2019 (8) TMI 1760 - AT - Income Tax

TP addition in respect of the international transaction of payment of Royalty - HELD THAT - The issue is of recurring in nature - As decided in own case 2019 (8) TMI 369 - ITAT PUNE decided it in assessee s favour by deleting the transfer pricing addition on account of Royalty. Similar view has been followed in all the subsequent years up to the year under consideration. The ld. DR could not point out any distinguishing feature in the facts for this year vis- -vis the preceding years. Following the precedent, we direct to delete the transfer pricing addition in respect of Royalty. Transfer pricing addition in the international transaction of Indenting Commission - HELD THAT - Similar issue came up for consideration again before the Tribunal in its order for A.Y. 2006-07 2019 (8) TMI 1053 - ITAT PUNE . Since this appeal came up through the route of the Dispute Resolution Panel in which there was no such categorical finding about the transaction being at arm s length price or not as was there for the A.Y. 2005-06, the Tribunal restored this matter to the file of AO/TPO for a fresh adjudication. However, for the year under consideration, it is observed from TPO s order that the assessee submitted a detailed calculation to the TPO by considering the Material cost and Depreciation cost in the base of costs and demonstrated that the transaction was at the ALP. The TPO did not controvert such a position but went with his earlier view that these costs were not required to be considered, which view has been overturned by the Tribunal for earlier years. Thus, it is evident that the facts and circumstances of the instant year are similar to those of the A.Y. 2005-06. Following the precedent, we order to delete the addition. Capitalization of expenditure on the Premises - HELD THAT - As found that the facts and circumstances of this ground are mutatis mutandis similar to those of preceding years. The Tribunal for the A.Y. 2006-07 2019 (8) TMI 1053 - ITAT PUNE and earlier years has upheld capitalization of expenses in relation to the Premises at 40%. Following the precedent, we direct accordingly. Disallowance at 10% of Miscellaneous expenses - HELD THAT - Since the extent of disallowance made by the AO accords with that upheld by the Tribunal in the assessee s own case for the immediately preceding year, following the same, we uphold the addition, more specifically because of the uncontroverted finding returned by the AO that the entire bills were not produced for verification. This ground, therefore, fails. Addition towards Commission at 7.5% - HELD THAT - Here again, it is found that similar issue came up for consideration before the Tribunal in the assessee s own case for earlier years. In its order for the A.Y. 2006-07 2019 (8) TMI 1053 - ITAT PUNE the Tribunal has deleted such disallowance. Following the precedent, we order to delete the addition.

Issues involved:
1. Validity of the order passed under section 143(3) read with section 144C of the Income-tax Act, 1961.
2. Claim of Education Cess.
3. Consequential claim of Depreciation on the Expenditure of Premises.
4. Confirmation of transfer pricing addition in respect of the international transaction of payment of Royalty.
5. Transfer pricing addition in the international transaction of Indenting Commission.
6. Capitalization of software expenses.
7. Capitalization of expenditure on the Premises.
8. Disallowance at 10% of Miscellaneous expenses.
9. Addition towards Commission at 7.5%.

Analysis:
1. The appeal challenged the validity of the order passed under section 143(3) read with section 144C of the Income-tax Act, 1961, citing non-compliance with the mandate of section 144C. However, the Tribunal dismissed these additional grounds based on a precedent where no demand notice was issued by the Assessing Officer, rendering the order not final. The appeal was dismissed accordingly.
2. The issue regarding the claim of Education Cess was decided in favor of the assessee based on a precedent in the assessee's own case for earlier years, allowing Education Cess on Income-tax paid as tax deductible expenses.
3. The claim for depreciation on the Expenditure of Premises was allowed following a decision in the assessee's favor for earlier assessment years, directing the grant of depreciation on premises expenditure held to be capital in nature.
4. The transfer pricing addition in the international transaction of payment of Royalty was deleted based on a precedent where the Tribunal had decided in favor of the assessee by deleting the transfer pricing addition on account of Royalty for preceding years.
5. Similarly, the transfer pricing addition in the international transaction of Indenting Commission was deleted following a precedent where the Tribunal had deleted the addition for earlier years, as the facts and circumstances were similar.
6. The capitalization of software expenses was not pressed by the appellant, as the expenditure was treated as capital expenditure and depreciation was allowed by the Assessing Officer.
7. Capitalization of expenditure on the Premises was upheld based on a precedent where the Tribunal had upheld capitalization of expenses in relation to premises at 40% for earlier years.
8. The disallowance at 10% of Miscellaneous expenses was upheld as the Assessing Officer made the addition based on unverified bills, similar to a decision in the assessee's own case for the preceding year.
9. The addition towards Commission at 7.5% was deleted following a precedent where the Tribunal had deleted such disallowance for earlier years. The appeal was partly allowed based on the above analysis.

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