DCIT, New Delhi V. M/s. Valvoline Cummins Ltd., New Delhi

ITA 1045/DEL/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5632 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 29-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Opportunity of being heard; International transaction
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI B BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA , ACCOUNTANT MEMBER, AND MS. SUCHITRA KAMBLE , JUDICIAL MEMBER ITA NO. 1 045 /DEL/20 1 6 [A.Y 20 1 1 - 1 2 ] THE DY . C.I.T VS. VALVOLINE CUMMINS LTD CIRCLE - 2 6 ( 1 ) 50/8, 1 ST FLOOR NEW DELHI TOLSTOY MARG, JANPATH , NEW DELHI PAN : AA ACW 0287 A [APPELLANT] [RESPONDENT] DATE OF HEARING : 29. 0 1 .201 9 DATE OF PRONOUNCEMENT : 3 0 . 0 1 .201 9 ASSESSEE BY : SHRI AJAY VOHRA, SR. ADV SHRI NEERAJ JAIN, ADV REVENUE BY : SHRI H.K. CHOUDHARY, CIT - DR ORDER PER N.K. BILLAIYA , ACCOUNTANT MEMBER, THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER DATED 30 . 1 2 . 201 5 FRAMED U/S 143(3) R.W.S 144C OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT] PERTAINING TO A.Y 20 1 1 - 1 2 . 2 2. THE GRIEVANCE RAISED BY THE REVENUE READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE DRP - 2 ERRED IN DIRECTING AO TO COMPLETE THE ASSESSMENT AS PER OBSERVATIONS MADE BY DRP IN THE ORDER WHICH RESULTING IN REDUCING THE ADDITION TO RS.21.98,34.275/ - IN PLACE OF ORIGINAL RECOMMENDED ALP OF RS.36.34.86.455/ - FOR THE INTERNATIONAL TRANSACTIONS UNDERTAKEN THE ASSESSEE COMPANY WITH ITS ASSOCIATE/PARENT ENTERPRISE'. '2. WHETHER THE DRP WAS JUSTIFIED IN NOT APPRECIATING THE FACT THAT BRIGHT LINE IS A M ERE STEP [OF THE MOST APPROPRIATE METHOD FOR BENCHMARKING THE AMP SERVICES] CARRIED OUT TO ESTIMATE AND BIFURCATE EXPENDITURE PERTAINING TO THE TAXPAYER FOR ITS OWN ROUTINE DISTRIBUTION FUNCTION AND THE EXPENDITURE INCURRED ON AMP SERVICE PROVIDED TO THE A E IN A SITUATION WHERE THE ASSESSEE HAS NOT REPORTED THE INTERNATIONAL TRANSACTION PERTAINING TO MARKETING FUNCTION.' 3. 'WHETHER UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE HON'BLE DRP WAS CORRECT IN HOLDING THAT PLR CANNOT BE THE BASIS FOR COMPUTING MARKUP ON AMP EXPENSES WITHOUT APPRECIATING THE REVENUES CASE WHEREIN THE PLR OF BANKS HAS BEEN USED AS AN UNCONTROLLED COMPARABLE TO BENCHMARK THE OPPORTUNITY COST OF MONEY INVOLVED AND LOCKED UP IN AMP EXPENSE? 3 4. 'WHETHER IN THE FACTS AN D CIRCUMSTANCE OF THE CASE AND IN LAW THE HON'BLE DRP WAS JUSTIFIED IN STATING THAT ROUTINE SELLING AND DISTRIBUTION EXPENSES WOULD NOT FORM PART OF AMP EXPENSES DISREGARDING THAT FACT THAT THESE EXPENSES CONTRIBUTE TO CREATION OF MARKETING INTANGIBLE) EVE N WHILE THE SAME IS A FACTOR FOR COMPARABILITY ANALYSIS AS DIFFERENT ENTITIES ACCOUNT FOR SUCH EXPENDITURE UNDER DIFFERENT HEADS?' 3. AT THE VERY OUTSET, THE LD. AR STATED THAT THE GRIEVANCE OF THE REVENUE IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y 201 1 - 1 2 . 4. THE LD. DR COULD NOT BRING ANY DISTINGUISHING DECISION IN FAVOUR OF THE REVENUE. 5. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW AND THE ORDER OF TH E TRIBUNAL IN ITA NO. 527/DEL/2016 . WE FIND FORCE IN THE CONTENTION OF THE LD. AR. AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL IN ITA NO. 527 /DEL/201 6 VIDE ORDER DATED 26.11.2018. THE RELEVANT FINDINGS OF THE CO - ORDINATE BENCH READ AS UNDER: 4 16. AFTER CONSIDERING THE LEGAL POSITION AS DISCUSSED IN THE PRECEDING PARAGRAPHS, WE ARE OF THE CONSIDERED OPINION THAT THE ALP OF AN INTERNATIONAL TRANSACTION INVOLVING AMP EXPENSES, THE ADJUSTMENT MADE BY THE TPO/DRP/AO IS NOT SUSTAINABLE IN THE EYES OF LAW. AT THE SAME TIME, WE CANNOT IGNORE THE SUBMISSION OF THE LEARNED DR THAT THE MATTER IS PENDING BEFORE HON'BLE APEX COURT AND THE DECISION OF HON'BLE APEX COURT WOULD BE BINDING UPON ALL THE AUTHORITIES. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDERS O F AUTHORITIES BELOW AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER. WE HOLD THAT AS PER THE FACTS OF THE CASE AND THE LEGAL POSITION AS OF NOW AND DISCUSSED ABOVE IN THIS ORDER, THE ADJUSTMENT MADE BY THE TPO/DRP/AO IN RESPECT OF AMP EXPENSES IS NOT SUSTAINABLE. HOWEVER, IF THE ABOVE DECISIONS OF HON'BLE JURISDICTIONAL HIGH COURT WHICH IS UNDER CONSIDERATION BEFORE THE HON'BLE APEX COURT IS MODIFIED OR REVERSED BY THE HON'BLE APEX COURT, THEN THE ASSESSING OFFICER WOULD PASS THE ORDER AFRESH CO NSIDERING THE DECISION OF HON'BLE APEX COURT. IN THOSE CIRCUMSTANCES, HE WILL ALSO ALLOW OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5 6. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO - ORDINATE BENCH [SUPRA] , WE DECLINE TO INTERFERE. GROUNDS RAISED BY THE REVENUE STAND DISMISSED. 7 . IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 1045 /DEL/201 6 IS DISMISSED. THE ORDER IS PRON OUNCED IN THE OPEN COURT ON 3 0 . 0 1 .201 9 . S D / - S D / - [ SUCHITRA KAMBLE ] [ N.K. BILLAIYA ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 0 T H JANUARY , 201 9 VL/ COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 6 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER