TAJ TELEVISION INDIA P.,LTD, MUMBAI V. DCIT 7(3), MUMBAI

ITA 6370/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8353 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2014
• Appeal Filed By: Assessee
• Bench Allotted: K
• Next Hearing Date: 12-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 17-10-2012
• Court: TRIBUNAL
• Keywords: Transfer pricing; Business expenditure; International transaction; Retrospective amendment; Avoidance of tax
• Section: 143(3); 92B; 37(1); 37; 12; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI JH JH JH JH VKJ VKJVKJ VKJ- -- - LH LHLH LH- -- - 'KEKZ 'KEKZ 'KEKZ 'KEKZ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ,OA ,OA,OA ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K JH FOT; IKY JKO] U;KF;D LNL; DS LE{K JH FOT; IKY JKO] U;KF;D LNL; DS LE{K JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE SHRI R.C, SHARMA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA[;K VK;DJ VIHY LA[;K VK;DJ VIHY LA[;K VK;DJ VIHY LA[;K / ITA NO.6370/MUM/2012 FU/KKZJ.K O'KZ FU/KKZJ.K O'KZ FU/KKZJ.K O'KZ FU/KKZJ.K O'KZ @ @@ @ ASSESSMENT YEAR: - 2008-09 VK;DJ VIHY LA[;K VK;DJ VIHY LA[;K VK;DJ VIHY LA[;K VK;DJ VIHY LA[;K / ITA NO.6434/MUM/2012 FU/KKZJ.K O'KZ FU/KKZJ.K O'KZ FU/KKZJ.K O'KZ FU/KKZJ.K O'KZ @ @@ @ ASSESSMENT YEAR: - 2008-09 TAJ TELEVSISION INDIA PVT. LTD 13/F PRABHADEVI INDUSTRIAL ESTATE VEER SAVARKAR MARG, PRABHADEVI, MUMBAI 200 025. VS. THE DY COMMISSIONER OF INCOME- TAX, -7(3), ROOM NO. 315, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. MARG MUMBAI 400 020. PAN:- AABCT5103D APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST THE ORDER OF ASSESSING OFFICER DATED 22-08-2012 PASSED U/S 143(3 ) R.W.S 144C(5) OF INCOME TAX ACT IN PURSUANT TO DIRECTIONS OF DRP DATED 31.07.20 12 U/S 144C(5) OF THE INCOME TAX ACT FOR THE A.Y. 2008-09. 2. AT THE TIME OF HEARING IT HAS BEEN POINTED OUT T HAT THE ASSESSEE HAS INADVERTENTLY FILED TWO APPEALS AGAINST THE SAME IM PUGNED ORDER, THEREFORE, IT IS PRAYED THAT ITA NO. 6434/MUM/2012 MAY BE DISMISSED BEING A DUPLICATE APPEAL OF ASSESSEE BY / FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS SHRI NIRAJ SHETH REVENUE BY/ JKTLO DH VKSJ LS JKTLO DH VKSJ LS JKTLO DH VKSJ LS JKTLO DH VKSJ LS SHRI S.D. SRIVASTAVA DATE OF HEARING 12.08.2014 DATE OF PRONOUNCEMENT 22.08.2014 TAJ TELEVSISION INDIA PVT. LTD 2 | P A G E ITA NO. 6307/MUM/2012. THE LD. DR RAISED NO OBJECTI ON IF THE DUPLICATE APPEAL IN ITA NO. 6434/MUM/2012 IS DISMISSED AS PRAYED. 3. ACCORDINGLY THE APPEAL IN ITA NO. 6434/MUM/2012 IS DISMISSED BEING A DUPLICAE APPEAL FILED SUBSEQUENT TO THE APPEAL IN I TA NO. 6370/MUM/2012 AGAINST THE SAME IMPUGNED ORDER DATED 22.08.2012. 4. THE ASSESSEE IN ITA NO. 6370/MUM/2012 HAS RAISED FOLLOWING GROUNDS:- GROUND NO.1: TRANSFER PRICING (TP) ADJUSTMENT OF RS . 1,03,89,353/- ON ACCOUNT OF REIMBURSEMENT OF EXPENSES MADE BY THE APPELLANT TO ITS ASSOCIATE ENTERPRISE('AE') THE APPELLANT RESPECTFULLY OBJECTS TO TP ADJUSTMENT OF RS. 1,03,89,353 MADE BY THE LEARNED ASSESSING OFFICER ('AO') IN HIS ORDER U/S. 143(3) R.W.S. 144C(5) R.W.S. 92CA OF THE INCOME TAX ACT BY RELYING ON THE DIRECTIONS ISS UED BY DISPUTE RESOLUTION PANEL. IN THIS REGARD, THE APPELLANT WISH TO SUBMIT ITS GR OUNDS OF OBJECTION WHICH ARE AS FOLLOWS: ADJUSTMENT OF REIMBURSEMENT OF EXPENSES MADE BY THE APPELLANT TO ITS AE A) THE LEARNED AO ERRED IN THE FACTS OF THE CASE AN D IN LAW IN HOLDING THE AMOUNT OF RS. 1,03,89,3531- OF REIMBURSEMENT PAID BY THE APPE LLANT TO ITS AE AS NOT BEING AT ARM'S LENGTH. B) THE LEARNED AO ERRED IN THE FACTS OF THE CASE AN D IN LAW IN NOT APPRECIATING THE NATURE OF EXPENSES IN QUESTION AND THE PURPOSE OF T HESE EXPENSES, WHICH INTER-ALIA INCLUDES SALARY PAYMENTS MADE TO EMPLOYEES OF THE A PPELLANT. C) THE LEARNED AO HAS ALSO ERRED IN THE FACTS OF TH E CASE IN HOLDING THAT THE REIMBURSEMENTS PAID BY THE APPELLANT TO THE AE, BEN EFITS ONLY THE AE, WITHOUT ANY EVIDENCE AND ON THE BASIS OF AN UNSUBSTANTIATED PRE SUMPTION, IN SPITE OF DETAILED FACTS PLACES ON THE RECORD BY THE APPELLANT. D) THE LEARNED AO ERRED IN LAW IN DETERMINING THE A RM'S LENGTH PRICE OF THE REIMBURSEMENT OF EXPENSES OTHERWISE THAN AS PROVIDE D IN SECTION 92C(3) OF THE ACT. 5. THE ASSESSEE TAJ TELEVISION (I) PVT. LTD. IS AN INDIAN COMPANY, ENGAGED IN THE BUSINESS OF PROVIDING DISTRIBUTION SERVICES AND ADVERTISING SALE, MARKETING SERVICES TO ITS AE TAJ TV. LTD. THE SERVICES PROVID ED BY THE ASSESSEE TO ITS AE ARE IN RELATION TO TEN SPORTS CHANNEL OWNED BY THE AE THAT IS BROADCAST IN INDIA. THE DISTRIBUTION SERVICES TO TAJ TV CONSISTS OF NEGOTIA TION AND ENTERING INTO PROCUREMENT OF LICENSE AGREEMENT WITH CABLE SYSTEM IN INDIA FOR DISTRIBUTING THE TEN SPORTS TAJ TELEVSISION INDIA PVT. LTD 3 | P A G E CHANNEL TO END CONSUMER. THE DISTRIBUTION AGREEMENT AND THE ADVERTISING AGREEMENT HAD BEEN ENTERED INTO BETWEEN THE ASSESSE E AND ITS AE TAJ TV LTD., ENUMERATING THE TERMS AND CONDITIONS OF THE SERVICE S PROVIDED BY THE ASSESSEE. DURING THE F.Y. 2007-08, THE ASSESSEE MADE REIMBURS EMENT OF CERTAIN EXPENSES TO ITS AE AMOUNTING TO RS. 1,03,89,353/-. THESE EXPENS ES WERE INCURRED PRIMARILY FOR ORGANIZING CRICKET MATCHES FOR THE DISTRIBUTORS OF TEN SPORTS CHANNEL WHICH WAS HELD IN UAE. THESE EXPENSES WERE INCURRED TOWARDS TRAVEL , STAY AND OTHER EXPENSES PERTAINING TO SUCH PROMOTIONAL EVENTS OF THE SPORTS CHANNEL OWNED BY THE TAJ TV MAURITIUS. SINCE IT WAS AN INTERNATIONAL TRANSACTIO N DECLARED BY THE ASSESSEE, THE ASSESSING OFFICER INTER ALIA REFERRED THE SAME TO THE TRANSFER PRICING OFFICER FOR DETERMINATION OF ARMS LENGTH PRICE OF REIMBURSEMEN T OF EXPENSES. 6. THE TPO HELD THAT THE EXPENDITURE HAS BEEN INCUR RED FOR BUILDING THE BRAND VALUE OF THE CHANNEL AND, THEREFORE, IT IS THE PRIM ARY RESPONSIBILITY OF THE OWNER OF THE CHANNEL TO INCUR THE EXPENSES TOWARDS SUCH PROMOTIO NAL EVENTS AND MARKETING EXPENSES. ACCORDINGLY, THE TPO HAS DETERMINED THE A LP OF REIMBURSEMENT AT NIL AND RECOMMENDED FOR ADJUSTMENT OF THE ENTIRE AMOUNT OF RS. 1,03,89,353/- REIMBURSED BY THE ASSESSEE ON ACCOUNT OF EXPENDITUR E INCURRED ON ORGANIZING CRICKET MATCH IN UAE. THE ASSESSING OFFICER ACCORDI NGLY PROPOSED TO MAKE THE ADDITION OF THE SAID AMOUNT IN THE DRAFT ASSESSMENT ORDER DATED 25.11.2011. THE ASSESSEE FILED OBJECTIONS BEFORE THE DRP AGAINST TH E DRAFT ORDER AND PROPOSED TRANSFER PRICING ADJUSTMENT OF RS. 1,03,89,353/- 7. THE DRP HELD THAT THE TPO WAS CORRECT IN HOLDING THE TAX PAYER HAS DERIVED NO BENEFIT FROM THE ABOVE EXPENSES AND UPHELD THE D ECISION OF THE TPO IN DETERMINING THE ARMS LENGTH PRICE AT NIL. TAJ TELEVSISION INDIA PVT. LTD 4 | P A G E 8. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE TPO HAS DISALLOWED THE EXPENDITURE BEING B RAND PROMOTION OF THE AE WHEREAS THE SAID EXPENDITURE HAS BEEN INCURRED BY T HE ASSESSEE IN THE REGULAR COURSE OF HIS BUSINESS ACTIVITIY AND WHOLLY AND EXC LUSIVERLY FOR THE PURPOSE OF ASSESSEES BUSINESS. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE ACTS ON A PRINCIPLE TO PRINCIPLE RELATIONSHIP WITH AE FOR DISTRIBUTION OF CONTENTS OF THE CHANNEL IN INDIA. FUNCTIONS OF THE ASSESSEE INCLUDES MARKETING AND PR OMOTION OF THE CHANNEL TO INCREASE VIEWERSHIP OF THE CHANNEL AS LAID DOWN IN THE DISTRIBUTION AGREEMENT. WHEN THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUS IVERLY FOR THE BUSINESS OF THE ASSESSEE IT CANNOT BE CATEGORIZED AND DISALLOWED ON THE GROUND THAT IT MIGHT ALSO HAVE BENEFITED THE ASSESSEES AE. THE ASSESSEE IS D ERIVING BENEFIT OUT OF THE SAID EXPENDITURE WHICH FOR THE PURPOSE OF INCREASE IN SA LE OF THE CHANNEL AND CONSEQUENTLY THE ASSESSEE IS GETTING MORE REVENUE/I NCOME. THE LD. AUTHORIZED REPRESENTATIVE HAS REFERRED THE DETAILS OF THE EXPE NDITURE AND SUBMITTED THAT THESE EXPENSES HAVE BEN INCURRED BY THE AE ON BEHALF OF T HE ASSESSEE AND PARTICULARLY ON THE EMPLOYEES OF THE ASSESSEE IN RESPECT OF TRANSI T VISA AND OTHER EXPENSES OF STAY IN UAE OF THE EMPLOYEES OF THE ASSESSEE AS WEL L AS CLIENTS. SOME OF THE EXPENSES WERE INCURRED FOR CRICKET MATCH ORGANIZED FOR TAJ INDIA DISTRIBUTORS IN UAE. THUS THE LD. AUTHORIZED REPRESENTATIVE HAS SUBMITTE D THAT WHEN THE EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS OF TH E ASSESSEE, THE SAME CANNOT BE DISALLOWED UNDER THE PROVISIONS OF TRANSFER PRICING . IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THIRD MEMBER DECISION OF THIS TRIBU NAL IN THE CASE OF STAR INDIA PVT. LTD. VS. ACIT (104 TTJ 01)(THIRD MEMBER) (MUMBAI). 9. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON TH E ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE EXPENDITURE HAS BEEN INCURRE D FOR BRAND PROMOTION OF TEN SPORTS OWNED BY THE AE OF THE ASSESSEE. THEREFORE, THE EXPENDITURE INCURRED FOR THE BRAND PROMOTION OF THE FOREIGN AE HAS BEEN RIGHTLY DISALLOWED ON THE GROUND OF NIL ALP. THE LD. DR HAS FURTHER CONTENDED THAT THIS ISS UE IS NOW COVERED BY THE TAJ TELEVSISION INDIA PVT. LTD 5 | P A G E DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE C ASE OF L.G. ELECTRONICS INDIA (P) LTD. VS. ASST. CIT (140 ITD 41) (DELHI)(SB). 10. IN REBUTTAL, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE DECISION IN THE CASE OF L.G. ELECTRONICS I NDIA (P) LTD. VS. ASST. CIT IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE WHEN THE ASS ESSEE IS WORKING ON A PRINCIPLE TO PRINCIPLE AND THERE IS NO CONTROL OF THE AE ON T HE AFFAIRS OF THE ASSESSEE. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND RE LEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE EXPENDITURE IN QUESTIO N HAS BEEN INCURRED FOR ORGANIZING THE CRICKET MATCH WHICH IS SPONSORED BY THE TEN SPO RTS CHANNEL. TEN SPORTS CHANNEL IS OWNED BY THE AE OF THE ASSESSEE AND BROA DCAST IN INDIA. THE ASSESSEE IS REMUNERATED WITH A COMMISSION OF 12.5% OF THE GR OSS REVENUE COLLECTED BY THE AE IN RESPECT OF THE ADVERTISEMENT ON THE CHANNEL. THE DETAILS OF THE EXPENDITURE HAS BEEN REPRODUCED BY THE TPO AT PAGE 2 AS UNDER:- NARRATION AMOUNT (RS.) COST OF URGENT TRANSIT VISA FOR TAJ INDIAN EMPLOYEE 3,267 FINAL SETTLEMENT AMOUNT PAID TO TAJ INDIA EMPLOYEE PAID BY TAJ MAURITIUS ON THEIR BEHALF 40,07,466 COST OF VISAS FOR TRAVEL TO UAE BY TAJ INDIA AD SAL ES TEAM ALONG WITH CLIENTS 66,727 BUSINESS PROMOTION EXPENSE FOR TRAVEL TO UAE BYTAJ INDIA AD SALES TEAM ALONG WITH CLIENTS 4,07,973 COST OF HOTEL STAY OF TAJ INDIA AD SALES TEAM 13,97 5 COST OF HOTEL STAY, AIR TICKETS AND MEALS OF TAJ IN DIA AD SALES TEAM ALONG WITH CLIENTS TO UAE FOR BUSINES PROMOTION PUR POSES 16,78,294 COST OF HOTEL STAY, CONVEYANCE AND OTHER EXPENSES O F TAJ INDIA TEAM TO ISTANBUL, TURKEY FOR ATTENDING ANNUAL CONFE RENCE 5,35,584 COST OF HOTEL STAU AND OTHER EXPENSES OF TAJ INDIA TEAM ON TRAVEL TO UAE 15,245 EXPENSES FOR CRICKET MATCH ORGANIZED FOR TAJ INDIA DISTRIBUTORS IN UAE 6,70,780 EXPENSES FOR CRICKET MATCH ORGANIZED FOR TAJ INDIA DISTRIBUTORS IN UAE 12,08,893 EXPENSES FOR CRICKET MATCH ORGANIZED FOR TAJ INDIA DISTRIBUTORS IN UAE 1,79,214 TAJ TELEVSISION INDIA PVT. LTD 6 | P A G E EXPENSES FOR CRICKET MATCH ORGANIZED FOR TAJ INDIA DISTRIBUTORS IN UAE 653 EXPENSES FOR ENTERTAINMENT FOR BUSINESS PROMOTION P URPOSES 35,390 EXPENSES FOR CRICKET MATCH ORGANIZED FOR TAJ INDIA DISTRIBUTORS IN UAE 15,65,892 TOTAL 1,03,89,353 12. THE TPO IN ITS ORDER HAS RECORDED THE FACT THAT THE ASSESSEE IN ITS P&L ACCOUNT HAS SHOWN THE EXPENDITURE OF RS. 86.26 CRO RE TOWARDS DISTRIBUTION EXPENSES APART FROM THE EXPENDITURE TOWARDS PERSONN EL COST OF RS. 4.10 CRORE AND OTHER SELLING AND GENERAL ADMINISTRATIVE EXPENSES O F RS. 4.53 CRORE, WHICH HAVE BEEN INCURRED INCIDENTAL TO ITS DISTRIBTION & MARKE TING BUSINESS. APART FROM THAT IT WAS NOTED FROM THE P&L ACCOUNT THAT THE ASSESSEE HAS EX CLUSIVELY INCURRED A SEPARATE SUM OF RS. 1,49,73,756/- UNDER THE HEAD OF MARKETI NG EXPENSES WHICH IS SET OFF AGAINST ITS MARKETING COMMISSION OF RS. 3.88 CRORE EARNED DURING THE YEAR FROM ITS AE. THUS THE TPO HAS BROUGHT ON RECORD THAT THE EXP ENDITURE WHICH HAS BEEN INCURRED BY THE ASSESSEE EXCLUSIVELY WITH RESPECT TO THE CRICKET MATCH ORGANIZED IN UAE WHICH HAS BEEN SHOWN BY THE ASSESSEE AS BUSINES S PROMOTION PURPOSE. HOWEVR, THE TPO TREAED THE SAME AS BRAND PROMOTION OF THE AE. THE ASSESSEE HAS RAISED TWO OBJECTIONS AGAINST THE FINDINGS OF THE T PO VIZ. THE ASSESSEE IS ACTING AS PRINCIPLE TO PRINCIPLE IN RESPECT OF THE ACTIVITY OF DISTRIBUTION SERVICES AND ADVERTISING SALES MARKETING SERVICE TO AE AND SECOND THE EXPEND ITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVERLY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. AS REGARDS THE RELATIONSHIP OF THE ASSESSEE WITH AE ON PRINCIPLE T O PRINCIPLE IS CONCERNED, THE SAME HAS TO BE ASCERTAINED ONLY FROM THE AGREEMENTS ENTE RED INTO BETWEEN THE PARTIES. THOUGH THE ASSESSEE HAS CLAIMED TO HAVE FILED THE D ISTRIBUTION AGREEMENT AS WELL AS ADVERTISEMENT AGREEMENT WITH ITS AE BEFORE THE TPO, HOWEVER NO SUCH AGREEMENTS HAVE BEEN FILED BEFORE US. WE NOTE THAT IN THE TP S TUDY REPORT UNDER THE HEAD THE EXECUTIVE SUMMARY AT PAGE 34 OF THE PAPER BOOK TH E ASSESSEE STATED AS UNDER:- TAJ TV INDIA WAS APPOINTED BY TAJ TV LIMITED AS AN N AGENT FOR PROVIDING ADVERTISING SUPPORT SERVICES AND DISTRIBUTION OF THE TEN SPORTS CHANNEL. TAJ TELEVSISION INDIA PVT. LTD 7 | P A G E 13. IT IS CLEAR THAT THE ASSESSEE ITSELF HAS CLAIME D AS AN AGENT FOR ITS AE FOR PROVIDING ADVERTISING SUPPORT SERVICES AND DISTRIBU TION OF THE TEN SPORTS CHANNEL. THERE IS NO QUARREL ON THE POINT THAT ANY EXPENDITU RE EVEN ON THE ADVERTISEMENT OF THE