MSD Pharmaceuticals Pvt. Ltd., New Delhi V. Addl. CIT, Special Range- 6, New Delhi

ITA 7569/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2336 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I1
• Assessment Year: 2014-2015
• Appeal Filed On: 29-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY I BARA
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Rule of consistency; Additional evidence; Wholly owned subsidiary
• Section: 92C; 92B; 115JB; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1, NEW DELHI BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER AND SH. SANDEEP GOSAIN,JUDICIAL MEMBER ITA NO.7569/DEL/2018 ASSESSMENT YEAR: 2014-15 MSD PHARMACEUTICALS PVT. LTD. 1544, LEVEL 15, EROS CORPORATE TOWERS, NEHRU PLACE, NEW DELHI -110019 PAN NO. AAECM1106C VS ADDITIONAL COMMISSIONER OF INCOME TAX SPECIAL RANGE-6, NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY MS. RASHMI CHOPRA, ADVOCATE RESPONDENT BY SH. SANJAY I. BARA, CIT DR DATE OF HEARING: 06/03/2019 DATE OF PRONOUNCEMENT: 07/03/2019 ORDER PER N. K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER DATED 26.10.2018 FRAMED U/S 143 (3) R.W.S. 144 C OF THE ACT PERTAINING TO A. Y. 2014-15. 2. THE SUBSTANTIVE GRIEVANCE OF THE ASSESSEE READ : - 2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AN D IN LAW; 1. THE LEARNED ASSESSING OFFICER (LD. AO) FOLLOWI NG THE DIRECTIONS OF HONBLE DISPUTE RESOLUTION PANEL - 2 (HONBLE DRP) HAS ERRED IN ASSESSING THE RETU RNED INCOME OF THE APPELLANT OF RS. 258,415,100 G BROUGHT FORWARD LOSSES OF RS. 84,705,565) AT RS. 639,855,300/-. TRANSFER PRICING ISSUES 2. THE ORDER / DIRECTIONS PASSED PASSED BY LD. AO/ LEARNED TRANSFER PRICING OFFICER (LD. TPO)/ HON'BLE DRP ARE BAD IN LAW AND FACTS, TO TH E EXTENT OF ADJUSTMENT OF RS. 381,440,197 /- MADE IN THE IMPUGNED ORDER. ALLEGED EXCESSIVE ADVERTISING. MARKETING AND PROMOTION (AMP) EXPENSES 2. THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LA W, THE LD. AO/LD. TPO/ HONBLE DRP HAS GROSSLY ERRED BOTH IN FACTS & LAW, IN ENHANCING TH E INCOME OF THE APPELLANT BY RS. 271,284,352/- ON ACCOUNT OF NON RECEIPT OF THE INCO ME FOR ALLEGEDLY EXCESSIVE AMP EXPENSES INCURRED BY THE APPELLANT AND IN DOING SO HAVE GRO SSLY ERRED IN: 3.1. ASSUMING JURISDICTION IN RESPECT OF THE AMP EXPENDI TURE WHEN SUCH EXPENDITURE DID NOT SATISFY THE REQUISITES OF BEING AN INTERNATIONAL TR ANSACTION UNDER SECTION 92B READ WITH SECTION 92F(V) OF THE ACT; 3.2. NOT APPRECIATING THAT EXPENDITURE INCURRED BY THE A PPELLANT W AS ON ACCOUNT OF SALES ACTIVITY AND, COULD NOT BE REGARDED AS A TRANSACTION IN AB SENCE OF ANY UNDERSTANDING/ ARRANGEMENT BETWEEN THE APPELLANT AND THE ASSOCIATE D ENTERPRISE (AE) FOR THE PROMOTION OF BRAND AND THEREFORE CANNOT BE TERMED AS AN INTERNATIONAL TRA NSACTION BETWEEN THE APPELLANT AND