AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (1) TMI 110
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....rms length price(ALP) in relation to international transactions with its Associate Enterprises (AE's), as reported in Form no.3CEB. The TPO, vide order dated 28.1.2015 u/s 92CA(3) of the I T Act had made the following upward transfer pricing adjustments: i) Connector division Rs. 26,07,24,126 ii) Tooling division Rs. 5,07,58,397 iii) Payment to patent cost Rs. 75,53,314 Total Rs. 31,90,35,837 2.1 Pursuant to the receipt of the TPO's order, the Assessing Officer had passed a draft assessment order which had incorporated the transfer pricing adjustments made by the TPO and in addition, the Assessing Officer had made the following disallowances/additions: i) Additional depreciation for which 50% of the additional depreciation was allowed in AY 2010-11 .. 94,05,185 ii) The Assessing Officer disallowed amounts u/s 14A RWR 8D .. 13,65,688 2.2 Against the draft assessment order, the assessee filed objections before the Dispute Resolution Panel (DRP). The DRP confirmed the draft assessment order and the final assessment order was passed as per the directions of the DRP. 3 Aggrieved by the assessment order passed u/s 143(3) r.w.s 144C of the Act, the assessee has ....
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.... amount of patent cost was correctly computed and hence ought to have been allowed. (b) If for any reason, the addition of Rs. 75,53,314/- is sustained in the AY 2011-12, the said amount is to be deducted in AY 2012-13 u/s 41(1) of the IT Act. The appellant has written back in the IT return the said amount in the AY 2012-13 (as reduction of the patent cost of AY 2012-13) and hence has offered the same for assessment in AY 2012-13 u/s 41(1) of the I.T Act. The assessing officer may be directed to delete the same in the AY 2012-13 to avoid double taxation. 4. The Ld.AO/DRP went wrong in not allowing additional depreciation of Rs. 94,05,185/­ being balance 10% out of additions made to Plant and Machinery during the second half of the AY 2010-11. It is now well settled that the said additional depreciation claimed is allowable. 5. The Ld.AO/DRP went wrong in making an upward transfer pricing adjustment in respect of Section 14A r.w.s. 8D of the I.T Act amounting to Rs. 13,65,688/-. Having regard to the facts of the appellant, no addition ought to have been made. 6. For these and other grounds that may be further adduced at the time of hearing, the order of the Ld.DRP requir....
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.... volume of transactions need not be considered. The ld DR supported the order of the TPO. 5.5.1 We have heard the rival submissions and perused the material on record. The assessee had used the internal TNMM method for bench marking transactions with AE. The TPO rejected the internal TNMM method adopted by the assessee for the bench marking transactions with AE since the volume of transactions with a non AE is not significant. Further, the TPO also noticed that there is inconsistency in the assessee's TP study with regard to transaction of sale with AE and non AE. The view taken by the TPO was confirmed by the DRP. We notice that the sales to the non AE is insignificant and is amounting to only Rs. 34 crores whereas the sales to AE is around 235 crores. For a proper bench marking of ALP, there should be adequate sales turnover for the assessee with the non AE and AE's. In the instant case, since the sales turnover of the assessee with the non AE is insignificant compared to the overall export turnover of this division, the internal TNMM adopted by the assessee, according to us, has been rightly rejected by the TPO. Therefore, the ground No. 1(b) is rejected. Working Capital: 6 T....
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....tated that this is closely linked to the exports and is given as an incentive to subsidise exporters by giving reduction in customs duty on raw materials. It was contended that these two items have to be reduced from raw materials cost. The ld AR relied on the following judicial pronouncements: i. TNS India Private Ltd. 57 Taxmann.com 165 ii. Watson Pharma Private Limited 54 Taxmann.com 88 iii. Petro Araldite Private Ltd. 51 Taxmann.com 230 iv. GE BE (P) Ltd. 42 Taxmann.com 554 v. Alfa Laval (India) Ltd. 46 Taxmann.com 394. 7.1 The ld DR supported the order of the TPO and DRP. 7.2 We have heard the rival submissions and perused the material on record. The DRP had rejected the claim of the assessee by observing as under: "1.2 The contention of assessee for including profits from sale of scraps and export entitlement benefit as part of operating income from the export segment was not accepted by the TPO. Sale of scraps being one incidental is not part of the main business operation of the assessee. Export entitlement is only from the incentive scheme of the Govt. and has no relation with operating income of the assessee. The TPO has relied on assessee laws in support of....
