2016 (5) TMI 262 - AT - Income Tax

Tribunal rules on transfer pricing, depreciation rates

Thomas Cook (India) Limited, The DCIT-1 (3), Mumbai Versus The Addl. Commissioner of Income Tax -1 (3) Mumbai, Thomas Cook (India) Limited

Thomas Cook (India) Limited, The DCIT-1 (3), Mumbai Versus The Addl. Commissioner of Income Tax -1 (3) Mumbai, Thomas Cook (India) Limited - [2016] 49 ITR ... Issues:1. Transfer pricing adjustment of corporate guarantee2. Disallowance of depreciation on data cables3. Disallowance of depreciation on Jodhpur property4. Depreciation rate on printers, scanners, switches, and routersTransfer Pricing Adjustment of Corporate Guarantee:The case involved cross-appeals by the assessee and Revenue against an order passed by the Ld. CIT(A)-15, Mumbai, regarding A.Y. 2008-09. The primary issue was the addition of Rs. 18,05,400 to the total income due to a transfer pricing adjustment related to a corporate guarantee provided by the assessee for a foreign subsidiary. The Transfer Pricing Officer determined this adjustment as the arm's length price. The assessee contested this adjustment on various grounds, including the nature of the transaction and the rate of guarantee commission. The Tribunal held that the 3% rate adopted by the authorities was not justified and directed the adoption of a 0.50% rate, citing precedents and the distinct nature of corporate guarantees. The Tribunal partially allowed the assessee's appeal on this issue.Disallowance of Depreciation on Data Cables:The second issue pertained to the disallowance of depreciation on data cables at a rate of 15% instead of the assessee's claim of 60%. The Tribunal referred to a precedent in the assessee's own case for the previous year and directed the Assessing Officer to allow depreciation at 60%. Consequently, the assessee succeeded on this ground.Disallowance of Depreciation on Jodhpur Property:The third ground involved the disallowance of depreciation on Jodhpur property amounting to Rs. 1,86,692. The Tribunal noted that a similar issue had been decided against the assessee in previous years, following earlier Tribunal decisions. As a result, the appeal on this ground was dismissed.Depreciation Rate on Printers, Scanners, Switches, and Routers:The final issue concerned the depreciation rate on printers, scanners, switches, and routers. The Revenue appealed the CIT(A)'s decision to allow depreciation at 60% instead of 15% allowed by the Assessing Officer. The Tribunal found this issue identical to a previous year's appeal, which was decided in favor of the assessee. Consequently, the Revenue's appeal on this ground was dismissed.In conclusion, the Tribunal partly allowed the assessee's appeal and dismissed the Revenue's appeal. The decision was based on detailed analysis of each issue, considering legal precedents and the specific facts of the case.