M/s. Whirlpool of India Ltd., Gurgaon V. DCIT, New Delhi

ITA 1972/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7436 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Next Hearing Date: 12-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 06-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY I BARA
• Keywords: Transfer pricing; Business expenditure; Principle of natural justice; International transaction; Question of law; Tangible material
• Section: 143(3); 92B; 142(1); 115JB; 40(a)(ia); 143(1); 37; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: BENCH I-1, NEW DELHI BEFORE SHRI R.K.PANDA, ACCOUNTANT MEMBER AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 1972/DEL/2015 AY: 2010-11 ITA NO. 1787/DEL/2016 AY: 2011-12 ITA NO. 7085/DEL/2017 AY: 2012-13 WHIRLPOOL OF INDIA LTD. PLOT NO.40, SECTOR 44 GURGAON 122 002 PAN: AAACW1336L VS . DCIT , LTU NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SH. AJAY VOHRA, SR. ADV. SH. NEERAJ JAIN, ADV. & MR. RAMIT KATYAL, C.A. RESPONDENT BY : SH. SANJAY I BARA, CIT(DR) DATE OF HEARING : 08/01/2019 DATE OF PRONOUNCEMENT : 18/01/2019 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST O RDER DATED 26/02/2015 PASSED BY DCIT LTU-1, NEW DELHI UNDER SE CTION 143(3) READ WITH 144C OF THE INCOME TAX ACT, 1961(THE ACT). AT THE OUTSET LD. COUNSEL SUBMITTED THAT, GROUNDS RAISED BY ASSESSEE IN ALL YEARS UNDER ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 2 CONSIDERATION ARE SAME AND IDENTICAL. THIS FACT HAS NOT BEEN DISPUTED BY LD.CIT DR AND THEREFORE, WE HAVE TAKEN THESE APPEAL S TO BE DISPOSED OFF, BY WAY OF COMMON ORDER. FOR SAKE OF CONVENIENCE, GR OUNDS FOR ASSESSMENT YEAR 2010-11 ARE REPRODUCED HEREUNDER: GENERAL GROUND: 1. THAT THE IMPUGNED ORDER OF ASSESSMENT FRAMED BY THE OFFICER IN PURSUANCE OF THE DIRECTIONS OF THE DISPUTE RESOLUTI ON PANEL (HEREINAFTER REFERRED TO AS DRP) UNDER SECTION 14 3(3) READ WITH SECTION 144C OF THE INCOME-TAX ACT, 1961 (ACT), I S BAD IN LAW, VIOLATIVE OF PRINCIPLES OF NATURAL JUSTICE AND VOID AB-INITIO. 1.1 THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN L AW IN DETERMINING INCOME OF THE APPELLANT AT RS. 4,455,589,972 AGAINS T RETURNED TOTAL INCOME OF RS. 1,941,316,860. TRANSFER PRICING MATTERS : 2. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LA W IN MAKING ADDITION OF RS. 243,85,14,991 ON ACCOUNT OF ALLEGED DIFFERENCE IN THE ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTIONS RE SULTING FROM THE ADVERTISEMENT, MARKETING AND SALES PROMOTION EXPENS ES (HEREINAFTER REFERRED TO AS THE AMP EXPENSES) INCURRED BY THE APPELLANT ON THE BASIS OF THE ORDER PASSED BY THE TPO UNDER SECTION 92CA(3) OF THE ACT. 2.1. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN L AW IN HOLDING THAT THE (I) ASSOCIATED ENTERPRISE IS THE BENEFICIA RY OF THE EFFORTS OF THE APPELLANT AND (II) THE ASSESSEE IS CREATING A MARKE TING INTANGIBLE IN FAVOUR OF THE ASSOCIATED ENTERPRISE. 2.2. THAT THE DRP ERRED ON FACTS AND IN LAW IN HOLDING T HAT THE APPELLANT HAS BEEN DEVELOPING LOCAL MARKETING INTAN GIBLES FOR ITS ASSOCIATED ENTERPRISE IN INDIA BY (I) PROMOTING BRA NDS OWNED BY THE ASSOCIATED ENTERPRISES AND CREATING AWARENESS AMONG INDIAN CUSTOMERS AND (II) DEVELOPING AND MAINTAINING NETWO RK OF SUB DISTRIBUTORS, DEALERS, RETAILERS AND OTHER BUSINESS PARTNERS. ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 3 2.3. THAT THE DRP ERRED ON FACTS AND IN LAW IN NOT APPRE CIATING THAT BY VIRTUE OF AGREEMENTS ENTERED INTO WITH INDIAN DISTR IBUTORS, DEALERS, AND RETAILERS THE DISTRIBUTION NETWORK IN INDIA IS OWNED BY THE APPELLANT. 2.4. THAT THE DRP ERRED ON FACTS AND IN LAW IN HOLDING T HAT THE EXPENDITURE INCURRED TOWARDS PROMOTION OF MARKETING INTANGIBLES ENHANCING THE VALUE OF THE INTANGIBLE PROPERTY IS A N INTERNATIONAL TRANSACTION 2.5. THE DRP/TPO ERRED ON FACTS AND IN LAW IN NOT APPREC IATING THAT THE AMP EXPENSES, ETC., UNILATERALLY INCURRED BY THE AP PELLANT IN INDIA COULD NOT BE CHARACTERIZED AS AN INTERNATIONAL TRAN SACTION AS PER SECTION 92B, IN THE ABSENCE OF ANY PROVED UNDERSTAN DING / ARRANGEMENT BETWEEN THE APPELLANT AND THE ASSOCIATE D ENTERPRISE, SO AS TO INVOKE THE PROVISIONS OF SECTION 92 OF THE ACT. 2.6. THE DRP ERRED ON FACTS AND IN LAW IN NOT HOLDING TH AT THE INDIAN COMPANY HAD INCURRED EXPENDITURE ON ADVERTISEMENT O F THE PRODUCTS IN INDIA AND MERELY BECAUSE THE AMP EXPENSES INCURR ED BY THE TAXPAYER, WERE PROPORTIONATELY HIGHER THAN THOSE IN CURRED BY COMPARABLE CASES TAKEN BY THE TPO, DID NOT LEAD TO THE INFERENCE OF TRANSACTION BETWEEN THE TAXPAYER AND THE FOREIGN AE FOR CREATING MARKETING INTANGIBLES ON BEHALF OF THE LATER. 2.7. THE DISPUTE RESOLUTION PANEL (DRP)/TPO ERRED ON FAC TS AND IN LAW IN NOT APPRECIATING THAT THE ONLY TRANSFER PRICING ADJ USTMENT PERMITTED BY CHAPTER X OF THE ACT WAS IN RESPECT OF THE DIFFE RENCE BETWEEN THE ARMS LENGTH PRICE (ALP) AND THE CONTRACT OR DECLAR ED PRICE, BUT THE SAID PROVISION COULD NOT BE INVOKED TO DETERMINE TH E QUANTUM/EXTENT OF BUSINESS EXPENDITURE. 2.8. THE DRP/TPO ERRED ON FACTS AND IN LAW IN HOLDING TH AT EXPENDITURE INCURRED BY THE APPELLANT WHICH INCIDENTALLY RESULT ED IN BRAND BUILDING FOR THE FOREIGN AE, WAS A TRANSACTION OF C REATING AND IMPROVING MARKETING INTANGIBLES FOR AND ON BEHALF O F ITS FOREIGN AE ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 4 AND FURTHER THAT SUCH A TRANSACTION WAS IN THE NATU RE OF PROVISION OF A SERVICE BY THE APPELLANT TO THE AE. 2.9. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN NOT A PPRECIATING THAT ADJUSTMENT ON ACCOUNT OF ALLEGEDLY EXCESS AMP EXPEN SES IS UNWARRANTED IN THE CASE OF THE APPELLANT, A FULL RI SK BEARING MANUFACTURER/DISTRIBUTOR. 2.10. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN RE-CH ARACTERIZING THE APPELLANT, A FULL RISK BEARING MANUFACTURER/DISTRIB UTOR, AS A LIMITED RISK SERVICE PROVIDER ENTITLED TO COST PLUS REMUNER ATION FOR ITS MARKETING EFFORTS. 2.11. WITHOUT PREJUDICE THAT THE DRP/TPO ERRED ON FACTS A ND IN LAW IN NOT APPRECIATING THAT SINCE THE AMP EXPENSES INCURR ED BY THE APPELLANT OUGHT TO HAVE BEEN BENCHMARKED BY AGGREGA TING THE SAME WITH OTHER CLOSELY LINKED TRANSACTIONS UNDERTAKEN B Y THE APPELLANT 2.12. WITHOUT PREJUDICE THAT THE DRP/TPO ERRED ON FACTS A ND IN LAW IN NOT APPRECIATING THAT SINCE THE OPERATING PROFIT MARGIN S OF THE APPELLANT WERE HIGHER THAN MARGINS OF THE COMPARABLE COMPANIE S, THE APPELLANT WAS ADEQUATELY COMPENSATED FOR THE ALLEGE DLY EXCESS AMP EXPENSES INCURRED BY THE APPELLANT. 2.13. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN HOLDI NG THAT THE ENTITY IN CONTROL OF THE INTANGIBLE ASSET IS TREATE D AS THE OWNER, NOT APPRECIATING THAT THE APPELLANT, BY PERFORMING THE CRITICAL DECISION MAKING FUNCTIONS IS CONTROLLING THE INTANGIBLE, AND ACCORDINGLY SHALL BE CONSIDERED AS OWNER OF SUCH INTANGIBLE. 2.14. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN HOLDI NG THAT THE APPELLANT HAS DEVELOPED MARKETING INTANGIBLE FOR W HIRLPOOL BRAND BY BEARING SIGNIFICANT COST AND RISKS AND WAS ACCOR DINGLY ENTITLED TO GET REIMBURSEMENT OF THE COST INCURRED BY IT IN EXC ESS OF ROUTINE DISTRIBUTOR. 2.15. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN HOLDI NG THAT BENEFIT ACCRUING TO THE ASSOCIATED ENTERPRISE IS NOT INCIDE NTAL AND INSTEAD ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 5 THE INCREASE IN SALE OF THE APPELLANT IS ACTUALLY T HE INCIDENTAL BENEFIT ARISING AS A RESULT OF INCURRING THE AMP EXPENSES. 2.16. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN HOLDI NG THAT THE AES ARE DERIVING HUGE BENEFIT FROM THE INTANGIBLE DEVEL OPED BY THE APPELLANT BY WAY OF ENHANCED SALE OF PRODUCTS IN IN DIA NOT APPRECIATING THAT THE ASSOCIATED ENTERPRISE IS NOT SELLING ANY GOODS DIRECTLY IN INDIA. 2.17. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN ARBIT RARILY HOLDING THAT IF THE ASSOCIATED ENTERPRISE DECIDES TO DISTRI BUTE THE PRODUCTS BY ITSELF OR THROUGH SOME OTHER ENTITY IN INDIA AFTER TERMINATING THE CONTRACT WITH THE APPELLANT, IT WOULD ENJOY THE FRU ITS OF EFFORTS PUT IN BY THE APPELLANT FOR PROMOTING THE BRAND. 2.18. THAT THE DRP ERRED ON FACTS AND IN LAW IN BASED UPO N ASSUMPTIONS AND SURMISES, HOLDING THAT THE ASSOCIATED ENTERPRIS E CAN TERMINATE THE LICENSE AGREEMENT AT ANY GIVEN TIME BECAUSE OF THE PECULIAR RELATIONSHIP BETWEEN THE ASSESSEE AND THE ASSOCIATE D ENTERPRISE. 2.19. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN RELYI NG ON THE US TRANSFER PRICING GUIDELINES NOT APPRECIATING THAT E VEN UNDER SUCH GUIDELINES THE APPELLANT, BEING THE LICENSED USER O F WHIRLPOOL BRAND IN INDIA WOULD BE TREATED AS OWNER OF SUCH BRAND FO R TRANSFER PRICING PURPOSES. 2.20. THAT TPO/DRP ERRED ON FACTS AND IN LAW IN NOT APPRE CIATING THAT SUCH A TRANSFER PRICING ADJUSTMENT COULD NOT AT ALL BE MADE IN RESPECT OF AMP EXPENSES WHICH WERE FOUND TO CONSTIT UTE LEGITIMATE, BONAFIDE AND DEDUCTIBLE BUSINESS EXPENDITURE AND TH E APPELLANT WAS THE ECONOMIC OWNER OF THE BENEFIT OF SUCH EXPEN SES. 2.21. WITHOUT PREJUDICE, THE DRP /TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT EVEN IF MARKETING INTANGIBLE HAS BEEN CREATED THEN THE APPELLANT IS THE ECONOMIC OWNER OF SUCH INTANGI BLE. 2.22. THE DRP/TPO ERRED ON FACTS AND IN LAW IN APPLYING B RIGHT LINE TEST (BLT) FOR COMPUTING ADJUSTMENT ON ACCOUNT OF EXPEND ITURE ON ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 6 ADVERTISEMENT AND BRAND PROMOTION EXPENSES, WITHOUT APPRECIATING THAT BLT IS BEYOND THE PROVISIONS OF CHAPTER X AND HAS NO MANDATE UNDER THE ACT. 2.23. WITHOUT PREJUDICE THAT THE DRP/TPO ERRED ON FACTS A ND IN LAW, IN NOT APPRECIATING THAT THE AMP EXPENSES INCURRED BY THE APPELLANT WAS APPROPRIATELY ESTABLISHED TO BE AT ARMS LENGTH APP LYING TNMM AND AGGREGATING THE AMP EXPENSES WITH OTHER CLOSELY LIN KED TRANSACTIONS UNDERTAKEN BY THE APPELLANT. 2.24. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN NOT E XCLUDING THE REBATE DISCOUNT/PRICING ADJUSTMENT OF RS.204,55,83, 442 FROM THE QUANTUM OF AMP EXPENDITURE, ALLEGEDLY HOLDING THAT THE QUESTION BEING INVESTIGATED IS MARKETING INTANGIBLE AND NO T JUST BRAND PROMOTION ALONE IN THE INSTANT CASE. 2.25. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN HOLDI NG THAT COMMISSION ON SALES OR SALES DISCOUNT ETC. HELP THE COMPANY TO CREATE LOYALTY AMONG DISTRIBUTORS NOT APPRECIATING THAT SUCH EXPENSES ARE INCURRED ONLY FOR EFFECTING THE SALES AND NOT FOR PROMOTING THE BRAND. 2.26. THAT THE DRP ERRED ON FACTS AND IN LAW IN HOLDING T HAT SELLING EXPENSES ARE INCURRED BY THE APPELLANT FOR PROMOTIO N OF THE BRAND THROUGH CREATION OF A NET WORK OF DEALERS AND SHOPS AND ARE LEADING TO THE CREATION OF MARKETING INTANGIBLES. 2.27. THAT TPO ERRED ON FACTS AND IN LAW IN EXCLUDING SAL ARY PAID TO PRODUCT DEMONSTRATORS AMOUNTING TO RS.9,97,38,593/- FROM THE AMP EXPENSES, DESPITE THE DIRECTION OF THE DRP TO NOT T O INCLUDE SUCH EXPENSES IF THEY HAVE NO DIRECT NEXUS WITH THE CREA TION OF INTANGIBLES. 2.28. THAT THE TPO/DRP ERRED ON FACTS AND IN LAW IN HOLDI NG THAT THE APPELLANT HAS RENDERED SERVICE TO THE AES B INCURRI NG THE AMP EXPENSES AND BY HOLDING THAT MARK UP HAS TO BE EARN ED BY THE APPELLANT IN RESPECT OF THE AMP EXPENSES, ALLEGED T O HAVE INCURRED ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 7 FOR AND ON BEHALF OF THE AE. 2.29. WITHOUT PREJUDICE, THE TPO/DRP ERRED ON FACTS AND I N LAW IN NOT APPRECIATING THAT MARK UP, IF AT ALL, HAD TO BE RES TRICTED TO THE VALUE ADDED EXPENSES INCURRED BY THE APPELLANT FOR PROVID ING THE ALLEGED SERVICE IN THE NATURE OF BRAND PROMOTION. CORPORATE TAX ADDITIONS: 3. THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AND I N LAW IN MAKING AN ADDITION OF RS.15,77,011 ALLEGING THAT THE ASSESSEE HAS MADE CASH DEPOSIT TO THAT EXTENT, HOLDING THE SAME TO BE UNEX PLAINED MONEY IN TERMS OF SECTION 69A OF THE ACT. 4. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LA W IN MAKING AN ADDITION OF RS.10,546 ALLEGEDLY ON ACCOUNT OF DIFFE RENCE IN THE SALES TAX DEPOSITED BY THE ASSESSEE IN BANGALORE ON THE BASIS OF UNSUBSTANTIATED INFORMATION RECEIVED FROM INDIVIDUAL TRANSACTION ST ATEMENT/AIR INFORMATION. 5. THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AND I N LAW IN MAKING AN ADDITION OF RS. 25,30,000/- ALLEGEDLY ON ACCOUNT OF LEASE PAYMENT MADE BY THE APPELLANT TO BIRD AUTOMOTIVE PVT. LTD. ON TH E BASIS OF INFORMATION OBTAINED FROM INDIVIDUAL TRANSACTION STATEMENT/AIR INFORMATION. 6. THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AND I N LAW IN MAKING AN ADDITION OF RS. 21,26,953/- ALLEGEDLY ON ACCOUNT OF PAYMENT MADE TOWARDS CLUB MEMBERSHIP FEE OR HOTEL BILLS, OUTSIDE THE BOOKS OF ACCOUNTS AND UNACCOUNTED IN THE RETURN OF INCOME ON THE BASIS OF INDIVIDUAL TRANSACTION STATEMENT/AIR INFORMATION. 7. THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AND I N LAW IN MAKING DISALLOWANCE OF RS. 2,43,85,14,991/- BEING EXPENSES INCURRED ON ADVERTISEMENT AND PUBLICITY ON AN ALTERNATIVE BASIS HOLDING THAT SUCH EXPENSES WERE NOT WHOLLY AND EXCLUSIVELY INCURRED F OR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 8 8. THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AND I N LAW IN MAKING AN ADDITION OF RS. 8,87,611/- ALLEGEDLY BEING UNDISCLO SED INCOME, ON THE BASIS OF DIFFERENCE IN THE TDS CLAIMED BY THE APPEL LANT AND AMOUNT OF TDS REPORTED IN THE INDIVIDUAL TRANSACTION STATEMEN T/AIR INFORMATION. 9. THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AND I N LAW IN MAKING AN ADDITION OF RS. 3,60,76,000 INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, ALLEGEDLY ON ACCOUNT OF SHORTFALL IN TAX D EDUCTED AT SOURCE ON THE BASIS OF THE INDIVIDUAL TRANSACTION STATEMENT / AIR INFORMATION. 10. THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AND I N LAW IN MAKING DISALLOWANCE OF RS. 3,25,50,000/- BEING PROVISION F OR EXPENSES OF PACKAGE TOUR HOLDING THE SAME TO BE CONTINGENT IN N ATURE. 11. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LA W IN LEVYING INTEREST UNDER SECTION 234B, SECTION 234C AND SECTI ON 234D OF THE ACT. 12. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LA W IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C ) OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR VARY, ANY OF THE AFORESAID GROUNDS OF APPEAL BEFORE OR AT THE TIME O F HEARING OF THE APPEAL. ASST: YR:2010-11 2. BRIEF FACTS OF THE CASE ARE AS UNDER: ASSESSEE FILED ITS RETURN OF INCOME DECLARING NIL UNDER NORMAL PROVISIONS OF THE ACT AND INCOME OF RS.2,11,96,44,616/- UNDER SECTION 115JB OF THE ACT, ON 14/10/2010. THE SAME WAS PROCESSED UNDER SE CTION 143(1) OF THE ACT, AND SUBSEQUENTLY WAS SELECTED FOR SCRUTINY . ACCORDINGLY, NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED FOLLOWED BY NOTICES UNDER SECTION 142(1) AND QUESTIONNAIRE. ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 9 2.1. LD.AO, DURING ASSESSMENT PROCEEDINGS, OBSERVED TH AT ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTION WITH ITS AE AND SINCE VALUE OF SUCH TRANSACTIONS EXCEEDED MORE THAN RS. 15 CRORES, CASE WAS REFERRED TO TRANSFER PRICING OFFICER (TPO). LD.TPO ON RECEIPT O F REFERENCE, ISSUED NOTICE TO ASSESSEE AND CALLED UPON TO FILE DOCUMENT ATIONS PRESCRIBED UNDER RULE 10 D OF RULES, 1962 AND OTHER DETAILS AS CALLED FOR. 2.2 . LD.TPO OBSERVED THAT ASSESSEE IS A SUBSIDIARY OF WHIRLPOOL USA, AND IS ENGAGED IN PRODUCTION, SALE AND DISTRIBUTION OF WHIRLPOOL APPLIANCES. IT WAS OBSERVED THAT ASSESSEE ENTERED I NTO FOLLOWING INTERNATIONAL TRANSACTION: NATURE OF INTERNATIONAL TRANSACTIONS METHOD AMOUNT (IN RS.) PURCHASE OF RAW MATERIALS, COMPONENTS & SPARES TNMM 473,706,494 PURCHASE RETUR N TNMM 115,906 SALE OF SPARES TNMM 17,679,550 PURCHASE OF FINISHED GOODS & SPARES TNMM 144,546,214 SALE OF FINISHED GOODS TNMM 1,272,334,718 TECHNICAL AND BRAND ASSISTANCE FEE TNMM 303,030,776 SERVICE INCOME TNMM 645,925,115 INTEREST RECEIVED TNMM 25,287,505 COST RECHARGES PAID TNMM 45,273,697 COST RECHARGES RECEIVED CUP 102,180,049 2.3 . LD.TPO AFTER CALLING FOR ALL REQUISITE DETAILS AN D SUBMISSIONS FROM ASSESSEE COMPUTED ADJUSTMENT AS UNDER: COMPUTATION OF TP ADJUSTMENT (IN RS.) VALUE OF GROSS SALES 26,02,91,03,000 AMP/SALES OF THE COMPARABLES 2.39% AMOUNT THAT REPRESENTS BRIGHT LINE 62,20,95,561 EXPENDITURE ON AMP BY ASSESSEE 2,78,96,64,442 EXPENDITURE IN EXCESS OF BRIGHT LINE 2,16,75,68,881 MARK - UP AT 12.50% 27,09,4 6,110 ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 10 REIMBURSEMENT THAT ASSESSEE SHOULD HAVE RECEIVED 2,43,85,14,991 REIMBURSEMENT ACTUALLY RECEIVED N I L ADJUSTMENT TO ASSESSEES INCOME 2,43,85,14,991 3. AGGRIEVED BY ADJUSTMENT MADE, ASSESSEE RAISED OBJ ECTIONS BEFORE THE DRP. DRP IN THEIR DIRECTION DATED 18/12/14 DIRECTED LD.TPO/AO TO EXAMINE NATURE OF SALARY AND REMUNERATION AMOUNTING TO RS.9,97,38,593/-, SPENT BY ASSESSEE. LD.TPO UPON VE RIFICATION DID NOT MAKE ANY CHANGES IN ADDITION PROPOSED IN DRAFT ORDE R. THEREAFTER, UPON RECEIPT OF SUCH INTIMATION FROM LD.TPO, LD.AO PASSE D FINAL ASSESSMENT ORDER BY DETERMINING THE TOTAL INCOME OF ASSESSEE A T RS.4,45,55,89,972/-, AS AGAINST RETURNED INCOME OF RS.1,94,13,16,860/-. 4. AGGRIEVED BY ORDER OF LD. AO, ASSESSEE IS IN APPE AL BEFORE US NOW. 5. AT THE OUTSET, LD. COUNSEL SUBMITTED THAT GROUND NO. 1 RAISED BY ASSESSEE IS GENERAL IN NATURE, AND THEREFORE DO NOT REQUIRE ANY ADJUDICATION. ACCORDINGLY THE SAME IS DISMISSED. 6. GROUND NO. 2 TO 2.29 HAS BEEN RAISED AGAINST ADJUSTMENT MADE BY LD.AO ON ACCOUNT OF ALLEGED EXCESSIVE AMP EXPENS ES AMOUNTING TO RS.243.85 CRORES. IT HAS BEEN SUBMITTED BY LD. COUN SEL THAT SAID ISSUE NOW STANDS SQUARELY COVERED IN ASSESSEES OWN CASE BY ORDER OF THIS TRIBUNAL IN ITA NO.426/DEL/2013 FOR ASSESSMENT YEAR 2008-09 VIDE ORDER DATED 13/01/14 REPORTED IN (2014) 42 TAXMANN.COM 553, WHICH IS UPHELD BY HONBLE DELHI HIGH COURT REPORTED IN (2015) 64 TAXMANN.COM 324 . AT THIS JUNCTURE, LD.SR.DR SUBMITTED THAT AGAINST O RDER OF HONBLE DELHI HIGH COURT , REVENUE PREFERRED APPEAL BEFORE HONBLE SUPREME COURT WHICH ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 11 IS PENDING FOR FINAL HEARING. HE SUBMITTED THAT TIL L DISPOSAL OF MATTER BY HONBLE SUPREME COURT , THE ISSUE MAY BE KEPT IN ABEYANCE. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS OF BOTH SIDE S IN LIGHT OF RECORDS AND ORDERS PASSED ON THIS ISSUE BY COORDINA TE BENCHES OF THIS TRIBUNAL AS WELL AS HONBLE DELHI HIGH COURT . 7.1 . FROM RECORDS PLACED BEFORE US, IT IS OBSERVED TH AT, UNDISPUTEDLY LD.TPO PROPOSED ADJUSTMENT ON ACCOUNT OF AMP EXPENS ES BY APPLYING BRIGHT LINE TEST. IT IS OBSERVED THAT LD.TPO AS WEL L AS DRP TREATED AMP EXPENSES AS INTERNATIONAL TRANSACTION BY APPLYING R ATIO LAID DOWN BY SPECIAL BENCH DECISION OF THIS TRIBUNAL IN CASE OF LG ELECTRONICS INDIA PVT. LTD., VS. ACIT REPORTED IN (2013) 29 TAXMANN.COM 300, WHICH STANDS OVER RULED BY DECISION OF HONBLE DELHI HIGH COURT IN CASE OF SONY ERICSON INDIA PVT.LTD VS. CIT REPORTED IN (2015) 55 TAXMANN.COM 240. HONBLE COURT WHILE DECIDING SONY ERICSON INDIA PVT.LTD (SUPRA) CATEGORICALLY HELD THAT BRIGHT LINE TEST IS NOT AN APPROPRIATE YARDSTI CK FOR DETERMINING EXISTENCE OF AN INTERNATIONAL TRANSACTION FOR CALCU LATING ARMS LENGTH PRICE. 7.2. HONBLE DELHI HIGH COURT WHILE DECIDING QUESTION OF LAW RAISED FOR ASSESSMENT YEAR 2008-09 HELD AS UNDER: CONCLUSION 47. FOR THE AFOREMENTIONED REASONS, THE COURT IS OF THE VIEW THAT AS FAR AS THE PRESENT APPEALS ARE CONCERNED, THE RE VENUE HAS BEEN UNABLE TO DEMONSTRATE BY SOME TANGIBLE MATERIAL THA T THERE IS AN INTERNATIONAL TRANSACTION INVOLVING AMP EXPENSES BE TWEEN WOIL AND WHIRLPOOL USA. IN THE ABSENCE OF THAT FIRST STE P, THE QUESTION OF DETERMINING THE ALP OF SUCH A TRANSACTION DOES N OT ARISE. IN ANY EVENT, IN THE ABSENCE OF A MACHINERY PROVISION IT W OULD BE HAZARDOUS FOR ANY TPO TO PROCEED TO DETERMINE THE A LP OF SUCH A TRANSACTION SINCE BLT HAS BEEN NEGATIVED BY THIS CO URT AS A VALID ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 12 METHOD OF DETERMINING THE EXISTENCE OF AN INTERNATI ONAL TRANSACTION AND THEREAFTER ITS ALP. 48. QUESTION (I) IN THE ASSESSEE'S APPEAL VIZ., 'WA S THERE AN INTERNATIONAL TRANSACTION BETWEEN WOIL AND ITS AE I NVOLVING THE AMP EXPENSES WITHIN THE MEANING OF SECTION 92B OF T HE ACT READ WITH SECTION 92F(V) OF THE ACT?' IS ANSWERED IN THE NEGATIVE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. CON SEQUENTLY QUESTION (II) IN THE ASSESSEE'S APPEAL IS NOT REQUI RED TO BE ANSWERED. FURTHER, THE ONLY QUESTION FRAMED IN THE REVENUE'S APPEAL VIZ., 'WHETHER THE ITAT ERRED IN DELETING TH E ADDITION OF RS. 180,73,10,769 MADE BY THE AO/TPO ON ACCOUNT OF AMP EXPENSES UNDER SECTION 37 OF THE ACT?' IS ANSWERED IN THE NE GATIVE, I.E. IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 49. THE IMPUGNED ORDER OF THE ITAT AND THE CORRESPO NDING ORDERS OF THE DRP AND THE TPO, ON THE ABOVE ISSUES ARE HER EBY SET ASIDE. THE APPEAL OF THE ASSESSEE, ITA NO. 228 OF 2015 IS ALLOWED AND THE APPEAL OF THE REVENUE, ITA NO. 610 OF 2014 IS DI SMISSED IN THE ABOVE TERMS, BUT IN THE CIRCUMSTANCES WITH NO ORDER S AS TO COSTS. 7.3. ON PERUSAL OF ORDERS PASSED BY LD.TPO/AO/DRP FOR YEAR UNDER CONSIDERATION, IT IS OBSERVED THAT AMP EXPENDITURE HAS BEEN CONSIDERED TO BE INTERNATIONAL TRANSACTION BY APPLYING BRIGHT LINE TEST, WHEREBY LD.TPO PROPOSED AN ADJUSTMENT OF 243.8 CRORES. 7.4. LD.SR.DR PREFERRED ADJOURNMENT APPLICATION ON THE GROUND THAT ISSUE INVOLVED IN PRESENT APPEAL IS IN RESPECT OF A MP ADJUSTMENT. HE SUBMITTED THAT CONSISTENT STAND HAS BEEN TAKEN BY R EVENUE BEFORE THIS TRIBUNAL TO REQUEST FOR ADJOURNMENT IN ALL APPEALS, WHERE AMP ADJUSTMENT HAS BEEN DISPUTED BY EITHER PARTIES ON G ROUND THAT HONBLE SUPREME COURT IS CEASED WITH THE MATTER. 7.5. DURING THE COURSE OF ARGUMENT LD.SR.DR SOUGHT PERMI SSION FROM THE BENCH TO FILE WRITTEN SUBMISSION REGARDING ISSU ES RAISED BY ASSESSEE WHICH WAS GRANTED. ACCORDINGLY, ON 10/01/2019 A DET AILED WRITTEN ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 13 SUBMISSION HAS BEEN FILED BY REVENUE IN RESPECT OF ISSUES RAISED BY ASSESSEE FOR ALL YEARS UNDER CONSIDERATION WHICH IS TAKEN ON RECORD. 7.6. PLEA TAKEN BY REVENUE IN WRITTEN SUBMISSION TO JUS TIFY AMP ADJUSTMENT PROPOSED BY LD.TPO THAT ASSESSEE HAS BEE N WORKING FOR BENEFIT OF FOREIGN AE AND DESERVES SUITABLE REMUNER ATION. HEAVY RELIANCE HAS BEEN PLACED BY LD.SR.DR ON BEPS GUIDELINES, PRO VIDED FOR TRANSFER PRICING OF INTANGIBLES, UNDER ACTION PLAN 8-10 OF G E 20/OECD BEPS PROJECT IN SUPPORT OF ADJUSTMENT. 7.7. IT HAS FURTHER BEEN ALLEGED BY LD.SR.DR THAT, TH ERE IS MUTUAL AGREEMENT/ARRANGEMENT BETWEEN ASSESSEE AND ITS AE, FOR DISCHARGE OF FUNCTION OF MARKETING AND MARKET DEVELOPMENT IN ADD ITION TO AGREEMENT/ARRANGEMENT FOR SALE AND DISTRIBUTION OF GOODS PURCHASED FROM ITS AE, FOR WHICH COST HAS BEEN BORNE BY AE. L D.TPO HAS ALSO REJECTED CLAIM THAT ASSESSEE IS A FULL RISK BEARING MANUFACTURER/DISTRIBUTOR, AS THERE IS NO SUPPORTING GROUND FOR THE SAME. 8. IN OUR CONSIDERED OPINION, SINCE BASIS ON WHICH AD JUSTMENT HAS BEEN MADE BEING BRIGHT LINE TEST ITSELF HAS BEEN REJECTE D BY HONBLE DELHI HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 , NO FURTHER INTERFERENCE CAN BE CALLED FOR AT THIS STAGE. FURTH ER RELIANCE PLACED BY LD.SR.DR ON BEPS GUIDELINES AND ACTION PLAN 8-10 CA NNOT BE APPLIED AS THE SAME IS YET TO BE IMPLEMENTED. 8.1. FURTHER IT HAS BEEN SUBMITTED BY BOTH SIDES THAT F ACTS AND CIRCUMSTANCES IN PRESENT APPEAL ARE NO MANNER DIFFE RENT WITH THAT OF ASSESSMENT YEAR 2008-09 THAT WAS FOR CONSIDERATION BEFORE THIS TRIBUNAL AND THEREAFTER BEFORE HONBLE HIGH COURT . IN OUR CONSIDERED OPINION UNDER SUCH CIRCUMSTANCES, NO PURPOSE WILL BE SERVED BY KEEPING PRESENT ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 14 APPEAL PENDING, AS ISSUES RAISED BY REVENUE IN ASSE SSEES OWN CASE ALONG WITH OTHER CASES, HAS NOT BEEN LISTED BEFORE HONBLE SUPREME COURT . WE ARE THEREFORE INCLINED TO FOLLOW VIEW TAKEN BY THIS TRIBUNAL IN ASSESSEES OWN CASE WHICH HAS BEEN UPHELD BY HONBLE HIGH COURT FOR ASSESSMENT YEAR 2008-09. WE THEREFORE, REJECT PRAYER ADVANCED BY LD.SR.DR FOR ADJOURNMENT. IT IS OBSERVED THAT SIMILAR VIEW HAS B EEN TAKEN BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 IN ITA NO.1254/DEL/2014 VIDE ORDER DATED 26/11/18 . 8.2. HOWEVER, WE APPRECIATE THE CONCERN RAISED BY LD.SR .DR THAT DECISION OF HONBLE SUPREME COURT WILL BE BINDING UPON ASSESSEE AS WELL AS REVENUE. WE ARE THEREFORE, INCLINED TO SET ASIDE THIS ISSUE TO LD.AO/TPO TO PASS FRESH ORDER CONSIDERING DECISION OF HONBLE SUPREME COURT . NEEDLESS TO SAY THAT PROPER OPPORTUNITY SHALL BE GRANTED TO ASSESSEE OF BEING HEARD. ACCORDINGLY GROUNDS 2 TO 2.29 STAND ALLOWED FOR STA TISTICAL PURPOSES. 9. AMONGST CORPORATE GROUNDS RAISED BY ASSESSEE, LD.CO UNSEL SUBMITTED THAT GROUND NOS. 3, 4, 5, 6, 8, 9 HAS BEEN RAISED DUE TO MISMATCH IN 26 A-S. HE SUBMITTED THAT AT THE TIME O F ASSESSMENT, ALL DETAILS REGARDING CLAIM RAISED IN THESE GROUNDS WER E NOT AVAILABLE WITH ASSESSEE DUE TO WHICH RECONCILIATION COULD NOT BE D RAWN. HOWEVER LD.COUNSEL SUBMITTED THAT NOW ASSESSEE HAS ALL RELE VANT INFORMATION TO FILE RECONCILIATION STATEMENT IN RESPECT OF SAME. H E SUBMITTED THAT THESE GROUNDS MAY BE SET-ASIDE TO LD.AO FOR DUE VERIFICAT ION ON BASIS OF SUBMISSIONS ADVANCED BY ASSESSEE. 9.1. LD.SR.DR DOES NOT OBJECT TO PLEA ADVANCED BY LD. C OUNSEL. ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 15 9.2. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 9.3. PERUSAL OF RECORD IT APPEARS THAT DIFFERENTIAL AMO UNT REFLECTED IN FORM 26 A-S WERE NOT PROPERLY RECONCILED. AS NOW AS SESSEE HAS ALL RELEVANT INFORMATION FOR THE SAME, IN THE INTEREST OF NATURAL JUSTICE, WE DIRECT LD. AO TO TALLY DATABASE OF REVENUE IN LIGHT OF DETAILS FILED BY ASSESSEE. 9.4. WE ARE THEREFORE INCLINED TO SET ASIDE THESE GROUN DS TO LD.AO FOR RECONCILIATION. ACCORDINGLY GROUND NOS. 3, 4, 5, 6, 8, 9 ARE ALLOWE D FOR STATISTICAL PURPOSES . 10. GROUND NO. 7 HAS BEEN RAISED BY ASSESSEE REGARDING DISALLOWANCE OF EXPENSES UNDER SECTION 37 OF THE ACT, INCURRED B Y ASSESSEE ON ACCOUNT OF ALLEGED AMP EXPENSES. 10.1 . LD.COUNSEL SUBMITTED THAT THIS ISSUE HAS BEEN CON SIDERED BY HONBLE HIGH COURT ASSESSEES OWN CASE WHICH HAS BEEN REFERRED TO HER EIN ABOVE. HE SUBMITTED THAT ISSUE RELATES TO AMP EXPEN SES WHICH HAVE BEEN DISALLOWED BY LD.AO UNDER SECTION 37 OF THE ACT. LD .COUNSEL SUBMITTED THAT HONBLE HIGH COURT HAS ANSWERED THE QUESTION IN NEGATIVE THAT IS IN FAVOUR OF ASSESSEE AND AGAINST REVENUE. 10.2 . LD.SR.DR PLACED RELIANCE UPON ORDER OF AUTHORITIE S BELOW AND SUBMITTED THAT THIS ISSUE IS ALSO INTERCONNECTED WI TH MAIN ISSUE OF TREATMENT OF AMP EXPENSES AS INTERNATIONAL TRANSACT ION. 10.3. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 16 10.4. AS THE ISSUE RELATING TO NATURE OF AMP EXPENSES BE ING INTERNATIONAL TRANSACTION OR NOT HAS BEEN SET ASIDE TO LD.AO IN PRECEDING PARAGRAPHS, THE ALLOWABILITY OF SUCH EXPENSES CLAIMED BY ASSESS EE UNDER SECTION 37 OF THE ACT ALSO DESERVES TO BE SET-ASIDE. THE OUTCOME OF THIS GROUND RAISED DEPENDS UPON DECISION OF HONBLE SUPREME COURT IN ASSESSEES OWN CASE. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS A LLOWED FOR STATISTICAL PURPOSES. 11. GROUND NO. 10 IS IN RESPECT OF DISALLOWANCE OF RS.3,25,50,000/- GIVING PROVISION FOR EXPENSES OF TOUR PACKAGES GIVE N TO DEALERS. 11.1 . LD.COUNSEL SUBMITTED THAT DEALERS ARE GIVEN TOUR PACKAGES. IT HAS BEEN SUBMITTED THAT VISION FOR TOOL PACKAGES WERE M ADE ON ACCRUAL BASIS TO ACCOUNT FOR ACHIEVEMENT OF SALES TARGETS AND NEC ESSARY TO AND RESULTANT EXPENSES THESE WERE ACCOUNTED FOR IN SUBS EQUENT FINANCIAL YEARS. 11.2 . LD.AO DISALLOWED IT BY HOLDING THAT EXPENSES ARE OF CONTINGENT IN NATURE WHICH DEPENDS UPON HAPPENING OF CERTAIN EVEN T AND THEREFORE NOT ALLOWABLE FOR YEAR UNDER CONSIDERATION. IS IT IS AL SO SUBMITTED BY LD.SR.DR THAT PROVISION MADE TOWARDS EXPENSES WERE NOT ACTUAL EXPENSES INCURRED WHICH HAS BEEN CRYSTALLISED DURIN G YEAR UNDER CONSIDERATION AND THEREFORE SAME IS NOT ALLOWABLE. 11.3 . WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDE S IN LIGHT OF RECORDS PLACED BEFORE US. NO DOUBT, UNLESS EXPENDITURE IS ACTUALLY INCURRED, OR IT IS ACCRUED DURING RELEVANT YEAR, IT WOULD NOT BE ALLOWED AS DEDUCTION . LIABILITY HAS TO BE IN PRAESENTI . HOWEVER AT THE SAME TIME, IN PRESENT SCENARIO WHE RE ASSESSEES EMPLOYEES OR DEALERS ACHIEVED SALES TARG ET, ASSESSEE OFFERED ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 17 FOREIGN TOURS, EXPENSES OF WHICH WERE ACCOUNTED FOR IN SUBSEQUENT YEAR, WHICH IS CONSISTENT WITH ACCOUNTING STANDARDS AND T HESE ACCOUNTING STANDARDS ALSO LAY DOWN THE NORMS INDICATING THE PA RTICULAR POINT OF TIME WHEN THE PROVISIONS FOR ALL KNOWN LIABILITIES AND L OSSES HAS TO BE MADE, THE MAKING OF SUCH A PROVISION BY ASSESSEE APPEARS TO BE JUSTIFIED, MORE SO WHEN ASSESSEE HAS ACTUALLY MADE PAYMENT TO SUCH EMPLOYEES/ DEALERS AND PROVISION HAS BEEN MADE. THE ONLY DIFFE RENCE IS THAT, EXPENSES WERE ACCOUNTED FOR IN SUBSEQUENT FINANCIAL YEAR. IT IS UNDISPUTED THAT EXPENDITURE INCURRED BY ASSESSEE IS ADMISSIBLE DEDUCTION. THE ONLY DISPUTE THAT REVENUE SEEKS TO R AISE IS REGARDING YEAR OF ALLOWABILITY OF EXPENDITURE. CONSIDERING THAT AS SESSEE IS A COMPANY ASSESSED AT UNIFORM RATE OF TAX, ENTIRE EXERCISE OF SEEKING TO DISTURB YEAR OF ALLOWABILITY OF EXPENDITURE IS, IN ANY CASE, REV ENUE NEUTRAL. 11.4. HOWEVER, DRP NOTES THAT ASSESSEE HAS NOT DISCHARGE D ONUS TO SUBSTANTIATE ITS CLAIM WITH ACTUAL FIGURES FOR SUCH PACKAGE TOOLS UNDERTAKEN BY EMPLOYEES/DEALERS AS A PART OF INCENT IVES. EVEN FROM THE RECORDS WE UNDERSTAND THAT NO DOCUMENTS/EVIDENCES H AVE BEEN PLACED TO ESTABLISH THE CLAIM. WE ARE THEREFORE INCLINED T O SET ASIDE THIS ISSUE BACK TO LEARN THE AO/TPO FOR READJUDICATION. ASSESS EE SHALL FILE ALL REQUISITE DETAILS IN ORDER TO ESTABLISH THE CLAIM. IT SHALL GIVE ITEMISED DETAILS REGARDING THE INCENTIVES THAT HAVE BEEN AWA RDED TO ITS EMPLOYEES OR DEALERS AS THE CASE MAY BE. LD. AO/TPO SHALL THE N VERIFY THE SAME AND IF FOUND IN ORDER SHALL ALLOW THE CLAIM OF ASSE SSEE EVEN THOUGH THE EXPENSES HAS BEEN ACCOUNTED FOR IN SUBSEQUENT FINAN CIAL YEAR. ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 18 BEFORE WE PART WITH, WE ARE REMINDED OF A CLASSIC O BSERVATIONS BY HONBLE BOMBAY HIGH COURT IN CASE OF THE CIT V. NAGRI MILLS CO. LTD., REPORTED IN (1958) 33 ITR 681 , WHICH READS AS UNDER: WE HAVE OFTEN WONDERED WHY THE INCOME-TAX AUTHORIT IES, IN A MATTER SUCH AS THIS WHERE THE DEDUCTION IS OBVIOUSL Y A PERMISSIBLE DEDUCTION UNDER THE INCOME-TAX ACT, RAISE DISPUTES AS TO THE YEAR IN WHICH THE DEDUCTION SHOULD BE ALLOWED. THE QUESTION AS TO THE YEAR IN WHICH A DEDUCTION IS ALLOWABLE MAY BE MATERIAL W HEN THE RATE OF TAX CHARGEABLE ON THE ASSESSEE IN TWO DIFFERENT YEA RS IS DIFFERENT; BUT IN THE CASE OF INCOME OF A COMPANY, TAX IS ATTR ACTED AT A UNIFORM RATE, AND WHETHER THE DEDUCTION IN RESPECT OF BONUS WAS GRANTED IN THE ASSESSMENT YEAR 1952-53 OR IN THE ASSESSMENT YE AR CORRESPONDING TO THE ACCOUNTING YEAR 1952, THAT IS IN THE ASSESSMENT YEAR 1953-54, SHOULD BE A MATTER OF NO C ONSEQUENCE TO THE DEPARTMENT; AND ONE SHOULD HAVE THOUGHT THAT TH E DEPARTMENT WOULD NOT FRITTER AWAY ITS ENERGIES IN FIGHTING MAT TERS OF THIS KIND. BUT, OBVIOUSLY, JUDGING FROM THE REFERENCES THAT CO ME UP TO US EVERY NOW AND THEN, THE DEPARTMENT APPEARS TO DELIGHT IN RAISING POINTS OF THIS CHARACTER WHICH DO NOT AFFECT THE TAXABILITY O F THE ASSESSEE OR THE TAX THAT THE DEPARTMENT IS LIKELY TO COLLECT FR OM HIM WHETHER IN ONE YEAR OR THE OTHER. 11.5. THE AFORESAID OBSERVATIONS OF HONBLE BOMBAY HIGH COURT HAS BEEN REITERATED BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. SHRI RAM PISTONS & RINGS LTD. REPORTED IN [2008] 174 TAXMAN 147 , AS UNDER : FINALLY, WE MAY ONLY MENTION WHAT HAS BEEN ARTICUL ATED BY THE BOMBAY HIGH COURT IN COMMISSIONER OF INCOME TAX, DE LHI, AJMER, ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 19 RAJASTHAN AND MADHYA PRADESH V. NAGRI MILLS CO. LTD . [1958] 33 ITR 681 AS FOLLOWS : IN THE REFERENCE THAT IS BEFORE US THERE IS NO DOUB T THAT THE ASSESSEE HAD INCURRED AN EXPENDITURE. THE ONLY DISPUTE IS RE GARDING THE DATE ON WHICH THE LIABILITY HAD CRYSTALLIZED. IT APPEARS THAT THERE WAS NO CHANGE IN THE RATE OF TAX FOR THE ASSESSMENT YEAR 1 983-84 WITH WHICH WE ARE CONCERNED. THE QUESTION, THEREFORE, IS ONLY WITH REGARD TO THE YEAR OF DEDUCTION AND IT IS A PITY THAT ALL OF US HAVE TO EXPAND SO MUCH TIME AND ENERGY ONLY TO DETERMINE THE YEAR OF TAXABILITY OF THE AMOUNT. LD. AO/TPO SHALL KEEP IN MIND THE UNDERLYING RATIO RENDERED IN THE ABOVE REFERRED DECISIONS WHILE DECIDING THE ALLOWAB ILITY OF CLAIM OF ASSESSEE. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS A LLOWED FOR STATISTICAL PURPOSES. 12. GROUND NO. 11 IS IN RESPECT OF LEVY OF INTEREST UNDER SECTION 234 B, 234C AND 234D OF THE ACT WHICH IS CONSEQUENTIAL IN NATURE AND GROUND NO. 12 IS IN RESPECT OF PENALTY PROCEEDINGS UNDER SECTION 271 (1) (C ) OF THE ACT WHICH IS PREMATURE AT THIS STAGE AND DOES N OT REQUIRE ANY ADJUDICATION. IN THE RESULT APPEAL FILED BY ASSESSEE FOR ASSESSME NT YEAR 2010-11 STANDS ALLOWED AS DISCUSSED ABOVE. 13. IN RESPECT OF ASSESSMENT YEAR 2011-12 TO 2012-13, LD.COUNSEL SUBMITTED THAT ALL GROUNDS ARE IDENTICAL AND SIMILA R TO THAT OF 2010-11. LD.SR.DR DID NOT OBJECT TO SUBMISSIONS ADVANCED BY LD.COUNSEL IN RESPECT OF THE SAME. ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 20 ACCORDINGLY, WE DECIDE GROUNDS RAISED FOR ASSESSMEN T YEARS 2011- 12 TO 2012-13 IN SIMILAR MANNER AS ASSESSMENT YEAR 2010-11 HEREINABOVE. 14 . FOR ASSESSMENT YEAR 2011-12 ASSESSEE RAISED BEFORE US ADDITIONAL GROUND IN TERMS OF RULE 11 OF INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963, WHICH READS AS UNDER: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE DRP /ASSESSING OFFICER ERRED IN NOT HOLDING THAT THE AP PELLANT WAS ELIGIBLE FOR CLAIMING WEIGHTED DEDUCTION UNDER SECTION 35(2AB) O F THE ACT IN RESPECT OF EXPENSES INCURRED BY IN-HOUSE RESEARCH & DEVELOPMEN T FACILITY, WHICH WAS APPROVED BY DEPARTMENT OF SCIENTIFIC & INDUSTRIAL R ESEARCH. MINISTRY OF SCIENCE & TECHNOLOGY (DSIR) VIDE THEIR APPROVAL DAT ED NOVEMBER 5, 2012. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP/ASSESSING OFFICER ERRED IN NOT ALLOWING WEIGHTE D DEDUCTION OF RESEARCH & DEVELOPMENT EXPENSES AMOUNTING TO RS. 21 ,96,33,264 INCURRED DURING THE RELEVANT PREVIOUS YEAR AS PER SECTION 35 (2AB) OF THE ACT. 14.1. LD.COUNSEL SUBMITTED THAT ASSESSEE RAISED ADDITION AL GROUND IN VIEW OF LEGAL POSITION RECENTLY CLARIFIED BY HONBLE DELHI HIGH COURT IN CASE OF MARUTI SUZUKI INDIA LTD VS UNION OF INDIA REPORTED IN (2017) 84 TAXMANN.COM 45 WHEREIN, HONBLE DELHI HIGH COURT WHILE CLARIFYING THE POSITION OF LAW IN THIS REGARD HELD THAT, SECTION 3 5 (2 AB) CLEARLY PROVIDES THAT, ANY EXPENDITURE INCURRED BY A PARTY ON ITS R & D FACILITY EXCEPT, INSOFAR AS IT RELATES TO LAND AND BUILDING LIABLE T O BE ALLOWED TO BE CLAIMED AS DEDUCTION. 14.2. LD.COUNSEL SUBMITTED THAT HONBLE DELHI HIGH COURT FURTHER HELD THAT FOR AVAILING BENEFIT UNDER SECTION 35 (2AB), W HAT IS RELEVANT IS NOT ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 21 DATE OF RECOGNITION OR CUT-OFF DATE MENTIONED IN CE RTIFICATE OF DISR OR EVEN DATE OF APPROVAL, BUT EXISTENCE OF RECOGNITION . HE FURTHER SUBMITTED THAT HONBLE DELHI HIGH COURT THUS OPINED THROUGH THIS DECISION THAT, IF AN R&D CENTRE IS NOT RECOGNISED, IT IS NOT ENTITLED TO DEDUCTION UNDER SECTION 35 (2 AB) OF THE ACT. HE PLACED RELIANCE UP ON DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF CIT VS CLARIS LIFESCIENCES LTD., REPORTED IN 326 ITR 251, WHICH HAS BEEN REFERRED TO AND RELIED UPON BY HONBLE DELHI HIGH COURT WHILE DECIDING THE CASE OF MARUTI SUZUKI INDIA LTD (SUPRA) . 14.3. CONSIDERING LEGALITY OF ISSUE INVOLVED THAT HAS BE EN CLARIFIED BY HONBLE DELHI HIGH COURT , WE DEEM IT FIT AND PROPER TO ADMIT ADDITIONAL GROUND SO RAISED BY ASSESSEE. 14.4. WHILE ARGUING UPON ISSUE IN ADDITIONAL GROUND, LD. COUNSEL PLACED RELIANCE UPON VARIOUS DOCUMENTS WHICH WAS NOT BEFOR E LD.AO FOR HIS CONSIDERATION AND VERIFICATION. 14.5. LD.SR.DR THEREFORE SUBMITTED THAT THE ISSUE MAY BE SET-ASIDE TO LD.AO FOR VERIFICATION AND CONSIDERATION ON BASIS O F DOCUMENTS FILED BY ASSESSEE. 14.6. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 14.7. THIS ISSUE HAS BEEN RAISED BY LD.COUNSEL FOR FIRST TIME, BEFORE US, AND CONSIDERING LEGALITY OF CLAIM, RAISED IN ADDITI ONAL GROUND IT HAS ALREADY BEEN ADMITTED HEREINABOVE IN PRECEDING PARA GRAPHS. HOWEVER, WE ARE OF OPINION THAT LD.ASSESSING OFFICER HAS NOT GOT AN OPPORTUNITY TO VERIFY CLAIM IN LIGHT OF DOCUMENTS RELIED UPON BY A SSESSEE BEFORE US. IN THE INTEREST OF NATURAL JUSTICE, WE SET ASIDE THIS ISSUE TO LD.AO FOR DUE VERIFICATION OF DOCUMENTS AND TO CONSIDER CLAIM OF ASSESSEE IN LIGHT OF ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 22 DECISION DELIVERED BY HONBLE DELHI HIGH COURT IN CASE OF MARUTI SUZUKI INDIA LTD (SUPRA ). NEEDLESS TO SAY THAT LD.AO SHALL GRANT PROPER OPPORTUNITY TO ASSESSEE AS PER LAW TO REPRESENT ITS CLAIM. ACCORDINGLY THE ADDITIONAL GROUNDS RAISED BY ASSESS EE STANDS ALLOWED FOR STATISTICAL PURPOSES. IN THE RESULT APPEAL FILED BY ASSESSEE FOR ASSESSME NT YEAR 2011-12 TO 2012-13 STAND ALLOWED AS DISCUSSED ABOVE. ORDER PRONOUNCED IN OPEN COURT ON 18 TH JANUARY, 2019. SD/- SD/- (R.K.PANDA) (BEENA A PILLAI) ACCOUNTANT MEMBER JUD ICIAL MEMBER DT. 18 TH JANUARY, 2019 GMV KAVITA ARORA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES ITA NOS. 1972/DEL/15 AY 2010-11 1787/DEL/16 AY 2011-12 7085/DEL/17 AY 2012-13 WHIRLPOOL OF INDIA LTD. VS. DCIT-LTU 23 S.NO. DETAILS DATE 1 DRAFT DICTATED ON DRAGON 11/01/2019 17/01/19 2 DRAFT PLACED BEFORE AUTHOR 11/01/2019 17/01/2019 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 18/01/2019 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 18/01/2019 5 APPROVED DRAFT COMES TO THE SR. PS/PS 18/01/2019 6 KEPT FOR PRONOUNCEMENT ORDER UPLOADED ON : 18/01/2019 7 FILE SENT TO BENCH CLERK 18/01/2019 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER