Tribunal grants relief in tax appeal, orders fresh examination on key issues. Decision covers multiple grounds.

The Tribunal partly allowed the appeal, directing fresh examination on certain issues and granting specific relief on others. The Tribunal's decision, pronounced on May 8, 2019, addressed various issues including the admission of additional grounds of appeal, exclusion of telecommunication charges from export turnover, addition of Special Additional Duty of Customs refund, disallowance of depreciation on assets acquired through slump sale, disallowance of warranty claim, disallowance of non-compete fee, exclusion of certain comparables in Transfer Pricing adjustment, and charging of interest under sections 234B and 234C.

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Issues involved:
1. Admission of additional ground of appeal on the issue of limitation.
2. Exclusion of telecommunication charges from export turnover.
3. Addition of Special Additional Duty of Customs refund.
4. Disallowance of depreciation on assets acquired through slump sale.
5. Disallowance of warranty claim.
6. Disallowance of non-compete fee.
7. Exclusion of certain comparables in Transfer Pricing adjustment.
8. Charging of interest under sections 234B and 234C.

Issue-wise Detailed Analysis:

1. Admission of Additional Ground of Appeal on the Issue of Limitation:
The Assessee contended that the assessment order was barred by limitation and therefore non est in law. The Tribunal admitted the additional ground, citing that it raised a purely legal issue that could be decided based on existing records. However, the Tribunal rejected the Assessee's contention on merits, holding that the provisions of Section 144C override Section 153 concerning the time limit for passing the final assessment order.

2. Exclusion of Telecommunication Charges from Export Turnover:
The Assessee argued that telecommunication charges should not be excluded from export turnover as they were incurred for connectivity within India. The Tribunal relied on the Karnataka High Court's decision in Tata Elxsi Ltd., which mandates that expenses excluded from export turnover should also be excluded from total turnover. Consequently, the Tribunal directed the AO to exclude the telecommunication charges from both export and total turnover.

3. Addition of Special Additional Duty of Customs Refund:
The Assessee claimed that the refund of Special Additional Duty (SAD) did not accrue during the relevant year. The Tribunal accepted the Assessee's argument, noting that the refund was sanctioned in subsequent years and thus did not accrue in the year under consideration. The Tribunal directed the deletion of the addition made by the AO.

4. Disallowance of Depreciation on Assets Acquired Through Slump Sale:
The Tribunal examined the valuation reports and found that the AO had incorrectly invoked Explanation 3 to Section 43(1) without substantiating the claim that the main purpose of the transfer was to reduce tax liability. The Tribunal concluded that the depreciation on the cost of acquisition of various assets as claimed by the Assessee should be allowed, thus allowing the Assessee's ground.

5. Disallowance of Warranty Claim:
The Tribunal noted that the Assessee did not have an opportunity to be heard on this issue before the AO and DRP. The Tribunal set aside the order of the AO and DRP and directed a fresh examination of the warranty claim by the AO.

6. Disallowance of Non-Compete Fee:
The Tribunal found that the non-compete fee was part of a global business transfer agreement and was essential for the smooth functioning of the business. While the Tribunal did not accept the non-compete fee as a revenue expenditure, it allowed the Assessee to claim depreciation on it as an intangible asset under Section 32(1)(ii).

7. Exclusion of Certain Comparables in Transfer Pricing Adjustment:
The Tribunal agreed with the Assessee's contention to exclude Coral Hubs Ltd. and Wipro Ltd. from the list of comparables, as these companies were functionally different and owned significant intangibles. The Tribunal directed the TPO to recompute the ALP after excluding these companies and to apply the permissible variation margin.

8. Charging of Interest under Sections 234B and 234C:
The Tribunal held that the charging of interest under Section 234B is consequential and directed the AO to give effect accordingly. Interest under Section 234C should be charged on the returned income.

Conclusion:
The appeal was partly allowed, with directions for fresh examination on certain issues and specific relief granted on others. The Tribunal's decision was pronounced on May 8, 2019.

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