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TMI Blog2011 (8) TMI 945X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of wiring etc. and the appropriate head under which the wiring etc. should be classified. Interest u/s 234B - Held that:- MAT credit should be allowed before arriving at the amount on which interest is charged u/s 234B and 234D. See CIT v. Jindal Exports Ltd(2003 -TMI - 52119 - Tribunal) Transfer Pricing - ALP - assessee chose comparable uncontrolled price ("CUP" ) method to justify the value of international transactions with the AEs - Revenue contended CUP method to be inappropriate - Held that:- CUP method adopted is appropriate since there is no instance of uncontrolled sale either to Germany or to South American countries where the goods were actually shipped by the assessee on CIF basis. In these circumstances, we think it fit to restore the whole matter to the file of the AO for fresh determination of the ALP of international transactions with AEs. by applying an appropriate method. - IT Appeal Nos. 3582 and 3659 (Delhi) of 2007 - - - Dated:- 5-8-2011 - C.L. Sethi, K.G. Bansal, JJ. Narendra Chand for the Appellant. G.C. Srivastava, Manonit Dalal, V.P. Gupta and Basant Kumar for the Respondent. ORDER K.G. Bansal, Accountant Member These cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been disputed by the learned DR. The decision of the High Court has been placed on page No.30 of the enclosures to the chart, rendered in I.T.A. No.133/09 dated 25.03.2009. One of the questions before the Hon'ble Court was - whether ITAT was correct in law in upholding the order of CIT(A) and deleting the addition of Rs. 59,35,292/- on account of capitalized emergency spares? It is mentioned that the learned counsel for the revenue conceded that this issue stands covered by the decision of the court in I.T.A. No.873/08 dated 27.02.2009 entitled CIT v. Insilco Ltd. [2009] 179 Taxman 55 (Delhi) which is the assessee's own case relating toe immediately preceding assessment year. In view thereof, the appeal was dismissed. The decision of Hon'ble Supreme Court has been placed on page No.30A, in which the special leave petition bearing No.16475/2009 was dismissed on 06.11.2009. Relying on these decisions, this ground is allowed. 4. Ground No.4(a) is against the finding of the CIT(A) regarding disallowance of an amount of Rs. 5,82,148/-. It is mentioned that the assessee-company made a payment of Rs. 5,82,148/- during the year as long service award, and the Assessing Officer w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70/- made by the Assessing Officer has been upheld. At this stage, we may also make a mention about the finding of the Assessing Officer in this matter. He has furnished a table of assets in respect of which the rate of depreciation is in dispute. Thereafter, it has been mentioned that wiring is an integral part of the factory or non-factory building. Therefore, the depreciation is allowable at the rates in force for factory or non-factory buildings. It is further mentioned that the assessee has itself claimed depreciation @10% on similar additions made to the assets during this year. Thus, from the order it appears that the assets on which depreciation @25% is claimed, have been brought forward from earlier years. 5.1 Before us, it has been stated in the written submissions that the assessee had claimed deduction of depreciation @25% on electrical wires, cabling and wiring for telephone systems etc. The details of the assets have been mentioned, which are the same as tabulated by the Assessing Officer in the assessment order. It is further stated that Appendix 1 of the I.T. Rules, contains a list of various assets under the head "plant and machinery." While computing depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts have not been fully ascertained in this matter. Therefore, we think it fit to restore the matter to the file of the Assessing Officer for determining the year of installation of wiring etc. and the appropriate head under which the wiring etc. should be classified. He may hear the assessee in the matter and pass a fresh order after ascertaining the facts. Thus, this ground is treated as allowed for statistical purposes. 6. Ground No.6 is in respect of computation of interest u/s 234B of the Act. The dispute is whether the interest should be calculated on the amount payable after giving MAT credit or before giving such credit. This issue admittedly stands covered by the decision of Hon'ble Delhi High Court in the case of CIT v. Jindal Exports Ltd., [2009] 179 Taxman 391, as also under the decision of "F" Bench of Delhi Tribunal in the case of the assessee itself for assessment year 2003-04. It has been held that MAT credit should be allowed before arriving at the amount on which interest is charged u/s 234B and 234D. Respectfully following these decisions, the ground taken by the assessee is allowed. 7. Ground No.7 regarding initiation of penalties u/s 271(1)(c); 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch examples have been narrated in the order. It has been concluded in respect of such transactions that the only reason for sale through AEs to the final customers seems to be to transfer profits from the assessee to the A.Es. Further, in spite of taking average yearly sale price, the TPO adopted average monthly price on the ground that u/s 92(1) each transaction has to be evaluated separately. As against the aforesaid, the submission of the assessee had been that goods have been sold to the AEs for improving capacity utilization, therefore, no adverse inference should be drawn in respect of such transactions, as the assessee had no other option. This submission has been rejected by mentioning that Rule 10B does not allow any adjustment on account of business compulsions. There is one more point of divergence between the transfer pricing study report of the assessee and the order of the TPO. It is mentioned that CUP method will have to be seen in the light of the fact as to whether goods are sold on FOB or CIF basis. In order to neutralize the impact of this issue, prices have been compared on FOB India (Net of freight at Indian port). After considering these matters, the TPO came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of FOB price was quite justified for the purpose of making transfer pricing adjustment due to varying distances of the place of ultimate buyers. However, it was fairly conceded that CUP method may not really be justifiable in respect of ultimate sales to South American countries made through the A.E. as no sale to any independent party was made there. At this stage, the learned counsel also submitted that in a subsequent year, the appropriate method has been taken as transaction net margin method. For this purpose, the order of the TPO for assessment year 2007-08 has been placed on record. As the CUP method is not the suitable method for arriving at arm's length price, it was submitted by the learned counsel that the whole matter may be restored to the file of the Assessing Officer for fresh determination. This submission was not opposed by the learned DR. 8.4 We have considered the facts of the case and rival submissions. We do agree with the submissions of the learned counsel that CUP method is not appropriate in respect of sales made to the Degussa, AG, Germany. The reason is that there is no instance of uncontrolled sale either to Germany or to South American countries whe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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