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2023 (6) TMI 1268 - AT - Income TaxTP Adjustment - Arm's Length Price (ALP) - US-AE transactions and Non-AE transactions - transaction with US-AE as agreed in the MAP may be considered for the transaction with US-AE for such period that is not covered in the MAP - assessee is praying for the rates agreed in the MAP with the US-AE transactions during April to December 2012 to be considered for the transactions between January to March 2013 which is relevant FY to the Assessment Year under consideration which was not considered in MAP - HELD THAT - It is obvious that the transaction with an entity is to be considered in a consolidated way, and cannot be bifurcated according to the calendar year prevalent in that contracting state. We therefore direct the Ld.AO/TPO to consider the rate applied in the MAP for the transactions that entered by the assessee with US-AE for the period April 2012 to December 2019 to the transactions that the assessee entered with the US-AE during January 2013 to March 2013. In respect of non-US transaction, we note that the assessee in the TP study report gave bifurcation of the revenue earned from USAE and non-AE. The relevant extract is placed at page 2 of the 92CA order. Both the transactions are in respect of SWD segment. We note from the order passed u/s. 92CA that the ALP was computed only having regards to the US-AE transaction. In other words, the Ld.TPO treated the non-AE transaction to be at arms length. This we notice from the computation of ALP of the 92CA order wherein the price received considered by the Ld.TPO pertains to the US-AE transaction alone. However in the event there is any transaction with a non-AE is considered in a consolidated way in the said amount by the Ld.TPO, the same may be considered in accordance with the ratio laid down in case of J.P. Morgan Services India (P.) Ltd. ( 2019 (4) TMI 219 - BOMBAY HIGH COURT ). Decided in favour of assessee. Depreciation on computer servers and software at 15% by considering it as plant and machinery - HELD THAT - We find that the issue is no longer res-integra and has been decided in the case of Mphasis Ltd. 2014 (8) TMI 690 - KARNATAKA HIGH COURT wherein held that computer accessories such as switches and routers form part of peripherals of computer system and hence entitled to depreciation at 60%. Following the same, we allow this ground by the assessee. Direct the Ld.AO to grant the depreciation to assessee at 60% on computer servers, software and networking equipments as it falls under the category computers. Computation of deduction u/s. 10AA - AO reduced the expenditure incurred in foreign currency and communication expenses and insurance expenses as not contributable to the delivery of articles or things or computer software outside India - HELD THAT - We note that this issue is no longer resintegra by virtue of the decisions passed in case of CIT vs. Mphasis Ltd. 2019 (11) TMI 1383 - SUPREME COURT held that since the services rendered were in respect of software development or production of computer software which are technical in nature, the said expenses incurred in foreign currency for providing technical services outside India, cannot be excluded from the export turnover. We direct the Ld.AO to compute the deduction u/s. 10AA in accordance with the principles laid down by Hon ble Supreme Court hereinabove. Non-grant of foreign tax credit- AR submitted that relevant documents in respect of the same were filed before the Ld.AO however the same has not been considered - HELD THAT - In the interest of justice, we remand this issue to the Ld.AO to verify the documents and to consider the claim in accordance with law. Non-grant of MAT credit - AO has not granted the MAT credit to the extent of difference assessed tax computed under normal provisions of the act and MAT computation - HELD THAT - We remand this issue to the Ld.AO and direct to compute the MAT credit available to the assessee in accordance with law. Assessee is directed to file relevant details in respect of the same.
Issues Involved: Transfer Pricing, Corporate Tax (Depreciation, Section 10AA Deduction, Foreign Tax Credit, MAT Credit).
Transfer Pricing: 1. Adjustment to Revenue: The Tribunal addressed the assessee's appeal against the adjustment of INR 271,125,771 to the revenue earned from Associated Enterprises (AEs) in its software design services segment under section 92CA read with section 143(3) & 144C of the Act. The Tribunal allowed the withdrawal of grounds 1-16 pertaining to transfer pricing adjustments in respect of US transactions pursuant to MAP resolution dated 16.10.2020. 2. Transfer Pricing Documentation: The Tribunal admitted additional grounds of appeal related to the similarity of functions performed, assets employed, and risks assumed by the assessee in rendering services to its AEs in the US and other countries. The Tribunal directed the AO/TPO to consider the rate applied in the MAP for transactions with the US-AE for the period April 2012 to December 2012 to be applied to transactions from January 2013 to March 2013. Corporate Tax: 3. Depreciation on Computer Servers and Software: The Tribunal allowed the assessee's claim for depreciation at 60% on computer servers, software, and networking equipment, treating them as part of the computer category. This decision was based on precedents including the Karnataka High Court's ruling in PCIT vs. Mphasis Ltd. 4. Section 10AA Deduction: The Tribunal directed the AO to compute the deduction under section 10AA by excluding expenses incurred in foreign currency, communication, and insurance from both export turnover and total turnover, following the Supreme Court's ruling in CIT vs. HCL Technologies Ltd. 5. Foreign Tax Credit: The Tribunal remanded the issue of non-grant of foreign tax credit to the AO for verification of documents and consideration in accordance with the law. 6. MAT Credit: The Tribunal remanded the issue of non-grant of MAT credit to the AO, directing computation of available MAT credit in accordance with the law, and instructed the assessee to file relevant details. Conclusion: The appeal was partly allowed, with specific directions for re-evaluation and computation on several grounds. The Tribunal emphasized adherence to established legal precedents and proper verification of facts and documents.
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