2012 (10) TMI 536 - AT - Income Tax

Transfer Pricing Adjustment - arm s length price of the international transaction entered by the appellant with its associated enterprises - Held that - As decided in VODAFONE ESSAR LTD. versus DISPUTE RESOLUTION PANEL-II and ORS 2011 (12) TMI 22 - DELHI HIGH COURT when a quasi judicial authority like the DRP deals with a lis u/s 144C, then, it is obligatory on its part to give cogent reasons for the decision. DRP has passed its order by just relying on the findings recorded by the A.O./TPO, without considering the various objections raised before it by the assessee. A perusal of the DRP order shows that it is a short order passed in general terms on both the issues involved, i.e., arm s length price u/s 92CA(3) and excess depreciation on computer accessories and peripherals. The objections raised by the assessee before the ld. DRP have not been discussed in detail - Remit this matter to the file of the DRP, to be decided afresh in accordance with the law by passing a speaking order on affording adequate and proper opportunity of hearing to the assessee

Summary

Issues:
1. Transfer Pricing Adjustment
2. Depreciation on Computer accessories and peripherals
3. Delay in filing the appeal

Transfer Pricing Adjustment:
The appeal was filed challenging the addition of Rs.13,904,365 to the total income of the appellant due to adjustments in the arm's length price of international transactions with associated enterprises. The grounds included contentions about the economic analysis disregarded by the DRP, segregation of services without justification, rejection of comparables without sufficient basis, incorrect margin computation, use of single-year data, failure to adjust for working capital and risk profile differences, and not considering the arm's length range. The DRP upheld the adjustments, finding the reasons given by the TPO sound and sustainable, without interference required in the order of the TPO/A.O.

Depreciation on Computer accessories and peripherals:
The AO disallowed excess depreciation by restricting the claim to 15% instead of the claimed 60% on computer peripherals. The DRP directed the AO to allow depreciation at 60% on peripherals that work only with computers and to restrict depreciation on assets that can work independently without computers to 15%. The DRP's order was signed by three officials from the tax department.

Delay in filing the appeal:
A delay of 53 days in filing the appeal was condoned due to the inadvertence of a clerk who did not deliver the assessment order promptly. The delay was not deliberate, intentional, and the appellant did not stand to gain from the delay. The delay was condoned, and the appeal was allowed to proceed on its merits.

The Tribunal remitted the matter back to the DRP for a fresh decision, as the DRP's order lacked detailed discussion on the objections raised by the assessee. The Tribunal emphasized the importance of the DRP providing cogent and germane reasons in its order to facilitate appreciation before superior fora. The matter was not delved into on its merits as it was being sent back to the DRP for a more detailed consideration. The appeal of the assessee was treated as allowed for statistical purposes.