9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (3) TMI 1761 - AT - Income TaxTP Adjustment to the manufacturing segment - upward adjustment - international transactions entered in the manufacturing segment - whether international transactions aggregated under manufacturing segment of the Appellant were not at an arm's length? - Admission of additional evidence as amount of fixed assets written-off is not a part of its operating costs and the same cannot be considered to compute its margin for carrying out the comparability analysis with the margin of selected comparables - HELD THAT - The impugned sum cannot be construed as part of operating costs for the purpose of arriving at the margin of assessee s manufacturing segment. The said proposition is amply supported by the earlier decisions of our coordinate Benches in the case of Thyssenkrupp Industries India (P.) Ltd. 2013 (11) TMI 930 - ITAT MUMBAI as well as Claas India Pvt. Ltd. 2015 (9) TMI 178 - ITAT DELHI . DRP, in our view, wrongly noted that the new plea would require admission of any fresh evidence. In fact, all that is required to verify the Additional plea is the examination of the existing material available on the records of the Assessing Officer. Therefore, in our view, there was no justification on the part of the DRP not to admit such a plea. Margin of assessee s manufacturing segment is liable to be adopted at 5.33% as against 2.62% considered by the TPO. Once it is compared with the margin of the comparables adopted by the TPO at 8.07%, the difference, in our view, is within the variation of 3% permissible in terms of the second proviso to Sec. 92C(2) of the Act and, therefore, necessity of any adjustment to the stated value of international transactions is obviated. Therefore, on the basis of Grounds of assessee is allowed and the Assessing Officer is directed to delete the addition made to the returned income on account of transfer pricing adjustment. Claim of amortisation of premium paid for leasehold land - HELD THAT - The issue is liable to be decided against the assessee in view of the precedents in assessee s own case 2011 (3) TMI 1630 - ITAT MUMBAI Disallowance of depreciation - depreciation in respect of addition to fixed assets of that year was disallowed since assessee had failed to produce supporting documents for verification - HELD THAT - the lead year of dispute is Assessment Year 2006-07. In Assessment Year 2006-07, the depreciation in respect of addition to fixed assets made in that year has not been allowed by the income-tax authorities and the said position continues to prevail till now. In this view of the matter, in our view, the Assessing Officer made no mistake in giving consequential effect and scaling down assessee s claim for depreciation in this year. We are inclined to uphold the stand of the Assessing Officer with a caveat that if the position of assessee s claim of depreciation for Assessment Year 2006-07 is altered by any higher authority in favour of the assessee, the consequential relief be allowed to the assessee in the instant assessment year also. With these remarks, we hereby affirm the ultimate decision of the Assessing Officer and accordingly, assessee fails on this aspect. Claim of depreciation on computer software - @ 60% by assessee as against 25% allowed by the Assessing Officer - HELD THAT - Considering the judgment of the Hon'ble Bombay High Court in the case of M/s. Saraswat Infotech Ltd. 2013 (1) TMI 861 - BOMBAY HIGH COURT we hereby allow assessee s claim of depreciation @ 60% on computer software. Thus, on this aspect, assessee Disallowance of Provisions for legal and professional fee and Power and fuel expenditure succeeds - Disallowance u/s 37(1) - only plea raised by the assessee is that the aforesaid Provisions have been made in the books of account on an estimated basis pending the receipt of actual bills, which were received by the assessee in the subsequent financial year - HELD THAT - Insofar as the case made out by the Assessing Officer to disallow the impugned Provision of expenses is concerned, the same is fair and proper as nothing cogent has been led by the assessee to counter the findings contained in para 10.4 of the assessment order. Thus, the disallowance made by the Assessing Officer u/s 37(1) of the Act is hereby affirmed. Insofar as assessee s plea for considering the claim in the subsequent year is concerned, the same be considered by the Assessing Officer in accordance with law as and when the claim is put forth by the assessee before him. Thus, we hereby affirm the said addition and accordingly, assessee fails on this aspect. - Appeal of assessee partly allowed
Issues Involved:
1. Adjustment of ?19,21,38,016/- to the manufacturing segment. 2. Disallowance of amortization of the premium paid for leasehold land. 3. Disallowance of depreciation on addition to fixed assets pertaining to Assessment Year 2006-07. 4. Disallowance of depreciation claimed @ 60% on computer software. 5. Disallowance of provision for legal and professional fees and power and fuel expenses under Section 37 of the Income-tax Act, 1961. Issue-Wise Detailed Analysis: 1. Adjustment of ?19,21,38,016/- to the Manufacturing Segment: The primary issue concerns the upward adjustment of ?19,21,38,016/- to the assessee's income due to transfer pricing adjustments in the manufacturing segment. The assessee, a subsidiary of foreign entities, engaged in international transactions with associated enterprises. The Transfer Pricing Officer (TPO) determined the arm's length price (ALP) of these transactions, leading to the disputed adjustment. The TPO computed the ALP higher than the stated value by ?19,21,38,016/- based on the arithmetic mean of margins of comparable companies at 8.07%, compared to the assessee's margin of 2.62%. The Dispute Resolution Panel (DRP) upheld this adjustment. The assessee argued that the fixed assets written-off amounting to ?9,06,80,292/- should not be included in operating costs, which if excluded, would result in a revised margin of 5.33%, within the permissible variation of +3%. The Tribunal agreed with the assessee, citing previous decisions and the fact that the fixed assets written-off were added back in the tax computation, thus directing the deletion of the ?19,21,38,016/- adjustment. 2. Disallowance of Amortization of the Premium Paid for Leasehold Land: The assessee's claim for amortization of ?20,14,932/- paid as a premium for leasehold land was disallowed by the Assessing Officer (AO) and upheld by the DRP, referencing the Tribunal's decision in the assessee's own case for previous years. The Tribunal noted that this issue had been consistently decided against the assessee in earlier years and thus dismissed the ground of appeal. 3. Disallowance of Depreciation on Addition to Fixed Assets Pertaining to Assessment Year 2006-07: The AO disallowed depreciation of ?20,75,940/- out of the total claimed depreciation due to the assessee's failure to produce supporting documents for additions to fixed assets in the Assessment Year 2006-07. The Tribunal upheld this disallowance, noting that the disallowance in the lead year (2006-07) continued to hold, and thus the consequential effect in the current year was justified. However, it allowed for potential relief if the higher authority altered the position in favor of the assessee for the lead year. 4. Disallowance of Depreciation Claimed @ 60% on Computer Software: The AO restricted depreciation on computer software to 25% instead of the 60% claimed by the assessee. The Tribunal allowed the assessee's claim, referencing the Bombay High Court judgment in CIT vs. M/s. Saraswat Infotech Ltd., which supported a 60% depreciation rate on computer software. 5. Disallowance of Provision for Legal and Professional Fees and Power and Fuel Expenses: The AO disallowed provisions for legal and professional fees (?93,50,000/-) and power and fuel expenses (?47,62,500/-) under Section 37(1) of the Income-tax Act, 1961, due to a lack of supporting evidence and basis for estimation. The Tribunal upheld the disallowance, agreeing with the AO's findings. However, it allowed the assessee to claim these expenses in the subsequent year when actual bills were received, subject to verification by the AO. Conclusion: The appeal was partly allowed. The Tribunal directed the deletion of the ?19,21,38,016/- transfer pricing adjustment, upheld the disallowance of amortization of leasehold land premium, confirmed the partial disallowance of depreciation for additions to fixed assets, allowed 60% depreciation on computer software, and upheld the disallowance of provisions for legal and professional fees and power and fuel expenses with a caveat for subsequent year claims.
|
