TMI Blog2019 (5) TMI 1971X X X X Extracts X X X X X X X X Extracts X X X X ..... wed. Non allowance of additional depreciation on tools purchased by the assessee - case of assessee is that the assessee had claimed additional depreciation on plant machinery u/s 32(1)(iia) which has been allowed in the hands of assessee - HELD THAT:- The aim under the Finance Act, 2005 while allowing the additional depreciation under section 32(1)(iia) of the Act was extended to new industrial undertaking on additional investments. Once the earlier basis of allowing additional depreciation for the units where the capacity had to be increased for about 25% is no more and now additional depreciation is to be allowed on additional investments and where the plant includes tools, the assessee is entitled to the claim of additional depreciation under section 32(1)(iia) of the Act on the aforesaid tools purchased by assessee. Consequently, we direct the AO to allow the claim of assessee of additional depreciation under section 32(1)(iia) - Appeal of assessee is allowed. - ITA No.641/PUN/2017 - - - Dated:- 2-5-2019 - MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM For the Assessee : S/Shri Nikhil Pathak Mahavir Jain For the Revenue : Shri S.B. Prasad, CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical, business risks, etc between the alleged comparable transactions. 3] The learned AO / DRP erred in making an adjustment of Rs.13,05,812/- by adopting the Comparable Uncontrolled Price (CUP) Method for determining the Arm's Length Price (ALP) in respect of some of the international transactions pertaining to import of goods. 3.1] The learned AO / DRP erred in holding that the CUP method was the most appropriate method for determining the ALP in respect of certain transactions of import of certain goods merely on the basis that the data pertaining to similar transactions with third parties were available. 3.2] The learned AO / DRP failed to appreciate that there were various differences on account of transactional, functional, geographical, volume, timing, business risks, etc. in respect of alleged comparable transactions which ought to have been considered and since suitable adjustments were not possible, there was no reason to adopt the CUP method for determining the ALP. 3.3] The learned AO / DRP failed to appreciate that the TNMM was the most appropriate method for determining the ALP in respect of import of goods from the AE since the net profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of appeal No.1 raised by assessee is general and does not need any adjudication. 4. The issue raised vide grounds of appeal No.2 to 2.4 is against transfer pricing adjustment made with respect to exports to associated enterprises, whereas the issue raised vide grounds of appeal No.3 to 3.4 is the transfer pricing adjustment made with respect to imports from associated enterprises. The learned Authorized Representative for the assessee pointed out that the issues in grounds of appeal No.4 to 6 are consequential. In respect of grounds of appeal No.7 and 7.1, he stated that the issue of allowability of additional depreciation on tools is raised. Drawing our attention to the order of TPO, he pointed out that total exports made to associated enterprises by the assessee were ₹ 114.36 crores and total imports from associated enterprises for sale in domestic market were ₹ 32.09 crores. The assessee had applied TNMM method and found the transactions at arm's length price. However, the TPO separated few transactions out of total turnover and applied CUP method as most appropriate method. He however, accepted the application of TNMM method on balance transactions. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue fairly admitted that the issue of transfer pricing adjustment stands covered by the order of the Hon ble Bombay High Court. However, in respect of additional depreciation, he placed reliance on the order of Dispute Resolution Panel (DRP) at page 10 para 9.8. 6. We have heard the rival contentions and perused the record. Briefly, in the facts of the case, the assessee was wholly owned subsidiary of Amphenol Corporation, USA. The assessee had entered into various international transactions with its associated enterprises totaling ₹ 152.94 crores, which included export of finished goods to associated enterprises to the extent of ₹ 114.36 crores and import of raw material / consumables / components to the extent of ₹ 32.09 crores. The assessee had applied TNMM method for benchmarking its international transactions and had declared that its margins were higher than with mean margins of comparables. The said TNMM method was applied on aggregation approach. However, the TPO on perusal of product-wise details observed that the goods which were exported and imported in respect of associated enterprises and third parties were different. The TPO further analyzed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017 dismissed the appeal of Revenue on similar issue, copy of which is placed at pages 6 to 10 of Paper Book. The learned Authorized Representative for the assessee has also pointed out that the Hon ble Bombay High Court vide order dated 07.03.2018 in Income Tax Appeal Nos.1100, 1102 1131 of 2015, relating to assessment years 2006-07 to 2008-09 had also dismissed appeal of Revenue and upheld the order of Tribunal on both the issues. The issues which were raised before the Hon ble High Court were as under:- (i) Whether on the facts and circumstances of the case and in law, the Tribunal was justified in considering TNMM and MAM, without considering the FAR analysis of the transactions to determine the ALP of the export sales to AEs.? (ii) Whether on the facts and circumstances of the case and in law, the Tribunal was justified in differentiating CUP analysis on the basis of geographic difference and volume difference in respect of sale commission, especially when the commission is earned on the basis of percentage of sales? 10. The Hon ble High Court after analyzing the issues at length has held that CUP method would not be the most appropriate method in view of various ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al depreciation on tools purchased by the assessee. The case of assessee is that the assessee had claimed additional depreciation on plant machinery under section 32(1)(iia) of the Act, which has been allowed in the hands of assessee. The assessee further claims that plant includes toolings and the depreciation rate on tools was similar to the rate on depreciation of plants and hence, it was entitled to claim the aforesaid additional depreciation. The Assessing Officer was of the view that since toolings could be used in many machines and have no independent existence and hence, do not qualify for additional depreciation as plant machinery. The DRP was of the view that similar issue was pending in assessment year 2011-12 and hence, the order of Assessing Officer be upheld and however, the Assessing Officer was directed to re-compute depreciation after considering the modified opening WDV as per depreciation actually allowed in assessment year 2011-12. 12. The assessee is in appeal against final assessment order passed by Assessing Officer after applying directions issued by DRP. The scope of additional depreciation has been considered by the CIT(A) while deciding appeal in a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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