The ITO, Ward-1(1)(3), Ahmedabad V. M/s. Bosch Rexroth (India) Ltd., Ahmedabad

ITA 850/AHD/2015

AI Insights

The case involves cross appeals by the assessee, M/s. Bosch Rexroth (India) Ltd., and the Department of Income Tax against the orders passed by the Assessing Officer under section 143(3) read with section 144C(5) of the Income Tax Act, 1961. The appeals pertain to the assessment year 2010-11 and involve issues related to transfer pricing adjustments made to international transactions of payment for information technology consultancy charges and guarantee fees to associated enterprises (AEs), as well as the classification of office equipment for depreciation purposes. The Tribunal examined the nature of the services provided by the AEs and the corresponding payments made by the assessee, ultimately deciding in favor of the assessee on most counts.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133628 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2023
• Appeal Filed By: Department
• Order Result: DismissedDismissed
• Bench Allotted: D
• Next Hearing Date: 16-05-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 09-04-2015
• Other Referred Cases: Rotork Controls India P. Ltd. Vs. CIT, CIT Vs. Subrata Dutta Choudhary
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Transfer pricing; International transaction; Proportionate interest; Additional evidence; Capital expenditure; TDS
• Section: 92C; 143(3); 40(a)(ia); 37(1); 144C; 73

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘D’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD ] BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER IT(TP)A No.850/Ahd/2015 WITH Cross Objection NO.84/Ahd/2015 Assessment Year : 2010-11 ITO, Ward-1(1)(3) Ahmedabad. M/s.Bosch Rexroth (India) Ltd. Sanand Viragam Highway Mouje Lyava Tal: Sanand Dist. Ahmedabad 382 170 IT(TP)A No.930/Ahd/2015 Assessment Year :2010-11 M/s.Bosch Rexroth (India) Ltd. Sanand Viragam Highway Mouje Lyava, Tal: Sanand Dist. Ahmedabad 382 170. ITO, Ward-1(1)(3) Ahmedabad. (Applicant) (Responent) Assessee by : Shri S.N. Soparkar, Sr.Advocate with Shri Parin Shah, ARs. Revenue by : Shri Alok Kumar, CIT-DR स ु नवाई क तार ख/D a t e o f H e a r i n g : 17/05/2023 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t : 3 1 / 0 5 / 2 0 2 3 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER These are cross appeals by the assessee and the Department, and cross-objection filed by the assessee; all against orders passed IT(TP)A No.850 & 930/Ahd/2015 with CO 2 by the Assessing Officer under section 143(3) read with section 144C(5) of the Act,in compliance of the directions of the Dispute Resolution Panel (“DRP” for short) under section 144C of the Income Tax Act, 1961 [hereinafter referred to as "the Act" for short]pertaining to the Asst.Year 2010-11. 2. We shall first take up the assessee’s appeal in ITA No.930/Ahd/2015. IT(TP)No.930/Ahd/2015 3. Ground No.1, 2 & 3 raisedby the assessee, it was pointed out, related to the issue of adjustment made to the international transaction of payment for information technology consultancy charges to the AE of the assessee amounting to Rs.4,84,28,143/-, the ALP of which was determined by the TPO at NIL, holding, it was only in the nature of stewardship and supervisory services. All these grounds are being dealt with by us together.The said grounds read as under: 1. On the facts and in the circumstances of the case and in law, the Learned Income-tax Officer, Ward-1 (1)(3), Ahmedabad ('Ld. AO') and the Learned Deputy Commissioner of Income-tax, Transfer Pricing Officer- II ('Ld. TPO') under the directions of Honourable Dispute Resolution Panel ('Hon'ble DRP'), erred in making an upward adjustment of Rs. 1,47,36,729/- in relation to the international transaction of payment of Information Technology Consulting Charges to Associated Enterprise ('AE'). The Appellant prays that the additions made by the Ld. AO / TPO in relation to the international transactions of payment of intra-group services to AE be deleted. 2. On the facts and in the circumstances of the case and in law, the Ld. AO / TPO under the directions of Hon'ble DRP erred in making the adjustment on account of Information Technology Consulting Charges ignoring that: IT(TP)A No.850 & 930/Ahd/2015 with CO 3 i. the Appellant had supported the claims for need and rendition of the services with appropriate evidences while demonstrating the benefits received therefrom; ii. there was commercial rationale and expediency in availing the services from the AEs; and iii. the Appellant is not required to establish the benefit arising out of the said services. The Appellant therefore prays that the above adjustment be deleted. 3. Without prejudice to the above, on the facts and in the circumstances of the case and in law, the Ld. AO / TPO under the directions of Hon'ble DRP erred in determining the arm's length price of the Information Technology Consulting Charges at NIL. 4. On the facts and in the circumstances of the case and in law, the Ld. AO / TPO under the directions of Hon'ble DRP, erred in making adjustment of Rs. 52,91,667/- in relation to the international transaction of payment of guarantee fees to AE. The Appellant prays that the additions made by the Ld. AO / TPO in relation to the international transactions of payment guarantee fees to AE be deleted. 5. On the facts and in the circumstances of the case and in law, the Ld. AO under the directions of Hon'ble DRP erred in classifying office equipment under the head "furniture and fittings" instead of "plant and machinery" and thereby disallowing differential depreciation of Rs.11,71,648 by restricting the claim of depreciation on office equipment to ten percent. Appellant prays that the aforesaid addition be deleted. On the facts and in the circumstances of the case and in law, the Ld. AO erred in disallowing seminar expenses, exhibition expenses and advertisement expenses amounting to, Rs.32,82,122 under section 40(a)(ia) of the Act without appreciating the fact that the payments were not subject to IDS. The Appellant prays that the aforesaid addition be deleted. 7. On the facts and in the circumstances of the case and in law, the Ld. AO under the directions of Hon'ble DRP erred in disallowing provision for advertisement expenses amounting to Rs. 85,500 by considering it as an ad hoc provision without appreciating the break-up of the' said expense and the fact that taxes had been withheld and deposited to the credit of government on the said provision amount. The Appellant prays that the aforesaid addition be deleted. 8. On the facts and in the circumstances of the case and in law, the Ld. AO under the directions of Hon'ble DRP erred in disallowing devaluation of IT(TP)A No.850 & 930/Ahd/2015 with CO 4 inventory amounting to Rs. 1,79,46,564. While making the addition, the Ld. AO erred in law and on facts on the following: i. in disregarding the stock valuation made by the Appellant as per AS 2 and section 145A of the Act; ii. in not appreciating the fact that no adverse remark is made by the Auditors in the audit report; iii. in disregarding the contention of the Appellant that the current method of valuation of inventory has been followed consistently over the past years; The Appellant prays that the aforesaid addition be deleted. 9. On the facts and in the circumstances of the case and in law, the Ld. AO under the directions of Hon'ble DRP erred in capitalising interest expense amounting to Rs.59,12,913 to the capital work-in-progress ('CWIP') without any basis. It is prayed that the interest be allowed u/s 36(1)(iii) of the Act since it is for the purpose of business.” 4. The ld.counsel for the assessee before us contended that IT consultancy expenses to the tune of Rs.4,84,28,143/- were incurred by the assessee on account of support received from its AE for implementation and trouble-shooting of SAP software, RAINBOW, acquired by it . It was pointed out that this SAP software was customized for the requirement of the Bosch group. For the roll out of this software to the assessee, the regional team of consultants from US,Europe, AsiaPacific, worked on site as well as provided support from legacy system. It was pointed out that during the implementation process various meetings were held to discuss various transactions and concept for functionality of the same in SAP. As evidence, it was pointed out, the list of employees of AE working on SAP implementation was filed; copy of schedule reflecting time and agenda of various sessions conducted during the implementation of SAP for various modules; minutes of meeting reflecting trouble shoot/guidance for different types of transactions, management of various databases and procedures in day-to-day business operations, viz. outgoing payments, guarantees given, customer master, invoice processing, salary interference, vendor IT(TP)A No.850 & 930/Ahd/2015 with CO 5 master were submitted. Our attention was invited to description of IT technology services submitted to the TPO vide letter dated 26.6.2013 placed before us a PB page no.119 as under: “1. Bosch Group entities are provided Information Technology solutions and support sendees so as to have economical and reliable solutions of high quality for the benefit of Bosch Group on a global basis. BRIL is also provided such support so that its activities are aligned with the Bosch Group strategy at a global level. 2. BRIL achieves cost advantage by global contracts and gets advantage of new technology. Such services are provided to BRIL and the costs of these services are allocated by the AE incurring the expense. 3. For drives and control business, this customized SAP is called Rexroth Application Integration for Business Optimisation Worldwide ('RAINBOW'). 4. During the year under consideration, BRIL was allocated charges for SAP consulting. For roll out of any SAP software, the regional team (US, Europe, Asia Pacific) of consultants work on site as well as provide the support for roll out from legacy system to RAINBOW. They charge for consultancy and travel costs of consultants. 5. It is important to note here that, these services received by BRIL are availed in both the segments i.e. Manufacturing and Trading segments. Hence the value of these international transactions has been allocated between manufacturing and trading activities by using sales value as a basis of allocation. Sales made by the manufacturing division are INR 207.57 crores and trading division is INR 185.89 crores i.e. the allocation ration being 50.89/6 and 49.11% respectively. 6. Sample invoices for the service are enclosed herewith as Annexure — K 1.1 5. Our attention was drawn to various invoices raised on account of the said services by its AE placed at PB Page No.120 to 124 and also agreement for rendering of services of AE, placed before at PB Page No.115 to 117. Our attention was also drawn to the list of employees who worked on the SAP project placed before us at PB page no.522; schedule of sessions conducted during the implementation of SAP at page no.523 to 524; minutes of meeting reflecting trouble shoot/guidance of different modules of SAP at PB page no.525 to 553, and certificate from hotel for stay of personal IT(TP)A No.850 & 930/Ahd/2015 with CO 6 engaged in SAP implementation was also filed and placed before us at PB Page No.554 to 555, which were submitted to the DRP also. 6. The ld.counsel for the assessee contended that the above evidencessufficiently demonstrated that the assessee had actually required such support from its AE and had also received benefit from such services. He thereafter drew our attention to the finding of the DRP dismissing the assessee’s objection at para-5 of his order as under: “5. IT consulting charges_-The payment is claimed to have been made to avail support in relation to the implementation of SAP module in respect of the issues faced in initial implementation. This is in relation to the implementation of RAINBOW. This amount has not been capitalised. 5.1 We find from the details furnished by the assessee that the description of the services rendered under this head is sketchy, the payment has been made to more than one AE. The assessee has not been able to explain as to how the maintenance cost of a software purchased for Rs.2.91 cr can be as high as 1.47 cr in a single year. Further it is seen from the annual accounts of the assessee company that a huge amount of Rs 3.10 cr. has been shown as paid to Robert Bosch Engineering and services Ltd on account of IT support including online support for SAP implementation, as per the details furnished before the AO. Besides the TPO has already allowed the charges paid in the name of I.T. Support charges amounting to Rs 1.46 cr. In such circumstances we agree with the TPO that services under this head were either not delivered at all or were merely in the nature of supervisory guidance to ensure alignment of the systems with the group's integrated system. Therefore we reject the assesee's objections in this regard and confirm the adjustment proposed by the TPO to this extent.” 7. Referring to the above, the ld.counsel for the assessee pointed out that the DRP held that the services were not delivered and in any case were only in the nature of supervisory and support services and accordingly upheld the findings of the TPO determining the ALP of these transactions to be NIL. Ld. Counsel for the assessee argued that in view of all the evidences and explanation filed by the assessee as above the DRP IT(TP)A No.850 & 930/Ahd/2015 with CO 7 was incorrect in holding that no services were rendered to the assessee. He further pointed out that the DRP concurred with the finding of the TPO that no services were rendered on this count or they were merely supervisory services ,on the basis that quantum of charges paid by the assessee for these services was disproportionately higher in relation to the cost of the software for the implementation of which these services were procured by the assessee. He pointed out that the DRP had taken note that while software purchased for Rs.2.91 crores, the maintenance cost claimed by the assessee as IT consultancy charges, was as high as Rs.1.47 crores, and based on this, the DRP held that the assesseeactually hadnot received any benefit on this count. The ld.counsel for the assessee contended that this cannot be the basis for holding that the assessee had not procured any service on account of IT consultancy, more particularly, when all evidences in this regard, as noted above, were filed by the assessee. The ld.DR on the other hand relied on the order of the DRP/TPO. 8. We have heard both the parties; we have also carefully considered submissions made by the assessee to the TPO/DRP .We find merit in the contention of the Ld.Counsel for the assessee that the AO/DRP had erred in determining the ALP of the international Transaction of Information Technology Consulting Charges at NIL as opposed to Rs. 1,47,36,729/- claimed by the assessee. The basis for determining the ALP at Nil by the AO/DRP , being that no services as such were rendered by the AE ,we find is totally contrary to facts and in fact is without considering and addressing the voluminous evidences filed by the assessee IT(TP)A No.850 & 930/Ahd/2015 with CO 8 demonstrating the fact of having received services for implementation of SAP software. All the evidences filed by the assessee in this regard, as noted above by us, are to the effect that there was an agreement entered into by the AE for provision for these services;the evidences demonstrate rendering services, by way of bills raised on the assessee by the AE; the fact of the services rendered are also demonstrated by the minutes of the meeting, and engagement of employees of the AE for the implementation of SAP projects. The assessee has also provided list of employees who had come to render these services. Both the TPO/DRP wefind,have chosen to ignore all these evidences and not even cared to comment on the same either by pointing out any infirmity or otherwise. The DRP has only stated that the description of the services was very sketchy, without pointing out how it arrived at this finding from the evidences filed by the assessee before it. All evidences taken together cannot in our view be said to giving sketchy description of the services rendered by the assessee to the AE. Further, we also agree with the ld.counsel for the assessee that merely because cost paid by the assessee for the implementation of the SAP software was disproportionately high, as compared to the cost of software itself, that alone cannot be basis for arriving at the conclusion that no services were rendered by the AE to the assessee. Such high cost for services rendered for implementing asoftware does raise doubts, but mere suspicion cannot be the basis for holding that no services were rendered by the AR for the said purpose , more particularly when the assessee had filed evidences showing rendering of services. It is for the Department to make further inquiry to find out whether any constructive services as such wasrendered by the AE or not to the assessee. Without pointing out any infirmity in the evidences furnished by the assessee, demonstrating rendering of IT services, IT(TP)A No.850 & 930/Ahd/2015 with CO 9 the Revenue authorities, we hold could not have casually gone on to state that no services were rendered by the AE to the assessee, and that the evidences did not establish nature of services rendered. 9. In view of the same, we do not agree with the AO/DRP that no services were rendered by the AE to the assessee on account of IT consultancy services, and we therefore, direct the deletion of the adjustment made to the same by treating the ALP of the said services at NIL as opposed to Rs.1,47,36,729/- claimed by the assessee. In view of the above, ground nos.1, 2 & 3 raised by the assessee are allowed. 10. Ground No.4 raised by the assessee reads as under: 4. On the facts and in the circumstances of the case and in law, the Ld. AO / TPO under the directions of Hon'ble DRP, erred in making adjustment of Rs. 52,91,667/- in relation to the international transaction of payment of guarantee fees to AE. 11. The issue involved in this ground relates to the TP adjustment made in relation to international transactions of payment of guarantee fees by the assessee to its AE amounting to Rs.52,91,667/- theArms Length Price(ALP) of which was determined at NIL by AO/TPO, objection of the assessee to which, was dismissed by the DRP. 11. The facts relating to the issue are that during the impugned year, the assessee has availed Rs.100 crores borrowing from its group company viz. Bosch Ltd., Bangalore, and interest rate charged thereon was at the rate of 11%. For the said purpose, one of the AEs of the assesseei.e. Robert Bosch Gmbh acted as guarantor and IT(TP)A No.850 & 930/Ahd/2015 with CO 10 charged guarantee fee at the rate of 0.75% per annum to the assessee for the guarantee provided. During the impugned year, the assessee accordingly paid guarantee charges of Rs.52,91,667/-. The TPO found that no services for guarantee had been rendered by the AO; no distinct benefit had accrued to the assessee in form of reduction in the interest rate on account of guarantee and the transaction sought to be propagated by the assessee as comparable adopting CUP method was not comparable. Accordingly, the transaction of the AE giving guarantee on behalf of the assessee- company was benchmarked at NIL, as no service of any value was found rendered and upward adjustment to the extent of Rs.52,91,667/- was proposed to be made by the TPO. The relevant finding of the TPO in this regard at para 6 of his order are as under: IT(TP)A No.850 & 930/Ahd/2015 with CO 11 IT(TP)A No.850 & 930/Ahd/2015 with CO 12 12. The ld.DRP confirmed the finding of the ld.TPO and accordingly rejected the objection filed by the assessee. 13. We have heard both the parties; gone through orders of the AO/TPO/DRP and the submissions made by both the authorities before us. 14. As noted above by us, primary basis for making this upward adjustment on account of guarantee fees paid by the assessee to its AE was the finding of the AO to the effect; (i) no service by way of any guarantee was rendered by the AE to the assessee; (ii) in any case, no benefit had accrued to the assessee on account of guarantee provided by the AE, and (iii) the comparable cited by the assessee for benchmarking the transaction of guarantee using CUP method was not comparable at all. 15. The basis with the TPO for arriving at his finding that no service of guarantee was rendered by the AE to the assessee was that, he noted, the transaction of taking loan by the assessee and providing of guarantee on the said loans to the lenders were all undertaken with AEs of the same group to which the assessee IT(TP)A No.850 & 930/Ahd/2015 with CO 13 belonged. The borrowing, which was guaranteed, was from one of the AEs of the assessee i.e. Bosch Ltd., and the guarantor wasalso anAE belonging to the same group i.e. Robert Bosch GmbH. Besides, he also noted that the assessee was a debt-free entity with sufficient reserves and no lender, in such circumstances, would have asked for any guarantee fee on giving loans to the assessee. The assessee was found to be in a very sound financial position by the TPO. Thirdly, the TPO noted that the loan had been made for acquiring capital assets, and in such a situation he found that, the capital asset itself would have sufficed as collateral securities for the loan, and there was no requirement for any guarantee fee to be given by any party. He also noted that there was neither any insistence by the lender for guarantee, and as per the assessee it appeared to have been given more as a unilateral group policy for imposing guarantee fees on the assessee. His detailed findings in this regard at para 5(a) to 5(e) are as under: IT(TP)A No.850 & 930/Ahd/2015 with CO 14 IT(TP)A No.850 & 930/Ahd/2015 with CO 15 16. His finding to the effect that no benefit accrued to the assessee on account of guarantee is based on the facts noted by him that the loan was advanced to the assessee at PLR and considering that the assessee was in financially sound position, it was normal for banks to advance loan on discount at PLR, and therefore, in the present case no distinct benefit on account of guarantee seemed to be fastened on the assessee-company. His finding on this regard at para 5.2(f) is as under: IT(TP)A No.850 & 930/Ahd/2015 with CO 16 17. The assessee had benchmarked this international transaction by treating the CUP as most appropriate method. The comparable, chosen for the purpose was a short term loan of Rs.10 crores taken by the assessee during the impugned year from Deutsche Bank bearing interest at the rate 16% per annum. Thus, the assessee had tried to demonstrate that on account of guarantee provided to it, the assessee had been able to procure loan from its sister concerns at a much lesser rate of interest at 11.75% including 0.75 guarantee fees thereon. The TPO has found the comparable selected by the assessee to be inappropriate for the reason that the loan taken by the assessee from Deutsche Bank was found to be in the nature of short term facility while that taken by the assessee from its AE for which guarantee was paid was noted to be utilized for the purchase of fixed assets including land, meaning thereby that, the loan was a long term borrowing. The finding of the TPO in this regard at para 5.2(h) are as under: IT(TP)A No.850 & 930/Ahd/2015 with CO 17 IT(TP)A No.850 & 930/Ahd/2015 with CO 18 IT(TP)A No.850 & 930/Ahd/2015 with CO 19 IT(TP)A No.850 & 930/Ahd/2015 with CO 20 18. Therefore, noting that no services of guarantee had been provided by the AE to the assessee, no benefit on account of guarantee provided to the assessee, and rejecting the comparables selected by the assessee, the ALP of the guarantee fee was determined at NIL by the TPO. 19. The contention of the ld.counsel for the assessee before us against aforesaid adjustment was that: • the guarantee had been paid at the insistence of the lender. To this effect, minutes of the Board meeting of the lender was filed before us at PB Page No.584; • that there was distinct benefit to the assessee on account of guarantee provided, since the borrowings had been made by the assessee at 11% interest rate as compared to the SBI PLR rate of 11.75% per annum; • that decision with regard to offering its currents assets or capital assets as collateral was a business decision of the assessee and it would not be appropriate for the revenue to question commercial wisdom of the assessee; • that once the requirement of guarantee services are appreciated, the same could not benchmarked at NIL. IT(TP)A No.850 & 930/Ahd/2015 with CO 21 20. Brief submissions of the assessee in this regard were filed before us as under: 21. We do not find any merit in the contentions made by the ld.counsel for the assessee made before us. The facts relating to the payment of guarantee commission that it was all an arrangement between the AE of the entities itself is not disputed,the lender being an AE of the assessee, as also the entity providing guarantee to the assessee,all belonging to the same group. It is also not disputed and denied that the assessee was a debt-free company with huge and sufficient reserves as noted by the TPO. There was no necessity demonstrated for guaranteeing of the loan. The service of guarantee in the facts of the case was not needed by the assessee at all as rightly noted by the AO/TPO. Therefore, we agree with the TPO that there was no rendering of any service of guarantee in the present case by the AE to the assessee, warranting payment of guarantee, if at all. Further, it is not denied that the loan had been taken by the assessee for acquiring long term assets i.e. land etc. and therefore, the assets itself could serve as a collateral securities, doing away the IT(TP)A No.850 & 930/Ahd/2015 with CO 22 need for any guarantee to be provided, more particularly, considering that the assessee was a financially sound company, as the loan could have been sufficiently guaranteed by the collateral securities itself. Also, as rightly noted by the TPO, the assessee had been advanced loan at PLR rate itself, and no benefit, as such had accrued to the assessee on account of guarantee provided, if any, by its AE. Therefore, considering all the above, we agree with the TPO that theassessee was unable to demonstrate rendering of services of any sort of guarantee by the AE to the assessee, and therefore, we hold,the TPO/DRP has rightly determined the ALP of the transactions at NIL. 22. Further, the basis for rejecting the comparable provided by the assessee for benchmarking its transactions using CUP was also not controverted by the ld.counsel for the assessee before us. The TPO had pointed out that while the comparable transaction was a short term loan transaction which the assessee had shown to have attracted interest rate at 16%. The transactions undertaken by the assessee with its AE for borrowing of Rs.100 crores was for the acquisition of capital assets, and was a long term borrowings, therefore, noting this basic distinction in the character of two transactions, the comparable selected was not suitable and appropriate, and has been rightly rejected by the Revenue authorities, we hold. 23. In view of the above, we confirm the upward adjustment made on account of guarantee fees amounting to Rs.52,91,667/- and dismiss ground no.4 raised by the assessee. 24. The ground no.5 reads as under: IT(TP)A No.850 & 930/Ahd/2015 with CO 23 “On the facts and in the circumstances of the case and in law, the ld.AO under the direction of Hon’ble DRP erred in classifying office equipment under the head “furniture and fittings” instead of “plant & machinery” and thereby disallowing differential depreciation of Rs.11,71,648/- “ 25. Brief facts relating to the case are that during the assessment proceedings, the AO had noted that the assessee had claimed depreciation on office equipments at the rate of 15% on an amount of Rs.2,36,57,570/-. The AO held that the office equipment qualified as furniture and fittings and that the assessee accordingly was entitled to depreciation at the rate of 10% thereon and not 15%. The assessee was confronted with the same who responded by stating that it had claimed depreciation at the rate of 15% on office equipments which qualified as plant & machinery and were used in the factory premises. He stated that these equipments did not fall within the meaning of furniture and fittings. The AO was not convinced with the submission of the assessee, who held that as per the rate of depreciation prescribed under the Income Tax Rules, 1962 in Part-III of new Appendix,equipments are not covered under the plant & machinery, but they are covered under the category fittings on which rate of depreciation is 10%. Accordingly, he restricted the assessee’s claim of depreciation on office equipments to 10% as opposed to 15% claim by the assessee, and excess depreciation so claimed by the assesseeamounting to Rs.11,71,648/- was proposed by the AO to be disallowed in his draft order passed under section 143C of the Act. 26. The assessee objected to the same before the ld.DRP contending that it had been consistently claimed depreciation at the rate of 15% on office equipments which qualified as plant & machinery, and which had been allowed in earlier year also, and IT(TP)A No.850 & 930/Ahd/2015 with CO 24 further relied on the decision of Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Subrata Dutta Choudhary, 197 taxmann 71 (P&H) in support of his contentions that equipments qualify cannot be treated as office furniture, but qualified as plant & machinery. The Ld.DRP however dismissed the contentions of the assessee, nothing that the assessee had not furnished details of items on which depreciation at the rate of 15% was claimed under the head “office equipments”, and therefore, in the absence of details furnished by the assessee, the contention of the assessee cannot be accepted that office equipments qualified as plant & machinery for claiming depreciation at the rate of 25%. The relevant finding of the ld.DRP in this regard at para 1.2 of his order reads as under: “1.2 We have considered the basis of allowing of depreciation @ 10% as against depreciation claimed @ 15% by the assessee on office equipments and also consider the detailed submission and arguments of the assessee. From the detailed submission before the AO as well as before this panel, it is clear that assessee has not furnished the details of items on which depreciation @ 15% is claimed under the head office equipments. As per Part A of new Appendix -I, depreciation @10% is allowable on furniture and fittings including electrical fitting and electrical fittings include electrical wiring, socket, other fittings and fans etc. Office equipments without any details and description with supporting evidence @ 15%. Assessee's argument that the details of items/list of assets (office equipments on which depreciation was claimed @ 15% was never asked for by the AO cannot be accepted because of such office equipments. Under these circumstances, it is held that, the Assessing Officer has rightly allowed the depreciation @10% and disallowed differential depreciation of Rs.11,71,648/-. Therefore, the assessee's objection rejected. However, the AO is directed to adopt revised WDV for granting depreciation in subsequent year.” 27. Accordingly, in compliance with direction of the ld.DRP, AO made disallowance on excess depreciation claimed by the assessee on office equipments amounting to Rs.11,17,648/- and it is against this disallowance that the assessee has raised the above ground before us. IT(TP)A No.850 & 930/Ahd/2015 with CO 25 28. During the course of hearing before us, the ld.counsel for the assessee reiterated his contentions made before lower authorities which summarized briefly to the effect that – i) The assessee had been consistently claiming depreciation on office equipments which were in the nature of plant & machinery at the rate of 15% treating them as qualified for depreciation under the block “plant & machinery”; ii) That the major portion of the depreciation was claimed by the assessee on office equipments pertained to opening block of asset so qualified as office equipments on whichthe assessee had claimed depreciation at the rate of 15% in earlier years, and had been consistently allowed by the Revenue. In this regard, our attention was drawn to the Paper Book Page No.58 of Volume-I of PB being particulars of depreciation allowable as per Income Tax Rules for the impugned year i.e. 2010-11 being part of tax audit report furnished by the assessee, pointing out therefrom the fact that of the total value of office equipments on which depreciation at the rate of 15% had been claimed by the assessee amounting to Rs.2,32,52,570/-, an amount of Rs.2,24,47,127/- represented the opening written down value of the block of asset and the additions made during the year were only to the tune of Rs.12,10,443/-. The contentionof the assessee was that where the assessee’s block of asset of office equipments qualifying for depreciation at the rate of 15% had been consistently recognized by the Revenue as being in accordance with the law and rules prescribed in this regard, the block of asset now being shifted by IT(TP)A No.850 & 930/Ahd/2015 with CO 26 taking a total different view that too without any basis at all and merely on change of view that office equipments invariably of their nature and description, did not qualify as plant & machinery for claiming depreciation at the rate of 15%; iii) The ld.counsel for the assessee contended that the finding of the ld.DRP that no details of office equipments have been furnished by the assessee was incorrect as complete details had been furnished during the assessment proceedings vide letter dated 17.1.2014 to the AO wherein the details of additions to the fixed asset including office equipments was furnished. Our attention as drawn to the said details placed before us at PB Page No.301 to 307 more particularly, PB Page No.301 to 303 containing the details of office equipments purchased during the year specifically detailed by the assessee; iv) The ld.counsel for the assessee reiterated the proposition of law in this regard laid down by Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Subrata Dutta Choudhary (supra) to the effect that even office equipments which are in the nature of plant & machinery used in the business of the assessee have to be treated as plant & machinery for the purpose of determining rate at which depreciation is allowable to them. 29. On the other hand, the ld.DR relied on the orders of the ld.DRP/ AO. IT(TP)A No.850 & 930/Ahd/2015 with CO 27 30. We have heard contentions of both the parties. The issue to be adjudicated is rate at which the depreciation is to be allowed as office equipments which the assessee had claimed at the rateof 15% i.e. rate applicable to the assets qualified as furniture and fixtures in Income Tax Rules, 1962. We have gone through entire facts of the case which are that the assessee’s claim of depreciation on office equipments at the rate of 15% was on the block of assets of office equipments comprising of opening WDV of Rs.2,24,47,127/- and additions made during the year to the tune of Rs.12,10,443/-. What transpires from the fact therefore is that the majority depreciation claimed by the assessee on office equipments at the rate of 15% related to the opening value of the block of asset coming over from past years, when these assets were acquired. It is an undisputed fact that all these opening WDV of office equipments value of Rs.2.24 crores, the assessee had consistently been claiming depreciation at the rate of 15% and has been allowed the same also by the Revenue. The assesseehas consistently pleaded before the Revenue authorities and even before us and this contention of the assessee has never been controverted by the Revenue. Therefore, it is fact on record that out of total WDV of office equipments on which the assessee had claimed depreciation at therate of 15% of Rs.2.36 crores, Rs.2.24 crores value of office equipments had all along been allowed depreciation at the rate of 15% by the Revenue in the past. 31. With respect to these assets, we find, the Revenue has changed its stand of asset qualifying for depreciation at the rate of 10% merely on account of change of view that too without any basis. It is not that the Revenue has now come in possession of some details regarding theseequipments, which showed that they did not qualify for depreciation at the rate of 15%, butare in the nature of furniture IT(TP)A No.850 & 930/Ahd/2015 with CO 28 and fittings entitled to depreciation at 10%. It is only description of block of asset as office equipments which has lead the Revenue now to form a different view that being used in office, these equipments qualified as fittings to be included in the block of asset being furniture and fittings, thus qualified depreciation at the rate of 10%. Having consistently allowed the depreciation at the rate of 15% on this opening WDV of office equipments and with no change in facts and circumstances coming to the notice of the Revenue, we hold that the Revenue cannot now change its view on the issue to disentitle the assessee from its consistently allowing claim of depreciation at 15% on the same. 32. As for the office equipments purchased during the year, we have noted that the assessee has provided complete details of assets which were so purchased and which we have noted from the details furnished to us in PB Page No.301 to 303 that they were primarily in the nature of ACs., projectors, digital camera etc. and the assessee has claimed all these items as being installed as being used in the factory premises and since these assets qualified as machinery, we see no infirmity in the claim of the assesseefor depreciation at the rate of 15% thereon treating these assets as plant & machinery. Argument of the ld.counsel for the assessee is supported by the decision of Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Subrata Dutta Choudhary (supra) wherein identical claim of the assessee to depreciation on transformers, fax-machine and CCTV systems installed in the office premises were held by the Hon’ble Court, did not qualify as office furniture and fittings, but to be treated as part and parcel of the plant & machinery and entitled to depreciation at the rate prescribed to it. IT(TP)A No.850 & 930/Ahd/2015 with CO 29 33. In view of the above, we hold that the assesseeis entitled to claim of depreciation at 15% on office equipments and disallowance of excess depreciation made by the AO by treating these assets as furniture and fittings entitled to depreciation at the rate of 10% amounting to Rs.11,71,648/- is directed tobe deleted. Ground no.5 of the assessee’s appeal is allowed. 34. Ground No.6 reads as under: “6. On the facts and in the circumstances of the case and in law, the ld.AO erred in disallowing seminar expenses, exhibition expenses and advertisement expenses amounting to Rs.32,82,122/- under section 40(a)(ia) of the Act without appreciating the fact that the said payments were not subject to TDS.” 35. The ld.counsel for the assessee fairly admitted before us that the above ground does not arise from the order of the DRP. Thus, this ground no.6 is dismissed as not maintainable. 36. Ground No.7 raised by the assessee reads asunder: “On the facts and in the circumstances of the case and in law, the Ld. AO under the directions of Hon'ble DRP erred in disallowing provision for advertisement expenses amounting to Rs. 85,500 by considering it as an ad hoc provision without appreciating the break-up of the said expense and the fact that taxes had been withheld and deposited to the credit of government on the said provision amount.” 37. Briefly, the facts relating to the issue are that the AO on verification of the details filed by the assessee in respect of advertisement expenses noted that the assessee had made a provision of Rs.85,500/- on account of advertisement expenses on adhoc basis, holding that provision of this nature are not allowable as expenditure in computing the income. He accordingly proposed disallowance of the said provision made by the assessee. The IT(TP)A No.850 & 930/Ahd/2015 with CO 30 objection filed by the assessee to the ld.DRP was dismissed by him noting that the assessee-company did not furnish any fresh details to press this groundof objection. The finding of the ld.DRP at para-4 in page no.32 of his order is as under: “4. The next objection raised is regarding disallowance made out of advertisement expenses amounting to Rs.85,500/-. During the DRP proceedings, the AR of the assessee company did not furnish any fresh details of press this ground of objection. The same is therefore rejected.” Accordingly, the disallowance of provision for advertisement amounting to Rs.85,500/- was made by the AO in compliance of directions of the DRP in this regard. 38. Before us, the ld.counsel for the assessee contended that the findingof the ld.DRPwas that it had been repeatedly contended before the lower authority that it was not adhoc provision made by the assessee, but in fact related to specific advertisement expenses incurred by the assessee. The details of which had also been furnished to the DRP as additional evidence, pointing out that the same could not be furnished to the AO since he had not given opportunity to the assessee before making disallowance. Our attention as drawn to the submission made before the DRP in this regard, along with additional evidences filed vide letter dated 17.10.2014 placed before us at paper book page no.590 is as under: “2.4.2. Provision for advertisement expenses During the course of assessment proceedings, the Ld. AO had asked for the details of taxes withheld on advertisement expense which were duly submitted by the Assessee. The Ld. AO disallowed the claim of advertisement expense amounting to Rs. 85,500 by considering it as an ad hoc provision. The Ld. AO did not ask for the details/documentary evidence/s in support of such provision to enable the Assessee to substantiate its claim of such expense as allowable business expenditure. In order to substantiate its claim, the Assessee submits that though the nomenclature used is ad hoc provision, the same is not ad hoc in nature. The said provision is in respect of the following advertisement expense: IT(TP)A No.850 & 930/Ahd/2015 with CO 31 Table 2: Details of provision for advertisement expense Sr. No. Particulars Party Name Amount (Rs.) 1 Graphics designing work for Bosch Rexroth - India training calendar 2010 including PDF interactive designing work. Vrushabh Art 15,000 2 FULL PAGE-FOUR COLOUR.SEARCH 1.3.10 Network 18 and Media Investment Ltd. 23,500 3 FULL PAGE-FOUR COLOUR.SEARCH 1.3. Network 18 and Media Investment Ltd. 23,500 4 FULL PAGE-FOUR COLOUR Network 18 and Media Investment Ltd. 23,500 Total 85,500/- The above table indicates that the provision for advertisement expense is not ad hoc in nature. Instead, the provision amount has been created on the basis of the abovementioned details and is in respect of an ascertained liability. The same were not submitted with the Ld. AO as it were not called for by the Ld. AO during the course of assessment proceedings. These have also been submitted in the application dated 10 April 2014 (Refer Page 58 to 58 of the DRP submission). 39. The ld.counsel for the assessee further contended that after passing of the order by the DRP rectification application was also been filed to the DRP pointing out incorrect finding of the DRP that no details havebeen furnished by the assessee with regard to the provision for advertisement expenses and the same being on adhoc basis. Our attention was drawn to the rectification application submitted post the DRP direction placed before us at PB page no.605 to 612. The ld.counsel for the assessee therefore contended that the disallowance has been made totally disregarding the facts and submissionsmade by the assessee in this regard. IT(TP)A No.850 & 930/Ahd/2015 with CO 32 The ld.DR on the other hand, relied on the orders of authorities below. 40. We have considered contentions of boththe parties, and have gone throughthe documents referred to before us. We have noted from orders of the authorities below that the disallowance of provision for advertisement expenses amounting to Rs.85,500/-, which is in dispute before us was made for the reasons that the assessee was unable to furnish any details with regard to the same, to prove that itwas not mere provision made on adhoc basis. We have noted that basis of making disallowance was contrary to the facts of the case, since it has been demonstrated before us that complete details of this provision made by the assessee had been furnished to the DRP, pointing out the specific expenses in relation to which the provision had made by the assessee. The assessee clearly had demonstrated that it was not an adhoc provision made by it, but based on specific bills of advertisement expenses incurred by the assessee. Clearly, the DRP for the reason best known chose to ignore this evidence filed by the assessee. The order passed therefore by the DRP disallowing the expense is grossly incorrect and unjustified, we hold that the assessee having proved by way of evidence that provision or advertisement expenses were not adhoc in nature. There was no reason to make the impugned disallowance. The disallowance so made therefore of advertisement expenses amounting toRs.85,500/- is accordingly directed to be deleted. The ground no.7 is accordingly allowed. 41. Ground No.8 reads as under: “On the facts and in the circumstances of the case and in law, the Ld. AO under the directions of Hon'ble DRP erred in disallowing devaluation of inventory amounting IT(TP)A No.850 & 930/Ahd/2015 with CO 33 to Rs.1,79,46,564. While making the addition, the Ld. AO erred in law and on facts on the following: i. in disregarding the stock valuation made by the Appellant as per AS 2 and section 145A of the Act; ii. in not appreciating the fact that no adverse remark is made by the Auditors in the audit report; iii. in disregarding the contention of the Appellant that the current method of valuation of inventory has been followed consistently over the past years; The Appellant prays that the aforesaid addition be deleted.” 42. Briefly stated facts are that the AO noted on verification of the details of inventory that the assessee has reduced the value of closing stock by an amount of Rs.1,79,49,564/- being written off of slow moving stock. On being asked to justify and explain its claim, the assessee responded by stating that devaluation of stock had been done following the method of accounting prescribed under AS-2 for valuation of inventories requiring inventories to be valued at cost or net realizable value, whichever is lower, which practice the assessee had been consistently following in the past also, and which was in accordance the provisions of section 145A of the Act also. The AO however was not satisfied with the reply of the assessee for the reason that, he noted, while the assessee had reduced the value of cost of inventory by almost 50%, but had not supported this reduction in value with any evidence or logic. The AO noted that the assessee was manufacturer of hydraulic and pneumatic equipments and parts, and these items did not get decayed easily. The AO held that devaluation in accordance with the AS-2 was to be done on inventory only, in case they were damaged or had become whole or partially obsolete or their selling price has declined and the assessee has failed to prove with evidence that they became obsolete, damaged or declined in selling price of inventories so devalued by it. The assessee further contended before the AO that it had system for devaluing assets based on scientific evaluation of its IT(TP)A No.850 & 930/Ahd/2015 with CO 34 stock wherein on the basis of age of inventory, a percentage valuation in its value had been worked out by the company to cover its loss in value which the company had noted inversely proportionate to the holding period of inventory. The AO however rejected this contention of the assessee also stating that the assessee had failed to identify the items which it had devalued. Accordingly not satisfied with the explanation of the assessee that the devaluation of its inventory to the extent of Rs.1,79,49,564/-, the AO had proposed disallowance of the same. The assessee objected to this disallowance. 43. Before the ld.DRP reiterating the contentions made before the AO and pointing out that the nature of its inventory were such that their value reduced over time on account of various factors; due to nature of products, design invention, quality improvement, discontinuation of certainproducts, introduction of new products and reiterated that devaluation was done by technical experts inthis regard based on system which were scientifically devised on an age- wise analysis of the inventory. The ld.DRP however rejected all the contentions of the assessee stating that there was no justification for devaluation since the assessee appears to be selling stock at more thanthe cost price earning profits thereon. The relevant finding of the ld.DRP in this regard at para 2.1 to 2.4 of his order are as under: “2.1 We have considered the submission made by the assessee as reproduced above which is exactly the same in contents and in legal aspects filed before the Assessing Officer as in the case of Hagglund Drives India Pvt.Ltd. The Assessing Officer as un every aspect of the assessee's submission and arguments in the draft assessment order. Bosch rexorth (India) Ltd.is now merged with Hagglund Drives India Pvt. Ltd. Further, the assessee has not produced any submission on working of closing stock valuation to the panel of DRP as given in the case of Hagglund Drives Pvt.Ltd. 2.2 We have considered the arguments of the Assessing Officer as well as the assessee and its Authorised Representative. It is abundantly clear from the chart of closing stock, purchase and sales, is out of all spare parts, whether it is sold within IT(TP)A No.850 & 930/Ahd/2015 with CO 35 6 months or within 24 months or even from non moving items, that the realizable value of the closing stock was much more than the cost of item sold. From the profit earned on sale of spare parts it is clear that the sale price of items sold are not less than the cost price. There appears to be no justification for declaring the value of closing stock at 50% of the cost when the assessee himself has earned profit on each and every item sold. From the details of purchase, sales, opening stock and closing stock, in quantity and in value, it is proved beyond doubt that the realizable value of closing stock has not been reduced on any counts as per AS-2. From the details of sales and considering the gross profit margin on the sold items, it is clear that neither the selling price nor realizable value has declined. 2.3. Further, the assessee was requested to furnish the details of devalued items shown in opening stock and sold during the month of April, May, November & December, 2009 to find out whether the devalued items, either purchased during the year or during the earlier years have been sold at devalued price or purchase price or even more than that to find out whether the assessee has shown the correct valuation of closing stock at the year-end or not? Whether realizable value has really gone down as claimed by assessee? But the assessee did not produce the above details before the DRP panel. 2.4 From the above facts, it is abundantly clear that realizable value was not less than purchase value in any of the above items sold out of the old stock or purchase made during the year, which has been devalued by the assessee, by 50% of the purchase value, whether the purchase date is in the year 2009,2008 or 1999 or 2007 or 2001 or 2003. This shows that assessee has not followed the policy as per AS 2.Theassessee has never sold the devalued items below cost as admitted by the authorized representatives present during the hearing. However, the assessee through their Authorised Representative could not establish that the realizable value of the items were never less than the purchase value. This remains undisputed fact on record. It is proved beyond doubt that because of aging factor or on lapse of time, the realizable value of items in stock were never less than purchase value. On the contrary, the assessee has earned huge profit on the items sold out of opening stock. All items in stock have been sold on regular selling price and not sold any item at even discounted sales price. The assessee has claimed that the closing stock has been value as per AS-2 i.e. realizable value or purchase price whichever is less but the fact on record prove that the closing stock has been wrongly devalued below the purchase price. Hence, it is held that the Assessing Officer has rightly disallowed the devaluation of closing stock and has made addition of Rs.1,79,46.564/-. In view of the above facts and circumstances of the case, the objection raised by the assessee against the addition made on account of devaluation of closing stock is rejected.” 44. The AO in compliance of the direction of the DRP accordingly disallowance of devaluation to the extent of Rs.1,79,49,564/-. 45. Before us, the ld.counsel for the assessee reiterated contentions made before the authorities below. Briefly, his arguments were – i) Devaluation was in compliance with the AS-2 issued by the Institute of Chartered Accountants of India for IT(TP)A No.850 & 930/Ahd/2015 with CO 36 accounting of valuation of inventory prescribing inventory to be valued at lower of cost or net realizable value; ii) That the assessee was consistently following the prescribed accounting standards and complied with the provision of section 145A of the Act in this regard also; iii) That devaluation of the inventory was done by a team of technical experts of the assessee-company in accordance with a system devised noting the reduction in value of stock on account of various factors and devising a method of devaluation on age-wise analysis of the assets; iv) Complete details of all the stocks so valued along with basis of devaluation was furnished to the authorities below; v) That in view of the fact the assessee had devalued the assets as per a scientifically devised system for reduction on account of passage of time, it was in accordance with the accounting standard (AS) prescribed in this regard by the ICAI was in compliance with section 145A also and complete details were also furnished to the authorities below and the devaluation had been certified by the statutory auditors also. There was no reason for making any disallowance of devaluation which was in accordance with law. 46. In this regard, our attention was drawn to the following : • Annual accounts of the company mentioning write off slow moving stock from inventory to the extent of Rs.1,79,49,564/-on the basis of technical evaluation (placed before us at page no.87). IT(TP)A No.850 & 930/Ahd/2015 with CO 37 • Letter dated 20.2.2014 addressed to the AO explaining that devaluation of inventories was in accordance with AS-2 and as per provisions of section 145A of the Act and enclosing working of devaluation of closing stock along with submissions (placed before in paper book page nos.309 to 329). The working of the devaluation of closing stock at PB Page No.313 to 329 giving details of each item of closing stock devalued unit wise giving its value before devaluation and after devaluation. • Letter dated 24.2.2014 addressed to the AO explaining the basis evolved by the assessee for devaluation of inventory noting that its realizable value is inversely proportionate to the holding period of inventory and giving age-wise analysis for the valuation of inventory; the contents of the same was pointed out to us from page PB Page no.336 as under: IT(TP)A No.850 & 930/Ahd/2015 with CO 38 • Our attention was drawn to the Annexure-1 attached to the aforesaid communication addressed to the AO containing the basis of devaluation on the age-wise analysis of the inventory ineach unit of the assessee (Page No.341 of the PB). • Letter dated 26.2.2014 addressed to the AO explaining the scientific basis evolved by the assessee for working out the devaluation in the value of inventory (placed before us at page no.347 of the PB) as under: IT(TP)A No.850 & 930/Ahd/2015 with CO 39 • Our attention was invited further to the technical report of the devaluation of each item (placed before us at page no.351 to 495 of the PB) containing the details of item-code, its description, its quantity in stock, before and after evaluation, the last date on which the stock was received and any movement in the stock in the impugned year or IT(TP)A No.850 & 930/Ahd/2015 with CO 40 preceding years. From this, it was pointed out that all the items of inventory which was devalued had shown no movement by way of receipt of impugned order and/or even by way of issue for production, thus confirming the fact that they were slow moving items and the devaluation was done in accordance with age-wise analysis method adopted by the assessee. • Letter dated 10.12.2014 addressed to the DRP pointing out all the details and explanation relating to devaluation of stock, which were also furnished to the AO and summarizing the devaluation so done by the assessee in each of its unit, thus pointing out that all necessary details and explanation also furnished before the lower authorities (placed before us at Page no.617 to 620 of the PB). 47. The ld.counselfor the assessee therefore submitted that having furnished complete details and explanation regarding devaluation of the stock, and disallowance thereof was highly unjustified and needed to be deleted. 