M/s.Unibic Foods India Private Limited, Bangalore V. Deputy Commissioner of Income Tax, Bangalore

ITA 323/BANG/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6959 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 13-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C H SUNDAR RAO I
• Keywords: Business income; Depreciation; Transfer pricing; Business expenditure; International transaction; Set aside
• Section: 143(3); 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER I T ( TP) A NO S . 323/BANG/2017 & 449/BANG/2016 ASSESSMENT YEAR S : 2012 - 13 & 2011 - 12 UNIBIC FOODS INDIA PVT. LTD., (FORMERLY UNIBIC BISCUITS INDIA PVT. LTD.), NO.1134, 5 TH FLOOR, SHREERAM NIVAS, 100 FT. ROAD, HAL 2 ND STAGE, INDIRA NAGAR, BANGALORE 560 037. PAN: AAAC U 6928L VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7(1)(1), BANGALORE. A PP EL L ANT RESPONDENT APP ELL ANT BY : SHRI AJAY ROTTI, CA R E SPONDENT BY : SHRI C.H. SUNDAR RAO, CIT(DR - I), ITAT, BANGALORE. DATE OF HEARING : 22. 0 7 . 201 9 DATE OF PRONOUNCEMENT : 31 . 0 7 . 201 9 O R D E R PER N V VASUDEVAN, VICE PRESIDENT BOTH THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE FINAL ORDERS OF ASSESSMENT DATED 27.01.2016 AND 26.12.201 6 PASSED BY THE DCIT, CIRCLE 7(1)(1), BANGALORE PASSED U/S. 143(3) R.W.S. 144C(13) OF THE INCOME-TAX ACT, 1961 [THE ACT] IN RELATION TO ASS ESSMENT YEARS 2011-12 AND 2012-13 RESPECTIVELY. SINCE COMMON ISSUES ARIS ING OUT OF IDENTICAL FACTS AND CIRCUMSTANCES ARE INVOLVED IN BOTH THESE APPEALS, THEY WERE HEARD TOGETHER. WE DEEM IT APPROPRIATE TO PASS A C OMMON ORDER. IT(TP)A NOS. 323/BANG/2017 & 449/BANG/2016 PAGE 2 OF 12 IT(TP)A NO.449/BANG/2016 (AY 2011-12) 2. THE GROUNDS WHICH WERE ARGUED AND PRESSED FOR AD JUDICATION IN THIS APPEAL IS GROUND NO.2 WITH REGARD TO ADDITION OF RS .9,91,86,369 BEING A TRANSFER PRICING (TP) ADJUSTMENT IN RELATION TO AN ALLEGED INTERNATIONAL OF ADVERTISEMENT, MARKETING & SALES PROMOTION (AMP) EX PENSES INCURRED BY THE ASSESSEE. THE SECOND ISSUE RAISED IN GR.NO.3 I S WITH REGARD TO CORRECTNESS OF DETERMINATION OF ARMS LENGTH PRICE (ALP) IN RESPECT OF A TRADING TRANSACTION OF SALE OF COOKIES BY THE ASSES SEE TO ITS ASSOCIATED ENTERPRISE (AE) OF A SUM OF RS.39,99,056 CONSEQUENT TO DETERMINATION OF ALP. 3. THE FACTUAL DETAILS WITH REGARD TO THE AFORESAID TWO ISSUES ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS O F MANUFACTURING OF WIDE VARIETY OF PRODUCTS INCLUDING BISCUITS AND REL ATED BAKERY PRODUCTS AND CONFECTIONARIES. DURING THE PREVIOUS YEAR, THE ASS ESSEE HAD ENTERED INTO A TRANSACTION OF SALE OF COOKIES MANUFACTURED BY IT I N INDIA TO UNIBIC AUSTRALIA WHICH WAS AN ASSOCIATED ENTERPRISE (AE). SINCE THE TRANSACTION OF SALE OF COOKIES WAS AN INTERNATIONAL TRANSACTION, THE PRICE AT WHICH THE ASSESSEE SELLS COOKIES TO ITS AE HAS TO BE AT ARMS LENGTH A S LAID DOWN UNDER THE PROVISIONS OF SEC.92 OF THE ACT. IN TERMS OF SEC.9 2CA OF THE ACT, THE ASSESSING OFFICER (AO) REFERRED TO THE TRANSFER PRI CING OFFICER (TPO) THE QUESTION OF DETERMINATION OF ALP IN RESPECT OF THE AFORESAID INTERNATIONAL TRANSACTION. THE TPO CALLED UPON THE ASSESSEE TO F ILE TP STUDY AND REPORT IN FORM 3CEB. THE ASSESSEE DID NOT FILE THE SAME A ND ALSO FAILED TO PROVIDE REQUIRED DETAILS. SINCE THE PROCEEDINGS OF DETERMINATION OF ALP WAS GETTING BARRED BY LIMITATION, THE TPO PROCEEDED TO DETERMINE THE ALP ON SALE OF COOKIES AS FOLLOWS:- IT(TP)A NOS. 323/BANG/2017 & 449/BANG/2016 PAGE 3 OF 12 6 TAXPAYER HAS NOT SEARCHED FOR ANY COMPARABLE AND HAS NOT MAINTAINED ITS ANALYSIS OF ARMS LENGTH NATURE OF IT S INTERNATIONAL TRANSACTIONS PERTAINING TO SALE OF COOKIES OF RS. 1 ,38,82,560/-. A FRESH SEARCH WAS CONDUCTED FOR FY 2010-11 BY THE UN DERSIGNED USING KEYWORDS BAKERY AND BISCUITS ON CAPITALINE DA TABASE. THE FOLLOWING FILTERS WERE USED: A. COMPANIES WITH INCOMPLETE OR NO DATA IN FY 2010- 11 WERE REJECTED B. FUNCTIONALLY DIFFERENT COMPANIES WERE REJECTED C. AN UPPER TURNOVER FILTER OF RS. 400 CRS WAS PLAC ED, AFTER MAKING AN INDUSTRY ANALYSIS D. A LOWER TURNOVER FILTER OF 1 CRS WAS PLACED 7. COMPANIES FOUND BY THE UNDERSIGNED ARE AS UNDER : SL COMPANY NAME OP. SALES (OS) IN CR OP. COST (OC) IN CR OP. PROFIT (OP) IN CR OP/OC 1 ANMOL BISCUITS LTD 258.12 245 .56 12.56 5.11% 2 CREMICA AGRO FOODS LTD 16.81 16.29 0.52 3.19% 3 INTERNATIONAL BAKERY PRODUCTS LTD 13.79 13.76 0.03 0.22% 4 SHAH FOODS LTD 2.19 2.17 0.02 0.92% 5 J B MANGHARAM FOODS PVT LTD 21.18 20.27 0.91 4.49% MEAN MARGIN 2.79% 8 ADJUSTMENT PROPOSED ON SALE OF COOKIES TO AE IS A S UNDER: SALES TO AE RS. 1,38,82,560/- EQUIVALENT AMOUNT OF COST RS. 1,73,96,260/- ARMS LENGTH PRICE OF SALES @ 102.79% OF COST RS. 1,78,81,616/- ADJUSTMENT RS. 39,99, 056 / - IT(TP)A NOS. 323/BANG/2017 & 449/BANG/2016 PAGE 4 OF 12 4. THE TPO ALSO NOTICED THAT THERE WAS AN AGREEMENT BETWEEN THE ASSESSEE AND UNIBIC LICENSING CO. PVT. LTD., AN AUS TRALIAN COMPANY, WHEREBY THE ASSESSEE WAS GRANTED LICENSE TO EXCLUSI VELY USE THE TRADEMARKS AND ASSOCIATED PROPERTY IN RELATION