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2023 (12) TMI 1227 - AT - Income TaxTP Adjustment - apportioning the expenses of assessee s affiliates - HELD THAT - We note that the Ld.TPO has not considered the agreements between the assessee and its AE and the nature of the transaction entered into, the services rendered by the assessee to its AE and the benchmarking method adopted by the assessee on a consistent basis. In the interest of justice, we remand this issue back to the Ld.AO/TPO to consider the claim of assessee by analysing all the details vis- -vis the contracts and the functions performed by the assessee in respect of the services rendered. Also noted that the assessee has received certain services from its AE which has been treated by the Ld.TPO at arms length by the assessee. However, the Ld.TPO has apportioned 1/5th of the expenses once again to the assessee and proposed a TP adjustment which in our view amounts to double addition. Such kind of computation of adjustment is not in accordance to the sound principles of transfer pricing rules. We direct the Ld.AO/TPO to consider the segments of the assessee under the receipt of business development services from its AE denovo in accordance with law. Needless to say that proper opportunity of being heard must be granted to assessee. Grant of depreciation at the rate of 60% on NMS CG/TX Cards, switches, etc., on the ground that these items do not come within the definition of computers - HELD THAT - Identical issue has been considered by Coordinate Bench of this Tribunal for A.Y. 2015-16 2022 (8) TMI 1343 - ITAT BANGALORE we direct the Ld.AO to allow the depreciation at 16% on the CG/TX Cards, switches etc. TDS u/s 195 - grant of deduction of tax paid outside India in respect of which no foreign tax credit is eligible in India by holding that the same would be outside the scope of Section 40(a)(ii) - HELD THAT - We direct the Ld.AO to verify the amount of foreign tax credit paid that is attributable to the income accruing / arising in India and to allow the same. Accordingly in the light of the decisions relied by Coordinate Bench of this Tribunal hereinabove in assessee s own case for A.Ys. 2014-15 and 2015-16 Accordingly, Ground nos. 2-3 raised by revenue is remanded to the Ld.AO to consider the claim in accordance with law. Needless to say that proper opportunity of being heard must be granted to assessee.
Issues Involved:
1. Transfer Pricing 2. Corporate Tax - Penalty Proceedings 3. Corporate Tax - Depreciation on NMS CG/Tx Cards, Switches, etc. 4. Corporate Tax - Deduction of Tax Paid Outside India Summary: Transfer Pricing: The Assessee challenged the adjustment of INR 44,32,02,099 determined by the AO/TPO/CIT(A) for its international transactions with Associated Enterprises (AEs) under Section 92CA of the Income-tax Act, 1961. The Tribunal noted that the TPO did not consider the agreements between the assessee and its AEs, the nature of transactions, and the benchmarking method consistently adopted by the assessee. The Tribunal remanded the issue back to the AO/TPO for a fresh analysis, emphasizing proper consideration of the agreements and functions performed by the assessee. The Tribunal also highlighted that the TPO's apportionment of expenses led to double addition, which is against transfer pricing principles. Therefore, the Tribunal directed the AO/TPO to re-evaluate the segments under the receipt of business development services from its AE in accordance with the law, ensuring proper opportunity for the assessee to be heard. Corporate Tax - Penalty Proceedings: The Tribunal did not specifically address the penalty proceedings under Section 271(1)(c) of the Act, as it was not a primary issue in the appeal. Corporate Tax - Depreciation on NMS CG/Tx Cards, Switches, etc.: The Revenue challenged the CIT(A)'s decision to grant 60% depreciation on NMS CG/Tx cards, switches, etc., classifying them as "Computers." The Tribunal referred to its previous decisions in the assessee's favor for various assessment years, including the affirmation by the Karnataka High Court. The Tribunal reiterated that these items are part of computers and thus eligible for 60% depreciation. Consequently, the Tribunal dismissed Revenue's ground on this issue. Corporate Tax - Deduction of Tax Paid Outside India: The Revenue contested the CIT(A)'s decision to allow the deduction of tax paid outside India, arguing it falls outside the scope of Section 40(a)(ii) of the Act. The Tribunal referred to the Bombay High Court's decision in Reliance Infrastructure Ltd., which allowed such deductions if no foreign tax credit is available. The Tribunal directed the AO to verify the amount of foreign tax credit paid attributable to income accruing/arising in India and allow the deduction accordingly. The Tribunal remanded the issue to the AO for proper verification and consideration, ensuring the assessee is granted a proper hearing. Conclusion: The appeals filed by both the assessee and the revenue were partly allowed for statistical purposes, with specific issues remanded back to the AO/TPO for re-evaluation and verification in accordance with the law. The Tribunal emphasized the need for proper consideration of agreements, business models, and adherence to transfer pricing principles, ensuring fair opportunity for the assessee to present their case.
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