THE AE; 3.3. NOT HOLDING THAT THE EXISTENCE OF INTERNATIONAL TR ANSACTION IN RESPECT OF AMP HAS TO BE SEEN THROUGH THE PRISM OFCONDUCT OF THE PARTIES AND TH E OWNERSHIP OF IPR(S) AND THEIR USAGE; 3.4. IN CONCLUDING THAT THE APPELLANT ENTERED INTO AN IN TERNATIONAL TRANSACTION WITH ITS AE AS A CONSEQUENCE OF INCURRING A HIGHER EXPENDITURE ON AMP IN THE ABSENCE OF ANY MATERIAL ON RECORD AND/OR ANY POWERS UNDER CHAPTER-X OF THE ACT; 3.5. FAILING TO APPRECIATE THE FACT THAT THE APPELLANT O PERATES IN THE PHARMACEUTICAL INDUSTRY WHICH IS A HIGHLY REGULATED INDUSTRY WHICH PROHIBIT S THE APPELLANT FROM UNDERTAKING ANY KIND OF ADVERTISING CAMPAIGN TO PROMOTE ITS PRO DUCTS AS ALLEGED BY THE LD. AO / TPO / HONBLE DRP AND THAT THE ALLEGED AMP EXPENSES RELATE TO MEDICAL DETAILING EXPENSES, DISEASE AWARENESS CAMPAIGNS ETC.; 3.6. HOLDING THAT THE APPELLANT IS ADDING VALUE TO THE P RODUCTS SOLD IN INDIA BY INCURRING AMP EXPENSES WITHOUT APPRECIATING THE FACT THAT AMP EXPENSES INCURRED BY THE APPELLANT ARE PRIMARILY FOR THE PURPOSE OF SELLING THE PRODUCTS AND NOT TOWARDS BRAND BUILDING ACTIVITY AND IS INTERLINKED AND INTER-CONN ECTED TO THE DISTRIBUTION BUSINESS OF THE APPELLANT; 3.7. THAT THE LD. AO/LD. TPO/ HONBLE DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE AMP EXPENSES ARE INCURRED BY THE APPELLANT AT ITS OWN VOLITION AND FOR ITS OWN BENEFIT AND ANY BENEFIT ACCRUING TO THE AE IS INCID ENTAL FOR WHICH NO COMPENSATION IS WARRANTED; 3.8. WRONGLY ASSUMING THAT THE APPELLANT IS OPERATING UN DER THE DIRECTIONS AND FOR THE PURPOSES OF /ME AE; 3 3.9. APPLYING BRIGHT LINE TEST (BLT) FOR COMPUTING ADJU STMENT ON ACCOUNT OF EXPENDITURE ON AMP WITHOUT APPRECIATING THAT IN ABSENCE OF SPECIFI C PROVISION UNDER THE TRANSFER PRICING REGULATIONS IN INDIA, AN ADJUSTMENT ON ACCO UNT OF THE ARMS LENGTH PRICE OF AMP EXPENSES COULD NOT BE MADE; 3.10. ERRED IN APPLYING BLT AGAINST THE BINDING PRECEDENT AS LAID DOWN BY THE HONBLE DELHI HIGH COURT IN CASE OF SONY MOBILE COMMUNICATIONS [3 74 ITR 118 (DEL)]; 3.11. NOT APPRECIATING THAT BRIGHT LINE LIMIT IS NOT A PRESCRIBED METHOD UNDER THE PURVIEW OF SECTION 92C OF THE ACT; 3.12. NOT APPRECIATING THAT TRANSACTIONAL NET MARGIN MET HOD (TNMM) ANALYSIS INCLUDED AMP EXPENSES AND COULD NOT BE BENCHMARKED AND ADJUS TED AS A PART OF THE ADJUSTMENT PERTAINING TO MARKETING INTANGIBLES; 3.13. APPLYING AN AD-HOC MARK-UP OF 10.19% PERCENT ON ALL EGEDLY EXCESS AMP EXPENSES INCURRED BY THE APPELLANT; 3.14. ERRED IN CONSIDERING SELLING AND DISTRIBUTION EXPEN SES WITHIN THE AMBIT OF AMP EXPENSES WHICH IS AGAINST THE BINDING PRINCIPLES LA ID DOWN BY THE HONBLE DELHI HIGH COURT IN CASE OF SONY MOBILE COMMUNICATIONS (SUPRA) 3.15. WITHOUT PREJUDICE, LD. AO/ LD. TPO/ HONBLE DRP HAS ERRED ON FACTS AND IN LAW IN GIVING AN ERRONEOUS FINDING OF USING