https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=414620 https://www.taxtmi.com/caselaws?id=414620 TP Adjustment - computing TNMM operating margin earned from provision of services to AEs - amortization of goodwill and non-compete fees as non-operating expenses - HELD THAT:- We find that in subsequent A.Ys, the TPO has considered amortization of goodwill and non-compete fees as non-operating expenses. Therefore, we do not find any merits in considering them as part of operating expenses for the year under consideration when the facts are same. We direct the Assessing Officer to treat amortization of goodwill and non-compete fees as abnormal and non recurring expense and exclude them while computing TNMM operating margin earned from provision of services to AEs. Adjustment on purchase of medical equipments - Assessee is also engaged in the business of trading of medical equipment i.e. blood gas analysers and consumables - HELD THAT:- We find that the assessee Appellant follows a unique business model wherein the assessee buys analysers and sells them to third parties i.e. hospitals, medical institutions etc, books the revenue under the trading segment. On the other hand, if the customer is not willing to buy the analysers, such instruments were installed at the customer s premises and the consumables required by the customer in using these instruments were provided by the assessee. We find that the cost of such analysers imported from the AEs, were capitalized in the books of accounts of the assessee and its related operating cost, i.e. depreciation, has been charged to the profit and loss account while computing the profitability of the trading segment. We find that the assessee has used TNMM analysis to bench mark arm s length nature of international transaction of purchase of medical equipment. TPO has accepted the purchase price of such analysers for the trading segment as arm s length, but surprisingly, determined the arm s length price of purchase of fixed assets at Nil. The Assessing Officer, while framing the final assessment order, even went ahead one step further and disallowed the claim of depreciation considering the arm s length price determined by the TPO as NIL. The documents referred to by assessee during the course of arguments were considered from which we find that the import of goods was substantiated by furnishing the custom documentation which includes sample invoices along with corresponding bill of entries. Interestingly, we find that the custom s duty paid and cost of transportation were considered as the arm s length price by the lower authorities for computing the allowable depreciation whereas the cost of equipment has been taken at NIL. Equipment would not have been imported at NIL price even in an independent scenario. Moreover, we do not find that the TPO has applied any method to benchmark the said transaction, which action of the TPO is in violation of Rule 10B of the Income Tax Rules. We find that while treating the purchase of capital goods as NIL, the TPO failed to provide any comparable data which would have suggested that the arm s length price for the purchase of capital goods can be NIL. In our understanding, no third party would have sold such goods free of cost. In our considered opinion, arm s length price could be lower or higher but cannot be NIL, as the goods have been imported. Incidentally, the same products purchased from the same AE, for the same price, in the same year, cannot be held to be at arm s length for trading goods and not at arm s length for capitalised goods at the same time and in the same breath - we direct the Assessing Officer to allow the claim of depreciation on the purchase of fixed assets. Case-Laws Income Tax Fri, 27 Aug 2021 00:00:00 +0530