Discovery Communications India, New Delhi V. DCIT, New Delhi

ITA 5490/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98001 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I1
• Next Hearing Date: 02-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 30-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR
• Assessee Lawyers: MANOJ PARDASANI
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 92B; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : I-1 : NEW DELHI BEFORE SHRI R.S. SYAL, AM & SHRI KULDIP SINGH, JM ITA NO.5490/DEL/2012 ASSESSMENT YEAR : 2008-09 DISCOVERY COMMUNICATIONS INDIA, 9/1B, SECULAR HOUSE, QUTAB INSTITUTIONAL AREA, ARUNA ASAF ALI MARG, NEW DELHI. PAN: AAACD4746K VS. DCIT, CIRCLE 10(1), ROOM NO.406, CR BUILDING, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MANOJ PARDASANI, CA DEPARTMENT BY : SHRI AMRENDRA KUMAR, CIT, DR DATE OF HEARING : 02.12.2015 DATE OF PRONOUNCEMENT : 03.12.2015 ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E FINAL ORDER PASSED BY THE ASSESSING OFFICER (AO) U/S 144C READ WITH SECTION 143(3) ITA NO.5490/DEL/2012 2 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLE D THE ACT) IN RELATION TO THE ASSESSMENT YEAR 2008-09. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE ADDITION OF RS.12,15,11,974/- ON ACCOUNT OF TRANSFER PRICING AD JUSTMENT OF ADVERTISEMENT, MARKETING AND PROMOTION (AMP) EXPENS ES. 3. THE APPEAL FILED BY THE ASSESSEE WAS EARLIER DIS POSED OF BY THE TRIBUNAL VIDE ITS ORDER DATED 13.9.2013 RESTORING T HE COMPUTATION OF ALP OF AMP EXPENSES TO THE TPO TO BE DECIDED IN AC CORDANCE WITH THE SPECIAL BENCH DECISION IN THE CASE OF LG ELECTRONICS INDIA (P) LTD. VS. ACIT (2013) 152 TTJ 273 (DEL) (SB). THE ASSESSEE APPEALED AGAINST THE TRIBUNAL ORDER. THE HONBLE JURISDICTIONAL HIGH COU RT HAS DISPOSED OF THE ASSESSEES APPEAL IN A BATCH OF APPEALS WITH TH E LEADING ORDER IN SONY ERICSON MOBILE COMMUNICATION INDIA (P) LTD. VS. CIT (2015) 374 ITR 118 (DEL) RESTORING THE MATTER TO THE TRIBUNAL FOR A FRESH D ECISION IN TERMS OF THE GUIDELINES LAID DOWN BY THEIR LORDSHIP S IN THIS JUDGMENT. THAT IS HOW THIS APPEAL HAS COME UP FOR A FRESH CON SIDERATION BEFORE US. ITA NO.5490/DEL/2012 3 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A SUBSIDIARY OF DISCOVERY CHANNEL (MAURITIUS) PVT. LT D. WITH DISCOVERY COMMUNICATION INC., USA AS THE PARENT COMPANY OF TH IS GROUP. THE ASSESSEE IS ENGAGED IN THE DISTRIBUTION OF DISCOVER Y CHANNEL, DISCOVERY TRAVEL AND LIVING CHANNEL AND ANIMAL PLANET CHANNEL IN INDIA REGION AND ALSO SALE OF ADVERTISEMENT INVENTORY ON THE CHA NNELS. THE ASSESSEE REPORTED THREE INTERNATIONAL TRANSACTIONS WHICH HAV E BEEN ENLISTED ON PAGE 2 OF THE ORDER PASSED BY THE TRANSFER PRICING OFFICER (TPO). THE ASSESSEE EMPLOYED TRANSACTIONAL NET MARGIN METHOD ( TNMM) AS THE MOST APPROPRIATE METHOD FOR DEMONSTRATING THAT ITS INTERNATIONAL TRANSACTIONS WERE AT ARMS LENGTH PRICE (ALP). ON A REFERENCE MADE BY THE AO FOR DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTIONS, THE TPO ACCEPTED THE REPORTED INTERNATIONAL TRANSACTION S AT ALP. HE, HOWEVER, OBSERVED THAT THE ASSESSEE INCURRED AMP EX PENSES TO THE TUNE OF RS.20,54,57,391/-. FOR DETERMINING THE ALP OF T HE INTERNATIONAL TRANSACTION OF AMP EXPENSES, HE CHOSE CERTAIN COMPA NIES AS COMPARABLES. BY APPLYING THE BRIGHT LINE TEST, HE W ORKED OUT NON-ROUTINE EXPENSES INCURRED FOR DEVELOPING INTANGIBLES IN EXC ESS OF BRIGHT LINE AT ITA NO.5490/DEL/2012 4 RS.10,56,62,586/-. ADDING THE MARK UP OF 15%, HE W ORKED OUT A TRANSFER PRICING ADJUSTMENT OF RS.12,15,11,974/-. THE ASSESSEE REMAINED UNSUCCESSFUL BEFORE THE DISPUTE RESOLUTION PANEL (D RP). EVENTUALLY, THE AO, VIDE HIS FINAL ORDER, MADE AN ADDITION OF R S.12.15 CRORE AND ODD ON THIS ISSUE. THE ASSESSEE IS AGGRIEVED AGAINST T HIS ADDITION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF LG ELECTRONICS INDIA PVT. LTD. VS. ACIT (SUPRA), BY ITS MAJORITY DECISION HELD, INTER ALIA , THAT AMP IS A TRANSACTION AND ALSO AN INTERNATIO NAL TRANSACTION WITHIN THE MEANING OF SECTION 92B OF TH E ACT AND THAT THE TPO HAS JURISDICTION TO COMPUTE THE ALP OF THIS INT ERNATIONAL TRANSACTION DESPITE THE SAME NOT HAVING BEEN SPECIF ICALLY REFERRED TO BY THE AO. ON THE QUESTION OF DETERMINATION OF THE AL P OF THIS INTERNATIONAL TRANSACTION, THE SPECIAL BENCH APPROV ED THE APPLICATION OF BRIGHT LINE TEST FOR WORKING OUT THE AMOUNT OF NON- ROUTINE AMP EXPENSES AND HELD THAT THE ALP OF AMP EXPENSES SHOU LD BE DETERMINED ON COST PLUS METHOD BY TREATING AMP TRANSACTION AS A SEPARATE AND ITA NO.5490/DEL/2012 5 DISTINCT FROM OTHER INTERNATIONAL TRANSACTIONS. IT WAS FURTHER HELD THAT THE SELLING EXPENSES DIRECTLY INCURRED IN CONNECTION WI TH THE SALES DO NOT LEAD TO BRAND PROMOTION AND HENCE SHOULD NOT BE BRO UGHT WITHIN THE AMBIT OF AMP EXPENSES. THE SPECIAL BENCH LAID DOWN CERTAIN PARAMETERS TO BE TAKEN INTO CONSIDERATION FOR DETER MINING THE ALP OF AMP EXPENSES. IN THE ULTIMATE ANALYSIS, THE MATTER WAS SENT BACK TO THE TPO FOR UNDERTAKING THE EXERCISE AFRESH IN THE LIGH T OF ITS DIRECTIONS. 6. FOLLOWING THE SAID ORDER, BENCHES OF THE TRI BUNAL DECIDED SEVERAL CASES INVOLVING AMP EXPENSES, RESTORING THE MATTER TO THE FILE OF AO/TPO FOR DECIDING THIS ISSUE IN CONFORMITY WITH T HE DIRECTIONS GIVEN BY THE SPECIAL BENCH IN LG ELECTRONICS (SUPRA) . SEVERAL ASSESSEES AS WELL AS THE REVENUE PREFERRED THEIR RESPECTIVE APPE ALS BEFORE THE HONBLE HIGH COURTS AGAINST THE TRIBUNAL ORDERS FOL LOWING THE SPECIAL BENCH ORDER. A BATCH OF SUCH APPEALS, ALSO INCLUDI NG THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, LED BY SONY ERICSON MOBILE COMMUNICATIONS INDIA PVT. LTD. VS. CIT (SUPRA) HAS BEEN DISPOSED OF BY THEIR LORDSHIPS OF THE HONBLE DELHI HIGH COURT, UPHOLDING THE ITA NO.5490/DEL/2012 6 MAJORITY VIEW OF SPECIAL BENCH IN LG ELECTRONICS (SUPRA) TREATING AMP AS AN INTERNATIONAL TRANSACTION AND ALSO CONFERRING JURISDICTION IN THE TPO TO DETERMINE THE ALP OF THE INTERNATIONAL TRANS ACTION OF AMP EXPENSES. THE HONBLE HIGH COURT HAS HELD, INTER ALIA , THAT THE INTERNATIONAL TRANSACTION OF AMP EXPENSES SHOULD BE BUNDLED OR AGGREGATED WITH OTHER INTERNATIONAL TRANSACTION CAR RIED OUT BY THE ASSESSEE AS A DISTRIBUTOR, WHO EITHER SIMPLY ACTS A N AGENT OF MANUFACTURER OR PURCHASES GOODS FROM THE MANUFACTUR ER FOR RESALE AT HIS OWN ACCOUNT. HOWEVER, IN THE CASE OF A MANUFACTURE R, THE IMPORT OF RAW MATERIAL HAS BEEN HELD TO BE AN INDEPENDENT TRANSAC TION OF MARKETING AND DISTRIBUTION. IN THE CASE OF A DISTRIBUTOR, THE HO NBLE HIGH COURT HELD THAT WHERE TNMM HAS BEEN APPLIED AS THE MOST APPROP RIATE METHOD, WHICH METHOD HAS NOT BEEN DISTURBED BY THE TPO, THE N, THE INTERNATIONAL TRANSACTIONS OF AMP AND DISTRIBUTION ACTIVITIES SHO ULD BE CLUBBED. IT FURTHER HELD THAT FOR DETERMINING THE ALP OF SUCH T RANSACTIONS UNDER A COMBINED APPROACH, ONLY SUCH COMPARABLES SHOULD BE CHOSEN WHICH CONFORM TO THE AMP FUNCTIONS AND OTHER DISTRIBUTION FUNCTIONS CONDUCTED BY THE ASSESSEE. IF THERE IS SOME DIFFER ENCE IN THE FUNCTIONS ITA NO.5490/DEL/2012 7 UNDER THESE INTERNATIONAL TRANSACTIONS, INCLUDING T HAT OF AMP, BETWEEN THE ASSESSEE AND THE COMPARABLES, THEN, SUITABLE AD JUSTMENT SHOULD BE MADE TO BRING BOTH THE TRANSACTIONS AT PAR. IF PROB ABLE COMPARABLES ARE NOT PERFORMING SIMILAR FUNCTIONS AS DONE BY THE ASS ESSEE AND NO ADJUSTMENT IS POSSIBLE FOR BRINGING THE INTERNATION AL TRANSACTIONS OF THE ASSESSEE IN AN AGGREGATE MANNER AT PAR WITH THOSE U NDERTAKEN BY THE COMPARABLES, THEN, SEGREGATION SHOULD BE DONE AND T HE INTERNATIONAL TRANSACTION OF AMP SPEND SHOULD BE SEPARATELY PROCE SSED UNDER THE TRANSFER PRICING PROVISIONS FOR THE PURPOSES OF DET ERMINING ITS ALP SEPARATELY. IN SUCH DETERMINATION OF ALP OF AMP EX PENSES IN A SEGREGATED MANNER, PROPER SET OFF ON ACCOUNT OF EXC ESS PURCHASE PRICE ADJUSTMENT SHOULD BE ALLOWED. THE VIEW TAKEN BY TH E TRIBUNAL IN SEGREGATING ROUTINE AND NON-ROUTINE EXPENSES ON THE BASIS OF BRIGHT LINE TEST HAS BEEN SET ASIDE BY THE HONBLE HIGH COURT. THE VIEW TAKEN BY THE SPECIAL BENCH THAT THE EXPENSES CONCERNED WITH THE SALES, SUCH AS, REBATES AND DISCOUNTS ETC., SHOULD BE EXCLUDED FROM THE AMBIT OF AMP EXPENSES, HAS BEEN UPHELD. ITA NO.5490/DEL/2012 8 7. WE CAN SUMMARIZE THE RELEVANT POSITION EMANA TING FROM THE JUDGMENT OF THE HONBLE HIGH COURT, AS UNDER : - AMP EXPENSE IS AN INTERNATIONAL TRANSACTION [PARAS 52 & 53 OF THE JUDGMENT] ; THE TPO HAS JURISDICTION TO DETERMINE THE ALP OF TH E INTERNATIONAL TRANSACTION OF AMP EXPENSES [PARA 50 OF THE JUDGMENT]; INTER-CONNECTED INTERNATIONAL TRANSACTIONS CAN BE A GGREGATED AND SECTION 92(3) DOES NOT PROHIBIT THE SET-OFF [PARAS 80 & 81]; AMP IS A SEPARATE FUNCTION. AN EXTERNAL COMPARABLE SHOULD PERFORM SIMILAR AMP FUNCTIONS. [PARAS 165 &166] ; BRIGHT LINE TEST CANNOT BE APPLIED TO WORK OUT NON- ROUTINE AMP EXPENSES FOR BENCHMARKING [PARA 194(X)]; ALP OF AMP EXPENSES SHOULD BE DETERMINED PREFERABLY IN A BUNDLED MANNER WITH THE DISTRIBUTION ACTIVITY [PARA S 91, 121 & OTHERS] ; ITA NO.5490/DEL/2012 9 FOR DETERMINING THE ALP OF THESE TRANSACTIONS IN A BUNDLED MANNER, SUITABLE COMPARABLES HAVING UNDERTAKEN SIMI LAR ACTIVITIES OF DISTRIBUTION OF THE PRODUCTS AND ALSO INCURRING OF AMP EXPENSES, SHOULD BE CHOSEN [PARAS 194(I), (II), (VI II) & OTHERS]; THE CHOICE OF COMPARABLES CANNOT BE RESTRICTED ONLY TO DOMESTIC COMPANIES USING ANY FOREIGN BRAND [PARA 120] ; IF NO COMPARABLES HAVING PERFORMED BOTH THE FUNCTI ONS IN A SIMILAR MANNER ARE AVAILABLE, THEN, SUITABLE ADJU STMENT SHOULD BE MADE TO BRING INTERNATIONAL TRANSACTIONS AND COMPAR ABLE TRANSACTIONS AT PAR [PARA 194 (III)] ; IF ADJUSTMENT IS NOT POSSIBLE OR COMPARABLE IS NOT AVAILABLE, THEN, THE TNMM ON ENTITY LEVEL SHOULD NOT BE APPLIED [P ARAS 100, 121, 194(III) & (VI)] ; IN THE ABOVE EVENTUALITY, INTERNATIONAL TRANSACTION OF AMP SHOULD BE VIEWED IN A DE-BUNDLED MANNER OR SEPARATELY [PAR AS 121& 194(XI)] ; ITA NO.5490/DEL/2012 10 IN SEPARATELY DETERMINING THE ALP OF AMP EXPENSES, THE TPO IS FREE TO CHOOSE ANY OTHER SUITABLE METHOD INCLUDING COST PLUS METHOD [PARA 194(XIII)]; IN SO MAKING A TP ADJUSTMENT ON ACCOUNT OF AMP EXPE NSES, A PROPER SET OFF/PURCHASE PRICE ADJUSTMENT SHOULD BE ALLOWED FROM THE OTHER TRANSACTION OF DISTRIBUTION OF THE PRODUC TS [PARA 93] ; SELLING EXPENSES CANNOT BE CONSIDERED AS PART OF AM P EXPENSES [PARAS 175 & 176 OF THE JUDGMENT]. 8. WITH THE ABOVE BACKGROUND OF THE RATIO DECIDENDI OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT, LET US EX AMINE THE CONTENTION PUT FORTH BY THE LD. AR IN SUPPORT OF THE DELETION OF ADDITION. 9. THE LD. AR INITIALLY CONTENDED THAT THE ASSESSEE IS A SERVICE COMPANY AND HENCE CANNOT BE CONSIDERED EITHER AS A DISTRIBUTOR OR A MANUFACTURER. IT WAS HOWEVER ADMITTED THAT CONSIDE RING THE TOTALITY OF THE NATURE OF BUSINESS, THE ASSESSEE IS MORE AKIN T O THAT OF A DISTRIBUTOR RATHER THAN A MANUFACTURER. THE HONBLE HIGH COURT HAS DEALT WITH THE CASE OF THE ASSESSEE IN A GROUP OF CASES WHO ARE EI THER DISTRIBUTORS OR ITA NO.5490/DEL/2012 11 MANUFACTURERS. THERE IS NO SEPARATE DISCUSSION QUA THE ASSESSEE IN THE JUDGMENT ON THE DETERMINATION OF THE ALP OF AMP EXP ENSES. THIS SHOWS THAT THE ASSESSEE HAS NOT BEEN CONSIDERED BY THE HONBLE HIGH COURT AS BELONGING TO A SEPARATE CLASS OTHER THAN A DISTRIBUTOR OR A MANUFACTURER. SINCE THE LD. AR HAS ADMITTED THAT O UT OF THESE TWO OPTIONS, IT IS MORE CLOSE TO A `DISTRIBUTOR, WE AR E PROCEEDING ACCORDINGLY BY CLASSIFYING IT AS A DISTRIBUTOR. 10. THE LD. AR SUBMITTED THAT THE ASSESSEE APPLIE D TNMM AS THE MOST APPROPRIATE METHOD. SINCE THE PROFIT MARGIN DECLAR ED BY THE ASSESSEE WAS FAVOURABLY COMPARABLE WITH THE AVERAGE MARGIN O F THE COMPARABLES, WHICH FACT HAS NOT BEEN DISPUTED BY THE TPO, THEN, NO ADJUSTMENT SHOULD BE MADE ON ACCOUNT OF AMP EXPENSES BECAUSE SUCH EXP ENSES STAND SUBSUMED IN THE OVERALL OPERATING PROFIT. THIS WAS COUNTERED BY THE LD. DR WITH REFERENCE TO CERTAIN PARAS OF THE JUDGMENT IN SONY ERICSSON (SUPRA) NOT PERMITTING THE ACCEPTANCE OF SUCH A WIDE PROPO SITION. 11. WE ARE UNABLE TO ACCEPT THE ARGUMENT ADVANCED ON BEHALF OF THE ASSESSEE FOR DELETION OF THE ADDITION TOWARDS AMP E XPENSES ON THE PLAIN ITA NO.5490/DEL/2012 12 LOGIC OF THE ASSESSEES PROFIT MARGIN MATCHING WITH THOSE OF COMPARABLES. THERE IS A BASIC FALLACY IN THE ARGUM ENT OF THE LD. AR. IT IS PERTINENT TO NOTE THAT THE TPO EXAMINED AND GOT SATISFIED WITH THE ASSESSEES PROFIT MARGIN VIS--VIS THE COMPARABLES ONLY QUA THE INTERNATIONAL TRANSACTIONS OF DISTRIBUTION FUNCTION . HE DETERMINED THE ALP OF AMP EXPENSES BY APPLYING BRIGHT LINE TEST AN D IN THIS PROCESS SIMPLY COMPARED THE QUANTITATIVE FIGURES OF AMP EXP ENSES INCURRED BY THE ASSESSEE AND COMPARABLES FOR WORKING OUT THE NO N-ROUTINE EXPENSES. HE DID NOT EXAMINE THE AMP FUNCTIONS CARRIED OUT BY THE ASSESSEE AND THE COMPARABLES. AS THE BRIGHT LINE TEST PRIMARILY CONCENTRATES ON THE QUANTITATIVE ASPECTS OF THE AMP EXPENSES ALONE, IT OVERLOOKS THE EXAMINATION OF THE AMP FUNCTIONS CARRIED OUT BY THE ASSESSEE ON ONE HAND AND THE COMPARABLES ON THE OTHER. NOW, THE HO NBLE HIGH COURT IN SONY ERICSON MOBILE (SUPRA) HAS HELD THAT AMP EXPENSE IS A SEPARATE INTERNATIONAL TRANSACTION AND ALSO BRIGHT LINE TEST IS NOT APPLICABLE FOR DETERMINING THE ALP OF AMP EXPENSES. THE MANNER FOR THE DETERMINATION OF THE ALP OF THE DISTRIBUTION ACTIVI TY AND AMP ACTIVITY HAS ALSO BEEN SET OUT BY THE HONBLE HIGH COURT TO BE CONDUCTED, FIRSTLY, ITA NO.5490/DEL/2012 13 IN A BUNDLED MANNER BY CONSIDERING THE DISTRIBUTION AND AMP FUNCTIONS PERFORMED BY THE ASSESSEE AS WELL AS THE PROBABLE C OMPARABLES, AND IF PROBABLE COMPARABLES HAVING PERFORMED BOTH THE FUNC TIONS ARE NOT AVAILABLE, THEN TO DETERMINE THE ALP OF AMP EXPENSE S IN A SEGREGATED MANNER. AS SUCH, IT BECOMES IMMENSELY IMPORTANT TO SEPARATELY EXAMINE THE DISTRIBUTION AND AMP FUNCTIONS UNDERTAKEN BY THE ASSESSEE AS WELL AS PROBABLE COMPARABLES. IT IS VITAL TO HIGHLIGHT T HE DIFFERENCE BETWEEN THE AMP EXPENSES AND AMP FUNCTIONS. WHEREAS THE AMP FUNCTIONS ARE THE MEANS BY WHICH THE AMP ACTIVITY IS PERFORMED, T HE AMP EXPENSES ARE THE AMOUNT SPENT ON THE PERFORMANCE OF SUCH MEA NS (FUNCTIONS). TO PUT IT SIMPLY, AN EXAMINATION OF AMP FUNCTIONS CARRIED OUT BY THE ASSESSEE AND THE PROBABLE COMPARABLES IS SINE QUA NON IN THE PROCESS OF DETERMINATION OF THE ALP OF THE INTERNATIONAL TRANS ACTION OF AMP SPEND, EITHER IN A SEGREGATE OR AN AGGREGATE MANNER. WHAT THEIR LORDSHIPS HAVE HELD IS TO BUNDLE THE DISTRIBUTION ACTIVITY WITH TH E AMP ACTIVITY, BEING TWO SEPARATE BUT CONNECTED INTERNATIONAL TRANSACTIO NS, FOR THE PURPOSES OF DETERMINATION OF THE ALP OF BOTH THESE INTERNATIONA L TRANSACTIONS IN A COMBINED MANNER. THE ARGUMENT OF THE LD. AR, IF TA KEN TO A LOGICAL ITA NO.5490/DEL/2012 14 CONCLUSION, WILL MAKE THE AMP SPEND AS A NON-INTERN ATIONAL TRANSACTION, WHICH, IN OUR CONSIDERED OPINION, IS NOT APPROPRIAT E. ONCE AMP EXPENSE HAS BEEN HELD TO BE AN INTERNATIONAL TRANSA CTION, IT IS, BUT, NATURAL THAT THE FUNCTIONS PERFORMED BY THE ASSESSE E UNDER SUCH A TRANSACTION NEED TO BE COMPARED WITH SIMILAR FUNCTI ONS PERFORMED BY A COMPARABLE CASE. IF AMP FUNCTIONS PERFORMED BY THE ASSESSEE TURN OUT TO BE DIFFERENT FROM THOSE PERFORMED BY A PROBABLE COMPARABLE COMPANY, THEN, AN ADJUSTMENT IS REQUIRED TO BE MADE SO AS TO BRING THE AMP FUNCTIONS PERFORMED BY THE ASSESSEE AS WELL AS THE COMPARABLE, AT THE SAME PEDESTAL. IF WE CONCUR WITH THE CONTENTIO N OF THE LD. AR THAT THE ADDITION ON ACCOUNT TRANSFER PRICING ADJUSTMENT OF AMP EXPENSES BE DELETED WITHOUT ANY EXAMINATION OF THE AMP FUNCTION S CARRIED OUT BY THE ASSESSEE AS WELL AS COMPARABLES, THIS WILL AMOU NT TO SNATCHING AWAY THE TAG OF INTERNATIONAL TRANSACTION FROM AMP EXPE NSES, ASSIGNED BY THE HONBLE HIGH COURT. WHAT THEIR LORDSHIPS HAVE HELD IN THE JUDGMENT IS THAT THE DISTRIBUTION ACTIVITY AND AMP EXPENSES ARE TWO SEPARATE BUT RELATED INTERNATIONAL TRANSACTIONS. IT IS ONLY FOR THE PURPOSES OF DETERMINING THEIR ALP THAT THESE TWO SHOULD BE AGGR EGATED. THE PROCESS ITA NO.5490/DEL/2012 15 OF SUCH AGGREGATION DOES NOT TAKE AWAY THE SEPARATE CHARACTER OF THE AMP TRANSACTION, ALBEIT RELATED. AN ANALYSIS AND EXAMINATION OF THE DISTRIBUTION AND AMP FUNCTIONS CARRIED OUT BY THE A SSESSEE MUST BE NECESSARILY DONE IN THE FIRST INSTANCE, WHICH SHOUL D BE THEN COMPARED WITH SIMILAR FUNCTIONS PERFORMED BY SOME PROBABLE COMPARABLES. IF THE DISTRIBUTION AND AMP FUNCTIONS PERFORMED BY THE ASS ESSEE TURN OUT TO BE DIFFERENT FROM THOSE PERFORMED BY PROBABLE COMPAR ABLES, THEN, A SUITABLE ADJUSTMENT SHOULD BE MADE TO THE PROFITS O F THE COMPARABLE SO AS TO BALANCE THE EFFECT OF SUCH DIFFERENCES. IF H OWEVER DIFFERENCES EXIST IN SUCH FUNCTIONS, BUT NO ADJUSTMENT CAN BE MADE, T HEN, SUCH PROBABLE COMPARABLE SHOULD BE DROPPED FROM THE LIST OF COMPA RABLES. IF, IN DOING THIS EXERCISE, THERE REMAINS NO COMPANY DOING COMPA RABLE DISTRIBUTION AND AMP FUNCTIONS, THEN, BOTH THE INTERNATIONAL TRA NSACTIONS ARE REQUIRED TO BE SEGREGATED AND THEN EXAMINED ON INDIVIDUAL BA SIS BY FINDING OUT PROBABLE COMPARABLES DOING SUCH SEPARATE FUNCTIONS SIMILARLY. FOR THE INTERNATIONAL TRANSACTION OF AMP SPEND, THIS CAN BE DONE BY, FIRSTLY, SEEING THE AMP FUNCTIONS ACTUALLY PERFORMED BY THE ASSESSEE AND THEN COMPARING IT WITH THE AMP FUNCTIONS PERFORMED BY A PROBABLE ITA NO.5490/DEL/2012 16 COMPARABLE. IF BOTH ARE FOUND OUT TO BE SIMILAR, TH EN THE MATTER ENDS AND A COMPARABLE IS FOUND AND ONE CAN GO AHEAD WITH DET ERMINING THE ALP OF SUCH A TRANSACTION. IF THE AMP FUNCTIONS PERFORM ED BY THE TWO ENTITIES ARE FOUND TO BE DIFFERENT, THEN ADJUSTMENT IS REQUIRED TO BE MADE IN THE CASE OF A PROBABLE COMPARABLE, SO AS TO MAKE IT UNIFORM WITH THE ASSESSEE. THE ASSESSEE MAY HAVE POSSIBLY DONE, SAY, FOUR DIFFERENT AMP FUNCTIONS AS AGAINST THE PROBABLE COMPARABLE HAVING DONE, SAY, ONLY THREE. IN SUCH A SCENARIO, AGAIN THE ADJUSTMENT WIL L BE WARRANTED. IN ANOTHER SITUATION, THE AMP FUNCTIONS PERFORMED BY T HE ASSESSEE AND PROBABLE COMPARABLE MAY BE SIMILAR BUT WITH VARYING STANDARDS, WHICH WILL ALSO CALL FOR AN ADJUSTMENT. CRUX OF THE MATT ER IS THAT THE AMP FUNCTIONS PERFORMED BY THE ASSESSEE MUST BE SIMILAR TO THOSE DONE BY THE COMPARABLE, IN THE SAME MANNER AS SUCH FUNCTIONS AR E COMPARED IN ANY OTHER INTERNATIONAL TRANSACTION. HOWEVER, IN COMPUT ING ALP OF AMP SPEND, THE ADJUSTMENT OR SET OFF, IF ANY, AVAILABLE FROM THE DISTRIBUTION FUNCTION, SHOULD BE MADE. THE ESSENCE OF THE JUDGMENT IN THE CASE OF SONY ERICSON MOBILE (SUPRA) IS THAT THE TWO INTERNATIONAL TRANSACTIONS OF DISTRIBUTION AND AMP SHOULD BE EXAMINED ON THE TOUC HSTONE OF TRANSFER ITA NO.5490/DEL/2012 17 PRICING PROVISIONS, BUT ON AN AGGREGATE BASIS. DETE RMINING THE ALP OF TWO TRANSACTIONS IN AN AGGREGATE MANNER POSTULATES MAKING A COMPARISON OF BOTH THE FUNCTIONS OF DISTRIBUTION AND AMP CARRI ED OUT BY THE ASSESSEE WITH THE COMPARABLES, SO THAT SURPLUS FROM THE DISTRIBUTION ACTIVITY COULD BE ADJUSTED AGAINST THE DEFICIT IN T HE AMP ACTIVITY. THE HONBLE HIGH COURT HAS NO WHERE LAID DOWN THAT THE AMP FUNCTIONS PERFORMED BY THE ASSESSEE SHOULD NOT BE COMPARED WI TH THOSE PERFORMED BY THE COMPARABLE PARTIES. ON THE CONTRARY, IT TUR NED DOWN THE CONTENTION RAISED BY THE LD. AR URGING FOR NOT TREA TING AMP AS A SEPARATE FUNCTION, WHICH IS APPARENT FROM THE EXTRA CTION FROM PARA 165 OF THE JUDGMENT : `ON BEHALF OF THE ASSESSEE, IT WA S INITIALLY ARGUED THAT THE TPO CANNOT ACCOUNT FOR OR TREAT AMP AS A FUNCTI ON. THIS ARGUMENT ON BEHALF OF THE ASSESSEE IS FLAWED AND FALLACIOUS FOR SEVERAL REASONS. THERE ARE INHERENT FLAWS IN THE SAID ARGUMENT. IT HELD VIDE PARA 165 OF THE JUDGMENT THAT : ` AN EXTERNAL COMPARABLE SHOULD PERFORM SIMILAR AMP FUNCTIONS. THUS IT IS MANIFEST THAT COMPARISON OF AMP FUNCTI ONS IS VITAL WHICH CANNOT BE DISPENSED WITH. LET US WE GO A STEP FURTHER WITH THE ALTERNATIVE PRESCRIPTION OF THE JUDGMENT THAT I F ALP OF BOTH THE ITA NO.5490/DEL/2012 18 TRANSACTIONS OF DISTRIBUTION AND AMP CANNOT BE DET ERMINED IN A COMBINED MANNER, THEN THE ALP OF AMP FUNCTION SHOUL D BE SEPARATELY DONE. THE SUBMISSION ADVANCED BY THE ASSESSEE OF C ONSIDERING THE PROFIT ON AN ENTITY LEVEL WITHOUT MAKING COMPARISON OF AMP FUNCTIONS DONE BY THE ASSESSEE AS WELL AS THE COMPARABLE, WIL L RENDER THIS ALTERNATIVE APPROACH INCAPABLE OF COMPLIANCE. CANV ASSING SUCH A VIEW AMOUNTS TO TREATING AMP SPEND AS A NON-INTERNATIONA L TRANSACTION, WHICH IS PATENTLY INCAPABLE OF ACCEPTANCE. 12. ADVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THE TPO ACCEPTED TNMM AS THE MOST APPROPRIATE METHOD AND DI D NOT MAKE ANY TP ADJUSTMENT ON ACCOUNT OF THE REPORTED INTERNATIO NAL TRANSACTIONS CARRIED OUT BY THE ASSESSEE DURING THE COURSE OF IT S BUSINESS. HE, HOWEVER, ESPOUSED THE AMP EXPENSE AS A SEPARATE AND DISTINCT ITEM. TREATING THE AMP SPEND AS A SEPARATE INTERNATIONAL TRANSACTION, HE APPLIED THE COST PLUS METHOD AND PROPOSED THE EXTAN T ADJUSTMENT. IN DOING SO, HE SEGREGATED ROUTINE AMP EXPENSES INCURR ED BY THE ASSESSEE FOR HIS BUSINESS FROM THE NON-ROUTINE AMP EXPENSES BY TREATING SUCH ITA NO.5490/DEL/2012 19 NON-ROUTINE AMP EXPENSES LEADING TO THE CREATION OF MARKETING INTANGIBLE FOR ITS AE. THIS BIFURCATION OF TOTAL A MP EXPENSES WAS DONE BY APPLYING BRIGHT LINE TEST. IT IS OBVIOUS THAT I N THE ENTIRE EXERCISE CARRIED OUT BY THE TPO, HE PROCEEDED ON AN ALTOGETH ER DIFFERENT LINE IN EXAMINING THE QUANTUM OF AMP EXPENSE FOR DETERMINING THE VALUE OF THE INTERNATIONAL TRANSACTION OF AMP, WITHOUT LOOKI NG AT THE AMP FUNCTIONS CARRIED OUT BY THE ASSESSEE AND THE COMPARABLES. D ISTINCT EXAMINATION OF AMP FUNCTIONS DOES NOT FIND PLACE IN THIS METHOD OF COMPUTING THE VALUE OR THE ALP OF AMP SPEND. NOW, WHEN WE LOOK AT THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT , IT BECOMES CRYSTAL CLEAR THAT THE APPROACH ADOPTED BY THE TPO FOR DETERMINING ALP OF AMP EXPENSES HAS BEEN RENDERED INCORRECT. HOWEV ER, THE FACT REMAINS THAT AS PER THE VERDICT OF THE HONBLE HIGH COURT, THE AMP SPEND IS AN INTERNATIONAL TRANSACTION, WHICH IS RE QUIRED TO BE PROCESSED UNDER CHAPTER X OF THE ACT BY TAKING INTO ACCOUNT T HE AMP FUNCTIONS PERFORMED BY THE ASSESSEE AND THEN COMPARING SUCH F UNCTIONS WITH THOSE PERFORMED BY COMPARABLE ENTITIES, THOUGH, FIRSTLY I N A COMBINED MANNER WITH THE DISTRIBUTION FUNCTIONS. WE FIND NO REFERE NCE TO THE AMP ITA NO.5490/DEL/2012 20 FUNCTIONS CARRIED OUT BY THE ASSESSEE IN THE ORDER OF THE TPO. AS SUCH, THERE CAN BE NO QUESTION OF MAKING ANY COMPARISON O F THE ASSESSEES AMP FUNCTIONS WITH THOSE OF THE COMPARABLES. GOING BY THE RATIO IN THE CASE OF SONY ERICSON MOBILE (SUPRA), IT IS MANDATORY TO MAKE A COMPARISON OF THE AMP FUNCTIONS PERFORMED BY THE AS SESSEE AND COMPARABLES AND THEN MAKING AN ADJUSTMENT, IF ANY, DUE TO DIFFERENCES BETWEEN THE TWO, SO THAT THE AMP FUNCTIONS PERFORME D BY THE ASSESSEE AND COMPARABLE ARE BROUGHT TO A SIMILAR PLATFORM. IN FACT, THIS IS ALSO THE PRESCRIPTION OF RULE 10B(1)(E), WHICH PROVIDES AS U NDER :- ` (E) TRANSACTIONAL NET MARGIN METHOD, BY WHICH, (I) THE NET PROFIT MARGIN REALISED BY THE ENTERPRIS E FROM AN INTERNATIONAL TRANSACTION ENTERED INTO WITH AN ASSO CIATED ENTERPRISE IS COMPUTED IN RELATION TO COSTS INCURRED OR SALES EFF ECTED OR ASSETS EMPLOYED OR TO BE EMPLOYED BY THE ENTERPRISE OR HAV ING REGARD TO ANY OTHER RELEVANT BASE ; (II) THE NET PROFIT MARGIN REALISED BY THE ENTERPRI SE OR BY AN UNRELATED ENTERPRISE FROM A COMPARABLE UNCONTROLLED TRANSACTION OR A NUMBER OF SUCH TRANSACTIONS IS COMPUTED HAVING REGA RD TO THE SAME BASE ; (III) THE NET PROFIT MARGIN REFERRED TO IN SUB-CLAU SE (II) ARISING IN COMPARABLE UNCONTROLLED TRANSACTIONS IS ADJUSTED TO TAKE INTO ACCOUNT THE DIFFERENCES, IF ANY, BETWEEN THE INTERNATIONAL TRANSACTION AND THE COMPARABLE UNCONTROLLED TRANSACTIONS , OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS, WHICH COULD MATERI ALLY AFFECT THE AMOUNT OF NET PROFIT MARGIN IN THE OPEN MARKET ; ITA NO.5490/DEL/2012 21 (IV) THE NET PROFIT MARGIN REALISED BY THE ENTERPRI SE AND REFERRED TO IN SUB-CLAUSE (I) IS ESTABLISHED TO BE THE SAME AS THE NET PROFIT MARGIN REFERRED TO IN SUB-CLAUSE (III) ; (V) THE NET PROFIT MARGIN THUS ESTABLISHED IS THEN TAKEN INTO ACCOUNT TO ARRIVE AT AN ARMS LENGTH PRICE IN RELAT ION TO THE INTERNATIONAL TRANSACTION. 13. A PERUSAL OF THE SUB-CLAUSE (III) OF THIS RU LE DIVULGES THAT NET PROFIT MARGIN UNDER A COMPARABLE UNCONTROLLED TRANSACTION AS DETERMINED UNDER SUB-CLAUSE (II) SHOULD BE: ADJUSTED TO TAKE INTO ACCOUNT THE DIFFERENCES, IF ANY, BETWEEN THE INTERNATIONAL TRAN SACTION AND THE COMPARABLE UNCONTROLLED TRANSACTIONS. IT IS ONLY SUCH ADJUSTED NET PROFIT MARGIN IN SUB-CLAUSE (III) OF RULE 10B(1)(E) WHICH IS COMPARED WITH THE NET PROFIT MARGIN REALIZED BY THE ASSESSEE AS PER THE MANDATE OF SUB-CLAUSE (IV) OF RULE 10B(1)(E). 14. SUB-RULE (2) OF RULE 10B PROVIDES THAT FOR THE PURPOSES OF SUB- RULE (1), THE COMPARABILITY OF AN INTERNATIONAL TR ANSACTION WITH AN UNCONTROLLED TRANSACTION SHALL BE JUDGED WITH REFER ENCE TO THE FOLLOWING, NAMELY (A) THE SPECIFIC CHARACTERISTICS OF THE PR OPERTY TRANSFERRED OR SERVICES PROVIDED IN EITHER TRANSACTION ; (B) THE FUNCTIONS ITA NO.5490/DEL/2012 22 PERFORMED, TAKING INTO ACCOUNT ASSETS EMPLOYED OR T O BE EMPLOYED AND THE RISKS ASSUMED, BY THE RESPECTIVE PARTIES TO THE TRANSACTIONS ; (C) THE CONTRACTUAL TERMS (WHETHER OR NOT SUCH TERMS AR E FORMAL OR IN WRITING) OF THE TRANSACTIONS WHICH LAY DOWN EXPLICI TLY OR IMPLICITLY HOW THE RESPONSIBILITIES, RISKS AND BENEFITS ARE TO BE DIVIDED BETWEEN THE RESPECTIVE PARTIES TO THE TRANSACTIONS ; (D) CONDI TIONS PREVAILING IN THE MARKETS IN WHICH THE RESPECTIVE PARTIES TO THE TRAN SACTIONS OPERATE, INCLUDING THE GEOGRAPHICAL LOCATION AND SIZE OF THE MARKETS, THE LAWS AND GOVERNMENT ORDERS IN FORCE, COSTS OF LABOUR AND CAP ITAL IN THE MARKETS, OVERALL ECONOMIC DEVELOPMENT AND LEVEL OF COMPETITI ON AND WHETHER THE MARKETS ARE WHOLESALE OR RETAIL. SUB-RULE (3) OF R ULE 10B STIPULATES THAT AN UNCONTROLLED TRANSACTION SHALL BE COMPARABLE TO AN INTERNATIONAL TRANSACTION IF (I) NONE OF THE DIFFERENCES, IF ANY , BETWEEN THE TRANSACTIONS BEING COMPARED, OR BETWEEN THE ENTERPR ISES ENTERING INTO SUCH TRANSACTIONS ARE LIKELY TO MATERIALLY AFFECT T HE PRICE OR COST CHARGED OR PAID IN, OR THE PROFIT ARISING FROM, SUCH TRANSA CTIONS IN THE OPEN MARKET ; OR (II) REASONABLY ACCURATE ADJUSTMENTS CA N BE MADE TO ELIMINATE THE MATERIAL EFFECTS OF SUCH DIFFERENCES. ITA NO.5490/DEL/2012 23 15. ON A COMPARATIVE READING OF SUB-RULES (1), (2) AND (3) OF RULE 10B, IT BECOMES PALPABLE THAT THE INTERNATIONAL TRA NSACTION AND THE UNCONTROLLED TRANSACTION WITH WHICH COMPARISON IS S OUGHT TO BE MADE FOR DETERMINING THE ALP, IN THE FIRST INSTANCE, MUST H AVE OVERALL SIMILAR CHARACTERISTICS. IT IS VIVID THAT IF THE GOODS/SE RVICES ARE DIFFERENT, THEN NO EFFECTIVE COMPARISON CAN BE MADE. ONCE THE GOODS /SERVICES UNDER BOTH THE TRANSACTIONS ARE BROADLY SIMILAR BUT THERE IS A DIFFERENCE IN THEM BECAUSE OF CERTAIN SPECIFIC CHARACTERISTICS; AND/O R THE PRODUCTS/SERVICES IN BOTH THE TRANSACTIONS ARE IDENTICAL, BUT STILL T HERE ARE CERTAIN DIFFERENCES DUE TO THE CONTRACTUAL TERMS OR THE GEO GRAPHICAL LOCATION, ETC., THEN, A REASONABLY ACCURATE ADJUSTMENT SHOUL D BE MADE FOR ELIMINATING THE MATERIAL EFFECTS OF SUCH DIFFERENCE S SO AS TO BRING THE INTERNATIONAL TRANSACTION AND THE COMPARABLE UNCONT ROLLED TRANSACTION ON THE SAME PODIUM. IF DUE TO ONE REASON OR THE OTHER, NO REASONABLE ACCURATE ADJUSTMENT CAN BE MADE DUE TO SUCH DIFFERE NCES, THEN, SUCH UNCONTROLLED TRANSACTION SHOULD NOT BE CONSIDERED A S A COMPARABLE TRANSACTION. ITA NO.5490/DEL/2012 24 16. IT IS DISCERNIBLE THAT THE PRESCRIPTION OF RULE 10B IS IN COMPLETE HARMONY WITH THE RATIO OF THE JUDGMENT IN THE CASE OF SONY ERICSON MOBILE (SUPRA) , TO THE EFFECT THAT THE AMP FUNCTIONS CARRIED OUT BY THE ASSESSEE ARE REQUIRED TO BE NECESSARILY COMPARED WI TH THE AMP FUNCTIONS CARRIED OUT BY A COMPARABLE ENTITY IN DET ERMINING THE AMP OF ALP EXPENSES. DIFFERENCE BETWEEN THE FUNCTIONS, IF CAPABLE OF ADJUSTMENT, SHOULD BE GIVEN EFFECT TO IN THE PROFIT RATE OF THE COMPARABLE AND IF SUCH DIFFERENCE CANNOT BE GIVEN EFFECT TO, T HEN, THE PROBABLE COMPARABLE SHOULD BE ELIMINATED FROM THE LIST OF CO MPARABLES. GOING FURTHER, IF NO PROPER COMPARABLE SURVIVES, THEN THE TNMM SHOULD BE DISCARDED AND AN ALTERNATIVE METHOD, MAY BE, COST PLUS OR ANY OTHER SUITABLE METHOD BE APPLIED FOR DETERMINING THE ALP OF AMP EXPENSES. 17. AT THE COST OF REPETITION, WE SUMMARIZE THAT T HE DISTRIBUTION AND AMP FUNCTIONS ARE TWO SEPARATE INTERNATIONAL ACTIVI TIES, WHICH NEED TO BE COMPARED WITH UNCONTROLLED TRANSACTIONS. BECAUS E OF THEIR INTER- TWINNING, IT IS ONLY FOR THE PURPOSES OF DETERMINI NG THEIR ALP THAT BOTH THESE TRANSACTIONS CAN BE AGGREGATED IN THE FIRST I NSTANCE, SO THAT THE ITA NO.5490/DEL/2012 25 SURPLUS FROM ONE COULD BE ADJUSTED AGAINST THE DEFI CIT FROM THE OTHER IN AN OVERALL APPROACH. IT DOES NOT MEAN THAT BECAUSE OF AGGREGATION, THE AMP EXPENSE TRANSACTION SHEDS ITS CHARACTER OF A SE PARATE INTERNATIONAL TRANSACTION AND HENCE THE AMP FUNCTIONS SHOULD NOT BE MATCHED WITH THE AMP FUNCTIONS CARRIED OUT BY PROBABLE COMPARABL ES. IF SUITABLE COMPARABLES CAN BE FOUND HAVING PERFORMED BOTH DIST RIBUTION AND AMP FUNCTIONS, THEN, THEIR ALP SHOULD BE DETERMINED ON AGGREGATE BASIS. IF, HOWEVER, THERE IS SOME DIFFERENCE IN THE DISTRIBUTI ON OR AMP FUNCTIONS PERFORMED BY THE ASSESSEE VIS--VIS THE PROBABLE COMPARABLES, THEN AN ATTEMPT SHOULD FIRST BE MADE TO IRON OUT SUCH DIFFE RENCE BY MAKING A SUITABLE ADJUSTMENT TO THE PROFIT MARGIN OF COMPARA BLES. IF SUCH AN ADJUSTMENT IS NOT POSSIBLE, THEN SUCH PROBABLE COMP ARABLE SHOULD BE ELIMINATED. IF, BY MAKING A COMPARATIVE ANALYSIS O F THE DISTRIBUTION AND AMP FUNCTIONS JOINTLY, THERE REMAINS NO COMPARABLE CASE PERFORMING SUCH DISTRIBUTION AND AMP FUNCTIONS, THEN, THE INTE RNATIONAL TRANSACTION OF AMP SHOULD BE SEGREGATED AND ITS ALP BE DETERMIN ED SEPARATELY BY APPLYING A SUITABLE METHOD. HOWEVER, IN SO DETERMI NING THE ALP OF SUCH AN INTERNATIONAL TRANSACTION OF AMP EXPENSES O N SEPARATE BASIS, A ITA NO.5490/DEL/2012 26 PROPER SET OFF, IF ANY, AVAILABLE FROM THE DISTRIBU TION ACTIVITY, SHOULD BE ALLOWED. 18. COMING BACK TO THE FACTS OF THE INSTANT CASE, W E FIND THAT NO DETAIL OF THE AMP FUNCTIONS PERFORMED BY THE ASSESSEE IS A VAILABLE ON RECORD. SIMILARLY, THERE IS NO REFERENCE IN THE ORDER OF TH E TPO TO ANY AMP FUNCTIONS PERFORMED BY COMPARABLES. IN FACT, NO SU CH ANALYSIS OR COMPARISON HAS BEEN UNDERTAKEN BY THE TPO BECAUSE O F HIS APPLYING THE BRIGHT LINE TEST FOR DETERMINING THE VALUE OF THE I NTERNATIONAL TRANSACTION OF AMP EXPENSE AND THEN APPLYING THE COST PLUS METH OD FOR DETERMINING ITS ALP. THE LD. AR ALSO FAILED TO DRAW OUR ATTENT ION TOWARDS ANY MATERIAL DIVULGING THE AMP FUNCTIONS PERFORMED BY T HE ASSESSEE AS WELL AS COMPARABLES. AS SUCH, WE ARE HANDICAPPED TO DETE RMINE THE ALP OF AMP EXPENSES AT OUR END, EITHER IN A COMBINED OR A SEPARATE APPROACH. THE LD. AR HAS ALSO DISPUTED THE BASE OF TOTAL AMP EXPENSES TAKEN BY THE TPO. HE ARGUED THAT SOME OF EXPENSES, WHICH AR E IN THE NATURE OF SELLING EXPENSES DIRECTLY INCURRED IN CONNECTION WI TH SALES NOT LEADING TO BRAND PROMOTION IN ANY MANNER, SHOULD BE EXCLUDED. IN PRINCIPLE, WE ITA NO.5490/DEL/2012 27 AGREE WITH THE CONTENTION OF THE LD. AR THAT SELLIN G EXPENSES INCURRED FOR MAKING SALES ARE DISTINCT FROM AMP EXPENSES AND , HENCE, SHOULD NOT BE INCLUDED IN THE BASE AMOUNT FOR CONSIDERATION. THE HONBLE JURISDICTIONAL HIGH COURT IN SONY ERICSON MOBILE COMMUNICATION INDIA (P) LTD . (SUPRA) HAS ALSO HELD SO. AS THERE IS INAPPROPRIA TE DISCUSSION ABOUT THE PRECISE NATURE OF EXPENSES WHICH HAVE BEE N ASSAILED BEFORE US, WE CONSIDER IT EXPEDIENT TO DIRECT THE AO TO FIRST ASCERTAIN THE CORRECT NATURE OF SUCH EXPENSES. IF THESE EXPENSES ARE FOU ND TO BE IN THE NATURE OF SELLING EXPENSES DIRECTLY IN CONNECTION WITH SA LES, THEN, THEY SHOULD BE REMOVED FROM THE BASE AMOUNT FOR COMPUTING THE A LP OF AMP EXPENSES. IN THE OTHERWISE SCENARIO, THE AMP EXPENS ES, WHICH ARE NOT IN THE NATURE OF SELLING EXPENSES INCURRED DIRECTLY FO R SALES, SHOULD CONTINUE TO INCLUDE IN THE BASE AMOUNT. UNDER SUCH CIRCUMSTANCES, WE SET ASIDE THE IMPUGNED ORDER AND SEND THE MATTER BA CK TO THE FILE OF THE TPO/AO FOR DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTION OF AMP SPEND AFRESH IN ACCORDANCE WITH THE MANNER LAID DOWN BY THE HONBLE HIGH COURT IN SONY ERICSON MOBILE (SUPRA). ITA NO.5490/DEL/2012 28 19. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 03.12.201 5. SD/- SD/- [KULDIP SINGH] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 03 RD DECEMBER, 2015. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.