Addition can't be made for the Purpose of Disallowing/reducing Amount of Depreciation on assets purchased from AE: ITAT [Read Order]

In the case of BT India. Pvt. Ltd vs DCIT, Delhi bench of Income Tax Appellate Tribunal (ITAT) recently held that no addition can be made for the purpose of disallowing or reducing the amount of depreciation on assets purchased from its Associate Enterprises.

The assessee in the instant case is private limited company filed its return of income for the relevant assessment year and declared its total income of Rs.59,22,60,532 and the Assessee claimed depreciation on fixed assets which they purchased from its associated enterprise during the financial year.

During the assessment period, the Assessing Officer (AO) noticed that the Assessee Company had undertaken the international transaction with its associated enterprise and accordingly he made reference to the Transfer Pricing Officer (TPO). After analyzing the issue the Officer has proposed an addition of Rs.47,26,39,889. Subsequently, the AO computed the tax liability of the Assessee at Rs. 1,08,38,06,550 and disallowed the claim of the Assessee on depreciation also.

Aggrieved by the order of the authority the Assessee carried the matter before the Tribunal and counsel for the Assessee advocate Nageshwar Rao and advocate Parth submitted that as related to depreciation on fixed assets the same is covered by Assessee’s own order for the Assessment Year 2009-10 and the Tribunal was granted relief to the Assessee on the same issue.

After analyzing the above-narrated facts deeply, the Tribunal bench comprising of Judicial Member Suchithra Kamble and Vise President R.S.Syal observed that “international transaction of purchase of fixed asset as independent of all other transactions is not universal. It is illogical to compute the ALP of the transaction of purchase of fixed assets and consequently reduce or nullify the amount of depreciation allowance de hors the consideration of international transaction of the revenue from AE”.

While concluding the issue the division bench further held that “the determination of ALP of the international transaction of purchase of fixed assets, in the facts and circumstances of the instant case, is tax neutral”.

Therefore the bench ordered for the deletion of addition made by disallowing or reducing the amount of depreciation on the assets purchased from AE by restoring the order passed by the Tribunal earlier in Assessee’s own case.

To Read the full text of the Order CLICK HERE