TPO must use LIBOR for transfer pricing analysis, 60% depreciation allowed on computer equipment under Section 10A

ITAT Bangalore remanded transfer pricing issues back to TPO for fresh analysis of business model and arm's length pricing verification. Court held that interest rates should be market-based in relevant currency, directing TPO to use LIBOR instead of Indian PLR for computing interest on delayed payments. TDS credit issues were remanded to AO for verification. Court allowed 60% depreciation on NMS CG/TX cards as computer equipment and confirmed Section 10A deduction eligibility for mobile content development services, following Karnataka HC precedent in OnMobile Global Ltd case.

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Issues:
1. Transfer pricing adjustments based on international transactions.
2. Imputation of interest using Indian PLR instead of LIBOR.
3. Credit of taxes and MAT credit not granted.
4. Grant of depreciation on specific items.
5. Deduction under section 10A of the Act.

Transfer Pricing Adjustments:
The case involved cross-appeals by the assessee and revenue against the final assessment order for the assessment year 2011-12. The assessee provided mobile value-added services globally and entered into international transactions with its associated enterprises. The revenue authorities made transfer pricing adjustments based on the premise that the subsidiaries availed services from the assessee, leading to income shifting. The assessee sought a remand to present relevant agreements to demonstrate the actual business model. The Tribunal remanded the transfer pricing issues to the Transfer Pricing Officer (TPO) for a proper analysis based on the contracts provided by the assessee.

Imputation of Interest:
The revenue imputed interest using Indian PLR instead of LIBOR on loans advanced in foreign currencies. The Tribunal directed the TPO to compute interest based on the currency in which it is payable, adopting LIBOR. The issue was remanded for the TPO to recompute the interest accordingly.

Credit of Taxes and MAT Credit:
The assessee challenged the non-granting of credit for taxes deducted at source and MAT credit. Both parties agreed to remand these issues to the assessing officer for proper consideration based on the evidence provided by the assessee.

Grant of Depreciation:
The revenue challenged the grant of depreciation on specific items, arguing they did not fall under the definition of "computer." The Tribunal found in favor of the assessee based on previous decisions and upheld the grant of depreciation.

Deduction under Section 10A:
The revenue challenged the deduction under section 10A of the Act, which was already upheld in favor of the assessee in previous cases. The Tribunal, following the precedent set by the Hon'ble Karnataka High Court, dismissed the revenue's ground, affirming the assessee's entitlement to the deduction.

In conclusion, the Tribunal allowed the assessee's appeal for statistical purposes and dismissed the revenue's appeal, pronouncing the order on 29th April 2022.

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