Capitalized Expense shouldn’t be considered for computation of proportionate TP adjustment

Toyota Industries Engine India Pvt Ltd Vs NFAC (ITAT Bangalore)

ITAT Bangalore held that as professional and consultation charges & purchase of fixed assets are capitalized in the books of accounts, it should not be considered for computation of proportionate TP adjustment.

Facts- This appeal by assessee is directed against final assessment order passed by AO / NFAC for the assessment year 2016-17.

It mainly contested that AO has erred in computation of proportionate adjustment by including the two international transactions which are capital in nature i.e. Payment of professional and consultancy charges and Purchase of fixed assets.

Conclusion- We are inclined to remit this issue to the file of Assessing Officer/TPO to examine whether these two expenditures namely payment of professional and consultation charges & purchase of fixed assets are capitalized in the books of accounts of assessee. If it is so, these expenditures cannot be considered for computation of proportionate TP adjustment and the Assessing Officer/TPO has to decide the issue after giving the opportunity of hearing to the assessee.

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