Appeal Details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 4091 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
06-10-2017
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
I1
Next Hearing Date
10-07-2017
Assessment Year
2012-2013
Appeal Filed On
20-02-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1 NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 980/DEL/2017 AY: 2012-13 LOUIS VUITTON INDIA RETAIL PVT. LTD., 901-A, NINTH FLOOR, TIME TOWER, MEHRAULI GURGAON ROAD, GURGAON-122002 (PAN: AAACL8230E) VS DCIT, CIRCLE-2, GURGAON. APPELLANT BY: SHRI VISHAL KALRA, ADV. SHRI ANKIT SAHNI, ADV. SHRI S. TOMAR, ADV. RESPONDENT BY : SHRI AMRENDRA KUMAR, CIT DR DATE OF HEARING 10.07.2017 DATE OF PRONOUNCEMENT 06.10.2017 ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE FINAL ASSESSMENT ORDER DATED 30.01.2017 PASSED BY T HE ASSESSING OFFICER (AO) U/S 143(3) READ WITH SECTION 144C OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) PERTAINING TO ASSESSMENT YEAR 2012-13. THE MAIN ISSUE OF GRIEVANC E IS THE ADDITION ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT TOWARDS ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES AMO UNTING TO RS. 97,539,656/-. I.T.A. NO. 980/DEL/2017 ASSESSMENT YEAR 2012-13 2 2. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSEE IS AN INDIAN SUBSIDIARY OF M/S LOUIS VUITTON MALLETIER SA , FRANCE AND IS ENGAGED IN THE BUSINESS OF RETAILING THE PRODUCT S OF THE GROUP. THE ASSESSEE IMPORTS MATERIAL FROM ITS GROUP COMPAN IES AND RESELLS THE SAME IN THE INDIAN MARKETS. THE PRODUCT S WHICH ARE IMPORTED IN INDIA BY THE ASSESSEE ARE FASHION ACCES SORIES, LEATHER BAGS AND SHOES. 2.1 FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED RETURN DECLARING NIL INCOME AND ALSO REPORTED CERTAIN INTE RNATIONAL TRANSACTIONS. THE AO REFERRED THE MATTER OF DETERMI NATION OF ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANS ACTIONS TO THE TRANSFER PRICING OFFICER (TPO). THE INTERNATIONAL T RANSACTIONS REPORTED BY THE ASSESSEE INCLUDED IMPORT OF FINISHE D GOODS, IMPORT OF WINDOW DISPLAY, PACKAGING MATERIAL, BROCH URES AND CATALOGUES OF GOODS AND REIMBURSEMENT OF EXPENSES ( RECEIVED). FOR IMPORT TRANSACTIONS, THE ASSESSEE APPLIED RESAL E PRICE METHOD (RPM) AS THE MOST APPROPRIATE METHOD (MAM), WHEREAS FOR THE REIMBURSEMENT OF EXPENSES, THE ASSESSEE APP LIED COMPARABLE UNCONTROLLED METHOD (CUP). DURING THE CO URSE OF THE PROCEEDINGS, THE TPO OBSERVED THAT THE ASSESSEE HAD INCURRED ADVERTISEMENT, MARKETING AND PROMOTION (AMP) EXPENS ES. I.T.A. NO. 980/DEL/2017 ASSESSMENT YEAR 2012-13 3 TREATING THIS AS AN INTERNATIONAL TRANSACTION, THE TPO PROPOSED TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF AMP EXPEN SES AT RS. 9,75,39,656/- ON SUBSTANTIVE BASIS BY INTENSITY ADJ USTMENT BY APPLYING THE COST-PLUS METHOD. AS AN ALTERNATE, THE TPO PROPOSED AN ADDITION OF RS. 6,64,95,995/- ON PROTEC TIVE BASIS BY APPLYING THE BRIGHT LINE TEST (BLT). NO RELIEF WAS ALLOWED BY THE HONBLE DISPUTE RESOLUTION PANEL (DRP) AND THE HON BLE DRP DIRECTED THAT AMP ADJUSTMENT SHOULD BE MADE USING T HE BRIGHT LINE TEST AND AS AN ALTERNATE, AMP INTENSITY ADJUST MENT BE MADE ON A PROTECTIVE BASIS. THE AO IN THE FINAL ASSESSME NT ORDER, MADE THE ADDITION OF RS. 9,75,39,656/- ON SUBSTANTIVE BA SIS BUT DID NOT MAKE ANY ADDITION ON PROTECTIVE BASIS. NOW, THE ASSESSEE HAS COME UP IN APPEAL BEFORE US. 2.2 THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER - 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE AO ERRED IN ASSESSING THE TOTAL IN COME OF THE APPELLANT UNDER SECTION 143(3) READ WITH SEC TION 144C(13) OF THE ACT, FOR THE RELEVANT AY AT INR 15,77,78,710 AS AGAINST NIL INCOME RETURNED BY THE APPELLANT. FURTHER, THE DRP ERRED IN UPHOLDING THE SAME. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO / DRP / TPO HAVE ERRED IN MAKING ADJUSTMENT OF INR 9,75,39,656 TO THE ARMS LENGTH P RICE OF ALLEGED INTERNATIONAL TRANSACTION OF ADVERTISEME NT, MARKETING AND PROMOTION (AMP) EXPENDITURE. I.T.A. NO. 980/DEL/2017 ASSESSMENT YEAR 2012-13 4 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ORDERS PASSED BY THE AO /TPO WERE BAD IN LAW AS THE PRE-REQUISITE FOR APPLYING CHAPTER-X, I. E., EXISTENCE OF AN INTERNATIONAL TRANSACTION BETWEEN T WO ASSOCIATED ENTERPRISES (AE) UNDER SECTION 92B OF THE ACT, WAS NOT SATISFIED OR EXISTED AS THERE WAS NO AGREEMENT, UNDERSTANDING OR ARRANGEMENT BETWEEN THE APPELLANT AND THE AE FOR INCURRENCE OF SUCH EXPENDI TURE BY THE APPELLANT. FURTHER, THE DRP ERRED IN UPHOLDI NG THE SAME. 4. WITHOUT PREJUDICE, THE ORDERS PASSED BY THE AO / TPO WERE BAD IN LAW AS THE UNILATERAL AMP EXPENDITU RE INCURRED BY THE APPELLANT WAS CATEGORIZED AS INTERNATIONAL TRANSACTION UNDER CHAPTER X OF THE ACT, BY THE AO / DRP / TPO, CONTRARY TO LAW IN AS MUCH THE AO NEITHER GRANTED THE APPELLANT PROPER OPPORTUNITY OF BEING HEARD, NOR RECORDED HIS SATISFACTION IN RESPE CT THEREOF. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE TPO ERRED IN RE-CHARACTERIZING THE UNIL ATERAL AMP EXPENDITURE BEING PAYMENTS MADE BY APPELLANT TO INDEPENDENT THIRD PARTIES AS AN INTERNATIONAL TRANSACTION UNDER CHAPTER X OF THE ACT AND PARTICU LARLY WHEN THE JURISDICTION OF THE TPO IS ONLY TO COMPUTE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTION. FURTHER, THE DRP ERRED IN NOT ADJUDICA TING THE OBJECTIONS CHALLENGING THE JURISDICTION OF THE TPO IN THIS REGARD. 5.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE TPO ERRED IN SUO-MOTO BENCHMARKING THE ALLEGED INTERNATIONAL TRANSACTION RELATED TO AM P EXPENDITURE WITHOUT THEIR BEING ANY ORDER OR REFERE NCE FROM THE AO IN RELATION THERETO. 6. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, AO / DRP HAVE ERRED IN HOLDING THAT THE APPELL ANT HAS FAILED TO DEMONSTRATE BUSINESS PURPOSE / BENEFI T FROM INCURRENCE OF ALLEGED EXCESSIVE AMP EXPENDITUR E WITHOUT PROVIDING ANY COGENT REASONS AND COMPLETELY IGNORING THAT INCURRENCE OF THE AMP EXPENDITURE HAS I.T.A. NO. 980/DEL/2017 ASSESSMENT YEAR 2012-13 5 ACCELERATED GROWTH OF APPELLANTS TURNOVER OVER THE YEARS. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO / DRP / TPO HAVE ERRED IN RE- CHARACTERIZING THE APPELLANT AS SERVICE PROVIDER RENDERING BRAND BUILDING SERVICES TO ITS AE, WITHOU T APPRECIATING THAT IT IS A NORMAL RISK BEARING DISTR IBUTOR INCURRING AMP EXPENDITURE IN THE COURSE OF ITS OWN BUSINESS TO PROMOTE ITS SALES IN INDIA. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO / DRP / TPO HAVE ERRED IN NOT FOLLOW ING THE VARIOUS DECISIONS OF THE HIGH COURT. THE DRP FU RTHER ERRED IN SUSTAINING THE ORDER OF AO / TPO ON THE PREMISES THAT THE SPECIAL LEAVE PETITION AGAINST SU CH DECISIONS HAVE BEEN ADMITTED BY THE HONBLE SUPREME COURT. 9. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP HAS GROSSLY ERRED IN SUSTAINING THE ORDER OF AO / TPO SINCE THE DEPARTMENT CANNOT FILE AN APPEAL AGAINST THE DIRECTIONS OF THE DRP. 10. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE DRP HAS GROSSLY ERRED IN UPHOLDING THE ORDER OF AO / TPO WITH PRE-CONCEIVED NOTION, WITHOU T PROPER APPLICATION OF MIND AND IN UNDUE HASTE. NOTWITHSTANDING AND WITHOUT PREJUDICE TO THE ABOVE GROUNDS THAT THE AMP EXPENDITURE INCURRED BY THE APPELLANT DOES NOT CONSTITUTE AN INTERNATIONAL TRANSACTION UNDER CHAPTER X OF THE ACT, THE APPELLA NT CRAVES TO RAISE FOLLOWING GROUNDS ON MERITS: RE: ADDITIONS MADE ON SUBSTANTIVE BASIS 11. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE AO / DRP / TPO HAVE ERRED IN NOT APPRECIAT ING THAT DISTRIBUTION AND MARKETING ARE INTER-CONNECTED AND INTERTWINED FUNCTIONS AND SHOULD BE BENCHMARKED ON AN AGGREGATE BASIS. THE AO / DRP / TPO FURTHER ERRE D IN NOT APPRECIATING THAT IF THE TWO FUNCTIONS ARE I.T.A. NO. 980/DEL/2017 ASSESSMENT YEAR 2012-13 6 SEGREGATED AND BENCHMARKED, THEN THE SAME WOULD RESULT IN OVER TAXATION AND IS CONTRARY TO THE PROV ISIONS OF THE ACT. 11.1 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE AO / TPO HAVE ERRED IN HOLDING THAT THE APPELLANT DID NOT PROPOSE / FURNISH COMPARABLES WHI CH PERFORMED DISTRIBUTION AS WELL AS AMP FUNCTION, WIT HOUT APPRECIATING THAT THE COMPARABLES COMPANIES FURNISH ED BY THE APPELLANT WERE UNDERTAKING AMP EXPENDITURE / FUNCTION AS WELL. FURTHER, THE DRP ERRED IN SUMMARI LY REJECTING SUCH COMPARABLES WITHOUT PROVIDING ANY OPPORTUNITY TO THE APPELLANT. 12. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE AO / DRP / TPO ERRED IN NOT APPRECIATING T HAT THE OPERATING MARGIN OF THE APPELLANT WAS BETTER TH AN THE AVERAGE MEAN MARGIN OF THE COMPARABLE COMPANIES SUBMITTED BY THE APPELLANT USING TNMM, IN THE COURS E OF ASSESSMENT. 13. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE AO / DRP / TPO HAVE ERRED IN APPLYING COST PLUS METHOD TO BENCHMARK THE AMP EXPENSES, AND FURTHER ERRED IN APPLYING THE SAME DE HORS THE INDI AN TRANSFER PRICING REGULATIONS. 13.1 WITHOUT PREJUDICE AND NOTWITHSTANDING, THAT O N THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO / DRP / TPO HAVE ERRED IN NOT GRANTING SET-OFF O F EXCESSIVE GROSS PROFIT EARNED BY THE APPELLANT FROM DISTRIBUTION FUNCTION, AGAINST TP ADJUSTMENT PROPOS ED IN RELATION TO AMP EXPENSES, EVEN IF SEGREGATE APPROAC H WAS TO BE ADOPTED FOR BENCHMARKING THE AMP EXPENDITURE. 14. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, AO / DRP / TPO HAVE ERRED IN NOT APPRECIATING THAT THE APPELLANT HAD NOT PROVIDED AN Y VALUE ADDED / BRAND BUILDING SERVICES TO ITS AE BY INCURRING AMP EXPENDITURE, AND THEREFORE, NO MARK-U P COULD HAVE BEEN CHARGED / LEVIED ON SUCH EXPENDITUR E, EVEN IF THE SAME WAS TO BE CHARACTERIZED AS AN 'INTERNATIONAL TRANSACTION. 15. NOTWITHSTANDING AND WITHOUT PREJUDICE TO THE A BOVE GROUND, EVEN IF THE MARK-UP IS TO BE APPLIED, THE S AME COULD HAVE BEEN CHARGED ONLY ON THE VALUE ADDED I.T.A. NO. 980/DEL/2017 ASSESSMENT YEAR 2012-13 7 EXPENSES INCURRED BY THE APPELLANT FOR SUCH ALLEGED BRAND PROMOTION SERVICE AND NOT ON THE ENTIRE AMOUN T INCURRED / PAID TO THIRD PARTY VENDORS. 15.1 WITHOUT PREJUDICE AND NOTWITHSTANDING, THAT O N THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO / DRP / TPO HAVE ERRED IN APPLYING APPELLANTS GROSS PROFIT RATE AS MARK-UP FOR ALLEGED INTERNATIO NAL TRANSACTION RELATING TO RENDITION OF BRAND BUILDING SERVICES (AMP EXPENDITURE). 16. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE DRP HAS ERRED IN NOT APPRECIATING THAT AO / TPO FAILED TO EXCLUDE DIRECT MARKETING EXPENSES, SU CH AS EXPENSES RELATING TO BUSINESS PROMOTION, PUBLIC RELATIONS, WINDOW DISPLAY, MERCHANDISING AND BROCHURES & CATALOGUES; FROM THE AMBIT OF AMP EXPENDITURE WHILE BENCHMARKING THE ALLEGED INTERNATIONAL TRANSACTION OF AMP EXPENDITURE ON SUBSTANTIVE BASIS, DISREGARDING VARIOUS DECISIONS O F THE HON'BLE DELHI HIGH COURT 16.1 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, DRP HAS ERRED IN DIRECTING AO / TPO TO INCL UDE SALES RELATING EXPENDITURE WHILE BENCHMARKING THE ALLEGED INTERNATIONAL TRANSACTION OF AMP EXPENDITUR E, DISREGARDING VARIOUS DECISIONS OF THE HIGH COURT. 16.2 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE DRP HAS ERRED IN NOT AFFORDING OPPORTUN ITY OF BEING HEARD TO THE APPELLANT, WHICH IS A SINE QUA N ON UNDER SECTION 144C( 11) OF THE ACT BEFORE ISSUING A NY DIRECTION WHICH IS PREJUDICIAL TO THE INTEREST OF T HE ASSESSEE, WHILE DIRECTING AO / TPO TO INCLUDE SALES RELATING EXPENDITURE AS PART OF AMP EXPENDITURE WHI LE BENCHMARKING THE SAID INTERNATIONAL TRANSACTION. 17. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE AO / DRP / TPO HAVE ERRED IN NOT GRANTING QUANTITATIVE / ECONOMIC ADJUSTMENTS (SUCH AS NON-PAYMENT OF ROYALTY / EXPENSES ON PRODUCT LAUNCHES) WHILE QUANTIFYING ADJUSTMENTS RELATING TO ALLEGED EXCESSIVE AMP EXPENDITURE. I.T.A. NO. 980/DEL/2017 ASSESSMENT YEAR 2012-13 8 RE: ADDITIONS MADE ON PROTECTIVE BASIS 18. NOTWITHSTANDING AND WITHOUT PREJUDICE TO THE O THER GROUNDS, THE AO / DRP / TPO HAVE ERRED IN DETERMINI NG ADJUSTMENTS ON PROTECTIVE BASIS BY APPLYING BRIGHT LINE TEST (BLT) METHOD WHICH HAS BEEN JETTISONED BY TH E HONBLE DELHI HIGH COURT. 18.1. NOTWITHSTANDING AND WITHOUT PREJUDICE, ON FAC TS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP H AS ERRED IN NOT APPRECIATING THAT AO / TPO FAILED TO E XCLUDE DIRECT MARKETING EXPENSES, SUCH AS EXPENSES RELATIN G TO BUSINESS PROMOTION, PUBLIC RELATIONS, WINDOW DISPLA Y, MERCHANDISING AND BROCHURES & CATALOGUES; FROM THE AMBIT OF AMP EXPENDITURE WHILE BENCHMARKING THE ALLEGED INTERNATIONAL TRANSACTION OF AMP EXPENDITUR E ON PROTECTIVE BASIS, COMPLETELY DISREGARDING VARIOUS DECISIONS OF THE HONBLE DELHI HIGH COURT 18.2 NOTWITHSTANDING AND WITHOUT PREJUDICE, ON FAC TS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO / TPO HAVE ERRED IN REJECTING COMPARABLE COMPANIES PROPOS ED BY APPELLANT FOR APPLYING THE BLT IN THE COURSE OF TRANSFER PRICING PROCEEDINGS WITHOUT PROVING ANY CO GENT REASONS FOR THE SAME. FURTHER, DRP ERRED IN UPHOLDI NG THE ORDER OF AO / TPO. 19. NOTWITHSTANDING AND WITHOUT PREJUDICE TO THE O THER GROUNDS, THE DRP HAS ERRED IN NOT AFFORDING OPPORTU NITY OF BEING HEARD TO THE APPELLANT, WHICH IS A SINE QU A NON UNDER SECTION 1440(11) OF THE ACT, BEFORE ISSUING A NY DIRECTION WHICH IS PREJUDICIAL TO THE INTEREST OF T HE ASSESSEE, WHILE DIRECTING AO / TPO TO CARRY OUT ALTERNATIVE COMPARABILITY ADJUSTMENT. 19.1 NOTWITHSTANDING AND WITHOUT PREJUDICE TO THE OTHER GROUNDS, THE DRP HAS ERRED IN ARBITRARILY SEL ECTING COMPANIES IN MARKET SUPPORT SERVICES FOR CARRYING O UT COMPARABILITY ADJUSTMENT ON ACCOUNT OF DIFFERENCES IN INTENSITY OF AMP EXPENDITURE OF THE APPELLANT VIS-A -VIS COMPARABLE COMPANIES, FOR DETERMINING THE AVERAGE I.T.A. NO. 980/DEL/2017 ASSESSMENT YEAR 2012-13 9 RETURN ON MARKET SUPPORT SERVICES AND FURTHER, ERRE D IN CONSIDERING COMPANIES WHICH ARE FUNCTIONALLY DIFFER ENT. OTHER GROUNDS: 20. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE AO / DRP HAVE ERRED IN NOT GRANTIN G / DIRECTING SET-OFF OF BROUGHT FORWARD LOSS AND UNABSORBED DEPRECIATION, AS PER THE PROVISIONS OF SECTION 72 AND SECTION 32 OF THE ACT, BEFORE DETERM INING TOTAL INCOME OF THE APPELLANT. 21. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO / DRP / TPO HAVE ERRED IN IGNORING THE PROVISIONS OF RULE 10B, RULE 10CA AND RULE 10D OF THE RULES AND JUDICIAL PRONOUNCEMENTS, WHICH ADVOCATE USAGE OF MULTIPLE YEAR DATA OF COMPARABLE COMPANIES FOR THE PURPOSE OF DETERMINATI ON OF THE ARMS LENGTH PRICE. 22. THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE AO / DRP / TPO HAVE ERRED IN NOT PROVIDING THE APPELLANT THE BENEFIT OF (+/-) 5% RAN GE AS PROVIDED BY THE PROVISO TO SECTION 92C(2) OF THE AC T. 23. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE AO HAS ERRED IN CHARGING INTEREST U NDER SECTIONS 234A, 234B AND 234C OF THE ACT. 23.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE AO HAS FURTHER ERRED IN INCORRECT CALCULATION OF INTEREST UNDER SECTIONS 234A, 234B A ND 234C OF THE ACT. EACH OF THE ABOVE GROUNDS IS INDEPENDENT AND WITHOU T PREJUDICE TO THE OTHER GROUNDS OF APPEAL PREFERRED BY THE APPELLANT. THE APPELLANT PRAYS FOR LEAVE TO AD, ALTER, VARY, O MIT, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE AP PEAL. 3. THE LD. AR CONTENDED THAT THE INCURRING OF AMP E XPENSES IS NOT AN INTERNATIONAL TRANSACTION AT ALL AND, HENCE, THERE CAN BE NO QUESTION OF DETERMINING THE ARMS LENGTH PRICE O F THIS I.T.A. NO. 980/DEL/2017 ASSESSMENT YEAR 2012-13 10 TRANSACTION OR MAKING ANY ADDITION THEREON. IT WAS SUBMITTED THAT THERE WAS NO FINDING OF THE TPO ON THE ISSUE O F DETERMINATION OF INTERNATIONAL TRANSACTION AND AS S UCH THE ADDITION WAS BASELESS. IT WAS ALSO SUBMITTED THAT N O ADDITION ON ACCOUNT OF AMP ADJUSTMENT HAD BEEN MADE IN THE PREC EDING ASSESSMENT YEAR I.E. AY 2011-12. A COPY OF THE ITAT S ORDER IN ASSESSEES OWN CASE FOR AY 2010-11 WAS ALSO PLACED BEFORE US WHEREIN THE ITAT IN ITA 775/MUM/2015 HAD RESTORED T HE ISSUE OF AMP ADJUSTMENT TO THE FILE OF THE AO/TPO ON THE GROUND THAT WHEN THE TPO HAD HELD AMP EXPENSES TO BE AN INTERNA TIONAL TRANSACTION, HE DID NOT HAVE ANY OCCASION TO CONSID ER THE RATIO LAID DOWN IN SEVERAL JUDGMENTS OF THE HONBLE JURIS DICTIONAL HIGH COURT WHICH WERE LATER AVAILABLE. THE LD. AR SUBMIT TED THAT, HOWEVER, FOR THE YEAR UNDER CONSIDERATION, THE SITU ATION WAS FACTUALLY DIFFERENT, BECAUSE IN THIS YEAR, THE TPO AS WELL AS THE HONBLE DRP HAD THE BENEFIT OF THE VARIOUS JUDGMENT S OF THE HONBLE HIGH COURT ON THE ISSUE AND, THEREFORE, THE ISSUE BE ADJUDICATED BY THE ITAT ITSELF. 3.1 THE LD. AR RELIED ON THE FOLLOWING JUDGMENTS/OR DERS IN THE CASES OF SONY ERICSSON MOBILE COMMUNICATIONS INDIA PVT. LTD VS. CIT OF THE HONBLE DELHI HIGH COURT REPORTED IN 276 CTR 97 I.T.A. NO. 980/DEL/2017 ASSESSMENT YEAR 2012-13 11 (DEL), TOSHIBA INDIA (P) LTD. VS. DCIT OF ITAT DELH I REPORTED IN 2015- TII-191 ITAT DEL TP, ZIMMER INDIA (P) L TD. VS. DCIT OF ITAT DELHI REPORTED IN 2015 TII- 222- ITAT- DE L- TP, BAUSH & LOMB INDIA PVT. LTD. VS. DCIT OF ITAT DELHI REPOR TED IN 2015- TII- 244- ITAT- DEL- TP, CASIO INDIA COMPANY PVT. LTD VS. DCIT OF ITAT DELHI REPORTED IN 2015- TII- 268 ITAT D EL- TP, NIKON INDIA P LTD VS. DCIT OF ITAT DELHI REPORTED IN 2015 TT- 424- ITAT- DEL- TP AND HAIER APPLIANCES INDIA LTD. VS. D CIT OF ITAT DELHI REPORTED IN 2015 TII 461- ITAT DEL- TP AND SUBMITTED THAT THERE WAS NO INTERNATIONAL TRANSACTI ON OF AMP EXPENSES ON THE BASIS OF PRINCIPLES LAID DOWN IN TH ESE JUDGMENTS AND, HENCE, THE ENTIRE EXERCISE OF DETERMINING ITS ALP AND, CONSEQUENTLY, MAKING TRANSFER PRICING ADJUSTMENT, B E DELETED. 3.2 THE LD. AR ALSO SUBMITTED THAT A REMAND TO THE TPO TO ADJUDICATE THE ISSUE AFRESH WAS NOT SUITABLE. 4. THE LD. CIT DR, IN RESPONSE, RELIED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF SONY ERICSO N MOBILE COMMUNICATIONS (INDIA)PVT. LTD. VS. CIT REPORTED IN (2015) 374 ITR 118 (DEL) IN WHICH AMP EXPENSES HAVE BEEN HELD TO BE AN INTERNATIONAL TRANSACTION AND THE MATTER OF DETERMI NATION OF ITS ALP WAS RESTORED. HE ALSO RELIED ON A LATER JUDGMEN T OF THE I.T.A. NO. 980/DEL/2017 ASSESSMENT YEAR 2012-13 12 HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF YU M RESTAURANTS (INDIA) P. LTD. VS. ITO REPORTED IN (20 16) 380 1TR 637 (DEL) AND STILL ANOTHER JUDGMENT DATED 28.1.201 6 OF THE HONBLE DELHI HIGH COURT IN THE CASE OF SONY ERICSO N MOBILE COMMUNICATIONS (INDIA) PVT. LTD. (FOR THE AY 2010-1 1) IN WHICH THE QUESTION AS TO WHETHER AMP EXPENSE IS AN INTERN ATIONAL TRANSACTION HAD BEEN RESTORED FOR A FRESH DETERMINA TION. THE LD. CIT DR SUBMITTED THAT THE JUDGMENT IN THE CASE OF YUM RESTAURANTS AND SONY ERICSON (FOR AY 2010-11) DELIV ERED IN JANUARY, 2016 IS LATER IN POINT OF TIME TO THE EARL IER JUDGMENTS IN THE CASE OF MARUTI SUZUKI AND WHIRLPOOL, ETC. AN D, HENCE, THE MATTER SHOULD BE RESTORED FOR A FRESH DETERMINATION . IT WAS FURTHER SUBMITTED THAT THERE IS NO BLANKET RULE OF THE AMP EXPENSES AS A NON-INTERNATIONAL TRANSACTION. HE STA TED THAT THE HONBLE HIGH COURT IN WHIRLPOOL (SUPRA) HAS MADE CE RTAIN OBSERVATIONS, WHICH SHOULD BE PROPERLY WEIGHED FOR ASCERTAINING IF AN INTERNATIONAL TRANSACTION OF AMP EXPENSE DOES EXIST. IT WAS ARGUED THAT THE ITAT IN SEVERAL CASES, INCLUDING TH E ASSESSEES OWN CASE FOR AY 10-11, HAD RESTORED THIS ISSUE TO T HE FILE OF TPO TO BE DECIDED AFRESH IN THE LIGHT OF THE AVAILABLE JUDGMENTS OF THE HONBLE DELHI HIGH COURT. HE ALSO RELIED ON ANOTHER JUDGMENT I.T.A. NO. 980/DEL/2017 ASSESSMENT YEAR 2012-13 13 DATED 28.1.2016 OF THE HONBLE DELHI HIGH COURT IN SONY ERICSON MOBILE COMMUNICATIONS (INDIA) PVT. LTD. (FOR THE AY 2010-11) IN WHICH THE QUESTION AS TO WHETHER AMP EXPENSE IS AN INTERNATIONAL TRANSACTION, HAD BEEN RESTORED FOR A FRESH DETERMINATION. HE STILL FURTHER REFERRED TO THE THR EE LATER JUDGMENTS OF THE HONBLE DELHI HIGH COURT, VIZ., RA YBAN SUN OPTICS INDIA LTD. VS. CIT (ORDER DATED 14.9.2016), PR. CIT VS. TOSHIBA INDIA PVT. LTD. (ORDER DATED 16.8.2016) AND PR. CIT VS. BOSE CORPORATION (INDIA) PVT. LTD. (ORDER DATED 23. 