48. The ld.DR relied on the orders of the DRP/AO. 49. We have considered contentionsof both the parties and gone through the orders ofauthorities. We have also carefully gone through allthe documents referred before us. 50. On going through all the orders of the authorities below, we find that the assessee’s claim of devaluation of stock to the extent of Rs.1,79,49,564/- was disallowed primarily for the reason that the assessee was unable to file any justification for devaluation in value of stock. The DRP went to the extent of stating that claim of IT(TP)A No.850 & 930/Ahd/2015 with CO 41 devaluation was not allowable to the assessee since it was earning profits on sale of spare, and there was no question of any value in the value of its stock/inventory so as to justify the devaluation. We have carefully gone throughthe submissions made by the assessee before the lower authorities to which our attention was drawn, and we find that the assessee had explained and demonstrated to the lower authorities that devaluation of inventory so done related to the slow moving inventory. It was pointed out by the assessee to the authorities below that on account of passage of time, such inventory loses its value in terms of market price for various reasons, such as on account of new products coming into the market, demands for the same no longer remain, and so on. The assessee had contended that its technical team had devised a basis for write off the value on slow moving assets based on age-wise analysis and details thereof were also furnished. It was also pointed out that the assessee consistently following the system all along and the system was in compliance with AS-2 and section 145A of the Act also. The assessee, we have noted, had furnished details of each and every inventory which it had devalued, substantiating its basis of the devaluation on age-wise analysis giving complete details of last date on which inventory was purchased showing that they were slow moving items, and based on age-wise analysis adopted by the assessee company, assets were accordingly devalued. 51. It is a universal truth that with the passage of time most of the stock looses their value since become obsolete on account of advancement of technology in today’s time. The assessee, we have noted, has adopted a scientific basis of reduction in value of its inventory based on age-wise analysis and has been applying it universally to all its inventory consistently from year to year. We fail IT(TP)A No.850 & 930/Ahd/2015 with CO 42 to understand what further evidence the assessee was required to furnish to justify its claim. The claim of the assessee being based on scientific basis, approved by the statutory auditors also, and which has been following consistently year to year, we find no reason or justification for disallowing the same. The claim of the devaluation of inventory is accordingly allowed and disallowance so made of Rs.1,79,49,564/- is directed to be deleted. This ground is allowed. 52. The ground no.9 reads as under: “On the facts and in the circumstances of the case and in law, the Ld. AO under the directions of Hon'ble DRP erred in capitalising interest expense amounting to Rs.59,12,913 to the capital work-in-progress ('CWIP') without any basis. It is prayed that the interest be allowed u/s 36(1)(iii) of the Act since it is for the purpose of business.” 53. The brief facts relating to theissue are that the AO noted that the assessee has shown capital work-in-progress at Rs.7,29,94,068/- which included capital advance of Rs.70,17,554/-. He further noted the assessee had incurred an amount of Rs.59,12,913/- as interest on loans. Accordingly, he asked the assessee to explain as to why proportionate interest should not be capitalized on account of interest bearingfunds having been used for acquiring capital assets which had not been put to use as per section 36(1)(iii) of the Act. The assessee responded by stating that it had not utilized any interest bearing funds for the capital WIP and entire WIP was created from its own interest free funds/WIP. The assessee also contended that accounting policy followed by the assessee in relation to borrowing cost as prescribed by the ICAI in AS-16 requiring of borrowing cost incurred for acquiring fixed assets to be capitalized was being consistently followed by the assessee which was mentioned in the audited financial statement of the assessee also. The AO however was not satisfied with the reply of IT(TP)A No.850 & 930/Ahd/2015 with CO 43 the assessee noting that the assessee had not given any evidence to substantiate its claim that it had utilized its working capital for the purpose of capital work-in-progress. Accordingly, he worked out the interest relatable to CWIP of the assessee, which amounted to Rs.72,54,775/- and noting, the assessee has debited interest to the extent of Rs.59,12,913/-. He disallowed entire claim of interest expenditure treating it as capital in nature to be added to the CWIP. The assessee objected to the same before the DRP, and the DRP has also dismissed in the absence of any details furnished by the assessee. The relevant findings of the DRP at para 5.2 of his order as under: “5.2 We have considered the facts of the case. The fact is undisputed that the assessee had a WIP in the current ear and he assessee also had interest bearing capital. The assessee has in the subsequent year's capitalized interest on he WIP. The assessee however failed to establish that there were new borrowings in he subsequent ears for the purpose of capital WIP. Nor has the assessee been able to explain that the WIP shown next year is entirely different from this years WIP. In absence of these details, we think the AO has correctly inferred that this ear also the interest bearing funds had been utilized for WIP and the proportionate disallowance of interest is therefore rightly done. The objection filed by the assessee is rejected.” 54. Accordingly, in compliance with directions of the DRP, the AO disallowed claim of interest expenditure amounting to R.59,12,913/- . 55. Before us, solitary contentions of the ld.counsel for the assessee was that the assessee had sufficient own interest free funds for investing in CWIP and presumption therefore was that interest bearing funds were utilized for the said purpose warranted no disallowance of interest as per the provisions of section 36(1)(iii) of the Act. Inthis regard, he drew our attention to the audited balance sheet of the assessee placed at PB 73 pointing out therefrom that total capital and reserves of the assessee during the impugned year stood at Rs.134 crores as opposed to CWIP of Rs.1.29 cores which IT(TP)A No.850 & 930/Ahd/2015 with CO 44 facts clearly demonstrated that the assessee had more than sufficient interest free funds, which accordingly have to be presumed to have been invested in CWIP calling for no disallowance under section 36(1)(iii) of the Act. The reliance was placed on the decision of the ITAT, Ahmedabad in the case of CIL Nova Petrochemicals Ltd. Vs. ITO, ITA No.1401/Ahd/2017 order dated 25.3.2019. (copy of which was placed before us). 56. The ld.counsel for the assessee further pointed out thatits accounting policy adopted was in accordance with AS-16 prescribed by the ICAI for accounting of borrowing cost which require borrowing cost attributable to acquisition, construction or production of a qualifying asset to be capitalized to the cost of assets and Auditors in the Notes to the Accounts forming part of the auditedbalance sheet had mentioned so in clear terms in Schedule-18 thereof. It was further pointed out that in the subsequent assessment year, the assessee had capitalized interest on CWIP to the extent of Rs.2,17,80,822/- and had clearly mentioned so in its auditedbalance sheet; thus demonstrating that borrowing cost attributable to CWIP were being added to CWIP as mandated by AS- 16. Our attention as also drawn to audited report for the impugned year mentioning that no interest was disallowable under provisionsof section 36(1)(iii) of the Act and also no interest expenditure of capital nature have been debited to the profit & loss account. On other hand, the ld.DR relied on orders of the authorities below. 57. We have heard both the parties and issuedto be adjudicated is relating to interest expenses incurred in relation to capital work-in- progress which are required tobe capitalized as per first proviso to IT(TP)A No.850 & 930/Ahd/2015 with CO 45 section 36(1)(iii) of the Act. The AO has attributed such interest expenditure incurred by the assessee to the extent of Rs.59,12,913/- being the entire claim of interest expenditure debited P&L account. We have noted from the submissions made by the assessee to the authorities below that the assessee had been consistently following the accounting standard prescribed for the accounting of borrowing cost as per AS-16 which had been affirmed by the statutory auditors in the audited balance sheet of the company also. The assessee had also demonstrated this fact by pointing out that in the subsequent year, when such interest cost relating to CWIP had been incurred by the assessee, it had added the same to the CWIP capitalizing it in accordance with the AS-16. We have also noted that both the statutory auditors and tax auditors have categorically stated that no interest expenditure pertaining to the capital assets have been claimed by the assessee. More pertinently, the assessee has demonstrated that it had sufficient interest free funds for investment in CWIP which fact has not been controverted by the Revenue. On the contrary, the Revenue has no basis for disallowing the interest expenditure treated to have been incurred for acquiring CWIP except for facts and figures noted in the financial statement of the assessee showing huge CWIP and interest expenditure incurred by the assessee. In view of the fact that the assessee haddemonstrated that it was consistently following AS-16 which prescribes basis for accounting of interest cost in relation to fixed assets, and had demonstrated so also from its financial statement pertaining to the succeeding year and this fact was certified by the statutory auditors and even the tax auditors and further noting the fact that the assessee had sufficient interest free funds of its own for investing in CWIP, we hold that there was no basis with the Revenue nor any justification for holding that the assessee had huge interest bearing IT(TP)A No.850 & 930/Ahd/2015 with CO 46 funds for CWIP and thus capitalizing the interest to the extent of Rs.72,54,775/-. In view of the above, we direct the deletion of disallowance of interest expenditure to the extent of Rs.59,12,913/-. Ground No.9 is allowed. Now we take up Revenue’s Appeal in IT(TP) 850/Ahd/2015 for A.Y.2010-11 58. Ground no.1 reads as under: “(i) Whether the DRP has substantially erred in deleting the addition of Rs.60,22,515/- being provision for product support despite the fact that the assessee has made only provision in the P&L account and failed to produce any evidence to prove.” 59. Issue raised by the Revenue in the above grounds relates to disallowance proposed by the AO in his draft order of provision made by the assesseefor product support amounting to Rs.60,22,515/- the objection to the same by the assesseebefore the DRPwas accepted and the DRP accordingly directed the AO to delete the disallowance. 60. As transpires from the ordersof the authorities below, the provision for product support had been debited by the assessee for after sale services/warranty/ product support and was explained by the assessee to have been calculated by adopting scientific method, by calculating average proportion of actual warranty cost to total sales for past three years. This percentage was thereafter applied on six months’ sales to arrive at the amount of provision for warranty. A table demonstrating the calculation of provision for product support, following the above method in the past three years ,was also submitted by the assessee. The assessee had contended that this provision created by it on scientific basis, based on estimating IT(TP)A No.850 & 930/Ahd/2015 with CO 47 the warranty cost which the assessee would be liable to incur over the years on accountof after sale services/product support, was allowable in view of the decision of the Hon’ble Apex Court in the case of Rotork Controls India P. Ltd. Vs. CIT, 314 ITR 62 (SC) which had laid down fulfillment of the conditions for allowability of claim for provisions for warranty viz. (a) provisionfor warranty must be an ascertained liability, (b) there should be present obligation as a result of past event, and (c) provision for warranty should be determined on a scientific and systematic basis i.e. based on past experience. It was pointed out that the assessee-company satisfied all the above conditions laid by the Apex Court for deductibility of provision for warrant claimed by it. The ld.AO however was not convinced with the explanation of the assessee and held that since the assessee had only made provisions and not produced any evidence to prove that it had in fact incurred any expenditure towards products service/support, accordingly, he held that the impugned expenditure was only a provision for expenses and hence not allowable under section 37(1) of the Act. He accordingly proposed the disallowance of Rs.60,22,515/-. 61. The assessee objected to the same to the DRP who noted that identical claim had beenallowed to the assessee in the preceding year both by the AO in Asst.Year 2009-10 and the Ld.CIT(A) and ITAT in earlier yearsincluding Asst.Year 2006-07. His finding at para-6 of the order in this regard are as under: “Addition on account of disallowance of provision of product support expenses: The next objection raised relates to disallowance of provision for product support expenses. The assessee mentioned that for A.Y 2009-10, the AO has passed in favourable assessment order and allowed the claim of the Assessee of provision for warranty expense. Further CIT(A) and IT AT has ruled in favour of the assessee regarding allowability of provision for IT(TP)A No.850 & 930/Ahd/2015 with CO 48 warranty expenses. Reproduced below is are extract from the order fof CIT(A) for A.Y 2006-07 " Similar issue in earlier years has been decided in favour of the appellant by CIT (A) as well as IT A T in the appellants own case. The claims have been made on the basis of pending warrant claims received from branched at the close of the year. It is also seen that in earlier years, the CIT(A) have deleted such addition on the basis of the order of IT AT in appellants own case. Therefore, following the order of IT AT ant my predecessors, the addition made by the AO is deleted" Following the earlier years order of Tribunal in the assessee's own case, we allow this ground of objection and direct the AO to delete the disallowance.” 62. Therefore noting the facts that the issue stood decided in favour of the assessee by the ITAT in the earlier years, the DRP agreed to the objection of the assessee to the disallowance made by the AO for provision for products support/services, and accordingly, the DRP directed the AO to delete the disallowance so made. 63. Before us, the ld.DR was unable to point out any infirmity in the order of the ld.CIT(A). The ld.DR was also unable to distinguish the earlier year case of the assesseewith the present one. In view of the above, since the issue already stands decided in favour of the assessee in earlier years by the ITAT, we see no reason to interfere in the order of the DRP directing the deletion of product supports/service charge amount to Rs.60,22,515/-. Ground no.1 raised by the Revenue is dismissed. 64. Ground no.2 & 3 raised by the Revenue relate to transfer pricing adjustment proposed by the TPO on account of intra-group services, objection of the assessee to which before the DRP were allowed by the DRP and the adjustment so made were directed to be deleted by the DRP . The said grounds read as under: IT(TP)A No.850 & 930/Ahd/2015 with CO 49 ii) Whether the DRP has erred in deleting the adjustment towards template charges of Rs.2,91,40,800/- ignoring the findings of the A.O. that such excessive payments to AE were made by the assessee without credible cost benefit analysis. (iin) Whether the DRP has erred in deleting the adjustment of Rs.31,86,790/- made towards infrastructure and consultancy support ignoring the findings of the A.O. that such excessive payments to AE were made by the assessee without credible cost benefit analysis.” 65. The TP adjustment relating to the intra-group services directed tobe deleted by the DRP related to template chargesamounting to Rs.2,91,40,800/- and infrastructure consultancy charges amounting to Rs.31,86,790/-. The assessee availed these services from various AEs belonged to its group companies, the details of which are reproduced at page 2 of the DRP’s order as under: Name of the AE Nature of payment Amount Allowed/disa llowed by TPO Bosch Rexroth AG Information Technology Consulting Charges 59,76,501 Disallowed Information Technology Consulting Charges 58,65,189 Disallowed Information Technology Support Charges 25,23,700 allowed Information Technology Support Charges 7,18,384 allowed Template charges 2,91,40,800 disallowed Shanghai Bosch Rexroth Hydraulics & Automation Ltd Information Technology Consulting Charges 14,61,126 disallowed Information Technology Consulting Charges 14,33,913 disallowed Robert Bosch Gmbh Infrastructure Consultancy and Support Charges 22,37,042 disallowed Infrastructure Consultancy and Support Charges 4,79,338 disallowed IT(TP)A No.850 & 930/Ahd/2015 with CO 50 Infrastructure . Consultancy and Support Charges 4,70,410 . disallowed Information Technology Support Charges 57,39,414 allowed Information Technology Support Charges 56,32,518 allowed Total 6,16,78,335 66. The TPO analyzed all the material before him regarding these intra-group services and held that the services rendered by the AEs with regard to template charges and infrastructure consultancy charges were only in the nature of stewardship services necessary for overseeing the function undertaken by the assessee for the benefit of AE and not giving any benefit directly to the assessee. He noted that they were only in thenature of control and supervisory function of the providers of the services, and therefore, treated that the ALP of these services provided to the assessee by the AE at NIL. The assessee’s explanation and the TPO’s finding in this regard summarized in a table produced at page no.3 to 5 of the DRP’s order as under: Sr. No. Assessee’s function as per their Transfer Pricing Study Report Description given by the assesses Analysis of the documents Supplied and remarks Amount involved and remarks 1. Licensed Manufacturerwith less than normal risk and distributor in respect of trading functions RAINBOW- From a strategic realignment to RAINBOW:In order to achieve acoordinated approach of all IT activities within theRexroth Group worldwide anew InformationManagement Strategy was developed by the corporate department Information Management. The aim from RAINBOW was to significantly reduce the costs The AE providingservices to controloverallmonitor ing of the operations of the subsidiary/relateentit y (other thanday-to- daymanagement).The serviceswereprovided to alignthe operations oftheassesee to thegroup'soperations. 2,91,40,800 Control andsupervisory functions of theprovider- IT(TP)A No.850 & 930/Ahd/2015 with CO 51 of IT implementation and increase the reusability of Business Processes by global harmonization and standardization. Defined global processes, worldwide harmonized master data management system and intensive,predefined links between the various Business Entities. ensure most benefits forglobal collaboration. RAINBOW furthermore is the ideal enabler for theVlerger of Bosch ATandRlexroth in the variouscountries. RAINBOW helps 0 integrate the different business processes in theCountry Units and to roll outnew business rules and newreporting requirements of the Bosch Rexroth Group to theCountry Units 2 -do- IT consulting charges – Thepayment was made to availsupport in relation . to theimplementation of SAP module in respect of theissues faced in initialimplementation. This is inrelation to theimplementation of RAINBOW. The AE providing services to controloverall monitoring of the operations of the subsidiary/related entity (other than day-to-day management).Theserv ices wereprovided to alignthe operations of the assessee to thegroup's operations. 1,47,36,729 Control, supervisory and monitoring function 3 -do- IT Support charges- The payment is made for the useof hardware, network and software licenses. The AE provided services for maintenance ofnetwork, consolidation ofthe purchase ofsoftware licensesetc 1,46,14,016 The payment is not in the nature of control and supervisory function by the AE, 4 -do- Infrastructure consultingcharges The AE provided the service The AE provided services to make certain that the 31,86,790 Control, supervisory and IT(TP)A No.850 & 930/Ahd/2015 with CO 52 67. The assessee, we have noted, had explained indetail the nature of services rendered by the AE relating to both template charges and infrastructure consultancy paid, and taking note of the same, the DRP held that they were not in the nature stewardship services, but to the direct benefit to the assessee, and accordingly deleted the adjustment proposed by the AO/TPO for the services at NIL on both counts. 68. Taking up the first explanation of the assessee regarding template charges, the assessee contended that thecharges related to cost of procuring SAP licence and customizing the same as per the needs of the group’s business. It was explained that on behalf of the assessee, the Bosch Rexroth AG had purchased the SAP licencefrom third party and carried out the relevant customization to ensure that the SAP modules met with the business requirement of the Bosch entities; that for drives and control (“DC”) business, this customized SAP was named “Rexroth Application Integration for Business Optimization Worldwide” (“Rainbow”); that for every DC units in the Bosch group, SAP template was provided by Rexroth and charges were based on users. Accordingly, the assessee being a part of the drive and control business of the Bosch group, had acquired the above Rainbow template from Rexroth AG. It was contended that the template charges paid by the assessee to its AE was on account of SAP, which was installed by the AE as per the requirements of the assessee’s business. It was also explained by the assessee that the AE had charged the assessee for this software on cost basis, and as evidences, invoices for purchase of the SAP were furnished and also mechanism followed for determining the cost allocated to the assesseeprovided. The explanation in this regard furnished by the assesseeto the AO/TPO vide letter dated 7.1.2014 was placed before IT(TP)A No.850 & 930/Ahd/2015 with CO 53 us at PB Page No.196. At PB at page no.199 a detailed write up on the said software “Rainbow” and its utility for the businessof the assessee was placed pointing out that the “Rainbow” was nothing but an application software developed from SAP adapted to the needs and requirement of Bosch group of companies and was a bundled package of modularized SAP scenarios and processes, generic projects plans and templates, global master data maintenance, standardized customizing concepts, change process and documentation etc. The object being to achieve a coordinated approach of all IT activities within the Rexroth group and thus develop a new information management strategy. 69. Considering the above, the DRP held that since this is an undisputed fact that the assessee by way of template charges bought a software, its price could not be said to be NIL unless it was held that no software was actually procured by the assessee. The DRP also rejected the TPO’s contention that the production of software by the AE amounted to controlling and supervising activity. It pointed out that as per the facts before it, the software was developed to smoothen flow of the information and increased connectivity among the groups and this perse could not be said to be an activity being in the supervisory nature. Finding so, the DRP directed the deletion of adjustment made to the international transactions of intra-group charges of template charges of Rs.2,91,40,800/-, the ALP of which was determined at NIL by the AO. The findingof the DRP at para 3.2 of his order is as under: “3.2 The fact of the matter is that the assessee claimed that they had bought this software Rainbow, as a one time measure and the amount has been capitalised in the assesee's books of accounts. The TPO has not discussed any facts to show that the software was not bought by the assessee. The TPO's main argument is on the pricing of the software. In our view pricing of the software can not be nil, unless it is held that no software was actually procured. We have already held that there is nothing on the record to hold that no software was actually procured by the assessee. Hence the adjustment proposed by the TPO by treating ALP of the IT(TP)A No.850 & 930/Ahd/2015 with CO 54 Rainbow Template at NIL is unjustified. The TPO is also of the view that the provision of software by the AE amounts to controlling and supervisory activity. We find it a rather stretched inference not supported by facts. The software was developed as claimed by the assessee and not refuted by the TPO, to smoothen flow of information and increase connectivity among the group concerns. The assessee has lot of transactions with the group concerns and ail such transactions have been accepted by the TPO as at ALP. A software to streamline arms length business transactions and increase connectivity with other group concerns cannot be called per se a device by the AE to tighten its control over the assesee's affairs and that also to the detriment of the assessee. We therefore direct the AO/TPO to delete this adjustment.” 70. The ld.DR before us has been unable to controvert the fact demonstrated by the assessee as above, both to TPO and the DRP that template charges was paid for acquiring the SAP software whichwas developed by its AE for streamlining the business transactions of the assessee. We, therefore, agree with the DRP that the cost of acquisition of software cannot be treated at NIL. Moreover, since undisputedly, the purpose of the software was to smoothen the business activity and information management system in the assessee-company, it cannot be said to be providing services only of supervisory and stewardship nature. Benefits from this software surely arose to the assessee directly. The ld.DR was unable to point out as to how this SAP software provided to the assessee was only for the purpose of playing a supervisory role. Inview of the above, we concur with the DRP that TPO had erred in treating intra-group services of template acquired by the assessee as beingin the nature of supervisory services. We accordingly uphold theorder of the DRP directing deletion of adjustment made to the template charges of Rs.2,91,40,800/-by determining ALP at NIL. Ground no.2 raised by the Revenue is dismissed. IT(TP)A No.850 & 930/Ahd/2015 with CO 55 71. Now coming to the issue of infrastructure consultancy and support charges paid by the assessee,we have noted from the orders of the authorities below that the assessee had explained the services rendered by the AE in relation to the saidexpenditureas being for setting up of plant at Sanad; that the AE was providing consultancy and support services for the developmentof this infrastructure of the assessee for which these charges had been paid. The explanationof the assessee is reproduced at para-4 of the DRP’s order as under: "The expenses incurred for provisioning of infrastructural related services mentioned in the agreement has been recovered from BR1L. The said expenses have been allocated with an appropriate base (time spent), at actual cost to BRIL. A part of the total expenses i.e. Rs. 2,237,042 relate to the expenses incurred for setting up the plant at Sanand and hence the same have been capitalized, whilst the balance Rs. 479,338 (Manufacturing Segment) and Rs. 470,410 (trading segment) are revenue in nature. Rs. 2,237,402 (capitalised) represent recovery of cost for infrastructure consultancy and support services availed by BRIL. BRIL is expanding its manufacturing facility in India with development of a new facility at Sanand, Ahmedabad. The facility is constructed based on the standards prescribed by the Bosch Group and with guidance on the infrastructural development from the Group. Since this amount represents recovery of cost (without any mark up) the transaction value is not inconsistent with the arm's length standard as provided /s. under section 92C of the Income-tax Act, 1961." 72. The DRP, we have noted, went on to note that the TPO did not dispute the above facts that the infrastructure consultancy and support services offered by the AE to the assessee, was for development of additional infrastructure facility of the assessee by way of setting up of new plant at Sanand. Since the TPO had held this service also in the nature of stewardship services, the DRP disagreed with the findingof the TPO proposing determination of ALP of the said services at NIL. The relevant finding of the DRP at para 4.1 and 4.2 of the order is as under: “4.1 The TPO has not disputed the facts but has held that the The AE provided services to make certain that the various offices maintained AE's production standards and that the subsidiaries performed their duties to their clients' satisfaction. The TPO then held that the services were in the nature of controlling and supervisory services. IT(TP)A No.850 & 930/Ahd/2015 with CO 56 4.2 We do not agree with the TPO. Building of a plant according to certain standards, may be set by the group, is not per se an activity in the nature of stewardship. The services rendered by the AE have essentially helped the assessee in building a new world class plant. Most of the expenses have been capitalised as cost of the plant. The adjustment proposed by the TPO, in such circumstances is totally unjustified. We direct the AO/TPO to delete the adjustment.” 73. The ld.DR was unable to controvert the factual finding of the DRP that infrastructure and consultancy services were for development of a new plant in Sanand. We therefore see no reason to interfere in the order of the DRP holding that these services cannot be held to be supervisory and stewardship services rendered by the AE to the assessee,as contended by the TPO and as argued by the ld.DR before us. We accordingly uphold the order of the DRP directing the deletion of adjustment made to the infrastructure consultancy and support services by the TPO at NIL, as opposed to Rs.31,86,790/- incurred by the assessee on account of the same. 74. Ground no.3 raised by the Revenue is also dismissed. 75. In view of the above, the appeal of the Revenue is dismissed, and the appeal of the assessee is partly allowed. 76. Now we take up assessee’s CO No.84/Ahd/2015. 77. The grounds raised by the assessee in its CO are as under: “1. On the facts and in the circumstances of the case and in law, the Assessing Officer ("AO")/ Transfer Pricing Officer ("TPO") erred in not appreciating the fact that the Cross objector had capitalized the payment made to the AE for Template Charges amounting to INR 2,91,40,800 and claimed depreciation on it. It is therefore prayed that in the event if the objection of the AO is upheld, than the Ld. AO be directed not to adjust the entire payment made by the IT(TP)A No.850 & 930/Ahd/2015 with CO 57 Cross objector as the international transaction has an impact on the taxable income only to the extent of depreciation claimed on the capital asset. 2. On the facts and in the circumstances of the case and in law, the AO/TPO erred in not appreciating the fact that the Cross objector had treated the payment made to the AE for Infrastructure Consultancy and Support services amounting to INR 31,86,790 as capital work in progress during the year under consideration and had not claimed depreciation on it. It is therefore prayed that in the event if the objection of the AO is upheld, the Ld. AO be directed not to adjust the payment made by the Cross objector on account of international transaction of Infrastructure Consultancy and Support services as the international transaction has no impact on the profit and loss account for the year under consideration.” 78. As is evident from the bare perusal of the above grounds, the plea of the assesseebefore us is two folds, viz. (i) that with respect to TP adjustment made on account of payment of template charges paid to AE of the assessee amounting toRs.2,91,40,800/- treating the ALP of the same as NIL by the TPO, since the assessee had treated the amounts so paid as capital expenditure and claimed only depreciation on the same, therefore, the adjustment to bemade to the income of the assessee on account of determination of ALP of the impugned transactions is to be restricted to claim of depreciation only; (ii) that with respect to TP adjustment made to international transaction of infrastructure consultancy and support services amounting to Rs.31,86,790/- treating ALP at NIL by the AO, the assessee having treated the entire amount paid in work-in-progress and no expenses as such claimed by the assessee in its profit & loss account, no adjustment therefore needed to be made to the income computed by the assessee on account of determination of ALP at NIL by the TPO. 79. On both these issues, the DRP had granted relief to the assessee setting aside the proposed adjustment by the TPO to the ALP of the said two transactions. The Department has come in appeal before us against the order of the DRP in Ground No.(ii) & (iii) raised in its appeal in IT(TP)A.No.850/Ahd/2015 which has been IT(TP)A No.850 & 930/Ahd/2015 with CO 58 dealt by us in the foregoing paragraph-68 to 70 of our above order, upholding the order of the DRP. In view of the same, since we have held that no upward adjustment is warranted in the case of international transaction of both template charges and infrastructure consultancy & support services claimed by the assessee, relief sought by the assessee vide its CO are of no relevance. Hence, both grounds raised in the CO are dismissed. 80. In the result, the CO of the assessee is dismissed. 81. In the combined result, appeal of the Revenue is dismissed; appeal of the assessee is partly allowed and the CO of the assessee is dismissed. Order pronounced in the Court on 31 st May, 2023 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 31/05/2023 vk* आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु !त / Concerned CIT 4. आयकर आय ु !त(अपील) / The CIT(A) 5. $वभागीय 'त'न ध, आयकर अपील य अ धकरण / DR, ITAT, 6. गाड* फाईल / Guard file. आदेशान ु सार/BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील-य अ.धकरण, अहमदाबाद / ITAT, Ahmedabad