Whirlpool of India Ltd., Gurgaon V. DCIT, New Delhi

ITA 426/DEL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5489 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 16-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 23-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PEEYUSH JAIN; YOGESH KUMAR VERMA
• Assessee Lawyers: PUNEET CHUGH
• Keywords: Transfer pricing; International transaction
• Section: 37(1); 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SHRI C. M. GARG, JUDICIAL MEMBER I.T.A .NO.-426/DEL/2013 (ASSESSMENT YEAR-2008-09) WHIRLPOOL OF INDIA LTD. VS. DCIT WHIRLPOOL HOUSE, PLOT NO.40, LTU, SECTOR -44, NEW DELHI. GURGAON (HARYANA) PAN: AAACW1336L (APPELLANT) (RESPONDENT) ASSESSEE BY:-SH. NEERAJ JAIN, ADV. & SH. AJAY VOHRA, ADV. & SH. PUNEET CHUGH, CA. & SH. ABHISHEK AGGARWAL, CA. REVENUE BY:-SH. PEEYUS H JAIN, CIT. DR & SH. YOGESH KUMAR VERMA, CIT DR. ORDER PER R. S. SYAL, AM. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 23.11.2012 PASSED BY THE ASSESSING OFFICER U/S 143( 3) R.W.S. 144C OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLE D `THE ACT) IN RELATION TO THE ASSESSMENT YEAR 2008-09. I.T.A .NO.-426/DEL/2013 2 2. FIRST ISSUE RAISED IN THIS APPEAL IS AGAINST THE JURISDICTION OF THE TRANSFER PRICING OFFICER (TPO) TO MAKE TRANSFER PRICING (TP) ADJUSTMENT ON ACCOUNT OF ADVERTISEMENT, MARKETING A ND PROMOTION (AMP) EXPENSES. AT THE VERY OUTSET, IT WA S FAIRLY ACCEPTED BY THE LD. AR AND RIGHTLY SO, THAT THE SPE CIAL BENCH OF THE TRIBUNAL IN THE CASE OF LG ELECTRONICS INDIA PVT. VS. ACIT (2013) 152 TTJ (DEL) (SB) 273 HAS UPHELD THE JURISDICTION OF THE TPO UNDER SIMILAR CIRCUMSTANCES. HOWEVER, THE LD. AR ST ATED THAT HE WANTED TO KEEP THIS ISSUE ALIVE. IN VIEW OF THE AFO RESAID SPECIAL BENCH ORDER DECIDING THIS ISSUE AGAINST THE ASSESSE E, WE UPHOLD THE JURISDICTIONAL OF THE TPO TO MAKE THE TP ADJUSTMENT ON ACCOUNT OF AMP EXPENSES. 3. THE SECOND ISSUE RAISED BY THE LD. AR IS ABOUT THE EXCLUSION OF A SUM OF RS.143,36,26,136/-, CHARACTERIZED BY TH E ASSESSEE AS PRICING ADJUSTMENT, FROM THE COMPUTATION OF TOTAL AMP EXPENSES FOR THE PURPOSES OF DETERMINATION OF ARMS LENGTH PRICE (ALP) IN THIS REGARD. 4. BRIEFLY STATED THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSEE INCURRED CERTAIN AMOUNT OF ADVERTISEMENT EXPENSES, THE DETAIL OF WHICH HAS BEEN INCORPORATED ON PAGE 10 OF THE TPOS ORDER. THE TPO ACCEPTED THE ASSESSEES CONTENTION OF ALL EXPEN SES IN THIS LIST I.T.A .NO.-426/DEL/2013 3 AS NOT FALLING WITHIN THE SCOPE OF AMP EXPENSES EXC EPT A SUM OF RS.143,36,26136/- DESCRIBED BY THE ASSESSEE AS PRI CING ADJUSTMENT. IT WAS ARGUED BEFORE THE TPO THAT SUCH PRICING ADJUSTMENT OF RS.143.36 CRORE WAS NOTHING BUT A LE VERAGE IN THE MAXIMUM RETAIL PRICE OF THE PRODUCTS SOLD TO THE D EALERS AND DISTRIBUTORS OF THE ASSESSEE COMPANY AS A PROFIT M ARKUP IN THE FORM OF EXTRA TRADE DISCOUNT. THE TPO DID NOT ACCEP T THE ASSESSEES CONTENTION FOR THE ELIMINATION OF THIS AMOUNT FROM THE TOTAL AMP EXPENSES BY OPINING THAT IT WAS A TOOL EMPLOYED BY THE ASSESSEE TO CREATE THE BRAND LOYALTY AMONGST ITS DEALERS. HE, T HEREFORE, INCLUDED THIS AMOUNT OF RS.143.36 CRORE IN THE TOTA L AMP EXPENSES FOR THE PURPOSES OF BENCHMARKING. THE DRP, AND, IN TURN, THE AO ACCEPTED THE TPOS POINT OF VIEW ON THIS ASPECT. NO W THE ASSESSEE WANTS THIS AMOUNT TO BE DELETED FROM THE GROSS QUAL IFYING AMOUNT OF AMP EXPENSES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE SPECIAL BENCH OF THE TRIBUN AL IN THE CASE OF LG ELECTRONICS (SUPRA) HAS HELD VIDE PARAS 18.5 AND 18.6 OF ITS ORDER THAT: THE EXPENSE IN CONNECTION WITH THE SAL ES WHICH DO NOT LEAD TO BRAND PROMOTION CANNOT BE BROUGHT WITHIN AM BIT OF ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES F OR DETERMINING THE COST/VALUE OF INTERNATIONAL TRANSAC TIONS. IT HAS I.T.A .NO.-426/DEL/2013 4 FURTHER BEEN HELD THAT THE LOGIC IN THE EXERCISE OF FINDING OUT THE AMP EXPENSES TOWARDS CREATION OF MARKETING INTANGIB LE FOR THE FOREIGN AE STARTS WITH IDENTIFYING THE EXPENSES WHI CH ARE OTHERWISE IN THE NATURE OF ADVERTISEMENT, MARKETING AND PROMOTION. IF AN EXPENDITURE ITSELF IS NOT IN THE N ATURE OF ADVERTISING, MARKETING OR PROMOTION, THAT OUGHT TO BE EXCLUDED AT THE VERY THRESHOLD. FROM THE ABOVE OBSERVATIONS OF THE SPECIAL BENCH ON THIS ISSUE, IT IS MANIFEST THAT THE EXPENS ES WHICH ARE IN THE NATURE OF DISCOUNT ARE OUTSIDE THE PURVIEW OF T OTAL COMPOSITION OF AMP EXPENSES FOR THE PURPOSES OF DETERMINATION O F THEIR ALP. 6. ADVERTING TO THE FACTS OF THE EXTANT CASE, WE FI ND FROM PAGES 250 AND 251 OF THE PAPER BOOK, BEING THE WRITTEN SU BMISSIONS DATED 14.9.2011 FILED BEFORE THE TPO, THAT THE ASSE SSEE CATEGORICALLY STATED THAT THE SUM OF RS.143.36 CROR E WAS IN THE NATURE OF PRICING ADJUSTMENT PASSED ON TO ITS DEALE RS AND DISTRIBUTORS AS EXTRA TRADE DISCOUNT . IT WAS FURTHER EXPLAINED THAT: PRICING ADJUSTMENT IN A WAY IS A REDUCTION IN THE SALES PRICE AS THE SAME HAVE BEEN PASSED ON TO THE DEALERS AND DISTRIB UTORS ON EFFECTING THE SALES' . THE TPO DID NOT DISPUTE THE NATURE OF `PRICING ADJUSTMENT AS BEING DISCOUNT AND INCENTIVE GIVEN T O DEALERS. THIS FACT IS VIVID FROM PAGE 22 OF HIS ORDER WHEREIN HE RECORDED THAT: ` THE DISCOUNT AND INCENTIVES THAT THE ASSESSEE IS PA SSING ON TO THE I.T.A .NO.-426/DEL/2013 5 DEALERS . IT SHOWS THAT THE TPO DULY ACCEPTED THE NATURE OF THE AMOUNT AS DISCOUNT AND INCENTIVES TO THE ASSESSEES DEALERS AND DISTRIBUTORS. HE PROCEED TO INCLUDE THI S AMOUNT IN THE TOTAL AMP EXPENSES BY HOLDING THAT IT WAS A TOOL EM PLOYED BY THE ASSESSEE TO CREATE THIS BRAND LOYALTY AMONG THE DEA LERS. THUS IT IS PATENT THAT THE NATURE OF THE AMOUNT OF RS.143.36 C RORE IS UNDISPUTED, AS BEING DISCOUNT GIVEN TO DEALERS ON T HE SALES MADE. ONCE IT IS HELD THAT A PARTICULAR AMOUNT IS DISCOUN T AND IS NOT IN THE NATURE OF DIRECT ADVERTISEMENT EXPENSES, THE SAME S TANDS EXPELLED FROM THE QUALIFYING AMOUNT WHICH UNDERGOES THE PROC ESS OF DETERMINATION OF ALP OF THE AMP EXPENSES. RESPECTFU LLY FOLLOWING THE MANDATE OF THE SPECIAL BENCH VERDICT IN THE CASE OF LG ELECTRONICS (SUPRA), WE ORDER FOR THE EXCLUSION OF THE AMOUNT OF PRICING ADJUSTMENT FROM THE TOTAL AMP EXPENSES FOR THE PURPOSES OF DETERMINATION OF ALP IN RESPECT OF AMP EXPENSES. 7. NOW WE TAKE UP THE NEXT ISSUE RAISED BEFORE US A BOUT THE OTHER COMPONENT OF THE TOTAL AMP EXPENSES. IT IS A SUM OF RS.52.70 CRORE WHICH WAS INCLUDED BY THE TPO IN THE TOTAL AMP EXPENSES. NOTWITHSTANDING HIS SUBMISSIONS AS DEALT WITH INFRA IN SUPPORT OF FULL DEDUCTION OF AMOUNT, THE LD. AR CAN DIDLY CONCEDED THAT AS PER THE SPECIAL BENCH ORDER IN THE CASE OF LG ELECTRONICS (SUPRA), THIS AMOUNT OF RS.52.70 CRORE IS IN THE NA TURE OF AMP I.T.A .NO.-426/DEL/2013 6 EXPENSES, EXCEPT FOR A SUM OF RS.6 CRORE WHICH REPR ESENTED SALARIES PAID TO DEMONSTRATORS ENGAGED AT THE DEALERS' / DIS TRIBUTORS' OUTLETS. THE LD. AR CONTENDED THAT SINCE THIS AMOUNT WAS IN THE NATURE OF SALARIES PAID TO THE DEALERS STAFF IN CONNECTION W ITH THE SALE OF PRODUCTS, THE SAME SHOULD BE ELIMINATED FROM THE TO TAL AMP EXPENSES. THE LD. DR OPPOSED THIS CONTENTION. 8. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE TRUE NATURE AN D CHARACTER OF THE AMOUNT OF RS.6 CRORE IS NOT PROPERLY COMING UP FROM THE MATERIAL ON RECORD. THOUGH IT WAS CONTENDED THAT THIS AMOUN T WAS IN THE NATURE OF REIMBURSEMENT OF SALARY PAID TO SALES STA FF OF DEALERS/DISTRIBUTORS, BUT NO MATERIAL HAS BEEN SHOW N TO SUBSTANTIATE THIS CONTENTION. WE WANT TO MAKE IT CLEAR THAT IT I S THE CORRECT NATURE OF AMOUNT WHICH IS DECISIVE AND NOT THE NOME NCLATURE GIVEN BY THE PARTIES. AS THE CORRECT NATURE OF THIS AMOUN T OF RS.6 CRORE IS NOT ASCERTAINABLE, WE ARE HANDICAPPED TO RENDER ANY DECISION ON IT. AS SUCH, WE DEEM IT PROPER TO SET ASIDE THE IMPUGNE D ORDER ON THIS ISSUE AND REMIT THE MATTER TO THE FILE OF THE AO/TP O FOR TAKING A FRESH DECISION AFTER ASCERTAINING THE CORRECT NATUR E OF THIS AMOUNT. IF THIS AMOUNT OR ITS PART IS FOUND TO BE LEADING T O THE ADVERTISEMENT OR PROMOTION OF THE PRODUCTS SOLD BY THE ASSESSEE, THEN IT SHOULD BE INCLUDED TO THAT EXTENT IN THE AMP EXPENSES. IF HOW EVER, IT TURNS I.T.A .NO.-426/DEL/2013 7 OUT TO BE REIMBURSEMENT OF EXPENSES NOT CONNECTED W ITH THE ADVERTISING OR PROMOTION OF THE PRODUCTS/BRAND, THE N IT SHOULD BE EXCLUDED TO THAT EXTENT FROM THE TOTAL QUANTUM OF A MP EXPENSES FOR DETERMINING THE ALP OF AMP EXPENSES. 9. NEXT CONTENTION RAISED BY THE LD. AR IS ABOUT TH E SELECTION OF COMPARABLES CHOSEN BY THE TPO. 10. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE MECHA NISM FOR SELECTION OF COMPARABLES, IN THE SITUATION ANALOGOU S TO THE ONE WHICH IS OBTAINING BEFORE US, HAS BEEN SET OUT BY T HE SPECIAL BENCH ORDER IN LG ELECTRONICS (SUPRA) VIDE PARA 17.6 OF I TS ORDER. THE LD. AR CONTENDED THAT SOME OF THE COMPARABLES TAKEN NOT E OF BY THE TPO ARE IN VIOLATION OF THE MANDATE OF THE SPECIAL BENCH ON THIS ISSUE. AS SUCH, WE SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND REMIT THE MATTER TO THE FILE OF THE AO/TPO FOR ADHE RING TO THE MODUS OPERANDI GIVEN BY THE SPECIAL BENCH FOR SELEC TION OF COMPARABLE CASES AND, THEREAFTER, PROCEED TO DETERM INE THE ALP OF AMP EXPENSES. 11. LAST ISSUE RAISED BY THE ASSESSEE IN THIS APPEA L IS AGAINST THE ALTERNATIVE CONFIRMATION OF DISALLOWANCE AMOUNTING TO RS.180.73 I.T.A .NO.-426/DEL/2013 8 CRORES BY THE AO AS PER THE PROVISIONS OF SECTION 3 7(1) OF THE ACT. THE FACTS OF THIS ISSUE ARE THAT THE TPO DETERMINED THE ORIGINAL QUALIFYING AMOUNT SPENT ON CREATION OF MARKETING IN TANGIBLE AT RS.180.73 CRORES. BY APPLYING 12.5% MARK-UP, HE WOR KED OUT THE TP ADJUSTMENT OF RS.203 CRORE, WHICH HAS BEEN DEALT WITH BY US IN THE EARLIER PART OF THIS ORDER. THE AO CANVASSED TH E VIEW VIDE PARA 6 OF THE IMPUGNED ORDER THAT WITHOUT PREJUDICE TO T HE AMP ADJUSTMENT MADE BY THE TPO, THE PRINCIPAL AMOUNT OF RS.180.73 CRORE IS NOT ALLOWABLE U/S 37(1) OF THE ACT. SINCE THE TPO HAD ALREADY PROPOSED ADJUSTMENT OF RS.203 CRORE, WHICH THE AO MADE IN THE FINAL ORDER, HE DID NOT SPECIFICALLY MAKE TH E SEPARATE ADDITION OF RS.180.73 CRORE. THE ASSESSEE IS AGGRIEVED AGAIN ST THE OBSERVATIONS OF THE AO MADE IN THE ALTERNATIVE LEAD ING TO THE MAKING OF DISALLOWANCE OF RS.180.73 CRORE IN CASE T HE FINAL TP ADJUSTMENT ON THIS SCORE IS REDUCED. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE RELEVANT MATERIAL ON RECORD. THE ALTERNATIVE CASE O F THE AO FOR MAKING THE ADDITION OF RS.180.73 CRORE IS THAT SUCH EXPENDITURE ON AMP IS NOT INCURRED `WHOLLY AND EXCLUSIVELY' FOR TH E ASSESSEES BUSINESS AND IT HAS RESULTED IN SPENDING THE REACH OF THE BRAND OF THE PARENT COMPANY. I.T.A .NO.-426/DEL/2013 9 13. AT THIS JUNCTURE, WE WOULD LIKE TO ESPOUSE THE CONTENTION OF LD. AR REFERRED TO HEREINABOVE FOR THE DEDUCTIBILITY OF THE FULL AMOUNT OF AMP EXPENSES AS HAVING BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSE IN TERMS OF SECTION 37(1) OF THE ACT. 14. IT IS IMPERATIVE TO NOTE THAT THE LD. AR RELI ED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN SASSOON J. DAVID & CO. P. LTD. VS. CIT [(1979) 118 ITR 261 (SC) TO BUTTRESS HIS ARGUMENT THAT THE ASSESSEE CAN CLAIM DEDUCTION FOR FULL AMOUNT OF EXP ENSES INCURRED FOR ITS BUSINESS PURPOSE AND THE FACT THAT SOMEBODY ELSE ALSO GOT BENEFITED INCIDENTALLY BY SUCH EXPENDITURE WOULD NO T MAR THE DEDUCTIBILITY, IF IT OTHERWISE SATISFIES THE TEST O F DEDUCTIBILITY. THERE IS NO DOUBT ABOUT THE GENERAL PROPOSITION AS LAID D OWN IN THIS JUDGMENT THAT IF AN EXPENDITURE IS DEDUCTIBLE U/S 3 7(1) AS HAVING BEING INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSIN ESS PURPOSE, THE SAME HAS TO BE ALLOWED IN ENTIRETY NOTWITHSTANDING THE FACT THAT SOME THIRD PARTY (BEING THE FOREIGN AE IN THE PRESE NT CASE) ALSO GOT SOME ADVANTAGE BY SUCH EXPENDITURE. HOWEVER, WE FI ND THAT IN CASE OF AN INTERNATIONAL TRANSACTION, THIS GENERAL PROPOSITION UNDERGOES CHANGE BECAUSE OF THE OPERATION OF CHAPTE R X OF THE ACT, WHICH REQUIRES THE COMPUTATION OF INCOME FROM INTERNATIONAL TRANSACTIONS HAVING REGARD TO ARMS LENGTH PRICE. IT FOLLOWS THAT ONCE THERE IS AN INTERNATIONAL TRANSACTION, THEN TH E TP PROVISIONS I.T.A .NO.-426/DEL/2013 10 SHALL PREVAIL OVER OTHER REGULAR PROVISIONS GOVERNI NG THE DEDUCTIBILITY OR TAXABILITY OF AN AMOUNT FROM SUCH TRANSACTION. THE EXERCISE OF SEPARATING THE AMOUNT SPENT BY THE ASSE SSEE IN RELATION TO AN INTERNATIONAL TRANSACTION OF BUILDING BRAND F OR ITS FOREIGN AE FOR DISTINCTLY PROCESSING AS PER SECTION 92 OF THE ACT CANNOT BE CONSIDERED AS A CASE OF DISALLOWANCE OF AMP EXPENS ES U/S 37(1). IN FACT, BOTH THE SECTIONS I.E. 37(1) AND SEC. 92 O PERATE IN DIFFERENT FIELDS. THE SPECIAL BENCH IN L.G ELECTRONICS (SUPRA ) HAS DECIDED THIS ISSUE BY HOLDING THAT THE OVERALL AMOUNT OF AM P EXPENSES SHOULD BE PROCESSED TO FIND OUT THE AMOUNT SPENT ON THE BRAND BUILDING FOR THE FOREIGN AE AND THEN DISALLOWANCE S HOULD BE MADE FOR SUCH AMOUNT WITH THE APPROPRIATE MARK-UP BY WA Y OF TP ADJUSTMENT. THE REMAINING AMOUNT IS CONSIDERED AS I NCURRED BY THE ASSESSEE FOR ITS OWN BUSINESS PURPOSE LIABLE FOR DE DUCTION SUBJECT TO THE REGULAR PROVISIONS OF THE ACT. 15. THIS IS WHAT HAS BEEN DECIDED BY US IN THE E ARLIER PART OF THIS ORDER BY APPROVING THE INCLUSION OF CERTAIN AMOUNT IN THE OVERALL AMP EXPENSES FOR WORKING OUT THE TP ADJUSTMENT ON T HIS COUNT. THIS AUTOMATICALLY IMPLIES THAT THE REMAINING AMOUN T IS ALLOWABLE AS INCURRED FOR THE BUSINESS OF THE ASSESSEE SUBJEC T TO THE PROVISIONS OF THE ACT. AS THERE IS NO MANDATE FOR A LLOWING THE ENTIRE COMMON AMP EXPENSES ALBEIT INCIDENTALLY BEN EFITING THE I.T.A .NO.-426/DEL/2013 11 FOREIGN AE PARTLY, EQUALLY THERE IS NO JUSTIFICATIO N FOR DISALLOWING THE ENTIRE AMOUNT AS NOT ALLOWABLE U/S 37(1) AS HAV ING NOT BEEN INCURRED `WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSE OF THE ASSESSEE. THE CRUX OF THE MATTER IS THAT THE OVERA LL AMP EXPENSES ARE REQUIRED TO BE PROCESSED AS PER THE MANDATE OF THE LG ELECTRONICS (SUPRA) TO FIND OUT THE AMOUNT SPENT TO WARDS BRAND BUILDING FOR THE FOREIGN AE AND THEN MAKING ADDITI ON BY WAY OF TP ADJUSTMENT WITH APPROPRIATE MARK-UP. NOTHING MOR E AND NOTHING LESS THAN THAT IS WARRANTED ON THIS COUNT. 16. THIS PROPOSITION CAN BE VIEWED FROM ANOTHER ANGLE ALSO. IT IS TRITE THAT THE AVOWED OBJECT OF THE TP ADJUSTMENT O N ACCOUNT OF AMP EXPENSES IS TO FIRST FIND OUT AND ATTRIBUTE THE AMOUNT SPENT BY THE ASSESSEE TOWARDS PROMOTION OF ITS FOREIGN AE'S BRAND/LOGO ETC. AND THEN MAKE ADDITION FOR SUCH AMOUNT WITH APPROPR IATE MARK-UP. BY THIS EXERCISE, THE TOTAL AMP EXPENSES GET SEGREG ATED INTO TWO CLASSES, VIZ., ONE BENEFITING THE ASSESSEE'S BUSINE SS AND TWO, BENEFITING THE FOREIGN AE BY WAY OF PROMOTION OF TH E BRAND. WHEREAS THE FIRST AMOUNT IS DEDUCTIBLE IN FULL SUBJ ECT TO THE REGULAR PROVISIONS, THE SECOND AMOUNT IS ADDED TO THE TOTAL INCOME WITH SUITABLE MARK-UP BY WAY OF THE TP ADJUSTMENT. ONCE THE TOTAL AMOUNT OF AMP EXPENSES IS PROCESSED THROUGH THE PRO VISIONS OF CHAPTER X OF THE ACT WITH THE AIM OF MAKING TP ADJU STMENT I.T.A .NO.-426/DEL/2013 12 TOWARDS AMP EXPENSES INCURRED FOR THE FOREIGN AE, O R IN OTHER WORDS SUCH EXPENSES AS ARE NOT INCURRED FOR THE ASS ESSEE'S BUSINESS, THERE CAN BE NO SCOPE FOR AGAIN REVERTING TO SECTIO N 37(1) QUA SUCH AMOUNT TO MAKE ADDITION BY CONSIDERING THE SAME EXP ENDITURE AS HAVING NOT BEEN INCURRED `WHOLLY AND EXCLUSIVELY F OR THE PURPOSES OF ASSESSEES BUSINESS. IF THE AMOUNT OF AMP EXPEN SES IS DISALLOWED BY PROCESSING UNDER BOTH THE SECTIONS, T HAT IS 37 AND 92, IT WILL RESULT IN DOUBLE ADDITION TO THE EXTENT OF THE ORIGINAL AMOUNT INCURRED FOR THE PROMOTION OF THE BRAND OF THE FORE IGN AE DE HORS THE MARK-UP. IN VIEW OF THE FOREGOING DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS NOT JUSTIFIED IN OB SERVING ALTERNATIVELY THAT A SUM OF RS.180 CRORE AND ODD IS NOT ALLOWABLE AS PER SECTION 37(1) OF THE ACT. WE, THEREFORE, VACATE THE ALTERNATIVE FINDING GIVEN BY THE AO FOR DISALLOWANCE. 17. IN THE FINAL ANALYSIS, WE SET ASIDE THE IMPU GNED ORDER ON THIS ISSUE AND REMIT THE MATTER TO THE AO/TPO FOR REWORK ING THE TP ADJUSTMENT ON ACCOUNT OF AMP EXPENSES IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH IN LG ELECTRONICS (SU PRA) AND OUR ABOVE CASE-SPECIFIC DIRECTIONS. IT IS MADE CLEAR TH AT NO ADDITION IS CALLED FOR IN THE FACTS AND CIRCUMSTANCES OF THE PR ESENT CASE TOWARDS SECTION 37(1) ON ACCOUNT OF AMP EXPENSES. N EEDLESS TO I.T.A .NO.-426/DEL/2013 13 SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPO RTUNITY OF BEING HEARD IN SUCH FRESH PROCEEDINGS. 18. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/01/2014. SD/- SD/- (C. M. GARG ) (R. S. S YAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 13/01/2014 *AK VERMA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR I.T.A .NO.-426/DEL/2013 14 DATE INITIAL 1. DRAFT DICTATED ON 19-12-2013 PS 2. DRAFT PLACED BEFORE AUTHOR 2-1-2014 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. *