Suzuki Motorcycles (I) Pvt. Ltd., New Delhi V. DCIT, Circle-24(2), New Delhi

ITA 7142/DEL/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7280 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2013-2014
• Appeal Filed On: 28-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Business expenditure; Opportunity of being heard; International transaction; Tangible material; Onus to prove; Set aside
• Section: 144C; 13; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-2 : NEW DELHI) (THROUGH VIDEO CONFERENCE) SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.7142/DEL./2017 (ASSESSMENT YEAR : 2013-14) M/S. SUZUKI MOTORCYCLES (I) PVT. LTD., VS. DCIT, C IRCLE 24 (2), 2 ND FLOOR, PLOT NO.1, NELSON MANDELA ROAD, NEW DELHI. VASANT KUNJ, NEW DELHI 110 070. (PAN : AAACI5832P) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AJAY VOHRA, SENIOR ADVOCATE SHRI NEERAJ JAIN, ADVOCATE SHRI RAMIT KATIYAL, ADVOCATE REVENUE BY : SHRI ANUPAM KANT GARG, CIT DR DATE OF HEARING : 27.08.2020 DATE OF ORDER : 31.08.2020 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. SUZUKI MOTORCYCLES (I) PVT. LTD. ( HEREINAFTER REFERRED TO AS THE TAXPAYER) BY FILING THE PRESEN T APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 20.09.2017 PASSE D BY THE AO IN CONSONANCE WITH THE ORDERS PASSED BY THE LD. DRP/TP O UNDER SECTION 143 (3) READ WITH SECTION 144C OF THE INCOM E-TAX ACT, 1961 ITA NO.7142/DEL./2017 2 (FOR SHORT THE ACT) QUA THE ASSESSMENT YEAR 2013- 14 ON THE GROUNDS INTER ALIA THAT :- 1. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN COMPLETING THE ASSESSMENT UNDER SECTION 144C READ W ITH SECTION143(3) OF THE INCOME-TAX ACT, 1961 ('THE ACT ') AT A LOSS OF RS.20,56,26,035 AS AGAINST THE LOSS OF RS 37,85,45, 196 RETURNED BY THE APPELLANT. 2. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN MAKING TRANSFER PRICING ADJUSTMENT OF RS.17,29,19,1 61 IN RELATION TO THE ADVERTISEMENT, MARKETING AND SALES PROMOTION EXPENSES (HEREINAFTER REFERRED TO AS 'THE AMP EXPEN SES') INCURRED BY THE APPELLANT. 3. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN NO T APPRECIATING THAT THE AMP EXPENSES, ETC., UNILATERA LLY INCURRED BY THE APPELLANT IN INDIA COULD NOT BE CHARACTERIZE D AS AN INTERNATIONAL TRANSACTION AS PER SECTION 928, IN TH E ABSENCE OF ANY PROVED UNDERSTANDING / ARRANGEMENT BETWEEN THE APPELLANT AND THE ASSOCIATED ENTERPRISE, SO AS TO INVOKE THE PROVISIONS OF SECTION 92 OF THE ACT. 4. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN HO LDING THAT THERE EXISTS AN INTERNATIONAL TRANSACTION IN C ONNECTION WITH INCURRING OF AMP EXPENSES WITHOUT PLACING ON RECORD ANY TANGIBLE MATERIAL OR EVIDENCE TO SUBSTANTIATE THE E XISTENCE OF SUCH TRANSACTION. 5. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN HO LDING THAT VALUABLE MARKETING INTANGIBLE HAS BEEN CREATED BY THE APPELLANT IN INDIA IN FAVOR OF THE ASSOCIATED ENTER PRISES. 6. THAT THE TPO/DRP ERRED ON FACTS AND IN LAW IN HO LDING THAT THERE EXISTS AN INTERNATIONAL TRANSACTION OF I NCURRING AMP EXPENSES ALLEGEDLY HOLDING THAT THE APPELLANT HAS R EPORTED REIMBURSEMENT RECEIVED FROM ASSOCIATED ENTERPRISES ON ACCOUNT OF AMP EXPENSES AS AN INTERNATIONAL TRANSACTION IN FORM 3CEB NOT APPRECIATING THAT SUCH EXPENSES WERE REIMBURSED BY THE ASSOCIATED ENTERPRISE AS GRATIS AND NOT IN PURSUANC E OF ANY INTERNATIONAL TRANSACTION. 7. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN HO LDING THAT AMP EXPENSES INCURRED BY THE APPELLANT CONSTIT UTES AN INTERNATIONAL TRANSACTION ON THE BASIS THAT THE ASS OCIATED ENTERPRISE HAS REIMBURSED A PART OF AMP EXPENSES NO T APPRECIATING THAT SUCH EXPENSES WERE REIMBURSED BY THE ASSOCIATED ENTERPRISE IN ORDER TO SUPPORT THE OPERA TIONS OF THE ITA NO.7142/DEL./2017 3 APPELLANT AND NOT IN PURSUANCE OF ANY UNDERSTANDING , ARRANGEMENT OR ACTION IN CONCERT TO INCUR AMP EXPEN SES. 8. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN HO LDING THAT THE ASSOCIATED ENTERPRISE NOT ONLY OWNS THE IN TANGIBLES BUT ALSO CONTROLS FURTHER DEVELOPMENT AND GROWTH OF ITS INTANGIBLES. 9. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN NO T APPRECIATING THAT THE APPELLANT WAS PERFORMING THE CRITICAL DECISION MAKING FUNCTIONS WITH REGARD TO ADVERTISEM ENT AND MARKETING ACTIVITY AND WAS THEREFORE INDEPENDENTLY CONTROLLING THE AMP EXPENDITURE INCURRED BY IT. 10. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN R ELYING UPON THE MEMORANDUM ENTERED INTO BETWEEN THE APPELL ANT AND THE ASSOCIATE ENTERPRISES WHICH STATES THAT THE 'AE COMMISSIONED THE ASSESSEE TO PUT IN EFFECT THE ADVERTISEMENT AND PUBLICITY OF ASSESSEE'S PRODUCTS IN INDIA' TO HOLD THAT THE ASSO CIATED ENTERPRISE HAS A DEFINITE SAY IN THE DECISIONS REGA RDING INCURRING OF ADVERTISEMENT IN INDIA WITHOUT APPRECIATING THAT SUCH MEMORANDUM PROVIDES FOR ADVERTISEMENT AND PROMOTION OF APPELLANT'S OWN PRODUCTS IN INDIA. 11. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN N OT APPRECIATING THAT IN TERMS OF MEMORANDUM ENTERED IN TO BETWEEN THE APPELLANT AND THE ASSOCIATE ENTERPRISES, THE AS SOCIATED ENTERPRISE REIMBURSES 100% OF THE EXPENSES INCURRED FOR ADVERTISEMENT OF 'SUZUKI' BRAND AND THE REMAINING A MP EXPENSES HAVE BEEN INCURRED SOLELY FOR PROMOTION OF SALE OF PRODUCTS OF THE APPELLANT IN INDIA. 12. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN N OT APPRECIATING THAT THE ONLY TRANSFER PRICING ADJUSTM ENT PERMITTED BY CHAPTER X OF THE ACT WAS IN RESPECT OF THE DIFFE RENCE BETWEEN THE ARM'S LENGTH PRICE (ALP) AND THE CONTRACT OR DE CLARED PRICE, BUT THE SAID PROVISION COULD NOT BE INVOKED TO DETE RMINE THE 'QUANTUM' / EXTENT OF BUSINESS EXPENDITURE. 13. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN N OT APPRECIATING THAT BY VIRTUE OF LONG TERM RIGHT TO U SE THE 'SUZUKI' BRAND IN INDIA, THE APPELLANT HAS GAINED ECONOMIC O WNERSHIP OF THE SAID BRAND. 14. THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN N OT APPRECIATING THAT ADJUSTMENT ON ACCOUNT OF ALLEGEDL Y EXCESS AMP EXPENSES IS NOT WARRANTED IN THE CASE OF THE APPELL ANT, A FULL RISK BEARING ENTREPRENEUR. 15. THAT THE TPO ERRED ON FACTS AND IN LAW IN HOLDI NG THAT THE ASSOCIATED ENTERPRISE IS BENEFITING FROM THE AM P EXPENSES ITA NO.7142/DEL./2017 4 INCURRED BY THE APPELLANT ON ACCOUNT OF ROYALTY, SA LE OF GOODS ETC. NOT APPRECIATING THAT SUCH TRANSACTIONS HAVE BEEN S EPARATELY BENCH MARKED AND ACCEPTED TO BE AT ARM'S LENGTH. 16. THAT THE TPO ERRED ON FACTS AND IN LAW IN HOLDI NG THAT THE ASSOCIATED ENTERPRISE IS BENEFITING FROM THE AM P EXPENSES ON ACCOUNT OF DEVELOPMENT OF BRAND WITHOUT APPRECIATIN G THAT THE ASSOCIATED ENTERPRISE IS NOT SELLING ANY GOODS DIRE CTLY IN THE INDIAN MARKET. 17. THAT ASSESSING OFFICER ERRED ON FACTS AND IN LA W IN NOT APPRECIATING THAT THE TRANSFER PRICING ADJUSTMENT M ADE BY THE TPO IN THE PRESENT CASE WAS A MERE QUANTITATIVE ADJ USTMENT, ON THE FOOTING THAT THE APPELLANT HAD INCURRED EXCESSI VE AMOUNT OF AMP EXPENDITURE AND CONSEQUENTLY THAT SUCH TRANSFER PRICING ADJUSTMENT WAS NOT AT ALL PERMITTED OR AUTHORIZED B Y CHAPTER X OF THE ACT. 18. THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE ADVERTISEMENT AND MARKETING E XPENSES WERE INCURRED BY THE APPELLANT WHOLLY AND EXCLUSIVELY FO R PURPOSES OF ITS BUSINESS AND NOT ON BEHALF OF OR FOR THE BENEFI T OF THE AE; ANY BENEFIT TO THE AE BEING ONLY INCIDENTAL. 19. THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN APPLYING BRIGHT LINE TEST NOT APPRECIATING THAT USE OF BRIGHT LINE TEST FOR THE PURPOSE OF UNDERTAKING BENCHMARKING AN ALYSIS HAS BEEN JETTISONED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF SONY ERICSSON MOBILE COMMUNICATIONS PVT LTD 374 ITR 118 20. WITHOUT PREJUDICE THAT THE ASSESSING OFFICER/TP O ERRED ON FACTS AND IN LAW, IN NOT APPRECIATING THAT THE AMP EXPENSES INCURRED BY THE APPELLANT WAS APPROPRIATELY ESTABLI SHED TO BE AT ARM'S LENGTH APPLYING TNMM. 21. WITHOUT PREJUDICE THAT THE ASSESSING OFFICER ER RED ON FACTS AND IN LAW IN CONSIDERING REBATE AMOUNTING TO RS 27 ,43,804 AND DISCOUNT OF RS.4,37,65,020 FOR THE PURPOSE OF CALCU LATING ALLEGED AMP EXPENDITURE OF THE ASSESSEE. 22. WITHOUT PREJUDICE, THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW CONSIDERING COMPANIES HAVING DIFFERENT PRODU CT PROFILE THAN THE APPELLANT AS COMPARABLE COMPANIES FOR THE PURPOSE OF BENCHMARKING THE ALLEGED INTERNATIONAL TRANSACTION OF AMP EXPENDITURE INCURRED BY THE APPELLANT. 23. WITHOUT PREJUDICE, THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN APPLYING A MARKUP OF 8.50% ON THE ALLEGED EXCESS AMP EXPENDITURE INCURRED BY THE APPELLANT, WHILE COMPUT ING THE VALUE ITA NO.7142/DEL./2017 5 OF COMPENSATION TO BE RECEIVED BY THE APPELLANT ON ACCOUNT OF CREATION OF MARKETING INTANGIBLE OF 'SUZUKI' BRAND. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE ISSUE AT HAND ARE : SUZUKI MOTORCYCLES INDIA PVT. LTD. (SMIPL), THE TAXPAYER, AN INDIA BASED MANUFACTURER AND SELLE R OF TWO WHEELERS BEARING BRAND/TRADEMARK OF ITS ASSOCIATED ENTERPRISES (AE), SUZUKI MOTOR COMPANY, JAPAN, ENTERED INTO INT ERNATIONAL TRANSACTIONS WITH ITS AE FOR CARRYING OUT ITS MANUF ACTURING ACTIVITIES AS UNDER :- S. NO. NATURE OF INTERNATIONAL TRANSACTION AMOUNT IN INR MOST APPROPRIATE METHOD 1. IMPORT/PURCHASE OF COMPONENT/RAW MATERIAL TRANSACTIONAL NET MARGIN METHOD (TNMM) 1.1 IMPORT OF COMPONENTS/CONSUMABLES 8425780 1.2 PURCHASE OF RAW MATERIAL AND COMPONENT 4625788711 2. SALE OF MOTORCYCLE/SCOOTERS 9644921 3. SALE OF COMPONENTS 14990823 4. PURCHASE OF MANUFACTURING MACHINERIES, TOOLS AND EQUIPMENTS 4591533 5. ROYALTY PAYMENT 97559309 6. SUPERVISION FEE PAID 27380184 7. LICENSE FEE PAID 170776 8. REIMBURSEMENT OF EXPENSES TO AES 33383056 9. RECOVERY OF EXPENSES FROM AES 386045879 10. RENT PAID 18792582 11. SALARY OF DEPUTED EMPLOYEE PAID 14317532 12. REPAIR AND MAINTENANCE PAID 76700 13. DIRECTORS REMUNERATION PAID 12102309 14. PURCHASE OF TRADED MOTORCYCLE 100026522 ITA NO.7142/DEL./2017 6 3. LD. TRANSFER PRICING OFFICER (TPO) ACCEPTED THE BENCHMARKING ANALYSIS OF INTERNATIONAL TRANSACTIONS MADE BY THE TAXPAYER TO BE AT ARMS LENGTH EXCEPT DISPUTING THE ADVERTISEMENT, MARKETING AND PROMOTION (AMP) EXPENSES INCURRED BY THE TAXPAYER FOR THE PRODUCTS HAVING BRAND NAME OF SUZU KI AND PROCEEDED TO CARRY OUT THE BENCHMARKING ANALYSIS OF THE SAME. DURING TRANSFER PRICING (TP) STUDY, LD. TPO NOTICED THAT IN THE PROCESS OF MANUFACTURING AND SELLING OF GOODS BY TH E TAXPAYER, SIGNIFICANT AMP EXPENDITURE HAVE BEEN INCURRED WHIC H ARE AS UNDER:- S.NO. NATURE OF TRANSACTIONS REIMBURSEMENT IN INR 1. DISCOUNTS 43765020 2. ADVERTISEMENT 835776644 3. REBATE TRADED MOTORCYCLE 27143804 TOTAL 906685468 4. LD. TPO NOTICED THAT IN THE PROCESS OF MANUFACTU RING AND SELLING OF GOODS WHICH BEAR THE BRAND AND TRADEMARK OF AE, VALUABLE MARKETING INTANGIBLES HAVE BEEN CREDITED B Y WAY OF WELL DEVELOPED SALES NETWORK AND VALUABLE SUPPLY CHAIN I N INDIA IN FAVOUR OF THE AE CALLING FOR SUITABLE COMPENSATION FROM AE. 5. IN ORDER TO BENCHMARK THE REIMBURSEMENT OF AMP EXPENDITURE BY THE AE, THE TAXPAYER AGGREGATED ALL INTERNATIONAL TRANSACTIONS AND BENCHMARKED THEM TOGETHER BY APPLY ING ITA NO.7142/DEL./2017 7 TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD (MAM) WITH OPERATING PROFIT/OPER ATING COST (OP/OC) AS THE PROFIT LEVEL INDICATOR (PLI) BY USIN G MULTIPLE YEAR DATA SELECTED THREE COMPARABLES AND COMPUTED THEIR PLI AT (-) 1.72% AFTER AVAILING WORKING CAPITAL ADJUSTMENT AS AGAINST THE PLI OF THE TAXPAYER AT (-) 3.19%. CONSEQUENTLY, THE TAXPAYER FOUND ITS TRANSACTION AT ARMS LENGTH IT BEING WITHIN THE RANGE OF +/- 3%. 6. LD. TPO EXAMINED THE EFFECT OF AMP EXPENDITURE I NCURRED BY THE TAXPAYER ON THE MARGIN EARNED BY IT. LD. TP O IN ORDER TO BENCHMARK THE AMP EXPENSES USED BRIGHT LINE TEST (B LT) IN ORDER TO WORK OUT THE LIMIT OF ROUTINE AMP EXPENDIT URE INCLUDING TRADE DISCOUNTS, COMMISSIONS AND REBATES. LD. TPO RESORTED TO COMPARE THE AMP EXPENDITURE OF THE TAXPAYER WITH AM P EXPENDITURE OF OTHER COMPARABLE COMPANIES IN SIMILA R BUSINESS USING AMP EXPENDITURE TO SALES RATIO. BY USING THE BLT LIMIT, THE TPO DETERMINED THE AVERAGE RATIO OF AMP EXPENDITURE TO SALES OF COMPARABLES AT 2.29% AS AGAINST 6.23% OF THE TAXPAY ER AND HELD THAT THE EXCESS EXPENDITURE OF RS.58,43,99,881/-, W HICH EXCEEDS THE BLT, REQUIRED TO BE COMPENSATED BY THE AE. CON SEQUENTLY, LD. TPO PROPOSED THE TP ADJUSTMENT AT RS.26,01,37,110/- . 7. THE TAXPAYER CARRIED THE MATTER BEFORE THE LD. D ISPUTES RESOLUTION PANEL (DRP) BY WAY OF OBJECTIONS WHO HAS EXCLUDED ITA NO.7142/DEL./2017 8 TWO COMPARABLE COMPANIES, NAMELY, ATUL AUTO AND LIM ITED AND MAHINDRA TWO WHEELERS LTD. FROM THE FINAL SET OF CO MPARABLES CHOSEN BY THE TPO FOR THE PURPOSE OF APPLYING THE B LT AND ALSO DIRECTED THE TPO TO VERIFY THE MARGIN OF THE COMPAR ABLE COMPANIES FOR THE PURPOSE OF COMPUTING ADJUSTMENT. AFTER DRP ORDER, AO COMPUTED THE ADJUSTMENT AT RS.17,29,19,161/- ON ACC OUNT OF AMP EXPENSES. FEELING AGGRIEVED, THE TAXPAYER HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 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. 9. UNDISPUTEDLY, THE TAXPAYER IS A MANUFACTURING EN TITY AND ITS AMP/SALES RATIO IS 6.23% AS AGAINST 2.29% OF THE CO MPARABLES BY APPLYING THE BLT. IT IS ALSO NOT IN DISPUTE THAT T HE AE HAS COMPENSATED THE TAXPAYER WITH AN AMOUNT OF RS.32,42 ,62,780/- ON ACCOUNT OF EXPENDITURE MADE BY IT. LD. TPO ALSO AP PLIED THE MARK UP OF 15.43% OF AMP EXPENSES BY USING THE BLT OVER AND ABOVE THE AMP EXPENSES COMPUTED ON THE BASIS OF COMPARABL E ANALYSIS. LD. TPO CONSEQUENTLY REACHED THE CONCLUSION THAT TH E TAXPAYER HAS INCURRED HUGE AMOUNT IN EXCESS OF THE BRIGHT LINE L IMIT IN ORDER TO ITA NO.7142/DEL./2017 9 PROMOTE THE BRAND AND TRADEMARK OF ITS AE WHICH IS REQUIRED TO BE COMPENSATED. 10. LD. TPO ON THE BASIS OF ITS TP STUDY COMPUTED T HE AVERAGE RATIO OF AMP/SALES EXPENDITURE AT 2.29% OF COMPARAB LES VIS--VIS 6.23% OF THE COMPARABLES AND PROCEEDED TO COMPUTE T HE AMP EXPENDITURE AS UNDER :- PARTICULARS VALUE (RS.) VALUE OF GROSS SALES OF ASSESSEE A 14560170913 ARITHMETIC MEAN OF AMP/SALES OF COMPARABLES B 2.75% AMOUNT THAT REPRESENTS PRICE FOR ROUTINE AMP ACTIVITIES C=B*A 400404700.00 TOTAL EXPENDITURE INCURRED BY ASSESSEE ON AMP D 906685468.00 ARMS LENGTH PRICE OF THE SERVICE/EXPENDITURE FOR CREATION OF MARKETING INTANGIBLE IN INDIA IN FAVOUR OF THE AE E=D-C 506280768.00 MARK-UP @ 15.43% R=15.43% OF E 78119113.00 THE AMOUNT BY WHICH THE ASSESSEE COMPANY SHOULD HAVE BEEN REIMBURSED BY AE AND FOR WHICH THE ADJUSTMENT IS PROPOSED TO BE MADE G=E+F 584399881.00 PRICE RECEIVED FROM THE AE FOR CREATION OF MARKETING INTANGIBLES H 324262780.00 ADJUSTMENT REQUIRED TO BE MADE FOR CREATION OF MARKETING INTANGIBLES I=G-H 260137110.00 11. LD. AR FOR THE TAXPAYER CONTENDED THAT IDENTICA L ISSUE OF SIMILAR ADJUSTMENT ON ACCOUNT OF AMP EXPENSES MADE BY THE TPO IN TAXPAYERS OWN CASE IN ITA NO.476/DEL/2015 FOR AY 2 010-11 ITA NO.7142/DEL./2017 10 ORDER DATED 26.11.2018 HAS BEEN DECIDED IN FAVOUR OF THE TAXPAYER BY DELETING ADDITION. 