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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI N. V. VASUDEVAN & SHRI.CHANDRA POOJARI
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : BANGALORE BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND SHRI.CHANDRA POOJARI, ACCOUNTANT MEMBER IT(TP)A Nos. and Appellant Respondent Assessment Year 2593/Bang/2019 M/s. TE Connectivity India Private Limited, ACIT, 2015-16 TE Park, 22B, Doddenakundi Corporation, Circle – 2, 2nd Phase, Industrial Area, Large Taxpayer Unit, Whitefield Road, Bengaluru Bengaluru – 560 048. PAN: AABCT 7374 C 372/Bang/2021 -do- -do- 2016-17 200/Bang/2022 -do- DCIT, LTU, 2017-18 Circle – 2, Bengaluru. 716/Bang/2022 -do- ACIT, 2018-19 Circle – 7(1)(1), Bengaluru. Assessee by : Shri Sriram Seshadri, Advocate Revenue by : Shri Sumer Singh Meena, CIT(DR)(ITAT), Bengaluru. Date of hearing : 21.09.2022 Date of Pronouncement : 23.09.2022 O R D E R Per N. V. Vasudevan, Vice President :
These are 4 appeals by the assessee against the following final Orders of Assessments : i. Assessment Year 2015-16 – Final Order of Assessment dated 25.10.2019 passed by the ACIT, LTU, Circle – 2, Bengaluru, under
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section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter called ‘the Act’). ii. Assessment Year 2016-17 – Final Order of Assessment dated 31.05.2021 passed by National Faceless Assessment Centre, Delhi, under section 143(3) r.w.s. 144C(13) read with section 144B of the Act. iii.Assessment Year 2017-18 – Final Order of Assessment dated 28.01.2022 passed by National Faceless Assessment Centre, Delhi, under section 143(3) r.w.s. 144C(13) read with section 144B of the Act. iv.Assessment Year 2018-19 – Final Order of Assessment dated 30.06.2022 passed by ACIT, Circle – 7(1)(1), Bengaluru, under section 143(3) r.w.s. 144C(13) of the Act. 2. Since common issues arise for consideration in all these appeals, they were heard together and we deem it convenient to pass consolidated order.
The factual background in all these appeals needs to be first set out. The assessee is engaged, inter-alia, in the business of manufacture of connectors & cable interconnects and fibre optic cable interconnects; trading of AMP Netconnect cables, and providing back office services, engineering design services and sourcing services as a contract service provider to the Group. The transaction of providing services to the group companies was an international transaction with an associated enterprise (AE) and in terms of Sec.92 of the Act, income from international
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transaction with AE has to be determined having regard to Arm’s Length Price (ALP). Section 92F define Arm’s Length Price as the price applied (or proposed to be applied) when two unrelated persons enter into a transaction in uncontrolled conditions. Unrelated Persons; Section 92A, the persons said to be unrelated if they are not associated or deemed to be associated enterprise. Uncontrolled Conditions; are that conditions which are not controlled or suppressed or moulded for achievement of a predetermined results.
In Assessment Years 2015-16 to 2018-19, the assessee had entered into international transactions pertaining to purchase of raw materials, sale of traded goods, sale of manufactured goods, purchase of traded goods, purchase of capital goods, payment of royalty, receipt of service income, receipt of agency commission for direct sales made in India, receipt of external commercial borrowings ("ECB"), payment of interest on ECB, payment of information system charges ("IS Charges"), reimbursement of expenses, and reimbursement of restricted stock options. The assessee had also maintained the documentation/ transfer pricing study, as required under the provisions of the Act read with the relevant Rules of the Income-tax Rules, 1962 ("Rules"), with respect to such international transactions. Based on the documentation maintained, submissions made and hearings had, the learned Transfer Pricing Officer (TPO) accepted the international transactions in respect of the distribution segment (which included purchase of goods for resale, sale of traded goods, receipt of agency commission, as well as a portion of the IS charges); and services segment, as well as, other international transactions of purchase of capital goods, payment of royalty,
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receipt of service income, receipt of commission for direct sales made in India, receipt of ECB, payment of interest on ECB, reimbursement of expenses and reimbursement of restricted stock options to be at arm's length.
The international transactions in respect of which the present appeals have been filed by the Assessee are international transaction by which the Assessee (i) carried out licensed manufacture of connectors and cable interconnects to it’s AE (Licensed Manufacturing Segment); (ii) provided Engineering Design Services (EDS segnebt) in AY 2016-17; (iii) made payment for Information Services (IS charges segment). The Assessee aggregated the services as part of licensed manufacturing segment and benchmarking was done accordingly. The TPO rejected the claim of the Assessee and conducted an independent benchmarking for IS Charges Segment and Licensed Manufacturing Segment separately.
The TPO proposed an adjustment to the transfer price. Therefore, in respect of Transfer Pricing adjustment consequent to determination of ALP, there were three segments in AY 2016-17 and two segments in the other AYs. Those additions are subject matter of these four appeals. Apart from the above, there is also an issue of depreciation on goodwill. In the previous year relevant to AY 2014-15, the Assessee acquired by way of amalgamation another company. The excess consideration paid amounting to INR 28,87,75,784/- over and above the networth of the company so acquired was claimed as intangible assets and in AY 2014-15 depreciation amounting to INR 4,06,09,095/- was claimed on such goodwill, which was
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disallowed. The consequential disallowance of depreciation was made in the AYs 15-16 & 16-17. That is also one of the dispute in these four appeals.
We shall take up for consideration the issue with regard to determination of Arm’s Length Price, i.e., Transfer Pricing issues. The transfer pricing analysis undertaken by the assessee in the Transfer Pricing Study was in the following manner: Manufacturing Segment:
• The assessee had undertaken an analysis adopting the Transactional Net Margin Method ("TNMM") as the most appropriate method with operating profit margin i.e., Operating Profit/Sales being the Profit Level Indicator ("PLI") for the Licensed Manufacturing segment and mark-up on total cost being the PLI for the Services segment. • In order to identify companies which are comparable to that of the assessee, the search was conducted on two publicly available databases, i.e., Prowess (a database compiled 3.nd managed by The Centre for Monitoring Indian Economy) and Capitaline Plus (a database compiled and managed by Capital Market Publishers) for obtaining publicly available financial information of companies in India engaged in similar business activity as the assessee for the two segments. • companies were identified as comparables for the licensed manufacturing segment, weighted average of operating profit earned on sales of the comparables was computed. • Based on the above analysis, the range of the net margins (prior to working capital adjustment) of the comparable companies was computed. The assessee's net margin in the licensed manufacturing segment being within the range of comparables' margins, the international transactions entered into by the assessee in the licensed manufacturing segment
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were duly considered to be at arm's length in accordance with the Indian transfer pricing regulations. EDS Segment in AY 2016-17: • TNMM was adopted as most appropriate method. PLI chosen for comparison was OP/sales. 28 companies were identified as comparables for Assessment Year 2016-17 the services segment [EDS segment], weighted average of operating profit earned on cost of the comparables was computed. • Based on the above analysis, the range of the net margins of the comparable companies, assessee's net margin in the services segment being within the range of comparables' margins, the international transactions entered into by the assessee in the Services segment were duly considered to be at arm's length in accordance with the Indian transfer pricing regulations. Information Systems Charges: (IS Charges) • In respect of payment of IS charges, the Assessee submitted that IS services were required by the Assessee in carrying out its operations on a day-to-day basis, and the associated costs were allocated to the licensed manufacturing, distribution and services segments in arriving at the effective net margin of the Assessee in each of these segments and therefore, benchmarked under the aggregate transaction approach using TNMM.
The TPO rejected certain filters. The TPO proceeded to reject the TP Study of the Assessee holding the view that the comparable companies identified by the Assessee and the approach adopted were inappropriate as the data used in the computation of arm's length price was not reliable or correct.
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Manufacturing Segment: The TPO undertook a fresh economic analysis and rejected certain comparable companies identified by the assessee, by modifying some of the filters and using additional filters. Based on the above, TPO determined the ALP of the manufacturing segment. EDS Segment: The learned TPO recharacterized the services segment as Engineering Design Services ('EDS') segment. The assessee made detailed written submission wherein, it was explicitly stated that this segment encompasses various different services viz., Engineering Design Services ('EDS'), sourcing services and back-office accounting services. Further, the TPO undertook a fresh economic analysis and applied the filters as adopted for the Licensed Manufacturing segment and proposed companies as comparable to the purported EDS segment of the assessee. The TPO recharacterized the services segment as EDS segment and determined the ALP of the services segment. Payment of IS Charges Additionally, in respect of the IS charges, the TPO disregarded the aggregation of transaction approach adopted by the assessee for benchmarking the transactions using TNMM as the most appropriate method, and disregarded the documentation/ evidences provided in respect of the transactions. Thereafter, the learned TPO proceeded to adopt Comparable Uncontrolled Price ("CUP") Method as the Most Appropriate Method, considered the ALP at NIL and consequently, treated the entire payment of IS charges as an adjustment.
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In FY 2013-14, the Assessee received approval from the Hon'ble Karnataka High Court for amalgamation of Tyco Electronics Systems Pvt Ltd ('TESIL'), a fellow subsidiary and XOL Technologies Private Limited ('XOL'), a subsidiary of the Assessee into Assessee with retrospective effect from April 1, 2013. The Assessee paid consideration for amalgamation whereby over and above the networth of the Company that was taken over an addition sum of Rs.28,87,75,784/- was paid. The said additional consideration was nothing but value of goodwill which was an intangible asset, on which the Assessee claimed depreciation in Assessment Year 2014-15 amounting to Rs.4,06,09,095/- on such goodwill. The said Goodwill amounting to INR 288.77 million arising on account of amalgamation has also been considered as an intangible asset being business or commercial right and eligible for depreciation under section 32(1)(ii) of the Act. The AO required the assessee to provide explanation why depreciation claimed on goodwill in computation of income should not be disallowed as per the Act. The Assessee provided the required information and submitted that as per the judgement of Hon'ble Supreme Court's in the case of CIT v. Smifs Securities Ltd. [2012] 348 ITR 302 (SC) and other judicial precedents, the difference paid between the fair value of assets less liabilities i.e., networth and the consideration paid for transfer was to be regarded as goodwill on which Assessee can claim depreciation. The AO rejected the contention of the assessee and disallowed the claim of depreciation by invoking explanation 3 to section 43(1) and fifth proviso to section 32(1)(iii). It was the plea of the Assessee that, goodwill did not pre- exist in the books of account of TESIL and XOL. In the absence of a transfer of a pre-existing asset, the provisions of Explanation 3 to section 43(1) should not apply. This is because, the Explanation deals with use of
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the impugned assets before acquisition. The goodwill in the present case has arisen on amalgamation of TECIL with TESIL, a fellow subsidiary and XOL, a subsidiary OF TECIL. This being the case the verdict of UB case in relation to application of Explanation 3 to section 43(1) is not relevant in the present case. Further the Assessee submitted that the Assessee has paid actual cash consideration for acquisition of tangible and intangible assets of TESIL, a fellow subsidiary and XOL, a subsidiary of the Assessee TECIL. On facts and in the circumstances of the present case, there was no revaluation of assets by the Assessee and hence, no fictional amount is recorded in the books of the Assessee. On application of 6th Proviso to Sec.32(1) of the Act, the Assessee submitted that the said proviso does not restrict the claim of depreciation on goodwill resulting from excess of purchase price over the fair value of assets acquired. It is intended only for apportioning the amount of depreciation between the amalgamating company and the amalgamated company based on the respective period of the use of the asset during the previous year. The sixth proviso is applicable only in case of assets already existing in the books of amalgamating company on which amalgamating company was claiming depreciation before amalgamation and it is not applicable on assets recognized only by amalgamated company at the time of amalgamation. The intention for enacting the sixth proviso is to apportion the depreciation claimed on same assets by both amalgamating company and the amalgamated company. The AO did not agree with the submission of the Assessee and disallowed claim for depreciation.
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The AO made additions in the draft Assessment Order in all the four Assessment Years. The assessee filed objections to the draft Assessment Order before Dispute Resolution Panel (DRP). The DRP confronted the order of the AO. The AO passed final Assessment Order against which the assessee has filed those appeals before Tribunal.
The Disputed Issues for the Impugned Assessment Years are tabulated herein: (All amounts in INR Crores) AY Disalowancc TP Margin TP TP Total of [Manufacturin Margin Adj.- TP Depreciaton g Segment] [EDS IS Adj. on Goodwill Segment] Charge s 11.26 39.05 - 43.20 82.25 2015-16 4.06 38.41 2.11 33.67 74.20 2016-17 - 26.54 - 33.79 60.34 2017-18 - 40.45 - 32.23 72.68 2018-19
The learned Counsel for the assessee submitted that the TP adjustments listed above, are covered by the Orders of the Hon’ble Tribunal for Assessment Year 2013-14 (Margin Adjustments) and Assessment Year 2014-15 (IS Charges adjustment). The learned Counsel for the assessee submitted that the following grounds will become academic in nature, if the directions of this Tribunal, for the said earlier years, are applied for the Impugned Assessment Years:
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It was submitted that if the margin computation in licensed manufacturing Grounds of 2015-16 2016-17 2017-18 2018-19 Appeal Transfer Pricing 4 to 10, 14 & 15 2.2 to 2.6, 2.11 3 to 6, 10, 11 3 to 6, 10 segment is recomputed then there would no addition on account of ALP determination.
The relevant grounds of appeal on TP Margin Adjustment in license manufacturing and EDS Segments, are as follows:
AY 2015-16 2016-17 2017-18 2018-19 Grounds of 1 to 3 1, 2.1, 2.7 1,2 1,2 Appeal No.
It was submitted that the Assessee aggregated IS Charges in determining the arms’ length price (‘ALP’) of the margins earned by it under various segments (i.e., Licence Manufacturing, Trading and Service segments). The Transfer Pricing Officer (‘Ld. TPO’) however held that IS Charges shall be benchmarked separately and determined the corresponding ALP as Nil, upon allegedly applying the Comparable Uncontrolled Price (‘CUP’) Method. While the TPO rejected the assessee’s aggregation approach and considered IS Charges separately for the determination of ALP, the said charges were not excluded from the segment costs, in determining the ALP of the assessee’s margins under different segments i.e., licensed manufacturing segment and EDS segment (only for Assessment Year 2016-17). This resulted in a double adjustment in relation to IS Charges, i.e., as a part of the margin adjustments made under the ‘Transaction Net Margin Method’ (‘TNMM’) in respect of its licence
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manufacturing (and Service) Segment, as well as a separate adjustment by holding that the ALP of the said charges is Nil. The said approach was adopted by the Ld. TPO for all the Impugned Assessment Years. 15. The said issue of double adjustment was considered and dealt with by this Tribunal for the earlier year, i.e., Assessment Year 2013-14 in IT(TP)A No.2680/Bang/2017, order dated 18.07.2022. The Hon’ble Tribunal, upon a detailed consideration of the submissions of the Assessee, accepted its contentions against such double adjustment, and directed that IS Charges shall be excluded from the segment operating expenses, for determining the Appellant’s margin under the TNMM Method, when the same is being separately benchmarked. (Page 37, Para 49, of the said order). The TP margin adjustment for Assessment Year 2013-14 was set- aside by the Hon’ble Tribunal, and the same was remanded back to the lower authorities for a de-novo consideration, in accordance with the said direction. The relevant extracts are reproduced hereinbelow:
