THE PR. COMMISSIONER OF INCOME TAX -6 vs. NOKIA SEIMENS NETWORKS INDIA P. LTD.

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ITA/48/2020HC DelhiDLHC01051886201921 March 2024Bench: HON'BLE MR. JUSTICE YASHWANT VARMA,HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court addressed the issues as follows: Regarding the depreciation on equipment (Question 2.1), the Court held that the matter would have to be answered against the appellant (Revenue) in light of the judgment in CIT v. BSES Yamuna Power Ltd. [2010 SCC OnLine Del 2960]. For the issue of depreciation on goodwill and the remand (Question 2.2), the Court found no substantial issue warranting entertainment of the appeal, as the ITAT had merely remitted the matter. For the remaining questions concerning the exclusion and inclusion of comparables (Questions 2.3, 2.4, and 2.5), the Court, after considering a tabular statement of excluded comparables and the decisions cited by the Revenue, found no ground to interfere with the ITAT's view. The Court concluded that the appeal raised no substantial question of law and consequently dismissed it. No issue was expressly left undecided.

What were the facts?

The Revenue has appealed against a judgment of the Income Tax Appellate Tribunal (ITAT) dated October 1, 2018. The appeal concerns assessment year(s) not explicitly stated but relates to additions made by the Assessing Officer (AO) and disallowances. The disputed amounts include Rs. 19,33,295/- concerning depreciation on equipment treated as computer peripherals and Rs. 9,81,15,000/- for depreciation on goodwill. The ITAT's order also dealt with the exclusion and inclusion of certain companies as comparables in transfer pricing analysis. The procedural history involves the AO's actions, the ITAT's decision, and now the Revenue's appeal to the High Court proposing specific questions of law.

What were the issues?

The High Court was asked to decide the following questions of law: 1. Whether the ITAT erred in deleting the addition of Rs. 19,33,295/- by holding that equipment forms an integral part of computer systems, entitling the assessee to 60% depreciation on peripherals as part of the computer block, under Section 32 of the Income Tax Act, 1961. 2. Whether the ITAT erred in remanding the matter regarding the disallowance of Rs. 9,81,15,000/- for depreciation at 25% on goodwill, considering the assessee made a fresh claim which, as per the Act, can only be made via a revised return and not during assessment proceedings. 3. Whether the ITAT's order was perverse on facts in directing the exclusion of specific companies (Bodhtree Consulting Ltd., Cat Technologies Ltd., etc.) as comparables, despite them performing similar functions as the assessee. 4. Whether the ITAT's order was perverse on facts in directing the inclusion of SIP Technologies Ltd. as a comparable, despite it failing the diminishing revenue filter applied by the TPO. 5. Whether the ITAT's order was perverse on facts in directing the exclusion of Apitco Ltd., IDC (India) Ltd., RITES (Seg), and WPCOS Ltd. in the support services segment, despite them performing similar functions as the assessee. Assessee's arguments were not explicitly recorded for each issue. The Revenue argued that the ITAT erred on the points raised in the questions of law. For issue 2.2, the Revenue contended that a fresh claim for depreciation on goodwill could not be entertained during assessment proceedings without a revised return.

Which sections of the Income-tax Act were involved?

Section 32

AI-generated summary — verify with the full judgment below

$~18 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 48/2020

THE PR. COMMISSIONER OF INCOME TAX -6 ..... Appellant

Through: Mr. Aseem Chawla, Sr. SC

alongwith Ms. Pratishtha

Chaudhary, Advocate

Versus

NOKIA SEIMENS NETWORKS INDIA P. LTD. ..... Respondent

Through: Mr. Deepak Chopra and Mr.

Ankul Goyal, Advocates

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR

KAURAV

O R D E R %

21.03.2024

1.

The Revenue questions the judgment rendered by the Income Tax Appellate Tribunal [“ITAT”] dated 1 October 2018 and has proposed the following questions of law for our consideration:- “2.1 Whether ld. ITAT erred in deleting the addition of Rs.19,33,295/- made by Assessing officer by holding 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?

2.2 Whether ld. ITAT erred in remanding the matter to the file of Assessing officer in relation with the disallowance of Rs.9,81,15,000/- towards depreciation at 25% on goodwill acquired from purchase of network business ignoring the fact that Assessee has made fresh claim and as per the scheme of Income tax Act,1961 such claim can be made only by the way of filing of revise return and such claim cannot be entertaining during the Assessment proceedings?

This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/04/2024 at 14:07:25

2.3 Whether the order of the ld. ITAT was perverse on facts directing to exclude Bodhtree Consulting Ltd., Cat Technologies Ltd, E-Infochips-Bangalore, E-Infochips Ltd, FCS Software Solutions Ltd., Helios &Mathorson Information Technologies Ltd, Igate Global Solutions Ltd, Infosys Ltd, Kals Information System Ltd. LGS Global Ltd., Larsen & Toubro Infotech Ltd., Mindtree Ltd. Persistent System Ltd, Quintegra Solution Ltd. R System International Ltd and Tata Elxsi Ltd even though these companies performs similar functions as that to Assessee?

2.4 Whether the order of the ld. ITAT was perverse on facts directing to include SIP technologies Ltd. as comparables even though this company had failed diminishing revenue filter applied by TPO?

2.5 Whether the order of the ld. ITAT was perverse on the facts directing to exclude Apitco Ltd. IDC (India) Ltd, RITES (Seg) WPCOS Ltd in support services segment even though these companies performs similar functions as that to Assessee?”

2.

We note that insofar as the issue of depreciation is concerned, the same would have to be answered against the appellant bearing in mind the judgment rendered in CIT v. BSES Yamuna Power Ltd. [2010 SCC OnLine Del 2960]. 3. In so far as question 2.2 is concerned, bearing in mind the fact that the ITAT has merely remitted the matter, we find no substantial issue which would warrant entertainment of the appeal on the aforesaid score. 4. That only leaves us with questions 2.3, 2.4 and 2.5. Pursuant to the last order passed, Mr. Chawla, learned counsel for the appellant, has drawn up a tabular statement in respect of the excluded comparables and the decisions rendered in that context. The chart is reproduced hereinbelow:- S.No. Comparable(s) Remarks 1. Bodhtree Consulting Ltd Refer Principal Commissioner of Income Tax-1 v. Barclays Technology Centre India This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/04/2024 at 14:07:25

(P.) Ltd [2018] 95 taxmann.com 170 (Bombay) [Refer para 4 (iii)] 2. E-Info chips- Bangalore Refer Principal Commissioner of Income tax, Vadodara-1 v. Allscripts (India) (P.) Ltd [2016] 72 taxmann.com 305 (Gujarat) [Refer para 10-11] 3. E-Infochips Ltd Refer Principal Commissioner of Income- tax, Delhi v. Saxo India (P.) Ltd [2016] 74 taxmann.com 88 (Delhi) [Refer para 5] 4. FCS Software Solutions Ltd Refer Principal Commissioner of Income Tax-1 v. Barclays Technology Centre India (P.) Ltd [2018] 95 taxmann.com 170 (Bombay) [Refer para 4 (iv) 5. Infosys Ltd Refer Commissioner of Income-tax v. Agnity India Technologies (P.) Ltd, [2013] 36 taxmann.com 289 (Delhi) [Refer para 5 @ Pg 52] “5. The Tribunal has observed that the assessee was not comparable with Infosys Technologies Ltd., as Infosys Technologies Ltd. was a large and bigger company in the area of development of software and, therefore, the profits earned cannot be a benchmarked or equated with the respondent, to determine the results declared by the respondent assessee. In paragraph 3.3 the This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/04/2024 at 14:07:25

Tribunal has referred to the difference between the respondent-assessee and Infosys Technologies Ltd…….” 6. Kals Information System Ltd. Refer Principal Commissioner of Income Tax-1 v. Barclays Technology Centre India (P.) Ltd [2018] 95 taxmann.com 170 (Bombay) [Refer para 4 (ii)] 7. Larsen & Toubro Infotech Ltd., Refer Principal Commissioner of Income- tax, Delhi v. Saxo India (P.) Ltd [2016] 74 taxmann.com 88 (Delhi) [Refer para 5] 8. Mindtree Ltd Refer Principal Commissioner of Income- tax v. GXS India Technology Centre (P.) Ltd [2019] 111 taxmann.com 271 (Karnataka) [Refer para 3] 9. Persistent System Ltd, Refer Principal Commissioner of Income- tax, Delhi v. Saxo India (P.) Ltd [2016] 74 taxmann.com 88 (Delhi) [Refer para 5] 10. Quintegra Solution Ltd. Refer Steria India Ltd. v. Deputy Commissioner of Income-tax [2018] 92 taxmann.com 120 (Delhi) [Refer para 17] 11. Tata Elxsi Ltd Refer DE Shaw India Software (P.) Ltd. v. Assistant Commissioner of Income-tax, Circle - 1(2), Hyderabad [2014] 42 taxmann.com 74 (Hyderabad - Trib.) [Refer para 32 @ Pg 70] “………Respectfully following the decision of This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/04/2024 at 14:07:25

the co-ordinate bench as aforesaid, we also remit this issue to the Assessing Officer/TPO

for considering it afresh after affording a reasonable opportunity of being heard to the assessee.” 12. IDC (India) Ltd. Refer Principal Commissioner of Income- tax v. Warburg Pincus India (P.) Ltd. [2022] 144 taxmann.com 160 (Bombay) [Refer para 16 – 20]

5.

Bearing in mind the views expressed in the aforenoted decisions, we find no ground to interfere with the view as ultimately taken by the ITAT. 6. The appeal raises no substantial question of law. Consequently, the appeal fails and shall stand dismissed.

YASHWANT VARMA, J.

PURUSHAINDRA KUMAR KAURAV, J. MARCH 21, 2024 p’ma This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/04/2024 at 14:07:25

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