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TaxTMI 
TaxTMI 
2023 (3) TMI 1300
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....e. Therefore, in view of the above, we proceed to dispose off the present appeals ex-parte, qua the assessee after hearing the learned Departmental Representative („learned DR‟) and based on the material available on record. ITA No. 4926/Mum/2017 Revenue's Appeal - A.Y - 2010-11 3. In this appeal, the Revenue has raised the following grounds: "1. On the facts and circumstances of the case and in law, the Learned CIT(A) erred in allowing the assessee's claim for depreciation on the additions to plant and machinery made during the year totaling to Rs. 43,32,961/- without appreciating the fact that the AO was completely justified in disallowing the assessee's claim u/s the spirit of Section 32 of the Income Tax Act, 1961? 2. On the facts and circumstances of the case and ion law, the Learned CIT(A) erred in allowing assessee's claim for depreciation @ 60% in respect of Opening Written Down Value as on 01.04.2009 to the extent of directions given by CIT(A), Mumbai and ITAT, Mumbai for earlier assessment years 2004-05 to 2009-10, without appreciating the fact that the verification of the data of machinery could not be carried out for th....
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....are or application system, and a person with basic knowledge of computes will understand that these assets are apparently in nature of computer hardware or computer software The Chartered Engineer, Shri Kumar Subramaniam, has clearly certified that these assets as computers, vide his report dated 22.12.2014 Similarly, the inhouse expert, Shn Parminder Singh Chadda, has also certified that these assets to be computers it appears that the leamed AO never tried to look into the nature of these assets, even though he had made a visit to the premises of the assessee, in the previous years. Computer does not mean only a personal computer or a laptop or a mainframe computer. In fact, only microprocessor based device may be termed as computer. 12. Identical issue had come up for consideration before me in the assessee's own case for AY 2004-05, and after considering the facts of the case and submissions of the appellant, I had, vide order dated 1/7/2014, disallowed the claim of the appellant and deleted the disallowance made by the AO. ................. Identical issue is involved in the present year also Therefore, for the details reasons discussed by me in ....
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....-11. Prima facie it appears from the records that the AO has not made any discussions and merely based his decision on the basis of his predecessor's decisions and disallowed the claim for depreciation @60% without application of mind and without referring to the invoices. It looks like a stereo typed assessment order without any application of mind to the facts of the case and to the nature of additions to fixed assets totaling Rs. 43,32,961/- made during the previous year relevant to AY 2010-11. Perusal of the various bills and invoices furnished by the assessee in respect of the additions of Rs. 97,56,566/- for AY 2010-11 to the block of assets on which depreciation @ 60% is claimed, indicates that these additions of Rs. 97,56,566/- mainly consist of processors, hard discs and hard drives, software, workstation platforms, drivers, monitors, servers, display and control panels with different types of software which are classifiable as "Computer and Computer Software within the meaning of the same under Item A-III (5) of new appendix I to rule 5 of IT Rules, 1962 Even otherwise these items are classifiable as "Computers within its meaning under the Information Technology Act, ....
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....ailable on record, we find that this issue is recurring in nature since the assessment year 2004-05. We further find that assessee is claiming depreciation on computer-based editing equipment, part of which was acquired in preceding years and part was purchased during the year under consideration. As noted on page 5 of the impugned order, addition during the year mainly consist of processors, hard disk and hard drives, software, workstation platforms, drivers, monitors, servers, display, and control panels with different types of software. We further find that the coordinate bench of the Tribunal in assessee's own case in the immediately preceding assessment year, in DCIT vs Prime Focus Ltd., in ITA No. 1470/Mum./2015, vide order dated 12/04/2017, following the judicial precedent in assessee's own case decided a similar issue in favour of the assessee. The relevant findings of the coordinate bench of the Tribunal are as under: "4. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the assessee has divided these assets under three different heads in the schedule of assets i.e. the editing equipments computer based, edi....
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.... the assessing authority forming a view on the basis of the material not found incorrect or untrue, is nevertheless a view, so that it becomes a case of review. Rather, as it appears, the A.O.‟s action is guided by the consideration of being consistent in-as-much as like claim was not accepted by the Revenue for the immediately preceding year, i.e., A.Y. 2004-05. That by itself cannot be a ground for reopening." 5. As the issue is covered in assessee‟s own case for AY 2005-06 also and in the given facts and circumstances of the case, we confirm the order of CIT(A) allowing depreciation on computers at the rate of 60%. The appeal of Revenue is dismissed." 7. We further find that the coordinate bench of the Tribunal in assessee's own case in ACIT vs Prime Focus Ltd., in ITA No. 6133/Mum./2019, for the assessment year 2012-13, vide order dated 30/08/2021 rendered similar findings. 8. This issue is recurring in nature and has been decided in favour of the assessee by the decisions of the coordinate bench of the Tribunal in other assessment years. The learned DR could not show us any reason to deviate from the aforesaid decision and no change in facts and law ....
