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TMI Blog2022 (10) TMI 1281X X X X Extracts X X X X X X X X Extracts X X X X ..... well as orders are passed Ld.CIT(A) during pandemic period, therefore, this delay in filing the appeals are condoned. ITA No. 2474/MUM/2021 (A.Y. 2013-14) 4. Revenue has raised following grounds in its appeal: - "1. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) had erred in deleting the disallowance made u/s 14A on the ground that the AO had failed to record his satisfaction whereas the AO had clearly in para 8.1 of assessment order indicated that he is not satisfied with the working of disallowance made by the assessee." 2. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing the depreciation on the customer contract rights without appreciating the fact that the customer contract rights do not represent intangible assets as contemplated u/s 32(1) of the Act," 3. Whether on the facts and circumstances of the case and in law, the Hon'ble CIT(A) was justified in deleting the transfer pricing adjustment of Rs. 32,23,72,589/- on account of depreciation claimed by assessee on the value of business and commercial rights purchased by the appellant from its associated enterprise and capitalised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ength price of the transaction. 9. Whether on the facts and circumstances of the case and in law, the order of the Ld. CIT (A) is not bad in law in not appreciating that merely by not mentioning the methodology by the TPO would simply not vitiate the entire order and even if it is considered a defect, it is curable u/s 292B? 10. Whether in the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in overlooking the import of sections 92F(ii) and 92F(v) and Base erosion to India? 11. Without prejudice to the above grounds, whether the Ld. CIT (A) is correct in not considering the method adopted by the TPO as Other Method in view of the following: a. While section 92(1) mentions the word 'shall' when it says, "Any income arising from an international transaction shall be computed having regard to the arm's length price', 'shall' need not always be mandatory and could. also be read as 'may', as per law laid down by the Hon'ble Supreme Court in the case of Director of Inspection of Income Tax (Investigation) v. Pooran Mal & Sons (96 ITR 390) and in the case of Sainik Motors v. State of Rajasthan (AIR 1961 SC 1480) and Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ITAT observed that Rule 10AB was introduced with the purpose and objective to remove practical difficulties by allowing use of methods not specifically listed, and when a new method is allowed, with the objective of enabling determination of proper ALP, then such a provision operates retrospectively, and can be used to determine ALP in earlier assessment years also, and therefore, without prejudice, if CUP could not be considered as methodology adopted by TPO, whether 'Other Method' should not have been considered as the methodology adopted by TPO. 12. The Appellant prays that the order of the CIT(Appeals) on the above ground be set aside and that of the AO be restored. 13. The Appellant craves leave to amend or alter any ground or to submit additional new ground, which may be necessary." 5. We shall deal with the issues ground wise for adjudication. 6. At the time of hearing, with regard to Ground No. 1 which is in respect of disallowance u/s. 14A of the Act, Ld. AR of the assessee brought to our notice that similar issue in appeal has been considered by the Coordinate Bench of this tribunal in assessee's own case for the A.Ys.2011-12 and 2012-13 and decided the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, as we have already allowed the ground on first plea." 9. Since the issue is exactly similar and grounds as well as the facts are also identical, respectfully following the above decision in assessee's own case for the A.Y. 2011-12 and 2012-13, we dismiss the ground raised by the revenue. Ground No.1 raised by the revenue is dismissed. 10. With regard to Ground No. 2 and 3 which are in respect of disallowance of depreciation on intangibles representing acquisition of business contracts, Ld. AR of the assessee brought to our notice that similar issue in appeal has been considered by the Coordinate Bench of this tribunal in assessee's own case for the A.Ys. 2005-06, 2007-08, 2009-10, 2011-12 & 2012-13 and decided the issue in favour of the assessee. Copy of the order is placed on record. Ld. AR of the assessee prayed that the same may be adopted for the year under consideration. 11. On the other hand, Ld.DR fairly accepted the submissions of the Ld.AR and he relied on the order of the Ld.CIT(A). 12. Considered the submissions and material placed on record, we observe from the record that Coordinate Bench in the immediately preceding Assessment year i.e. A.Y. 2012-13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation claimed by the assessee is allowable. The decisions relied upon by the learned Sr. Counsel for the assessee also supports our aforesaid view. Accordingly, we uphold the decision of the learned Commissioner (Appeals) by dismissing the grounds raised." Respectfully, following the said order, we set aside the order of the DRP and allow the ground raised by the assessee." 13. Since the issue is exactly similar and grounds as well as the facts are also identical, respectfully following the above decision in assessee's own case for the A.Y. 2011-12 and 2012-13, we dismiss the ground raised by the revenue. Ground No. 2 & 3 are raised by the revenue are dismissed. 14. With regard to Ground No. 4 to 11 which are in respect of consequential depreciation adjustment on purchase of business rights, Ld.AR of the assessee brought to our notice that similar issue in appeal has been considered by the Coordinate Bench of this tribunal in assessee's own case for the case for the A.Ys. 2011-12 and 2012-13 and decided the issue in favour of the assessee. He specifically brought to our notice Para Nos. 10, 20 to 26 of the Tribunal order. Copy of the order is placed on record. Ld. AR of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by the assessee to WCIL should be considered as the ALP and no adjustment to the value of the international transaction be made in the present case. The learned AR relied on the decision of the Tribunal in the case of DCIT vs. Calance Software (P.) Ltd. (ITA 5023/Del/2012). ......... ..... Since the issue is exactly similar and grounds as well as the facts are also identical, respectfully following the above decision in assessee's own case for the A.Y. 2011-12 and 2012-13, we dismiss the ground raised by the revenue. Ground No. 2 & 3 are raised by the revenue are dismissed. 20. We have heard the rival parties and perused the material on record as placed before us including the written submissions filed by both the sides. We note that in this case the TPO has determined arm's length price on incremental benefit approach and none of the transfer pricing methods as prescribed u/s. 92C of the IT Act has been followed. Whereas, the assessee has followed in its transfer pricing study as the CUP method as the most appropriate method by determining the value of the MSA on the basis of valuation report given by the independent valuer. Section 92C(1) of the Act provides that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the TPO both on the basis of the third party quotations which are considered as internal CUP and the VG Bomv Certificates as external CUP. Under both the workings Assessee is able to justify the price paid and on this reason also, we have to accept Assessee 's contentions. "Similarly, in the case under consideration, Assessee justified the price paid by way of a certificate which can be considered as external CUP. Since TPO/DRP did not rely on any other certificate and in the absence of any contrary information, price paid by Assessee, which was lesser than the value mentioned in the certificate can be accepted as such. For these reasons, we allow Assessee's ground and direct the AO/TPO to accept Assessee's valuation and allow depreciation as claimed. Grounds pertaining to this issue are allowed. " In the case of Social Media India Ltd. vs. ACIT (supra), the Hon'ble Bench has held as under: "Further, the assessee also furnished the valuation report where the valuer adopted the cost method and the assessee has paid only the cost incurred by AE.As seen from the order of DRP, the DRP stated that valuer arrived at the cost of website at Rs. 5,38,31,832/-, as against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10B(1)(e) does not enable consideration or imputation of cost incurred by third parties or unrelated enterprises to compute the assessee's net profit margin for application of the TNMM. Rule 10B(1)(e) recognizes that "the net profit margin realized by the enterprise from an international transaction entered into with an associated enterprise is computed in relation to costs incurred or sales effected or assets employed or to be employed by the enterprise ..." (emphasis supplied). It thus contemplates a determination of ALP with reference to the relevant factors (cost, assets, sales etc.) of the enterprise in question, i.e. the assessee, as opposed to the AE or any third party. The textual mandate, thus, is unambiguously clear. The TPO's reasoning to enhance the assessee's cost base by considering the cost of manufacture and export of finished goods, i.e., readymade garments by the third party vendors (which cost is certainly not the cost incurred by the assessee), is nowhere supported by the TNMM under Rule 10B(1)(e) of the Rules. Having determined that (TNMM) to be the most appropriate method, the only rules and norms prescribed in that regard could have been applie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts India (P.) Ltd. (supra), wherein the Bench has held as under: "... This being so, the value paid by Assessee duly supported by valuation report cannot be ignored. In case of any doubt on the matter, the best way is to refer the machinery to the valuation officer under the IT Act. Without doing so, the TPO or the DRP has no base to determine the value at Nil and consequently denying the depreciation claim of the assessee while at the same time, the payment of custom duty and countervailing duty are considered as value of cost. ..." "The learned counsel in the course of arguments relied on the decision of the coordinate bench of IT AT, Mumbai in the case of Ballast Nedam Dredging (supra) to submit that in the absence of any contrary certificate, the certificate relied upon by Assessee has to be accepted. In the said case, Assessee has filed two certificates and TPO tweaked with two certificates so as to arrive at the so called difference in the ALP. On those facts, it was held that "if proper analysis was made there would not be any difference from the price paid to the price determined, as demonstrated before the TPO both on the basis of the third party quotations which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the argument of the assessee merits consideration that whatever price has been determined in the valuation report needs no further adjustment as that events were not foreseeable on the date of valuation. The case of the assessee is supported by the decision of the Tribunal in the case of DQ (International) Ltd. vs. ACIT, wherein it has held as under: " - the valuation method adopted for determining the future years cannot be replaced with actuals down the line, the valuation will go either way. When it goes to north, the revenue may adopt the same time, when it goes to south, the assessee may adopt, there won't be any consistency. What is important is the value available at the time of making business decision. It should be left to the wisdom of the businessman, he knows what is good for the organization. No doubt, 'IP' was sold to 'AE'. The method adopted should be consistent and should be documented to review in the future. The review does not mean replacing the projection with actuals. It is the rational of adopting the values for making decision at the point of time of making decision. When the values are replaced subsequently, it is not valuation but eva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances, we are inclined to set aside the order of DRP and direct the AO to delete the adjustment made to the cost of MSA. The ground raised by the assessee is allowed." 17. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in A.Ys. 2011-12 and 2012-13 is respectfully followed, accordingly, ground raised by the Revenue is dismissed. 18. In the result, appeal filed by the revenue is dismissed. 19. Coming to the appeal of the revenue in ITA. No. 2473/Mum/2021 relating to A.Y.2014-15, since facts and grounds in this appeal is mutatis mutandis, therefore the decision taken in A.Y. 2013-14 is applicable to this assessment year also. Accordingly, this appeal is also dismissed. ITA. No. 2438/Mum/2021 (2014-15) - Assessee Appeal 20. Assessee has raised following ground in its appeal: - "1. On the fact and in circumstances of the case and in law, the Hon'ble CIT(A) has erred in adjudicating the ground on notional foreign exchange loss from option contract to be as part of the profits for deduction under Section 10AA of the Act without appreciating the fact that the Learned Assessing Officer had no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed u/s. 10A of the Act. The case of the assessee is supported by the decision of the Apex court in the case of Radhasoami Satsang vs. CIT (supra), wherein the Hon'ble Court has held that while dealing with the principle of consistency and principle of res judicata, unless there is a material change justifying to take a different view in the matter, shall not be appropriate for the Revenue to take a contrary view. Similarly, Hon'ble Bombay High Court in the case of CIT vs. Darius Pandole (supra), has held as under: "The Tribunal, while deciding the appeal for the assessment year 2003-04 has observed that there was no change in the set of facts and circumstances as they obtained for the assessment years 1997-98 and 2002-03. The Tribunal was correct in holding that there was due application of mind by the Assessing Officer to the very same issue during the course of the earlier two assessment years and that the assessments were finalized after considering the reply filed by the assesses specifically to the query raised by the Assessing Officer. In the circumstances, the Tribunal was, in our view, justified in following the decision of the Supreme Court in Radhasoami Satsang v. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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