DCIT, New Delhi V. M/s. Haier Appliances India (P) Ltd., New Delhi

ITA 3549/DEL/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7564 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 19-11-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 23-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PEEYUSH JAIN
• Keywords: Gift; Transfer pricing; Opportunity of being heard; International transaction; Bonafide belief; Wholly owned subsidiary; Reasonable cause; Revenue expenditure; Capital expenditure
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH. B.C.MEENA, ACCOUNTANT MEMBER I.T.A .NOS. - 3571/DE L/20 10 & 507/DE L/20 11 (ASSESSMENT YEAR - 2005 - 06 ) HAIER APPLIANCES (INDIA) PVT. LTD., B - 1/A - 14, MOHAN CO - OP. INDL. ESTATE, MATHURA ROAD, NEW DELHI - 110044. PAN - AABCH3162L (APPELLANT) VS DCIT, CIRCLE - 12(1), NEW DELHI (RESPONDENT) I.T.A .NO. - 3549/DE L/20 10 (ASSESSMENT YEAR - 2005 - 06 ) DCIT, CIRCLE - 12(1), NEW DELHI (APPELLANT) VS HAIER APPLIANCES (INDIA) PVT. LTD., B - 1/A - 14, MOHAN CO - OP. INDL. ESTATE, MATHURA ROAD, NEW DELHI - 110044. (RESPONDENT) APPELLANT BY SH. NEERAJ JAIN, ADV & SH.ABHISHEK AGARWAL, CA RESPONDENT BY SH. PEEYUSH JAIN, CIT DR ORDER PER DIVA SINGH, JM THESE THREE APPEALS PERTAINING TO 2005 - 06 ASSESSMENT YEARS ARE BEING DECIDED BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE. WHEREAS ITA NO. - 3571/DEL/2010 & 3549/DEL/2010 ARE CROSS - APPEALS FILED BY THE ASSESSEE AND THE REVENUE ASSAILING TH E CORRECTNESS OF THE ORDER DATED 25.05.2010 OF THE CIT(A) - XX, NEW DELHI ON VARIOUS GROUNDS. ITA NO. - 507/DEL/2011 IS AN APPEAL FILED BY THE ASSESSEE ASSAILING THE CORRECTNESS OF THE IMPUGNED ORDER DATED 29.11.2010 OF CIT(A) - XX, NEW DELHI WHERE THE PENALT Y IMPOSED U/S 271AA OF THE INCOME TAX ACT, 1961 HAS BEEN UPHELD IN APPEAL. 2 I.T.A .NOS. - 3571 & 3549 /DEL/2010 & 507/DEL/2011 2. BEFORE ADDRESSING THE ISSUES RAISED BY THE RESPECTIVE PARTIES IN THE QUANTUM APPEALS, WE FIRST SET OUT FROM THE RECORD THE RELEVANT FACTS AS AVAILABLE ON RECORD WHICH SHOWS THAT THE ASSESSEE IS STATED TO BE A WHOLLY OWNED SUBSIDIARY COMPANY OF HAIER ELECTRICAL APPLIANCES CORP. LTD., CHINA ENGAGED IN THE BUSINESS OF DISTRIBUTION OF CONSUMER DURABLES SUCH AS AIR CONDITIONERS, REFRIGERATOR, WASHING MACHINES, TELEVISION SETS ETC. IN THE YEAR UNDER CONSIDERATION THE ASSESSEE IS FOUND TO HAVE FILED A LOSS RETURN WHICH WAS REFERRED BY THE AO TO THE TRANSFER PRICING OFFICER (HEREINAFTER REFERRED TO AS TO THE TPO ). THE TPO VIDE HIS ORDER DT.24.10.2008 U/S 92CA(3) PROPOSED ADJUSTMEN T OF RS. 26,26,83,454/ - IN THE ARM S LENGTH PRICE (HEREINAFTER REFERRED TO AS ALP ) OF THE ASSESSEE. 3. IT IS SEEN THAT THE TAX PAYER IN APPEAL IS FOUND TO HAVE CONTENDED THAT IT HAD EXCLUSIVE RIGHT FOR USE OF THE TRADE MARK HAIER IN INDIA AND THE TAX PAYER FURTHER IS ALSO THE EXCLUSIVE DISTRIBUTOR IN INDIA OF CONSUMER DURABLES PRODUCTS MANUFACTURED BY HAIER GROUP OF COMPANIES UNDER THE BRAND NAME OF HAIER. REFERRING TO THE TRADE MARK LICENSE AGREEMENT DATED 27.01.2004 WITH HAIER ELECTRICAL APPLIANCES CORP. LTD, CHINA WITH ITS AE (HEREINAFTER REFERRED TO AS ASSOCIATE ENTERPRISES ) . T HE TAX PAYER IS FOUND TO HAVE CLAIMED THAT THE AFORESAID AGREEMENT PROVIDED THAT NO PAYMENT FOR ROYALTY FOR THE FIRST FIVE YEARS FOR THE USE OF TRADE MARK WAS REQUIRED T O BE MADE FOR THE EXCLUSIVE RIGHT AND LICENSES TO USE THE TRADE MARK OF HAIER FOR MANUFACTURE / SALE OF PRODUCTS IN THE INDIA . 3.1. IN THIS BACKGROUND THE TAX PAYER IS FOUND TO HAVE ASSAILED THE ADDITIONS MADE BY WAY OF RESORTING TO BRIGHT LINE HOLDING AMP AS AN INTERNATIONAL TRANSACTION. THE CONTENTION HAD BEEN PUT FORTH PRAYING FOR EXCLUSION OF EXPENDITURE CONSISTING OF ADVERTISEMENT AND SALE PROMOTIONS AMOUNTING TO RS.25.87 CRORES ON THE GR OUND THAT IT WAS FOR ITS OWN BENEFIT AS THE EXPENDITURE INCURRED FOR THE BENEFIT OF THE AE WAS REIMBURSED TO THE EXTENT OF RS. 19.01 3 I.T.A .NOS. - 3571 & 3549 /DEL/2010 & 507/DEL/2011 CRORES . T HE REMAINING EXPENSES AMOUNTING TO RS. 6.79 CRORES INCURRED WAS EXPLAINED AS AN EXPENSE WHICH IS NECESSARILY RE QUIRED TO BE INCURRED AS A DISTRIBUTOR OF PRODUCTS IN INDIA ON ACCOUNT OF EXPENSES PERTAINING TO COST OF FINANCE SCHEME TO THE CUSTOMER, FREE GIFT ON PRODUCT SALES, SALARY OF SALES STAFF, DEALERS MEET EXPENSES, EXPENSES ON SALES ACTIVITIES, PRINTED DEMONS TRATION MATERIAL, STICKERS, SALES OF PRODUCT ETC WHOSE BENEFIT C OULD N OT BE ATTRIBUTED TO THE AE OR C OULD BE R ECOVERED BY WAY OF ADJUSTMENT AS IT WA S INCURRED FOR ATTRACTING BUSINESS. I T WAS ALSO CANVASSED THAT REBATE AND DISCOUNT DO NOT FORM PART OF AMP EXPENSES . S ELECTION OF COMPARABLES FOR BENCH - MARKING THE AMP EXPENSES W ERE ALSO ASSAILED. IT WAS CONTENDED THAT THE ADVERTISEMENT EXPENSES INCURRED BY THE ASSESSEE D ID NOT RESULT IN CREATING ANY BENEFIT/ TANGIBLES FOR THE AE. 4 . CONSIDERING THE SUBMISS IONS THE CIT(A) VIDE PARA S 19 TO 21.4 UPHELD THE ACTION OF THE TPO GIVING PART RELIEF TO THE ASSESSEE VIDE P A RA 2 1. 3 HOLDING THAT REBATE AND DISCOUNTS AMOUNTING TO RS.23.13 CRORE WERE TO BE EXCLUDING WHILE BENCHMARKING THE AMP EXPENDITURE AND VIDE PARA 21. 4 HE SUSTAINED THE ADJUSTMENT TO THE EXTENT OF RS.3.12 CRORES. 5 . AGGRIEVED BY THIS BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL BEFORE THE TRIBUNAL. THE LD. AR RELYING UPON THE ORDER OF THE SPECIAL BENCH IN THE CASE OF L.G. ELECTRONICS CASE SUBMITTED THAT THE ISSUE NEEDS TO BE REMAND ED TO THE TPO . APART FROM RELYING UPON THE SAID ORDER IT WAS FURTHER SUBMITTED THAT THE TPO MAY BE DIRECTED TO DECIDE THE ISSUE IN TERMS OF THE DECISION OF THE ITAT IN ITS OWN CASE PERTAINING TO 2006 - 07 & 2007 - 08 ASSESSM ENT YEARS BY THE CO - ORDINATE BENCH IN ITA NO. - 4680/DEL/2010 AND 5235/DEL/2011 CONSIDERED SIMILAR ISSUES BY WAY OF A DETAILED FINDING. THE APPEALS FOR 2006 - 07 AND 2007 - 08 ASSESSMENT YEARS CAME TO BE DECIDED EARLIER AS THEY WERE STAY GRANTED APPEALS. 4 I.T.A .NOS. - 3571 & 3549 /DEL/2010 & 507/DEL/2011 6. CONSIDERING THE ABOVE SITUATION , LD. CIT DR ADDRESSING THE ISSUE S AGITATED BY THE ASSESSEE IN GROUND NO S . - 1 TO 1. 13 WHICH ARE ON THE AMP ISSUE ON ITS VARIOUS FACETS AND GROUND 1 TO 6 RAISED IN THE REVENUE S APPEAL WHICH WAS AGAINST THE RELIEF GRANTED BY THE CIT(A) HAD NO OBJECTION IF THE ISSUE IS RESTORED TO THE TPO IN ITS ENTIRETY WITH THE DIRECTION TO TAKE INTO CONSIDERATION THE MANDATE OF THE SPECIAL BENCH IN THE CASE OF LG ELECTR ONICS CASE. 7 . IN THE LIGHT OF THE SUBMISSIONS ADVANCED BY THE PARTIES BEFORE THE BENCH WE SET ASIDE THE ORDERS AND RESTORE THE ISSUE TO THE TPO DIRECTING HIM TO DECIDE THE ISSUES AFRESH IN TERMS OF THE MANDATE OF THE SPECIAL BENCH IN L.G. ELECTRONICS CA SE. THE TPO SHALL ALSO TAKE INTO CONSIDERATION THE ORDERS OF THE TRIBUNAL RELIED UPON BY THE ASSESSEE IN ITS OWN CASE FOR 2004 - 05; 2006 - 07 AND 2007 - 08 ASSESSMENT YEAR. NEEDLESS TO SAY THAT THE TPO FOLLOWING THE JUDICIAL PRECEDENT SHALL EXCLUD E FROM THE A MP BUNDLE OF EXPENSES THE EXPENDITURE INCURRED IN CONNECTION WITH SALES FOLLOWING THE ORDER OF THE CO - ORDINATE BENCH IN ASSESSEE S OWN CASE. 8 . THE NEXT GROUND RAISED BY THE ASSESSEE READS AS UNDER: - 2. THAT THE COMMISSIONER OF INCOME - TAX(APPEALS) ERRED ON FACTS AND IN LAW IN NOT ALLOWING THE PROVISION FOR WARRANTY BY THE APPELLANT AMOUNTING TO RS.26,39,636 HOLDING THE SAME TO BE CONTINGENT EXPENDITURE. 9 . THE RECORD SHOWS THAT THE ASSESSEE S CLAIM FOR TREATING THE PROVISION FOR WARRANTY AS ASCERTAINED LIABILITY WAS NOT ACCEPTED BY THE AO . THIS ACTION ON BEING CHALLENGED IN APPEAL BY THE ASSESSEE WAS UPHELD BY THE CIT(A) WHO CONCURRED THAT IT WAS IN THE NATURE OF CONTINGENT LIABILITY . T HE LD. AR HAS PLACED RELIANCE UPON THE ORDER OF THE HON BLE SUPREM E COURT IN THE CASE OF ROTORK CONTROLS INDIA PVT. LTD. VS CIT, CHENNAI 314 ITR 62 (SC) AND THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS WHIRLPOOL OF INDIA LTD. (ITA NO. - 1154 OF 2009) SO AS TO CONTEND THAT THE ASSESSEE ON SALE OF ITS PRODUCTS UNDERTAKES TO PROVIDE WARRANTY SERVICES FOR A PERIOD OF ONE YEAR . T HE PROVISION WAS MADE ON ACCOUNT OF WARRANTY WHICH WAS ESTIMATED TO DEVOLVE IN RESPECT OF 5 I.T.A .NOS. - 3571 & 3549 /DEL/2010 & 507/DEL/2011 SALES MADE IN THE RELEVANT PREVIOUS YEAR. THE ESTIMATE OF THE PROVISION FOR WARRANTY IT WAS SUBM ITTED WAS MADE ON A RATIONALE BASIS CONSIDERING THE PAST FAILURE RATIO IN RESPECT OF SALES OF PRODUCTS. THE SAME ACCORDINGLY IT WAS SUBMITTED DESERVES TO BE ALLOWED. 10 . THE LD. CIT DR HAD NO OBJECTION IF THE ISSUE IS RESTORED TO THE AO FOR VERIFICATION O N FACTS WHERE IT WAS SUBMITTED THE ASSESSEE MAY BE DIRECTED TO DEMONSTRATE THE AVERMENT MADE THAT THE PROVISION WAS MADE ON A SCIENTIFIC BASIS . 11 . T HE LD AR IN REPLY STATED THAT THE ASSESSEE HAD NO OBJECTION TO DEMONSTRATE THE FACTS BEFORE THE AO. IN THE LIGHT OF THE SUBMISSIONS ADVANCED THE GROUND NO. - 2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES WITH THE DIRECTION THAT THE AO SHALL PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD FOLLOWING THE LEGAL PRECEDENT RELIED UPON IN THE CASE OF ROTORK CONTROLS INDIA PVT. LTD. VS CIT (CITED SUPRA). A PERUSAL OF THE PRINCIPLE LAID DOWN BY T HEIR LORDSHIP S IN THE AFORESAID JUDGEMENT SHOWS THAT IN CASE THE ASSESSEE IS ABLE TO DEMONSTRATE THAT THE PROVISION HAS BEEN MADE ON A SCIENTIFIC BASIS IT H AS TO BE TREATED AS AN ASCERTAINED LIABILITY AND NOT A CONTINGENT LIABILITY. THE AO TO EXAMINE THE ISSUE AFRESH. 1 2 . THE NEXT ISSUE AGITATED BY THE ASSESSEE IS ADDRESSED IN GROUND NO. - 3 WHICH RE ADS AS UNDER: - 3. THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN SUSTAINING THE DISALLOWANCE OF DEDUCTION AMOUNTING TO RS.68,59,797 BEING 10% OF THE ADVERTISEMENT EXPENDITURE OF RS6,85,97,975 NOT REIMBURSED BY THE AE, HOLDING I T TO BE CAPITAL EXPENDITURE ON THE GROUND THAT THE SAME WAS INCURRED FOR LAUNCHING AND BUILDING THE APPELLANT S BRAND IN INDIA. 13 . THE ISSUE IS STATED TO BE A RECURRING ISSUE FOR THE ASSESSEE . THE RELEVANT FACTS ARE FOUND DISCUSSED IN PARA 25 TO 25.10 OF CIT (A) S ORDER. A PERUSAL OF THE SAME S HOWS THAT THE AO CONSIDERING THE CLAIM OF ADVERTISING AND PUBLICITY 6 I.T.A .NOS. - 3571 & 3549 /DEL/2010 & 507/DEL/2011 EXPENSES INCURRED AMOUNTING TO RS.25.87 CRORES ODD TREATED IT AS A DEFERRED REVENUE EXPENDITURE AND ALLOWED 1/5 OF THE SAME THEREBY RESULTING IN THE ADDITION OF RS.20.69 CRORES ODD. THE CIT(A) CONSIDERING THE FACT THAT THE ASSESSEE HAD RECEIVED SUBSIDY OF RS.19.01 CRORES ODD EXCLUDED THE SAME AND HELD 10% OF THE REMAINING WAS TO BE DISALLOWED AS CAPITAL EXPENDITURE AS HE WAS OF THE VIEW THAT THE EXPENDITURE DOES GIVE USE TO AN ENDURING BENEFIT. 14 . IN THE SAID BACKGROUND THE LD. AR REFERRING TO THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. IN 2004 - 05 ASSESSMENT YEAR IN ITA NO. - 294/DEL/2008 SUBMITTED THAT THE EXPENDITURE HAS BEEN HELD AS A R EVENUE EXPENDITURE AND THIS ORDER OF THE TRIBUNAL HAS BEEN UPHELD BY THE HON BLE HIGH COURT IN ITA NO. - 956/10, COPIES OF THE ORDER IT IS FOUND ARE AVAILABLE ON RECORD. ADDRESSING THE POSITION IN THE SUBSEQUENT ASSESSMENT YEARS THE LD. AR REFERRING TO THE ORDERS FOR 2006 - 07 & 2007 - 08 ASSESSMENT YEARS (CITED SUPRA), IN VITED ATTENTION TO PARA 11 & 12 OF THE SAME . ON THE BASIS OF THESE PARAS IT WAS SUBMITTED THAT IDENTICAL TREATMEN T WAS GIVEN BY THE REVENUE TO SIMILAR EXPENDITURE AND REPEATEDLY THIS ISSUE HAS BEEN DECIDED IN ASSESSEE S FAVOUR AS WOULD BE EVIDENT FROM THE ORDERS AVAILABLE ON RECORD. THE LD. CIT DR O N CONSIDERING THE ORDER S OF THE TRIBUNAL DID NOT DISPUTE THE STAND OF THE LD. AR. 1 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE LIGHT OF THE SUBMISSIONS ADVANCED AND CONSIDERING THE JUDICIAL PRECEDENT CITED IN ASSESSEE S OWN CASE WE SET ASIDE THE ORDERS ON RECORD AND HOLD T HAT GROUND NO. - 3 RAISED BY THE ASSESSEE HAS TO BE IS ALLOWED. 1 6. IN THE RESULT THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. I.T.A .NO. - 507/DE L/20 11 1 7. THE RELEVANT FACTS RELATABLE TO THE PENALTY IMPOSED BY THE AO U/S 271AA VIDE HIS ORDER DATED 25.06.2009 SHOW THAT THE AO PROCEEDED TO DO SO TAKING 7 I.T.A .NOS. - 3571 & 3549 /DEL/2010 & 507/DEL/2011 INTO CONSIDERATION THE FACT THAT THE ASSESSEE HAD NOT DISCLOSED AMP EXPENSES AS AN INTERNATIONAL TRANSAC TION IN THE TRANSFER PRICING REPORT SUBMITTED . T HE ARGUMENT OF THE ASSESSEE THAT REIMBURSEMENT OF SUBSIDY HAD BEEN RECEIVED TO THE EXTENT OF RS.19 CRORE ODD WAS HELD TO BE AN ARGUMENT IN CONTRADICTION AS IN FORM 3CEB THE ASSESSEE HAD NOT DISCLOSE D THE ABOVE AS AN INTERNATIONAL TRANSACTION. IN VIEW THEREOF IT WAS HELD THAT THE ASSESSEE WAS LIABLE FOR PEN ALTY U/S 271AA OF THE ACT. 1 8 . IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY IN VIEW OF THE FACT THAT PARTIAL RELIEF WAS GRANTED IN QUANTUM APPEAL THE CIT(A) GRANTED PARTIAL RELIEF TO THE EXTENT THE ADDITION STOOD REDUCED HOWEVER PRINCIPALLY HE CONFIRMED THE AO S ACTION FOR NOT REPORTING THE TRANSACTION . 19. STILL AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. AR REFERRING TO THE ORDER OF THE SPECIAL BENCH IN THE CASE OF L.G. ELECTRONICS RENDERED ON 23.01.2013 SUBMITTED THAT THE VERY FACT THAT A SPECIAL BENCH HAD TO BE CONSTITUTED TO DECIDE WHETHER IT IS AN INTERNATIONAL TRANSACTION OR NOT WOULD SHOW THAT THE ISSUE WAS DEBATABLE. THE SPECIAL B ENCH IT WAS SUBMITTED CONSIDERING THE ARGUMENTS OF VARIOUS INTERVENERS WHO ARGUE D THAT AMP WAS NOT A SEPARATE TRANSACTION LET ALONE AN INTERNATIONAL TRANSACTION THOUGH HAS HELD BY A MAJORITY VIEW THAT IT WAS AN INTERNATIONAL TRANSACTION . HOWEVER IT WAS SUBMITTED THAT IT IS ONLY AFTER THE SAID DATE THAT IT CAN BE SAID THAT THE ISSUE MAY NO LONGER BE DEBATABLE AS FAR AS THE PRESENT FORUM IS CONCERNED . IT WAS ARGUED THAT THE EXISTENCE OF A MINORITY VIE W SHOWS THAT THE ISSUE CONTINUES TO REMA I N A DEBATABLE ISSUE AS FAR AS THE PENALTY PROCEEDINGS ARE CONCERNED. REFERRING TO THE RECORD IT WAS SUBMITTED THAT TH E DECISION OF L.G .ELECTRONICS WAS THE VERY FIRST CASE IN WHICH THE SAID TRANSACTION WAS HELD TO BE AN INTERNATIONAL TRANSACTION AND THE CONCE PT OF BRIGHT LINE INTRODUCED WAS UPHELD . THE DISCLOSURE IN THESE CIRCUMSTANCES BY THE ASSESSEE BASED ON THE PAST POSITION IT WAS SUBMITTED WAS MADE ON A BONAFIDE BELIEF THAT THE SAID ISSUE IS NOT AN 8 I.T.A .NOS. - 3571 & 3549 /DEL/2010 & 507/DEL/2011 INTERNATIONAL TRANSACTION . IT WAS FURTHER SUBMITTED TH AT BASED ON THE MATERIAL PLACED BY THE ASSESSEE BEFORE THE TAX AUTHORITIES THE ADDITIONS HAVE BEEN PROPOSED ON WHICH PART RELIEF WAS GRANTED BY THE CIT(A) AND AS A RESULT OF THE DECISION OF THE SPECIAL BENCH IN THE QUANTUM PROCEEDINGS THE ISSUE HAS BEEN RE STORED TO THE TPO TO CONSIDER THEM AFRESH IN THE LIGHT OF THE DECISIONS OF THE SPECIAL BENCH AND ASSESSEE S OWN CASE IN SUBSEQUENT YEARS . IN THESE AFORE - MENTIONED PECULIAR FACTS AND CIRCUMSTANCES IT WAS HIS SUBMISSION THAT THE RE EXISTED A REASONABLE CAUS E IN TERMS OF SECTION 27 3 B OF INCOME TAX ACT, 1961 ON ACCOUNT OF WHICH THE ASSESSEE HAD NOT DISCLOSED THE SAID TRANSACTION AS AN INTERNATIONAL TRANSACTION AS SUCH THE PENAL TY IMPOSED WAS NOT ATTRACTED . 2 0 . THE LD. CIT DR SUBMITTED THAT THESE EXPLANATIONS D O NOT SEEM TO BE ADDRESSED IN THE IMPUGNED ORDER AS THE CIT(A) HAS NOT DISCUSSED WHAT ARGUMENTS WERE ADVANCED ON BEHALF OF THE ASSESSEE AND IN THE CIRCUMSTANCES IT WAS HIS STAND THAT WHAT ARGUMENTS WERE ADVANCED BEFORE THE CIT(A) SHOULD BE VERIFIED. 21 . W E HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE ARE OF THE VIEW THAT THE FACT THAT THESE ABOVE MENTIONED ARGUMENTS ARE NOT FOUND RECORDED IN THE IMPUGNED ORDER IS NOT A SHORTCOMING AS FAR AS THE ASSESSEE IS CONCERNED AN D THE ISSUE MAY REQUIRE A N INTERNAL ADMINISTRATIVE REDRESSAL IF SO WARRANTED AT THE END OF THE FIRST APPELLATE AUTHORITY. THE RECORD SHOWS THAT THE ORDER UNDER CHALLENGE WAS PASSED ON 29.11.2010. THE DECISION OF THE SPECIAL BENCH IS DATED 23.01.2013 AC CORDINGLY THESE ARGUMENTS APPARENTLY COULD NOT HAVE BEEN ADVANCED. AS PER GROUND NO.(II) BEFORE THE CIT(A) IN THE PENALTY PROCEEDINGS IT IS SEEN THE ASSESSEE IS FOUND TO HAVE AGITATED THAT THERE WAS NO INCOME ELEMENT IN THE SUBSIDY RECEIVED TOWARDS BRAND PROMOTION. ACCORDINGLY WE HOLD THAT THE SAID ARGUMENT OF THE LD. CIT DR HAS NO MERIT. HOWEVER ON A CAREFUL READING OF THE PENALTY ORDER IT IS SEEN THAT THE ASSESSEE HAS CANVASSED THAT PART OF THE EXPENSES WERE 9 I.T.A .NOS. - 3571 & 3549 /DEL/2010 & 507/DEL/2011 REIMBURSED WHICH FACT HAS BEEN FOUND TO BE ACCEPTABLE ON CONSIDERING THE MATERIAL AVAILABLE ON RECORD BY THE FIRST APPELLATE AUTHORITY IN QUANTUM PROCEEDINGS. THE SAID ORDER ALONGWITH THE FINDING IT IS SEEN HAS BEEN SET ASIDE BY US TO THE FILE TO THE TPO. IN THE LIGHT OF THESE PECULIAR FACTS ON R ECORD TAKING INTO CONSIDERATION THE ADMITTED FACT THAT BRIGHT LINE AS A CONCEPT WAS INTRODUCED FOR THE FIRST TIME AS FAR AS THE ASSESSEE IS CONCERNED IN THE YEAR UNDER CONSIDERATION AND EVEN OTHERWISE AS WOULD BE DEMONSTRATED FROM THE ARGUMENTS ADVANCED B EFORE THE SPECIAL BENCH. IN THESE PECULIAR FACTS AND CIRCUMSTANCES WE ARE INCLINED TO AGREE WITH THE ARGUMENTS ADVANCED BY THE LD. AR THAT THERE WAS A REASONABLE CAUSE ON ACCOUNT OF WHICH THE SPECIFIC TRANSACTION WAS NOT DISCLOSED AS AN INTERNATIONAL TRAN SACTION IN ITS FORM 3CEB. IN VIEW OF THE BONAFIDE BELIEF OF THE ASSESSEE THAT THE DOCUMENTATION PLACED ON RECORD IS CORRECT AND AS PER THE REQUIREMENT OF THE LAW AT THE RELEVANT POINT OF TIME, WE HOLD THAT IN THESE PECULIAR FACTS AND CIRCUMSTANCES PENALTY U/S 271AA WAS NOT ATTRACTED. THE LD. AR HAD PLACED RELIANCE UPON THE ORDER DATED 09.11.2011 IN ITA NO. - 5779/MUM./2007 IN THE CASE OF ACIT, RANGE - 8(3), MUMBAI VS M/S SMITH & NEWPHEW HEALTHCARE P. LTD. IN SUPPORT OF ITS GROUND. HOWEVER WE DO NOT DE EM IT NECESSARY TO REFER THERETO AS THE FINDING ARRIVED AT THEREIN IS FACT SPECIFIC. 22 . IN THE RESULT ITA NO. - 507/DEL/2011 OF THE ASSESSEE IS ALLOWED. 23 . IN THE RESULT, ITA NO.3549/DEL/2010 IS ALLOWED FOR STATISTICAL PURPOSES; ITA NO. - 507/DEL/2011 OF T HE ASSESSEE IS ALLOWED AND ITA NO. - 3571/DEL/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. . THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 1 2 T H OF DECEM BER 2014. SD / - S D / - ( B.C.MEENA ) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 2 / 1 2 /2014 *AMIT KUMAR* 10 I.T.A .NOS. - 3571 & 3549 /DEL/2010 & 507/DEL/2011 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI