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2020 (11) TMI 740 - AT - Income TaxTP adjustment - payment made towards field supervision services - assessee had rendered certain services to its AE termed as field services and received after providing discount @15% - TPO, while determining the ALP of such services rendered to AE held that the discount allowed is not at arm's length and accordingly made adjustment - HELD THAT - We find, while considering identical issue in assessee's own case in Assessment Year 2006-07, the Tribunal 2011 (9) TMI 261 - ITAT MUMBAI has accepted the price charged by the assessee to the AEs towards provision of field services after allowing discount to be at arm's length. We delete the addition which is not covered under the MAP proceedings. These grounds are partly allowed. Disallowance of cost contribution charges u/s. 37(1), section 40A(2)(b) and section 40A(i) - HELD THAT - No separate disallowance on the issues raised in the present ground has been made by the Assessing Officer, the ground raised by the assessee has become redundant, hence dismissed. Addition on account of adjustment of unutilized CENVAT credit to closing stock by invoking the provision of Section 145A - HELD THAT - Remitted the matter back to the file of Ld. AO for redoing the computation in accordance with order for AY 2001-02. Addition on the basis of Annual Information Return (AIR) - AO on the basis of information available on record found that the assessee has not offered income - HELD THAT - Aforesaid claim of the assessee has not at all been enquired into by the Assessing Officer by making enquiry with the concerned parties. Further, assessee's contention that during the year under consideration invoices of ₹ 51,050/- was raised on Eastern Electrolysers Ltd. has not at all been enquired into by the Assessing Officer. When the assessee has furnished evidence to reconcile the difference and claims that there is no such income was earned by it, the Assessing Officer was duty bound to make proper enquiry to ascertain the correctness of assessee's claim. Without making any enquiry, the Assessing Officer cannot make the additions. More so, when the assessee has disclosed huge turnover and has also offered substantially high income. That being the case, it cannot be expected that the assessee would not disclose such a petty amount. However, it is a fact on record that the assessee was unable to reconcile the difference of ₹ 449/- on account of income received from Hindustan Petroleum Corporation Ltd. In view of the above, we sustain addition only to the extent of ₹ 449/- and delete the balance amount. This ground is partly allowed. Disallowance of depreciation claimed on Uninterrupted Power Supply (UPS) by treating it as plant and machinery - @15% or 60% - HELD THAT - As noticed, in the case of PCIT vs Goa Tourism Development Ltd. 2019 (3) TMI 287 - BOMBAY HIGH COURT has held that UPS being a part/accessory of computer is eligible for depreciation at 60%. The same view has been expressed by the Hon'ble Delhi High court in case of CIT vs Orient Ceramics and Industries Ltd. 2011 (1) TMI 26 - DELHI HIGH COURT and in case of DCIT vs M/s. Sarswath Infotech Ltd 2014 (1) TMI 1888 - ITAT MUMBAI . In view of the ratio laid down in the judicial precedents referred to above, we allow assessee's claim of depreciation on UPS @ 60%. This ground is allowed. Addition on account of AIR information - HELD THAT - Without making any enquiry the Assessing Officer has added back the amount. When the assessee claims that he has not entered into any transaction with the concerned parties, the least the Assessing Officer could have done is to ascertain the correctness of assessee's claim by making enquiry with the concern parties. AO having not done so, the addition cannot be sustained. Further, looking at the huge turnover and substantially high income declared by the assessee, it is not at all believable that the assessee would suppress such a small amount. Accordingly, we delete the addition.
Issues Involved:
1. Transfer pricing adjustment on cost contribution charges. 2. Transfer pricing adjustment on payment towards field supervision services. 3. Disallowance of cost contribution charges under sections 37(1), 40A(2)(b), and 40A(i). 4. Adjustment of unutilized CENVAT credit to closing stock under Section 145A. 5. Additions based on Annual Information Return (AIR). 6. Depreciation rate on Uninterrupted Power Supply (UPS). Detailed Analysis: 1. Transfer Pricing Adjustment on Cost Contribution Charges: The assessee challenged the addition of ?4,44,07,733/- made by the Transfer Pricing Officer (TPO) on cost contribution charges paid to the overseas Associated Enterprises (AEs). The TPO determined the arm's length price (ALP) of the transaction as "Nil," leading to the adjustment. The Dispute Resolution Panel (DRP) allowed 50% of the amount, determining the ALP at ?2,22,03,867/-. The assessee applied for Mutual Agreement Procedure (MAP), resolving the dispute by determining the ALP at ?3,33,05,800/-, proposing an adjustment of ?1,11,01,933/-. Consequently, the assessee withdrew grounds No. 1 to 4, and these were dismissed as not pressed. 2. Transfer Pricing Adjustment on Payment Towards Field Supervision Services: The assessee challenged the addition of ?3,47,360/- made by the TPO on payments for field supervision services. The TPO disallowed the 15% discount provided by the assessee, determining it was not at arm's length. The DRP upheld this adjustment. The assessee invoked MAP for transactions with the USA AE, resulting in a proposed adjustment of ?1,41,995/-. For the remaining amount of ?2,05,365/-, the Tribunal followed its decision from AY 2006-07, accepting the discount as arm's length and deleted the addition not covered under MAP. 3. Disallowance of Cost Contribution Charges under Sections 37(1), 40A(2)(b), and 40A(i): The assessee challenged the disallowance of cost contribution charges under sections 37(1), 40A(2)(b), and 40A(i). The final assessment order did not make such disallowances, and the MAP proceedings allowed deduction of ?3,33,05,800/-. Thus, the ground became redundant and was dismissed. 4. Adjustment of Unutilized CENVAT Credit to Closing Stock under Section 145A: The assessee challenged the addition of ?22,36,615/- for adjustment of unutilized CENVAT credit to closing stock under Section 145A. The Tribunal followed its decision from previous assessment years (AY 2007-08 and AY 2006-07) and restored the issue to the Assessing Officer for re-computation in accordance with earlier years' directions. 5. Additions Based on Annual Information Return (AIR): The assessee challenged the addition of ?42,383/- based on AIR information. The Assessing Officer added this amount due to unreconciled differences between the income as per books and AIR. The Tribunal found that the Assessing Officer did not make proper inquiries to verify the assessee's claims and deleted the addition except for ?449/- related to Hindustan Petroleum Corporation Ltd., which the assessee could not reconcile. 6. Depreciation Rate on Uninterrupted Power Supply (UPS): The assessee claimed depreciation at 60% on UPS, treating it as part of the computer system. The Assessing Officer restricted it to 15%, treating it as plant and machinery. The Tribunal, following judicial precedents, allowed the depreciation at 60%, considering UPS as part of the computer system. Separate Judgments for Different Assessment Years: Assessment Year 2008-09 (ITA no. 7723/Mum./2012): - Grounds No. 1 to 4 dismissed as not pressed. - Part deletion of addition on field supervision services. - Redundant disallowance under sections 37(1), 40A(2)(b), and 40A(i) dismissed. - Adjustment of unutilized CENVAT credit restored to Assessing Officer. - Partial deletion of addition based on AIR. - Depreciation on UPS allowed at 60%. - Appeal partly allowed. Assessment Year 2009-10 (ITA no. 1127/Mum./2014): - Grounds No. 1 to 4 dismissed as not pressed. - Part deletion of addition on field supervision services. - Redundant disallowance under sections 37(1), 40A(2)(b), and 40A(i) dismissed. - Adjustment of unutilized CENVAT credit restored to Assessing Officer. - Addition based on AIR deleted. - Depreciation on UPS allowed at 60%. - Appeal partly allowed. Revenue’s Appeal for AY 2009-10 (ITA no. 1068/Mum./2014): - Grounds related to cost contribution charges and unutilized CENVAT credit dismissed. - Appeal dismissed. Conclusion: The assessee’s appeals were partly allowed, and the revenue’s appeal was dismissed. The Tribunal provided detailed analysis and directions on each issue, ensuring consistency with previous decisions and judicial precedents.
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