TaxTMI 
TaxTMI 
2014 (12) TMI 757
X X X X Extracts X X X X
X X X X Extracts X X X X
....cted the rate of depreciation to 25%. 4. After considering the rival submissions and perusing the relevant material on record, it is noticed from the assessment order itself that the AO restricted the claim of depreciation on ITG Networking Equipments by relying on the view taken by him for the AY 2002-03. The said assessment year came up for consideration before the Tribunal in ITA No.4173/Del/2010. Vide its order dated 19.11.2010, a copy of which is available on record, the Tribunal accepted the applicability of higher rate of depreciation by relying on the Special Bench order passed in the case of DCIT vs. Data Craft India Ltd. (2010) 133 TTJ (Mumbai)(SB) 377. In the absence of any distinguishing feature having been brought to our notice by the ld. DR about the facts of the instant year and the preceding year, we, respectfully following the precedent, allow this ground of appeal. 5. The next ground is against the disallowance of depreciation on company owned vehicles amounting to Rs. 1,23,84,597/-. The facts apropos this ground are that the assessee claimed depreciation for the said amount on vehicles which were owned by it but used by its employees. The AO observed in fin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs or employees. As such, there can be no occasion to treat the use of vehicles by the directors/employees as a personal use by the company. We, therefore, order for the deletion of the addition of depreciation on such vehicles. 7. Ground No. 5 is against the disallowance of Rs. 78,25,822/- towards running and maintenance expenses of the vehicles used by the employees of the assessee company. The AO, following the direction of the Dispute Resolution Panel (DRP), held that 50% of running and maintenance expenses of the vehicles were to be disallowed for non-business purpose. 8. After considering the rival submissions and perusing the relevant material on record, we find that this issue is squarely covered by the above referred judgments of the Hon'ble Gujarat High Court and the Tribunal order passed by the Delhi Bench. The same analogy which applies for not making any disallowance on account of depreciation for personal or non-business use, equally applies for not warranting any disallowance on account of running and maintenance expenses of the vehicles used by the employees of the company. We, therefore, order for the deletion of the addition. 9. Ground No. 6 is against th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nding for deduction of expenses relating to the AY 2006-07 discharged in the period relevant to the AY 2007-08. There can be no reason to deny deduction for such expenses genuinely incurred for the purpose of business, if these are otherwise deductible as per law. Since the AO did not have an occasion to consider the otherwise deductibility of such expenses, we are of the considered opinion that the ends of justice would meet adequately if the impugned order on this issue is set aside and the matter is restored to the file of AO. We order accordingly and direct him to scrutinize the details of such 'prior period expenses' booked in the accounts for AY 2007-08 for ascertaining if these were incurred for the AY 2006-07 and then to that extent allow deduction, if these are otherwise deductible. 11. The only other ground which survives for our consideration is against the addition of Rs. 28,55,40,322/- made on account of transfer pricing adjustment. Briefly stated, the facts of the case are that the assessee reported four international transactions, viz., 'Provision of marketing support services' with value of Rs. 324,73,13,183/-; Provision for regional guest employee services; Prov....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by the TPO as the most appropriate method. The change of benchmarking done by the TPO of the comparables on the basis of single year data instead of multiple year data, has also not been assailed by the assessee. In fact, no other aspect of the TP adjustment has been challenged except the determination of PLI of the comparables. Here again, the assessee has confined itself to challenging the inclusion of five new companies by the TPO in the final list of comparables. We are, therefore, restricting ourselves in examining the comparability or otherwise of the five new companies introduced by the TPO in the final list of comparables. 13. Before embarking upon making an analysis of comparability, it is sine qua non to first ascertain the correct nature of the assessee's activity under the segment of 'Provision of marketing support services.' The assessee's Transfer pricing study report indicates that the assessee, a wholly owned subsidiary of Microsoft Corporation, provided marketing support services mainly to Microsoft Corporation Pte Ltd., Singapore and a small portion of revenue arose from services rendered to Microsoft Corpn., UK. The assessee was compensated for such services ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee is providing high-end marketing services after identifying the customers and its job is not simply to create market awareness by performing a low-end non-complex function. This, in the opinion of the TPO, is done by the launching of the products with big advertisement campaigns, customer interface and provision for training and back-up for use of products and softwares. In this regard, it is firstly relevant to note that we are dealing with the AY 2006-07 and the relevant financial year ends on 31.3.2006. All the clippings referred to by the TPO relate to subsequent years. Be that as it may, it can be seen that the inference drawn by the TPO that the assessee is not only engaged in the dissemination of information, but also providing high-end marketing services leading to creation of marketing intangible for its AE, is not correct. It can be seen from the clipping dated 24th November, on page 19 of the TPO's order that Microsoft Corporation India Pte Ltd., announced the availability of the Get Genuine Solutions (GGS) for Windows, Vista through which customers were able to legalise their counterfeit or unlicensed Windows XP Professional PCs under GGS by simply 'place(ing) an o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h a positive conclusion about the comparability of such a company. Same position equally applies to the TPO as well. Simply because a particular company was wrongly excluded by him in determining the ALP of an international transaction for an earlier year, cannot debar him from including it in the list of comparables in the succeeding year, if it is actually comparable. The essence of the matter is to examine the comparability and not the fact as to whether it was included or excluded in the past or in the future. 15.3. It can be seen from the TPO's order that he insisted on the inclusion of this company on the sole reason of the assessee treating it as comparable for the two earlier years. Such a view cannot be countenanced without examining the correct nature and the functional profile of this company. 15.4. It can be seen that Engineers (India) Ltd., is a company providing engineering and related technical services for petroleum refineries and other industrial projects. This company has two business segments, namely, Consultancy & Engineering projects and Lumpsum Turnkey projects. These services are in the nature of engineering services, which, by no standard, can be compa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... WAPCOS: 18.1. This company was considered by the TPO as comparable on the same reasons, being, the assessee's inclusion of this company in the list of comparables for the AYs 2002-03 and 2003- 04. 18.2. We find that this company operates in two segments, namely, Consultancy & engineering projects and Lumpsum turnkey projects. This company provides consultancy services, such as, pre-feasibility report of hydroelectric projects, field investigation drilling of tube wells, etc. From the above description of the nature of activities performed by this company, it can be seen that the same is engaged in providing engineering and consultancy services, which can be of no match to the assessee's marketing support services. This company is also directed to be excluded from the list of comparables. v) Vinita Labs Ltd.: 19.1. The TPO included this company in the list of comparables by noticing that it has been so used as comparable to the assessee by the TPO since the AY 2002-03. He further supported his finding by noticing that this company was providing similar services as provided by the assessee. 19.2. We do not find any force in the functional comparability of this company....