2018 (7) TMI 1869 - HC - Income Tax

High Court reviews international transaction order, grants depreciation, upholds correct rate. Appeals disposed, parties to appear before Tribunal.

M/s Sony India Pvt Ltd. Versus Commissioner Of Income Tax-II And Vice-Versa.

The High Court set aside the Tribunal's order regarding the treatment of advertisement expenditure as an international transaction for adjustment in arms ... TPA - international transaction - Held that:- This Court and other High Courts which the assessee would like to rely upon. It is open for assessee to rely upon the said ratios. Equally, Revenue will be entitled to defend their stand. Revenue submits as the order of the Tribunal has been set aside, Revenue would raise all pleas and contentions when the appeals are taken up for hearing. It will be open to the Revenue to rely upon judgments and ratios which they feel are in their favour. Counsel for the assessee states that he would have no objection but would contest the contention of the Revenue on merits. Entitlement to depreciation under Section 32 - balance written down value relating to Daru Hera unit, forming part of the block of assets - Held that:- The issue is covered in favour of the assessee and against the Revenue as relying on Sony India Pvt. Ltd. v. CIT. [2017 (1) TMI 1442 - DELHI HIGH COURT] Depreciation at the rate of 60% on UPS, printers and switches - Held that:- The said issue is covered against the Revenue vide decision CIT vs. BSES Yamuna Power Ltd., (2010 (8) TMI 58 - DELHI HIGH COURT). Accordingly, this substantial question of law is answered against the revenue Issues Involved:1. Treatment of advertisement, marketing, and sale promotion expenditure as an international transaction for adjustment in arms length pricing.2. Entitlement to depreciation under Section 32 of the Income Tax Act, 1961, for the balance written down value relating to a specific unit.3. Correct rate of depreciation on UPS, printers, and switches.Analysis:Issue 1: Treatment of Advertisement ExpenditureThe first issue raised pertains to whether the advertisement and marketing expenditure incurred by the appellant assessee can be treated as an international transaction and made subject to adjustment in arms length pricing. The High Court, after considering the arguments of both parties, decided to set aside the Tribunal's order based on the decision in Sony Ericson Mobile Communication India Private Limited v. CIT. The Court directed the Tribunal to reevaluate the issue in light of the directions provided in the aforementioned decision. The assessee was allowed to rely on subsequent decisions by other courts, and the Revenue was granted the opportunity to present their arguments.Issue 2: Entitlement to DepreciationThe second question raised by the assessee concerns the entitlement to depreciation under Section 32 of the Income Tax Act, 1961, for the balance written down value related to a specific unit. The Court referred to a previous decision in ITA Nos. 13/2012 and 14/2012, Sony India Pvt. Ltd. v. CIT, where the issue was decided in favor of the assessee against the Revenue. Following this precedent, the Court ruled in favor of the assessee on this issue as well.Issue 3: Correct Rate of DepreciationThe third issue raised by the Revenue questioned the correct rate of depreciation on UPS, printers, and switches, specifically regarding the allowance of depreciation at 60% instead of the normal rate of 15%. The Court cited a previous decision in CIT vs. BSES Yamuna Power Ltd., where a similar issue was decided against the Revenue. Consequently, the substantial question of law was answered against the Revenue and in favor of the assessee.In conclusion, the appeals were disposed of, and all pending applications were deemed infructuous. The parties were directed to appear before the Tribunal on a specified date for further proceedings, aiming to expedite the resolution of the matter.