COMPANIES SELE CTED BY LD. TPO, WHICH ARE, NEITHER FUNCTIONALLY COMPARABLE, NOR INTO SIMILAR BUSINESS ACTIVITIES TO BENCHMARK THE AMP EXPENSES OF THE APPELLANT ADJUSTMENT ON ACCOUNT OF PROVISION OF COORDINATION AND OTHER SUPPORT SERVICES 4. THAT ON THE FACTS AND CIRCUMSTANCE OF THE CASE A ND IN LAW', THE LD. AO/LD. TPO/ HONBLE DRP HAS ERRED IN PROPOSING TP ADJUSTMENT ON ACCOUNT OF CO-ORDINATION & OTHER SUPPORT SENDEES PROVIDED BY THE ASSESSEE AND IN DOING SO HAVE GROSS LY ERRED IN: 4.1. IGNORING THE PRINCIPLE OF CONSISTENCY IN TAX PROCEE DINGS. 4.2. COMPUTING THE ENTITY LEVEL OPERATING MARGIN OF THE ASSESSEE INSTEAD OF CO-ORDINATION AND OTHER SUPPORT SERVICE SEGMENT BY DISREGARDING T HE SEGMENTAL ANALYSIS AND NOT APPROPRIATELY EXCLUDING NON-OPERATING INCOME/ EXPEN SES AND INCLUDING OPERATING INCOME/ EXPENSES. 4.3 CALCULATING INCORRECT MARGIN OF COMPARABLES, DESPITE OF CORRECTED MARGINS SUBMITTED DURING THE COURSE OF TP ASSESSMENT; 4.4. CONSIDERING FUNCTIONALLY DISSIMILAR COMPANIES FOR C OMPUTING THE ALP; 4.5. DISREGARDING THE APPROACH ADOPTED BY THE ASSESSEE O F USING THE MULTIPLE YEAR DATA IN THE TP DOCUMENTATION AND HOLDING THAT CURRENT YEAR (I.E. FY 2013-14) DATA FOR COMPARABLE COMPANIES SHOULD BE USED DESPITE THE FAC T THAT THE SAME WAS NOT NECESSARILY AVAILABLE TO THE ASSESSEE AT THE TIME O F PREPARING ITS TP DOCUMENTATION. 5. THAT LD. AO/TPO HAS IGNORED THE FACT THAT APPELLAN T HAS FILED A RECTIFICATION APPLICATION AGAINST THE ORDER OF LD. TPO PURSUANT TO DRP DIRECT IONS. OTHERS 6. THE LD. AO / HONBLE DRP HAS ERRED IN NOT GRANTING SET-OFF OF BROUGHT FORWARD LOSS AMOUNTING TO RS. 84,705,565 OF AY 2012-13. 7. THE LD. AO/HONBLE DRP HAS ERRED IN NOT GRANTING M INIMUM ALTERNATIVE TAX (MAT) CREDIT AMOUNTING TO RS. 18,081,414 WHILE COMPUTING THE TAX LIABILITY OF THE APPLICANT. THE LD. AO 4 FAILED TO APPRECIATE THE FACT THAT DURING AY 2013-1 4, THE APPELLANT HAD PAID TAXES UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT AND ACCORDIN GLY, APPELLANT IS ELIGIBLE FOR UTILIZATION OF MAT CREDIT AGAINST THE TAX LIABILITY FOR AY 2014-15 COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT. 8. THE LD. AO ERRED IN DISREGARDING THE SOUND TP PRIN CIPLES AND JUDICIAL PRONOUNCEMENTS IN INDIA IN UNDERTAKING THE TP ADJUSTMENTS. 9. THE LD. AO HAS ERRED IN LEVYING INTEREST UNDER SEC TION 234A OF THE ACT WHILE CALCULATING THE AMOUNT OF DEMAND, WITHOUT APPRECIATING THE FACT THA T THE APPELLANT HAS FILED ITS RETURN OF INCOME WITHIN THE PRESCRIBED DUE DATE MENTIONED UND ER SECTION 139(1) OF THE ACT. 10. THE LD. AO HAS WHILE CALCULATING THE AMOUNT OF DEM AND DUE FROM THE APPELLANT, COMPUTED THE INTEREST TO BE LEVIED ON THE APPELLANT ERRONEOUSLY. 11. THE LD.AO/HONBLE DRP HAS ERRED IN HOLDING THAT TH E APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF EACH ITEM OF DI SALLOWANCE / ADDITIONS AND IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271 (1) (C) OF TH E ACT. 12. THAT THE APPELLANT RESERVES ITS RIGHT TO ADD, ALTE R, AMEND OR WITHDRAW ANY GROUND OF OBJECTIONS EITHER BEFORE OR AT THE TIME OF HEARING OF THESE OBJECTIONS. THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTH ER. 3. VIDE APPLICATION DATED 23.12.2018 THE ASSESSEE S OUGHT PERMISSION TO FILE ADDITIONAL EVIDENCE IN SUPPORT O F THE APPEAL. THE CONTENTS OF THE SAID APPLICATION READ :- 1. IN THE CAPTIONED APPEAL PREFERRED BY APPELLANT, AGA INST THE ORDER DATED OCTOBER 26, 2018 PASSED BY THE JOINT COMMISSIONER OF INCOME TAX, SPECIAL RANGE -6, NEW DELHI UNDER SECTION 143 (3) READ WITH SECTION 144C OF THE INCOME TAX ACT, 1961, THE APPELLANT HAS INTERALIA RAISED GROUNDS OF APPEAL AGAINST AN A DDITION OF INR 25,450,280 ON ACCOUNT OF PROVISION OF COORDINATION AND SUPPORT SERVICES. 2. IN THIS REGARD, APPELLANT HUMBLY SUBMITS THAT LEAR NED TRANSFER PRICING OFFICER (LD. TPO) HAS COMPUTED THE ENTITY LEVEL OPERATING MARGIN INSTEAD OF SUPPORT SERVICE SEGMENT BY DISREGARDING THE SEGMENTAL ANALYSIS DOCUMENTED BY A PPELLANT IN TRANSFER PRICING DOCUMENTATION AND STATING THAT RELIABLE SEGMENTAL I NFORMATION IS NOT AVAILABLE. 3. IN THIS REGARD, WE SUBMIT HEREWITH THE CERTIFICATE FROM THE INDEPENDENT AUDITOR AUTHENTICATING THE MARGIN EARNED FROM THE EACH SEGM ENT OF BUSINESS INCLUDING PROVISION OF COORDINATION AND OTHER SUPPORT SERVICES. IN THE LIGHT OF THE AFORESAID SUBMISSION, HONBLE B ENCH MAY, WITH A VIEW TO ADVANCE THE CAUSE OF JUSTICE, BE PLEASED TO ADMIT T HESE DOCUMENTS TO THE PROCEEDINGS UNDER CONSIDERATION AND PASS SPECIFIC ORDER TO THAT EFFECT IN THIS PRAYER. 4. THE MSD PHARMACEUTICALS PRIVATE LIMITED (MSD IN DIA OR THE ASSESSEE OR THE COMPANY) IS A WHOLLY OWNED SUBSIDIARY OF 5 MERCK, SHARPE AND DOHME B. V. AND AN INDIRECT WHOLL Y-OWNED SUBSIDIARY OF MERCK & CO. INC., A U. S. PUBLICLY- T RADED COMPANY (MERCK & CO. , INC. AND ENTITIES DIRECTLY AND INDI RECTLY RELATED TO IT ARE HEREINAFTER COLLECTIVELY REFERRED TO AS MER CK GROUP). THE COMPANY WAS INCORPORATED ON DECEMBER 3, 2004 AND CO MMENCED ITS OPERATIONS IN JANUARY 2005. INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSES SEE DURING THE YEAR UNDER CONSIDERATION ARE AS UNDER :- NO. NATURE OF TRANSACTION METHOD VALUE OF TRANSACTION 1 PURCHASE OF TRADING GOODS RPM 1,82,06,11,600 2 PROVISION OF CO - ORDINATION SERVICES CPM 448,37,860 3 OTHER SUPPORT SERVICES CPM 2531,333,14 4 RECOVERY OF EXPENSES - 457,60,134 5 REIMBURSEMENT OF EXPENSES PAID - 139,94,817 6 SUBVENTION INCOME RECEIVED OTHER METHOD 3,74,40,000 5. THE FACTUAL MATRIX INVOLVED IN THE GRIEVANCE OF THE ASSESSEE CAN BE UNDERSTOOD FROM THE ORDER GIVING EFFECT TO T HE DIRECTION OF THE DRP AND THE SAME READ AS UNDER :- 4. FOLLOWING THE