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TMI Blog2020 (9) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... nces, provisions of section 40a(i)/(ia) can be invoked has already been decided by the Mumbai Tribunal in the case of SKOL Breweries Ltd. [ 2013 (1) TMI 623 - ITAT MUMBAI] as held The deduction under section 32 is not in respect of the amount paid or payable which is subjected to TDS; but it is a statutory deduction on an asset which is otherwise eligible for deduction of deprecation. Depreciation is not an outgoing expenditure and therefore, the provisions of Section 40(a)(i) are not attracted on such deduction. Also see M/S MARK AUTO INDUSTRIES LTD. [ 2013 (1) TMI 448 - PUNJAB AND HARYANA HIGH COURT] - Decided against revenue. - IT (TP) APPEAL NO. 2193 (BANG.) OF 2019, CO. NO. 1 (BANG.) OF 2020 - - - Dated:- 31-8-2020 - N.V.Vasudevan, Vice-President And G. Manjunatha, Accountant Member For the Appellant : Priyadarshi Misra Jt. CIT (DR) For the Respondent : Darpan Kirpalani, Adv. ORDER N.V. VASUDEVAN, VICE PRESIDENT. 1. The appeal is by the revenue against the order dated 12-6-2019 of the CIT(Appeals)-6, Bengaluru relating to assessment year 2010-11. The assessee has filed Cross Objection against the very same order of CIT(Appeals). 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered as at Arm's Length. 5. The Transfer Pricing Officer (TPO) to whom the determination of ALP was referred to by the AO, accepted TNMM as the MAM and also used the same PLI for comparison i.e., OP/TC. He also selected some comparable companies from database. The TPO accepted some companies chosen by the Assessee as comparable companies. The TPO on his own identified some other companies as comparable with the Assessee company and worked out the average arithmetic mean of their profit margins as follows:- Sl. No. NAME PLI 1 Accentia Technologies Ltd. 43.06% 2 Acropetal Technologies Ltd. (Seg) 22.27% 3 E-Clerx Services Ltd. 55.97% 4 Fortune Infotech Ltd. 22.80% 5 ICRA Online Ltd. (Seg) 43.39% 6 Informed Technologies India Ltd. 26.15% 7 Infosys BPO 31.23% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts and circumstances of the case, whether the Ld CIT(A) is justified in directing the TPO to exclude the company M/s. E-Clerx Services Limited, without appreciating that the definition of ITeS service in the CBDT Notification doesn't differentiate between BPO and KPO services and that there is no basis for the contention that the companies providing KPO services do not fall in the category of ITeS providers. 4. On the facts and circumstances of the case, whether the Ld CIT(A) is justified in directing the TPO to include the company M/s. Microgenetics Systems Limited, in the list of comparables even though it wasn't considered by the taxpayer or the TPO during the TP audit proceedings as its inclusion at this stage would amount of cherry picking of comparables. 5. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT(A), in so far as it relates to the above grounds may be reversed and that of the Assessing Officer be restored. 6. The appellant craves leave to add, to alter, to amend or delete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is whether for the purpose of determining the arm's length price of international transactions of the assessee company providing back office support services to their overseas associated enterprises, companies performing KPO functions should be considered as comparable ?. In our opinion, the answer to this question will depend on the facts and circumstances of each case inasmuch as if the assessee company, on the basis of its own functional profile, is found to have provided to its AE the low-end back office support services like voice or data processing services as a whole or substantially the whole, the companies providing mainly high-end services by using their specialized knowledge and domain expertise cannot be considered as comparables. (Emphasis supplied) 11. As far as ground 3 raised by the revenue is concerned, the challenge to the exclusion of E-Clerk Services Ltd. and the argument in this regard are identical to the arguments advanced in the case of Acropetal Technologies Ltd. The exclusion of E-Clerk Services Ltd. was considered by the Special Bench in the case of Maersk Global Centres (India) (P.) Ltd. (supra) and for the same reason for which Acropetal Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this filter has been upheld in pares 5.7 supra, the exclusion of these three companies by the TPO is upheld. This ground of appeal is therefore partly allowed. (Emphasis supplied) 13. We are of the view that it would be just and appropriate to set aside the issue of comparability of this company to the TPO/AO for consideration afresh. We hold and direct accordingly. 14. The other grounds of appeal by the revenue are general in nature and calls for no specific adjudication. 15. As far as CO of the assessee is concerned, the grounds of CO which survive for consideration are grounds 1 to 6 which are as follows:- Corporate Tax matters 1. The learned AO has erred, in law and on facts, by disallowing depreciation on capital assets on the basis that no tax has been deducted at source while making payment for such assets. Further, the learned AO has erred in law, by not giving the Assessee an opportunity of being heard in this respect. 2. The learned CIT(A) has erred, in law and on facts, by directing disallowance of the entire amount incurred towards purchase of software on which tax has not been deducted at source. In doing so, the learned CIT(A) failed to ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation should be disallowed by invoking the provisions of section 40a(i)/(ia) of the Act. Accordingly, the aforesaid sum of ₹ 3,87,497 claimed as depreciation on software was disallowed by the AO. 18. On appeal by the assessee, the CIT(Appeals) confirmed the order of AO. 19. The crux of the argument of the ld. counsel for the assessee was that depreciation is a statutory allowance and it cannot be disallowed by invoking the provisions of section 40a(i)/(ia) of the Act and in this connection placed reliance on the decision of Mumbai Tribunal in the case of SKOL Breweries Ltd. v. DCIT [2013] 29 taxmann.com 111 [Mum Trib]. 20. The ld. DR relied on the order of CIT(Appeals). 21. We have considered the rival submissions and we find that admittedly the expenditure in question incurred in respect of purchase of software has been capitalized in the books of account and has not been debited to the P L account. The question whether in such circumstances, provisions of section 40a(i)/(ia) can be invoked has already been decided by the Mumbai Tribunal in the case of SKOL Breweries Ltd. (supra) wherein it was held as follows:- Depreciation is a statutory deduction and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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