TaxTMI 
TaxTMI 
2018 (8) TMI 656
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....ompleting the assessment under section 144C read with section 143(3) of the Income-tax Act (the Act) at income of Rs. Nil after adjusting brought forward business losses of Rs. 54,37,55,822, as against returned income of Rs. Nil after setting off of brought forward losses of Rs. 4,87,99,289. 2. That the assessing officer erred on facts and in law in making adjustment of Rs. 48,29,39,813 to the income of the appellant on account of the alleged difference in the arm's length price of the international transaction of provision of software development services undertaken during the previous year on the basis of order passed by Transfer Pricing Officer ('TPO') under section 92CA(3) of the Act. 2.1 That the Dispute Resolution Panel ('DRP')/TPO erred on facts and in law in disregarding the internal benchmarking undertaken by the appellant for determining the arm's length price of the international transactions, applying TNMM, holding that: (i) the appellant did not maintain segmental accounts for the related and non-related transactions and there was no segregation of these activities in the audited financials. (ii) in the segmental accounts prepared by....
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....at the assessing officer/ DRP erred on facts and in law in making an ad-hoc disallowance of interest expenses of Rs. 1,20,16,720 allegedly holding that the interest paid on short term loans which are invested in acquisition of fixed assets shall be capitalized along with the fixed assets. 3.1 That the assessing officer/ DRP erred on facts and in law in not appreciating that the fixed assets were acquired by the assessee out of its own funds and accordingly, no interest expenses shall be aggregated with the value of fixed assets. 3.2 That the assessing officer erred on facts and in law in not appreciating that interest on amounts borrowed in connection with acquisition of an asset to the extent relatable to the period after such asset is first put to use, cannot be capitalized and treated as part of actual cost of such asset. 3.3 Without prejudice, the assessing officer/ DRP erred on facts and in law in allegedly considering the interest rate at 15% on the short term loans for the purpose of computing the interest to be capitalized. 3.4 Without prejudice the assessing officer/ DRP erred on facts and in law in not allowing depreciation on the incre....
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....her hand, Ld. CIT(DR) supported the order of the AO/TPO. 4.3 We have heard the rival contentions and perused the records. We find that the TPO/AO has rejected the internal TNMM Method, but the Hon'ble Delhi High Court vide its order dated 15.04.2015 passed in ITA No. 44/2015 has affirmed the view of the Tribunal in Assessment Year 2009-10 by observing as under:- "The second question is whether the adjustment directed by the AO/TPO ultimately set aside by the ITAT, with respect to the profits margin derived by the assessee in regard to its transactions with the associated enterprise could have been subjected to adjustment. The ITAT was of the opinion that since the assessee was a service provider to its associated enterprise (AE) as well as other foreign customers or non-AEs, the suggestion that the non-AE transactions which reported lower margins and to be used for bench marking the AE transactions were acceptable. The adjustment was not called for. This Court sees no reason to interfere firstly because the ITAT's order has become final. Furthermore, the ITAT's reasoning is in accord with Rule 10B(1)(e)(ii) of the Income Tax Rules. This question does not arise for consi....
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.... circumstances in the present assessment year are similar to the facts and circumstances as obtaining in the preceding assessment years. The revenue has not placed before us any material so as to enable us to take a different view in the matter. In view of these facts and circumstances, respectfully following the order for earlier assessment years noted above, we restore this matter to the file of the AO/TPO with similar directions as have been given by the ITAT in the preceding assessment year." 4.3.2 Since the facts of the year under consideration are similar to the facts involved in the assessment year 2008-09, therefore, respectfully following the precedent as referred above, the ground no. 2 to 2.7 are restored to the file of the AO/TPO with the similar directions as have been given by the ITAT in assessment year 2008-09 (Supra). In the result, the ground is allowed for statistical purposes. 5. Apropos ground nos 3 to 3.4 relating to adhoc disallowance of interest expenses of Rs. 1,20,16,720/-. 5.1 Ld. Counsel for the Assessee submitted that identical issue came up before the Tribunal in the assessment year 2009-10 in assessee's own case passed in ITA No. 1572/Del/201....
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....or acquisition of assets for expansion of existing business; therefore the interest accrued on the borrowed fund from the date on which the capital was borrowed for acquisition of the asset till the date on which the asset was put to use shall be disallowed. Therefore in order to apply the proviso to Section 36(l)(iii) of the Act to the facts of the present case, that is in other words, before disallowing the interest expenditure on the Fund borrowed for procurement of asset for extension of existing business, the AO has to record as a matter of fact the date on which the assessee borrowed the fund for acquisition of asset for extension of business and the date on which the asset thus procured was put to use is absolutely necessary. However in the instant case, we find that no such exercise has been done by the AO to find out the date on which the assessee borrowed the fund for acquisition of asset in the relevant AY and we also find that no attempt has been made by the AO to find out on which date the asset thus procured with the said borrowed fund have been put to use. Only after the dates as afore-stated has been found out then only one can compute the disallowance as prescribed....
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....ference in the arm's length price of the international transaction of provision of software development services undertaken during the previous year on the basis of order passed by Transfer Pricing Officer ('TPO') under section 92CA(3) of the Act. 2.1 That the Dispute Resolution Panel ('DRP')/TPO erred on facts and in law in disregarding the internal benchmarking undertaken by the appellant for determining the arm's length price of the international transactions, applying TNMM, holding that: (i) the appellant did not maintain segmental accounts for the related and non¬related transactions and there was no segregation of these activities in the audited financials. (ii) in the segmental accounts prepared by the appellant, expenses which cannot be directly allocated are apportioned on the basis of respective turnover and is not reliable at all. (iii) The segmental accounts were created by the assessee artificially. (iv) that the characteristics of services transferred, functions performed, asset employed and risk assumed by assessee in providing services to related and unrelated party are different. 2.2 That the DRP/ TPO erred ....
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.... 3.2 Without prejudice, the assessing officer erred on facts and in law in allegedly considering the interest expense of Rs. 73,91,619 paid on loans aggregating to Rs. 22.50 crores, without appreciating that the total purchases of fixed assets made during the year was only for Rs. 9.89 crores. 4. That the assessing officer erred on facts and in law in allowing set-off of brought forward losses from the assessed income for Rs. 5,43,79,729 as against actual brought forward losses claimed in the return of income of Rs. 25,00,07,902. 5. That the assessing officer erred on facts and in law in levying interest under Section 234B and Section 234C of the Act. The appellant craves leave to add, alter, amend or vary from the appeal before or at the time of hearing. 9. Ground no. 1 is general in nature, hence, needs no separate adjudication. 10. Apropos ground nos. 2 to 2.6 relating to TP adjustment amounting to Rs. 9,86,08,398/- in respect of international transaction of provision of software development services is concerned, we find that issue in dispute is exactly similar to the issue raised in assessment year 2012-13 as discussed in para no. 4 to 4.3.2 re....