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TMI Blog2022 (2) TMI 1331X X X X Extracts X X X X X X X X Extracts X X X X ..... activities of the assessee in AY 2008-09 and 2009-10 also and since the same was disputed by the assessee before the Tribunal, the ITAT has restored the issue of transfer pricing adjustment to the file of the TPO by the coordinate bench - Thus we restore this issue to the file of the AO/TPO with similar directions. Disallowance of provision for warranty - A.R. submitted that the assessee has been providing for warranty liability on accrual basis on the basis of percentage of sales at the end of each year - contention of the assessee is that it is following a scientific method for determining the amount to be provided for warranty liability - HELD THAT:- We notice that the AO has rejected the claim without finding fault with the method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udevan, A.R. Respondent by : Shri Sumer Singh Meena, D.R. ORDER PER B.R. BASKARAN, ACCOUNTANT MEMBER: These cross appeals are directed against the assessment order dated 30.1.2015 passed by the A.O. for assessment year 2010-11 u/s 143(3) r.w.s 144C in pursuance of directions given by Ld. Dispute Resolution Panel ( DRP ). In the appeal filed by the assessee, following issues are contested:- a) Addition made on account of transfer pricing adjustment b) Disallowance of provision for warranty c) Disallowance of a part of software expenses treating as capital expenditure and other part u/s 40(a)(i) of the Income-tax Act,1961 ['the Act' for short] for non-deduction of tax at source. 2. The rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the following observations:- 11. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. The main dispute between the assessee and the department is with regard to characterization of services rendered to its AE. The assessee claims that services rendered to its AE are in the nature of engineering design services. The TPO has accepted the fact that the assessee is into mainly engineering design services; however, he has characterized the services rendered by the assessee to AE as ITES/BPO services. We find that although the assessee is mainly into the activity of providing engineering design services but, it is also into the activity of providing ITES services to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration and to decide the issue of characterization of services rendered by the assessee to its AE. We, further, noted that as observed by the learned DR although the assessee is deriving revenue from two segments, but failed to provided separate segmental details in its TP study and therefore the assessee is directed to segregate its services into engineering design services and ITES services for the purpose of determination of ALP of international transactions with its AE. Accordingly, following the above said decision, we restore this issue to the file of the AO/TPO with similar directions. 5. The next issue relates to disallowance of provision for warranty. The Ld. A.R. submitted that the assessee has been providing for warrant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60,90,985 Amount ( E ) = (D-C)- Provision created during FY 2009-10 11,77,163 The ld. A.R. submitted that the assessee placed reliance before the AO on the decision rendered by Hon ble Supreme Court in the case of Rotork Controls Pvt. Ltd. Vs. CIT (2009) 180 Taxman 422. The A.O. disallowed the provision amount of Rs.11,77,163/- holding that the assessee is not following scientific basis and the same was also confirmed by Ld. DRP. 6. The Ld. A.R. submitted that an identical disallowance was made in AY 2011-12 in the assessee s own case and the co-ordinate bench Tribunal has restored this issue to the file of AO for examining it afresh in its order passed in IT(TP)A No.650/Bang/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has deducted tax at source from the amount of Rs.53,49,303/- and did not deduct tax at source on the balance amount of Rs.13,12,642/-. Accordingly, the A.O., following the decision rendered by Hon ble High Court of Karnataka in the case of Samsung Electronics Ltd. disallowed the amount of Rs.13,12,642/-, which did not suffer TDS. With regard to the remaining amount of Rs.53,49,303/-, the A.O treated the same as capital expenditure and allowed depreciation @30% thereon. Accordingly, he disallowed the balance amount of Rs.38,14,512/-. The Ld. DRP upheld the disallowance subject to correction of some clerical mistake pointed out by the assessee. 9. The ld. A.R. submitted that the issue whether software expenses is capital or revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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