TaxTMI 
TaxTMI 
2026 (1) TMI 248
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....ecided by way of this consolidated order. With the consent of the parties, the assessee's appeal for the assessment year 2011-12 is considered as a lead case, and the decision rendered therein shall apply mutatis mutandis to other appeals. ITA No.1236/Mum/2016 Assessee's Appeal (A.Y. 2011-12) 3. In this appeal, the assessee has raised the following grounds: - "Ground 1 - General On the facts and in the circumstances of the case and in law, the directions of the Hon'ble Dispute Resolution Panel- II (DRP') and the final assessment order passed by the learned Deputy Commissioner of Income-tax - 15(3)(1), Mumbai (DCIT) are bad in law and merit to be set aside. Ground 2 - Depreciation on contracts - Acquisition from Glaxosmithkline Pharmaceuticals Ltd ('GSK') in AY 2008-09 2.1 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 7.54,46,294 on the written down value of business or commercial rights being the manufacturing contracts as on 1 April 2010 under section 32(1) r.w.s 2(11) of the IT Act. 2.2 On the facts an....
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....artered Accountants of India 3.3 Without prejudice to the above, the learned DCIT and Hon'ble DRP erred in not considering the value of maintenance contracts as goodwill acquired from CTPL, which is an intangible asset eligible for deprecation under section 32(1) r.w.s 2(11) of the IT Act. 4. Ground 4 - Consequential depreciation on software expenses capitalised in AY 2007-08 On the facts and in the circumstances of the case and in law, the learned DCIT has erred in not following the directions of the Hon'ble DRP for granting consequential depreciation of Rs. 16,790 on the written down value of software expenses considered to be depreciable capital expenditure in completed assessment proceedings of AY 2007-08. 5. Ground 5 - Allowance of brought forward unabsorbed depreciation of AY 2008-09 5.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2008-09 of Rs. 23,42,932 as per return of income. 5.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred ....
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....4 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 41,975 relating to depreciation on software expenses treated as capital expenditure in AY 2007-08. Ground 8 - Transfer pricing (TP") adjustment relating to purchase of finished goods (Rs. 2,90,74,384) The Appellant most respectfully submits before Your Honours that this Ground of Appeal is subject to learned DCIT disposing the rectification application filed by the Appellant under Sec 154 of the IT Act on 09 February 2016. In this application, it was brought to the notice of learned DCIT that the learned TPO has incorrectly granted relief by deleting the entire TP adjustment in relation to purchase of finished goods amounting to Rs. 13,44.35,683 while giving effect to the directions of the Hon'ble DRP i.e. accepting Advanced Micronic Devices Ltd. and Frontline Electro Medical Ltd. as comparables for the purpose of computing the revised arm's length gross profit margin. In view of this, the revised TP adjustment stands at Rs. 2,90,74.384 instead of Rs. Nil as confirmed by Learned TPO. On the facts and in the....
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....ed TP adjustment stands at Rs. 6,90,51,774 instead of Rs. 8,37,82,467 as confirmed by Learned TPO. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in confirming the upward adjustment of Rs. 6,90,51,774 to the income of the Appellant in relation to the international transaction of purchase of analysers; and in doing so the learned DCIT and Hon'ble DRP grossly erred in agreeing with the learned TPO's action of - a. rejecting the economic analysis in the TP documentation maintained by the Appellant; b. rejecting the comparable uncontrolled price analysis of the Appellant for purchase from Associated Enterprises ('AEs) amounting to Rs. 2,26,13,896; and c. rejecting (i) Sataytej Commercial Company Ltd. and (ii) Remi Sales and Engineering Ltd. from the economic analysis for the balance purchases from AEs amounting to Rs. 4,49,43,913, which are comparable to the Appellant's assembling activity in terms of functions, asset base and risk profile; and d. not granting proportionate adjustment in the ratio of AE and non AE purchases. Ground 11 -No TP adjustment of Rs. ....
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.....1 is general in nature, and therefore, the same needs no specific adjudication. 5. Grounds No.2 and 3, raised in assessee's appeal, pertain to the claim of depreciation on manufacturing contracts, supply and maintenance contracts acquired by the assessee pursuant to the acquisition of two undertakings under slump sale arrangements in earlier years. 6. The brief facts of the case pertaining to this issue as emanating from the record are: The assessee is engaged in the business of manufacturing, installation and sale (including trading) of scientific/medical laboratory equipment and chemicals. For the year under consideration, the assessee e-filed its return of income on 30.11.2011, which was subsequently revised on 22.03.2013, declaring a total loss of Rs. 65,44,74,379/-. During the assessment proceedings, upon perusal of the details of depreciation claimed by the assessee, it was observed that the assessee has claimed depreciation on manufacturing contracts and supply/maintenance contracts of Rs. 9,36,45,101/- and Rs. 36,61,868/-, respectively, based on the acquisition of "Qualigens Fine Chemical Division" from M/s. GlaxoSmithklinePharma Limited ("GSK Pharma Ltd.") and "Anal....
