2015 (5) TMI 1157 - AT - Income Tax

Deemed international transactions - TPA - adjustment in respect of the relevant transactions of the assessee with M/s. Mylan Laboratories Ltd., involving the payment of management fees - Held that - s The issue involved in the year under consideration as well as all the material facts relevant thereto are similar to that of A.Y. 2009-2010 2015 (3) TMI 1271 - ITAT HYDERABAD , we respectfully follow the decision of the Coordinate Bench of this Tribunal for A.Y. 2009-2010 and uphold the order of the DRP directing the A.O. not to make any addition on account of T.P. adjustment in respect of the transactions of the assessee company with M/s. Mylan Laboratories Ltd., involving payment of management fees. The appeal of the Revenue is accordingly dismissed. Disallowance of depreciation in respect of technical knowhow purchased from M/s. Mylan Laboratories Ltd. and development charges paid to the said company - Held that - The issue involved in the appeal of the assessee for the A.Y. 2010-2011 thus is squarely covered in favour of the assessee by the decision of the Coordinate Bench of this Tribunal rendered vide order dated 25.03.2015 (supra) for A.Y. 2009-2010 and respectfully following the same, we direct the A.O. to delete the disallowance made on account of assessee s claim for depreciation of ₹ 9,71,97,865 on intangible assets. - Decided in favour of assessee

Summary

Issues:
1. Transfer Pricing Adjustment - Deletion of addition by DRP.
2. Disallowance of depreciation on intangible assets.

Transfer Pricing Adjustment - Deletion of addition by DRP:
The case involved corss-appeals against the order of the A.O. regarding Transfer Pricing adjustment in transactions with an Associated Enterprise (AE). The TPO proposed an addition of management fees paid to the AE, deeming it an international transaction. However, the DRP directed not to make the TP adjustment, citing that the AE was not an Associated Enterprise. The Tribunal upheld the DRP's decision based on similar precedents, emphasizing that domestic transactions cannot be examined under TP provisions. The Tribunal dismissed the Revenue's appeal.

Disallowance of Depreciation on Intangible Assets:
The assessee's appeal challenged the disallowance of depreciation on technical knowhow and development charges purchased from an entity. The A.O. disallowed the claim based on Explanation-3 of section 43(1) of the Act. However, the Tribunal noted that a similar issue in the assessee's case for A.Y. 2009-2010 was decided in favor of the assessee. The Tribunal directed the A.O. to delete the disallowance of depreciation on intangible assets, following the precedent set in the earlier case. Consequently, the assessee's appeal was allowed, and the Revenue's appeal was dismissed.

In conclusion, the ITAT Hyderabad ruled in favor of the assessee, allowing the appeal related to the disallowance of depreciation on intangible assets and dismissing the Revenue's appeal concerning the Transfer Pricing adjustment. The judgment highlighted the importance of consistency in applying legal principles across similar cases and emphasized the need to adhere to established precedents in tax matters.