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TMI Blog2016 (1) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... afore-mentioned peculiar factual position, we find that there is no merit in the departmental appeal. Disallowance of excess depreciation on UPS - Held that:- A perusal of the order shows that relying upon the decision of the Delhi High Court in the case of CIT vs BSES Rajdhani Power Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT ] depreciation @ 60% for UPS, printers and scanners on the ground that they formed integral part of the computer system is allowed and held to be applicable to block of computer. The position of law is well-settled, thus in the absence of any arguments to the contrary by the Revenue, Ground of the Revenue is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances as it is in an endeavour to avoid protracted litigation. 3. The relevant facts of the case as available from para 2 of the assessment order u/s 143(3) dated 29.12.2008 address the background of the assessee as under:- 2. "The assessee is engaged in the business of marketing and after sales support services to Nortel group companies, installation, testing and commissioning services in relation to telecom equipment/I.T/other products and technical services, including repair and maintenance services in relation to the telecom equipment/IT products supplied by Nortel group of companies in India." 3.1. The assessee in the year under consideration returned an income of ₹ 33,34,44,830/- wherein the assessment was concluded at a figure of ₹ 74,27,57,980/-. The assessee in the year under consideration disclosed the following international transactions in its 3CEB Report:- S.No. International Transactions Method Value Rs. 1. Import of components TNMM 714,98,28,572 2. Provision of technical support services (R&D) TNMM 4,63,56,666 3. Availing of technical services from AE TNMM 2,57,26,109 4. Provision of professional services (BSNL contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arm's length. 4.3. The TPO considering the comparables chosen by the assessee excluded 3 of the above on the ground that their financials for F.Y. 2004-05 were not available. He further excluded two loss making comparables, namely Hartron Communication and Himachal Futuristic Communication Ltd. Accordingly after retaining 5 comparables of the originally offered comparable companies by the assessee, he proposed an upward adjustment of ₹ 2.60 crore odd as their operating profits on operating revenue margin worked out as 13.52% whereas the assessee's margin was only 7%. The following five comparables retained were retained:- S.No. Particulars Operating profits on operating revenue (%) (2005) 1. Engineers India Limited 20.75 2. F L Smidth Limited 5.01 3. RITES Limited 19.24 4. TCE Consulting Engineers Ltd. 13.01 5. Water & Power Consultancy Services Ltd. 13.01 Arithmetic Mean 13.52 5. Aggrieved the assessee in appeal before the CIT(A) objected to the exclusion of HFCL based on the negative financial result of FY 2003-04 and 2004-05 and argued that simply because the company shown loss in 01-02 years it cannot be concluded that it is consistently a loss maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... billing and coding. The appellant has contended that it has considered only job work segment of the said company under which it is engaged in repairing and servicing of electronic cards for Keltron Ltd., a company operating in telecom sector. Obviously, Hartron Communication is not directly engaged in telecommunication industry and hence its business profile is substantially different from that of the appellant. Even if the appellant has used its job work segment, it can not be said that repairing and servicing of electronic cards are comparable with business activities of the appellant. Hence, I hold that FAR analysis of Hartron Communication does not permit it to be taken as comparable. 9.4 In view of discussion supra, there shall be 6 comparables and their profit margin after taking current year data only is worked out as under: S.No. Particulars Operating profits on operating revenue (%) 1. Engineers India Limited 20.75 2. FL Smidth Limited 5.01 3. RITES Limited 19.24 4. TCE Consulting Engineers Ltd. 9.63 5. Water & Power Consultancy Services Ltd. 13.01 6. Himachal Futuristic Communication Ltd. -27.01 Arithmetic Mean 6.77 9.5. Since the operating marg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is necessary for the Revenue at that stage to bring some cogent reason, argument or fact justifying that still the comparable needs to be excluded. Merely re-iterating the TPO's stand at this stage that it was consistently a loss making company does not hold good in the face of the finding of the CIT(A). The data placed on record by the assessee assails the conclusion and this fact has been accepted by the CIT(A). We further find that it remains unrebutted on record. In the afore-mentioned peculiar factual position, we find that there is no merit in the departmental appeal. The conclusion drawn is found supported by the decision of the Hon'ble Delhi High Court in the case of Chrys Capital and finding ourselves in agreement with the reasoning and the finding of the CIT(A), Ground no.1 of the Revenue is dismissed. 9. The facts relatable to Ground No.2 are found discussed in pages 3-5 of para 4 of the assessment order. In view of the stand taken by the assessee qua the same reference thereto is not necessary. 10. The issue has been considered by the CIT(A) at pages 19 to 20 in paras 21 to para 21.4 and again for similar reason there is no need to bring out the facts. 11. The rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80 days. Similarly, the claim on UPS and symmetra battery module added in July 2004 is allowed @15% on 4,96,365/- i.e ₹ 74,455/- . Hence the excess claim of depreciation amounting to ₹ 2,51,264/- (Rs.2,23,364/-+ ₹ 27,900/-) is hereby disallowed u/s 32 of the I.Tax Act and added back to the total income of the assessee. I am satisfied that the assessee company has furnished inaccurate particulars of its income and has suppressed its income on this issue, therefore, penalty proceedings u/s 271(1)(c) of I. Tax Act have been initiated separately." (Addition ₹ 2,51,264/- ) 13. The facts qua the issue are not in dispute and have been brought out in the impugned order as under:- 26. Appellant's case • "During the financial year relevant to subject assessment year, the appellant claimed depreciation of INR 297,189 @ 60% on the opening balance of UPS of INR 496,365 under the head 'Computer'. • The appellant had purchased another UPS in March 2005 for INR 124,000 and claimed depreciation of INR 37,200 on the same @ 30 per cent under the head 'Computer' since it was put to use for less than 180 days (i.e. 50% of the normal rate of depreciation perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsistent orders of the Delhi High Court and Coordinate Benches of the ITAT. In the absence of any arguments to the contrary by the Revenue, Ground No.3 of the Revenue is dismissed. 15. The facts relatable to Ground No.4 are found addressed at pages 8-12 of the assessment order and the issue has been considered by the CIT(A) at pages 23-29 vide paras 29-30.3 wherein before the start of the arguments of the Revenue, the Ld. AR submitted that in the peculiar facts of the present case, he is under instruction to seek a direction from the Bench that by allowing the Ground of the Revenue, the issue may be restored to the AO directing him to allow necessary relief as permissible on facts and law, keeping the concept of matching principle in mind where the Revenue is recognized and the necessary expenses to the extent incurred duly certified by the auditors sought to be placed on record by way of additional evidence may be considered and verified and if satisfied on facts may be directed to be allowed. 16. Ld. Sr. DR considering the fresh evidences sought to be filed by the assessee stated that he has no objection if the same are taken into consideration however the impugned order was as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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