M/s. Haier Telecom India (P) Ltd., New Delhi V. ACIT, New Delhi

ITA 5368/DEL/2011

• Counselvise Citation: 536820114 RSA 2011
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 24-07-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 01-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PEEYUSH JAIN TP
• Assessee Lawyers: ASHWANI TANEJA; SOMIL AGARWALCA
• Keywords: Depreciation; Transfer pricing; Opportunity of being heard; Principle of natural justice; International transaction
• Section: 143(3); 234B; 14A; 144

Judgement Text

IN THE INCOME TAX APPELLATE T RIBUNAL (DELHI BENCH I : NEW DELHI) BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI J. S. REDDY, ACCOUNTANT MEMBER ITA NO.5368/DEL/ 2011 (ASSESSMENT YEAR: 2007-08) M/S HAIER TELECOM INDIA (P) LTD. VS. ACIT A-101/3, SFS, SAKET CIRCLE12(1) NEW DELHI-110017 NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHWANI TANEJA & SHRI SOMIL AGARWAL,CA REVENUE BY : SH. PEEYUSH JAIN, CIT/DR (T .P) ORDER PER DIVA SINGH, JUDICIAL MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER DATED 24/10/2011 PASSED U/S 143(3) READ WITH SECTIO N 144C OF THE INCOME- TAX ACT PURSUANT TO THE DIRECTIONS OF THE DRP DATED 16 TH SEPTEMBER 2011 U/S 144 C(5) OF THE INCOME-TAX ACT ON THE FOLLOWING GRO UNDS:- 1. THAT THE APPELLANT DENIES ITS LIABILITY TO BE ASSES SED AT GROSS TOTAL INCOME OF RS.8,15,51,320/- AND ACCORDINGLY DENIES ITS LIABILI TY TO PAY TAX, INTEREST, CESS AND SURCHARGE DEMANDED THEREON. 2(A) THAT HAVING REGARD TO THE FACTS AND CIRCUMSTAN CES OF THE CASE, LD. ASSTT. CIT, CIRCLE-12(1) HAS ERRED IN LAW AND ON FACTS IN MAKIN G ADDITION OF RS.2,32,05,277/- ON THE NOTIONAL MARKUP ON THE REIMBURSEMENT ON THE BASIS OF ORDER OF LD. TPO AS AFFIRMED BY LD. DRP AND THE ORDER IMPUGNED ARE CONT RARY TO LAW AND FACTS ON VARIOUS LEGAL AND FACTUAL GROUNDS. 2(B) THAT HAVING REGARD TO THE FACTS AND CIRCUMSTAN CES OF THE CASE, LD. ASSTT. CIT, CIRCLE-12(1) HAS ERRED IN LAW AND ON FACTS IN MAKIN G ADDITION ON THE BASIS OF ORDER OF TPO U/S 92CA(3) AS AFFIRMED BY LD. DRP ON ACCOUN T OF ALLEGED DIFFERENCE IN ARMS LENGTH PRICE AGGREGATING TO RS.2,32,05,277/-. 2(C) THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER , ACTION OF LD. ASSTT. CIT IN MAKING THE AGGREGATE ADDITION OF RS.2,32,05,277/- IS CONTR ARY TO LAW AND FACTS AND THE SAME HAS BEEN MADE IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AND WITHOUT GIVING ADEQUATE OPPORTUNITY OF HEARING. 3.THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. ASSTT. CIT, CIRCLE-12(1) HAS ERRED IN LAW AND ON FACTS IN MAKIN G ADDITION OF RS.21,777/- U/S 14A OF THE INCOME TAX ACT, 1961. 4.THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. ASSTT. CIT, CIRCLE-12(1) HAS ERRED IN LAW AND ON FACTS IN NOT A LLOWING THE DEPRECIATION @60% ON THE AMOUNT OF COMPUTE PERIPHERALS AND HAS FURTHE R ERRED IN RESTRICTING IT TO 15% AND ACCORDINGLY MADE THE DISALLOWANCE OF RS.45,224/ - UNDER THIS HEAD. 5. THAT THE TRANSFER PRICING ORDER DATED 30/7/2010 PASSED U/S 92CA(3) BY THE ADDL. CIT, TPO-1(2), NEW DELHI IS BAD IN LAW, CONTRARY TO FACTS, ILLEGAL AND IS NOT SUSTAINABLE ON VARIOUS LEGAL AND FACTUAL GROUNDS. 6. THAT THE DRAFT ORDER DATED 21/12/2010 PASSED BY DCIT (OSD), CIT-IV, NEW DELHI IS ALSO ILLEGAL AND IS NOT SUSTAINABLE ON VARIOUS L EGAL AND FACTUAL GROUNDS. 7. THAT THE ORDER PASSED BY HONBLE DISPUTE RESOLU TION SYSTEM U/S 144C(5) DATED 16/9/2011 IS ALSO ILLEGAL AND THE SAME IS NOT SUSTA INABLE ON VARIOUS LEGAL AND FACTUAL GROUNDS AND THE DIRECTIONS ISSUED THEREIN A RE ALSO CONTRARY TO LAW AND FACTS. 8. THAT THE ORDER PASSED U/S 144C/143(3) DATED 24/1 0/2011 BY ASSTT. CIT, CIRCLE- 12(1), NEW DELHI IS ILLEGAL, CONTRARY TO LAW AND FA CTS, BARRED BY LIMITATION AND THE SAME IS NOT SUSTAINABLE ON VARIOUS LEGAL AND FACTUA L GROUNDS AND THE ADDITIONS MADE THEREIN ARE ALSO BAD IN LAW AND AGAINST THE FA CTS AND CIRCUMSTANCES OF THE CASE. 9. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. ASSTT. CIT, CIRCLE-12(1) HAS ERRED IN LAW AND ON FACTS IN CHARG ING INTEREST U/S 234B AND 234D OF THE INCOME TAX ACT, 1961. 10. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, MOD IFY, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND ALL TH E ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 2. AT THE OUTSET, THE LD. AR INVITING ATTENTION T O THE GROUNDS RAISED STATED THAT HE WOULD NOT BE PRESSING GROUND NO. 3 A ND APART FROM THE TRANSFER PRICING ISSUES ADDRESSED IN GROUND NO, 1, 2, 5, 6, 7 & 8 THE ONLY CORPORATE ISSUE REQUIRING ADJUDICATION IS GROUND NO . 4. GROUND NO. 9 IT WAS ADMITTED IS CONSEQUENTIAL AND GROUND NO. 10 REQUIRE S NO ADJUDICATION. ADDRESSING THE TRANSFER PRICING ISSUES ATTENTION WA S INVITED TO THE STATEMENT OF THE FACTS FILED BEFORE THE DRP ON WHICH HEAVILY RELIANCE WAS BEING PLACED BY THE ASSESSEE ASSAILING THE ACTION OF UPHOLDING T HE ADDITION MADE BY APPLYING THE MARK OF16.56%. IT WAS HIS STAND THAT UNLIKE THE CASE OF L. G. ELECTRONICS DECIDED BY THE SPECIAL BENCH IN THE FAC TS OF THE PRESENT CASE, THE ASSESSEE HAS BEEN REIMBURSED FOR ADVERTISEMENT & PR OMOTION EXPENSES FOR BRAND PROMOTION EXPENSES AND ALSO FOR AFTER SALES S ERVICES. IN THE CIRCUMSTANCES IT WAS HIS SUBMISSION THAT A MARK WAS NOT WARRANTED. IT WAS STATED THAT AS A RESULT OF THE EFFORTS IN THE HIGHL Y COMPETITIVE MARKET THE ASSESSEE IN ITS VERY FIRST YEAR HAS A TURN OVER OF APPROXIMATELY THREE HUNDRED CRORES. IT WAS STATED THAT THIS COULD BE ACHIEVED O NLY BY THE DIRECT EFFORTS OF THE ASSESSEE AND BY HAVING AN EXCELLENT AFTER SALE SERVICES SO AS TO WIN CUSTOMER CONFIDENCE AND THE NEED AND NECESSITY OF S UCH AN EXERCISE CANNOT BE OVER EMPHASIZED. IT WAS HIS SUBMISSION THAT THE COMPARABLES OF THE ASSESSEE HAVE BEEN WRONGLY REJECTED AND THE OBJECTI ONS OF THE ASSESSEE TO THE TPOS COMPARABLES HAVE NOT BEEN CONSIDERED BY THE D RP. IT WAS ARGUED THAT 2% NET PROFIT EARNED BY THE ASSESSEE COMPANY I S SUFFICIENT TO ADDRESS THE ISSUE OF PROFIT WHICH IS MUCH MORE THEN THE ARITHME TIC MEAN OF -10.97% SHOWN BY COMPARABLES. IT WAS HIS SUBMISSION THAT T HE ARGUMENTS ON FACTS HAS BEEN IGNORED BY THE DRP. IT WAS FURTHER SUBMIT TED THAT REFERRING TO THE STATEMENT OF FACTS FILED BEFORE THE DRP SPECIFIC P ARA 3 THAT ENTIRE WORKING CAPITAL NEEDS OF THE ASSESSEE WERE TAKEN CARE OF BY THE AE AND THERE WAS NO BORROWING COST IN TERMS OF INTEREST ETC. AND THE EN TIRE REIMBURSEMENTS ON ADVERTISEMENT, BRAND PROMOTION, AFTER SALE SERVICE WAS RECEIVED WELL IN ADVANCE BY THE ASSESSEE FROM ITS AE AND FURTHER THE ENTIRE PURCHASE WAS MADE FROM AE ON CREDIT BASES WHICH ALSO FACILITATED THE WORKING CAPITAL NEEDS. THESE SUBMISSIONS IT WAS STATED HAVE NOT B EEN CONTROVERTED BY THE REVENUE MADE IN LETTER DATED 15/4/2010. 2.1 ATTENTION IN THIS BACKGROUND WAS INVITED TO THE ORDER OF THE ITAT IN HAIR APPLIANCES INDIA (P) LTD VS. DCIT PUBLISHED IN (2013) 35 TAXMAN.COM 203 DELHI TRIBUNAL WITH THE REQUEST THAT SINCE THE FACTS ON RECORD HAVE NOT BEEN CONSIDERED BY THE TPO AND THE OBJECTIONS HAVE NOT BEEN DEALT WITH BY THE DRP THE ISSUE MAY BE RESTORE D TO THE TPO. THE LD. AR WAS REQUIRED TO ADDRESS WHETHER IN THE FACTS OF THE SAID CASE ALSO THE AMOUNTS HAVE BEEN REIMBURSED BY THE AE AND WHETHER FACTS AND CIRCUMSTANCES OF THE CASE WERE IDENTICAL. IN RESPON SE TO THE SAID QUERY IT WAS SUBMITTED THAT HIS LIMITED PRAYER WAS THAT THE ISSU E MAY BE RESTORED AND HE WAS NOT AWARE OF THE FACTS OF THAT CASE. 3. THE LD. CIT DR ON THE OTHER HAND INVITING ATTENT ION TO PAGE 18 & 19 OF THE TPOS ORDER CONTENDED THAT THE ASSESSEE HAS NOT BENCH MARKED THE TRANSACTIONS AS WOULD BE EVIDENT FROM PARA 6. THE S AME IS REPRODUCED FOR READY REFERENCE:- 6. THE TRANSFER PRICING APPROACH IN THIS ORDER MAY BE SUMMARIZED AS BELOW: (I) IN RESPECT OF THE FOLLOWING TRANSACTIONS NO BEN CHMARKING WAS DONE BY THE ASSESSEE. S. NO. DESCRIPTION AMOUNT (INR) 1. REIMBURSEMENT OF EXPENSES. ADVERTISEMENT AND PROMOTION 71,374,339 2. REIMBURSEMENT OF EXPENSES BRAND PROMOTION 42,231,239 3. REIMBURSEMENT OF EXPENSES AFTER SALES SERVICE 26,522,910 TOTAL 140,128,488 (II) THE JV AGREEMENT WAS PERUSED AND IT WAS NOTIC ED THAT IN CONNECTION WITH THE ACTIVITIES REFERRED TO ABOVE, THE LEVEL OF EFFORT OF THE ASSESSEE WAS HIGH ENOUGH TO MERIT A MARK UP ON COST AND A MERE R EIMBURSEMENT WOULD NOT BE IN KEEPING WITH THE ARMS LENGTH PRINCIPLE. (III) ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED T O THE ASSESSEE. THE SAME IS REPRODUCED OF THIS ORDER. THE ASSESSEES REPLY HAS BEEN DISCUSSED AT PARA 4 ONWARDS. BASED ON THE DISCUSSION AN ADJUSTME NT OF RS.23,205,277 HAS BEEN M DE TO THE RETURNED INCOME OF THE ASSESSE E. (IV) THE ASSESSEE WAS ALLOWED REASONABLE OPPORTUNIT Y OF BEING HEARD WHICH INCLUDE PERSONAL HEARING ON VARIOUS DATES MENTIONED IN COL 7 OF PAGE 1 OF THIS ORDER. 3.1 ADDRESSING THE FUNCTIONS PERFORMED BY THE ASSES SSEE IT WAS HIS SUBMISSION THAT THE ASSESSEE IS PERFORMING VITAL FU NCTION AND PROMOTING THE BRAND NAMES TRADE MARK OF AE WHICH IS OWNED BY THE AE. INVITING ATTENTION TO THE MOU ENTERED INTO BETWEEN THE ASSESSEE AND IT S ASSOCIATED ENTERPRISE WHICH HAS BEEN REPRODUCED IN THE TPOS ORDER IT WAS HIS SUBMISSION THAT IT WAS MUTUALLY AGREED THAT THE ASSOCIATE ENTERPRISE S HALL BEAR ONLY PART OF THE FOLLOWING EXPENSES:- ADVERTISING AND SALES PROMOTION WHICH INCLUDES OPE RATOR BUSINESS, OPEN MARKET BUSINESS AND BRAND PROMOTION. AFTER SALES SERVICE TESTING AND CERTIFICATION COSTS INCLUDING FEES RELE VANT LABOUR/EMPLOYEE COSTS, VEHICLE MAINTENANCE, TRAVEL COST, SPECIAL TESTING COST, COMMUNICATION COSTS, COMPUTER MAINTENANCE COSTS, ETC. OTHER EXPENSES SUCH AS SALARY COSTS, ESTABLISHMENT EXPENSES, TRAVELING COSTS OF EMPLOYEES ENGAGED IN PROVIDING A FTER SALES SERVICE, TESTING SERVICES. 3.2 ADDRESSING THE OBLIGATIONS OF THE ASSESSEE IT W AS SUBMITTED THAT THE ASSESSEE WAS REQUIRED TO USE ITS BEST EFFORTS TO MA KE THE SALES AND EXPAND THE BUSINESS. IT WAS HIS SUBMISSION THAT THE ASSESSEE WAS RESPONSIBLE FOR THE SALE OF THE PRODUCT WITHIN THE TERRITORY THROUGH THE USE OF AN ACTIVE AND EFFECTIVE SALES ORGANIZATION AS IS EVIDENT FROM A READING OF THE RELEVANT CLAUSES OF HE AGREEMENT REPRODUCED IN THE TPOS ORDER. SPECIFIC A TTENTION WAS INVITED TO CLAUSE F, (I) & J SO AS TO EMPHASIZE THAT SIGNIFICA NT SERVICES PROMOTING RESULTING IN BRAND BUILDING FOR THE BENEFIT OF THE A.E HAS BEEN DONE BY THE ASSESSEE AT ITS COST. FOR READY REFERENCE WE REPRO DUCE FROM THE TPOS ORDER:- OBLIGATIONS OF THE COMPANY. THE COMPANY SHALL BE RESPONSIBLE FOR THE FOLLOWING. (A)THE COMPANY SHALL USE ITS BEST EFFORTS TO SELL A ND EXPAND THE SALE OF PRODUCTS WITHIN THE TERRITORY THROUGH THE USE OF AN ACTIVE A ND EFFECTIVE SALES ORGANIZATION AND SERVICE NETWORK. (B)THE COMPANY SHALL BE KEPT INFORMED BOUT PURCHASE SALE AND INVENTORY OF EACH CUSTOMER AND MAKE ORDER FORECAST ACCORDINGLY AND MA INTAIN AN INVENTORY OF THE PRODUCTS SUFFICIENT TO MEET THE DEMAND OF CUSTOMERS THROUGHOUT THE TERRITORY IN A TIMELY MANNER. (C) THE COMPANY SHALL OBTAIN AND MAINTAIN ALL NECES SARY GOVERNMENT APPROVAL, LICENSES, PERMITS REGISTRATION CERTIFICATES AND OTH ER FORMS OF APPROVAL WHICH ARE NECESSARY OR ADVISABLE FOR THE SALE OF THE PRODUCTS AND THE IMPLEMENTATION OF THIS AGREEMENT WITHIN THE TERRITORY. (D)THE COMPANY SHALL PROPERLY INFORM THE PARTIES OF ANY FACTS OR OPINIONS LIKELY TO BE RELEVANT IN RELATION TO THE MANUFACTURE, SALE , USE FOR DEVELOPMENT OF THE PRODUCTS WITHIN THE TERRITORY INCLUDING (BUT NOT LI MITED TO) THOSE CONCERNING SAFETY AND LABELING REQUIREMENTS AND THE ACTIVITIES OF THE COMPANYS COMPETITORS. (E) THE COMPANY SHALL NOT, DIRECTLY OR THROUGH ANY THIRD PERSON OR ENTITY ESTABLISH A SALES OFFICE A WAREHOUSE OR A DISTRIBUT ION CENTER OUTSIDE THE TERRITORY OR SOLICIT ORDERS FOR THE PRODUCTS FROM CUSTOMERS O UTSIDE THE TERRITORY. UNLESS OTHERWISE AGREED BY PARTY A IN WRITING ANY SUCH ORD ER OBTAINED BY THE COMPANY SHALL BE FORWARDED PROMPTLY TO PARTY A. (F) THE COMPANY IS RESPONSIBLE FOR UNIFORM PLANNING AND PROMOTION OF HAIER BRAND IN THE TERRITORY AND FORMULATING AND IMPLEMEN TING ADVERTISING AND PROMOTION PLAN AND PAY ALL ADVERTISING AND PROMOTIO NAL EXPENSES INCURRED IN MARKETING THE PRODUCTS PURSUANT TO THIS AGREEMENT. THE COMPANY SHALL PROVIDE THE PARITIES WITH A COURTESY COPY OF ALL ADVERTISIN G FOR ITS RECORDS. (G) THE COMPANY IS NOT AUTHORIZED TO MAKE, AND SHAL L NOT MAKE ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE P RODUCTS EXPECT THOSE REPRESENTATIONS AND WARRANTIES AUTHORIZED IN WRITIN G BY PARTY A. PARTY A SHALL NOT BE LIABLE FOR AND THE COMPANY SHALL HOLD PARTY A HARMLESS FROM, ALL CLAIMS, DEMANDS, ADMINISTRATIVE OR GOVERNMENTAL PENALTIES O R FINES, ACTIONS CAUSE OF ACTION, FEES, COSTS ATTORNEYS FEES AND EXPENSES ARI SING FROM ANY ALL PROMOTIONAL SALES OR MARKETING ACTIVITIES, REPRESENTATIONS WARR ANTIES AND STATEMENTS (WRITTEN OR VERBAL)MADE BY THE COMPANY OR ANY OF ITS AGENTS EMPLOYEES REPRESENTATIVES AND OR ASSIGNS IN RELATION TO THE PRODUCTS THIS AGR EEMENTS OR THE PARTIES. (H) THE COMPANY SHALL AT ALL TIMES CONDUCT ITSEL F IN AN APPROPRIATE MANNER SO AS NOT TO INJURE THE BUSINESS GOODWILL REPUTATION O R GOOD STANDING OF THE PARTIES. (I) THE COMPANY SHALL FORMULATE AND IMPLEMENT HAIER S DEVELOPMENT STRATEGY FOR THE TERRITORY; THE COMPANY SHALL FURNISH OPERATION AND DEVELOPMENT PLAN FOR NEXT YEAR IN OCTOBER OF EACH YEAR. THE GOAL OF THE OPER ATION AND DEVELOPMENT PLAN SHALL NOT BE LOWER THAN THE MARKET TARGET AS DEFINE D IN DETAIL IN APPENDIX I HERETO. (J)THE COMPANY SHALL PROVIDE THE PARTIES WITH A QUA RTERLY REPORT AND BUSINESS PLAN WHICH OUTLINES (1) THE SALES OF THE PRODUCTS D URING THE PRECEDING QUARTER.(2) THE PROMOTIONAL ACTIVITIES OF THE COMPANY DURING TH E PRECEDING QUARTER INCLUDING THE NAMES AND ADDRESSES OF ACTUAL AND POTENTIAL CUS TOMERS: (3) THE BUSINESS ENVIRONMENT IN THE TERRITORY INCLUDING A DISCUSSION OF THE ACTIVITIES OF THE COMPANYS COMPACTORS, THE LAWS AND GOVERNMENTAL POL ICIES AFFECTING THE SALE OF THE PRODUCTS, AND THE ECONOMIC CONDITIONS IN THE TE RRITORY AFFECTING THE SALE OF THE PRODUCTS; AND (4) ANTICIPATED SALES FOR THE CUR RENT QUARTER. THIS REPORT SHALL BE PROVIDED TO THE PARTIES BY THE END OF EACH QUART ERLY MONTH OF THE CALENDAR YEAR (I.E MARCH, JUNE, SEPTEMBER AND DECEMBER). ( K) THE COMPANY SHALL INVESTIGATE NEW BUSINESS OPPO RTUNITIES AND MAXIMIZE MARKET DEVELOPMENT FOR THE PRODUCTS WITHIN THE TERR ITORY. (L) THE COMPANY SHALL INVESTIGATE, SELECT AND MONI TOR DISTRIBUTORS, AGENTS AND REPRESENTATIVES OF THE PRODUCTS WITHIN THE TERRITOR Y. (M) THE COMPANY SHALL COLLECT AND ANALYZE MARKET DA TA TO FURTHER INCREASE DEMANDS OF HAIER PRODUCTS WITHIN THE TERRITORY; AND (N) THE COMPANY SHALL PROMOTE ADVERTISE AND MARKET THE PRODUCTS IN A HIGHLY PROFESSIONAL MANNER AND ENDEAVOR TO ACHIEVE MAXIMUM MARKET SHARE. 3.3 REGARDING THE PRAYER OF THE ASSESSEE THAT THE O BJECTIONS HAVE NOT BEEN DEALT WITH BY THE DRP RELIANCE WAS PLACED ON THE SA ME. HOWEVER, THE REQUEST THAT AFTER SALES SERVICES BEING CRUCIAL FOR THE BUSINESS NEEDS OF THE ASSESSEE AND THEY SHOULD BE EXCLUDED FROM THE AMP E XPENSE FOR THE PURPOSES OF MARK UP WAS VEHEMENTLY OPPOSED BY THE D EPARTMENT. CONSIDERING THE PRAYER THAT THE ISSUE MAY BE RESTOR ED TO THE TPO IT WAS FAIRLY STATED THAT THE LAW ON THE ASPECT HAS DEVELO PED AND EVOLVED AS SUCH HE WOULD HAVE NO OBJECTION IF THE ISSUE IS RESTORED TO THE TPO TO CORRECTLY APPLY THE LAW ON FACTS. 4. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. CONSIDERING THE SAME IT IS WORTH MENTIO NING THAT THE PARTIES IN THE COURSE OF THE HEARING WERE REQUIRED TO ADDRESS AS TO HOW BENCH MARKING HAD BEEN DONE BY THE ASSESSEE ON WHICH ASPECT LD. C IT DEPARTMENTAL REPRESENTATIVE MADE HIS POINT AS NOTED IN THE EARL IER PART OF THIS ORDER. LD. AR TO ELABORATE HAD INVITED ATTENTION TO FORM 3CEB. IT IS ALSO SEEN FROM A PERUSAL OF THE SAME THAT IN COLUMN NO-13 THE FOLLOW ING INFORMATION HAS BEEN GIVEN BY THE ASSESSEE. 13. PARTICULARS IN RESPECT OF ANY OTHER TRANSACTION; HAS THE ASSESSEE ENTERED INTO ANY OTHER INTERNATIONAL TRANSACTION NOT SPECIFICALLY REFERRED TO ABOVE, WITH ASSOCIATED ENTERPRISE? YES, THE ASSESSEE COMPANY HAS RECEIVED FINANCIAL SUPPORT FROM ITS ASSOCIATED ENTERPRISES. BESIDES, THE ASSESSEE COMPANY HAS ALSO RECEIVED COMMISSIONS FROM ASSOCIATED ENTERPRISES. IF YES PROVIDE THE FOLLOWING DETAILS IN RESPECT OF EACH ASSOCIATED ENTERPRISE AND EACH TRANSACTION: (A) NAME AND ADDRESS OF THE ASSOCIATED ENTERPRISE WITH WHOM THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO. PLEASE REFER ANNEXURE C (B) DESCRIPTION OF THE TRANSACTION FINANCIAL SUPPOR T IN RESPECT OF ADVERTISEMENT EXPENSES-US$ 1,583,078 EQUIVALENT TO RS.71374339 FINANCIAL SUPPORT IN RESPECT OF BRAND PROMOTION EXPENSES-US$ 954,604 EQUIVALENT TO RS.42,231,239 FINANCIAL SUPPORT IN RESPECT OF AFTER SALES SERVICES-US$ 588541 EQUIVALENT TO RS.26522910.00 OTHER REIMBURSEMENTS US$ 80,924 EQUIVALENT TO RS.3,547,317/- THE ASSESSEE COMPANY HAS RECEIVED COMMISSION AMOUNTING TO US$ 337,417 EQUIVALENT TO RS.1,60,18,512/-. (C) AMOUNT PAID/RECEIVED OR PAYABLE/RECEIVABLE IN THE TRANSACTION- AS PER ANNEXURE-C (I) AS PER BOOKS OF ACCOUNT FINANCIAL SUPPORT IN RE SPECT OF ADVERTISEMENT EXPENSES-US$ 1,583,078 EQUIVALENT TO RS. 71374339 FINANCIAL SUPPORT IN RESPECT OF BRAND PROMOTION EXPENSES-US $ 954,604 EQUIVALENT TO RS.26,522,910/-. OTHER REIMBURSEMENT US $ 80,924 EQUIVALENT TO RS.3,547,317/- THE ASSESSEE COMPANY HAS RECEIVED COMMISSION AMOUNTING TO US $ 337,417 EQUIVALENT TO RS.1,60,18,512/-. AS COMPUTED BY THE ASSESSEE HAVING REGARD TO THE ARMS LENGTH PRICE. FINANCIAL SUPPORT IN RESPECT OF ADVERTISEMENT EXPENSES-US$ 1,583,078 EQUIVALENT TO RS.71,374,339/- FINANCIAL SUPPORT IN RESPECT OF BRAND PROMOTION EXPENSES-US$ 954,604 EQUIVALENT TO RS.42,231,239/- FINANCIAL SUPPORT IN RESPECT OF AFTER SALES SERVICES-US$ 588541 EQUIVALENT TO RS.26,522,910/- OTHER REIMBURSEMENTS US$ 80,924 EQUIVALENT TO RS.3,547,317/- THE ASSESSEE COMPANY HAS RECEIVED COMMISSION AMOUNTING TO US $ 337,417 EQUIVALENT TO RS.1,60,18,512/-. D) METHOD USED FOR DETERMINING THE ARMS LENGTH PRICE [ SEE SECTION 92C(1) REIMBURSEMENT OF EXPENSES AND FINANCIAL SUPPORT RECEIVED FROM ASSOCIATED ENTERPRISES. IN RESPECT OF COMMISSION-COMPARABLE UNCONTROLLED PRICE METHOD. 4.1 ACCORDINGLY IT IS SEEN THAT THE ASSESSEE DISC LOSES THAT FINANCIAL SUPPORT HAS BEEN RECEIVED FROM ITS ASSOCIATED ENTER PRISE. APART FROM THAT THE ASSESSEE HAS ALSO RECEIVED COMMISSION INCOME FROM A .E OF SPECIFIC AMOUNTS FOR BRAND PROMOTION EXPENSES, AFTER SALES SERVICES PLUS SOME OTHER IMBURSEMENTS HAVE BEEN GIVEN. SPECIFIC AMOUNTS FOR FINANCIAL SUPPORT IN RESPECT OF ADVERTISEMENT EXPENSES, BRAND PROMOTION EXPENSES, AFTER SALES SERVICES AND OTHER REIMBURSEMENTS ARE ALSO MENTIONE D. THUS IS SEEN THAT THERE IS NO DISPUTE ON THE FACT THAT THE FINANCIA L SUPPORT HAS BEEN RECEIVED IN RESPECT OF ADVERTISEMENT EXPENSES; BRAND PROMOTI ON EXPENSES AND AFTER SALES SERVICE ETC. IT IS ALSO SEEN THAT UNLIKE THE DECISION IN L. G. ELECTRONICS CASE (2013) 29 TAXMANN.COM 300 (DELHI) WHERE THE EX PENDITURE WAS CLAIMED AS AN EXPENDITURE OF THE ASSESSEE AND DISCL OSED AS A DOMESTIC TRANSACTION AND THE REVENUES STAND WAS UPHELD BY THE SPECIAL BENCH HOLDING THAT NON-ROUTINE AMP EXPENSE APPLYING THE B RIGHTLINE TEST IS TO BE IMBURSED FOR BRAND BUILDING BY ADVERTISING THE BRAN D OWNED BY THE A. E WHICH WAS HELD AS AN INTERNATIONAL TRANSACTION. IN THE FACTS OF THE PRESENT CASE, IT IS SEEN THAT THE ASSESSEE ITSELF HAS SHOWN IT TO BE AN INTERNATIONAL TRANSACTION HOWEVER, IN THE TP STUDY THE ASSESSEE H AS NOT BENCHMARKED THE SAME TO SHOW THAT IT IS AT ARMS LENGTH PRICE. IT IS SEEN THAT IN THE COURSE OF THE ARGUMENTS THE ASSESSEE HAS CONTENDED THAT THESE ARE REIMBURSEMENT OF EXPENSES AND SIMILARLY THE TPO HAS ALSO CONSIDERED THE SAME TO BE RE- IMBURSEMENT OF EXPENSES HOLDING THAT MERE REIMBURSE MENT OF EXPENSES ON COST TO COST BASIS SHALL NOT BE SUFFICIENT AND A MA RK UP IS TO BE APPLIED. THIS PRINCIPLE IS UPHELD BY US AS NO UNRELATED PARTY WOU LD PROVIDE SUCH A SERVICE WITHOUT EXPECTING A REMUNERATION FOR ITS EFFORT DEP LOYED IN TERMS OF TIME AND ENERGY. IN THE FACTS OF THE PRESENT CASE EVEN IF FI NANCIAL SUPPORT BY WAY OF PROVIDING WORKING CAPITAL ETC. ARE PROVIDED AND CRE DIT FACILITIES ARE MADE AVAILABLE, IT HAS TO BE DEMONSTRATED BY THE ASSESSE E THAT THE SAME WERE ADEQUATE KEEPING IN MIND THE SERVICES RENDERED AND THE EXPENSES INCURRED. THE FACT THAT THEY WERE AT ARMS LENGTH HAS NOT BEE N DEMONSTRATED BY THE ASSESSEE AND FOR CONSIDERING THE ISSUE OF MARK UP T HIS EXERCISE HAS TO BE DONE. ACCORDINGLY IT IS SEEN THAT THE WHOLE EXERCIS E HAS TO BE DONE AGAIN AS THE COMPARABLES HAVE TO BE SELECTED BASED ON FUNCTI ONAL SIMILARITY. SIMILARLY THE BASIS OF WORKING OF THE AMOUNTS STATE D TO BE FINANCIAL SUPPORT PROVIDED FOR EACH OF THE ACTIVITIES AS WHETHER IT I NCLUDES MERELY REIMBURSEMENT ORDERS OR DOES IT INCLUDE PROFIT FOR SERVICES RENDERED ALSO. AS THE ARGUMENTS AND ORDERS ARE BASED ON THE REASONING THAT THESE ARE RE- IMBURSEMENTS DESPITE THE SPECIFIC NARRATION GIVEN B Y THE ASSESSEE THAT IT IS FINANCIAL SUPPORT, ACCORDINGLY WE DEEM IT APPRO PRIATE TO RESTORE THE ISSUE IN THE INTEREST OF JUSTICE BACK TO THE TPOS SETTIN G ASIDE THE ORDERS. THE ASSESSEE SHALL MAKE AVAILABLE TO THE TPO THE COMPLE TE BREAK-UP OF THE CALCULATIONS OF THE FINANCIAL SUPPORT RECEIVED VIS- -VIS THE BILLS RAISED. IT IS SEEN THAT NOT ONLY THE TPO BUT EVEN THE ASSESSEE HA S PROCEEDED ON THE FOOTING THAT THESE ARE REIMBURSEMENT WHICH APPEARS TO BE FACTUALLY INCORRECT AS PER COLUMN 13 OF FORM 3CEB REPORT FILED BY THE A SSESSEE. IN THE CIRCUMSTANCES WE DEEM IT A PROPER TO RESTORE THE IS SUE BACK TO THE FILE OF THE TPO WITH THE DIRECTION TO DECIDE THE SAME IN ACCORD ANCE WITH LAW BY WAY OF A SPEAKING ORDER AFTER GIVING THE ASSESSEE A REASON ABLE OPPORTUNITY OF BEING HEARD. THE ASSESSEE SHALL PLACE RELEVANT FACTS AND EVIDENCES BEFORE THE TPO BENCH MARKING THE INTERNATIONAL TRANSACTIONS AND IT IS ONLY AFTER CHARACTERIZING THE ASSESSEE THAT THE COMPARABLES CA N BE SELECTED ON THE BASIS OF FUNCTIONAL SIMILARLY. FOR DECIDING THE APPLICABI LITY OF MARK UP THE NECESSARY FACTS NEED TO BE AVAILABLE THUS UPHOLDING IN PRINCIPLE THE APPLICABILITY OF MARK UP AS COST TO COST RE-IMBURS EMENT OF EXPENSES IS NOT ENOUGH AS NO UNRELATED PARTY WOULD PROVIDE SERVICES WITHOUT EXPECTING A REMUNERATION, HOWEVER ON FACTS THE ISSUE IS RESTORE D TO THE TPO. IT MAY ALSO NECESSARILY BE KEPT IN MIND THAT THIS IS THE FIRST YEAR OF BUSINESS FOR THE ASSESSEE IN THE COMPETITIVE MARKET AND AS PER PARA 17.4 OF L. G. ELECTRONICS CASE (2013) 29 TAXMANN.COM 300 (DELHI) DECISION THI S FACT NEEDS TO BE KEPT IN MIND WHILE DECIDING THE ISSUE. ACCORDINGLY, THE ISSUE IS RESTORED TO THE FILE OF THE TPO/A.O. 5. CONSIDERING THE ONLY CORPORATE ISSUE WHICH SURVI VES ADJUDICATION IS THE RATE OF DEPRECIATION ALLOWABLE TO COMPUTER PERI PHERALS THE AO IS DIRECTED TO EXAMINE THE CLAIM AND ALLOW IN TERMS OF THE JUDG MENT OF THE JURISDICTION HIGH COURT IN THE CASE OF BSES RAJDHANI. . IN THE R ESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH /09/ 2013. SD/- SD/- (J. S. REDDY) (DIVA SINGH) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED THE 13 TH DAY OF SEPTEMBER, 2013 R. NAHEED COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT(ITAT), NEW DELHI. AR,ITAT NEW DELHI.