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of <h1>Appeal partially allowed with emphasis on compliance with DRP directions and industry-specific factors</h1> <h3>BNY Mellon International Operations (India) Pvt. Ltd. Versus The Dy. Commissioner of Income Tax, Circle 1 (1), Pune</h3> BNY Mellon International Operations (India) Pvt. Ltd. Versus The Dy. Commissioner of Income Tax, Circle 1 (1), Pune - TMI Issues Involved:1. Adjustment made by DCIT on international transactions and depreciation claim.2. Selection and rejection of comparable companies by DCIT.3. Calculation of working capital adjustment by DCIT.4. Risk adjustment not granted to the Appellant.5. Disallowance of depreciation claim on professional wireless devices.6. Disallowance of repairs and maintenance expenses under section 37 of the Act.Issue 1: Adjustment on International Transactions and Depreciation Claim:The appeal was against the DCIT's order regarding assessment year 2012-13 under section 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961. The DCIT made adjustments totaling INR 38,25,56,571 on international transactions, depreciation claim, and repairs and maintenance expenses. The Appellant challenged the adjustments, arguing they were erroneous and not in compliance with the DRP's directions.Issue 2: Selection and Rejection of Comparable Companies:The DCIT selected four companies as comparables for benchmarking international transactions, resulting in an upward adjustment of INR 37.81 crores due to higher margins of comparables compared to the Appellant. The Appellant contested the inclusion of Excel Infoways Ltd. and Universal Print Systems Ltd. as comparables, citing low employee cost to sales ratios and fluctuating margins. The Tribunal directed the exclusion of these companies from the final list of comparables.Issue 3: Calculation of Working Capital Adjustment:The DCIT was criticized for not complying with the DRP's directions in computing the working capital adjustment and for not allowing adjustments on companies with segmental accounts. The Appellant argued that the directions were not correctly considered, leading to a significant adjustment in their favor.Issue 4: Risk Adjustment Not Granted:The Appellant contended that the DCIT erred in not granting a risk adjustment. However, the judgment did not provide detailed analysis or resolution on this specific issue.Issue 5: Disallowance of Depreciation Claim on Wireless Devices:The Appellant claimed depreciation at a higher rate for professional wireless devices, arguing they were akin to computers. The DCIT disallowed the claim, allowing depreciation at a lower rate. The Tribunal partially allowed the claim, directing the DCIT to allow depreciation under 'plant & machinery' at a specified rate.Issue 6: Disallowance of Repairs and Maintenance Expenses:The DCIT disallowed repairs and maintenance expenses of INR 5,67,481, considering them capital in nature. The Appellant failed to provide sufficient evidence to support the claim, leading to the dismissal of this ground of appeal.In conclusion, the Tribunal partly allowed the appeal, directing adjustments in the selection of comparable companies and depreciation claim while upholding the disallowance of repairs and maintenance expenses due to lack of supporting evidence. The judgment highlighted the importance of complying with DRP's directions and considering industry-specific factors in selecting comparable companies for benchmarking international transactions.
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