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2017 (3) TMI 1575 - AT - Income TaxTPA - computation of PLI - excluding losses in Solar Trial in computing PLI of manufacturing segment and not identifying separate segment in respect of Solar Test - Held that - There is no need to interfere with the order of the DRP with regard to computation of PLI. It had rightly held that ST activity was an extraordinary item and was not part of the regular business of the assessee and that there was impairment of assets. Therefore, upholding the order of the DRP, we dismiss both the grounds. Claim for set off of brought forward unabsorbed depreciation - Held that - Where there is current depreciation for such succeeding year the unabsorbed depreciation is added to the current depreciation for such succeeding year and is deemed as part thereof. If, however, there is no current depreciation for such succeeding year, the unabsorbed depreciation becomes the depreciation allowance for such succeeding year. We are of the considered opinion that any unabsorbed depreciation available to an assessee on the 1st day of April, 2002 (the assessment year 2002-03), will be dealt with in accordance with the provisions of section 32(2) as amended by the Finance Act, 2001. And once Circular No. 14 of 2001 clarified that the restriction of eight years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from the assessment year 1997-98 up to the assessment year 2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by the Finance Act, 2001, and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever. See General Motors India Private Ltd. case 2012 (8) TMI 714 - GUJARAT HIGH COURT - Decided in favour of assessee.
Issues Involved:
1. Adjustment on account of Transfer Pricing (TP) 2. Disallowance out of repairs and maintenance 3. Rejection of claim for set-off of brought forward unabsorbed depreciation Issue-wise Detailed Analysis: 1. Adjustment on account of Transfer Pricing (TP): The primary issue was the exclusion of losses in Solar Trial (ST) in computing the Profit Level Indicator (PLI) of the manufacturing segment and the non-identification of a separate segment for the Solar Test (ST). The Transfer Pricing Officer (TPO) found that the assessee had segmented its activities into manufacturing and indenting but had also separated out ST as a separate segment, which was not recognized in the audited segmental accounting. The TPO rejected the PLI computation of the assessee, including ST in the manufacturing segment, and computed the PLI of the manufacturing segment at 3.51%. The TPO used three comparables and determined the PLI of OP/OC at 25.83%, proposing an adjustment of ?10.26 crores. The assessee objected, arguing that ST costs were extraordinary and should be excluded. The Dispute Resolution Panel (DRP) agreed, noting that the ST activity was an exception to the regular business and incurred exceptional expenses. The DRP directed the TPO to exclude the losses in ST run-up in computing the PLI of the manufacturing segment and to exclude non-operating transactions for accurate PLI computation. The Tribunal upheld the DRP's order, acknowledging the ST activity as extraordinary and not part of regular business, thus dismissing the grounds raised by the AO. 2. Disallowance out of repairs and maintenance: The judgment does not provide specific details on the disallowance out of repairs and maintenance amounting to ?31.63 lakhs. However, it can be inferred that this issue was part of the overall assessment and objections raised by the assessee. The primary focus of the judgment was on the transfer pricing adjustment and the set-off of unabsorbed depreciation. 3. Rejection of claim for set-off of brought forward unabsorbed depreciation: The AO rejected the assessee's claim for set-off of unabsorbed depreciation aggregating ?2.86 crores, referring to the decision in the case of Times Guarantee Ltd., which limited the carry forward of unabsorbed depreciation to eight years. The DRP, however, directed the AO to allow the adjustment, referencing the cases of General Motors India Private Ltd. and Hindustan Unilever Ltd., which supported the assessee's claim. During the hearing, both parties agreed that the issue was covered in favor of the assessee by the judgments of the jurisdictional High Court and the Gujarat High Court. The Tribunal reproduced the relevant portions of the Gujarat High Court's judgment, which clarified that unabsorbed depreciation from the assessment years 1997-98 to 2001-02 could be carried forward without any time limit, following the amendment by the Finance Act, 2001. Consequently, the Tribunal dismissed the grounds raised by the AO. Conclusion: The Tribunal dismissed the appeal filed by the AO and treated the cross-objection by the assessee as infructuous. The order was pronounced in the open court on 8th March 2017.
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