9911796707
TMI Blog2014 (11) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... de to the file of TPO with the direction to eliminate the difference, if any – Decided in favour of assessee. Depreciation on computer peripherals on the UPS @ 60% – Held that:- The UPS system is designed special for computers for both low and high users and it forms part of entire information technology infrastructure of the company - The UPS is entitled for depreciation @ 60% as decided in CIT vs. BSES Rajdhani Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] - assessee company is eligible for depreciation @ 60% on UPS – Decided in favour of assessee. - ITA No. 107/PNJ/2012 - - - Dated:- 8-8-2014 - SHRI P. K. BANSAL AND SHRI D.T. GARASIA, JJ. For The Appellant by : Shri P.J. Pardiwalla, Sr. Adv. For The Respondent by : Smt. Asha Desai, Ld. DR. ORDER PER: D.T. GARASIA This appeal has been filed by the assessee against the order of ACIT, Circle-1, Margao order dated 28.09.2012 for the Assessment Year 2008-09. 2. The following grounds are raised in this appeal as under:- Ground No. 1: On the facts and in the circumstances of the case and in law, the Assessing Officer ( AO?) grossly erred, in conformity with the directions of Hon?ble Dispute Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer Pricing Officer (TPO) has not considered that this year was first year of company operation. Since, the company was new to the Indian Market, initially it procured pumps in CKD/SKD sets and started assembling the same. Since almost 80% of materials were imported from Germany, the material cost was higher due to high value addition in Germany, fright and handling charges and basic customs duty of 7.5% and education cess. The company s products were substantially designed and made in Germany containing many features not offered by the competition in India. The established players in the industry were offering a no-frill basic machine, lower build dimensions, etc with substantially higher local content. In comparison to competition, the company s material costs were therefore higher. The Selling Price in the market was dictated by the pricing policies of the established market players like Sany Heavy Industries, Schwing Stetter, Greaves. The Company manufactured and sold machines of a stronger build, better featues but had to compete with similar machine models offered by competition. Due to this, the sales realization was given by the market and the company incurred loss at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Annexure contains details in respect of components which formed part of SKD units (i.e. assembly done in Germany by AE) procured by the appellant company in FY 2007-08 but in subsequent year these components were individually imported and assembled in India. The average difference (i.e. decrease ) in price in subsequent year vis- -vis comparative unit price in FY 2007-08 is approximately 11% only and it is due to no assembly cost involved for AE in subsequent year where parts have been purchased individually and not in SKD form. 4. Comparative analysis of price per unit charged for components forming part of Semi-Knocked Down (SKD) unit (SKD BSA 140X- D, Ph.3) sold by the AE to the appellant company in the financial year 2007-08 and corresponding price per unit charged for the individual components supplied by the AE in subsequent year is given in Annexure # 4 . The working given in this Annexure contains details in respect of components which formed part of SKD units (i.e. assembly done in Germany by AE) procured by the appellant company in FY 2007-08 and subsequent year these components were individually imported and assembled in India. From the comparative price ana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business model of a car marker having 98.5% import content in raw material normally could not be same as of a car maker having import content of 26 per cent to 56.84% and thus, no comparisons were possible between them, unless impact of import contents was eliminated. The Tribunal remitted back this matter to TPO to consider the element of high costs of raw material due to import. The learned AR has similarly relied upon the decision in ITA No. 120/Pune/2011, in the case of Demag Cranes Components (India) Pvt. Ltd. vs.DCIT, wherein the similar issue has arisen and following the decision of Skoda Auto India (P.) Ltd., the matter was restored to the TPO/AO/DRP to consider the same in accordance with the law. 2.3. The learned DR relied upon the order of the AO. 3. We have heard the rival contention of both the parties. Looking to the facts and circumstances of the case, we find that the during the course of hearing the assessee has submitted the details in respect of materials, components or parts purchased by the assessee from its AE during the financial year 2007-08 and corresponding particulars of transactions is given in Annexure-1 . The workings given in Annexure-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a), but what is to be really seen is whether this high import content was necessitated by the extraordinary circumstances beyond assessee s control. As was observed by a Co-ordinate Bench of this Tribunal in the case of E-Gain Communication (P) Ltd. (supra) the differences which are likely to materially affect the price, cost charged or paid in, or the profit in the open market are to be taken into consideration with the idea to make reasonable and accurate adjustment to eliminate the differences having material effect . We do not agree with the AO that every time the assessee pays the higher import duty, it must be passed on to the customers or it must be adjusted for in negotiating the purchasing price. All these things could be relevant only when higher import content is a part of the business model which the assessee has consciously chosen but then (fit is a business model to import the SKD kits of the cars, assemble it and sell it in the market, that Is certainly not the business models of the comparables that the TPO has adopted in this case. The adjustments then are required to be made for functionally differences. The other way of looking at the present situation is to ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO with the direction to eliminate the difference, if any. However, TPO/AO/DRP shall see to it whether the differences in question is likely to materially affect the price or cost charged or paid in, or the profit arising from, such transactions in the open market as envisaged in Sub-Rule 3 of Rule 10B of Income Tax Rule 1962. The appeal is allowed for statistical purpose on this ground. . 4. Second Ground:- The assessee has claimed depreciation on the UPS @ 60%, taking it as part of Computer. The assessee submitted that the UPS system form part of their server and it is not stand alone and accordingly requested to allow the depreciation as claimed by it. The AO held that UPS is not an integral part of the computer, therefore higher rate of depreciation cannot be allowed. 4.1. The matter carried to DRP and DRP has upheld the action of the AO. 4.2. We have heard the rival contention of both the parties. Looking to the facts and circumstances of the case, we find that the UPS system is designed special for computers for both low and high users and it forms part of entire information technology infrastructure of the company. The UPS is entitled for depreciation @ 60% as hel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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