8.2016) IN ALL OF WHICH SIMILAR ISSUE HAD BEEN RESTORED FOR FRESH DETERMINATION IN THE LIGHT OF THE EARLIER JUDGMENT IN SONY ERICSS ON MOBILE COMMUNICATIONS INDIA PVT. LTD. (SUPRA). THE LD. CIT DR ARGUED THAT THE HONBLE DELHI HIGH COURT IN ITS EARLIER DE CISION IN SONY ERICSON MOBILE COMMUNICATIONS (INDIA) PVT. LTD. VS. CIT REPORTED IN (2015) 374 ITR 118 (DEL) HAD HELD AMP EXPENSES T O BE AN INTERNATIONAL TRANSACTION. IT WAS ARGUED THE MATTER SHOULD BE RESTORED FOR A FRESH DETERMINATION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT W HEN THE TPO HELD AMP EXPENSES TO BE AN INTERNATIONAL TRANSA CTION, HE HAD THE BENEFIT OF ONLY SOME OF JUDGMENTS OF THE HO NBLE JURISDICTIONAL HIGH COURT. NOW, SEVERAL OTHER JUDGM ENTS ON THE I.T.A. NO. 980/DEL/2017 ASSESSMENT YEAR 2012-13 14 ISSUE, INCLUDING THOSE WHICH HAVE BEEN DELIVERED AF TER THE PASSING OF THE ORDER BY THE TPO, ARE AVAILABLE FOR CONSIDERATION. AS THE ENTIRETY OF THE JUDICIAL POSITION, AS LAID D OWN BY THE HONBLE HIGH COURT, IS NOW REQUIRED TO BE APPLIED T O THE FACTUAL POSITION PREVAILING IN THIS CASE, WE DIRECT THAT A FRESH DETERMINATION OF THE ALP OF AMP EXPENSE BE DONE AT THE END OF THE TPO/AO. 5.1 IT IS SEEN THAT A SIMILAR ISSUE CAME UP FOR CO NSIDERATION BEFORE THE ITAT IN ASSESSEES OWN CASE FOR ASSESSME NT YEAR 2010- 11 AND ITAT DELHI BENCH, VIDE ITS ORDER DATED 01/03 /2017 IN ITA NO.775/MUM/2015, RESTORED SUCH MATTER TO THE FILE O F TPO/A.O. FOR A FRESH CONSIDERATION. DESPITE THE ABOVE POSITI ON SETTLED BY THE ITAT IN ASSESSEES OWN CASE FOR AY 2010-11 REST ORING THE MATTER TO THE TPO/AO FOR A FRESH DETERMINATION, THE LD. AR ARGUED THAT THE MATTER BE DECIDED BY THE TRIBUNAL I TSELF AS, IN HIS OPINION, THERE WERE CERTAIN DISTINGUISHING FEATURES PREVALENT FOR THIS YEAR VIS-A-VIS THE PRECEDING YEARS. THE FIRST SUCH ISSUE BROUGHT TO OUR NOTICE BY THE LD. AR IS THE VIEW CAN VASSED BY THE HONBLE DRP ON AMP INTENSITY ADJUSTMENT. THE LD. AR ARGUED THAT IN NONE OF THE EARLIER YEARS, DID THE HONBLE DRP DIRECT THE I.T.A. NO. 980/DEL/2017 ASSESSMENT YEAR 2012-13 15 CARRYING OUT OF AMP INTENSITY ADJUSTMENT. IT IS TRU E THAT THE ISSUE OF AMP INTENSITY ADJUSTMENT HAS BEEN CONSIDERED BY THE HONBLE DRP, AS AN ALTERNATE, FOR THE FIRST TIME IN THE PRO CEEDINGS FOR THE INSTANT YEAR WHICH WAS NOT THERE IN EARLIER YEARS. HOWEVER, THE PERTINENT FACT TO BE NOTED IS THAT THE AO HAS NOT M ADE ANY ADDITION ON THE BASIS OF INTENSITY ADJUSTMENT ON A PROTECTIVE BASIS AS DIRECTED BY THE HONBLE DRP AND, THUS, NO ADDITION BY APPLYING AMP INTENSITY ADJUSTMENT HAS BEEN EVENTUAL LY MADE IN THE IMPUGNED ORDER. WITHOUT GOING INTO THE MERITS O F THE DECISION OF THE HONBLE DRP ON THIS ISSUE AND, THEREFORE, TH E SAME HAS NO IMPACT IN THE PROCEEDINGS FOR THE YEAR UNDER CONSID ERATION. THIS CONTENTION OF THE ID. AR, ERGO, FAILS. 5.2 THE OTHER POINT URGED BY THE LD. AR WAS TO DECI DE THIS ISSUE AT OUR END AS THE TPO HAD PASSED ORDER ON 29.01.201 6 IN WHICH HE HAD CONSIDERED CERTAIN HIGH COURT JUDGMENTS ON T HE POINT. ONCE SUCH JUDGMENTS WERE TAKEN INTO CONSIDERATION, THE LD. AR ARGUED, THAT THERE WAS NO POINT IN AGAIN DIRECTING THE TPO TO CONSIDER THE EFFECT OF THE JUDGMENTS DELIVERED BY T HE HON'BLE HIGH COURT ON THE POINT. THE ARGUMENT PUT FORTH ON BEHALF OF THE ASSESSEE IN THIS REGARD IS PARTLY CORRECT. IT IS SE EN THAT THOUGH I.T.A. NO. 980/DEL/2017 ASSESSMENT YEAR 2012-13 16 THE TPO HAS REFERRED TO CERTAIN RULINGS OF THE HON BLE JURISDICTIONAL HIGH COURT ON THE POINT IN COMING TO THE CONCLUSION THAT THERE WAS A SEPARATE INTERNATIONAL TRANSACTION, YET, THERE ARE CERTAIN OTHER IMPORTANT JUDGMENTS OF THE HON'BLE HIGH COURT, DELIVERED AFTER THE PASSING OF THE ORDE R BY THE TPO, WHICH COULD NOT BE CONSIDERED, AS THOSE WERE NOT IN EXISTENCE AT THAT POINT OF TIME. IN THIS REGARD, IT IS NOTED THA T THERE ARE AT LEAST THREE LATER JUDGMENTS OF THE HONBLE DELHI HI GH COURT, REFERRED TO ABOVE, VIZ., RAYBAN SUN OPTICS INDIA LT D. VS. CIT (ORDER DATED 14.9.2016), PR. CIT VS. TOSHIBA INDIA PVT. LTD. (ORDER DATED 16.8.2016) AND PR. CIT VS. BOSE CORPOR ATION (INDIA) PVT. LTD. (ORDER DATED 23.8.2016) IN ALL OF WHICH S IMILAR ISSUE HAS BEEN RESTORED FOR FRESH DETERMINATION IN THE LIGHT OF THE EARLIER JUDGMENT IN SONY ERICSSON MOBILE COMMUNICATIONS IND IA PVT. LTD. (SUPRA). ACCORDINGLY, THE CONTENTION OF THE LD. AR, CLAIMING DEPARTURE FROM THE EARLIER YEAR, ON THIS SCORE, IS NOT TENABLE. THEREFORE, IN LIGHT OF THE NON-SUSTAINABILITY OF TH E OBJECTIONS TAKEN BY THE LD. AR AND FOLLOWING THE EARLIER VIEW TAKEN BY THE ITAT IN ASSESSMENT YEAR 2010-11 IN THE CASE OF THE ASSESSEE, WE SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER T O THE FILE OF TPO/AO FOR A FRESH DETERMINATION OF THE QUESTION AS TO WHETHER I.T.A. NO. 980/DEL/2017 ASSESSMENT YEAR 2012-13 17 THERE EXISTS AN INTERNATIONAL TRANSACTION OF AMP EX PENSES. IF THE EXISTENCE OF SUCH AN INTERNATIONAL TRANSACTION IS N OT PROVED, THE MATTER WILL END THERE AND THEN, CALLING FOR NO TRAN SFER PRICING ADDITION. IF, ON THE OTHER HAND, THE INTERNATIONAL TRANSACTION IS FOUND TO BE EXISTING, THEN THE TPO WILL DETERMINE T HE ALP OF SUCH AN INTERNATIONAL TRANSACTION IN THE LIGHT OF T HE RELEVANT JUDICIAL POSITION, AFTER ALLOWING A REASONABLE OPPO RTUNITY OF BEING HEARD TO THE ASSESSEE. 5.3 IT IS FURTHER CLARIFIED THAT IF A SITUATION FO R DETERMINING THE ALP OF AMP EXPENSES ARISES, THEN NO TRANSFER PRICIN G ADJUSTMENT SHOULD BE MADE BY APPLYING THE BRIGHT LINE TEST BEC AUSE THE HONBLE JURISDICTIONAL HIGH COURT HAS NOT APPROVED THE APPLICATION OF THE BRIGHT LINE TEST IN SEVERAL DECI SIONS. 5.4 ACCORDINGLY, THE IMPUGNED ORDER IS SET ASIDE AN D THE MATTER IS SENT BACK TO THE TPO/AO FOR A FRESH DETERMINATIO N OF THE ALP OF AMP EXPENSES, IF WARRANTED, IN THE INSTANT CASE IN THE LIGHT OF THE DETAILED DISCUSSION MADE ABOVE. 6. IN THE FINAL RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO. 980/DEL/2017 ASSESSMENT YEAR 2012-13 18 ORDER PRONOUNCED IN THE OPEN COURT ON 6TH OCTOBER, 2017. SD/- SD/- (R.S. SYAL) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDIC IAL MEMBER DT. 06TH OCTOBER, 2017 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR
