Sandisk IndiCentre Private Lima Device Design ited, Bengaluru V. Joint Commissioner Of Income Tax, Special Range-6, Bangalore

MA 8/BANG/2023

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The case involves M/s. SanDisk India Device Design Centre Pvt. Ltd. filing a miscellaneous petition against an earlier Tribunal order concerning the assessment year 2016-17. The petition addressed issues related to the exclusion of certain comparables in a transfer pricing analysis and the treatment of free of cost assets received from an associated enterprise (AE). The Tribunal examined whether there were mistakes in the original order regarding the comparables and whether the value of free of cost assets should be treated as capital in nature. The Tribunal found no mistakes in the treatment of the comparables but did address and adjudicate the previously unconsidered ground regarding the capital nature of the assets received free of cost from the AE.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 115311 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 05-03-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 05-01-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 14-12-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU “B” BENCH, BENGALURU BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER MP No. 8/Bang/2023 (Arising out of IT(TP)A No.288/Bang/2021) (Assessment Year: 2016-17) M/s. SanDisk India Device Design Centre Pvt. Ltd. Survey No. 143/1, Amani Bellandur Khane Village, Prestige Tech Park, Marathalli-Sarjapur Outer Ring Road Kadubeesanahalli, Varthur Hobli Bangalore 560103 PAN – AAICS9204M vs JCIT (OSD), Circle 6(1)(1) Bangalore (Applicant) (Respondent) Applicant by: Shri Ajay Rotti, CA Respondent by: Shri Pavan Kumar, Addl. CIT Date of hearing: 06/01/2023 Date of pronouncement: 06/03/2023 O R D E R PER: BEENA PILLAI, J.M. The present miscellaneous petition has been filed by the assessee against the order of the Tribunal dated 30.06.2022. The learned A.R. submitted that there has been certain mistakes that crept in the order passed by the Tribunal that deserves to be considered. 2. Referring to Ground No. 10.5 raised in the original grounds of appeal, which is reproduced in the impugned order, the learned A.R. submitted that this Tribunal has directed the learned TPO to verify the claim of persistent loss making in respect of comparable Goldstone Technologies Ltd. that was sought MP No. 8/Bang/2023 M/s. SanDisk India Device Design Centre Pvt. Ltd. 2 to be excluded by the assessee. The learned A.R. submitted that the assessee had argued for exclusion of Goldstone Technologies Ltd. due to the persistent loss incurred in the preceding years. 3. The learned D.R., on the contrary, submitted that no injury is caused to the assessee as this comparable has been remanded to the learned AO to verify. 4. We have heard the rival contentions and perused the material on record. We note that the assessee had submitted that this comparable has incurred losses in two out of three financial years that were considered for benchmarking. However, the reason for such loss has not been categorically noted down and it is not possible to decipher from the annual report of this company. It was for such reasons that this comparable has been remanded to the learned AO/TPO for verification. We do not find any reasons to interfere with such a view taken in respect of this comparable and accordingly this objection raised by the assessee does not amount to a mistake apparent on record and the same is dismissed. 5. The next issue raised by the learned A.R. is in respect of comparable Cybage Software Pvt. Ltd. The learned A.R. submitted that this comparable was submitted to be not functionally similar to the assessee. He submitted that, this Tribunal while passing the order recorded that the assessee did not press for exclusion of this company. He submitted that various written submissions have been filed for exclusion of this company which has not been considered at the time of passing of this order and accordingly this amounts to a mistake apparent on record. 6. The learned D.R., on the contrary, supported the view taken by this Tribunal. 7. We have heard the rival contentions and perused the material on record. In order to verify the submission of the learned A.R. in the present MP on this MP No. 8/Bang/2023 M/s. SanDisk India Device Design Centre Pvt. Ltd. 3 issue. We have cross checked the log book notings, wherein it is noted that the learned A.R. did not argue exclusion of Cybage Software Pvt. Ltd. No doubt, various submissions are placed on record in respect of many such comparables which has not been pressed by the learned A.R./assessee. Since this comparable was not specifically argued on the date of hearing there is a specific noting in the order mentioning that this comparable has not been argued and therefore not considered. We, therefore, do not find it to be a mistake apparent on record and accordingly this objection raised by the assessee stands dismissed. 8. The third issue raised by the assessee in this present MP is in respect of not deciding Ground No. 13.1. The learned A.R. submitted that, this Tribunal in para 22 & 22.1 has only considered Ground No. 13.2 granting depreciation on free of cost assets received by the assessee from its AE. As a corollary he submitted that Ground 13.1 has to be decided in respect of treating the value of free of cost assets to be capital in nature. We note that this ground has not been specifically adjudicated in the order dated 30.06.2022. Accordingly we adjudicate ground No. 13.1 herein by observing as under: - 22.2 Ground No. 13.1: The Hon'ble Panel erred in upholding the action of the NeAC in treating the value of free of cost assets received by the Appellant as prerequisites/ benefits arising to the Appellant under section 28(iv) of the Act and bringing the same to tax. 22.3 The assessee has received free of cost assets from its Associated Enterprises which were used for the purpose of rendering services as per the AE’s requirements. It is submitted by the learned A.R. that no benefit is received by the assessee in respect of such assets and accordingly provisions of Section 28(iv) of the Act cannot be applied. It is the submission of the learned A.R. that the assessee is not engaged in the business of trading of capital goods received from the AE and such goods are used for the purpose of rendering specific services for the AE. 22.4 On the contrary, the learned D.R. submitted that the goods obtained by the assessee from its AE free of cost is benefitted the assessee in rendering its services to the AE. It is also brought to the MP No. 8/Bang/2023 M/s. SanDisk India Device Design Centre Pvt. Ltd. 4 notice that the assessee has paid customs duty on arrival of such goods and therefore it cannot be said that no value is attributable to the goods that is received from the AE. He thus submitted that the learned AO has rightly treated the assets to be capital in nature, hence taxable under Section 28(i)(iv) of the Act. 22.5 We have heard the rival contentions and perused the material on record. We note that the assets received by the assessee free of cost during the year under consideration from it AE is worth Rs.57,89,38,923/- It is noted by the DRP that these assets include computers, testing equipments, computer accessories and SD cards. Before the learned AO the assessee submitted that the assets received from the AE are on capital account. And it is not the case were the assessee would be returning these goods back to the AE after testing is completed. Admittedly these goods are provided by the AE which are custom made designs specifically used for the projects undertaken by the AE and are not available in the open market for purchase for commercial purposes. Under such circumstances admittedly if these goods/equipments are not received by the assessee on returnable basis it definitely amounts to benefit in the hands of the assessee. In our view the approach adopted by the authorities below are correct and these goods received by the assessee have to be capitalised. Accordingly we do not find any merit in this ground raised by the assessee and is dismissed. 9. Above paragraphs shall be inserted and read after para 22.1 at page 29 of the order dated 30.06.2022. Accordingly, the M.P. stands partly allowed. Dictated and pronounced in the open Court on 06 th March, 2023. Sd/- Sd/- (LAXMI PRASAD SAHU) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER Bengaluru, Dated: 06 th March, 2023. MP No. 8/Bang/2023 M/s. SanDisk India Device Design Centre Pvt. Ltd. 5 Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) - 4. The CIT - 5. The DR, ITAT, Bengaluru 6. Guard File By Order //True Copy// Assistant Registrar ITAT, Bengaluru n.p.