DIRECTIONS OF HONBLE DRP, EFFEC T IS BEING GIVEN IN THE MANNER GIVEN BELOW :- 6 A. REVISED COMPUTATION OF CO-ORDINATION AND SUPPOR T SERVICES :- NAME OF THE COMPANY OP/ OC (%) AS PER ORDER U/S 92 CA(3) OP/OC(%) IN PURSUANCE OF DRPS DIRECTION OP/ OC (%) AFTER WC ADJUSTMENT BANGALORE BIOTECH LABS PVT. LTD. 12.7% 4.42% 1.06% CHOKSI LABORATORIES LTD. 15.18% 15.18% 10.72% RAPTAKOS, BRETT TEST LABORATORIES LTD. 5.32% 5.32% 3.17% VIMLA LABS LTD. 15.85% 15.85% 11.57% VIVO BIO TECH LTD. 36.12% 1.16% 4.05% AVERAGE 17.03% 8.39% 6.11% IN ABSENCE OF RELIABLE SEGMENTAL WORKING, TPO WHIL E PASSING ORDER U/S 92CA(3) OF THE ACT HAS CALCULATED NET MAR GIN AT ENTITY LEVEL OF THE ASSESSEE COMPANY @ -2.29%. IN THIS RE GARD, LD. DRP HAS HELD THAT THE TPO HAS CITED ABSENCE OF SEGMENTA L DATA AND SATISFACTORILY ALLOCATION OF EXPENSES IN THIS SEGME NT. WE DONT FIND ADEQUATE REASON TO DISAGREE WITH THE TPOS ACT ION AND HENCE UPHOLD THE SAME. ASSESSEES OBJECTION IN THIS REGA RD ARE REJECTED. 7 IT IS FURTHER ADDED THAT THERE IS NO RELIABLE SEGME NTAL DATA AVAILABLE WITH THE ASSESSEE, HENCE COULD NOT BE ALL OWED. BASED ON THE ABOVE UPDATE AVERAGE PLI OF COMPARABLES @6.1 1% IN RESPECT OF PROVISION OF CO-ORDINATION AND OTHER SUP PORT SERVICE SEGMENT, ALP IS BEING REVISED AS FOLLOWS :- B. PURCHASE OF TRADING GOODS FROM THE AE:- FOLLOWING THE DIRECTIONS OF HONBLE DRP, THE FINAL SET OF COMPARABLE WITH WCA UPDATED MARGINS ARE AS FOLLOWS: - REGARDING, THE SEGMENTAL MARGINS OF THE ASSESSEE, T HE DETAILS SUBMITTED BY THE ASSESSEE DOES NOT HAVE ANY AUDITED BACKING. IN LIGHT OF THIS, TPO IS NOT ABLE TO PROVIDE THIS RELI EF TO THE ASSESSEE. BASED ON THE ABOVE COMPUTED TABLE, THE FOLLOWING EF FECT IS PROVIDED IN COMPUTATION OJFAWPS LENGTH PRICE:- TOTAL OPERATING COST 5,567,691,546 ARMS LENGTH PRICE AT A MARGIN OF 6.11% 5,907,877,500 TRANSFER PRICE RECEIVED BY THE TAXPAYER 5,442,979,466 SHORTFALL OF TRANSFER PRICE FROM ALP 46,48,98,033 INTERNATIONAL TRANSACTION RELATED TO SUPPORT SERVICES 297,971,174 % OF TRANSACTION 5.47% PROPORTIONATE ADJUSTMENT 2,54,50,280 NAME OF COMPARABLE COMPANY INTENSITY ADJUSTED OP/OC (%) WORKING CAPITAL ADJUSTED MARGIN BRAWN BIOTECH LTD. 2.38% 0.36% EMAMI FRA NK ROSS LTD. 5.43% 0.04% INFUGEN PHARMA 2.84% 2.21% OCEANIC PHARMACHEM 9.40% 5.38% ZUVENTUS HEALTHCARE LTD. 5.63% 1.83% AVERAGE 5.14% 1.97% 8 THE AMOUNT WHICH REPRESENTS THE BRIGHT LINE AND THE AMOUNT THAT SHOULD HAVE BEEN COMPENSATED TO THE ASSESSEE C OMPANY ARE COMPUTED HEREUNDER:- OPERATING REVENUE 5,442,979,466 ARMS LENGTH PRICE AT A MARGI N OF 1.97% 10,72,26,695 ARMS LENGTH PRICE 5,335,752,771 PRICE PAID BY THE ASSESSEE 5,567,691,546 DIFFERENCE 23,19,38,775 LESS: REIMBURSEMENT RECEIVED 400,000,000 DIFFERENCE AFTER REIMBURSEMENT NIL PROPORTIONATE ADJUSTMENT NIL C. RE - COMPUTATION OF ALP FOR CREATION OF MARKETING