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....PLI of 7 companies chosen at 9.92%. According to the TPO, the PLI of the assessee is negative 37.83% and therefore, the TPO made upward revision of 47.75% (37.83% + 9.92%) amounting to Rs. 5,07,58,397/- 8.2 The only issue argued by the ld AR of the assessee was that the TPO disregarded the lower capacity utilization of the assessee's plant. It was contended that the tooling division had operated only at 40% capacity and no adjustment has been made for this factor. It was stated that if this factor is considered the PLI of Tooling division will be 8.94% instead of negative 37.83% calculated by the TPO. It was contended that the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, July 2010, prescribe the making of adjustments to eliminate differences in capacity utilization or idle capacity adjustments. It was submitted that Rule 10B(1)(e){iii) of the Income-tax Rules, 1962 ('the Rules') stipulates that an adjustment to the net profit margin can be made for "capacity under-utilization". The ld DR present was duly heard. 8.3 We have heard the rival submissions and perused the material on record. The DRP had rejected the above claim of ....
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....atent was paid by that Company. After the demerger of the Tooling Division, it is now being paid by the assessee Company FCI DEN Connectors Ltd., which is in violation of the agreement. 9.2 The above view taken by the TPO was confirmed by the DRP after noticing that the assessee had offered this amount of Rs. 75,53,314/- in the subsequent asst year i.e. A.Y 2012-13. The ld AR reiterated the submissions made before the DRP. The ld DR present was duly heard. 9.3 We have considered the rival submissions and perused the material on record. We notice that for the assessment year 2012-13, the assessee had returned back this amount of Rs. 75,53,314/- as no more payable and has offered it for taxation. Hence, the assessee has accepted the decision of the TPO since the patent cost was no more payable by the assessee. If at all what has been returned in the assessment year 2012-13, is to be deleted, the assessee has to move a rectification petition for AY 2012-13 and no direction can be given by us. It is ordered accordingly. In the result, ground no.3 is rejected. B. Corporate Tax Issues: 10 Fourth ground in the appeal memo relates to the grant of additional depreciation amounting to R....
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....e during the previous year and is put to use for the purpose of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this sub-section in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (i) or clause (ii) or clause (iia) as the case may be." 11. A bare reading of this section 32(1)(iia) clearly says that in case a new machinery or plant was acquired and installed after 31-03-2005 by an assessee, who is engaged in the business of manufacture or produce of article or thing, then, a sum equal to 20% of the actual cost of the machinery and plant shall be allowed as a deduction. It is not in dispute that the assessee has acquired and installed the machinery after 31-03- 2005. It is also not in dispute that the assessee is engaged in the manufacture of article or thing. Therefore, the assessee is eligible for additional depreciation which is equivalent to 20% of the actual cost of such machinery. The dispute is the year in which the depreciation has to be allowed. The assessee has already claimed 10% of the depreciation in t....
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....n 180 days in the year of acquisition. This restriction is only on the basis of period of use. There I no restriction that balance of one time incentive in the form of additional sum of depreciation shall not be available in the subsequent year. Section 32(2) provides for a carry forward set up of unabsorbed depreciation. This additional benefit in the form of additional allowance u/s 32(1)(iia) is one time benefit to encourage the industrialization and in view of the decision of Hon'ble Supreme Court in the case of Bajaj Tempo Ltd (supra), the provisions related to it have to be construed reasonably, liberally and purposive to make the provision meaningful while granting the additional allowance. This additional benefit is to give impetus to industrialization and the basic intention and purpose of these provisions can be reasonably and liberally held that the assessee deserves to get the benefit in full when there is no restriction in the statute to deny the benefit of balance of 50% when the new machinery and plant were acquired and used for less than 180 days. One time benefit extended to assessee has been earned in the year of acquisition of new machinery and plant . It has bee....
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....rs of the lower authorities on this issue are set side and the assessing officer is directed to allow the claim of balance 50% additional depreciation in the year under consideration." 10.3 In view of the decision of the Cochin Bench of the Tribunal in the case of Apollo Tyres Ltd (supra) which is identical to the facts of the instant case, we direct the Assessing Officer to grant additional depreciation of balance 10% for the current assessment year namely asst.year 2011-12. It is ordered accordingly. In the result, the ground no.4 is allowed. 11 Fifth ground relates to the addition made by invoking provisions of section 14A r.w.r 8D of the I T Rules. 11.1 The assessee had received dividend income of Rs. 1,38,62,144/- which was claimed as exempt from income tax. The assessee did not show any expenses for earning the dividend income. The plea of the assessee that there were no expenses pertaining to the earning of the dividend income, was not accepted by the Assessing Officer. The Assessing Officer by invoking the provisions of section 14A r.w.r 8D(iii), computed the disallowance amounting to Rs. 13,65,688/-. The view taken by the Assessing Officer was confirmed by the DRP....