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TMI Blog2011 (7) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... after accepting the working of Depreciation/Total cost ratio, failed to make adjustment for extraordinary items of depreciation in the order. Therefore, no perversity is found in said order. Advertisement expenses - Capital or revenue expenditure - Held that:- Cost of a signboard cannot be contemplated as a capital expenditure because the benefit accruing to the assessee cannot be said to be in the capital field. It merely facilitates the assessee’s trading operations. Thus rightly held as revenue expenditure See Empire Jute Co. Ltd. vs. CIT [1980 (5) TMI 1 - SUPREME Court] - Decided in favor of the assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... For the assessment year 2005-06, the assessee filed its return on 31.10.2005, declaring loss of Rs.25,28,901/-. The return was processed under Section 143(1) of the Act. Assessment under Section 143(3) was completed vide order dated 26.12.008 at an income of Rs.61,29,390/- whereby the assessing officer made certain additions, i.e. Rs.79,84,438/- on account of difference in Arm's Length Price; Rs. 1,00,000/- on account of disallowance of advertisement and three more amounts of Rs. 4,80,000/-, 52,416/-, and 41,434/- on account of disallowance of Diwali expenses, Refreshment expenses and Printing and Stationery expenses, respectively. 4. The assessee filed appeal before the Commissioner of Income Tax (Appeals) [for short "the CIT(A)"]. The C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricing Officer for determination of correct profits of the assessee, the revenue had relied upon the instances of the following three Companies. The data of the said Companies is reproduced here-in-below: Sr. No. Comparable Companies S To. OP/TC (%) Wages/TC (%) Depr/TC (%) 1. Allsee Technologies Ltd. 57.58 30.49 48.73 8.74 2. Wipro BPO Solutions Ltd. 647.72 27.50 44.36 9.57 3. Cepha Imaging Pvt. Ltd. 10.04 47.70 32.97 13.98 Average 35.26% 9. By relying upon the above, the Revenue had tried to convince the Tribunal that average of 35.26% should have been adopted. On the other hand, the assessee had placed reliance on the same kind of data of different Companies to persuade the authorities for applying the average ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n cases enumerated in para 7.4.2 of the T.P.O's order are not strictly comparable having regard to their level of operation and turnover. Therefore, we are not inclined to accept the plea of the learned DR that all the eleven cases be considered for the purposes of comparability analysis. At this point, we may also notice that though the assessee assailed the selection of comparable cases before the CIT(A) but there is no specific finding on this aspect, and instead he has adopted an adhoc Operating cost/Total cost ratio of 15% for the purposes of computing the ultimate ALP. We find no justificationto approve the action of the CIT(A) in this regard. Considering the entirety of circumstances, in our considered opinion, the following four com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion as is evident from the working done in para 9 of his order, and accordingly there is no dispute on this aspect. The dispute surviving before us pertains to the plea of the assessee for adjustment of depreciation amounting to Rs. 31,82,586/- which has been denied while computing the LAP as per para 9 of the TPO's order. In this connection the TPO has observed as under in para 8.2 of the order: "8.2 As may be observed from above, Depreciation / cost ratio in the case of assessee is 26.16% and is far higher as compared to all the comparables listed in the table below para No. 7.4.2. Considering the submission of assessee on extraordinary expenditure on administrative assets (cars purchased), Wages/ Total cost and Depreciation/ Total cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, no substantial question of law, as claimed on this issue, arises for consideration by this Court. 15. The last question is, whether the advertisement expenses would form part of capital expenses. The assessee had debited a sum of Rs. 1,00,000/- on account of advertisement expenses which it had spent on purchase of sign-boards and had, thus, treated the same as revenue expenses. The case of the revenue on this point, however, was that it was capital in nature. The Tribunal recorded the following findings on this issue, which are: "We have considered the rival submissions carefully. In our considered opinion, cost of a signboard cannot be contemplated as a capital expenditure because the benefit accruing to the assessee cannot be said to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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