ASSESSEES OWN BUSINESS ACTIVITY AND ASSESSEES OWN BRAND NAME IS AN ALLOWABLE EXPENDITURE AND WOULD NOT FALL IN THE CAT EGORY OF THE EXPENDITURE FOR THE PROMOTION OF BRAND OF AE. HOWEVER, IN THIS CASE THE EXPENDITURE HAS BEEN INCURRED FOR ORGANIZING CRICKET MATCH AT UAE WHICH HAS BEEN SPONSORED BY THE AE AND ITS TEN SPORTS CHANNEL. THEREFORE, PRIMA F ACIE IT APPEARS THAT THE EXPENDITURE HAS BEEN INCURRED FOR BRAND PROMOTION OF THE AE OF THE ASSES SEE. AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF OF L.G. ELECTRONICS INDIA (P) LTD. VS. ASST. CIT (SUPRA). T HE TRIBUNAL HAS ELABORATELY DEALT WITH EATCH AND EVERY ASPECTS OF THE ISSUE FELL FOR THEIR CONSIDERTION. IN THE CASE OF OF L.G. ELECTRONICS INDIA (P) LTD. VS. ASST. CIT (SUPR A) THE EXPENDITURE HAD BEEN INCURRED AS CONTRIBUTION TOWARDS GLOBLAL CRICKET AN D SPONSORHSIP. IN THE SAID CASE THE TPO WAS OF THE OPINION THAT THE ASSESSEE WAS PROMOT ING THE L.G. BRAND OWNED BY ITS FOREIGN AE, HENCE, SHOULD HAVE BEEN ADQUATELY C OMPENSATED BY FOREIGN AE. THE ASSESSEE RAISED VARIOUS ISSUES BEFORE THE SPECIAL B ENCH INCLULDING THE QUESTION WHETHER THE CONTRIBUTION TOWARDS THE SPONSORHIP EXP ENSES FALLS IN THE AMBIT OF INTERNATIONAL TRANSACTION. THE SPECIAL BENCH AFTER CONSIDERING THE RELEVANT PROVISIONS OF TRANSFER PRICING UNDER THE INCOME TA X ACT AS WELL AS THE RIVAL SUBMISSIONS OF THE PARTIES HELD IN PARA 9.10 TO 9.1 2 AS UNDER:- 9.10 WE DO NOT FIND ANY FORCE IN THE CONTENTION OF THE LD. DR THAT THE MERE FACT OF THE ASSESSEE HAVING SPENT PROPORTIONATELY HIGHER AM OUNT ON ADVERTISEMENT IN COMPARISON WITH SIMILARLY PLACED INDEPENDENT ENTITI ES BE CONSIDERED AS CONCLUSIVE TO INFER THAT SOME PART OF THE ADVERTISEMENT EXPENSES WERE INCURRED TOWARDS BRAND PROMOTION FOR THE FOREIGN AE. EVERY BUSINESSMAN KNO WS HIS INTEREST BEST. IT IS FOR THE ASSESSEE TO DECIDE THAT HOW MUCH IS TO BE INCURRED TO CARRY ON HIS BUSINESS SMOOTHLY. THERE CAN BE NO IMPEDIMENT ON THE POWER O F THE ASSESSEE TO SPEND AS MUCH AS HE LIKES ON ADVERTISEMENT. THE FACT THAT TH E ASSESSEE HAS SPENT PROPORTIONATELY MORE ON ADVERTISEMENT CAN, AT BEST BE A CAUSE OF DOUBT FOR THE AO TO TRIGGER EXAMINATION AND SATISFY HIMSELF THAT NO BEN EFIT ETC. IN THE SHAPE OF BRAND BUILDING HAS BEEN PROVIDED TO THE FOREIGN AE. THERE CAN BE NO SCOPE FOR INFERRING ANY BRAND BUILDING WITHOUT THERE BEING ANY ADVERTIS EMENT FOR THE BRAND OR LOGO OF THE FOREIGN AE, EITHER SEPARATELY OR WITH THE PRODUCTS AND NAME OF THE ASSESSEE. THE TAJ TELEVSISION INDIA PVT. LTD 8 | P A G E AO/TPO CAN SATISFY HIMSELF BY VERIFYING IF THE ADVE RTISEMENT EXPENSES ARE CONFINED TO ADVERTISING THE PRODUCTS TO BE SOLD IN INDIA ALO NG WITH THE ASSESSEE'S OWN NAME. IF IT IS SO, THE MATTER ENDS. THE AO WILL HAVE TO ALLO W DEDUCTION FOR THE ENTIRE AMP EXPENSES WHETHER OR NOT THESE ARE PROPORTIONATELY H IGHER. BUT IF IT IS FOUND THAT APART FROM ADVERTISING THE PRODUCTS AND THE ASSESSEE'S NA ME, IT HAS ALSO SIMULTANEOUSLY OR INDEPENDENTLY ADVERTISED THE BRAND OR LOGO OF THE F OREIGN AE, THEN THE INITIAL DOUBT GETS CONVERTED INTO A DIRECT INFERENCE ABOUT SOME T ACIT UNDERSTANDING BETWEEN THE ASSESSEE AND THE FOREIGN AE ON THIS SCORE. AS IN TH E CASE OF AN EXPRESS AGREEMENT, THE INCURRING OF AMP EXPENSES FOR BRAND BUILDING DR AWS STRENGTH FROM SUCH EXPRESS AGREEMENT; IN THE LIKE MANNER, THE INCURRING OF PRO PORTIONATELY MORE AMP EXPENSES COUPLED WITH THE ADVERTISEMENT OF BRAND OR LOGO OF THE FOREIGN AE, GIVES STRENGTH TO THE INFERENCE OF SOME INFORMAL OR IMPLIED AGREEMENT IN THIS REGARD. 9.11 ADVERTING TO THE FACTS OF THE INSTANT CASE, IT IS NOTICED THAT THE LD. DR HAS AMPLY SHOWN THAT THE ASSESSEE NOT ONLY PROMOTED ITS NAME AND PRODUCTS THROUGH ADVERTISEMENTS, BUT ALSO THE FOREIGN BRAND SIMULTAN EOUSLY, WHICH HAS REMAINED UNCONTROVERTED ON BEHALF OF THE ASSESSEE. THIS FACT OR TOGETHER WITH THE FACT THAT THE ASSESSEE'S AMP EXPENSES ARE PROPORTIONATELY MUCH HI GHER THAN THOSE INCURRED BY OTHER COMPARABLE CASES, LENDS DUE CREDENCE TO THE I NFERENCE OF THE TRANSACTION BETWEEN THE ASSESSEE AND THE FOREIGN AE FOR CREATIN G MARKETING INTANGIBLE ON BEHALF OF THE LATTER. 9.12 THE LD. AR HAS VEHEMENTLY ARGUED THAT WHEN THE ASS ESSEE INCURRED AMP EXPENSES FOR ITS BUSINESS PURPOSE AND RECORDED THEM AS SUCH, THE REVENUE WENT WRONG IN RECHARACTERIZING THIS TRANSACTION BY SPLIT TING IT INTO TWO PARTS, VIZ., ONE TOWARDS ADVERTISEMENT EXPENSES FOR THE ASSESSEE'S B USINESS AND SECOND TOWARDS THE BRAND BUILDING FOR THE FOREIGN AE. HE FORTIFIED THIS CONTENTION BY RELYING ON THE JUDGMENT OF EKL APPLIANCES LTD. (SUPRA). THERE IS A BSOLUTELY NO DOUBT THAT PARA 17 OF THE JUDGMENT UNAMBIGUOUSLY LAYS DOWN THAT THE TA X ADMINISTRATION SHOULD NOT DISREGARD THE ACTUAL TRANSACTION AND SUBSTITUTE OTH ER TRANSACTIONS FOR IT. HOWEVER, IT IS IMPERATIVE TO NOTE THAT THE PROPOSITION LAID DOWN I N PARA 17 IS NOT INFALLIBLE OR IS NOT AN UNEXCEPTIONABLE RULE. CAVEAT HAS BEEN INCLUDED I N THE IMMEDIATELY NEXT PARA NO. 18. TWO EXCEPTIONS HAVE BEEN CARVED OUT OF THE GENE RAL RULE AGAINST RECHARACTERIZATION OF ANY TRANSACTION AS SET OUT IN PARA 17, VIZ. '(I) WHERE THE ECONOMIC SUBSTANCE OF A TRANSACTION DIFFERS FROM IT S FORM; AND (II) WHERE THE FORM AND SUBSTANCE OF THE TRANSACTION ARE THE SAME BUT THE A RRANGEMENTS MADE IN RELATION TO THE TRANSACTION, VIEWED IN THEIR TOTALITY DIFFER FR OM THOSE WHICH WOULD HAVE BEEN ADOPTED BY THE INDIVIDUAL ENTERPRISE BEHAVING IN A COMMERCIALLY RATIONAL MANNER.' IN OUR CONSIDERED OPINION, THE SECOND EXCEPTION GOVERN S THE EXTANT SITUATION, AS PER WHICH, WHERE THE FORM AND SUBSTANCE OF THE TRANSACT ION ARE THE SAME, BUT ARRANGEMENTS MADE IN RELATION TO TRANSACTION VIEWED IN TOTALITY DIFFER FROM THOSE WHICH WOULD HAVE BEEN ADOPTED BY INDEPENDENT ENTERP RISES BEHAVING IN A COMMERCIALLY RATIONAL MANNER. THE ASSESSEE INCURRED AMP EXPENSES AND EXPLICITLY SHOWED THEM AS SUCH. THUS THE FORM OF SHOWING THE A MP EXPENSES COINCIDES WITH THE SUBSTANCE OF THE AMP EXPENSES. BUT THE ARRANGEM ENT MADE IN SUCH TRANSACTION, VIEWED IN TOTALITY, DIFFERS FROM THAT WHICH WOULD H AVE BEEN ADOPTED BY INDEPENDENT ENTERPRISES BEHAVING IN A COMMERCIALLY RATIONAL MAN NER. THOUGH THE AMP EXPENSES WERE SHOWN AS SUCH BUT THE OVERT ACT OF SHOWING SUC H EXPENSES AS ITS OWN IS DIFFERENT FROM WHAT IS INCURRED BY INDEPENDENT ENTE RPRISES BEHAVING IN A COMMERCIALLY RATIONAL MANNER, WHICH UNEARTHS THE CO VERT ACT OF TREATING THE AMP TAJ TELEVSISION INDIA PVT. LTD 9 | P A G E EXPENSES INCURRED FOR THE BRAND BUILDING FOR AND ON BEHALF OF THE FOREIGN AE, AS ALSO ITS OWN. WHAT IS RELEVANT TO CONSIDER IS AS TO WHET HER AN INDEPENDENT ENTERPRISE BEHAVING IN A COMMERCIALLY RATIONAL MANNER WOULD IN CUR THE EXPENSES TO THE EXTENT THE ASSESSEE HAS INCURRED. IF THE ANSWER TO THIS QU ESTION IS IN AFFIRMATIVE, THEN THE TRANSACTION CANNOT BE RECHARACTERIZED. IF, HOWEVER, THE ANSWER IS IN NEGATIVE, THEN THE TRANSACTION NEEDS TO BE PROBED FURTHER FOR DETE RMINING AS TO WHETHER ITS RECHARACTERIZATION IS REQUIRED. SUCH RECHARACTERIZA TION CAN BE DONE WITH THE HELP OF THE RATIO DECIDENDI OF THIS JUDGMENT ITSELF, BEING, MAKING A COMPARISON WITH WHAT 'INDEPENDENT ENTERPRISES BEHAVING IN A COMMERCIALLY RATIONAL MANNER' WOULD DO, TIED WITH THE FACT OF THE ASSESSEE ALSO SIMULTANEOUSLY A DVERTISING THE BRAND OF ITS FOREIGN AE. REVERTING TO THE CONTEXT OF AMP EXPENSES, ONE N EEDS TO FIND OUT AS TO HOW MUCH AMP EXPENSES WOULD INDEPENDENT ENTERPRISES BEH AVING IN A COMMERCIALLY RATIONAL MANNER, INCUR. ONCE BY MAKING SUCH A COMPA RISON, THE RESULT FOLLOWS THAT THE INDIAN AE, PROMINENTLY DISPLAYING BRAND OF ITS FOREIGN AE IN ITS ADVERTISEMENTS, HAS INCURRED EXPENSES PROPORTIONATELY MORE THAN THA T INCURRED BY INDEPENDENT ENTERPRISES BEHAVING IN A COMMERCIAL RATIONAL MANNE R, THEN IT BECOMES EMINENT TO RECHARACTERIZE THE TRANSACTION OF TOTAL AMP EXPENSE S WITH A VIEW TO SEPARATE THE TRANSACTION OF BRAND BUILDING FOR THE FOREIGN AE. E VEN THE UNITED NATIONS TRANSFER PRICING MANUAL, WHICH HAS ONLY A PERSUASIVE VALUE, PROVIDES FOR THE ALLOCATION OF SUCH COST BETWEEN THE MNE AND ITS SUBSIDIARIES. WE, THEREFORE, HOLD THAT IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THERE IS A T RANSACTION BETWEEN THE ASSESSEE AND THE FOREIGN AE UNDER WHICH THE ASSESSEE INCURRE D AMP EXPENSES TOWARDS PROMOTION OF BRAND WHICH IS LEGALLY OWNED BY THE FO REIGN ENTITY. 14. THUS THE ADVERTISEMENT AND MARKETING PROMOTION EXPENSES INCURRED FOR THE BRAND BUILDING OF FOREIGN AE HAS BEEN HELD BY THE S PECIAL BENCH AS A TRANSACTION BETWEEN THE ASSESSEE AND FOREIGN AE. THE CONTENTION OF THE ASSESSEE BEFORE US IS THAT ITS AE HAS NO CONTROL OVER THE AFFAIRS OF THE ASSESSEE, WE FIND THAT THIS ASPECT HAS ALSO NO RELEVANCE ON THE ISSUE OF TRANSFER PRIC ING ADJUSTMENT OF THESE EXPENSES. A SIMILAR ARGUMENT WAS ALSO RAISED BEFORE THE SPECI AL BENCH AND THE SPECIAL BENCH HAS OBSERVED IN PARA 11.5 AS UNDER:- 11.5 IN OUR CONSIDERED OPINION THE RIVAL PARTIES HAVE OC CUPIED THE POSITION AKIN TO NORTH POLE AND SOUTH POLE ON THIS SCORE. IN THE CON TEXT OF THE TP PROVISIONS, THE CORRECT POSITION LIES SOMEWHERE BETWEEN THESE TWO E XTREME ENDS. WHEREAS THE SEPARATE LEGAL CHARACTER OF BOTH THE ENTITIES REMAI NS INTACT UNDER CHAPTER-X, AT THE SAME TIME THERE IS A SIMULTANEOUS MANDATE FOR REMOV ING THE EFFECT OF INFLUENCE OF ONE ENTITY OVER THE ECONOMIC DEALINGS WITH THE OTHE R ON A TRANSACTIONAL LEVEL BY COMPUTING THE INCOME HAVING REGARD TO THE ALP OF EA CH INTERNATIONAL TRANSACTION. TAJ TELEVSISION INDIA PVT. LTD 10 | P A G E 15. THE SPECIAL BENCH HAS GIVEN THE FINDING ON THE POINT OF DEFINITION OF INTERNATIONAL TRANSACTION AND WHETHER THE BRAND BUI LDING FALLS IN THE AMBIT OF THE TERM INTERNATIONAL TRANSACTION IN 14.13-2 AND CONCL UDED IN PARA 14.21 AS UNDER:- 14.13.2 TURNING TO THE DEFINITION OF INTERNATIONAL TRANSAC TION AS PER SUB-SECTION (1) OF SEC. 92B IT IS NOTICED THAT IT USES BOTH THE WORDS 'MEANS' AND 'INCLUDES'. WHEN WE EXAMINE THE EXPLANATION TO THIS SECTION CLA RIFYING THE MEANING OF THE EXPRESSION 'INTERNATIONAL TRANSACTION' AND 'INTANGI BLE PROPERTY', THEN IT BECOMES CLEAR THAT BOTH HAVE AGAIN BEEN DEFINED IN INCLUSIV E MANNER. EVEN THOUGH SUB- CLAUSES (A) TO (C) AND (E) OF CLAUSE (I) OF THE EXP LANATION DEFINING 'INTERNATIONAL TRANSACTION' ARE EXHAUSTIVE, BUT SUB-CLAUSE (D) BEI NG THE 'PROVISION OF SERVICES' IS AGAIN INCLUSIVE AS 'INCLUDING' PROVISION OF MARKET RESEARCH, MARKET DEVELOPMENT, MARKETING MANAGEMENT,'. IT IS OF CRITICAL IMPORTAN CE TO OBSERVE THAT THE EXPRESSION 'INTERNATIONAL TRANSACTION' ITSELF HAS B EEN DEFINED IN THIS EXPLANATION ONLY IN AN INCLUSIVE MANNER. AS A RESULT OF INSERTI ON OF THE EXPLANATION WITH RETROSPECTIVE EFFECT, THE OTHERWISE EXHAUSTIVE DEFI NITION OF 'INTERNATIONAL TRANSACTION' GIVEN IN SUB-SECTION (1) HAS BEEN CONV ERTED INTO AN INCLUSIVE ONE. CLAUSE (II) OF THE EXPLANATION ALSO DEFINES THE EXP RESSION 'INTANGIBLE PROPERTY' IN AN INCLUSIVE MANNER. SUB-CLAUSE (A) OF CLAUSE (II) EMB RACES 'MARKETING RELATED INTANGIBLE ASSETS' IN THE AMBIT OF INTANGIBLE PROPE RTY, WHICH IS AGAIN NOT EXHAUSTIVE BECAUSE OF THE USE OF THE EXPRESSION 'SU CH AS' BEFORE 'TRADEMARKS, TRADE NAMES, BRAND NAMES, LOGOS'. FROM THE ABOVE EXAMINAT ION OF SECTION 92B IN ENTIRETY, IT CAN BE EASILY NOTICED THAT THE LEGISLA TURE HAS GIVEN VERY EXTENSIVE AND INCLUSIVE MEANING TO THE EXPRESSIONS 'INTERNATIONAL TRANSACTION' AND 'INTANGIBLE PROPERTY'. 14.21 THUS IT IS PALPABLE THAT ALL THE THREE NECESSARY I NGREDIENTS AS CULLED OUT FROM A BARE READING OF SECTION 92B ARE FULLY SATISF IED IN THE PRESENT CASE. THERE IS A TRANSACTION OF CREATING AND IMPROVING MARKETING INT ANGIBLES BY THE ASSESSEE FOR AND ON BEHALF OF ITS FOREIGN AE ; THE FOREIGN AE IS NON-RESIDENT ; SUCH TRANSACTION IS IN THE NATURE OF PROVISION OF SERVICE. RESULTANTLY, WE HOLD THAT THE REVENUE AUTHORITIES WERE FULLY JUSTIFIED IN TREATING THE TR ANSACTION OF BRAND BUILDING AS AN INTERNATIONAL TRANSACTION IN THE FACTS AND CIRCUMST ANCES OF THE PRESENT CASE. 16. THUS THERE IS NO DISPUTE AS FAR AS THE NATURE O F THE TRANSACTION IS CONCERNED THAT THE SAME FALLS IN THE AMBIT OF THE INTERANTION AL TRANSACTION AS PER THE PROVISIONS TAJ TELEVSISION INDIA PVT. LTD 11 | P A G E OF SECTION 92B OF THE INCOME TAX ACT. AS REGARDS TH E 3 RD MEMBER DECISION OF TRIBUNAL IN THE CASE OF STAR INDIA PVT. LTD. VS. AC IT (SUPRA) THE SAID DECISION IS ON THE POINT OF ALLOWABILITY OF EXPENDITURE U/S 37 OF THE INCOME TAX ACT AND NOT IN RESPECT OF TRANSFER PRICING ADJUSTMENT. THE SPECIA L BENCH IN THE CASE OF L.G. ELECTRONICS INDIA (P) LTD. VS. ASST. CIT (SUPRA) HA D THE OCCASION TO DEAL WITH A SIMILAR QUESTION AND HELD IN PARA 16.6 AND 16.8 AS UNDER:- 16.6 WE HAVE HEARD THE RIVAL SUBMISSIONS IN THE LIGHT O F MATERIAL PLACED BEFORE US AND PRECEDENTS RELIED ON. A LOT OF EMPHASIS HAS BEE N PLACED BY THE LD. COUNSEL FOR THE APPELLANT AND OTHER INTERVENERS ON THE POINT TH AT THE DEDUCTIBILITY OF AMP EXPENSES SHOULD BE VIEWED IN THE LIGHT OF SECTION 3 7(1) ALONE. ONCE THE ENTIRE AMOUNT IS FOUND TO BE DEDUCTIBLE UNDER THIS PROVISI ON, THEN, NO PART OF IT CAN BE ATTRIBUTED TO THE BRAND BUILDING FOR THE FOREIGN AE NOTWITHSTANDING THE FACT THAT THE FOREIGN AE ALSO GOT BENEFITTED OUT OF SUCH EXPENSE. WE DO NOT FIND SUCH SUBMISSION AS CORRECT UNDER THE PRESENT LEGAL AND FACTUAL SCEN ARIO. THERE IS NO DOUBT ABOUT THE GENERAL PROPOSITION AS LAID DOWN IN THE DECISIONS P RESSED INTO SERVICE BY THE LD. AR THAT IF AN EXPENDITURE IS DEDUCTIBLE U/S 37(1), BEI NG INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE, THE SAME HAS TO BE ALLOWED IN ENTIRETY NOTWITHSTANDING THE FACT THAT SOME THIRD PARTY WAS ALSO BENEFITTED BY SUCH E XPENDITURE. HOWEVER, IN CASE OF AN INTERNATIONAL TRANSACTION, THIS GENERAL PROPOSIT ION UNDERGOES CHANGE BECAUSE OF CHAPTER X OF THE ACT CONTAINING THE TRANSFER PRICIN G PROVISIONS, WITH THE MARGINAL NOTE: 'SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX'. THIS CHAPTER REQUIRES THE COMPUTATION OF INCOME FROM INTERNATIONAL TRANSACTIO NS HAVING REGARD TO ARM'S LENGTH PRICE. THE HITHERTO SECTION 92 AS EXISTING ON THE S TATUTE UP TO THE A.Y. 2001-02 WAS SUBSTITUTED BY THE FINANCE ACT, 2001 WITH SECTIONS 92 TO 92F. THROUGH SUCH TP PROVISIONS IT HAS BEEN MANDATED THAT ANY INCOME ARI SING FROM AN INTERNATIONAL TRANSACTION SHALL BE COMPUTED HAVING REGARD TO ARM' S LENGTH PRICE. IT HAS FURTHER BEEN PROVIDED THROUGH SECTION 92 THAT THE COST OR EXPENS ES ALLOCATED OR APPORTIONED BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES SHALL BE AT ARM'S LENGTH PRICE. MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE BILL HAS INCLUDED SUCH PROVISION UNDER THE MAIN CATEGORY OF 'MEASURES TO C URB TAX AVOIDANCE'. THIS SET OF SECTIONS HAS BEEN DESCRIBED AS A : 'NEW LEGISLATION TO CURB TAX AVOIDANCE BY ABUSE OF TRANSFER PRICING'. IT IS SIGNIFICANT TO NOTE THE FOLLOWING EXCERPT FROM THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE BILL : 'THE INCREASING PARTICIPATION OF MULTINATIONAL GROUPS IN ECONOMIC A CTIVITIES IN THE COUNTRY HAS GIVEN RISE TO NEW AND COMPLEX ISSUES EMERGING FROM TRANSA CTIONS ENTERED INTO BETWEEN TWO OR MORE ENTERPRISES BELONGING TO THE SAME MULTI NATIONAL GROUP. THE PROFITS DERIVED BY SUCH ENTERPRISES CARRYING ON BUSINESS IN INDIA CAN BE CONTROLLED BY THE MULTINATIONAL GROUP, BY MANIPULATING THE PRICES CHA RGED AND PAID IN SUCH INTRA-GROUP TRANSACTIONS, THEREBY, LEADING TO EROSION OF TAX RE VENUES.' THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE BILL 2001 FURTHER PROVIDES AS UNDER : - 'WITH A VIEW TO PROVIDE A STATUTORY FRAMEWORK WHICH CAN LEAD TO COMPUTATION OF REASONABLE, FAIR AND EQUITABLE PROFITS AND TAX I N INDIA, IN THE CASE OF SUCH TAJ TELEVSISION INDIA PVT. LTD 12 | P A G E MULTINATIONAL ENTERPRISES, NEW PROVISIONS ARE PROPO SED TO BE INTRODUCED IN THE INCOME-TAX ACT. ** ** ** IT IS PROPOSED TO SUBSTITUTE SECTION 92 WITH A NEW SECTION TO PROVIDE THAT ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION SH ALL BE COMPUTED HAVING REGARD TO THE ARM'S LENGTH PRICE. IT FURTHER PROVID ES THAT THE COSTS OR EXPENSES ALLOCATED OR APPORTIONED BETWEEN TWO OR MORE ASSOCI ATED ENTERPRISES SHALL BE AT ARM'S LENGTH PRICES.' 16.8 MOREOVER, THE DECISIVE TEST IS TO CONSIDER THE DED UCTIBILITY OF ANY EXPENSE IN THE HANDS OF THE ASSESSEE ON ITS OWN ACCOUNT AND NO T OTHERWISE. IT IS OBVIOUS THAT IF SOME AMOUNT IS SPENT BY THE ASSESSEE FOR ITS AE, WHICH MAY BE DEDUCTIBLE IN THE HANDS OF SUCH AE, CANNOT BY ANY STRETCH OF IMAGINAT ION BE CLAIMED AS DEDUCTION BY THE ASSESSEE. THE TP PROVISIONS AIM AT STREAMLINING THE EFFECT OF SHIFTING OF SUCH EXCESS EXPENSES IN THE HANDS OF THE INDIAN ASSESSEE . IT SHOWS THAT THE AMOUNT SPENT ON AN INTERNATIONAL TRANSACTION, IF COMBINED BY THE ASSESSEE WITH ITS OWN BUSINESS EXPENSES, IS REQUIRED TO BE TAKEN OUT FOR PROCESSING UNDER THE TP PROVISIONS TO FIND OUT THE EXTENT OF ITS TAXABILITY IN THE HANDS OF THE INDIAN ASSESSEE. THE REMAINING AMOUNT INCURRED TOWARDS ITS OWN BUSINESS EXPENSES SHALL BE CONSIDERED FOR DEDUCTIBILITY AS PER THE REGULAR PROVISIONS OF THE ACT. IT IS WHOLLY ILLOGICAL TO CONTEND THAT THE DEDUCTIBILITY OF SUCH TOTAL EXPENSE, ALSO CONSISTING OF THE AMOUNT SPENT ON THE INTERNATIONAL TRANSACTION, SHOULD BE VIEWED AS PER THE GENERAL PROVISIONS OF THE ACT. IF THE CONTENTION AD VANCED ON BEHALF OF THE ASSESSES IS ACCEPTED AND THE DEDUCTIBILITY OF THE ENTIRE AMO UNT OF AMP EXPENSES, INCLUDING THAT INCURRED ON ACCOUNT OF INTERNATIONAL TRANSACTI ON, IS CONSIDERED UNDER THE GENERAL PROVISIONS OF CHAPTER IV-D, THEN IT WOULD R ENDER THE TP PROVISIONS AS A REDUNDANT PIECE OF LEGISLATION. OBVIOUSLY THIS CAN NEVER BE A CORRECT POSITION. WHEN THE LEGISLATURE HAS INSERTED A SPECIAL PROVISI ON IN THE ACT AND THAT TOO, WHICH IS FOR THE AVOIDANCE OF TAX, THE TAXABILITY O F THE AMOUNT SPENT TOWARDS THE INTERNATIONAL TRANSACTION, INCLUDED IN THE TOTAL AM OUNT OF EXPENSE, IS REQUIRED TO BE EXAMINED AS PER THE TP PROVISIONS. THE EXERCISE OF SEPARATING THE AMOUNT SPENT BY THE ASSESSEE IN RELATION TO INTERNATIONAL TRANSA CTION OF BUILDING BRAND FOR ITS FOREIGN AE FOR SEPARATELY PROCESSING AS PER SECTION 92 OF THE ACT CANNOT BE CONSIDERED AS A CASE OF DISALLOWANCE OF AMP EXPENSE S U/S 37(1). IN FACT, BOTH THE SECTIONS I.E. 37(1) AND SEC. 92 OPERATE IN DIFFEREN T FIELDS . TAJ TELEVSISION INDIA PVT. LTD 13 | P A G E 17. THUS IT IS CLEAR THAT THE AMOUNTS SPENT ON AN I NTERNATIONAL TRANSACTION IS REQUIRED TO BE TAKEN OUT FOR PROCESSING UNDER TP PR OVISIONS TO FIND OUT ITS TAXABILITY IN THE HANDS OF THE INDIAN ASSESSEE. THE AMOUNT INCURR ED TOWARDS ITS OWN BUSINESS EXPENSES SHALL BE CONSIDERED FOR TAXABILITY AS PER REGULAR PROVISIONS OF THE ACT INCLUDING SECTION 37 OF THE INCOME TAX ACT. IN VIEW OF THE FACT THAT WHEN A TRANSACTION FALLS IN THE AMBIT OF INTERNATIONAL TRA NSACTION EVEN IF PART OF THE EXPENDITURE IS RELEVANT TO THE EXPENSES FOR THE PUR POSE OF THE ASSESSEES OWN BUSINESS ACTIVITY THE REMAINING OF THE EXPENSES HAS TO BE TESTED UNDER THE PROVISIONS OF SECTION 92 FOR ITS TAXABILITY IN THE HANDS OF THE ASSESSEE. THE SPECIAL BENCH HAS CONCLUDED IN PARA 18.3 ON THE POINT OF DI VISION OF SUCH EXPENSES BETWEEN PROMOTION OF SALES ON ONE HAND AND EXPENSES IN CONN ECTION WITH SALES IN OTHER HAND AS UNDER:- 18.3 HAVING HEARD THE RIVAL SUBMISSIONS ON THIS ISSUE, WE FIND THAT THE AMP EXPENSES REFER ONLY TO ADVERTISEMENT, MARKETING AND PUBLICITY EXPENSES. A DIVIDER NEEDS TO BE PLACED BETWEEN THE EXPENSES FOR THE PRO MOTION OF SALES ON ONE HAND AND EXPENSES IN CONNECTION WITH THE SALES ON THE OT HER. BOTH THESE EXPENSES ARE REQUIRED TO BE KEPT IN DIFFERENT COMPARTMENTS. WHIL E EXPENSES FOR THE PROMOTION OF SALES DIRECTLY LEAD TO BRAND BUILDING, THE EXPENSES DIRECTLY IN CONNECTION WITH SALES ARE ONLY SALES SPECIFIC. 18. THE SPECIAL BENCH HAS FINALLY RESTORED THE MATTER T O THE FILE OF TPO/ASSESSING OFFICER BY OBSERVING IN PARA 19 AS UNDER:- 19. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, IT IS FOUND THAT THE TPO RESTRICTED THE COMPARABLE CASES TO ONLY TWO WITHOUT DISCUSSING AS TO HOW OTHER CASES CITED BY THE ASSESSEE WERE NOT COMPARABLE. FU RTHER IT CAN BE SEEN THAT THE TPO HAS NOT CONSIDERED THE EFFECT OF ANY OF THE REL EVANT FACTORS AS DISCUSSED ABOVE. A BALD COMPARISON WITH THE RATIO OF AMP EXPE NSES TO SALES OF THE COMPARABLE CASES WITHOUT GIVING EFFECT TO THE RELEV ANT FACTORS AS DISCUSSED ABOVE, CANNOT PRODUCE CORRECT RESULT. IT CAN BE ILLUSTRATE D BY A SIMPLE EXAMPLE. IF THERE IS NO SUBSIDY IN A COMPARABLE CASE BUT THE ASSESSEE HA S RECEIVED SOME AMOUNT OF SUBSIDY FROM ITS FOREIGN AE ON IMPORTS OR IN ANY OT HER MANNER, WHICH FACT OTHERWISE NEEDS TO BE SPECIFICALLY ESTABLISHED BY T HE ASSESSEE, THEN THE INITIAL AMOUNT SO COMPUTED WOULD REQUIRE REDUCTION TO THE E XTENT OF SUCH SUBSIDY OR VICE VERSA. AS THE TPO HAS NEITHER PROPERLY CONSIDERED T HE REQUEST OF THE ASSESSEE FOR TAJ TELEVSISION INDIA PVT. LTD 14 | P A G E INCLUSION OF SOME OTHER COMPARABLE CASES NOR EXAMIN ED THE EFFECT OF THE ABOVE DISCUSSED RELEVANT FACTORS ON THE QUESTION OF DETER MINATION OF THE COST/VALUE OF INTERNATIONAL TRANSACTION, IN OUR CONSIDERED OPINIO N THE ENDS OF JUSTICE WILL MEET ADEQUATELY IF THE ORDER OF THE TPO AND THAT OF THE AO GIVING EFFECT TO SUCH ORDER IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE TPO FOR DETERMINING THE COST/VALUE OF THE INTERNATIONAL TRANSACTION AND THE CONSEQUENT ALP AFRESH AS PER LAW AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE. 19. IN THE CASE IN HAND, THE ASSESSEE HAS NOT FILED THE RELEVANT AGREEMENTS SO AS TO GIVE A FINDINGN ON THE NATURE OF RELATIONSHIP BETWEEN TH E ASSESSEE AND ITS AE AS WELL AS THE RESPECTIVE COTRACTUAL OBLIGATIONS AND RIGHTS OF THE PARTIES. FURTHER THE AUTHORITIES BELOW HAVE ALSO NOT EXAMINED AND DISCUSSED THE AGREEMENTS ENTERED INTO BETWEEN THE ASSESSEE AND AE. ACCODINGLY IN THE FACTS AND CIRCUMSTANCES O F THE CASE AND IN THE INTEREST OF JUSTICE, WE SET ASIDE THIS ISSUE TO THE RECORD OF TPO/AO TO RECONSIDER AND DECIDE THE SAMER AFTER VERIFICATION OF ALL THE FACTS AND IN THE LIGHT OF D ECISION OF SPECIAL BENCH IN THE CASE OF L.G. ELECTRONICS INDIA (P) LTD. VS. ASST. CIT (SUPRA). 20 . IN THE RESULT APPEAL OF THE ASSESSEE IS IN ITA NO. 6370/MUM/2012 IS ALLOWED FOR STATISTICAL PURPOSES AND APPEAL IN ITA NO. 6434/MUM /2012 IS DISMISSED BEING DUPLICATE. ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 22- 8-2014 SD/- SD/- (R.C. SHARMA) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 22-8 -2014 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, K BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI