My foreign group companies ship me handsets, network equipment and other test gear free of cost so that I can test the software I write for them, and I send it back or scrap it when the testing is done. The AO has added the value under s.28(iv) as a benefit arising from my business. Can he?
No, on these facts. The Bangalore Bench deleted an addition of Rs 7,37,33,056 under s.28(iv) on equipment supplied free of cost by the assessee's associated enterprises for testing software the assessee had developed for them. Two things carried it: the equipment was either returned or destroyed after testing, so nothing irretrievable or of enduring nature was made available to the assessee, and the price for the software development services had already been settled under a Mutual Agreement Procedure resolution between the competent authorities of India and Korea, in which the cost of indirect benefits should have been embedded - so if there were a nexus at all it belongs in a transfer pricing adjustment and not in a second addition under s.28(iv). The same order also deleted a s.40(a)(i) disallowance of depreciation on capitalised software, following the coordinate bench in the assessee's own case. Note what the order does not do: it decides nothing under s.194R.
Decided by the ITAT (Income Tax Appellate Tribunal, Bangalore 'A' Bench - Shri George George K., Vice President, and Ms. Padmavathy S., Accountant Member; the order is authored by Padmavathy S., Accountant Member) on 2024-10-22, reported as IT(TP)A No. 625/Bang/2020 (assessee's appeal) and IT(TP)A No. 641/Bang/2020 (Revenue's appeal), Assessment Year 2015-16; heard 16.10.2024, pronounced 22.10.2024; appeals against the order of the Commissioner of Income Tax (Appeals)-10, Bangalore dated 31.02.2020 (the date as printed in the order). It bears on section 28(iv), section 40(a)(i), section 32, section 9(1)(vi), section 90(2), section 92CA of the Income Tax Act 1961, in Assessment & Scrutiny, TDS Defaults and Deductions & Disallowances matters.
This is the order practitioners reach for when an AO taxes free-of-cost inputs supplied by a foreign parent to a captive service provider. It gives you two distinct arguments. The first is the Helios Food test, adopted at para 16: a benefit under s.28(iv) has to be irretrievable - made available to the recipient to be enjoyed or used permanently - and has to be received with an intention to circumvent income, which is why a returned or destroyed test rig is not a benefit while Priyanka Chopra's car was. The second is structural and more useful: where the assessee bills its AEs on cost plus and the arm's length price of those services has already been tested by the TPO or settled under MAP, the value of an indirect benefit received from the same AE has already been absorbed in the margin, and the department cannot add it again under s.28(iv); at para 17 the Bench says that even assuming a nexus, the route would be a transfer pricing adjustment, not s.28(iv). The department's counter, run by the DR here at para 12, is that the assessee bills at cost plus so a cost it never incurred is income it never earned - that argument was put and rejected. The one thing to be careful about is s.194R. Section 194R appears in this order only in the assessee's argument at para 11(x), which cited CBDT Circular No. 12/2022 by analogy for the proposition that a product returned after use is not a benefit or perquisite. The Bench did not take up the circular, did not mention s.194R anywhere in its own reasoning, and did not decide anything about withholding; the year in issue is AY 2015-16 and the order does not state whether s.194R was on the statute book for that year. On the department's own 1961-to-2025 concordance, s.194Q, s.194R and s.194S all map to s.393 of the Income-tax Act 2025 (Tax to be deducted at source), with s.400 (power to relax) and s.402 (interpretation) alongside; that is a concordance mapping and nothing this order says about it.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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Samsung R&D Institute India - Bangalore Pvt. Ltd. is a wholly owned subsidiary of Samsung Electronics Company Ltd., Korea (SECL) and provides software development services to SECL and other group subsidiaries, compensated on a cost plus mark up basis. The work is done to the specific requirements of the AEs for Samsung products - telecom systems, home and office appliances, computer systems, mobile devices and networking products. For AY 2015-16 it returned a total income of Rs 238,85,10,090 on 30.11.2015. The AO referred the international transactions to the TPO, who by order under s.92CA dated 26.10.2018 proposed a transfer pricing adjustment of Rs 1,86,94,215 on the software development services, and the AO passed the assessment order incorporating it. Besides the TP adjustment the AO disallowed Rs 18,20,990 under s.40(a)(i), being depreciation claimed on computer software, on the footing that no tax had been deducted at source on the payments for the software; and he added Rs 7,37,33,056 under s.28(iv) as the value of equipment given to the assessee by its AEs free of cost for software development and testing. The items were testing boards, cameras, accessories, network equipment, printers, SD cards and data storage, imported so that software could be tested and calibrated on the actual hardware and its compatibility with existing hardware checked; the assessee's case was that they were either returned to the AEs or destroyed after testing. The CIT(A) gave partial relief on the TP adjustment and confirmed both the s.40(a)(i) disallowance and the s.28(iv) addition, and both sides appealed. While the appeals were pending the assessee applied for resolution of the transfer pricing dispute under the Mutual Agreement Procedure; the competent authorities of India and Korea agreed to resolve it and this was communicated to the assessee by letter dated 04.12.2023, after which the AO passed an order giving effect to the MAP resolution. By letter dated 12.02.2024 the assessee filed revised grounds confined to the non-transfer-pricing additions, and its ground that no order giving effect to MAP had been passed was not pressed at the hearing.
The assessee's appeal was allowed and the Revenue's appeal dismissed. The Revenue's grounds all concerned the relief the CIT(A) had given on the transfer pricing adjustment, and having become infructuous on the MAP resolution and the order giving effect to it, they were dismissed on that ground alone (para 5). On s.40(a)(i), no disallowance can be made towards depreciation on computer software on the ground that no TDS was deducted on the payments for that software, the facts being identical to AY 2014-15 in the assessee's own case (para 8). On s.28(iv), the addition was deleted: the assets imported free of cost for testing purposes are either returned or destroyed by the assessee, and the pricing for the software development services has been agreed under MAP, so the AO was not correct in making the addition (para 18).
On s.40(a)(i) the Bench simply followed the coordinate bench order dated 30.05.2024 in the assessee's own case for AYs 2011-12 to 2014-15, which it set out in full. The reasoning it adopts is that s.40 operates on an outgoing amount chargeable under the Act and subject to TDS under Chapter XVII-B, whereas depreciation under s.32 is a statutory deduction on an asset owned and used for business, mandatory after Explanation 5 to s.32, and is an allowance and not an expenditure, loss or trading liability; s.40(a)(i) and (ia) therefore do not reach a claim for depreciation. That is the Karnataka High Court's analysis in PCIT v. Tally Solutions Pvt. Ltd., quoted at length, and the coordinate bench had also rejected the DR's argument that the nature of the software needed separate analysis, applying para 100 of Engineering Analysis Centre of Excellence (P) Ltd. v. CIT and s.90(2) to hold that the wider Explanation 2 to s.9(1)(vi) must yield to the treaty definition where the treaty is more beneficial, and that the Revenue had put nothing on record to show a transfer of rights amounting to royalty. On s.28(iv) the Bench set out the provision - 'the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession' - and framed the limited question as whether the free import of testing assets is a benefit in the nature of income arising from the business of software development (paras 14-15). It took its test from para 16 of the Mumbai Bench's order in Helios Food Improvers (P.) Ltd. v. DCIT, ITA No.1748/Mum/2003 dated 28.02.2007, quoted in the order: 'benefit' and 'perquisite' are to be read together and draw colour from each other, a perquisite is something the giver knows from the outset is irretrievable to him, and so a benefit too must be something irretrievable given at the time of the business transaction, the crucial fact always being circumvention of income by taking or receiving income in other forms. The Bench distilled that at para 16 into a two-part test - the benefit must be irretrievable, in the sense of being made available to the recipient to be enjoyed or used permanently, and must be received with an intention to circumvent income - and illustrated it by a seller who sells at a discount and takes a gift back from the purchaser, and by Priyanka Chopra, where the car had a direct nexus to the assessee's professional services as brand ambassador. Applying that at para 17, the equipment was returned or destroyed once testing was complete, so it was never made available permanently and gave no benefit of enduring nature; and being testing equipment or prototypes, the assets in isolation could not be used to derive any benefit. The Bench then addressed the income limb through the transfer pricing history: the arm's length price of the services had already been tested by the TPO and the pricing dispute resolved through MAP, in which the cost of indirect benefits received by the assessee should have been embedded in arriving at the margin, so it could not be alleged that the assessee had reduced the price charged for its services against the value of the free assets, and the Revenue had brought nothing on record to substantiate such a contention. Even assuming a nexus between the price charged and the free import, the correction would be a transfer pricing adjustment to the price charged for software development, and that price is already agreed under MAP - so there is no justification for a separate s.28(iv) addition on the footing that a cost actually incurred would have increased the assessee's cost-plus billing, which was the DR's argument at para 12.
In view of these discussion we are of the view that the AO is not correct in making addition under section 28(iv) of the Act given that the assets imported free of cost for testing purposes are either returned or destroyed by the assessee and that the pricing towards software development services rendered are agreed under MAP.
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Handle my notice → Ask a CA on WhatsAppNo, on these facts. The Bangalore Bench deleted an addition of Rs 7,37,33,056 under s.28(iv) on equipment supplied free of cost by the assessee's associated enterprises for testing software the assessee had developed for them. Two things carried it: the equipment was either returned or destroyed after testing, so nothing irretrievable or of enduring nature was made available to the assessee, and the price for the software development services had already been settled under a Mutual Agreement Procedure resolution between the competent authorities of India and Korea, in which the cost of indirect benefits should have been embedded - so if there were a nexus at all it belongs in a transfer pricing adjustment and not in a second addition under s.28(iv). The same order also deleted a s.40(a)(i) disallowance of depreciation on capitalised software, following the coordinate bench in the assessee's own case. Note what the order does not do: it decides nothing under s.194R. This was decided by the ITAT (Income Tax Appellate Tribunal, Bangalore 'A' Bench - Shri George George K., Vice President, and Ms. Padmavathy S., Accountant Member; the order is authored by Padmavathy S., Accountant Member) and bears on section 28(iv), section 40(a)(i), section 32, section 9(1)(vi), section 90(2), section 92CA of the Income Tax Act 1961. It is reported as IT(TP)A No. 625/Bang/2020 (assessee's appeal) and IT(TP)A No. 641/Bang/2020 (Revenue's appeal), Assessment Year 2015-16; heard 16.10.2024, pronounced 22.10.2024; appeals against the order of the Commissioner of Income Tax (Appeals)-10, Bangalore dated 31.02.2020 (the date as printed in the order). This is the order practitioners reach for when an AO taxes free-of-cost inputs supplied by a foreign parent to a captive service provider. It gives you two distinct arguments. The first is the Helios Food test, adopted at para 16: a benefit under s.28(iv) has to be irretrievable - made available to the recipient to be enjoyed or used permanently - and has to be received with an intention to circumvent income, which is why a returned or destroyed test rig is not a benefit while Priyanka Chopra's car was. The second is structural and more useful: where the assessee bills its AEs on cost plus and the arm's length price of those services has already been tested by the TPO or settled under MAP, the value of an indirect benefit received from the same AE has already been absorbed in the margin, and the department cannot add it again under s.28(iv); at para 17 the Bench says that even assuming a nexus, the route would be a transfer pricing adjustment, not s.28(iv). The department's counter, run by the DR here at para 12, is that the assessee bills at cost plus so a cost it never incurred is income it never earned - that argument was put and rejected. The one thing to be careful about is s.194R. Section 194R appears in this order only in the assessee's argument at para 11(x), which cited CBDT Circular No. 12/2022 by analogy for the proposition that a product returned after use is not a benefit or perquisite. The Bench did not take up the circular, did not mention s.194R anywhere in its own reasoning, and did not decide anything about withholding; the year in issue is AY 2015-16 and the order does not state whether s.194R was on the statute book for that year. On the department's own 1961-to-2025 concordance, s.194Q, s.194R and s.194S all map to s.393 of the Income-tax Act 2025 (Tax to be deducted at source), with s.400 (power to relax) and s.402 (interpretation) alongside; that is a concordance mapping and nothing this order says about it. If it applies to you, the first step is this: Build the record on retrievability first. This addition fell because the equipment was returned or destroyed - keep shipping documents, re-export or scrap records and the asset-by-asset schedule (the assessee's ran to pages 119 to 182 of the paperbook and it filed additional evidence on the point), because the Bench treated the returned-or-destroyed fact as undisputed on the strength of the CIT(A)'s own observations.
