AMD Research & Development Centre India Pvt. Ltd. Vs DCIT (ITAT Hyderabad)
The method of depreciation adopted by the various comparable companies has an impact on the operating result of the respective comparable companies, which is highlighted in the above charts. The assessee company’s percentage of depreciation to total expenditure is 12.80% whereas the mean of the comparable companies are 5.26%. We notice, there is considerable impact on the operating result. Hence, we agree with the DRP that the depreciation should be considered for evaluating the operating results of the comparables.
FULL TEXT OF THE ITAT JUDGEMENT
The appeal by Revenue and cross appeal by Assessee are against the assessment order passed u/s 143(3) read with section 1 44C(5) of the IT Act, 1961. The appeals pertain to AY 201 0-1 1.
2. Briefly the facts of the case are, AMD Research & Development India Pvt. Ltd., is a company engaged in the business of Research, Design and Development of application solutions for semi conductor products. Assessee is a subsidiary of ATI Canada which is a group company of AMD US. AMD US acquired ATI Canada in 2006, pursuant to which ATI Technologies India Private Limited (ATI Technologies’) changed its name to AMD Research & Development Center India Private Limited (‘AMD R&D’). AMD R&D is engaged in rendering of research, design and development services to ATl Canada in connection with the development of consumer technologies. ATI Technologies has entered into research and development agreement with ATI Canada and ATI Barbados dated April 2005.
2.2 AMD Group was founded on 1st May 1969 by a group of former Fairchild semiconductor executives. The AMD group began as a manufacturer of logic chips, and entered the RAM chip business in 1975. AMD US is a part of the AMD Group, based out of Sunnyvale, California, United States. AMD US develops computer processors and related technologies for commercial and consumer markets. The main products of AMD US includes microprocessors, motherboard chipsets, embedded processors and graphics processors for servers, workstations and personal computers, and processor technologies for handheld devices, digital television, and game consoles. Some of the platforms and technologies developed by AMD Group are – AMD chipsets: AMD Live; AMD Quad FX Platform; Commercial Platform; Desktop Platforms; Embedded systems; Flash technology and Mobile platforms.
2.3. During the relevant FY, assessee as per 3CEB report, disclosed the following international transactions with it AEs:
1. ATI Technology ULC Canada – Rs. 102,66,46,782
2. Advanced Micro Devices Inc. – Rs. 12,15,09,540
2.4 Financials of the assessee during the FY 2009-10:
1. Operating revenue Rs.114,81,56,322
2. Operating Cost Rs.103,36,55,531
3. Operating profit Rs.11,45,00,791
4. OP/OR (%) 97%
5. OP/OC (%) 11 .07%
2.5 Assessee has taken 16 comparables out of which the Transfer Pricing Officer (TPO) has rejected 9 and accepted six companies as comparables.
2.6 The final comparables selected by TPO with their OP to OC are as under:
