Appeal details
Counselvise Citation
159121714 RSA 2011
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-01-2012
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
23-01-2012
Assessment Year
2007-2008
Appeal Filed On
26-09-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER ITA NO.1591(MDS)/2011 ASSESSMENT YEAR : 2007-08 M/S.LASON INDIA PVT. LTD., DOWLATH TOWERS 8-12 FLOORS, 59, 61 & 63, TAYLORS RD., KILPAUK, CHENNAI-600 010. PAN AABCV3563H. VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE II(4), CHENNAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.HARIHARAN, C .A. RESPONDENT BY : SHRI SHAJI P JACOB, IR S, COMMISSIONER OF INCOME- TAX. DATE OF HEARING : 23 RD JANUARY, 2012 DATE OF PRONOUNCEMENT : 30 TH JANUARY, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL FILED BY THE ASSESSEE RELATES TO THE ASSESSMENT YEAR 2007-08. THIS APPEAL IS FILED AGAI NST THE DIRECTION OF THE DISPUTE RESOLUTION PANEL AT CHENNA I, DATED 20-7-2011 GIVEN UNDER SECTION 144C(5) AND THE ASSES SMENT - - ITA 1591 OF 2011 2 ORDER DATED 25-8-2011 PASSED UNDER SECTION 143(3), READ WITH SECTION 144C(13) OF THE INCOME-TAX ACT, 1961. THIS IS A TRANSFER PRICING CASE. 2. THE FIRST GROUND RAISED BY THE ASSESSEE IN THE PRESENT APPEAL IS THAT THE LOWER AUTHORITIES HAVE E RRED IN HOLDING THAT THE ORDERS PASSED BY THEM ARE IN ACCORDANCE WI TH LAW. THE FIRST ORDER PASSED BY THE ASSESSING AUTHORITY ON 27 -12-2010 WAS COMMUNICATED AS FINAL ORDER, WHEREUPON THE ASSESSIN G AUTHORITY CANNOT ISSUE ANY CORRIGENDUM AND THEREAFTER AGAIN C OMMUNICATE A DRAFT ASSESSMENT ORDER AND AFTER THAT AGAIN TO PA SS A FINAL ASSESSMENT ORDER. ALL THESE PROCEEDINGS ARE NULL A ND VOID IN THE EYES OF LAW. THE DISPUTE RESOLUTION PANEL HAS ERRE D IN UPHOLDING THE ORDERS PASSED BY THE ASSESSING AUTHOR ITY AS GOOD AND ENFORCEABLE IN LAW. 3. IT IS THE CASE OF THE ASSESSEE THAT THE DISPUTE RESOLUTION PANEL OUGHT TO HAVE HELD THAT THE CORRIG ENDUM, PURPORTED TO CURE THE DEFECT IN THE ORDER DATED 27- 12-2010, WAS NOT A PERMISSIBLE MECHANISM OF CURING THE DEFECT, A S WAS HELD IN - - ITA 1591 OF 2011 3 DR. B.PADMAJA AND DR. B.LAVANYA VS. INCOME-TAX OFFI CER, 105 ITD 344 (HYD). IT IS THE CASE OF THE ASSESSEE THAT THE FINAL ORDER DATED 28-2-2011 PASSED BY THE ASSESSING AUTHORITY W AS BARRED BY LIMITATION, IF THE ORDER DATED 27-12-2010 WAS TR EATED AS VALID. 4. WE HEARD SHRI S.HARIHARAN, THE LEARNED CHARTERE D ACCOUNTANT APPEARING FOR THE ASSESSEE-COMPANY AND S HRI SHAJI P JACOB, THE LEARNED COMMISSIONER OF INCOME-TAX APP EARING FOR THE REVENUE. 5. IN THIS CASE THE ASSESSING AUTHORITY HAD PASSED AN ORDER UNDER SECTION 143(3), READ WITH SECTION 144C OF THE ACT, ON 27-12-2010 TO GIVE EFFECT TO THE ADJUSTMENTS PROPOS ED BY THE TRANSFER PRICING OFFICER. THE ORDER WAS CHRISTENED AS FINAL ORDER, EVEN THOUGH THE ASSESSING AUTHORITY WAS SUPPOSED TO ISSUE, AT THE FIRST INSTANCE, A DRAFT ORDER INVITING OBJECTIO NS OF THE ASSESSEE AGAINST THE ADJUSTMENTS PROPOSED BY THE TRANSFER PR ICING OFFICER. THE ASSESSEE TREATED THE SAID ORDER OF TH E ASSESSING AUTHORITY AS THE FINAL ORDER AND FILED APPEAL BEFOR E THE COMMISSIONER OF INCOME-TAX(APPEALS). AS THE MISTAK E HAS - - ITA 1591 OF 2011 4 BECOME APPARENT SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED A CORRIGENDUM ON 21-2-2011, STATING THAT THE FIRST ORDER SERVED ON THE ASSESSEE WAS A DRAFT ORDER UNDER SECTION 144C(1 ) OF THE ACT. THE SAID CORRIGENDUM WAS SERVED ON THE ASSESSEE ON 1-3-2011. THE CORRIGENDUM ALSO MENTIONED THAT THE DEMAND NOTI CE SENT ALONGWITH THE FIRST ORDER SERVED ON THE ASSESSEE HA D TO BE TREATED AS WITHDRAWN. AFTER THE ISSUE OF CORRIGEND UM, THE ASSESSING OFFICER PASSED A FINAL ORDER UNDER SECTIO N 144C(3) ON 28-2-2011, AGAINST WHICH, IN THE NORMAL COURSE, THE ASSESSEE WENT BEFORE THE DISPUTE RESOLUTION PANEL AND THEREA FTER CAME BEFORE US. 6. IN THE ABOVE SCENARIO, THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSING AUTHORITY HAS ERRED IN ISSUING A CORRIGENDUM TO THE ORIGINAL ORDER PASSED UNDER SECT ION 144C(1). ACCORDING TO THE ASSESSEE, THERE IS NO PROVISION UN DER THE INCOME-TAX LAW TO ISSUE A CORRIGENDUM AND RECTIFY E RRORS IN AN ORDER PASSED BY THE ASSESSING OFFICER. THEREFORE, THE CORRIGENDUM ISSUED ON 21-2-2011 HAS NO LEGAL FORCE, AS A RESULT OF WHICH, THE ASSESSMENT PROCEEDINGS FALL ON GROUND . - - ITA 1591 OF 2011 5 7. WE CONSIDERED THE ISSUE IN DETAIL. THE PROCEDU RES TO BE ADOPTED IN THE COURSE OF A TRANSFER PRICING A SSESSMENT, WHERE ADJUSTMENTS HAVE TO BE MADE AS SUGGESTED BY T HE TRANSFER PRICING OFFICER, ARE WELL ENUMERATED IN TH E ACT AND RULES. ONCE THE TRANSFER PRICING OFFICER TRANSMITS HIS PROPOSALS TO THE ASSESSING OFFICER, THE PROPOSALS HAVE TO BE INCORPORATED IN THE DRAFT ASSESSMENT ORDER BY THE ASSESSING AUTH ORITY AND SENT TO THE ASSESSEE. THE ASSESSEE, IF AGGRIEVED O F THE PROPOSED ADJUSTMENT, MAY APPEAR BEFORE THE DISPUTE RESOLUTION PANEL WITH ITS CONTENTIONS. THE DISPUTE RESOLUTION PANEL WILL THEREAFTER ISSUE ITS DIRECTIONS UNDER SECTION 144C( 5) OF THE ACT, BASED ON WHICH, THE ASSESSING AUTHORITY SHALL FINAL LY PASS THE ASSESSMENT ORDER UNDER SECTION 144C(13) OF THE ACT. THE VERY SAME PROCEDURE HAS BEEN STRICTLY FOLLOWED BY THE AS SESSING AUTHORITY IN THE PRESENT CASE AS WELL. THE ONLY IN NOCUOUS MISTAKE HAPPENED WAS THAT THE FIRST DRAFT ORDER WAS SHOWN AS FINAL ORDER BY THE ASSESSING AUTHORITY AND A DEMAND NOTICE WAS ALSO ISSUED ALONGWITH THAT ORDER. ONCE THE ASSESSI NG OFFICER ISSUES A CORRIGENDUM, THAT MISTAKE IS UNDONE AND TH E FIRST COMMUNICATION OF THE ASSESSING OFFICER ASSUMED THE CHARACTER - - ITA 1591 OF 2011 6 OF A DRAFT ORDER. THE ARGUMENT THAT THERE IS NO PR OVISION IN THE ACT TO ISSUE A CORRIGENDUM IS NOT PROPER, AS THAT P OWER IS ALWAYS INHERENT WITH ANY STATUTORY AUTHORITY. IN FACT, A CORRIGENDUM IS EVEN APPEALABLE IF IT IS PREJUDICIAL TO AN ASSESSEE . IN THE PRESENT CASE, THE CORRIGENDUM ISSUED BY THE ASSESSING AUTHO RITY IS NOT PREJUDICIAL. THE ASSESSING OFFICER WAS ONLY CLARIF YING THE SITUATION. THE ASSESSEE HAS ALSO ACCEPTED THE ABOV E POSITION BY APPEARING BEFORE THE DISPUTE RESOLUTION PANEL TO REDRESS ITS GRIEVANCES. THEREFORE, WE FIND THAT THIS GROUND RA ISED BY THE ASSESSEE IS JUST A TECHNICAL GROUND RAISED FOR THE PURPOSE OF RAISING A GROUND. 8. IN THIS CONTEXT, THE LEARNED COMMISSIONER OF INCOME-TAX APPEARING FOR THE REVENUE HAS RIGHTLY IN VITED OUR ATTENTION TO THE JUDGMENT OF THE HONBLE SUPREME CO URT IN THE CASE OF M/S.DEEPAK AGRO FOODS VS. STATE OF RAJASTHA N & ORS., REPORTED IN 2008-TIOL-134-SC-CT. IN PARAGRAPHS 15, 16 AND 18 OF ITS ORDER, THE HONBLE APEX COURT HAS DISCUSSED THE FINE DISTINCTION BETWEEN THE ORDERS WHICH ARE NULL AND V OID AND ORDERS WHICH ARE IRREGULAR, WRONG OR ILLEGAL. IN THE CASE OF ORDERS OTHER - - ITA 1591 OF 2011 7 THAN NULL AND VOID, THE IRREGULARITY OR DEFECT CAN BE CURED. IN OTHER WORDS, CURABLE DEFECTS DO NOT MAKE AN ORDER N ULL AND VOID. WE MAY BE PERMITTED TO EXTRACT THOSE PARAGRAPHS FRO M THE ORDER OF THE HONBLE SUPREME COURT AS BELOW:- 15. ALL IRREGULAR OR ERRONEOUS OR EVEN ILLEGAL ORD ERS CANNOT BE HELD TO BE NULL AND VOID AS THERE IS A FI NE DISTINCTION BETWEEN THE ORDERS WHICH ARE NULL AND V OID AND ORDERS WHICH ARE IRREGULAR, WRONG OR ILLEGAL. WHERE AN AUTHORITY MAKING ORDER LACKS INHERENT JURISDICTION, SUCH ORDER WOULD BE WITHOUT JURISDICT ION, NULL NON EST AND VOID AB INITIO AS DEFECT OF JURISD ICTION OF AN AUTHORITY GOES TO THE ROOT OF THE MATTER AND STRIKES AT ITS VERY AUTHORITY TO PASS ANY ORDER AND SUCH A DEFECT CANNOT BE CURED EVEN BY CONSENT OF THE PARTIES. (SEE: KIRAN SINGH & ORS. VS. CHAMAN PASWAN & ORS.1). HOWEVER, EXERCISE OF JURISDICTION IN A WRONGFUL MANNER CANNOT RESULT IN A NULLITY IT I S AN ILLEGALITY, CAPABLE OF BEING CURED IN A DULY CONSTI TUTED LEGAL PROCEEDINGS. - - ITA 1591 OF 2011 8 16. PROCEEDINGS FOR ASSESSMENT UNDER A FISCAL STATU TE ARE NOT IN THE NATURE OF JURIDICAL PROCEEDINGS, LIK E PROCEEDINGS IN A SUIT INASMUCH AS THE ASSESSING OFFICER DOES NOT ADJUDICATE ON A LIS BETWEEN AN ASSESSEE AND THE STATE AND, THEREFORE, THE LAW ON T HE ISSUE LAID DOWN UNDER THE CIVIL LAW MAY NOT STRICTO SENSU APPLY TO ASSESSMENT PROCEEDINGS. NEVERTHELESS, IN ORDER TO APPRECIATE THE DISTINCTIO N BETWEEN A NULL AND VOID ORDER AND AN ILLEGAL OR IRREGULAR ORDER, IT WOULD BE PROFITABLE TO NOTICE A FEW DECISIONS OF THIS COURT ON THE POINT. 17. . 18. IN VIEW OF THE ABOVE, IN THE PRESENT CASE, APAR T FROM THE FACT THAT ON A PLAIN READING OF SECTION 29 (8)(B) OF THE ACT, IT IS MANIFESTLY CLEAR THAT FRESH ASSES SMENT FOR THE ASSESSMENT YEAR 1995-96, FRAMED PURSUANT TO THE ORDER PASSED BY THE APPELLATE AUTHORITY ON 8 TH JUNE, 2000, WAS WELL WITHIN THE PRESCRIBED TIME, EV EN OTHERWISE, IN THE LIGHT OF THE AFORE-STATED LAW, TH E - - ITA 1591 OF 2011 9 ASSESSMENT ORDERS IN QUESTION COULD NOT BE HELD TO BE NULL AND VOID ON ACCOUNT OF THE STATED IRREGULARITI ES COMMITTED BY THE ASSESSING OFFICER DURING THE COURS E OF ASSESSMENT PROCEEDINGS. IN OUR OPINION, THEREFO RE, DESPITE SCATHING OBSERVATIONS BY THE DIVISION BENCH ON THE CONDUCT OF THE ASSESSING OFFICER, IT WAS A C ASE OF AN IRREGULARITY IN ASSESSMENT PROCEEDINGS BY THE OFFICER, WHO WAS NOT BEREFT OF AUTHORITY TO ASSESS THE APPELLANT. AT BEST, IT WAS AN ILLEGALITY, WHICH DE FECT WAS CAPABLE OF AND HAS BEEN CURED BY THE HIGH COURT BY SETTING ASIDE THE ORDERS AND BY GRANTING CONSEQUENTIAL RELIEF. 9. THEREFORE, WE CONCLUDE THAT THE FIRST GROUND RA ISED BY THE ASSESSEE REGARDING THE VALIDITY OF THE ORDER S IS LIABLE TO REJECTED. 10. THE NEXT GROUND RAISED BY THE ASSESSEE-COMPANY IS ON THE MERITS OF THE CASE. THE CASE OF THE ASSE SSEE IS THAT THE DISPUTE RESOLUTION PANEL HAS NOT CONSIDERED THE HIG HER - - ITA 1591 OF 2011 10 DEPRECIATION CHARGED BY THE ASSESSEE COMPANY AS AGA INST THE CASE OF COMPARABLE COMPANIES IN WORKING OUT ITS OPE RATING COST. 11. THE TRANSFER PRICING OFFICER HAD PROPOSED THRE E KINDS OF QUANTITATIVE ADJUSTMENTS IN THE TRANSFER P RICING ASSESSMENT OF THE ASSESSEE. THE FIRST ADJUSTMENT R ELATED TO WRITE-BACK OF EXCESS DEPRECIATION CHARGED BY THE AS SESSEE IN WORKING OUT ITS OPERATING PROFIT. THE SECOND ADJUS TMENT RELATED TO EXCHANGE FLUCTUATION LOSS. THE THIRD ONE RELATE D TO BANK CHARGES. 12. OUT OF THE ABOVE THREE PROPOSED ADJUSTMENTS, T WO ADJUSTMENTS WERE TAKEN IN REFERENCE BEFORE THE DISP UTE RESOLUTION PANEL. THEY RELATED TO DEPRECIATION ADJ USTMENT AND FOREIGN EXCHANGE LOSS ADJUSTMENT. THE DISPUTE RESO LUTION PANEL CONFIRMED THE PROPOSAL OF THE TRANSFER PRICIN G OFFICER AS FAR AS THE DEPRECIATION FACTOR IS CONCERNED. ON TH E QUESTION OF FOREIGN EXCHANGE LOSS, THE DISPUTE RESOLUTION PANEL ACCEPTED THE ARGUMENTS OF THE ASSESSEE AND DISAPPROVED THE P ROPOSAL MADE BY THE TRANSFER PRICING OFFICER. THEREFORE, T HAT PROPOSAL - - ITA 1591 OF 2011 11 WAS ABORTED. AS A RESULT OF THE ADJUSTMENT APPROVE D BY THE DISPUTE RESOLUTION PANEL, AN ADDITION BY WAY OF ADJ USTMENT WAS MADE BY THE ASSESSING AUTHORITY TO THE EXTENT OF ` 2,38,24,515/-. IT IS IN THIS CONTEXT, THAT THE ASSESSEE HAS RAISED ITS CONTENTIONS REGARDING THE ADJUSTMENT ON DEPRECIATION FACTOR. 13. IN SCHEDULE 16 TO ITS FINAL ACCOUNTS, WHICH PR OVIDES NOTES ON ACCOUNTS, THE ASSESSEE HAS CLARIFIED THE S IGNIFICANT ACCOUNTING POLICIES FOLLOWED BY IT IN THE MATTER OF FIXED ASSETS AND DEPRECIATION. IT IS STATED THEREIN THAT THE AS SESSEE HAS PROVIDED DEPRECIATION ON STRAIGHT-LINE METHOD. THE RATES HAVE BEEN ADOPTED ON THE BASIS OF TECHNICAL ESTIMATES MA DE OF USEFUL LIFE OF THE ASSETS. ACCORDINGLY, THE ASSESSEE HAS PROVIDED DEPRECIATION AT 33.33% IN THE CASE OF PLANT AND MAC HINERY INCLUDING COMPUTER HARDWARE AND SOFTWARE. FURNITUR E AND FIXTURES WERE DEPRECIATED AT THE RATE OF 14.29% AND MOTOR VEHICLES AT THE RATE OF 20%. DEPRECIATION WAS PROV IDED ON OFFICE EQUIPMENT AT 20% AND AIR-CONDITIONERS AT 12.5%. - - ITA 1591 OF 2011 12 14. IT IS THE CASE OF THE ASSESSEE THAT IN THE CAS E OF COMPARABLE INSTANCES EXAMINED BY THE TRANSFER PRICI NG OFFICER, THEY HAVE PROVIDED FOR DEPRECIATION AS PER INCOME-T AX RULES, WHICH ARE MUCH LESS COMPARED TO THE DEPRECIATION PR OVIDED BY THE ASSESSEE-COMPANY. IF THE DEPRECIATION PROVIDED BY THE ASSESSEE-COMPANY AND THE DEPRECIATION PROVIDED BY T HE COMPARABLES ARE EQUALIZED BY MEANS OF ADJUSTING FAC TORS, THE OPERATING PROFIT OF THE ASSESSEE WOULD BE HIGHER, C OMPARED TO THE OPERATING PROFITS REFLECTED IN THE ACCOUNTS OF THE COMPARABLES. THE ASSESSEE EXPLAINED THAT THE OPERA TING PROFIT OF THE ASSESSEE-COMPANY IS CALCULATED AT 6.97% AFTE R ABSORBING THE HIGHER AMOUNT OF DEPRECIATION PROVIDED BY IT IN ITS ACCOUNTS. THE OPERATING PROFIT OF COMPARABLES IS WORKED OUT T O 14.01% ON A LESSER ABSORPTION OF DEPRECIATION. IT IS THE CAS E OF THE ASSESSEE THAT IF THE DEPRECIATION OF THE ASSESSEE I S ALSO ADJUSTED TO THE DIMINISHING METHOD, ITS OPERATING PROFIT WOU LD BE MORE THAN 14%, VERY MUCH COMPARABLE TO THE OPERATING PRO FIT OF OTHER COMPANIES. - - ITA 1591 OF 2011 13 15. NEITHER THE TRANSFER PRICING OFFICER, NOR THE DISPUTE RESOLUTION PANEL, ACCEPTED THE ABOVE CONTENTION OF THE ASSESSEE. THAT IS WHY THIS POINT IS VERY MUCH AGIT ATED BEFORE THE TRIBUNAL. THE ASSESSEE HAS FORMULATED ITS ACCO UNTING POLICIES ON THE BASIS OF ITS EVALUATION OF VARIOUS FACTORS DETERMINING THE OPERATING COSTS. AS FAR AS THE QUE STION OF DEPRECIATION IS CONCERNED, THE ASSESSEE HAS MADE A TECHNICAL STUDY. IT IS ON THE BASIS OF THE TECHNICAL STUDY T HAT THE ASSESSEE HAS ESTIMATED THE LIFESPAN OF EVERY ASSET AND DETER MINED THE RATES OF DEPRECIATION SO THAT THE ASSETS ARE WRITTE N OFF DURING THE PERIOD OF ITS USEFUL LIFE ITSELF. IT IS AN ACCEPTE D PRACTICE OF PROVIDING DEPRECIATION. IT IS ONLY WHILE COMPUTING THE TAXABLE INCOME THAT THE ASSESSEE HAS TO LIMIT ITS CLAIM OF DEPRECIATION IN ACCORDANCE WITH INCOME-TAX RULES. THE COMPANIES AC T ALSO PROVIDES THAT THE ASSESSEE MUST PROVIDE THE MINIMUM AMOUNT OF DEPRECIATION; BUT IT CAN ALWAYS PROVIDE FOR MORE DE PRECIATION. WHEN A COMPANY IS WORKING OUT ITS OPERATING PROFIT, THE CONSIDERATION IS MAINLY OF DIFFERENT FACTORS OF PRO DUCTION, ECONOMIES, COST ITEMS, ETC., RATHER THAN INCOME-TAX RULES AND OTHER STATUTES. IN OTHER WORDS, THE COMPUTATION OF OPERATING - - ITA 1591 OF 2011 14 PROFIT ON A SCIENTIFIC BASIS DO IN FACT REFLECT TH E ACTUAL OPERATING COST AND OPERATING PROFIT OF AN ASSESSEE. THE DEPR ECIATION PROVIDED UNDER THE INCOME-TAX RULES OR THE MINIMUM DEPRECIATION PROVIDED UNDER THE COMPANIES ACT MAY N OT BE REALLY EXHIBITING THE ACTUAL POSITION. 16. IN THE PRESENT CASE, THE ASSESSEE HAS FOLLOWED A SCIENTIFIC SYSTEM WHEREIN THE ASSESSEE IS PROVIDING FOR DEPRECIATION ON A MORE REAL TIME BASIS. THE ASSESS EE IS IN FACT NOT PROVIDING TECHNICAL DEPRECIATION INFLUENCED BY INCOME-TAX RULES. THE ASSESSEE IS PROVIDING FOR MORE OR LESS THE ACTUAL DEPRECIATION. THIS ACTUAL DEPRECIATION IS MORE REL EVANT IN WORKING OUT THE OPERATING PROFIT OF THE ASSESSEE. THEREFORE, WE FIND THAT NO ADJUSTMENT IS CALLED FOR IN THE QUANTU M OF DEPRECIATION PROVIDED BY THE ASSESSEE IN ITS OPERAT ING ACCOUNT SO AS TO WORK OUT ITS OPERATING PROFIT FOR THE PURP OSE OF DETERMINING THE ARMS LENGTH PRICE (ALP). 17. APART FROM THE ABOVE FACTUAL ASSESSMENT OF THE CASE, LET US EXAMINE THE RATES PROVIDED BY THE ASSE SSEE. THE - - ITA 1591 OF 2011 15 TRANSFER PRICING OFFICER HAS EXAMINED IN PARAGRAPHS 13.7, 13.8 AND 13.9 IN HER REFERENCE ORDER, THE VARIOUS RATES OF THE DEPRECIATION PROVIDED BY THE ASSESSEE IN ITS ACCOUN TS. IN THE CASE OF COMPUTER, THE ASSESSEE HAS PROVIDED DEPRECI ATION AT THE RATE OF 33.3%. AS POINTED OUT BY THE TRANSFER PRIC ING OFFICER, THE INCOME-TAX RULES PROVIDE DEPRECIATION AT 60% IN THE CASE OF CAPITAL ITEMS AND 100% IN THE CASE OF REVENUE ITEMS . THEREFORE, IT IS NOT POSSIBLE TO HOLD THAT THE DEPRECIATION PR OVIDED BY THE ASSESSEE IS IN ANY WAY HIGHER THAN THE INCOME-TAX R ATES. IN THE CASE OF OTHER ITEMS ALSO THE DIFFERENCE IN THE RATE IS MARGINAL. 18. NOW, COMING TO THE CUMULATIVE EFFECT OF PROVID ING DEPRECIATION ON STRAIGHT-LINE METHOD AT HIGHER RATE , WE FIND THAT, OVER A PERIOD OF TIME THE DIFFERENCE OF DEPRECIATIO N PROVIDED UNDER DIFFERENT METHODS OFFSETS BY ITSELF. ULTIMAT ELY, THE QUANTUM OF DEPRECIATION WRITTEN OFF OVER A PERIOD OF TIME W OULD BE ALMOST THE SAME EXCEPT FOR A MARGINAL DIFFERENCE. THIS PO INT HAS BEEN SUCCINCTLY EXPLAINED BY THE LEARNED COMMISSIONER OF INCOME-TAX APPEARING FOR THE REVENUE. HE HAS RIGHTLY EXPLAINE D THAT IN THE WRITTEN DOWN VALUE METHOD THE DEPRECIATION FOR INIT IAL YEARS MAY - - ITA 1591 OF 2011 16 BE MORE AND THE DEPRECIATION FOR SUBSEQUENT YEARS M AY BE LESS, WHEREAS IN A STRAIGHT-LINE METHOD THE DEPRECIATION WILL BE UNIFORM BUT COMPARED TO THE OLD AGE OF THE ASSETS INITIAL D EPRECIATION WILL BE LESS AND SUBSEQUENT DEPRECIATION WOULD BE MORE. BUT AT THE END OF THE DAY, THE DEPRECIATION OFFSETS EACH BY IT SELF. IN OTHER WORDS, THEY ARE COMPENSATING DIFFERENCES. 19. IN THE ABOVE CIRCUMSTANCES, WE DO NOT FIND FOR CE IN THE ARGUMENTS ADVANCED BY THE ASSESSEE COMPANY ON T HE QUESTION OF ADJUSTMENT OF THE DEPRECIATION FACTOR. 20. IN RESULT, THIS TRANSFER PRICING APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON MONDAY, THE 30 TH OF JANUARY, 2012 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 30 TH JANUARY, 2012. V.A.P. COPY TO: APPELLANT/RESPONDENT/CIT/DR/GF
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