ITAT decision favors assessee on domestic transactions, upholds depreciation claim, dismisses revenue's appeal.

The ITAT allowed the assessee's appeal and dismissed the revenue's appeal. The ITAT upheld the assessee's objections on domestic transactions, allowing the depreciation claim as a consequential claim to previous years. The DRP recognized the transactions as domestic, citing no profit shifting out of India, and dismissed the revenue's claim of unsubstantiated expenses. The ITAT's decision emphasized the acceptance of objections and the substantiation of claims.

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Issues:
Cross appeals by assessee and revenue against the orders of A.O. under section 143 read with section 144C(v) consequent to the directions of DRP, Hyderabad dated 29.11.2013.

Analysis:
1. The assessee, a joint venture company specializing in the manufacture of Antiretroviral Active Pharmaceutical Ingredients (API), filed returns for A.Y. 2009-2010. The TPO accepted international transactions within arms length price limits but disallowed a management fee and depreciation claimed on technical knowhow. The DRP accepted objections on the management fee but not on depreciation, citing pending issues before the ITAT for A.Y. 2006-07.

2. Regarding the depreciation issue, both counsels agreed that the ITAT's order for A.Y. 2006-07 dated 16.01.2015 did not uphold proceedings under section 263, making the depreciation claim eligible. The ITAT directed the A.O. to allow the depreciation as claimed, being a consequential claim to previous years.

3. In the revenue's appeal, the TPO deemed transactions between resident companies as international, but DRP recognized them as domestic transactions, citing no profit shifting out of India. Relying on past ITAT decisions, the DRP held that T.P. provisions do not apply to domestic transactions, upholding the assessee's objections. The Revenue's claim of unsubstantiated expenses was dismissed as the assessee had provided evidence.

4. The ITAT allowed the assessee's appeal and dismissed the revenue's appeal, emphasizing the acceptance of objections on domestic transactions and the substantiation of claims. The order was pronounced on 25.03.2015.

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