Tribunal grants partial appeal, allows depreciation claim on fixed assets, adjusts international transaction, and directs fresh adjudication.

The Tribunal allowed the appeal partly, directing the Assessing Officer to allow the claim of depreciation on the purchase of fixed assets, deleting the adjustment related to the international transaction for the purchase of medical equipment. The Tribunal also directed a fresh adjudication on the adjustment towards interest on outstanding receivables, considering factors like the delay in realization and the possibility of setting off outstanding payables. Additionally, the Tribunal deleted the adjustment for mark-up on the recovery of expenses from the associated enterprise and directed the grant of set-off of brought forward unabsorbed depreciation after resolving issues from preceding years.

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Issues Involved:
1. Adjustment to international transaction relating to purchase of medical equipment.
2. Adjustment towards interest on outstanding receivables.
3. Mark-up on recovery of expenses from AE.
4. Non-grant of set-off of brought forward unabsorbed depreciation.

Issue-wise Detailed Analysis:

1. Adjustment to international transaction relating to purchase of medical equipment:
The assessee, a resident company engaged in trading medical equipment, challenged the adjustment of Rs. 77,04,297 made to the international transaction relating to the purchase of medical equipment. The Transfer Pricing Officer (TPO) had determined the Arm's Length Price (ALP) of imported medical equipment at nil, leading to an adjustment in the depreciation claimed. The Dispute Resolution Panel (DRP) upheld this adjustment. However, the Tribunal found that in a similar case for the assessment year 2012-13, it was held that the TPO's determination of ALP at nil was incorrect. The Tribunal noted that the assessee had substantiated the import of goods with customs documentation and that the TPO had not applied any method to benchmark the transaction. Therefore, the Tribunal directed the Assessing Officer to allow the claim of depreciation on the purchase of fixed assets, deleting the adjustment of Rs. 77,04,297.

2. Adjustment towards interest on outstanding receivables:
The TPO noticed a delay in the realization of invoices from the AE and treated the outstanding receivables as unsecured loans, proposing an adjustment of Rs. 13,57,841. The DRP directed the TPO to re-compute the interest using a lower rate and a 60-day credit period. The assessee argued that outstanding receivables from AE cannot be treated as an international transaction and that no interest was charged on receivables from either AE or non-AE. The Tribunal recognized the need to examine the reasons for the delay and whether the assessee charged interest on receivables from non-AEs. It restored the issue to the Assessing Officer for fresh adjudication, considering the average delay and the possibility of setting off outstanding payables against receivables.

3. Mark-up on recovery of expenses from AE:
The TPO proposed a 5% mark-up on the recovery of expenses incurred on behalf of the AE, resulting in an adjustment of Rs. 36,83,982. The DRP upheld this decision. The assessee contended that the expenses were reimbursed on a cost-to-cost basis and that the AE also reimbursed expenses without any mark-up. The Tribunal found that the invoices for the costs incurred were raised on a back-to-back basis and that there was no need for a mark-up when the AE did not charge any mark-up on expenses incurred on behalf of the assessee. Consequently, the Tribunal deleted the adjustment of Rs. 36,83,982.

4. Non-grant of set-off of brought forward unabsorbed depreciation:
The assessee challenged the non-grant of set-off of brought forward unabsorbed depreciation against the addition made due to transfer pricing adjustments. Both parties agreed that the Assessing Officer should grant consequential relief based on the decisions in preceding assessment years. The Tribunal directed the Assessing Officer to grant the set-off after the issue is resolved in the preceding years.

Other Grounds:
Ground no. 1 was of a general nature and did not require specific adjudication. Ground no. 6 was not pressed and was dismissed. Ground no. 7 was considered premature and was also dismissed. The appeal was partly allowed, with the order pronounced in the open court on 20th January 2022.

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