9911796707
TMI Blog2022 (7) TMI 1417X X X X Extracts X X X X X X X X Extracts X X X X ..... dia by a variety of financing options. 2.1 For the AY -2017-18, the Appellant filed the return of income on November 11, 2017, wherein the Appellant had disclosed INR 369,08,46,410 as total income [(under the normal provisions of the Income Tax Act, 1961 (`the Act')] and was liable to pay income tax amounting to INR 127,73,28,126 (including surcharge and education cess). Post availing tax credit under Section 115JAA of the Act [Minimum Alternate Tax (MAT') provisions], the net tax liability was determined to INR 43,68,24,082. The same was discharged by the Appellant by way of taxes deducted at source amounting to INR 27,63,89,762 and advance tax amounting to INR 24,50,00,000 thereby claiming refund of INR 8,45,65,680. Subsequently, the case was picked up for scrutiny assessment under section 143(2) of the Act by the Assistant Commissioner of Income Tax - Circle 2(1)(1) vide notice dated September 5, 2018, for which appropriate response was provided. During the scrutiny assessment the jurisdiction of the Appellant was transferred to National e-Assessment Centre, Delhi (hereinafter referred to as the `learned faceless AO'). Further, during the assessment proceedings, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to the assets leased out by it under finance lease, thereby disallowing the claim for depreciation made by Cisco Capital in the return of income. 2) Without prejudice to the above grounds, the learned AO has erred in law and in fact, by not allowing depreciation on the opening written down value ("WDV") of the block of assets leased out under finance lease arrangement, pursuant to allowance of depreciation on the same block of assets for some of the prior years. 3) Without prejudice to the above grounds, the learned AO has erred law and in fact by not deducting the lease rentals received by the Assessee on assets leased out under finance lease (offered to tax by the Assessee in the return of income filed) while computing total income of the Assessee, in spite of depreciation on such assets being disallowed." 3.2 The first ground for our consideration is with regard to disallowance of depreciation on assets given under finance lease. After hearing both the parties, we are of the opinion that similar issue came for our consideration before this Tribunal in assessee's own case for assessment year 2016-17 wherein the Tribunal held as under: 8. "The ld. AR submitted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ger res integra and is squarely covered by the decision of the Hon'ble Supreme Court in M/s ICDS Ltd (Supra) as well as the judgement delivered by the Division bench of this court in case of Hewlett Packard India Sales Pvt Ltd (Supra)." 9. The ld. AR further submitted that the Tribunal in Assessee's own case for AY 2011-12 and AY 2013-14 dated June 7, 2019 has held that the decision in the case of M/s Asea Brown Boveri Ltd Vs. Industrial Finance Corporation of India & Ors in CA 3574 of 1998 dated October 27, 2004 as relied on by the Department is not on the issue of claim of depreciation of assets given on financial lease under the Act and was rendered in an appeal under section 10 of the Special Court Act, 1992. Further, the Tribunal also observed that the decision of the Hon'ble Supreme Court in the case of ICDS (supra) was delivered much after the judgement of in the case of Asea Brown Boveri Ltd (supa). Accordingly, the Tribunal has reversed the findings in the final assessment order dated November 24, 2017 and remanded the matter back to AO's file for fresh adjudication with a direction to the assessee to produce the copies of the lease agreements called for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... October 27, ,2004. This judgment is not on the issue of claim of depreciation of assets given on financial lease under the Income-Tax Act, 1961 ["the Act"]. This judgment was rendered in an appeal under section 10 of the Special Courts (Trials of Offences relating to Transactions in Securities) Act, 1992. In fact, the judgment of Hon'ble Supreme Court in the case of ICDS Ltd. (supra) has been delivered much after the judgment in the case of Asea Brown Boveri Ltd (supra). Hence, these findings of the ld. AO, which were approved by the DRP are hereby reversed as these are not in accordance with law. 7. Be it as it may, as at page 18 of the final assessment order for the AY 2011-12, the AO records that the assessee was asked to produce copies of agreements and that the assessee had only produced a few of them. We agree with the argument of the ld. DR that at least some more agreements have to be produced for examination before the AO, so that the submissions of the assessee that, the terms of the agreement in these financial leases are similar to the terms of the agreement considered by the Hon'ble Supreme Court in the case of ICDS Ltd. (supra) is correct or not. 8. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed the above grounds and hence these grounds are dismissed as not pressed. 5. Ground Nos.7 to 17 of the appeal of the assessee are reproduced as under:- "B. Grounds of appeal in relation to transfer pricing matters Initiating scrutiny proceedings in relation to Specified domestic transaction, not considering amendment made by Finance Act - 2017 7. The learned AO/TPO has erred in law and fact, by initiating scrutiny proceedings in relation to the specified domestic transaction of payment made by the Appellant towards the fees for administrative support services to the AE. disregarding the deletion of clause (i) of section 92BA of the Act by virtue of amendment by the Finance Act, 2017 w.e.f April 1, 2017. Transfer pricing adjustment on account of re-characterization of payment made for administration support services Treating payment for administrative support services to Cisco Systems India Private Limited ('Cisco India') as an International transaction 8. The learned TPO/AO has failed to appreciate the fact that the agreement between Cisco Capital and Cisco India for availing of administrative support services (which was in the nature of outsourcing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Without prejudice to the other grounds, the learned AO/TPO have erred. in law and in fact by a) not appreciating the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with Income Tax Rules, 1962, b) rejecting the transfer pricing approach identified by the Appellant in its transfer pricing documentation report maintained, c) conducting a fresh economic analysis for identification of comparables (with unreasonable comparability criteria) and determining of the ALP in connection with the impugned specified domestic transaction. Rejection of Non-comparable companies 15. Without prejudice, the learned TPO/ AO has erred. in law and in fact. by selecting certain companies as comparable companies ignoring the fact that the companies are functionally different: a) Pressman Advertising Limited b) Majestic Research Service and Solutions Limited c) Scarecrow Communications Limited 16. Without prejudice, the learned TPO/ AO has erred, in law and on facts. in erroneously selecting the companies that has high fluctuating profit trend as comparable i.e. Pressman Advertising Limited. 17. Without prejudice, the learned T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s length after considering the payment of administrative and marketing support services as part of operating cost, no separate adjustment is warranted in respect of the same. 20. We have both the parties. This issue came up for consideration in assessee's own case in AY 2015-16 in IT(TP)A No.2614/Bang/2019 and by order dated 8.4.2021 the Tribunal held as under:- "6.7 It is also an admitted fact that assessee has been carrying out these activities in a bundled format in the preceding years which has not been objected by the Ld.TPO/AO. Further that all these expenses incurred by assessee towards administrative expenses and sales and marketing expenses stands subsumed in the operating expenses under TNMM for computing the arm's length margin of the international transaction, a separate benchmarking may not be necessary. However all these things deserves verification at the end of Ld.AO/TPO. The Ld.AO/TPO shall verify the transactions as indicated hereinabove. In the event the expenses are subsumed under TNMM we do not find any necessity for a separate benchmarking. Accordingly these grounds raised by assessee stands partly allowed." 21. Taking a consistent view, we hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m its earlier order in the same case, rejected the contention that interest gets subsumed in the working capital adjustment. The Tribunal held that the deferred receivable transaction has to be analysed as a separate international transaction, and also observed that working capital adjustment can have no impact on the determination of ALP of international transaction relating to interest on deferred receivable. The relevant extract of the observation is as under: "19. In the case of Ameriprise (supra), it has been observed that the working capital adjustment is in respect of international transaction of rendering services to the AE. Interest for credit period allowed as per the agreement is given in the price charged for rendering of services. Whereas the non-realisation of invoice value beyond the stipulated period is a separate international transaction whose ALP is required to be determined. Granting of working capital adjustment is confined to the international transaction of rendering of services, whose ALP is separately determinable. On the other hand, the international transaction of interest receivable from its AEs for late realization of invoices beyond such stipulated p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d computing notional interest on such trade receivables. The main contention of the ld. AR is that deferred receivables would not constitute a separate international transaction and need not be benchmarked while determining the ALP of the international transaction. In our opinion, this issue was considered by the Tribunal in assessee's own case for AY 2014-15 and in para 23 to 23.9 of the order dated 21.5.2020 this Tribunal held as under:- "23. Ground No. 14-17 alleged by assessee against adjustment of notional interest on outstanding receivables. From TP study, it is observed that payments to assessee are not contingent upon payment received by AEs from their respective customers. Further Ld.AR submitted that working capital adjustment undertaken by assessee includes the adjustment regarding the receivables and thus receivables arising out of such transaction have already been accounted for. Alternatively, he submitted that working capital subsumes sundry creditors and therefore separate addition is not called for. 23.1. Ld.TPO computed interest on outstanding receivables under weighted average method using LIBOR + 300 basis points applicable for year under consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business;. . . . ' 23.5. Ld.CIT.DR submitted that expression 'debt arising during the course of business' refers to trading debt arising from sale of goods or services rendered in course of carrying on business. Once any debt arising during course of business is an international transaction, he submitted that any delay in realization of same needs to be considered within transfer pricing adjustment, on account of interest income short charged or uncharged. It was argued that insertion of Explanation with retrospective effect covers assessment year under consideration and hence under/non-payment of interest by AEs on debt arising during course of business becomes international transactions, calling for computing its ALP. He referred to decision of Delhi Tribunal in Ameriprise (supra), in which this issue has been discussed at length and eventually interest on trade receivables has been held to be an international transaction. Referring to discussion in said order, it was stated that Hon'ble Delhi Bench in this case noted a decision of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing capital adjustment subsumes sundry creditors. In such situation computing interest on outstanding receivables and loans and advances to associated enterprise would amount to double taxation. Hon'ble Delhi Tribunal in case of Orange Business Services India Solutions (P.) Ltd. v. Dy. CIT [2018] 91 taxmann.com 286 has observed that: "There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which would have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the assessee would have to be studied. It went on to hold that, there has to be a proper inquiry by the TPO by analysing the statistics over a period of time to discern a pattern which would indicate that vis-a-vis the receivables for the supplies made to an AE, the arrangement reflected an international transaction intended to benefit the AE in some way. Similar matter once again came up for consideration before the Hon'ble Delhi High Court in Avenue Asia Advisors Pvt. Ltd v. DCIT [2017] 398 ITR 120 (Del). Following the earlier decision in Kusum Healthcare (supra), it was observed that there are ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
