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TMI Blog2022 (12) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities on the basis that the functions performed, services and products supplied by both the units are identical, allocated the impugned expenditure to STP unit, without considering whether such expenditure was in fact incurred in relation to the STP unit. The assessee has also filed an application dated 29/04/2014 seeking admission of additional evidence, inter-alia, in support of its claim. Thus, we deem it appropriate to remand this issue to the file of AO for de novo adjudication after examination of all the details, including the details filed before us by way of additional evidence, in respect of impugned expenditures incurred by the assessee. We further direct that if upon examination it is found that the expenditure pertains to the places where assessee has no STP unit then said expenditure should be excluded while computing profit of STP unit. Further, the assessee shall be at liberty to file any other detail in support of its claim vis- -vis the impugned expenditures before the Assessing Officer for necessary examination.Assessee s appeal is allowed for statistical purpose. Exclusion of communication expenses from both export turnover as well as the total turnover, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capitalised for Income Tax purpose and debited to the profit and loss account. Assessee has also filed an application seeking admission of additional evidence, whereby the assessee has provided the sample copy of invoices in respect of these expenses as well as the details regarding the expenditure which has been capitalised and debited to the profit and loss account. Since, these details were not examined by the lower authorities, therefore, we considered it appropriate to remand this issue to the file of AO for de novo adjudication, by way of speaking order, after examination of all details, including the details filed before us by way of additional evidence. We further direct that upon examination, if it is found that any expenditure has already been capitalised by the assessee then said expenditure should be excluded. Assessee shall be at liberty to file any other detail in support of its claim. Disallowance of employees contribution to superannuation fund - HELD THAT:- As per the assessee, employees contribution to superannuation fund was deposited on or before the due date of filing of return of income. However, the Revenue disallowed the claim of the assessee on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (AE) were not at arm‟s length; 3. erred in invoking powers under section 92C(3) of the Act without fulfilling the conditions stated therein and considering the facts and circumstances of the case; 4. erred in disregarding the economic analysis undertaken by the Appellant, without proper justification and conducting a fresh economic analysis for the determination of the arm's length price in connection with the impugned international transactions; 5. failed to appreciate that the Appellant is availing tax holiday u/s 10A of the Act, and hence there is no intention to shit the profit base out of India, which is one of the basic intention of the introduction of transfer pricing provisions; Use of contemporaneous data 6. erred in determining the arm's length margin price by applying the data of the comparables for the financial year 2005-06 data, which was not available to the Appellant at the time of complying with the transfer pricing documentation requirements, as against multiple year data considered by the Appellant; Rejection of comparables identified by the Appellant and introducing new comparables 7. erred in using arbitrary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f services outside India; 16. Without prejudice to Ground No. 15 , erred in excluding the communication expenses from the export turnover and not excluding the same from total turnover while calculating the deduction under Section 10A of the Act; Depreciation granted on servers considered as 'Computer's as against 'Plant and Machinery‟ 17. erred in granting depreciation by classifying additions to servers amounting to Rs.19,587,053 in relation to the STP unit as 'Computers instead of 'Plant and Machinery and thereby reducing the profits eligible for deduction under Section 10A of the Act; 18. Without prejudice to the Ground No 17. should have on a consistent basis given similar treatment to the additions made to servers while computing the profits of non-10A unit; Disallowance of capital expenditure while computing the assessed income 19. erred in not considering the amount of Rs.15,054,179 being capital expenditure already disallowed in the return of income for the purpose of computing the income of the STP unit, thereby resulting in reduction in the amount eligible for deduction under section 10A; Disallowance und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground No. 11, raised in assessee s appeal, is pertaining to selection of profit level indicator ( PLI‟) for benchmarking the international transaction. 6. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is wholly owned subsidiary of Reuters Ltd., U.K. The Reuters group is a leading global provider of news, financial information, and technology solutions to the world s media, financial institutions, businesses and individuals. Assessee distributes Reuters products within the territory of India. During the year under consideration, assessee provided IT Enabled Services to its associated enterprises. For the relevant assessment year, assessee filed its return of income on 29/11/2006 declaring total income of Rs. 30,00,10,917. For benchmarking the aforesaid international transaction, assessee adopted Transitional Net Margin Method as the most appropriate method with operating profit by total cost as the PLI. The assessee after considering itself as a tested party selected the comparables, and accordingly concluded that its international transaction is at arm s length price. Pursuant to reference by the Assessing Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 2007-2008 accepting Cash profit / Operating cost as the PLI Similar position was demonstrated in respect of the order passed by the TPO for assessment year 2008-2009 also. 6. The further contention of the learned Departmental Representative that the principle of res judicata is not applicable in case of different years, is no doubt correct. Since the learned CIT(A) has allowed the claim of exclusion of depreciation by considering the fact that in subsequent assessment year Le. 2007-2008 TPO has accepted the same, therefore, the principle of consistency cannot be ignored. Here is a case in which the TPO has himself accepted the ratio of Cash profit / Operating cost as the correct PLI in assessee' own case for assessment years 2007-2008 and 2008-2009. Further the adoption of such PLI in the circumstances which are instantly prevailing has the sanction of law in view of several orders, as noted supra, passed by the tribunal. It, therefore, shows that the applicability of this PLI in the facts and circumstances as are presently prevailing, is an established position. In view of the foregoing discussion we hold that the learned CIT(A) was justified in applyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07-08 and 2008-09. Thus it is an acceptable ratio while applying the TNMM method. In any case on facts as obtained from the remand report of the TPO, the Authorities under the Act i.e. the CIT(A) as well as the Tribunal have for the subject assessment year found that the ratio of cash profits to operating cost is appropriate to determine the ALP. 11. We also find that even TPO has also accepted cash profit/cost as PLI for benchmarking the international transaction pertaining to ITeS in assessment years 2007 08 and 2008 09, in assessee s own case. 12. The learned DR could not show us any reason to deviate from the aforesaid orders and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present case is recurring in nature and has been decided in favour of the assessee by the decisions cited supra. Thus, respectfully following the decision rendered by Hon ble jurisdictional High Court in assessee s own case, we uphold the plea of the assessee and direct the TPO/Assessing Officer to consider profit before depreciation (PBDIT) as PLI for transfer pricing analysis. Accordingly, ground No. 11 raised in assessee s appeal is allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR vehemently relied upon the orders passed by the lower authorities. 19. We have considered the rival submissions and perused the material available on record. In the present case, assessee has non-STP units at Delhi, Mumbai and Calcutta, while its STP unit is in Bangalore. It is the plea of the assessee that expenses having allocated between the STP unit and non-STP unit on the respective cost centres of both the units. It is also the plea of the assessee that impugned expenditure is pertaining to places where assessee has no STP unit. We find that the lower authorities on the basis that the functions performed, services and products supplied by both the units are identical, allocated the impugned expenditure to STP unit, without considering whether such expenditure was in fact incurred in relation to the STP unit. The assessee has also filed an application dated 29/04/2014 seeking admission of additional evidence, inter-alia, in support of its claim. Thus, in view of the above, we deem it appropriate to remand this issue to the file of Assessing Officer for de novo adjudication after examination of all the details, including the details filed before us by way of additional ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation is chargeable at 15%. The Assessing Officer observed that following such an approach in case of STP unit, profits are inflated to the extent depreciation was short claimed and therefore, depreciation on servers is chargeable at 60% by considering the same in the category of computers . During the assessment proceedings, assessee submitted that similar treatment is to be given to the servers shown in the non-STP unit also. The Assessing Officer denied the aforesaid claim of the assessee on the basis that no such servers have been added to the fixed assets of non-STP unit. The learned DRP vide directions issued under section 144C(5) of the Act, inter-alia, rejected the plea of the assessee in respect of non-STP units inabsence of details, which shows that servers are added to non-STP units also. Being aggrieved, assessee is in appeal before us. 27. We have considered the rival submissions and perused the material available on record. It is the plea of the assessee that servers in non-STP units should be given similar treatment as was given in case of STP units and depreciation on the same should be charged at 60%. Details of addition to the fixed assets in case of non-STP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed for statistical purpose. 32. The issue arising in grounds no. 20 and 21, raised in assessee s appeal, is pertaining to disallowance of expenditure, inter-alia, in the nature of training, office renovation, office equipment and property maintenance under section 40(a)(ia) of the Act. 33. The brief facts of the case pertaining to this issue, as emanating from the record, are: The Assessing Officer, inter-alia, disallowed various expenditures incurred by the assessee under section 40(a)(ia) of the Act for non-deduction of tax at source while making the payment. The learned DRP, inter-alia, rejected the objections filed by the assessee. Being aggrieved, assessee is in appeal before us. 34. We have considered the rival submissions and perused the material available on record. In the present case, assessee had incurred certain training expenses for its employees to increase the efficiency of employees. The assessee also incurred certain expenses, in nature of reimbursement of office expenses. As per the assessee, some of these expenditures have been capitalised for Income Tax purpose and debited to the profit and loss account. The assessee has also filed an application see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of employee s contribution on or before the due date of filing of return of income is allowable. Thus, respectfully following the aforesaid judicial precedent, we direct the Assessing Officer to delete the disallowance made under section 2(24)(x) read with section 36(1)(va) of the Act. As a result, ground no. 22 raised in assessee s appeal is allowed. 38. Ground no. 23 raised in assessee s appeal is pertaining to grant of credit of tax deducted at source. We find that in respect of this issue also the assessee s rectification application dated 23/11/2010 under section 154 of the Act is still pending. Therefore, we direct the Assessing Officer to grant the credit of tax deducted at source after necessary verification and as per law. Accordingly, ground no. 23 raised in assessee s appeal is allowed for statistical purpose. 39. Ground no. 24 raised in assessee s appeal is pertaining to levy of interest under section 234B and 234C of the Act, which is consequential in nature. Thus, ground no. 24, is allowed for statistical purpose. 40. Ground no. 25 raised in assessee s appeal is pertaining to initiation of penalty proceedings, which is premature in nature and therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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