2022 (9) TMI 1644 - AT - Income Tax

Disallowance of interest for delayed payment of taxes - DRP confirmed the same by relying on the decision of Chennai Properties Investment Ltd. 1998 (4) TMI 89 - MADRAS HIGH COURT wherein it was held that the amount of TDS was not an amount of expenditure - HELD THAT - The amount not deducted and remitted has the character of tax and has to be remitted to the state and could not be utilized by the assessee for its own business. Therefore, the interest so paid would not be business expenditure for the assessee. Since Ld. DRP has followed the decision of jurisdictional High Court, we find no reason to interfere in the same. This ground stand dismissed. Disallowance of depreciation on UPS - assessee claimed depreciation on UPS system @60% considering the same to be part of computer block - rejecting the same, Ld. AO restricted the depreciation to 15% and made addition also confirmed by DRP - HELD THAT - We are of the considered opinion that UPS is an integral part of computer system and would be eligible for same rate of depreciation as is applicable to computer system. The various decisions of Tribunal have taken the same view. Considering the same, we direct Ld. AO to grant the depreciation as claimed by the assessee. TP Adjustment of administration and support services fees paid to Associated Enterprises (AE) - HELD THAT - It could be seen that the assessee has paid aggregate administrative fees of Rs.1003.58 Lacs to Danish Entity as well as Singapore Entity. The substantial fees of Rs.884.44 Lacs has been paid to Danish entity which has been settled under MAP @50% adjustment. The fees paid to Singapore entity is Rs.119.14 Lacs and the nature of the services is the same. Therefore, in our considered opinion, the same approach, as settled in MAP for Danish entity would be applicable for the fees paid to Singapore entity also. Therefore, we direct Ld. AO to restrict the adjustment to the extent of 50% of Rs.119.14 Lacs and re-compute the income of the assessee. We order so.

Summary

Issues:
- Appeal for Assessment Year (AY) 2012-13 involving disallowance of interest for delayed payment of taxes and depreciation on UPS.
- Appeal for AY 2013-14 regarding Transfer Pricing Adjustments.
- Appeal for AY 2015-16 concerning Transfer Pricing Adjustment of administration and support services fees paid to Associated Enterprises (AE).

Analysis:

Assessment Year 2012-13:
- The appeal for AY 2012-13 arose from a final assessment order passed by the Deputy Commissioner of Income Tax. The assessee sought to withdraw Transfer Pricing grounds, which were dismissed. The only remaining issues were disallowance of interest for delayed tax payment and depreciation on UPS.
- The deduction of interest for delayed Tax Deduction at source was denied by the AO and DRP, citing a High Court decision. The Tribunal upheld this decision, dismissing the ground.
- Regarding depreciation on UPS, the AO restricted it to 15%, but the Tribunal disagreed, stating UPS is part of the computer system and should be eligible for a higher rate of depreciation. The Tribunal directed the AO to grant the depreciation as claimed, partially allowing the appeal.

Assessment Year 2013-14:
- The assessee was aggrieved by Transfer Pricing Adjustments but sought to withdraw these grounds due to receiving Mutual Agreement Procedure resolution. As there were no other issues, the appeal was dismissed as withdrawn.

Assessment Year 2015-16:
- The assessee sought to withdraw Transfer Pricing grounds related to adjustments of administration and support services fees paid to Associated Enterprises. Mutual Agreement Procedure resolution led to the withdrawal of 50% of the adjustment.
- Another adjustment related to fees paid to a different Associated Enterprise was contested. The TPO proposed a downward adjustment, which was confirmed by the DRP. The Tribunal directed the AO to restrict the adjustment to 50% of the fees paid to the entity, partially allowing the appeal.

Conclusion:
- The appeals for AY 2012-13 and 2015-16 were partly allowed, while the appeal for AY 2013-14 was dismissed as withdrawn.