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....see in respect of manufacturing contracts and supply/maintenance contracts and added the same to the total income of the assessee. 8. The learned DRP, vide its direction dated 14.12.2015 issued under section 144C(5) of the Act, rejected the objections filed by the assessee on this issue following the approach adopted in the assessee's own case in preceding years, wherein depreciation on manufacturing contracts and supply/maintenance contracts was disallowed. Accordingly, the action of the AO in not entertaining the claim of the assessee was upheld. In conformity, the AO passed the impugned final assessment order dated 09.01.2016 under section 144(3) read with section 144C(13) of the Act on this issue. Being aggrieved, the assessee is in appeal before us. 9. During the hearing, the learned Authorised Representative ("learned AR") submitted that the claim of depreciation in respect of manufacturing contracts and supply/maintenance contracts was allowed by the Co-ordinate Bench of the Tribunal in assessee's own case for the assessment year 2010- 11. 10. On the other hand, the learned Departmental Representative ("learned DR") vehemently relied upon the order passed by the low....
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....dice to the aforesaid submission, the learned AR, inter-alia, submitted that even assuming without accepting that the consideration paid for these contracts does not constitute a separate intangible asset, the same would be liable to be considered as goodwill, i.e. the difference between the purchase consideration and the net assets value, and the depreciation is allowable on goodwill being an intangible asset. 11. On the contrary, the learned Departmental Representative ("learned DR") submitted that as per the provisions of the Accounting Standard-26, manufacturing contracts, supply contracts and maintenance contracts acquired by the assessee pursuant to the above-mentioned slump sale acquisitions cannot be recognised as intangible assets. The learned DR further submitted that the Accounting Standard-26 specifically requires the capacity of an enterprise to control future economic benefits from an intangible asset. However, in the present case, the assessee has not been able to demonstrate its capacity to control future economic benefits from the contracts, which are only for the duration of 1 year, 2 years or 5 years. It was further submitted that the cost of these contr....
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....w of these contracts continued in the year under consideration. Further, the maintenance contracts were all entered into on a yearly basis. However, as noted above, as per the assessee, the relationship with the manufacturer/customers/distributors has continued for many years, and these contracts are likely to continue in future. Further, as noted above, it is the plea of the assessee that these are specialty chemicals that enjoy a leadership position and due to continuing long-standing relationships, the assessee continued to enjoy future economic benefits. 14. In any case, it is pertinent to note that in the present case, the total consideration paid by the assessee for the afore-mentioned slump sale acquisitions from GSK Pharma Ltd and Chemito Technologies Pvt. Ltd. includes consideration paid for manufacturing contracts, supply contracts and maintenance contracts acquired by the assessee. Thus, even if it is assumed that these contracts are not separate intangible assets under section 32(1)(ii) of the Act, it cannot be disputed that the consideration paid also covered the consideration for these contracts, and the said consideration was over and above the net asset val....
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....ve been if the demerged company had continued to hold the capital asset for the purpose of its own business : Provided that such actual cost shall not exceed the written down value of such capital asset in the hands of the demerged company." 5.20 On perusal of the above Explanation, we find that same is in relation to transactions of amalgamation and not related to slump sale transactions, which is the case of the assessee. 5.21 The learned Assessing Officer has further relied Explanation-2 to section 43(6) of the Act, which reads as under: "Explanation 2.-Where in any previous year, any block of assets is transferred,- (a) by a holding company to its subsidiary company or by a subsidiary company to its holding company and the conditions of clause (iv) or, as the case may be, of clause (v) of section 47 are satisfied; or (b) by the amalgamating company to the amalgamated company in a scheme of amalgamation, and the amalgamated company is an Indian company, then, notwithstanding anything contained in clause (1), the actual cost of the block of assets in the case of the transferee-company or amalgamated company, as the case may be....
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.... there was amalgamation of the three wholly owned subsidiaries whereas in the instant case there is a acquisition of units of third parties by way of slump sale. 5.26 The learned DR before us submitted that allocation of values to the fixed asset acquired has been on lower side for creating goodwill as intangible asset. But in our opinion, if the quantum of goodwill is reduced, the valuation of the fixed asset will increase, which are also eligible for depreciation and thus in the exercise of reallocation of values among the goodwill and other fixed asset, will be a revenue neutral exercise. 5.27 In view of the above discussion, we concur with the arguments of the learned counsel of the assessee that goodwill arising from transactions of acquisition of units of GSK and CTPL, is eligible for depreciation under the provisions of the Act. As far as claim of the assessee for allowing depreciation on said goodwill corresponding to assessment year 2008-09, we are of the opinion that claim with respect to depreciation for assessment years 2008-09, cannot be allowed in the appeal for assessment year 2009-10. It is for the assessee to explore necessary remedy under the pro....
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....depreciation for the assessment years 2008-09 to 2010-11. 14. We have considered the submissions of both sides and perused the material available on record. As per the assessee, the AO has not allowed brought forward and unabsorbed depreciation on account of disallowance of depreciation on intangible assets in several preceding years and the allowance of depreciation on software as well as allowance on brought forward and unabsorbed depreciation for the assessment years 2008-09 to 2010-11 during the present year is linked to the outcome of the previous years. Thus, as per the assessee, this issue is consequential and depends on the outcome of the preceding years. We find that while considering a similar issue, the Coordinate Bench of the Tribunal in assessee's own case for the assessment year 2015-16, cited supra, observed as follows: - "6.2. On perusal of record we find that the Assessing Officer did not allow Assessee's claim of brought forward unabsorbed depreciation on account of disallowances made in the preceding years. Since the allowance of unabsorbed depreciation is linked to the outcome of the appeals for the Assessment Years 2008-2009 to 2014-2015, we dee....
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....computed the transfer pricing adjustment of Rs. 13,44,35,683/- in respect of international transaction of purchase of finished products, over and above the suo motu voluntary adjustment of Rs. 9,39,75,175/- made by the assessee. 19. The learned DRP, vide its direction, partly accepted the objections filed by the assessee and directed the TPO/AO to include two companies, i.e., Advanced Micronics Devices Limited and Frontline Elector Medical Limited, as comparable. Thus, the same resulted in partial relief to the assessee in respect of international transaction of purchase of finished products, vide final assessment order. Being aggrieved by the balance transfer pricing adjustment, the assessee is in appeal before us. 20. During the hearing, the learned AR submitted that if only one company, i.e., Satyatej Commercial Co. Ltd., is directed to be included as the comparable, then the assessee's margin would fall within the arm's length margin range. As regards the inclusion of Satyatej Commercial Co. Ltd., the learned AR submitted that it is in a similar line of business as that of the assessee and is engaged in the trading of surgical and medical instruments, which is similar to ....
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....gn currency, whereas the assessee's total purchase in foreign currency is more than INR 51 crore. The TPO also noted that for working margin, this company has taken freight and forwarding, customs duty as part of operating cost, while in the assessee's working, these items were not taken as part of operating cost. Accordingly, the TPO directed the exclusion of Satyatej Commercial Co. Ltd. as the same is not comparable to the assessee. The learned DRP, vide its directions, upheld the exclusion of this company on the basis that the goods dealt with by this company are different from the goods traded by the assessee. 37. Therefore, from the record, it is evident that one of the factors for excluding this company as a comparable by the lower authorities is product dissimilarity, as Satyatej Commercial Co. Ltd. is dealing in surgical, medical goods and disposables. On the other hand, the assessee is importing laboratory equipment and related products from its Associated Enterprises. We find that while analysing the relevance of product similarity for benchmarking the international transactions by adopting the RPM as the most appropriate method, the coordinate bench of the Tribu....
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....e and resale of the "same or similar" property or from obtaining and providing the "same or similar" services. Thus, it is evident that Rule 10B(1)(b) of the Rules, which prescribes the RPM as one of the methods for the determination of arm's length price, also does not require strict product similarity for benchmarking the international transaction. We find that while analysing this aspect of the matter, i.e., the relevance of product similarity for benchmarking the international transaction by adopting the RPM as most appropriate method, the Co-ordinate Bench of the Tribunal in the case of Mattel Toys (I) (P) Ltd. vs. DCIT, reported in (2014) 30 ITR(T) 283 (Mumbai), observed as follows:- "38. Thus, the RPM method identifies the price at which the product purchased from the A.E. is resold to a unrelated party. Such price is reduced by normal gross profit margin i.e., the gross profit margin accruing in a comparable controlled transaction on resale of same or similar property or services. The RPM is mostly applied in a situation in which the reseller purchases tangible property or obtain services from an A.E. and reseller does not physically alter the tangible goods an....
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....he following decisions:- * ACIT vs. Kobelco Construction Equipment India Ltd., (2017) 81 taxmann.com 31 (Delhi - Trib.) * Pepperl & Fuchs (India) (P.) Ltd. vs. DCIT, (2019) 105 taxmann.com 29 (Bangalore - Trib.) 16. Thus, we find that it has been consistently held by the Co-ordinate Benches of the Tribunal that under the RPM, the focus is more on same or similar nature of properties or services rather than the similarity of products, and therefore, the functional attribute is a primary factor while undertaking the comparability analysis under the RPM." 38 Thus, in the aforesaid decision, the coordinate bench arrived at the conclusion that for benchmarking under the RPM, functional attribute is a primary factor rather than the similarity of the products. Therefore, respectfully following the aforesaid decision, we do not find any merit in the findings of the lower authorities in excluding Satyatej Commercial Co. Ltd. as a comparable on the basis that it is dealing in different products. 39. As regards the finding of the TPO that this company has purchases in foreign currency only amounting to INR 51 lakh out of the total purchases of INR ....
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....sociated enterprises' products throughout the territory of India. For benchmarking the said international transaction, the assessee adopted the Comparable Uncontrolled Price ("CUP") method as the most appropriate method. By considering itself as a tested party, the assessee selected the following comparable companies by conducting a search on Royalty stat database: - Sr. No. Contractors Commission rate % 1 Hand Innovations. Inc. 22.00 2 Smith & Nephew, Inc (S&N) 9.00 3 Vip Med 3.38 4 Mentor Medical Inc. 11.40 5 Cincinnati Sub-Zero Products, Inc. 9.00 6 Servomex Company 13.25 7 RG Medical Diagnostics 17.50 8 J.T. Posey Co. Inc. 15.00 28. As the mean of the commission rates of the said comparable companies was 12.57%, which was less than the commission rate charged by the assessee of 12.90% from its associated enterprises, the assessee claimed that the international transaction of receipt of indenting commission is at arm's length. 29. During the transfer pricing adjustment proceedings, it was observed that some of the companies selected by the assessee from the Royaltystat database were not co....
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....objections, if any, against the TPO's findings on this adjustment are kept open for adjudication if they arise in the assessee's case in future. 35. We find that the Co-ordinate Bench of the Tribunal in assessee's own case for the assessment year 2010-11, cited supra, after considering the Sales Representative Agreement entered into between Hand Innovations Inc. and Harry Kraus, as well as the Sales Representative Agreement entered into by RG Medical Diagnostics, found that these companies are having similar product profile as the companies which were excluded by the TPO. Accordingly, agreeing with the submissions of the assessee, the Co-ordinate Bench directed the TPO to exclude Hand Innovations Inc. and RG Medical Diagnostics for benchmarking the international transaction of receipt of indenting commission. The relevant findings of the Co-ordinate Bench of the Tribunal, vide aforesaid decision, are reproduced as follows: - "49. From the perusal of the TPO's order, we find that Smith & Nephew, Inc., selected by the assessee, was excluded by the TPO on the basis that the same is into bone healing therapy for Fresh Closed Distal Radius Fractures. Thus, the TPO held t....
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.... exclude RG Medical Diagnostics for benchmarking the international transaction of receipt of the indenting commission. As a result, ground no.11 and additional ground no.16 raised in assessee's appeal are allowed." 36. In the instant appeal, the learned AR raised similar submissions and sought the exclusion of Hand Innovations Inc. and RG Medical Diagnostics. However, since the relevant Sales Representative Agreements entered into by these two companies for the year under consideration are not forming part of the record, we deem it appropriate to restore this issue to the file of the TPO, with a direction to the assessee to produce these documents before the TPO. The TPO is further directed that if in this year also, after perusing the Sales Representative Agreement for the year under consideration entered into by Hand Innovations Inc. and RG Medical Diagnostics, it is found that the functional profile is similar to the companies which have already been excluded, the TPO is directed to also exclude Hand Innovations Inc. and RG Medical Diagnostics in lines with the findings of the Co-ordinate Bench of the Tribunal in assessee's own case for the assessment year 2010-11. Therefore,....
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....ethod for benchmarking the remaining transaction. The TPO rejected four companies considered as comparable by the assessee in its transfer pricing study report, and based on the remaining one company, i.e., Hicks Thermometers (India) Ltd., having a margin of 43.92%, made a transfer pricing adjustment of Rs. 8,37,82,467/- in respect of the international transaction of purchase of analysers. 41. The learned DRP, vide its directions, granted partial relief to the assessee. In conformity, the AO passed the impugned final assessment order on this issue. Being aggrieved, the assessee is in appeal before us. 42. During the hearing, the learned AR prayed for the inclusion of only one company, i.e., Satyatej Commercial Co. Ltd. and a direction to compute the transfer pricing adjustment, restricting it to the international transaction undertaken by the assessee with its associated enterprises. The learned AR submitted that even after the grant of the aforesaid relief, there would still be some transfer pricing adjustment. However, the assessee is only pressing these two aspects in respect of the impugned transfer pricing adjustment. As regards the inclusion of Satyatej Commercial Co. L....
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....elhi High Court in CIT v/s Keihin Panalfa Ltd., in ITA No. 11 of 2015, reported in 381 ITR 407, wherein it was held that where segmental accounts are not available, then proportionate adjustments have to be made only in respect of the international transactions with associated enterprises. The relevant findings of the Hon'ble Jurisdictional High Court in ALSTOM Projects India Ltd (supra) are reproduced as follows: - "5. Be that as it may, Mr. Chhotaray, learned Counsel for the Revenue submits that identical question as raised herein had been admitted by this Court and in particular invited our attention to the following orders passed at the stage of admission :- (a) Commissioner of Income Tax-15 Vs. M/s Super Diamonds, Income Tax Appeal No.298 of 2013; (Order dated 16 February 2015); and (b) The Commissioner of Income Tax-8 Vs. Global Jewellery Pvt. Ltd., Income Tax Appeal No. 1395 of 2013. (Order dated 16 April 2015) 6. In both the above appeals we find that the question admitted was with regard to transfer pricing adjustment being done at the entity level and not restricted only to the transactions with Associated Enterprises. However, both....
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....be done only in respect of the international transactions with Associated Enterprises. This is so recorded in the order dated 24 November 2015. Therefore, on the above ground itself, the question as proposed does not give rise to any substantial question of law. 10. We may once more note that the Income Tax Department within the jurisdiction of this Court must adopt a consistent view on issues of law. In this case, we find that the Revenue urges the absence of segmental accounts would warrant entity wise adjustment, when the Revenue had itself in Pedro Araldite Pvt. Ltd. (Supra) did not canvas the point, as even according to it the issue stood covered by the earlier orders of this Court in favour of the Assessee. The Revenue must apply the law equally to all and cannot take inconsistent position in law (de hors the facts) to apply different standards to different assessee. The administration of the tax laws should not degenerate into an arbitrary and inconsistent application of law dependent upon the Assessee concerned. 11. We also note that the Delhi High Court in Commissioner of Income Tax Vs. Keihin Panalfa Ltd. (ITA No.11 of 2015) decided on 9 September, 2015 ....
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.... Ground No.10 raised in assessee's appeal is partly allowed. 49. Ground No.11, raised in assessee's appeal, pertains to double disallowance in respect of reimbursement of expenses already voluntarily disallowed by the assessee. 50. Having considered the submissions of both sides and perused the material on record, as per the assessee, it made suo motu disallowance to an extent of Rs. 8,97,25,506/- under section 40(a)(ia) of the Act, which inter alia includes the reimbursement of communication expenses of Rs. 2,08,30,427/- and reimbursement of professional expenses of Rs. 13,36,463/-. As per the assessee, the TPO, vide its order passed under section 92CA(3) of the Act, considered the arm's length price of the expenditure reimbursed by the assessee to its associated enterprises as Rs. Nil, and while doing so, the aforementioned reimbursement of communication expenses and reimbursement of professional expenses, which were suo motu disallowed by the assessee under section 40(a)(ia) of the Act, were again disallowed. We agree with the submissions of the assessee that no expenditure should be disallowed twice. Since this issue only requires factual verification, we restore this iss....
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....sessment year 2010-11. While deciding the issue in favour of the assessee, the Co-ordinate Bench, vide aforesaid order, observed as follows: - "54. We have considered the submissions of both sides and perused the material available on record. During the year under consideration, the assessee reimbursed expenditures in the nature of SAP development expenses, Internet charges, professional expenses and administrative expenses to its Associated Enterprises for the cost incurred on behalf of the assessee. Such reimbursement was made by the assessee without paying any markup on the cost. The TPO, as well as the learned DRP, treated the arm's length price of this transaction at NIL on the basis that the assessee has failed to justify/prove the rendition, necessity and benefit of this expenditure. We find that during the proceedings before the learned DRP, the assessee filed the details of reimbursement paid to the Associated Enterprises by way of additional evidence. As regards the SAP development expenses, the assessee furnished the invoice raised by Dell Perot Systems in respect of the India rollout project. As regards the Internet services received by the assessee, the assess....
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....nal has recorded the fact that the respondent assessee has launched new products which involved huge advertisement expenditure. The sharing of such expenditure by the respondent assessee is a strategy to develop its business. This results in improving the brand image of the products, resulting in higher profit to the respondent assessee due to higher sales Further, it must be emphasized that the TPO's jurisdiction was to only determine the ALP of an International Transaction. In the above view, the TPO has to examine whether or not the method adopted to determine the ALP is the most appropriate and also whether the comparables selected are appropriate or not. It is not part of the TPO's jurisdiction to consider whether or not the expenditure which has been incurred by the respondent assessee passed the test of Section 37 of the Act and/or genuineness of the expenditure. This exercise has to be done, if at all, by the Assessing Officer in exercise of his jurisdiction to determine the income of the assessee in accordance with the Act. In the present case, the Assessing Officer has not disallowed the expenditure but only adopted the TPO's determination of ALP of the advert....
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....essee for the assessment year 2011-12 is partly allowed for statistical purposes. ITA No.577/Mum/2017 Assessee's Appeal (A.Y. 2012-13) 59. In this appeal, the assessee has raised the following grounds: - "1. Ground 1 - General On the facts and in the circumstances of the case and in law, the directions of the Hon'ble Dispute Resolution Panel- 2 ('DRP') and the final assessment order passed by the learned Deputy Commissioner of Income-tax - 15(3)(1), Mumbai ('DCIT") are bad in law and merit to be set aside. 2. Ground 2 - Depreciation on contracts - Acquisition from Glaxosmithkline Pharmaceuticals Ltd ("GSK') in AY 2008-09 2.1 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 5,65,84,720 on the written down value of business or commercial rights being the manufacturing contracts as on 1 April 2011 under section 32(1) r.w.s. 2(11) of the IT Act. 2.2 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 1,36,49,105 on ....
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....aintenance contracts as Goodwill acquired from CTPL, which is an intangible asset eligible for deprecation under section 32(1) r.w.s. 2(11) of the IT Act. Ground 4 - Consequential depreciation on software expenses capitalised in AY 2007-08 On the facts and in the circumstances of the case and in law, the learned DCIT has erred in not following the directions of the Hon'ble DRP for granting consequential depreciation of Rs. 6,716 on the written down value of software expenses considered to be depreciable capital expenditure in completed assessment proceedings of AY 2007-08. 5. Ground 5 - Allowance of brought forward unabsorbed depreciation of AX 2008-09 5.1. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2008-09 of Rs. 23,42,932 as per return of income. 5.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2008-09 of Rs. 18,73.52,790 on Goodwill purchased from GSK. 5.3 On the fac....
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.... DRP erred in not allowing depreciation of Rs. 41,975 relating to software expenses treated as capital expenditure in AY 2007-08. Ground 8 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2011-12 8.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2011-12 of Rs. 32,60,75,657 as per return of income. 8.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 16,790 relating to software expenses treated as capital expenditure in AY 2007-08. Ground 9 - Transfer pricing (TP') adjustment relating to purchase and sale of finished goods (Rs, 8,79,59,642) 9. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in confirming to the extent of Rs. 8,79,59,642 the income of the Appellant in relation to the international transaction of purchase and sale of finished goods; and in doing so the learned DCIT and Hon'ble DRP grossly erred in agreeing with the learned Trans....
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....tional transaction of reimbursement of expenses [in the nature of communication expenses (inter-connectivity charges), professional expenses, employee expenses and travel expenses] as Nil (instead of Rs. 79,19,536) and in doing so the learned DCIT and Hon'ble DRP failed to take cognizance of the third party supporting documentation maintained by the Appellant and the fact that these expenses are essential to the business of the Appellant. The Appellant therefore prays that the addition made by the learned DCIT and Hon'ble DRP of Rs. 79,19,536 under Section 143(3) r.w.s. 144(C) of the IT Act on the basis of the order passed by the learned TPO under Section 92CA(3) of the IT Act be deleted. 14. Ground 14 - Interest under section 244A of IT Act 14.1. On the facts and circumstances of the case and in law, the Learned DCIT has erred in allowing consequential amount of interest under section 244A of IT Act. 15. Ground 15 - Penalty proceeding 15.1. On the facts and in the circumstances of the case and in law, the learned DCIT erred in initiating penalty proceeding under section 271(1)(c) of the IT Act. 60. Ground No.1 is general in n....
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....erused the material available on record, we find that, as regards the first relief sought by the assessee, it is well settled that, as per section 144C(13) of the Act, the AO has to pass the final assessment order in conformity with the directions issued by the learned DRP. Accordingly, we direct the TPO/AO to comply with the statutory provisions and follow the learned DRP's directions on this issue. 67. As regards the second relief, we find that Satyatej Commercial Co. Ltd. has already been found to be comparable to the assessee in the foregoing paragraphs. Therefore, our findings rendered therein shall apply mutatis mutandis to this ground. Accordingly, the TPO/AO is directed to consider Satyatej Commercial Co. Ltd. as a comparable to the assessee for benchmarking the international transaction of the purchase of finished goods. As a result, Grounds No.9-10 raised in assessee's appeal are allowed for statistical purposes. 68. Ground No.11, raised in assessee's appeal, pertains to the transfer pricing adjustment in respect of the international transaction of purchase of analysers. As per the assessee, the learned DRP granted complete relief to the assessee and directed the in....
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....y the assessee for the assessment year 2012- 13 is partly allowed for statistical purposes. ITA No.7393/Mum/2017 Assessee's Appeal (A.Y. 2013-14) 76. In this appeal, the assessee has raised the following grounds: - "Ground 1 - General On the facts and in the circumstances of the case and in law, the directions of the Hon'ble Dispute Resolution Panel- 2 (DRP) and the final assessment order passed by the learned Deputy Commissioner of Income-tax - 15(3)(1), Mumbai (DCIT) are bad in law and merit to be set aside. 2. Ground 2 - Depreciation on contracts - Acquisition from Glaxosmithkline Pharmaceuticals Ltd (GSK) in AY 2008-09 2.1 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 4,24,38,540 on the written down value of business or commercial rights being the manufacturing contracts as on 1 April 2012 under section 32(1) r.w.S. 2(11) of the IT Act. 2.2 On the facts and in the circumstances of the case and in law, the learned DCIT and the Hon'ble DRP erred in not granting depreciation of Rs. 1,02,36,829 on the written do....
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....quired from CTPL, which is an intangible asset eligible for deprecation under section 32(1) r.w.s. 2(11) of the IT Act. 4. Ground 4 - Deduction for employee's contribution to Provident Fund (PF) and Employees State Insurance Corporation (ESIC) On the facts and in the circumstances of the case and in law, the Hon'ble DRP and learned DCIT erred in disallowing payment towards employees contribution to PF and ESIC aggregating to Rs. 7,29,418 without appreciating that the amount was paid before the due date of filing the original return of income. 5. Ground 5 - Allowance of brought forward unabsorbed depreciation of AY 2008-09 5.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2008-09 of Rs. 23,42,60,932 as per return of income. 5.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2008-09 of Rs. 18,73.52,790 on Goodwill purchased from GSK. 5.3 On the facts and in the circumstances o....
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....depreciation of Rs. 41,975 relating to software expenses treated as capital expenditure in AY 2007-08. Ground 8 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2011-12 8.1. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2011-12 of Rs. 32,60,75,657 as per return of income. 8.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 16,790 relating to software expenses treated as capital expenditure in AY 2007-08. 9. Ground 9 - Allowance of brought forward unabsorbed depreciation pertaining. to AY 2012-13 9.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2012-13 of Rs. 26,32,11,490 as per return of income. 9.2 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing depreciation of Rs. 6,716 relating to software expenses tre....
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....me. 13. Ground 13 - Failure to grant credit of advance tax of merged entities 13.1. On the facts and circumstances of the case and in law, the learned DCIT has erred in not granting credit for advance tax of Rs. 6,27,40,000 claimed by the appellant in its return of income in accordance with section 199 of the IT Act read with Rule 37BA of IT Rules which was paid by the following merged entities. Sr. No. Name of the entities Advance tax 1 Dionex India Private Limited 3,21,70,000 2 Thermo Electron India Private Limited 2,79,00,000 3 Phadia India Private Limited 26,70,000 Total 6,27,40,000 14. Ground 14 - Penalty proceeding 14.1. On the facts and in the circumstances of the case and in law, the learned DCIT erred in initiating penalty proceeding under section 271(1)(c) of the IT Act." 77. In the appeal, the assessee also raised the following additional ground of appeal, vide letter dated 03.09.2025: - "Ground No. 15: On the facts and circumstances of the case and in law, the Ld. TPO/Ld. DRP/Ld. AO erred in not excluding certain companies which are not functionally comparable to....
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....ies selected for benchmarking this transaction. It was submitted that the TPO has excluded certain companies engaged in particular product profiles, even though other companies with similar product profiles have been accepted for benchmarking. The learned AR submitted that Smith & Nephew, Inc., excluded by the TPO, has a similar product profile to Hand Innovations Inc. Thus, the learned AR sought the exclusion of only one company, i.e. Hand Innovations Inc., for benchmarking the international transaction of receipt of the indenting commission. In support of its contention, the learned AR placed reliance upon the decision of the Co-ordinate Bench in the assessee's own case for the assessment year 2010-11 and submitted that Hand Innovations Inc. was directed to be excluded by the Co-ordinate Bench, accepting a similar contention of the assessee. 85. On the other hand, the learned DR vehemently relied upon the order passed by the lower authorities on this issue. 86. Having considered the submissions of both sides and perused the material available on record, we are confining our findings only in respect of the exclusion of Hand Innovations Inc. as sought by the learned AR. Other....
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.... all the credits are duly reflected in Form 26AS for the year under consideration, and the corresponding income has been offered to tax in its entirety during the year under consideration. 91. We find that a similar issue also came up for consideration in assessee's own case for the assessment 2015-16, wherein the Co-ordinate Bench of the Tribunal issued the following directions: - "7. Ground No.11 raised by the Assessee pertains to the short grant of credit of Tax Deducted at Source (TDS). The Assessee had claimed TDS Credit of INR.2,10,45,439/- which was reflected in Form 26AS of the Assessee- Company and the merged entities for the year Assessment Year 2015-2016. It has been contended on behalf of the Assessee that the income corresponding to the TDS Credit claimed by the Assessee was offered to tax during the relevant previous year and therefore, the Assessee was entitled to claim TDS Credit of INR.2,10,45,439/- and that the Assessing Officer has erred in non-grant of TDS Credit amounting to INR.10,75,900/-. In order to redress the grievance of the Assessee, we deem it appropriate to direct the Assessing Officer to verify the records. In case on verification it is f....
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....ting depreciation on the written down value of manufacturing and supply contracts based on the following observations which are incorrect on facts: * Manufacturing and supply contracts are not self-generated by GSK and have not been transferred to the Appellant * Manufacturing and supply contracts are not an intangible asset as per Accounting Standard (AS)-26 issued by the Institute of Chartered Accountants of India 2.4 Without prejudice to para 2.1 and 2.3 above, the learned DCIT and Hon'ble DRP erred in not considering the value of manufacturing contracts as Goodwill acquired from GSK, which is an intangible asset eligible for deprecation under section 32(1) r.w.s. 2(11) of the IT Act. 2.5 Without prejudice to para 2.2 and 2.3 above, the learned DCIT and Hon'ble-DRP erred in not considering the value of supply contracts as Goodwill acquired from GSK, which is an intangible asset eligible for depreciation under section 32(1) r.w.s. 2(11) of the IT Act. 3. Ground 3 - Depreciation on contracts - Acquisition from Chemito Technologies Private Limited (CTPL) in AY 2009-10 3.1 On the facts and in the circumstances of the case....
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....unabsorbed depreciation of AY 2009-10 of Rs. 14,05,14,593 on the written down value of Goodwill purchased from GSK as on 1 April 2008. 5.3 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2009-10 of Rs. 7,23,12,099 on Goodwill purchased from CTPL. 5.4 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of Rs. 104,938 relating to software expenses treated as capital expenditure in AY 2007-08. Ground 6 - Allowance of brought forward unabsorbed depreciation pertaining to AY 2010-11 6.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward unabsorbed depreciation of AY 2010-11 of Rs. 20,63,13,710 as per return of income. 6.2. On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in not allowing brought forward of the unabsorbed depreciation of AY 2010-11 of Rs. 10,53,85,945....
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....,60,52,674) 10.1 On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP erred in confirming the upward adjustment of Rs. 5,60,52,674 to the income of the Appellant in relation to the international transaction of purchase of finished goods; and in doing so the learned DCIT and Hon'ble DRP grossly erred in agreeing with the learned Transfer Pricing Officer's (TPO's) action of - a. rejecting the economic analysis in the TP documentation maintained by the Appellant; and b. rejecting (i) Sataytej Commercial Company Ltd. and (ii) Remi Sales and Engineering Ltd. from the economic analysis, which are comparable to the Appellant's distribution activity in terms of functions, asset base and risk profile. The Appellant therefore prays that the adjustment made by the learned DCIT and Hon'ble DRP of Rs. 5,60,52,674 under Section 143(3) r.w.s. 144(C) of the IT Act on the basis of the order passed by the learned TO under section 92CA(3) of the IT Act be deleted. Ground 11 - TP adjustment relating to receipt of indenting commission (Rs. 5,93,65,507) On the facts and in the circumst....
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....h Rule 37BA of IT Rules which was paid by Phadia India Private Limited. Ground 15 - Penalty proceeding On the facts and in the circumstances of the case and in law, the learned DCIT erred in initiating penalty proceeding under section 271(1)(c) of the IT Act." 96. In the appeal, the assessee also raised the following additional ground of appeal, vide letter dated 03.09.2025: - "Ground No. 16: On the facts and circumstances of the case and in law, the Ld. TPO/Ld. DRP/Ld. AO erred in not excluding certain companies which are not functionally comparable to the Appellant's international transaction of provision of indenting services from the final set of comparables." 97. Since the issue raised by way of additional ground can be decided on the basis of the material available on record, the same is admitted for adjudication. 98. Ground No.1 is general in nature. Therefore, the same needs no specific adjudication. 99. Grounds No.2 and 3, raised in assessee's appeal, pertain to the claim of depreciation on manufacturing contracts, supply and maintenance contracts acquired by the assessee pursuant to the acquisition of two undertakings un....
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.... of the international transaction of receipt of indenting commission. 106. Having considered the submissions of both sides and perused the material available on record, we are confining our findings only in respect of the exclusion of Hand Innovations Inc. as sought by the learned AR. Other objections, if any, against the TPO's findings on this adjustment are kept open for adjudication if they arise in the assessee's case in future. 107. We find that the Co-ordinate Bench of the Tribunal in assessee's own case for the assessment year 2010-11, cited supra, after considering the Sales Representative Agreement entered into between Hand Innovations Inc. and Harry Kraus, found that this company had a similar product profile as the companies which were excluded by the TPO. Accordingly, agreeing with the submissions of the assessee, the Co-ordinate Bench directed the TPO to exclude Hand Innovations Inc. for benchmarking the international transaction of receipt of indenting commission. The relevant findings of the Co-ordinate Bench of the Tribunal for the exclusion of this company, vide aforesaid decision, are noted in the foregoing paragraphs. 108. In the instant appeal, the ....