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....rency Convertible Bond (FCCB) funds of USD 5,50,00,000 raised by the assessee in the UK at the compound rate of 7.375% during December 2007. The TPO determined the arm's length interest rate of 11.56% by adopting the weighted cost of borrowed capital of 8.56% + markup of 3% for the currency, entity, and country-specific risks. Accordingly, the TPO proposed transfer pricing adjustment of Rs. 2,70,55,543. The learned CIT(A) vide impugned order dismissed the appeal filed by the assessee on this issue and treated the transaction as a loan and determine the arm's length interest rate of 8.375% by adopting the FCCB rate of 7.375 percent +1% for other lending risks. The relevant findings of learned CIT(A) in this regard are as under: "Decision- 3.3 I have gone through the assessment order and the submissions made by the assessee. The moot point for is whether the amount of USD 45,00,000 equivalent to Rs.23 Crores advanced by the assessee to its AE Prime Focus plc. UK (PFPUK) constituted an interest free loan or not and if so, whether interest should have been charged by the assessee from its AE-PFPUK and if so, what should be the rate of interest on it during the period ....
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....ee should have at least charged interest @ 7.35% on its advances of USD 45,00,000 from its AE-PFPUK. The assessee's contention that it had earned interest rate of 2.57% o its fixed deposit with BOI London is prima facie not relevant since the reasons and circumstances in which assessee was forced to park its surplus funds in London, UK with BOI, London @ 2.67% is not known and even if it were not known, when the funds were being advanced as loan, interest rate of 7.375% should have been charged by the assessee from the AE PFPUK Secondly the assessee's contention to charge interest @LIBOR rate of interest is also not much relevant since LIBOR rate of interest is the rate of interest charged by the banks between itself while barrowing and for lending funds from the member banks and not from third party transactions where the rate of interest is usually LIBOR plus 3% to cover various risks like exchange, currency and lending and hence charging interest at LIBOR rate, though accepted by the TPO/AO in later assessment years is patently erroneous since the assessee had borrowed US Dollar funds by way of FCCB @ 7.375% from the market. Similarly charging of interest rate of 11.56%,....
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....ther, the learned CIT(A) also rejected the plea of the assessee to charge interest at the LIBOR rate as LIBOR rate of interest is the rate of interest charged by the banks between itself while borrowing and/or lending funds from the member banks and not from the 3rd party transactions where the rate of interest is usually LIBOR +3% to cover various risks like exchange, currency, and lending. The learned CIT(A) considered the FCCB rate of 7.375%. Since the funds are borrowed in USD and advanced in USD the learned CIT(A) came to the conclusion that the question of currency and exchange risks is minimal and therefore, only risk that needs to be factored in was the lending risks by the assessee to its AE. Accordingly, the learned CIT(A) computed the arm's length rate of interest on loan granted to AE at 8.375% i.e. rate of FCCB borrowings of 7.375% + markup of 1% for other lending rates. Since it is undisputed that advance was made by the assessee to its AE out of the funds generated from FCCB, therefore, we are of the considered view that the learned CIT(A) was right in considering the FCCB compound rate of 7.375% as the base rate. Further, since the funds have been borrowed in USD an....
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....mount advanced to the associated enterprise was on account of share application monies and shall not be construed as deemed loan and on the basis of interest rate difference. 2. The Ld. CIT(A) has erred in applying the FCCB rate of the appellant for determining the Arm's Length rate of interest on deemed loan/ instead of International borrowing rate or LIBOR." 15. The issue arising in grounds No. 1 and 2 raised in Revenue's appeal is pertaining to deletion of disallowance of depreciation on editing equipment. Since a similar issue has already been decided in the Revenue's appeal being ITA No. 4926/Mum./2017, therefore, our findings/conclusion rendered in said appeal shall apply mutatis mutandis. Accordingly, grounds No. 1 and 2 raised in Revenue's appeal are dismissed. 16. The issue arising in ground No. 3, raised in Revenue's appeal, and grounds No. 1 and 2, raised in assessee's appeal, is pertaining to addition on account of transfer pricing adjustment. 17. The brief facts of the case as emanating from the record are: The AO made a reference under section 92CA(1) of the Act to the TPO to determine the arm's length price of the international transactions ente....
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....risks, entity risks, and country-specific risks, which the assessee had not factored in by lending money. Accordingly, the TPO by adopting weighted cost of borrowed capital of 8.05% per annum +3% markup due to risk factors, computed the arm's length interest rate of 11.05%. As a result, the TPO proposed an adjustment of Rs. 18,96,129. 19. Further, the TPO noted that the assessee had an opening share application money pending allotment of earlier years of Rs. 23,40,44,490 for which no equity shares were allotted during the relevant assessment year. The TPO also noted that no interest has been charged on the above amount and no separate transfer pricing analysis has been done in respect of this transaction. Following the approach adopted in the preceding year, the TPO treated the transaction as granting of interest-free loan to the AE and computed the arm's length interest rate of 11.05% per annum. Accordingly, TPO made a transfer pricing adjustment of Rs. 2,33,82,007. 20. The learned CIT(A) vide impugned order, in respect of the amount advanced to the subsidiary as share application money treated the transaction to be in the nature of loan on the basis similar to the preceding....