2023 (1) TMI 562 - AT - Income Tax

TP Adjustment on account of technical know-how fees - DRP granted partial relief to the assessee by directing to exclude the service tax competent from the amount of TPO s adjustment computed on this issue - HELD THAT - Similar findings were also rendered by the coordinate bench of the Tribunal in assessee s own case in Merck Specialties Private Ltd 2019 (11) TMI 705 - ITAT MUMBAI and 2019 (12) TMI 1628 - ITAT MUMBAI - DR could not show us any reason to deviate from the aforesaid orders and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present appeal is recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of the Tribunal for preceding assessment years. Thus, respectfully following the orders passed by the coordinate bench of the Tribunal in assessee s own case cited supra, we uphold the plea of the assessee and direct the AO/TPO to delete the transfer pricing adjustment in respect of payment of technical consultancy fees. Ground in assessee s appeal is allowed. Disallowance of depreciation on intangible assets - assessee is availing depreciation on intangibles at the rate of 25% on the various items appearing in the balance sheet in schedule of fixed assets of the assessee company - HELD THAT - We find that the coordinate bench of the Tribunal in assessee s own case 2019 (11) TMI 705 - ITAT MUMBAI remand this issue to the file of AO for de novo adjudication on similar lines as was directed in earlier assessment years. Denial of depreciation on goodwill arising from scheme of amalgamation - HELD THAT - In the present case, the AO as well as learned DRP did not entertain the claim of the assessee in view of decision of Goetze (India) Ltd. 2006 (3) TMI 75 - SUPREME COURT however, it is now well settled that there is no bar on the appellate authority to entertain a fresh claim of the assessee, if the relevant fact for deciding such issue are available on record. Further, it is pertinent to note that on one hand in the remand proceedings, the AO for the first time raised doubts about the valuation report, however, on the other hand AO has allowed depreciation on intangible assets @ 25%, which were also acquired by the assessee and were also revalued in the books of the assessee upon amalgamation. We find merit in the claim of the assessee and accordingly we direct the AO to grant depreciation on goodwill arising on account of amalgamation of subsidiary company with the assessee. As a result, ground No. 4 raised in assessee s appeal is allowed. Charging of interest u/s 234A - HELD THAT - We deem it appropriate to remand this issue to the file of AO for de novo adjudication after necessary examination of the fact whether the return of income was filed by the assessee within the prescribed time under the Act. As a result, ground raised in assessee s appeal is allowed for statistical purpose.

Issues Involved:
1. General Grounds of Appeal
2. Transfer Pricing Issues
3. Depreciation on Intangible Assets
4. Depreciation on Goodwill from Amalgamation
5. Interest under Section 234A
6. Interest under Section 234B
7. Interest under Section 234C
8. Initiation of Penalty Proceedings under Section 271(1)(c)

Detailed Analysis:

1. General Grounds of Appeal:
The assessee raised general grounds contesting the overall assessment order. The tribunal found these grounds to be general in nature and did not require separate adjudication.

2. Transfer Pricing Issues:
The primary issue under this head was the addition of Rs. 1,52,47,997 on account of technical consultancy fees paid to the associated enterprise (AE). The assessee used the Transactional Net Margin Method (TNMM) to benchmark the transaction. The Transfer Pricing Officer (TPO) disagreed, claiming no services were rendered and thus no benefit was derived. The TPO estimated the arm's length price (ALP) for these services at Rs. 24 lakh.

The Dispute Resolution Panel (DRP) upheld the TPO's findings but directed the exclusion of the service tax component from the adjustment. The tribunal referred to its earlier decisions in the assessee's own case and similar cases, noting contradictions in the lower authorities' findings. It concluded that the assessee had reasonably established the receipt of services and the payment was for a package of services, not on an ala carte basis. The tribunal directed the deletion of the transfer pricing adjustment, following its earlier decisions.

3. Depreciation on Intangible Assets:
The issue involved the disallowance of Rs. 5,19,87,305 claimed as depreciation on intangible assets purchased from Merck Limited. The AO and DRP disallowed the depreciation, stating no actual assets were transferred and the assets were fictitious.

The tribunal noted that similar issues in earlier years were remanded to the AO for de novo adjudication. It followed the same approach, remanding the issue to the AO for fresh adjudication based on the directions given in earlier years.

4. Depreciation on Goodwill from Amalgamation:
The assessee claimed depreciation on goodwill arising from the amalgamation of Bangalore Genei (India) Pvt. Ltd. with the assessee. The AO rejected the claim citing the Supreme Court decision in Goetze (India) Ltd., as the claim was not made in the original or revised return.

The DRP upheld the AO's decision but noted a mistake in adding back the depreciation amount to the total income. The tribunal found that the goodwill arose from the excess consideration paid over the net assets acquired upon amalgamation, which is eligible for depreciation. It referred to various judicial precedents supporting the claim and directed the AO to grant depreciation on goodwill.

5. Interest under Section 234A:
The tribunal remanded the issue of charging interest under Section 234A to the AO for de novo adjudication after examining whether the return of income was filed within the prescribed time.

6. Interest under Section 234B:
The tribunal noted that the issue of interest under Section 234B is consequential and allowed it for statistical purposes.

7. Interest under Section 234C:
Similar to Section 234B, the tribunal treated the issue of interest under Section 234C as consequential and allowed it for statistical purposes.

8. Initiation of Penalty Proceedings under Section 271(1)(c):
The tribunal found the issue of initiating penalty proceedings to be premature and dismissed it.

Conclusion:
The appeal by the assessee was partly allowed for statistical purposes, with directions for de novo adjudication on certain issues and deletion of the transfer pricing adjustment.

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