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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 ..... EMBER: 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 revenue is in appeal assailing the relief granted by Ld DRP in respect of transfer pricing adjustment. 3. The Ld. A.R. submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders 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 its AE which is evident from the fact that the assessee has itself in its TP study has accepted the fact that the proportion of ITES and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 warranty liability on accrual basis on the basis of percentage of sales at the end of each year. The details of provision made as on 31.3.2010 are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l has restored this issue to the file of AO for examining it afresh in its order passed in IT(TP)A No.650/Bang/2016 dated 18.2.2020. 7. We heard Ld. D.R. on this issue and perused the record. We notice that the assessee had placed reliance on the decision rendered by Hon'ble Supreme Court in the case of Rotork Controls India Pvt. Ltd. (supra) and also the decision rendered by Hon'ble Delhi High Court in the case of CIT Vs. Goetz India Ltd. (2010) 8 Taxmann.com 303. The contention of the assessee is that it is following a scientific method for determining the amount to be provided for warranty liability. We notice that the AO has rejected the claim without finding fault with the method adopted by the assessee to determine the quantum of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the assessee. 9. The ld. A.R. submitted that the issue whether software expenses is capital or revenue in nature has been decided by the special bench in the case of Amway India Enterprises (2008) 111 ITD 112. With regard to the disallowance u/s 40(a)(i) of the Act, the Ld. A.R. submitted that the decision rendered by Hon'ble Karnataka High Court in the case of Samsung Electronics Ltd. (supra) has since been reversed by the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (LL 2021 SC 124). Accordingly, he prayed that both the issues, viz., software expenses disallowed as capital in nature and disallowed u/s 40(a)(i) of the Act require re-examination by considering the above said decisions. 10. We heard t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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