M/s. Sennheiser Electronics India Pvt. Ltd., Gurgaon V. ACIT, Gurgaon

ITA 269/DEL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1906 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Next Hearing Date: 19-07-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 17-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY I BARA
• Assessee Lawyers: RAMIT KATYAL CAS
• Keywords: Depreciation; Transfer pricing; Principle of natural justice; International transaction; Onus to prove
• Section: 143(3); 92B; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-1 : NEW DELHI) BEFORE HONBLE VICE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.269/DEL./2017 (ASSESSMENT YEAR : 2012-13) M/S. SENNHEISER ELECTRONICS INDIA PVT.LTD., VS. ACI T, 102-A, FIRST FLOOR, TIME TOWER, CIRCLE 4 (1), M.G. ROAD, GURGAON. GURGAON 122 002. (PAN : AAKCS4629Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AJAY VOHRA, SENIOR ADVOCATE SHRI NEERAJ JAIN, ADVOCATE S/SHRI ABHISHEK AGARWAL & RAMIT KATYAL, CAS REVENUE BY : SHRI SANJAY I. BARA, CIT DR DATE OF HEARING : 12.11.2018 DATE OF ORDER : 19.11.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, M/S. SENNHEISER ELECTRONICS INDIA PV T. LTD. (HEREINAFTER REFERRED TO AS THE TAXPAYER) BY FILI NG THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 22.12.2016 PASSED BY THE AO IN CONSONANCE WITH THE ORDERS PASS ED BY THE LD. DRP/TPO UNDER SECTION 143 (3) READ WITH SECTION 144 C OF THE ITA NO.269/DEL/2017 2 INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) QUA THE ASSESSMENT YEAR 2012-13 ON THE GROUNDS INTER ALIA THAT :- GENERAL GROUNDS: 1. THAT THE IMPUGNED ORDER OF ASSESSMENT FRAMED BY THE ASSESSING OFFICER IN PURSUANCE OF THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL (HEREINAFTER REFERRED TO A S 'DRP') UNDER SECTION 143(3) READ WITH SECTION 144C OF THE INCOME- TAX ACT, 1961 ('ACT'), IS BAD IN LAW, VIOLATIVE OF PRINCIPLES OF NATURAL JUSTICE AND VOID AB-INITIO. 1.1 THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN DETERMINING INCOME OF THE APPELLANT AT RS.3,39,05,4 06 AGAINST RETURNED TOTAL INCOME OF RS. NIL (AFTER SET -OFF OF BROUGHT FORWARD LOSS AND DEPRECIATION) UNDER THE NO RMAL PROVISIONS OF THE ACT. 1.2 THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN DETERMINING INCOME OF THE APPELLANT AT RS.26,952,81 8 ON PROTECTIVE BASIS AGAINST RETURNED TOTAL INCOME OF R S. NIL (AFTER SET-OFF OF BROUGHT FORWARD LOSS AND DEPRECIA TION) UNDER THE NORMAL PROVISIONS OF THE ACT. TRANSFER PR ICING ADJUSTMENT FOR ADVERTISEMENT, MARKETING AND SALES PROMOTION ('AMP') EXPENSES: TRANSFER PRICING ADJUSTMENT FOR ADVERTISEMENT, MARK ETING AND SALES PROMOTION (AMP) EXPENSES 2. THAT THE ASSESSING OFFICER/ TPO ERRED ON FACTS A ND IN LAW IN MAKING ADDITION TO THE INCOME OF THE APPELLA NT OF RS.3,74,72,708 ON ACCOUNT OF THE ALLEGED DIFFERENCE IN ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES. 2.1 THAT THE ASSESSING OFFICER / TPO ERRED ON FAC TS AND IN LAW IN MAKING ADDITION TO THE INCOME OF THE APPELLA NT OF RS.3,05,19,120 ON PROTECTIVE BASIS ON ACCOUNT OF TH E ALLEGED DIFFERENCE IN ARM'S LENGTH PRICE OF THE INTERNATION AL TRANSACTION OF ADVERTISEMENT, MARKETING AND PROMOTI ON EXPENSES. ITA NO.269/DEL/2017 3 3. THE DRP ERRED ON FACTS AND IN LAW IN UPHOLDING T HE FINDING OF THE TPO THAT THE AMP EXPENSES INCURRED B Y THE APPELLANT CONSTITUTED AN INTERNATIONAL TRANSACTION. 3.1 THAT THE DRP ERRED ON FACTS AND IN LAW IN HOLD ING THAT THERE EXISTS AN INTERNATIONAL TRANSACTION OF I NCURRING AMP EXPENSES ALLEGEDLY HOLDING THAT THE APPELLANT H AS REPORTED REIMBURSEMENT RECEIVED FROM ASSOCIATED ENTERPRISES ON ACCOUNT OF AMP EXPENSES AS AN INTERN ATIONAL TRANSACTION IN FORM 3CEB 3.2 THE DRP/TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT AMP EXPENSES, ETC., UNILATERALLY INCURRED BY THE APPELLANT IN INDIA COULD NOT BE CHARACTERIZE D AS AN INTERNATIONAL TRANSACTION AS PER SECTION 92B OF THE ACT, IN THE ABSENCE OF ANY PROVED UNDERSTANDING / ARRANGEME NT BETWEEN THE APPELLANT AND THE ASSOCIATED ENTERPRISE (HEREINAFTER REFERRED TO AS 'AE'). 3.3 THE DRP/ TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE ONLY TRANSFER PRICING ADJUSTM ENT PERMITTED BY CHAPTER X OF THE ACT WAS IN RESPECT OF THE DIFFERENCE BETWEEN THE ARM'S LENGTH PRICE (ALP) AND THE CONTRACT OR DECLARED PRICE, BUT THE SAID PROVISION COULD NOT BE INVOKED TO DETERMINE THE 'QUANTUM' / EXTENT OF B USINESS EXPENDITURE. 3.4 THE TPO/DRP ERRED ON FACTS AND IN LAW IN RELYI NG UPON THE DECISION OF THE SPECIAL BENCH OF THE TRIBU NAL IN CASE OF LG ELECTRONICS (ITA NO. 5140/DE1/2011) TO H OLD THAT AMP EXPENSES INCURRED BY THE APPELLANT CONSTIT UTES AN INTERNATIONAL TRANSACTION, NOT APPRECIATING THAT TH E SAID JUDGMENT HAS BEEN OVERRULED BY THE HON'BLE DELHI HI GH COURT IN THE CASE OF SONY ERICSSON MOBILE COMMUNICA TIONS 374 ITR 118. 3.5 THAT THE DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE REIMBURSEMENT ON ACCOUNT OF A MP EXPENSES WAS RECEIVED FROM THE ASSOCIATED ENTERPRIS ES IN RESPECT OF SPECIFIC MARKETING ACTIVITIES/EVENTS AND DID NOT RELATE TO THE ENTIRE ADVERTISEMENT AND MARKETING EX PENDITURE INCURRED BY THE APPELLANT 3.6 THAT THE TPO ERRED ON FACTS AND IN LAW IN HOLD ING THAT THE APPELLANT IS OPERATING AS A LIMITED RISK D ISTRIBUTOR NOT APPRECIATING THAT THE APPELLANT WAS CHARACTERIZ ED AS A ITA NO.269/DEL/2017 4 NORMAL RISK BEARING OR FULL RISK BEARING DISTRIBUTO R IN THE TRANSFER PRICING DOCUMENTATION MAINTAINED BY THE AP PELLANT. 3.7 THAT THE DRP ERRED ON FACTS AND IN LAW IN ARBI TRARILY HOLDING THAT 'IT IS THE AE, WHICH DIRECTS THE AMP S TRATEGY AND EXPENDITURE DONE BY THE ASSESSEE IN INDIA' NOT APPRECIATING THAT THE APPELLANT, AS AN INDEPENDENT ENTREPRENEUR, IS RESPONSIBLE FOR CONTROLLING AND COORDINATING THE MARKETING ACTIVITIES AND INCURRING ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES FOR THE PURPOSE OF IT'S BUSINESS IN INDIA. 3.8 THE DRP/TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE ADVERTISEMENT AND MARKETING E XPENSES WERE INCURRED BY THE APPELLANT WHOLLY AND EXCLUSIVE LY FOR PURPOSES OF ITS BUSINESS AND NOT ON BEHALF OF OR FO R THE BENEFIT OF THE AE; ANY BENEFIT TO THE AE BEING ONLY INCIDENTAL. 3.9 THE DRP/ TPO ERRED ON FACTS AND IN LAW IN HOLD ING THAT EXPENDITURE INCURRED BY THE APPELLANT WHICH RE SULTED IN BENEFIT BY WAY OF BRAND BUILDING AND INCREASES SALE S FOR THE FOREIGN AE, AND THEREFORE RESULTING IN A TRANSACTIO N OF CREATING AND IMPROVING MARKETING INTANGIBLES FOR AN D ON BEHALF OF ITS FOREIGN ASSOCIATED ENTERPRISE 3.10 THE DRP/ TPO ERRED ON FACTS AND IN LAW IN HOL DING THAT ADVERTISEMENT, MARKETING AND PROMOTION EXPENSE S INCURRED BY THE APPELLANT RESULTED IN TRANSACTION O F PROVISION OF A BRAND BUILDING SERVICES BY THE APPEL LANT TO THE ASSOCIATED ENTERPRISE. 3.11 WITHOUT PREJUDICE THAT THE DRP/TPQ ERRED ON F ACTS AND IN LAW IN NOT APPRECIATING THAT NO ADJUSTMENT O N ACCOUNT OF ALLEGEDLY EXCESSIVE AMP EXPENSES IS WARR ANTED IN THE CASE OF THE APPELLANT EVEN IF AMP EXPENSES I NCURRED BY THE APPELLANT ARE SEPARATELY BENCHMARKED APPLYIN G THE GUIDELINES PRESCRIBED BY THE HON'BLE DELHI HIGH COU RT IN THE CASE OF SONY ERICSSON MOBILE COMMUNICATIONS IND IA PVT LTD 374 ITR 118 3.12 WITHOUT PREJUDICE THAT THE DRP/TPQ ERRED ON F ACTS AND IN LAW, IN NOT APPRECIATING THAT THE AMP EXPENS ES INCURRED BY THE APPELLANT WAS APPROPRIATELY ESTABLI SHED TO BE AT ARM'S LENGTH APPLYING TNMM. ITA NO.269/DEL/2017 5 3.13 THAT THE DRP ON FACTS AND IN LAW ERRED IN NOT HOLDING THAT THE AMP EXPENDITURE I FUNCTION, BEING CLOSELY LINKED WITH ITS OPERATION OF SALES AND DISTRIBUTION OF HEADPHONES ETC. AND THE PROFIT MARGIN OF THE APPELL ANT BEING HIGHER THAN THE COMPARABLE COMPANIES AND APPLICATION OF TRANSACTIONAL NET MARGIN METHOD (TNM M) HAVING BEEN ACCEPTED BY THE REVENUE, NO SEPARATE ADJUSTMENT WAS REQUIRED TO BE MADE IN RESPECT OF SU CH AMP EXPENSES 3.14 THAT THE DRP ERRED ON FACTS AND IN LAW IN REL YING UPON THE BEPS REPORT NOT APPRECIATING THAT THE RECOMMENDATIONS OF THE SAID REPORT ARE NOT PART OF THE INDIAN TRANSFER PRICING LEGISLATION. 