Amadeus India Pvt. Ltd., New Delhi V. ACIT, Circle- 2(2), New Delhi

ITA 7376/DEL/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 2861 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Assessment Year: 2014-2015
• Appeal Filed On: 22-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Transfer pricing; International transaction; Earning of tax free income; Permanent establishment; Question of law; Tangible material; Fair market value; Avoidance of tax; Set aside
• Section: 143(3); 92D; 92B; 234B; 14A; 260A; 64; 43; 48; 13; 153; 22; 92CA

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI I-1 B ENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO. 7376/DEL/2018 [A.Y 2014-15] AMADEUS INDIA PVT LTD VS. THE A.C.I.T E 9, CONNAUGHT HOUSE CIRCLE 2(2) CONNAUGHT PLACE NEW DELHI NEW DELHI PAN: AAACA 0364 L [APPELLANT] [RESPONDENT] ASSESSEE BY : SHRI TARANDEEP SING H, ADV REVENUE BY : SHRI SURENDER PAL, C IT-DR DATE OF HEARING : 02.03.2021 DATE OF PRONOUNCEMENT : 08.03.2021 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER DATED 29.10.2018 FRAMED U/S 143(3) R.W.S 144C(13) OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHOR T] PERTAINING TO A.Y 2014-15. 2 2. THE GRIEVANCE OF THE ASSESSEE CAN BE SUMMARISED AS UNDER: 1) THE ASSESSEE IS AGGRIEVED BY THE TRANSFER PRICIN G ADJUSTMENT ON ACCOUNT OF ADVERTISEMENT, MARKETING A ND SALES PROMOTION [AMP] EXPENSES ON: (I) PROTECTIVE ADJUSTMENT - RS. 15,897,37,475/- (II) SUBSTANTIVE ADJUSTMENT - RS. 84,65,77 1/- 2) THE ASSESSEE IS AGGRIEVED BY THE DISALLOWANCE OF RS. 38,31,472/- MADE U/S 14A OF THE ACT. 3. THE REPRESENTATIVES OF BOTH THE SIDES WERE HEARD AT LENGTH, THE CASE RECORDS CAREFULLY PERUSED AND WITH THE ASSISTA NCE OF THE LD. COUNSEL, WE HAVE CONSIDERED THE JUDICIAL DECISIONS BROUGHT ON RECORD TO OUR NOTICE DURING THE COURSE OF ARGUMENTS. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A MADEUS INDIA PRIVATE LIMITED [AIPL] IS A JOINT VENTURE BETWEEN M S. RADHA BHATIA AND FAMILY AND BIRD TRAVELS PRIVATE LIMITED IN WHICH TH E FORMER HOLDS 95% 3 OF ITS EQUITY CAPITAL AND THE REMAINING SHARE CAPIT AL OF 5% IS HELD BY THE LATTER. 5. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E HAS REPORTED THE FOLLOWING INTERNATIONAL TRANSACTIONS: NATURE OF TRANSACTION METHOD VALUE [RS.] PROVISION OF INFORMATION TECHNOLOGY ENABLES SERVICES [ITES] TNMM 1563251818 RECEIVING OF IT ENABLED SERVICES 174112734 REIMBURSEMENT OF EXPENSES RECEIVED/ RECEIVABLE FROM AE$S 273863 6. DURING THE COURSE OF TRANSFER PRICING ASSESSMENT PROCEEDINGS, SHOW CAUSE NOTICE DATED 29.09.2017 WAS SENT TO THE ASSESSEE WHICH READS AS UNDER: AGREEMENT, WITH THE AE: IT IS SEEN FROM THE DISTRI BUTION AGREEMENT ENTERED INTO BETWEEN AMADEUS GLOBAL AND A MADEUS INDIA, DATED 01.10.2004, THAT ALL THE PROPRIETARY M ARKS ARE OWNED BY THE AMADEUS GLOBAL WHICH HAS GRANTED THE ASSESSE E THE LICENSE TO USE THE SAME, AS LONG AS THE AGREEMENT REMAINS I N FORCE. IT IS FURTHER PROVIDED THAT UPON THE TERMINATION OF THE A GREEMENT, THE USE OF PROPRIETARY MARKS SHALL BE DISCONTINUED BY A MADEUS INDIA 4 AND THAT THE ASSESSEE WILL EVEN HAVE TO CHANGE ITS NAME, REMOVING 'AMADEUS'. THE PROPRIETARY MARKS HAVE BEEN DEFINED TO BE TRADE MARKS, TRADE NAMES AND SERVICE MARKS AND RELATED WO RDS SLOGANS, LETTER AND SYMBOLS USED IN CONNECTION WITH THE MARK ETING AND OPERATION OF THE AMADEUS SYSTEM AND OTHER AMADEUS P RODUCTS. THE AGREEMENT REMAINS VALID. 1.2 EXPENDITURE ON AMP : EXPENDITURE OFRS.202141620/- HAS BEEN INCURRED FOR PROMOTING BRAND AND CREATING MARKETING INTANGIBLE OF AMADEUS GLOBAL BY THE TAXPAYER. THE AFORESAID EXPEN DITURE INCLUDES EXPENDITURE INCURRED BY THE TAXPAYER ON AD VERTISEMENT & PROMOTION, INCENTIVES, AGENT TRAINING AND ENTERTAIN MENT. IT IS SEEN FROM THE RECORDS THAT THERE IS NO COST SHARING AGRE EMENT BETWEEN AMADEUS INDIA AND AMADEUS GLOBAL FOR INCURRING ADVE RTISEMENT AND SELLING EXPENSES. 2 THE TRANSFER PRICING REGULATIONS REQUIRE THAT IT I S NOT THE FORM' BUT THE OVERALL ARRANGEMENT/ SUBSTANCE OF THE TRANS ACTIONS THAT MUST BE KEPT IN MIND. SECTION 92F(V) OF THE INCOME-TAX ACT STATES: 'TRANSACTION INCLUDES AN ARRANGEMENT, UNDERSTANDING OR ACTION IN CONCERT, WHETHER OR NOT SUCH ARRANGEMENT, UNDERSTAN DING OR ACTION IS FORMAL OR IN WRITING;' SIMILARLY, RULE 10B(2)(C) STATES: THE CONTRACTUAL TERMS (WHETHER OR NOT SUCH TERMS ARE FORMAL OR IN WRITING) OF THE TRANSACTIONS WHICH LAY DOWN EXPLICITLY OR IMPLICITL Y 5 HOW THE RESPONSIBILITIES, RISKS AND BENEFITS ARE TO BE DIVIDED BETWEEN THE RESPECTIVE PARTIES TO THE TRANSACTIONS. ABOVE PROVISIONS READ WITH THE WELL ESTABLISHED DOC TRINE OF SUBSTANCE OVER FORM (APPLIED BY THE COURTS IN NUMEROUS JUDICIAL DECISIONS) INDICATE THAT TRANSFER PRICING REGULATIONS ARE TO HE APPLIED KEEPING IN MIND THE OVERALL SCHEME OF TH E TAXPAYER'S BUSINESS ARRANGEMENT. 3 IN VIEW OF THE DISCUSSIONS IN THE FOREGOING PARAGR APHS I AM OF THE CONSIDERED VIEW THAT THE EXPENDITURE INCURRED ON AM P BY THE ASSESSEE AND THEREBY PROMOTING THE BRAND/TRADE NAME OWNED BY THE AES, IS AN INTERNATIONAL TRANSACTION AND THE SA ME HAS NEITHER BEEN REPORTED IN FORM 3CEB NOR HAS IT BEEN BENCHMAR KED IN TRANSFER PRICING STUDY. I AM OF THE CONSIDERED VIEW THAT THE ONUS WHICH WAS ON THE ASSESSEE TO BENCHMARK THE INTERNAT IONAL TRANSACTION RELATING TO THE EXPENDITURE INCURRED ON AMP HAS NOT BEEN DISCHARGED. I THEREFORE PROPOSE TO BENCHMARK T HE TRANSACTIONS RELATING TO 'AMP'. METHODOLOGY: 4 THE BASIC OBJECTIVE OF MAKING COMPARABILITY ANALYS IS IS TO DETERMINE BRIGHT LINE LIMIT I.E., ROUTINE ADVERTISE MENT, MARKETING AND PROMOTIONAL EXPENDITURE INCLUDING TRADE DISCOUN T AND VOLUME REBATE (AMP EXPENDITURE) WHICH A NO RISK DISTRIBUTO R (WHICH IS NOT THE OWNER OF BRAND NAME OR INTANGIBLE) IS EXPECTED TO SPEND; TO EXPLOIT THE ITEMS OF INTANGIBLE PROPERTY WHICH IT H AS BEEN PROVIDED. INDIAN TRANSFER PRICING PROVISIONS STIPULATE THE DE TERMINATION OF 6 ARM'S LENGTH PRICE OF EACH TRANSACTION. ACCORDINGLY , ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF PROMOTING THE BRAND NAME BY THE ASSESSEE AND THE ADVANTAGE OBTAINED BY THE A E IN THE FORM OF BRAND BUILDING AND INCREASED AWARENESS OF ITS BR AND IN THE DOMESTIC MARKET, SHOULD BE DETERMINED SEPARATELY US ING TNMM. 5 THE COMPARABLE SELECTED AS MENTIONED IN PARA 3 ABO VE DISCUSSED FROM THE VIEW POINT OF BENCHMARKING AMP EXPENDITURE IN ORDER TO BENCHMARK THE TRANSACTIONS, I PROPOSE T O COMPARE AMP EXPENDITURE OF THE TESTED PARTY WITH AMP EXPENDITUR E OF THE FINAL COMPARABLES AS SELECTED ABOVE FOR THE PURPOSE OF CO MPARABILITY, I PROPOSE TO USE THE CURRENT YEAR'S DATA (MARCH, 2012 ) OF THE COMPARABLES ALREADY SELECTED BY YOU FOR THE DISTRIB UTION FUNCTION. THE AMP BY SALES EXPENDITURE OF THE COMPARABLES IS AS UNDER: S.N COMPANIES 1 COSMIC GLOBAL LTD. 2 CALIBER POINT BUSINESS SOLUTIONS 3 E4E HEALTHCARE BUSINESS SERVICES PVT. LTD. 4. INFORMED TECHNOLOGIES INDIA LTD. 5. R SYSTEMS INTERNATIONAL LIMITED 6. DATAMATICS FINANCIAL SERVICES LTD. 7. JEEVAN SCIENTIFIC TECHNOLOGY LTD. 8. JINDAL INTELLICOM LIMITED 9. OMEGA HEALTHCARE MANAGEMENT 7 6 IT MAY FURTHER BE MENTIONED THAT FOR BENCHMARKING AMP/SALES EXPENDITURE FOR AY 2013-14 THE COMPARABLE OF GALILE O INDIA WAS CONSIDERED WHICH HAS A BUSINESS WHICH IS MORE IN AK IN TO THAT OF THE ASSESSEE. HOWEVER AS THE INFORMATION FOR THE AFORES AID COMPARABLE IS NOT AVAILABLE IN PUBLIC DOMAIN, THEREFORE IT HAS NOT BE EN CONSIDERED AS A COMPARABLE. 7 THE RATIO OFAMP/SA LES IN THE CASE OF THE TESTED PARTY HAS BEEN COMPUT ED AS U NDER 8 THE MEAN OF THE 'EXPENDITURE INCURRED ON AMP/SALE S' OF SUCH INDEPENDENT COMPANIES IS THE 'BRIGHT LINE'. ANY EXP ENDITURE IN EXCESS OF THE BRIGHT LINE IS FOR THE PROMOTION OF B RAND/TRADE NAME S.N NAME OF THE COMPANY AMP/SALES( %) 1 COSMIC GLOBAL LTD. 0.03% 2. CALIBER POINT BUSINESS SOLUTIONS LTD. 0.82% 3. E4E HEALTHCARE BUSINESS SERVICES PVT. LTD. 0.93% 4. INFORMED TECHNOLOGIES INDIA LTD. NA 5. R SYSTEMS INTERNATIONAL LIMITED 0.41% 6. DATAMATICS FINANCIAL SERVICES LTD. 2.28% 7. JEEVAN SCIENTIFIC TECHNOLOGY LTD. 1.35% 8. JINDAL INTELLICOM LIMITED NA 9 OMEGA HEALTHCARE MANAGEMENT SERVICES NA AVG 0.97% EXPENDITURE ON AMP 202141620 VALUE OF GROSS SALES 1485556734 13.61% 8 (WHICH IS OWNED BY THE AE) THAT NEEDS TO BE SUITABL Y COMPENSATED BY THE AE. THE AMOUNT WHICH REPRESENTS THE BRIGHT L INE AND THE AMOUNT THAT SHOULD HAVE BEEN COMPENSATED TO THE ASS ESSEE COMPANY ARE COMPUTED HEREUNDER: 9 ON THE BASIS OF ABOVE IT CAN BE SEEN THAT THE EXPE NDITURE ON AMP INCURRED BY YOU EXCEEDS THE BRIGHT LINE LIMIT. SUCH EXCESS EXPENDITURE OF RS. 18,77,31,720SHOULD HAVE BEEN COM PENSATED BY THE AE. HOWEVER THE AE HAS NOT AT ALL COMPENSATED T HE ASSESSEE COMPANY. I THEREFORE PROPOSE TO DETERMINE THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF PROMOTING THE B RAND NAME BY THE ASSESSEE AND THE ADVANTAGE OBTAINED BY THE AE I N THE FORM OF BRAND BUILDING AND INCREASED AWARENESS OF ITS BRAND IN THE DOMESTIC MARKET. VALUE OF GROSS SALES 1485556734 AMP/SALES OF THE COMPARABLES 0.97% AMOUNT THAT REPRESEN T BRIGHT LINE 14409900 EXPENDITURE ON AMP BY ASSESSEE 202141620 EXPENDITURE IN EXCESS OF BRIGHT LINE 187731720 PLI 41 % MARKUP (41.00%) 76970005 CUMULATIVE ADDITION 26,47,01.725 9 10 SINCE THE AMOUNT OF RS. 18,77,31,720WAS SPENT BY T HE ASSESSEE COMPANY OVER AND ABOVE THE BRIGHT LINE LIMIT FOR PR OVISION OF SERVICES RELATED TO AMP PURELY FOR THE AE, AN INDEP ENDENT ENTITY UNDER SIMILAR CIRCUMSTANCES WOULD HAVE CHARGED A MA RK UP ON THIS AMOUNT, FOR THE MONEY SPENT AND FOR THE SERVICE ELE MENT. FOR THE PURPOSE OF THE MARK UP ON THIS EXPENDITURE BORNE BY THE ASSESSEE, I PROPOSE TO USE OP/OC MARGIN. THIS IS AS PER THE D IRECTION OF HON'BLE DRP IN THE ASSESSEE OWN CASE AY 2013-14. TH EREFORE, THE ASSESSEE COMPANY SHOULD HAVE BEEN COMPENSATED BY TH E AE AT RS. 18,77,3L,720PLUS MARK UP @ 41.00% FOR UNDERTAKING A DVERTISEMENT, MARKETING AND PUBLICITY ACTIVITIES PURELY FOR AE AN D MOST IMPORTANTLY CREATING A MARKETING INTANGIBLE FOR THE AE. THE MARK UP ON THIS AMOUNT WORKS OUT TO RS. 26,47,01,725. IN VIEW OF THE DISCUSSIONS IN THE FOREGOING PARAGRA PHS, I PROPOSE TO MAKE AN ADJUSTMENT OF RS. 26,47,01,725 11 EXAMINATION OF THE BALANCE SHEET REVEALS RECEIVABL ES THEREBY IMPLYING THAT THE PAYMENT FOR THE INVOICES RAISED B Y YOU HAVE NOT BEEN RECEIVED WITHIN THE STIPULATED TIME AS PROVIDE D IN YOUR SERVICE AGREEMENT WITH YOUR AE. IN THIS REGARD, YOU ARE REQ UESTED TO FURNISH THE TIME PERIOD FOR PAYMENT AS PER YOUR SER VICE AGREEMENT WITH YOUR AE. HOWEVER, TO BE REASONABLE AND FAIR TO THE ASSESSEE, INSTEAD OF CHARGING PENAL INTEREST, THE DELAYED PAY MENTS ARE BEING TREATED AS UNSECURED LOANS ADVANCED TO THE AES AND IT IS PROPOSED TO CHARGE A NORMAL RATE AS PER THE ANNUAL AVEMGEYIE LD OF CORPORATE BONDS PERTAINING TO CREDIT RATING OF YOUR AE FOR TH E PERIOD OF DELAY IN RECEIPT OF PAYMENT BEYOND THE TIME STIPULA TED IN THE 10 SERVICES AGREEMENT. THE INTEREST RATE HAS BEEN CHAR GED ON THE BASIS OF PREVAILING AVERAGE SBI BASE RATE DURING TH E YEAR. YOU ARE REQUESTED TO FURNISHED CREDIT RATING OF ALL THE AES FOR THE FY 2012-13 WITH WHOM YOU HAVE UNDER TAKEN AFORESAID TR ANSACTIONS YOU ARE REQUESTED TO FURNISHED INVOICE WISE DETAILS ALONG WITH WITH THE PERIOD OF DELAY IN RECEIPT OF PAYMENT AS PER DE TAILS BELOW: YOU ARE ALSO REQUESTED TO GIVE SIMILAR DETAILS OF R ECEIVABLE OUTSTANDING AS ON 01.04.2012. IN CASE NO PAYMENT TE RMS IS SPECIFIED IN THE SERVICE AGREEMENT / INVOICE RAISED TO THE AE, YOU ARE REQUESTED TO GIVE AVERAGE RECEIVABLE PERIOD FOR THIRD PARTY TRANSACTIONS. IN CASE THERE ARE NO SUCH THIRD PARTY TRANSACTIONS, THE DETAILS OF AVERAGE PAYABLE PERIOD FOR AE TRANSA CTIONS SHOULD BE MENTIONED. (UNQUOTE) 7. REPLYING TO THE AFORE-STATED NOTICE, THE ASSESSE E CONTENDED THAT IN ORDER TO COVER A TRANSACTION WITHIN THE AMBIT OF CHAPTER X, THE TRANSACTION MUST BE AN INTERNATIONAL TRANSACTION AN D THE DEFINITION OF THE INTERNATIONAL TRANSACTION HAS BEEN DEFINED U/S 92B OF THE ACT. REFERRING TO THE RELEVANT PROVISIONS, THE ASSESSEE STATED THAT NOTHING INVOICE NO. DATE OF INVOICE AMOUNT (INR) DATE OF RECEIPT OF PAYMENT (INR) PERIOD OF DELAY INTEREST @ OF 12.87% P.A. FOR THE DELAY PERIOD 11 HAS BEEN BROUGHT ON RECORD TO SUGGEST THAT THERE EX ISTS CERTAIN ARRANGEMENT, UNDERSTANDING OR ACTION. 8. FURTHER, IN ITS REPLY, THE ASSESSEE STRONGLY OBJ ECTED TO ANY ADJUSTMENT ON ACCOUNT OF AMP EXPENDITURE. 9. THE REPLY OF THE ASSESSEE WAS DULY CONSIDERED BY THE TPO BUT DID NOT FIND ANY FAVOUR. THE TPO WAS OF THE STRONG BEL IEF THAT THE ASSESSEE HAS ENTERED INTO LOYALTY AGREEMENT WITH VA RIOUS SUBSCRIBERS I.E., TRAVEL AGENTS. THREE OF SUCH AGREEMENTS HAVE BEEN ENCLOSED WITH LETTER DATED 30.10.2013 WITH VICE REGAL TRAVELS AND RESORTS LIMITED, LINBERT TRAVELS PVT LTD, AIR PARADISE TOURS AND TRA VELS PVT LTD. 10. THE TPO, AFTER CONSIDERING THE AGREEMENTS EXTEN SIVELY EXTRACTED AT PAGE 20 OF THE TPOS ORDER, WAS OF THE OPINION T HAT THE ENTIRE BURDEN OF AMP EXPENDITURE OF RS. 70.83 CRORES IN TH E YEAR WAS ON THE ASSESSEE AND FURTHER OBSERVED THAT THE ASSESSEE WAS PROMOTING BRAND OF THE AE IN INDIA AND WAS DEVELOPING MARKETING INT ANGIBLES FOR THE PRODUCTS OF THE AES AND ACCORDINGLY, THE ASSESSEE H AD DEVELOPED MARKETING INTANGIBLES FOR ITS AE IN INDIA AT ITS OW N COST AND RISK BY INVESTING HUGE SUMS IN MARKETING AND OTHER SELLING ACTIVITIES. THE TPO 12 FURTHER OBSERVED THAT THE ASSESSING OFFICER HAS MAD E NIL CONTRIBUTION TO TOTAL AMP EXPENDITURE INCURRED BY THE TAX PAYER ON DEVELOPMENT OF BRAND AND MARKETING INTANGIBLE FOR THE AES IN INDIA IN THE YEAR UNDER CONSIDERATION AND THE AE ASSUMED NO RESPONSIBILITY FOR DEVELOPING AND DEFENDING ITS TRADE MARK AND MARKETING INTANGIBLE I N INDIA. 11. THE TPO THEREAFTER PROCEEDED TO DETERMINE THE Q UANTUM OF AMP EXPENDITURE INCURRED BY THE ASSESSEE ON THE PROMOTI ON OF THE BRAND OF AE AND ON DEVELOPMENT OF MARKETING INTANGIBLE FOR T HE AE IN INDIA IN ADDITION TO ROUTINE AMP EXPENDITURE WHICH THE TAXPA YER, AS DISTRIBUTOR, WAS EXPECTED TO SPEND FOR ITS NORMAL R OUTINE DISTRIBUTION BUSINESS. 12. ACCORDING TO THE TPO, SALES PROMOTION EXPENSES GO A LONG WAY IN CREATING MARKETING INTANGIBLE. DETAILS OF AMP EXPE NDITURE, AS TAKEN BY THE TPO ARE AS UNDER: PARTICULARS AMOUNTS (INR) AMP 70,75,446 INCENTIVE PAID 13,07,51,463 TOTAL 13,78,26,909 13 THE AMOUNT WHICH REPRESENTS THE BRIGHT LINE AND THE AMOUNT THAT SHOULD HAVE BEEN COMPENSATED TO THE TAXPAYER COMPANY ARE COMPUT ED HEREUNDER: 13. IN LIGHT OF THE ABOVE, THE TPO WAS OF THE OPINI ON THAT THE EXPENDITURE ON AMP INCURRED BY THE ASSESSEE EXCEEDS BRIGHT LINE LIMIT AND, THEREFORE, EXPENDITURE OF RS. 13,07,51,463/- S HOULD HAVE BEEN COMPENSATED BY THE AE. SINCE THE AE HAS NOT AT ALL COMPENSATED THE ASSESSEE, THE TPO PROPOSED TO DETERMINE ALP OF INTE RNATIONAL TRANSACTION OF AMP. TAKING A MARK UP AT 19.65% FOR UNDERTAKING AMP EXPENDITURE AND APPLYING MARK UP OF RS. 2,60,69,297 /- TO RS. 1,30,75,51,464/- DETERMINED CUMULATIVE ADDITION OF RS. 15,87,37,475/- AND ACCORDINGLY MADE PROTECTIVE ADJUSTMENT OF THE S AME. VALUE OF GROSS SALES 156,32,51,81 AMP/SALES OF THE COMPARABLES 0.33% AMOUNT THAT REPRESENT BRIGHT LINE 51,58,731 EXPENDITURE ON AMP BY ASSESSEE 13,78,26,909 EXPENDITURE OVER AND ABOVE SIMILAR .EXPENSES BY THE ACCEPTED COMPARABLE ENTITIES WHICH CONSTITUTES THE COMPONENT OF INTERNATIONAL TRANSACTION ATTRIBUTED T O THE AE TOWARDS BUILD-UP OF INTANGIBLES THAT NEEDS TO BE SUITABLY COMPENSATED BY THE AE 13,26,68,178 PLI 19.65 % MARKUP 2,60,69,297 CUMULATIVE ADDITION 15,87,37,475 14 14. OBJECTIONS WERE RAISED BEFORE THE DRP AND FOLLO WING THE DECISION OF THE DRP AND ON VERIFICATION OF DETAILS OF AMP EX PENSES, THE TPO EXCLUDED THE FOLLOWING EXPENSES FROM THE PURVIEW OF AMP INCENTIVE CHARGE OF RS. 13,07,51,463/- AND DETERMINED NET AMP EXPENSES AT RS. 70,75,446/- AND APPLYING MARK UP @ 74.80% WHICH COM ES TO RS. 52,92,434/-, TOTAL ADJUSTMENT U/S 92CA WAS DETERMIN ED AT RS. 1,23,67,880/- WHICH WAS ADDED ON SUBSTANTIVE BASIS IN ADDITION TO THE PROTECTIVE ADJUSTMENT OF RS. 15,87,37,475/-. 15. OBJECTIONS WERE RAISED BEFORE THE DRP AND AFTER CONSIDERING THE FACTS AND DETAILED SUBMISSIONS OF THE ASSESSEE, THE DRP OBSERVED AS UNDER: WE FIND THAT AMP ADJUSTMENT IS A LEGACY ISSUE IN T HE ASSESSEE'S CASE AND SLP HAS BEEN FILED BEFORE THE HON'BLE SUPR EME COURT BY. THE DEPARTMENT. 15 2, THE ASSESSEE HAS ARGUED THAT THE AMI? ADJUSTMENT IS NOT VALID AS THIS IS NOT AN INTERNATIONAL TRANSACTION. THE SU BMISSIONS OF THE ASSESSEE AND THE FACTS HAVE BEEN CAREFULLY CONSIDER ED. THE TPO HAS DISCUSSED THIS ISSUE IN DETAIL DRAWING REFERENC E TO INTERNATIONAL GUIDANCE AVAILABLE ON THE AMP MATTER. THIS DISCUSSI ON IS NOT BEING REPEATED HERE FOR THE SAKE OF BREVITY. THE TPO HAS ANALYSED THE AGREEMENT BETWEEN THE ASSESSEE AND ITS AE AND TP RE PORT OF THE ASSESSEE. 16. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEH EMENTLY STATED THAT THE ENTIRE QUARREL HAS NOW BEEN SETTLED IN FAV OUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE HON' BLE HIGH COURT OF AY STATUS 2007- 08 HON'BLE HIGH COURT DECIDED AGAINST U_ _ ITA NO 535/2014 ORDER DATED 15 - 04 - 2015 SLP 2009- 10 [TAT DELHI DELETED THE TP ADJUSTMENT IN ITA 1804/DEL/2014 DATED 21 - 09 - 2016 DEPARTMENT HAS BEEN FILED SLP. REVENUE APPEAL BEFORE THE HIGH COURT REJECTED VIDE ORDER DATED 26 - 04 - 2017. 2012- 13 THE DRP VIDE ORDER DATED 20-12-201.6 HAS UPHELD TP ADJUSTMENT USING THE COST PLUS METHOD ON SUBSTANTIVE BASIS AND UNDER BRIGHT LINE METHOD ON PROTECTIVE BASIS. PENDING BEFORE IT AT 2013- 14 THE DRP HAS UPHELD TP ADJUSTMENT USING THE COST METHOD ON SUBSTANTIVE BASIS AN UNDER BRIGHT LINE METHOI PROTECTIVE BASIS. PENDING BEFORE ITAT 16 DELHI AND THE TRIBUNAL IN ASSESSEES OWN CASE IN A. Y 2007-08 AND 2009- 10. COPIES OF THE RELEVANT JUDGMENTS WERE SUPPLIED . 17. THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF T HE DRP AND THE TPO AND READ THE RELEVANT OBSERVATIONS OF THE DRP F ROM PARA 2.2 TO 2.42 OF THE ORDER AND STATED THAT COMPUTATION OF AM P ADJUSTMENT HAS BEEN CORRECTLY DONE BY THE TPO. 18. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW AND HAVE CAREFULLY CONSIDERED THE DECISION OF THE HON'BLE HIGH COURT AND THE TRIBUNAL. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. SIMILAR QUARRE L WAS THERE BEFORE THE TRIBUNAL IN ITA NO. 1811 AND 7691/DEL/2017 A.Y 2012-13 AND 2013- 14. WE FIND THAT THE TRIBUNAL HAD THE BENEFIT OF C ONSIDERING ALL THE AGREEMENTS RELIED UPON BY THE TPO IN HIS ORDER. RE LEVANT FINDINGS READ AS UNDER: 2.5 THE ASSESSEE ENTERED INTO AN AGREEMENT WITH M/ S AMADEUS SPAIN ON 1ST OCTOBER, 2004. THE MAIN ACTIVITY OF TH E ASSESSEE IS TO PROVIDE CONNECTIVITY TO THE SUBSCRIBERS IN INDIA TO THE HOST THE CRS SYSTEM BY CREATION/ MODIFICATION/UP-GRADATION O F COMPUTER PROGRAMMES ONLINE. THE ASSESSEE HAS A DATA PROCESSI NG CENTRE, WHICH PROVIDES THE ABOVE SERVICES TO THE DEEMED AE. IN THE 17 TRANSFER PRICING (TP) STUDY, THE ASSESSEE HAS DECLA RED THE FOLLOWING INTERNATIONAL TRANSACTIONS WITH ITS DEEME D AE: NATURE OF TRANSACTION METHOD VALUE (RS) PROVISION OF INFORMATION TNMM 231,71,32,514 TECHNOLOGY ENABLED SERVICES (ITES) RECEIPT OF DATA PROCESSING SERVICES 9,40,17,116 2.6 IN THE TRANSFER PRICING STUDY, THE ASSESSEE HAD FOLLOWED THE TRANSACTION NET MARGIN METHOD (TNMM) TO SUBSTANTIAT E THE ARMS LENGTH PRICE (ALP) OF ABOVE DISCLOSED INTERNA TIONAL TRANSACTION/S PERTAINING TO PROVISION OF ITES SERVI CES WITH ITS DEEMED AE AND ACCORDINGLY IT COMPARED THE NET OPERA TING PROFIT/TOTAL COST (OP/TC) EARNED BY IT WITH THE MEA N OP/TC OF THE COMPARABLE COMPANIES SELECTED BY IT AND CONCLUDED T HAT SINCE THE OP/TC OF THE ASSESSEE IS HIGHER THAN THE MEAN OP/TC OF COMPARABLE COMPANIES, THE DISCLOSED INTERNATIONAL T RANSACTION ARE AT ARMS LENGTH PRICE. IN ORDER TO VERIFY THIS, THE AO MADE A REFERENCE TO THE TRANSFER PRICING OFFICER (TPO). TH E TPO HAS ACCEPTED THE BENCHMARKING OF THE ABOVE DECLARED INT ERNATIONAL TRANSACTIONS. IN THIS REGARD AFTER A DETAILED BENCH MARKING OF THE DISCLOSED INTERNATIONAL TRANSACTION/S, THE TPO HAS, AT PAGE 69 OF ORDER DATED 20TH JANUARY, 2015, HELD THAT FROM ABOVE IT CAN BE SEEN THAT THE INTERNATIONAL TRANSACTION OF TAXPAYER IN RESPECT OF ITES IS WITHIN + / - 5% OF ARMS LENGTH PRICE. 18 2.7 THE TPO, HOWEVER, OBSERVED THAT THE ASSESSEE HA D INCURRED MORE THAN NORMAL AMP EXPENSES TO BUILD AMADEUS BRAND IN INDIA WHICH IS LEGALLY OWNED BY M/S AMADEUS SPAIN. THE TP O HELD THAT THE ASSESSEE SHOULD HAVE BEEN REIMBURSED WITH APPRO PRIATE MARK- UP ON SUCH EXCESSIVE AMP EXPENDITURE IDENTIFIED BY HIM BY APPLYING THE BRIGHT LINE TEST (BLT). IN HIS ORDER, THE TPO HAS IDENTIFIED THE SAID ABNORMAL AMP EXPENSES BY APPLYI NG THE BRIGHT LINE METHOD I.E., BY COMPARING THE AMP AS A PERCENT AGE TO SALES OF THE ASSESSEE WITH AVERAGE AMP AS A PERCENTAGE OF TH E COMPARABLE COMPANIES FINALLY SELECTED BY HIM FOR BENCHMARKING THE MAIN FUNCTIONS OF THE ASSESSEE. THEREAFTER, BY APPLYING A MARK-UP OF 11.69%, THE TPO HAS COMPUTED THE FINAL ADJUSTMENT F OR THE ALLEGED TRANSACTION OF BRAND PROMOTION AS UNDER:- TPO ORDER DATED TPO ORDER DATED 20-01-2015 28.02.2016 GIVING EFFECT TO DRP VALUE OF GROSS SALES RS 231,73,07,014 RS 231,7 3,07,014 AMP/SALES OF THE COMPARABLES 1.48% 1.48% AMOUNT THAT REPRESENT BRIGHT LINE RS 3,42,96,144 RS 3,42,96,144 EXPENDITURE ON AMP BY ASSESSEE RS 94,31,24,844 R S 94,31,24,844 EXPENDITURE IN EXCESS OF BRIGHT LINE RS 90,88,28,7 00 RS 90,88,28,700 PLI 11.69 % 26.42% MARKUP RS 10,62,42,075 RS 24,01,12,542 CUMULATIVE ADDITION RS 101,50,70,775 RS 114,89 ,41,243 2.8 BEING AGGRIEVED BY THE ABOVE PROPOSED TRANSFER PRICING ADJUSTMENT, THE ASSESSEE FILED DETAILED OBJECTIONS BEFORE THE LD. DRP. THE LD. DRP, WHILE REFERRING TO DECISION OF TH E HONBLE DELHI 19 HIGH COURT IN THE CASE OF SONY ERICSSON MOBILE COMM UNICATIONS REPORTED IN 374 ITR 118(DEL), HAS EXAMINED THE CONT ENTIONS PUT FORTH BY THE ASSESSEE BEFORE IT AS UNDER:- SUB GROUNDS OF APPEAL SUMMARIZED SONY ERICSSON HIG H COURT ORDER AS PER ISSUE FROM FORM 35A DT.16MARCH, 2015 RE-CHARACTERIZATION OF EXPENSES UPHELD AT PARA 64 PAGE 48 OF 142 INCURRED FOR OWN BUSINESS AS A SERVICE PARA 147, P AGE 111 TO AE IS NOT JUSTIFIED THE BURDEN IS ON THE ASSESSE D TO SELECT AND JUSTIFY THE METHOD ADOPTED AND THE ARMS LENGTH PRICE DECLARED UNDER SUB-SECTION (3) TO SECTION 92C, THE ASSESSING OFFICER CAN PROCEED TO DETERMINE THE ARMS LENGTH PRICE IN ACCORDANCE WITH SECTION 92C(1) AND (2) ON THE BASIS OF MATERIAL, INFORMATION OR DOCUMENTS IN HIS POSSESSION, IF ANY OF THE CIRCUMSTANCES MENTIONED IN CLAUSES (A) TO (D) ARE SATISFIED - THE AMP EXPENSES INCURRED BY THE AMP EXPENSE IS AN INTERNATIONAL ASSESSEE, QUA INDEPENDENT PARTIES, TRANSACTION. (P ARAS 52 & 53 OF THE ARE DOMESTIC TRANSACTION AND NOT JUDGMENT) INTERNATIONAL TRANSACTION AS DEFINED IN SECTION 92B OF THE ACT. THE TPO HAS JURISDICTION TO DETERMINE THE ALP OF THE INTERNATIONAL TRANSACTION OF AMP EXPENSES (PARA 50 OF THE JUDGMENT); DISCUSSION UNDER THE HEADING C PARA 51-57, THE SUBSTANTIAL QUESTION OF LAW ANSWERED IN FAVOR OF REVENUE. AO/TPO CAN SEGREGATE AMP EXPENSES AS AN INDEPENDENT INTERNATIONAL TRANSACTION, BUT ONLY AFTER ELUCIDATING THE GROUNDS AND 20 REASONS FOR NOT ACCEPTING THE BUNCHING ADOPTED BY THE ASSESSED AND EXAMINING AND GIVING BENEFIT OF SET OFF UNDER 92(3). ASSESSEE IS ALREADY REMUNERATED FOR OWNER OF THE MARKETING INTANGIBLE THE ACTIVITIES PERFORMED BY IT. SHOULD ADEQUATEL Y COMPENSATE THE DOMESTIC AE INCURRING COSTS TOWARDS MARKETING ACTIVITIES BY REVENUE REIMBURSEMENT OF EXPENSES OR BY SUFFICIENT AND APPROPRIATE RETURN. BRIGHT LINE TEST, APPLIED BY THE PARA 194, SNO X, PAGE 139 LD. TPO/LD. AO, IS NOT PERMITTED BY THE BRIGHT LINE TEST HAS NO STATUTORY TRANSFER PRICING REGULATIONS MANDATE. BRIGHT LINE TEST CANNOT BE APPLIED TO WORK OUT NON-ROUTINE AMP EXPENSES FOR BENCHMARKING [PARA 194 (X)]; THE AMP EXPENSES INCURRED BY THE PAGE 140 ASSESSEE ALREADY BENCHMARKED BY AO FOR GOOD AND S UFFICIENT APPLYING TNMM SO SEPARATE BENCHMARKING REASONS CA N DE-BUNDLE INTERCONNECTED NOT REQUIRED TRANSACTIONS, IS SEGREGATED DISTRIBUTION, MARKETING OR AMP TRANSACTIONS WHEN BUNDLED TRANSACTIONS CANNOT BE ADEQUATELY COMPARED ON AN AGGREGATE BASIS. ALP OF AMP EXPENSES SHOULD BE DETERMINED PREFERABLY IN A BUNDLED MANNER WITH THE DISTRIBUTION ACTIVITY (PARAS 91,121 & OTHERS); VALUE OF ALLEGED INTERNATIONAL PAGE. 137 TRANSACTION HAS BEEN DETERMINED THE ASSESSED, I.E. , THE DOMESTIC AE INCORRECTLY MUST BE COMPENSATED FOR THE AMP EXPENSES BY THE FOREIGN AE. SUCH COMPENSATION MAY BE INCLUDED OR 21 SUBSUMED IN LOW PURCHASE PRICE OR BY NOT CHARGING OR CHARGING LOWER ROYALTY. DIRECT COMPENSATION CAN ALSO BE PAID. THE METHOD SELECTED AND COMPARABILITY ANALYSIS SHOULD BE APPROPRIATE AND RELIABLE SO AS TO INCLUDE THE AMP FUNCTIONS AND COSTS. THE LD.AO/LD.TPO HAS SELECTED AMP IS A SEPARATE FU NCTION. AN INAPPROPRIATE COMPARABLES EXTERNAL COMPARABLE SHOUL D PERFORM SIMILAR AMP FUNCTIONS. [PARAS 165 & 166]; FOR DETERMINING THE ALP OF THESE TRANSACTIONS IN A BUNDLED MANNER, SUITABLE COMPARABLES HAVING UNDERTAKEN SIMILAR ACTIVITIES OF DISTRIBUTION OF THE PRODUCTS AND ALSO INCURRING OF AMP EXPENSES, SHOULD BE CHOSEN (PARAS 194(I), (II), (VIII) & OTHERS); THE AO/TPO CAN REJECT A METHOD SELECTED BY THE ASSESSED FOR SEVERAL REASONS INCLUDING WANT OF RELIABILITY IN THE FACTUAL MATRIX OR LACK / NONAVAILABILITY OF COMPARABLES (SEE SECTION 92C(3) OF THE ACT). PAGE 138 WHEN THE AO/TPO REJECTS METHOD ADOPTED BY ASSESSED, HE IS ENTITLED TO SELECT MAM, AND UNDERTAKE COMPARABILITY ANALYSIS. SELECTION OF METHOD AND COMPARABLES SHOULD BE AS PER THE COMMAND AND DIRECTIVE OF THE ACT AND RULES AND JUSTIFIED BY GIVING REASONS. THE CHOICE OF COMPARABLES CANNOT BE RESTRICTED ONLY TO DOMESTIC 22 COMPANIES USING ANY FOREIGN BRAND (PARA 120);IF NO COMPARABLES HAVING PERFORMED BOTH THE FUNCTIONS IN A SIMILAR MANNER ARE AVAILABLE, THEN, SUITABLE ADJUSTMENT SHOULD BE MADE TO BRING INTERNATIONAL TRANSACTIONS AND COMPARABLE TRANSACTIONS AT PAR [PARA] 194(III)]; IF ADJUSTMENT IS NOT POSSIBLE OR COMPARABLE IS NOT AVAILABLE, THEN, THE TNMM ON ENTITY LEVEL SHOULD NOT BE APPLIED [PARAS 100, 121, 194(III) & (VI)] FOR DETERMINING THE ALP OF THESE TRANSACTIONS IN A BUNDLED MANNER, SUITABLE COMPARABLES HAVING UNDERTAKEN SIMILAR ACTIVITIES OF DISTRIBUTION OF THE PRODUCTS AND ALSO INCURRING OF AMP EXPENSES, SHOULD BE CHOSEN [PARAS 194(I), (II), (VIII) & OTHERS]; THE CHOICE OF COMPARABLES CANNOT BE RESTRICTED ONLY TO DOMESTIC COMPANIES USING ANY FOREIGN BRAND [PARA 120]; ARBITRARY MARK UP PLR CANNOT BE THE BASIS FOR COMPUTING MARKUP ON AMP EXPENSES AS AN INTERNATIONAL TRANSACTION. MARK-UP AS PER SUB- CLAUSE (II) TO RULE 10B(1) WOULD BE COMPARABLE GROSS PROFIT ON THE COST OR EXPENSES INCURRED AS AMP. THE MARK-UP HAS TO BE BENCHMARKED WITH COMPARABLE UNCONTROLLED TRANSACTIONS OR TRANSACTIONS FOR PROVIDING SIMILAR SERVICE/PRODUCT. THE REVENUES STAND IN SOME CASES APPLYING THE PRIME LENDING RATE FIXED BY THE RESERVE BANK OF INDIA WITH A 23 FURTHER MARK-UP, IS MISTAKEN AND UNFOUNDED. INTEREST RATE MARK-UP WOULD APPLY TO INTERNATIONAL TRANSACTIONS GRANTING/AVAILING LOANS, ADVANCES, ETC. 19. THE TRIBUNAL ADJUDICATED AS UNDER: 5.0 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS M ADE BY BOTH THE SIDES AND HAVE ALSO PERUSED THE MATERIAL AVAILA BLE ON RECORD. IT IS SEEN THAT THE ISSUE IN DISPUTE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE COORDINATE BENCH OF THIS COURT IN E ARLIER ASSESSMENT YEARS AND THE ORDER PASSED BY THE COORDI NATE BENCH FOR A.Y.2009-10 HAS ALSO BEEN UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT. IN EARLIER YEARS THE ISSUE IN DISPUTE H AS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE COORDINATE BENCH B Y TAKING INTO CONSIDERATION THE FOLLOWING DECISIONS OF THE HONBL E JURISDICTIONAL HIGH COURT:- (I) MARUTI SUZUKI INDIA LTD. VS. CIT REPORTED IN 38 1 ITR 117 (DELHI); (II) CIT VS. WHIRLPOOL OF INDIA LTD. REPORTED IN 38 1 ITR 154 (DELHI); (III) HONDA SIEL POWER PRODUCTS LTD. VS. DY. CIT RE PORTED IN 237 TAXMAN 304 (DELHI); (IV) BAUSCH AND LOMB EYECARE (INDIA) PVT. LTD. V. A DDL. REPORTED IN CIT 381 ITR 227 (DELHI); 5.1 IN THE YEAR UNDER CONSIDERATION THERE IS NO CHA NGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS COMPARED TO A.Y. 2 009-10 AND 24 EVEN THE AGREEMENTS BETWEEN ASSESSEE AND THE AE CON TINUE TO BE OPERATIONAL FOR THE YEAR UNDER CONSIDERATION. WE, T HEREFORE, CONCUR WITH THE REASONING GIVEN BY THE COORDINATE B ENCH FOR A.Y. 2009-10,WHEREIN, IT IS HELD AS UNDER:- 8. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY THE PARTIES AND HAVE ALSO PERUSED THE MATERIAL AVAILABL E ON RECORD. UNDISPUTEDLY, THE MAIN DATA PROCESSING AND SUBSIDIARY DISTRIBUTION ACTIVITIES OF THE APPELLANT HAVE BEEN HELD TO BE AT THE ARM'S LENGTH PRICE APPLYING THE TRANSACTIONAL NET MARGIN METHOD. PROVISION OF THE INFORMATION TECHNOLOGY ENABLED SERVICES TO ASSOCIAT ED ENTERPRISE UNDER THE AGREEMENT HAS BEEN THOROUGHLY BENCHMARKED BY THE TRANSFER PRICING OFFICER. MOST APPROPRIATE METHOD BEING THE TRANSACTIONAL NET MARG IN METHOD HAS NOT BEEN DOUBTED AND AFTER AN IN-DEPTH ANALYSIS OF COMPARABLE COMPANIES SELECTED BY THE APPELLANT AND BY TINKERING WITH THE SAME THE LEARNE D TRANSFER PRICING OFFICER HAS GIVEN A FINDING THAT O P/OC OF THE ASSESSEE IS 20.27 PER CENT AND OP/OC OF REVI SED COMPARABLE SET IS 23.94 PER CENT. NO ADJUSTMENT MAD E ON THIS ACCOUNT HAS BEEN MADE AS THE DIFFERENCE IS WIT HIN + FIVE PER CENT RANGE. THE LEARNED TRANSFER PRICING O FFICER, HOWEVER, HAS SEGREGATED THE ADVERTISEMENT, MARKETIN G AND PROMOTION EXPENSES AND HELD THAT BEING AN INDEPENDENT TRANSACTION IT REQUIRES TO BE BENCHMARK ED INDEPENDENTLY. IN THESE CIRCUMSTANCES, IN OUR OPINI ON, THE FUNDAMENTAL QUESTION TO BE ANSWERED IS TO DECIDE AS TO 25 WHETHER IN THE ABSENCE OF ANY AGREEMENT, ARRANGEMEN T OR UNDERSTANDING FOR EITHER INCURRING THE ADVERTISEMEN T, MARKETING AND PROMOTION EXPENSES ON BEHALF OR FOR T HE BENEFIT OF THE ASSOCIATED ENTERPRISE OR FOR PAYMENT OF THE ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES BY THE ASSOCIATED ENTERPRISE CAN IT BE HELD THAT THERE WAS AN 'INTERNATIONAL TRANSACTION' ONLY ON THE BASIS THAT THE ADVERTISEMENT, MARKETING AND PROMOTION EXPENDITURE, INCURRED BY THE APPELLANT, WOULD HAVE BENEFITED THE ASSOCIATED ENTERPRISE, WHO OWNED THE BRANDS USED BY THE APPELLANT. THE LEARNED AUTHORIZED REPRESENTATIVE HA S RIGHTLY SUBMITTED THAT THIS IS A JURISDICTIONAL ISS UE, WHICH REQUIRES A FOREMOST ADJUDICATION AND ONLY IF THE AN SWER TO THIS ISSUE IS AGAINST THE APPELLANT THAT THE MATTER THEN REQUIRED A DE NOVO ADJUDICATION IN THE LIGHT OF THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF S ONY ERICSSON MOBILE COMMUNICATIONS (SUPRA). THE ABOVE L INE OF ADJUDICATION IS ALSO SUPPORTED BY THE DECISION OF T HE HONOURABLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIAKIN AIRCONDITIONING INDIA (P.) LTD. (SUPRA) WHEREIN IT IS HELD AS UNDER: 'ACCORDINGLY, THE COURT DIRECTS AS UNDER: (A) THE IMPUGNED ORDER DATED OCTOBER 8, 2015, PASSE D BY THE INCOME-TAX APPELLATE TRIBUNAL IN I. T. A. NO. 5090/ DEL/2010 FOR THE ASSESSMENT YEAR 2006-07 IS SET ASIDE AND THE SA ID APPEAL IS RESTORED TO THE FILE OF THE INCOME-TAX APPELLATE TR IBUNAL ; 26 (B) THE INCOME-TAX APPELLATE TRIBUNAL WILL FIRST DE CIDE THE QUESTION REGARDING THE EXISTENCE OF AN INTERNATIONA L TRANSACTION INVOLVING AMP EXPENSES BETWEEN THE ASSESSEE AND ITS ASSOCIATED ENTERPRISE. THIS QUESTION WILL NOT BE REMANDED BY T HE INCOME-TAX APPELLATE TRIBUNAL TO ANY OTHER AUTHORITY FOR DECIS ION. IF THE SAID QUESTION IS ANSWERED IN FAVOUR OF THE ASSESSEE, THE N NO OTHER QUESTION WOULD ARISE. IF ANSWERED AGAINST THE ASSES SEE, THEN THE INCOME-TAX APPELLATE TRIBUNAL WILL DECIDE THE FURTH ER ISSUES THAT ARISE IN THE APPEAL IN ACCORDANCE WITH LAW.' 8.1 THE CASE RECORDS FURTHER SHOW THAT BOTH THE LOW ER AUTHORITIES HAVE CATEGORICALLY GIVEN A FINDING THAT THERE EXIST ED A 'TRANSACTION' FOR BRAND PROMOTION BETWEEN APPELLANT AND ITS ASSOCIATED ENTERPRISE. THIS IS ALSO UNDER CHALLENGE BEFORE US. HENCE, IT CANNOT BE SAID THAT NECESSARY FACTS ARE N OT ON RECORD. WITH REGARD TO THE SUBMISSIONS OF THE LEARNED DEPAR TMENTAL REPRESENTATIVE THAT THE ISSUE OF ADVERTISEMENT, MAR KETING AND PROMOTION EXPENSES BE RESTORED BACK TO THE FILE OF THE LEARNED TRANSFER PRICING OFFICER, WE WOULD LIKE TO STATE TH AT SINCE FACTS NECESSARY TO DETERMINATION ARE ON RECORD THE LAW LA ID DOWN BY THE HONOURABLE JURISDICTIONAL HIGH COURT HAS TO BE GIVE N EFFECT TO. IT IS NOT EVEN THE ARGUMENT OF THE LEARNED COMMISSIONER O F INCOME-TAX (DEPARTMENTAL REPRESENTATIVE) THAT ANY FRESH FACT IS REQUIRED FOR SUCH A DETERMINATION. UNDER THE CIRCUMSTANCES, A DI RECTION FOR REMAND IS NOT CALLED FOR. THE HONOURABLE JURISDICTI ONAL HIGH COURT IN VARIOUS CASES HAVE HIGHLIGHTED THE TESTS TO BE A PPLIED FOR ASCERTAINING WHETHER THERE EXISTS A TRANSACTION FOR BRAND PROMOTION IN A PARTICULAR CASE. THE LEARNED AUTHORI SED 27 REPRESENTATIVE HAS IMPARTIALLY SUMMARISED THE RELEV ANT PROPOSITIONS FROM THESE DECISIONS IN HIS NOTE, WHIC H WE HAVE REPRODUCED ABOVE. WE FIND THAT IN THE CASES OF MARU TI SUZUKI INDIA LTD. V. CIT [2015] 64 TAXMANN.COM 150/[2016] 237 TAXMAN 256/381 ITR 117, CIT V. WHIRLPOOL OF INDIA LTD. [20 15] 64 TAXMANN.COM 324/[2016] 237 TAXMAN 49/381 ITR 154 (D ELHI), BAUSCH & LOMB EYECARE (INDIA) (P.) LTD. [2016] 65 T AXMANN.COM 141/237 TAXMAN 24/381 ITR 227 (DELHI) THE HONOURABL E HIGH COURT ON THE ISSUE OF THE ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES HAS DELIBERATED UPON EXTENSIVELY ON EACH A ND EVERY ARGUMENT RAISED BY THE TRANSFER PRICING OFFICER/DIS PUTE RESOLUTION PANEL AND HAS ANALYSED THE SAME THREADBA RE. WE WOULD LIKE TO REPRODUCE THE RELEVANT PORTION OF THE JUDGM ENT OF BAUSCH & LOMB EYECARE (INDIA) (P.) LTD.'S CASE (SUPRA) AS UN DER (PAGE 251): 'A READING OF THE HEADING OF CHAPTER X ('SPECIAL PR OVISIONS RELATING TO AVOIDANCE OF TAX') AND SECTION 92(1) WHICH STATES T HAT ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION SHALL BE COMPUTED HAVING REGARD TO THE ARM'S LENGTH PRICE AND SECTION 92C(1) WHICH SETS OU T THE DIFFERENT METHODS OF DETERMINING THE ARM'S LENGTH PRICE, MAKE S IT CLEAR THAT THE TRANSFER PRICING ADJUSTMENT IS MADE BY SUBSTITUTING THE ARM'S LENGTH PRICE FOR THE PRICE OF THE TRANSACTION. TO BEGIN WI TH THERE HAS TO BE AN INTERNATIONAL TRANSACTION WITH A CERTAIN DISCLOSED PRICE. THE TRANSFER PRICING ADJUSTMENT ENVISAGES THE SUBSTITUTION OF TH E PRICE OF SUCH INTERNATIONAL TRANSACTION WITH THE ARM'S LENGTH PRI CE. UNDER SECTIONS 92B TO 92F, THE PRE-REQUISITE FOR COMMENCING THE TRANSF ER PRICING EXERCISE IS TO SHOW THE EXISTENCE OF AN INTERNATIONAL TRANSACTI ON. THE NEXT STEP IS TO DETERMINE THE PRICE OF SUCH TRANSACTION. THE THIRD STEP WOULD BE TO 28 DETERMINE THE ARM'S LENGTH PRICE BY APPLYING ONE OF THE FIVE PRICE DISCOVERY METHODS SPECIFIED IN SECTION 92C. THE FOU RTH STEP WOULD BE TO COMPARE THE PRICE OF THE TRANSACTION THAT IS SHOWN TO EXIST WITH THAT OF THE ARM'S LENGTH PRICE AND MAKE THE TR ANSFER PRICING ADJUSTMENT BY SUBSTITUTING THE ARM'S LENGTH PRICE F OR THE CONTRACT PRICE. SECTION 92B DEFINES 'INTERNATIONAL TRANSACTION' AS UNDER: '92B. MEANING OF INTERNATIONAL TRANSACTION.(1) FOR THE PURPOSES OF THIS SECTION AND SECTIONS 92, 92C, 92D AND 92E, 'INTERNATIONAL TRANSACTION' MEANS A TRANSACTION BET WEEN TWO OR MORE ASSOCIATED ENTERPRISES, EITHER OR BOTH OF W HOM ARE NON-RESIDENTS, IN THE NATURE OF PURCHASE, SALE OR L EASE OF TANGIBLE OR INTANGIBLE PROPERTY, OR PROVISION OF SE RVICES, OR LENDING OR BORROWING MONEY, OR ANY OTHER TRANSACTIO N HAVING A BEARING ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISES, AND SHALL INCLUDE A MUTUAL AGREEMENT O R ARRANGEMENT BETWEEN TWO OR MORE ASSOCIATED ENTERPRI SES FOR THE ALLOCATION OR APPORTIONMENT OF, OR ANY CONTRIBU TION TO, ANY COST OR EXPENSE INCURRED OR TO BE INCURRED IN CONNE CTION WITH A BENEFIT SERVICE OR FACILITY PROVIDED OR TO BE PROVI DED TO ANYONE OR MORE OF SUCH ENTERPRISES. (2) A TRANSACTION ENTERED INTO BY AN ENTERPRISE WIT H A PERSON OTHER THAN AN ASSOCIATED ENTERPRISE SHALL, FOR THE PURPOSES OF SUB-SECTION (1), BE DEEMED TO BE A TRANSACTION ENTE RED INTO BETWEEN TWO ASSOCIATED ENTERPRISES, IF THERE EXISTS A PRIOR 29 AGREEMENT IN RELATION TO THE RELEVANT TRANSACTION B ETWEEN SUCH OTHER PERSON AND THE ASSOCIATED ENTERPRISE; OR THE TERMS OF THE RELEVANT TRANSACTION ARE DETERMINED IN SUBST ANCE BETWEEN SUCH OTHER PERSON AND THE ASSOCIATED ENTERP RISE.' THUS, UNDER SECTION 92B (1) AN 'INTERNATIONAL TRANS ACTION' MEANS '(A) A TRANSACTION BETWEEN TWO OR MORE ASSOCIATED E NTERPRISES, EITHER OR BOTH OF WHOM ARE NON-RESIDENT, (B) THE TRANSACTION IS IN THE NATURE OF PURCHASE, S ALE OR LEASE OF TANGIBLE OR INTANGIBLE PROPERTY OR PROVISION OF SERVICE OR LENDING OR BORROWING MONEY OR ANY OTHER TRANSACTION HAVING A BEARING ON THE PROFITS, INCOMES OR LOSSES OF SUCH E NTERPRISES, AND (C) SHALL INCLUDE A MUTUAL AGREEMENT OR ARRANGEMENT BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES FOR ALLOCATION O R APPORTIONMENT OR CONTRIBUTION TO THE ANY COST OR EX PENSES INCURRED OR TO BE INCURRED IN CONNECTION WITH THE B ENEFIT, SERVICE OR FACILITY PROVIDED OR TO BE PROVIDED TO O NE OR MORE OF SUCH ENTERPRISES.' CLAUSES (B) AND (C) ABOVE CANNOT BE READ DISJUNCTIV ELY. EVEN IF RESORT IS HAD TO THE RESIDUARY PART OF CLAUSE (B) T O CONTEND THAT THE AMP SPEND OF BLI IS 'ANY OTHER TRANSACTION HAVI NG A BEARING' ON ITS 'PROFITS, INCOMES OR LOSSES', FOR A 'TRANSACTION' THERE HAS TO BE TWO PARTIES. THEREFORE, FOR THE PUR POSES OF THE 30 'MEANS' PART OF CLAUSE (B) AND THE 'INCLUDES' PART, OF CLAUSE (C), THE REVENUE HAS TO SHOW THAT THERE EXISTS AN 'AGREE MENT' OR 'ARRANGEMENT' OR 'UNDERSTANDING' BETWEEN BLI AND B& L, USA WHEREBY BLI IS OBLIGED TO SPEND EXCESSIVELY ON AMP IN ORDER TO PROMOTE THE BRAND OF B&L, USA. AS FAR AS THE LEG ISLATIVE INTENT IS CONCERNED, IT IS SEEN THAT CERTAIN TRANSA CTIONS LISTED IN THE EXPLANATION UNDER CLAUSES (I)(A) TO (E) TO S ECTION 92B ARE DESCRIBED AS AN 'INTERNATIONAL TRANSACTION'. THIS M IGHT BE ONLY AN ILLUSTRATIVE LIST, BUT SIGNIFICANTLY IT DOES NOT LIST ADVERTISEMENT, MARKETING AND PROMOTION SPENDING AS ONE SUCH TRANSACTION. IN MARUTI SUZUKI INDIA LTD. [2016] 381 ITR 117 (DEL HI), ONE OF THE SUBMISSIONS OF THE REVENUE WAS (PAGE 144) : 'TH E MERE FACT THAT THE SERVICE OR BENEFIT HAS BEEN PROVIDED BY ONE PARTY TO THE OTHER WOULD BY ITSELF CONSTITUTE A TRANSACTI ON IRRESPECTIVE OF WHETHER THE CONSIDERATION FOR THE S AME HAS BEEN PAID OR REMAINS PAYABLE OR THERE IS A MUTUAL A GREEMENT TO NOT CHARGE ANY COMPENSATION FOR THE SERVICE OR B ENEFIT'. THIS WAS NEGATIVED BY THE COURT BY POINTING OUT (PA GE 144): 'EVEN IF THE WORD 'TRANSACTION' IS GIVEN ITS WIDEST CONNOTATION, AND NEED NOT INVOLVE ANY TRANSFER OF MONEY OR A WRITTEN AGREEMENT AS SUGGESTED BY THE REVENUE, AND EVEN IF RESORT IS HAD TO SECTION 92F(V ), WHICH DEFINES 'TRANSACTION' TO INCLUDE 'ARRANGEMENT ', 'UNDERSTANDING' OR 'ACTION IN CONCERT', 'WHETHER FO RMAL OR IN WRITING', IT IS STILL INCUMBENT ON THE REVENU E TO SHOW THE EXISTENCE OF AN 'UNDERSTANDING' OR AN 31 'ARRANGEMENT' OR 'ACTION IN CONCERT' BETWEEN MSIL A ND SMC AS REGARDS ADVERTISEMENT, MARKETING AND PROMOTION SPEND FOR BRAND PROMOTION. IN OTHER WORDS , FOR BOTH THE 'MEANS', PART AND THE 'INCLUDES' PART OF SECTION 92B(1) WHAT HAS TO BE DEFINITELY SHOWN IS T HE EXISTENCE OF TRANSACTION WHEREBY MSIL HAS BEEN OBLIGED TO INCUR AMP OF A CERTAIN LEVEL FOR SMC FOR THE PURPOSES OF PROMOTING THE BRAND OF SMC.' IN WHIRLPOOL OF INDIA LTD. [2016] 381 ITR 154 (DELH I), THE COURT INTERPRETED THE EXPRESSION 'ACTED IN CONCERT' AND IN THAT CONTEXT REFERRED TO THE DECISION OF THE SUPREME COU RT IN DAIICHI SANKYO CO. LTD. V. JAYARAM CHIGURUPATI [ 2010] 157 COMP CAS 380 (SC) ; [2010] 6 MANU/SC/0454/2010, WHICH AROSE IN THE CONTEXT OF ACQUISITION OF SHARES OF ZENOTECH LABORATORY LTD. BY THE RANBAXY GROUP. THE QUESTION THAT WAS EXAMINED WAS WHETHER AT THE RELEV ANT TIME THE APPELLANT, I.E., 'DAIICHI SANKYO COMPANY A ND RANBAXY' WERE 'ACTING IN CONCERT' WITHIN THE MEANIN G OF REGULATION 20(4)(B) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOV ERS) REGULATIONS, 1997. IN PARAGRAPH 44, IT WAS OBSERVED AS UNDER (PAGE 408 OF 157 COMP CAS): 'THE OTHER LIMB OF THE CONCEPT REQUIRES TWO OR MORE PERSONS JOINING TOGETHER WITH THE SHARED COMMON OBJECTIVE AND PURPOSE OF SUBSTANTIAL ACQUISITION OF SHARES, ETC., OF A CERTAIN TARGET COMPANY. THERE CA N BE 32 NO 'PERSONS ACTING IN CONCERT' UNLESS THERE IS A SH ARED COMMON OBJECTIVE OR PURPOSE BETWEEN TWO OR MORE PERSONS OF SUBSTANTIAL ACQUISITION OF SHARES, ETC., OF THE TARGET COMPANY. FOR, DEHORS THE ELEMENT OF THE SHAR ED COMMON OBJECTIVE OR PURPOSE THE IDEA OF 'PERSON ACT ING IN CONCERT' IS AS MEANINGLESS AS CRIMINAL CONSPIRAC Y WITHOUT ANY AGREEMENT TO COMMIT A CRIMINAL OFFENCE. THE IDEA OF 'PERSONS ACTING IN CONCERT' IS NOT ABOU T A FORTUITOUS RELATIONSHIP COMING INTO EXISTENCE BY ACCIDENT OR CHANCE. THE RELATIONSHIP CAN COME INTO BEING ONLY BY DESIGN, BY MEETING OF MINDS BETWEEN T WO OR MORE PERSONS LEADING TO THE SHARED COMMON OBJECTIVE OR PURPOSE OF ACQUISITION OF SUBSTANTIAL ACQUISITION OF SHARES, ETC., OF THE TARGET COMPANY. IT IS ANOTHER MATTER THAT THE COMMON OBJECTIVE OR PURPOSE MAY BE IN PURSUANCE OF AN AGREEMENT OR AN UNDERSTANDING, FORMAL OR INFORMAL ; THE ACQUISITION OF SHARES, ETC., MAY BE DIRECT OR INDIRECT OR THE PERS ONS ACTING IN CONCERT MAY CO-OPERATE IN ACTUAL ACQUISIT ION OF SHARES, ETC., OR THEY MAY AGREE TO CO-OPERATE IN SU CH ACQUISITION. NONETHELESS, THE ELEMENT OF THE SHARED COMMON OBJECTIVE OR PURPOSE IS THE SINE QUA NON FOR THE RELATIONSHIP OF 'PERSONS ACTING IN CONCERT' TO COME INTO BEING.' THE TRANSFER PRICING ADJUSTMENT IS NOT EXPECTED TO BE MADE BY DEDUCING FROM THE DIFFERENCE BETWEEN THE 'EXCESS IVE' AMP EXPENDITURE INCURRED BY THE ASSESSEE AND THE ADVERT ISEMENT, 33 MARKETING AND PROMOTION EXPENDITURE OF A COMPARABLE ENTITY THAT AN INTERNATIONAL TRANSACTION EXISTS AND THEN PROCEEDING TO MAKE THE ADJUSTMENT OF THE DIFFERENCE IN ORDER TO DETERMINE THE VALUE OF SUCH ADVERTISEMENT, MARKETING AND PROMOTION EXPENDITURE INCURRED, FOR THE ASSOCIATED ENTERPRISE. IN ANY EVE NT, AFTER THE DECISION IN SONY ERICSSON [2015] 374 ITR 118 (D ELHI), THE QUESTION OF APPLYING THE BRIGHT LINE TEST TO DETERM INE THE EXISTENCE OF AN INTERNATIONAL TRANSACTION INVOLVING THE ADVERTISEMENT, MARKETING AND PROMOTION EXPENDITURE DOES NOT ARISE. THERE IS MERIT IN THE CONTENTION OF THE ASSESSEE TH AT A DISTINCTION IS REQUIRED TO BE DRAWN BETWEEN A 'FUNC TION' AND A 'TRANSACTION' AND THAT EVERY EXPENDITURE FORMING PART OF THE FUNCTION, CANNOT BE CONSTRUED AS A 'TRANSACTION'. F URTHER, THE REVENUE'S ATTEMPT AT RECHARACTERISING THE ADVERTISE MENT, MARKETING AND PROMOTION EXPENDITURE INCURRED AS A TRANSACTION BY ITSELF WHEN IT HAS NEITHER BEEN IDEN TIFIED AS SUCH BY THE ASSESSEE OR LEGISLATIVELY RECOGNISED IN THE EXPLANATION TO SECTION 92B RUNS COUNTER TO THE LEGA L POSITION EXPLAINED IN CIT V. EKL APPLIANCES LTD. [2012] 345 ITR 241 (DELHI) WHICH REQUIRED A TRANSFER PRICING OFFICER ' TO EXAMINE THE 'INTERNATIONAL TRANSACTION' AS HE ACTUALLY FIND S THE SAME'. IN THE PRESENT CASE, THE MERE FACT THAT B&L, USA TH ROUGH B&L, SOUTH ASIA, INC. HOLDS 99.9 PER CENT. OF THE S HARE OF THE ASSESSEE WILL NOT IPSO FACTO LEAD TO THE CONCLUSION THAT THE MERE INCREASING OF THE ADVERTISEMENT, MARKETING AND 34 PROMOTION EXPENDITURE BY THE ASSESSEE INVOLVES AN INTERNATIONAL TRANSACTION IN THAT REGARD WITH B&L, USA. A SIMILAR CONTENTION BY THE REVENUE, NAMELY THAT EVEN IF THERE IS NO EXPLICIT ARRANGEMENT, THE FACT THAT THE BENEF IT OF SUCH ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES WOU LD ALSO ENURE TO THE ASSOCIATED ENTERPRISE IS ITSELF S UFFICIENT TO INFER THE EXISTENCE OF AN INTERNATIONAL TRANSACTION HAS BEEN NEGATIVED BY THE COURT IN MARUTI SUZUKI INDIA LTD. [2016]381 ITR 117(DELHI) AS UNDER (PAGE 146): 'THE ABOVE SUBMISSIONS PROCEED PURELY ON SURMISES AND CONJECTURES AND IF ACCEPTED AS SUCH WILL LEAD T O SENDING THE TAX AUTHORITIES THEMSELVES ON A WILD-GO OSE CHASE OF WHAT CAN AT BEST BE DESCRIBED AS A 'MIRAGE '. FIRST OF ALL, THERE HAS TO BE A CLEAR STATUTORY MAN DATE FOR SUCH AN EXERCISE. THE COURT IS UNABLE TO FIND O NE. TO THE QUESTION WHETHER THERE IS ANY 'MACHINERY' PROVISION FOR DETERMINING THE EXISTENCE OF AN INTERNATIONAL TRANSACTION INVOLVING ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES, MR. SRIVASTAVA ONLY REFERRED TO SECTION 92F(II) WHICH DEFINES ARM' S LENGTH PRICE TO MEAN A PRICE 'WHICH IS APPLIED OR PROPOSED TO BE APPLIED IN A TRANSACTION BETWEEN PERSONS OTHER THAN ASSOCIATED ENTERPRISE IN UNCONTROLLED CONDITIONS'. SINCE THE REFERENCE IS TO 'PRICE' AND TO 'UNCONTROLLED CONDITIONS' IT IMPLICI TLY BRINGS INTO PLAY THE BRIGHT LINE TEST. IN OTHER WOR DS, IT EMPHASISES THAT WHERE THE PRICE IS SOMETHING OTHER 35 THAN WHAT WOULD BE PAID OR CHARGED BY ONE ENTITY FR OM ANOTHER IN UNCONTROLLED SITUATIONS THEN THAT WOULD BE THE ARM'S LENGTH PRICE. THE COURT DOES NOT SEE THIS AS A MACHINERY PROVISION PARTICULARLY IN LIGHT OF THE FA CT THAT THE BRIGHT LINE TEST HAS BEEN EXPRESSLY NEGATIVED B Y THE COURT IN SONY ERICSSON. THEREFORE, THE EXISTENCE OF AN INTERNATIONAL TRANSACTION WILL HAVE TO BE ESTABLISH ED DEHORS THE BRIGHT LINE TEST. . . . WHAT IS CLEAR IS THAT IT IS THE 'PRICE' OF AN INTER NATIONAL 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 ARM'S LENGTH PRICE , AN 'ADJUSTMENT' HAS TO BE MADE. THE BURDEN IS ON THE REVENUE TO FIRST SHOW THE EXISTENCE OF AN INTERNATI ONAL TRANSACTION. NEXT, TO ASCERTAIN THE DISCLOSED 'PRIC E' OF SUCH TRANSACTION AND THEREAFTER ASK WHETHER IT IS A N ARM'S LENGTH PRICE. IF THE ANSWER TO THAT IS IN THE NEGATIVE THE TRANSFER PRICING ADJUSTMENT SHOULD FOL LOW. THE OBJECTIVE OF CHAPTER X IS TO MAKE ADJUSTMENTS T O THE PRICE OF AN INTERNATIONAL TRANSACTION WHICH THE ASSOCIATED ENTERPRISES INVOLVED MAY SEEK TO SHIFT F ROM ONE JURISDICTION TO ANOTHER. AN 'ASSUMED' PRICE CAN NOT FORM THE REASON FOR MAKING AN ARM'S LENGTH PRICE ADJUSTMENT. 36 SINCE A QUANTITATIVE ADJUSTMENT IS NOT PERMISSIBLE FOR THE PURPOSES OF A TRANSFER PRICING ADJUSTMENT UNDER CHAPTER X, EQUALLY IT CANNOT BE PERMITTED IN RESPEC T OF ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES EITHER. AS ALREADY NOTICED HEREINBEFORE, WHAT THE REVENUE HAS SOUGHT TO DO IN THE PRESENT CASE IS TO RESORT TO A QUANTITATIVE ADJUSTMENT BY FIRST DETERM INING WHETHER THE ADVERTISEMENT, MARKETING AND PROMOTION SPEND OF THE ASSESSEE ON APPLICATION OF THE BRIGHT LINE TEST, IS EXCESSIVE, THEREBY EVIDENCING THE EXISTENC E OF AN INTERNATIONAL TRANSACTION INVOLVING THE ASSOCIAT ED ENTERPRISE. THE QUANTITATIVE DETERMINATION FORMS TH E VERY BASIS FOR THE ENTIRE TRANSFER PRICING EXERCISE IN THE PRESENT CASE. . . . THE PROBLEM WITH THE REVENUE'S APPROACH IS THAT IT WANTS EVERY INSTANCE OF AN ADVERTISEMENT, MARKETING AND PROMOTION SPEND BY AN INDIAN ENTITY WHICH HAPPENS TO USE THE BRAND OF A FOREIGN ASSOCIATED ENTERPRISE TO BE PRESUMED TO INVOLVE AN INTERNATION AL TRANSACTION. AND THIS, NOTWITHSTANDING THAT THIS IS NOT ONE OF THE DEEMED INTERNATIONAL TRANSACTIONS LISTED UNDER THE EXPLANATION TO SECTION 92B OF THE ACT. TH E PROBLEM DOES NOT STOP HERE. EVEN IF A TRANSACTION INVOLVING AN ADVERTISEMENT, MARKETING AND PROMOTION SPEND FOR A FOREIGN ASSOCIATED ENTERPRISE IS ABLE T O BE LOCATED IN SOME AGREEMENT, WRITTEN, (FOR E.G., THE SAMPLE AGREEMENTS PRODUCED BEFORE THE COURT BY THE 37 REVENUE) OR OTHERWISE, HOW SHOULD A TRANSFER PRICIN G OFFICER PROCEED TO BENCHMARK THE PORTION OF SUCH, ADVERTISEMENT, MARKETING AND PROMOTION SPEND THAT THE INDIAN ENTITY SHOULD BE COMPENSATED FOR?' FURTHER, IN MARUTI SUZUKI INDIA LTD. [2016] 381 ITR 117 (DELHI) THE COURT FURTHER EXPLAINED THE ABSENCE OF A MACHINERY PROVISION QUA THE ADVERTISEMENT, MARKETIN G AND PROMOTION EXPENSES BY THE FOLLOWING ANALOGY (PAGE 1 49): 'AS AN ANALOGY, AND FOR NO OTHER PURPOSE, IN THE CO NTEXT OF A DOMESTIC TRANSACTION INVOLVING TWO OR MORE REL ATED PARTIES, REFERENCE MAY BE MADE TO SECTION 40A(2)(A) UNDER WHICH CERTAIN TYPES OF EXPENDITURE INCURRED B Y WAY OF PAYMENT TO RELATED PARTIES IS NOT DEDUCTIBLE WHERE THE ASSESSING OFFICER 'IS OF THE OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REG ARD TO THE FAIR MARKET VALUE OF THE GOODS'. IN SUCH EVE NT, 'SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED A S A DEDUCTION'. THE ASSESSING OFFICER IN SUCH AN INSTAN CE DEPLOYS THE 'BEST JUDGMENT' ASSESSMENT AS A DEVICE TO DISALLOW WHAT HE CONSIDERS TO BE AN EXCESSIVE EXPENDITURE. THERE IS NO CORRESPONDING 'MACHINERY' PROVISION IN CHAPTER X WHICH ENABLES AN ASSESSING OFFICER TO DETERMINE WHAT SHOULD BE THE FAIR 'COMPENSATION' AN INDIAN ENTITY WOULD BE ENTITLED T O IF IT IS FOUND THAT THERE IS AN INTERNATIONAL TRANSACT ION IN THAT REGARD. IN PRACTICAL TERMS, ABSENT A CLEAR STA TUTORY GUIDANCE, THIS MAY ENCOUNTER FURTHER DIFFICULTIES. THE 38 STRENGTH OF A BRAND, WHICH COULD BE PRODUCT SPECIFI C, MAY BE IMPACTED BY NUMEROUS OTHER IMPONDERABLES NOT LIMITED TO THE NATURE OF THE INDUSTRY, THE GEOGRAPH ICAL PECULIARITIES, ECONOMIC TRENDS BOTH INTERNATIONAL A ND DOMESTIC, THE CONSUMPTION PATTERNS, MARKET BEHAVIOU R AND SO ON. A SIMPLISTIC APPROACH USING ONE OF THE MODES SIMILAR TO THE ONES CONTEMPLATED BY SECTION 9 2C MAY NOT ONLY BE LEGALLY IMPERMISSIBLE BUT WILL LEND ITSELF TO ARBITRARINESS. WHAT IS THEN NEEDED IS A C LEAR STATUTORY SCHEME ENCAPSULATING THE LEGISLATIVE POLI CY AND MANDATE WHICH PROVIDES THE NECESSARY CHECKS AGAINST ARBITRARINESS WHILE AT THE SAME TIME ADDRESSING THE APPREHENSION OF TAX AVOIDANCE.' IN THE ABSENCE OF ANY MACHINERY PROVISION, BRINGING AN IMAGINED TRANSACTION TO TAX IS NOT POSSIBLE. THE DE CISIONS IN CIT V. B. C. SRINIVASA SETTY [1981] 128 ITR 294 (SC) ; [2002-TIOL-587-SC-IT-LB] AND PNB FINANCE LTD. V. CIT [2008] 307 ITR 75 (SC) MAKE THIS POSITI ON EXPLICIT. THEREFORE, WHERE THE EXISTENCE OF AN INTERNATIONAL TRANSACTION INVOLVING AMP EXPENSE WITH AN ASCERTAIN ABLE PRICE IS UNABLE TO BE SHOWN TO EXIST, EVEN IF SUCH PRICE IS NIL, CHAPTER X PROVISIONS CANNOT BE INVOKED TO UNDERTAKE A TRANSFER PRICING ADJUSTMENT EXERCISE. AS ALREADY MENTIONED, MERELY BECAUSE THERE IS AN IN CIDENTAL BENEFIT TO THE FOREIGN ASSOCIATED ENTERPRISE, IT CA NNOT BE SAID THAT THE ADVERTISEMENT, MARKETING AND PROMOTION EXP ENSES INCURRED BY THE INDIAN ENTITY WAS FOR PROMOTING THE BRAND OF 39 THE FOREIGN ASSOCIATED ENTERPRISE. AS MENTIONED IN SASSOON J. DAVID [1979] 118 ITR 261, 276 (SC) 'THE FACT THA T SOMEBODY OTHER THAN THE ASSESSEE IS ALSO BENEFITTED BY THE EXPENDITURE SHOULD NOT COME IN THE WAY OF AN EXPEND ITURE BEING ALLOWED BY WAY OF A DEDUCTION UNDER SECTION 1 0(2)(XV) OF THE ACT (INDIAN INCOME-TAX ACT, 1922) IF IT SATI SFIES OTHERWISE THE TESTS LAID DOWN BY THE LAW'.' 8.2 ON A CAREFUL CONSIDERATION OF THE FACTS ON RECO RD WE ARE OF THE OPINION THAT THERE IS NOTHING ON RECORD TO SHOW THA T THE APPELLANT BY INCURRING THE ADVERTISEMENT, MARKETING AND PROMO TION EXPENSES WANTED TO PROMOTE ITS ASSOCIATED ENTERPRISE. THE LE ARNED TRANSFER PRICING OFFICER HAS FAILED TO PROVE THAT THE APPELL ANT BY INCURRING THE ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES WANTED TO BENEFIT THE ASSOCIATED ENTERPRISE AND NOT TO PROMOT E ITS OWN BUSINESS. THE SUBMISSION OF THE LEARNED TRANSFER PR ICING OFFICER THAT CLAUSES 10.02, 10.05, 11.01 AND ARTICLE XVI OF THE AGREEMENT INDICATE THE EXISTENCE OF A 'TRANSACTION' FOR BRAND PROMOTION IS NOT SUPPORTED BY CONTENTS OF THOSE CLAUSES. THE APPELLA NT'S OBJECTIONS BEFORE THE LEARNED DISPUTE RESOLUTION PANEL, WHICH WE HAVE QUOTED ABOVE, ARE ACCEPTABLE. THESE CLAUSES NOWHERE PROVID E THAT THE APPELLANT WILL BE INCURRING BRAND PROMOTION EXPENSE S FOR AND ON BEHALF OF ITS ASSOCIATED ENTERPRISE OR SOLELY FOR I TS BUSINESS PURPOSES AND INTERESTS. THE AGREEMENT DATED OCTOBER 1, 2004, BETWEEN THE APPELLANT AND ITS ASSOCIATED ENTERPRISE IS BASED UPON THE REVENUE SHARING MODEL IN WHICH 46 PER CENT REVE NUE IS BEING SHARED BY AMADEUS SPAIN WITH THE APPELLANT AND, HEN CE, IT IS DIFFICULT TO VISUALISE THAT THE APPELLANT WILL NOT BE INCURRING ROUTINE 40 ADVERTISEMENT EXPENSES IN ITS ENTREPRENEUR CAPACITY . EXCLUDING THE PAYMENT OF INCENTIVES, WHICH IN THE EARLIER YEARS H AVE BEEN HELD, TO BE PURE SELLING EXPENSES THE RATIO OF THE AMP/SALES OF THE APPELLANT IS MERE 2.29 PER CENT. THE LEARNED AUTHORISED REPRE SENTATIVE IS ALSO RIGHT IN RELYING UPON THE DECISION OF THE HONOURABL E JURISDICTIONAL HIGH COURT IN THE CASE OF SONY ERICSSON MOBILE COMMUNICATIONS (SUPRA) FOR SUBMITTING THAT EVENTS W HICH WOULD TRANSPIRE ON TERMINATION OF DISTRIBUTION REQUIRE A TRANSFER PRICING ADJUSTMENT AT THAT STAGE BUT THE SAME WILL BE IMMAT ERIAL TO PRESUME THE EXISTENCE OF AN AGREEMENT, ARRANGEMENT OR UNDERSTANDING IN THE YEAR UNDER CONSIDERATION. IN T HIS REGARD THE HONOURABLE HIGH COURT AT PARAGRAPH 153 OF ITS REPOR TED JUDGMENT HAS BEEN PLEASED TO BE HOLD AS UNDER (PAGE 217): 'ECONOMIC OWNERSHIP OF A BRAND IS AN INTANGIBLE ASS ET, JUST AS LEGAL OWNERSHIP. UNDIFFERENTIATED, ECONOMIC OWNE RSHIP BRAND VALUATION IS NOT DONE FROM MOMENT TO MOMENT B UT WOULD BE MANDATED AND REQUIRED IF THE ASSESSED IS DEPRIVED, DENIED OR TRANSFERS ECONOMIC OWNERSHIP. T HIS CAN HAPPEN UPON TERMINATION OF THE DISTRIBUTION-CUM-MAR KETING AGREEMENT OR WHEN ECONOMIC OWNERSHIP GETS TRANSFERR ED TO A THIRD PARTY. TRANSFER PRICING VALUATION, THEREFORE, WOULD BE MANDATED AT THAT TIME. THE INTERNATIONAL TRANSACTIO N COULD THEN BE MADE A SUBJECT MATTER OF TRANSFER PRICING A ND SUBJECTED TO TAX.' 8.3 AS HELD ABOVE, THE APPELLANT HAS RAISED OBJECTI ONS BEFORE THE LEARNED DISPUTE RESOLUTION PANEL THAT NONE OF THE A BOVE CLAUSES OF THE AGREEMENT MAKE IT MANDATORY FOR THE APPELLANT T O INCUR THE 41 BRAND PROMOTION EXPENSES FOR AND ON BEHALF OF THE A SSOCIATED ENTERPRISE. THE LEARNED DISPUTE RESOLUTION PANEL HA S NOT DISTURBED THESE OBJECTIONS BUT HAS UPHELD THE CASE OF THE LEA RNED TRANSFER PRICING OFFICER ON SOME OTHER GROUNDS, I.E., (I) BY RELYING UPON THE SPECIAL BENCH DECISION IN THE CASE OF L. G. ELECTRO NICS INDIA (P.) LTD. V. ASSTT. CIT [2013] 29 TAXMANN.COM 300/140 IT D 41 (DELHI - TRIB.) [SB] ; (II) BY HOLDING THAT SINCE THE APPELL ANT IS A DEPENDENT AGENCY PERMANENT ESTABLISHMENT OF ITS ASSOCIATED EN TERPRISE HENCE ALL THE EXPENSES ON ADVERTISEMENT, MARKETING AND PR OMOTION ARE BEING INCURRED BY IT FOR THE BENEFIT OF THE ASSOCIA TED ENTERPRISE, AND (III) BY RELYING UPON THE AMENDED PROVISIONS OF SEC TION 92B. WE DO NOT FIND ANY SUBSTANCE IN THE ABOVE APPROACH OF THE LEARNED DISPUTE RESOLUTION PANEL. THE DECISION OF THE SPECI AL BENCH IN L.G. ELECTRONICS (P.) LTD. (SUPRA) IS NO MORE GOOD LAW P OST ABOVE DECISIONS OF THE JURISDICTIONAL HIGH COURT. WE HAVE ALREADY REPRODUCED THE ABOVE FINDINGS OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF BAUSCH & LOMB EYECARE (INDIA) (P.) LTD. (SUPRA) WHEREIN IT IS HELD THAT (PAGE 253) '. . . AS FAR AS THE LEG ISLATIVE INTENT IS CONCERNED, IT IS SEEN THAT CERTAIN TRANSACTIONS LIS TED IN THE EXPLANATION UNDER CLAUSES (I)(A) TO (E) TO SECTION 92B ARE DESCRIBED AS AN 'INTERNATIONAL TRANSACTION'. THIS MIGHT BE ON LY AN ILLUSTRATIVE LIST BUT SIGNIFICANTLY IT DOES NOT LIST ADVERTISEME NT, MARKETING AND PROMOTION SPENDING AS ONE SUCH TRANSACTION . . .' H ENCE THE AMENDMENTS TO SECTION 92B BY THE FINANCE ACT, 2012, ALSO DO NOT SUPPORT THE CASE OF THE REVENUE LASTLY ON THE OBSER VATIONS MADE BY THE LEARNED DISPUTE RESOLUTION PANEL THAT SINCE THE APPELLANT IS A DEPENDENT AGENCY PERMANENT ESTABLISHMENT OF ITS ASS OCIATED ENTERPRISE, HENCE, ALL ITS EXPENSES ON ADVERTISEMEN T, MARKETING AND 42 PROMOTION ARE BEING INCURRED BY IT FOR THE BENEFIT OF ASSOCIATED ENTERPRISE WE WOULD LIKE TO STATE THAT THIS IS ALSO ENTIRELY IRRELEVANT. WHILE ALLEGING AS THE ABOVE THE LEARNED DISPUTE RES OLUTION PANEL HAS NOT APPRECIATED THAT THE APPELLANT HAS BEEN HEL D TO BE A DEPENDENT AGENT PERMANENT ESTABLISHMENT OF AMADEUS SPAIN FOR DETERMINATION OF AMADEUS SPAIN'S INCOME, WHICH IS T AXABLE IN INDIA. MOREOVER, WE MAY REFER HERE THE DECISION OF THE HONOURABLE JURISDICTIONAL HIGH COURT IN THE CASE OF WHIRLPOOL OF INDIA LTD. (SUPRA) WHEREIN IT IS HELD BY THE HONOURABLE H IGH COURT AS UNDER (PAGES 175, 179 OF 381 ITR): THE PROVISIONS UNDER CHAPTER X DO ENVISAGE A 'SEPAR ATE 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 DICTATED BY WHIRLPOOL USA. MERELY BECAUSE WHIR LPOOL USA HAS A FINANCIAL INTEREST, IT CANNOT BE PRESUMED THAT THE ADVERTISEMENT, MARKETING AND PROMOTION EXPENSE INCU RRED BY THE WOIL ARE AT THE INSTANCE OR ON BEHALF OF WHI RLPOOL USA. THERE IS MERIT IN THE CONTENTION OF THE ASSESS EE THAT THE INITIAL ONUS IS ON THE REVENUE TO DEMONSTRATE THROU GH SOME TANGIBLE MATERIAL THAT THE TWO PARTIES ACTED IN CON CERT AND FURTHER THAT THERE WAS AN AGREEMENT TO ENTER INTO A N INTERNATIONAL TRANSACTION CONCERNING THE ADVERTISEM ENT, MARKETING AND PROMOTION EXPENSES . . . . AS ALREADY MENTIONED, MERELY BECAUSE THERE IS AN IN CIDENTAL BENEFIT TO WHIRLPOOL, USA, IT CANNOT BE SAID THAT T HE ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES INC URRED 43 BY WOIL WAS FOR PROMOTING THE BRAND OF WHIRLPOOL, U SA. AS MENTIONED IN SASSOON J. DAVID [1979] 118 ITR 261 (S C) 'THE FACT THAT SOMEBODY OTHER THAN THE ASSESSEE IS ALSO BENEFITED BY THE EXPENDITURE SHOULD NOT COME IN THE WAY OF AN EXPENDITURE BEING ALLOWED BY WAY OF A DEDUCTION UND ER SECTION 10(2)(XV) OF THE ACT (INDIAN INCOME-TAX ACT , 1922) IF IT SATISFIES OTHERWISE THE TESTS LAID DOWN BY THE LAW. ' 8.4 CONSIDERING THE MATERIAL FACTS LIKE THE ABSENCE OF AN AGREEMENT, ARRANGEMENT OR UNDERSTANDING BETWEEN THE APPELLANT AND ITS ASSOCIATED ENTERPRISE FOR SHARING THE ADVER TISEMENT, MARKETING AND PROMOTION EXPENSES OR FOR INCURRING T HE ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES FOR THE SOLE BENEFIT OF THE ASSOCIATED ENTERPRISE, PAYMENTS MADE BY THE APPELLANT UNDER THE HEAD 'ADVERTISEMENT, MARKETING AND PROMOTION' TO THE DOMESTIC PARTIES CANNOT BE TERMED AS AN 'INTERNATIONAL TRANSACTION' SPECIFICALLY WHEN THE L EARNED TRANSFER PRICING OFFICER HAS NOT BEEN ABLE TO PROVE THAT THE EXPENSES INCURRED WERE NOT FOR THE BUSINESS CARRIED OUT BY T HE APPELLANT IN INDIA. WE ARE THUS OF THE OPINION THAT THE TRANSFER PRICING OFFICER HAD WRONGLY INVOKED THE PROVISIONS OF CHAPTER X OF THE ACT FOR THE SAID ADVERTISEMENT, MARKETING AND PROMOTION SPENT. THE ADDITION OF RS. 75,40,09,515 IS, THEREFORE, DIRECTED TO BE D ELETED. GROUND NOS. 4 TO 4.4 ARE THEREFORE ALLOWED. CONSIDERING OU R CONCLUSIONS ABOVE GROUND NOS. 5 AND 5.1 DO NOT REQUIRE ANY ADJU DICATION. 5.2 THE ORDER PASSED BY THE COORDINATE BENCH FOR A. Y. 2009-10 HAS ALSO BEEN FOLLOWED BY THE TRIBUNAL VIDE ORDER D ATED 23RD OCTOBER, 2017 IN ITA NO.1835/DEL/2015 FOR A.Y. 2010-11. MORE OVER, THE DECISION OF THE COORDINATE BENCH FOR A.Y.2010-11 HA S ALSO BEEN 44 UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN ITA NO. 154/2017 VIDE ORDER DATED 26TH APRIL, 2017 AS UNDER:- 3. THE FIRST ISSUE CONCERNS THE DELETION OF THE TRANSF ER PRICING ADJUSTMENT OF RS.75,40,09,515/- ON ACCOUNT OF ADVER TISING, MARKETING AND SALES PROMOTION EXPENSES (AMP EXPENSE S) RELYING UPON THE DECISIONS OF THIS COURT INCLUDING THE DECI SION IN BAUSCH & LOMB EYECARE (INDIA) PVT. LTD. VS. ADDITIONAL COM MISSIONER OF INCOME TAX (2016) 381 ITR 227 (DEL). 4. AS FAR AS THE ABOVE ISSUE IS CONCERNED, IT IS CO VERED BY THE EARLIER DECISIONS OF THIS COURT AGAINST THE REVENUE . THIS COURT IS NOT INCLINED TO FRAME ANY SUBSTANTIAL QUESTION OF L AW ON THIS ISSUE. 5.3 RESPECTFULLY FOLLOWING THE ABOVE BINDING PRECED ENTS, IT IS CONCLUDED THAT THE TPO HAS WRONGLY INVOKED THE PROV ISIONS OF CHAPTER X OF THE ACT. THE ADDITION OF RS.114.89 CRO RES, IS THEREFORE, DIRECTED TO BE DELETED. GROUND NOS. 3 & 3.1 ARE, TH EREFORE, ALLOWED. CONSIDERING OUR CONCLUSIONS, OTHER GROUNDS CHALLENG ING VARIOUS OTHER FACETS OF THE IMPUGNED ADDITION DO NOT REQUIRE ANY ADJUDICATION AS HAVING BECOME IN FRUCTUOUS. 20. THE HON'BLE HIGH COURT OF DELHI IN ASSESSEES O WN CASE IN ITA NO. 154/2017 ORDER DATED 26.04.2017 HAD THE OCCASION TO CONSIDER THIS QUARREL. ORDER OF THE HON'BLE JURISDICTIONAL HIGH COURT READS AS UNDER: 45 2. THERE ARE BROADLY TWO ISSUES RAISED BY THE REVEN UE IN THIS APPEAL UNDER SECTION 260A OF THE INCOME TAX ACT, 19 61 (ACT) AGAINST THE ORDER DATED 21ST AUGUST, 2016 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL (ITAT) IN ITA NO. 1804/DEL /2014 FOR THE ASSESSMENT YEAR (AY) 2009-10. 3. THE FIRST ISSUE CONCERNS THE DELETION OF THE TRA NSFER PRICING ADJUSTMENT OF RS. 75,40,09,515/- ON ACCOUNT OF ADVE RTISING, MARKETING AND SALES PROMOTION EXPENSES (AMP EXPENSE S) RELYING UPON THE DECISIONS OF THIS COURT INCLUDING THE DECI SION IN BAUSCH & LOMB EYECARE (INDIA) PVT. LTD. V. ADDITIONAL COMMIS SIONER OF INCOME TAX (2016) 381 ITR 227(DEL). 4. AS FAR AS THE ABOVE ISSUE IS CONCERNED, IT IS CO VERED BY THE EARLIER DECISIONS OF THIS COURT AGAINST THE REVENUE . THIS COURT IS NOT INCLINED TO FRAME ANY SUBSTANTIAL QUESTION OF L AW ON THIS ISSUE. 21. THIS ORDER WAS AGAIN FOLLOWED BY THE HON'BLE HI GH COURT IN ITA NO. 901 OF 2019 ORDER DATED 16.10.2019. THE RELEVA NT FINDINGS READ AS UNDER: 3. THE REVENUE IS IN APPEAL TO ASSAIL THE ORDER DA TED 27.02.2019 PASSED BY THE INCOME TAX APPELLATE TRIBU NAL, DELHI BENCH I, NEW DELHI. WE ARE CONCERNED WITH I TA 1662/DEL/2016 RELEVANT TO THE ASSESSMENT YEAR 2011- 12 IN RESPECT OF THE RESPONDENT ASSESSEE. THE TRIBUNAL HA S 46 REJECTED THE SAID APPEAL. ON THE ISSUE OF TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF AMP EXPENSES, THE TRIBUNAL RELIED UPON THE COORDINATE BENCH DECISION IN THE RESPONDEN T ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11 WHICH HAS BEEN UPHELD BY THIS COURT IN ITA 154/2017 DELET ING THE ADDITION ON THE GROUND THAT THE TPO HAS WRONGLY INV OKED THE PROVISIONS OF CHAPTER X OF THE ACT FOR THE SAID AMP SPENT. IN RELATION TO THE ISSUE OF DEDUCTION UNDER SECTION 10 A, THE ITAT HAS FOLLOWED ITS OWN DECISION IN THE RESPONDEN T ASSESSEE OWN CASE FOR THE ASSESSMENT YEAR 2009-10 A ND HELD THAT THE ASSESSEE IS ELIGIBLE FOR THE CLAIM OF DEDU CTION UNDER SECTION 10A OF THE ACT. IT HAS ALSO RELIED UPON THE ORDER OF THIS COURT IN ITA 154/2017 DATED 22.05.2017 WHICH HAS UPHELD THE FIND INGS OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2009-10. MR. H OSSAIN LEARNED SENIOR STANDING COUNSEL FOR THE APPELLANT F AIRLY STATES THAT SO FAR AS THESE ISSUES ARE CONCERNED, THEY STA ND CONCLUDED BY THIS COURT. 22. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-O RDINATE BENCH AND THE HON'BLE JURISDICTIONAL HIGH COURT OF DELHI, WE DIRECT THE ASSESSING OFFICER /TPO TO DELETE THE ADDITIONS MADE ON ACCOUN T OF AMP EXPENDITURE, SUBSTANTIVE AND PROTECTIVE. GROUND NO S. 1 TO 8 TAKEN TOGETHER ARE ALLOWED. 47 23. SECOND GRIEVANCE RELATES TO THE DISALLOWANCE OF RS. 38,31,472/- MADE U/S 14A OF THE ACT. 24. WE FIND THAT DURING THE YEAR UNDER CONSIDERATIO N, THE ASSESSEE HAS EARNED NO EXEMPT INCOME. THEREFORE, IN THE LIG HT OF THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S CHEMINVEST LTD 121 ITD 318 WHICH WAS AFFIRMED BY THE HON'BLE HIGH COURT OF DEL HI. SAME VIEW IS TAKEN BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CORRTECH ENERGY (P) LTD 372 ITR 97. WE ARE OF THE CONSIDERED OPINION THAT NO DISALLOWANCE SHOULD HAVE BEEN MADE U/S 14A OF THE A CT. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 38,31,472/-. 25. CHALLENGE OF LEVY OF INTEREST U/S 234B OF THE A CT IS CONSEQUENTIAL AND WE DIRECT ACCORDINGLY. 48 26. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO . 7376/DEL/2018 IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 08.03. 2021. SD/- SD/- [ SUCHITRA KAMBLE ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 08 TH MARCH, 2021 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 49 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER