2020 (10) TMI 1352 - AT - Income Tax

Depreciation on assets leased out under finance lease agreement - Depreciation on the opening written down value (ANDV) of the block of assets leased out under finance lease arrangement - HELD THAT - As in Assessment Years 2011-12 and 2013-14 in assessee s own case 2019 (6) TMI 660 - ITAT BANGALORE the Tribunal has restored back similar matter to the file of AO for a fresh adjudication with a direction to the AO to examine the arguments entered into by the assessee in light of decision of Hon ble Apex Court rendered in the case of ICDS Ltd. 2013 (1) TMI 344 - SUPREME COURT and he pointed out Tribunal order are relevant in this regard and he submitted a copy of this Tribunal order. He submitted that in the present year also this issue should be restored back to the file of AO with similar directions. TP adjustment - This is the submission of the learned AR of the assessee before us that in Assessment Years 2010-11 and 2011-12 similar matter is pending before DRP but since we are restoring back the Corporate Tax issue to the file of AO for a fresh decision we feel it proper to restore back this TP issue in the present year also to the file of AO for a fresh decision and the AO is directed to decide the TP issue in line with the final decision of AO as per the direction of DRP in Assessment Years 2010-11 and 2011-12.

Summary

Issues:
1. Disallowance of depreciation on assets leased out under finance lease agreement.
2. Transfer pricing addition.
3. Levying of interest under sections 234B and 234C of the Act.

Issue 1 - Disallowance of Depreciation on Finance Lease Assets:
The appeal challenged the Assessment Order for the Assessment Year 2012-13 under section 143(3) r.w.s. 144C of the Income Tax Act, 1961. The grounds raised by the assessee primarily focused on the disallowance of depreciation claimed on assets leased out under finance lease transactions. The Tribunal directed the Assessing Officer (AO) to re-examine the issue of depreciation in line with the Tribunal's order for the Assessment Year 2011-12. The Tribunal emphasized the importance of following the binding judgment of the Hon'ble Supreme Court in ICDS Ltd. v. CIT and required the AO to consider additional agreements to determine the similarity of terms for granting depreciation.

Issue 2 - Transfer Pricing Addition:
Another significant issue in the appeal related to transfer pricing matters, specifically the selection of the most appropriate method for determining the arm's length price (ALP) of international transactions. The Tribunal found errors in the approach of the Transfer Pricing Officer (TPO) and AO in rejecting the Transactional Net Margin Method (TNMM) adopted by the assessee and considering Cisco Capital India as the tested party instead of overseas Associated Enterprises. The Tribunal directed the AO to re-evaluate the transfer pricing issue in line with the final decision of the AO as per the direction of the Dispute Resolution Panel (DRP) for the Assessment Years 2010-11 and 2011-12.

Issue 3 - Interest Levied under Sections 234B and 234C:
The appeal also contested the levying of interest under sections 234B and 234C of the Act amounting to INR 4,20,28,672 and INR 5,89,728, respectively, due to adjustments proposed to the returned income. However, the Tribunal's decision did not specifically address this issue in detail, and the appeal was allowed for statistical purposes without further elaboration on the interest levied.

In conclusion, the ITAT Bangalore directed the AO to re-examine the disallowance of depreciation on finance lease assets and the transfer pricing addition in accordance with the Tribunal's directions and relevant legal precedents. The appeal was allowed for statistical purposes, without a specific mention of the interest levied under sections 234B and 234C of the Income Tax Act, 1961.