TO P RODUCT VIZ., CHOCOLATE CHIP BISCUITS IN THE TERRITORY OF INDIA. THE RIGHT S SO GRANTED WAS A RIGHT TO USE THE NAME, IMAGE AND/OR LIKENESS OF SIR DONALD B RADMAN AND RIGHT TO USE THE NAME OR LOGO OF THE FOUNDATION. THE TPO AL SO NOTICED THAT THE ASSESSEE HAD INCURRED RS.10,11,83,218 ON ACCOUNT OF AMP EXPENSES AS PER FOLLOWING DETAILS:- SALES TRAVELLING RS. 1,16,28,911/ - INTENSIVE MARKET COVERAGE RS. 30,10,510/ - ADVERTISEMENT RS. 93,62,626/ - DISPLAY RS. 57,56,680/ - DISCOUNTS & TRADE SCHEMES RS. 6,38,89,612 / - INSHOP PROMOTION RS. 15,10,356/ - SAMPLING RS. 17,11,432/- SALES PROMOTION RS. 43,13,091 / - TOTAL RS.10,11,83,218/- AMP AS PERCENTAGE OF NET SALES 18.22% 5. AS CAN BE SEEN FROM THE ABOVE TABLE, THE PERCENT AGE OF AMP EXPENSES TO NET SALES WAS 18.22%. WE HAVE ALREADY SEEN THAT THE ASSESSEE DID NOT FURNISH ANY DETAILS WITH REGARD TO THE INTERNATIONAL TRANSACTION FOR THE PURPOSE OF DETERMINING THE ALP. IN THE COURSE OF PROCEEDINGS BEFORE THE TPO, HE CALLED UPON THE ASSE SSEE TO EXPLAIN THE REASONS FOR INCURRING SUCH HUGE AMP EXPENSES AND BY DOING TO THE ASSESSEE WAS INDIRECTLY PROMOTING THE BRAND OF AE. IN THE TPOS ORDER, THERE IS A REFERENCE TO THE ASSESSEE INCREASING THE BRAND VALUE OF UNIBIC LICENSING CO.LTD., WHICH BELONGED TO AE AND THEREBY INCREASING THE GOODWILL OF THE AE. THE TPO WAS OF THE VIEW THAT I NCURRING OF SUCH AMP EXPENSES WAS AN INTERNATIONAL TRANSACTION AND THE A LP IN RESPECT OF SUCH IT(TP)A NOS. 323/BANG/2017 & 449/BANG/2016 PAGE 5 OF 12 TRANSACTION HAD TO BE DETERMINED U/S. 92 OF THE ACT . THEREAFTER, THE TPO ADOPTED BRIGHT LINE TEST FOR DETERMINING THE ALP. THE BRIGHT LINE TEST IS A TEST BY WHICH SIMILAR AMP EXPENSES INCURRED BY COMP ARABLE COMPANIES ARE COMPARED WITH THE EXPENSES INCURRED BY THE ASSE SSEE AND TO THE EXTENT EXPENSES INCURRED BY ASSESSEE ARE EXCESSIVE, THE SAME IS CONSIDERED AS PROMOTING THE GOODWILL OF THE AE AND ADDED TO THE TOTAL INCOME AS ADJUSTMENT ON ACCOUNT OF DETERMINATION OF ALP. TPO ACCORDINGLY SUGGESTED AN ADDITION OF RS.9,91,86,369 BY APPLYING THE BRIGHT LINE TEST AS FOLLOWS:- S1 COMPANY NAME NET SALES (CR) AMP EXPENSES (CR) % OF AMP TO SALES 1 ANMOL BISCUITS LTD 258.12 4.85 1.88% 2 CREMICA AGRO FOODS LTD 16.81 0 0 3 INTERNATIONAL BAK ER Y PRODUCTS LTD 13.79 0 0 4 SHAH FOODS LTD 2.19 0 0 5 J B MANGHARAM FOODS PVT LTD 21.18 0 0 MEAN MARGIN 0.36% 11.4 THEREFORE ADJUSTMENTS TO BE MADE IS CALCULATED AS UNDER: AMP EXPENSES BORNE BY TAXPAYER RS. 10,11,83,218/ - NET SA LES OF TAXPAYER RS . 