2021 (8) TMI 1243 - AT - Income Tax

TP Adjustment - international transaction of payment for CCR Divisional Cost treating at Nil - HELD THAT - TPO on one hand admitted that the assessee availed services from its AE and rendering of services by the AE to the assessee. In our opinion the said services were in terms of agreement as discussed above and evidences also on record substantiating the said services which clearly demonstrate that the assessee availed services from its AE. Therefore, we hold that the assessee proved the receipt of services from its AE. The ld. DR reported no objection in remanding the matter to the TPO for determination of arms length price. Therefore, we deem it proper to remand the issue to the file of TPO for its fresh adjudication to determine the ALP of international transaction in respect of CCR Division Cost. Thus, the ground No. 3 raised by the assessee is allowed for statistical purpose. Disallowance of depreciation on goodwill - HELD THAT - As relying on assessee s own case for A.Y. 2003-04 2016 (2) TMI 187 - ITAT PUNE it is clear that the allowance of depreciation on goodwill is granted. There was no contrary view placed by the ld. DR before us. Thus, the ground No. 8 raised by the assessee is allowed. Disallowance of depreciation on non-compete fees - HELD THAT - Tribunal in assessee s own case for A.Y. 2003-04 2016 (2) TMI 187 - ITAT PUNE it is clear that the allowance of depreciation on non-compete fees is granted. Disallowance of depreciation on technical know-how and other assets - HELD THAT - In the light of the orders of this Tribunal in assessee s own case for A.Y. 2004-05 2018 (1) TMI 12 - ITAT PUNE it is clear that the allowance of depreciation on technical know-how and other assets is granted. There was no contrary view placed by the ld. DR before us. - Decided in favour of assessee. Short grant of credit of taxes deducted at source - HELD THAT - AR filed details of annual tax statement in Form No. 26AS and prayed to give a direction to the AO/TPO for examination of the same afresh. Upon hearing both the parties, we deem it proper to remand this issue to the file of AO/TPO for fresh adjudication by examining the details provided in Form No. 26AS and to decide the issue giving an opportunity to the assessee. Thus, ground No. 11 raised by the assessee is allowed for statistical purpose.

Summary

Issues Involved:
1. Transfer Pricing Adjustment on CCR Divisional Cost.
2. Disallowance of Depreciation on Goodwill.
3. Disallowance of Depreciation on Non-Compete Fees.
4. Disallowance of Depreciation on Technical Know-How and Other Assets.
5. Short Grant of Credit of Taxes Deducted at Source.
6. Initiation of Penalty Proceedings under Section 271(1)(c) of the Act.

Issue-Wise Detailed Analysis:

1. Transfer Pricing Adjustment on CCR Divisional Cost:
The assessee contested a transfer pricing adjustment of ?1,88,58,689/- related to the international transaction for CCR Divisional Cost, which was treated as Nil by the AO/TPO. The assessee provided a Group Consultancy Services Agreement dated 29-03-2010, effective from 01-04-2009, detailing consultancy services from the AE, predominantly from the UK. Despite submitting extensive evidence of services availed, the TPO held that the assessee failed to furnish information regarding the cost incurred by the AE for providing such services. The Tribunal found that the services were availed as per the agreement and substantiated by evidence. The matter was remanded to the TPO for fresh adjudication to determine the arm's length price (ALP) of the international transaction concerning CCR Division Cost.

2. Disallowance of Depreciation on Goodwill:
The assessee challenged the disallowance of depreciation on goodwill. The Tribunal referred to its previous decision in the assessee’s own case for A.Y. 2003-04, where it allowed depreciation on goodwill, citing the Supreme Court's decision in Commissioner of Income Tax Vs. Smifs Securities Ltd. The Tribunal reiterated that goodwill qualifies as an asset under Explanation 3(b) to Section 32(1) of the Act, and thus, depreciation on goodwill is allowable. The ground was allowed.

3. Disallowance of Depreciation on Non-Compete Fees:
The assessee contested the disallowance of depreciation on non-compete fees. The Tribunal referred to its earlier decision for A.Y. 2003-04, where it allowed depreciation on non-compete fees, supported by the Karnataka High Court's judgment in Commissioner of Income Tax Vs. Ingersoll Rand International Ind. Ltd. The Tribunal held that non-compete payment is capital in nature and falls in the category of an intangible asset eligible for depreciation under Section 32(1)(ii) of the Act. The ground was allowed.

4. Disallowance of Depreciation on Technical Know-How and Other Assets:
The assessee challenged the disallowance of depreciation on technical know-how and other assets. The Tribunal referred to its decision in the assessee’s own case for A.Y. 2004-05, where it granted allowance of depreciation on technical know-how and other assets. The Tribunal held that the acquisition of know-how, patents, trademarks, etc., was part of the business transfer and thus eligible for depreciation. The ground was allowed.

5. Short Grant of Credit of Taxes Deducted at Source:
The assessee raised the issue of short grant of credit for taxes deducted at source. The Tribunal directed the AO/TPO to examine the details provided in Form No. 26AS afresh and decide the issue after giving the assessee an opportunity to present their case. The ground was allowed for statistical purposes.

6. Initiation of Penalty Proceedings under Section 271(1)(c) of the Act:
The assessee contested the initiation of penalty proceedings under Section 271(1)(c) of the Act. The Tribunal held that the challenge to penalty proceedings at this stage is premature and dismissed the ground.

Conclusion:
The appeal of the assessee was partly allowed for statistical purposes, with specific issues remanded for fresh adjudication and others decided in favor of the assessee based on precedent and detailed examination of the evidence and applicable law.