Samsung R&D Institute India - Bangalore Pvt. Ltd. is a wholly owned subsidiary of Samsung Electronics Company Ltd., Korea (SECL) and provides software development services to SECL and other group subsidiaries, compensated on a cost plus mark up basis. The work is done to the specific requirements of the AEs for Samsung products - telecom systems, home and office appliances, computer systems, mobile devices and networking products. For AY 2015-16 it returned a total income of Rs 238,85,10,090 on 30.11.2015. The AO referred the international transactions to the TPO, who by order under s.92CA dated 26.10.2018 proposed a transfer pricing adjustment of Rs 1,86,94,215 on the software development services, and the AO passed the assessment order incorporating it. Besides the TP adjustment the AO disallowed Rs 18,20,990 under s.40(a)(i), being depreciation claimed on computer software, on the footing that no tax had been deducted at source on the payments for the software; and he added Rs 7,37,33,056 under s.28(iv) as the value of equipment given to the assessee by its AEs free of cost for software development and testing. The items were testing boards, cameras, accessories, network equipment, printers, SD cards and data storage, imported so that software could be tested and calibrated on the actual hardware and its compatibility with existing hardware checked; the assessee's case was that they were either returned to the AEs or destroyed after testing. The CIT(A) gave partial relief on the TP adjustment and confirmed both the s.40(a)(i) disallowance and the s.28(iv) addition, and both sides appealed. While the appeals were pending the assessee applied for resolution of the transfer pricing dispute under the Mutual Agreement Procedure; the competent authorities of India and Korea agreed to resolve it and this was communicated to the assessee by letter dated 04.12.2023, after which the AO passed an order giving effect to the MAP resolution. By letter dated 12.02.2024 the assessee filed revised grounds confined to the non-transfer-pricing additions, and its ground that no order giving effect to MAP had been passed was not pressed at the hearing. The matter was decided on 2024-10-22 by the ITAT (Income Tax Appellate Tribunal, Bangalore 'A' Bench - Shri George George K., Vice President, and Ms. Padmavathy S., Accountant Member; the order is authored by Padmavathy S., Accountant Member). On those facts the ITAT held as follows. The assessee's appeal was allowed and the Revenue's appeal dismissed. The Revenue's grounds all concerned the relief the CIT(A) had given on the transfer pricing adjustment, and having become infructuous on the MAP resolution and the order giving effect to it, they were dismissed on that ground alone (para 5). On s.40(a)(i), no disallowance can be made towards depreciation on computer software on the ground that no TDS was deducted on the payments for that software, the facts being identical to AY 2014-15 in the assessee's own case (para 8). On s.28(iv), the addition was deleted: the assets imported free of cost for testing purposes are either returned or destroyed by the assessee, and the pricing for the software development services has been agreed under MAP, so the AO was not correct in making the addition (para 18).
On s.40(a)(i) the Bench simply followed the coordinate bench order dated 30.05.2024 in the assessee's own case for AYs 2011-12 to 2014-15, which it set out in full. The reasoning it adopts is that s.40 operates on an outgoing amount chargeable under the Act and subject to TDS under Chapter XVII-B, whereas depreciation under s.32 is a statutory deduction on an asset owned and used for business, mandatory after Explanation 5 to s.32, and is an allowance and not an expenditure, loss or trading liability; s.40(a)(i) and (ia) therefore do not reach a claim for depreciation. That is the Karnataka High Court's analysis in PCIT v. Tally Solutions Pvt. Ltd., quoted at length, and the coordinate bench had also rejected the DR's argument that the nature of the software needed separate analysis, applying para 100 of Engineering Analysis Centre of Excellence (P) Ltd. v. CIT and s.90(2) to hold that the wider Explanation 2 to s.9(1)(vi) must yield to the treaty definition where the treaty is more beneficial, and that the Revenue had put nothing on record to show a transfer of rights amounting to royalty. On s.28(iv) the Bench set out the provision - 'the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession' - and framed the limited question as whether the free import of testing assets is a benefit in the nature of income arising from the business of software development (paras 14-15). It took its test from para 16 of the Mumbai Bench's order in Helios Food Improvers (P.) Ltd. v. DCIT, ITA No.1748/Mum/2003 dated 28.02.2007, quoted in the order: 'benefit' and 'perquisite' are to be read together and draw colour from each other, a perquisite is something the giver knows from the outset is irretrievable to him, and so a benefit too must be something irretrievable given at the time of the business transaction, the crucial fact always being circumvention of income by taking or receiving income in other forms. The Bench distilled that at para 16 into a two-part test - the benefit must be irretrievable, in the sense of being made available to the recipient to be enjoyed or used permanently, and must be received with an intention to circumvent income - and illustrated it by a seller who sells at a discount and takes a gift back from the purchaser, and by Priyanka Chopra, where the car had a direct nexus to the assessee's professional services as brand ambassador. Applying that at para 17, the equipment was returned or destroyed once testing was complete, so it was never made available permanently and gave no benefit of enduring nature; and being testing equipment or prototypes, the assets in isolation could not be used to derive any benefit. The Bench then addressed the income limb through the transfer pricing history: the arm's length price of the services had already been tested by the TPO and the pricing dispute resolved through MAP, in which the cost of indirect benefits received by the assessee should have been embedded in arriving at the margin, so it could not be alleged that the assessee had reduced the price charged for its services against the value of the free assets, and the Revenue had brought nothing on record to substantiate such a contention. Even assuming a nexus between the price charged and the free import, the correction would be a transfer pricing adjustment to the price charged for software development, and that price is already agreed under MAP - so there is no justification for a separate s.28(iv) addition on the footing that a cost actually incurred would have increased the assessee's cost-plus billing, which was the DR's argument at para 12. In the words reproduced by the source cited on this page: "In view of these discussion we are of the view that the AO is not correct in making addition under section 28(iv) of the Act given that the assets imported free of cost for testing purposes are either returned or destroyed by the assessee and that the pricing towards software development services rendered are agreed under MAP." The decision followed or applied Coordinate bench of the Bangalore Tribunal in the assessee's own case for AYs 2011-12 to 2014-15, order dated 30.05.2024 - followed on s.40(a)(i) and reproduced in full (paras 7-8); the order does not give its appeal numbers; PCIT v. Tally Solutions Pvt. Ltd. (Karnataka High Court) - the analysis relied on for depreciation not being an expenditure within s.40(a)(i); quoted at length inside the coordinate bench order, which cites it only as '(supra)' so no citation appears in this order; SKOL Breweries Ltd. v. ACIT (2013) 29 taxmann.com 111 (Mumbai Tribunal) - noted in the quoted coordinate bench order as expressing the same view; Engineering Analysis Centre of Excellence (P) Ltd. v. CIT (2021) 125 taxmann.com 42 - para 100 relied on in the quoted coordinate bench order, with s.90(2), to reject the argument that the software payments were royalty; Helios Food Improvers (P.) Ltd. v. DCIT, ITA No.1748/Mum/2003 dated 28.02.2007 (Mumbai Bench) - para 16 relied on for the irretrievability and circumvention-of-income test under s.28(iv) (paras 15-16); Priyanka Chopra (Mumbai Bench) - relied on by the AO and distinguished by the Tribunal at para 16 on the ground that the car there had a direct nexus to the professional services rendered; the order gives no citation for it.
It was decided by the ITAT on 2024-10-22 and is reported as IT(TP)A No. 625/Bang/2020 (assessee's appeal) and IT(TP)A No. 641/Bang/2020 (Revenue's appeal), Assessment Year 2015-16; heard 16.10.2024, pronounced 22.10.2024; appeals against the order of the Commissioner of Income Tax (Appeals)-10, Bangalore dated 31.02.2020 (the date as printed in the order). Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 28(iv), section 40(a)(i), section 32, section 9(1)(vi), section 90(2), section 92CA, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The assessee's appeal was allowed and the Revenue's appeal dismissed. The Revenue's grounds all concerned the relief the CIT(A) had given on the transfer pricing adjustment, and having become infructuous on the MAP resolution and the order giving effect to it, they were dismissed on that ground alone (para 5). On s.40(a)(i), no disallowance can be made towards depreciation on computer software on the ground that no TDS was deducted on the payments for that software, the facts being identical to AY 2014-15 in the assessee's own case (para 8). On s.28(iv), the addition was deleted: the assets imported free of cost for testing purposes are either returned or destroyed by the assessee, and the pricing for the software development services has been agreed under MAP, so the AO was not correct in making the addition (para 18). It arises in Assessment & Scrutiny, TDS Defaults and Deductions & Disallowances matters, on section 28(iv), section 40(a)(i), section 32, section 9(1)(vi), section 90(2), section 92CA of the Income Tax Act 1961, and was decided by Income Tax Appellate Tribunal, Bangalore 'A' Bench - Shri George George K., Vice President, and Ms. Padmavathy S., Accountant Member; the order is authored by Padmavathy S., Accountant Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Show that the item cannot be used for anything else. Para 17 accepts that testing equipment and prototypes in isolation cannot be used to derive any benefit; a general-purpose asset that the assessee could deploy in its own business will not fit this reasoning. Put the transfer pricing history on the file. If the arm's length price of your services has been tested by the TPO, or settled in an APA or under MAP, say so and say that the cost of indirect benefits was embedded in the margin - that is what closes off the DR's cost-plus argument here. Make the AO identify the benefit. The assessee's point at para 11(iv), that it is for the AO to demonstrate what benefit is derived and that a vague allegation will not do, was in substance accepted: the Bench recorded that the Revenue brought nothing on record to substantiate a reduction in the price charged. Do not cite this order for s.194R. If the question is withholding on a benefit or perquisite, the corpus already carries the circular itself at cbdt-circular-12-2022-194r and the explainer at 194r-benefit-or-perquisite-tds; this order is authority on s.28(iv) and s.40(a)(i) only.
Still good law. This is an order of the Bangalore Bench of the Income Tax Appellate Tribunal pronounced on 22 October 2024. No search for later treatment was carried out in this pass - the entry was written from the text of the order alone, and no digest, reporter or citator was consulted, so it is not known here whether the Revenue took it to the Karnataka High Court under s.260A or whether any bench has since followed or distinguished it. What would displace it: a High Court or Supreme Court decision on whether the free supply of returnable inputs by an AE is a benefit under s.28(iv), a contrary view of a Special Bench, or a statutory change. Two of its limbs are narrower than they look and would not survive a change of facts - the returned-or-destroyed finding, and the reliance on the price having been settled under MAP. The s.40(a)(i) limb rests on a Karnataka High Court decision in PCIT v. Tally Solutions Pvt. Ltd. and on the Supreme Court in Engineering Analysis, whose current standing was not checked in this pass. That finding was checked against a published source, which is linked on this page, on 2026-09-05. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Written from the full text of the order only; no digest, reporter or citator was consulted, and no reporter citation is given because the file carries none. The most important thing to record is what is not here. Section 194R is mentioned four times in this order and every one of them is inside the assessee's argument at para 11(x), where CBDT Circular No. 12/2022 dated 16.02.2022 was cited by analogy - a product returned to the manufacturer after being used to render a service is not a benefit or perquisite for s.194R. The Tribunal's own discussion runs from para 13 to para 18 and does not mention s.194R or the circular at all. So this is not a judgment on s.194R, and it should not be indexed or cited as one; it decides s.40(a)(i) and s.28(iv). Indian Kanoon carries the Revenue's cross-appeal, IT(TP)A No. 641/Bang/2020, as a separate document bearing the same date and the same text - this is one order disposing of both cross-appeals and this is one entry for it. Several slips are visible on the face of the order and a reader should not be thrown by them: the CIT(A)'s order is dated '31.02.2020', a date that does not exist; the running head throughout reads 'IT(TP)A Nso.'; para 16 reads 'the benefit should irretrievable', evidently for 'should be irretrievable'; the CIT(A) refers repeatedly to 'section 28(i)(iv)', which is not a provision - s.28(iv) is meant; and para 2 spells 'capive' for captive. The order reproduces the coordinate bench order for AYs 2011-12 to 2014-15 in full for the s.40(a)(i) point, and inside that quoted passage the Karnataka High Court decision is identified only as 'PCIT vs. Tally Solutions Pvt. Ltd. (supra)' with no citation, so no citation for it is given here. At para 17 the Bench says it is 'an undisputed fact' that the equipment was returned or destroyed and refers to the CIT(A)'s observations; what the CIT(A) actually recorded at para 17.1 is that 'Some stray information filed indicate that few assets have been returned back to the AE, whereas majority of these free of cost assets have been destroyed during the year and afterwards', and that the assessee had not produced the AEs' or its own books to show how the assets were disclosed. The Bench does not deal with the CIT(A)'s further finding that the intercompany invoices required payment within 30 days, which the CIT(A) thought contradicted the free-of-cost case. The decisions cited by the AR in David Dhawan, Rupee Finance & Management and the AO's reliance on Servall Engineering Works, TV Sundaram Iyengar & Sons, Solid Containers and Logitronics are recorded in the order as argument or as the orders below but are not dealt with in the Tribunal's reasoning. Nothing is said about the Income-tax Act 2025. The largest gap is the one the caption invites. This order decides nothing about s.194R. It does not decide whether the free supply of goods by a non-resident associated enterprise is a benefit or perquisite for s.194R, whether a person providing such a benefit wholly in kind must deduct or collect tax before releasing it, whether s.194R reaches a foreign supplier at all, or what weight CBDT Circular No. 12/2022 carries - the circular is cited only in the assessee's argument at para 11(x) and the Bench never touches it. The year in issue is AY 2015-16 and the order does not state whether s.194R was in force for that year, so it does not even tell you that the section could have applied. A reader who needs the withholding answer should go to the circular and to the s.194R explainer, not here. On s.28(iv) itself a great deal is left open. It does not decide the position where the free asset is retained by the recipient rather than returned or destroyed - on the Bench's own reasoning that is a different case, and the CBDT's guidance quoted in argument says a retained product is a benefit. It does not decide what happens where the recipient is not a captive service provider, or where its pricing has not been tested by a TPO, an APA or MAP; both of the Bench's grounds depend on those features. It does not lay down how a benefit in kind would be valued if it were taxable, and it does not test the Rs 7,37,33,056 figure the AO arrived at or say how he arrived at it. It does not decide the argument the CIT(A) rejected, that assets capital in nature fall outside s.28(iv), nor does it deal with the CIT(A)'s reliance on TV Sundaram Iyengar & Sons, Solid Containers and Logitronics; those authorities are simply not addressed. It does not deal with the CIT(A)'s finding that the intercompany invoices required payment within 30 days, which the CIT(A) treated as contradicting the free-of-cost case. It does not say whether the additional evidence the assessee filed on returns and destruction was admitted, and it does not record any finding on the proportion returned as against destroyed - the CIT(A) had said a few were returned and the majority destroyed, and the Bench treats the whole as undisputed. It says nothing about whether the assessee claimed depreciation on the free assets, about customs treatment beyond the assessee's assertion in argument that duty was not leviable on equipment brought in for export services, or about s.56(2)(x). On the transfer pricing side, the MAP resolution's terms are not set out - the order says only that the cost of indirect benefits 'should have been embedded' in the margin, and does not say that the competent authorities in fact took the free assets into account, so how far the argument runs where the MAP or APA record is silent is untested. The Revenue's appeal was dismissed as infructuous, so nothing in it about the CIT(A)'s partial relief on the TP adjustment was decided. On s.40(a)(i), the order decides only that depreciation is not caught by s.40(a)(i) for want of TDS; it does not decide whether the software payments were royalty and whether tax ought to have been deducted under s.195 in the first place, and it does not deal with the consequences under s.201 if it ought to have been. No successor provision under the Income-tax Act 2025 is stated for s.28(iv) or s.40(a)(i), because the order says nothing about that Act. 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The assessee's appeal was allowed and the Revenue's appeal dismissed. The Revenue's grounds all concerned the relief the CIT(A) had given on the transfer pricing adjustment, and having become infructuous on the MAP resolution and the order giving effect to it, they were dismissed on that ground alone (para 5). On s.40(a)(i), no disallowance can be made towards depreciation on computer software on the ground that no TDS was deducted on the payments for that software, the facts being identical to AY 2014-15 in the assessee's own case (para 8). On s.28(iv), the addition was deleted: the assets imported free of cost for testing purposes are either returned or destroyed by the assessee, and the pricing for the software development services has been agreed under MAP, so the AO was not correct in making the addition (para 18).
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