INTANGIBLES (AMP): - FOLLOWING THE DIRECTIONS OF HONBLE DRP, THE FINAL SET OF COMPARABLE FOR APPLY OF K - UP WITH UPDATED MARGINS ARE AS FOLLOWS: - NAME OF COMPARABLE COMPANY GP/OC MARGIN (%) CRYSTAL HUES LTD 6.60% GOLDMINE A DVERTISING LTD. 5.34% ICRA MANAGEMENT CONSULTING SERVICES LTD. 5.36% KESTONE INTEGRATED MKG. SERVICES LTD. 8.27% KILLICK AGENCIES & MKG. LTD. 25.39% AVERAGE 10.19% PARTICULARS VALUE (INR) VALUE OF GROSS SALE OF ASSESSEE (A) 5442583284 ARITHMETIC MEAN OF AMP/SALES OF COMPARABLES (B) 0.61% AMOUNT THAT REPRESENTS PRICE FOR ROUTINE AMP ACTIVITIES (C=B*A 33353250 TOTAL EXPENDITURE INCURRED BY ASSESSEE ON AMP (D) 642559487 ARMS LENGTH PRICE OF THE SERVICE/EXPENDITURE FOR CREATION OF MARKETING INTANGIBLE IN INDIA IN FAVOUR OF THE AE (E=D -C) 609206237 MARK-UP (A), 10.19% (F) 62078115 THE AMOUNT BY WHICH ASSESSEE COMPANY SHOULD HAVE BEEN REIMBURSED BY AE, AND FOR WHICH ADJUSTMENT IS REQUIRED TO BE MADE (G=E+F) 671284352 LESS: PRICE RECEIVED FROM THE AE FOR CREATION OF MARKETING INTANGIBLES 400000000 REVISED ADJUSTMENT FOR CREATION OF MARKETING INTANGIBLES 27,12,8 4,352 9 THUS, GIVING EFFECT TO THE DIRECTIONS OF HONBLE DR P AND BASED ON THE ABOVE COMPUTATION, AN ADJUSTMENT OF RS 27,12,84 ,352/- TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF MARK ETING AND MARKET DEVELOPMENT FUNCTION CARRIED OUT FOR THE AE FOR WHICH THE ASSESSEE COMPANY WAS NOT ADEQUATELY COMPENSATED IS REQUIRED TO BE CARRIED OUT HOWEVER, BENCHMARKING CARRIED OUT AB OVE IS ON PROTECTIVE BASIS. 6. A PERUSAL OF THE ABOVE SHOWS THAT THE GRIEVANCE OF THE ASSESSEE HAS BOILED DOWN TO ADJUSTMENT OF RS.27,12, 84,352/- TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF MARK ETING AND MARKETING DEVELOPMENT FUNCTION CARRIED OUT FOR THE AE HOWEVER THIS BENCH MARKETING IS CARRIED OUT ON PROTECTIVE B ASIS. 7. AT THE OUTSET THE COUNSEL FOR THE ASSESSEE STATE D THAT AN IDENTICAL ISSUE ON IDENTICAL SET OF FACTS WAS CONSI DERED BY THE TRIBUNAL IN ITA NO.6565/DEL/2017. IT IS THE SAY OF THE COUNSEL THAT SINCE THE FACTS FOR THE YEAR UNDER CONSIDERATI ON ARE IDENTICAL TO THE FACTS CONSIDERED IN A. Y. 2013-14, THE GRIEV ANCE RAISED BY THE ASSESSEE HAS BEEN DECIDED BY THE TRIBUNAL IN FA VOUR OF THE AND AGAINST THE REVENUE. 8. PER CONTRA THE DR STATED THAT THOUGH BRIGHT LINE TEST (BLT ) HAS BEEN DISCARDED BY THE HONBLE JURISDICTIONAL HI GH COURT IN CASE OF SONY MOBILE COMMUNICATIONS 374 ITR 118, THE REFORE, THE MATTER SHOULD BE RESTORED TO THE FILE OF THE TPO TO DECIDE THE AMP ADJUSTMENT WITHOUT APPLYING BLT. 9. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. AS CAN BE SEEN FROM THE ORD ER GIVING FACT TO THE DIRECTIONS OF THE DRP THE ONLY DISPUTE BEFOR E US IS THE 10 BENCH MARKETING DONE ON PROTECTIVE BASIS. SINCE TH E ORDER OF THE DRP HAS BEEN ACCEPTED BY THE REVENUE AND SINCE THE REVENUE IS NOT APPEAL BEFORE US, WE ARE ONLY ADJUDICATING ON T HE ISSUES RAISED BY THE ASSESSEE BEFORE US. 10. WE FIND FORCE IN THE CONTENTION OF THE LD. COU NSEL FOR THE ASSESSEE. ON IDENTICAL SET OF FACTS THE COORDINATE BENCH IN A. Y. 2013-14 IN ITA NO.6565/DEL/2017 HAS DELETED THE ADD ITION MADE ON PROTECTIVE BASIS. THE RELEVANT FINDINGS OF THE TRIBUNAL READ :- 6. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, WE ARE UNABLE TO SEE ANY MERITS IN THE IMPUGNED ALP ADJUSTMENT OF RS. 23,83,92,783 ON, WHAT HAS BEEN TERMED AS, PROTECTIVE BASIS. LEAR NED DEPARTMENTAL REPRESENTATIVE HAS NOT EVEN DISPUTED THAT THE ISSUE IS COVERED AGA INST THE REVENUE AUTHORITIES BY BINDING JUDICIAL PRECEDENTS, BUT HIS WORRY IS ABOUT PROTECTING LEGITIMATE INTERESTS OF THE REVENUE. THESE APPREHENSIONS, HOWEVER, ARE NOT REAL LY JUSTIFIED. THERE IS NO DISPUTE THAT THE APPLICATION OF BRIGHT LINE TEST, FOR MAKIN G ALP ADJUSTMENTS IN RESPECT OF THE AMP EXPENSES, IS HELD TO BE UNSUSTAINABLE IN LAW BY HONBLE JURISDICTIONAL HIGH COURT, AND THE TPO HIMSELF STATES SO IN SO MANY WORDS. IT IS ALSO ELEMENTARY THAT IT IS NOT, CANNOT BE, OPEN TO US TO DISREGARD THE BINDING JUDI CIAL PRECEDENTS AND UPHOLD THE APPLICATION OF BRIGHT LINE TEST, FOR DETERMINING TH E ALP ADJUSTMENT IN RESPECT OF AMP EXPENSES, MERELY BECAUSE A BINDING JUDICIAL PRECEDE NT FROM HONBLE JURISDICTIONAL HIGH COURT HAS BEEN CHALLENGED BY THE REVENUE AUTHORITIE S BEFORE THE HONBLE SUPREME COURT. THE BINDING NATURE OF A JUDICIAL PRECEDENT, AS LONG AS IT HOLDS THE FIELD I.E. IS NOT OVERTURNED, REMAINS UNAFFECTED BY WHETHER OR NOT IT HAS BEEN CHALLENGED BEFORE A HIGHER FORUM. AS A COROLLARY TO THIS LEGAL POSITION , THE IMPUGNED ADDITION OF RS'23,83,92.783 MUST STAND DELETED. THE VERY CONCEP T OF PROTECTIVE ADDITION IS RELEVANT ONLY WHEN AN INCOME IS TO BE ADDED IN THE HANDS OF MORE THAN ONE TAXPAYER, IN A SITUATION IN WHICH THERE IS AN ELEMENT OF AMBI GUITY AS TO IN WHOSE HANDS THE SAID INCOME CAN BE RIGHTLY BROUGHT TO TAX. THATS NOT TH E CASE BEFORE US. IN OUR HUMBLE UNDERSTANDING, THEREFORE, THE CONCEPT OF 'PROTECTIV E ASSESSMENT, AS IS KNOWN TO THE INCOME TAX LAW, HAS NO APPLICATION IN THE CASES LIK E THE ONE BEFORE US. 7. IN VIEW OF THE ABOVE DISCUSSIONS, THE ADDITION OF RS 23,83,92,783 STANDS DELETED. 8. SO FAR AS THE QUESTION OF SET OFF OF THE BROUGHT FO RWARD BUSINESS LOSSES IS INCURRED, LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE MATTER IS REQUIRED TO BE REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJU DICATION IN THE LIGHT OF THE RESULT OF THE APPELLATE PROCEEDINGS IN RESPECT OF THE PRECEDING A SSESSMENT YEARS IN WHICH THE RELATED DISPUTED ADDITIONS HAVE BEEN MADE. IT IS PO INTED OUT BY THE LEARNED COUNSEL THAT, IN ANY EVENT, THE ASSESSEE HAS CLAIMED SET OF F OF THE LOSS OF RS 26,25,85,933 INCURRED IN THE ASSESSMENT YEAR 2012-13 WHICH COULD NOT HAVE BEEN SET OFF FOR THE 11 PRIOR YEARS, AND THE ONLY YEAR FOLLOWING THE SAID A SSESSMENT YEAR IS THE YEAR BEFORE US. IT IS ALSO POINTED OUT THAT THE ALP ADJUSTMENT, IN RESPECT OF AMP EXPENSES BY APPLYING THE BRIGHT LINE TEST (BLT), WHICH IS NOW D ECIDED IN FAVOUR OF THE ASSESSEE. WHILE LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT R EALLY ADDRESS ON ALL THESE ASPECTS, HE FAIRLY AGREED TO OUR SUGGESTION THAT TH E MATTER IS REQUIRED TO BE EXAMINED AFRESH BY THE ASSESSING OFFICER IN THE LIGHT OF OUT COME OF THE APPELLATE PROCEEDINGS FOR THE OTHER ASSESSMENT YEARS AS ALSO BY WAY OF A SPEA KING ORDER DEALING WITH THE SPECIFIC CONTENTIONS OF THE ASSESSEE. IN THE LIGHT OF THIS UNDISPUTED POSITION WITHIN A NARROW COMPASS OF MATERIAL FACTS, WE REMIT THE MATT ER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF OUR ABOVE OBSERVATIONS. WE ALSO DIRECT THE ASSESSEE TO FULLY COOPERATE WITH THE ASSESSING OFFI CER IN EXPEDITIOUS DISPOSAL OF THE REMANDED PROCEEDINGS. ORDERED, ACCORDINGLY. 11. RESPECTFULLY FOLLOWING THE FINDINGS OF THE COOR DINATE BENCH THE ADDITION OF RS.27,12,84,352/- IS DELETED. 12. THE SECOND QUARREL RELATES TO THE ADJUSTMENT ON ACCOUNT OF PROVISION OF COORDINATION AND OTHER SUPPORT SERVICE S. 13. WE FIND THAT THE ROOT CAUSE OF THIS ADJUSTMENT IS THE ABSENCE OF SEGMENTAL DATA AND SATISFACTORILY ALLOCA TION OF EXPENSES IN THE SEGMENT. 14. THE COUNSEL STATED THAT AT THE TIME OF THE ASSE SSMENT PROCEEDINGS AUDITED SEGMENTAL DATA WERE NOT AVAILAB LE WHICH CAUSED THE IMPUGNED ADJUSTMENT. IT IS THE SAY OF T HE COUNSEL THAT WITH THE APPLICATION UNDER RULE 29 THE ASSESSE E HAS PRAYED TO ADMIT THE AUDITED SEGMENTAL DATA. 15. WE HAVE CAREFULLY PERUSED THE APPLICATION UNDER RULE 29 AND THE AUDIT CERTIFICATE FILED. IN OUR CONSIDERED VIEW SINCE NOW THE AUDITED SEGMENTAL DATA ARE AVAILABLE THE TPO MUST E XAMINE THE SAME AND DECIDE THE ISSUE AFRESH AFTER GIVING A REA SONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 12 16. WE ACCORDINGLY RESTORED THIS ISSUE TO THE FILES OF THE TPO WITH A DIRECTION TO CONSIDER AND EXAMINE THE AUDITE D SEGMENTAL DATA AND DECIDE THE ISSUE ACCORDINGLY. THE ASSESSEE IS DIRECTED TO FURNISH RELEVANT DATA BEFORE THE TPO. GROUND NO.4 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. BEFORE CLOSING SIN CE NO OTHER ISSUE WAS ARGUED BEFORE US THERE WAS NO OCCASION TO ADJUD ICATE ON THEM. SD/- SD/- (SANDEEP GOSAIN) (N . K. BILLAIYA) JUDICIAL MEMBER ACCOUNT ANT MEMBER *NEHA* DATE:- 07 .03.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGI STRAR ITAT NEW DELHI DATE OF DICTATION 05.03.2019 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. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 07.03.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER 13