Xerox India Ltd., Gurgaon V. DCIT, New Delhi

ITA 2060/DEL/2015

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9070 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 09-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Transfer pricing; International transaction; Tangible material; TDS; Set aside
• Section: 92B; 92F; 234B; 191; 207; 64; 13; 22; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: I-1, NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.2060/DEL./2015 ASSESSMENT YEAR: 2010-11 M/S. XEROX INDIA LTD., 5 TH & 6 TH FLOOR, VATIKA BUSINESS PARK, SECTOR-49, SOHNA ROAD, GURGAON VS. DCIT, CIRCLE-27(2), NEW DELHI PAN :AAACM8634R (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST FIN AL ASSESSMENT ORDER DATED 29/01/2015 PASSED BY THE DEP UTY COMMISSIONER OF INCOME-TAX, CIRCLE-27(2), NEW DELHI [IN SHORT THE ASSESSING OFFICER] PURSUANT TO THE DIRECTION DATED 18/12/2014 OF THE LEARNED DISPUTE RESOLUTION PANEL (DRP). THE GROUNDS RAISED BY THE ASSESSEE ARE REPRODUCED AS UN DER: 1. THAT ON FACTS AND IN LAW THE ORDERS PASSED BY T HE ASSESSING OFFICER [HEREINAFTER REFERRED AS THE AO] / DISPUT E RESOLUTION PANEL [HEREINAFTER REFERRED AS THE DRP] / TRANSFE R PRICING OFFICER APPELLANT BY SHRI TARANDEEP SINGH, ADV. RESPONDENT BY SHRI SURENDERPAL, CIT(DR) DATE OF HEARING 21.07.2020 DATE OF PRONOUNCEMENT 05.08.2020 2 ITA NO. 2060/DEL./2015 [HEREINAFTER REFERRED AS THE TPO] ARE BAD IN LAW AND VOID AB- INITIO. 2. THAT ON FACTS AND IN THE LAW THE AO/TPO/DRP ERR ED IN MAKING/PROPOSING/UPHOLDING AN ADDITION TO TOTAL INC OME OF RS. 15,42,32,773/- UNDER CHAPTER X OF THE INCOME TAX AC T, 1961 [HEREINAFTER REFERRED AS THE ACT] ON ACCOUNT OF A DVERTISEMENT, MARKETING AND SALES PROMOTION {HEREINAFTER REFERRED AS AMP} EXPENSES. 2.1 THAT ON FACTS AND IN LAW THE TPO/DRP ERRED IN NOT APPRECIATING THAT IN ABSENCE OF A TRANSACTION AS ENVISAGED UND ER SECTION 92F OF THE ACT BETWEEN THE APPELLANT AND ITS AE FOR BRA ND PROMOTION OR FOR ESTABLISHING MARKETING INTANGIBLES THE TPO H AD NO JURISDICTION TO PROPOSE AN ADJUSTMENT ON ACCOUNT AM P EXPENSES. 2.2 THAT ON FACTS AND IN LAW THE TPO ERRED IN HOLD ING AND THE DRP INTER ALIA ERRED IN UPHOLDING/OBSERVING THAT THE: (I) APPELLANT HAD INCURRED AMP EXPENDITURE OF RS.1 3,70,95,799/- ON PROMOTION OF PROPRIETARY MARKS AND FOR DEVELOPME NT OF MARKETING INTANGIBLE FOR THE BENEFIT OF AE. (II) AMP EXPENDITURE OF RS.13,70,95,799/- INCURRED BY THE APPELLANT IS AN INTERNATIONAL TRANSACTION U/S 92B OF THE ACT. (III) SELLING EXPENSES (FOR EG. DISCOUNTS, COMMISS ION) INCURRED BY THE APPELLANT ARE IN THE NATURE OF AMP EXPENSES. (IV) AE IS DIRECTLY BENEFITED BY ANY EXPENDITURE I NCURRED BY ASSESSE ON AMP. 2.3 THAT ON FACTS AND IN LAW THE AO/TPO/DRP ERRED IN NOT APPRECIATING THAT BENCHMARKING ON THE BASIS OF EXPE NSES INCURRED BY AN ASSESSEE IS NOT RECOGNIZABLE AS PER THE PROVI SIONS OF CHAPTER X. 3. WITHOUT PREJUDICE, THAT ON FACTS AND IN LAW THE AO/DRP/TPO ERRED IN SELECTING AN INAPPROPRIATE COMPARABLE SET FOR THE PURPOSE OF BENCHMARKING ALLEGED AMP TRANSACTIONS. 4. THAT WITHOUT PREJUDICE ON FACTS AND IN LAW THE TPO/DRP ERRED IN MAKING/UPHOLDING THE APPLICABILITY OF A MARKUP OF 12.50% ON THE ALLEGED EXCESSIVE AMP EXPEN SES INCURRED BY THE APPELLANT ON BEHALF OF THE ASSOCIAT ED ENTERPRISE. 5. WITHOUT PREJUDICE, THAT ON FACTS AND IN LAW THE TPO/DRP ERRED IN NOT APPRECIATING THAT ONCE THE MAIN INTERNATIONAL TRANSACTIONS 3 ITA NO. 2060/DEL./2015 EXECUTED BY THE APPELLANT AS A DISTRIBUTOR HAVE BEE N ACCEPTED TO BE AT ALP THEN NO FURTHER ADJUSTMENT ON ACCOUNT OF ALLEGED AMP TRANSACTIONS WERE CALLED FOR. 5.1 WITHOUT PREJUDICE, THAT ON FACTS AND IN LAW TH E AO/TPO/DRP ERRED IN NOT APPRECIATING THAT THE ALLEGED TRANSACT IONS OF AMP WERE CLOSELY LINKED WITH THE MAIN ACTIVITY OF DIS TRIBUTORSHIP CARRIED ON BY THE APPELLANT AND HENCE IT CANNOT BE SEGREGATED AND BENCHMARKED ON A STAND-ALONE BASIS. 6. THAT ON FACTS AND IN LAW THE AO/DRP ERRED IN MAKING/UPHOLDING A DISALLOWANCE OF RS 33,34,814/- B EING DEPRECIATION ALLOWANCE ON CAPITAL ASSETS CONVERTED INTO STOCK IN TRADE. 7. THAT ON FACTS AND IN LAW THE AO/DRP ERRED IN CH ARGING/UPHOLDING LEVY OF INTEREST U/S 234B & 234C OF THE ACT. 8. THATON FACTS AND IN LAW WHILE COMPUTING THE FIN AL TAX LIABILITY THE AO ERREDIN NOT GRANTING CREDITS FOR: (A) ADVANCE FRINGE BENEFIT TAX OF RS. 20,00,000/- (B) TDS CERTIFICATES OF RS. 56,49,994/- 9. THAT ON FACTS AND IN LAW, THE ASSUMPTION OF JUR ISDICTION BY THE AO/TPO TO DETERMINE ARMS LENGTH PRICE IS BAD IN LA W AND VOID AB-INITIO. THAT THE APPELLANT PRAYS FOR LEAVE TO ADD, ALTER, AMEND AND/OR VARY THE GROUND(S) OF APPEAL AT OR BEFORE THE TIME OF HEARING. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE COMPANY IS ONE OF THE COMPANY OF XEROX GROUP. THE COMPANY OPERATES IN DOCUMENT MANAGEMENT INDUSTRY, PROVIDING A RANGE OF OFFICE EQUIPMENT, SOFTWARE SOLUTIONS AND DOCUMENT M ANAGEMENT SERVICES. THE ASSESSEE FILED RETURN OF INCOME ON 30 /09/2010 DECLARING TOTAL INCOME OF 24,89,29,283/-, WHICH WAS SUBSEQUENTLY REVISED ON 31/03/2012 FOR CLAIMING MOR E CREDIT OF TAX DEDUCTED AT SOURCE (TDS). THE CASE WAS SELECTED FOR SCRUTINY AND IN VIEW OF THE INTERNATIONAL TRANSACTIONS REPOR TED BY THE ASSESSEE, THE MATTER FOR DETERMINATION OF THEIR ARM S-LENGTH WAS 4 ITA NO. 2060/DEL./2015 REFERRED TO THE LEARNED TRANSFER PRICING OFFICER (T PO). THE LEARNED TRANSFER PRICING OFFICER (TPO) PROPOSED ADJUSTMENT OF 11,44,61,024/- TO THE INTERNATIONAL TRANSACTION OF PROCEDURE OF FINISHED GOODS FOR RESALE. WHILE PROPOSING THE ADJ USTMENT, THE LEARNED TPO HELD THAT MOST APPROPRIATE METHOD FOR D ETERMINATION OF ARMS-LENGTH PRICE (ALP) OF PURCHASE OF THE FINI SHED GOODS SHOULD BE RESALE PRICE METHOD (RPM) INSTEAD OF T RANSACTIONAL NET MARGIN METHOD (TNMM) APPLIED BY THE ASSESSEE. THE LEARNED TPO ALSO OBSERVED THAT THE ASSESSEE HAD INCURRED A HUGE AMOUNT ( 16,79,22,000/-) ON ADVERTISEMENT AND MARKET PROMOT ION (AMP) EXPENSES WHICH HAS CREATED MARKET INTANGIBLES INCLU DING BRAND VALUE IN FAVOUR OF ASSOCIATED ENTERPRISES AND THUS BEING AN INTERNATIONAL TRANSACTION, SAME NEED TO BE BENCHMAR KED. HE APPLIED BRIGHT LINE TEST (BLT) FOR COMPUTING THE AM P ADJUSTMENT. THE LEARNED TPO ALLOWED THE AMP EXPENSES OF 3,08,26,201/- AND BALANCE AMP EXPENSES OF 13,70,95,799/- WAS CONSIDERED AS INCURRED FOR CREATING MARKETING INTANGIBLES IN FAVO UR OF THE AE. HE APPLIED A MARKUP OF 12.5% ON THE SAID AMOUNT AND PROPOSED TOTAL AMP ADJUSTMENT OF 15,42,32,773/-. IN THE DRAFT ASSESSMENT ORDER DATED 12/03/2014 THE ASSESSING OFF ICER INCLUDED THE ADJUSTMENT PROPOSED BY THE LEARNED TPO . IN THE SAID DRAFT ASSESSMENT ORDER, THE LEARNED ASSESSING OFFIC ER ALSO PROPOSED DISALLOWANCE OF DEPRECIATION ON DE-CAPITAL IZED ASSET AMOUNTING TO 33,34,814/-. 2.1 AGGRIEVED WITH THE ADDITION PROPOSED, THE ASSESSEE FILED OBJECTION BEFORE THE LEARNED DRP. ON THE ISSUE OF T HE ADJUSTMENT TO THE TRANSACTION OF PURCHASE OF FINISHED GOODS, T HE ASSESSEE SUBMITTED FOR COMPUTATION OF THE CORRECT GROSS PROF IT MARGIN OF 5 ITA NO. 2060/DEL./2015 THE ASSESSEE AS HUGE CHUNK OF THE BUSINESS WAS COMI NG FROM THE RENTAL INCOME AND CONSIDERABLE EXPENSES WERE INCURR ED ON REPLACEMENT OF THE SPARE PARTS. THE LEARNED DRP DIR ECTED TO CONSIDER ABOVE SUBMISSION OF THE ASSESSEE. IN THE E FFECT GIVING ORDER OF THE LEARNED DRP, THE LEARNED TPO COMPUTED NIL ADJUSTMENT TO THE TRANSACTION OF PURCHASE OF THE FI NISHED GOODS. AS REGARD TO THE ADJUSTMENT OF AMP EXPENSES, THE LE ARNED DRP REJECTED THE OBJECTION OF THE ASSESSEE. THE ISSUE O F DISALLOWANCE OF DEPRECIATION ON CAPITAL ASSETS CONVERTED INTO A STOCK-IN-TRADE WAS ALSO MAINTAINED BY THE LEARNED DRP. IN COMPLIAN CE TO THE DIRECTION OF THE LEARNED DRP, THE ASSESSING OFFICER HAS PASSED THE IMPUGNED FINAL ASSESSMENT ORDER, WHEREIN HE MAD E ADDITION OF 15,42,32,773/- FOR ADJUSTMENT IN ARMS-LENGTH PRIC E TO AMP TRANSACTION AND ADDITION OF 33,34,814/- FOR DEPRECIATION DISALLOWED ON DE-CAPITALIZED ASSETS. AGGRIEVED WITH THE ABOVE ADDITIONS, THE ASSESSEE IS IN APPEAL BEFORE THE TRI BUNAL RAISING THE GROUNDS AS REPRODUCED ABOVE. 3. THIS APPEAL OF THE ASSESSEE HAS BEEN HEARD THROUGH VIDEOCONFERENCING FACILITY AFTER DUE CONSENT OF THE PARTIES. THE LEARNED DR ALSO CONSENTED TO ARGUE THE APPEAL THROU GH VIDEOCONFERENCING. 4. BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE FIL ED A PAPER- BOOK AND OTHER DOCUMENTS ELECTRONICALLY. THE LEARNE D COUNSEL SUBMITTED THAT IDENTICAL ISSUE OF AMP ADJUSTMENT TH E CASE OF THE ASSESSEE HAS BEEN DELETED BY THE TRIBUNAL IN ASSESS MENT YEAR 2008-09. HE REFERRED TO PARA- 22 TO 34 OF THE ORDER OF THE TRIBUNAL, WHEREIN THE BLT APPROACH FOR COMPUTING AD JUSTMENT TO AMP EXPENSES HAS BEEN REJECTED. THE LEARNED COUNSEL SUBMITTED 6 ITA NO. 2060/DEL./2015 THAT IN THE DECISIONS CITED BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2008-09, THE EXISTENCE OF INTERNATIONAL TRANSACTION OF THE AMP HAS BEEN REJECTED BOTH ON THE GROUND OF THE EXCESSI VE SPENDING AND USE OF THE LOGO. THE LEARNED COUNSEL, HOWEVER, SUBMITTED THAT PARA 35 OF THE ORDER OF THE TRIBUNAL MAY NOT B E FOLLOWED AS THE APPEALS INVOLVING AMP ISSUES HAVE NOT BEEN HEAR D BY THE HONBLE SUPREME COURT AND THUS RESTORING THE ISSUE TO THE TPO FOR FOLLOWING THE DECISION OF THE HONBLE SUPREME C OURT, WHICH YET HAS NOT BEEN PRONOUNCED, IS NOT JUSTIFIED. 5. THE LEARNED DR, ON THE OTHER HAND, RELIED ON THE O RDER OF THE LEARNED TPO AND LEARNED DRP AND SUBMITTED THAT FACTS OF THE YEAR UNDER CONSIDERATION ARE DIFFERENT FROM THE ASS ESSMENT YEAR 2008-09. HE SUBMITTED THAT IN THE YEAR UNDER CONSID ERATION LEARNED TPO HAS ANALYZED CREATION OF THE MARKETING INTANGIBLES IN VIEW OF THE EVIDENCES BROUGHT ON RECORD AS AGAINST THE EARLIER YEAR, WHERE THE TRIBUNAL REJECTED THE CONTENTION OF THE REVENUE MAINLY ON THE GROUND THAT NO EVIDENCES WERE BROUGHT ON RECORD TO SUPPORT CREATION OF MARKET INTANGIBLES. ACCORDIN G TO HIM, THE DECISION OF THE TRIBUNAL IS DISTINGUISHABLE ON FACT S. THEN, HE SUBMITTED THAT IMPACT OF EXPLANATION TO SECTION 92B WHICH HAS BEEN INSERTED BY THE FINANCE ACT, 2012, HAS ALSO NO T BEEN CONSIDERED BY THE TRIBUNAL IN THE SAID DECISION. 6. IN THE REJOINDER, THE LEARNED COUNSEL OF THE ASSES SEE SUBMITTED THAT IN THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF MARUTI SUZUKI INDIA LTD. VS. CIT, (2015) 64 TAXMANN.COM 150 (DELHI) RELIED UPON BY THE TRIBUNAL , THE EXPLANATION TO SECTION 92B HAS BEEN DULY CONSIDERED . HE ALSO SUBMITTED THAT OBJECTION OF THE COGENT MATERIAL AND EVIDENCES 7 ITA NO. 2060/DEL./2015 TOWARDS MARKETING INTANGIBLES HAVE ALSO BEEN CONSID ERED BY THE HONBLE HIGH COURT IN THE CASES REFERRED BEFORE THE TRIBUNAL AND THEREFORE DECISION OF THE TRIBUNAL IS SQUARELY APPL ICABLE ON THE FACTS OF THE INSTANT CASE. 7. WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE. THE TRIBUNAL IN ASSESSMENT YEAR 2008-09 HAS ADJUDICATED THE ISSUE AFTER CONSIDERING THE VARIOUS DECISION OF THE HONBLE HIGH COURT IS AS UNDER: 22. LD. AR FOR THE TAXPAYER FURTHER CONTENDED THAT USE OF ANY LOGO ACROSS THE GLOBE IS NOT CONSIDERED EQUIVALENT TO EN HANCING A BRAND. HOWEVER, LD. TPO PROCEEDED TO OBSERVE ON THE BASIS OF GENERAL OBSERVATION THAT THE MANDATORY USE OF BRAND NAME OR LOGO OF THE OVERSEAS PARENT COMPANY WILL LEAD TO THE CREATION O F A 227 15 ITA NO.5528/DEL./2012 MARKETING INTANGIBLES IN FAVOUR O F THE TAXPAYER. HOWEVER, WHEN WE EXAMINE THE FACTS OF THIS CASE IN ENTIRETY, NO DOUBT TAXPAYER USES XEROX LOGO BUT ALL THE INFORM ATION IN RELATION TO CONTRACT ADDRESS, BRAND AMBASSADOR, PRODUCT, MAR KET AND OTHER SIMILAR DETAILS IN THE ADVERTISEMENT IS CONFINED TO INDIA ONLY. SO, IT CANNOT BE SAID TO PROMOTE THE XEROX BRAND WORLD-WID E. MOREOVER, WHEN IT IS UNDISPUTED FACT THAT THE TAXPAYER HAS NO T PAID ANY ROYALTY FOR USE OF XEROX BRAND NAME, INCIDENTAL BEN EFITS, IF ANY, TO OVERSEAS ENTITY DOES NOT CALL FOR ANY COMPENSATION FOR THE TAXPAYER. 23. IN CASE OF VALVOLINE CUMMINS (P.) LTD. VS. DCIT (2017) 84 TAXMANN.COM 191 (DELHI), HONBLE DELHI HIGH COURT H ELD THAT MERE USE OF BRAND NAME OR LOGO OWNED BY THE AES BY THE T AXPAYER WILL NOT AUTOMATICALLY LEAD TO INFLUENCE THAT ANY EXPENS ES THAT THE TAXPAYER INCURRED TOWARDS AMP WAS ONLY TO ENHANCE T HE BRAND BY RETURNING FOLLOWING FINDINGS :- 17. ONCE THE BLT HAS BEEN DECLARED BY THIS COURT I N SONY ERICSSON INDIA PVT. LTD.(SUPRA) TO NO LONGER BE A V ALID BASIS FOR DETERMINING THE EXISTENCE OF OR THE ALP OF AN INTER NATIONAL TRANSACTION INVOLVING AMP EXPENSES, THE ORDER OF TH E TPO WAS UNSUSTAINABLE IN LAW. THE MERE FACT THAT THE ASSESS EE WAS PERMITTED TO USE THE BRAND NAME VALVOLINE WILL NO T AUTOMATICALLY LEAD TO AN INFERENCE THAT ANY EXPENSE THAT THE ASSESSEE INCURRED TOWARDS AMP WAS ONLY TO ENHANCE T HE BRAND VALVOLINE. THE ONUS WAS ON THE REVENUE TO S HOW THE EXISTENCE OF ANY ARRANGEMENT OR AGREEMENT ON THE BA SIS OF WHICH IT COULD BE INFERRED THAT THE AMP EXPENSE INC URRED BY THE ASSESSEE WAS NOT FOR ITS OWN BENEFIT BUT FOR TH E BENEFIT OF 8 ITA NO. 2060/DEL./2015 ITS AE. THAT FACTUAL FOUNDATION HAS BEEN UNABLE TO BE LAID BY THE REVENUE IN THE PRESENT CASE. ON THE BASIS OF TH E EXISTING RECORD, THE TPO HAS FOUND NO BASIS OTHER THAN BY AP PLYING THE BLT, TO DISCERN THE EXISTENCE OF INTERNATIONAL TRAN SACTION. THEREFORE, NO PURPOSE WILL BE SERVED IF THE MATTER IS REMANDED TO THE TPO, OR EVEN THE ITAT, FOR THIS PURPOSE. 24. WHEN ALL THESE OBJECTIONS WERE RAISED BY THE TA XPAYER BEFORE THE LD. DRP, SAME HAS BEEN DISMISSED BY USING SAME RATI O APPLIED BY THE TPO FIRSTLY TO DECLARE THE AMP EXPENDITURE AS A N INTERNATIONAL TRANSACTION AND THEN TO TREAT THE AMP EXPENDITURE I NCURRED BY THE TAXPAYER IN EXCESS OF ROUTINE EXPENDITURE TO PROMOT E THE BRAND AND CREATING INTANGIBLES FOR ITS AE BY USING THE BLT, A S IS EVIDENT FORM PARA 5.3 OF THE LD. DRP ORDER. IN PARA 5.8, LD. DRP AGAIN APPLIED THE BLT TO BENCHMARK THE INTERNATIONAL TRANSACTION QUA AMP EXPENDITURE BY RETURNING FOLLOWING FINDINGS:- 5.8 WE HAVE ALSO CONSIDERED THE ASSESSEE'S OBJECTI ON ABOUT REJECTION OF CERTAIN COMPARABLES BY THE TPO. TWO OF THEM, NAMELY, MIS RICOH INDIA LTD. AND MIS SPICE MOBILE L TD. ARE ENGAGED IN THE DISTRIBUTION OF BRANDED GOODS. WE HA VE ALREADY MENTIONED THAT THE TPO HAS CONSIDERED THE DISTRIBUTORS OF ONLY THE SIMILAR UNBRANDED GOODS TO DETERMINE THE ROUTINE MARKETING AND DISTRIBUTION EXPENDITURE BY THEM. THE AMP EXPENDITURE INCURRED BY THE DISTRIBUTORS OF THE BRANDED GOODS WOULD INCLUDE CERTAIN AMOUNT OF BRAND PROMOTION EXPENSES. THAT IS WHY SUCH DISTRIBUTORS H AVE NOT BEEN CONSIDERED AS COMPARABLES BECAUSE O~ AIM IS TO DETERMINE THE ROUTINE MARKETING AND DISTRIBUTION EX PENSES TO FIX THE 'BRIGHTLINE' AND ASCERTAIN THE EXPENDITURE INCURRED BY THE ASSESSEE WHICH IS ATTRIBUTABLE TO BRAND PROMOTI ON. ONLY ROUTINE DISTRIBUTORS ARE TO BE TAKEN WHO ARE NOR EN GAGED IN ANY BRAND BUILDING EXERCISE. THE PURPOSE OF BRIGHT LINE IS TO ASCERTAIN AS TO HOW MUCH AMP EXPENSES WOULD NORMALL Y BE INCURRED BY A MANUFACTURER DISTRIBUTOR FOR CARRYING ON ITS ROUTINE DISTRIBUTION ACTIVITY. FOR THIS IT IS NECES SARY TO SELECT COMPARABLES WHICH ARE NOT ENGAGED IN CREATION OF BR AND NAME. IN RESPECT OF THE THIRD COMPANY, M/S. RATHI G RAPHICS LTD., THE TPO HAS OBSERVED IN THE ORDER THAT IT WAS CARRYING OUT AMP ACTIVITIES ON BEHALF OF ITS SUBSIDIARIES AL SO. THE ASSESSEE HAS NOT GIVEN ANY ARGUMENTS TO REBUT THE C ONTENTION OF THE AO. THEREFORE, THE ASSESSEE'S OBJECTION REGA RDING REJECTION OF ALL THE THREE COMPARABLES IS TURNED DO WN BY THE PANEL. THE ASSESSEE HAS 229 17 ITA NO.5528/DEL./201 2 ALSO GIVEN A LIST OF ITS OWN COMPARABLES FOR DETERMINING THE 'BRIGHTLINE'. HOWEVER, ALL THE COMPARABLES PROPOSED BY THE ASSESSEE ARE DISTRIBUTORS OF BRANDED GOODS AND, THE REFORE, FOR THE REASONS MENTIONED ABOVE, SUCH COMPARABLES CANNO T BE 9 ITA NO. 2060/DEL./2015 ACCEPTED. HOWEVER, THE PANEL, ON ITS OWN, HAS CAREF ULLY EXAMINED THE FUNCTIONAL PROFILE AS WELL AS THE FINA NCIALS OF ALL THE COMPARABLES USED BY THE TPO. IT HAS BEEN NOTED THAT MORE THAN 50% OF TURNOVER OF M/S DHOOT INDUSTRIAL FINANC E LTD. IS FROM SALE OF SHARES. THE PANEL IS, THEREFORE, OF TH E VIEW THAT IT SHOULD HAVE NOT BEEN CONSIDERED AS A COMPARABLE. 25. BY NOW, IT IS SETTLED PRINCIPLE OF LAW THAT BLT IS NOT A VALID METHOD FOR DETERMINING THE EXISTENCE OF INTERNATION AL TRANSACTION OR FOR DETERMINATION OF ALP OF SUCH TRANSACTIONS. 22. HONBLE DELHI HIGH COURT IN CASE OF CIT VS. WHI RLPOOL OF INDIA LTD. (2016) 381 ITR 154 (DELHI) DECIDED THE IDENTIC AL ISSUE BY RETURNING FOLLOWING FINDINGS :- 34. THE TP ADJUSTMENT IS NOT EXPECTED TO BE MADE B Y DEDUCING FROM THE DIFFERENCE BETWEEN THE 'EXCESSIVE ' AMP EXPENDITURE INCURRED BY THE ASSESSEE AND THE AMP EXPENDITURE OF A COMPARABLE ENTITY THAT AN INTERNAT IONAL TRANSACTION EXISTS AND THEN PROCEED TO MAKE THE ADJ USTMENT OF THE DIFFERENCE IN ORDER TO DETERMINE THE VALUE OF S UCH AMP EXPENDITURE INCURRED FOR THE AE. 35. IT IS FOR THE ABOVE REASON THAT THE BLT HAS BEE N REJECTED AS A VALID METHOD FOR EITHER DETERMINING THE EXISTE NCE OF INTERNATIONAL TRANSACTION OR FOR THE DETERMINATION OF ALP OF SUCH TRANSACTION. ALTHOUGH, UNDER SECTION 92B READ WITH SECTION 92F(V), AN INTERNATIONAL TRANSACTION COULD INCLUDE AN ARRANGEMENT, UNDERSTANDING OR ACTION IN CONCERT, TH IS CANNOT BE A MATTER OF INFERENCE. THERE HAS TO BE SOME TANG IBLE EVIDENCE ON RECORD TO SHOW THAT TWO PARTIES HAVE A CTED IN CONCERN. .. 37. THE PROVISIONS UNDER CHAPTER X DO ENVISAGE A S EPARATE ENTITY CONCEPT. IN OTHER WORDS, THERE CANNOT BE A PRESUMPTION THAT IN THE PRESENT CASE SINCE WOIL IS A SUBSIDIARY OF WHIRLPOOL USA, ALL THE ACTIVITIES OF WOIL ARE IN FA CT DICTATED BY WHIRLPOOL USA. MERELY BECAUSE WHIRLPOOL USA HAS A F INANCIAL INTEREST, IT CANNOT BE PRESUMED THAT AMP EXPENSE IN CURRED BY THE WOIL 230 18 ITA NO.5528/DEL./2012 ARE AT THE IN STANCE OR ON BEHALF OF WHIRLPOOL USA. THERE IS MERIT IN TH E CONTENTION OF THE ASSESSEE THAT THE INITIAL ONUS IS ON THE REV ENUE TO DEMONSTRATE THROUGH SOME TANGIBLE MATERIAL THAT THE TWO PARTIES ACTED IN CONCERT AND FURTHER THAT THERE WAS AN AGREEMENT TO ENTER INTO AN INTERNATIONAL TRANSACTIO N CONCERNING AMP EXPENSES. .. 10 ITA NO. 2060/DEL./2015 47. FOR THE AFOREMENTIONED REASONS, THE COURT IS OF THE VIEW THAT AS FAR AS THE PRESENT APPEALS ARE CONCERNED, T HE REVENUE HAS BEEN UNABLE TO DEMONSTRATE BY SOME TANGIBLE MAT ERIAL THAT THERE IS AN INTERNATIONAL TRANSACTION INVOLVIN G AMP EXPENSES BETWEEN WOIL AND WHIRLPOOL USA. IN THE ABS ENCE OF THAT FIRST STEP, THE QUESTION OF DETERMINING THE AL P OF SUCH A TRANSACTION DOES NOT ARISE. IN ANY EVENT, IN THE AB SENCE OF A MACHINERY PROVISION IT WOULD BE HAZARDOUS FOR ANY T PO TO PROCEED TO DETERMINE THE ALP OF SUCH A TRANSACTION SINCE BLT HAS BEEN NEGATIVED BY THIS COURT AS A VALID METHOD OF DETERMINING THE EXISTENCE OF AN INTERNATIONAL TRANS ACTION AND THEREAFTER ITS ALP. 26. HONBLE DELHI HIGH COURT IN CASE OF MARUTI SUZU KI INDIA LTD. VS. CIT (2015) 64 TAXMANN.COM 150 (DELHI) ALSO DECIDED AS TO HOW THE INTERNATIONAL TRANSACTION QUA AMP EXPENDITURE IS TO BE DETERMINED AND AS TO HOW THE PRICE OF INTERNATIONAL TRANSACTIO N QUA AMP EXPENDITURE IS TO BE DETERMINED BY RETURNING FOLLOW ING FINDINGS :- 68. THE ABOVE SUBMISSIONS PROCEED PURELY ON SURMIS ES AND CONJECTURES AND IF ACCEPTED AS SUCH WILL LEAD TO SE NDING THE TAX AUTHORITIES THEMSELVES ON A WILD-GOOSE CHASE OF WHAT CAN AT BEST BE DESCRIBED AS A 'MIRAGE'. FIRST OF ALL, T HERE HAS TO BE A CLEAR STATUTORY MANDATE FOR SUCH AN EXERCISE. THE COURT IS UNABLE TO FIND ONE. TO THE QUESTION WHETHER THERE I S ANY 'MACHINERY' PROVISION FOR DETERMINING THE EXISTENCE OF AN INTERNATIONAL TRANSACTION INVOLVING AMP EXPENSES, M R. SRIVASTAVA ONLY REFERRED TO SECTION 92F (II) WHICH DEFINES ALP TO MEAN A PRICE 'WHICH IS APPLIED OR PROPOSED TO BE APPLIED IN A TRANSACTION BETWEEN PERSONS OTHER THAN AES IN UNC ONTROLLED CONDITIONS'. SINCE THE REFERENCE IS TO PRICE AND TO UNCONTROLLED CONDITIONS IT IMPLICITLY BRINGS INTO PLAY THE BLT. IN OTHER WORDS, IT EMPHASISES THAT WHERE THE PRICE IS SOMETHING OTHER THAN WHAT WOULD BE PAID OR CHARGED BY ONE ENTITY FROM ANOTHER IN 231 19 ITA NO.5528/DEL./2012 UNCONTROLLED SITUATIONS THEN THAT WOULD BE THE ALP. THE COURT DOES NOT SEE THIS AS A MACHINERY PROVISION PARTICUL ARLY IN LIGHT OF THE FACT THAT THE BLT HAS BEEN EXPRESSLY NEGATIV E BY THE COURT IN SONY ERICSSON. THEREFORE, THE EXISTENCE OF AN INTERNATIONAL TRANSACTION WILL HAVE TO BE ESTABLISH ED DE HORS THE BLT. .. 70. WHAT IS CLEAR IS THAT IT IS THE 'PRICE' OF AN I NTERNATIONAL TRANSACTION WHICH IS REQUIRED TO BE ADJUSTED. THE V ERY EXISTENCE OF AN INTERNATIONAL TRANSACTION CANNOT BE PRESUMED BY ASSIGNING SOME PRICE TO IT AND THEN DEDUCING THA T SINCE IT IS NOT AN ALP, AN 'ADJUSTMENT' HAS TO BE MADE. THE BUR DEN IS ON THE REVENUE TO FIRST SHOW THE EXISTENCE OF AN INTER NATIONAL 11 ITA NO. 2060/DEL./2015 TRANSACTION. NEXT, TO ASCERTAIN THE DISCLOSED 'PRIC E' OF SUCH TRANSACTION AND THEREAFTER ASK WHETHER IT IS AN ALP . IF THE ANSWER TO THAT IS IN THE NEGATIVE THE TP ADJUSTMENT SHOULD FOLLOW. THE OBJECTIVE OF CHAPTER X IS TO MAKE ADJUS TMENTS TO THE PRICE OF AN INTERNATIONAL TRANSACTION WHICH THE AES INVOLVED MAY SEEK TO SHIFT FROM ONE JURISDICTION TO ANOTHER. AN 'ASSUMED' PRICE CANNOT FORM THE REASON FOR MAKING A N ALP ADJUSTMENT. . 74. THE PROBLEM WITH THE REVENUE'S APPROACH IS THAT IT WANTS EVERY INSTANCE OF AN AMP SPEND BY AN INDIAN ENTITY WHICH HAPPENS TO USE THE BRAND OF A FOREIGN AE TO BE PRES UMED TO INVOLVE AN INTERNATIONAL TRANSACTION. AND THIS, NOTWITHSTANDING THAT THIS IS NOT ONE OF THE DEEMED INTERNATIONAL TRANSACTIONS LISTED UNDER THE EXPLANA TION TO SECTION 92BOF THE ACT. THE PROBLEM DOES NOT STOP HE RE. EVEN IF A TRANSACTION INVOLVING AN AMP SPEND FOR A FOREIGN AE IS ABLE TO BE LOCATED IN SOME AGREEMENT, WRITTEN (FOR E.G., THE SAMPLE AGREEMENTS PRODUCED BEFORE THE COURT BY THE REVENUE )OR OTHERWISE, HOW SHOULD A TPO PROCEED TO BENCHMARK TH E PORTION OF SUCH AMP SPEND THAT THE INDIAN ENTITY SH OULD BE COMPENSATED FOR? 27. IN CASE OF HONDA SIEL POWER PRODUCTS LTD. VS. D CIT (2015) 64 TAXMANN.COM 328 (DELHI), HONBLE DELHI HIGH COURT H ELD THAT:- 25. IF THE BLT IS KEPT ASIDE AS A VALID MEANS OF D ETERMINING THE EXISTENCE OF AN INTERNATIONAL TRANSACTION CONCE RNING AMP EXPENSES, THE REVENUE WOULD HAVE TO MAKE OUT ITS CA SE ON THE BASIS OF THE OTHER TANGIBLE MATERIAL WHICH MIGHT SH OW THE EXISTENCE OF ANY ARRANGEMENT OR 'UNDERSTANDING' O R ANY CONDUCT OF EITHER PARTY TO SHOW THAT THEY WERE ACT ING IN CONCERT AS FAR AS THE ASSESSEE HAVING TO PROMOTE T HE BRAND OF THE FOREIGN AE IS CONCERNED. 28. IN CASE OF LE PASSAGE TO INDIA TOUR & TRAVELS ( P.) LTD. (2017) 391 ITR 207 (DELHI), HONBLE DELHI HIGH COURT AGAIN HELD 232 20 ITA NO.5528/DEL./2012 THAT ALL TRANSACTIONS REPORTING A MP CANNOT BE TREATED AS INTERNATIONAL TRANSACTION AND THE FACT O F EACH CASE WOULD HAVE TO BE EXAMINED INDEPENDENTLY BY RETURNING FOLL OWING FINDINGS :- 4. THIS COURT IS OF THE VIEW THAT WHILST L.G. ELEC TRONICS INDIA PVT. LTD.(SUPRA) INDICATED THAT AMPS WERE OR DID CO NSTITUTE THE BASIS FOR AN INQUIRY INTO THE INTERNATIONAL TRANSAC TION AND INDICATED A BRIGHT LINE TEST FOR IT, SONY ERICSSO N MOBILE COMMUNICATIONS INDIA PVT. LTD.(SUPRA) OVERRULED THA T DECISION. THIS PER SE DOES NOT MEAN THAT EVERY ENDEAVOUR WILL BE TO CONCLUDE THAT ALL TRANSACTIONS REPORTING AMPS ARE T O BE TREATED 12 ITA NO. 2060/DEL./2015 AS INTERNATIONAL TRANSACTIONS, THE FACTS OF EACH CA SE WOULD HAVE TO BE EXAMINED FOR SOME DELIBERATIONS. WHILST THE TPO AND THE DRP UNDOUBTEDLY HELD THAT THE INTERNATIONAL TRANSACTIONS EXISTED - THAT UNDERSTANDING APPARENTL Y WAS PASSED UPON THE PRE-EXISTING REGIME, PROPOUNDED IN L.G. ELECTRONICS INDIA PVT. LTD.(SUPRA) WITH GREATER CLA RITY ON ACCOUNT OF THIS COURTS DECISION IN SONY ERICSSON M OBILE COMMUNICATIONS INDIA PVT. LTD.(SUPRA). THE I.T.A.T. IN OUR OPINION, SHOULD HAVE FIRST DECIDED WHETHER IN THE CIRCUMSTANCES OF THIS CASE, THE NATURE OF THE AMP R EPORTED, COULD LEAD TO THE CONCLUSION THAT THERE WAS AN INTE RNATIONAL TRANSACTION. WHEN DOING SO, IT SHOULD HAVE REMITTED THE MATTER BACK FOR EXAMINATION TO THE A.O. IN THIS CASE. ACCO RDINGLY, FOLLOWING THE DECISION OF SONY ERICSSON MOBILE COMMUNICATIONS INDIA PVT. LTD.(SUPRA) AND A SUBSEQU ENT DECISION IN DAIKIN AIRCONDITIONING INDIA PVT. LIMIT ED V. ASSISTANT COMMISSIONER OF INCOME TAX IN ITA 269/201 6, DECIDED ON 27.07.2016, THIS COURT HEREBY REMITS THE MATTER FOR A COMPREHENSIVE DECISION BY THE I.T.A.T. IN OTH ER WORDS, THE I.T.A.T. WILL DECIDE WHETHER THE REPORTING OF T HE AMP IN REGARD TO THE OUTBOUND BUSINESS CONSTITUTES AN INTE RNATIONAL TRANSACTION FOR WHICH ALP DETERMINATION WAS NECESSA RY AND IF SO, THE EFFECT THEREOF. THE PARTIES ARE DIRECTED TO APPEAR BEFORE THE I.T.A.T. ON 01.02.2017. THE APPEAL IS PARTLY AL LOWED IN THE ABOVE TERMS. 29. HONBLE DELHI HIGH COURT IN VALVOLINE CUMMINS ( P.) LTD. VS. DCIT (SUPRA) FURTHER DECIDED THE ISSUE IN FAVOUR OF THE TAXPAYER THAT MERELY BECAUSE OF THE FACT THAT AMP EXPENDITURE INC URRED BY THE TAXPAYER WAS IN EXCESS, EXISTENCE OF INTERNATIONAL TRANSACTION 233 21 ITA NO.5528/DEL./2012 CANNOT BE INFERRED. OPERAT IVE PART OF THE FINDINGS IS EXTRACTED AS UNDER :- 15. THE DECISION IN LE PASSAGE TO INDIA TOUR & TRA VELS (P) LTD.(SUPRA) TURNED ON THE FACT THAT THERE WAS NO DE TERMINATION BY THE TPO IN THE FIRST PLACE WHETHER THERE WAS AN INTERNATIONAL TRANSACTION. IN THE PRESENT CASE, HOW EVER, THE TPO DID APPLY HIS MIND TO THE EXISTENCE OF AN INTER NATIONAL TRANSACTION INVOLVING AMP EXPENSE. THE ONLY GROUND ON WHICH THE CONCLUSION WAS REACHED BY THE TPO WAS THAT THE AMP EXPENDITURE INCURRED BY THE ASSESSEE WAS IN EXCESS OF THAT INCURRED BY THE COMPARABLES. HIS CONCLUSION WAS NOT BASED ON ANY OTHER FACTOR. IN OTHER WORDS, IT WAS NOT AS IF THE CONCLUSION ARRIVED BY THE TPO WAS BASED ON TWO OR T HREE GROUNDS, ONE OF WHICH WAS THE BLT. 16. THIS COURT IN SONY ERICSSON INDIA PVT. LTD.(SUP RA) CATEGORICALLY FOUND THAT THE BLT WAS NOT AN APPROPR IATE 13 ITA NO. 2060/DEL./2015 YARDSTICK FOR DETERMINING THE EXISTENCE OF AN INTER NATIONAL TRANSACTION OR FOR THAT MATTER FOR CALCULATING THE ALP OF SUCH TRANSACTION. THE DECISION OF THE FULL BENCH OF THE ITAT IN L.G. ELECTRONICS INDIA PVT. LTD. V. ACIT (2013) 22 ITR ( TRIB.) 1WHICH SOUGHT TO MAKE BLT THE BASIS WAS SET ASIDE BY THIS COURT. 30. IN THE INSTANT CASE, THERE IS NOT AN IOTA OF MA TERIAL ON THE FILE APART FROM RELYING UPON THE FACT THAT BY INCURRING HUGE AMP EXPENSES TO THE TUNE OF 6.93%, TAXPAYER HAS ENHANCE D BRAND VALUE AND CREATED INTANGIBLES IN FAVOUR OF ITS AE, NO COG ENT MATERIAL IS THERE TO TREAT THE INCURRING OF AMP EXPENSES AS INT ERNATIONAL TRANSACTIONS. TPO HAS ALSO NOT RETURNED THE FINDING THAT HOW THE BENEFIT OF AMP EXPENDITURE INCURRED BY THE TAXPAYER HAVE BENEFITED AE, NO CALCULATION HAS COME ON RECORD, SO IN THESE 234 22 ITA NO.5528/DEL./2012 CIRCUMSTANCES WHEN WE DISCARDED T HE BLT THE ENTIRE CASE OF LD. TPO/DRP FELL FLAT. 31. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE AND FO LLOWING THE DECISIONS RENDERED BY HONBLE HIGH COURT DISCUSSED IN THE PRECEDING PARAS, WE ARE OF THE CONSIDERED VIEW THAT FIRSTLY, THERE IS NOT AN IOTA OF MATERIAL WITH LD. TPO TO PROVE THE E XISTENCE OF AN INTERNATIONAL TRANSACTIONS INVOLVING AMP EXPENSES B Y THE TAXPAYER. TPO RATHER PROCEEDED ON THE PREMISE THAT THE AMP EX PENDITURE INCURRED BY THE TAXPAYER WERE FAR EXCESS OF AMP EXP ENSES INCURRED BY THE COMPARABLES. 32. TPO HAS ALSO APPLIED THE BLT WHICH HAS BEEN DIS CARDED BY THE HONBLE HIGH COURT IN A NUMBER OF JUDGMENTS. EVEN O THERWISE, IN THE ABSENCE OF ANY AGREEMENT, ARRANGEMENT OR UNDERSTAND ING BETWEEN THE TAXPAYER AND ITS AE, EXPRESSED OR IMPLIED, THAT AMP SPENT OF THE TAXPAYER WOULD ALSO BE BENEFICIAL TO THE AE OR IT W OULD ENHANCE THE BRAND VALUE OF THE AE IN ANY MANNER, NO INTERNATION AL TRANSACTION CAN BE INFERRED. 33. MOREOVER, ON THE OTHER HAND, THE TAXPAYER HAS C OME UP WITH SPECIFIC PLEADING THAT IT HAS ANALYSED A PRINCIPAL TO PRINCIPAL RELATIONSHIP WITH ITS AE AND AT NO POINT, IT HAS AC TED AS AGENT OF THE AE. IF THIS IS SO, AMP EXPENSES WHICH THE TAXPAYER HAS INCURRED TO BOOST UP ITS SALES CANNOT BE TREATED TO ENHANCE THE BRAND VALUE AND TO CREATE 235 23 ITA NO.5528/DEL./2012 INTANGIBLES IN FAVOUR OF THE AE. ALL THESE FACTS STAND PROVED FROM THE GROWING S ALE PATTERN OF THE TAXPAYER WHICH SHOWS THAT BENEFIT OF AMP ACTIVITIES ACCRUED IN FAVOUR OF THE TAXPAYER. MOREOVER WHEN TPO HAS FAILE D TO PROVE THAT THERE IS AN EXISTENCE OF INTERNATIONAL TRANSACTION BETWEEN TAXPAYER AND AE, THE ADDITION ON ACCOUNT OF AMP EXPENSES CAN NOT BE MADE ON THE BASIS OF THE FACT THAT AMP EXPENSES OF THE T AXPAYER ARE FAR EXCESS THAN THE AMP EXPENSES OF COMPARABLES. 14 ITA NO. 2060/DEL./2015 34. EVEN OTHERWISE, THE MERE USE OF LOGO OF AE IS P ER SE NOT INTERNATIONAL TRANSACTION. CONSEQUENTLY, WE ARE OF THE CONSIDERED VIEW THAT AO/DRP/TPO HAVE ERRED IN MAKING ADDITION OF RS.36,41,27,428/- WHICH IS NOT SUSTAINABLE IN THE E YES OF LAW, HENCE ORDERED TO BE DELETED. HENCE, GROUNDS NO.3 TO 25 ARE DETERMINED IN FAVOUR OF THE TAXPAYER. 7.1 WE ARE OF THE CONSIDERED OPINION THAT ISSUES RAISE D BY THE LEARNED DR HAVE ALREADY BEEN CONSIDERED IN THE DECI SION OF THE HONBLE HIGH COURTS CITED IN THE ORDER OF THE TRIB UNAL (SUPRA). IN VIEW OF THE BINDING PRECEDENT, FOLLOWING THE DECISI ON OF THE TRIBUNAL, WE HEREBY DIRECT TO DELETE ADJUSTMENT MAD E ON ACCOUNT OF AMP TRANSACTIONS. THE CORRESPONDING GROUNDS RAIS ED ARE ACCORDINGLY ALLOWED. 8. ON THE GROUND OF DEPRECIATION ALLOWANCE DISALLOWED ON CAPITAL ASSET TREATED AS A STOCK-IN-TRADE, THE LEAR NED COUNSEL SUBMITTED THAT ISSUE IN DISPUTE IS COVERED IN THE F AVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL FOR ASSESSMEN T YEAR 2007- 08. THE LEARNED DR, HOWEVER, RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 8.1 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE. BEFORE THE ASSESSING OFFICER, THE ASSES SEE SUBMITTED THAT CERTAIN ITEMS OF THE TRADABLE INVENTORY WERE C ONVERTED TO CAPITAL GOODS FOR SELF USE AND DEPRECIATION WAS CLA IMED ON THE SAME. THIS CONVERSION OF THE INVENTORY TO FIXED ASS ET WAS REFERRED AS CAPITALIZATION. AFTER HAVING CAPITALIZED INVENTO RY AS CAPITAL GOODS/FIXED ASSETS, SOMETIMES THE ASSESSEE TRANSFER RED THESE ASSETS BACK TO INVENTORY, WHICH WAS TERMED AS DE-CA PITALIZATION. THE MAIN REASON FOR SUCH CONVERSION INCLUDE ASSETS GONE OUT OF ORDER OR DAMAGED, ASSERTS NO LONGER REQUIRED. THE F INDING OF THE 15 ITA NO. 2060/DEL./2015 ASSESSING OFFICER ON DEALING OF RECAPITALIZED ASSET BY THE ASSESSEE IS REPRODUCED AS UNDER: AFTER DE-CAPITALIZATION, ASSETS WHICH ARE CONVERTE D IN INVENTORY ARE DEALT WITH AS UNDER:- (I) WHERE THE ASSET IS IN WORKING CONDITION:- SOLD WITH OR WITHOUT CARRYING OUR SERFICE( OR SM ALL REPAIR WORK) OF THE ASSET SO AS TO MAKE IT FIT FOR SELLING ; RE-CONVERTED IN CAPITAL GOODS( I.E.CAPITALISED) FOR (A) SELF USE IN SAME OR DIFFERENT LOCATION; (B) ANY OTHER REVENUE GENERATING PRINITING CONTRAC T; SUCH SELLING OR RE-CONVERSION OF THE ASSET CAN TAKE PLACE IN THE SAME OR IN THE SUBSEQUENT FINANCIAL YEARS. (II) WHERE ASSET IS NOT IN WORKING CONDITION AND SA ME IS REPARABLE, IT IS REPAIRED AND THEREAFTER IT CAN BE (A) SOLD OR (B) USED FOR SELF USE OR FOR REVENUE GENERATING CONTRACTS; (III) WHERE IT IS NOT IN WORKING CONDITION AND SAME IS IRREPARABLE; SUCH ASSETS ARE CANNIBALISED (I.E.DISM ANTLED). AFTER CANNIBALISATION WORKING PARTS ARE TAKEN OUT FOR SEL LING OR FOR CARRYING OUT REPAIR WORK. NON-WORKING OR DAMAGED PA RTS ARE WRITTEN OFF AND THEREAFTER SCARAPPED AND SOLD TO SCRAP DEAL ERS.' 8.2 THE ASSESSING OFFICER HELD THAT THE DEPRECIATION C ANNOT BE ALLOWED TO THE ASSESSEE EVEN AFTER SALE OF THE GOOD S. THE LEARNED DRP DISTINGUISHED THE DECISION OF THE TRIBUNAL (FOR AY 2002-03) RELIED UPON BY THE ASSESSEE OBSERVING AS UNDER: 14.3. IT IS OBSERVED THAT THERE IS A DECISION OF H ON'BLE HIGH COURT OF DELHI IN THE CASE OF ASSESSEE FOR AY 2002-03 WHEREI N THE APPEAL OF THE REVENUE AGAINST THE DECISION OF THE ITAT IN THE ASSESSEE'S OWN CASE WAS DISMISSED HOLDING THAT NO SUBSTANTIAL QUES TION OF LAW ARISES. HOWEVER THE ISSUE BEFORE THE ITAT WAS FACTU ALLY DIFFERENT. THE ISSUE BEFORE THE HON'BLE ITAT WAS 'THAT ON THE FACT AND CIRCUMSTANCE OF THE CASE LD CIT APPEAL HAS ERRED CO NFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS.9252253 ON FIXED ASSETS 'WRITTEN OFF BY THE APPELLANT COMPANY DURING THE YEAR.' (EMP HASISSUPPLIED). HOWEVER, THE FACTS IN THE PRESENT CASE ARE NOT SIMI LAR TO THE FACTS MENTIONED IN THE ITAT DECISION REFERRED TO BY THE A SSESSEE. IN THAT CASE THE ISSUE WAS DISALLOWANCE OF DEPRECIATION ON FIXED ASSETS WRITTEN OFF ON ACCOUNT OF THEIR VANISHING ON PHYSIC AL VERIFICATION. WHERE AS IN THE INSTANT CASE THE ISSUE IS OF DEPREC IATION ON DECAPITALIZED ASSETS I.E., THOSE ASSETS THAT ARE CO NVERTED FROM CAPITAL GOODS TO STOCK IN TRADE. THEREFORE THE CASE LAW CITED BY THE ASSESSEE IS DISTINGUISHABLE ON FACTS. MOREOVER IN T HAT CASE, THE 16 ITA NO. 2060/DEL./2015 ISSUE HAS BEEN SET ASIDE WITH DIRECTIONS TO A.O AND NOT DELETED OUTRIGHTLY AS CLAIMED BY THE ASSESSEE. IN VIEW OF THE ABOVE FACTUAL POSITION THE PANEL IS NOT INCLINED TO ACCEPT THE CASE OF THE ASSESSEE FOR ISSUING ANY DIR ECTION. THE PROPOSED DISALLOWANCE IS THEREFORE MAINTAINED. 8.3 THE TRIBUNAL IN THE ASSESSMENT YEAR 2007-08 HAS CONSIDERED OBJECTION OF THE REVENUE IN DETAILS AND DECIDED THE ISSUE AS UNDER: 5. IN THE GROUND NO.2, THE ISSUE INVOLVED IS CONFI RMING THE DISALLOWANCE BY DRP OF DEPRECIATION OF RS.28,21,208 /- ON DE- CAPITALISED ASSETS. 6. WHILE PLEADING ON BEHALF OF THE ASSESSEE, LD. AR SUBMITTED THAT CERTAIN FIXED ASSETS WERE NOT CAPABLE OF USE FOR CA PTIVE CONSUMPTION AND WERE DISCARDED FROM BLOCK OF ASSETS AND CONVERT ED INTO STOCK- IN-TRADE. THIS CONVERSION WAS DONE AT A NOMINAL VAL UE WHICH WAS DEDUCTED FROM THE OPENING WDV FROM THE BLOCK ON WHI CH THE DEPRECIATION WAS CLAIMED. HE FURTHER SUBMITTED THAT THE ASSETS CONVERTED INTO STOCK-IN-TRADE ARE GENERALLY USED AS SETS AND INCAPABLE OF ANY FURTHER USE, THEREFORE, THE SALEAB LE OR MARKET VALUE OF THESE IS NEGLIGIBLE. SINCE THESE ASSETS ARE BEIN G TECHNOLOGY PRODUCTS. THEREFORE, THESE ASSETS TEND TO BECOME OB SOLETE IN A VERY SHORT SPAN OF PERIOD AS NEW AND MORE ADVANCED TECHN OLOGY COMES INTO OPERATION. HE FURTHER SUBMITTED THAT MOST OF T HE ASSETS WHICH ARE CONVERTED INTO STOCK-IN-TRADE HAD EITHER BEEN O UTLIVED THEIR USEFUL FUNCTIONAL LIFE OR WERE NOT COST EFFECTIVE. FURTHER, CERTAIN ASSETS BECAME DEFECTIVE DUE TO WHICH THEY HAD TO BE DE-CAPITALISED. IN THESE CIRCUMSTANCES, THE ASSESSEE WAS JUSTIFIED IN REDUCING THE NOMINAL VALUE FROM RUNNING WDV OF THE BLOCK OF THE ASSETS UNDER WHICH SUCH ASSETS FELL. HE FURTHER SUBMITTED THAT F OR THE TAX TREATMENT, THE DEPRECIATION UNDER THE AMENDED PROVI SIONS OF SECTION 32 OF THE ACT IS CALCULATED BY APPLYING THE SPECIFI ED RATE TO THE WDV OF BLOCK OF ASSETS. HE FURTHER SUBMITTED THAT AFTER INTRODUCTION OF DEPRECIATION ON BLOCK OF ASSETS CONCEPT W.E.F. 01.0 4.1988, DEPRECIATION IS AVAILABLE ON THE RELEVANT BLOCK OF ASSETS AND NOT ON INDIVIDUAL ASSETS AS THE INDIVIDUAL ITEM OR ASSET L OSES ITS IDENTITY WHEN IT IS MIXED WITH THE BLOCK OF ASSETS. THE DEPR ECIATION IS ALLOWABLE ON THE WDV AT THE END OF THE RELEVANT PRE VIOUS YEAR FOR A BLOCK OF ASSETS WHICH WAS COMPUTED BY ADDING TO THE OPENING WDV OF THE SAID BLOCK OF ASSETS, ACTUAL COST OF THE ASS ETS ACQUIRED DURING THE YEAR AND DEDUCTING THEREFROM MONEYS PAYABLE INC LUDING SCRAP VALUE, IF ANY, IN RESPECT OF ASSETS SOLD OR DISCARD ED DURING THE YEAR. IT IS SUBMITTED THAT THE PHRASE MONEYS PAYABLE RE FERS TO THE CASH 17 ITA NO. 2060/DEL./2015 RECEIVED ON ACCOUNT OF SALE OR SCRAPPING OF THE ASS ET. LD. AR DRAW OUR ATTENTION TO THE PROVISIONS OF SECTION 43(6)(C) OF THE ACT WHERE THE WDV HAS BEEN DEFINED. HE FURTHER SUBMITTED THAT THE PROVISIONS OF LAW CLEARLY SUGGESTS THAT WHERE THE ASSET WHOSE WDV IS RS.100/- IS DE-CAPITALISED AND VALUED AT RS.1/-, DEPRECIATION O N THE REMAINING RS.99/- SHALL BE CONTINUED TO BE ALLOWED EVEN THOUG H THE ASSET DOES NOT PHYSICALLY EXIST IN THE BLOCK OF ASSETS. THIS C ONCEPT OF DEPRECIATION OF BLOCK OF ASSETS WAS INTRODUCED AND THE ASSETS FORMING PART OF THE BLOCK OF ASSETS NEED NOT BE IDE NTIFIABLE, HOWEVER, IT WILL CONTINUE TO FORM A PART OF THE ASSETS. IF A NY ASSET IS SOLD THEN THE BLOCK OF ASSETS REDUCED BY THE SELLING PRICE OF THE ASSET AND DEPRECIATION SHALL BE ALLOWABLE ON THE REMAINING WD V OF BLOCK OF ASSETS. THUS, HE PLEADED THAT IT IS CLEAR FROM THE PROVISIONS OF LAW THAT IT IS NOT NECESSARY TO CONTINUE TO EXIST OR SH OULD CONTINUE TO BE USED FOR THE BUSINESS PURPOSES FOR THE CLAIM OF THE DEPRECIATION. ONCE THE ASSET IS A PART OF BLOCK OF ASSETS, THE DE PRECIATION CAN BE CONTINUED TO BE ALLOWED EVEN IF THE SAME IS SOLD OR DE-CAPITALISED OR DEMOLISHED OR DESTROYED. HE FURTHER SUBMITTED THAT WHERE THE ASSETS HAVE BEEN TRANSFERRED TO INVENTORY AND DULY ACCOUNTED FOR AND WHENEVER THEY ARE SOLD, THE PROFIT ON THEIR SAL E SHALL BE ACCOUNTED FOR IN THE PROFIT AND LOSS ACCOUNT. THERE FORE, THERE SHALL BE NO LOSS TO THE REVENUE BY THIS TRANSACTION WHICH IS COMPLETELY ACCORDING TO THE PROVISIONS OF INCOME-TAX ACT, 1961 . HE FURTHER SUBMITTED THAT IN EARLIER PROVISIONS OF THE ACT, TH ERE WAS A CLAUSE FOR TERMINAL DEPRECIATION WHICH WAS ALLOWABLE IN THE YE AR OF SALE OF THE ASSET. UNDER THE CONCEPT OF BLOCK OF ASSETS, THE TE RMINAL DEPRECIATION CONCEPT HAS BEEN DONE AWAY WITH AND NOW THE LOSS ON SALE OF ASSETS IS NOT BOOKED IN THE YEAR IN WHICH ASSET IS SOLD. THE DEPRECIATION ON SUCH ASSETS CONSTITUTED IN THE BLOC K IS CONTINUED TO BE ALLOWED TILL THE BLOCK REMAINS IN THE BOOKS OF A CCOUNT. HE SUBMITTED THAT SUCH PROPOSITION OF LAW HAS BEEN ACC EPTED BY THE ITAT IN THE ASSESSEES OWN CASE IN ITA NO.680/DEL/2 006 FOR ASSESSMENT YEAR 2002-03. IN THAT YEAR, CERTAIN FIXE D ASSETS COULD NOT BE LOCATED ON PHYSICAL VERIFICATION AND ASSESSE E WROTE OFF THE SAME IN THE BOOKS OF ACCOUNT. FINALLY, THE ITAT HEL D THAT EVEN THOUGH THESE FIXED ASSETS WERE WRITTEN OFF, THE DEP RECIATION SHALL BE CONTINUED TO BE ALLOWED ON THE BLOCK OF ASSETS AFTE R DEDUCTING THE SCRAP VALUE OF THESE ASSETS FROM THE BLOCK OF ASSET S, IF ANY. THE ASSESSEES CASE OF DE-CAPITALISATION / DISCARDING O F ASSETS FROM THE BLOCK OF ASSETS IS ALSO COVERED BY THE DECISION OF ITAT IN ASSESSEES OWN CASE, HENCE, DEPRECIATION CANNOT BE DISALLOWED ON THE ASSETS SO DISCARDED DURING THE YEAR UNDER CONSIDERATION. HE F INALLY SUBMITTED THAT THE LEGAL POSITION ON ALLOWABILITY OF DEPRECIA TION ON THE ASSETS FORMING A PART OF THE BLOCK OF ASSETS WHICH HAVE BE EN SOLD OR WRITTEN OFF OR NOT FOUND, DISCARDED OR DESTROYED OR DEMOLIS HED THAT ONCE AN ASSET IS A PART OF THE BLOCK OF ASSETS AND IT IS PU T TO USE, THE DEPRECIATION WILL BE ALLOWED TILL THE BLOCK OF ASSE TS CONTINUED TO EXIST EVEN IF THE RELEVANT ASSETS ARE SOLD, DISCARDED, DE STROYED OR 18 ITA NO. 2060/DEL./2015 DEMOLISHED. SUCH A PROPOSITION HAS BEEN UPHELD BY H ONBLE DELHI HIGH COURT IN ASSESSEES OWN CASE WHERE AN ASSET FO RMING PART OF THE BLOCK OF ASSETS IS NOT FOUND OR IS NOT TRACEABL E OR IS LOST, THEN ALSO DEPRECIATION CONTINUED TO BE ALLOWED ON SUCH A SSETS AS LONG AS THE BLOCK OF ASSETS DO EXIST. IN THIS CASE, THE ASS ESSEE HAS DISCARDED THE ASSETS FROM THE BLOCK OF ASSETS AT A VALUE OF R S.1/- AND HAS TAKEN TO INVENTORY AS STOCK-IN-TRADE AT RS.1/-. THE REFORE, DEPRECIATION WILL CONTINUE TO BE ALLOWED ON THESE A SSETS WHICH HAVE BEEN TAKEN INTO INVENTORY. RELIANCE WAS PLACED ON T HE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF YAHAMA MOTO R INDIA PVT. LTD. REPORTED IN 328 ITR 297 (DEL.). HE FURTHER SUBMITTE D THAT THERE WAS NO LOSS TO THE REVENUE AS THE ASSET TAKEN AT RS.1/- IN THE INVENTORY WHENEVER THESE WERE SOLD, THE ENTIRE DIFFERENCE BET WEEN SALE PRICE AND COST OF RS.1/- SHALL BE OFFERED TO TAX AS INCOM E AND ULTIMATELY, THE REVENUE WILL BE THE NET GAINER. THE ASSESSEE HA S SUBMITTED COMPLETE DETAILS WHICH HAVE BEEN DISCARDED AND TAKE N TO INVENTORY. THE ASSESSEE HAS STRONG INTERNAL CONTROLS TO RECORD ALL THE ENTRIES. HE PLEADED TO DELETE THE ADDITION. 7. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THE ASSETS WER E HAVING MARKETABLE VALUE. IT HAS BEEN CONVERTED TO STOCK-IN -TRADE ON NOMINAL VALUE. THE ACTUAL VALUE OF ASSET HAS TO BE REDUCED FROM THE BLOCK OF ASSETS AS THESE ASSETS WERE TRANSFERRED TO STOCK-IN -TRADE. THESE ASSETS WERE NOT DISCARDED OR DESTROYED. IT WAS ALSO SUBMITTED THAT CERTAIN ASSETS HAVE BEEN LEASED OUT AGAIN AND THESE HAVE BEEN RE- CAPITALISED IN THE BLOCK OF ASSETS AT THE VALUE AT WHICH SUCH ASSETS WERE DE-CAPITALISED. THUS, THE ACTUAL VALUE WAS NOT REFLECTED ON TRANSFER. HE ALSO SUBMITTED THAT DEPRECIATION CANNO T BE ALLOWED ON THE ASSETS WHICH ARE FORMING PART OF THE STOCK-IN-T RADE. HE FINALLY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE A SSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF XEROGRAPHIC E QUIPMENTS, PRINTERS, SCANNERS, FAXES, MULTI FUNCTIONAL DEVICES AND CONSUMABLES PARTS THEREOF. THE ASSESSEE LEASED OUT THE EQUIPMENTS TO THE CUSTOMERS ON AN OPERATING LEASE BASIS AND TH ESE EQUIPMENTS ARE CAPITALIZED AND DEPRECIATION IS CLAIMED FOR TAX PURPOSES IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. THESE OP ERATING LEASED ASSETS WERE RETURNED TO THE ASSESSEE EITHER ON THE TERMINATION OF THE LEASE OR OTHERWISE AFTER A PERIOD OF SIX MONTHS, TH EN THE ASSESSEE IS FOLLOWING A PRACTICE TO CONVERT THESE ASSETS INTO S TOCK-IN-TRADE AT A NOMINAL VALUE OF RS.1/- AS THESE USED ASSETS ARE NO T HAVING ANY READYMADE MARKET FOR FURTHER LEASING. THIS NOMINAL VALUE IS REDUCED FROM THE BLOCK OF ASSETS. IN SOME OF THE CASES, THE SE ASSETS ARE AGAIN LEASED OUT THEN THEY ARE RECAPITALIZED IN THE BLOCK OF ASSETS AT THE NOMINAL VALUE AT WHICH THESE WERE DECAPITALISED . HOWEVER, CERTAIN USED ASSETS REMAINED IN STOCK-IN-TRADE AND WHENEVER THESE 19 ITA NO. 2060/DEL./2015 ARE SOLD, THE PROFIT IS OFFERED FOR TAXATION. THIS METHOD OF ACCOUNTING IS BEING FOLLOWED CONSISTENTLY BY THE ASSESSEE. WHE N THE ASSETS ARE RECAPITALIZED AT THE NOMINAL VALUE AT WHICH IT IS D ECAPITALISED THEN THERE IS NO EFFECT ON THE TAXABILITY OF THE ASSESSE E. SIMILARLY, WHENEVER THESE USED ASSETS ARE CONVERTED INTO STOCK -IN-TRADE AND SOLD SUBSEQUENTLY AND THE SURPLUS ON THE SALE IS OF FERED FOR TAXATION THEN THERE IS NO HARM TO THE REVENUE. CONSIDERING A LL THESE FACTS, WE ALLOW THIS GROUND OF ASSESSEES APPEAL. 9. IN THE GROUND NO.3, THE ISSUE INVOLVED IS DISALL OWANCE OF DEPRECIATION OF RS.6,03,122/- ON THE FIXED ASSETS W HICH HAS BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT AND WHERE THE A SSETS CEASED TO EXIST. THE ASSESSING OFFICER MADE AN ADDITION OF RS .20,99,837/- IN RESPECT OF FIXED ASSETS WRITTEN OFF DURING THE YEAR . THE DRP IN ITS DIRECTION DATED 24.08.2011 HAS REDUCED THE AMOUNT T O RS.6,03,122/-. THE DRP SUSTAINED THIS AMOUNT ON THE BASIS THAT THIS DISALLOWANCE HAS PAST HISTORY AND THE MATTER HAS TR AVELLED UP TO HIGH COURT AND THE DEPARTMENTS APPEAL HAS BEEN DIS POSED OFF AND THE HIGH COURT ORDER IS AWAITED. 10. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. AT T HE OUTSET, LD. AR SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION OF HONBLE DELHI HIGH COURT IN ASSESSEES OWN CASE. IN THE SUBSEQUENT YEAR, I.E. ASSESSMENT YEAR 2008-09, THE DRP ITSELF HAS GIVEN THE RELIEF TO THE ASSESSEE WHICH IS EVIDENT F ROM ITS ORDER DATED 30.08.2012. THE RELEVANT PARA IS 3 TO 3.2 OF THE OR DER. THE ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY T HE HONBLE JURISDICTIONAL HIGH COURT. THE DRP, IN THE ASSESSME NT YEAR 2008-09, WHILE DISPOSING OFF THE OBJECTIONS OF THE ASSESSEE ON THE SAME ISSUE, HAS HELD AS UNDER :- 3. THE AO HAS PROPOSED TO DISALLOW AN AMOUNT OF RS.8,89,960/- ON ACCOUNT OF DEPRECIATION CLAIM IN R ESPECT OF FIXED ASSETS WRITTEN-OFF DURING THE YEAR. 3.1 IT WAS SUBMITTED THAT THE ASSESSEE COULD NOT LO CATE CERTAIN FIXED ASSETS HAVING BOOK VALUE OF RS.22,24,899/- ON CONDUCTING PHYSICAL VERIFICATION. THEREFORE, THE AS SESSEE DECIDED TO WRITE OFF THE BOOK VALUE OF THE FIXED AS SETS IN ITS PROFIT AND LOSS ACCOUNT SINCE THERE WAS NO SCRAP VA LUE FOR SUCH ASSETS NO ADJUSTMENT WAS MADE TO THE WRITTEN D OWN VALUE OF THE RESPECTIVE BLOCK OF ASSETS FOR COMPUTI NG DEPREDATION UNDER THE PROVISIONS OF THE ACT THE ASS ESSEE FURTHER SUBMITTED THAT OUT OF THESE ASSETS AROUND 9 2% (IN TERMS OF COST) WERE PURCHASED PRIOR TO YEAR 2000 AN D ANOTHER 7% WERE PURCHASED BEFORE 2005 BUT AFTER 2000. THESE ASSETS WHICH WERE WRITTEN OFF WERE TANGIBLE MOVABLE ASSETS WHICH OVER A PERIOD OF TIME WOULD HAVE BROKEN OR LOST. TH E ASSESSEE 20 ITA NO. 2060/DEL./2015 ALSO CLARIFIED THAT SAME ISSUE HAS ALREADY BEEN: DE CIDED IN FAVOUR OF THE ASSESSEE IN THE ASSTT. YEAR 2002-03 B Y HON'BLE ITAT (DELHI BENCH). IT WAS ALSO MADE CLEAR THAT THE APPEAL OF THE REVENUE BEFORE JURISDICTIONAL DELHI HIGH COURT AGAINST STANDS DECIDED IN FAVOUR OF THE ASSESSEE. IT WAS FU RTHER SUBMITTED THAT IN THE ASSTT. YEAR 2004-05 IDENTICAL DISALLOWANCE HAS BEEN DELETED BY THE COMMISSIONER O F INCOME TAX (APPEALS). 3.2 WE HAVE CONSIDERED THE MATERIAL ON RECORD. THE HON'BLE DELHI HIGH COURT VIDE ITS ORDER DATED 27.07.2011 HA S HELD THAT TAX AUTHORITIES WERE NOT JUSTIFIED IN WORKING OUT THE DEPRECIATION ON BLOCK OF ASSETS BY REDUCING THE VAL UE OF ASSETS WHICH HAVE EITHER TO BE DISCARDED OR DESTROYED OR S OLD OR WRITTEN OFF. THE ITAT'S DECISION TO REMIT THE MATTE R BACK TO THE A.O. TO RECOMPUTE THE DEPRECIATION ONLY AFTER ASCER TAINING THE SCRAP VALUE OF ASSETS WHICH HAVE BEEN DISCARDED OR WRITTEN OFF IN THE BOOKS DURING THE YEAR UNDER CONSIDERATIO N WAS ENDORSED BY DELHI HIGH COURT ASSESSEE SUBMITTED THA T THE ASSETS WRITTEN OFF DO NOT HAVE AN SCRAP VALUE AND S ECTION 43(6)(C) WHICH DEFINES WDV OF A BLOCK ASSETS STATES THAT THE WDV OF THE ASSETS HAS TO BE REDUCED BY THE MONEY PA YABLE IN RESPECT OF ANY ASSET FALLING WITHIN THAT BLOCK WHIC H IS SOLD OR DISCARDED OR DEMOLISHED OR DESTROYED DURING THE PRE VIOUS YEAR TOGETHER WITH THE AMOUNT OF SCRAP VALUE, IF AN Y. THE ASSESSEE SUBMITTED THAT THERE IS NO VALUE OF THESE ASSETS AND HENCE NO REDUCTION NEEDS TO BE MADE. SIMILAR ISSUE HAD COME UP IN THE ASSTT. YEAR 2007-08 AND DRP-II VIDE ITS D IRECTION DATED 24.08.2011 DECIDED NOT TO INTERFERE WITH THE DRAFT ASSTT. ORDER AS THE ORDER OF THE HIGH COURT WAS AWAITED. B UT NOW THE ORDER OF DELHI HIGH COURT HAS BEEN RECEIVED AND THE ASSESSING OFFICER VIDE HER LETTER DATED 06.08.2012 HAS SUBMITTED THAT PROPOSAL FOR FILING SLP AGAINST THE ORDER DATED 27.07.2011 OF DELHI HIGH COURT WAS SENT TO THE DIRE CTORATE OF LEGAL & RESEARCH, NEW DELHI BUT THE SAME WAS NOT AP PROVED FOR FILING SLP. THUS THE ISSUE HAS ATTAINED FINALIT Y IN FAVOUR OF THE ASSESSEE. THEREFORE, THE PROPOSED ADDITION OF RS.8,89,960/- ON THIS ISSUE IS DIRECTED TO BE DELETED. SINCE THE FACTS OF THE CASE ARE SAME AND THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE J URISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE, THEREFORE, WE ALLOW T HIS GROUND OF ASSESSEES APPEAL AND DIRECT TO RE-COMPUTE THE DEPR ECIATION AND ALLOW THE NECESSARY RELIEF TO THE ASSESSEE. 21 ITA NO. 2060/DEL./2015 8.4 AS THE ISSUE IN DISPUTE IS SQUARELY COVERED IN THE FAVOUR OF THE ASSESSEE BY THE ABOVE DECISION OF THE TRIBUNAL (SUPRA), WE ACCORDINGLY ALLOW THE GROUND OF THE APPEAL AND DIRE CT THE AO TO RECOMPUTE THE DEPRECIATION AND ALLOW THE NECESSARY RELIEF TO THE ASSESSEE. THE GROUND NO.6 OF THE APPEAL IS ACCORDIN GLY ALLOWED FOR STATISTICAL PURPOSES. 9. THE GROUND NO. 7 OF THE APPEAL IS CONSEQUENTIAL IN NATURE AND THEREFORE, WE ARE NOT REQUIRED TO ADJUDICATE UP ON. 10. IN GROUND NO. 8 THE ASSESSEE HAS SOUGHT FOR ALLOWI NG THE CREDIT OF THE ADVANCE FRINGE BENEFIT TAX AND TDS. A LLOWING OF THE CREDIT OF THE TAXES PAID BY THE ASSESSEE IS MATTER OF THE VERIFICATION BY THE ASSESSING OFFICER AND THEREFORE , ACCORDINGLY WE DIRECT THE LEARNED AO FOR VERIFICATION OF THE TAXES PAID AND ALLOW THE CREDIT IN ACCORDANCE WITH THE LAW. THIS GROUND OF THE APPEAL IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH AUGUST, 2020. SD/- SD/- (AMIT SHUKLA) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 5 TH AUGUST, 2020. RK/- (D.T.D.S.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI