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of <h1>Tribunal allows appeal, cancels Transfer Pricing adjustment, remands income issues, upholds assessment order</h1> <h3>M/s. VMware Software India Private Limited Versus The Deputy Commissioner of Income-tax, Circle 7 (1) (2) Bangalore.</h3> M/s. VMware Software India Private Limited Versus The Deputy Commissioner of Income-tax, Circle 7 (1) (2) Bangalore. - [2022] 98 ITR (Trib) 219 (ITAT ... Issues Involved:1. Validity of the impugned final assessment order.2. Transfer pricing (TP) adjustment of Rs.26,85,43,457.3. Addition of Rs.7,62,39,388 as alleged suppressed income.4. Non-grant of depreciation on certain expenses incurred in earlier years and held to be capital in nature.Issue-Wise Detailed Analysis:1. Validity of the Impugned Final Assessment Order:The appellant contended that the final assessment order dated 24.01.2017 was not passed within the time limit prescribed under section 144C(13) of the Income-tax Act, making it void ab initio. It was argued that the order was received on 03.10.2017 and that the demand from CPC was dated 13.03.2017. The Tribunal, after examining the assessment records, found that the order was dispatched on 24.01.2017 itself and the delay in demand upload to CPC did not invalidate the order. Thus, grounds 1 to 3 raised by the assessee were rejected.2. Transfer Pricing (TP) Adjustment:The appellant challenged the TP adjustment of Rs.26,85,43,457 made by the TPO. The DRP had directed the TPO to recompute margins after treating foreign exchange gain/loss as operating in nature and to exclude certain companies from the comparables. However, the final assessment order did not reflect these changes, maintaining the TP adjustment at Rs.26,85,43,457. The Tribunal found this non-conformity with the DRP's directions to be illegal and unsustainable, leading to the deletion of the TP adjustment.3. Addition of Rs.7,62,39,388 as Alleged Suppressed Income:The AO had added Rs.7,62,39,388 to the assessee's income, alleging it represented suppressed income due to differences between invoices and financial statements. The appellant explained that this discrepancy arose from audit adjustments related to service tax credit, VAT refund, and foreign exchange fluctuations. The Tribunal noted that a similar issue was resolved in favor of the assessee in the subsequent assessment year (2013-2014). Therefore, the AO was directed to consider the reconciliation provided by the assessee and decide accordingly, allowing grounds 4 and 5 for statistical purposes.4. Non-grant of Depreciation on Certain Expenses:The appellant argued that certain expenses disallowed as capital expenditure in previous years should be eligible for depreciation. The Tribunal directed the AO to examine the claim and allow depreciation if the expenses were indeed disallowed as capital expenditure in past assessments. Thus, ground 6 was allowed for statistical purposes.Conclusion:The appeal was partly allowed, with the Tribunal deleting the TP adjustment due to non-conformity with DRP directions and remanding the issues of alleged suppressed income and depreciation on capital expenditure for further examination by the AO. The validity of the final assessment order was upheld.
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