margin by the wholesale distributors on the basis of actual figures or the undisputed discount policies on cover prices but based on certain hypothesis which turns out to be based on misconception of facts and is, in any case, unsubstantiated by material on record. We are, therefore, of the view that the very foundation of impugned ALP adjustment is unsustainable in law. Our reasoning may have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he work done at the assessment level or to step into the shoes of the AO and TPO for deciding what more could have been done in a particular case. We have also noted that right from 2004-05 to 2012-13 the ALP benchmarking on this basis has been accepted by the revenue and even though a reference was made to TPO in the assessment year 2010-11, the TPO did not disturb this ALP determination either.
19. In view of all these facts, and bearing in mind entirety of the case, we approve the conclusions arrived at by the CIT(A) on this issue as well and decline to interfere in this matter.
20. Ground No. 4 is thus dismissed.
21. In the result, the appeal is dismissed. Pronounced in the open court today on 13th day of October, 2014. X X X X Extracts X X X X X X X X Extracts X X X X
|