12. LEARNED DR FOR THE REVENUE, ALTHOUGH ADMITTED T HE LEGAL POSITION ENUNCIATED IN THE PRECEDING PARAGRAPHS, BU T CONTENDED THAT SINCE ALL THE AFORESAID DECISIONS ARE LYING CHALLEN GED BEFORE THE HON'BLE APEX COURT, THE MATTER MAY BE KEPT PENDING TILL THE DECISION BY HON'BLE APEX COURT. HOWEVER, WE ARE OF THE CONSIDERED VIEW THAT SINCE IT IS A STAY GRANTED MAT TER AND THE PROCEEDINGS BEFORE THE SECOND APPELLATE AUTHORITY H AVE NOT BEEN STAYED BY ANY HIGHER FORUM, THE SAME CANNOT BE KEPT PENDING. 13. WE HAVE EXAMINED THE ORDER PASSED BY THE COORDI NATE BENCH OF THE TRIBUNAL IN TAXPAYERS OWN CASE IN AY 2010-11 (SUPRA) WHICH IS EXACTLY ON THE IDENTICAL ISSUE AND ADJUSTM ENT ON ACCOUNT OF AMP EXPENDITURE MADE BY THE TPO HAS BEEN FOUND T O BE NOT SUSTAINABLE ON THE GROUND THAT NO INTERNATIONAL TRA NSACTIONS HELD TO BE INVOLVED AND THAT ECONOMIC/LEGAL OWNERSHIP OF TH E BRAND SEEKING COMPENSATION FOR AMP EXPENDITURE IS INCONSI STENT WITH THE CHARACTERIZATION AND BUSINESS MODEL OF THE TAXP AYER AND THAT ADJUSTMENT ON ACCOUNT OF AMP EXPENSES IS NOT PERMIS SIBLE WITHIN THE SCHEME OF CHAPTER X. ITA NO.7142/DEL./2017 11 14. IN VIEW OF THE BACKDROP OF THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, THE SOLE QUESTION ARISES FOR DETERMINATION IN THIS CASE IS :- AS TO WHETHER REVENUE HAS DISCHARGED ITS ONUS OF P ROVING THE INTERNATIONAL TRANSACTIONS BETWEEN THE TAXPAYER AND THE AE AND AS TO WHETHER EXISTENCE OF INTERNATIONAL TRA NSACTIONS CAN BE INFERRED MERELY ON THE BASIS OF BLT? 15. COORDINATE BENCH OF THE TRIBUNAL IN TAXPAYERS OWN CASE FOR AY 2010-11 (SUPRA) DECIDED THIS ISSUE BY RETURNING FOLLOWING FINDINGS :- 10. HONBLE DELHI HIGH COURT IN MARUTI SUZUKI INDI A LTD. V. CIT (2016) 381 ITR 117 (DEL.) HAS DECIDED THE IDENT ICAL ISSUE OF AMP EXPENSES IN CASE OF MANUFACTURING ENTITY IN FAV OUR OF THE ASSESSEE BY DISTINGUISHING SONY ERICSSON INDIA PVT. LTD. VS. CIT (2015) 374 ITR 118 (DEL.) CASE WHEREIN THE ASSESS EE HAS NOT DISPUTED THE EXISTENCE OF INTERNATIONAL TRANSACTION QUA ITS AMP EXPENSES. SO, IN CASE OF ASSESSEE, BEING A MANUFAC TURING ENTITY, RATIO OF SONY ERICSSON INDIA PVT. LTD. (SUPRA) CANN OT BE APPLIED. AT THE SAME TIME, IN SONY ERICSSON INDIA PVT. LTD. (SUPRA), HONBLE HIGH COURT HAS HELD THAT BLT HAS NO STATUTO RY MANDATE AND CONSIDERING THE EXCESS EXPENDITURE BEYOND THE B RIGHT LINE AS AN INTERNATIONAL TRANSACTION WAS UNWARRANTED. 11. HONBLE DELHI HIGH COURT IN SERIES OF DECISIONS INTER ALIA MARUTI SUZUKI INDIA LTD.; BAUSCH & LOMB EYECARE (IN DIA) PVT. LTD. V. ADDITIONAL CIT (2016) 381 ITR 227 (DEL) AND HONDA SIEL POWER PRODUCTS LTD. V. DY.CIT (2016) 237 TAXMAN 304 HELD THAT THE REVENUE IS TO DISCHARGE FIRST THE ONUS OF PROVI NG THE EXISTENCE OF AN INTERNATIONAL TRANSACTION BETWEEN A SSESSEE AND THE AE AND SUCH TRANSACTIONS CANNOT BE INFERRED MER ELY ON THE BASIS OF BRIGHT LINE TEST. REVENUE HAS TO DISCHARG E THE INITIAL ONUS BY BRINGING ON RECORD SOME TANGIBLE MATERIAL T HAT THE TAXPAYER AND ITS AE HAVE ACTED IN CONCERT AND FURTH ER THAT THERE WAS AN AGREEMENT TO ENTER INTO INTERNATIONAL TRANSA CTIONS CONCERNING AMP EXPENSES. 12. IN THE INSTANT CASE, THERE IS NOT AN IOTA OF MA TERIAL ON THE FILE APART FROM APPLYING THE BLT AND BY TAKING THE VIEW THAT THE TAXPAYER HAS INCURRED HUGE AMP/SALES EXPENSES TO TH E EXTENT OF 10.26%, NO COGENT MATERIAL IS THERE TO TREAT THE IN CURRING OF AMP ITA NO.7142/DEL./2017 12 EXPENSES AS INTERNATIONAL TRANSACTION MORE PARTICUL ARLY WHEN BASIS FOR TREATING THE AMP EXPENSES AS INTERNATIONA L TRANSACTION I.E. BLT IS NOT A LEGALLY SUSTAINABLE METHOD. 13. SO, WE ARE OF THE CONSIDERED VIEW THAT MERELY B Y APPLYING THE BLT, THE EXISTENCE OF INTERNATIONAL TRANSACTION S CANNOT BE PROVED AND AS SUCH THE ADJUSTMENT MADE BY THE TPO/D RP/AO ON THIS ACCOUNT IS NOT SUSTAINABLE IN THE EYES OF LAW. WE ARE FURTHER OF THE CONSIDERED VIEW THAT ALP EXPENSES INCURRED B Y THE TAXPAYER WERE NOT FOR THE BENEFIT OF AE BUT ONLY TO ENHANCE SALES OF THE TAXPAYER. 14. TPO ON THE BASIS OF HIS TP ANALYSIS OBSERVED TH AT INCURRING OF HUGE AMP EXPENDITURE BY THE TAXPAYER H AVE BENEFITED ITS AE TO PROMOTE SUZUKI A TRADEMARK OW NED BY ITS AE ON ITS PRODUCT RANGE AND TO CREATE MARKET INTANG IBLES FOR THE SALE OF PRODUCT WITH BRAND NAME OF THE AE IN INDIA. HOWEVER, THESE OBSERVATIONS OF THE TPO HAVE BEEN NEGATED BY HONBLE DELHI HIGH COURT IN VALVOLINE CUMMINS PRIVATE LTD. VS. DCIT IN ITA 158/2016 ORDER DATED 31.07.2016 BY HOLDING THAT THE MERE FACT THAT THE ASSESSEE WAS PERMITTED TO USE THE BRA ND NAME WILL NOT AUTOMATICALLY LEAD TO THE INFERENCE THAT ANY EX PENSES THAT THE ASSESSEE INCURRED TOWARDS AMP IS ONLY TO ENHANCE TH E BRAND/TRADEMARK VALVOLINE. SO, IN THE ABSENCE OF ANY ARRANGEMENT OR AGREEMENT, IT IS DIFFICULT TO INFER THAT THE AMP EXPENSES INCURRED BY ASSESSEE ARE NOT FOR ITS OWN B ENEFIT BUT FOR THE BENEFIT OF ITS AE. SO, WHEN THE FACTUAL FOUNDA TION I.E. BLT METHOD TO DETERMINE THE EXISTENCE OF OR THE ALP OF INTERNATIONAL TRANSACTIONS INVOLVING AMP EXPENSES IS HELD TO BE N OT SUSTAINABLE, THE ENTIRE ADJUSTMENT MADE BY TPO/DRP/ AO IS NOT SUSTAINABLE. 15. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT FOLLOWING THE SERIES OF DECISI ONS RENDERED BY HONBLE DELHI HIGH COURT DISCUSSED IN PRECEDING PAR AS, WHEN THE TAXPAYER HAS DISPUTED THE EXISTENCE OF INTERNAT IONAL TRANSACTION QUA ITS AMP EXPENSES THE REVENUE HAS FA ILED TO DISCHARGE ITS INITIAL ONUS TO PROVE ON THE BASIS OF TANGIBLE MATERIAL THAT THERE EXISTS AN INTERNATIONAL TRANSAC TION QUA INCURRING OF AMP EXPENSES BETWEEN THE TAXPAYER AND ITS AE OR THAT THE TAXPAYER AND ITS AE HAVE ACTED IN CONCERT BY WAY OF ANY AGREEMENT AS TO INCURRING OF INTERNATIONAL TRANSACT IONS QUA AMP EXPENSES. 16. SO, WHEN THE BLT METHOD ADOPTED BY THE TPO INCU RRING THE AMP EXPENSES BY FOLLOWING THE RATIO OF LG ELECT RONICS INDIA PVT. LTD. (SUPRA) DECIDED BY SPECIAL BENCH OF THE T RIBUNAL, HAS BEEN HELD TO BE NOT LEGALLY SUSTAINABLE BY THE HON BLE DELHI HIGH COURT IN SERIES OF JUDGMENTS DISCUSSED IN PRECEDING PARAS, THE ENTIRE EXERCISE OF DETERMINING AMP EXPENSES AS INTE RNATIONAL ITA NO.7142/DEL./2017 13 TRANSACTION BY THE TPO IS WITHOUT ANY BASIS, HENCE NOT SUSTAINABLE. 17. LEARNED DR FOR THE REVENUE, ALTHOUGH ADMITTED T HE LEGAL POSITION ENUNCIATED IN THE PRECEDING PARAGRAPHS, BU T 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 COUR T. HOWEVER, WE ARE OF THE CONSIDERED VIEW THAT SINCE IT IS A ST AY GRANTED MATTER AND THE PROCEEDINGS BEFORE THE SECOND APPELLATE AUT HORITY HAVE NOT BEEN STAYED BY ANY HIGHER FORUM, THE SAME CANNO T BE KEPT PENDING. 16. EVEN OTHERWISE, ADJUSTMENT ON ACCOUNT OF AMP EX PENSES IS NOT PERMISSIBLE WITHIN THE SCHEME OF CHAPTER - X OF THE ACT AS HAS BEEN HELD BY THE HONBLE DELHI HIGH COURT IN CASE OF MARUTI SUZUKI INDIA LTD. VS. CIT (2016) 381 ITR 117 (DEL.) . 17. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT ADDITION MADE BY AO/DRP/TPO ON ACCOUNT OF AMP EXPENSES IS NOT SUSTAINABLE AND AS SUCH QUES TION FRAMED IS ANSWERED IN THE NEGATIVE. 18. AT THE SAME TIME, WE CANNOT IGNORE THE SUBMISSI ON OF THE LEARNED DR THAT THE MATTER IS PENDING BEFORE HON'BL E APEX COURT AND THE DECISION OF HON'BLE APEX COURT WOULD BE BIN DING UPON ALL THE AUTHORITIES. 19. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDERS O F AUTHORITIES BELOW AND RESTORE THE MATTER TO THE FILE OF THE ASS ESSING OFFICER. WE HOLD THAT AS PER THE FACTS OF THE CASE AND THE L EGAL POSITION AS OF NOW AND DISCUSSED ABOVE IN THIS ORDER, THE ADJUSTME NT MADE BY THE ITA NO.7142/DEL./2017 14 TPO/DRP/AO IN RESPECT OF AMP EXPENSES IS NOT SUSTAI NABLE. HOWEVER, IF THE ABOVE DECISIONS OF HON'BLE JURISDIC TIONAL HIGH COURT WHICH IS UNDER CONSIDERATION BEFORE THE HON'B LE APEX COURT IS MODIFIED OR REVERSED BY THE HON'BLE APEX COURT, THEN THE ASSESSING OFFICER WOULD PASS THE ORDER AFRESH CONSI DERING THE DECISION OF HON'BLE APEX COURT. IN THOSE CIRCUMSTAN CES, HE WILL ALSO ALLOW OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 20. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE AND FO LLOWING THE ORDER PASSED BY THE COORDINATE BENCH OF THE TRIBUNA L, WE ARE OF THE CONSIDERED VIEW THAT THE ADJUSTMENT MADE BY THE TPO /DRP/AO BY APPLYING THE BLT ON ACCOUNT OF AMP EXPENSES IN THE ABSENCE OF INTERNATIONAL TRANSACTIONS BETWEEN THE TAXPAYER AND AE IS NOT SUSTAINABLE IN THE EYES OF LAW, HENCE ORDERED TO BE DELETED. 21. RESULTANTLY, THE APPEAL FILED BY THE TAXPAYER I S ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 31 ST DAY OF AUGUST , 2020. SD/- SD/- (N.K. BILLAIYA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 31 ST DAY OF AUGUST, 2020 TS ITA NO.7142/DEL./2017 15 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A) 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.