TaxTMI 
TaxTMI 
2013 (1) TMI 212
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....O on account of TP adjustments in respect of reimbursement/allocation of COE3 related expenses which has been sustained by the learned CIT(Appeals) to the extent of Rs. 1,68,80,675/-. 4. The assessee in the present case is a company which is engaged in the business of manufacturing and distribution of lubricant oils, greases, brake fluids and other speciality products. The return of income for the year under consideration was filed by it on 31-10-2002 declaring total income of Rs. 138,63,51,510/-. The assessee belongs to multi-national BP group of companies and during the year under consideration, it had entered into international transactions, inter alia, involving cost sharing and cost reimbursement with associated enterprises. As submitted in the TP report furnished by the assessee company, BP group undertakes worldwide information technology initiatives and the assessee company being a member of the said group, receives information technology support from its associated enterprises. It also shares the related cost incurred by the said enterprises in providing such support. During the year under consideration, significant IT costs were incurred relating to a Common Operating ....
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....2 was to start on 10.03.2001 and was to get over by 27.08.2001. The plan and Documentation for Phase 3 was to start on 02.07.2001 and the business approval was to be obtained for this Phase 3 on 16.07.2001. Considering these facts, it can be stated that, during the year 2001, COE3 was not implemented, and the assessee did not submit any document, as required vide this office letter dated 16.08.2004. No supporting documents for this invoice are filed. Considering these facts, the Arm's Length Price of this transaction is computed at NIL. 5.3.2 Cost Allocation of Digital Business - Rs.4,225,647/- Paid/Payable to BP International Ltd., U.K. The amount in foreign currency is US$ 86,589. This is invoice dated 23.03.2002 and the details read as : "1Q02 D80 Infrastructure Charges". As discussed earlier, the assessee was asked to submit the details and basis of allocation, which is not submitted. These documents, it was required to obtain and maintain as per Clauses 5.3 and 5.4 of the Agreement. In absence of these documents, the Arm's Length Price of the transaction is computed at NIL. 5.3.3 Cost Allocation of Global Licenses Charges - Rs. 1,269,885/-Paid/Payable to BP Internatio....
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.... of the year only. In absence of these details, the Arm's Length Price of this transaction is also computed at NIL. 5. 3.6 The amounts paid payable to BP Singapore Pte Ltd., account of the following : (i) Cost Allocation of Digital Business Expenses Rs.2,923,472/- (ii) Allocation of Technical Expenses Rs. 647,110/- (iii) Reimbursement of Leased Line Charges Rs. 1,33,098/- (iv) Allocation of Expenses relating to COE3 Project Rs. 1,580,822/- (v) Allocation of Digital Business Performance Management Charges Rs. 214,443/- For supporting these expenses, an invoice for Singapore Dollar 168,561 is filed. The charges for Digital Business COE Charge Out, Data Charge Out, Telephone/ISL Charge Out, HR Charge Out, HSSE Charge Out, Digital Business ROM Charge Out are mentioned in the invoice. However, the documents as mentioned in the Clause 5.3 and 5.4 of the agreement i.e. whether these are the expenses incurred by the BP Singapore Pte Ltd. or re ass throh (sic) expenses, are not submitted. In absence of these expenses, the Arm's length Price on this allocation is also computed ....
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....allowable on these expenses. Considering this, the billing for transfer pricing of AUD 868.38 is not an allowable expense. This will result into disallowance of Rs. 21,214/- out of the expenses on this account claimed by the assessee. (iv) Allocation of Technical Services Fees - Rs.854,868/- For this expense also, a debit note dated March, 2002 by BP Australia Ltd. is filed and the relevant portion reads as: "Digital Business Project Recovery September, 2001 Base Costs - US$15,076.65 75% Transfer Pricing - US$1,130.75' For supporting the total Base Costs and basis of allocation, no documents are filed as required by Clauses 5.3 and 5.4 of the Service Agreement, therefore, the Arm's Length Price of this transaction is computed at NIL. (v) Cost Allocation of Digital Business Expenses - Rs.8,526,505/- For this expense also, a debit note dated Feb. 2002 is filed. The relevant portion of this reads as: "Digital Business Project Recovery September, 2001 Base Costs - US$162,545.12 7.5% Transfer Pricing - US$ 12,190.88 Total - US$ 174,736.00 F....
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....tails filed -Basis allocation Global and central downstream are allocated at USD 139 (Global team charges) + USD 140 (Downstream team charges). The basis of allocation for Microsoft license charges is USD 261 per seat. The basis for allocation is provided which is followed uniformly throughout the group. 2. Cost Allocation Digital Business Rs. 42,25,647/-USD 86,589 Filed copy of Invoice dt. 23/03/02 ALP determined as NIL. No details & basis of allocation submitted. Additional details filed -Basis of allocation The amount calculated for Castrol India Ltd. is based on the number of total seats [396] for the entire India region. The basis for allocation is provided which is followed uniformly throughout the group. 3. Allocation of Federal charge on account of Digital business. Rs. 9,91,456/-USD 20,316 Invoice dt. 10.4.02 ALP determined as NIL. No supporting documents of service agreement submitted Additional details filed -Basis of allocation These charges are allocated to India site based on the COE seat count. India's share is 0.26% of the total charge. The amount charged by the AE pertains to India, which comprise of various legal entiti....
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....d CIT(Appeals) giving complete details of the said expenses as well as the basis of allocation thereof. The said details were forwarded by the learned CIT(Appeals) to the AO/TPO and on verification of the same, the TPO accepted in his remand report that allocation/reimbursement of COE3 expenses to the extent of Rs. 2,20,83,188/- was in order. Keeping in view this finding recorded by the TPO in the remand report, the addition made on this issue to the extent of Rs. 2,20,83,188/- has been deleted by the learned CIT(Appeals) and, in our opinion, quite rightly so. We, therefore, find no merit in the solitary ground raised by the Revenue in its appeal on this issue and dismiss the same. 7. In so far as the allocation/reimbursement of COE3 expenses to the extent of Rs. 1,68,80,675/- is concerned, the learned counsel for the assessee has submitted before us that there is no dispute about the fact that significant costs were incurred related to COE3 project deployed by the BP group worldwide and the assessee company as a part of the said group had derived benefit thereof. As submitted by him, the dispute is about the basis of allocation and want of details in this regard. He has submitt....
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....t Rs. 15,84,40,030/-. The said amount of depreciation was worked out by the assessee on the written down value of assets of Silvassa Unit without taking into consideration depreciation for the earlier years as no such depreciation in the earlier years was claimed by the assessee. Since the depreciation on the assets of Silvassa Unit was allowed by the AO in the earlier years, he worked out the written down value of the assets of Silvassa Unit after deducting the depreciation so allowed in the earlier years and recomputed the depreciation allowable to the assessee at Rs. 6,13,74,121/- on the written down value so worked out. This resulted in the disallowance of depreciation to the extent of Rs.9,70,65,909/-. On appeal, the learned CIT(Appeals) confirmed the said disallowance made by the AO relying on the decision of Hon'ble Bombay High Court in the case of Plastiblends Ltd. v. Addl. CIT [2009] 318 ITR 352. 10. We have heard the arguments of both the sides and perused the relevant material on record. As agreed even by the learned counsel for the assessee, the issue raised in ground No. 3 of the assessee's appeal is squarely covered against the assessee and in favour of the Revenue....