Appellate Tribunal directs transfer pricing decision review, approves higher depreciation rate for computer accessories

The Appellate Tribunal directed the matter back to the Dispute Resolution Panel for a decision on objections raised by the assessee regarding the Transfer Pricing Officer's basis for determining the Arm's Length Price and the rejection of comparables. The Tribunal emphasized the need for the Panel to provide a detailed order considering the assessee's objections and evidence. Additionally, the Tribunal ruled in favor of the assessee regarding the depreciation rate on computer accessories, allowing a higher rate of 60% for UPS, considering it an integral part of computers. The appeal was partly allowed for statistical purposes.

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Issues involved: Transfer pricing adjustment and depreciation rate on computer accessories.

Transfer Pricing Adjustment: The assessing officer referred the matter to the Transfer Pricing Officer (TPO) for determining the Arm's Length Price (ALP) of the assessee's international transactions. The objections filed by the assessee before the Dispute Resolution Panel (DRP) were related to the proposed addition on account of adjustment in ALP and the rejection of certain comparables by the TPO. The DRP rejected the objections stating that the assessee failed to establish significant influencing factors from previous financial years and that the comparables' losses were not proven to be incorrect.

Judgment on Transfer Pricing: The Appellate Tribunal directed the matter back to the DRP for a decision on the objections raised by the assessee regarding the basis adopted by the TPO for determining ALP and the rejection of comparables. Citing a Delhi High Court decision, the Tribunal emphasized the necessity for the DRP to pass a speaking order after considering the objections and supporting evidence provided by the assessee.

Depreciation Rate on Computer Accessories: The second issue pertained to the denial of higher depreciation rate on UPS for computers by the Assessing Officer (AO). The Tribunal ruled in favor of the assessee, citing a previous decision where it was held that peripherals like printers and scanners are integral parts of a computer and eligible for higher depreciation rate. Consequently, the AO was directed to allow depreciation on computer UPS at a higher rate of 60% as claimed by the assessee.

Conclusion: The appeal filed by the assessee was partly allowed for statistical purposes, with the Tribunal issuing the order on 18th February 2011.

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