9911796707
TMI Blog2018 (1) TMI 1394X X X X Extracts X X X X X X X X Extracts X X X X ..... on’ble Delhi High Court in the case of CIT vs. BSES Yamuna Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] has held that computer accessories and peripherals such as printers, scanners and server, etc. form an integral part of computer system and hence they are entitled to depreciation at higher rate of 60%. Thus we hold that the assessee is entitled to depreciation at the rate of 60% on computer peripherals. The ground raised by the assessee is allowed. Deduction u/s 10A on the income enhanced on account of disallowances made in the assessment order. It has been held in various decisions that whenever there is enhancement of income by the Assessing Officer on account of disallowance of expenses, the profit goes up and the enhanced profit is entitled to deduction u/s 10A of the I.T. Act. Therefore, the ground raised by the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... . Name OP/TC (%) 1 Alphageo (India) Ltd. 40.64 2 L&T Valdel Engs. (P) ltd. 22.43 3 M J B India Gas Turbine Services Ltd. 7.11 4 Mahindra Consulting Engineers Ltd. 2.71 5 Mahindra Engineering Services Ltd. 36.31 6 Mitcon Consulting Services Ltd. 36.32 7 Oil Field Instrumentation (India) Ltd. 74.83 8 Stup Consultation (P) Ltd. 25.07 9 T C E Consultation (P) Ltd. 20.99 10 Accuspeed Engineering Ltd. 2.34 11 ASE Structure Desgn (P) Ltd. (-) 0.95 12 Geometric Ltd. 13.18 13 MN Dastur Co. (P) Ltd. 5.63 Arithmetic Mean 22.04 Calculation of arm's length price Total cost of the assessee Rs.20,97,81,615/- ALP at a margin of 22.04% Rs.25,60,17,482/- Revenue shown Rs.22,99,90,787/- Adjustment u/s 92CA Rs.2,60,26,695/- 5. The Assessing Officer accordingly passed the draft assessment order making upward adjustment of ₹ 26,026,695/- towards the arm's length price of the international transactions undertaken by the assessee. 6. The Assessing Officer further observed that the assessee in its STPI unit has claimed deduction u/s 10A of the I.T. Act. The Assessing Officer asked the assessee to explain as to why the insurance expenses amounti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeing with the Ld. Transfer Pricing Officer's ('TPO') action of: 2.1 not appreciating that the Appellant and prepared the detailed contemporaneous Transfer Pricing documentation bona fide and in compliance with the Income tax Act, 1961 ('the Act') and Income Tax Rules, 1962 ('the Rules'). 2.2 not appreciating the fact that the Appellant had selected uncontrolled comparable companies based on a detailed Functional Asset and Risk ('FAR') analysis following a methodical benchmarking process and completely disregarding the comparable companies identified by the Appellant. 2.3 clubbing/ aggregating the activities of IT enabled engineering design services and software development services for the purpose of economic analysis and ignoring the fact that these activities have distinct functions, assets and risk profile and thus should not be aggregated for the purpose of determination of arm's length price. 2.4 selecting comparable companies whose FAR is different from the Assessee rendering them non-comparable to the Assessee. 2.5 disregarding the companies as identified by the Assessee, on a without prejudice basis, following the same methodology as adopted b the TPO. 2.6 fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred in law in proposing to charge interest under section 234B of the Act. The above grounds are without prejudice to each other. The appellant craves leave to alter, amend or withdraw all or any of the grounds herein or add any further grounds as may be considered necessary either before or during the hearing." 9. Ground no.1 by the assessee being general in nature is dismissed. 10. Ground no.2.3 was not pressed by the assessee for which ld. DR has no objection. Accordingly, ground no.2.3 is also dismissed. 11. So far as remaining set of grounds of appeal no.2 are concerned, they relate to the order of the Assessing Officer/DRP on account of adjustment of ₹ 2,60,26,695/- to the income of the assessee. 12. Ld. counsel for the assessee while arguing the case limited his argument to five of the comparables from the final set of comparables as chosen by the TPO and upheld by the DRP which are as under :- S.No. Company Name OP/OC % 1 Alphageo (India) Ltd. 40.64 2 Mahindra Engineering Services Ltd. 36.31 3 Mitcon Consultancy Services Ltd. 36.32 4 Oil Field Instrumentation (India) Ltd. 74.83 5 T C E Consulting Engineers Ltd. 20.99 13. So far as Alpha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of the Assessing Officer with the direction to find out the RPT and if it is more than 25%, the same should be excluded from the list of comparables. 16. So far as Mitcon Consultancy Services Ltd. is concerned, he submitted that the above comparable is functionally different. The above company has provided consultancy services and has organized several training programs that included workshops, vocational training centres, etc. It has incurred various vocational and IT training expenses and also has generated income from such trainings. Further, it is a power sector company and has numerous divisions engaged in diversified business. Therefore, the above company should not be considered as a comparable. 17. So far as Oil Field Instrumentation Limited is concerned, he submitted that the above company is also functionally different. It has diversified nature of operations and undertakes a wide range of services like Mud Logging services, supply of equipment etc. Referring to the Annual Report Compendium, he drew the attention of the Bench to page 122 of the Paper Book and submitted that the above company is into manufacturing activities and export of finished goods as is evident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India (P.) Ltd. (supra) wherein the Tribunal at para 5.9 of the order has observed as under :- "5.9 We have heard the rival submission and perused the relevant material on record including the paper book of the assessee. On perusal of the annual report of M/s Alphageo, we find that during the year under consideration the comparable company has shown income from seismic survey and other related services. On perusal of page 326 of the paper book, which is part of the annual report of M/s Alphageo , we find that the company was engaged in providing services of design and preplanning of 2-D and 3-D surveys, seismic data acquisition, seismic data interpretation , topographic surveys etc. as compared to the services of engineering design by the assessee. Thus, in our opinion, the comparable company was engaged in providing designs for survey as well as in conducting the surveys and data acquisition etc. Thus, we find that the assessee is engaged in providing only engineering design services whereas M/s Alphageo has provided many other engineering services. Further, the asset employed by M/s Alphageo is higher in terms of net fixed assets/sales ratio. In the case of the assessee, net fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious submissions of the assessee. We, therefore, restore this issue to the file of the Assessing Officer/TPO for fresh adjudication for inclusion/exclusion of the above two comparables. 24. So far as TCE Consulting Engineers Limited is concerned, we find the order of the TPO here is also very cryptic. The order of the DRP also is silent about the various arguments advanced by the assessee before them. Therefore, we deem it proper to restore the inclusion/exclusion of the above comparable to the file of the Assessing Officer/TPO with the direction to pass appropriate order by giving reasons regarding the inclusion/exclusion of the above three comparables. Grounds no.2.2, 2.5 to 2.11 are accordingly allowed for statistical purposes. 25. So far as ground no.3 is concerned, the ld. counsel for the assessee submitted that the assessee during the assessment year 2005-06 has deducted leaseline expenses from the turnover. Therefore, when the same is included in the previous year relevant to the assessment year 2007-08, the same should not be rejected. We find the order of the Assessing Officer on this issue is contrary to what the ld. counsel for the assessee has argued before us. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cited (supra), we hold that the assessee is entitled to depreciation at the rate of 60% on computer peripherals. The ground raised by the assessee is allowed. 28. So far as ground no.5 is concerned, the same relates to deduction u/s 10A of the I.T. Act on the income enhanced on account of disallowances made in the assessment order. It has been held in various decisions that whenever there is enhancement of income by the Assessing Officer on account of disallowance of expenses, the profit goes up and the enhanced profit is entitled to deduction u/s 10A of the I.T. Act. Therefore, the ground raised by the assessee is allowed. 29. So far as ground no.6 is concerned, the ld. counsel for the assessee submitted that due to some clerical errors by the Assessing Officer, there is difference in the figure in the draft assessment order and the final assessment order. Since this is a clerical error as argued by the ld. counsel for assessee, therefore, we restore the issue to the file of the Assessing Officer with the direction to verify the same and consider the correct income. The ground raised by the assessee is allowed for statistical purposes. 30. So far as ground no.7 is concerned, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
