AMD India Private Limited Vs DCIT (ITAT Bangalore)
ITAT Bangalore held that assets received for testing purpose and there is no specific benefit that arises to the assessee with respect to usage of those assets, the same is not taxable under section 28(iv) of the Income tax Act. Accordingly, appeal of assessee allowed.
Facts- The assessee company is engaged in the business of providing software development services in the field of design of semi-conductor products and application solutions to its associated enterprise. During the AY 2013-14, the Assessee had rendered Software Development Services amounting to Rs.168,92,48,762/- to its AE. The Assessee selected Transactional Net Margin Method (“TNMM”) as the most appropriate method to justify the price charged for the Software Development Services rendered to its AE. Post reference, TPO made adjustment of Rs. 10,42,47,726/- in respect to software development services rendered to AE. AO had also made an adjustment amounting to Rs.7,73,50,917/- towards the capital assets received by the Assessee free of cost from AE for testing purposes on the ground that it constitutes benefit to the Assessee u/s 28(iv) of the Act.
CIT(A) partly allowed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that as demonstrated by the invoice copies filed by the assessee, the assets were received for testing purposes and value is given in the invoice only for custom duty purposes. The Assessee acted in accordance with the instructions of AE in relation to usage of these items. Further, the Assessee has no ownership of the assets. When the assets are received for testing purposes, there is no specific benefit that arises to the assessee with respect to usage of those assets. We are of the considered opinion that once the Assets have to be used only for testing purposes, which is one of the services rendered by the assessee to the associated enterprises there is no benefit derived by the assessee out of those assets. The addition is made by the AO only based on presumption and the AO has not demonstrated what benefit was received by the Assessee by use of such assets. We are also of the considered opinion that the assets are used in the process of rendering services. Thus, we direct the AO to delete the entire addition of Rs.7,73,50,917/- as made u/s 28(iv) of the Act. Accordingly this ground of Appeal of the assessee is allowed & the ground of the revenue is dismissed.
