M/s. Xerox India Ltd., Gurgaon V. ACIT, New Delhi

ITA 5528/DEL/2012

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1258 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I1
• Next Hearing Date: 05-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 01-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY I BARA
• Keywords: Capital asset; Depreciation; Transfer pricing; International transaction; Additional evidence; Tangible material; Bad and doubtful debts; Commercial expediency; Onus to prove; Set aside
• Section: 92C; 143(3); 244A; 92B; 92F; 234B; 144C; 191; 207; 64; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-1 : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.5528/DEL./2012 (ASSESSMENT YEAR : 2008-09) M/S. XEROX LIMITED, VS. ACIT, CIRCLE 20, (PREVIOUSLY KNOWN AS XEROX NEW DELHI. MODICORP LIMITED) 5 TH AND 6 TH FLOOR, VATIKA BUSINESS PARK, SECTOR 49, SOHNA ROAD, GURGAON (HARYANA). (PAN : AABCM8634R) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI TARANDEEP SINGH, ADVOCATE REVENUE BY : SHRI SANJAY I. BARA, CIT DR DATE OF HEARING : 07.11.2019 DATE OF ORDER : 16.12.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER THE APPELLANT, M/S. XEROX INDIA LTD. (HEREINAFTER REFERRED TO AS THE TAXPAYER) BY FILING THE PRESENT APPEAL SOU GHT TO SET ASIDE THE IMPUGNED ORDER DATED 24.09.2012 PASSED BY THE A O IN CONSONANCE WITH THE ORDERS PASSED BY THE LD. DRP/TP O UNDER SECTION 143 (3) READ WITH SECTION 144C OF THE ACT Q UA THE ASSESSMENT YEAR 2008-09 ON THE GROUNDS INTER ALIA T HAT :- ITA NO.5528/DEL./2012 2 ORDER BEING BAD IN LAW 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE ORDER PASSED BY THE LEARNED ASSESSING O FFICER ('AO') UNDER SECTION 143(3) READ WITH SECTION 144(C ) OF THE ACT IS ERRONEOUS AND BAD IN LAW. 2. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED AO ERRED IN ASSESSING THE RETURNED INCOME OF RS.15,50,03,450 AT RS. 52,89,44,734. TRANSFER PRICING GROUNDS 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED AO ERRED IN UPHOLDING THE ADJUS TMENT MADE BY THE LEARNED TRANSFER PRICING OFFICER (''TPO'') O F INR 364,127,428 TO THE INCOME OF THE APPELLANT. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED TPO ERRED BY TAKING SUO MOTO CO GNIZANCE OF AN ALLEGED INTERNATIONAL TRANSACTION ON ACCOUNT OF ADVERTISEMENT, MARKETING AND PROMOTION (AMP') EXPE NSES OF APPELLANT. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED TPO/AO/DISPUTE RESOLUTION PANEL ERRED IN ADOPTING AN INCORRECT AND UNJUSTIFIED INTERPRETATIO N OF SECTION 92C OF THE ACT BY ASSUMING THE AMP EXPENSE WOULD SA TISFY THE JURISDICTIONAL PRE-REQUISITE OF BEING AN 'INTERNATI ONAL TRANSACTION'. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED AO/DISPUTE RESOLUTION PANEL ('D RP')/TPO ERRED IN HOLDING THAT AMP EXPENSES PAID TO UNRELATE D THIRD PARTIES IN INDIA BY APPELLANT FOR ITSELF IS AN 'INT ERNATIONAL TRANSACTION' WITHIN THE MEANING OF SECTION 92B OF T HE ACT IN ABSENCE OF ANY AGREEMENT, ARRANGEMENT OR UNDERSTAND ING WITH ITS ASSOCIATED ENTERPRISE ('AE') IN THIS REGARD. 7. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED TPO LACKED JURISDICTION UNDER S UB-SECTIONS 2A AND 2B OF SECTION 92CA OF THE ACT IN PICKING UP THE TRANSACTION OF AMP IN ABSENCE OF ANY SPECIFIC REFER ENCE BY AO. 8. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED AO /DRP / TPO ERRED IN APPLYING THE 'BRIGHT LINE THEORY' AS ARTICULATED IN TRANSFER PRI CING REGULATIONS OF FOREIGN JURISDICTIONS AND DECISIONS RENDERED BY FOREIGN COURTS (BASED ON SPECIFIC TRANSFER PRICING REGULATIONS OF THOSE COUNTRIES). ITA NO.5528/DEL./2012 3 9. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED AO / DRP / TPO WITHOUT ANY MATE RIAL ON RECORD ERRED IN ASSUMING THAT BEYOND ENGAGING IN TH E BUSINESS OF DISTRIBUTING PRODUCTS IN INDIA, APPELLANT RENDERED A SERVICE (I.E. BRAND PROMOTION) TO A FOREIGN ASSOCIATED ENTERPRISE OF APPELLANT. 10. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO / DRP / TPO ERRED IN ASSUMIN G THE MERE FACT THAT UPON FORFEITURE OF DISTRIBUTION ACTIVITIE S / TERMINATION OF BUSINESS ARRANGEMENT, THE BRAND (AND RELATED TRADEM ARK) SHALL VEST WITH THE OWNER AND HENCE, REQUIRES A PRE-EMPTI VE TRANSFER PRICING ADJUSTMENT ON AN ANNUAL BASIS. 11. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, AND ASSUMING ARGUENDO THAT THE APPELLANT'S AMP EXPENDITURES CONSTITUTED AN INTERNATIONAL TRANSACTI ON POTENTIALLY SUBJECT TO ADJUSTMENT BY THE LEARNED TPO/AO, THE LE ARNED AO / DRP / TPO ERRED BY INCLUDING EXPENSES INCURRED FOR TRADE/CASH DISCOUNTS, SALES PROMOTION SCHEMES AND COMMISSIONS AS PART OF APPELLANT'S AMP EXPENDITURE, PARTICULARLY FOR PURPO SES OF BENCHMARKING APPELLANT'S AMP EXPENDITURE AGAINST AM P EXPENDITURE INCURRED BY COMPARABLE COMPANIES. 12. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO / DRP / TPO ERRED IN CONCLUD ING THAT THE APPELLANT'S AMP IS EXCESSIVE AND HAS RESULTED IN CR EATION OF MARKETING INTANGIBLE IN FAVOUR OF AE, FOR WHICH IT SHOULD BE COMPENSATED ALONG WITH A MARK-UP BY THE AE. 13. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO / DRP / TPO ERRED BY NOT TAK ING COGNIZANCE OF THE BUSINESS MODEL, FUNCTIONAL AND RI SK PROFILE OF THE APPELLANT AND IN CONCLUDING AMP EXPENDITURE TO BE EXCESSIVE. 14. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO / DRP / TPO ERRED BY IDENTIF YING INCORRECT SET OF COMPARABLES. 15. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO / DRP / TPO ERRED BY EXCLUDI NG FEW COMPANIES FROM THE SET OF COMPARABLES WHILE BENCHMA RKING THE PERCENTAGE OF AMP EXPENDITURE INCURRED BY THE APPEL LANT AGAINST THE PERCENTAGE OF AMP EXPENDITURE INCURRED BY COMPARABLE COMPANIES IN AN AD-HOC MANNER. FURTHER, LEARNED AO ERRED BY STATING THAT NO ARGUMENTS WERE PROVIDIN G AGAINST RATHI GRAPHICS LIMITED AND EXCLUDING THE SAME FROM THE SET OF COM PARABLES WHILE BENCHMARKING THE PERCENTAGE OF A &P EXPENDITURE. ITA NO.5528/DEL./2012 4 16. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO / DRP / TPO ERRED BY MAKING A MECHANICAL COMPARISON BETWEEN THE AMP EXPENDITURE O F THE APPELLANT AND OTHER COMPARABLE COMPANIES AND CONCLU DING IT TO BE EXCESSIVE. 17. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO ERRED BY NOT FOLLOWING THE D IRECTIONS RECEIVED FROM LEARNED DRP. 18. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO / DRP / TPO ERRED BY NOT APP RECIATING THE FACT THAT THE APPELLANT UNDERTAKES AMP EXPENSE TO INCREASE ITS OWN BUSINESS / SALES IN INDIA AND THEREFORE ITS BENEFIT LIES WITH APPELLANT. 19. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO / DRP / TPO ERRED BY BENCHMA RKING THE AMP SPEND ON A STANDALONE BASIS WITHOUT GIVING COGN IZANCE TO THE FACT THAT THE APPELLANT HAS APPLIED THE TRANSAC TIONAL NET MARGIN METHOD AND THE SAME WAS ACCEPTED BY LEARNED AO / TPO / DRP. 20. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO / DRP / TPO ERRED BY APPLYIN G COMPARABLE UNCONTROLLED PRICE METHOD IN A MANNER TH AT IS NOT PRESCRIBED OR JUSTIFIED UNDER THE LAW. 21. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO / DRP / TPO ERRED IN EVALUAT ING THE REASONABLENESS OF APPELLANT'S AMP EXPENSES SOLELY O N A SUBJECTIVE BASIS AND IGNORING THE POINT OF VIEW OF COMMERCIAL EXPEDIENCY. 22. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO / DRP / TPO ERRED BY ADDING A MARK-UP AND EVEN IF THE MARK-UP WAS JUSTIFIED, THEN THE APP ROACH ADOPTED BY TPO TO DETERMINE THE MARKUP IS NOT APPROPRIATE. 23. THAT THE LEARNED AO / DRP / TPO HAVE NOT PLACED CORRECT RELIANCE ON OECD TRANSFER PRICING GUIDELINE S FOR MULTINATIONAL ENTERPRISES AND TAX ADMINISTRATORS, J ULY 2010 AND OTHER INTERNATIONAL COMMENTARIES AND JURISPRUDE NCE. 24. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO / DRP / TPO ERRED BY NOT PRO VIDING THE APPELLANT THE BENEFIT OF 5 PERCENT RANGE AS PROVIDE D BY THE PROVISO OF SECTION 92C(2) OF THE ACT. ITA NO.5528/DEL./2012 5 25. THE LEARNED AO / DRP / TPO HAS ERRED BY NOT CAR RYING OUT THE DETERMINATION OF ARM'S LENGTH PRICE AS REQU IRED UNDER SECTION 92C OF THE ACT READ WITH RULE 10D OF INCOME TAX RULES, 1962. CORPORATE TAX GROUNDS DISALLOWANCE OF DEPRECIATION ON ACCOUNT OF CAPITAL ASSETS CONVERTED INTO STOCK IN TRADE 26. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/DRP HAS ERRED IN MAKING AN ADJUSTMENT O F DEPRECIATION OF RS. 24,94,155 ON ACCOUNT OF CAPITAL ASSETS GETTING CONVERTED INTO STOCK-IN-TRADE. 27. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE AO/DRP ERRED IN NOT FOLLOWING THE DECISION OF HON'B LE ITAT AND HON'BLE DELHI HIGH COURT IN APPELLANT'S OWN CAS E DELETING A SIMILAR DISALLOWANCE IN EARLIER YEAR. DISALLOWANCE OF DEPRECIATION ON COMPUTER PERIPHERAL S 28. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED AO HAS ERRED IN LAW AND FACTS IN DISALLOWIN G DEPRECIATION AMOUNTING TO RS. 8,89,960 ON THE ASSET S WRITTEN OFF. 29. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LEARNED AO/DRP ERRED IN LAW AND FACTS BY DISALLOWING A SUM OF RS.8,26,071, BY NOT ALLOWING THE DEPRECIATION AT 60 % ON PRINTERS, ROUTERS, UPS SMF BATTERY ETC. AS THEY FALL UNDER TH E DEFINITION OF COMPUTER AND COMPUTER SYSTEM, AND INSTEAD ALLOWING 15% DEPRECIATION BY TREATING THEM AS 'PLANT AND MACHIN ERY'. DISALLOWANCE OF BAD DEBTS AND ADVANCES WRITTEN OFF 30. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LEARNED AO/DRP ERRED IN LAW AND FACTS BY DISALLOWING A SUM OF RS.56,03,670 OF BAD DEBTS AND ADVANCES WRITTEN OFF. LEVY AND WITHDRAWAL OF INTEREST U/S 234 BAND 244 A RESPECTIVELY 31. THAT THE LEARNED AO ERRED ON FACTS AND IN LAW, IN WITHDRAWING INTEREST UNDER SECTION 244A AND LEVYING INTEREST UNDER SECTIONS 234B AND 234 D OF THE ACT. PENALTY PROCEEDINGS WRONGLY INITIATED 32. THAT THE LEARNED AO ERRED ON FACTS AND IN LAW, IN INITIATING PENALTY PROCEEDINGS U/S 271 (1)(C) OF TH E ACT. ITA NO.5528/DEL./2012 6 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : M/S. XEROX INDIA LIMITED, THE TAXPAYER IS A MEMBER OF THE XEROX GROUP OF COMPANIES AND IS 100 % SUBSIDIARY OF XEROX USA. THE TAXPAYER OPERATES IN DOCUMENT MANAGEMENT INDUSTRY PROVIDING A RANGE OF OFFICE EQU IPMENT, SOFTWARE SOLUTIONS AND DOCUMENT MANAGEMENT SERVICES WITH PRIMARY FUNCTION OF DISTRIBUTION OF GOODS IMPORTED FROM ITS ASSOCIATED ENTERPRISES (AES). 3. DURING THE YEAR UNDER ASSESSMENT, THE TAXPAYER E NTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AES AS UNDER :- NATURE OF TRANSACTION METHOD SELECTED TOTAL VALUE OF TRANSACTION (IN RS.) IMPORT OF RAW MATERIALS AND COMPONENTS TNMM 15,736,421 PURCHASE OF FINISHED GOODS FOR RESALE TNMM 2,037,73 1,760 SALE OF FINISHED GOODS TNMM 46,002,398 PROVISION OF SOFTWARE DEVELOPMENT, ACCOUNTING AND MARKETING SERVICES TNMM 53,206,736 RECEIPT OF SUPPORT SERVICES TNMM 626,516 4. DURING TRANSFER PRICING ANALYSIS, TRANSFER PRICI NG OFFICER (TPO) NOTICED THAT THE TAXPAYER HAS INCURRED SUBSTA NTIAL EXPENSES ON ADVERTISEMENT, MARKETING & PROMOTION (AMP) AIMED AT CREATING/ENHANCING THE VALUE OF XEROX BRAND IN INDI A AND THE FINAL BENEFICIARY OF THIS FUNCTION OF TAXPAYER WAS ITS AE S. TPO CONSIDERED THE SAME AS INTERNATIONAL TRANSACTION AN D PROCEEDED TO BENCHMARK THE SAME. ITA NO.5528/DEL./2012 7 5. TPO DECLINED THE CONTENTIONS RAISED BY THE TAXPA YER QUA EXPENDITURE INCURRED UNDER THE HEAD AMP EXPENSES TH AT TRADE DISCOUNTS AND COMMISSIONS ARE NOT PART OF THE AMP E XPENSES AND THE TRADE DISCOUNT AND COMMISSIONS ARE NOT USED TO UNDERTAKE AMP ACTIVITIES. TPO FOUND AMP EXPENDITURE TO SALES IN CASE OF TAXPAYER AT 6.93% VIS--VIS AMP/SALES RATIO OF COMP ARABLES AT 1.20%. AMP/SALES RATIO OF THE COMPARABLES USED BY THE TAXPAYER IS TABULATED AS UNDER :- SL.NO. NAME AMP/SALES (%) 1 DHOOT INDUSTRIAL FINANCE LTD. 0.06% 2 INTEX TECHNOLOGIES LTD. 5.53% 3 HCL INFOSYSTEMS LTD. 0.58% 4 IRIS COMPUTERS LTD. 0.48% 5 KILBURN OFFICE AUTOMATION LTD. 1.04% 6 PRIYA LTD. 0.06% 7 RATHI GRAPHIC TECHNOLOGIES LTD. 12.96% 8 RICOH LTD. 3.32% 9 SAVEX COMPUTERS LTD. 0.31% 10 SPS INTERNATIONAL LTD. 0.38% 11 SPICE MOBILES LTD. 13.71% 12 TYCHE PERIPHERALS LTD. 2.19% 13 UNIVERSAL PRINT SYSTEMS LTD. 1.20% 6. DECLINING THE CONTENTIONS RAISED BY THE TAXPAYER THAT NO DIRECT BENEFIT ACCRUES TO ANY OTHER XEROX ENTERPRIS E OR THE HOLDING COMPANY XEROX USA FROM THE MARKETING ACTIVITIES CAR RIED OUT BY THE TAXPAYER, THE TPO PROCEEDED TO HOLD THAT BY INC URRING THESE EXPENSES, TAXPAYER ENHANCED THE VALUE OF INTANGIBLE S THAT IS OWNED BY THE PARENT COMPANY AND DETERMINED THE ARMS LENG TH PRICE ITA NO.5528/DEL./2012 8 (ALP) QUA AMP EXPENSES RESULTING INTO CREATION OF M ARKETING INTANGIBLES IN FAVOUR OF AES AT RS.36,41,27,428/- 7. THE TAXPAYER CARRIED THE MATTER BEFORE THE LD. D RP BY WAY OF FILING OBJECTIONS, WHO HAS CONFIRMED THE PROPOSE D ADJUSTMENT INCURRED ON ACCOUNT OF AMP EXPENSES BY THE TAXPAYER . LD. DRP ALSO CONFIRMED THE MARK-UP OF 12.5% OF AMP EXPENSES CHARGED BY THE TPO FOR THE ENTREPRENEURIAL EFFORT INCLUDING US E OF ITS INFRASTRUCTURE ETC. FEELING AGGRIEVED, THE TAXPAYE R HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT AP PEAL. 8. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUNDS NO.1 & 2 9. GROUNDS NO.1 & 2 NEED NO FINDINGS BEING GENERAL IN NATURE AND HAVING NOT BEEN PRESSED BY THE LD. AR FOR THE T AXPAYER. TRANSFER PRICING GROUNDS GROUNDS NO.3 TO 25 10. UNDISPUTEDLY, TAXPAYER CARRIED AMP ACTIVITIES T O IDENTIFY CUSTOMERS IN INDIA AND BEARS COST OF MARKETING/ADVE RTISING ACTIVITIES. MAJOR FUNCTIONS PERFORMED QUA SALE OF PRODUCTS INCLUDE DEVELOPMENT OF MARKETING STRATEGY, CONTROL/COORDINA TION OF ITA NO.5528/DEL./2012 9 MARKETING ACTIVITIES, DEVELOPMENT OF PROMOTIONAL AC TIVITIES, PLANNING OF ADVERTISEMENTS, DEVELOPMENT OF GOODS CA TALOGUES, RECRUITMENT AND MAINTENANCE OF SALES PERSONNEL, IDE NTIFICATION OF DISTRIBUTION CHANNELS AND CONTRACTING WITH CLIENTS, NEGOTIATION PRICE, TERMS ETC. 11. AFTER EXAMINING THE FUNCTIONS PERFORMED BY THE TAXPAYER, LD. TPO PROCEEDED TO OBSERVE THAT THE TAXPAYER IS MAKIN G SERIOUS EFFORTS TO MARKET THE PRODUCTS OF ITS AES FOR WHICH IT HAS DEVELOPED MARKETING STRATEGY, IDENTIFIED CUSTOMERS AND FINALL Y & MOST IMPORTANTLY BORNE THE COST OF MARKETING ACTIVITIES. IT IS ALSO OBSERVED THAT THE TAXPAYER IS MAKING AN EXTREMELY H IGH LEVEL OF ADVERTISING AND MARKETING EXPENDITURE PROMOTION UND ER THE HEAD ADVERTISEMENT EXPENSES, DISCOUNTS AND COMMISSI ONS WHICH ARE 6.93% OF THE SALES. DETAILS OF DISCOUNTS ARE AS UN DER :- ACCOUNT CODE DESCRIPTION AMOUNT IN RS. NATURE 30050111 DISCOUNT ON EQUIPMENT SALES ORS 8,82,06,873 REBATE OR DISCOUNT GIVEN TO PARTNERS/DISTRIBUTORS ON SALE OF EQUIPMENTS(PHOTOCOPY MACHINES) BASED ON SCHEMES ANNOUNCED BY THE COMPANY 31100111 DISCOUNT ON PAPER SALES 1,45,58,446 REBATE OR DISCOUNT GIVEN TO PARTNERS ON SALE OF PAPER BASED ON APPROVED SCHEMES 31200111 DISCOUNT ON TONER SALES 6,98,23,493 REBATE OR DISCOUNT GIVEN TO PARTNERS/DISTRIBUTORS ON SALE OF SUPPLIES (CONSUMABLES BUSINESS) BASED ON REBATE OR DISCOUNTS SCHEMES ANNOUNCED BY THE ITA NO.5528/DEL./2012 10 COMPANY 31620211 DISCOUNT ON PARTS SALES 28,712 REBATE OR DISCOUNT GIVEN TO PARTNERS/DISTRIBUTORS ON SALES OF PART OF MACHINES. THESE REBATES/ DISCOUNTS ARE BASED ON SCHEMES ANNOUNCED BY THE COMPANY FROM TIME TO TIME 61800301 CASH DISCOUNT TO CUSTOMERS 61,86,170 CASH DISCOUNT OFFERED TO CHANNEL CUSTOMERS PARTNERS/DISTRIBUTORS FOR EARLY/PROMPT PAYMENTS (UPFRONT PAYMENTS) TOTAL 17,88,03,695 SIMILARLY, YOU HAVE PROVIDED DETAILS OF COMMISSION PAID WHICH ARE TABULATED BELOW. ACCOUNT CODE DESCRIPTION AMOUNT IN RS. NATURE 53300101 DEALER COMMISSION ON EQUIPMENT SALES ORS 5,46,34,581 NORMAL COMMISSION PAID TO THE DEALERS DEPENDING UPON APPROVED COMMISSION PERCENTAGE 53300121 DEALER COMMISSION ON PAPER SALES 1,14,40,125 NORMAL COMMISSION PAID TO THE DEALERS DEPENDING UPON APPROVED COMMISSION PERCENTAGE TOTAL 660,74,706 12. LD. TPO CHOSEN 10 COMPARABLES WITH AVERAGE OF 1 .18% TO BENCHMARK THE AMP EXPENDITURE OF THE TAXPAYER WHICH ARE AS UNDER :- SL.NO. NAME AMP/SALES (%) 1 DHOOT INDUSTRIAL FINANCE LTD. 0.06% 2 INTEX TECHNOLOGIES LTD. 5.53% 3 HCL INFOSYSTEMS LTD. 0.58% 4 IRIS COMPUTERS LTD. 0.48% 5 KILBURN OFFICE AUTOMATION LTD. 1.04% 6 PRIYA LTD. 0.06% ITA NO.5528/DEL./2012 11 7 SAVEX COMPUTERS LTD. 0.31% 8 SPS INTERNATIONAL LTD. 0.38% 9 SPICE MOBILES LTD. 13.71% 1 0 TYCHE PERIPHERALS LTD. 2.19% 11 UNIVERSAL PRINT SYSTEMS LTD. 1.20% AVERAGE 1.18% 13. IN ORDER TO DETERMINE THE MARK-UP, THE TPO CHOS EN 17 COMPARABLES WITH AVERAGE OF 22.24% WHICH ARE AS UND ER :- SL.NO. NAME PBIT/COST (%) 1 TAMIL NADU EX-SERVICEMEN'S CORPN. LTD. 9.29% 2 APITCO LTD. 49.35% 3 BEST MULYANKAYAN CONSULTANTS LTD 12.84% 4 CHOKSI LABORATORIES LTD 29.18% 5 GENINS INDIA T P A LTD. 9.11% 6 I C R A MANAGEMENT CONSULTING SERVICES LTD. 4.18% 7 I D C (INDIA) LTD. 15.31% 8 INDIA CEMENTS CAPITAL LTD 42.46% 9 INDUS TECHNICAL & FINANCIAL CONSULTANTS LTD. 14.05% 10 MECAN LTD. 11.8% 11 NIS SPARTA LTD. 1.84% 12 ORG INFORMATICS LTD.(SEG.) 6.54% 13 RITES LTD. 31.52% 14 SANCO TRANS LTD. 20.62% 15 TECHNICOM-CHEMIE (INDIA) LTD. 13.43% 16 VAPI WASTE & EFFLUENT MGMT. CO. LTD. 47.53% 17 WAPCOS LTD. (SEG.) 58.98% AVERAGE 22.24% 14. CONSEQUENTLY, TPO PROCEEDED TO DETERMINE ALP OF INTERNATIONAL TRANSACTION QUA INCURRING OF AMP EXPE NDITURE OF THE TAXPAYER AS UNDER :- ITA NO.5528/DEL./2012 12 TOTAL REVENUE OF THE ASSESSEE RS.5,626,964,000 ARMS LENGTH PRICE OF AMP EXPENSES 1.18% ARM LENGTH AMP EXPENSES RS.66,398,175 (A) AMP EXP INCURRED BY ASSESSEE RS.390,067,000 (B) EXPENSES INCURRED ON CREATION OF INTANGIBLES (C) = (B A) RS.323,668,825 MARK UP @ 12.5% (D) RS.40,458,603 ADJUSTMENT U/S 92CA (C + D) RS.364,127,428 THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSAC TION IS DETERMINED AT RS.364,127,428 AS AGAINST NIL DETER MINED BY THE ASSESSEE. THE ASSESSING OFFICER SHALL ENHANCE THE INCOME OF THE ASSESSEE BY RS.362,127,428. 15. HONBLE DELHI HIGH COURT IN SUBSEQUENT DECISION S VIZ. BAUSCH & LOMB EYE CARE (INDIA) PVT. LTD. V. ADDITIO NAL CIT (2016) 381 ITR 227 (DEL.) AND HONDA SIEL POWER PRODUCTS LTD. V. DY. CIT (2016) 237 TAXMAN 304 HELD THAT IT IS FOR THE REVENUE TO FIRSTLY DISCHARGE THE ONUS TO PROVE THE EXISTENCE O F AN INTERNATIONAL TRANSACTION BETWEEN THE TAXPAYER AND ITS AE AND ONL Y THEREAFTER ALP OF INTERNATIONAL TRANSACTIONS INVOLVING AMP CAN BE COMPUTED. 16. LD. AR FOR THE TAXPAYER VEHEMENTLY CONTENDED TH AT AMP EXPENDITURE IS NOT AN INTERNATIONAL TRANSACTION NOR ANY OBJECTIVE FINDINGS HAVE BEEN RETURNED BY THE LD. TPO. WHEN W E PERUSE THE FINDINGS OF LD. TPO IN PARAS 3.5 & 3.6, THE TPO IN ORDER TO FIND OUT WHETHER AMP IS AN INTERNATIONAL TRANSACTION RELIED UPON SECTION 92F(V) WHICH DEFINES TRANSACTION AS UNDER :- (V) TRANSACTION INCLUDES AN ARRANGEMENT, UNDERST ANDING OR ACTION IN CONCERT,- (A) WHETHER OR NOT SUCH ARRANGEMENT, UNDERSTANDING OR ACTION IS FORMAL OR IN WRITING; OR (B) WHETHER OR NOT SUCH ARRANGEMENT, UNDERSTANDING OR ACTION IS INTENDED TO BE ENFORCEABLE BY LEGAL PROCE EDING. ITA NO.5528/DEL./2012 13 17. LD. TPO BY RELYING UPON SECTION 92F (V) OF THE ACT RETURNED THE FINDINGS DECLARING AMP EXPENDITURE AS AN INTERN ATIONAL TRANSACTION AS UNDER :- THE ISSUE OF AMP EXPENDITURE FALLS SQUARELY WITHIN THE DEFINITION OF TRANSACTION AS PER SEC. 92F(V). HE NCE, THERE IS NO INFIRMITY WITH THE ACTION OF THIS OFFICE. 18. THE LD. AR FOR THE TAXPAYER FURTHER CONTENDED T HAT CONTINUOUS GROWING SALES PATTERN OF THE TAXPAYER SU BSTANTIATES THE FACT THAT THE BENEFIT OF AMP ACTIVITIES ACCRUES TO THE TAXPAYER ONLY AND NOT TO ANY OTHER ENTITY. HOWEVER, THE LD. TPO DISMISSED THIS ARGUMENT OF TAXPAYER BY OBSERVING THAT GROWTH IN SA LES IS ACTUALLY INCIDENTAL BENEFIT AND IT IS ONLY THE ENHANCEMENT O F BRAND VALUE I.E. ACTUAL OBJECTIVE OF THIS EXERCISE. 19. LD. TPO ALSO OBSERVED THAT AMP EXPENDITURE OF T HE TAXPAYER ARE MORE THAN THE NORMAL RANGE OF EXPENDIT URE INCURRED BY THE ROUTINE DISTRIBUTOR AND SUCH HIGH LEVEL OF A MP EXPENSES IS NOT INCURRED ONLY FOR INCREASING ITS SALES BUT TO P ROMOTE THE BRAND WHICH IS EVIDENT FROM THE FACT THAT AMP/ SALES RATI O OF TAXPAYER IS 6.93% VIS--VIS 1.18% THE AMP/SALES RATIO OF ROUTIN E DISTRIBUTORS. WE ARE OF THE CONSIDERED VIEW THAT ALL THESE FINDIN GS ARE GENERAL IN NATURE AND ARE NOT FACTUAL OBJECTIVE FINDINGS BASED UPON ANY EVIDENCE. MERELY BECAUSE OF THE FACT THAT AMP EXPE NSES OF THE ITA NO.5528/DEL./2012 14 TAXPAYER ARE ON HIGHER SIDE, THE SAME CANNOT BE TRE ATED TO PROMOTE THE BRAND AND CREATE INTANGIBLES FOR ITS AE. 20. LD. AR FOR THE TAXPAYER FURTHER CONTENDED THAT NO DIRECT BENEFIT ACCRUES TO ANY OTHER XEROX ENTERPRISE OR HO LDING COMPANY (XEROX US) AS A RESULT OF MARKETING ACTIVITIES UNDE RTAKEN BY IT. HOWEVER, DISMISSING THE CONTENTIONS RAISED BY THE T AXPAYER, LD. TPO MADE OUT THE CASE THAT, BY INCURRING THESE EXPENSES, THE TAXPAYER HAS ENHANCED THE VALUE OF INTANGIBLES OWNE D BY THE PARENT COMPANY . 21. LD. AR FOR THE TAXPAYER FURTHER CONTENDED THAT TO IMPROVE ITS BUSINESS MARKET, IT IS THE SOLE RESPONSIBILITY OF T HE TAXPAYER AND AS SUCH, THE AMP EXPENDITURE HAS DIRECT NEXUS WITH ITS EARNING OF THE INCOME. THE TAXPAYER ALSO RELIED UPON PARA 7.13 OF THE OECD GUIDELINES WHICH STATE INTER ALIA THAT, AN AE SHOULD NOT BE CONSIDERED TO RECEIVE AN INTRA-GROUP SERVICE WHEN I T OBTAINS INCIDENTAL BENEFITS ATTRIBUTABLE SOLELY TO ITS BEIN G PART OF A LARGER CONCERN AND NOT TO A SPECIFIC ACTIVITY BEING PERFOR MED . 22. LD. AR FOR THE TAXPAYER FURTHER CONTENDED THAT USE OF ANY LOGO ACROSS THE GLOBE IS NOT CONSIDERED EQUIVALENT TO ENHANCING A BRAND. HOWEVER, LD. TPO PROCEEDED TO OBSERVE ON TH E BASIS OF GENERAL OBSERVATION THAT THE MANDATORY USE OF BRAND NAME OR LOGO OF THE OVERSEAS PARENT COMPANY WILL LEAD TO THE CRE ATION OF A ITA NO.5528/DEL./2012 15 MARKETING INTANGIBLES IN FAVOUR OF THE TAXPAYER. H OWEVER, WHEN WE EXAMINE THE FACTS OF THIS CASE IN ENTIRETY, NO D OUBT TAXPAYER USES XEROX LOGO BUT ALL THE INFORMATION IN RELATI ON TO CONTRACT ADDRESS, BRAND AMBASSADOR, PRODUCT, MARKET AND OTHE R SIMILAR DETAILS IN THE ADVERTISEMENT IS CONFINED TO INDIA O NLY. SO, IT CANNOT BE SAID TO PROMOTE THE XEROX BRAND WORLD-WIDE. MOR EOVER, WHEN IT IS UNDISPUTED FACT THAT THE TAXPAYER HAS NOT PAI D ANY ROYALTY FOR USE OF XEROX BRAND NAME, INCIDENTAL BENEFITS, IF AN Y, TO OVERSEAS ENTITY DOES NOT CALL FOR ANY COMPENSATION FOR THE T AXPAYER. 23. IN CASE OF VALVOLINE CUMMINS (P.) LTD. VS. DCIT (2017) 84 TAXMANN.COM 191 (DELHI) , HONBLE DELHI HIGH COURT HELD THAT MERE USE OF BRAND NAME OR LOGO OWNED BY THE AES BY THE TAXPAYER WILL NOT AUTOMATICALLY LEAD TO INFLUENCE THAT ANY E XPENSES THAT THE TAXPAYER INCURRED TOWARDS AMP WAS ONLY TO ENHANCE T HE BRAND BY RETURNING FOLLOWING FINDINGS :- 17. ONCE THE BLT HAS BEEN DECLARED BY THIS COURT I N SONY ERICSSON INDIA PVT. LTD.(SUPRA) TO NO LONGER BE A V ALID BASIS FOR DETERMINING THE EXISTENCE OF OR THE ALP OF AN INTER NATIONAL TRANSACTION INVOLVING AMP EXPENSES, THE ORDER OF TH E TPO WAS UNSUSTAINABLE IN LAW. THE MERE FACT THAT THE ASSESS EE WAS PERMITTED TO USE THE BRAND NAME VALVOLINE WILL NO T AUTOMATICALLY LEAD TO AN INFERENCE THAT ANY EXPENSE THAT THE ASSESSEE INCURRED TOWARDS AMP WAS ONLY TO ENHANCE T HE BRAND VALVOLINE. THE ONUS WAS ON THE REVENUE TO SHOW TH E EXISTENCE OF ANY ARRANGEMENT OR AGREEMENT ON THE BASIS OF WHI CH IT COULD BE INFERRED THAT THE AMP EXPENSE INCURRED BY THE AS SESSEE WAS NOT FOR ITS OWN BENEFIT BUT FOR THE BENEFIT OF ITS AE. THAT FACTUAL FOUNDATION HAS BEEN UNABLE TO BE LAID BY THE REVENU E IN THE PRESENT CASE. ON THE BASIS OF THE EXISTING RECORD, THE TPO HAS FOUND NO BASIS OTHER THAN BY APPLYING THE BLT, TO D ISCERN THE ITA NO.5528/DEL./2012 16 EXISTENCE OF INTERNATIONAL TRANSACTION. THEREFORE, NO PURPOSE WILL BE SERVED IF THE MATTER IS REMANDED TO THE TPO, OR EVEN THE ITAT, FOR THIS PURPOSE. 24. WHEN ALL THESE OBJECTIONS WERE RAISED BY THE TA XPAYER BEFORE THE LD. DRP, SAME HAS BEEN DISMISSED BY USING SAME RATIO APPLIED BY THE TPO FIRSTLY TO DECLARE THE AMP EXPENDITURE A S AN INTERNATIONAL TRANSACTION AND THEN TO TREAT THE AMP EXPENDITURE INCURRED BY THE TAXPAYER IN EXCESS OF ROUTINE EXPEN DITURE TO PROMOTE THE BRAND AND CREATING INTANGIBLES FOR ITS AE BY USING THE BLT, AS IS EVIDENT FORM PARA 5.3 OF THE LD. DRP ORD ER. IN PARA 5.8, LD. DRP AGAIN APPLIED THE BLT TO BENCHMARK THE INTE RNATIONAL TRANSACTION QUA AMP EXPENDITURE BY RETURNING FOLLOW ING FINDINGS:- 5.8 WE HAVE ALSO CONSIDERED THE ASSESSEE'S OBJECTI ON ABOUT REJECTION OF CERTAIN COMPARABLES BY THE TPO. TWO OF THEM, NAMELY, MIS RICOH INDIA LTD. AND MIS SPICE MOBILE L TD. ARE ENGAGED IN THE DISTRIBUTION OF BRANDED GOODS. WE HA VE ALREADY MENTIONED THAT THE TPO HAS CONSIDERED THE DISTRIBUT ORS OF ONLY THE SIMILAR UNBRANDED GOODS TO DETERMINE THE ROUTIN E MARKETING AND DISTRIBUTION EXPENDITURE BY THEM. THE AMP EXPEN DITURE INCURRED BY THE DISTRIBUTORS OF THE BRANDED GOODS W OULD INCLUDE CERTAIN AMOUNT OF BRAND PROMOTION EXPENSES. THAT IS WHY SUCH DISTRIBUTORS HAVE NOT BEEN CONSIDERED AS COMPARABLE S BECAUSE O~ AIM IS TO DETERMINE THE ROUTINE MARKETING AND DISTR IBUTION EXPENSES TO FIX THE 'BRIGHTLINE' AND ASCERTAIN THE EXPENDITURE INCURRED BY THE ASSESSEE WHICH IS ATTRIBUTABLE TO B RAND PROMOTION. ONLY ROUTINE DISTRIBUTORS ARE TO BE TAKE N WHO ARE NOR ENGAGED IN ANY BRAND BUILDING EXERCISE. THE PURPOSE OF BRIGHT LINE IS TO ASCERTAIN AS TO HOW MUCH AMP EXPENSES WO ULD NORMALLY BE INCURRED BY A MANUFACTURER DISTRIBUTOR FOR CARRYING ON ITS ROUTINE DISTRIBUTION ACTIVITY. FOR THIS IT I S NECESSARY TO SELECT COMPARABLES WHICH ARE NOT ENGAGED IN CREATIO N OF BRAND NAME. IN RESPECT OF THE THIRD COMPANY, M/S. RATHI G RAPHICS LTD., THE TPO HAS OBSERVED IN THE ORDER THAT IT WAS CARRY ING OUT AMP ACTIVITIES ON BEHALF OF ITS SUBSIDIARIES ALSO. THE ASSESSEE HAS NOT GIVEN ANY ARGUMENTS TO REBUT THE CONTENTION OF THE AO. THEREFORE, THE ASSESSEE'S OBJECTION REGARDING REJEC TION OF ALL THE THREE COMPARABLES IS TURNED DOWN BY THE PANEL. THE ASSESSEE HAS ITA NO.5528/DEL./2012 17 ALSO GIVEN A LIST OF ITS OWN COMPARABLES FOR DETERM INING THE 'BRIGHTLINE'. HOWEVER, ALL THE COMPARABLES PROPOSED BY THE ASSESSEE ARE DISTRIBUTORS OF BRANDED GOODS AND, THE REFORE, FOR THE REASONS MENTIONED ABOVE, SUCH COMPARABLES CANNOT BE ACCEPTED. HOWEVER, THE PANEL, ON ITS OWN, HAS CAREFULLY EXAMI NED THE FUNCTIONAL PROFILE AS WELL AS THE FINANCIALS OF ALL THE COMPARABLES USED BY THE TPO. IT HAS BEEN NOTED THAT MORE THAN 5 0% OF TURNOVER OF M/S DHOOT INDUSTRIAL FINANCE LTD. IS FR OM SALE OF SHARES. THE PANEL IS, THEREFORE, OF THE VIEW THAT I T SHOULD HAVE NOT BEEN CONSIDERED AS A COMPARABLE. 25. BY NOW, IT IS SETTLED PRINCIPLE OF LAW THAT BLT IS NOT A VALID METHOD FOR DETERMINING THE EXISTENCE OF INTERNATION AL TRANSACTION OR FOR DETERMINATION OF ALP OF SUCH TRANSACTIONS. 22. HONBLE DELHI HIGH COURT IN CASE OF CIT VS. WHIRLPOOL OF INDIA LTD. (2016) 381 ITR 154 (DELHI) DECIDED THE IDENTICAL ISSUE BY RETURNING FOLLOWING FINDINGS :- 34. THE TP ADJUSTMENT IS NOT EXPECTED TO BE MADE B Y DEDUCING FROM THE DIFFERENCE BETWEEN THE 'EXCESSIVE ' AMP EXPENDITURE INCURRED BY THE ASSESSEE AND THE AMP EX PENDITURE OF A COMPARABLE ENTITY THAT AN INTERNATIONAL TRANSA CTION EXISTS AND THEN PROCEED TO MAKE THE ADJUSTMENT OF THE DIFF ERENCE IN ORDER TO DETERMINE THE VALUE OF SUCH AMP EXPENDITUR E INCURRED FOR THE AE. 35. IT IS FOR THE ABOVE REASON THAT THE BLT HAS BEE N REJECTED AS A VALID METHOD FOR EITHER DETERMINING THE EXISTE NCE OF INTERNATIONAL TRANSACTION OR FOR THE DETERMINATION OF ALP OF SUCH TRANSACTION. ALTHOUGH, UNDER SECTION 92B READ WITH SECTION 92F(V), AN INTERNATIONAL TRANSACTION COULD INCLUDE AN ARRANGEMENT, UNDERSTANDING OR ACTION IN CONCERT, TH IS CANNOT BE A MATTER OF INFERENCE. THERE HAS TO BE SOME TANGIBL E EVIDENCE ON RECORD TO SHOW THAT TWO PARTIES HAVE ACTED IN CONC ERN. .. 37. THE PROVISIONS UNDER CHAPTER X DO ENVISAGE A SEPARATE ENTITY CONCEPT. IN OTHER WORDS, THERE CANNOT BE A PRESUMPTION THAT IN THE PRESENT CASE SINCE WOIL IS A SUBSIDIARY OF WHIRLPOOL USA, ALL THE ACTIVITIES OF WOIL ARE IN FACT DICTATE D BY WHIRLPOOL USA. MERELY BECAUSE WHIRLPOOL USA HAS A FINANCIAL I NTEREST, IT CANNOT BE PRESUMED THAT AMP EXPENSE INCURRED BY THE WOIL ITA NO.5528/DEL./2012 18 ARE AT THE INSTANCE OR ON BEHALF OF WHIRLPOOL USA. THERE IS MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE INITIAL ONUS IS ON THE REVENUE TO DEMONSTRATE THROUGH SOME TANGIBLE MATERI AL THAT THE TWO PARTIES ACTED IN CONCERT AND FURTHER THAT THERE WAS AN AGREEMENT TO ENTER INTO AN INTERNATIONAL TRANSACTIO N CONCERNING AMP EXPENSES. .. 47. FOR THE AFOREMENTIONED REASONS, THE COURT IS O F THE VIEW THAT AS FAR AS THE PRESENT APPEALS ARE CONCERNED, T HE REVENUE HAS BEEN UNABLE TO DEMONSTRATE BY SOME TANGIBLE MATERIA L THAT THERE IS AN INTERNATIONAL TRANSACTION INVOLVING AMP EXPEN SES BETWEEN WOIL AND WHIRLPOOL USA. IN THE ABSENCE OF THAT FIRS T STEP, THE QUESTION OF DETERMINING THE ALP OF SUCH A TRANSACTI ON DOES NOT ARISE. IN ANY EVENT, IN THE ABSENCE OF A MACHINERY PROVISION IT WOULD BE HAZARDOUS FOR ANY TPO TO PROCEED TO DETERM INE THE ALP OF SUCH A TRANSACTION SINCE BLT HAS BEEN NEGATI VED BY THIS COURT AS A VALID METHOD OF DETERMINING THE EXISTENC E OF AN INTERNATIONAL TRANSACTION AND THEREAFTER ITS ALP. 26. HONBLE DELHI HIGH COURT IN CASE OF MARUTI SUZUKI INDIA LTD. VS. CIT (2015) 64 TAXMANN.COM 150 (DELHI) ALSO DECIDED AS TO HOW THE INTERNATIONAL TRANSACTION QUA AMP EXPEND ITURE IS TO BE DETERMINED AND AS TO HOW THE PRICE OF INTERNATIONAL TRANSACTION QUA AMP EXPENDITURE IS TO BE DETERMINED BY RETURNING FO LLOWING FINDINGS :- 68. THE ABOVE SUBMISSIONS PROCEED PURELY ON SURMIS ES AND CONJECTURES AND IF ACCEPTED AS SUCH WILL LEAD TO SE NDING THE TAX AUTHORITIES THEMSELVES ON A WILD-GOOSE CHASE OF WHA T CAN AT BEST BE DESCRIBED AS A 'MIRAGE'. FIRST OF ALL, THERE HAS TO BE A CLEAR STATUTORY MANDATE FOR SUCH AN EXERCISE. THE COURT I S UNABLE TO FIND ONE. TO THE QUESTION WHETHER THERE IS ANY 'MAC HINERY' PROVISION FOR DETERMINING THE EXISTENCE OF AN INTER NATIONAL TRANSACTION INVOLVING AMP EXPENSES, MR. SRIVASTAVA ONLY REFERRED TO SECTION 92F (II) WHICH DEFINES ALP TO M EAN A PRICE 'WHICH IS APPLIED OR PROPOSED TO BE APPLIED IN A TR ANSACTION BETWEEN PERSONS OTHER THAN AES IN UNCONTROLLED COND ITIONS'. SINCE THE REFERENCE IS TO PRICE AND TO UNCONTROL LED CONDITIONS IT IMPLICITLY BRINGS INTO PLAY THE BLT. IN OTHER WO RDS, IT EMPHASISES THAT WHERE THE PRICE IS SOMETHING OTHER THAN WHAT WOULD BE PAID OR CHARGED BY ONE ENTITY FROM ANOTHER IN ITA NO.5528/DEL./2012 19 UNCONTROLLED SITUATIONS THEN THAT WOULD BE THE ALP. THE COURT DOES NOT SEE THIS AS A MACHINERY PROVISION PARTICUL ARLY IN LIGHT OF THE FACT THAT THE BLT HAS BEEN EXPRESSLY NEGATIVE B Y THE COURT IN SONY ERICSSON. THEREFORE, THE EXISTENCE OF AN INTER NATIONAL TRANSACTION WILL HAVE TO BE ESTABLISHED DE HORS THE BLT. .. 70. WHAT IS CLEAR IS THAT IT IS THE 'PRICE' OF AN I NTERNATIONAL TRANSACTION WHICH IS REQUIRED TO BE ADJUSTED. THE V ERY EXISTENCE OF AN INTERNATIONAL TRANSACTION CANNOT BE PRESUMED BY ASSIGNING SOME PRICE TO IT AND THEN DEDUCING THAT SINCE IT IS NOT AN ALP, AN 'ADJUSTMENT' HAS TO BE MADE. THE BURDEN IS ON THE R EVENUE TO FIRST SHOW THE EXISTENCE OF AN INTERNATIONAL TRANSA CTION. NEXT, TO ASCERTAIN THE DISCLOSED 'PRICE' OF SUCH TRANSACTION AND THEREAFTER ASK WHETHER IT IS AN ALP. IF THE ANSWER TO THAT IS IN THE NEGATIVE THE TP ADJUSTMENT SHOULD FOLLOW. THE OBJECTIVE OF C HAPTER X IS TO MAKE ADJUSTMENTS TO THE PRICE OF AN INTERNATIONAL T RANSACTION WHICH THE AES INVOLVED MAY SEEK TO SHIFT FROM ONE J URISDICTION TO ANOTHER. AN 'ASSUMED' PRICE CANNOT FORM THE REASON FOR MAKING AN ALP ADJUSTMENT. . 74. THE PROBLEM WITH THE REVENUE'S APPROACH IS THAT IT WANTS EVERY INSTANCE OF AN AMP SPEND BY AN INDIAN ENTITY WHICH HAPPENS TO USE THE BRAND OF A FOREIGN AE TO BE PRES UMED TO INVOLVE AN INTERNATIONAL TRANSACTION. AND THIS, NOT WITHSTANDING THAT THIS IS NOT ONE OF THE DEEMED INTERNATIONAL TR ANSACTIONS LISTED UNDER THE EXPLANATION TO SECTION 92BOF THE ACT. THE PROBLEM DOES NOT STOP HERE. EVEN IF A TRANSACTION INVOLVING AN AMP SPEND FOR A FOREIGN AE IS ABLE TO BE LOCATED IN SOM E AGREEMENT, WRITTEN (FOR E.G., THE SAMPLE AGREEMENTS PRODUCED B EFORE THE COURT BY THE REVENUE)OR OTHERWISE, HOW SHOULD A TPO PROCEED TO BENCHMARK THE PORTION OF SUCH AMP SPEND THAT THE INDIAN ENTITY SHOULD BE COMPENSATED FOR? 27. IN CASE OF HONDA SIEL POWER PRODUCTS LTD. VS. DCIT (2015) 64 TAXMANN.COM 328 (DELHI), HONBLE DELHI HIGH COUR T HELD THAT:- 25. IF THE BLT IS KEPT ASIDE AS A VALID MEANS OF DETERMINING THE EXISTENCE OF AN INTERNATIONAL TRANSACTION CONCE RNING AMP EXPENSES, THE REVENUE WOULD HAVE TO MAKE OUT ITS CA SE ON THE BASIS OF THE OTHER TANGIBLE MATERIAL WHICH MIGHT SH OW THE EXISTENCE OF ANY ARRANGEMENT OR 'UNDERSTANDING' O R ANY CONDUCT OF EITHER PARTY TO SHOW THAT THEY WERE ACT ING IN CONCERT AS FAR AS THE ASSESSEE HAVING TO PROMOTE THE BRAND OF THE FOREIGN AE IS CONCERNED. 28. IN CASE OF LE PASSAGE TO INDIA TOUR & TRAVELS (P.) LTD. (2017) 391 ITR 207 (DELHI), HONBLE DELHI HIGH COURT AGAIN HELD ITA NO.5528/DEL./2012 20 THAT ALL TRANSACTIONS REPORTING AMP CANNOT BE TREAT ED AS INTERNATIONAL TRANSACTION AND THE FACT OF EACH CASE WOULD HAVE TO BE EXAMINED INDEPENDENTLY BY RETURNING FOLLOWING FINDI NGS :- 4. THIS COURT IS OF THE VIEW THAT WHILST L.G. ELEC TRONICS INDIA PVT. LTD.(SUPRA) INDICATED THAT AMPS WERE OR DID CONSTITUTE THE BASIS FOR AN INQUIRY INTO THE INTERN ATIONAL TRANSACTION AND INDICATED A BRIGHT LINE TEST FOR IT, SONY ERICSSON MOBILE COMMUNICATIONS INDIA PVT. LTD.(SUPR A) OVERRULED THAT DECISION. THIS PER SE DOES NOT MEAN THAT EVERY ENDEAVOUR WILL BE TO CONCLUDE THAT ALL TRANSACTIONS REPORTING AMPS ARE TO BE TREATED AS INTERNATIONAL TRANSACTION S, THE FACTS OF EACH CASE WOULD HAVE TO BE EXAMINED FOR SOME DELIBERATIONS. WHILST THE TPO AND THE DRP UNDOUBTED LY HELD THAT THE INTERNATIONAL TRANSACTIONS EXISTED - THAT UNDERSTANDING APPARENTLY WAS PASSED UPON THE PRE-EXISTING REGIME, PROPOUNDED IN L.G. ELECTRONICS INDIA PVT. LTD.(SUPR A) WITH GREATER CLARITY ON ACCOUNT OF THIS COURTS DECISION IN SONY ERICSSON MOBILE COMMUNICATIONS INDIA PVT. LTD.(SUPR A). THE I.T.A.T. IN OUR OPINION, SHOULD HAVE FIRST DECIDED WHETHER IN THE CIRCUMSTANCES OF THIS CASE, THE NATURE OF THE A MP REPORTED, COULD LEAD TO THE CONCLUSION THAT THERE W AS AN INTERNATIONAL TRANSACTION. WHEN DOING SO, IT SHOULD HAVE REMITTED THE MATTER BACK FOR EXAMINATION TO THE A.O . IN THIS CASE. ACCORDINGLY, FOLLOWING THE DECISION OF SONY E RICSSON MOBILE COMMUNICATIONS INDIA PVT. LTD.(SUPRA) AND A SUBSEQUENT DECISION IN DAIKIN AIRCONDITIONING INDIA PVT. LIMITED V. ASSISTANT COMMISSIONER OF INCOME TAX IN ITA 269/2016, DECIDED ON 27.07.2016, THIS COURT HEREBY REMITS THE MATTER FOR A COMPREHENSIVE DECISION BY THE I.T.A.T. IN OTHER WORDS, THE I.T.A.T. WILL DECIDE WHETHER THE REPORTI NG OF THE AMP IN REGARD TO THE OUTBOUND BUSINESS CONSTITUTES AN INTERNATIONAL TRANSACTION FOR WHICH ALP DETERMINATI ON WAS NECESSARY AND IF SO, THE EFFECT THEREOF. THE PARTIE S ARE DIRECTED TO APPEAR BEFORE THE I.T.A.T. ON 01.02.2017. THE AP PEAL IS PARTLY ALLOWED IN THE ABOVE TERMS. 29. HONBLE DELHI HIGH COURT IN VALVOLINE CUMMINS (P.) LTD. VS. DCIT (SUPRA) FURTHER DECIDED THE ISSUE IN FAVOUR OF THE TAXPAYER THAT MERELY BECAUSE OF THE FACT THAT AMP EXPENDITUR E INCURRED BY THE TAXPAYER WAS IN EXCESS, EXISTENCE OF INTERNATIO NAL TRANSACTION ITA NO.5528/DEL./2012 21 CANNOT BE INFERRED. OPERATIVE PART OF THE FINDINGS IS EXTRACTED AS UNDER :- 15. THE DECISION IN LE PASSAGE TO INDIA TOUR & TRAVELS (P) LTD.(SUPRA) TURNED ON THE FACT THAT THE RE WAS NO DETERMINATION BY THE TPO IN THE FIRST PLACE WHET HER THERE WAS AN INTERNATIONAL TRANSACTION. IN THE PRES ENT CASE, HOWEVER, THE TPO DID APPLY HIS MIND TO THE EXISTENCE OF AN INTERNATIONAL TRANSACTION INVOLVING AMP EXPENSE. THE ONLY GROUND ON WHICH THE CONCLUSION WAS REACHED BY THE TPO WAS THAT THE AMP EXPENDITURE INCURRED BY THE ASSESSEE WAS IN EXCESS OF THAT INCURRED BY THE COMPARABLES. HIS CONCLUSION WA S NOT BASED ON ANY OTHER FACTOR. IN OTHER WORDS, IT W AS NOT AS IF THE CONCLUSION ARRIVED BY THE TPO WAS BASED O N TWO OR THREE GROUNDS, ONE OF WHICH WAS THE BLT. 16. THIS COURT IN SONY ERICSSON INDIA PVT. LTD.(SUPRA) CATEGORICALLY FOUND THAT THE BLT WAS NO T AN APPROPRIATE YARDSTICK FOR DETERMINING THE EXISTENCE OF AN INTERNATIONAL TRANSACTION OR FOR THAT MATTER FOR CALCULATING THE ALP OF SUCH TRANSACTION. THE DECISI ON OF THE FULL BENCH OF THE ITAT IN L.G. ELECTRONICS I NDIA PVT. LTD. V. ACIT (2013) 22 ITR (TRIB.) 1WHICH SOUG HT TO MAKE BLT THE BASIS WAS SET ASIDE BY THIS COURT. 30. IN THE INSTANT CASE, THERE IS NOT AN IOTA OF MA TERIAL ON THE FILE APART FROM RELYING UPON THE FACT THAT BY INCURRING HUGE AMP EXPENSES TO THE TUNE OF 6.93%, TAXPAYER HAS ENHANCE D BRAND VALUE AND CREATED INTANGIBLES IN FAVOUR OF ITS AE, NO COG ENT MATERIAL IS THERE TO TREAT THE INCURRING OF AMP EXPENSES AS INT ERNATIONAL TRANSACTIONS. TPO HAS ALSO NOT RETURNED THE FINDIN G THAT HOW THE BENEFIT OF AMP EXPENDITURE INCURRED BY THE TAXPAYER HAVE BENEFITED AE, NO CALCULATION HAS COME ON RECORD, SO IN THESE ITA NO.5528/DEL./2012 22 CIRCUMSTANCES WHEN WE DISCARDED THE BLT THE ENTIRE CASE OF LD. TPO/DRP FELL FLAT. 31. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE AND FO LLOWING THE DECISIONS RENDERED BY HONBLE HIGH COURT DISCUSSED IN THE PRECEDING PARAS, WE ARE OF THE CONSIDERED VIEW THAT FIRSTLY, THERE IS NOT AN IOTA OF MATERIAL WITH LD. TPO TO PROVE THE E XISTENCE OF AN INTERNATIONAL TRANSACTIONS INVOLVING AMP EXPENSES B Y THE TAXPAYER. TPO RATHER PROCEEDED ON THE PREMISE THAT THE AMP EXPENDITURE INCURRED BY THE TAXPAYER WERE FAR EXCES S OF AMP EXPENSES INCURRED BY THE COMPARABLES. 32. TPO HAS ALSO APPLIED THE BLT WHICH HAS BEEN DIS CARDED BY THE HONBLE HIGH COURT IN A NUMBER OF JUDGMENTS. E VEN OTHERWISE, IN THE ABSENCE OF ANY AGREEMENT, ARRANGE MENT OR UNDERSTANDING BETWEEN THE TAXPAYER AND ITS AE, EXPR ESSED OR IMPLIED, THAT AMP SPENT OF THE TAXPAYER WOULD ALSO BE BENEFICIAL TO THE AE OR IT WOULD ENHANCE THE BRAND VALUE OF TH E AE IN ANY MANNER, NO INTERNATIONAL TRANSACTION CAN BE INFERRE D. 33. MOREOVER, ON THE OTHER HAND, THE TAXPAYER HAS C OME UP WITH SPECIFIC PLEADING THAT IT HAS ANALYSED A PRINCIPAL TO PRINCIPAL RELATIONSHIP WITH ITS AE AND AT NO POINT, IT HAS AC TED AS AGENT OF THE AE. IF THIS IS SO, AMP EXPENSES WHICH THE TAXPAYER HAS INCURRED TO BOOST UP ITS SALES CANNOT BE TREATED TO ENHANCE THE BRAND VA LUE AND TO CREATE ITA NO.5528/DEL./2012 23 INTANGIBLES IN FAVOUR OF THE AE. ALL THESE FACTS S TAND PROVED FROM THE GROWING SALE PATTERN OF THE TAXPAYER WHICH SHOW S THAT BENEFIT OF AMP ACTIVITIES ACCRUED IN FAVOUR OF THE TAXPAYER . MOREOVER WHEN TPO HAS FAILED TO PROVE THAT THERE IS AN EXIST ENCE OF INTERNATIONAL TRANSACTION BETWEEN TAXPAYER AND AE, THE ADDITION ON ACCOUNT OF AMP EXPENSES CANNOT BE MADE ON THE BASIS OF THE FACT THAT AMP EXPENSES OF THE TAXPAYER ARE FAR EXCESS TH AN THE AMP EXPENSES OF COMPARABLES. 34. EVEN OTHERWISE, THE MERE USE OF LOGO OF AE IS P ER SE NOT INTERNATIONAL TRANSACTION. CONSEQUENTLY, WE ARE OF THE CONSIDERED VIEW THAT AO/DRP/TPO HAVE ERRED IN MAKING ADDITION OF RS.36,41,27,428/- WHICH IS NOT SUSTAINABLE IN THE E YES OF LAW, HENCE ORDERED TO BE DELETED. HENCE, GROUNDS NO.3 T O 25 ARE DETERMINED IN FAVOUR OF THE TAXPAYER. 35. BEFORE PARTING WITH THIS ORDER, WE WOULD LIKE T O BRING ON RECORD THE FACT THAT LD. DR FOR THE REVENUE, ALTHOU GH ADMITTED THE LEGAL POSITION ENUNCIATED IN THE PRECEDING PARAGRAP HS, BUT HE CONTENDED THAT SINCE ALL THE AFORESAID DECISIONS AR E LYING CHALLENGED BEFORE THE HON'BLE APEX COURT, THE MATTE R MAY BE KEPT PENDING TILL THE DECISION BY HON'BLE APEX COURT. HO WEVER, WE ARE OF THE CONSIDERED VIEW THAT SINCE IT IS A STAY GRAN TED MATTER AND THE ITA NO.5528/DEL./2012 24 PROCEEDINGS BEFORE THE SECOND APPELLATE AUTHORITY H AVE NOT BEEN STAYED BY ANY HIGHER FORUM, THE SAME CANNOT BE KEPT PENDING. 36. AFTER CONSIDERING THE LEGAL POSITION AS DISCUSS ED IN THE PRECEDING PARAGRAPHS, WE ARE OF THE CONSIDERED OPIN ION THAT THE ALP OF AN INTERNATIONAL TRANSACTION INVOLVING AMP E XPENSES, THE ADJUSTMENT MADE BY THE TPO/DRP/AO IS NOT SUSTAINABL E IN THE EYES OF LAW. AT THE SAME TIME, WE CANNOT IGNORE THE SUBMISSION OF THE LEARNED DR THAT THE MATTER IS PENDING BEFORE HO N'BLE APEX COURT AND THE DECISION OF HON'BLE APEX COURT WOULD BE BINDING UPON ALL THE AUTHORITIES. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER. WE HOLD THAT AS PER THE FACTS OF THE CASE AND THE LEGAL POSITION AS OF NOW AND DISCUSSED ABOVE IN THI S ORDER, THE ADJUSTMENT MADE BY THE TPO/DRP/AO IN RESPECT OF AMP EXPENSES IS NOT SUSTAINABLE. HOWEVER, IF THE ABOVE DECISIONS OF HON'BLE JURISDICTIONAL HIGH COURT WHICH IS UNDER CONSIDERAT ION BEFORE THE HON'BLE APEX COURT IS MODIFIED OR REVERSED BY THE H ON'BLE APEX COURT, THEN THE ASSESSING OFFICER WOULD PASS THE OR DER AFRESH CONSIDERING THE DECISION OF HON'BLE APEX COURT. IN THOSE CIRCUMSTANCES, HE WILL ALSO ALLOW OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. ITA NO.5528/DEL./2012 25 CORPORATE GROUNDS GROUNDS NO.26 & 27 37. AO/DRP HAVE MADE ADJUSTMENT OF DEPRECIATION OF RS.24,94,155/- ON ACCOUNT OF CAPITAL ASSETS GETTING CONVERTED INTO STOCK-IN-TRADE BY FOLLOWING AY 2007-08. HOWEVER, L D. AR FOR THE TAXPAYER CONTENDED THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE TAXPAYER IN AY 2007-08 BY THE TRIBUNAL IN ITA NO.5389/DEL/2011 ORDER DATED 12.12.2014 WHICH HAS BEEN CONFIRMED BY THE HONBLE DELHI HIGH COURT. UNDISPU TEDLY, THERE IS NO CHANGE IN THE FACTS OF THE PRESENT CASE FROM THE FACTS OF AY 2007-08 AND ISSUE IS ALSO IDENTICAL. COORDINATE BE NCH OF THE TRIBUNAL DECIDED THE IDENTICAL ISSUE IN FAVOUR OF T HE ASSESSEE BY RETURNING FOLLOWING FINDINGS :- 8. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF XEROGRAPHI C EQUIPMENTS, PRINTERS, SCANNERS, FAXES, MULTI FUNCTI ONAL DEVICES AND CONSUMABLES PARTS THEREOF. THE ASSESSE E LEASED OUT THE EQUIPMENTS TO THE CUSTOMERS ON AN OPERATING LEA SE BASIS AND THESE EQUIPMENTS ARE CAPITALISED AND DEPRECIATION I S CLAIMED FOR TAX PURPOSES IN ACCORDANCE WITH THE PROVISIONS OF T HE ACT. THESE OPERATING LEASED ASSETS WERE RETURNED TO THE ASSESS EE EITHER ON THE TERMINATION OF THE LEASE OR OTHERWISE AFTER A P ERIOD OF SIX MONTHS, THEN THE ASSESSEE IS FOLLOWING A PRACTICE T O CONVERT THESE ASSETS INTO STOCK-IN-TRADE AT A NOMINAL VALUE OF RS .1/- AS THESE USED ASSETS ARE NOT HAVING ANY READYMADE MARKET FOR FURTHER LEASING. THIS NOMINAL VALUE IS REDUCED FROM THE BL OCK OF ASSETS. IN SOME OF THE CASES, THESE ASSETS ARE AGAIN LEASED OUT THEN THEY ARE RECAPITALIZED IN THE BLOCK OF ASSETS AT THE NOM INAL VALUE AT WHICH THESE WERE DECAPITALISED. HOWEVER, CERTAIN U SED ASSETS REMAINED IN STOCK-IN-TRADE AND WHENEVER THESE ARE S OLD, THE PROFIT IS OFFERED FOR TAXATION. THIS METHOD OF ACC OUNTING IS BEING FOLLOWED CONSISTENTLY BY THE ASSESSEE. WHEN THE AS SETS ARE RECAPITALIZED AT THE NOMINAL VALUE AT WHICH IT IS D ECAPITALISED ITA NO.5528/DEL./2012 26 THEN THERE IS NO EFFECT ON THE TAXABILITY OF THE AS SESSEE. SIMILARLY, WHENEVER THESE USED ASSETS ARE CONVERTED INTO STOCK -IN-TRADE AND SOLD SUBSEQUENTLY AND THE SURPLUS ON THE SALE IS OF FERED FOR TAXATION THEN THERE IS NO HARM TO THE REVENUE. CON SIDERING ALL THESE FACTS, WE ALLOW THIS GROUND OF ASSESSEES APP EAL. 38. SO, FOLLOWING THE AFORESAID DECISION RENDERED B Y THE COORDINATE BENCH OF THE TRIBUNAL, WE ARE OF THE CON SIDERED VIEW THAT CONVERSION OF USED ASSET INTO STOCK-IN-TRADE A ND SOLD SUBSEQUENTLY AND SURPLUS ON THE SALE IS BROUGHT TO TAX THEN THERE IS NO LOSS TO THE REVENUE. CONSEQUENTLY, THE ADDITION OF RS.24,94,155/- MADE BY THE AO/DRP IS ORDERED TO BE DELETED. HENCE, GROUND NOS.26 & 27 ARE DETERMINED IN FAVOUR OF THE TAXPAYER. GROUND NO.28 39. GROUND NO.28 IS DISMISSED HAVING NOT BEEN PRESS ED DURING THE COURSE OF ARGUMENTS. GROUND NO.29 40. THE TAXPAYER CHALLENGED THE DISALLOWANCE OF RS. 8,26,071/- BY AO/DRP ON THE GROUND THAT THE DEPRECIATION @ 60% ON PRINTERS, ROUTERS, UPS SMF BATTERY ETC. IS ALLOWABL E AS AGAINST 15% DEPRECIATION BY AO/DRP BY TREATING THE SAME AS PLAN T AND MACHINERY. 41. HONBLE DELHI HIGH COURT IN CASE OF CIT VS. BSES YAMUNA POWER LTD. IN ITA 1267/2010 ORDER DATED 31.08.2010 AFFIRMED THE ITA NO.5528/DEL./2012 27 FINDINGS RETURNED BY THE TRIBUNAL THAT COMPUTER ACC ESSORIES AND PERIPHERALS, SUCH AS, PRINTERS, SCANNERS AND SERVER ETC. ARE INTEGRAL PART OF THE COMPUTER SYSTEM, HENCE ENTITLED FOR DEP RECIATION @ 60% INSTEAD OF 15% ALLOWED BY THE DRP/AO. CONSEQUE NTLY, FOLLOWING THE DECISION RENDERED BY THE HONBLE DELH I HIGH COURT IN CASE OF CIT VS. BSES YAMUNA POWER LTD. (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT THE TAXPAYER IS ENTITLED FOR D EPRECIATION @ 60% ON COMPUTER ACCESSORIES AND PERIPHERALS. SO, T HE AO IS DIRECTED TO CALCULATE THE SAME ACCORDINGLY. GROUND NO.29 IS DETERMINED IN FAVOUR OF THE TAXPAYER. GROUND NO.30 42. THE TAXPAYER HAS CHALLENGED THE DISALLOWANCE OF RS.56,03,670/- ON ACCOUNT OF BAD DEBTS AND ADVANCES WRITTEN OFF ON THE GROUND THAT THE ENTIRE EVIDENCE WAS THERE BEFOR E THE LD. DRP BY WAY OF ADDITIONAL EVIDENCE WHICH WAS ALSO GIVEN TO AO DURING REMAND PROCEEDINGS. 43. LD. AR FOR THE TAXPAYER DREW OUR ATTENTION TOWA RDS THE SUBMISSIONS MADE BY THE TAXPAYER BEFORE AO DURING R EMAND PROCEEDINGS, AVAILABLE AT PAGE 623 TO 627 OF THE PA PER BOOK DULY ENCLOSED WITH DETAILS OF ADVANCES/SECURITY DEPOSITS WRITTEN OFF. BUT LD. DRP/AO HAVE NOT CONSIDERED THE SAID EVIDENCE BU T DISALLOWED THE SAME ON THE BASIS OF SURMISES. ITA NO.5528/DEL./2012 28 44. IN THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERE D VIEW THAT THE ISSUE IS REQUIRED TO BE REMANDED BACK TO THE LD . DRP TO DECIDE AFRESH AFTER PERUSING THE ADDITIONAL EVIDENCE BROUG HT ON RECORD BY THE TAXPAYER AFTER PROVIDING OPPORTUNITY OF BEING H EARD TO THE TAXPAYER, CONSEQUENTLY GROUND NO.30 IS DETERMINED I N FAVOUR OF THE TAXPAYER FOR STATISTICAL PURPOSES. GROUND NO.31 45. GROUND NO.31 BEING CONSEQUENTIAL IN NATURE NEED S NO SPECIFIC FINDINGS. GROUND NO.32 46. GROUND NO.32 BEING PREMATURE NEEDS NO SPECIFIC FINDINGS. 41. RESULTANTLY, THE APPEAL FILED BY THE TAXPAYER I S PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 16 TH DAY OF DECEMBER, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 16 TH DAY OF DECEMBER , 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.