Income Tax Appellate Tribunal - Pune
Alfa Laval India Ltd.,, Pune vs Deputy Commissioner Of Income-Tax,, on 30 June, 2017
आयकर अपीऱीय अधिकरण पुणे न्यायपीठ "ए" पुणे में
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
सुश्री सुषमा चावऱा, न्याययक सदस्य एवं श्री अयिऱ चतुवेदी, ऱेखा सदस्य के समक्ष
BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM
आयकर अपीऱ सं. / ITA No.588/PUN/2014
यििाारण वषा / Assessment Year : 2009-10
Alfa Laval India Ltd.,
Mumbai - Pune Road,
Dapodi, Pune - 411 012
.... अऩीऱाथी/Appellant
PAN: AAACA5899A
Vs.
The Deputy Commissioner of Income Tax,
Circle-8, Pune .... प्रत्यथी / Respondent
अऩीऱाथी की ओर से / Appellant by : Shri Nikhil Pathak
प्रत्यथी की ओर से / Respondent by : S/Shri Sandeep Garg, CIT &
Suhas Kulkarni
सुनवाई की तारीख / घोषणा की तारीख /
Date of Hearing : 05.04.2017 Date of Pronouncement: 30.06.2017
आदे श / ORDER
PER SUSHMA CHOWLA, JM:
This appeal filed by the assessee is against the order of The Deputy Commissioner of Income Tax, Circle-8, Pune dated 24-01-2014 relating to assessment year 2009-10 passed under section 143(3) r.w.s.144C(1) of the Income-tax Act, 1961 (in short „the Act‟).
2. The assessee has filed abridged grounds of appeal, which read as under:- 2 ITA No.588/PUN/2014
Alfa Laval India Ltd.
"The following grounds are taken without prejudice to each other - On facts and in law,
1. The learned A.O./DRP erred in making an addition of Rs.8,87,590/- in respect of the International Transaction of export of equipments.
2. The learned A.O./DRP erred in holding that the Cost Plus Method (CPM) was the most appropriate method for determining the Arm's Length Price (ALP) in respect of the International Transaction of export of equipments as against the Transactional Net Margin Method (TNMM) adopted by the assessee company.
3. The learned A.O./DRP erred in making an addition of Rs.98,52,454/- in respect of the International Transaction of export of spares.
4. The learned A.O./DRP erred in holding that the Cost Plus Method (CPM) was the most appropriate method for determining the Arm's Length Price (ALP) in respect of the International Transaction of export of spares as against the Transactional Net Margin Method (TNMM) adopted by the assessee company.
5. The learned A.O. erred in disallowing contribution of Rs.2,79,450/- made to workers Medical Relief Fund u/s 40A(9).
6. The learned A.O./DRP erred in confirming the disallowance of EDP/IT Service charges to the extent of Rs.2,08,30,658/- (Rs.1,45,81,460/- net of depreciation) by holding that the above expenditure was capital in nature.
7. The learned A.O./DRP erred in disallowing Prime Project expenses and other software development charges of Rs.2,81,58,342/- (Rs.1,97,10,840/-
net of depreciation) by holding that the above expenditure was capital in nature.
8. The learned A.O. erred in disallowing brokerage expenditure of Rs.3,07,500/-.
9. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal."
3. Briefly, in the facts of the case, the assessee for the year under consideration had filed the return of income declaring total income of Rs.140,01,58,448/-. The case of assessee was taken up for scrutiny. The assessee was engaged in the business of manufacture and sale of industrial products such as decanters, separators, etc. Reference under section 92CA(1) of the Act was made for computation of arm's length price in relation to the international transactions detailed in audit report in Form 3CEB. The TPO noted that the assessee was a subsidiary of Alfa Laval AB, Sweden, which held 88% equity stake in the assessee company. The balance shares were held by 3 ITA No.588/PUN/2014 Alfa Laval India Ltd.
institutional investors and the general public. The assessee was a leading supplier of plate & spiral exchangers, centrifugal separators and decanters, sanitary flow products and complete project and systems in India. The assessee had entered into various international transactions during the year. The assessee had two divisions i.e. equipment division and project division. The assessee had benchmarked the two divisions separately and no addition was made by the TPO in respect of project division. However, in respect of equipment division, the TPO noted that gross profit as against manufacturing cost in case of sales of equipments to the non-associated enterprises being 48.30% and that being 33.62% in respect of exports of equipment to associated enterprises, there was difference of 14.69% and by this margin, the assessee had earned less gross profit from international transactions relating to export of equipment to associated enterprises. The TPO proposed to adopt Cost Plus Method for benchmarking the international transactions relating to export of equipment to associated enterprises. The TPO issued show cause notice to the assessee as to why further internal comparable of sale of equipments to the third parties be not considered as comparable for the purpose of benchmarking the international transactions. In view of difference in the gross profit margin level of 14.69%, the TPO computed the adjustment at Rs.26.27 crores to arrive at the arm‟s length price of international transactions. The assessee in reply, pointed out the differences between the products sold in the domestic market and those which were exported to its associated enterprises and also pointed out that CPM Method was not an appropriate method to benchmark the international transactions of the assessee with its associated enterprises. The stress was laid to select TNNM method as most appropriate method. The assessee had benchmarked the international transactions of equipment manufacturing division by applying TNNM method and had selected certain external companies which are enlisted under para 9 of the 4 ITA No.588/PUN/2014 Alfa Laval India Ltd.
TPO‟s order. The TPO dealt with each of the said concerns selected by the assessee and found them not to be comparable considering their product profile and turnovers. It may be pointed out herein itself that the TPO vide para 9.3 observed that the turnover of assessee was to the tune of Rs.832 crores while excluding the concerns with turnover less than Rs.100 crores. However, the learned Authorized Representative for the assessee pointed out that there is mistake in the order of TPO in taking the turnover at Rs.832 crores as against the turnover shown by the assessee at Rs.373 crores. The TPO held that because of the product profiles and turnovers, the comparables selected by the assessee were not comparable at all. Thus, the TPO was of the view that TNNM method was not the most appropriate method and he proposed to adopt CPM method as most appropriate method and to use internal comparables i.e. compare the gross margins derived from the exports to associated enterprises with gross margins derived from sales to unrelated parties. The TPO made adjustment of Rs.5.51 crores to the international transactions of sale of equipments to associated enterprises.
4. The assessee had also aggregated all its international transactions and the segmental profitability of exports to associated enterprises was considered to benchmark against the arithmetic mean of PLI‟s of the set of external comparables following the TNNM method. The TPO noted that the stand of assessee that all the transactions undertaken by it were similar in nature and scope and there was no need to their being benchmarked separately. However, this stand of the assessee was also rejected and the TPO was of the view that the benchmarking had to be done on transaction to transaction basis. In certain situations, where these could not be evaluated on separate basis, combined approach had been suggested. However, in the case of assessee, separate evaluation in respect of its 5 ITA No.588/PUN/2014 Alfa Laval India Ltd.
international transactions relating to export to associate enterprises had been found to be feasible and hence, the contention of assessee of benchmarking on aggregated basis, was not found to be acceptable.
5. Further, the assessee had averred that "parts and service business is a totally different revenue generating activity of the company separate from equipment division and process technology division". The activity had different cost structure and much higher gross margins and was functionally different as it was providing re-conditioning services and was also engaged in distribution / trading of spare parts. The TPO noted that the revenue from sale of spares and services / re-conditioning income was separately disclosed in the annual accounts. Further, most of the sales of parts and services business were sale of traded goods. The TPO was of the view that even after the removal of spares from the non-associated enterprises transactions, the TP adjustment could be worked out. The TPO noted that where the assessee was engaged in re-sale of traded spares imported mainly from associated enterprises and deemed associated enterprises, therefore, benchmarking had to be based on gross profits under the Re-sale Price Method. Considering the same, the TNNM method was rejected and the gross profit from exports of traded goods were compared with domestic sales traded spares in the Parts and Services Segment. The export of traded spares to associated enterprises was at Rs.1.94 crores as against the domestic sales of traded spares at Rs.72.84 crores. The assessee during the course of TP proceedings was asked to give segmental accounts in respect of various segments of the assessee with the working of gross profit level, as well. The TPO noted from the details filed by the assessee that the gross profit over cost in respect of domestic segment of traded spares was at 133.74% and that in the case of export of traded spares to associated enterprises was at 54.71%. The TPO was of the 6 ITA No.588/PUN/2014 Alfa Laval India Ltd.
view that there was difference of 79.03% and by this margin, the assessee had earned less gross profit from its international transactions relating to export of traded spares to the associated enterprises. In view thereof, an adjustment of Rs.0.99 crores was considered necessary to arrive at the arm's length price of the said international transactions. After considering the reply of assessee, the TPO made an adjustment of Rs.0.99 crores to the value of international transactions relating to export of traded spares to the associated enterprises.
6. The Assessing Officer issued a draft assessment order to the assessee, against which the assessee filed its objections to the Dispute Resolution Panel (DRP), who in turn, confirmed the additions proposed by the TPO, except to verify the claim of assessee against the value of scrap sale of Rs.2.11 crores and other items of operating income / direct cost while calculating the gross profits. The TPO revised the working providing a relief of Rs.8,87,590/- to the assessee and the total adjustment made in the hands of assessee was Rs.6,40,55,452/- which included the TP adjustment of Rs.98,52,454/- made in the spares and traded items division. The Assessing Officer thereafter, passed rectification order because of certain arithmetical errors on 10.07.2014 and restricted the addition to Rs.8,87,590/- and Rs.98,52,454/-.
7. The assessee is in appeal against the order of Assessing Officer.
8. The learned Authorized Representative for the assessee pointed out that the original grounds of appeal were accordingly raised but the same have been abridged after the rectification order. He further pointed out that the assessee was following TNNM method and was benchmarking its international transactions with its associated enterprises and the said method has been applied by the Revenue authorities in assessment years 2002-03 to 2007-08. In assessment year 2008-09, 7 ITA No.588/PUN/2014 Alfa Laval India Ltd.
the CPM method was applied by the TPO for the first time. The Tribunal in ITA No.85/PN/2013 in assessee‟s own case relating to assessment year 2008-09, vide order dated 30.08.2013 held that CPM method was not the most appropriate method because of differences between the two segments i.e. on account of geographical differences, products sold, functions differing, credit period, volume difference and bad debt risk. The Tribunal had held that the international transactions pertaining to equipment division had to be aggregated and benchmark separately by computing its operating margins. Similarly, under the project division, after aggregation, the operating margins of the said division had to be computed which in turn, had to be compared with the comparable entity separately identified for the two divisions. The assessee‟s approach of aggregating all the closely linked transactions of equipment division and project division separately and applying TNNM method separately for both the divisions was accepted by the Tribunal. The learned Authorized Representative for the assessee further pointed out that the assessee had selected nine concerns as comparable out of which, the TPO accepted four but rejected five concerns. Our attention was drawn to the list of all the comparables at page 7 of the order of TPO and it was pointed out that the margins of none of the companies exceeded 19%, so where the assessee‟s margin was higher, then, no adjustment is to be made in respect of the same. The learned Authorized Representative for the assessee also pointed out that the concerns at serial No.5, 6 and 8 were found to be functionally different and at serial Nos.1 and 7 were rejected because of turnover.
9. The learned Departmental Representative for the Revenue relied on the order of Assessing Officer / TPO.
8ITA No.588/PUN/2014
Alfa Laval India Ltd.
10. We have heard the rival contentions and perused the record. The issue raised vide abridged grounds of appeal No.1 and 2 is against the TP adjustment of Rs.8,87,590/-. The assessee in the equipment division had declared turnover of Rs.373 crores, wherein it was manufacturing the items in India and was selling the same in the domestic market and also exporting to associated enterprises. The TPO was of the view that because of internal comparables available, CUP method should be applied. The assessee on the other hand, had applied TNNM method as the most appropriate method, wherein as against the margins of assessee at 19.48%, the mean margins of nine concerns selected to be functionally comparable was 10.74%; hence the transaction was held to be at arm's length. The TPO during the course of TP proceedings had also analyzed the functional comparability and other aspects of the concerns selected as comparables by the assessee. The list of the comparables is at page 7 of the TPO‟s order, which is as under:-
Sr Name of the Company Data Source OM
No
1 Axtel Industries Ltd. Prowess 9.09%
2 G E I Industrial Systems Ltd Prowess 13.56%
3 Gansons Ltd. Prowess 8.30%
4 Kilburn Engineering Ltd. Prowess 4.66%
5 Thermax Ltd. Prowess 13.92%
6 Walchandnagar Industries Ltd. Prowess 9.60%
7 Anup Engineering Ltd. Capitaline 17.34%
8 GMM Pfaudler Ltd (Chemical Process Prowess - Seg 12.15%
Equipment Segment)
9 BGR Energy Systems Ltd (Capital Capitaline - Seg 8.02%
Goods Segment)
Average 10.74%
11. The TPO observed that the concerns at serial Nos.5, 6 and 8 were functionally different from the assessee and the concerns at serial Nos.1 and 7 had to be rejected because of their turnover. The total turnover of the concerns Axtel Industries Ltd. was only Rs.33 crores and that of Anup Engineering Ltd. was Rs.78 crores as against the turnover of assessee at Rs.373 crores. There is merit in the 9 ITA No.588/PUN/2014 Alfa Laval India Ltd.
stand of TPO in rejecting the said two concerns. The second aspect was the rejection of Thermax Ltd., which was engaged in manufacture of boilers and power plant. The TPO held that Thermax Ltd. was operating in totally diverse sector from the operations of assessee and is not to be compared. In respect of Walchandnagar Industries Ltd., the said concern was rejected for its difference in accounting period, wherein the results of assessee were considered for 31 st March, 2009 and of Walchandnagar Industries Ltd., closing was 30th September, 2008. The last concern GMM Pfaudler Ltd. was engaged in Enameled acid and alkali and Chemical Equipment and mild steel and stainless steel equipments and the said equipments were not comparable to the products manufactured by the assessee. The TPO after observing the above said had rejected TNNM method to be applied and had selected CUP method as the most appropriate method.
12. Similar issue of selection of most appropriate method arose before the Tribunal in assessee‟s own case in assessment year 2008-09 and the Tribunal held that CPM method should not be applied and TNNM method is to be applied as most appropriate method. Applying the said ratio to the facts of the present case, where the TPO himself had applied TNNM method in all the earlier years starting from assessment years 2002-03 to 2007-08 and the Tribunal had directed the application of TNNM method in assessment year 2008-09, we hold that for benchmarking the international transactions in the equipment division, TNNM method is to be applied. The TPO has already considered the list of comparables selected by the assessee. In respect of comparables at serial Nos.1 and 7 being rejected for non-matching on turnover, we uphold the order of TPO. Similarly, Walchandnagar Industries Ltd. cannot be selected as comparable for different accounting period. In respect of Thermax Ltd. and GMM Pfaudler Ltd., the two concerns are not functionally comparable. Now, looking at the margins of balance 10 ITA No.588/PUN/2014 Alfa Laval India Ltd.
four concerns which were selected by the assessee and as pointed out by the learned Authorized Representative for the assessee that the margins of said concerns are much below the margins shown by the assessee at 19.48% and consequently, no adjustment is to be made in the hands of assessee on this account. We also accept the aggregation approach applied by the assessee under the said equipment division as similar aggregation approach has been applied by the TPO in all the earlier years and even by the Tribunal in assessment year 2008-
09. Consequently, we delete the addition of Rs.8,87,590/- made in the division of export of equipments.
13. The issue raised vide grounds of appeal No.3 and 4 is against the addition of Rs.98,52,454/- in respect of international transactions of export of spares.
14. The learned Authorized Representative for the assessee pointed out that the assessee was trading in spares and servicing, wherein it was benchmarked along with equipment division. However, before the TPO, the assessee stated that the same had to be benchmarked independently. The total turnover of the said division was about Rs.74 crores, under which exports to associated enterprises were Rs.1.94 crores and domestic sales were to the tune of Rs.72.84 crores. The learned Authorized Representative for the assessee pointed out that the spares were purchased in Indian market and were sold to the associated enterprises. In respect of sale in the domestic markets, the items were imported and sold, wherein the margins were 27%. The assessee had applied the TNNM method to benchmark the international transactions. However, the TPO had applied CPM method. The learned Authorized Representative for the assessee pointed out that there was difference in FAR and the first issue arises is whether TNNM method or the CPM method is to be applied. The learned Authorized Representative for the 11 ITA No.588/PUN/2014 Alfa Laval India Ltd.
assessee fairly pointed out that in case TNNM method is to be applied, then the same may be set aside to the TPO for benchmarking the international transactions. He further pointed out that out of total purchases of Rs.31 crores, purchases from associated enterprises were to the tune of Rs.16.84 crores, so it was controlled transaction and the same could not be considered for comparison vis-à-vis export segment, wherein RPT was 50%. Referring to Rule 10B of the Income Tax Rules, 1962 (in short „the Rules‟) and the definition of uncontrolled transaction, the learned Authorized Representative for the assessee stressed that the domestic market segment was a controlled transaction. Our attention was drawn to para 8.7 at page 51 of the order of Tribunal in assessment year 2008-09, wherein in the earlier year also, the RPT of domestic segment was noted by the Tribunal. He stressed that in such circumstances, CPM method could not be applied. He further stated that the TPO may verify 13 comparables selected by the assessee or may identify and conduct fresh search to benchmark the international transactions in the trading of spares and services segment and analyze the margins of comparables.
15. The learned Departmental Representative for the Revenue on the other hand, pointed out that there was no FAR analysis in the TP study as to from where the assessee was sourcing and trading in the said items. He stated that the ground was taken for the first time before the TPO. He stressed that TNNM method cannot be applied and pointed out that in case CPM method was rejected, then RPM method should be applied.
16. In rejoinder, the learned Authorized Representative for the assessee pointed out that the TPO was benchmarking export to associated enterprises and not benchmarking imports from associated enterprises. Referring to Rule 10B(b) of the Rules, it was pointed out by the learned Authorized Representative for the 12 ITA No.588/PUN/2014 Alfa Laval India Ltd.
assessee that RPM method was to be applied when imports were made from the associated enterprises. Our attention was drawn to the para 19 at page 23 of the TPO‟s order, where the transaction of imports from associated enterprises was accepted by the TPO and adjustment was made in the segment of export of traded spares and services.
17. We have heard the rival contentions and perused the record. The assessee under the segment of spares and servicing had traded in the items, wherein certain items were spares and were purchased in the Indian market and were sold to the associated enterprises. The assessee also imported certain items from associated enterprises and sold them in the domestic market along with servicing of the equipment. The import from the associated enterprises was to the extent of Rs.16.84 crores, on the other hand the gross margins in the domestic segment of sale of Rs.73 crores were to the extent of 133.74%, whereas the gross margins of export to associated enterprises was to the extent of 54.71%. The TPO was of the view that since the assessee was dealing in spares, then the margins of domestic segment should be applied to benchmark the margins earned by the assessee in its exports of spares to associated enterprises. The assessee on the other hand, vehemently stressed that because of differences in FAR, CPM method could not be applied and in order to benchmark the transaction of exports to associated enterprises of the spares purchased in the Indian market, then TNNM method was to be applied. Another aspect which was pointed out by the learned Authorized Representative for the assessee that out of total purchases of Rs.31 crores purchased from associated enterprises, to the extent of Rs.16.84 crores were in the domestic segment. So, it was a controlled transaction and the same could not be considered for comparison vis-à-vis export segment, where RPT was to the extent of 50%. Under Rule 10B of the Rules, it is provided that international 13 ITA No.588/PUN/2014 Alfa Laval India Ltd.
transactions with associated enterprises is to be compared with uncontrolled transactions but where the transaction of domestic market segment is a controlled transaction, then the same cannot be taken as comparable. Accordingly, we hold that there is no merit in the order of TPO in applying CPM method as the most appropriate method. In the alternate, the learned Departmental Representative for the Revenue pointed out that in case CPM method was rejected, then RPM method should be applied. However, Rule 10B(b) of the Rules provides that RPM method is to be used when imports are made from the associated enterprises. The TPO has accepted the transaction of imports from associated enterprises but had proposed the adjustment in the segment of export of traded spares to associated enterprises. Accordingly, there is no merit in the plea of learned Departmental Representative for the Revenue in applying RPM method. Accordingly, TNNM method is to be applied in order to benchmark the international transactions of export to associated enterprises of the traded spares. We hold so. The learned Authorized Representative for the assessee has already pointed out that it had selected 13 companies as comparables, which may be verified by the TPO or he may make a fresh search and identify the companies as comparables. We find merit in the said plea of the assessee and accordingly, direct the Assessing Officer/TPO to benchmark the international transactions of trading in spares by applying TNNM method and in this regard, make selection of the companies which are functionally comparable and comparing the margins of assessee with the mean margins of such selected comparables. The Assessing Officer / TPO may also consider 13 companies selected as comparable by the assessee in its TP study report and benchmark the international transactions of exports to associated enterprises. The Assessing Officer / TPO shall afford reasonable opportunity of hearing to the assessee. Hence, the grounds of appeal No.3 and 4 are allowed as indicated above.
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Alfa Laval India Ltd.
18. The grounds of appeal No.5 and 8 raised by the assessee are not pressed and hence, the same are dismissed as not pressed.
19. The issue in ground of appeal No.6 raised by the assessee is in respect of expenditure incurred on EDP / IT services to the extent of Rs.2,08,30,658/-, whether the same is capital or revenue expenditure.
20. The learned Authorized Representative for the assessee pointed out that similar issue arose before the Tribunal in assessment year 2006-07 and the same has been sent back to the file of Assessing Officer for verification.
21. The learned Departmental Representative for the Revenue placed reliance on the order of Assessing Officer.
22. We have heard the rival contentions and perused the record. The issue of allowability of expenditure on account of EDP / IT services was considered by the Tribunal in assessment year 2006-07 in ITA No.1457/PUN/2010, order dated 21.03.2016 and vide paras 19 and 20, it was held as under:-
"19. We have heard the rival contentions and perused the record. The assessee during the year under consideration had booked an expenditure to the tune of Rs.76,05,931/- as EDP Service charges paid to Alfa Laval Lund, Sweden. The said charges were paid to the principal company for providing various services relating to information technology to all the group companies in Alfa Laval group. The share was allocated by the Central IT group on account of information technology related cost incurred by the group and also on account of maintenance of central mail servers, maintenance of Alfa Laval internet and allocation cost incurred for evaluating various IT solution trials, IT initiates, etc. The Assessing Officer had in the draft assessment order proposed disallowance since as per the details, he was of the view that the same was for acquisition and use of software. The Assessing Officer in the draft assessment order proposed to allow depreciation @ 30%. However, the DRP held that the said expenditure had not resulted in owning or acquiring of any tangible or intangible assets, then held that the same expenditure is not to be allowed in the hands of assessee and the depreciation proposed to be allowed in the draft assessment order was directed to be withdrawn. The assessee has filed an appeal before us against the said directions, which have been incorporated by the Assessing Officer.15 ITA No.588/PUN/2014
Alfa Laval India Ltd.
20. We find that the Tribunal in assessee's own case relating to assessment year 2008-09 in ITA No.85/PN/2013, vide order dated 30.08.2013 was abreast of similar issue of payment of EDP Service charges and the issue was sent back to the Assessing Officer to look into the nature of expenditure and whether the same was made for usage of services or for acquisition of any assets of enduring nature. Following the said ratio, we remit this issue also back to the file of Assessing Officer, who shall decide whether the expenditure has been incurred for usage of services provided by Central IT group and not for acquisition of any asset of enduring nature and after affording reasonable opportunity of hearing to the assessee, decide the same in accordance with law in line with the order of Tribunal in assessment year 2008-09. The ground of appeal No.3 raised by the assessee is allowed for statistical purposes."
23. The issue arising in the present appeal is identical to the issue before the Tribunal in assessment year 2006-07 and following the same parity of reasoning, we remit this issue back to the file of Assessing Officer, who shall decide the issue in line with our directions in assessment year 2006-07.
24. Now, coming to the last issue raised by the assessee vide ground of appeal No.7 i.e. against the disallowance of Prime Project expenses and other software development charges of Rs.2,81,58,342/- i.e. Rs.1,97,10,840/-, net of depreciation. The Assessing Officer had disallowed the said expenses as to be capital in nature.
25. The learned Authorized Representative for the assessee pointed out that the said expenditure was incurred for the maintenance and upgradation of ERP system, wherein the assessee was using ERP system in the earlier years also and the expenditure in the year was incurred on upgradation of system. Reliance was placed on the ratio laid down by the Hon‟ble Bombay High Court in CIT Vs. UHDE India P. Ltd. (2013) 358 ITR 395 (Bom).
26. The learned Departmental Representative for the Revenue placed reliance on the orders of authorities below.
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Alfa Laval India Ltd.
27. We have heard the rival contentions and perused the record. The issue arising vide ground of appeal No.7 is against the allowability of expenditure on maintenance and upgradation of ERP systems, wherein the assessee was using ERP system and expenditure was incurred on upgradation of the said system, then expenditure is to be allowed as revenue expenditure. We find support from the ratio laid down by the Hon‟ble Bombay High Court in CIT Vs. UHDE India P. Ltd. (supra). Accordingly, we direct the Assessing Officer to verify the claim of assessee in this regard that the expenditure has been incurred on upgradation of ERP system and allow the same in accordance with the ratio laid down by the jurisdictional High Court. The ground of appeal No.7 raised by the assessee is thus, allowed as indicated above. The grounds of appeal raised by the assessee are thus, partly allowed.
28. In the result, the appeal of assessee is partly allowed.
Order pronounced on this 30th day of June, 2017.
Sd/- Sd/-
(ANIL CHATURVEDI) (SUSHMA CHOWLA)
ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER
ऩुणे / Pune; ददनाांक Dated : 30th June, 2017.
GCVSR
आदे श की प्रयतलऱपप अग्रेपषत/Copy of the Order is forwarded to :
1. The Appellant;
2. The Respondent;
3. The DIT (Intl. Taxation), Pune;
4. The DRP, Pune;
5. The DR 'A', ITAT, Pune;
6. Guard file.
आदे शािस ु ार/ BY ORDER, सत्यापऩत प्रतत //True Copy// सहायक ऩांजीकार / Assistant Registrar, आयकर अऩीऱीय अधधकरण, ऩण ु े / ITAT, Pune