M/s Widex India Pvt. Ltd., Chandigarh V. ACIT, Chandigarh

ITA 269/CHANDI/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0034 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 20-03-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 09-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S KAHLON SR DR
• Assessee Lawyers: SANDEEP KARHAIL
• Keywords: Related party transaction; Depreciation; Transfer pricing; Business expenditure; Search and seizure; International transaction; Application of stay; Wholly owned subsidiary; Tangible material; Fair market value; Corroborative evidences; Avoidance of tax; Commercial expediency; Onus to prove; Unabsorbed depreciation; Set aside
• Section: 92C; 143(3); 92D; 92B; 92F; 92E; 92

Judgement Text

, . , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B CHANDIGARH !', # $ %!, %! & ' ( ) * , +, $ BEFORE: SMT. DIVA SINGH, JM & SMT.ANNAPURNA GUPTA, AM ./ ITA NO. 269/CHD/2017 / ASSESSMENT YEAR : 2012-13 M/S WIDEX INDIA PVT.LTD., SCO 64-65, 1 ST FLOOR, SECTOR 17-A, CHANDIGARH. VS THE A CIT, CIRCLE 2(1), CHANDIGARH. ./ PAN NO: AAACW3207E / APPELLANT / RESPONDENT ! ' / ASSESSEE BY : SHRI NAGESHWAR RAO & SHRI SANDEEP KARHAIL # ! ' / REVENUE BY : SHRI J.S.KAHLON, SR.DR $ % ! &/ DATE OF HEARING : 12.04.2019 '()* ! &/ D ATE OF PRONOUNCEMENT : 23.05.2019 +-/ ORDER PER DIVA SINGH THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A SSAILING THE CORRECTNESS OF THE ORDER DATED 28/12/2016 OF ASSESSIN G OFFICER UNDER SECTION 144C(13) READ WITH SECTION 143(3) OF THE INCOME TAX ACT 1961. THE SAID ORDER WAS PASSED IN PURSUANCE TO THE DIRECTIONS DAT ED 29/11/2016 OF THE DRP. THE ASSESSEE IN THE PRESENT PROCEEDINGS HAS RA ISED THE FOLLOWING GROUNDS BEFORE US : GENERAL 1. THE ORDER OF THE LEARNED AO/ TRANSFER PRICING OFFIC ER ('TPO') AND DIRECTIONS OF THE HON'BLE DRP ARE BASED ON INCORRECT INTERPRET ATION OF LAW AND THEREFORE ARE BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW AND BASED ON THE DIRECTIONS OF DRP, THE LEARNED AO ERRED IN ASSESSIN G THE TOTAL INCOME OF THE APPELLANT AT RS. 1,75,60,837 AS AGAINST RETURNED IN COME OF RS. - 4,62,24,541 COMPUTED BY THE APPELLANT. TRANSFER PRICING GROUNDS 3. THAT THE LD. AO/TPO/DRP ERRED IN ROUTINELY ASSUMING EXISTENCE OF AN INDEPENDENT INTERNATIONAL TRANSACTION BY THE WAY OF ADVERTISING MARKETING AND PROMOTION ('AMP') SERVICES AND PROCEEDING TO MA KE AN UPWARD ADJUSTMENT ON THAT BASIS. 4. THAT THE LD. AO/TPO/DRP HAVE GROSSLY ERRED IN DISRE GARDING PRINCIPLES LAID DOWN BY THE HON'BLE DELHI HIGH COURT AND SUBSEQUENT DECISIONS OF HON'BLE TRIBUNAL PERTAINING TO THE UPWARD ADJUSTMENT TOWARD S AMP EXPENDITURE AND FURTHER INCORRECTLY RELIED ON THE SAME TO JUSTIFY T HE ADJUSTMENT. ITA 269/CHD/2017 A.Y.2012-13 PAGE 2 OF 58 5. 'THAT THE LD. AO/TPO/DRP HAS GROSSLY ERRED IN LAW A ND FACTS BY MAKING A FURTHER ADJUSTMENT TOWARDS MARK UP. 6. THAT THE LD. AO/TPO/DRP HAS GROSSLY ERRED IN FAILIN G TO APPRECIATE AND APPLY THE PRINCIPLES LAID DOWN BY HON'BLE DELHI HIGH COUR T AND VARIOUS TRIBUNAL DECISIONS IN LETTER AND SPIRIT, THEREBY PROCEEDING TO MAKE SE PARATE ADJUSTMENTS TOWARDS AMP EXPENDITURE BY REFERENCE TO THE VERY SAME COMPARABL ES USED FOR BENCHMARKING OTHER INTERNATIONAL TRANSACTIONS PERTAINING TO THE DISTRI BUTION SEGMENT. THUS THIS DUPLICATIVE APPROACH THAT HAS BEEN USED IS ULTRA VIRES UNDER TH E LAW AND SHOULD BE HELD AS INVALID JUST AS THE BRIGHT LINE METHOD. 7. LD. AO/ LD. DRP ERRED IN PRESUMING EXISTENCE OF INTERNATIONAL TRANSACTION, RELYING ON IRRELEVANT MATERIAL, UPHOLD ING APPLICATION OF BRIGHT LINE TEST, DIRECTING INCLUSION OF SELLING AND DISTRIBUTION EXP ENSES, CONCLUDING THAT EXISTENCE OF INTERNATIONAL TRANSACTION OF AMP IS NOT EVEN NECESS ARY WHILE UPHOLDING ADJUSTMENT, DIRECTING TPO/AO TO CARRY OUT FURTHER VERIFICATION/ANALYSIS AND IN UPHOLDING TWO PROTECTIVE ADJUSTMENTS IN ADDITION TO SUBSTANTIVE A MP ADJUSTMENT. 8. IMPUGNED ASSESSMENT ORDER / DEMAND AS ALSO PROTECTI VE ADJUSTMENTS ARE SELF- CONTRADICTORY, UNLAWFUL AND CONTRARY TO LAW AND FUR THER DECISION MAKING PROCESS ADOPTED IS SO VITIATED THAT IT IS DIFFICULT TO FIGU RE OUT WHICH FACTOR HAS INFLUENCED SUCH CONCLUSIONS. FURTHER, LD. DRP EFFECTIVELY ENHANCED SUBSTANTIVE ADJUSTMENT CONTRARY TO LAW AND WITHOUT FOLLOWING PRESCRIBED PROCESS. 9. THE LEARNED AO ERRED, IN LAW AND IN FACTS, IN INITI ATING PENALTY PROCEEDINGS U/S 271(L)(C) OF THE ACT. 2. THE APPEAL HAS COME UP FOR HEARING ON VARIOUS DA TES AND THE LD. AR ADDRESSING THE MAIN ARGUMENTS IN SUPPORT OF THE GROUNDS RAISED AND THE WITHOUT PREJUDICE ARGUMENTS RAISED IN SUPPORT OF TH E OTHER GROUNDS ON RECORD HAS CONSISTENTLY CANVASSED THAT THE ISSUE IS FULLY COVERED IN FAVOUR OF THE ASSESSEE BY VIRTUE OF THE ORDER DATED 16.02.2017 IN ITA 117/CHD/2016 PERTAINING TO 2011-12 ASSESSMENT YEAR. COPY OF THIS ORDER HAS BEEN FILED IN THE COURSE OF THE HEARING. 3. THE LD. SR.DR MR. J.S. KAHLON APPEARING ON BEHA LF OF THE REVENUE ON THE OTHER HAND HAS SUPPORTED THE ORDER PASSED BY TH E AO PURSUANT TO THE DRPS DIRECTIONS STATING THAT FULL FACTS HAVE NOT B EEN DISCLOSED BY THE ASSESSEE TO THE TAX AUTHORITIES, ACCORDINGLY THE SA ID ORDER MAY NOT BE FOLLOWED. THE ORDER PASSED IN THE YEAR UNDER CONSI DERATION IT WAS SUBMITTED, HAS BEEN PASSED IN THE LIMITED FACTS MADE AVAILABLE AFTER FULLY HEARING THE ASSESSEE AND THUS THE ORDER MAY BE UPHELD. IT WAS ALSO HIS SUBMISSION THAT THE REVENUE IN FACT IS IN APPEAL BEFORE THE HON'BLE HIGH COURT SPECIFICALLY ON ACCOUNT OF THIS LIMITED DISCLOSURE OF FACTS MADE BY THE ASSESSEE. ACCORDINGLY, IT HAS BEEN VEHEMENTLY SUBMITTED THAT IN THE YEAR UNDER CONSIDERATION, THE EARLIER YEARS ORDER MAY NOT BE FOLLOWED AS IT HAS BEEN PASSED ON FACTS WHERE THE ASSESSEE HAS FAILED ALL A LONG TO PRODUCE THE RELEVANT AGREEMENTS WITH ITS AE AND SINCE THE ORDER PASSED IS AN ORDER PASSED AFTER AFFORDING A FULL OPPORTUNITY TO THE AS SESSEE, THE PAST PRECEDENT IN VIEW THEREOF MAY NOT BE FOLLOWED. ITA 269/CHD/2017 A.Y.2012-13 PAGE 3 OF 58 4. THE LD. AR MR. N. RAO TOOK STRONG OBJECTION TO T HE SAID DEPARTMENTAL LINE OF ARGUMENT. HE MADE A STATEMENT AT BAR STATI NG THAT APART FROM THE JOINT VENTURE AGREEMENT PLACED ON RECORD BY THE ASS ESSEE AND ADDRESSED BY THE TAX AUTHORITIES THERE IS NO OTHER AGREEMENT WHI CH THE ASSESSEE HAS ENTERED INTO WITH THE AE, THUS, THE OCCASION TO PRO DUCE THE NON EXISTENT AGREEMENT DOES NOT ARISE. IT WAS HIS SUBMISSION TH AT INFACT THE DEPARTMENT HAD FILED A MISCELLANEOUS APPLICATION BEFORE THE IT AT WHEREIN SIMILAR ASSERTIONS HAD BEEN MADE. THE APPLICATION WAS DISM ISSED BY ORDER DATED 28.12.2017 IN M.A. 76/CHD/2017 ( COPY FILED). THE LD. SR.DR AGREED THAT M.A. HAD BEEN FILED. IT WAS HIS SUBMISSION THAT SI NCE THE REVENUE DID NOT SUCCEED BEFORE THE ITAT, THE ISSUE IS PENDING BEFOR E THE HON'BLE HIGH COURT. THE LD. AR ON THE OTHER HAND RELYING UPON THE MISCE LLANEOUS APPLICATION DATED 28.12.2017SUBMITTED THAT THERE IS NO OTHER A GREEMENT AND THIS REPEATED INSISTENCE OF THE DEPARTMENT HAS BEEN ADDR ESSED BY THE ASSESSEE. 5. THE LD. AR ADDRESSING THE ASSESSEE'S STAND HAS A LSO FILED AN APPLICATION REQUESTING FOR ADMISSION OF ADDITIONAL GROUND AS GROUND NUMBER 8(A). SUBSEQUENTLY THE ASSESSEE HAS FILED ANOTHER A PPLICATION REQUESTING FOR ADMISSION OF ANOTHER ADDITIONAL GROUND TITLED AS 8 (B) WITHOUT PREJUDICE TO THE MAIN ARGUMENTS ADVANCED. IT WAS HIS SUBMISSION THAT THE ARMS LENGTH CALCULATION RESORTED TO BY THE TPO ON THE DIRECTION S OF THE DRP BY APPLYING THE INTENSITY ADJUSTMENT IS OPPOSED IN PRINCIPLE BY THE ASSESSEE AS IT IS INVALID IN LAW AND A MIRROR IMAGE TO BRIGHT LINE TE ST WHICH DOES NOT HAVE ANY JUDICIAL APPROVAL. HOWEVER, WITHOUT PREJUDICE TO THIS ARGUMENT, IT WAS HIS SUBMISSION THAT THERE ARE MANY CALCULATION ERR ORS MADE BY THE TPO AND IF THESE ARE CORRECTED, THERE WOULD STILL BE NO ADJ USTMENT WARRANTED. THESE CALCULATIONS, IT WAS SUBMITTED HAVE BEEN MADE AVAIL ABLE BY THE ASSESSEE TO THE REVENUE AND REFERRING TO THE RECORD, IT WAS FUR THER SUBMITTED THAT THE DEPARTMENT HAS BEEN DIRECTED TO ADDRESS THE CALCULA TION ERRORS POINTED OUT BY THE ASSESSEE WHICH ARE PATENTLY EVIDENT ON RECOR D. IT WAS SUBMITTED THAT DESPITE OPPORTUNITY, THE ISSUE IN ITS REPLY GIVEN H AS BEEN SKIRTED BY THE REVENUE. IN THE SAID BACKDROP THE LD. AR INVITING A TTENTION TO THE BACKGROUND OF THE ASSESSEE SUBMITTED THAT THE ASSESS EE HAS BEEN IN THIS LINE OF BUSINESS SINCE 2000 AND THAT THERE IS NO CHANGE IN THE MANNER OF DOING BUSINESS OR THE BUSINESS MODEL OF THE ASSESSEE. IN THE FACTS OF THE PRESENT CASE THE ONLY ISSUE PICKED UP BY THE TPO AS IN THE EARLIER YEAR WAS THE AMP ISSUE ON SIMILAR FACTS, CIRCUMSTANCES AND POSITION OF LAW. ACCORDINGLY, IT WAS SUBMITTED THAT THE ISSUE IS FULLY COVERED BY THE EARLI ER DECISION OF THE ITAT ON ITA 269/CHD/2017 A.Y.2012-13 PAGE 4 OF 58 SAME SET OF FACTS AND CIRCUMSTANCES. IT WAS ALSO HIS SUBM ISSION THAT THIS FACT HAS BEEN TAKEN NOTE OF BY THE TPO HIMSELF IN PARA 5 OF HIS ORDER. INVITING ATTENTION TO THE IMPUGNED ORDER IT WAS SUBMITTED TH AT NOTWITHSTANDING THE ARGUMENTS WHICH HE WOULD BE ADVANCING ON VARIOUS IS SUES WHEREIN AGAINST THE SETTLED LEGAL POSITION NAMELY THAT THE DIRECT S ELLING EXPENSES WERE TO BE EXCLUDED EVEN WHERE AMP ADJUSTMENT IS RESORTED TO T HE DRP IN THE FACTS OF THE PRESENT CASE HAS GONE AHEAD AND DIRECTED THE TPO TO DO SOMETHING WHICH EVEN THE TPO HIMSELF DID NOT ORIGINALLY ADD. THE D RP DIRECTED THE TPO TO INCLUDE THE DIRECT SELLING EXPENSES EXCLUDED FROM T HE AMP EXPENSES. THESE ISSUES, IT WAS SUBMITTED, ARE BEING REFERRED TO ONL Y TO HIGHLIGHT THE UNREASONABLE STAND OF THE DEPARTMENT. IT WAS SUBMI TTED THAT HE WOULD BE ADDRESSING THESE IN GREATER DETAIL IN THE COURSE OF THE HEARING HOWEVER AT THE OUTSET HE WOULD WANT TO INVITE ATTENTION TO PAR A 81 OF THE TPOS ORDER TO SHOW HOW HE HAS COME UP WITH TWO DIFFERENT POSSIBLE CALCULATIONS. THE APPELLATE FORUM, ON THE OTHER HAND ENHANCES THE ADD ITION MADE BY THE ASSESSING OFFICER ON A SUBSTANTIVE BASIS BY HOLDING THAT INCOME OF THE ASSESSEE IS ENHANCED BY RS. 6,37,03,906/- (ON SUBST ANTIVE BASIS), RS.7,98,44,360/- (ON PROTECTIVE BASIS) AND RS. 2,22 ,80,489/- (INTENSITY ADJUSTMENT ON PROTECTIVE BASIS). REFERRING TO THE S AID FINDING IT WAS HIS SUBMISSION THAT THESE VARYING STANDS OF THE DEPARTM ENT DEMONSTRATE THE PRE-MEDIATED DETERMINATION TO SOMEHOW MAKE AN ADDIT ION. THIS WAVERING AND VARYING STAND WITHOUT ADDRESSING WHETHER THE ADDITIO N IS TO BE MADE ON A PROTECTIVE BASIS AS THEY DESCRIBE OR ON A SUBSTAN TIVE BASIS OR INTENSITY BASIS AS THEY PROPOSE CLEARLY DEMONSTRATES THE HOLL OWNESS OF THEIR CLAIM AS IT UNFAILINGLY DEMONSTRATE THAT WHERE THE TAX AUTHO RITIES THEMSELVES ARE NOT SURE AS TO WHICH CALCULATION IS CORRECT, THE OCCASI ON TO FAULT THE ASSESSEE DOES NOT ARISE. 5.1 IT WAS ALSO HIS SUBMISSION THAT THE MULTIPLE DI FFERENT WAYS OF CALCULATION AND THE DIFFERENT CALCULATIONS HAVE ADM ITTEDLY BEEN MADE IN THE ABSENCE OF RELEVANT RULES IN THE PROVISIONS AND THE ACT. THE SAID ACTIONS, IT WAS ARGUED ACCEPTS THAT IT IS NOT POSSIBLE FOR THE REVENUE TO COME TO ONE ACCEPTABLE COMPUTATION. THUS, WHERE THE DEPARTMENT ITSELF IS UNSURE FAULTING THE ASSESSEE FOR NOT FOLLOWING THE NONEXIS TENT RULES AND PROVISIONS IS CONTRARY TO ALL SETTLED LEGAL PRINCIPLES AND CAN ONS OF TAXATION. IT WAS HIS SUBMISSION THAT IT IS WELL ACCEPTED THAT THERE SHOU LD BE CERTAINTY OF WHO IS TO BE TAXED; WHAT EVENT IS TO BE TAXED AND THE COMP UTATION OF THE TAX. IT WAS SUBMITTED THAT THE ASSESSING OFFICER BY PARA 4.5 OF HIS ORDER UNAMBIGUOUSLY ITA 269/CHD/2017 A.Y.2012-13 PAGE 5 OF 58 DEMONSTRATES THAT THE DEPARTMENT IS NOT SURE AS TO BY WHAT AMOUNT AND WHAT METHOD THE INCOME OF THE ASSESSEE IS TO BE ENH ANCED. REFERRING TO THE RECORD IT WAS HIS SUBMISSION THAT THE ASSESSEE'S RE TURNED LOSS IS RS. 4,62,24,541/- THE INCOME WAS ASSESSED AT RS. 1. 75 CRORE ODD AFTER THE DIRECTIONS OF THE DRP AND AT RS. 7.98 CRORE ODD ON PROTECTIVE BASIS AND RS. 2.22 CRORE ODD ON THE BASIS OF INTENSITY ADJUSTMENT ALSO ON PROTECTIVE BASIS. IN THE SAID BACKGROUND ATTENTION WAS INVITED TO THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE BY THE RESPECTIVE APPLICATIO NS AVAILABLE ON RECORD. THESE GROUNDS ARE REPRODUCED HEREUNDER FOR READY RE FERENCE : GROUND 8(A): ( APPLICATION DATED 16.04.2018) GROUND 8(A): THAT WITHOUT PREJUDICE TO ABOVE, INTENSITY ADJUSTME NT IS INVALID IN LAW JUST AS BRIGHT LINE TEST. FURTHER WITHOUT PREJUDICE , THE QUANTIFICATION OF INTENSITY ADJUSTMENT IS ALSO ERRONEOUS. THEREFORE, THE ADJUST MENT MADE OF RS. 2,22,80,489 IS ALSO UNLAWFUL AND DESERVES TO BE DELETED. GROUND 8(B): ( APPLICATION DATED 06.07.2018) GROUND 8(B): THE LD. DRP ERRED IN DIRECTING/UPHOLDING APPLICATIO N OF TNNM AND CARRYING OUT OF INTENSITY ADJUSTMENT, INSTEAD OF AP PLYING RPM/MODIFIED RPM AS THE MOST APPROPRIATE METHOD. 6. THE LD. SR. DR WAS REQUIRED TO ADDRESS WHETHER T HE ADDITIONAL GROUNDS MAY BE ADMITTED AT THIS STAGE OR NOT. 7. CONSIDERING THE GROUNDS THE LD. SR.DR SUBMI TTED THAT INFACT THE ASSESSEE IS ONLY ELABORATING WHAT HE HAS ADDRESSED IN THE ORIGINAL GROUNDS RAISED AND THESE CAN BE TREATED TO BE CLARIFICATORY IN NATURE AND THE DEPARTMENT IS NOT OBJECTING TO THE RAISING OF THE S AID GROUNDS AT THIS STAGE. 8. ACCORDINGLY, IN THE LIGHT OF THE SUBMISSIONS O F THE PARTIES BEFORE THE BENCH, THE ADDITIONAL GROUNDS ARE ADMITTED. 9. THE PARTIES MADE THEIR RESPECTIVE SUBMISSIONS FO R AND AGAINST THE GROUNDS RAISED MENTIONING THAT FACTUAL BACKGROUND O F THE ASSESSEE REMAINS SAME IN BOTH THE YEARS. THE DEPARTMENT HAS IN THE ARGUMENTS ADVANCED ONLY DISPUTED THE PRAYER OF THE ASSESSEE THAT THE V IEW TAKEN IN THE EARLIER YEAR MAY NOT BE FOLLOWED ON THE GROUND THAT FULL FACTS WERE N OT MADE KNOWN TO THE TAX AUTHORITIES FOR WHICH PURPOSE THE REVENU E IS IN APPEAL BEFORE THE HON'BLE HIGH COURT. THE LD. AR, AS NOTED EARLIER H AS MADE A STATEMENT AT BAR THAT APART FROM THE JOINT VENTURE AGREEMENT, TH ERE IS NO OTHER AGREEMENT. HOWEVER, AT THE TIME OF DICTATION, IT WA S NOTICED THAT THE PARTIES HAVE BEEN IN AN ERROR IN MENTIONING THAT THE FACTS OF THE TWO YEARS ARE IDENTICAL AS THE TPO IN HIS PAGE 3 OF HIS 46 PAGED ORD ER HAS NOTICED THAT THE ITA 269/CHD/2017 A.Y.2012-13 PAGE 6 OF 58 ASSESSEE IN THE YEAR UNDER CONSIDERATION IS 100% SU BSIDIARY OF AE (WIDEX A/S. DENMARK) WITH GSA INVEST A/S, DENMARK HAVING O NLY 1 SHARE. THE DRP, IT WAS NOTICED AT PAGE 6 OF ITS 90 PAGED ON TH E CONTRARY PROCEEDS ON THE FOOTING THAT WIDEX INDIA IS A JOINT VENTURE BET WEEN WIDEX A/S DENMARK AND MR. T.S.ANAND. THE FACTS CONSIDERED BY THE DRP IN AS MUCH AS THAT THERE WAS NO CHANGE IN THE SHAREHOLDING PATTERN OF THE ASSESSEE WAS ADMITTEDLY CONTRARY TO RECORD. ACCORDINGLY, SINCE IN THE COURSE OF THE HEARINGS, THE PARTIES HAD ALSO PROCEEDED ON THE FOO TING THAT THERE WAS NO CHANGE IN FACTS, THE PARTIES WERE PUT TO NOTICE OF THIS FACT AND REQUIRED TO ADDRESS THEIR ARGUMENTS. THE ATTENTION OF THE PART IES WAS INVITED TO PARA 2 PAGE 2 OF THE ORDER OF THE ITAT WHEREIN IT HAD BEEN NOTICED THAT THE SHARE OF THE AE IN THE YEAR UNDER CONSIDERATION AS THEN CONS IDERED BY THE ITAT WAS 78.43% AND THE BALANCE SHARE OF MR. T.S. ANAND WAS 21.57% WHEREAS IN THE YEAR UNDER CONSIDERATION THE OWNERSHIP OF THE AE HA S NOW BECOME 100%. THUS, PARTIES WERE PUT TO NOTICE OF THIS FACT. 10. WHEREAS THE LD. AR SUBMITTED THAT THIS FACT HAS BEEN NOTICED BY THE TPO AND ACCORDING TO HIM, THERE IS NO IMPACT AS FAR AS THE ASSESSEE IS CONCERNED. THE LD. SR.DR TOOK TIME TO VERIFY THE P OSITION FROM THE TPO. IT WAS BROUGHT TO THE NOTICE OF THE PARTIES THAT THE D RP HAS PROCEEDED IN ADJUDICATING UPON THE ISSUES BEFORE IT TAKING NOTE OF THE FACT THAT THERE WAS NO CHANGE IN FACTS AND CIRCUMSTANCES IN THE FACTS O F THE CASE IN THE YEAR UNDER CONSIDERATION. THE CHANGE OF SHAREHOLDING PA TTERN BY THE DRP APPARENTLY WENT UN-NOTICED. ACCORDINGLY, IT WAS CO MMUNICATED TO THE PARTIES THAT THE CONCLUSIONS DRAWN ON INCORRECT AND WRONG F ACTS PRIMA FACIE BECOME PERVERSE. IN RESPONSE TO THE SAID QUERY OF THE BEN CH, THE LD. AR REPEATED THAT IT HAS NO MATERIAL IMPACT ON THE ISSUE AT HAND. TIME WAS G IVEN TO THE PARTIES TO RESPOND AFTER SEEKING INSTRUCTIONS AND VERIFYING THE LEGAL AND FACTUAL ASPECTS IMPACTED. MR. N.RAO ON THE NEXT DATE SUBMI TTED THAT THE TPO HAS ACCEPTED THE FACT THAT THE CHANGE IN SHAREHOLDING P ATTERN HAD NO IMPACT ON THE ISSUE. THE LD. SR.DR MR. KAHLON WAS REQUIRED T O PLACE THE WRITTEN RESPONSE OF THE REVENUE ON RECORD. THE LD. SR.DR S TATED THAT HE HAS BEEN INSTRUCTED BY THE TPO TO STATE THAT THERE IS NO IMP ACT ON ACCOUNT OF THE CHANGE IN SHARE HOLDING PATTERN. THE DEPARTMENT WA S PERMITTED/DIRECTED TO PUT THIS FACT IN WRITING. THE TPO VIDE HIS REPLY D ATED 22/25.02.2019 HAS PLACED ON RECORD THE WRITTEN SUBMISSION ACCEPTING T HAT THERE IS NO IMPACT ON ACCOUNT OF THIS CHANGE IN SHARE HOLDING PATTERN. I N THE SAID BACKGROUND, PARTIES WERE REQUIRED TO RE-ARGUE THE CASE. ITA 269/CHD/2017 A.Y.2012-13 PAGE 7 OF 58 11. THE LD. AR RE-ITERATED HIS INITIAL ARGUMENT THA T THE ISSUE IS COVERED IN HIS FAVOUR. IT WAS HIS ARGUMENT THAT WHEREAS IN TH E IMMEDIATELY PRECEDING ASSESSMENT YEAR, THE DEPARTMENT HAS INSISTED CONTRA RY TO FACTS THAT CLAUSES OF THE JOINT VENTURE AGREEMENT BE INTERPRETED IN A MANNER THAT DEMONSTRATED THAT THERE WAS AN AGREEMENT TO INCUR E XPENDITURE AT THE BEHEST OF THE AE WHICH SUBMISSION HAS BEEN REPULSED BY THE ITAT EVEN IN THE MISCELLANEOUS APPLICATION. IN THE YEAR UNDER CONSIDE RATION, IT WAS SUBMITTED, IN VIEW OF CHANGE IN SHARE HOLDING PATTERN, EVEN TH E JOINT VENTURE ARGUMENT HAS NO RELEVANCE. THUS, APART FROM THE TRADE MARK AGREEMENTS ETC., THERE IS NO OTHER AGREEMENT. THUS, THE ISSUE, IT WAS SUBMIT TED, IS FULLY COVERED IN HIS FAVOUR. INVITING SPECIFIC ATTENTION TO PAGE 8 PARA 8 WHICH CONTINUES AT PAGE 9 OF THE ORDER OF THE ITAT, THE LD. AR CARRIED US THR OUGH THE WRITTEN SUBMISSIONS WHICH HAD BEEN PLACED ON BEHALF OF THE ASSESSEE, WHICH HAVE BEEN RECORDED AT PAGE 12 OF THE ITAT ORDER AND CONS IDERING THESE, THE ITAT RELYING ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN TH E CASE OF BAUSCH & LOMB 381 ITR 227 (DELHI) ALLOWED THE APPEAL OF TH E ASSESSEE. PARA 11, 12 AND 13 OF THE ORDER OF THE ITAT WERE HEAVILY RELIED UPON. INVITING SPECIFIC ATTENTION TO THE DECISION OF THE DELHI HIGH COURT I N THE CASE OF BAUSCH & LOMB WHICH HAS BEEN EXTRACTED AT PAGES 17 TO 21 OF THE ORDER OF THE ITAT, SPECIFIC ATTENTION WAS INVITED TO PARA 62 OF THE AF ORESAID DECISION WHEREIN THE FACT THAT THE HOLDING COMPANY HELD 99.9% SHARES IN THE ASSESSEE, IT WAS SUBMITTED, WAS A NEAR SIMILAR FACT IN THE SAID CASE ALSO. ACCORDINGLY, IT WAS HIS SUBMISSION THAT THE CHANGE IN SHARE HOLDING PAT TERN HAS NO IMPACT SPECIFICALLY WHEN TAKEN INTO CONSIDERATION THE FACT THAT THERE WAS NO OTHER AGREEMENT AND INFACT IN THE YEAR UNDER CONSIDERATIO N, THE ASSESSEE HAS A MUCH BETTER CASE AS EVEN THE JOINT VENTURE AGREEMEN T WHICH IS THE BASIS OF THE DEPARTMENTAL APPEAL BEFORE THE HIGH COURT, IS N O LONGER RELEVANT. INVITING ATTENTION TO THE PAPER BOOK PAGE 323, IT WAS HIS SU BMISSION THAT 1 SHARE IN WIDEX INDIA IS HELD BY GSA INVEST A/S DENMARK AND 1 00% FOREIGN HOLDING WAS WITH WIDEX A/S DENMARK. 12. ADDRESSING THE POINT, THE LD. AR SUBMITTED THAT TH E CHANGE IN SHAREHOLDING PATTERN HAS BEEN REFERRED TO BY THE ASSES SEE IN HIS TP REPORT AND HAS BEEN NOTED BY THE TPO AND THUS, THE DRP EVEN IF OF THE VIEW THAT THERE IS NO CHANGE IN FACTS CAN BE HELD TO HAVE CONCLUD ED THAT THERE IS NO CHANGE IN MATERIAL FACTS AS THE CHANGE IN SHAREHOLDING PAT TERN DOES NOT IMPACT THE ADDITIONS MADE. IT WAS HIS SUBMISSION THAT THE RE IS NO IMPACT WHATSOEVER WHETHER THE WIDEX A/S DENMARK HOLDS 74% SH ARE OR 99% ITA 269/CHD/2017 A.Y.2012-13 PAGE 8 OF 58 SHARE AS THE ORDER ON THE BASIS OF WHICH THE ASSESSEE IS RELYING UPON IN ITS OWN CASE HAS TAKEN NOTE OF THE FACT THAT IN THE CASE OF BAUSCH & L OMB, THE INDIAN ASSESSEE COMPANY WAS 100% SUBSIDIARY OF THE FOREIGN AES, THUS THE OWNERSHIP OF THE ASSESSEE WAS NOT RELEVANT. FOR TH E SPECIFIC PURPOSE, OUR ATTENTION WAS INVITED TO INTERNAL PAGE 19 WHEREIN TH E FACTS FROM THE DECISIONS OF THE BAUSCH AND LOMB NOTED IN PARA 62 ARE BEING R EFERRED TO FOR READY REFERENCE : 62. IN THE PRESENT CASE, THE MERE FACT THAT B&L, USA TH ROUGH B&L, SOUTH ASIA, INC HOLDS 99.9% OF THE SHARE OF THE ASSESSEE WILL NOT I PSO FACTO LEAD TO THE CONCLUSION THAT THE MERE INCREASING OF AMP EXPENDITURE BY THE ASSESSEE INVOLVES AN INTERNATIONAL TRANSACTION IN THAT REGARD, WITH B&L, USA . A SIMILAR CONTENTION BY THE REVENUE, NAMELY, THAT EVEN IF THERE IS NO EXPLICIT ARRANGEMENT, THE FACT THAT THE BENEFIT OF SUCH AMP EXPENSES WOULD ALSO ENURE TO THE AE IS ITSELF SUFFICIENT TO INFER THE EXISTENCE OF AN INTERNATIONAL TRANSACTION HAS BEEN NEGATIVED BY THE COURT IN MARUTI SUZUKI INDIA LTD. (SUPRA) (EMPHASIS PROVIDED BY THE BENCH) 12.1 IT WAS ALSO HIS SUBMISSION THAT THE ASSESSEE IN HIS I NTERACTIONS WITH THE AO IN THE COURSE OF SOME HEARING HAS BEEN CON VEYED BY THE TPO HIMSELF THAT THE CHANGE IN SHAREHOLDING PATTERN HAS NOT IM PACTED THE ISSUE IN THE YEAR UNDER CONSIDERATION. ORAL ASSERTIONS OF THE ASSESSEE ON BEHALF OF THE TPO WERE DIRECTED TO BE COMMUNICATED IN WRIT ING FOR WHICH SPECIFIC PURPOSE, THE LD. SR.DR WAS REQUIRED TO PLACE THE WR ITTEN REPLY OF THE AO/TPO ON RECORD. THE LD. SR.DR AS NOTED HAS PLACE D THE TPOS REPLY ON RECORD STATING THAT THE CHANGE IN SHAREHOLDING PATTE RN IN THE YEAR UNDER CONSIDERATION DOES NOT IMPACT THE ISSUE. FOR THE SAKE OF COMPLETENESS, THE DEPARTMENTAL RESPONSE IS EXTRACTED HEREUNDE R : OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX TRANS FER PRICING OFFICER-1(3)(2), ROOM NO.510, 5 TH FLOOR, E-2, BLOCK, CIVIC CENTRE, MINTO ROAD, NEW DELHI F.NO. TPO - 1(3)(2)/COMMENTS/2018-19/481 DATED : 25.02.2019 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(1), CHANDIGARH, SUB: APPEAL IN THE CASE OF M/S WIDEX INDIA P VT. LTD. AY 2012-13 IN , ITA NO. 269/CHD/2017-REG. PLEASE REFER TO ITAT'S ORDER DATED 01/02/2019 DISPO SING THE STAY APPLICATION OF THE ASSESSEE. 2. WHILE PASSING THE ABOVE MENTIONED ORDER THE HON'BLE ITAT HAS QUESTIONED ABOUT THE CHANGED SHARE HOLDING STRUCTURE OF THE ASSESSEE COM PANY FROM EARLIER YEAR TO THE PREVIOUS YEAR. THE TRIBUNAL HAS ASKED TO FILE WRITTEN SUBMIS SION ADDRESSING THE CHANGE OF SHARE HOLDING PATTERN OF THE ASSESSEE COMPANY. IT IS PERT INENT TO MENTION HERE THAT IN THE AY 2011- 12. 21.57% OF_ SHARES OF THE ASSESSEE HELD BY SH. T .S .ANAND AND REST OF THE SHARES WERE HELD BY THE AE OF THE ASSESSEE I.E.WIDEX DENMARK. H OWEVER DURING THE AY 2012-13 SH. T .S .ANAND HAD SOLD HIS SHARES TO THE WIDEX DENMARK AND RESULTANTLY AT THE TIME OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2012 -13, THE WIDEX DENMARK WAS THE 99.99% SHARE HOLDING COMPANY OF THE ASSESSEE. THE S AME SHARE HOLDING PATTERN HAS BEEN ITA 269/CHD/2017 A.Y.2012-13 PAGE 9 OF 58 REFLECTED IN THE TPO ORDER PASSED IN THIS REGARD. SH. T .S .ANAND IS AN INDIVIDUAL AND TRANSFER/SALE OF SHARES FROM SH. ANAND TO THE AE OF THE ASSESSEE HAS NO IMPACT ON TH E RELATED PARTY TRANSACTION BETWEEN THE ASSESSEE AND ITS AE AS FAR AS TP AUDIT OF SUCH TRANSACTIONS IS CONSIDERED. 3. REGARDING EFFECT OF THIS CHANGE OF SHARE H OLDING PATTERN ON THE TP ADJUSTMENT, IT MAY BE MENTIONED THAT THAT THE TP ADJUSTMENT IN THE INSTAN T CASE HAD BEEN PROPOSED ON THE BASIS OF AMP EXPENDITURE. THE TP ADJUSTMENT HAD BEEN COMPUTED CONSIDERING THE PROFIT S MARGINS EARNED AND EXPENDITURE INCURRED IN COMPARISON TO TH E MARKET FORCES AND COMPARABLE COMPANIES OF THE ASSESSEE AS A UNIT AND NOT ACCORDI NG TO THE SHARE HOLDERS FOR INSTANCE. 4. FURTHER, THE ADJUSTMENTS PROPOSED ON AMP EXPEND ITURE IS BASED ON THE FACT THAT THE ASSESSEE COMPANY HAD INCURRED A HEAVY EXPENDITURE T OWARDS ADVERTISEMENT, MARKETING, AND PROMOTION OF THE BRAND TO WHICH IT IS NOT A LEGAL O WNER AND ALL THE ULTIMATE BENEFITS OF THIS EXERCISE IS DESTINED TO BE FRUITFUL FOR THE HOLDING COMPANY WHICH IS THE LEGAL OWNER OF THE BRAND. AS SUCH THE ADJUSTMENT HAD BEEN PROPOSED ONL Y TO REDUCE ARTIFICIALLY INDUCED LOSSES/ PROFIT SHIFTING FROM THE ASSESSEE TOWARDS ITS HOLDI NG COMPANY. 5. IN VIEW OF THE ABOVE MENTIONED FACTS, IT IS AMP LY CLEAR THAT THE CHANGE OF SHARE HOLDING PATTERN OF THE ASSESSEE COMPANY DOES NOT HAVE ANY I MPACT ON THE TP ADJUSTMENTS PROPOSED IN THE CASE OF THE ASSESSEE COMPANY. 6. THIS ISSUES AFTER PRIOR APPROVAL OF THE COMMISSI ONER OF INCOME TAX, TP-1, NEW DELHI. SD/- (SADDIK AHMED) DY. COMMISSIONER OF INCOME TAX, TPO-L(3)(2), NEW DELHI 12.2 ACCORDINGLY, IN THE LIGHT OF THE SAID FACTUAL BACK GROUND, THE PARTIES PROCEEDED TO ADDRESS THE ISSUES. 13. BOTH THE PARTIES WERE BEEN HEARD AT LENGTH . 14. THE LD. AR AGAIN TOOK THE POSITION THAT THE AP PEAL OF THE ASSESSEE IS ALLOWABLE IN TERMS OF THE ORDER OF THE ITAT PASSED IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. 2011-12 IN ASSESSEE 'S OWN CASE. 14.1 THE LD. SR.DR OPPOSING THE PRAYER, RE-ITERATED THE DE PARTMENTAL PRAYER STATING THAT THE ORDER MAY BE UPHELD. THE ISSUE, I T WAS SUBMITTED, WAS BEFORE THE HON'BLE HIGH COURT AS THE ASSESSEE BEFOR E THE ITAT HAD NOT PLACED THE COMPLETE AGREEMENTS AND ACCORDINGLY THE SAID OR DER WAS UNDER CHALLENGE. 14.2 THE LD. AR MR. N. RAO AS NOTED EARLIER ALSO TOOK A STRONG OBJECTION TO THE LINE OF THE DEPARTMENTAL ARGUMENT. IT WAS RE-I TERATED THAT THE DEPARTMENT HAS CANVASSED THESE ARGUMENTS IN THE MIS CELLANEOUS APPLICATION BEFORE THE ITAT. ATTENTION WAS INVITED TO ORDER DA TED 28.12.2017 IN M.A. 76/2017 WHEREIN IT WAS SUBMITTED THAT THE VERY SAME ARGUMENTS OF THE DEPARTMENT NAMELY THAT THERE WAS SOME OTHER AGREEME NT BETWEEN THE ASSESSEE AND ITS ASSOCIATED ENTERPRISES OR ANY OTHE R ARRANGEMENT HAD BEEN SPEAKINGLY DISMISSED BY THE ITAT. IT WAS HIS SUBMI SSION THAT EVEN BEFORE THE HON'BLE HIGH COURT ON BEHALF OF THE ASSESSEE, HE HA S MADE A STATEMENT AT BAR THAT APART FROM THE JOINT VENTURE AGREEMENT AVA ILABLE WITH THE TPO ITA 269/CHD/2017 A.Y.2012-13 PAGE 10 OF 58 REFERRED TO IN THE EARLIER ASSESSMENT YEAR, THERE W AS NO OTHER AGREEMENT AND INFACT IN THE YEAR UNDER CONSIDERATION, EVEN THIS W AS NOT RELEVANT. ADDRESSING THE OTHER ISSUES, INVITING ATTENTION TO THE TPOS O RDER, IT WAS HIS SUBMISSION THAT THE TPO HAS IDENTIFIED CERTAIN COMPARABLES A ND APPLYING THE BRIGHT LINE TEST OVERRULING THE ASSESSEE'S OBJECTIONS HAS PROPOSED THE ADDITIONS TO THE AMP. IT WAS HIS SUBMISSION THAT SINCE THE CALC ULATION BASED ON THE INTENSITY ITSELF DOES NOT HAVE JUDICIAL SANCTION, T HE TPO PRESUMABLY CONSCIOUS OF THE SAID FACTS HAS IN THE ALTERNATE PR OPOSED ADDITIONS BY WAY OF ADJUSTMENTS NOMINATING THEM AS SUBSTANTIVE AND PROT ECTIVE. ASSAILING THE SAID STAND, IT WAS HIS SUBMISSION THAT THE VERY FAC T THAT THE TPO IS CONFUSED AS TO HOW TO SUPPORT THE CLAIM OF ADDITIONS, HIS CA SE FALLS AS IT DOES NOT SATISFY THE FUNDAMENTALS OF THE TAXING CANNONS. AC CORDINGLY, IF THE INCIDENCE, RATE, AND EVENT OF TAX ITSELF IS NOT CLE ARLY CERTAIN, THE TAX IT WAS SUBMITTED, CANNOT BE SAID TO BE A FAIR AND JUST TAX. IN THE F ACTS OF THE PRESENT CASE, IT WAS SUBMITTED, THE DEPARTMENTAL STAND APPE ARS TO BE THAT SOME HOW OR THE OTHER THE ADDITION HAS TO BE MADE. 14.3 CARRYING US THROUGH THE TPOS ORDER AND THE O BJECTIONS ON BEHALF OF THE ASSESSEE, IT WAS SUBMITTED THAT WHEN THE ISSUE CAME UP BEFORE THE DRP, THE DRP CONSCIOUS OF THE FACT THAT THE MANNER OF CA LCULATIONS RESORTED TO BY THE TPO NAMELY USE OF BRIGHT LINE TEST METHOD, WAS NOT IN CONSONANCE WITH THE SETTLED LEGAL OPINIONS DID NOT UPBRAID THE TPO AND INSTEAD UPHOLDING HIS ACTION REMANDED THE ISSUE TO THE TPO FURTHER DIRECT ING THAT SELLING EXPENSES ETC. EXCLUDED BY THE TPO MAY ALSO BE ADDED BACK AND ALSO DIRECTED IN THE ALTERNATIVE ALSO THE TPO TO INSTEAD MAKE ADDITION F OR THE ARMS LENGTH PRICE CALCULATED ON THE BASIS OF INTENSITY. ELABORATING THE ISSUE, IT WAS HIS SUBMISSION THAT INTENSITY AS WORKED OUT AND UNDER STOOD BY THE TAX DEPARTMENT BY WAY OF APPLYING TO THE FACTS OF THE C ASE CAN BE BEST EXPLAINED AS A REVERSE OF BRIGHT LINE TEST AND IS A MIRROR IM AGE OF THE ASSESSEE'S AMP APPLIED TO THE VERY SAME COMPARABLES AS SELECTED FOR THE BRI GHT LINE TEST AND CONSIDERING THE ASSESSEE'S AMP MARGIN HAS APPLIED T O THE SAME SELECTED COMPARABLES AND ON THE BASIS OF THAT THE ADDITIONS HAVE BEEN PROPOSED. 14.4 THE LD. AR OPPOSING THE INTENSITY APPROACH OF CALCULATING THE ALP SUBMITTED THAT THE TAX DEPARTMENT HAS LOST TRACK OF THE FACT THAT AMP IS A FUNCTION OF A DISTRIBUTOR AND THE ASSESSEE ADMITTED LY IS A DISTRIBUTOR AND THUS, THE FACT THAT THE VERY SAME COMPARABLES HAVE BEEN RETAI NED FOR WORKING OUT THE SO CALLED EXCESS AMP APPLYING THE INTENSIT Y APPROACH OF METHODOLOGY ITSELF GIVES APPROVAL TO THE ASSESSEE'S CLAIM AS HAVING BEEN ITA 269/CHD/2017 A.Y.2012-13 PAGE 11 OF 58 ACCEPTED BY THE TPO THAT THE ASSESSEE IS A DISTRIBU TOR. THUS, IN THE CIRCUMSTANCES, REVERSE BLT WHICH HAS BEEN DESCRIBED AS INTENSITY APPROACH, IT WAS HIS PRAYER, MAY NOT BE PERMITTED. 14.5 IT WAS HIS SUBMISSION THAT WITHOUT PREJUDICE T O THIS ARGUMENT, THE ASSESSEE ADDRESSING THE DEPARTMENTAL CALCULATIONS O N THE BASIS OF WHICH THE ADDITIONS HAVE BEEN PROPOSED AND HAVE BEEN MADE, HA S POINTED OUT THAT THERE ARE FACTUAL INACCURACIES AND CALCULATION ERRO RS IN THE TPOS/AOS ORDER. THE ASSESSEE HAS PLACED HIS CALCULATIONS ON RECORD, IT WAS HIS SUBMISSION THAT AS FAR AS THE YEAR UNDER CONSIDERATION IS CONC ERNED, EVEN IF FOR A MOMENT, THE DIRECTIONS OF THE DRP ARE NOT INTERFERE D WITH, EVEN IN SUCH AN EVENTUALITY NO ADDITION APPLYING THIS METHOD ALSO CAN BE MADE, THUS SINCE THE NET IMPACT IN THE YEAR UNDER CONSIDERATION IS ZERO. ACCORDINGLY, IT WAS HIS SUBMISSION THAT IN THE YEAR UNDER CONSIDERATION SUBJECT TO THE DEPARTMENT AGREEING TO THE CALCULATIONS OF THE ASSE SSEE, THE INTENSITY APPROACH ISSUE MAY BE LEFT OPEN TO BE DECIDED IN SOM E OTHER YEAR WHEN THERE MAY BE AN IMPACT AS IN THE YEAR UNDER CONSIDERATION , EVEN IF THE SAID ISSUE WITHOUT PREJUDICE IS NOT INTERFERED WITH, THE ASSES SEE SAILS HOME ON CALCULATIONS ITSELF. IT WAS CLARIFIED BY WAY OF ABUN DANT CAUTION THAT IT MAY BE NOTED THAT THE ASSESSEE IS NOT GIVING UP HIS OBJECT IONS TO THE INTENSITY APPROACH OR ITS RIGHT TO SEEK ADJUDICATION ON THE ISS UE WHENEVER THE ASSESSEE IS IMPACTED WITH THE SAID UNDERSTANDING, HE IS WILL ING TO AGREE THAT THESE OBJECTIONS FOR THESE STATED REASONS MAY NOT BE ADJU DICATED UPON. IT WAS SUBMITTED THAT THE CALCULATION PROVIDED BY THE ASS ESSEE WERE MADE AVAILABLE TO THE DEPARTMENT WHERE THE ASSESSEE HAS SHOWN THAT EVEN IN TERMS OF THE DIRECTIONS OF THE DRP, THE ASSESSEE IS NOT EXPOSED TO ANY ADDITION. IT WAS SUBMITTED THAT THESE HAVE BEEN REPLIED TO BY THE DE PARTMENT. 14.6 THE LD. AR ADDRESSING THE DEPARTMENTAL REPLY S UBMITTED THAT THE TPO DOES NOT POSE A SINGLE OBJECTION TO THE ASSESSEE'S CALCULATION AND MERELY REITERATES IN SUPPORT OF THE INTENSITY APPROACH. AC CORDINGLY, IT WAS HIS SUBMISSION THAT IT MAY BE PRESUMED THAT IN THE ABSE NCE OF DEPARTMENTAL OBJECTIONS, IT MAY BE ACCEPTED THAT THE ASSESSEE'S CALCULATIONS ARE NOT DISPUTED AND SINCE THERE IS NO IMPACT ON THE ASSESS EE IN THE YEAR UNDER CONSIDERATION, THE ISSUE MAY BE LEFT OPEN FOR ANOTH ER YEAR. THE SAID SUBMISSION, IT WAS SUBMITTED, IS WITHOUT PREJUDICE TO THE MAIN GROUND WHEREIN THE ASSESSEE IS IN PRINCIPLE OBJECTING TO T HE SAID METHOD. ITA 269/CHD/2017 A.Y.2012-13 PAGE 12 OF 58 15. THE LD. SR.DR ON THE OTHER HAND SUBMITTED THAT HE RELIES UPON HIS WRITTEN SUBMISSIONS AND CONTRARY TO THE TPOS WRITT EN STAND, IT WAS ARGUED BY HIM THAT IT CANNOT BE SAID THAT CHANGE IN SHARE HOLDING PATTERN CANNOT HAVE ANY IMPACT ON THE AMP EXPENSES AND STRATEGY MA KING OF THE ASSESSEE. IT WAS HIS SUBMISSION THAT WHEREAS EARLIER TO THE E XTENT OF 27% LOCAL PERSON HAD A SAY IN THE RUNNING OF THE BUSINESS AND THE BU SINESS DECISIONS WHICH WOULD NECESSARILY HAVE AN IMPACT ON THE FUNCTIONS O F THE DISTRIBUTIONS BUT NOW AS AN OWNER OF ALMOST 100% SHARE, THE ENTIRE SH OW IS RUN BY THE FOREIGN AE. ACCORDINGLY, IT CANNOT BE SAID THAT IT HAS NO IMPACT. IT WAS SPECIFICALLY PUT TO THE NOTICE OF THE LD. SR.DR THAT THIS WAS TH E SPECIFIC FACT ON ACCOUNT OF WHICH CLARIFICATIONS HAD BEEN FIXED AND THE DEPARTM ENT WAS REQUIRED TO ADDRESS AND TPO APPEARS TO HAVE GIVEN UP THE CASE B Y WAY OF HIS WRITTEN SUBMISSIONS. THE LD. SR.DR ARGUED THAT THOUGH THE T PO HAS GIVEN UP THE ISSUE, HOWEVER IT WAS HIS SUBMISSION THAT IT APPEAR S TO BE AN INCORRECT DECISION TO DO SO. THE LD. SR.DR WAS REQUIRED TO A DDRESS WHETHER HE CAN ARGUE BEYOND THE BRIEF OF THE AO/TPO AS HE IS STAND ING IN TO DEFEND THE TPOS STAND WHETHER IN THE CIRCUMSTANCES, HE CAN GO BEYOND WHAT THE TPO INSTRUCTS, THE SR.DR CONSIDERING HIS POSITION SUBMI TTED THAT HE RELIES ON THE ORDER OF THE DRP AND THE FINAL ASSESSMENT ORDER. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE ADVERTING TO THE ISSUE S WHICH REQUIRE ADJUDICATION IN THE PRESENT PROCEEDINGS, IT IS NECESSARY TO FIRS T ADDRESS THE FACTS AND THE REASONING OF THE RESPECTIVE AUTHORITIES ON RECORD W HICH LED TO THE ADDITIONS MADE WHICH ARE UNDER CHALLENGE IN THE PRESENT PROCE EDINGS. 16.1 THE RELEVANT FACTS OF THE CASE ARE THAT THE AS SESSEE IN THE YEAR UNDER CONSIDERATION FILED A LOSS RETURN OF RS. 4,62,24,54 0/- THE ASSESSING OFFICER AFTER ISSUING DUE NOTICES ETC. MADE A REFERENCE TO THE TPO IN VIEW OF THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSE SSEE WITH ITS AE. REFERENCE IS MADE TO THE FACT THAT WIDEX WAS ONE OF THE LEADI NG COMPANIES ENGAGED IN RESEARCH DEVELOPMENT AND SALE ETC. OF DIGITAL HEARI NG AID TECHNOLOGY. THE TPO NOTED THAT THE ASSESSEE I.E. WIDEX INDIA WAS A JOIN T VENTURE BETWEEN WIDEX AS DENMARK AND MS. T.S.ANAND IN 2000 WHICH HAD PION EERED THE DIGITAL HEARING AIDS IN THE INDIAN MARKET AND FROM ITS HEAD QUARTERS AT CHANDIGARH AND HAD ESTABLISHED ITS PRESENCE ACROSS THE COUNTR Y THROUGH ITS NETWORK OF SALES OFFICE AND SERVICE CENTER. CONSIDERING THE I NTERNATIONAL TRANSACTIONS DISCLOSED AND CARRYING OUT A FAR ANALYSIS OF THE AS SESSEE, THE TPO SUMMED UP THE TRANSFER PRICING METHODOLOGY OF THE ASSESSEE AND CAME TO THE ITA 269/CHD/2017 A.Y.2012-13 PAGE 13 OF 58 CONCLUSION THAT THE EXCESSIVE ADVERTISING, MARKETING AND PROMOTION EXPENSES INCURRED BY THE ASSESSEE WERE FOR THE BENEFIT OF THE AE. THE EXPENSES WERE CONSIDERED TO BE INCURRED AT THE BEHEST AND UNDER THE CONTROL OF THE AE AND PRIMARILY FOR THE BENEFIT OF THE AE; THAT VAL UABLE MARKETING INTANGIBLE WAS BEING CREATED AT ASSESSEE'S EXPENSES WHICH WAS LEGALLY OWNED BY THE AE; THE AE WAS THE FINAL BENEFICIARY OF THIS EXPENSE ON ACCOUNT OF THE BRAND/PENETRATION, THUS THE SEGREGATION OF THE MARK ETING INTANGIBLE, IT WAS HELD NEEDED A BENCH MARKING. ACCORDINGLY, ASSESSEE' S OWN G.P. RATE OF 49.84% WAS CONSIDERED APPROPRIATE. THE SPECIFIC CAL CULATION CARRIED OUT BY HIM IS EXTRACTED FROM THE ORDER : THE DIFFERENCE OF RS. 5,32,86,413/- REPRESENTS THE AMOUNT THAT HAS BEEN SPENT BY THE ASSESSEE TO CREATE THE MARKETING INTANGIBLE AND SHO ULD HAVE BEEN REIMBURSED BY THE AE ALONG WITH A MARK-UP. THE QUESTION OF MARK-UP ARISE S BECAUSE YOU HAVE PROVIDED SOME SERVICE FOR PROMOTING THE MARKETING INTANGIBLE OWNE D BY YOUR AE. FOR THESE SERVICES, YOU SHOULD BE ELIGIBLE FOR REMUNERATION EQUIVALENT TO Y OUR GROSS PROFIT TO SALES RATIO (49.84%). THEREFORE, BECAUSE OF THE EFFORTS MADE BY YOU, A FU RTHER MARKUP OF 49.84% ON THE ABOVE AMP SPEND AMOUNT IS CONSIDERED APPROPRIATE WHICH IS COMPUTED AS UNDER:- VALUE OF CROSS SALES OF THE ASSESSEE 36.19,12,878 AMP/SALES RATIO OF THE COMPARABLES 2.38% AMOUNT THAT REPRESENTS SIMILAR EXPENSES ON AMP BY T HE ACCEPTED COMPARABLE ENTITIES 86,13,526 TOTAL EXPENDITURE ON AMP BY THE ASSESSEE 6,18,99,93 9 EXPENDITURE OVER AND ABOVE SIMILAR EXPENSES BY THE ACCEPTED COMPARABLE ENTITIES WHICH CONSTITUTES THE COMPONENT OF INTERNATIONAL TRANSACTION ATTRIBUTED TO THE AE TOWARDS BUILD- UP OF INTANGIBLES THAT NEEDS TO BE SUITABLY COMPENSATED BY THE AE 5,32,86,413 MARKUP 49.84% 2,65,57,948 ADJUSTMENT U/S 92CA 7,98,44,360 16.2 THE ASSESSEE DISPUTED THE ADJUSTMENT AS PER ITS REPLY DATED 18.01.2018 EXTRACTED IN THE TPOS ORDER AT INTERNAL PAGE 10 ON THE FOLLOWING GROUNDS: THE ASSESSEE IS A ROUTINE/NORMAL DISTRIBUTOR WHICH EMPLOYS ROUTINE TANGIBLE ASSETS AND BEARS NORMAL RISKS ASSOCIATED WITH ITS OPERATIO NS; THE EXPENSE INCURRED IS NOT AN INTERNATIONAL TRANSA CTION AS PER SECTION 92B READ WITH SECTION 92F(V) OF THE ACT, WHICH TOGETHER DEFI NE AN 'INTERNATIONAL TRANSACTION'. BRIGHT LINE CONCEPT IS NOT APPLICABLE EXPENDITURE ON AMP IS INCURRED BY THE ASSESSEE AS A ROUTINE / NORMAL DISTRIBUTOR FOR THE PURPOSE OF ITS OWN BUSINESS AND THERE IS A BENEFIT FROM THE EXPENDITURE. THE AMP COSTS WERE INCURRED FOR ADVERTISEMENT IN TH E DESIGNATED TERRITORY OF THE ASSESSEE. HOWEVER, THE PRIMARY SPEND OF THE ASSESSE E IS ON SALES PROMOTION ACTIVITIES WHICH ARE MEANT TO PROMOTE ITS SALES IN ITS TERRITORY. THE ASSESSEE HAD THE SOLE DISCRETION OF DECIDING T HE FORM, MANNER, CONTENT AND TIMING OF ITS ADVERTISEMENT, SALES PROMOTION AS WEL L AS SELLING ACTIVITY; THE ASSESSEE HAS EARNED THE BENEFITS FROM ITS AMP A ND SELLING EXPENSES AS CAN BE SEEN FROM THE ASSESSEE'S INCREASING SALES. ANY BENE FIT THAT MAY HAVE ACCRUED TO THE AES IS MERELY INCIDENTAL 16.3 THE TPO NOTED THE LIMITATIONS EXPERIENCED ON A CCOUNT OF LACK OF AGREEMENTS ETC. EXPRESSED HIS ANGUISH IN THE FOLLOW ING WORDS HOLDING THAT THE; AMP EXPENSES INCURRED IN INDIA AT THE BEHEST OF THE PARENT AE; BEFORE ITA 269/CHD/2017 A.Y.2012-13 PAGE 14 OF 58 ANALYSING THIS ISSUE, IT WOULD HAVE BEEN EXPEDIENT TO GO INTO THE DISTRIBUTION AGREEMENT BETWEEN THE PARENT AND THE ASSESSEE. HOWE VER, IT WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 18/01/2016 THAT THERE IS NO SUCH MARKETING/DISTRIBUTOR AGREEMENT AVAILABLE. IN THIS SITUATION, IT IS NOT A SCERTAINABLE AS TO WHAT IS THE GLOBAL TP POLICY WITH REGARD TO SHARING OF AMP EXPE NSES BETWEEN THE PARENT AE AND THE WORLDWIDE ENTITIES. NO INFORMATION IN THIS REGARD HAS BEEN PROVIDED BY THE ASSESSEE ALSO. 16.4 THE TPO REFERRING TO THE ORDER OF THE ITAT IN THE CASE OF LG ELECTRONICS (INDIA) PVT. LTD., APPLIED BRIGHT LINE TEST AND FUR THER SUPPORTED HIS ACTION BY REFERRING TO THE DECISION IN THE CASE OF SONY ERICS ON AND MARUTI SUZUKI AS WELL AS WHIRLPOOL AND BAUSCH & LOMB AMONGST OTHERS. REFERENCE MADE BY THE TPO TO THESE DECISIONS SHOWS THAT THE TPO CONSC IOUSLY AND WILLFULLY APPLIED THE BRIGHT LINE TEST KNOWING-FULLY THAT IT WAS NOT AN APPROVED METHOD AS REPEATEDLY ADDRESSED BY THE DELHI HIGH CO URT IN THE AFORESAID DECISIONS ITSELF. THE JUDICIAL POSITION ON THE SAI D METHOD WAS WELL SETTLED BY THESE DECISIONS WHEREIN IT HAD BEEN HELD THAT THE M ETHOD HAD NO STATUTORY SANCTION AND EVIDENTLY ADMITTEDLY LACKED JUDICIAL A PPROVAL ALSO. DESPITE THIS, IN WILLFUL DEFIANCE TO THE STATED LEGAL POSITION, T HE TPO, WE NOTE, HAS RESORTED TO APPLYING THE BRIGHT LINE TEST. THIS BRAZEN ACT ON RECORD IS SEEN TO HAVE BEEN COUNTENANCED BY THE DRP WHO HAVE UNFORTUNATELY PROCEEDED TO FURTHER STEP UP THE BRAZEN DISREGARD OF THE SERIES OF DECIS IONS OF THE HON'BLE HIGH COURT. WITHOUT SAYING ANYTHING FURTHER, WE NOTE THA T SUCH AN ACTION IS NOT ONLY CONTRARY TO THE HIERARCHY OF DISCIPLINE ON WHI CH THE JUDICIAL SYSTEM RESTS, IT ALSO ERODES THE TRUST REPOSED IN THE FAIRNESS OF THE TAX ADMINISTRATION. FOR READY REFERENCE, THE RELEVANT EXTRACT FROM THE TPO S ORDER IS REPRODUCED HEREUNDER : (A) LG ELECTRONICS INDIA PRIVATE LIMITED V. ASSIS TANT COMMISSIONER OF INCOME TAX (ITA NO. 5140/DEL/ 2011) A THREE-MEMBER SPECIAL BENCH WAS FORMED IN THE CASE OF LG ELECTRONICS TO ADJUDICATE THE ISSUE OF ADVERTISEMENT, MARKETING AND PROMOTION EXPENDITURE. THE MAJORITY DECISION HELD THAT ADVERTISEMENT CARRIED BY LG INDI A USING FOREIGN BRAND COUPLED WITH PROPORTIONATELY HIGH AMP EXPENDITURE LEADS TO THE C ONCLUSION THAT AN INTERNATIONAL TRANSACTION EXISTS BETWEEN THE LG INDIA AND LG KORE A. HENCE, IT WAS HELD THAT AMP EXPENDITURE IS AN INTERNATIONAL TRANSACTION. IN ADDITION TO THE ABOVE, FOLLOWING ARE A FEW KEY P RINCIPLES LAID DOWN BY THE SPECIAL BENCH: DEALER INCENTIVES, POINT OF SALE EXPENDITURE, ETC. DOES NOT CONSTITUTE AMP EXPENDITURE; ONLY ADVERTISEMENT AND PUBLICITY EXPENDITURE CONSTI TUTES THE AMP EXPENDITURE. THE SAME IS REQUIRED TO BE BENCHMARKED TO DETERMINE THE COMPENSATION FOR THE BRAND BUILDING ACTIVITY UNDERTAKEN BY LG INDIA; ITA 269/CHD/2017 A.Y.2012-13 PAGE 15 OF 58 BRIGHT-LINE IS A TOOL TO BIFURCATE THE AMP EXPENSES BETWEEN ROUTINE AND NON- ROUTINE AMP EXPENSES, I.E. EXPENDITURE INCURRED TOW ARDS BRAND BUILDING SERVICES; FOR THE PURPOSE OF BENCHMARKING, AMP CANNOT BE AGGR EGATED WITH ANY OTHER TRANSACTION; COMPARABLE COMPANIES OWNING DOMESTIC BRAND MAY BE A DOPTED TO BENCHMARK THE AMP EXPENDITURE, ONCE THE DEFINED CRITERIA FOR ADOPTION OF COMPARABLE COMPANIES STIPULATED IN THE JUDGMENT ARE MET; AND ARBITRARY MARK-UP IN THE FORM OF PRIME LENDING RATE CANNOT BE ADOPTED AND APPROPRIATE MARK-UP NEEDS TO BE DETERMINED FOR THE PURPOSE OF COMPUTING THE TRANSFER PRICING ADJUSTMENT IN RELATION TO RENDITION OF BRAN D BUILDING SERVICES (B) SONY ERICSSON MOBILE COMMUNICATIONS INDIA PRIVATE LIMITED V. COMMISSIONER OF INCOME (ITA NO. 16/2014) THE DELHI HIGH COURT IN THE CASE OF SONY ERICSSON A ND OTHERS, VIDE ORDER DATED MARCH 16, 2015, UPHELD THE VIEWS OF SPECIAL BENCH, EXCEPT FOR THE FOLLOWING: AMP EXPENDITURE INCURRED BY THE INDIA SUBSIDIARY DO ES NOT LEAD TO BRAND CREATION; THE AMP EXPENDITURE INCURRED BY INDIAN ENTITY IS IN RELATION TO THE MARKETING FUNCTION WHICH IS EMBEDDED IN THE DISTRIBUTION AND MARKETING OPERATIONS UNDERTAKEN BY A DISTRIBUTOR. THUS, THE INDIAN ENTITY IS REQUIR ED TO BE COMPENSATED FOR THE MARKETING FUNCTION UNDERTAKEN BY IT FOR DISTRIBUTIN G THE GOODS MANUFACTURED BY THE AES; BRIGHT-LINE IS NOT MANDATED AND STIPULATED IN THE I NDIAN TRANSFER PRICING PROVISIONS; (EMPHASIS SUPPLIED BY THE BENCH) DISTRIBUTION AND MARKETING FUNCTIONS ARE INTER-CONN ECTED AND BE TREATED AS ONE PACKAGE OR A BUNDLE TRANSACTION. TRANSFER PRICE FOR THE DISTRIBUTION TRANSACTION MUST TAKE INTO CONSIDERATION THE AMP FUNCTION; COMPENSATION FOR THE MARKETING FUNCTIONS PERFORMED BY INDIA ENTITY MAY BE IN THE FORM OF LOWER PURCHASE PRICE, NON OR REDUCED PA YMENT OF ROYALTY OR BY WAY OF DIRECT PAYMENT TO ENSURE ADEQUATE PROFITS FOR THE D ISTRIBUTION OPERATIONS; AMP FUNCTION CAN BE AGGREGATED WITH THE PRIMARY TRA NSACTION OF PURCHASE AND RESALE OF FINISHED GOODS AND BENCHMARKED USING TRAN SACTIONAL NET MARGIN METHOD ('TNMM') OR ADJUSTED RESALE PRICE METHOD (GROSS MAR GINS LESS AMP EXPENDITURE); SEGREGATING APPROACH TO BENCHMARK AMP FUNCTION MAY BE ADOPTED, PROVIDED AO / TPO PROVIDE ADEQUATE REASON FOR DOING THE SAME . UPON SEGREGATION AND BEFORE COMPUTING THE ADJUSTMENT, THE AO / TPO MUST PROVIDE THE FOLLOWING SET-OFF: O ANY REIMBURSEMENT, GRANT, SUBSIDY RECEIVED BY THE INDIAN ENTITY FROM THE AE ON ACCOUNT OF AMP; O ADDITIONAL MARGINS EARNED BY INDIA ENTITY F ROM THE DISTRIBUTION OPERATIONS OVER AND ABOVE THE COMPARABLE MARGINS. (C) MARUTI SUZUKI INDIA LIMITED V. COMMISSIONER OF INCOME TAX (ITA NO. 110/2014 AND 710/2015) DELHI HIGH COURT ADJUDICATED THE APPEALS PERTAINING TO MARUTI SUZUKI INDIA LIMITED ('MSIL'). IN THE SAID ORDER, THE DELHI HIGH COURT D ISTINGUISHED THE EARLIER ORDER ISSUED IN CASE OF SONY ERICSSON AND HELD THAT THE AMP EXPE NDITURE IS NOT AN INTERNATIONAL TRANSACTION. THE KEY HIGHLIGHTS OF THE ORDER ARE: THE ORDER OF THE HIGH COURT IN CASE OF SONY ERICSSO N AND OTHERS, WAS RESTRICTED TO DISTRIBUTORS, HENCE, THERE WAS A NEED TO ADJUDICATE THE ISSUE IN THE CASE OF FULL RISK / LICENSED MANUFACTURERS; THE SONY ERICSSON DECISION WAS ON THE PREMISE THAT AMP IS AN INTERNATIONAL TRANSACTION AND DISPUTE PERTAINED TO ADEQUACY OF COMPENSATION TO INDIAN SUBSIDIARY FOR INCURRING AND PERFORMING MARK ETING AND NON-ROUTINE AMP EXPENSES; ITA 269/CHD/2017 A.Y.2012-13 PAGE 16 OF 58 MSIL CONTENDED THE EXISTENCE OF AN INTERNATIONAL TR ANSACTION IN RESPECT OF THE INDIAN TRANSFER PRICING REGULATIONS AND THE HIG H COURT APPRECIATED THAT THE PROVISION IN THE REGULATIONS DO NOT PERMIT AMP ADJU STMENT, AS COMPUTED BY THE RAS; RAS FAILED TO ESTABLISH EXISTENCE OF ANY ARRANGEMEN T, UNDERSTANDING OR ACTION IN CONCERT BETWEEN MSIL AND SUZUKI MOTORS CO RPORATION, JAPAN ('SMC - SIGNIFICANT SHAREHOLDER IN MSIL AND BRAND OWNER OF 'SUZUKI' BRAND OR 'AE') FOR INCURRENCE OF AMP EXPENDITURE BY MSIL ON BEHALF OF ITS AE; HIGH COURT IN THE CASE OF SONY ERICSSON HAD DISREGA RDED THE USE OF BRIGHT- LINE FOR THE PURPOSE OF DETERMINING THE EXISTENCE O F AN INTERNATIONAL TRANSACTION AS WELL AS FOR COMPUTING THE ARM'S LENGTH PRICE. THE H IGH COURT IN CASE OF MSIL RELIED ON THE SAID PRINCIPLE AND HELD THAT IF THE U SE OF BRIGHT LINE IS DISREGARDED, THEN, THERE IS NO BASIS TO ALLEGE THE EXISTENCE OF AN INTERNATIONAL TRANSACTION; MSIL HAS EARNED A HIGHER NET OPERATING MARGIN VIS-A -VIS COMPARABLE COMPANIES, HENCE, BASED ON THE DECISION OF SONY ERI CSSON, NO ADJUSTMENT ON ACCOUNT OF AMP IS WARRANTED; MSIL'S CONTRIBUTION TOWARDS AMP / SALES IS SIGNIFIC ANTLY LESS IN PROPORTION TO THE GLOBAL AMP / SALES INCURRED BY SMC. THEREFOR E, THE ALLEGATION OF RAS THAT THERE EXISTS AN 'ARRANGEMENT' OR 'UNDERSTANDING' BE TWEEN MSIL AND SMC, BECAUSE OF WHICH THE FORMER HAS INCURRED AMP EXPENDITURE AT THE BEHEST OF THE LATTER DOES NOT SUSTAIN; MSIL USED THE CO-BRANDED TRADEMARK 'MARUTI-SUZUKI' WHICH WAS NOT OWNED BY SMC, HENCE, TO THAT EXTENT THE DECISION OF SONY ERICSSON WAS NOT APPLICABLE AS THE HIGH COURT IN CASE OF SONY ERICSS ON FACTORED A KEY ASPECT IN THE CASE TAXPAYERS THAT THE TRADEMARK OR BRAND WAS OWNE D BY THE FOREIGN AE; AND AMP ADJUSTMENT CANNOT BE MADE IN CASE OF FULL RISK MANUFACTURERS. (D) COMMISSION OF INCOME TAX-LTU V. WHIRLPOOL OF IN DIA LIMITED (ITA NO. 610/2014) DELHI HIGH COURT ADJUDICATED THE APPEALS PERTAINING TO WHIRLPOOL OF INDIA LIMITED ('WOIL'). IN THE SAID ORDER, THE DELHI HIGH COURT UPHELD THE PRINCIPLES LAID IN THE DECISION OF MSIL AND HELD THAT THE AMP 'EXPENDITURE IS NOT AN INTERNATIONAL TRANSACTION. THE KEY HIGHLIGHTS OF TH E ORDER ARE: COURT DISCUSSED THE PROVISIONS IN RELATION TO THE P ROPOSITION OF AN ADJUSTMENT AND HELD THAT THERE NEEDS TO BE A TRANSA CTION IN EXISTENCE WITH A DEFINED PRICE AND TP ADJUSTMENT IS COMPUTED BY SUBS TITUTING SUCH PRICE WITH ARM'S LENGTH PRICE; IN CASE OF AMP ADJUSTMENT, THE EXISTENCE OF TRANSAC TION WAS DEDUCED FROM COMPARISON OF AMP / SALES OF WOIL WITH THE BRI GHT-LINE AND THE EXPENDITURE IN EXCESS OF BRIGHT-LINE WAS HELD TO BE THE TP ADJUSTMENT. BRIGHT- LINE HAS BEEN DISREGARDED IN THE CASE OF SONY ERICS SON AND THERE IS NO OTHER MECHANISM SPECIFIED IN THE ACT TO ESTABLISH THE EXI STENCE OF AN INTERNATIONAL TRANSACTION ON ACCOUNT OF AMP; (EMPHASIS SUPPLIED BY THE BENCH) IN RELATION TO THE ALLEGATION OF THE AO / TPO THAT WOIL AND ITS AE HAVE ACTED IN CONCERT FOR INCURRENCE OF SUCH EXPENDITURE BY THE FORMER AT THE BEHEST OF THE LATTER, THE COURT HELD THAT THE RAS HAVE FAILED TO DEMONSTRATE BASED ON ANY TANGIBLE MATERIAL THAT THE PARTIES HAVE ACTED IN CO NCERT AND THAT THERE IS AN ARRANGEMENT BETWEEN THE TWO FOR SUCH INCURRENCE OF AMP EXPENDITURE. (E ) BAUSCH & LOMB EYECARE (INDIA) PRIVATE LIMITED V. THE ADDITIONAL COMMISSIONER OF INCOME TAX (ITA NO. 643/2014F (F) HONDA SIEL POWER PRODUCTS LIMITED V . DEPUTY COMMISSIONER OF INCOME TAX (ITA NO .346/2015) ITA 269/CHD/2017 A.Y.2012-13 PAGE 17 OF 58 IN BOTH THE DECISIONS OF BAUSCH & LOMB EYECARE (IND IA) PRIVATE LIMITED ('BL') AND HONDA SIEL POWER PRODUCTS LIMITED ('HONDA SIEL'), THE HIG H COURT RULED OUT EXISTENCE OF AN INTERNATIONAL TRANSACTION ON ACCOUNT OF THE FOLLOWI NG: HIGH COURT RELIED ON THE DECISION IN CASE OF MARUTI SUZUKI AND HELD THAT AO. / TPO HAVE BEEN UNABLE TO DEMONSTRATE EXISTENCE OF AN INTERNATIONAL TRANSACTION INVOLVING AMP EXPENSES BETWEEN ASSESSEE AND FOREIGN AE BASED ON ANY WITH TANGIBLE EVIDENCE; COURT HELD THAT THESE CASES WERE NOT COVERED BY DEL HI HC DECISION IN SONY ERICSON, AS THE TAXPAYERS WERE ENGAGED IN DISTRIBUT ION OPERATIONS WHO WERE RECEIVING SUBSIDIES / SUBVENTIONS FROM THEIR RESPEC TIVE AES, AND NONE OF THEM HAD QUESTIONED EXISTENCE OF INTERNATIONAL TRANSACTION O N ACCOUNT OF AMP EXPENSES; IN RELATION TO THE QUESTION ON EXISTENCE OF INTERNA TIONAL TRANSACTION OF AMP EXPENSES, THE HIGH COURT STATED THAT, U/S 92B R EAD WITH SEC 92F(V), AN INTERNATIONAL TRANSACTION COULD INCLUDE AN ARRANGEM ENT, UNDERSTANDING OR ACTION IN CONCERT. HOWEVER, THE AO / TPO HAVE BEEN UNABLE TO SUBSTANTIATE AN AGREEMENT WITHOUT ANY TANGIBLE EVIDENCE, HENCE, ACTION IN CON CERT CANNOT BE A MATTER OF INFERENCE. IN THIS REGARD, THE HIGH COURT RELIED ON THE DECISION OF SUPREME COURT IN THE CASE OF DAIICTII SANKYO COMPANY LTD. V. JAYA RAMCHIGURUPATI (G) INDIA MEDTRONIC PRIVATE LIMITED V DCIT (ITA N O 2168/M/2014) IN THE APPEALS PERTAINING TO INDIA MEDTRONIC, THE M UMBAI BENCH OF ITAT RELIED UPON THE PRINCIPLES LAID BY HIGH COURT IN THE CASE OF SONY ERICSSON. THE BENCH RELYING ON THE DECISION OF COORDINATE BENCH OF ITAT IN THE CASE OF TOSHIBA, CASIO, PERFETTI, CUMMINS, REEBOK, ETC. HELD THAT THE RULIN G OF DELHI HIGH COURT WAS NOT AVAILABLE DURING THE PROCEEDINGS BEFORE THE ASSESSI NG OFFICER, HENCE, REMANDED THE MATTER TO THE AO / TPO TO GIVE THEM AN OPPORTUN ITY. THE BENCH HELD THE FOLLOWING: TPO / AO TO ADOPT THE BUNDLED APPROACH FOR BENCHMAR KING AMP AS THE SAME HAS BEEN LEGALLY SETTLED; PROPOSING AN ADJUSTMENT ON ACCOUNT OF AMP BY SEGREG ATING THE TRANSACTION IS UNFAIR; AO / TPO MAY BENCHMARK THE TRANSACTION AS THE ASSES SEE ITSELF HAS BENCHMARKED THE AMP EXPENDITURE IN THE TP DOCUMENTA TION; TPO TO ADOPT THE COMPARABLE COMPANIES SELECTED BY H IM AS THE SAME WERE ACCEPTED AFTER COMPARING THE FUNCTIONS PERFORMED AN D AMP EXPENSES INCURRED BY THE ASSESSEE; REMAND IS LIMITED TO BENCHMARKING OF AMP EXPENSES. OTHER INTERNATIONAL TRANSACTIONS SHALL NOT BE TESTED DURING THE REMAND PROCEEDINGS, AS THE SAME WERE HELD TO BE AT ARM'S LENGTH BY THE TPO; TPO MAY NOT USE ANY FRESH DATA BUT MAY RE-USE THE D ATA ALREADY ON RECORD FOR BENCHMARKING THE AMP TRANSACTION, CONSIDERING T HE REJECTION OF BRIGHT-LINE BY HIGH COURT IN SONY ERICSSON; AND TPO TO APPLY PRINCIPLES LAID DOWN BY HIGH COURT IN THE CASE OF MARUTI SUZUKI INDIA LIMITED (ITA NO; 110/2014 AND ITA NO. 710/2015) FOR BENCHMARKING AMP TRANSACTION DURING REMAND PROCEEDI NGS. (H) YUM RESTAURANTS (INDIA) PRIVATE LIMITED V ITO ( ITA NO 349/2015 AND 388/2015) IN THE SAID APPEALS THE HON'BLE HIGH COURT, HELD TH E FOLLOWING:- EXAMINATION OF THE AGREEMENT OF THE ASSESSEE, ITS M ARKETING ARM AND FRANCHISEES IS REQUIRED TO DETERMINE IF ANY AMP EXP ENDITURE IS INCURRED BY YUM INDIA FOR CREATION OF MARKETING INTANGIBLES FOR ITS AES; ITA 269/CHD/2017 A.Y.2012-13 PAGE 18 OF 58 ONCE THE TRANSACTION BETWEEN YUM INDIA AND ITS AES IS ESTABLISHED, THEN, THE QUESTION ARISES, WHETHER SUCH TRANSACTION OF CR EATION OF MARKETING INTANGIBLES IS AT ARM'S LENGTH IN VIEW OF THE ABOVE QUESTIONS, THE HON'BLE HIGH CO URT REMANDED THE MATTER BACK TO THE FILES OF AO / TPO FOR DETERMINAT ION OF INTERNATIONAL TRANSACTION AND DETERMINATION OF ALP OF SUCH TRANSA CTION IN LIGHT OF DECISION IN CASE OF SONY ERICSSON MOBILE COMMUNICATIONS INDIA P . LIMITED (2015) 374ITR118 (DEL). 16.5 REVERTING BACK TO THE FACTS ON RECORD, WE NOTE THAT IGN ORING THE FACT THE BRIGHT LINE TEST DID NOT HAVE EITHER STATUTORY SANC TION NOR JUDICIAL APPROVAL, THE TPO IT APPEARS ON A SELECTIVE READING OF THE AFORESAID D ECISIONS AVOIDS THE RATIO WHERE BRIGHT LINE TEST IS REPULSED. WITHOUT ADDRESSING THE ASSESSEE'S OBJECTIONS, HE RELIES UPON THE DECISION OF THE HON' BLE DELHI HIGH COURT IN THE CASE OF SONY ERICSSON COMMUNICATIONS (INDIA) PVT. L TD. VS CIT OF THE DELHI HIGH COURT TO HOLD THAT AMP IS AN INTERNATIONAL TRA NSACTION IGNORING THE FACT THAT THE SAID ISSUE NEVER CAME UP FOR ADJUDICATION IN THE SAID DECISION AS EXISTENCE OF INTERNATIONAL TRANSACTION WAS NOT DISP UTED BY THE ASSESSEES IN THE FACTS OF THE SAID CASE BEFORE THE HON'BLE HIGH COURT. APART FROM THAT, THE TPO FURTHER RELIES UPON THE DIRECTIONS OF THE DRP G IVEN IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR WHEREIN IT HAD BEEN HELD THAT AMP IS AN INTERNATIONAL TRANSACTION. THE SPECIFIC REASONING F ROM THE ORDER IS EXTRACTED HEREUNDER : 50. THE DRP IN ITS ORDER DATED 17/11/2015 IN FY 2010-11 IN ASSESSEE' OWN CASE HAS HELD THAT ATTRIBUTION OF AMP EXPENSES TO THE AE IS AN INTERNATIONAL TRANSACTION BY OBSERVING AS UNDER:- THE CONCLUSIONS IN THIS ISSUE ARE AS BELOW: I. THE AMP EXPENSES CONSTITUTE INTERNATIONAL TRANSA CTION II. THE ROUTINE SELLING AND DISTRIBUTION EXPENSES A RE TO BE EXCLUDED WHILE COMPUTING THE AMP EXPENSES FOR THIS PURPOSE III. THE COMPARABLES CHOSEN BY TPO ARE GO OD AND SHALL BE RETAINED. IV. ONLY SIMILAR BOUQUET OF THE AMP EXPENSES US ORDAINED PER HIGH COURT RULING SHALL BE CONSIDERED WHILE MATCHING THE ASSES SES EXPENSES WITH THOSE OF THE COMPARABLES V. TPO SHALL USE COST PLUS METHOD FOR THIS PURPOSE. VI. THE MARK UP ON THE EXCESS AMP EXPENSES SHAL L BE AS PER SUB-CLAUSE LIT) TO RULE 10B(L)(C). 51. IN VIEW OF THESE FACTS AND DISCUSSION, THE AMP EXPENDITURE IS HELD TO BE AN INTERNATIONAL TRANSACTION' WITHIN THE MEANING OF SECTION 92B(1) OF THE ACT. 16.6 A PERUSAL OF THE ORDER FURTHER SHOWS THAT HE FURTHER SUPPORTED HIS CONCLUSION BY MAKING A REFERENCE TO US TRANSFER PRI CING LAW (IRC SECTION 482) WHICH HAS ADDRESSED THE ISSUE OF AMP INCURRED BY TH E DISTRIBUTOR AND ITS COMPENSATION BY THE FOREIGN TRADEMARK OWNER; THE DH L INCORPORATED AND SUBSIDIARIES VS COMMISSIONER OF INTERNAL REVENUE TAX COURT CASE, DHL CORPORATION, TCM 1998-46 LAFFD IN PART, REV'D IN PART 285F.3 D.1285, 89AFTR2D 2002- 1978 (CA-9,2002) DECIDED IN 2002; THE GLAXO SMITH KLINE HOLDING (AMERICAS) INC. VS COMMISSIONER, T.C NO.5750-04, GLA XO ITA 269/CHD/2017 A.Y.2012-13 PAGE 19 OF 58 SMITH KLINE HOLDING (AMERICAS) INC VS COMMISSIONER, T.C. NO 6959 -05 AND AUSTRALIAN LEGAL POSITION AS SET OUT IN AUSTRALIA PUBLISH ED GUIDANCE IN 2005 (NAT 14586-11.2005) RELATED TO THE COMPENSATION OF D ISTRIBUTION / MARKETING COMPANIES FOR ACTIVITIES THAT ENHANCE THE VALUE OF MARKETING INTANGIBLES THAT THEY DO NOT OWN. 16.7 ACCORDINGLY, REJECTING THE ASSESSEE'S EXPLANATION, HE REQUIRED THE ASSESSEE TO MAKE A SUBMISSION ON BENCH-MARKING THE TRANSACTION. 16.8 THE ASSESSEE SUBMITTED THAT AMP EXPENDITUR E CANNOT BE SEGREGATED AND HAS TO BE BENCH MARKED BY AGGREGATING THE SAME WITH THE DISTRIBUTION ACTIVITY AS IT WAS CLOSELY AND DIRECTLY LINKED TO I TS DISTRIBUTION ACTIVITY AND HENCE IF AT ALL IT SHOULD BE BENCH MARKED USING RPM . THE ASSESSEE SUPPORTED THE SAID ARGUMENT BY PLACING RELIANCE ON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF SONY ERICSSON WHEREIN THE COURT HAS HELD THAT; WHERE THE ASSESSING OFFICER/TPO ACCEPTS THE COMPAR ABLES ADOPTED BY THE ASSESSED, WITH OR WITHOUT MAKING ADJUSTMENTS, AS A BUN DLED TRANSACTION, IT WOULD BE ILLOGICAL AND IMPROPER TO TREAT AMP EXPENSES A S A SEPARATE INTERNATIONAL TRANSACTION, FOR THE SIMPLE REASON THAT I F THE FUNCTIONS PERFORMED BY THE TESTED PARTIES AND THE COMPARABLES MATCH, WITH OR WITHOUT ADJUSTMENTS, AMP EXPENSES ARE DULY ACCOUNTED FOR. IT WOULD BE INCONGRUOUS TO ACCEPT THE COMPARABLES AND DETERMINE OR ACCEPT THE TRANSFER PRICE AND STILL SEGREGATE AMP EXPENSES AS AN INTERNATION AL TRANSACTION. 16.9 IT WAS ALSO SUBMITTED THAT IF AMP IS TO BE C ONSIDERED AS AN INTERNATIONAL TRANSACTION, THEN ALSO THE EXPENSES S HOULD BE CONSIDERED AT GROSS LEVEL IN TERMS OF PARA 165 OF THE DECISION OF THE AFO RESAID DECISION OF THE DELHI HIGH COURT WHICH HOLDS; AN EXTERNAL COMPARABLE SHOULD PERFORM SIMILAR AMP FUNCTIONS. SIMILARLY THE COMPARABLE SHOULD N OT BE THE LEGAL OWNER OF THE BRAND NAME, TRADE MARK ETC. IN CASE A CO MPARABLE DOES NOT PERFORM AMP FUNCTIONS IN THE MARKETING OPERATIONS, A FUNCTION WHICH IS PERFORMED BY THE TESTED PARTY, THE COMPARABLE MAY HAV E TO BE DISCARDED. COMPARABLE ANALYSIS OF THE TESTED PARTY AND THE COMPA RABLE WOULD INCLUDE REFERENCE TO AMP EXPENSES. IN CASE OF A MISMATCH, ADJ USTMENT COULD BE MADE WHEN THE RESULT WOULD BE RELIABLE AND ACCURATE. OT HERWISE, RP METHOD SHOULD NOT BE ADOPTED. IF ON COMPARABLE ANALYS IS, INCLUDING AMP EXPENSES, GROSS PROFIT MARGINS MATCH OR ARE WITHIN THE SPECIFIED RANGE, NO TRANSFER PRICING ADJUSTMENT IS REQUIRED. IN SUCH CA SES, THE GROSS PROFIT MARGIN WOULD INCLUDE THE MARGIN OR COMPENSATION FOR T HE AMP EXPENSES INCURRED. ROUTINE OR NON-ROUTINE AMP EXPENSES WOULD N OT MATERIALLY AND ITA 269/CHD/2017 A.Y.2012-13 PAGE 20 OF 58 SUBSTANTIALLY AFFECT THE GROSS PROFIT MARGINS WHEN THE TESTED PARTY AND THE COMPARABLE UNDERTAKE SIMILAR AMP FUNCTIONS. 16.10 ACCORDINGLY, IT WAS SUBMITTED THAT SINCE DISTRIBUTIO N AND MARKETING WERE INTERTWINED A BUNDLED APPROACH MAY BE FO LLOWED. THE SAID ARGUMENT WAS ALSO SUPPORTED BY RELYING ON THE AFOR ESAID PARA 165 OF THE SAID DECISION IN THE CASE OF SONY ERICSSON WHEREIN T HE COURT OPINED; AN EXTERNAL COMPARABLE SHOULD PERFORM SIMILAR AMP FUNC TIONS. SIMILARLY THE COMPARABLE SHOULD NOT BE THE LEGAL OWNER OF THE BR AND NAME, TRADE MARK ETC. IN CASE A COMPARABLE DOES NOT PERFORM AMP F UNCTIONS IN THE MARKETING OPERATIONS, A FUNCTION WHICH IS PERFORMED BY THE TESTED PARTY, THE COMPARABLE MAY HAVE TO BE DISCARDED. COMPARABLE ANALYS IS OF THE TESTED PARTY AND THE COMPARABLE WOULD INCLUDE REFERENCE TO AM P EXPENSES. IN CASE OF A MISMATCH, ADJUSTMENT COULD BE MADE WHEN THE RESU LT WOULD BE RELIABLE AND ACCURATE. 16.11 THE TPO NOTING THAT SINCE NO RELIABLE COMP ARABLES WERE FOUND TO HAVE BEEN PROPOSED WHICH PERFORMED BOTH DISTRIBUTIO N AND SIMILAR AMP FUNCTION, ACCORDINGLY CONCLUDED THAT A TRANSACTION BY TRANSACTION APPROACH OF SEPARATELY BENCH MARKING THE AMP EXPENSES ON FAC TS WAS JUSTIFIED. RELYING ON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF SONY ERICSSON HE CONCLUDED THAT THE HON'BLE HIGH COURT HAS HELD T HAT WHEN SUITABLE COMPARABLES ARE NOT AVAILABLE, THEN A SEGREGATION A PPROACH MAY BE ADOPTED FOR THE PURPOSES OF BENCH MARKING. 16.12 THE TPO CONCLUDED THAT THE ASSESSEE HAS FAILED TO SHO W THAT THE AMP EXPENDITURE WAS COMPENSATED BY THE AE THROUGH A SET OF ANY OTHER TRANSACTION. ACCORDINGLY, ADJUSTMENT WAS PROPOSED ON PROTECTIVE BASIS IN THE FOLLOWING MANNER : ADJUSTMENT ON PROTECTIVE BASIS 65. SINCE THE INSTANT MATTER IS SUB-JUDICE BE FORE VARIOUS APPELLATE FORUMS, THE BENCHMARKING IS BEING INITIALLY DONE ON A PROTECTIVE BASIS/ IN ACCORDANCE WITH THE STAND OF THE DEPARTMENT EXPLAIN ED IN THE SHOW-CAUSE NOTICE DATED 07/01/2016. 66. THE RATIO OF AMP/SALES IN THE CASE OF THE TESTE D PARTY, I.E., THE ASSESSEE HAS BEEN COMPUTED AS UNDER:- EXPENDITURE ON AMP 6,18,99,939 VALUE OF SALES 36,19,12,878 AMP/SALES OF THE ASSESSEE 17.10% 67. IN THE DISTRIBUTION SEGMENT, THE ASSESSEE HAS F INALLY USED 3 COMPARABLES WHICH ARE TO BE FUNCTIONALLY SIMILAR TO IT. THE COMPARABLES CHOSEN BY THE ASSESSEE WILL BE FOR THE PURPOSE OF COMPARIS ON OF AMP EXPENDITURE. THE COMPARABLES CHOSEN BY IT AND THEIR RELEVANT DATA SU BMITTED VIDE LETTER DATED ITA 269/CHD/2017 A.Y.2012-13 PAGE 21 OF 58 31/12/2015 SHOWS THAT THE AGE AMP/SALES RATIO OF TH E COMPARABLES IS 2.38% AS PER DETAILS GIVEN BELOW:- S.N COMPARABLE COM PANY SALES (INR) AMP (INR) AMP /SALES 1 BPL LTD. 777,366,625 2,822,978 0.36 2 CENTRAL SCIENTIFIC SUPPLIES CO. LTD 21,749,766 NIL 0 3 HICKS TH ERMOMETERS( INDIA) LTD 307,575,143 20,853,947 6.78 AVERAGE 2,38 % 68. FURTHER, THE ABOVE DATA EXHIBITS THAT THE INTEN SITY OF AMP SPEND BY THE ASSESSEE IS MUCH HIGHER THAN THAT OF THE COMPARABLE S TAKEN BY THE ASSESSEE. ACCORDINGLY, THE AMP EXPENSES OVER AND ABOVE SIMILA R EXPENSES BY THE ACCEPTED COMPARABLE ENTITIES CONSTITUTES RATES THE COMPONENT OF INTERNATIONAL TRANSACTION ATTRIBUTED TO THE AE TOWARDS BUILD-UP OF INTANGIBLE S THAT NEEDS TO BE SUITABLY COMPENSATED BY THE AE. THEREFORE, THE AMOUNT THAT S HOULD HAVE BEEN COMPENSATED TO THE ASSESSEE COMPANY IS COMPUTED HER EUNDER:- VALUE OF GROSS SALES OF THE 36,19,12,878 AMP/SAIES RATIO OF THE COMPATIBLES 2.38% AMOUNT THAT REPRESENTS SIMILAR EXPENSES ON AMP BY T HE ACCEPTED COMPARABLE ENTITIES 86,13,526 TOTAL EXPENDITURE ON AMP BY THE ASSESSEE 6,18,99,939 EXPENDITURE OVER AND ABOVE SIMILAR EXPENSES BY THE ACCEPTED COMPARABLE ENTITIES WHICH CONSTITUTES THE COMPONENT OF INTERNATIONAL TRANSACTION ATTRIBUTED TO THE AE TOWA RDS BUILD- UP OF INTANGIBLES THAT NEEDS TO BE SUITABLY COMPENS ATED BY THE AE 5,32,86,413 69. THE DIFFERENCE OF RS. 5,32,86,413/- REPRESENTS THE AMOUNT THAT HAS BEEN SPENT BY THE ASSESSEE TO CREATE THE MARKETING INTAN GIBLE AND SHOULD HAVE BEEN REIMBURSED BY THE AE ALONG WITH A MARK-UP. THE QUES TION OF MARK-UP ARISES BECAUSE YOU HAVE PROVIDED SOME SERVICE FOR PROMOTIN G THE MARKETING INTANGIBLE OWNED BY YOUR AE. FOR THESE SERVICES, YO U SHOULD BE ELIGIBLE FOR REMUNERATION EQUIVALENT TO YOUR GROSS PROFIT TO SAL ES RATIO (49.84%). THEREFORE, BECAUSE OF THE EFFORTS MADE BY YOU, A FURTHER MARK UP OF 49.84% ON THE ABOVE AMP SPEND AMOUNT IS CONSIDERED APPROPRIATE WHICH IS COMPUTED AS UNDER:- VALUE OF GROSS SALES OF THE ASSESSEE 36,19,12,878 AMP/SALES RATIO OF THE COMPARABLES 2.38% AMOUNT THAT REPRESENTS SIMILAR EXPENSES ON AMP BY T HE ACCEPTED COMPARABLE 86,13,526 TOTAL EXPENDITURE ON AMP BY THE ASSESSEE 6,18,99,939 EXPENDITURE OVER AND ABOVE SIMILAR EXPENSES BY THE ACCEPTED COMPARABLE ENTITIES WHICH CONSTITUTES THE COMPONENT OF INTERNATIONAL TRANSACTION ATTRIBUTED TO THE AE TOWA RDS BUILD-UP OF INTANGIBLES THAT NEEDS TO BE SUITABLY COMPENSATE D BY THE AE 5,32,86,413 MARKUP @49.84% 2,65,57,948 ADJUSTMENT U/S 92CA 7,98,44,360 70. THE ABOVE AMOUNT OF RS. 7,98,44,360/- IS PROPOS ED AS AN ADJUSTMENT U/S 92CA IF THE INCOME TAX ACT ON A PROTECTIVE BASIS 16.13 REFERRING TO THE ABOVE PARAS, IT WAS SUBMI TTED THAT IN VIEW OF THE FACT THAT THE ISSUE WAS SUB-JUDICED THE TPO PROCEEDED A LSO TO MAKE AN ADJUSTMENT ON SUBSTANTIVE BASIS APPLYING COST PLUS METHOD BY MAKING REFERENCE TO RULE 10B(1)(C). RELIANCE WAS ALSO PLA CED UPON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF SONY ERICSON TO HOL D THAT COST PLUS METHOD WAS THE MOST APPROPRIATE METHOD. FURTHER RELIANCE WAS ALSO PLACED UPON THE ITA 269/CHD/2017 A.Y.2012-13 PAGE 22 OF 58 DRPS DECISION DATED 17.11.2015 IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR WHEREIN IT HAD BEEN HELD THAT COST PLUS METHOD WAS JUSTIFIED ON FACTS. 16.14 FOLLOWING THE DRPS DIRECTION IN THE IMMEDIA TELY PRECEDING ASSESSMENT YEAR, EXPENSES PERTAINING TO COMMISSION ON SALES AND DISCOUNTS WERE EXCLUDED. AFTER EXAMINING THE REMAINING EXPENS ES OF RS. 3,57,99,743/- AMOUNT OF RS. 1,99,69,057/- WAS ATTRIBUTED TO ADVER TISING, MARKETING SERVICES AND FOLLOWING DRPS DIRECTIONS GIVEN IN TH E IMMEDIATELY PRECEDING ASSESSMENT YEAR IT WAS MATCHED WITH THE SIMILAR EXP ENSES OF THE COMPARABLES AND ON A SUBSTANTIVE BASIS RS. 1,35,75, 537/- WAS PROPOSED TO BE ADJUSTED U/S 92CA . THE SPECIFIC REASONING AND CALCULATIONS MADE ARE EXTRACTED HEREUNDER FOR THE SAKE OF COMPLETENESS FR OM THE TPOS ORDER: 81 .THE DRP IN ITS ORDER DATED 17/11/2015 IN FY 20 10-11 IN ASSESSEE' OWN CASE HAS HELD THAT THE AMP EXPENSES ARRIVED ABOVE ARE TH EN TO BE MATCHED WITH SIMILAR EXPENSES OF THE COMPARABLES AND THE MARK-UP ON SUCH EXCESS/NON-ROUTINE EXPENSES INCURRED BY THE ASSESSEE SHALL BE EQUIVALENT TO THE GP/SALES RATIO OF THE COMPARABLES, AS PER SUB-CLAUSE (II) TO RULE 10 B(L) (C). ACCORDINGLY, THE TOTAL AMOUNT OF AMP ATTRIBUTION TO THE AE AND MARK-UP THEREON IS COMPUTED AS UNDER:- VALUE OF GROSS SALES OF THE ASSESSEE 36,19,12,878 AMP/SALES RATIO OF TINE COMPARABLES 2.38% AMOUNT THAT REPRESENTS SIMILAR EX PENSES ON AMP BY THE ACCEPTED COMPARABLE ENTITIES 86,13,526 TOTAL EXPENDITURE ON AMP BY THE ASSESSEE, AS COMPUT ED ABOVE 1,99,69,057 EXPENDITURE OVER AND ABOVE SIMILAR EXPENSES BY THE ACCEPTED COMPARABLE ENTITLES WHICH CONSTITUTES THE COMPONENT OF INTERNA TIONAL TRANSACTION ATTRIBUTED TO THE AE TOWARDS BUILD UP OF INTANGIBLES THAT NEED S TO BE SUITABLY COMPENSATED BY THE AE 1,13,55,531 MARKUP @ 19.55% 22,20,006 ADJUSTMENT U/S 92CA 1,35,75,537/- 82 . THE ABOVE AMOUNT OF RS. 1,35,75,537/- IS BEING PROP OSED AS AN ADJUSTMENT U/S 92CA OF THE INCOME-TAX ACT ON SUBSTANTIVE BASIS . SINCE THE AMP ISSUE IS SUB-JUDICE BEFORE VARIOUS AP PELLATE FORUMS, THE BENCHMARKING WAS INITIALLY DONE ON A PROTECTIVE BASIS RESULTING IN A N ADJUSTMENT OF RS. 7,98,44,360/-U/S 92CA OF THE INCOME-TAX ACT, AS STATED IN DETAIL SUPRA. 17. BEFORE THE DISPUTE RESOLUTION PENAL (DRP) APART FROM O THER OBJECTIONS TAKEN BY THE ASSESSEE, IT IS SEEN THAT A SP ECIFIC GROUND/OBJECTION WAS RAISED AGITATING THAT AMP WAS A FUN CTION OF THE ASSESSEE BEING A FULL FLEDGED DISTRIBUTOR AND THUS, IT WAS N OT AN INTERNATIONAL TRANSACTION. FOR READY REFERENCE, SAID GROUN D EXTRACTED IN THE ORDER IS REPRODUCED HEREUNDER : GROUND 2: THE LD. TPO HAS ERRED ON THE FACTS AND C IRCUMSTANCES OF THE CASE AND IN LAW IN BENCHMARKING AMP EXPENDITURE AS AN IN TERNATIONAL TRANSACTION IGNORING THAT ITS JUST A FUNCTION PERFORMED BY WIDE X INDIA AS A PART OF ITS ROLES AND RESPONSIBILITY AS A FULL-FLEDGED DISTRIBUTOR FO R ITS OWN BUSINESS AND THEREFORE, NOT AN INTERNATIONAL TRANSACTION AS PER INDIAN TRAN SFER PRICING REGULATIONS. 17.1 THE DRP AFTER SUMMING UP THE FACTS CONSIDERED BY TH E TPO AND THE FAR ANALYSIS REFERRED TO BY THE TPO PROCEEDED TO HOLD THAT THE BENEFIT OF THE EXPENSES WAS FOR THE AE AND THE DEMPE FUNCTIONS CA RRIED OUT BY THE ITA 269/CHD/2017 A.Y.2012-13 PAGE 23 OF 58 INDIAN SUBSIDIARY RESULTED IN A BENEFIT TO THE AE. FOR REA DY REFERENCE, THE RELEVANT FINDING IS REPRODUCED HEREUNDER : THUS AS PER THE TP STUDY REPORT FURNISHED BY THE A SSESSEE, IT IS APPARENT THAT THE VARIOUS RISKS ASSUMED BY THE TAXPAYER AND BY THE AS SESSEE ARE AS UNDER : NATURE OF RISK TAXPAYER/ASSESSEE ASSOCIATED ENTERPRISES MARKETS RISK NIL ENTIRELY BORNE BY THE AE PRODUCT LIABILITY/WARRANTY RISK NIL WARRANTY RISK FOR THE WARRANTY PERIOD OF PRODUCT OF 27 MONTHS IS BORNE BY THE AE TECHNOLOGY RISK DOES NOT BEAR ANY RISK AE IS THE OWNER OF THE TECHNOLOGY ASSOCIATED WITH THE PRODUCT, THUS, ENTIRE RISK OF TECHNOLOGICAL OBSOLESCENCE FOREIGN EXCHANGE FLUCTUATION RISK BEARS SOME FOREIGN EXCHANGE RISK AS IT HAS TO MAKE REMITTANCE TO THE AE NO RISK ACCOUNTS RECEIVABLE/CREDIT RISK PRODUCT SOLD TO END USERS BY WIDEX INDIA, THEREFORE, THERE IS VERY LOW CREDIT RISK NO RISK PRODUCT PRICE RISK DOES NOT ASSUME ANY PRICE RISK AS THE INVENTORY HOLDING IS NOT MORE THAN 3 - 4 MONTHS AND TECHNOLOGY IS NOT PRONE TO CHANGE NO RISK THE ABOVE FAR ANALYSIS ESTABLISHES THAT THE AE HAS BENEFITS AND RISKS IN THE INDIAN MARKET AND IS DEPENDENT UPON THE DEMPE FUNCT IONS CARRIED OUT BY THE INDIAN SUBSIDIARY THAT IS THE TAXPAYER. THUS, A NA TURAL CONSEQUENCE IS THAT THE INDIAN TAXPAYER SHOULD BE SUITABLY COMPENSATED FOR THE DEMPE FUNCTIONS BEING CARRIED OUT BY IT. 17.2. WE FIND ON A READING OF THE DRPS DECISION THAT THE A BRUPT CONCLUSION THAT THE ASSESSEE IS PERFORMING DEMPE FUNCTION S UNILATERALLY ARRIVED AT HAS NO BUILD UP EITHER BY WAY OF ANY PRIOR DISC USSION OR BASIS FOR THE CONCLUSION ON FACTS. THE ACRONYON DEMPE STANDS FOR DEVELOPMENT, ENHANCEMENT, MAINTENANCE, PRODUCTION AND EXP LOITATION OF THE INTANGIBLES. FOR THE SAID ABRUPT CONCLUSION, WE FIND THE RE IS NO SUPPORTING DISCUSSION IN THE ORDER OR WHAT WAS THE ASSE SSEE'S STAND THERETO. THOUGH THE ISSUE IS NOT RELEVANT FOR ADJUDICATIN G IN THE PRESENT PROCEEDINGS, WE BRIEFLY REFER FOR THE SAKE OF COMPLETENESS HEREUNDER TO THE 6 STEPS ENVISAGED FOR ADDRESSING THE SAME : 1. IDENTIFY THE INTANGIBLES AND RISKS WITHIN A PARTICU LAR TRANSACTION 2. IDENTIFY THE CONTRACTUAL AGREEMENTS RELATING TO THE TRANSACTION IN QUESTION 3. IDENTIFY WHICH PARTIES PERFORMED DEMPE FUNCTIONS, B Y MEANS OF A FUNCTIONAL ANALYSIS 4. DETERMINE WHETHER THE CONDUCT OF THE PARTIES WAS CO NSISTENT WITH THE CONTRACTUAL ASSUMPTION OF RISK 5. DELINEATE THE ACTUAL CONTROLLED TRANSACTIONS RELATI NG TO DEMPE 6. DETERMINE ARM'S LENGTH PRICES FOR THE TRANSACTIONS 17.3 WE FIND THE ABOVE CONCLUSION DEVOID OF EVEN ANY UNILAT ERAL DISCUSSION LET ALONE CONSIDERING THE ARGUMENT ON BEHALF OF T HE ASSESSEE TO MEET THE CHALLENGE DOES NOT MERIT ANY FURTHER DISCUSSION. 17.4 REVERTING BACK TO THE ORDER, IT IS SEEN THAT THE PA ST HISTORY OF THE ASSESSEE ON THE ISSUE IN THE ABSENCE OF ANY AGREEMENT ON RECORD WAS CULLED OUT BY THE DRP IN THE FOLLOWING MANNER :- ITA 269/CHD/2017 A.Y.2012-13 PAGE 24 OF 58 6.5 INFORMATION FROM PAST ANNUAL REPORTS REGARDI NG AMP SPENT INFORMATION OF 5 YEARS IN REGARD TO TURNOVER, GROSS PROFIT, NET PROFIT, SELLING AND DISTRIBUTION EXPENSES, AMP EXPENSES, ROYALTY PA YMENT, INFRA-GROUP SERVICE CHARGE PAYMENT, PURCHASE OF KEY COMPONENTS FROM THE AE, WAS PROVIDED BY THE TAXPAYER AS UNDER. PARTICULARS FY2007-08 FY2008-09 FY2009-10 FY2010-11 FY2011-12 TURNOVER (NET SALES) 20,97,02,066 24,64,70,948 30,58,61,516 33,53,40,893 36,19,12,878 GROSS PRO/IT 10,34,59,687 1 1,28,85,554 14,31,17,038 16,62,82,418 17,39,47,919 NET PROFIT BEFORE TAXES (1,10,66,673) (1,05,609) 1,57,23,649 (1,88,93,562) (5,04,80,124) SELLING AND DISTRIBUTION EXPENSES 3,16,35,473 2,11,30,988 4,16,88,884 5,29,97,907 6,18,99,939 ADVERTISEMENT EXPENSES -- -- -- -- -- ROYALTY PAYMENT - - - - - INTRO-GROUP SERVICES - - - - - PURCHASE OF GOODS FROM AE 11, 74,88,410 13,61,14,710 16,23,32,008 12,60,73,607 18,85,23,124 6.6 SELLING AND DISTRIBUTION EXPENSES OF THE ASSESS EE FOR PAST FIVE YEARS THE ASSESSEE HAS PROVIDED, THE FOLLOWING DETAILS PE RTAINING TO ALL SELLING AND DISTRIBUTION EXPENSES INCURRED BY IT IN THE PAST FIVE YEARS TO THE PANEL. PARTICULARS FY2007-08 FY2008-09 FY2009-10 FY2010-11 FY2011-12 ADVERTISEMENT EXPENSES 1,22,89,791 34,58,863 1,56,52,452 2,03,05,084 1,71,73,609 INAUGURATION EXPENSES 7,61,591 99,901 1,22,322 2,41,643 55,537 MARKETING EXPENSES - - - 7,60,266 BUSINESS PROMO & ENTERTAINMENT 5,79,450 15,29,464 42,30,356 10,98,842 7,02,753 PACKAGING CHARGES 33,875 11,06,387 15,98,759 13,79,692 31,17,687 INFERENCE, CAMPS & SEMINAR'S 23,13,681 24,59,240 40,20,921 30,55,802 34,98,127 CONFERENCE, CAMPS & SEMINAR'S- TVERSEOS 17,10,227 5,80,341 14,09,976 70,21,129 75,78,141 PR SERVICES 2,52,261 70,006 - - - PUBLICITY MATERIAL 9.00,103 4,03,323 11,50,487 15,05,338 17,13,622 BRAND AMBASSADOR 7,50,000 8,50,000 8,50,000 12,00.000 12,00,000 : REIM BURSEMENT FROM AE - - (61,40,324) - - COMMISSIONS 71,35,577 74,59,187 1,30,01,224 1,22,26,069 1,71,40,278 DISCOUNTS 49,08,917 31,14,276 57,92,710 49,64,308 89,59,918 TOTAL 3,16,35,473 2,11,30,988 4,16,88,884 5,29,97,907 6,18,99,939 17.5. THE ASSESSEE WAS REQUIRED TO ADDRESS THE SAME AN D CONSIDERING THE FOLLOWING REPLY OF THE ASSESSEE, IT WAS CONCLUDED THAT THE ASSESSEE IS TAKING A CONTRADICTORY STAND AND IS NOW TRYING TO PROJE CT ITSELF AS A HIGH RISK DISTRIBUTOR DESPITE ITS CLAIM IN ITS TP STUDY THAT IT WA S LOW RISK DISTRIBUTOR. THE FOLLOWING REPLY OF THE ASSESSEE WHICH DID NOT FIND FAVOUR WITH THE DRP IS EXTRACTED HEREUNDER FROM THE ORDER OF THE DRP ITSELF FOR READY REFERENCE : HOWEVER, IN REPLY TO THE QUESTIONNAIRE ISSUED BY TH E PANEL, THE ASSESSEE REPLIED VIDE LETTER DATED 24 TH OCTOBER 2016- POINT NO. 20 AS UNDER: ITA 269/CHD/2017 A.Y.2012-13 PAGE 25 OF 58 INFORMATION ALONG WITH EVIDENCES ON ALL THE RISKS A SSUMED, RISK MITIGATIONS UNDERTAKEN AND RISKS IN PRACTICE MATERIALIZED IN INDIA AND WHO HAS BORNE THE LOSS DUE TO THE SAME. WHAT WERE (HE REIMBURSEMENTS/COMPENSATION BY THE AE IN THIS REGARD TO THE TAXPAYER? IN THIS REGARD, WE WISH TO MENTION THAT THE ASSESSE E IS THE 'EXCLUSIVE' DISTRIBUTOR OF WIDEX PRODUCTS UNDER THE TRADE NAME 'WIDEX' IN THE GEOGRAPHICAL TERRITORY OF INDIA. THE ASSESSEE OPERATES IN THE CAPACITY OF A 'FULL-RI SK BEARING ENTITY 1 AND IS EXPOSED TO ALL ENTREPRENEURIAL RISKS AND REWARDS ASSOCIATED WITH I TS TRADING OPERATIONS. THE ASSESSEE ASSUMES ALL FUNCTIONS RELATING TO TRADING SUCH AS F ORECASTING DEMAND, SCHEDULING TIMELY PURCHASES, SALES AND MARKETING, WAREHOUSING, DISTRI BUTION AND SUPPLY, ESTIMATING EXPECTED SALE PRICE AND MAKING RECOMMENDATION TO DE ALERS / RETAILERS ON RETAILS PRICES ETC. THERE ARE NO ARRANGEMENTS GUARANTEEING ASSESSE E A RETURN ON THE EXPENSES IT BEARS OR MAKING UP FOR ANY FINANCIAL LOSSES IT MAY EXPERI ENCE FOR THE RELEVANT YEAR. THUS, THE OPERATING INCOME OR LOSS REALIZED BY THE ASSESSEE I S DIRECTLY DEPENDENT ON THE FINANCIAL SUCCESS OR FAILURE OF ITS ENTREPRENEURIAL EFFORTS, INCLUDING ITS MARKETING, ADVERTISING, AND PROMOTIONAL ACTIVITIES, IN INDIA. IT IS APPARENT FROM THE ABOVE REPLY OF THE ASSESSEE IN RESPONSE TO THE QUESTIONNAIRE THAT THE ASSESSEE IS TRYING TO PROJECT ITSELF AS A HIGH RISK DISTRIBUTOR INSPITE OF THE FACT THAT AS PER THE TP DOCUMENT IT HAS SHOWN THAT IT IS A LOW R ISK DISTRIBUTOR AND MOST OF THE RISK IN RESPECT OF THE FUNCTIONS UNDERTAKEN BY THE TAXPAYER ARE BORNE BY THE AE. 17.6 THE DRP, ACCORDINGLY, HELD THAT THE ASSESSEE WAS U NABLE TO SHOW THAT IT WAS IN ANY WAY RECEIVING ANY COMPENSATION FROM TH E AE IN ANY OF THE FOLLOWING MANNERS : I. REDUCTION IN PURCHASE PRICE OF THE PRODUCTS (RAW MA TERIAL/FINISHED GOODS), II. REDUCTION IN THE RATE OF ROYALTY, III. REDUCTION/ WAIVER OF CHARGES FOR SOME SUPPORT WHICH THE AE IS PROVIDING TO THE TAXPAYER-. IV. PROVISION OF DIRECT SUPPORT IN THE FORM OF GRAN T OF SUBSIDY/REIMBURSEMENT OF EXPENSES/SERVICE CHARGES. V. INCREASE IN SHARE OF PROFITS ASSOCIATED WITH THE ENHANCED VALUE OF TRADEMARK OR OTHER MARKETING INTANGIBLES VI. WAVER OF ROYALTY/FEES PAID TO THE TAXPAYER BY T HE AE ON ACCOUNT OF DISTRIBUTION OF AE'S GOODS TO THIRD PARTY OR DIRECT SALES MADE BY AE TO THE THIRD PARTIES IN INDIA FOR WHICH MARKET DEVELOPMENT HAS BEEN CARRIED OUT BY THE TAXP AYER. VII. BY ANY OTHER MANNER. THE ASSESSEE HAS IN NO WAY BEEN COMPENSATED FOR THE DEMPE FUNCTIONS CARRIED OUT BY IT. THE TPO WAS THEREFORE, JUSTIFIED IN BENCHMARKING THE AMP FU NCTIONS AND IN CARRYING OUT TP ADJUSTMENT IN RESPECT OF THE EXPENDITURE INCURRED BY THE TAXPAYER . 17.7 IN VIEW THEREOF, IT WAS HELD THAT THE TPO WAS JUSTIFIED TO BE NCHMARK THE AMP FUNCTIONS. 17.8 THE DRP REFERRING TO THE ECD/G-20 BEPS ACTION 8 TO 10 (BASE EROSION & PROFITS SPLITTING PROJECT ) AND REFERRING TO THE D ECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF SONY ERICSSON AND CERTAIN ORDERS OF THE ITAT WHEREIN FOLLOWING THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF SONY ERICSSON THE ISSUES WERE REMANDED BACK WH ICH ORDERS CAME UP ON A CHALLENGE TO THE REMAND BY THE ITAT ETC. BEFORE THE HON'BLE HIGH COURT CONCLUDED THAT BRIGHT LINE TEST AS THE OTHER METH OD HAD STATUTORY SUPPORT. SPECIFIC REFERENCE WAS MADE TO THE DECISION REND ERED IN THE CASE OF TOSHIBA (INDIA) LTD. VS DCIT WHEREIN ASSESSEE'S APPEAL WAS DISMISSED BY THE HON'BLE DELHI HIGH COURT. REFERENCE WAS ALSO MADE TO THE ITA 269/CHD/2017 A.Y.2012-13 PAGE 26 OF 58 DISMISSAL OF ASSESSEE'S APPEAL IN THE CASE OF KNORR BREMSE INDIA P.LTD. BY THE HON'BLE PUNJAB & HARYANA HIGH COURT. 17.8.1 IT IS SEEN THAT REFERENCE MADE TO THE DECISION O F THE HON'BLE DELHI HIGH COURT IN THE CASE OF TOSHIBA (INDIA) PVT. LTD. WAS MISP LACED AS THE SAID DECISION DOES NOT, IN ANY WAY, LAY DOWN THE PROPOSITIO N THAT BUNDLED APPROACH FOR CONSIDERING THE TRANSACTION IDENTIFIED BY THE TAX AUTHORITIES WAS OUSTED OUTRIGHTLY. 17.8.2 SIMILARLY, IT IS SEEN ON A READING OF THE DECISION OF T HE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF KNORR BREMS E INDIA P.LTD (SUPRA), THE COURT NOTED THAT THE ASSESSEE FAILED TO POINT OUT ANYTHING ON RECORD TO SUGGEST THAT EACH OF THE TRANSACTIONS ENTER ED INTO WITH DIFFERENT ENTITIES WERE INFACT ONE SINGLE TRANSACTION HOWEVER, NOTING THAT SINCE FACTS WERE NOT AVAILABLE CONSIDERING THE PRAYER OF THE ASSESSEE , THE ISSUE WAS REMANDED BACK. ACCORDINGLY, BY NO STRETCH OF IMAGINATION, IT CAN BE SAID THAT THE SAID DECISION LAYS DOWN THE PROPOSITION THAT TH E BUNDLED APPROACH WAS NEGATED BY THE COURT. ON THE CONTRARY, THE SAID DECISION LAYS OUT THE PROPOSITION THAT EVEN WHERE IN A CASE THE ASSESSEE EVEN BEFORE THE HIGH COURT, FAILS TO POINT OUT SUPPORTING EVIDENCE FOR IT S CLAIM THAT THE MULTIPLE TRANSACTIONS WERE INFACT ONE AND THE SINGLE TRANS ACTION NECESSITATED ACCEPTING THE WHOLE OR REJECTING THE ENTIR E BUNDLE OF TRANSACTIONS AS A WHOLE FAILED ON FACTS BEFORE THE AO /TPO , THE DRP AND THE ITAT, EVEN THEN THE MATTER CAN BE REMANDED BACK ACCEPTIN G THE PRAYER OF THE ASSESSEE TO DEMONSTRATE THAT IT WAS ACTUALLY ON E SINGLE TRANSACTION, EVEN IF THERE WERE MULTIPLE TRANSACTIONS WITH DIFFERENT ENTITIES AS FACT S WERE NOT REFERRED TO IN SUCH A MANNER BEFORE THE AUTHORITIES BELOW. 17.9 THE DRP, IT IS SEEN ALSO PLACED RELIANCE UPON THE DE CISION OF THE DELHI HIGH COURT IN THE CASE OF DENSO INDIA LTD. VS CIT. O N A READING OF THE EXTRACT OF PARA 6 OF THE AFORESAID DECISION WHICH HAS BEEN REPRODUCED AT INTERNAL PAGE 48 OF THE ORDER, IT IS SEEN THAT HON'BLE HIGH COURT HELD THAT IN THE FACTS OF THE SAID CASE, THE TPO WAS HELD TO BE JUSTIFIED IN C LOSELY SCRUTINIZING VALUE OF IMPORTS AND SEEK FURTHER DETAILS FROM T HE ASSESSEE AND THE ASSESSEE WAS HELD TO BE NOT JUSTIFIED IN ITS ARGU MENTS THAT THE BUNDLED OR AGGREGATING SERIES OR CHAIN OF TRANSACTIONS IN ITS TP REPORT SHOULD REMAIN UNDISTURBED. THE UN-USUAL FEATURES IN THE F ACTS OF THE SAID CASE, IT WAS HELD, REMAINED UNEXPLAINED BY THE ASSESSEE AN D THE TPO WAS HELD TO BE JUSTIFIED IN SEEKING FURTHER DETAILS. FOR READY R EFERENCE, RELEVANT EXTRACT RELIED UPON BY THE DRP IS EXTRACTED FROM ITS ORDER HEREUN DER : ITA 269/CHD/2017 A.Y.2012-13 PAGE 27 OF 58 8.2.5 DENSE INDIA LTD. V. CRT2016-TLL-14-HC-DELTP IN DENSO INDIA, THE HON'BLE DELHI HIGH COURT UPHELD THE DECISION OF THE TPO TO SEPARATELY BENCHMARK THE TRANSACTION OBSERVING AS FOLLOWS: 6. THE FACTUAL DISCUSSION IN THIS CASE CLEARLY REVE ALS THAT THE ASSESSEE CHOSE TO IMPORT COMPONENTS NOT FROM THE MANUFACTURER (WHICH WAS AN AE) BUT AN INTERMEDIARY. NORMALLY, THIS WOULD HAVE BEEN A COMMERCIAL DECISION, WHICH REVENUE AUTHORITI ES WOULD NOT QUESTION. HOWEVER, INTERESTINGLY, THE VENDOR OF THE COMPONENTS (WHICH CONSTITUTED OVER 85% OF THE RAW MATERIALS IMPORTED AND ABOUT 38% OF THE TOTAL RAW MATERIALS S OURCED) WAS ALSO CONNECTED WITH BOTH THE ASSESSEE AND THE MANUFACTURER. IF THESE REALITIES E MERGED DURING THE TP EXERCISE, COMPELLING THE TPO TO CLOSELY SCRUTINIZE THE VALUE OF SUCH IMPORTS AND SEEK FURTHER DETAILS FROM THE ASSESSEE, TO JUSTIFY ITS DECISION, THE ONUS WAS CLEARLY ON THE L ATTER TO AFFORD A CONVINCING AND REASONABLE EXPLANATION. SUCH OF THE EXPLANATIONS THAT WERE FOR THCOMING, WERE APPARENTLY UNCONVINCING. WHAT THE ASSESSEE BANKS UPON IN ITS APPEAL TO THIS COURT IS THE UNBENDING AND INFLEXIBLE ACCEPTANCE OF ITS TP EXERCISE; ACCORDING TO ITS LOG IC, A 'BUNDLED' OR AGGREGATED SERIES OR CHAIN OF TRANSACTIONS USED IN THE TP REPORT SHOULD REMAIN UNDISTURBED. NOW, THERE CAN BE NO DISPUTE THAT THE AO WOULD NORMALLY ACCEPT THE FIGURES GIVEN , IF THEY DO NOT SHOW FEATURES THAT CALL FOR HIS INTERFERENCE. HOWEVER, HIS JOB ALSO EXTENDS TO CRITICALLY EVALUATING MATERIALS AND IN CASES WHICH DO REQUIRE SCRUTINY, GO AHEAD AND DO SO. IN T HE PROCESS, AT LEAST IN THIS CASE, THE UNUSUAL FEATURES WHICH REMAINED UNEXPLAINED BY THE ASSESSEE , INFLUENCED THE TPO AND THE AO TO RESORT TO TRANSFER PRICING ADJUSTMENT AND DETERMINE ALP BY AD OPTING THE CUP METHOD FOR THE PROCUREMENTS FROM SUMITOMO JAPAN. THE 'SECOND TEST' SPOKEN OF IN SONY ERICCSON (SUPRA) I.E '4HE FORM AND-. SUBSTANCE OF THE TRANSACTION WE RE THE SAME BUT THE ARRANGEMENTS MADE IN RELATION TO A TRANSACTION, WHEN VIEWED IN THEIR TOT ALITY, DIFFER FROM THOSE WHICH WOULD HAVE BEEN ADOPTED BY AN INDEPENDENT ENTERPRISE BEHAVING IN A COMMERCIALLY RATIONAL MANNER.' WAS IN EFFECT ADOPTED. THIS COURT FINDS NO INFIRMITY IN THIS APPROACH. AS A RESULT, THE FIRST QUESTION FRAMED IS ANSWERED AGAINST THE ASSESSEE AND IN FAVO UR OF THE REVENUE. 17.10 THE RELIANCE PLACED ON THE SAID DECISION IT IS SEEN IS MISPLACED. 17.11 THE DRP IN INTERNAL PAGES 64 ONWARDS IN PARA 14 .2 TITLED AS JUDICIAL DECISIONS SUPPORTING THE BRIGHT LINE METHOD NOTES THAT IN SONY ERICSSONS CASE, THE HON'BLE DELHI HIGH COURT HAD NOT AP PROVED THE BRIGHT LINE METHOD CONCURS WITH THE TPOS ACTION OF MAKING TP A DJUSTMENT ON A PROTECTIVE BASIS IN VIEW OF THE ISSUES PENDING ADJUDICATION NOT IN APPEAL BUT IN A SLP BEFORE THE HON'BLE APEX COURT 17.12 THE DRP OVER-RULING THE ASSESSEE'S OBJECTIONS H ELD THAT AMP FUNCTION IS TO BE SEPARATELY BENCH MARKED. HOLDING THAT S INCE THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE TO SHOW THAT IT HAD BEEN CO MPENSATED EITHER THROUGH PRICING POLICY OR THROUGH FUTURE ECONOMIC OWNERS HIP OF THE BRAND THE DRP BEING OF THE VIEW THAT NO INDEPENDENT PERSON W OULD HAVE INCURRED THE SUBSTANTIAL AMP EXPENDITURE UNLESS IT HAD THE WRITTEN ASSURANCE OF CONTINUED DISTRIBUTION RIGHTS OVER WIDEX PROD UCTS. IT WAS HELD THAT AMP WAS NOT A NORMAL DISTRIBUTION FUNCTION. ACCO RDINGLY, CONSIDERING THE TRANSFER PRICING METHODOLOGY ADOPTED BY T HE ASSESSEE, THE INTERNATIONAL PROFILE OF THE ASSESSEE IN PARAS 8.4, 8.5, 9, 9.1, 9.2, 9.3 AND 9.4, IT WAS HELD THAT THE TPO WAS ENTITLED TO SELECT THE MOST APPROPRIATE METHOD AND HE WAS JUSTIFIED IN CHANGING THE METHOD OF BEN CH-MARKING ITA 269/CHD/2017 A.Y.2012-13 PAGE 28 OF 58 RELATED TO THE DISTRIBUTION SEGMENT TO TNMM AGAINST RPM . THE DRP WAS OF THE VIEW THAT SINCE THE ASSESSEE WAS NOT A NORMAL D ISTRIBUTOR SINCE THE ASSESSEE HAD SPENT AN AMOUNT OF RS. 6.18 CRORE ODD WHIC H WAS 17.10% OF THE SALES AND HIGHER THAN LEVEL OF EXPENSES ON MOST CO MPARABLES OF SUCH ACTIVITY DIRECTED THAT DISTRIBUTION AND SELLING EXPENSES WER E NOT TO BE EXCLUDED. IT WAS NOTED THAT THE TPO RELYING UPON DECIS ION OF THE DELHI HIGH COURT IN THE CASE OF SONY ERICSSON HAD EXCLUDED THE SE BUT DRP TOOK A CONTRARY VIEW IN VIEW OF THE FACT THAT THE ISSUE WAS UN DER CHALLENGE BEFORE THE APEX COURT. THE DRP TOOK NOTE OF THE FACT T HAT THE TPO HAD REQUIRED THE ASSESSEE TO GIVE THE DETAILS OF AMP/SALES RA TIO OF THE COMPARABLES SELECTED BY THE ASSESSEE IN ITS TP STUDY, HO WEVER, NO DETAILS WERE MADE AVAILABLE AND SINCE NO SUITABLE COMPARABLES WERE AVAILABLE, THE DRP PROCEEDED TO ADDRESS THE ASSESSEE'S FAILURE TO SUG GEST SUITABLE COMPARABLES FOR THE SEGREGATED APPROACH IN THE FOLLOWING MANNER : 13.2 ASSESSEE'S FAILURE TO SUGGEST SUITABLE COMPARA BLES FOR THE AGGREGATED APPROACH DURING PROCEEDINGS BEFORE THE DRP, THE ASSESSEE HAS NOT BEEN ABLE TO CONTROVERT THE FACT THAT THE ABOVE COMPANIES ARE NOT SUITABLE COMP ARABLES, FOR BENCHMARKING THE AMP EXPENDITURE FOLLOWING THE AGGREGATED APPROACH. THE ASSESSEE HAS ALSO FAILED TO FILE ANY NEW COMPARABLES WHICH MAY BE SUITABLE FOR THIS PURPOSE. IN VIEW OF THESE FACTS, NO SUITABLE COMPARABLE IS AVAILABLE FOR BENCHMARKING THE AMP EX PENDITURE FOLLOWING THE AGGREGATED APPROACH THE AMP TO SALES RATIO IS A GOOD MEASURE OF THE AMP INTENSITY. IN THE ABOVE COMPANIES, THE AMP TO SALES RATIO RANGES FROM 0% TO 6.78%, THE AVERAGE AMP EXPENDITURE IS 2.38% OF SALES, AS COMPARED TO THE ASSESSEE'S AMP EXPENDI TURE OF 17.10% OF SALES. THE ABOVE COMPANIES SHOW A VERY WIDE RANGE OF AMP EXPENDITURE AND INTENSITY. THE AMP INTENSITY OF THE ASSESSEE IS VERY DIFFERENT FROM THE AMP INTE NSITY OF THE ABOVE COMPARABLES. IN VIEW OF THESE FACTS, THE ABOVE COMPANIES ARE NOT SU ITABLE COMPARABLES FOR THE PURPOSE OF COMPARING AMP EXPENDITURE. AS DISCUSSED ABOVE, THE HON'BLE DELHI HIGH COURT HA VE UPHELD THE DECISION OF THE HON'BLE ITAT IN TOSHIBA AND DISMISSED AN APPEAL AGA INST THIS DECISION. 17.13 REFERRING TO THESE DECISIONS, THE DRP CONCLUDED THA T ASSESSEE WAS MORE THAN A NORMAL RISK DISTRIBUTOR BUT WAS NOT THE OWN ER OF THE BRAND, ACCORDINGLY, THE EXPENDITURE WAS CONSIDERED TO HAVE BEE N INCURRED FOR PROMOTING THE BRAND IN INDIA ON SALES MADE THROUGH IT. F OR THE SERVICES RENDERED TO THE AE, IT WAS NOTICED THAT COMPENSATION WA S NOT RECEIVED. ACCORDINGLY, SUITABLE ARMS LENGTH PRICE ADJUSTMENT WAS CONSIDERED TO BE NECESSARY. THE DRP TOOK NOTE OF THE FACT THAT ASSESS EE WAS RECEIVING MOSTLY ADVERTISING MATERIAL FROM THE AE. HOWEVER, THE PRIC E CHARGED AND PAID FOR IT IS NOT COMMENTED UPON LET ALONE AN EFFORT TO JU STIFY HOW ARMS LENGTH PRICE ADJUSTMENT FOR AMP WAS WARRANTED. FOR REA DY REFERENCE, PARA 8.3.4 FROM INTERNAL PAGE 51 IS EXTRACTED HEREUNDER : 8.3.4 CONTENT OF ADVERTISEMENT AND MARKETING ITA 269/CHD/2017 A.Y.2012-13 PAGE 29 OF 58 THE ASSESSEE IS RECEIVING PROMOTIONAL ADVERTISING M ATERIAL FROM ITS AE. THIS SHOWS THAT THE ENTIRE CONTROL OVER THE ADVERTISEMENT AND SALES PROMOTION AND THE NATURE AND CONTENT OF THE ADVERTISEMENT AND MARKETING ACTIVITIES IS OF THE AE . THEY INCUR EXPENSE ON ADVERTISEMENT AND THUS CONTROL THE NATURE AND CONTENT, BUT THE TAXPAY ER REIMBURSES THE EXPENSE INCURRED . 17.14 THE DRP FURTHER ADDRESSING THE COST PLUS METHO D, UPHELD THE APPLICATION OF THE SAID METHOD ALSO AND IN THE ABSENCE OF A NY COMPARABLE UNCONTROLLED TRANSACTIONS, UPHELD THE GROSS PROFIT OF THE A SSESSEE AS AN APPROPRIATE MARK UP FOR THE SERVICES RENDERED AS APPLIED BY THE TP O. 17.15 ADDRESSING THE ADDITION ON PROTECTIVE BASIS, REFER RING TO THE TPOS ORDER AND VARIOUS DECISIONS OF THE ITAT AND CERTAIN DECIS ION OF THE DELHI HIGH COURT NAMELY THE CASE OF NOBLE RESOURCES WHEREIN U PHOLDING THE CUP METHOD, THE MATTER WAS REMANDED, THE DRP REFERRING ALSO TO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF SUMIT OMO CORPORATION INDIA WHERE BERRY RATIO AS A PLI WAS HELD T O BE JUSTIFIED REFERRING TO ANOTHER DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF (170) TOLL GLOBAL FORWARDING (INDIA) CONCLUDED THAT THE METH OD IS CLEARLY APPLICABLE. IGNORING THE LEGAL POSITION AS WAS AVAILABLE IN A P LETHORA OF CASES, THE DRP FURTHER HELD THAT THE BRIGHT LINE METHOD IS ALTERNATELY SUPPORTED BY THE OTHER METHOD AS LAID DOWN IN RULE 10AB READ WITH RULE 10B(L)(F). THE SAID OBSERVATION IS PATENTLY CONTRARY TO THE SETTLED LEGAL POSITION. TO REVERT BACK, THE DRP PROCEEDED TO CONCLUDE AT INTERNAL PAGE 72 OF ITS ORDER AS UNDER : 14.4 CONCLUSION THIS ISSUE HAS BEEN DISCUSSED IN DETAIL BY THE TPO IN HIS ORDER. THE DECISION OF TPO TO USE THE BRIGHT LINE METHOD ON A PROTECTIVE BASIS IS SUP PORTED BY THE JUDICIAL DECISIONS AND RULE 10AB DISCUSSED ABOVE. THE TPO HAS PLACED RELIANCE O N THE DECISION OF THE HON'BLE ITAT IN LG ELECTRONICS. THE TPO HAS HELD THAT EXPENSES UP T O THE BRIGHT LINE ARE ROUTINE IN NATURE AND SINCE THE ASSESSEE HAS INCURRED AMP EXPE NSES IN EXCESS OF THE BRIGHT LINE, THE AMOUNT IN EXCESS OF THE BRIGHT LINE HAS BEEN HELD T O BE NON-ROUTINE AMP EXPENDITURE FOR THE CREATION OF MARKETING INTANGIBLES. THE TPO HAS USED THE BRIGHT LINE METHOD TO SEGREGATE ROUTINE AND NON-ROUTINE AMP EXPENSES. HE HAS USED SIMILAR COMPARABLES AND WORKED OUT THE BRIGHT LINE OF AMP EXPENSES. THE SEL ECTION OF COMPARABLES AND THE COMPUTATION OF BRIGHT LINE HAS BEEN DISCUSSED IN DE TAIL IN THE TPO'S ORDER. CONSIDERING THE FACTS AS ABOVE AND THAT THE DEPARTM ENT'S SLP HAS BEEN ADMITTED, THE TP ADJUSTMENT MADE USING THE BRIGHT LINE METHOD ON A P ROTECTIVE BASIS IS JUSTIFIED AND IS UPHELD. 17.16 THE DRP FURTHER DIRECTED THE TPO TO CARRY OUT THE FOLLOWING METHOD FOR BENCHMARKING THE ENTIRE DISTRIBUTION FUNCTION INCLUDING PURCHASE, MARKETING AND MARKET DEVELOPMENT ETC. ON A P ROTECTIVE BASIS. WITHOUT PREJUDICE TO THE EARLIER DIRECTIONS IN THE EVENT THAT THE ADJUSTMENTS ARE NOT APPROVED BY THE HIGHER JUDICIAL AUTHORITIES, IN THE FOLLOWING MANNER AND AGAIN ON AN ENTIRELY PROTECTIVE BAS IS. THE FOLLOWING SUPPORTING FACTS WERE REFERRED TO : ITA 269/CHD/2017 A.Y.2012-13 PAGE 30 OF 58 ..THE TPO TOOK THE SAME COMPARABLES SELECTED BY THE ASSESSEE IN ITS TP STUDY AND OBSERVED THAT THESE COMPARABLES HAVE AN A VERAGE AMP EXPENDITURE OF 2.38% OF SALES, AS COMPARED TO THE ASSESSEE'S AMP EXPENDITUR E OF 1 7.10%. THE ASSESSEE HAS FAILED TO FURNISH THE AMP EXPENDITURE AND THE AMP/SALES RATIO OF THE 3 COMPARABLES SELECTED BY THE ASSESSEE IN ITS TRANSFER PRICING STUDY. IT IS H OWEVER, APPARENT THAT THE AMP INTENSITY OF THE ASSESSEE IS VERY DIFFERENT FROM THE AMP INTENSI TY OF COMPANIES WHICH ARE SUITABLE COMPARABLES. 3. IN HIS ORDER, THE TPO HAS OBSERVED THAT THE ASSESSE E HAD INCURRED RS.6.18 CR. TOWARDS ADVERTISEMENT AND MARKET PROMOTION (AMP ) EXPENDITURE FOR PROMOTING MARKETING INTANGIBLES OWNED BY ITS AE. THIS EXPENDI TURE REPRESENTING 17.10% OF ITS SALES WAS CLEARLY EXTRAORDINARY CONSIDERING THAT THE AMP/ SALES RATIO OF THE COMPARABLES WAS ONLY 2.38%. 4. THE AMP EXPENDITURE INCURRED BY THE ASSESSEE HAS BE EN CONSIDERED FOR ADJUSTMENT ON THE PREMISE THAT THE ASSESSEE IN INDI A WAS INCURRING THESE EXPENSES FOR AND ON BEHALF OF ITS PARENT COMPANY OUTSIDE INDIA, AND THESE EXPENSES PROMOTED THE BRANDS/ TRADEMARKS THAT ARE LEGALLY OWNED BY FOREIG N PARENT AES. THESE EXPENDITURES CREATED OR DEVELOPED MARKETING INTANGI BLES IN THE FORM OF BRANDS / TRADEMARKS, CUSTOMER LIST, DEALER'S/DISTRIBUTION CH ANNELS ETC. EVEN THOUGH THE INDIAN COMPANY HAD NO OWNERSHIP RIGHTS IN THESE INTANGIBLE S. THE ASSESSEE CARRIED OUT FUNCTIONS WHICH ARE IN THE NATURE OF DEVELOPMENT, E NHANCEMENT, MAINTENANCE, PROTECTION AND EXPLOITATION (DEMPE FUNCTIONS) OF TH E INTANGIBLES. 5. IT IS CLEAR FROM THE ABOVE DISCUSSION THAT THE ASSE SSEE CARRIES OUT AMP FUNCTIONS WHOSE INTENSITY IS MUCH MORE THAN THAT OF THE COMPARABLES. AN ADJUSTMENT IS THEREFORE, REQUIRED TO IMPROVE COMPARABILITY FOR TRANSFER PRICING ANALYSIS. 17.17 THE DRP SUMMARIZED ITS CONCLUSION AND DIRECTIONS FINA LLY IN THE FOLLOWING MANNER : 16. FINAL CONCLUSION & SUMMARY AS DISCUSSED ISSUE WISE ABOVE THE TPO HAS GIVEN VAL ID REASONS FOR HIS DECISION. THE VARIOUS ISSUES RAISED BY THE ASSESSEE IN ITS GROUND S OF OBJECTIONS HAVE BEEN DISCUSSED IN THE ABOVE PARAS. THE ASSESSEE HAS FAILED TO CONTROVERT THE FINDINGS OF THE TPO. THE ASSESSEE OBJECTION TO IT BEING AN INTERNATIONAL TRA NSACTION HAS BEEN DISCUSSED IN GREAT DETAIL AND ON THE BASIS OF ADEQUATE SUPPORT FROM JU DICIAL DECISIONS IT HAS BEEN SUCCESSFULLY HELD TO BE AN INTERNATIONAL TRANSACTIO N. THE FAR ANALYSIS AND JUSTIFICATION FOR COMPENSATION HAS BEEN DISCUSSED IN PARA 6 WHICH IS ADEQUATELY SUPPORTED BY THE BEPS REPORT AS DISCUSSED IN PARA 7. THIS TAKES CARE OF MOST OF THE ASSESSEE'S OBJECTIONS. AS DISCU SSED, THE ASSESSEE HAS ALSO FAILED TO DEMONSTRATE THAT THE AMP EXPENDITURE DONE BY THE AS SESSEE WAS COMPENSATED BY THE AE THROUGH A SET OFF IN ANY OTHER HAACTION. AFTER DISCUSSION ON WHY THE TRANSACTION NEEDS TO BE SEPARATELY BENCHMARKED THE USE OF COST PLUS METHOD HAS BEEN JUSTIFIED AND IS UPHELD. IN VIEW OF THE SIP FILED AGAINST THE DEC ISION OF SONY ERICSSON THE TPO HAS BEEN DIRECTED NOT TO EXCLUDE SELLING AND DISTRIBUTI ON EXPENSES. THE PROTECTIVE ADJUSTMENT MADE USING THE BRIGHT LIN E METHOD HAS BEEN JUSTIFIED IN PARA 14 AND IS UPHELD. A WITHOUT PREJUDICE METHOD OF INTENSITY ADJUSTMENT USING TNMM HAS BEEN GIVEN IN PARA 15 FOR TPO TO COMPUTE AND ADD ON PROTECTIVE BA SIS. THE ORDER OF THE TPO IS THUS UPHELD. THE TAXPAYER AS WELL AS THE TPO HAS CITED VARIOUS D ECISIONS OF HIGHER AUTHORITIES WHICH HAVE BEEN TAKEN INTO ACCOUNT WHILE DECIDING THE ISS UES UNDER CONSIDERATION. HOWEVER, THE SAME HAVE NOT BEEN DISCUSSED IN DETAIL BY THIS PANEL FOR THE REASON THAT MANY OF SUCH DECISIONS HAVE BEEN INSPIRED BY THE FACTUAL MA TRIX AND CIRCUMSTANCES SPECIFIC TO THOSE DECISIONS. 17.18 PURSUANT TO WHICH THE AO/TPO PASSED THE FINAL ASS ESSMENT ORDER WAS PASSED WHICH IS UNDER APPEAL. 18. THE PARTIES HAVE BEEN HEARD. WE HAVE BROADLY TOU CHED UPON THE VARIOUS ARGUMENTS OF THE PARTIES QUA THE GROUNDS ORIGINA LLY RAISED AND THE ITA 269/CHD/2017 A.Y.2012-13 PAGE 31 OF 58 ADDITIONAL GROUNDS SUBSEQUENTLY RAISED. THOUGH ARGUMENT S HAVE BEEN BRIEFLY BROUGHT OUT IN THE EARLIER PART OF THIS ORDER, HOWE VER, BEFORE ADDRESSING THE SAME, IT IS NECESSARY TO FIRST AND FOREMOS T ADJUDICATE UPON THE ISSUE RAISED BY WAY OF GROUND NOS. 1,3, 4, 6 AND 7 IN THE PRESENT PROCEEDINGS. THE CENTRAL ISSUE SUMMED UP THEREIN IS, CAN AN INTERNATIONAL TRANSACTION BE PRESUMED TO EXIST DUE TO EXCESSIVE AM P EXPENSES INCURRED BY THE ASSESSEE DISTRIBUTOR IN THE FACTS OF THE PRESENT CASE. AS NOTED IN THE ARGUMENTS OF THE PARTIES ADDRESSED IN THE EARLIER PART OF THIS ORDER WHEREIN THE ASSESSEE RELIES UPON THE DECISIONS OF THE CO-ORDINATE BENCH RENDERED IN ASSESSEE'S OWN CASE AND THE SR.DR R ELIES ON THE ORDERS OF THE AUTHORITIES BELOW STATING THAT THE EARLIER ORDER UN DER CHALLENGE BEFORE THE HON'BLE HIGH COURT MAY NOT BE FOLLOWED FOR REAS ONS SET OUT IN GREATER DETAIL IN THE EARLIER PART OF THIS ORDER. 18.1 ACCORDINGLY, HAVING CONSIDERED THE RIVAL STAND IN REGA RD TO THE PAST HISTORY OF THE ASSESSEE BEFORE ADVERTING TO THE FACTS ON RECORD, WE DEEM IT APPROPRIATE TO FIRST TOUCH UPON THE PROPOSITIONS OF LAW AP PLICABLE ON FACTS IN THE CONTEXT OF THE ARGUMENTS BASED ON THE MATERIAL A VAILABLE ON RECORD. IT WOULD BE FRUITFUL TO FIRST REFER TO WHAT CAME UP FOR CON SIDERATION IN THE DECISIONS REFERRED TO BY THE TPO, THE DRP, THE LD. AR AND THE LD. SR.DR TO THE EXTENT IT IS RELEVANT AND GERMANE FOR DETERMINING TH E ISSUES IN THE PRESENT PROCEEDINGS. THE DECISION IN THE CASE OF SONY ER ICSSON (2015) 374 ITR 118 (DELHI) HAS BEEN EXTENSIVELY REFERRED TO BY THE T PO AND THE DRP. A CAREFUL PERUSAL OF THE SAME SHOWS THAT IN THE FACTS OF T HAT CASE, THE HON'BLE COURT WAS NOT CALLED UPON TO DECIDE WHETHER AMP WAS AN INTERNATIONAL TRANSACTION OR NOT. THE ASSESSEES BEFORE T HE COURT DID NOT DISPUTE THE EXISTENCE OF AN INTERNATIONAL TRANSACTION. THIS LEGAL POSITION IS WELL SETTLED AND IS NO LONGER OPEN FOR DEBATE AS HAD BEEN WELL ELABORATED AND DISCUSSED IN A PLETHORA OF CASES WHICH CAME SUBSEQUE NTLY THEREAFTER NAMELY MARUTI SUZUKI INDIA LTD. VS CIT (2016) 381 ITR 117 (DELHI); CIT VS WHIRLPOOL OF INDIA LTD. (2016) 381 ITR 154 (DELHI); BAUSCH A ND LOMB VS ACIT (2016) 381 ITR 227 (DELHI). THERE IS NO DOUBT WHAT SOEVER THAT THE DECISION IN THE CASE OF SONY ERICSSON PROCEEDED ON THE FO OTING THAT AMP EXPENSES WAS ACCEPTED BY THE PARTIES TO BE AN INTERNA TIONAL TRANSACTION. THIS MATERIAL FACT CANNOT BE LOST SIGHT OF. A PERUSAL OF THE AFORESAID DECISIONS LEAVES NO DOUBT WHATSOEVER THAT THE DECISION R ENDERED IN THE CASE OF SONY ERICSSON CAME UP REPEATEDLY FOR EXAMINATION WHERE THE RESPECTIVE ASSESSEES PLEADED IN EACH OF THE CASES THAT AMP EXPENSES ITA 269/CHD/2017 A.Y.2012-13 PAGE 32 OF 58 INCURRED WERE NOT AN INTERNATIONAL TRANSACTION IN TERMS O F THE RELEVANT PROVISIONS AND THE ASSESSEES WERE ALLOWED TO TAKE UP TH IS PLEA IN THE RESPECTIVE CASES AND THE COURT REFERRING TO THE PROVISIO NS OF THE ACT, FACTS ON RECORD AND THE DECISIONS AVAILABLE INCLUDING THE DECISION IN THE CASE OF SONY ERICSSON CASE HELD THAT THE ASSESSEES WERE SUCCE SSFUL IN THEIR CHALLENGE POSED TO THE EXISTENCE OF AN INTERNATIONAL TRANSACTION. 18.2. WE WILL COME TO THE DECISIONS AND THE PROVISIONS SUBSE QUENTLY AS FIRST WE MUST ALSO SET OUT THE OTHER APPLICABLE, WELL SETTLE D LEGAL POSITION NAMELY THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF S ONY ERICSSON ALSO UNAMBIGUOUSLY HELD THAT BRIGHT LINE TEST WAS AN ACT OF JUDICIAL LEGISLATION AND THE COURT HELD THAT BY VALIDATING THE BRIGHT LINE TEST, THE SPECIAL BENCH IN LG ELECTRONICS CASE WENT BEYOND CHAPTER -X OF THE ACT. THE COURT WHILE ARRIVING AT THE CONCLUSION WAS CONSCIOUS O F THE INTERNATIONAL TAX JURISPRUDENCE AND WAS CONSTRAINED TO H OLD THAT EVEN INTERNATIONAL TAX JURISPRUDENCE AND COMMENTARIES DO NOT RECOGNIZE THE BRIGHT LINE TEST FOR BIFURCATION OF ROUTINE AND NON ROUTINE E XPENSES. THE PURPOSE WHY WE FEEL THE NEED TO ADDRESS WHICH WE THOUG HT WAS A WELL SETTLED LEGAL POSITION IS ON ACCOUNT OF THE RESORT TO THE BRIGHT LINE TEST NOT ONLY BY THE TPO DESPITE THE AVAILABLE JUDICIAL OPINION TO TH E CONTRARY BUT THIS LAPSE, WE NOTE UNFORTUNATELY WAS NOT ADDRESSED BY THE DRP ALSO WHO INSTEAD HAVE TRIED TO DO SOME SKILLFUL TIP TOEING AROUND TH E ISSUE AND DID NOT CLEARLY REFER TO THE SETTLED LEGAL POSITION THEREON AN D LEFT THE CONCLUSION ARRIVED AT BY THE HON'BLE HIGH COURT IN AMBIGUIT Y. WHEN WE CONSIDER HOW INTENSITY APPROACH AS A METHOD WHICH HAS BEEN CARVED OUT BY THE DRP WHICH WE HAVE REFERRED TO IN THE EARLIER PART OF THIS ORDER WHILE ADVERTING TO THE OBJECTIONS POSED BY THE TAXPAYER, WE FIND OURSELVES IN AGREEMENT TO THE OBJECTIONS POSED AND WE HAVE NO HES ITATION IN HOLDING THAT WHAT APPLIES TO BRIGHT LINE TEST FULLY APPLIES TO THE I NTENSITY APPROACH AS WORKED OUT IN THE FACTS OF THE PRESENT CASE AS IT IS A REVERSE OF BRIGHT LINE TEST AS ITS MIRROR IMAGE. THE SAID MENTAL ACROBATICS A ND ATHLETICS DO NOT HAVE ANY JUDICIAL SANCTION AND CANNOT BE APPROVED. 18.3 ANOTHER RELEVANT AND FULLY APPLICABLE LEGAL POSITION ADDR ESSED BY THE COURTS IN THE BATCH OF DECISIONS RENDERED IN DECEMB ER 2015 IN 381 ITR REFERRED TO IN THE EARLIER PARAS TO OUR MINDS UN-AMB IGUOUSLY SETTLES THE LEGAL POSITION THAT THE EXISTENCE OF AN INTERNATIONAL T RANSACTION CANNOT BE PRESUMED ON ACCOUNT OF EXCESSIVE AMP INCURRED. T HERE CAN BE NO DEBATE AT THIS STAGE AS THE COURTS HAVE BEEN VERY CLE AR AND CATEGORIC IN ITA 269/CHD/2017 A.Y.2012-13 PAGE 33 OF 58 HOLDING THAT THE EXISTENCE OF THE INTERNATIONAL TRANSACTION HAS TO BE DEMONSTRATED AND THE ONUS TO DO SO IS ON THE REVENUE . THE REVENUE HAS TO SHOW THAT THERE EXISTED AN AGREEMENT OR AN UNDERS TANDING OR AN ARRANGEMENT THAT AN INDIAN ENTITY WOULD ENTER INTO AMP EXPENDITURE FOR AND ON BEHALF OF THE AE WHICH OWNS THE BRAND. THE LEGAL P OSITION AS SETTLED BY THE DELHI HIGH COURT WOULD SHOW THAT AFTER TH E DECISION OF THE DELHI HIGH COURT IN THE CASE OF SONY ERICSSON IN EARLY 201 5 THE DELHI HIGH COURT IN THE SERIES OF DECISIONS RENDERED ON 11.12.201 5, 22.12.2015 AND 23.12.2015 IN THE CASES OF MARUTI SUZUKI INDIA LTD., CIT VS WHIRLPOOL OF INDIA LTD. AND BAUSCH & LOMB EYECARE INDIA PVT. LTD. RESPECTIVELY HAVE ONE AFTER THE OTHER REPEATEDLY HELD THAT EXISTENC E OF INTERNATIONAL TRANSACTION OF AMP CANNOT BE PRESUMED, IT HAS TO BE DEM ONSTRATED BY THE REVENUE. WE FIND ON A PERUSAL OF THE RECORD THAT NOT ONLY THE TPO IN THE FACTS OF THE PRESENT CASE HAVING PASSED THE ORDER ON 2 8.01.2016 HAD THE BENEFIT OF THESE DECISIONS BUT EVEN THE DISPUTE RESOLUTION PANEL WAS FULLY AWARE OF THESE DECISIONS WHEREIN THE COURT HAS UN-AMBIGU OUSLY ADDRESSED THE LEGAL POSITION AND MADE IT CLEAR THAT THE EXISTENCE OF AN INTERNATIONAL TRANSACTION CANNOT BE PRESUMED. IN THE FA CE OF THESE DECISIONS, NEITHER THE TPOS ACTION NOR THE DRPS DIRECTIO NS, WE FIND ARE IN ACCORD WITH THE SETTLED LEGAL POSITION. 18.4 AT THIS STAGE, IT WOULD BE APPOSITE TO REFER TO THE RELEVANT STATUTORY PROVISIONS AS ADMITTEDLY THE TAX AUTHORITIES WERE S TATUTORILY BOUND TO CONSIDER THE ISSUE IN THE LIGHT OF THE RELEVANT PRO VISIONS OF THE ACT. INTERNATIONAL TRANSACTION HAS BEEN DEFINED IN SECTION 92B O F THE INCOME TAX ACT AS UNDER: MEANING OF INTERNATIONAL TRANSACTION. 92B. (1) FOR THE PURPOSES OF THIS SECTION AND SECTI ONS 92, 92C, 92D AND 92E, 'INTERNATIONAL TRANSACTION' MEANS A TRANSACTION BET WEEN TWO OR MORE ASSOCIATED ENTERPRISES, EITHER OR BOTH OF WHOM ARE NON-RESIDEN TS, IN THE NATURE OF PURCHASE, SALE OR LEASE OF TANGIBLE OR INTANGIBLE PROPERTY, OR PRO VISION OF SERVICES, OR LENDING OR BORROWING MONEY, OR ANY OTHER TRANSACTION HAVING A BEARING ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISES, AND SHALL INC LUDE A MUTUAL AGREEMENT OR ARRANGEMENT BETWEEN TWO OR MORE ASSOCIATED ENTERPRI SES FOR THE ALLOCATION OR APPORTIONMENT OF, OR ANY CONTRIBUTION TO, ANY COST OR EXPENSE INCURRED OR TO BE INCURRED IN CONNECTION WITH A BENEFIT, SERVICE OR F ACILITY PROVIDED OR TO BE PROVIDED TO ANY ONE OR MORE OF SUCH ENTERPRISES. (2) A TRANSACTION ENTERED INTO BY AN ENTERPRISE WI TH A PERSON OTHER THAN AN ASSOCIATED ENTERPRISE SHALL, FOR THE PURPOSES OF SUB-SECTION ( 1), BE DEEMED TO BE AN INTERNATIONAL TRANSACTION ENTERED INTO BETWEEN TWO ASSOCIATED ENT ERPRISES, IF THERE EXISTS A PRIOR AGREEMENT IN RELATION TO THE RELEVANT TRANSACTION B ETWEEN SUCH OTHER PERSON AND THE ASSOCIATED ENTERPRISE, OR THE TERMS OF THE RELEVANT TRANSACTION ARE DETERMINED IN SUBSTANCE BETWEEN SUCH OTHER PERSON AND THE ASSOCIA TED ENTERPRISE WHERE THE ENTERPRISE OR THE ASSOCIATED ENTERPRISE OR BOTH OF THEM ARE NON-RESIDENTS IRRESPECTIVE OF WHETHER SUCH OTHER PERSON IS A NON-RESIDENT OR NOT. ITA 269/CHD/2017 A.Y.2012-13 PAGE 34 OF 58 18.5 FROM A READING OF THE SECTION, IT IS CLEAR THAT THE ST ATUTE REQUIRES THAT THE TRANSACTION HAS TO BE BETWEEN TWO OR MORE A SSOCIATED ENTERPRISES, EITHER OR BOTH OF THEM SHOULD BE NON-RESIDENT. THE TRAN SACTION, IT HAS BEEN DEFINED SHOULD BE IN THE NATURE OF PURCHASE, SALE OR LEASE OF TANGIBLE OR INTANGIBLE PROPERTY OR PROVISION OF SERVICES OR A TRANS ACTION OF LENDING OR BORROWING MONEY. THE STATUTE MAKES IT CLEAR THAT A NY OTHER TRANSACTION CAN ALSO BE CONTEMPLATED WHICH HAS A BEARING ON THE PRO FITS, INCOME, LOSS OR ASSETS OF SUCH ENTERPRISE. THE STATUTE FURTHER MAKES IT CLEAR THAT THE WORD TRANSACTIONS CONTEMPLATED IN THE PROVISION WILL ALSO INC LUDE MUTUAL AGREEMENT AND THE ARRANGEMENT BETWEEN THE PARTIES FOR ALLOCATION, APPORTIONMENT OR ANY CONTRIBUTION TO ANY COST OR EXPEN SE INCURRED OR TO BE INCURRED IN CONNECTION WITH BENEFIT, SERVICES AND FACILITY P ROVIDED TO ANY OF SUCH ENTERPRISES. A READING OF SUB-SECTION (2) OF TH E ABOVE ALSO MAKES IT CLEAR THAT A TRANSACTION ENTERED INTO BY AN ENTERPRISE WITH A PERSON OTHER THAN AN ASSOCIATED ENTERPRISE SHALL, FOR THE PURPOSES OF SUB- SECTION (1), BE DEEMED TO BE AN INTERNATIONAL TRANSACTION E NTERED INTO BETWEEN TWO ASSOCIATED ENTERPRISES, IF THERE EXISTS A PRIO R AGREEMENT IN RELATION TO THE RELEVANT TRANSACTION BETWEEN SUCH OTHER PERSON AND THE ASSOCIATED ENTERPRISE, OR THE TERMS OF THE RELEVANT TRA NSACTION ARE DETERMINED IN SUBSTANCE BETWEEN SUCH OTHER PERSON AND THE ASSOCIATED ENTERPRISE WHERE THE ENTERPRISE OR THE ASSOCIATED ENTE RPRISE OR BOTH OF THEM ARE NON-RESIDENTS IRRESPECTIVE OF WHETHER SUCH OTH ER PERSON IS A NON-RESIDENT OR NOT. HOWEVER, FOR THE PURPOSES OF THE P RESENT PROCEEDINGS, WE NEED NOT BE CONCERNED WITH SUB SECTION (2) OF SECTION 92B. 18.6 A FURTHER READING OF THE RELEVANT EXPLANATION TO SECTION 92B AS INSERTED BY FINANCIAL ACT, 2012 FURTHER CLARIFIES THAT THE E XPRESSION INTERNATIONAL TRANSACTION SHALL INCLUDE THE PURCHASE, SALE, TRANSFER, LEASE OR USE OF INTANGIBLE PROPERTY, INCLUDING THE TRANSFER OF OWNE RSHIP OR THE PROVISION OF USE OF RIGHTS REGARDING LAND USE, COPYRIGHTS, P ATENTS, TRADEMARKS, LICENCES, FRANCHISES, CUSTOMER LIST, MARKETING CHA NNEL, BRAND, COMMERCIAL SECRET, KNOW-HOW, INDUSTRIAL PROPERTY RIGHT, EXTE RIOR DESIGN OR PRACTICAL AND NEW DESIGN OR ANY OTHER BUSINESS OR COMME RCIAL RIGHTS OF SIMILAR NATURE. CLAUSE (II) OF THE AFORESAID EXPLANATION FURTHER EXPLAINS THE EXPRESSION INTANGIBLE PROPERTY AS MARKETING RELATED INTA NGIBLE ASSETS, SUCH AS TRADE MARKS, TRADE NAMES, BRAND NAMES, LOGOS ET C. AMONGST OTHERS. A READING OF THE AFORESAID PROVISIONS MAKES IT CLE AR THAT WHEN THE TWO AES ENGAGED IN A TRANSACTION INVOLVING EITHER PURCHA SE OR SALE ; OR ITA 269/CHD/2017 A.Y.2012-13 PAGE 35 OF 58 TRANSFER OR LEASE; OR USE OF INTANGIBLE ASSETS THEN THE TR ANSACTION SHALL BE CLASSIFIED AS INTERNATIONAL TRANSACTION. AS IS EVIDENT FROM THE EXPANDED DEFINITION THAT EVEN PROVISION OF SERVICES; OR LENDING OR BORR OWING OF MONEY; OR ANY OTHER TRANSACTION HAVING A BEARING ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISES WHICH SHALL ALSO INCL UDING MUTUAL AGREEMENTS OR ARRANGEMENT BETWEEN THE TWO FOR ALLOCATIO N, APPORTIONMENT OR CONTRIBUTION OF CASH ETC. INCURRED OR TO BE INCURRED S HALL FALL UNDER THE DEFINITION OF INTERNATIONAL TRANSACTION FOR THE PURPOSES O F CHAPTER-X OF THE INCOME TAX ACT,1961. 18.7. A FURTHER READING OF SECTIONS 92B AND 92F IN CONCER T ALSO MAKES IT CLEAR THAT THE PRE-REQUISITE FOR COMMENCING THE TRANSFER PRICING EXERCISE IS TO SHOW THE EXISTENCE OF AN INTERNATIONAL TRANSACTION. A CAREFUL READING OF WHAT HAS BEEN DEFINED AS A TRANSACTION IN SECTION 92F FOR THE PURPOSES OF SECTION 92, 92A, 92B, 92C, 92D AND 92E WOULD SHOW THAT IT HAS BEEN FURTHER DEFINED THAT THE TRANSACTION SHALL INCLUDE UNLESS THE CONTEXT OTHERWISE REQUIRES AN ARRANGEMENT, UNDERSTANDING OR ACT ION IN CONCERT WHETHER OR NOT SUCH ARRANGEMENT, UNDERSTANDING OR ACT ION IS FORMAL OR IN WRITING; WHETHER OR NOT SUCH ARRANGEMENT, UNDERSTANDING OR ACTION IS INTENDED TO BE ENFORCEABLE BY LEGAL PROCEEDING OR NOT. T HE RELEVANT DEFINITION AS AVAILABLE IN THE STATUTE IS EXTRACTED HEREUNDER : DEFINITIONS OF CERTAIN TERMS RELEVANT TO COMPUTATI ON OF ARMS LENGTH PRICE, ETC. 92F. IN SECTIONS 92, 92A, 92B, 92C, 92D AND 92E, UN LESS THE CONTEXT OTHERWISE REQUIRES, (I). (II). (III) (IV). (V) TRANSACTION INCLUDES AN ARRANGEMENT, UNDERSTA NDING OR ACTION IN CONCERT, (A) WHETHER OR NOT SUCH ARRANGEMENT, UNDERSTANDING OR A CTION IS FORMAL OR IN WRITING; OR (B) WHETHER OR NOT SUCH ARRANGEMENT, UNDERSTANDING OR ACTION IS INTENDED TO BE ENFORCEABLE BY LEGAL PROCEEDING.] 18.8 WHEN THE DEFINITION OF TRANSACTION IS READ ALONG WITH T HE DEFINITION GIVEN IN SECTION 92B IT CLEARLY EMERGES THAT FIRST IT IS NEC ESSARY TO CROSS THE BAR AS SET OUT IN SECTION 92B(1) AND THE TRANSACTIO N SO SOUGHT TO BE CLASSIFIED SHOULD ALSO FALL WITHIN THE DEFINITION AS SET OUT IN SE CTION 92F. THE COURTS IN THE THREE SPECIFIC DECISIONS RENDERED IN DEC EMBER,2015 HAVE CLEARLY HELD THAT THE REVENUE HAS TO DEMONSTRATE THE EXISTENCE OF THE TRANSACTION BY EITHER REFERRING TO SOME ARRANGEMENT , UNDERSTANDING OR ACTION WHETHER FORMAL OR INFORMAL WHETHER ENFORCEABLE IN A COURT OF LAW OR NOT. IN THE SAID BACKDROP, LET US EXAMINE THE FACTS ON RECORD. ITA 269/CHD/2017 A.Y.2012-13 PAGE 36 OF 58 18.9 ON A PERUSAL OF THE RECORD, IT CAN BE SEEN THAT TH E ASSESSEE IN ITS TP STUDY HAD DISCLOSED THE FOLLOWING INTERNATIONAL TRANSACTIONS : 9. THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY T HE ASSESSEE DURING F.Y 2011-12AS STATED IN THE TP STUDY ARE TABULATED BELOW:- TRANSACTIONS ENTERED INTO BY WIDEX INDIA WITH ASSOC IATED ENTERPRISE DURING THE PERIOD APRIL V 2011 TO MARCH 31, 2012 IS DETAILED AS HEREUNDER:- PURCHASE OF GOODS NATURE OF TRANSACTION ASSOCIATED ENTERPRISE CONSIDE RATION (INR) PURC HASE OF DIGITAL HEARING AIDS AND ITS SPARE PARTS. WIDEX A/S, DENMARK 18,85,23,124 /- (QTY.-20,110) IMPORT OF LAB EQUIPMENTS, ADVERTISEMENT MATERIAL, CONSUMABLES ETC. WIDEX A/S, DENMARK 1,84,938/- (MULTIPLE ITEMS) 18.10 THE TPO NOTING THE ADVERTISING, MARKETING AND SA LES PROMOTIONS EXPENSES AMOUNTING TO RS. 6,18,99,939/- REJECTING THE AS SESSEE'S EXPLANATION CONSIDERED THEM TO HAVE BEEN INCURRED FOR TH E BENEFIT OF THE AE FOR WHICH COMPENSATION HAD NOT BEEN RECEIVED. THE SP ECIFIC BREAK UP OF THE EXPENSES IS EXTRACTED HEREUNDER FROM THE ORDER : S. NO PARTICULARS AMOUNT (RS.) 1 ADVERTISEMENT & BUSINESS PROMOTION 3,57,99,743 2 DISCOUNT 89,59,918 3 COMMISSION 1,71,40,278 TOTAL 6,18,99,939 18.11 THE ASSESSEE ON THE BASIS OF FAR ANALYSIS CLAIMED TO BE LOW RISK DISTRIBUTOR AS ALL MAJOR RISKS OF TECHNOLOGY, WARRANTY AND MARKET RISKS WERE BORNE BY THE AE. CONSEQUENTLY, IT WAS CLAIMED THAT THE BENEFIT OF THE AMP EXPENSES WAS FOR THE ASSESSEE EVEN IF AE GOT SOME INCIDENTAL BENEFITS. EXTRACTING THE FAR ANALYSIS FROM THE TP STUDY, THE TPO CONSIDERING THE LEGAL POSITION AS HE CHOSE TO UNDERSTAND REJECTED THE ASSESSEE'S CLAIM. RELYING ON THE VERY SAME FAR ANALYSIS ON THE BASIS OF WHICH IT WAS CLAIMED THAT THE ASSESSEE WAS INFACT INDEPEND ENT RISK BEARING DISTRIBUTOR WAS REJECTED BY THE DRP ALSO ON TH E REASONING THAT THE ASSESSEE IN ITS TP STUDY HAS CLAIMED TO BE A LOW RISK DIST RIBUTOR AND REPEATED THE SAID ARGUMENT BEFORE THE TPO CANNOT NOW BE ALLOWED TO CLAIM TO BE A HIGH RISK DISTRIBUTOR. THE TPOS STAND WAS UPHELD AND ENHANCEMENT ON THE PROTECTIVE CALCULATIONS WAS DIRECTED FURTHER ALTERNATE CALCULATION METHODOLOGY ALSO ON A PROTECTIVE BASIS WAS PRE SCRIBED. BEFORE WE ADVERT TO IT, IT IS APPROPRIATE TO FIRST REFER TO THE FA R ANALYSIS EXTRACTED BY THE TPO AND THE DRP AND ADDRESSED BY THE ASSESSE E BEFORE THE TAX AUTHORITIES. AS NOTED, THE ASSESSEE IN ITS TP STUDY CLAIMS TO BE A LOW RISK DISTRIBUTOR AND THE MAJOR RISKS ASSOCIATED WITH PRODUCT TECHNOLOGY, WARRANTY AND MARKET RISKS WERE STATED TO BORNE BY TH E AES AS THEY OWN ITA 269/CHD/2017 A.Y.2012-13 PAGE 37 OF 58 THE MARKETING AND COMMERCIAL INTANGIBLES WITH RESPECT TO T HE PRODUCTS. FOR MAKING THESE CLAIMS, THE FOLLOWING FAR ANALYSIS CARRIED OUT BY THE ASSESSEE IN ITS TP STUDY WAS RELIED UPON BY THE ASSESSE E AND CONSIDERED BY THE TPO AS WELL AS THE DRP : 10. FAR ANALYSIS THE ASSESSEE COMPANY HAS SUBMITTED THE FOLLOWING FA R ANALYSIS VIDE ITS TP REPORT FOR THE FY 2011-12:- [QUOTE] THE SECTION BELOW DISCUSSES THE FUNCTIONS THAT ARE CARRIED OUT BY THE WIDEX INDIA. PURCHASING THE WIDEX INDIA IS RESPONSIBLE FOR ALL THE PURCHASI NG ACTIVITIES IN INDIA. THE WIDEX INDIA DETERMINES THE NUMBER OF DIGITAL HE ARING AIDS TO BE IMPORTED FROM ITS AES. THE WIDEX INDIA HANDLES THE IMPORT ADMINISTRATION O F THE GOODS. ACTIVITIES/MARKETING/PRODUCT STRATEG Y THE WIDEX INDIA IS RESPONSIBLE FOR IMPLEMENTING AND DEVELOPING THE MARKETING STRATEGY FOR THE DIGITAL HEARING AIDS TO BE SOLD IN INDIA. IT AL SO HELPS DECIDING AS TO WHICH NEW PRODUCTS SHOULD BE INTRODUCED IN THE MARKET. THE WIDEX INDIA IS RESPONSIBLE FOR ADVERTISEMENT AN D PLANNING THE USAGE OF MEDIA. IT ALSO ORGANIZES SHOWS AND CONVENTIONS RELATING TO ITS OWN AREA OF EXPERTISE. THE WIDEX INDIA HANDLES THE TRAINING OF ITS SALES F ORCE AND CO-ORDINATES THE IMPLEMENTATION OF THE MARKETING STRATEGY. SALES THE WIDEX INDIA DOES THE ENTIRE SALES ACTIVITY STAR TING FROM PROCURING THE DIGITAL HEARING AIDS TO SELLING THEM TO EITHER THE DEALERS OR THE E ND USERS. THE WIDEX INDIA DETERMINES THE NEED OF ITS SALES PERSONNEL AND ACCORDINGLY SETS TH EIR REMUNERATION. IT IS ALSO RESPONSIBLE FOR DETERMINING THE SALE PRICE OF TLIE DIGITAL HEARING AIDS TO THE UNRELATED CUSTOMERS. INVOICING, COLLECTION AND DISTRIBUTION. THE WIDEX INDIA IS RESPONSIBLE FOR MAINTAINING THE DISTRIBUTION NETWORK AND DELIVERING THE DIGITAL HEARING AIDS TO THE DEALERS OR THE END USER S. IT HOUSES THE INVENTORY IN ITS WAREHOUSES AND ALSO MAINTAINS A CONTROL THE INVENTORY. THE WIDEX INDIA HANDLES THE INVOICING IN CASE OF TH E SALE OF DIGITAL HEARING AIDS IN INDIA. THE WIDEX INDIA IS ALSO RESPONSIBLE FOR HANDLING TH E IMPORT ADMINISTRATION OF THE DIGITAL HEARING AIDS. AFTER -SALES ACTIVITIES THE WIDEX INDIA HANDLES THE CUSTOMER COMPLAINTS AND IS RESPONSIBLE FOR CARRYING OUT REPAIRS IN CASE OF ANY DEFECT. THE WIDEX INDIA ALSO HANDLES ITS OXEN BILLING AND COLLECTION OF MONEY. ACCOUNTING THE WIDEX INDIA IS INVOLVED IN PROCESSING THE SALES ORDER FROM UNRELATED PARTIES. IT ALSO MAINTAINS ITS OWN ACCOUNTS, WHICH CONTRIBUTE TO THE CONSOLIDATED FINANCIAL STATEMENT OF THE ENTIRE GROUP. RISK ANALYSIS OVERVIEW UNDER CONDITION OF PERFECT COMPLETION, INCREASE IN AN ENTITY'S RISK SHOULD RESULT IN AN INCREASE IN EXPECTED RETURN. UNDER SIMILAR CIRCUMST ANCES, A RISKY INVESTMENT WOULD NOT BE PURSUED IF A LOWER RISK ALTERNATIVE PROVIDES THE SA ME REWARD. THEREFORE, CONTROLLED AND UNCONTROLLED TRANSACTIONS AND ENTITIES ARE NOT COMP ARABLE IF TINY DO NOT ASSUME SIMILAR RISK AND IT IS NOT POSSIBLE TO MAKE APPROPRIATE ADJUSTME NTS FOR THE DIFFERENCES IN RISK ASSUMED. MARKETS RISK MARKET RISK OCCURS WHEN AN ENTITY IS SUBJECTED TO A DVERSE SALES CONDITIONS DUE TO EITHER INCREASED COMPLETION IN THE MARKETPLACE, ADVERSE DE MAND CONDITIONS WITHIN THE MARKET, OR THE INABILITY TO DEVELOP MARKETS OR POSITION PRODUC TS TO SERVICE TARGETED CUSTOMERS. MARKETS RISK REPRESENTS STANDARD RISK BORNE BY ANY ENTERPRI SE IN MARKET DRIVEN TRANSACTIONS. MARKET RISK AFFECTS THE ABILITY OF A COMPANY TO MEET SHORT AND LONG TERM FINANCIAL OBLIGATIONS IF PRICE AND/OR QUANTITIES DEMANDED DECREASE. ITA 269/CHD/2017 A.Y.2012-13 PAGE 38 OF 58 WIDEX INDIA DOES NOT HAVE ANY EXPOSURE TO MARKET RI SK AS IT IS ONLY A TRADING IN HEARING AIDS PROVIDED BY AE AFTER CUSTOMIZATION AS PER USER REQU IREMENTS. THE MARKET RISK ARE BORNE ENTIRELY BY AE. PRODUCT LIABILITY /WARRANTY RISK PRODUCT LIABILITY / WARRANTY RISK REFERS TO THE RIS K OF HAVING TO BEAR THE COST OF A CLAIM OR RETURN OF DEFECTIVE PRODUCT. DEPENDING ON WARRANTY TERMS, THIS COST MAY HAVE TO BE INCURRED THROUGH THE REPAIR OR REPLACEMENT OF DEFECTIVE PROD UCTS. WIDEX INDIA DOES NOT HAVE ANY EXPOSURE TO WARRANTY RISK BECAUSE WARRANTY PERIOD OF PRODUCT OF 27 MONTHS IS BORNE BY AE. ASSOCIATED ENT ERPRISES ARE RESPONSIBLE FOR ANY CLAIMS ON THE PRODUCTS. TECHNOLOGY RISK THE RISK ARISES IF THE MARKET IN WHICH THE COMPANY OPERATES IS SENSITIVE TO INTRODUCTION OF NEW PRODUCTS AND TECHNOLOGIES. WIDEX INDIA DOES NOT BEAR ANY RISK ON THIS COUNT BE CAUSE THE AE, OWN THE PRODUCT AND THE TECHNOLOGY ASSOCIATED WITH THE PRODUCT. IN ADDITION , AE DETERMINE THE SPECIFICATIONS OF THE PRODUCTS AND TECHNOLOGIES TO BE DEVELOPED. SINCE AE ARE THE OWNERS OF THE TECHNOLOGY ASSOCIATE D WITH THE PRODUCT, IT SOLELY BEARS THE RISK OF TECHNOLOGICAL OBSOLESCENCE OF ITS PRODUCTS. FOREIGN EXCHANGE FLUCTUATION RISK CHANGES IN CURRENCY RATES CAN CAUSE FOREIGN EXCHANG ES PROFITS AND LOSSES WHERE PRODUCTS, RESOURCES OR SERVICES ARE PURCHASED IN ONE CURRENCY AND THEN SOLD IN ANOTHER CURRENCY. WIDEX INDIA DOES BEAR SOME FOREIGN EXCHANGE RISK, A S IT IS HAS TO MAKE REMITTANCE TO AE ON ACCOUNT OF PURCHASES IN FOREIGN CURRENCY. ACCOUNTS RECEIVABLE/CREDIT RISK CREDIT RISK IS THE RISK THAT A CLIENT WILL BE UNABL E TO FULFILL ITS OBLIGATION TO PAY FOR ITS PURCHASES OR SERVICES UNDER THE TERMS OF ITS CONTRA CT. ANOTHER COMPONENT OF CREDIT RISK IS THE COST OF REPLACING A CUSTOMER ORDER AFTER THE CLIENT HAS DEFAULTED. THE PRODUCTS ARE SOLD TO END USERS BY WIDEX INDIA T HROUGH ITS DEALER'S NETWORK AND ALSO DIRECTLY WITH AVERAGE CREDIT PAYMENT TERM OF30 DAYS , TAKING INTO ACCOUNT THE PAST RECOVERY TRENDS OF WIDEX INDIA THERE IS VERY LOW CREDIT RISK . PRODUCT PRICE RISK PRODUCT PRICE RISK IS THE RISK THAT THE VALUE OF FU TURE INCOME STREAMS IS SUBJECT TO EXTERNAL MARKET PRICES OR MARKET RATES. EFFECTIVELY, IT IS T HE RISK THAT AN ENTITY WILL NOT BE ABLE TO SELL PRODUCTS FOR THE PRICES IT ANTICIPATED AFTER THE PR ODUCT WAS PURCHASED. WIDEX INDIA DOES NOT ASSUME ANY PRICE RISK OWING TO THE FACT THAT INVENTORY HOLDING OF THE COMPANY IS NOT MORE THAN 3 TO 4 MONTHS AND TECHNOLO GY IS NOT PRONE TO FREQUENT CHANGES. SUMMARY WIDEX INDIA ACTS AS A LOW RISK DISTRIBUTOR. THE AES BEAR THE MAJOR RISKS ASSOCIATED WITH PRODUCT TECHNOLOGY, WARRANTY AND MARKET RISKS. THEY BEAR THESE RISKS, AS THEY OWN THE MARKETING AND COMMERCIAL INTANGIBLES WITH RESPECT T O THE PRODUCTS. [UNQUOTE] 18.12 AS NOTED IN THE EARLIER PART OF THIS ORDER IN DETAIL, T HE TPO IDENTIFYING THE COMPARABLES SELECTED BY THE ASSESSEE PRO CEEDED TO APPLY THE BRIGHT LINE TEST AND EXCLUDED THE DIRECT SELLING EXPEN SES. NO FURTHER AUTHORITY STILL NEEDS TO BE QUOTED TO HOLD THAT THE APPLIC ATION OF BRIGHT LINE TEST DOES NOT HAVE JUDICIAL SANCTION AND THE TPO ER RED IN RESORTING TO IT. WE HAVE ALSO SEEN THAT THE DRP THOUGH CONSCIOUS OF THE DECISIONS OF THE DELHI HIGH COURT IN THE CASE OF SONY ERICSSON AMONGS T OTHERS DID NOT GIVE APPROPRIATE DIRECTIONS TO THE TPO AND INSTEAD PROPO SED A PROCEDURE WHICH ALSO DOES NOT HAVE ANY LEGAL SANCTION I.E. THE INTENSI TY APPROACH. THE METHODOLOGY, THEREFORE, DOES NOT REQUIRE ANY DETAILED DISCUSSION AS ITA 269/CHD/2017 A.Y.2012-13 PAGE 39 OF 58 THE METHODOLOGY ITSELF DOES NOT HAVE ANY EITHER STATUTOR Y RECOGNITION OR LEGAL SANCTION. FOR THE PURPOSES OF THE PRESENT PROCEED INGS, SUFFICE IT TO SAY THAT THE DRP DIRECTED THAT THE VERY SAME COMPANIE S WHICH WERE IDENTIFIED FOR BRIGHT LINE TEST FOR THE PURPOSES OF INTENSITY APPROACH ALSO BE APPLIED. WE FIND THAT THE SAID APPROACH CANNOT BE UPHELD. WE HAVE GONE THROUGH THE FAR ANALYSIS AVAILABLE ON RECORD CARRIED OUT BY THE ASSESSEE IN ITS TP REPORT EXTRACTED BY THE TPO AS WELL AS THE DR P IN THEIR ORDERS. ON A READING THEREFROM, WE HAVE NO HESITATION IN HOLDING TH AT THE ASSESSEE IS AN INDEPENDENT RISK BEARING DISTRIBUTOR, RESPO NSIBLE FOR MARKETING, SALES, OPERATING IN A VERY NARROW COMPETITIVE M ARKET WITH LIMITED PRODUCT WARRANTY RISK THE EXPOSURE IS ONLY TO TH E CREDIT RISK AND FOREIGN EXCHANGE FLUCTUATION RISK ETC. AND THE ASSESSEE IS NOT EXPOSED TO ANY TECHNOLOGY RISK, PRODUCT RISKS; WARRANTY RISK ETC. TH E FACT THAT THE ENTIRE SHAREHOLDING PATTERN OF 100% IS OWNED BY THE FOREIGN AE AND EVEN A JOINT VENTURE AGREEMENT FOR THE YEAR UNDER CONSIDER ATION HAS NO RELEVANCE WHICH POSITION OF FACT HAS BEEN ARGUED BY THE PARTI ES ALSO. THUS, THERE IS NO OTHER MATERIAL BROUGHT OUT ON RECORD TO SUGGEST THA T THE EXPENDITURE INCURRED WAS AT THE BEHEST OF THE AE. 18.13. CONSIDERING THE FAR ANALYSIS OF THE ASSESSEE , IT CAN BE SAFELY CONCLUDED IN THE ABSENCE OF ANYTHING TO THE CONTRAR Y THAT THE DECISION OF INCURRING AMP EXPENSES ETC. WAS PURELY MARKET DRIVE N IN THE INTEREST OF ASSESSEE ITSELF EXPLOITING THE BRAND OF THE FOREIGN AE TO ACHIEVE A HIGHER MARKET PENETRATION IN THE COUNTRY. THE HEARING AID MARKET AS CLAIMED ON RECORD IS VERY LIMITED AND VERY COMPETITIVE ADMITTE DLY THERE IS NO AGREEMENT AVAILABLE AND NOTHING IN THE ARRANGEMENT OR CONDUCT OF THE ASSESSEE HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE SALES STRAT EGY, BUDGETING, PRICING, MARKET DISTRIBUTION ETC. WERE DONE AT THE BEHEST OF THE FOREIGN AE. IN THE ABSENCE OF ANY REFERENCE TO ANY AGREEMENT OR ARRANG EMENT OR FOR THAT MATTER, THE CONDUCT OF THE PARTIES IT CANNOT BE INF ERRED THAT THE AE HAS A ROLE FOR SALES AND MARKETING IN INDIA. ALTERNATELY THAT THE ASSESSEE IS CARRYING OUT THESE SALES AND MARKETING STRATEGY CONDUCTED B Y THE AE FOR THE BENEFIT OF AE. WE HAVE COME TO THE ABOVE CONCLUSIO N CONSIDERING THE PECULIAR FACTS OF THE PRESENT CASE AND THE RELEVANT PROVISIONS OF THE ACT AND THE RULES. 18.14 AT THIS STAGE, IT WOULD NOT BE OUT OF PLACE TO REFER TO THE DECISION RENDERED BY THE HON'BLE DELHI HIGH COURT IN THE CAS E OF CIT VS WHIRLPOOL OF INDIA CITED SUPRA WHERE THE COURT IDENTIFYING THE F OLLOWING ISSUE PROCEEDED ITA 269/CHD/2017 A.Y.2012-13 PAGE 40 OF 58 TO ADDRESS THE DEPARTMENTAL AND ASSESSEE'S GRIEVANC E WHICH DELIBERATIONS WOULD SHOW THAT THE LEGAL POSITION AS CANVASSED BY THE PARTIES WAS FULLY ADDRESSED BY THE AFORESAID DECISION. THE ISSUE IDE NTIFIED BY THE COURT IS EXTRACTED HEREUNDER FOR READY REFERENCE: THE ISSUE 2. THESE APPEALS CONCERN THE ISSUE OF TRANSFER PRICING ('TP') ADJUSTMENT IN RELATION TO THE INCURRING OF ADVERTISEMENT, MARKETING AND SA LES PROMOTION ('AMP') EXPENSES BY THE INDIAN ENTITIES INVOLVED IN INTERNATIONAL TR ANSACTIONS WITH THEIR RESPECTIVE FOREIGN ASSOCIATED ENTERPRISES ('AES'). THE CASE OF THE REVENUE IS THAT THE ARM'S LENGTH PRICE ('ALP') OF THE AMP EXPENSES INCURRED B Y THE INDIAN ENTITY I.E THE ASSESSEE IS REQUIRED TO BE DETERMINED SINCE IT HAS BEEN USING, FOR MARKETING AND PROMOTION OR OTHERWISE THE BRAND OF ITS FOREIGN AE AND THAT THE INCURRING OF SUCH AMP EXPENSES, WHILE ENURING TO THE BENEFIT OF THE A SSESSEE, IS ALSO BENEFITING THE BRAND OF THE FOREIGN AE. THE ATTEMPT BY THE REVENUE IS TO ATTRIBUTE SOME PART OF THE AMP EXPENSES INCURRED AS HAVING BEEN INCURRED FOR T HE FOREIGN AE FOR WHICH THE ASSESSEE IS TO BE COMPENSATED OR REIMBURSED BY THE FOREIGN AE. 18.14.1 HAVING IDENTIFIED THE ISSUE, THE COURT TOOK NOTE OF T HE FOLLOWING QUESTIONS RAISED BY THE REVENUE : 18.14.2 THE QUESTION RAISED BY THE ASSESSEE IN APPEAL BEFORE THE COURT FOR CONSIDERATION ARE ALSO EXTRACTED HEREUNDER : '(A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ITAT ERRED IN LAW IN UPHOLDING, IN PRINCIPLE, TRANSFER PRICING ADJUSTMEN T MADE BY THE ASSESSING OFFICER/TPO IN RESPECT OF EXPENDITURE INCURRED ON AMP EXPENSES? (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ITAT ERRED IN LAW IN NOT APPRECIATING THAT THE AMP EXPENSES, ETC., UNILATERA LLY INCURRED BY THE APPELLANT IN INDIA COULD NOT BE CHARACTERIZED AS AN INTERNATIONAL TRAN SACTION AS PER SECTION 92B, IN THE ABSENCE OF ANY PROVED UNDERSTANDING/ARRANGEMENT BET WEEN THE ASSESSEE AND THE AE SO AS TO INVOKE SECTION 92 OF THE ACT? (C) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ITAT ERRED IN LAW IN HOLDING THAT EXPENDITURE INCURRED BY THE ASSESSEE W HICH INCIDENTALLY, IF AT ALL, RESULTED IN '(I) WHETHER THE ITAT ERRED IN DIRECTING THE TPO TO CONSIDER THE COMBINED EFFECT OF FOURTEEN FACTORS OF DETERMINING THE COST VALUE OF T HE INTERNATIONAL TRANSACTION WHICH WILL MAKE THE WHOLE PROCESS OF COMPARABILITY IMPRACTICAL AND INEFFECTIVE AND NOT IN ACCORDANCE WITH RULE 10B(3) OF THE RULES AND OTHER PROVISIONS OF CHAPTER X OF THE ACT? (II) WHETHER THE ITAT ERRED IN DIRECTING THE TPO TO EXCLUDE THE EXPENSES INCURRED IN CONNECTION WITH SALES FROM AMP EXPENSES BY TREATING THEM AS EXPENSES NOT ADDING TO THE VALUE OF MARKETING INTANGIBLE LEGALLY OWNED BY THE AE BY DRAWING ANALOGY FROM SECTION 37(3A) ONCE PRESENT IN THE ACT WITHOUT GIVING ANY REASONS FOR THE SAME? (III) WHETHER THE ITAT ERRED IN DIRECTING THE TPO /AO TO EXCLUDE THE EXPENSES INCURRED IN CONNECTION WITH SALES FROM AMP EXPENSES WHEN SIMILAR EXPENSES HAVE NOT BEEN EXCLUDED BY THE TPO FROM THE AMP EXPE NSES OF COMPARABLES FOR THE REASONS THAT SUCH EXPENSES LEAD TO BENEFIT TO T HE AE? (IV) WHETHER THE ITAT ERRED IN DELETING THE ADDIT ION OF RS. 1,80,73,10,769/- MADE BY AO/TPO ON ACCOUNT OF ADVERTISING AND MARKETING PROM OTION UNDER SECTION 37 OF THE ACT? (V) WHETHER THE ITAT ERRED IN DIRECTING THE AO/TP O THAT NO ADDITION IS CALLED FOR I.E. AMOUNT OF RS. 1,80,73,10,769 UNDER SECTION 37 OF TH E ACT?' ITA 269/CHD/2017 A.Y.2012-13 PAGE 41 OF 58 BRAND BUILDING FOR THE FOREIGN AE, WAS A TRANSACTIO N OF CREATING AND IMPROVING MARKETING INTANGIBLES FOR AND ON BEHALF OF ITS FORE IGN AE AND FURTHER THAT SUCH A TRANSACTION WAS IN THE NATURE OF PROVISION OF SERVI CE BY THE ASSESSEE TO THE AE? (D) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ITAT ERRED IN LAW IN NOT APPRECIATING THAT SUCH A TP ADJUSTMENT COULD NOT AT ALL BE MADE IN RESPECT OF AMP EXPENSES WHICH WERE FOUND TO CONSTITUTE LEGITIMATE, BONA FIDE AND DEDUCTIBLE BUSINESS EXPENDITURE AND THE ASSESSEE WAS THE ECONOMIC OWNER OF THE BENEFIT OF SUCH EXPENSES? (E) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ITAT ERRED IN LAW IN NOT QUASHING THE ADJUSTMENT MADE BY THE TPO USING THE ' BRIGHT LINE TEST', WITHOUT FOLLOWING ANY OF THE PRESCRIBED METHODS FOR DETERMINATION OF THE ALP? (F) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ITAT ERRED IN SETTING ASIDE THE ORDER TO THE FILE OF THE ASSESSING OFFICER/TPO FOR FRESH BENCHMARKING/COMPARABILITY ANALYSIS ADOPTING ONLY DOMESTIC COMPARABLE COMPANIE S, NOT USING FOREIGN BRAND?' 18.14.3 THE COURT IN VERY CLEAR TERMS REFERRING TO Q UESTIONS (II) AND (III) PROJECTED BY THE REVENUE IN PARA 21 OF ITS ORDER HELD T HAT THESE STAND ANSWERED BY THE DECISION IN SONY ERICSSON MOBILE COMMUNIC ATIONS INDIA (P.) LTD. (SUPRA) IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE. THE COURT HELD THAT, IN THAT DECISION, THIS COURT HELD THAT THE EXPENSES I N CONNECTION WITH SALES AND MARKETING ARE TO BE EXCLUDED FOR THE PURPOSES OF DETERMINATION OF AMP EXPENSES. THE COURT FURTHER HELD THAT; QUESTION (I) ALSO STANDS ANSWERED BY THAT DECISION INASMUCH AS IT H AS BEEN HELD THAT FOURTEEN FACTORS SPECIFIED IN PARA 17.4 OF THE DECIS ION OF THE ITAT IN LG ELECTRONICS INDIA (P.) LTD. ARE NOT BINDING ON THE ASSE SSEE OR THE REVENUE. IN VIEW THEREOF, THE FOLLOWING QUESTION WAS FRAMED FOR CONSID ERATION AS FAR AS THE REVENUE'S APPEAL WAS CONCERNED: 'WHETHER THE ITAT ERRED IN DELETING THE ADDITION OF RS. 180,73,10,769 MADE BY THE AO/TPO ON ACCOUNT OF AMP EXPENSES UNDER SECTION 37 OF THE ACT?' 18.14.4 ADDRESSING THE QUESTIONS RAISED IN ASSESSEE 'S APPEAL, IT WAS HELD THAT QUESTION (E) DOES NOT SURVIVE AFTER THE DECISION O F THIS COURT IN SONY ERICSSON MOBILE COMMUNICATIONS INDIA (P.) LTD. (SUP RA), SINCE IT SPECIFICALLY OVERRULED THE DECISION OF THE MAJORITY OF THE SPECIAL BENCH OF THE ITAT IN LG ELECTRONICS INDIA (P.) LTD. AND HELD THAT THE BLT COULD NOT BE ADOPTED FOR DETERMINING THE ALP OF AN INTERNATIONAL T RANSACTION INVOLVING THE AMP EXPENSES ACCORDINGLY, THE COURT FRAMED THE FOLLOWING QUESTIONS FOR CONSIDERATION IN THE ASSESSEE'S APPEAL : (I) WAS THERE AN INTERNATIONAL TRANSACTION BETWEEN WOI L AND ITS AE INVOLVING THE AMP EXPENSES WITHIN THE MEANING OF SECTION 92B OF T HE ACT READ WITH SECTION 92F(V) OF THE ACT? (II) IF THE ANSWER TO THE ABOVE QUESTION IS IN AFFIRMAT IVE, WAS THE ITAT JUSTIFIED IN REMANDING THE MATTER TO THE AO/TPO FOR SEGREGATING THE AMP EXPENSES INCURRED INTO THE EXTENT ATTRIBUTABLE TO PROMOTE THE BRAND O F THE AE, AND THAT WAS WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES OF THE AS SESSEE, ALLOWABLE UNDER SECTION 37 OF THE ACT? ITA 269/CHD/2017 A.Y.2012-13 PAGE 42 OF 58 18.14.5. CONSIDERING THE SUBMISSIONS ON BEHALF O F THE ASSESSEE WHICH ARE NEAR SIMILAR TO WHAT HAS BEEN ARGUED IN THE PRESENT PROCEEDINGS, THE COURT CONSIDERED THE DEPARTMENTAL SUBMISSIONS IN PARA 26 TO 29 OF THE DECISION. 18.14.6 UNLIKE THE FACTS OF THE PRESENT CASE, WHI CH IN THE ABSENCE OF ANY MATERIAL ON RECORD STANDS ON A BETTER FOOTING IN TH E FACTS OF THAT CASE THE DEPARTMENT REFERRING TO THE ANALYSING THE TRADEMARK AND TRADE NAME LICENSE AGREEMENT ('TLA') MR. SRIVASTAVA, THE COURT NOTED, ARGUED THAT CLAUSE 3.2 THEREOF INDICATES THAT THE ASSESSEE HAS N O RIGHTS IN THE TRADE NAME AND THAT 'THE MANNER OF THE USE OF THE TRADEMA RK HAS TO BE APPROVED' BY WHIRLPOOL USA; CLAUSES 6.1, 6.2 AND 6.3 INDICATE THAT T HE CONTENTS OF THE ADVERTISEMENTS FOR BRAND PROMOTION ALSO NEEDS TO BE APPROVED. IT WAS SEEN THAT DURING THE FY IN CONSIDERATION, THE ASSESSEE HAD RECEIVED A GRANT OF RS.1.66 CRORES FROM ITS AE. IN THE EARLIER YEAR, IT RECEI VED RS. 4.22 CRORES. THE NATURE OF THIS GRANT HAD NOT BEEN SPECIFIED AND THIS WA S ALSO NOT SHOWN AS AN INTERNATIONAL TRANSACTION IN THE TP REPORT. THIS ACCORDING TO HIM WAS A CLEAR INDICATION THAT THE ASSESSEE WAS 'GETTING CERT AIN AMOUNT OF CONTRIBUTION FROM ITS AE TOWARDS THE EXPENSES INCUR RED'. THIS SHOWED THAT THE AE WAS SHARING SOME PART OF THE COST AND 'IT WOU LD BE A MATTER TO BE EXAMINED WHETHER SUCH CONTRIBUTION IS AT ARM'S LENGTH'. 18.14.7 CONSIDERING THE FOLLOWING ARGUMENTS IN TH E CONTEXT OF THE TRADE NAME LICENSING AGREEMENT, THE REVENUE ALSO ARGUED : 29. MR. SRIVASTAVA SUBMITS THAT CLAUSE 19.2 OF THE TLA INDICATES THAT THE AE'S PRIMARY OBJECTIVE IN ENTERING INTO THIS AGREEMENT WAS 'FURT HER PROTECTION AND ENHANCEMENT OF ITS UNIQUELY VALUABLE MARKS AND NAME'. THEREFORE, IT CO ULD NOT BE SAID THAT 'AE IS NOT CONCERNED WITH WHAT THE APPELLANT DOES OR BENEFIT I S NOT INTENDED OR NOT ARISING TO THE AE.' CLAUSE 3.1 OF THE AGREEMENT STATES THAT THE GOODWIL L CONNECTED WITH THE MARKS SHALL CONTINUE TO INURE TO THE BENEFIT OF THE AE. FURTHER THE LICENSOR I.E., WHIRLPOOL USA HAS POWER TO ASSIGN THE RIGHTS TO ANY OTHER ENTITY. IN SUCH CIRCUMSTANCES, NO LICENSEE COULD EVER UNDERTAKE SUCH AMP EXPENSES IF THE BENEFITS OF SUCH EXPENDITURE COULD BE TAKEN AWAY BY THE AE AT ITS OWN WILL . 18.14.8 THE FOLLOWING SUPPORTING SUBMISSIONS ON BE HALF OF THE REVENUE ALSO ARE EXTRACTED HEREUNDER FOR READY REFERENCE : 26. MR. G.C. SRIVASTAVA, LEARNED SPECIAL COUNSEL FOR T HE REVENUE, MADE AN ELABORATE ARGUMENT AND ALSO FILED WRITTEN SUBMISSIO NS. HE MADE AN EXTENSIVE REFERENCE TO THE TP STUDY SUBMITTED BY THE ASSESSEE WHICH ACCORDING TO HIM SHOWS THAT THE ASSESSEE IS ENGAGED BOTH IN MANUFACTURING AND DISTRIBUTION OF PRODUCTS. IT ALSO IMPORTS SOME FINISHED GOODS AND SPARES FROM IT S AE WHICH ARE SOLD IN INDIA. THE ASSESSEE DISTRIBUTES THE MANUFACTURED PRODUCTS TO NEIGHBOURING COUNTRIES SUCH AS NEPAL, BANGLADESH, SRI LANKA, MALDIVES AND AFRIC AN COUNTRIES. THE MAJOR SALES OF FINISHED GOODS ARE TO THE AES WHICH CONSTITUTES AN INTERNATIONAL TRANSACTION. EVEN IN RESPECT OF SUCH EXPORTS, THE ASSESSEE IS UN DERTAKING MARKETING ACTIVITIES. IT IS SUBMITTED THAT THE ASSESSEE IS NOT AN INDEPENDEN T MANUFACTURER BUT IS MANUFACTURING 'FOR THE BENEFIT OF THE GROUP ENTITIE S' AND ITS STATUS IS AKIN TO THAT OF ITA 269/CHD/2017 A.Y.2012-13 PAGE 43 OF 58 A CONTRACT MANUFACTURER. THEREFORE THE AMP ACTIVITY IS NOT FOR THE SOLE BENEFIT OF THE ASSESSEE BUT FOR THE GROUP AS A WHOLE. 27. ACCORDING TO THE REVENUE, THE TP REPORT SHOWS THAT THE MARKET RISKS WITH RESPECT TO THE PRODUCT INCLUDING CUSTOMER ACCEPTANC E ARE BORNE BY THE WHIRLPOOL GROUP. THEREFORE, IT WAS 'NOT OPEN TO URGE THAT AMP FUNCTIONS OF THE APPELLANT ARE SOLELY FOR ITS OWN BENEFIT'. CONSIDERING THE ASSESS EE WAS PAYING BRAND FEE @1% OF THE DOMESTIC AND EXPORT SALES TO ITS AE AND THAT TH E AGREEMENT LEAVES SUCH CRUCIAL ELEMENTS CONCERNING THE AMP FOR THE DEVELOPMENT OF THE BRAND UNDEFINED, THAT MERE FACT 'CANNOT LEAD TO THE INFERENCE THAT THE AC TIVITY OF THE INDIAN AE IS UNILATERAL OR THAT IT IS ENTIRELY FOR ITS OWN BENEF IT'. 18.14.9 ACCORDINGLY, AFTER CONSIDERING SECTION 9 2B OF THE ACT WHICH DEFINES INTERNATIONAL TRANSACTION, THE COURT WAS PLEASED TO HOLD THAT; UNDER SECTIONS 92B TO 92F, THE PRE-REQUISITE FOR COMMENCING THE TP EXERCISE IS TO SHOW THE EXISTENCE OF AN INTERNATION AL TRANSACTION. THE NEXT STEP IS TO DETERMINE THE PRICE OF SUCH TRANSACTION. THE THIRD STEP WOULD BE TO DETERMINE THE ALP BY APPLYING ONE OF THE FIVE PR ICE DISCOVERY METHODS SPECIFIED IN SECTION 92C. THE FOURTH STEP WOULD BE TO COMPARE THE PRICE OF THE TRANSACTION THAT IS SHOWN TO EXIST WITH THAT OF T HE ALP AND MAKE THE TP ADJUSTMENT BY SUBSTITUTING THE ALP FOR THE CONTRACT PRICE. (EMPHASIS SUPPLIED BY BOLD TEXTING). THE COURT HELD THAT ; A READING OF THE HEADING OF CHAPTER X ['SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX'] AND SECTION 92 (1) WHICH STATES THAT ANY INCOME ARISING FROM AN INT ERNATIONAL TRANSACTION SHALL BE COMPUTED HAVING REGARD TO THE ALP, SECTION 92 C (1) WHICH SETS OUT THE DIFFERENT METHODS OF DETERMINING THE ALP, MAKES IT CLEAR THAT THE TRANSFER PRICING ADJUSTMENT IS MADE BY SUBSTITUTING THE ALP FOR THE PRICE OF THE TRANSACTION. TO BEGIN WITH THERE HAS TO BE AN INTERNATIONAL TRANSACTION WITH A CERTAIN DISCLOSED PRICE. THE TP ADJUSTMENT ENVISAGES THE SUBSTITUTION OF THE PRICE OF SUCH INTE RNATIONAL TRANSACTION WITH THE ALP. IT WAS HELD THAT; THE TP ADJUSTMENT IS NOT EXPECTED TO BE MADE BY DEDUCING FROM THE DIFFERENCE BETWEEN THE 'E XCESSIVE' AMP EXPENDITURE INCURRED BY THE ASSESSEE AND THE AMP EX PENDITURE OF A COMPARABLE ENTITY THAT AN INTERNATIONAL TRANSACTION EXISTS AND THEN PROCEED TO MAKE THE ADJUSTMENT OF THE DIFFERENCE IN ORDER TO DETERMINE THE VALUE OF SUCH AMP EXPENDITURE INCURRE D FOR THE AE. (EMPHASIS SUPPLIED BY BOLD TEXTING) . THE COURT CLARIFIED THAT; IT IS FOR THE SAID REASON THAT THE BLT HAS BEEN REJECTED AS A VAL ID METHOD FOR EITHER DETERMINING THE EXISTENCE OF INTERNATIONAL TRANSACTI ON OR FOR THE DETERMINATION OF ALP OF SUCH TRANSACTION. ALTHOUGH, U NDER SECTION 92B READ WITH SECTION 92F(V), AN INTERNATIONAL TRANSACTION COU LD INCLUDE AN ARRANGEMENT, UNDERSTANDING OR ACTION IN CONCERT, THIS CANNOT BE A MATTER OF ITA 269/CHD/2017 A.Y.2012-13 PAGE 44 OF 58 INFERENCE. THERE HAS TO BE SOME TANGIBLE EVIDENCE ON RECORD TO SHOW THAT TWO PARTIES HAVE 'ACTED IN CONCERT'. (EMPHASIS SUPPLIED BY BOLD TEXTING) . REFERRING TO THE DECISION OF THE APEX COURT IN THE CASE OF DAIICHI SNAKYO CO. LTD. V. JAYARAM CHIGURUPATI [CIVIL APPEAL NO. 7148 OF 2009, DATED 8-7-2010] WHEREIN THE INTERPRETATION OF THE EXPRES SION 'ACTED IN CONCERT' AROSE IN THE CONTEXT OF ACQUISITION OF SHARES OF ZENOTECH LABORATORY LTD. BY THE RANBAXY GROUP. THE COURT EXAM INING ON FACTS THE QUESTION, WHETHER AT THE RELEVANT TIME THE APPELLANT I.E., DA IICHI SANKYO COMPANY AND RANBAXY WERE 'ACTING IN CONCERT' WITHIN THE MEANING OF REGULATION 20(4)(B) OF THE SECURITIES AND EXCHANGE BOARD OF I NDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATION S, 1997. THE COURT IN PARA 44 OBSERVED THAT; 'THE OTHER LIMB OF THE CONCEPT REQUIRES TWO OR MORE PERSONS JOINING TOGETHER WITH THE SHARED COMM ON OBJECTIVE AND PURPOSE OF SUBSTANTIAL ACQUISITION OF SHARES ETC. OF A CERTAIN TARGET COMPANY. THERE CAN BE NO 'PERSONS ACTING IN CONCERT' UNLESS THERE IS A SHARED COMMON OBJECTIVE OR PURPOSE BETWEEN TWO OR MORE PER SONS OF SUBSTANTIAL ACQUISITION OF SHARES ETC. OF THE TARGE T COMPANY. FOR, DE HORS THE ELEMENT OF THE SHARED COMMON OBJECTIVE OR PURPOSE THE IDEA OF 'PERSON ACTING IN CONCERT' IS AS MEANINGLESS AS CRIMINAL CONSPIRACY WITHOUT ANY AGREEMENT TO COMMIT A CRIMIN AL OFFENCE. THE IDEA OF 'PERSONS ACTING IN CONCERT' IS NOT ABOUT A FORTUITOUS RELATIONSHIP COMING INTO EXISTENCE BY ACCIDENT OR CHANCE. THE RELATIONSHIP CAN COME INTO BEING ONLY BY DESIGN, BY MEETING OF MINDS BETW EEN TWO OR MORE PERSONS LEADING TO THE SHARED COMMON OBJECTIVE OR P URPOSE OF ACQUISITION OF SUBSTANTIAL ACQUISITION OF SHARES ETC. OF THE TARGE T COMPANY. IT IS ANOTHER MATTER THAT THE COMMON OBJECTIVE OR PU RPOSE MAY BE IN PURSUANCE OF AN AGREEMENT OR AN UNDERSTANDING, FORMA L OR INFORMAL; THE ACQUISITION OF SHARES ETC. MAY BE DIRECT OR INDIRECT OR THE PERSONS ACTING IN CONCERT MAY COOPERATE IN ACTUAL ACQUISITION OF SHARES ETC. OR THEY MAY AGREE TO COOPERATE IN SUCH ACQUISITION. NONETHELESS, THE ELEMENT OF THE SHARED COMMON OBJECTIVE OR PURPOSE IS THE SINE QUA NON FOR THE RELATIONSHIP OF 'PERSONS ACTING IN CONCERT' TO COME INTO BEING.' (EMPHASIS SUPPLIED BY BOLD TEXTING) . IN THE BACKDROP OF THE SAID LEGAL POSITION, THE COURT REVERTING TO THE PROVISIONS UNDER CHAPTER X HELD THAT T HEY ALSO DO ENVISAGE A 'SEPARATE ENTITY CONCEPT'. IN THE CIRCUMSTAN CES, IN UNAMBIGUOUS TERMS, THE COURT HELD, IN OTHER WORDS, THERE CANNOT BE A PRESUMPTION THAT IN THE PRESENT CASE SINCE WOIL IS A SUBSIDIARY OF WHIRLPOOL USA, ALL THE ACTIVITIES OF WOIL ARE IN FACT DI CTATED BY WHIRLPOOL ITA 269/CHD/2017 A.Y.2012-13 PAGE 45 OF 58 USA. MERELY BECAUSE WHIRLPOOL USA HAS A FINANCIAL INTER EST, IT CANNOT BE PRESUMED THAT AMP EXPENSE INCURRED BY THE WOIL ARE AT THE INSTANCE OR ON BEHALF OF WHIRLPOOL USA. THERE IS MERIT IN THE CONTENT ION OF THE ASSESSEE THAT THE INITIAL ONUS IS ON THE REVENUE TO DEMONSTRATE THROUGH SOME TANGIBLE MATERIAL THAT THE TWO PARTIES ACTED IN CONCERT AND FU RTHER THAT THERE WAS AN AGREEMENT TO ENTER INTO AN INTERNATIONAL TRANSACTION CONCERNING AMP EXPENSES. CONSIDERING THE CLAUSES OF THE TLA WHICH HAD BEEN REFERRED TO IN EXTENSO BY THE REVENUE, THE COURT HELD THAT THEY GO TO SHOW T HAT WHIRLPOOL USA WAS PROTECTIVE OF ITS BRAND. HOWEVER, THE COU RT HELD THAT ON A PERUSAL OF THESE, IT WAS NOT DISCERNIBLE FROM THE CLAUS ES THAT WOIL WAS UNDER ANY OBLIGATION TO INCUR AN EXTENT OF AMP EXPEN SE FOR BUILDING THE BRAND OR MARK OF WHIRLPOOL USA. THE COURT IN VERY CAT EGORIC TERMS HELD THAT; THE REVENUE HAS BEEN UNABLE TO EXPLAIN WHY THERE SH OULD A PRESUMPTION THAT AS A RESULT OF THE TLA, THERE MUST HAVE BEEN AN UNDERSTANDING BETWEEN WHIRLPOOL USA AND WOIL AND THA T WOIL WILL SPEND 'EXCESSIVELY' ON AMP IN ORDER TO PROMOTE THE 'WHIRL POOL' BRAND IN INDIA. IN OTHER WORDS, IT IS NOT CLEAR WHY A PRESUMPTION SHOULD B E DRAWN THAT SINCE AN INCIDENTAL BENEFIT MIGHT ENURE TO THE BRAND OF WHI RLPOOL USA, A PROPORTION OF THE AMP EXPENSES INCURRED MUST BE ATTRIBUT ED TO IT. 18.14.10 IN VIEW THEREOF, THE COURT AGREED WITH THE SUBMIS SIONS ADVANCED ON BEHALF OF THE ASSESSEE ABOUT LACK OF MACHINE RY PROVISION WHICH WHEN CONSIDERED ON THE FACTS OF THE PRESENT CASE WHERE MULTIPLE POSSIBLE ALTERNATE ASSESSMENTS ARE FOUND TO HAVE BEEN M ADE ON RECORD I.E. ONE ON A SUBSTANTIVE AND TWO ON PROTECTIVE BASIS SUGGE STS CLEAR LACK OF MACHINERY PROVISIONS WHERE THE TAX AUTHORITIES IN THE ABS ENCE OF RELEVANT PROVISIONS ON THE STATUTE AND RULES ARE TRYING TO OUTGU ESS THE POSSIBLE OUTCOME OF THE ISSUES PENDING BEFORE THE APEX COURT OR WHICH MAY BE CARRIED TO THE APEX COURT. THESE FRANTIC ACTIONS OF SOM EHOW BRINGING TO TAX SOMETHING FOR WHICH THE PROVISIONS HAVE NOT BEEN MAD E I.E. MACHINERY IS LACKING FULLY SUPPORTS THE CONCLUSIONS DRAWN BY THE CO URT IN THE FOLLOWING PARAS OF CIT VS WHIRLPOOL WHERE THE COURT WAS PLEA SED TO OBSERVE: 39. IT IS IN THIS CONTEXT THAT IT IS SUBMITTED, AND RI GHTLY, BY THE ASSESSEE THAT THERE MUST BE A MACHINERY PROVISION IN THE ACT TO BRING A N INTERNATIONAL TRANSACTION INVOLVING AMP EXPENSE UNDER THE TAX RADAR. IN THE A BSENCE OF ANY CLEAR STATUTORY PROVISION GIVING GUIDANCE AS TO HOW THE EXISTENCE O F AN INTERNATIONAL TRANSACTION INVOLVING AMP EXPENSE, IN THE ABSENCE OF AN EXPRESS AGREEMENT IN THAT BEHALF, SHOULD BE ASCERTAINED AND FURTHER HOW THE ALP OF SUCH A TR ANSACTION SHOULD BE ASCERTAINED, IT CANNOT BE LEFT ENTIRELY TO SURMISES AND CONJECTU RES OF THE TPO. 40. MR. SRIVASTAVA SUBMITTED THAT SECTION 92F (II) WHI CH DEFINES ALP TO MEAN A PRICE 'WHICH IS APPLIED OR PROPOSED TO BE APPLIED IN A TR ANSACTION BETWEEN PERSONS OTHER ITA 269/CHD/2017 A.Y.2012-13 PAGE 46 OF 58 THAN ASSOCIATED ENTERPRISES IN UNCONTROLLED CONDITI ONS' COULD BE CONSTRUED AS A MACHINERY PROVISION. BUT THEN THAT PROVISION REFERS TO 'PRICE' AND TO 'UNCONTROLLED CONDITIONS'. IT IMPLICITLY BRINGS INTO PLAY THE BLT . IN OTHER WORDS, IT EMPHASISES THAT WHERE THE PRICE IS SOMETHING OTHER THAN WHAT WOULD BE PAID OR CHARGED BY ONE ENTITY FROM ANOTHER IN UNCONTROLLED SITUATIONS THEN THAT W OULD BE THE ALP. BLT AS A DETERMINATIVE TOOL HAS BEEN EXPRESSLY INVALIDATED B Y THE COURT IN SONY ERICSSON MOBILE COMMUNICATIONS INDIA (P.) LTD. (SUPRA). THER EFORE, IT IS NOT POSSIBLE TO VIEW THIS AS A MACHINERY PROVISION. THE EXISTENCE OF AN INTERNATIONAL TRANSACTION WILL HAVE TO BE ESTABLISHED DE HORS THE BLT. THERE IS NOTHING IN THE ACT WHICH INDICATES HOW, IN THE ABSENCE OF THE BLT, ONE CAN DISCERN THE EXISTEN CE OF AN INTERNATIONAL TRANSACTION AS FAR AS AMP EXPENDITURE IS CONCERNED. 41. RECENTLY THIS COURT HAS IN ITS DECISION DATED 11TH DECEMBER 2014 IN ITA NO. 110 OF 2014 (MARUTI SUZUKI INDIA LTD. (SUPRA)) WHILE IN TERPRETING THE PROVISIONS OF CHAPTER X OF THE ACT OBSERVED: 'THE ONLY TP ADJUSTMENT AUTHORISED AND PERMITTED BY CHAPTER X IS THE SUBSTITUTION OF THE ALP FOR THE TRANSACTION PRICE O R THE CONTRACT PRICE. IT BEARS REPETITION THAT EACH OF THE METHODS SPECIFIED IN S. 92C(1) IS A PRICE DISCOVERY METHOD. S.92C(1) THUS IS EXPLICIT THAT THE ONLY MAN NER OF EFFECTING A TP ADJUSTMENT IS TO SUBSTITUTE THE TRANSACTION PRICE W ITH THE ALP SO DETERMINED. THE SECOND PROVISO TO SECTION 92C(2) PROVIDES A 'GA TEWAY' BY STIPULATING THAT IF THE VARIATION BETWEEN THE ALP AND THE TRANSACTION P RICE DOES NOT EXCEED THE SPECIFIED PERCENTAGE, NO TP ADJUSTMENT CAN AT ALL B E MADE. BOTH SECTION 92CA, WHICH PROVIDES FOR MAKING A REFERENCE TO THE TPO FO R COMPUTATION OF THE ALP AND THE MANNER OF THE DETERMINATION OF THE ALP BY T HE TPO, AND SECTION 92CB WHICH PROVIDES FOR THE 'SAFE HARBOUR' RULES FOR DET ERMINATION OF THE ALP, CAN BE APPLIED ONLY IF THE TP ADJUSTMENT INVOLVES SUBST ITUTION OF THE TRANSACTION PRICE WITH THE ALP. RULES 10B, 10C AND THE NEW RULE 10AB ONLY DEAL WITH THE DETERMINATION OF THE ALP. THUS FOR THE PURPOSES OF CHAPTER X OF THE ACT, WHAT IS ENVISAGED IS NOT A QUANTITATIVE ADJUSTMENT BUT O NLY A SUBSTITUTION OF THE TRANSACTION PRICE WITH THE ALP.' 42. AGAIN IN MARUTI SUZUKI INDIA LTD. (SUPRA) THE COUR T HELD: 'THE VERY EXISTENCE OF AN INTERNATIONAL TRANSACTION CANNOT BE PRESUMED BY ASSIGNING SOME PRICE TO IT AND THEN DEDUCING THAT S INCE IT IS NOT AN ALP, AN 'ADJUSTMENT' HAS TO BE MADE. THE BURDEN IS ON THE R EVENUE TO FIRST SHOW THE EXISTENCE OF AN INTERNATIONAL TRANSACTION. NEXT STE P IS TO ASCERTAIN THE DISCLOSED 'PRICE' OF SUCH A TRANSACTION AND THEREAF TER ASK WHETHER IT IS AT ALP. IF THE ANSWER TO THAT IS IN THE NEGATIVE THE T P ADJUSTMENT SHOULD FOLLOW. THE OBJECTIVE OF CHAPTER X IS TO MAKE ADJUS TMENTS TO THE PRICE OF AN INTERNATIONAL TRANSACTION WHICH THE AES INVOLVED MA Y SEEK TO SHIFT FROM ONE JURISDICTION TO ANOTHER. AN 'ASSUMED' PRICE CAN NOT FORM THE REASON FOR MAKING AN ALP ADJUSTMENT.' 18.14.11 THE ABOVE CONCLUSION DRAWN BY THE COURT WA S FURTHER FORTIFIED BY MAKING A REFERENCE TO THE DECISIONS OF THE APEX COU RT IN THE CASE OF CIT V. B.C. SRINIVASA SETTY [1981] 128 ITR 294/5 TAXMAN 1 (SC) AND PNB FINANCE LTD. V. CIT [2008] 307 ITR 75/175 TAXMAN 242 (SC) TO HOLD THAT IN THE ABSENCE OF ANY MACHINERY PROVISION, BRINGING AN IMA GINED TRANSACTION TO TAX IS NOT POSSIBLE. FOR READY REFERENCE, T HE RELEVANT FINDING IS REPRODUCED HEREUNDER : 45. THE DECISIONS IN CIT V. B.C. SRINIVASA SETTY [1981] 128 ITR 294/5 TAXMAN 1 (SC) AND PNB FINANCE LTD. V. CIT [2008] 307 ITR 75/175 TAXMAN 242 (SC) MAKE IT EXPLICIT THAT IN THE ABSENCE OF ANY MACHINERY PROVI SION, BRINGING AN IMAGINED TRANSACTION TO TAX IS NOT POSSIBLE. HERE, THEREFORE , WHERE THE EXISTENCE OF AN INTERNATIONAL TRANSACTION INVOLVING AMP EXPENSE WIT H AN ASCERTAINABLE PRICE IS UNABLE TO BE SHOWN TO EXIST, EVEN IF SUCH PRICE IS NIL, CHAPTER X PROVISIONS CANNOT BE INVOKED TO UNDERTAKE A TP ADJUSTMENT EXERCISE. 46. AS ALREADY MENTIONED, MERELY BECAUSE THERE IS AN I NCIDENTAL BENEFIT TO WHIRLPOOL USA, IT CANNOT BE SAID THAT THE AMP EXPENSES INCURR ED BY WOIL WAS FOR PROMOTING ITA 269/CHD/2017 A.Y.2012-13 PAGE 47 OF 58 THE BRAND OF WHIRLPOOL USA. AS MENTIONED IN SASSOON J. DAVID (SUPRA) 'THE FACT THAT SOMEBODY OTHER THAN THE ASSESSEE IS ALSO BENEFITED BY THE EXPENDITURE SHOULD NOT COME IN THE WAY OF AN EXPENDITURE BEING ALLOWED BY WAY OF A DEDUCTION UNDER SECTION 10(2)(XV) OF THE ACT (INDIAN INCOME TAX ACT , 1922) IF IT SATISFIES OTHERWISE THE TESTS LAID DOWN BY THE LAW'. 18.14.12 ACCORDINGLY, FOR THE REASONS AS ADDRESSED, THE C OURT WAS PLEASED TO DISMISS THE REVENUES APPEAL AND ALLOW THE APPEAL OF T HE ASSESSEE. THE FOLLOWING REASONS AS SUMMED UP BY THE COURT IN THE PENUL TIMATE PARAS ARE ALSO EXTRACTED HEREUNDER FOR THE SAKE OF COMPLETENESS : 47. FOR THE AFOREMENTIONED REASONS, THE COURT IS OF TH E VIEW THAT AS FAR AS THE PRESENT APPEALS ARE CONCERNED, THE REVENUE HAS BEEN UNABLE TO DEMONSTRATE BY SOME TANGIBLE MATERIAL THAT THERE IS AN INTERNATIONAL TR ANSACTION INVOLVING AMP EXPENSES BETWEEN WOIL AND WHIRLPOOL USA. IN THE ABSENCE OF T HAT FIRST STEP, THE QUESTION OF DETERMINING THE ALP OF SUCH A TRANSACTION DOES NOT ARISE. IN ANY EVENT, IN THE ABSENCE OF A MACHINERY PROVISION IT WOULD BE HAZARD OUS FOR ANY TPO TO PROCEED TO DETERMINE THE ALP OF SUCH A TRANSACTION SINCE BLT H AS BEEN NEGATIVED BY THIS COURT AS A VALID METHOD OF DETERMINING THE EXISTENCE OF A N INTERNATIONAL TRANSACTION AND THEREAFTER ITS ALP. 48. QUESTION (I) IN THE ASSESSEE'S APPEAL VIZ., 'WAS T HERE AN INTERNATIONAL TRANSACTION BETWEEN WOIL AND ITS AE INVOLVING THE AMP EXPENSES WITHIN THE MEANING OF SECTION 92B OF THE 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. CONSEQUENTLY QUESTION (II) IN THE ASSESSEE'S APPEAL IS NOT REQUIRED TO BE ANSWERED. F URTHER, THE ONLY QUESTION FRAMED IN THE REVENUE'S APPEAL VIZ., 'WHETHER THE ITAT ERR ED IN DELETING THE 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 NEGATIVE, I.E. IN F AVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 49. THE IMPUGNED ORDER OF THE ITAT AND THE CORRESPONDI NG ORDERS OF THE DRP AND THE TPO, ON THE ABOVE ISSUES ARE HEREBY SET ASIDE. THE APPEAL OF THE ASSESSEE, ITA NO. 228 OF 2015 IS ALLOWED AND THE APPEAL OF THE RE VENUE, ITA NO. 610 OF 2014 IS DISMISSED IN THE ABOVE TERMS, BUT IN THE CIRCUMSTAN CES WITH NO ORDERS AS TO COSTS. 18.15 CONSIDERING THE LEGAL POSITION AS CONSIDERED BY THE HON'BLE HIGH COURT IN THE AFORESAID DECISION AMONGST OTHERS, WE ARE OF THE VIEW THAT THERE IS NOTHING IN THE CONDUCT OF THE ASSESSEE REFERRED TO BY THE REVENUE TO SHOW THAT THE INCURRING OF AMP WAS AN INTERNATIONAL TR ANSACTION AND NOT A FUNCTION OF THE ASSESSEE AS A DISTRIBUTOR. THERE IS NO REFERENCE TO ANY INSTANCE OF CONCERTED ACTION OR DESIGN SO AS TO SUG GEST THAT THE ADVERTISING, MARKETING AND PROMOTION EXPENSES WERE NOT FO R THE BENEFIT OF THE ASSESSEE AND WERE INFACT FOR THE BENEFIT OF THE AE. IN THE FACTS AS THEY STAND, THE EXPENSES INCURRED FOR THE BENEFIT OF THE ASSES SEE EXPLOITING THE BRAND OF THE AE CANNOT BE TERMED AS AN INTERNATIONAL TA XATION ON PRESUMPTIONS WHERE AT BEST BENEFIT TO THE AE MAY BE INC IDENTAL. THE SETTLED LEGAL POSITION AS DISCUSSED AT LENGTH IS THAT THE SUPPORTING FACTS HAVE TO BE BROUGHT ON RECORD BY THE REVENUE TO DISCH ARGE THE ONUS PLACED ON IT AND PRESUMPTION ALONE THAT EXPENSES ARE EXCESSIVE BY WAY OF SOME ARBITRARY PARAMETERS WHICH LACK JUDICIAL AND STATUTORY S UPPORT CANNOT BE SUBSCRIBED TO. IN THE ABSENCE OF ANY SUCH FACT WH ICH HAS BEEN ITA 269/CHD/2017 A.Y.2012-13 PAGE 48 OF 58 REFERRED TO BY THE REVENUE, THE PRESUMPTION DRAWN HAS NO LEGAL LEGS TO STAND ON AND DESERVES TO FAIL. 18.16 NOW IN THIS BACKDROP OF FACTUAL AND LEGAL P OSITION, AS APPRECIATED BY US, WE NOTE THAT THE CO-ORDINATE BENCH IN THE IMMED IATELY PRECEDING ASSESSMENT YEAR WHERE JOINT VENTURE AGREEMENT EXIST ED BETWEEN WIDEX A/S DENMARK AND MR. T.S. ANAND IN THE RATIO OF 78.43% A ND 21.57% WHEREIN A SIMILAR ISSUE WAS CONSIDERED AND THE ISSUE WAS STAT ED TO BE COVERED BY THE ASSESSEE AND CONTESTED BY THE REVENUE. WE PROPOSE TO FIRST SET OUT THE ISSUE BEFORE THE CO-ORDINATE BENCH: 8. DURING THE COURSE OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE CHALLENGED THE ADDITION MADE ON VARIOUS COUNTS. TH E FIRST CONTENTION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE WAS THAT AMP EXPENDITU RE INCURRED BY THE ASSESSEE COULD NOT BE TREATED AS A SEPARATE INTERNATIONAL TR ANSACTION FOR THE PURPOSE OF CHAPTER-X OF THE ACT. THE LD. COUNSEL FOR THE ASSE SSEE CONTENDED THAT THE AMP EXPENDITURE INCURRED HAD NOT BEEN MENTIONED AS A SE PARATE INTERNATIONAL TRANSACTION IN THE TP STUDY BY THE ASSESSEE BUT WAS CONSIDERED AS A FUNCTION FOR BENCHMARKING IMPORT AND TRADING BUSINESS. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE RELEVANT PAGES OF THE TP STUDY I.E. PAGES 4 AND 8, PARA 4.1 TO 4.5, PAGE 17 OF THE TPO ORDER, PAGES 26 TO 30 OF TH E TP STUDY AND PAGES, 53 TO 68 OF THE PAPER BOOK, WHICH WERE THE OBJECTIONS FILED BEFORE THE DRP. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE AO/DRP/TPO HAD PRO CEEDED ON INCORRECT PRESUMPTION ABOUT EXISTENCE OF AMP EXPENDITURE AS I NTERNATIONAL TRANSACTION WITHOUT CITING ANY BASIS. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE I.T.A.T. DELHI SPECIAL BENCH IN LG ELECTRONICS INDIA PVT. LTD. VS. ACIT AND DELHI HIGH COURT DECISION IN SONY ERICSSON MOBILE COMMUNICATIONS INDIA P. LTD. V. COMMISSIONER OF INCOME TAX (2015) 374 ITR 118 IN SUPPORT OF THIS CONTENTION. THE LD. COUNSEL FOR THE ASSESSEE POINT ED OUT THAT IN THE CASE OF SONY ERICSSON MOBILE COMMUNICATIONS INDIA P. LTD., FOR S UBSEQUENT ASSESSMENT YEAR, THE HON'BLE DELHI HIGH COURT, BY ORDER DATED 28.1.2016, HAD DIRECTED I.T.A.T. TO EXAMINE THE EXISTENCE OF INTERNATIONAL TRANSACTION OF AMP. THE LD. COUNSEL FOR THE ASSESSEE THEREAFTER STATED THAT CLAUSES REFERRED TO BY THE TPO/DRP IN THEIR ORDERS ONLY CLARIFY THE OWNERSHIP OF TRADE MARK WHICH CANN OT BE READ TO MEAN THAT THERE WAS ANY IMPOSITION OF ANY OBLIGATION ON THE ASSESSE E TO UNDERTAKE MARKETING EXPENDITURE MUCH LESS EXCESSIVE MARKETING EXPENDITU RE TO BENEFIT THE AE. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ONUS TO PR OVE EXISTENCE OF INTERNATIONAL TRANSACTION WAS ON THE DEPARTMENT AND HAVING FAILED TO DO SO THE ENTIRE ADJUSTMENT DESERVES TO BE DELETED. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS ABOVE CONTENTION : 1) BAUSCH AND LOMB EYECARE (INDIA) PVT. LTD. V. ADDL. CIT, 381 ITR 227 (DEL) 2) AMADEUS INDIA PVT. LIMITED (I.T.A.T. DELHI) LOR EAL INDIA (P) LTD. (I.T.A.T., MUMBAI K BENCH 3) SONY ERICSSON MOBILE COMMUNICATIONS INDIA P. LTD . V. COMMISSIONER OF INCOME TAX (2015) 374 ITR 118 (DEL) 9. THE NEXT CONTENTION OF THE LD. COUNSEL FOR THE A SSESSEE WAS THAT WITHOUT PREJUDICE TO THE ABOVE CONTENTION, THE SELLING EXPE NDITURE WERE TO BE EXCLUDED FROM AMP, WHICH DESPITE THE CLEAR DIRECTIONS OF THE DRP HAD NOT BEEN DONE. LD COUNSEL FOR THE ASSESSEE FURTHER ARGUED THAT ALL T HE DEALINGS WITH THE ASSOCIATED ENTERPRISES WERE AT ARMS LENGTH AND THE AO HAD IGN ORED THE FACT THAT NO ROYALTY PAYMENT WAS MADE BY THE ASSESSEE FOR USE OF THE EST ABLISHED TRADE MARK/BRAND USAGE. LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT T HE LD.DRP HAD SUBSTITUTED GROSS MARGIN AS THE MARK UP RATE BY INCORRECT INTER PRETATION OF SONY ERICSON DECISION - EVEN WHILE RIGHTLY REJECTING PLR RATE AD OPTED BY TPO. LD.COUNSEL CONTENDED THAT THE ORDER GIVING EFFECT TO DRP DIREC TIONS SELECTIVELY ADOPTS 32.32 % OF GROSS MARGIN FROM CALCULATION SUBMITTED AND IG NORED THAT AMP ITA 269/CHD/2017 A.Y.2012-13 PAGE 49 OF 58 EXPENDITURE SHOULD BE RS.1.88 CRORES AFTER EXCLUSIO N OF NON-AMP EXPENDITURE. A BRIEF SYNOPSIS OF THE SUBMISSIONS MADE WAS FILED BE FORE US WHICH READS AS UNDER: 1. ONUS ON DEPARTMENT TO ESTABLISH EXISTENCE OF IN TERNATIONAL TRANSACTION NOT DISCHARGED: > APPELLANT IS ENGAGED IN BUSINESS OF IMPORT (FROM AE) AND SALE OF HEARING AID TO THIRD PARTIES.(KINDLY REFER INTERNAL PAGE 2&3 OF TRANSFER PRICING ORDER, INTERNAL PAGE 4 OF DRP ORDE R PARA (A)) > TRANSFER PRICING ORDER RECOMMENDS RS.4.86 CRORE ADD ITION ON ACCOUNT OF ADVERTISING MARKETING AND PROMOTION (AMP ) EXPENDITURE (REFER INTERNAL PAGE 35). A CATEGORICAL FINDING IS RECORDED THAT OTHER TRANSACTIONS AR E AT ARMS-LENGTH (THIS INCLUDES INTERNATIONAL TRANSACTION OF IMPORTS ). > AMP SPENDING NOT MENTIONED AS SEPARATE INTERNATIONA L TRANSACTION IN TRANSFER PRICING STUDY BY APPELLANT - BUT WAS CONSIDERED AS A FUNCTION IN BENCHMARKING IMPORT AND TRADING BUSINESS.(KINDLY REFER(I) PAGE 4 & PAGE 8 PARA 4.1 TO 4.5 AND PAGE17(CONCLUSION ON INTERNATIONAL TRANSACTION) OF TP ORDER, (II)PAGES 26 & 30 OF PAPERBOOK TRANSFER PRICING STU DY (HI) OBJECTIONS FILED BEFORE DRP PAGES 53 TO 68 OF PAPER BOOK) BEFORE TPO AS ALSO DRP, APPELLANT CONTENDED THAT AM P EXPENDITURE CANNOT BE TREATED AS SEPARATE INTERNATI ONAL TRANSACTION FOR CHAPTER X; AO/DRP/TPO PROCEEDED ON INCORRECT PR ESUMPTION ABOUT EXISTENCE OF AMP AS INTERNATIONAL TRANSACTION WITHOUT CITING ANY BASIS - RELIANCE WAS PLACED ON DECISION OF SPECIAL BENCH IN LG ELECTRONICS AND DELHI HIGH COURT DECISION IN SONY ERICSSON (374 ITR 118) IN SUPPORT OF SUCH PRESUMPTION - SUCH PRES UMPTION HAS NO FACTUAL FOUNDATION WHATSOEVER. IN SONY'S OWN CASE F OR SUBSEQUENT ASSESSMENT YEAR HON'BLE DELHI HIGH COURT BY ORDER D ATED 28.1.2016 HAS DIRECTED ITAT TO EXAMINE EXISTENCE OF INTERNATI ONAL TRANSACTION OF AMP (KINDLY REFER TO PARA 11 (II) OF COPY HANDED OVER DURING HEARING). JV AGREEMENT CLAUSES REFERRED TO BY TPO/ DRP IN RES PECTIVE ORDERS (REFER PARA 4 ON PAGE 5 OF TP ORDER) ONLY CLARIFY OWNERSHIP OF TRADE MARK - NOTHING THEREIN CAN BE READ TO MEAN IM POSITION OF ANY OBLIGATION UPON APPELLANT COMPANY TO UNDERTAKE MARKETING EXPENDITURE - MUCH LESS EXCESSIVE MARKETING EXPENDI TURE TO BENEFIT AE BAUSCH AND LOMB [(DELHI HIGH COURT 381ITR 227) F ROM PARAGRAPHS 51 TO 67 MORE PARTICULARLY PARAS 61,65AN D 67] AMADEUS INDIA PVT LIMITED [(ITAT - DELHI '1-2' BENCH PARAGR APHS 4 TO 8.4 MORE PARTICULARLY PARA 7, 8.1, 8.2, 8.3 & 8.4)], L' OREAL INDIA (P) LTD., [(ITAT ,MUMBAI 'K' BENCH) PARAGRAPHS 2.1 ,2.2 & 2.4}, SONY ERICSON (374 ITR 118 DECISION OF 16.3.2015 - P ARAS 82,100,101,159,160,161, 164 AND 176) AND SONY ERICS SON [DECISION OF HON'BLE DEL HIGH COURT ON 28.1.2016 - PARA 11 (II)] WERE CITED AT THE HEARING. WITH REFERENCE TO PARTICULAR PARAGRAPHS OF ABOVE DECISIONS IT WAS SUBMITTED THAT ONUS TO PROVE EXISTENCE OF IN TERNATIONAL TRANSACTION IS ON DEPARTMENT. IN APPELLANT'S CASE D EPARTMENT HAS FAILED TO DISCHARGE THIS ONUS. ON THIS GROUND ITSEL F, WITHOUT ANYTHING FURTHER, ENTIRE ADJUSTMENT DESERVES TO BE DELETED. 111. WITHOUT PREJUDICE TO ABOVE SELLING EXPENSES AR E TO BE EXCLUDED FOR AMP: O PURPOSE OF SUCH EXPENDITURE WAS TO INCREASE A PPELLANT'S SALES DETAILS OF EXPENDITURE CAN BE FOUND AT PAGE S 123 TO 125 AND 130 OF PAPER BOOK; NO BASIS CITED BY DRP /TPO TO SU PPORT ALLEGATION THAT ANY PART OF SUCH EXPENDITURE WAS INCURRED BY A PPELLANT AT THE INSTANCE OF AE; CURSORY LOOK AT DETAILS WOULD SHOW NO PORTION OF SUCH SPENDING CAN BE SAID TO BE FOR BRAND BUILDIN G ; IN ANY CASE BRAND VALUE IS A FUNCTION OF SEVERAL ASPECTS LIKE Q UALITY OF PRODUCT, RELIABILITY OF SERVICE ETC., AS EXPLAINED IN PARAS 102 TO 112 OF SONY ERICSSON DECISION ( 374 ITR 118) O DESPITE CLEAR DIRECTION OF DRP WHICH ARE BINDING ON TPO TO EXCLUDE SELLING AND DISTRIBUTION EXPENSES (REFER IN TERNAL PAGE 6 OF ITA 269/CHD/2017 A.Y.2012-13 PAGE 50 OF 58 DRP ORDER), FINAL ASSESSMENT ORDER DATED 28.12.20 15 CONSIDERS RS. 3.58 CRORES (REFER INTERNAL PAGE 14 OF FIN AL ASSESSMENT ORDER) EVEN WHILE DRP IN ITS ORDER CONSIDERS RS. 1.88 CROR ES (REFER (I) PARA (B) ON INTERNAL PAGE 4 & TABLE AT PAGE 11 OF DRP ORDER (II) TABLE AT PAGE 146 OF PAPERBOOK). IV. WITHOUT PREJUDICE TO ABOVE ALL DEALINGS WIT H ASSOCIATED ENTERPRISES ARE AT ARMS-LENGTH O ALTERNATIVE ANALYSIS BY APPLYING RESALE PRICE METHO D SUBMITTED BEFORE DRP( KINDLY REFER RUNNING PAGE 71, INTERNAL PAGE 34 , OF THE APPEAL SET) APPLYING GROSS MARGIN OF TWO COMPARABLE COMPAN IES (NOT DISPUTED BY TPO) SELECTED AND DEDUCTING RS.4.86 CRO RES OF AMP PROPOSED BY TPO AS RECOVERABLE FROM AE (ASSUMING WITHOUT ACCEPTING). STILL GROSS MARGIN OF APPELLANT BEING B ETTER THAN COMPARABLE COMPANY GROSS MARGIN FURTHER CONFIRMED A RMS-LENGTH DEALINGS BETWEEN AE'S. O DIRECT SELLING EXPENDITURE NOT EXCLUDED FROM ADVERT ISEMENT, MARKETING AND PROMOTION EXPENDITURE DESPITE OF DRP DIRECTION -> ENTIRE RS.3.58 CRORES (AFTER EXCLUDING DISCOUNT AND COMMIS SION) CONSIDERED. DRP ITSELF ADOPTSRS.1.88CRORESASTHE REVISED NUMBER FOR DISCUSSION (KINDLY SEE PARA B ON PAGE 4 OF DRP ORDER AND RECTI FICATION APPLICATION FILED WHICH IS PLACED AT PAGE 146 OF PA PER BOOK). IV. OTHER ISSUES: O FACT OF NO ROYALTY PAYMENT BY APPELLANT FOR USE OF ESTABLISHED TRADE MARK/ BRAND USAGE (PAGE 154 OF PAPER BOOK) AND PRIN CIPLE OF CONSISTENCY (PAGE 147 OF PAPER BOOK) COMPLETELY IGN ORED. O DRP SUBSTITUTED GROSS MARGIN AS THE MARK UP RATE BY INCORRECT INTERPRETATION OF SONY ERICSON DECISION - EVEN WHIL E RIGHTLY REJECTING PLR RATE ADOPTED BY TPO O ORDER GIVING EFFECT TO DRP DIRECTIONS SELECTIVELY A DOPTS 32.32 % OF GROSS MARGIN FROM CALCULATION SUBMITTED (KINDLY REF ER APPELLANT'S SUBMISSION BEFORE DRP DATED 4 TH NOVEMBER 2015 COPY HANDED OVER AT THE TIME OF HEARING) AND IGNORES THAT AMP EXPENDI TURE SHOULD BE RS.1.88 CRORES AFTER EXCLUSION OF NON- AMP EXPENDIT URE ( KINDLY REFER PAGE 146 OF PAPER BOOK). O DEPARTMENT REPRESENTATIVES COUNTER ABOUT PE NDENCY OF FURTHER APPEALS BY DEPARTMENT ON THE ISSUE OF ONUS TO PROVE EXISTENCE OF AMP AS INTERNATIONAL TRANSACTION CANNOT BE BASIS FO R NOT FOLLOWING DECISION OF HON'BLE HIGH COURT OF DELHI IN BAUSCH & LOMB AS ALSO SERIES OF COORDINATE BENCH DECISIONS OF HON'BLE TRI BUNAL CITED AND COPIES HANDED OVER DURING HEARING. APPELLANT ACCORDINGLY PRAYS THAT ADJUSTMENT RELATIN G TO AMP DESERVES TO BE DELETED. 10. LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF THE AO/DRP. 18.16.1 IT IS SEEN THAT CONSIDERING THESE SUBMISSIONS, THE CO-ORDINATE BENCH WAS PLEASED TO HOLD AS UNDER : 11. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY THE PARTIES AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. UNDISPUT EDLY, THE MAIN OBJECT OF THE ASSESSEE I.E. PURCHASE OF DIGITAL AIDS AND ITS SPAR E PARTS AND IMPORT OF LAB EQUIPMENT, ADVERTISEMENT MATERIAL, CONSUMABLES HAD BEEN HELD TO BE AT ARMS LENGTH PRICE BY APPLYING TNMM METHOD. NO ADJUSTMEN T HAS BEEN MADE ON THIS ACCOUNT. THE LEARNED TPO, HOWEVER HAS SEGREGATED A MP AND HELD THAT IT WAS AN INTERNATIONAL TRANSACTION AND WAS REQUIRED TO BE BE NCHMARKED INDEPENDENTLY. THE FIRST OBJECTION OF THE LD COUNSEL FOR THE ASSES SEE IS VIS A VIS THIS FINDING OF THE TPO/DRP THAT THERE EXISTED AN INTERNATIONAL TRA NSACTION ON ACCOUNT OF AMP EXPENDITURE INCURRED BY THE ASSESSEE, MORE SPECIFIC ALLY IN THE ABSENCE OF ANY AGREEMENT, ARRANGEMENT OR UNDERSTANDING FOR EITHER INCURRING AMP EXPENDITURE ON BEHALF OF OR FOR THE BENEFIT OF AE AND MERELY ON THE BASIS THAT AMP EXPENDITURE INCURRED BY THE ASSESSEE WOULD HAVE BEN EFITED THE AE WHO OWNED THE BRAND USED BY THE ASSESSEE. ITA 269/CHD/2017 A.Y.2012-13 PAGE 51 OF 58 12. WE FIND THAT THIS ISSUE HAS BEEN DEALT WITH IN VARIOUS CASES BY THE HIGH COURTS WHICH HAVE HIGHLIGHTED THE TESTS TO BE APPLI ED FOR ASCERTAINING WHETHER THERE EXISTED A TRANSACTION FOR BRAND PROMOTION IN A PARTICULAR CASE. WE FIND THAT IN THE CASE OF BAUSCH AND LAUMB EYECARE (INDIA) PVT. LTD. (SUPRA) THE HON'BLE DELHI HIGH COURT HAS DELIBERATED EXTENSIVEL Y ON THE ISSUE OF AMP EXPENDITURE AND THE EXISTENCE OF INTERNATIONAL TRAN SACTION VIS A VIS THE SAME, DEALING WITH EACH AND EVERY ARGUMENT RAISED BY THE TPO/DRP AND ANALYZING THE SAME THREADBARE. THE HONBLE HIGH COURT INTERPR ETED THE PROVISION OF CHAPTER X, SECTION 92B TO 92F, AND STATED THAT THE APPLICABILITY OF TP PROVISIONS BEGIN WITH THE EXISTENCE OF AN INTERNATIONAL TRANSA CTION AT A CERTAIN DISCLOSED PRICE WHICH IS SUBSTITUTED WITH THE ALP BY WAY OF A DJUSTMENT UNDER TP PROVISIONS. THE HONBLE HIGH COURT THEN WENT ON TO INTERPRET THE DEFINITION OF INTERNATIONAL TRANSACTION AS PROVIDED IN SECTION 92 B AND STATED THAT THE DEFINITION OF THE SAME PRE-SUPPOSES THE EXISTENCE O F AN ARRANGEMENT OR AGREEMENT OR UNDERSTANDING BETWEEN THE TWO AES WHE REBY ONE IS OBLIGED TO SPEND EXCESSIVELY ON AMP TO PROMOTE THE BRAND OF TH E OTHER. THE COURT THEN WENT ON TO NEGATIVE THE ARGUMENTS OF THE REVENUE FO R CONTENDING THAT THERE EXISTED AN INTERNATIONAL TRANSACTION BY STATING THA T MERELY BECAUSE THE EXPENSE RESULTED IN SERVICE OR BENEFIT TO THE OTHER PARTY WOULD BY ITSELF NOT CONSTITUTE THE TRANSACTION AS INTERNATIONAL TRANSACTION. IT FURTH ER FOUND MERIT IN THE CONTENTION OF THE ASSESSE THAT THERE WAS A DISTINCTION BETWEEN FUNCTION AND TRANSACTION. THE COURT ALSO HELD THAT AMP WAS NOT RECOGNIZED AS A TR ANSACTION EVEN LEGISLATIVELY. THE COURT ALSO HELD THAT IT IS PRICE WHICH IS TO BE ADJUSTED UNDER TP PROVISIONS AND INTERNATIONAL TRANSACTION CANNOT BE PRESUMED BY ASSIGNING SOME PRICE TO IT THEN DECIDING THAT IT IS NOT AT ALP AND THUS ADJUST ING THE SAME. IT WAS ALSO HELD THAT NO MACHINERY PROVISION EXISTS QUA AMP TO DETER MINE FAIR COMPENSATION IF AN INTERNATIONAL TRANSACTION OF BRAND PROMOTION FOUND TO EXIST. WE WOULD LIKE TO REPRODUCE RELEVANT PORTION OF THE JUDGMENT IN THE C ASE OF BAUSCH AND LOMB EYECARE (INDIA) PVT. LTD. (SUPRA) AS FOLLOWS : THE CENTRAL ISSUE CONCERNING THE EXISTENCE OF AN I NTERNATIONAL TRANSACTION REGARDING AMP EXPENSES REQUIRES THE INTERPRETATION OF PROVISIONS OF CHAPTER X OF THE ACT, AND TO DETERMINE WHETHER THE REVENUE HA S BEEN ABLE TO SHOW PRIMA FACIE THE EXISTENCE OF INTERNATIONAL TRANSACTION IN VOLVING AMP BETWEEN THE ASSESSEE AND ITS AE. 52. AT THE OUTSET, IT MUST BE POINTED OUT THAT THES E CASES WERE HEARD TOGETHER WITH ANOTHER BATCH OF CASES, TWO OF WHICH HAVE ALREADY B EEN DECIDED BY THIS COURT. THE TWO DECISIONS ARE THE JUDGEMENT DATED 11TH DECE MBER 2015 IN ITA NO. 110/2014 ( MARUTI SUZUKI INDIA LTD. V. COMMISSIONER OF INCOME TAX) AND THE JUDGMENT DATED 22ND DECEMBER 2015 IN ITA NO. 610 OF 2014 ( THE COMMISSIONER OF INCOME TAX-LTU V. WHIRLPOOL OF INDI A LTD.) AND MANY OF THE POINTS URGED BY THE COUNSEL IN THESE APPEALS HAVE B EEN CONSIDERED IN THESE TWO JUDGMENTS. 53. A READING OF THE HEADING OF CHAPTER X ['COMPUTA TION OF INCOME FROM INTERNATIONAL TRANSACTIONS HAVING REGARD TO ARM'S L ENGTH PRICE'] AND SECTION 92(1) WHICH STATES THAT ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION SHALL BE COMPUTED HAVING REGARD TO THE ALP AND SECTION 92C (1) WHICH SETS OUT THE DIFFERENT METHODS OF DETERMI NING THE ALP, MAKES IT CLEAR THAT THE TRANSFER PRICING ADJUSTMENT IS MADE BY SUBSTITUTING THE ALP FOR THE PRICE OF THE TRANSACTION. TO BEGIN WITH THE RE HAS TO BE AN INTERNATIONAL TRANSACTION WITH A CERTAIN DISCLOSED PRICE. THE TRANSFER PRICING ADJUSTMENT ENVISAGES THE SUBSTITUTION OF THE PRICE OF SUCH INTERNATIONAL TRANSACTION WITH THE ALP. 54. UNDER SECTIONS 92B TO 92F, THE PRE-REQUISITE FO R COMMENCING THE TP EXERCISE IS TO SHOW THE EXISTENCE OF AN INTERNATION AL TRANSACTION. THE NEXT STEP IS TO DETERMINE THE PRICE OF SUCH TRANSACTION. THE THIRD STEP WOULD BE TO DETERMINE THE ALP BY APPLYING ONE OF THE FIVE PRICE DISCOVERY METHODS SPECIFIED IN SECTION 92C. THE FOURTH STEP WOULD BE TO COMPARE THE PRICE OF THE TRANSACTION THAT IS SHOWN TO EXIST WITH THAT OF THE ALP AND MAKE THE TP ADJUSTMENT BY SUBSTITUTING THE ALP FOR THE CONTRACT PRICE. 55. SECTION 92B DEFINES INTERNATIONAL TRANSACTION AS UNDER: MEANING OF INTERNATIONAL TRANSACTION . 92B. (1) FOR THE PURPOSES OF THIS SECTION AND SECTIONS 9 2, 92C, 92D AND 92E, 'INTERNATIONAL TRANSACTION' MEANS A TRANSA CTION BETWEEN TWO OR ITA 269/CHD/2017 A.Y.2012-13 PAGE 52 OF 58 MORE ASSOCIATED ENTERPRISES, EITHER OR BOTH OF WHOM ARE NON-RESIDENTS, IN THE NATURE OF PURCHASE, SALE OR LEASE OF TANGIBLE O R INTANGIBLE PROPERTY, OR PROVISION OF SERVICES, OR LENDING OR BORROWING MONE Y, OR ANY OTHER TRANSACTION HAVING A BEARING ON THE PROFITS, INCOME , LOSSES OR ASSETS OF SUCH ENTERPRISES, AND SHALL INCLUDE A MUTUAL AGREEMENT O R ARRANGEMENT BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES FOR THE ALLOCATI ON OR APPORTIONMENT OF, OR ANY CONTRIBUTION TO, ANY COST OR EXPENSE INCURRE D OR TO BE INCURRED IN CONNECTION WITH A BENEFIT, SERVICE OR FACILITY PROV IDED OR TO BE PROVIDED TO ANY ONE OR MORE OF SUCH ENTERPRISES. (2) A TRANSACTION ENTERED INTO BY AN ENTERPRISE WIT H A PERSON OTHER THAN AN ASSOCIATED ENTERPRISE SHALL, FOR THE PURPOS ES OF SUB-SECTION (1), BE DEEMED TO BE A TRANSACTION ENTERED INTO BETWEEN TWO ASSOCIATED ENTERPRISES, IF THERE EXISTS A PRIOR AGREEMENT IN RELATION TO TH E RELEVANT TRANSACTION BETWEEN SUCH OTHER PERSON AND THE ASSOCIATED ENTERP RISE, OR THE TERMS OF THE RELEVANT TRANSACTION ARE DETERMINED IN SUBSTANCE BE TWEEN SUCH OTHER PERSON AND THE ASSOCIATED ENTERPRISE. 56. THUS, UNDER SECTION 92B(1) AN 'INTERNATIONAL TR ANSACTION' MEANS- (A) A TRANSACTION BETWEEN TWO OR MORE AES, EITHER O R BOTH OF WHOM ARE NON-RESIDENT (B) THE TRANSACTION IS IN THE NATURE OF PURCHASE, S ALE OR LEASE OF TANGIBLE OR INTANGIBLE PROPERTY OR PROVISION OF SER VICE OR LENDING OR BORROWING MONEY OR ANY OTHER TRANSACTION HAVING A B EARING ON THE PROFITS, INCOMES OR LOSSES OF SUCH ENTERPRISES, AND (C) SHALL INCLUDE A MUTUAL AGREEMENT OR ARRANGEMENT BETWEEN TWO OR MORE AES FOR ALLOCATION OR APPORTIONMENT OR CONTRIB UTION TO THE ANY COST OR EXPENSES INCURRED OR TO BE INCURRED IN CONNECTION W ITH THE BENEFIT, SERVICE OR FACILITY PROVIDED OR TO BE PROVIDED TO ONE OR MO RE OF SUCH ENTERPRISES. 57. CLAUSES (B) AND (C) ABOVE CANNOT BE READ DISJUN CTIVELY. EVEN IF RESORT IS HAD TO THE RESIDUARY PART OF CLAUSE (B) TO CONTEND THAT THE AMP SPEND OF BLI IS 'ANY OTHER TRANSACTION HAVING A BEARING' ON ITS 'PROFITS, INCOMES OR LOSSES', FOR A 'TRANSACTION' THERE HAS TO BE TWO PA RTIES. THEREFORE FOR THE PURPOSES OF THE MEANS PART OF CLAUSE (B) AND THE 'INCLUDES PART OF CLAUSE (C), THE REVENUE HAS TO SHOW THAT THERE EXISTS AN ' AGREEMENT' OR 'ARRANGEMENT' OR 'UNDERSTANDING' BETWEEN BLI AND B& L, USA WHEREBY BLI IS OBLIGED TO SPEND EXCESSIVELY ON AMP IN ORDER TO PROMOTE THE BRAND OF B&L, USA. AS FAR AS THE LEGISLATIVE INTENT IS CONCE RNED, IT IS SEEN THAT CERTAIN TRANSACTIONS LISTED IN THE EXPLANATION UNDE R CLAUSES (I) (A) TO (E) TO SECTION 92B ARE DESCRIBED AS AN 'INTERNATIONAL TRAN SACTION'. THIS MIGHT BE ONLY AN ILLUSTRATIVE LIST, BUT SIGNIFICANTLY IT DOE S NOT LIST AMP SPENDING AS ONE SUCH TRANSACTION. 58. IN MARUTI SUZUKI INDIA LTD. (SUPRA) ONE OF THE SUBMISSIONS OF THE REVENUE WAS: 'THE MERE FACT THAT THE SERVICE OR BEN EFIT HAS BEEN PROVIDED BY ONE PARTY TO THE OTHER WOULD BY ITSELF CONSTITUT E A TRANSACTION IRRESPECTIVE OF WHETHER THE CONSIDERATION FOR THE SAME HAS BEEN PAID OR REMAINS PAYABLE OR THERE IS A MUTUAL AGREEMENT TO NOT CHARGE ANY CO MPENSATION FOR THE SERVICE OR BENEFIT.' THIS WAS NEGATIVED BY THE COUR T BY POINTING OUT: 'EVEN IF THE WORD 'TRANSACTION' IS GIVEN ITS WIDEST CONNOTATION, AND NEED NOT INVOLVE ANY TRANSFER OF MONEY OR A WRITTEN AGREEMENT AS SUGGESTED BY THE REVENUE, AND EVEN IF RESORT IS HAD TO SECTIO N 92F (V) WHICH DEFINES 'TRANSACTION' TO INCLUDE 'ARRANGEMENT', 'UNDERSTAND ING' OR 'ACTION IN CONCERT', 'WHETHER FORMAL OR IN WRITING', IT IS STILL INCUMBE NT ON THE REVENUE TO SHOW THE EXISTENCE OF AN 'UNDERSTANDING' OR AN 'ARRANGEM ENT' OR 'ACTION IN CONCERT' BETWEEN MSIL AND SMC AS REGARDS AMP SPEND FOR BRAND PROMOTION. IN OTHER WORDS, FOR BOTH THE MEANS PART AND THE INC LUDES PART OF SECTION 92B (1) WHAT HAS TO BE DEFINITELY SHOWN IS THE EXIS TENCE OF TRANSACTION WHEREBY MSIL HAS BEEN OBLIGED TO INCUR AMP OF A CER TAIN LEVEL FOR SMC FOR THE PURPOSES OF PROMOTING THE BRAND OF SMC.' 59. IN WHIRLPOOL OF INDIA LTD. (SUPRA), THE COURT INTERPRETED THE EXPRESSION 'ACTED IN CONCERT' AND IN THAT CONTEXT REFERRED TO THE DECISION OF THE SUPREME COURT IN DAIICHI SANKYO COMPANY LTD. V. JAYARAM CHIGURUPATI 2010(6) MANU/SC/0454/2010, WHICH AROSE IN THE CONTEXT OF ACQUISITION OF ITA 269/CHD/2017 A.Y.2012-13 PAGE 53 OF 58 SHARES OF ZENOTECH LABORATORY LTD. BY THE RANBAXY G ROUP. THE QUESTION THAT WAS EXAMINED WAS WHETHER AT THE RELEVANT TIME THE APPELLANT, I.E., DAIICHI SANKYO COMPANY AND RANBAXY WERE ACTING IN CONCERT WITHIN THE MEANING OF REGULATION 20(4) (B) OF THE SECURITIES A ND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOV ERS) REGULATIONS, 1997. IN PARA 44, IT WAS OBSERVED AS UNDER: THE OTHER LIMB OF THE CONCEPT REQUIRES TWO OR MORE PERSONS JOINING TOGETHER WITH THE SHARED COMMON OBJECTIVE AND PURPO SE OF SUBSTANTIAL ACQUISITION OF SHARES ETC. OF A CERTAIN TARGET COMP ANY. THERE CAN BE NO 'PERSONS ACTING IN CONCERT' UNLESS THERE IS A SHARE D COMMON OBJECTIVE OR PURPOSE BETWEEN TWO OR MORE PERSONS OF SUBSTANTIAL ACQUISITION OF SHARES ETC. OF THE TARGET COMPANY. FOR, DE HORS THE ELEMEN T OF THE SHARED COMMON OBJECTIVE OR PURPOSE THE IDEA OF 'PERSON ACTING IN CONCERT' IS AS MEANINGLESS AS CRIMINAL CONSPIRACY WITHOUT ANY AGRE EMENT TO COMMIT A CRIMINAL OFFENCE. THE IDEA OF 'PERSONS ACTING IN CO NCERT' IS NOT ABOUT A FORTUITOUS RELATIONSHIP COMING INTO EXISTENCE BY AC CIDENT OR CHANCE. THE RELATIONSHIP CAN COME INTO BEING ONLY BY DESIGN, BY MEETING OF MINDS BETWEEN TWO OR MORE PERSONS LEADING TO THE SHARED C OMMON OBJECTIVE OR PURPOSE OF ACQUISITION OF SUBSTANTIAL ACQUISITION O F SHARES ETC. OF THE TARGET COMPANY. IT IS ANOTHER MATTER THAT THE COMMON OBJEC TIVE OR PURPOSE MAY BE IN PURSUANCE OF AN AGREEMENT OR AN UNDERSTANDING, F ORMAL OR INFORMAL; THE ACQUISITION OF SHARES ETC. MAY BE DIRECT OR INDIREC T OR THE PERSONS ACTING IN CONCERT MAY COOPERATE IN ACTUAL ACQUISITION OF SHAR ES ETC. OR THEY MAY AGREE TO COOPERATE IN SUCH ACQUISITION. NONETHELESS, THE ELEMENT OF THE SHARED COMMON OBJECTIVE OR PURPOSE IS THE SINE QUA NON FOR THE RELATIONSHIP OF 'PERSONS ACTING IN CONCERT' TO COME INTO BEING. 60. THE TRANSFER PRICING ADJUSTMENT IS NOT EXPECTED TO BE MADE BY DEDUCING FROM THE DIFFERENCE BETWEEN THE 'EXCESSIVE' AMP EXP ENDITURE INCURRED BY THE ASSESSEE AND THE AMP EXPENDITURE OF A COMPARABLE EN TITY THAT AN INTERNATIONAL TRANSACTION EXISTS AND THEN PROCEEDIN G TO MAKE THE ADJUSTMENT OF THE DIFFERENCE IN ORDER TO DETERMINE THE VALUE O F SUCH AMP EXPENDITURE INCURRED FOR THE AE. IN ANY EVENT, AFTER THE DECISI ON IN SONY ERICSSON (SUPRA), THE QUESTION OF APPLYING THE BLT TO DETERM INE THE EXISTENCE OF AN INTERNATIONAL TRANSACTION INVOLVING AMP EXPENDITURE DOES NOT ARISE. 61. THERE IS MERIT IN THE CONTENTION OF THE ASSESSE E THAT A DISTINCTION IS REQUIRED TO BE DRAWN BETWEEN A 'FUNCTION' AND A 'TR ANSACTION' AND THAT EVERY EXPENDITURE FORMING PART OF THE FUNCTION CANNOT BE CONSTRUED AS A 'TRANSACTION'. FURTHER, THE REVENUE'S ATTEMPT AT RE -CHARACTERISING THE AMP EXPENDITURE INCURRED AS A TRANSACTION BY ITSELF WHE N IT HAS NEITHER BEEN IDENTIFIED AS SUCH BY THE ASSESSEE OR LEGISLATIVELY RECOGNISED IN THE EXPLANATION TO SECTION 92 B RUNS COUNTER TO LEGAL P OSITION EXPLAINED IN CIT V. EKL APPLIANCES LTD. (SUPRA) WHICH REQUIRED A TPO 'TO EXAMINE THE INTERNATIONAL TRANSACTION AS HE ACTUALLY FINDS TH E SAME. 62. IN THE PRESENT CASE, THE MERE FACT THAT B&L, US A THROUGH B&L, SOUTH ASIA, INC HOLDS 99.9% OF THE SHARE OF THE ASSESSEE WILL NOT IPSO FACTO LEAD TO THE CONCLUSION THAT THE MERE INCREASING OF AMP EXPE NDITURE BY THE ASSESSEE INVOLVES AN INTERNATIONAL TRANSACTION IN THAT REGAR D, WITH B&L, USA. A SIMILAR CONTENTION BY THE REVENUE, NAMELY, THAT EVE N IF THERE IS NO EXPLICIT ARRANGEMENT, THE FACT THAT THE BENEFIT OF SUCH AMP EXPENSES WOULD ALSO ENURE TO THE AE IS ITSELF SUFFICIENT TO INFER THE E XISTENCE OF AN INTERNATIONAL TRANSACTION HAS BEEN NEGATIVED BY THE COURT IN MARUTI SUZUKI INDIA LTD. (SUPRA) AS UNDER: '68. THE ABOVE SUBMISSIONS PROCEED PURELY ON SURMIS ES AND CONJECTURES AND IF ACCEPTED AS SUCH WILL LEAD TO SE NDING THE TAX AUTHORITIES THEMSELVES ON A WILD-GOOSE CHASE OF WHAT CAN AT BES T BE DESCRIBED AS A 'MIRAGE'. FIRST OF ALL, THERE HAS TO BE A CLEAR STA TUTORY MANDATE FOR SUCH AN EXERCISE. THE COURT IS UNABLE TO FIND ONE. TO THE Q UESTION WHETHER THERE IS ANY 'MACHINERY' PROVISION FOR DETERMINING THE EXIST ENCE OF AN INTERNATIONAL TRANSACTION INVOLVING AMP EXPENSES, MR. SRIVASTAVA ONLY REFERRED TO SECTION 92F (II) WHICH DEFINES ALP TO MEAN A PRICE 'WHICH IS APPLIED OR PROPOSED TO BE APPLIED IN A TRANSACTION BETWEEN PER SONS OTHER THAN AES IN ITA 269/CHD/2017 A.Y.2012-13 PAGE 54 OF 58 UNCONTROLLED CONDITIONS'. SINCE THE REFERENCE IS TO PRICE AND TO UNCONTROLLED CONDITIONS IT IMPLICITLY BRINGS INTO PLAY THE BLT. IN OTHER WORDS, IT EMPHASISES THAT WHERE THE PRICE IS SOMETH ING OTHER THAN WHAT WOULD BE PAID OR CHARGED BY ONE ENTITY FROM ANOTHER IN UNCONTROLLED SITUATIONS THEN THAT WOULD BE THE ALP. THE COURT DO ES NOT SEE THIS AS A MACHINERY PROVISION PARTICULARLY IN LIGHT OF THE FA CT THAT THE BLT HAS BEEN EXPRESSLY NEGATIVED BY THE COURT IN SONY ERICSSON . THEREFORE, THE EXISTENCE OF AN INTERNATIONAL TRANSACTION WILL HAVE TO BE EST ABLISHED DE HORS THE BLT. ........... 70. WHAT IS CLEAR IS THAT IT IS THE 'PRICE' OF AN I NTERNATIONAL TRANSACTION WHICH IS REQUIRED TO BE ADJUSTED. THE VERY EXISTENC E OF AN INTERNATIONAL TRANSACTION CANNOT BE PRESUMED BY ASSIGNING SOME PR ICE TO IT AND THEN DEDUCING THAT SINCE IT IS NOT AN ALP, AN 'ADJUSTMEN T' HAS TO BE MADE. THE BURDEN IS ON THE REVENUE TO FIRST SHOW THE EXISTENC E OF AN INTERNATIONAL TRANSACTION. NEXT, TO ASCERTAIN THE DISCLOSED 'PRIC E' OF SUCH TRANSACTION AND THEREAFTER ASK WHETHER IT IS AN ALP. IF THE ANSWER TO THAT IS IN THE NEGATIVE THE TP ADJUSTMENT SHOULD FOLLOW. THE OBJECTIVE OF C HAPTER X IS TO MAKE ADJUSTMENTS TO THE PRICE OF AN INTERNATIONAL TRANSA CTION WHICH THE AES INVOLVED MAY SEEK TO SHIFT FROM ONE JURISDICTION TO ANOTHER. AN 'ASSUMED' PRICE CANNOT FORM THE REASON FOR MAKING AN ALP ADJU STMENT.' 71. SINCE A QUANTITATIVE ADJUSTMENT IS NOT PERMISSI BLE FOR THE PURPOSES OF A TP ADJUSTMENT UNDER CHAPTER X, EQUALLY IT CANN OT BE PERMITTED IN RESPECT OF AMP EXPENSES EITHER. AS ALREADY NOTICED HEREINBEFORE, WHAT THE REVENUE HAS SOUGHT TO DO IN THE PRESENT CASE IS TO RESORT TO A QUANTITATIVE ADJUSTMENT BY FIRST DETERMINING WHETHER THE AMP SPE ND OF THE ASSESSEE ON APPLICATION OF THE BLT, IS EXCESSIVE, THEREBY EVIDE NCING THE EXISTENCE OF AN INTERNATIONAL TRANSACTION INVOLVING THE AE. THE QUA NTITATIVE DETERMINATION FORMS THE VERY BASIS FOR THE ENTIRE TP EXERCISE IN THE PRESENT CASE. ......... 74. THE PROBLEM WITH THE REVENUE'S APPROACH IS THAT IT WANTS EVERY INSTANCE OF AN AMP SPEND BY AN INDIAN ENTITY WHICH HAPPENS TO USE THE BRAND OF A FOREIGN AE TO BE PRESUMED TO INVOLVE AN INTERNATIONAL TRANSACTION. AND THIS, NOTWITHSTANDING THAT THIS IS NOT ONE OF THE DEEMED INTERNATIONAL TRANSACTIONS LISTED UNDER THE EXPLANA TION TO SECTION 92B OF THE ACT. THE PROBLEM DOES NOT STOP HERE. EVEN IF A TRAN SACTION INVOLVING AN AMP SPEND FOR A FOREIGN AE IS ABLE TO BE LOCATED IN SOME AGREEMENT, WRITTEN (FOR E.G., THE SAMPLE AGREEMENTS PRODUCED B EFORE THE COURT BY THE REVENUE) OR OTHERWISE, HOW SHOULD A TPO PROCEED TO BENCHMARK THE PORTION OF SUCH AMP SPEND THAT THE INDIAN ENTITY SH OULD BE COMPENSATED FOR? 63. FURTHER, IN MARUTI SUZUKI INDIA LTD. (SUPRA) THE COURT FURTHER EXPLAINED THE ABSENCE OF A 'MACHINERY PROVISION QUA AMP EXPENSES BY THE FOLLOWING ANALOGY: '75. AS AN ANALOGY, AND FOR NO OTHER PURPOSE, IN TH E CONTEXT OF A DOMESTIC TRANSACTION INVOLVING TWO OR MORE RELATED PARTIES, REFERENCE MAY BE MADE TO SECTION 40 A (2) (A) UNDER WHICH CERTAIN TYPES OF EXPENDITURE INCURRED BY WAY OF PAYMENT TO RELATED PARTIES IS NO T DEDUCTIBLE WHERE THE AO 'IS OF THE OPINION THAT SUCH EXPENDITURE IS EXCE SSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS .' IN SUCH EVENT, 'SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION.' THE AO IN SUCH AN INSTANCE DEPLOYS THE 'BEST JUDGMENT' ASSESSMENT AS A DEVICE TO DISALLOW WHAT HE CONSIDERS TO BE AN EXCESSIVE EXPENDITURE. THERE IS NO CORRESPONDING 'MACHINERY' PROVISION IN CHAPTER X WHICH ENABLES AN AO TO DETERMINE WHAT SHOULD BE THE FAIR 'COMPENSATION' AN INDIAN ENTITY WOULD BE ENTITLED TO IF IT IS FOUND THAT THERE IS AN INTERNATIONAL TRANSACTION IN THAT REGARD. IN PRACTICAL TERMS, ABSENT A CLEAR STATUTORY GUIDANCE, THIS MAY ENCOUNTER FURTHER DIFFICULTIES. THE STRENGTH OF A BRAND, WHICH COULD BE PRODUCT SPECIFIC, MAY BE IMPACTED BY NUMEROUS OTHER IMPONDERABLES NOT LIM ITED TO THE NATURE OF THE INDUSTRY, THE GEOGRAPHICAL PECULIARITIES, ECONO MIC TRENDS BOTH INTERNATIONAL AND DOMESTIC, THE CONSUMPTION PATTERN S, MARKET BEHAVIOUR AND SO ON. A SIMPLISTIC APPROACH USING ONE OF THE M ODES SIMILAR TO THE ONES CONTEMPLATED BY SECTION 92C MAY NOT ONLY BE LEGALLY IMPERMISSIBLE BUT WILL ITA 269/CHD/2017 A.Y.2012-13 PAGE 55 OF 58 LEND ITSELF TO ARBITRARINESS. WHAT IS THEN NEEDED I S A CLEAR STATUTORY SCHEME ENCAPSULATING THE LEGISLATIVE POLICY AND MANDATE WH ICH PROVIDES THE NECESSARY CHECKS AGAINST ARBITRARINESS WHILE AT THE SAME TIME ADDRESSING THE APPREHENSION OF TAX AVOIDANCE.' 64. IN THE ABSENCE OF ANY MACHINERY PROV ISION, BRINGING AN IMAGINED TRANSACTION TO TAX IS NOT POSSIBLE. THE DECISIONS I N CIT V. B.C. SRINIVASA SETTY (1981) 128 ITR 294 (SC) AND PNB FINANCE LTD. V. CIT (2008) 307 ITR 75 (SC) MAKE THIS POSITION EXPLICIT. THEREFORE, WHERE THE E XISTENCE OF AN INTERNATIONAL TRANSACTION INVOLVING AMP EXPENSE WITH AN ASCERTAINABLE PRICE IS UNABLE TO BE SHOWN TO EXIST, EVEN IF SUCH PRICE IS NIL, CHAPTER X PROVISIONS CANNOT BE INVOKED TO UNDERTAKE A TP ADJU STMENT EXERCISE. 65. AS ALREADY MENTIONED, MERELY BECAUSE THERE IS A N INCIDENTAL BENEFIT TO THE FOREIGN AE, IT CANNOT BE SAID THAT T HE AMP EXPENSES INCURRED BY THE INDIAN ENTITY WAS FOR PROMOTING THE BRAND OF THE FOREIGN AE. AS MENTIONED IN SASSOON J DAVID (SUPRA) 'THE FACT THAT SOMEBODY OTHER THAN THE ASSESSEE IS ALSO BENEFITTED BY THE EXPENDITURE SHOULD NOT COME IN THE WAY OF AN EXPENDITURE BEING ALLOWED BY WAY OF A DED UCTION UNDER SECTION 10 (2) (XV) OF THE ACT (INDIAN INCOME TAX ACT, 1922 ) IF IT SATISFIES OTHERWISE THE TESTS LAID DOWN BY THE LAW. 66. ON THE ISSUE OF THE INTRA GROUP SERVICES, THE A SSESSEE IS JUSTIFIED IN CONTENDING THAT THE RE-CHARACTERIZATION OF ITS TRAN SACTION INVOLVING ITS AE FOR THE TWO YEARS WHICH HAVE BEEN FULLY DISCLOSED I N THE TP STUDY ON THE BASIS OF IT NOT BEING FOR COMMERCIAL EXPEDIENCY OF THE ASSESSEE IS CLEARLY BEYOND THE POWERS OF THE TPO AND CONTRARY TO THE LE GAL POSITION EXPLAINED IN EKL APPLIANCES (SUPRA). 67. FOR THE AFOREMENTIONED REASONS THE COURT IS SAT ISFIED THAT THE REVENUE HAS NOT BEEN ABLE TO SHOW THE EXISTENCE OF AN INTERNATIONAL TRANSACTION INVOLVING AMP EXPENSES BETWEEN THE ASSE SSEE AND ITS AE, B&L, USA. QUESTION (II) IS ACCORDINGLY ANSWERED IN FAVOU R OF THE ASSESSEE AND AGAINST THE REVENUE. 68. AS A RESULT, QUESTION (III) DOES NOT ARISE. 13. THE ISSUE IN THE PRESENT CASE, WE FIND ,IS IDE NTICAL TO THAT IN BAUSCH & LAUMB (SUPRA). IN THE PRESENT CASE, THE AMP SPEN D HAS BEEN TREATED AS AN INTERNATIONAL TRANSACTION SINCE IT WAS FOUND TO BE BENEFITTING THE AE ONLY AS THE BRAND WAS OWNED BY THE AE. THERE IS NO FIN DING OF ANY CLAUSE IN THE AGREEMENT ENTERED INTO BETWEEN THE TWO PARTIES REQU IRING THE ASSESSEE TO UNDERTAKE BRAND PROMOTION EXPENSES ON BEHALF OF THE AE.THE EXISTENCE OF SOME SORT OF ARRANGEMENT BETWEEN THE ASSESSEE AND T HE AE OBLIGING THE ASSESSEE TO UNDERTAKE AMP EXPENDITURE ON BEHALF OF THE AE, HAS NOT BEEN DEMONSTRATED .ON THE CONTRARY THE OBLIGATION TO INC UR THE EXPENDITURE HAS BEEN PRESUMED TO EXIST ONLY ON THE BASIS OF THE QU ANTUM OF EXPENDITURE ,AND THE FACT THAT SINCE THE BRAND WAS OWNED BY THE AE T HE EXPENDITURE WAS FOR ITS BENEFIT ONLY. THIS BASIS HAS ALREADY BEEN REJEC TED BY THE DELHI HIGH COURT AS WE HAVE POINTED OUT ABOVE IN THE CASE OF B AUSCH AND LAUMB(SUPRA). FURTHER THE TPO HAS NOT BEEN ABLE TO PROVE THAT THE AMP EXPENSES INCURRED WAS NOT FOR THE BENEFIT OF THE AS SESSEE. THEREFORE, IN VIEW OF THE AFORESTATED DECISION OF THE DELHI HIGH COURT ,INTERNATIONAL TRANSACTION IN SUCH CIRCUMSTANCES CANNOT BE PRESUME D TO EXIST .NO IMAGINARY PRICE CAN BE ATTRIBUTED TO IT, AS HELD BY THE DELHI HIGH COURT ,IN THE AFORESTATED CASE, BY ALLOCATING COSTS INCURRED ON AMP EXPENSE AND THEN ADJUSTING THE SAME BY APPLYING THE TP PROVISIONS. 14. IN VIEW OF THE ABOVE WE HOLD THAT THE PAYMENT M ADE BY THE ASSESSEE UNDER THE HEAD AMP TO THE DOMESTIC PARTIES CANNOT B E TERMED AS INTERNATIONAL TRANSACTION. SINCE WE HAVE HELD THAT THERE DID NOT EXIST ANY INTERNATIONAL TRANSACTION QUA AMP SPEND MADE BY TH E ASSESSEE WE ARE OF THE OPINION THAT THE TPO HAS WRONGLY INVOKED THE PR OVISIONS OF CHAPTER X OF THE ACT FOR THE SAID AMP SPEND. ADDITION MADE O F RS.4,59,11,663/- IS, THEREFORE, DIRECTED TO BE DELETED. FURTHER SINCE T HE ADDITION MADE HAS BEEN DELETED FOR THE AFORESTATED REASON WE DO NOT CONSID ER IT NECESSARY TO DEAL WITH THE OTHER ARGUMENTS RAISED BY THE LD.COUNSEL F OR THE ASSESSEE. 15.GROUND NO.1 TO 8 RAISED BY THE ASSESSEE ARE, THE REFORE, ALLOWED. ITA 269/CHD/2017 A.Y.2012-13 PAGE 56 OF 58 16.IN GROUND NO.9, THE LD. COUNSEL FOR THE ASSESSEE HAS SOUGHT DIRECTIONS TO BE GIVEN TO THE ASSESSING OFFICER TO GIVEN DUE CRED IT FOR UNABSORBED DEPRECIATION BROUGHT FORWARD FROM PREVIOUS YEARS. 17.WE DIRECT THE AO TO EXAMINE THE CLAIM OF THE ASS ESSEE AND DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORT UNITY OF HEARING TO THE ASSESSSEE. 18. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . 18.17 WE FIND THAT THE CORRECTNESS OF THE SAID ORDER TO THE EXTENT PERMISSIBLE U/S 254(2) WAS CHALLENGED BY THE REVENUE IN M.A.76/CHD/2017 WHEREIN THE ISSUES IDENTIFIED BY THE CO-ORD INATE BENCH WERE SET OUT AS UNDER : 2. VIDE THIS MISCELLANEOUS APPLICATION IT HAS BEEN POINTED OUT THAT IN THE ORDER OF THE TRIBUNAL, THE DECISION OF THE HON'BLE HIGH COURT, W HICH WAS STATED TO APPLY SQUARELY TO THE FACTS OF THE CASE OF THE ASSESSEE AND FOLLOWING WHI CH THE APPEAL WAS DECIDED IN FAVOUR OF THE ASSESSEE, WAS NOT SQUARELY APPLICABLE TO THE FA CTS OF THE PRESENT CASE AND HENCE A MISTAKE HAD OCCURRED IN THE ORDER WHILE APPLYING TH E SAID DECISION TO THE FACTS OF THE PRESENT CASE. 3. BRIEF BACKGROUND OF THE CASE IS THAT THE ASSESSE E IS A JOINT VENTURE BETWEEN WIDEX A/S DENMARK AND MR. T.S. ANAND OF INDIA AND DEALS I N HEARING AIDS, SELLING PRODUCTS LARGELY TO THE END USERS AFTER CUSTOMIZATION OF THE PRODUCTS AND THROUGH A NETWORK OF DEALERS. IN THE IMPUGNED ASSESSMENT YEAR THE ASSES SING OFFICER HELD THAT THE ADVERTISING, MARKETING AND PROMOTION (AMP) EXPENSES INCURRED BY THE ASSESSEE WERE FOR THE PURPOSE OF PROMOTING THE BRAND/DEVELOPMENT OF MARKETING INT ANGIBLE FOR WIDEX PRODUCTS IN INDIA AND, THEREFORE, WAS AN INTERNATIONAL TRANSACTION IN TERMS OF SECTION 92 OF THE INCOME TAX ACT. THE ARMS LENGTH PRICE OF THE SAID TRANSACTIO N WAS DETERMINED BY APPLYING THE MOST APPROPRIATE METHOD (MAM) AND ADDITION TO THE TUNE O F RS.4,86,95,241/- WAS MADE TO THE INCOME OF THE ASSESSEE. A DRAFT ASSESSMENT ORDER I N THIS REGARD WAS PASSED, AGAINST WHICH OBJECTIONS WERE FILED BY THE ASSESSEE TO THE DISPUT E RESOLUTION PANEL, WHO IN TURN SCALED DOWN THE ADDITION TO RS.4,59,11,663/-. 3. AGGRIEVED BY THE SAME THE ASSESSEE CAME UP IN AP PEAL BEFORE THE I.T.A.T. AND CONTENDED THAT THE AMP SPEND WAS NOT AN INTERNATION AL TRANSACTION IN THE FIRST PLACE AND IN ANY CASE ALP DETERMINED OF THE SAID TRANSACTION WAS INCORRECT. THE I.T.A.T. FOUND THAT IDENTICAL ISSUE HAD BEEN DEALT WITH BY VARIOUS HIGH COURTS IN A NUMBER OF DECISIONS AND THEREAFTER REFERRING TO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF BAUSCH & LAUMB EYECARE (INDIA) PVT. LTD., 381 ITR 227 (DEL ) HELD THAT THE PROVISIONS OF TRANSFER PRICING AS OUTLINED IN CHAPTER-X OF THE ACT BEGIN W ITH THE EXISTENCE OF AN INTERNATIONAL TRANSACTION AT A CERTAIN DISCLOSED PRICE WHICH IS S UBSTITUTED WITH THE ALP BY WAY OF ADJUSTMENT UNDER TP PROVISIONS. THE I.T.A.T. HELD T HAT INTERNATIONAL TRANSACTION HAS TO EXIST AS PER THE DEFINITION OF THE SAME AS PROVIDED IN SECTION 92B OF THE ACT, WHICH PROVIDES FOR THE EXISTENCE OF AN ARRANGEMENT OR AGREEMENT O R UNDERSTANDING BETWEEN THE TWO ASSOCIATED ENTERPRISES WHEREBY ONE IS OBLIGED TO SP END ON AMP TO PROMOTE THE BRAND OF THE OTHER , AND THAT MERELY BECAUSE THE EXPENSES RE SULTED IN SERVICE OR BENEFIT TO THE OTHER PARTY WOULD NOT BY ITSELF CONSTITUTE THE TRANSACTIO N AS AN INTERNATIONAL TRANSACTION. THE I.T.A.T. FOUND THAT IN THE PRESENT CASE, THERE WAS NO FINDING OF ANY CLAUSE IN THE AGREEMENT ENTERED INTO BETWEEN THE TWO PARTIES, REQUIRING THE ASSESSEE TO UNDERTAKE BRAND PROMOTION EXPENSES ON BEHALF OF THE ASSESSEE AND IT WAS ALSO FOUND THAT AMP SPEND HAD BEEN TREATED AS INTERNATIONAL TRANSACTION SINCE IT WAS FOUND TO BENEFIT THE AE ONLY AS THE BRAND WAS OWNED BY THE AE. THEREFORE, FOLLOWING THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF BAUSCH & LAUMB EYECARE (INDIA) PVT. LTD. (S UPRA) THE ADDITION MADE ON ACCOUNT OF AMP EXPENSES, TREATING IT AS AN INTERNATIONAL TRANS ACTION, WAS DELETED. 4. IN THE MISCELLANEOUS APPLICATION NOW FILED BEFOR E US, THE CONTENTION OF THE REVENUE IS THAT THE CASE OF THE ASSESSEE IS DIFFERE NT FROM THE CASE OF BAUSCH & LAUMB EYECARE (INDIA) PVT. LTD. (SUPRA) AND THE SAME HAS BEEN POINTED OUT BY REFERRING TO A CLAUSE IN THE AGREEMENT ENTERED INTO BETWEEN WIDEX HOLDING, DENMARK AND MR.TRILOCHAN SINGH AS UNDER: THE JVCO UNDERTAKES TO MARKET THE LICENSED PRODUC TS WHICH ARE MANUFACTURED UNDER THE AGREEMENT EXCLUSIVELY IN INDIA. 8. AS PER THE REVENUE THE ABOVE CLAUSE CLEARLY SHOW S THAT THE JOINT VENTURE COMPANY I.E. THE ASSESSEE, HAS BEEN ENTRUSTED WITH THE RESP ONSIBILITY TO MARKET THE GOODS IN INDIA AND WHICH IS CONTRARY TO THE FINDINGS OF THE HON'BL E ITAT THAT OBLIGATION TO INCUR THE ITA 269/CHD/2017 A.Y.2012-13 PAGE 57 OF 58 EXPENDITURE HAS BEEN PRESUMED TO EXIST ONLY ON THE BASIS OF THE QUANTUM OF EXPENDITURE. IT WAS CONTENDED THAT EVEN DURING THE HEARING OF THE C ASE, THE ADDL. COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION HAD ARGUED THIS POINT, BUT IT DOES NOT FIND MENTION IN THE SAID ORDER. FURTHER IT WAS STATED THAT AS PER THE CLAUS E 22 OF THE JV AGREEMENT, WHICH READS AS, '22 TRADE MARKET AGREEMENT THE WIDEX TRADE MARK NAME AND LOGO IS THE EXCLUSIVE PROPERTY OF WIDEX AND BOTH THE PARTIES AGREE TO EXECUTE A SEPARATE AGREEMENT IN TH IS REGARD WHICH SHALL ENSURE THAT THE WIDEX TRADE MARK, TRADE NAME AND LOGO SHALL AT ALL TIMES REMAIN THE PROPERTY OF WIDEX.' THERE HAS TO BE A SEPARATE AGREEMENT DEALING WITH T RADEMARK ETC. LD.DR CONTENDED THAT THIS AGREEMENT WAS NOT PRODUCED BEFORE THE TPO DURI NG THE TRANSFER PRICING PROCEEDINGS WHICH FACT HAS BEEN MENTIONED IN PARA 7.1 OF THE TP O ORDER PASSED U/S 92CA OF THE L.T. ACT. 1961 DATED 29.01.2015. LD.DR CONTENDED THAT TH IS AGREEMENT WAS IMPORTANT IN THE CASE AS ADDITION IN THIS CASE HAD BEEN DONE ON THE BASIS OF AMP EXPENDITURE. 10. THE LD. COUNSEL FOR ASSESSEE, ON THE OTHER HAND , CONTENDED THAT THE ABOVE TWO CLAUSES IN THE JOINT VENTURE AGREEMENT NOWHERE DEMO NSTRATE THAT THE ASSESSEE WAS ENTRUSTED WITH THE RESPONSIBILITY OF INCURRING BRAN D PROMOTION EXPENSES AND, THEREFORE, THERE IS NO MERIT IN THE PRESENT MISCELLANEOUS APPL ICATION FILED BY THE REVENUE WHICH THEREFORE NEEDS TO BE DISMISSED. 18.17.1 IT IS SEEN THAT THE CHALLENGE WAS REPULSED BY T HE CO-ORDINATE BENCH HOLDING AS UNDER : 11. HAVING HEARD BOTH THE PARTIES, WE FIND NO MERIT IN THE CONTENTION RAISED BY THE REVENUE. AS STATED ABOVE, THE BASIS FOR ALLOWING T HE APPEAL BY THE I.T.A.T. AND BASIS FOR HOLDING THAT THE AMP SPEND BY THE ASSESSEE WAS NOT AN INTERNATIONAL TRANSACTION IN THE FIRST PLACE, WAS ON ACCOUNT OF THE FACT THAT THE RE VENUE HAD FAILED TO POINT OUT THE EXISTENCE OF ANY ARRANGEMENT OR AGREEMENT BETWEEN THE ASSESSE E AND ITS ASSOCIATED ENTERPRISE REFLECTING THE ENTRUSTMENT OF THE LIABILITY/RESPONS IBILITY TO CARRY OUT BRAND PROMOTION EXPENSES ON BEHALF OF THE PARENT AE BY THE ASSESSEE . THE CLAUSES NOW REFERRED TO BY THE REVENUE IN SUPPORT OF ITS CONTENTION THAT THEY REFL ECT THE ENTRUSTMENT OF THE RESPONSIBILITY OF CARRYING OUT BRAND PROMOTION TO THE ASSESSEE BY AE, WE FIND ARE OF NO RELEVANCE. CLAUSE NO.21 OF THE JV REFERRED TO BY THE REVENUE ONLY STA TES THAT THE ASSESSEE COMPANY WOULD MARKET THE LICENSED PRODUCTS WHICH ARE MANUFACTURED IN INDIA. THIS IS JUST A NORMAL SALES PROMOTION RESPONSIBILITY FOR THE GOODS MANUFACTURED BY THE ASSESSEE, ENTRUSTED TO THE ASSESSEE. IT CANNOT BY ANY STRETCH OF LOGIC BE RE AD TO MEAN THAT THE EXPENSES FOR PROMOTING THE BRAND OF AE WAS ENTRUSTED TO THE ASSE SSEE. SIMILARLY, THE TRADE MARK AGREEMENT AT CLAUSE 22 OF THE JOINT VENTURE AGREEME NT REFERRED TO BY THE REVENUE IN ITS MISCELLANEOUS APPLICATION MERELY STATES THAT THE TR ADE MARK NAME AND LOGO OF WIDEX IS THE EXCLUSIVE PROPERTY OF THE PARENT AE AND SEPARATE AG REEMENT WOULD BE EXECUTED BETWEEN THE PARTIES TO ENSURE THAT IT REMAINS SO IN FUTURE ALSO. WE FAIL TO UNDERSTAND HOW THIS THROWS ANY LIGHT ON THE ENTRUSTMENT OF THE RESPONSI BILITY TO CARRY OUT BRAND PROMOTION ON BEHALF OF THE AE BY THE ASSESSEE, NOR HAS THE SAME BEEN CLARIFIED BEFORE US. IN VIEW OF THE ABOVE, WE FIND NO MERIT IN THE CONTE NTION RAISED BY THE REVENUE BEFORE US. WE, THEREFORE, HOLD THAT THERE IS NO ERROR IN THE O RDER OF THE I.T.A.T. 12. IN THE RESULT, THE MISCELLANEOUS APPLICATIONS F ILED BY THE REVENUE IS DISMISSED. 18.18 WE, THUS FIND THAT THE DEPARTMENTAL OBJECTIONS THA T THE ORDER MAY NOT BE FOLLOWED AS AN ENTIRELY DIFFERENT ISSUE IN DIFFERENT CO NTEXT OF FACTS WAS BEING CONSIDERED WAS COMPLETELY UNFOUNDED. WE FIND T HAT THE PARTIES WERE IN AGREEMENT THAT CHANGE IN SHAREHOLDING PA TTERN IN THE YEAR UNDER CONSIDERATION HAD NO IMPACT IS A POSITION WHICH HAS NOT BEEN VARIED DESPITE THE FACT THAT THE CHANGE WAS POINTED OUT BY THE BENCH. IN THE FACTS AS THEY STAND, WE THEN FIND THAT SINCE THE SAID FACTOR IS STATED TO BE NOT A RELEVANT OR MATERIAL FACT AND WHEN CONSIDERED IN THE CONTEXT OF THE CASE LAWS CITED AND RELIED UPON, IT IS SEEN THAT THE ASSESSEE'S CLAIM STANDS ADDRESSED. ITA 269/CHD/2017 A.Y.2012-13 PAGE 58 OF 58 18.19 ACCORDINGLY, FOR THE DETAILED REASONS AS SET OUT HE REINABOVE IN THE EARLIER PARAS, WE FIND THERE IS NO MATERIAL REFERRED TO WHATSOEVER ON RECORD TO SHOW THAT THE AMP EXPENSES WERE EXCESSIVE AND THUS BE PRESUMED TO BE AN INTERNATIONAL TRANSACTION. WE HAVE ALS O SEEN THAT THE RELIANCE PLACED BY THE ASSESSEE IN THE ORDER PASSED BY THE CO-ORDINATE BENCH IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR IS NO T MISPLACED. ACCORDINGLY, WE HOLD THAT THE CLAIM OF THE REVENUE FAILS O N THE PRIMARY THRESHOLD ITSELF AS WE HOLD AMP EXPENSES INCURRED BY THE ASSESSEE IN THE FACTS AS THEY STAND IS NOT AN INTERNATIONAL TRANSACTION. 18.20 SINCE THE ASSESSEE SUCCEEDS ON THE JURISDICTIO NAL FOUNDATIONAL FACT ITSELF, WE FIND THAT THOUGH WE HAVE REFERRED IN PASSING TO THE CLAIMS AND COUNTER CLAIMS ON SUBSTANTIVE AND THE TWO PROTECTIV E ASSESSMENTS AND THE RESPECTIVE METHODOLOGIES, HOWEVER, IN THE AFOREMEN TIONED FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT ADJUDICATION O N THE MERITS OF THE METHODOLOGY IN GREATER DETAIL IN VIEW OF OUR CONCLUSIONS DRAWN ON THE FOUNDATIONAL FACT ITSELF BECOMES AN ACADEMIC EXERCISE. ACCOR DINGLY, WE ABSTAIN FROM ADDRESSING THOSE. ACCORDINGLY, IN VIEW OF OUR FIN DING ON GROUND NOS. 1, 3, 4 AND 7, THOUGH WE HAVE COMMENTED IN PASSING ON THE MERITS OF THE METHODOLOGIES AND CALCULATIONS CARRIED OUT BY THE TPO/RP, WE CONFINE OUR CONCLUSION TO THE AFOREMENTIONED GROUNDS. 19. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.05.2019. SD/- SD/- ( & ' ( ) * ) ( !' ) (ANNAPURNA GUPTA) (DIVA S INGH) +, $/ ACCOUNTANT MEMBER # $/ JUDICIAL MEMBER