55,46,80,311/ - AMP EXPENSES AT ARMS LENGTH @ 0.36% OF NET SALES RS. 19,96,849/ - ADJUSTMENT ON AMP EXPENDITURE RS. 9,91,86,369/ - 12 SUMMARY OF ADJUSTMENTS MADE IS AS UNDER: ADJUSTMENT ON SALE OF COOKIES TO AE RS. 39,99,056/ - ADJU STMENT ON AMP EXPE ND ITURE INCURRED ON BEHALF OF AE RS. 9,91,86,369/ - TOTAL ADJUSTMENTS RS. 10,31,85,425/ - 6. AGAINST THE AFORESAID TWO ADDITIONS MADE BY THE AO ON THE ORDER OF THE TPO IN THE DRAFT ORDER OF ASSESSMENT, THE ASSES SEE PREFERRED IT(TP)A NOS. 323/BANG/2017 & 449/BANG/2016 PAGE 6 OF 12 OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL (DRP ). BEFORE THE DRP, THE ASSESSEE FILED A TP REPORT INSOFAR AS IT RELATE S TO THE INTERNATIONAL TRANSACTIONS OF SALE OF COOKIES OF UNIBIC AUSTRALIA . THE ASSESSEE SUBMITTED THAT SIMILAR TRANSACTIONS OF SALE OF COOKIES WERE C ARRIED OUT BY THE ASSESSEE WITH UNRELATED PARTIES. THE ASSESSEE CLAI MED THAT IN RESPECT OF SALE OF COOKIES TO UNIBIC AUSTRALIA, THE NET MARGIN ON COST OF GOODS SOLD WAS 98.35% WHEREAS EXPORTS TO UNRELATED PARTIES PRO FIT MARGIN WAS ONLY 8.44%. THEREFORE, THE SALE OF COOKIES AT GREATER M ARGIN TO RELATED PARTIES SHOULD NOT BE VIEWED ADVERSELY AS TAX BASE OF THE C OUNTRY DOES NOT SUFFER AND MORE PROFITS ARE EARNED ON RELATED PARTY TRANSA CTIONS. IT WAS ALSO SUBMITTED THAT TRANSACTIONAL NET MARGIN METHOD (TNM M) WAS USED FOR THE PURPOSE OF COMPARISON AND THE MARGINS IN TNMN IN RE SPECT OF SALE TRANSACTION BETWEEN RELATED PARTY AND UNRELATED PAR TY WAS COMPARED AND IT WAS SUGGESTED THAT THE TRANSACTION WITH THE RELATED PARTY YIELDED MORE PROFITS AND THEREFORE THERE SHOULD NOT BE ANY ADJUS TMENT ON ACCOUNT OF DETERMINATION OF ALP. COMPUTATION OF MARGIN FILED BY THE ASSESSEE BEFORE DRP IS GIVEN AS ANNEXURE-1 TO THIS ORDER. THE AP A NALYSIS DONE WAS FILED ON 20.4.2015 BEFORE THE DRP AND THE SAME IS AVAILAB LE AT PAGES 158 TO 223 OF ASSESSEES PB. DESPITE SUCH SUBMISSIONS, TH E DRP CONFIRMED THE ORDER OF AO WHICH INCORPORATE THE DIRECTIONS OF TPO OBSERVING AS FOLLOWS:- 2.1 THE ASSESSEE HAS OBJECTED TO THE TP ADJUSTMENT OF RS.39,99,056/- ON ITS SALES TO AE. THE TAXPAYER DID NOT FURNISH ANY DOCUMENT TO THE TPO THOUGH REQUESTED FOR THE SA ME A NUMBER OF TIMES. THE TPO HAS RECORDED A DATE WISE S UMMARY OF NON-COMPLIANCE IN HIS ORDER AT PARE 3. IN VIEW OF N ON-COMPLIANCE BY THE ASSESSEE THE TPO PROCEEDED TO COMPLETE TP AN ALYSIS ON THE BASIS OF MATERIAL ON RECORD. AS A RESULT OF FRE SH SEARCH THE TPO SELECTED 5 COMPARABLES AS UNDER: ANMOL BISCUITS LTD. CREMICA AGRO FOODS LTD. INTERNATIONAL BAKERY PRODUCTS LTD. IT(TP)A NOS. 323/BANG/2017 & 449/BANG/2016 PAGE 7 OF 12 SHAH FOODS LTD. JB MANGHARAM FOODS PVT. LTD. THE PLI (OP/OC) OF THESE COMPARABLES WAS WORKED OUT AT 2.79%. CONSEQUENTLY, THE TPO WORKED OUT THE ALP ON SALES OF RS.138,82,560/- TO AE AT RS.178,81,616/-. THUS, TP ADJUSTMENT OF RS.39,99,056/- WAS MADE. 2.2 THUS IT IS FOUND THAT THE TPO HAS FOLLOWED DUE PROCEDURE TO CONDUCT TP STUDIES FOR BENCHMARKING IN THE SALES SEGMENT TO THE AE AS ASSESSEE HAD NOT CARRIED OUT ANY TP DOCUM ENTATION. THE ACTION OF TPO IS CONSIDERED JUSTIFIED AND THE A DJUSTMENT IS REASONABLE WHICH IS UPHELD. THE OBJECTION OF THE AS SESSEE IS CONSIDERED WITHOUT MERIT AND REJECTED. 7. IN RESPECT OF INCURRING OF AMP EXPENSES, THE DRP CONFIRMED THE ORDER OF TPO OBSERVING AS FOLLOWS:- 3. THE ASSESSEE HAS RAISED ANOTHER OBJECTION FOR TREATING AMP EXPENDITURE AS INTERNATIONAL TRANSACTION : THE ASSESSEE IN HIS SUBMISSION (OBJECTION) HAS BA SICALLY CHALLENGED THE ACTION OF TPO TO TREAT AMP EXPENDITU RE INCURRED BY ASSESSEE AS INTERNATIONAL TRANSACTION AND MAKE T P ADJUSTMENT ON THE SAME. 3.1 THE TPO HAS DISCUSSED THE ISSUE IN DETAIL FROM PAGE 4 TO PAGE 10 OF HIS ORDER. THE TRADEMARK 'UNIBIC' IS NOT OWNED BY ASSESSEE. ASSESSEE PAYS ROYALTY TO THE AE UNIBIC LI CENCING COMPANY PTY. LTD. AS PER THE TRADEMARK AGREEMENT. P AYMENT OF ROYALTY FOR TRADEMARK IS AN EXPENDITURE BY ASSESSEE TOWARDS THE BRAND. APART FROM THIS THE TAXPAYER HAS INCURRED AN EXPENSES OF RS.10,11,83,218/-TOWARDS 'AMP'. THE TPO HAS OBSERVE D THAT THE TAXPAYER IS A LOSS MAKING COMPANY FOR PAST FEW YEAR S. THE HUGE AMP EXPENSES IS 18.22% OF THE TOTAL SALES OF RS.55. 46 CRORES OF THE ASSESSEE. THOUGH PART OF AMP EXPENSES WILL BE U SEFUL TO INCREASE SALES, MAJOR PART OF THESE EXPENSES IS USE D TOWARDS BUILDING ON BRAND VALUE OF `UNIBIC' FOR WHICH TAXPA YER ALREADY PAYING ROYALTY TO ITS AE. ON THIS PREMISES THE TPO HAS ANALYSED THE VARIOUS ASPECTS IN HIS ORDER JUSTIFYING CALCULA TION OF ALP OF AMP EXPENSES INCURRED AT RS.10,11,83,218/-. FOR CAL CULATION OF IT(TP)A NOS. 323/BANG/2017 & 449/BANG/2016 PAGE 8 OF 12 ALP THE TPO HAS APPLIED BRIGHT LIME CONCEPT AND HAS JUSTIFIED THE SAME QUOTING THE FAVOURABLE DECISION OF HON'BLE ITAT CHENNAI IN THE CASE OF ASCENDAS (INDIA) PVT. LTD. I N ITA NO. 1736/MDS/2011. THE TPO HAS CALCULATED THE PERCENTAG E OF AMP EXPENSES TO SELLS FOR THE EOMPARABLES AND ARRIVED A T THE MEAN MARGIN OF 0.36%. ACCORDINGLY, THE AMP EXPENSES ADJU STMENT HAS BEEN WORKED OUT AT RS.9,91,86,369/-. 3.2 WE HAVE CONSIDERED THE SUBMISSION / OBJECTION O F THE ASSESSEE VERY CAREFULLY. IN VIEW OF DETAILED DISCUS SION AND JUSTIFICATION GIVEN BY TPO, THE APPROACH OF THE TPO CANNOT BE FAULTED WITH. THEREFORE, THE OBJECTION OF THE ASSES SEE IS REJECTED. 8. AGGRIEVED BY THE AFORESAID ADDITION SUSTAINED B Y THE DRP, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THE TR IBUNAL. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS CLEAR FROM A READING OF THE ORDER OF DRP AND THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE DRP VID E LETTER DATED 17.4.2015 (COPY OF WHICH IS AT PAGE 158 OF PB) THAT THE TP ANALYSIS FILED BY THE ASSESSEE BEFORE THE DRP HAS NOT BEEN CONSIDERED . THE REASONS FOR NOT FILING THE TP ANALYSIS BEFORE THE TPO WAS THAT THE CONSULTANT COULD NOT COMPLETE THE ASSIGNMENT IN DUE TIME. IN OUR OPINIO N, THE DRP OUGHT TO HAVE CONSIDERED THE TP STUDY FILED BY THE ASSESSEE BEFORE IT AND CONSIDERED THE OBJECTIONS OF ASSESSEE. WE ARE ALSO OF THE VIEW THAT IN THE LIGHT OF THE FACT THAT NET MARGINS ON COST OF GOODS SOLD TO UNRELATED PARTIES BEING LESS THAN THE NET MARGINS ON SALE OF RELATED PARTIES, THE TRANSACTIONS WITH AE HAS TO REGARDED AS AT ARMS LENGTH. IN OTH ER WORDS, THE INTERNAL TNMM ADOPTED BY THE ASSESSEE WOULD SHOW THAT THE PR ICE CHARGED IN THE INTERNATIONAL TRANSACTION ON SALE OF COOKIES TO UNI BIC, AUSTRALIA WAS AT ARMS LENGTH. SINCE THE TPO DID NOT HAVE AN OCCASION TO EXAMINE THIS REPORT, WE DEEM IT FIT AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. DRP ON THIS ISSUE AND REMAND THE QUESTION OF DETERMINATION OF A LP IN RESPECT OF TRANSACTION ON SALE OF COOKIES TO UNIBIC, AUSTRALIA FOR FRESH CONSIDERATION BY THE AO/TPO KEEPING IN MIND THE OBSERVATIONS MADE IN THIS ORDER AND ALSO IT(TP)A NOS. 323/BANG/2017 & 449/BANG/2016 PAGE 9 OF 12 TAKING NOTE OF THE TP STUDY AND OTHER DETAILS FILED BY THE ASSESSEE AND REFERRED TO IN THIS ORDER. 9. AS FAR AS TRANSACTION OF INCURRING AMP EXPENSES IS CONCERNED, IT IS CLEAR FROM A READING OF THE TPOS ORDER THAT THE EX PENSES WERE CONSIDERED AS PROMOTING BRAND VALUE OF UNIBIC. THE LD. COUNSE L FOR THE ASSESSEE BROUGHT TO OUR NOTICE THAT THE BRAND UNIBIC WAS N EVER OWNED BY ANY AE, BUT WAS OWNED BY THE ASSESSEE. A COPY OF THE COMPU TER GENERATED TRADEMARKS CERTIFICATE REPORT FROM GOVT. OF INDIA, MINISTRY OF COMMERCE & INDUSTRY, DEPARTMENT OF INDUSTRIAL POLICY & PROMOTI ON, CONTROLLER OF PATENTS, DESIGNS & TRADEMARKS WEBSITE, WAS FILED BE FORE US TO DEMONSTRATE THE FACT THAT THE TRADEMARK UNIBIC IS OWNED BY ASSESSEE AND APPLICATION FOR GRANT OF REGISTRATION OF THIS TRADE MARK WAS MADE BY THE ASSESSEE AS EARLY AS ON 23.09.2009. IN OUR VIEW, T HIS FACT IS VERY VITAL. IF THE TRADEMARK IS OWNED BY ASSESSEE, AMP EXPENSES CA NNOT BE DISALLOWED CONSEQUENT TO DETERMINATION OF ALP BECAUSE THOSE EX PENSES WOULD BE IN THE NATURE OF BUSINESS EXPENSES OF ASSESSEE. THE L D. COUNSEL FOR THE ASSESSEE ALSO FILED BEFORE US SAMPLE ADVERTISEMENTS TO DEMONSTRATE THAT WHATEVER ADVERTISEMENTS WERE CARRIED OUT IN INDIA W ERE INDIA-SPECIFIC AND BY NO STRETCH OF IMAGINATION SAID TO PROMOTE THE BR AND OF OWNED BY THE AE. IT WAS ALSO SUBMITTED BEFORE US THAT LICENSING AGRE EMENT WHEREBY UNIBIC LICENCING CO. P. LTD., AUSTRALIA DATED 21.8.2007 GR ANTED LICENCE TO THE ASSESSEE WAS A TRADEMARK LICENSE TO USE THE TRADEMA RK BRADMAN AND THIS IS CLEAR FROM THE SCHEDULE-I OF AGREEMENT WHICH REA DS AS FOLLOWS:- SCHEDULE I S. NO. TRADE MARK CLASS. REGISTRATION NO. & DATE GOODS I. BRADMAN 30 1316731 OCTOBER 21, 2004 GOODS IN CLASS 30 IT(TP)A NOS. 323/BANG/2017 & 449/BANG/2016 PAGE 10 OF 12 2. DON BRADMAN SIGNATURE 30 1316727 OCTOBER 21, 2004 GOODS IN CLASS 30 10. NO PRODUCT UNDER THIS BRANDNAME WAS EVER SOLD D URING THE PREVIOUS YEAR AND THEREFORE THE CONCLUSIONS OF THE TPO BASED ON LICENSING AGREEMENT DATED 21.8.2007 ARE UNSUSTAINABLE. 11. ALL THE SUBMISSIONS MADE ABOVE ARE NOT BORNE OU T OF THE RECORD OF AO/TPO/DRP. IN THESE CIRCUMSTANCES, WE DEEM IT FIT AND PROPER TO REMAND THIS ISSUE ALSO TO THE TPO/AO FOR FRESH CONSIDERATI ON IN THE LIGHT OF SUBMISSIONS MADE BY THE ASSESSEE BEFORE US. THE TP O WILL DETERMINE THE ALP AFRESH KEEPING IN MIND THE SUBMISSIONS AS MADE ABOVE. WE MAKE IT CLEAR THAT IN THE EVENT OF ASSESSEE BEING HELD TO B E THE OWNER OF UNIBIC TRADEMARK, THERE CAN BE NO ADDITION ON ACCOUNT OF A NY DEEMED INTERNATIONAL TRANSACTION OF INCURRING OF AMP EXPEN SES. WE ALSO MAKE IT CLEAR THAT THE ISSUE WHETHER INCURRING OF AMP EXPEN SES CAN BE CONSIDERED AS INTERNATIONAL TRANSACTION IN THE FACTS AND CIRCU MSTANCES OF THE PRESENT CASE IS LEFT OPEN FOR CONSIDERATION, IF THE ADJUDIC ATION OF THAT ISSUE BECOMES NECESSARY. WITH THESE OBSERVATIONS, WE ALLOW THE A PPEAL OF ASSESSEE IN IT(TP)A NO.449/BANG/2016 FOR AY 2011-12 FOR STATIST ICAL PURPOSES. IT(TP)A NO.323/BANG/2017 (AY 2012-13) 12. THE ONLY ISSUE FOR CONSIDERATION IN THIS APPEAL IS WITH REGARD TO AMP EXPENSES. THE FACTS AND CIRCUMSTANCES OF THE CASE IN AY 2012-13 ARE IDENTICAL TO THE FACTS AND CIRCUMSTANCES OF THE CAS E IN AY 2011-12 AND ORDERS OF THE REVENUE AUTHORITIES ARE ALSO IDENTICA L. WE THEREFORE DEEM IT FIT AND APPROPRIATE TO REMIT THIS ISSUE OF DETERMINATIO N OF ALP FOR AY 2012-13 ALSO FOR FRESH CONSIDERATION BY THE TPO/AO IN THE L IGHT OF DIRECTIONS CONTAINED IN THE ORDER FOR AY 2011-12. ACCORDINGLY , THIS APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. IT(TP)A NOS. 323/BANG/2017 & 449/BANG/2016 PAGE 11 OF 12 13. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF JULY, 2019. SD/- SD/- ( JASON P. BOAZ ) ( N.V . VASU DEVAN ) AC COUNTANT MEMBER VICE PRE SIDENT BANGALORE, DATED, THE 31 ST JULY, 2019. / D ESAI S MURTHY / COPY TO: 1. THE APP ELLANT 2. THE R ESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUA R D F ILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE. IT(TP)A NOS. 323/BANG/2017 & 449/BANG/2016 PAGE 12 OF 12 ANNEXURE I NET MARGIN CALCULATION FOR THE FINANCIAL YEAR 2010 -11 PARTICULARS DOMESTIC EXPORTS TO ASSOCIATED ENTERPRISE EXPORTS TO UNRELATED PARTIES TOTAL EXPORTS TOTAL SALES - (A) 47,13,01,954 1,38,82,560 5,87,55,133 7,26,37,693 54,39,39,647 MATERIALS COST 30,88,57,287 45,10,335 3,85,02,590 4,30,12,924 35,18,70,211 MANUFACTURING COST 2,39,69,709 5,18,524 67,56,751 72,75,275 3,12,44,984 INCREASE/DECREASE IN STOCK (1,07,34,995) (1,07,34,995) CENVAT ON DESPATCHES 2,29,89,311 2,29,89,311 TOTAL VARIABLE COST - (B) 34,50,81,312 50,28,858 4,52,59,341 5,02,88,199 39,53,69,511 GROSS PROFIT (C) = (A) - (B) 12,62,20,641 88,53,701 1,34,95,793 2,23,49,494 14,85,70,135 GROSS PROFIT / SALES 26.8% 63.8% 23.0% 30.8% 27.3% ADMINISTRATION OVERHEADS 2,85,33,762 8,40,484 35,57,178 43,97,662 3,29,31,424 EXCHANGE VARIANCE (9,69,159) (41,01,768) (50,70,927) (50,70,927) PERSONAL EXPENSES 5,77,24,461 2,01,088 8,51,065 10,52,153 5,87,76,614 SELLING AND DISTRIBUTION EXPENSES 16,48,57,656 7,19,312 36,30,168 43,49,480 16,92,07,136 FINANCIAL CHARGES 1,38,04,398 4,06,619 17,20,933 21,27,553 1,59,31,951 DEPRECIATION 2,75,05,214 8,10,187 34,28,954 42,39,141 3,17,44,355 LOSS ON SALE OF ASSET 11,165 11,165 MISCELLANEOUS INCOME (14,33,299) (38,540) (1,63,113) (2,01,653) (16,34,952) TOTAL ADMINISTRATION & OTHER COST - (D) 29,10,03,358 19,69,991 89,23,416 1,08,93,408 30,18,96,766 TOTAL COST OF GOODS SOL D (E) = (B) +(D) 63,60,84,671 69,98,850 5,41,82,757 6,11,81,607 69,72,66,277 NET PROFIT /(LOSS) (16,47,82,717) 68,83,710 45,72,376 1,14,56,086 (15,33,26,631) NET MARGIN ON COST OF GOODS SOLD -25.90% 98.35% 8.44% 18.72% -22%