“The ld. AR also submitted that if separate benchmarking is to be done in respect of intra-group services, then the effect of the same should be given in the operating cost considered for PLI purposes. We see merit in the submission of the ld. AR and direct the TPO/AO accordingly.” It was submitted that the entire ‘TP Margin Adjustments’ (i.e., in respect of the manufacturing and service segments, as applicable) for all the Impugned Assessment Years, would reduce to NIL and stand deleted, upon applying the aforementioned direction of the Hon’ble Tribunal for each of the Impugned Assessment Years, as demonstrated below:
Particulars AY 2015-16 AY 2016-17 AY 2017-18 AY 2018-19 Manufacturing Manufacturing EDS Manufacturing Manufacturing Segment --> PLI = OP/OR PLI = OP/OR PLI = OP/OC PLI = OP/OC PLI = OP/OC Appellant's Margin as per TP Order [A] -2.13% -0.80% 15.86% 4.09% 3.31% Operating Revenue [B] 728.85 504.15 71.95 577.03 617.67 Operating Cost [C] 744.36 508.18 62.10 554.35 597.87 Operating Profit [D] = [B - C] (15.51) (4.03) 9.85 22.68 19.80 Add : Proportionate IS Charges, considered separately by the TPO [E] 33.21 24.52 8.05 27.27 26.62
Operating Profit (Recomputed) [F] = [D + E] 17.70 20.49 17.90 49.95 46.42 Appellant's Margin (Recomputed) [G] 2.43% 4.06% 24.88% 9.01% 7.76% Range of ALP determined by the TPO:
35th Percentile [H] 2.32% 3.42% 18.51% 6.72% 6.90% Median 3.23% 6.82% 19.26% 9.30% 10.09% 65th Percentile 6.09% 7.16% 20.01% 9.58% 11.61% Whether Appellant's Recomputed Margin is at Yes Yes Yes Yes Yes ALP (i.e., If G >=H)
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Particulars AY 2015-16 AY 2016-17 AY 2017-18 AY 2018-19 Segment --> Manufacturing Manufacturing Services - EDS Manufacturing Manufacturing Reference to TP Order read with Pg. 8 of Pg. 8 of Pg. 8 of Pg. 8 of Pg. 3 of OGE to DRP Directions --> TP Order TP Order TP Order TP Order OGE to DRP Total 'Other Operating Expenses' [I] 272.26 174.73 215.30 211.23 ( IS Charges is included in this amount ) Allocation of 'Other Operating Expenses' [J] 209.29 127.26 41.78 173.73 187.24 Allocation % [K] = [J/I] 76.87% 72.83% 23.91% 80.69% 88.65% Adjustment towards IS Charges [L] 43.20 33.67 33.79 32.23 [Pgs. 38, 58, 42, 41 of the TP Order respectively] @ IS Charges Proportionate to 33.21 24.52 8.05 27.27 26.62 the allocation % [M] = [L * K]
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Particulars AY 2015-16 AY 2016-17 AY 2017-18 AY 2018-19 The Ld. DRP held that the facts and issues are the same as that of Pg. 18, Para 6.3 AY 2014-15, and therefore that there is no necessity to deviate from its Pg. 21, Para 7.2 Pg. 9, Para 7.1 Pg. 12, Para 7.1 of DRP Directions issued for AY 2014-15 (i.e., upholding the corresponding ALP as of DRP Directions of DRP Directions of DRP Directions Directions NIL ) IS Charges Adjsutment for AY 2014-15 was set-aside by the Hon'ble ITAT, and was remanded back to the TPO for fresh consideration de-novo , in Pg. 20, Para 22 of ITAT Order for AY 2014-15 light of the evidences furnished by the Appellant. Hence, the TP adjustment towards IS Charges for AY 2015-16 to AY 2018-19, made merely based on DRP Directions for AY 2014-15, which was subsequently set-aside by the Hon'ble ITAT, ought to be remanded back for a fresh consideration.
We have considered the rival submissions. We find that identical issue was considered by this Tribunal in assessee’s own case for Assessment Year 2013-14 and the Tribunal in its order dated 18.07.2022 on identical issue arising out of identical facts and circumstances, remanded the issue to the AO/TO for consideration afresh and further directed that the sum paid towards inter-group services should not be considered as a part of the operating cost while working out the PLI of the assessee in the licence manufacturing and EDS segment. We are of the view that identical directions would be appropriate in all the 4 Assessment Years as well. Accordingly, we set aside the order of the AO in this regard and remand the issue to the AO/TPO for fresh consideration in the light of the directions of the Tribunal as contained in Assessment Year 2013-14, after affording the assessee opportunity of being heard. The relevant grounds of appeal in all the 4 appeals accordingly stands allowed for statistical purpose. 16. We shall now deal with the TP Adjustment towards IS charges. The relevant grounds of appeal raised by the Assessee in this regard in the appeals for the four AYs are given in the table below:
AY 2015-16 2016-17 2017-18 2018-19 Grounds of 11 to 13 7 to 9 7 to 9 2.8 to 2.10 Appeal No.
The TPO held that IS Charges shall be considered separately for benchmarking, and allegedly adopted the CUP Method for determining ALP in this regard. However, without undertaking any benchmarking exercise, the TPO held that the ALP of IS Charges is NIL, on the allegation that no services were rendered by the assessee’s AEs, and that no evidence was submitted by the Appellant for establishing the need-benefit. It was
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submitted that it had furnished detailed submissions, documents, and evidence in respect of the said charges, capturing the nature of services received, basis of quantification of such services provided by the Group, basis for such apportionment, cost allocation keys depicting the nature of the costs etc. The assessee also furnished additional documentation in the nature of a ‘Report on IS Charges’ before the Ld. TPO / DRP for the Impugned Assessment Years. The said report provides an overview of overall department of TEIS, various information services, cost centre analysis & determination of service fee, including basis of allocation in relation to IS charges and other documentary evidence along with sample email exchanges etc. The DRP held that the facts and issues in respect of IS Charges, for the Impugned Assessment Years, are the same as that of Assessment Year 2014- 15, and concluded that there is no necessity to deviate from its Directions issued for Assessment Year 2014-15, i.e., to uphold the order of the TPO determining the ALP of the said charges as NIL. It was submitted that the adjustment towards IS Charges as upheld by the DRP for Assessment Year 2014-15 and relied upon for confirming the adjustment for the Impugned Assessment Years, was set-aside by this Tribunal and was the issue was remanded back to the TPO for fresh consideration de-novo, in light of the evidence furnished by the assessee in IT(TP) A.No.3373/Bang/2018 order dated 25.2.2022. In light of the above, the TP adjustment towards IS Charges for the Impugned Assessment Years, made merely based on the DRP Directions for Assessment Year 2014-15 which was subsequently set-aside by this Tribunal, the said adjustment for the Impugned Assessment Years are hereby set-aside, and the said issue ought to be remanded back for fresh consideration de-novo, in light of the evidence furnished, for the Impugned Assessment Years as well, in line with to this Tribunal’s order for
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Assessment Year 2014-15. In this regard it was also submitted that that during Assessment Year 2009-10 and 2010-11, a similar adjustment was proposed by the TPO towards IS charges. In this regard, the DRP, upon considering the Assessee’s submissions, concluded that the entire value of the IS charges cannot be held as ‘Nil’. Further, the DRP held that there is a proper and scientific basis for levying these charges and that in respect of cost allocation based on per user basis, the expenses claimed need to be allowed as the facilities/services have been utilised by the Assessee and allowed certain portion of these service charges. The said Directions of the DRP attained finality, pursuant to orders passed by the AO for the respective Assessment Years, to give effect to the DRP Directions (‘OGE to DRP Directions’), basis which a portion of the said adjustment, i.e., to the extent of expenses rendered on per user basis, was deleted. It was submitted that the said Directions of the DRP for Assessment Year 2009-10 and 2010-11, having attained finality, ought to be considered and given due weightage by the lower authorities in respect of the said adjustment for the Impugned Assessment Years, and prays that necessary directions be issued by this Tribunal to such effect. The TPO should also be directed to consider this aspect also in the set aside proceedings. 18. We have considered the submissions and are of the view that the issue stands covered by the earlier order of the Tribunal referred to by the learned counsel for the Assessee and are of the view that the issue of TP adjustment in the IS Charges segment should be set aside to the AO/TPO for consideration afresh as directed by the Tribunal in AY 2014-15 and the relevant grounds of appeal raised by the Assessee in the relevant Appeals for AY 2015-16 to 2017-18 stands allowed for statistical purpose. The TPO will
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also take note of the orders of the TPO/AO in AY 2009-10 & 2010-11 as pleaded by the learned counsel for the Assessee before us.
The next common ground in these appeals is with regard to Disallowance of depreciation on Goodwill, recorded pursuant to Amalgamation and Business Acquisition. The relevant grounds of appeal in this regard have been raised by the Assessee in AY 2015-16 & 2016-17 as tabulated below:
AY 2015-16 2016-17 Ground No. 16 to 24 3 to 6
During Assessment Year 2015-16 and 2016-17, the AO disallowed the Assessee’s claim of depreciation, on the opening written down value (‘WDV’) of Goodwill recorded in an earlier year, i.e., Assessment Year 2014-15. The facts and the issue in respect of the said claim is dealt with in detail, in the order of this Tribunal for Assessment Year 2014-15 in IT (TP) A.No.3373/Bang/2018 order dated 25.2.2022. For Assessment Year 2014- 15, the Tribunal set-aside the disallowance in this regard, and remanded the issue back to the AO for fresh consideration de-novo, in accordance with law and in light of the Assessee’s submissions before the Tribunal.The assessee submits that once an asset is added to the block of assets which is eligible to a prescribed rate of depreciation, there is no question of allowability of depreciation on the carried forward WDV of the said block, for the subsequent years. In light of the above, the disallowance made for the Impugned AYs, being purely consequential to the disallowance made in
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AY 2014-15, which was subsequently set-aside by this Tribunal, ought to be set-aside and remanded back to the AO for consideration in accordance with the remand order for Assessment Year 2014-15.
We have considered the rival submissions and are of the view that the depreciation on goodwill is a consequential issue in these two Assessment Years and consequently the AO will consider the issue de novo in the light of the decision that may be taken in Assessment Year 2014-15 and on the basis of the outcome in Assessment Year 2014-15. The AO will afford opportunity of being heard to the assessee.
Apart from the above issues, in AY 2015-16 in Ground No.25 & 26, the Assessee has projected its grievance in the AO having given short credit of Tax Deducted at Source (TDS) of amalgamating companies. For Assessment Year 2015-16, the AO has not allowed credit for tax deducted at source and advanced tax paid by the amalgamating companies in the hands of the assessee, who is the amalgamated company. The details of the amalgamating companies’ data were furnished. In the order of the Hon’ble Tribunal for Assessment Year 2014- 15, the Hon’ble Tribunal had directed the Ld. AO to verify this and allow the credits in Page 32 of its order. We are of the view that it would be just and appropriate to verify the claim of the Assessee and allow credit for TDS in accordance with law after affording Assessee opportunity of being heard.
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In the result, all these appeals are partly allowed.
Pronounced in the open court on the date mentioned on the caption page.
Sd/- Sd/- (CHANDRA POOJARI) (N.V. VASUDEVAN) Accountant Member Vice President Bangalore, Dated: 23.09.2022. /NS/*
Copy to: 1. Assessees 2. Respondent 3. CIT 4. CIT(A) 5. DR 6. Guard file By order
Assistant Registrar, ITAT, Bangalore.