9911796707
TMI Blog2013 (1) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... ost borne by the assessee cannot be disallowed by taking the ALP at Nil keeping in view the facts and circumstances of the case and the relevant details furnished by the assessee. The exercise of ascertaining ALPs has to be done by the TPO keeping in view the well laid down scheme in the relevant provisions of the Act and addition, if any, on account of TP adjustment, has to be made only after doing such exercise. Therefore, restore this issue to the file of the AO/TPO with a direction to do such exercise and make addition - in favour of assessee for statistical purposes. Disallowance of depreciation of unit located at Silvassa - Held that:- Assessee's appeal is squarely covered against the assessee and in favour of the Revenue as decided in the case of Plastiblends Ltd. v. Addl. CIT [2009 (10) TMI 39 - BOMBAY HIGH COURT] wherein held that for the purposes of deduction under Chapter VIA, the gross total income has to be computed inter alia by deducting the deductions allowable under section 30 to 43D of the Act, including depreciation allowable under section 32. Deduction u/s 80-IB - disallowance of Other Income directly linked to Silvassa Unit,Interest received, Miscellaneou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the learned CIT(Appeals) to the extent of Rs. 1,68,80,675/-. 4. The assessee in the present case is a company which is engaged in the business of manufacturing and distribution of lubricant oils, greases, brake fluids and other speciality products. The return of income for the year under consideration was filed by it on 31-10-2002 declaring total income of Rs. 138,63,51,510/-. The assessee belongs to multi-national BP group of companies and during the year under consideration, it had entered into international transactions, inter alia, involving cost sharing and cost reimbursement with associated enterprises. As submitted in the TP report furnished by the assessee company, BP group undertakes worldwide information technology initiatives and the assessee company being a member of the said group, receives information technology support from its associated enterprises. It also shares the related cost incurred by the said enterprises in providing such support. During the year under consideration, significant IT costs were incurred relating to a Common Operating Environment System (COE3) deployed by the BP group worldwide. As claimed in the TP return, COE3 offered significant b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2001 and the business approval was to be obtained for this Phase 3 on 16.07.2001. Considering these facts, it can be stated that, during the year 2001, COE3 was not implemented, and the assessee did not submit any document, as required vide this office letter dated 16.08.2004. No supporting documents for this invoice are filed. Considering these facts, the Arm's Length Price of this transaction is computed at NIL. 5.3.2 Cost Allocation of Digital Business - Rs.4,225,647/- Paid/Payable to BP International Ltd., U.K. The amount in foreign currency is US$ 86,589. This is invoice dated 23.03.2002 and the details read as : "1Q02 D80 Infrastructure Charges". As discussed earlier, the assessee was asked to submit the details and basis of allocation, which is not submitted. These documents, it was required to obtain and maintain as per Clauses 5.3 and 5.4 of the Agreement. In absence of these documents, the Arm's Length Price of the transaction is computed at NIL. 5.3.3 Cost Allocation of Global Licenses Charges - Rs. 1,269,885/-Paid/Payable to BP International Ltd., U.K. :, The corresponding amount in US$ is 26,022. A copy of E-mail dated 25.03.2002 is submitted and the relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amounts paid payable to BP Singapore Pte Ltd., account of the following : ( i ) Cost Allocation of Digital Business Expenses Rs.2,923,472/- ( ii ) Allocation of Technical Expenses Rs. 647,110/- ( iii ) Reimbursement of Leased Line Charges Rs. 1,33,098/- ( iv ) Allocation of Expenses relating to COE3 Project Rs. 1,580,822/- ( v ) Allocation of Digital Business Performance Management Charges Rs. 214,443/- For supporting these expenses, an invoice for Singapore Dollar 168,561 is filed. The charges for Digital Business COE Charge Out, Data Charge Out, Telephone/ISL Charge Out, HR Charge Out, HSSE Charge Out, Digital Business ROM Charge Out are mentioned in the invoice. However, the documents as mentioned in the Clause 5.3 and 5.4 of the agreement i.e. whether these are the expenses incurred by the BP Singapore Pte Ltd. or re ass throh (sic) expenses, are not submitted. In absence of these expenses, the Arm's length Price on this allocation is also computed at Nil. This will result in disallowance of expense by the Assessing Officer of Rs. 6,498,957 5.3.7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r pricing of AUD 868.38 is not an allowable expense. This will result into disallowance of Rs. 21,214/- out of the expenses on this account claimed by the assessee. ( iv ) Allocation of Technical Services Fees - Rs.854,868/- For this expense also, a debit note dated March, 2002 by BP Australia Ltd. is filed and the relevant portion reads as: "Digital Business Project Recovery September, 2001 Base Costs - US$15,076.65 75% Transfer Pricing - US$1,130.75' For supporting the total Base Costs and basis of allocation, no documents are filed as required by Clauses 5.3 and 5.4 of the Service Agreement, therefore, the Arm's Length Price of this transaction is computed at NIL. ( v ) Cost Allocation of Digital Business Expenses Rs.8,526,505/- For this expense also, a debit note dated Feb. 2002 is filed. The relevant portion of this reads as: "Digital Business Project Recovery September, 2001 Base Costs - US$162,545.12 7.5% Transfer Pricing - US$ 12,190.88 Total - US$ 174,736.00 For this debit note also, no documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Additional details filed -Basis allocation Global and central downstream are allocated at USD 139 (Global team charges) + USD 140 (Downstream team charges). The basis of allocation for Microsoft license charges is USD 261 per seat. The basis for allocation is provided which is followed uniformly throughout the group. 2. Cost Allocation Digital Business Rs. 42,25,647/-USD 86,589 Filed copy of Invoice dt. 23/03/02 ALP determined as NIL. No details basis of allocation submitted. Additional details filed -Basis of allocation The amount calculated for Castrol India Ltd. is based on the number of total seats [396] for the entire India region. The basis for allocation is provided which is followed uniformly throughout the group. 3. Allocation of Federal charge on account of Digital business. Rs. 9,91,456/-USD 20,316 Invoice dt. 10.4.02 ALP determined as NIL. No supporting documents of service agreement submitted Additional details filed -Basis of allocation These charges are allocated to India site based on the COE seat count. India's share is 0.26% of the total charge. The amount charged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2,20,83,188/- is concerned, it is observed that fresh details were furnished by the assessee for the first time before the learned CIT(Appeals) giving complete details of the said expenses as well as the basis of allocation thereof. The said details were forwarded by the learned CIT(Appeals) to the AO/TPO and on verification of the same, the TPO accepted in his remand report that allocation/reimbursement of COE3 expenses to the extent of Rs. 2,20,83,188/- was in order. Keeping in view this finding recorded by the TPO in the remand report, the addition made on this issue to the extent of Rs. 2,20,83,188/- has been deleted by the learned CIT(Appeals) and, in our opinion, quite rightly so. We, therefore, find no merit in the solitary ground raised by the Revenue in its appeal on this issue and dismiss the same. 7. In so far as the allocation/reimbursement of COE3 expenses to the extent of Rs. 1,68,80,675/- is concerned, the learned counsel for the assessee has submitted before us that there is no dispute about the fact that significant costs were incurred related to COE3 project deployed by the BP group worldwide and the assessee company as a part of the said group had derived ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on the assets of Silvassa Unit. In the year under consideration, depreciation on the said assets was claimed by the assessee at Rs. 15,84,40,030/-. The said amount of depreciation was worked out by the assessee on the written down value of assets of Silvassa Unit without taking into consideration depreciation for the earlier years as no such depreciation in the earlier years was claimed by the assessee. Since the depreciation on the assets of Silvassa Unit was allowed by the AO in the earlier years, he worked out the written down value of the assets of Silvassa Unit after deducting the depreciation so allowed in the earlier years and recomputed the depreciation allowable to the assessee at Rs. 6,13,74,121/- on the written down value so worked out. This resulted in the disallowance of depreciation to the extent of Rs.9,70,65,909/-. On appeal, the learned CIT(Appeals) confirmed the said disallowance made by the AO relying on the decision of Hon'ble Bombay High Court in the case of Plastiblends Ltd. v. Addl. CIT [2009] 318 ITR 352. 10. We have heard the arguments of both the sides and perused the relevant material on record. As agreed even by the learned counsel for the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue confirming the disallowance made by the AO u/s 80-IB in respect of first four items of other income. 14. In so far as the claim of the assessee for deduction u/s 80-IB in respect of insurance claim of Rs. 54,02,609/- is concerned, it is observed that the same is covered in favour of the assessee by the decision of coordinate bench of this Tribunal at Delhi in the case of J.K. Aluminium Co. v. ITO rendered vide its order dated 29-04-2011 passed in ITA No. 3303/Del/2010. In the said decision, the coordinate bench of this Tribunal has held that refund of excise duty being refund of assessee's own money cannot be regarded as separate income at all and the AO, therefore, was not justified in denying the relief u/s 80-IB on that amount. While rendering this decision, the Tribunal has taken into consideration the decision of Hon'ble Supreme Court in the case of Liberty India (supra). In our opinion, the decision of the Tribunal in the case of J.K. Aluminium Co. (supra) is applicable in respect of insurance claim received by the assessee inasmuch as the same being reimbursement/recovery of expenses actually incurred by the assessee, it has no effect on the final income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
