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2021 (2) TMI 352 - AT - Income TaxTP adjustment to the arm's length price of sale of raw materials and goods - HELD THAT - As relying on own case 2019 (6) TMI 1577 - ITAT MUMBAI we direct the Assessing Officer to compare the export segment of the assessee as per the segmental P L accounts with the profit margin of the comparables selected by TPO by applying any allocation key and determine the ALP accordingly. This ground is allowed, as indicated above. Disallowance of additional depreciation claimed under section 32(1)(iia) - Unclaimed additional depreciation - asset put to use - HELD THAT - The facts on record clearly reveal that in Assessment Year 2012-13 the assessee had purchased new plant and machinery on which additional depreciation @20% is allowable. However, since the plant and machinery were put to use for a period of less than 180 days in Assessment Year 2012-13, the additional depreciation was restricted to 50% of the admissible amount. In other words, depreciation was allowed @10%. The balance unclaimed additional depreciation was claimed by the assessee in the impugned assessment year. Now, the law is fairly well settled that the balance unclaimed amount of additional depreciation has to be allowed to the assessee in the immediately succeeding assessment year. As decided in M/S RITTAL INDIA PVT. LTD. (NO. 1) 2016 (1) TMI 81 - KARNATAKA HIGH COURT , SHRI T.P. TEXTILES PRIVATE LIMITED 2017 (3) TMI 739 - MADRAS HIGH COURT and M/S. GODREJ INDUSTRIES LTD., 2018 (12) TMI 64 - BOMBAY HIGH COURT the amendment made to section 32(1)(iia) by Finance Act, 2015 being clarificatory in nature would apply retrospectively. - Decided in favour of assessee.
Issues Involved:
1. Transfer pricing adjustment to the arm's length price of sale of raw materials and goods. 2. Disallowance of additional depreciation claimed under section 32(1)(iia). Issue-wise Detailed Analysis: 1. Transfer Pricing Adjustment to the Arm's Length Price of Sale of Raw Materials and Goods: The assessee, a resident company engaged in manufacturing and sale of shaving products, conducted transactions with associated enterprises (AEs) and domestic sales. The Transfer Pricing Officer (TPO) rejected the segmental profit and loss account submitted by the assessee due to unaudited accounts and improper allocation of expenses. The TPO used the entity-level margin of 0.8% for benchmarking and introduced new comparables, resulting in a proposed adjustment of ? 89.32 crores. The Dispute Resolution Panel (DRP) upheld the TPO's adjustment, citing discrepancies in the segmental accounts and improper allocation of common expenses. The assessee argued that there is no legal requirement for audited segmental accounts and provided allocation keys for expenses. The assessee's margin, even with the TPO's comparables, was within the arm's length range. The Tribunal previously rejected similar adjustments in the assessee's case for the Assessment Year 2012-13, directing the TPO to delete the adjustment based on the segmental P&L account. The Tribunal in the current case noted that the assessee had furnished audited segmental P&L accounts and allocation keys, which were rejected by the DRP on unreasonable grounds. The Tribunal directed the Assessing Officer to compare the export segment of the assessee with the profit margin of the comparables selected by the TPO by applying any allocation key and determine the ALP accordingly. 2. Disallowance of Additional Depreciation Claimed Under Section 32(1)(iia): The assessee claimed additional depreciation on new plant and machinery purchased and installed in the financial year 2011-12. Since the assets were used for less than 180 days, only 50% of the depreciation was allowed in Assessment Year 2012-13, and the balance was claimed in the subsequent year. The Assessing Officer disallowed the carry-forward claim, stating it must be allowed only in the year of purchase and use. The DRP upheld this decision. The Tribunal referred to judicial precedents, including decisions from the Karnataka High Court and other ITAT rulings, which held that the balance unclaimed additional depreciation must be allowed in the succeeding assessment year. The Tribunal allowed the assessee's claim for additional depreciation, following the clarificatory amendment to section 32(1)(iia) by the Finance Act, 2015. Conclusion: The appeal was partly allowed. The Tribunal directed the Assessing Officer to re-evaluate the transfer pricing adjustment based on the segmental P&L accounts and allowed the claim for additional depreciation. Other grounds were dismissed as premature or academic.
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