3.15 WITHOUT PREJUDICE THAT THE DRP ERRED ON FACTS AND IN LAW IN RELYING UPON EXAMPLES 8-13 OF THE BEPS REPOR T NOT APPRECIATING THAT THE SAID EXAMPLES PROVIDE FOR COMPENSATION IN RESPECT OF AMP EXPENSES IN VARIOUS FORMS INCLUDING BY WAY OF ADJUSTMENT TO PURCHASE PRICE OF GOODS 3.16 THE DRP ERRED ON FACTS AND IN LAW IN ALTERNAT IVELY MAKING PROTECTIVE ADJUSTMENT OF RS. 30,519,120 AND UPHOLDING THE USE OF BRIGHT LINE TEST ('BL T) EVEN THOUGH THE USE OF BLT IS NOT MANDATED UNDER THE TRANSFER P RICING REGULATIONS AND HAS BEEN REJECTED BY THE HON'BLE DE LHI HIGH COURT IN THE CASE OF SONY ERICSSON MOBILE COMMUNICATIONS LTD 374 ITR 118. 3.17 WITHOUT PREJUDICE THAT THE DRP/TPO ERRED ON F ACTS AND IN LAW IN CONSIDERING SELLING EXPENSES FOR THE PURPOSE OF COMPUTING PROTECTIVE ADJUSTMENT ON ACCOUNT OF AL LEGEDLY EXCESSING AMP EXPENSES INCURRED BY THE APPELLANT 3.18 WITHOUT PREJUDICE TO THE ABOVE MENTIONED OBJE CTION, THE DRP/TPO ERRED ON FACTS AND IN LAW IN ADOPTING A MARK- UP OF 12.06% ON THE BASIS OF PRIME LENDING RATE AND AN ADHOC INCREASE TO THE SAME, WITHOUT FURNISHING ANY EVIDENCE AND BASIS FOR ADOPTING SUCH A RATE. 3.19 WITHOUT PREJUDICE, THE DRP/ TPO ERRED ON FACTS AND IN LAW IN NOT REDUCING THE REIMBURSEMENT RECEIVED BY THE ASSESSEE AMOUNTING TO RS.10,674,331, WHILE COMPUTING THE ARM'S LENGTH PRICE OF ALLEGED INTERNA TIONAL TRANSACTION OF PROVISION OF BRAND BUILDING SERVICES . ITA NO.269/DEL/2017 6 3.20 WITHOUT PREJUDICE, THE DRP/TPO ERRED ON FACTS AND IN LAW IN CONSIDERING RECOVERY MADE BY TH E APPELLANT FROM ITS AES ON ACCOUNT OF ADVERTISEMENT EXPENSES INCURRED AT THEIR BEHEST AS RS.9,304,419 I NSTEAD OF THE CORRECT AMOUNT OF RS.10,674,331, WHILE COMPUTIN G THE PROTECTING ADJUSTMENT ON ACCOUNT OF ALLEGED INTERNA TIONAL TRANSACTION OF PROVISION OF BRAND BUILDING SERVICES . 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : M/S. SENNHEISER ELECTRONI CS INDIA PVT. LTD., THE TAXPAYER IS A SUBSIDIARY OF SENNHEISER EL ECTRONIC GMBH & CO., KG (HOLDING COMPANY), PRIMARILY INTO THE BUS INESS OF SALES AND DISTRIBUTION OF HEADPHONES, MICROPHONES, MONITO RING SYSTEMS, TOUR GUIDE SYSTEMS AND AVIATION HEADSETS. IT IMPOR TS GOODS FROM SENNHEISER GROUP COMPANIES FOR RESELLING THROUGH IT S DISTRIBUTORS IN INDIA. THE TAXPAYER DISTRIBUTES ALL BRANDS OF S ENNHEISER GROUP, NAMELY, SENNHEISER, SENNHEISER COMMUNICATIONS, NEUM ANN AND KLEIN AND HUMMEL AND ITS SERVICE CENTER IS LOCATED AT HARYANA, MUMBAI AND BANGALORE AND IT SERVICES PRODUCTS WITHI N AND OUTSIDE WARRANTY. ITS MAJOR PRODUCT RANGE IS MICROPHONES, A VIATION HEADPHONES, SPARES, EARPHONES, HEADPHONES, HEADSETS , WIRED AND WIRELESS MICROPHONES AND BOX/SPEAKERS. 3. DURING THE YEAR UNDER ASSESSMENT, THE TAXPAYER E NTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AE AS UNDER :- ITA NO.269/DEL/2017 7 S.NO. TYPE OF INTERNATIONAL TRANSACTION METHOD SELECTED TOTAL VALUE OF TRANSACTION (RS.) MAM PLI I. PURCHASE OF GOODS TRANSACTIONAL NET MARGIN METHOD OPERATING PROFIT/ OPERATING SALES 192,717,790 II. PROVISION OF SERVICES 19,992,561 III. ALLOCATION OF EXPENSES PAID 978,832 IV. REIMBURSEMENT OF EXPENSES PAID 926,903 V. INTEREST EXPENSES PAID 487,203 4. DURING THE TP PROCEEDINGS, TPO NOTICED THAT THE TAXPAYER HAS INCURRED SIGNIFICANT AMOUNT OF RS.402,42,425/- ON ACCOUNT OF ADVERTISEMENT, MARKETING AND PROMOTIONAL (AMP) EXPE NSES, WHICH IS 10.26% OF ITS SALES WHICH IS TABULATED AS UNDER :- PARTICULARS AMOUNT (IN INR) SALES 392,060,969 AMP EXPENSES 40,242,425 AMP SALES 10.26% 5. TWO MAJOR ISSUES HAVE CROPPED UP BEFORE TPO ON E : WHETHER THERE IS A RESISTANCE OF INTERNATIONAL TRAN SACTIONS ON ACCOUNT OF ENHANCED AMP EXPENSES; AND TWO : THAT TH E BENCHMARKING NEEDS TO BE CARRIED OUT FOR ITS INTERN ATIONAL TRANSACTION INCLUDING THE REIMBURSEMENT THAT HAS BE EN MADE BY THE ASSOCIATED ENTERPRISES (AE). OUT OF AMP EXPENSES O F RS.402,42,425/-, TAXPAYER RECEIVED REIMBURSEMENT OF RS.93,04,419/- FROM ITS AE FOR THE AMP EXPENSES INC URRED BY IT. ITA NO.269/DEL/2017 8 6. TPO, AFTER DECLINING THE CONTENTION RAISED BY TH E TAXPAYER, REACHED THE CONCLUSION THAT SINCE THE TAXPAYER HAS INCURRED A COST WITH REGARD TO THE BENEFITS AND SERVICES PROVIDED T O THE AE, THE BENEFIT OF WHICH IN THE FORM OF AMP EXPENSES IS FLO WING TO THE AE AND THUS CREATED VALUABLE MARKETING INTANGIBLES, TH US BENEFITED THE SENNHEISER BRAND IN INDIA AS THE TAXPAYER IS NOT TH E LEGAL OWNER OF THE BRAND IN INDIA. THE LD. TPO, BY APPLYING THE D ECISION OF SPECIAL BENCH DECISION RENDERED BY THE TRIBUNAL IN CASE OF LG ELECTRONICS INDIA PVT. LTD. (ITA NO.5140/DEL/2011), REJECTED THE CONTENTIONS RAISED BY THE TAXPAYER THAT THE EXPENSE S WERE INCURRED FOR ITS OWN ACTIVITY IN INDIA AND IS FOR THE BENEFI T OF INDIAN BUSINESS ONLY. 7. TPO ACCORDINGLY PROPOSED THAT THE TAXPAYER HAS I NCURRED RS.229,49,081/- UNDER THE HEAD AMP WHICH IS PUREL Y FOR BRAND PROMOTION. HOWEVER, THE TPO EXCLUDED RS.79,88,925/ - INCLUDED BY THE TAXPAYER UNDER THE HEAD SELLING & OTHER EXP ENSES FROM THE COMPUTATION OF AMP TREATING THE SAME AS SALES P ROMOTION EXPENSES AND THEREBY PROPOSED ALP ADJUSTMENT RELATI NG TO AMP EXPENSES AT RS.374,72,708/-. 8. TPO USED BRIGHT LINE TEST (BLT) FOR COMPUTATION OF PERCENTAGE OF AMP TO SALES BY DETERMINING THE BRIGH T LINE LIMIT. TPO BY EXAMINING INDIRECT EXPENSES MADE BY THE TAXP AYER ADDED ITA NO.269/DEL/2017 9 FURTHER MARK-UP OF 3% ON THE AMP SPENT AMOUNT AND D ETERMINED THE TOTAL MARK-UP OF 12.06% ON AMP SPENT AND PROPOS ED THAT THE TAXPAYER SHOULD HAVE BEEN COMPENSATED BY THE AE TO THE TUNE OF RS.355,37,693/- PLUS MARK-UP OF 12.06% FOR UNDERTAK ING AMP ACTIVITIES FOR ITS AE. TPO PROPOSED THE ALP OF AMP EXPENSES AS UNDER :- SUBSTANTIVE ADJUSTMENT (PARA 8.1.3) RS.37,472,708 PROTECTIVE ADJUSTMENT (PARA 8.2.5) RS.30,519,120 9. THE TAXPAYER CARRIED THE MATTER BEFORE THE LD. D RP BY FILING OBJECTIONS WHO HAS DISPOSED OF THE OBJECTIONS. FEE LING AGGRIEVED, THE TAXPAYER HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 10. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE S OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 11. UNDISPUTEDLY, TPO/DRP HAVE USED BLT IN ORDER TO COMPARE THE AMP EXPENSES OF THE TAXPAYER WITH THAT OF THE C OMPARABLES. IT IS ALSO NOT IN DISPUTE THAT THE TPO HAS RELIED UPON SPECIAL BENCH DECISION OF THE TRIBUNAL RENDERED IN LG ELECTRONICS INDIA PVT. LTD. (SUPRA) IN APPLYING THE BLT FOR DETERMINING THE EXI STENCE OF ITA NO.269/DEL/2017 10 INTERNATIONAL TRANSACTIONS IN ORDER TO COMPUTE THE ALP OF SUCH TRANSACTIONS, WHICH HAS SINCE BEEN OVER-RULED. IT IS ALSO NOT IN DISPUTE THAT THE TPO MADE TP ADJUSTMENT ON AMP EXPE NSES ON THE GROUND THAT THE TAXPAYER HAS INCURRED HUGE EXPENSES OF AMP WHICH HAS BENEFITED ITS AE BY DEVELOPING MARKETING INTANGIBLES AND BRAND NAME OF ITS AE. IT IS ALSO NOT IN DISPUT E THAT THE TPO HAS TAKEN INTO CONSIDERATION THAT THE TAXPAYER HAS NOT ONLY DEPLOYED ITS FUNDS BUT ALSO DEPLOYED HIS TRAINED MANPOWER FOR PR OVIDING AMP SERVICES. 12. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRC UMSTANCES OF THE CASE, THE SOLE QUESTION ARISES FOR DETERMINATIO N IN THIS CASE IS :- AS TO WHETHER BLT APPLIED BY TPO/DRP IN THIS CASE IS AN APPROPRIATE METHOD FOR DETERMINING THE INTERNATIONAL TRANSACTIONS AND IN RETURN TO FURTHER CALCULATE THE ALP OF SUCH INTERNATIONAL TRANSACTION S ? 13. UNDISPUTEDLY, TPO/DRP FOLLOWED THE LG ELECTRONICS INDIA PVT. LTD. (SUPRA) DECIDED BY SPECIAL BENCH OF THE TRIBUNAL A PPLIED THE BLT IN ORDER TO DECIDE THE ISSUE IF AMP EXPENDI TURE BY THE TAXPAYER IS AN INTERNATIONAL TRANSACTION LEADING TO THE BRAND BUILDING OF ITS AE. HONBLE DELHI HIGH COURT HAS S INCE OVERRULED THE LG ELECTRONICS INDIA PVT. LTD. (SUPRA) DECISION. WHEN THE HONBLE DELHI HIGH COURT IN SONY ERICSSON INDIA PVT. LTD. V. CIT (2015) 374 ITR 118 (DEL.) AND SUBSEQUENTLY IN MARUTI SUZUKI ITA NO.269/DEL/2017 11 INDIA LTD. V. CIT (2016) 328 ITR 210 (DEL.) HAS CATEGORICALLY HELD THAT BLT IS NOT A VALID BASIS FOR DETERMINING THE E XISTENCE OF INTERNATIONAL TRANSACTION OR FOR THAT MATTER FOR CO MPUTING THE ALP OF SUCH INTERNATIONAL TRANSACTION INVOLVING AMP EXP ENSES, THE ORDER OF TPO PASSED BY MAKING BLT AS BASIS OF THE A LP ADJUSTMENT IS NOT SUSTAINABLE IN THE EYES OF LAW. 14. FURTHERMORE, HONBLE DELHI HIGH COURT IN SUBSEQ UENT DECISIONS VIZ. BAUSCH & LOMB EYE CARE (INDIA) PVT. LTD. V. ADDITIONAL CIT (2016) 381 ITR 227 (DEL.) AND HONDA SIEL POWER PRODUCTS LTD. V. DY. CIT (2016) 237 TAXMAN 304 HELD THAT IT IS FOR THE REVENUE TO FIRSTLY DISCHARGE THE ONUS TO PROVE THE EXISTENCE OF AN INTERNATIONAL TRANSACTION BETWEEN THE TAXPAYER A ND ITS AE AND ONLY THEREAFTER ALP OF INTERNATIONAL TRANSACTIONS I NVOLVING AMP CAN BE COMPUTED. 15. IN THE INSTANT CASE, THERE IS NOT AN IOTA OF MA TERIAL ON THE FILE APART FROM APPLYING THE BLT AND BY TAKING THE VIEW THAT THE TAXPAYER HAS INCURRED HUGE AMP/SALES EXPENSES TO TH E TUNE OF 10.26%, NO COGENT MATERIAL IS THERE TO TREAT THE IN CURRING OF AMP EXPENSES AS INTERNATIONAL TRANSACTION MORE PARTICUL ARLY WHEN BASIS FOR TREATING THE AMP EXPENSES AS INTERNATIONAL TRAN SACTION I.E. BLT IS NOT A LEGALLY SUSTAINABLE METHOD. ITA NO.269/DEL/2017 12 16. HONBLE DELHI HIGH COURT IN VALVOLINE CUMMINS PRIVATE LIMITED IN ITA 158/2016 ORDER DATED 31.07.2017 CATEGORICALLY HELD THAT MERELY BECAUSE OF THE FACT THAT THE TAXPA YER WAS PERMITTED TO USE THE BRAND NAME VALVOLINE WILL NOT AUTOMATI CALLY LEAD TO AN INFERENCE THAT ANY EXPENSE INCURRED BY THE TAXPAYER TOWARDS AMP WAS ONLY TO ENHANCE THE BRAND. TO PROVE THIS FACT, THE REVENUE IS REQUIRED TO PROVE SPECIFIC ARRANGEMENT OR AGREEMENT BETWEEN TAXPAYER AND THE AE LEADING TO THE CONCLUSION THAT AMP EXPENSES INCURRED BY THE TAXPAYER WAS NOT FOR ITS OWN BENEFI T BUT FOR THE BENEFIT OF ITS AE. 17. SO, WE ARE OF THE CONSIDERED VIEW THAT MERELY B Y APPLYING THE BLT, THE EXISTENCE OF INTERNATIONAL TRANSACTION S CANNOT BE PROVED AND AS SUCH THE ADJUSTMENT MADE BY THE TPO/D RP/AO ON THIS ACCOUNT IS NOT SUSTAINABLE IN THE EYES OF LAW. WE ARE FURTHER OF THE CONSIDERED VIEW THAT ALP EXPENSES INCURRED BY T HE TAXPAYER WERE NOT FOR THE BENEFIT OF AE BUT ONLY TO ENHANCE SALES OF THE TAXPAYER. IDENTICAL ISSUE HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL IN FAVOUR OF THE T AXPAYER IN TAXPAYERS OWN CASE FOR AY 2013-14 HAVING IDENTICAL FACTS AND SAME BUSINESS MODEL AS IN THE YEAR UNDER CONSIDERAT ION WHEREIN THE TPO HAD ALSO COMPUTED THE ALP OF THE INTERNATIO NAL TRANSACTIONS BY APPLYING BLT. ITA NO.269/DEL/2017 13 18. LEARNED DR FOR THE REVENUE, ALTHOUGH ADMITTED T HE LEGAL POSITION ENUNCIATED IN THE PRECEDING PARAGRAPHS, BU T HE CONTENDED THAT SINCE ALL THE AFORESAID DECISIONS ARE LYING CH ALLENGED BEFORE THE HON'BLE APEX COURT, THE MATTER MAY BE KEPT PENDING TILL THE DECISION BY HON'BLE APEX COURT. HOWEVER, WE ARE OF THE CONSIDERED VIEW THAT SINCE IT IS A STAY GRANTED MAT TER AND THE PROCEEDINGS BEFORE THE SECOND APPELLATE AUTHORITY H AVE NOT BEEN STAYED BY ANY HIGHER FORUM, THE SAME CANNOT BE KEPT PENDING. 19. AFTER CONSIDERING THE LEGAL POSITION AS DISCUSS ED IN THE PRECEDING PARAGRAPHS, WE ARE OF THE CONSIDERED OPIN ION THAT THE ALP OF AN INTERNATIONAL TRANSACTION INVOLVING AMP E XPENSES, THE ADJUSTMENT MADE BY THE TPO/DRP/AO IS NOT SUSTAINABL E IN THE EYES OF LAW. AT THE SAME TIME, WE CANNOT IGNORE THE SUBMISSION OF THE LEARNED DR THAT THE MATTER IS PENDING BEFORE HO N'BLE APEX COURT AND THE DECISION OF HON'BLE APEX COURT WOULD BE BINDING UPON ALL THE AUTHORITIES. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER. WE HOLD THAT AS PER THE FACTS OF THE CASE AND THE LEGAL POSITION AS OF NOW AND DISCUSSED ABOVE IN THI S ORDER, THE ADJUSTMENT MADE BY THE TPO/DRP/AO IN RESPECT OF AMP EXPENSES IS NOT SUSTAINABLE. HOWEVER, IF THE ABOVE DECISIONS OF HON'BLE JURISDICTIONAL HIGH COURT WHICH IS UNDER CONSIDERAT ION BEFORE THE ITA NO.269/DEL/2017 14 HON'BLE APEX COURT IS MODIFIED OR REVERSED BY THE H ON'BLE APEX COURT, THEN THE ASSESSING OFFICER WOULD PASS THE OR DER AFRESH CONSIDERING THE DECISION OF HON'BLE APEX COURT. IN THOSE CIRCUMSTANCES, HE WILL ALSO ALLOW OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. 20. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED PRO TANTO. ORDER PRONOUNCED IN OPEN COURT ON THIS 19 TH DAY OF NOVEMBER, 2018. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) VICE PRESIDENT JUDICIAL MEMBER DATED THE 19 TH DAY OF NOVEMBER, 2018 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A). 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.