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2016 (1) TMI 1299 - AT - Income TaxTPA - comparability of the assessee with HFCL - Held that - On a careful reading of the impugned order we find that in the absence of any infirmity in the reasoning adopted by the First Appellate Authority the arguments of the Ld. Sr.DR cannot be accepted. The Revenue has not assailed the finding of the CIT(A) that functional comparability of the assessee with HFCL stands established. Thus where on FAR analysis the conclusion that it is correctly chosen as a comparable remains is unassailed then it is necessary for the Revenue at that stage to bring some cogent reason argument or fact justifying that still the comparable needs to be excluded. Merely re-iterating the TPO s stand at this stage that it was consistently a loss making company does not hold good in the face of the finding of the CIT(A). The data placed on record by the assessee assails the conclusion and this fact has been accepted by the CIT(A). We further find that it remains unrebutted on record. In the afore-mentioned peculiar factual position we find that there is no merit in the departmental appeal. Disallowance of excess depreciation on UPS - Held that - A perusal of the order shows that relying upon the decision of the Delhi High Court in the case of CIT vs BSES Rajdhani Power Ltd. 2010 (8) TMI 58 - DELHI HIGH COURT depreciation @ 60% for UPS printers and scanners on the ground that they formed integral part of the computer system is allowed and held to be applicable to block of computer. The position of law is well-settled thus in the absence of any arguments to the contrary by the Revenue Ground of the Revenue is dismissed.
Issues Involved:
1. Deletion of addition on account of difference in Arm's Length Price (ALP). 2. Deletion of addition on account of disallowance of provision of warranty. 3. Allowing depreciation on Uninterrupted Power Supply (UPS) at 60%. 4. Deletion of addition on account of recognition of revenue for BSNL project. Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of Difference in ALP: The Revenue challenged the deletion of an addition of Rs. 2,60,42,622/- made by the Transfer Pricing Officer (TPO) due to differences in ALP. The TPO had excluded three companies from the list of comparables due to unavailability of financial data for FY 2004-05 and excluded two loss-making companies. The CIT(A) reinstated Himachal Futuristic Communication Ltd. (HFCL) as a comparable, arguing it was not consistently loss-making. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue did not dispute the functional comparability of HFCL and failed to provide cogent reasons for its exclusion. Thus, the Tribunal dismissed the Revenue's appeal on this ground. 2. Deletion of Addition on Account of Disallowance of Provision of Warranty: The Revenue contested the deletion of an addition of Rs. 22,92,76,418/- related to the disallowance of a warranty provision. The assessee admitted to an excessive calculation of Rs. 10.14 crores. The CIT(A) allowed the actual warranty expenses in subsequent years. The Tribunal, agreeing with the assessee's stand and noting the lack of further arguments from the Revenue, allowed this ground of the Revenue's appeal. 3. Allowing Depreciation on UPS at 60%: The Revenue objected to the CIT(A)'s decision to allow depreciation on UPS at 60%, arguing it should be treated as "Plant and Machinery" with a depreciation rate of 15%. The CIT(A) relied on the Delhi High Court's decision in CIT vs. BSES Rajdhani Power Ltd., which held that UPS, printers, and scanners form an integral part of the computer system and are entitled to 60% depreciation. The Tribunal upheld this decision, dismissing the Revenue's appeal on this ground. 4. Deletion of Addition on Account of Recognition of Revenue for BSNL Project: The Revenue challenged the deletion of an addition of Rs. 13,87,91,437/- related to the recognition of revenue for the BSNL project. The CIT(A) considered the matching principle and the fact that the assessee recognized revenue based on the percentage completion method. The Tribunal noted that the CIT(A)'s decision was based on facts and was not made without considering evidence. However, the Tribunal allowed the admission of additional evidence and restored the issue to the Assessing Officer (AO) for reconsideration, directing the AO to grant necessary relief in accordance with the law and the matching principle. Conclusion: The Tribunal dismissed the Revenue's appeal on grounds 1 and 3, allowed ground 2, and partly allowed ground 4 by restoring the issue to the AO for reconsideration. The order was pronounced on January 11, 2016.
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