TaxTMI 
TaxTMI 
2018 (10) TMI 424
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.... violation of principles of natural justice and is otherwise arbitrary and is thus bad in law and void ab-initio. 2. That on the facts and circumstances of the case and in law, the Hon'ble DRP/ learned AO has erred in reducing the rate of tax depreciation allowable on certain items, characterized as 'computers' by the Appellant (viz. UPS, LAN/ WAN equipment, catalyst switches, network equipments, etc.) from 60 percent to 15 percent, by treating the same as Plant and Machinery and thus, disallowing depreciation amounting to Rs. 19,33,295 to the Appellant. 2.1. That on facts and circumstances of the case and in law, the Hon'ble DRP/ learned AO has failed to appreciate that UPS, LAN/ WAN equipment, catalyst switches, network equipment, etc. are "integral part of the computer system" and have been held to be in the nature of 'Computers' by the Hon'ble Jurisdictional Delhi High Court in the case of BSES Rajdhani Powers Ltd. (ITA No. 1266/ 2010), Orient Ceramics and Inds Ltd. (ITA No. 65 and 66 of 2011) and Citicorp Maruti Finance Ltd. (ITA No. 1712 and 1714 of 2010) and by the Hon'ble Special Bench of Mumbai Tribunal in the case of Datacraft India Limited (ITA No.7462 ....
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.... the Hon'ble DRP/ learned AO has erred in making a disallowance amounting to Rs. 5,38,977 in respect of payment to Nokia Hungary KFT, under section 40(a)(i) of the Act, without appreciating that the said amount is not chargeable to tax in India as FTS under Article 12 of India - Hungary DTAA, in view of the restritive definition of FTS provided under Article 12 read with the protocol to India - Hungary DTAA. 4. That on the facts and circumstances of the case and in law, the learned AO has erred in not granting depreciation at the rate of 25 percent under the provisions of section 32 of the Act in respect of goodwill amounting to Rs. 9,81,15,000 accounted for by the Appellant in its books of accounts arising out of purchase of networks business, despite of a specific claim having been made by the Appellant before finalization of the order dated November 30, 2012 by the learned AO. 4.1. That on the facts and circumstances of the case and in law, the learned AO has failed to appreciate that the said depreciation claim made by the Appellant is duly supported by the Hon'ble Supreme Court decision subsequently pronounced in the case of CIT vs Smifs Securities Ltd (Civil....
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....ctions related to Network's division for arm's length analysis and instead conducting separate analysis for certain international transactions of Networks division namely provision of marketing support services, warranty services and other support services using Transactional Net Margin Method ('TNMM') without giving cognizance to the functions, risks and assets ('FAR') analysis of the Appellant vis- a-vis its associated enterprises for international transactions reassociate the networks division. 5.5 That without prejudice, the learned TPO/ Hon'ble DRP has erred, in law and on facts, in not separately bifurcating the costs of the marketing team attributable towards the support provided on the sales made by the Appellant itself vis-a-vis support provided to the associated enterprises and erroneously attributed entire costs of the of marketing team towards the marketing support services provided to the associated enterprises while undertaking separate transaction by transaction analysis using TNMM. 5.6. That without prejudice, the learned TPO/ Hon'ble DRP has erred, in law and on facts in the application of TNMM for transaction by transaction analysis of certain in....
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.... 8. That on the facts and circumstances of the case and in law, the learned AO has erred in levying interest under section 234B and section 234D of the Act. 9. That, without prejudice to ground 8 above, on the facts and circumstances of the case and in law, the learned AO has erred in calculation of interest under section 234B and section 234D of the Act." 3. The assessee company incorporated in India under the provisions of the Companies Act, 1956. For the Assessment Year 2008-09, the assessee company was engaged in the business of manufacturing and trading of telecommunication network equipment and provision of related services such as network design, installation and commissioning. The company also provided support services to major telecom operators and IP service providers in India and to customers of its Associated Enterprises (AE). Further, the company also provided software development and certain network management support services. Furthermore, Nokia Siemens Networks Private Limited India rendered certain marketing support services to its AEs such as providing information on potential customers, providing assistance in marketing products its AE. During th....
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....g to Ground No. 2 and 2.1, relating to the depreciation on computer peripherals, assessee claimed depreciation on the equipment like UPS, stabilizer, LAN/WAN, catalyst switches, network switches etc. at 60%. However learned AO disallowed such a claim to an extent of Rs. 1,44,75,008/- on the ground that they form part of the block of assets under plant and machinery, in respect of which depreciation is allowed only at 15%. Basing on the decision of the Hon'ble jurisdictional High Court in CIT vs. BSES Yamuna Power Ltd. (2013) 358 ITR 47 (Del), assessee argued before the learned DRP that these peripherals form an integral part of computer system, and therefore, 60% depreciation must be allowed. Learned CIT(A), however, observed that the issue of allowability of depreciation on computer peripherals is pending before the Hon'ble Supreme Court, and since it did not attain finality, the plea of the assessee cannot be entertained. 6. It is the argument of the learned AR that the equipment in respect of which the depreciation at 60% is claimed does not function on their own and for deriving any functionality they must be connected to the computer equipment, as such they are part a....
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....Lastly, he brought to our notice that the learned DRP while dealing with this aspect in assessee's own case for the AY 2009- 10 and 2010-11 followed this legal position and the department also accepted the same. 10. In view of the above legal position, we find that the equipment forms integral part of the computer systems and the assessee is entitled to the claim of depreciation at 60% by treating the peripherals as part of block of computers. Grounds No. 2 and 2.1 are allowed accordingly." Thus, the facts in the present case are also identical. Therefore, Ground Nos. 2 and 2.1 are allowed. 8. The Ld. AR submitted that Ground Nos. 3, 3.1, 3.2, 3.3 and 3.4 related to disallowance u/s 40(a)(i) aggregating to Rs. 33,27,776 on the ground that payment made to following companies was in the nature of FTS and hence, assessee was liable to deduct tax on the same. The Ld. AR submitted that at the time of the Assessment Proceedings, the assessee could not produced the details as the details were not received from the third parties, but since the same are now available with the assessee, therefore, the assessee is filing additional evidence which has to be decided by the Assess....
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....d upon the order of Tribunal in case of M/s Nokia Siemens Networks India (supra) for Assessment Year 2008-09 wherein it is held as under: "33. Assessee as a tested party has been characterized as provider of software development services to its AEs which had used Transactional Net Margin Method (TNMM) as the most appropriate method for its benchmarking of international transaction. Search for uncontrolled comparables was made using Prowess and Capitoline database by the Assessee in its Transfer Pricing Study. Assessee had taken 16 comparables in its TP study with an arithmetic mean of 9.71%. Assessee computed its profit level indicator (PLI) at 4.26% on cost which was falling within the arm's length range of +/-5%." The Ld. AR submitted that the assessee is also engaged in providing software development services to its AEs. Thus, it is an undisputed position that assessee's functional profile qua the software development service division is identical to that of the erstwhile entity which has been considered by the Tribunal in M/s Nokia Siemens Networks India (supra). The TPO selected 25 comparables to benchmark the transaction pertaining to software development services....
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....guish the facts of the assessee's case relating to the comparables disputed by the assessee in present Assessment Year and that to the comparables dealt by the Tribunal in case of M/s Nokia Siemens Networks India (supra). 14. We have heard both the parties and perused all the relevant material available on record. The functional profile of the assessee company and M/s Nokia Siemens Networks India (supra) are identical and there is no dispute raised by the Revenue at any point of time. Therefore, the treatment given to the comparables in case of M/s Nokia Siemens Networks India (supra) by the Tribunal has to be followed in the present assessee's case as well. Ground No. 5.3 is partly allowed for statistical purpose. 15. As regarding to Ground No. 5.4 relating to Network Division i.e. support service segment, this segment is separate from the software development service segment. The Ld. AR submitted that four comparables to be excluded has to be excluded which are Apitco Ltd., IDC (India) Ltd., RITES (Seg), WPCOS Ltd. (Seg). The Ld. AR submitted that these are all functionally different comparables. Therefore, the same should be excluded. The Ld. AR submitted that ICRA Managem....
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....nd project appraisal. This company is full risk bearing company and thus cannot be compared to a service provider like assessee. It's a Government undertaking and has different model of revenue recognition. Besides that the company has intangible assets and there is no segmental data available. Thus, this company is functionally different from the assessee company. Therefore, we direct the TPO to exclude this comparable. 16.4 WAPCOS Ltd. (Seg): This company is into provision of Engineering Consultancy Services and turnkey projects and has diverse business activities. This company has grant in aid by government and the same are treated as fee from other services. Thus, this company is functionally different from the assessee company. Therefore, we direct the TPO to exclude this comparable. 17. Therefore, we remand back the issue to the file of the TPO/AO as per above directions given for each comparables. Thus, Ground No. 5.4 is partly allowed for statistical purpose. 18. As regards Ground Nos. 5.5, 5.6, 5.7, the Ld. AR submitted that the issue should be kept open for future, but at this juncture, the assessee is not pressing and this statement should not be taken into cons....