ACIT, CHENNAI V. M/s. Nippon Paint (India) Private Limited, Kancheepuram

ITTPA 73/CHNY/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4144 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 30-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 17-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS R ANITA
• Keywords: Transfer pricing; Double taxation relief; International transaction
• Section: 43B; 73

Judgement Text

IT (TP) A NO. 73 /CHNY/20 19 /ASSESSMENT YEAR: 2012-13 THE ASST. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-4(2), 121, M.G.ROAD, CHENNAI. V . M/S.NIPPON PAINT (INDIA) PVT. LTD., PLOT NO.K-8(1), PHASE- II, SIPCOT INDUSTRIAL PARK, MAMBAKKAM VILLAGE, KANCHEEPURAM-602 105. [ PAN: AACCN 2352 F] ( /APPELLANT) ( /RESPONDENT) DEPARTMENT BY : MRS.R.ANITA, ADDL.CIT ASSESSEE BY : MR.VIKRAM VIJAYARAGHAVAN, ADV. /DATE OF HEARING : 15.09.2021 /DATE OF PRONOUNCEMENT : 30.09.2021 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-8, CHENNAI, IN ITA NOS.166 & 397/16-17 & 105/17-18 DATED 07.08.2019 FOR THE AY 2012-13. IN THE GROUNDS OF APPEAL, THE REVENUE HAS RAISED TRANSFER PRICING ISSUE RELAT ING TO DELETION OF THE UPWARD ADJUSTMENT OF RS.3,26,29,475/- ON ACCOUNT OF BRAND PROMOTION EXPENDITURE (AMP) FOR THE AY 2012-13 AS WELL AS THE CORPORATE TAX ISSUE OF DELETION OF RS.9,05,913/- MADE U/S.36(1)(VA) R.W .S.2(24)(X) OF THE INCOME TAX ACT, 1961. , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI . . , . , , BEFORE SHRI DUVVURU R.L. REDDY, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER IT (TP) A NO.73/CHNY/2019 :: 2 :: 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSMENT U/S.143(3) R.W.S.92CA(3) OF THE INCOME TAX ACT, 1961 DATED 20. 05.2016 BY SUGGESTING AN UPWARD ADJUSTMENT OF RS.3,26,29,475/- ON ACCOUNT OF BRAND PROMOTION EXPENDITURE (AMP). THIS AMOUNT HAD BEEN ASCRIBED TOWARDS BENEFIT ACCRUED TO THE FOREIGN PRINCIPAL ON ACCOUNT OF THE AMP EXPENDITURE INCURRED IN DTAA. ON APPEAL, THE LD.CIT(A) DIRECTE D THE AO TO DELETE THE TP UPWARDS ADJUSTMENT OF RS.3,26,29,475/-. 3. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE T RIBUNAL. THE LD.DR CONTENDED THAT THE LD.CIT(A) HAS MECHANICALLY FOLLO WING THE ORDER OF ITAT FOR ASSESSMENT YEAR 2011-12, AND HOLDING THAT THERE WAS NO INTERNATIONAL TRANSACTION ON ACCOUNT OF AMP FUNCTIONS WITHOUT EXA MINING THE ACTUAL CONTRACTUAL RELATIONSHIP BETWEEN THE ASSESSEE AND T HE AE TO ASCERTAIN WHETHER THE AMP FUNCTIONS WAS PERFORMED BY THE ASSE SSEE ON 'ITS OWN, FOR ITS' OWN BENEFIT OR THE SAME WAS PERFORMED BY THE A SSESSEE AT THE BEHEST OF THE AE. FURTHER, IT WAS SUBMITTED THAT THE LD.C IT(A) HAS DELETED THE AMP ADJUSTMENT WITHOUT NOTING THE FACT THAT THE ASS ESSEE PERFORMED THE AMP FUNCTION AT A MUCH HIGHER INTENSITY AS COMPARED TO THE COMPARABLES CONSIDERED FOR BENCHMARKING ITS IMPORT TRANSACTION AS ITS AMP TO SALES RATIO OF 13.33% IS MUCH HIGHER THAN THE AVERAGE AMP TO SA LES RATIO OF 4.77% OF THE COMPARABLES. WITHOUT PREJUDICE TO THE ABOVE, T HE LD.DR SUBMITTED THAT THE ASSESSEE PERFORMED THE INTENSIVE AMP FUNCT ION FOR THE BENEFIT OF THE AE, IN THE ALTERNATIVE, THE MARGIN OF THE COMPA RABLES CONSIDERED FOR IT (TP) A NO.73/CHNY/2019 :: 3 :: BENCHMARKING THE IMPORT TRANSACTIONS OUGHT TO HAVE BEEN ADJUSTED TO A HIGHER AMOUNT BY MAKING COMPARABILITY ADJUSTMENT FO R A MORE INTENSIVE AMP FUNCTIONS PERFORMED BY THE ASSESSEE AND PLEADED THAT THE APPELLATE ORDER MAY BE REVERSED. ON THE OTHER HAND, THE LD.C OUNSEL FOR THE ASSESSEE HAS STRONGLY SUPPORTED THE ORDER PASSED BY THE LD.C IT(A). 4. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERI ALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. 5. SIMILAR ISSUE WAS SUBJECT MATTER IN APPEAL BEFOR E THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AY 2011-12, WHEREIN, TH E TRIBUNAL HAS PASSED DETAILED SPEAKING ORDER AND THE RELEVANT PORTIONS O F THE ORDER ARE EXTRACTED AS UNDER: 2.8 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED BEFORE US. WE HAVE GONE THROUGH THE DECISION S RELIED UPON BY BOTH THE PARTIES. THE TPO HAS NOTICED THAT THE ASS ESSEE SPENT AMOUNTS TOWARDS ADVERTISEMENT, MARKETING AND PROMOT ION EXPENSES AND HELD THAT THE EXPENSES WERE SPENT TOWARDS THE B RAND BUILDING OF THE PARENT AE M/S.NIPON TRADING CO. LTD., JAPAN, AN D SUGGESTED FOR UPWARD ADJUSTMENT OF DIFFERENCE OF 12,58,86,884/- AS AMP EXPENSES AND THE MARK-UP @ 12.15% AMOUNT TO 1,52,9 5,256/- AS BRAND PROMOTION. THE ASSESSEE STATED THAT THERE WA S NO AGREEMENT ENFORCING TO PROMOTE THE BRAND NAME NIPPON INDIA, W HICH OBLIGATED THE ASSESSEE TO SPEND TOWARDS THE AMP. THE ASSESSE ES AR ALSO ARGUED THAT THE ENTIRE EXPENDITURE WAS A BUSINESS E XPENDITURE OF NIPPON INDIA LTD., WHICH IMPROVE THEIR SALES IN THE FUTURE YEARS. THE AO/TPO HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO SH OW AND DEMONSTRATE THAT THE EXPENDITURE WAS INCURRED FOR T HE BRAND BUILDING OF NIPPON, JAPAN. 2.9 THE AO FOLLOWED THE BRIGHT LINE TEST METHOD FOR DETERMINING THE ARMS LENGTH PRICE OF AMP. WHEN ASSESSEE HAS C ONTESTED VEHEMENTLY THAT THE EXPENDITURE WAS NOT INCURRED FO R THE PURPOSE OF BRAND PROMOTION OF NIPPON, JAPAN/AE, IT IS THE BURD EN OF THE AO/TPO TO EXAMINE, MAKE ENQUIRIES AND BRING AN EVIDENCE TO SHOW THAT THE EXPENDITURE WAS INCURRED FOR BRAND BUILDING OF THE AE. NO SUCH EXERCISE WAS MADE BY THE AO IN THIS CASE. THE AO/T PO SIMPLY APPLIED BRIGHT LINE TEST METHOD AND BENCHMARKED THE DIFFERENCE AS AMP EXPENSES AND MADE A MARK-UP OF @12.15% ON THE C OST OF AMP. IT (TP) A NO.73/CHNY/2019 :: 4 :: THERE WAS NO EVIDENCE WITH THE REVENUE TO SHOW THAT THE ASSESSEE COMPANY HAS NOT INCURRED THE EXPENDITURE TOWARDS IT S SALES PROMOTION WHICH IS ALLOWABLE DEDUCTION U/S.37(1) OF INCOME TAX ACT AND NO EVIDENCE TO PROVE THAT THE EXPENDITURE IN QU ESTION WAS IN FACT A BRAND BUILDING EXPENDITURE INCURRED TOWARDS NIPPO N, JAPAN. IN THE TP STUDY REPORT OF THE ASSESSEE, THERE WAS NO MENTI ON OF ANY AMP EXPENDITURE OBLIGED BY THE ASSESSEE BY WAY OF ANY AGREEMENT/ARRANGEMENT OR ANY OTHER MODE MENTIONED I N THE INCOME TAX ACT. AS PER SEC.92B(1) OF INCOME TAX ACT, INTE RNATIONAL TRANSACTION MEANS A TRANSACTION BETWEEN TWO OR MORE AES, EITHER OR BOTH OF WHOM ARE NON-RESIDENTS IN THE NATURE OF PUR CHASE, SALE OR LEASE OF INTANGIBLE OR INTANGIBLE PROPERTY OR PROVI SION OF SERVICES OR BORROWING MONEY OR ANY OTHER TRANSACTION HAVING BEA RING ON THE PROFITS, INCOME, LOSSES OR RECEIPTS OR ASSETS OF SU CH ENTERPRISE. IN THE ASSESSEES CASE, THE TRANSACTION IS NOT BETWEEN THE AE AND THE ASSESSEE AS FAR AS AMP IS CONCERNED. THE LD.AR OF THE ASSESSEE STATED THAT THERE WAS NO ARRANGEMENT OR AGREEMENT O R ACTION IN CONCERT ARE UNDERSTANDING FOR INCURRING THE AMP EXP ENDITURE BY THE ASSESSEE TO BRING IT UNDER THE AMBIT OF SEC.92B(1) OF THE INCOME TAX ACT. 2.10 IN THIS CONNECTION, THE ASSESSEE RELIED ON T HE DECISION OF MARUTI SUZUKI INDIA LTD., REPORTED IN 381 ITR 117 D ELHI. THE HONBLE HIGH COURT, DELHI, DISAPPROVED THE DECISION OF HON BLE SPECIAL BENCH IN THE CASE OF LG ELECTRONICS AND HELD THAT THE RUL ING OF HONBLE ITAT SPECIAL BENCH IN THE CASE OF LG ELECTRONICS WAS NOT RIGHT IN DIRECTING A FRESH BENCH MARKING COMPARATIVE ANALYSIS TO BE UN DERTAKEN BY THE TPO. THE LD.AR BROUGHT TO OUR NOTICE, THE DECISION OF DELHI HONBLE HIGH COURT IN THE CASE OF SONY ERICSSON IN RELATION TO APPLICATION OF BRIGHT LINE TEST AND UPHELD THAT BRIGHT LINE TEST I S NOT A CORRECT METHOD AS PER THE INDIAN TP REGULATIONS TO BENCH MA RK THE TRANSACTION TO AMP EXPENSES. IN THIS CONNECTION, T HE LD.AR HAS INVITED OUR ATTENTION TO PARA NO.120 & 194 OF THE H ONBLE HIGH COURT, DELHI, DECISION IN THE CASE OF SONY ERICSSON REPORT ED IN 374 ITR 118 DELHI. 120. NOTWITHSTANDING THE ABOVE POSITION, THE ARGUM ENT OF THE REVENUE GOES BEYOND ADEQUATE AND FAIR COMPENSATION AND THE RATIO OF THE MAJORITY DECISION MANDATES THAT IN EACH CASE WHERE AN INDIAN SUBSIDIARY, OF A FOREIGN ASSOCIATED ENTERPRISE INCU RS THE AMP EXPENDITURE SHOULD BE SUBJECTED TO THE BRIGHT LINE TEST ON THE BASIS OF COMPARABLES MENTIONED IN PARAGRAPH 17.4. ANY EXC ESS EXPENDITURE BEYOND THE BRIGHT LINE SHOULD BE REGARD ED AS A SEPARATE INTERNATIONAL TRANSACTION OF BRAND BUILDING. SUCH A BROAD-BRUSH UNIVERSAL APPROACH IS UNWARRANTED AND WOULD AMOUNT TO JUDICIAL LEGISLATION. DURING THE COURSE OF ARGUMENTS, IT WAS ACCEPTED BY THE REVENUE THAT THE TRANSFER PRICING OFFICERS/ASSESSIN G OFFICERS HAVE UNIVERSALLY APPLIED BRIGHT LINE TEST TO DECIPHER AND COMPUTE THE VALUE OF INTERNATIONAL TRANSACTION AND, THEREAFTER, APPLIED COST PLUS METHOD OR COST METHOD TO COMPUTE THE ARMS LENGT H PRICE. THE SAID APPROACH IS NOT MANDATED AND STIPULATED IN THE ACT OR THE RULES. THE LIST OF PARAMETERS FOR ASCERTAINING THE COMPARA BLES FOR APPLYING IT (TP) A NO.73/CHNY/2019 :: 5 :: THE BRIGHT LINE TEST IN PARAGRAPH 17.4 AND, THEREAF TER, THE ASSERTION IN PARAGRAPH 17.6 THAT COMPARISON CAN BE ONLY MADE BY CHOOSING COMPARABLE OF DOMESTIC CASES NOT USING ANY FOREIGN BRAND, IS CONTRARY TO THE RULES. IT AMOUNTS TO WRITING AND PR ESCRIBING A MANDATORY PROCEDURE OR TEST WHICH IS NOT STIPULATED IN THE ACT OR THE RULES. THIS IS BEYOND WHAT THE STATUTE IN CHAPTER X POSTULATES. 194 QUESTION-5: WHETHER THE INCOME-TAX APPELLAT E TRIBUNAL WAS RIGHT IN DIRECTING THAT FRESH BENCH MARKING/COMPARA BILITY ANALYSIS SHOULD BE UNDERTAKEN BY THE TRANSFER PRICING OFFICE R BY APPLYING THE PARAMETERS SPECIFIED IN PARAGRAPH 17.4 OF THE ORDER DATED JANUARY 23, 2013, PASSED BY THE SPECIAL BENCH IN THE CASE O F L. G. ELECTRONICS INDIA (P) LTD.?. IN TERMS OF AND SUBJECT TO THE DISCUSSION UNDER THE HEADINGS D TO P, WE HELD THAT THE LEGAL RATIO ACCEPTED AND APPLIED B Y THE TRIBUNAL RELYING UPON THE MAJORITY DECISION IN L. G. ELECTRO NICS INDIA PVT. LTD. (SUPRA) IS ERRONEOUS AND UNACCEPTABLE. FOR THE REAS ONS SET OUT ABOVE, WE HAVE PASSED AN ORDER OF REMAND TO THE TRI BUNAL TO EXAMINE AND ASCERTAIN FACTS AND APPLY THE RATIO ENU NCIATED IN THIS DECISION. FOR THE PURPOSE OF CLARITY, WE WOULD LIKE TO ENLIST OUR FINDINGS: (X) PARAMETERS SPECIFIED IN PARAGRAPH 17.4 OF THE O RDER DATED JANUARY 23,2013, IN THE CASE OF LG ELECTRONICS INDI A PVT. LTD. (SUPRA) ARE NOT BINDING ON THE ASSESSEE OR THE REVENUE THE BRIGHT LINE TEST HAS NO STATUTORY MANDATE AND A BROAD-BRUSH APPROACH IS NOT MANDATED OR PRESCRIBED. WE DISAGREE WITH THE REVENU E AND DO NOT ACCEPT THE OVERBEARING AND OROTUND SUBMISSION THAT THE EXERCISE TO SEPARATE ROUTINE AND NON-ROUTINE AMP OR BRAND B UILDING EXERCISE BY APPLYING THE BRIGHT LINE TEST OF NON-COMPARABL ES SHOULD BE SANCTIONED AND IN ALL CASES, COSTS OR COMPENSATION PAID FOR AMP EXPENSES WOULD BE NIL, OR AT BEST WOULD MEAN THE AMOUNT OR COMPENSATION EXPRESSLY PAID FOR THE AMP EXPENSES. I T WOULD BE CONSPICUOUSLY WRONG AND INCORRECT TO TREAT THE SEGR EGATED TRANSACTIONAL VALUE AS NIL WHEN IN FACT THE TWO A SSOCIATED ENTERPRISES HAD TREATED THE INTERNATIONAL TRANSACTI ONS AS A PACKAGE OR A SINGLE ONE AND CONTRIBUTION IS ATTRIBUTED TO T HE AGGREGATE PACKAGE. UNHESITATINGLY, WE ADD THAT IN A SPECIFIC CASE THIS CRITERIA AND EVEN ZERO ATTRIBUTION COULD BE POSSIBLE BUT FAC TS SHOULD SO REVEAL AND REQUIRE. TO THIS EXTENT, WE WOULD DISAGREE WITH THE MAJORITY DECISION IN L. G. ELECTRONICS INDIA PVT. LTD. (SUPR A). THIS WOULD BE NECESSARY WHEN THE ARMS LENGTH PRICE OF THE CONTRO LLED TRANSACTION CANNOT BE ADEQUATELY OR RELIABLY DETERMINED WITHOUT SEGMENTATION OF THE AMP EXPENSES. 2.11 THE ASSESSEE ALSO PLACED RELIANCE ON THE DEC ISION OF DELHI TRIBUNAL IN THE CASE OF GOODYEAR INDIA LTD., VS. D CIT (ITA NO.5650/DEL/2011, 6240/DEL/2012 & 916/DEL/2014) AND WE EXTRACT THE RELEVANT PARAGRAPH AS UNDER: IT (TP) A NO.73/CHNY/2019 :: 6 :: 24. THE HONBLE DELHI HIGH COURT CONSIDERING THE DI SPUTE ON FACTS OF SEVERAL DISTRIBUTORS LAID DOWN IMPORTANT TRANSFER P RICING PRINCIPLES, VIZ. (A) BRIGHT LINE TEST APPLIED BY THE REVENUE HAS NO STATUTORY MANDATE, AND THE CONTENTION OF THE REVENUE THAT ANY EXCESS EXPENDITURE BEYOND THE BRIGHT LINE SHOULD BE REGARD ED AS SEPARATE INTERNATIONAL TRANSACTIONS IS UNWARRANTED (B) CLUBB ING OF CLOSELY LINKED TRANSACTIONS IS PERMISSIBLE, (C) BENCHMARKIN G OF A BUNDLE OF TRANSACTIONS APPLYING ENTITY WIDE TNMM IS PERMISSIB LE (D) ONCE THE REVENUE ACCEPTS THE TNMM AS THE MOST APPROPRIATE ME THOD, THEN IT WOULD BE INAPPROPRIATE FOR THE REVENUE TO TREAT A P ARTICULAR EXPENDITURE LIKE AMP AS A SEPARATE INTERNATIONAL TR ANSACTION. 25. AGAIN, THE DELHI HIGH COURT IN THE CASE OF MARU TI SUZUKI INDIA LTD (ITA NO 110/2014 & 710/2015) HAS DECIDED THE ISSUE OF BENCHMARKING AMP EXPENSE IN THE CASE OF MANUFACTURE RS AND AT THE OUTSET DELETED SUCH ADJUSTMENT HOLDING THATCHAPTER X OF THE ACT DOES NOT AUTHORIZE THE REVENUE TO MAKE QUANTITATIVE ADJUSTMENT SUCH AS AMP EXPENSE. FURTHER, THE HIGH COURT ALSO H ELD THAT EXISTENCE OF AN INTERNATIONAL TRANSACTION CANNOT BE PRESUMED ON THE BASIS OF THE BRIGHT LINE TEST. 26. FOLLOWING THE DE CISION IN THE CASE OF MARUTI (SUPRA), HONBLE 2.12 HONBLE DELHI HIGH COURT IN THE CASE OF 381 IT R 117 IN MARUTI SUZUKI INDIA LTD., HELD THAT AMP EXPENSES INCURRED BY THE ASSESSEE IS NOT AN INTERNATIONAL TRANSACTION IN PARAGRAPH NO .71 WHICH IS REPRODUCED HERE AS UNDER: 71 SINCE A QUANTITATIVE ADJUSTMENT IS NOT PERMISSI BLE FOR THE PURPOSES OF A TRANSFER PRICING ADJUSTMENT UNDER CHA PTER X, EQUALLY IT CANNOT BE PERMITTED IN RESPECT OF AMP EXPENSES E ITHER. AS ALREADY NOTICED HEREINBEFORE, WHAT THE REVENUE HAS SOUGHT T O DO IN THE PRESENT CASE IS TO RESORT TO A QUANTITATIVE ADJUSTM ENT BY FIRST DETERMINING WHETHER THE AMP SPENT BY THE ASSESSEE O N APPLICATION OF THE BRIGHT LINE TEST, IS EXCESSIVE, THEREBY EVID ENCING THE EXISTENCE OF AN INTERNATIONAL TRANSACTION INVOLVING THE ASSOC IATED ENTERPRISE. THE QUANTITATIVE DETERMINATION FORMS THE VERY BASIS FOR THE ENTIRE TRANSFER PRICE EXERCISE IN THE PRESENT CASE. 2.13 SIMILAR VIEW WAS EXPRESSED IN THE CASE OF WHIR LPOOL OF INDIA LTD. BY THE HONBLE HIGH COURT DELHI. THE CO-ORDINA TE BENCH OF DELHI TRIBUNAL IN THE CASE OF GOODYEAR INDIA LTD., VS. DC IT ITA NOS.5650/DEL/2011, 6240/DEL/2011 & 916/DEL/2014 FOL LOWING THE DECISION OF HONBLE HIGH COURT DELHI HAS DELETED TH E ADJUSTMENT MADE BY THE IN PARA NO.38 AS UNDER: 38. ACCORDINGLY, IN VIEW OF THE AFORESAID, WE ARE O F THE OPINION THAT THE ADJUSTMENT MADE BY THE TPO IS SQUARELY COVERED BY THE DECISION OF DELHI HIGH COURT IN THE CASE OF MARUTI (SUPRA) A ND HONDA SIEL POWER PRODUCTS (SUPRA) AND THEREFORE, IN THE ABSENC E OF ANY INTERNATIONAL TRANSACTION OF BRAND BUILDING OF GOO DYEAR BRAND, UNDERTAKEN BY THE ASSESSEE WITH ITS AE, THERE CANNO T BE ANY ADJUSTMENT UNDER THE TRANSFER PRICING PROVISIONS. F URTHER, AS HELD BY IT (TP) A NO.73/CHNY/2019 :: 7 :: THE HONBLE HIGH COURT, CHAPTER X OF THE ACT DOES NOT AUTHORIZE THE REVENUE TO MAKE QUANTITATIVE ADJUSTMENT UNDER THE T RANSFER PRICING PROVISIONS, SUCH AS AMP EXPENSE. THE CONTENTION OF THE LD. DR ABOUT ABNORMAL INCREASE IN 57 ITA NOS.5650/DEL/11, 6240/D EL/12 & 916/DEL/14 ADVERTISEMENT EXPENSES IN COMPARISON TO PRECEDING YEAR, DOES NOT RENDER ANY HELP TO THE REVENUE, KEEP ING IN VIEW THE PROPORTIONATE RISE IN TURNOVER OF ASSESSEE. WE ACCO RDINGLY DIRECT THE ASSESSING OFFICER TO DELETE THE ADJUSTMENT MADE ON THIS ACCOUNT. 2.14 THE TPO RELIED ON SEC.92F(V) OF INCOME TAX ACT FOR TAXING AMPS SPENT AS AN INTERNATIONAL TRANSACTION. HONB LE DELHI HIGH COURT IN THE CASE OF MARUTI SUZUKI IN PARAGRAPH NO.61 HEL D AS UNDER: 61. THE SUBMISSION OF THE REVENUE IN THIS REGARD I S: THE MERE FACT THAT THE SERVICE OR BENEFIT HAS BEEN PROVIDED BY ON E PARTY TO THE OTHER WOULD BY ITSELF CONSTITUTE A TRANSACTION IRRE SPECTIVE OF WHETHER THE CONSIDERATION THE SAME HAS BEEN PAID OR REMAINS PAYABLE OR THERE IS A MUTUAL AGREEMENT TO NOT CHARGE ANY COMPE NSATION FOR THE SERVICE OR BENEFIT. EVEN IF THE WORD TRANSACTION IS GIVEN ITS WIDEST CONNOTATION, AND NEED NOT INVOLVE ANY TRANSFER OF M ONEY OR A WRITTEN AGREEMENT AS SUGGESTED BY THE REVENUE, AND EVEN IF RESORT IS HAD TO SECTION 92F(V) WHICH DEFINES TRANSACTION TO IN CLUDE ARRANGEMENT, UNDERSTANDING OR ACTION IN CONCER T, WHETHER FORMAL OR IN WRITING, IT IS STILL INCUMBENT ON THE REVENUE TO SHOW THE EXISTENCE OF AN UNDERSTANDING OR AN ARRANGEMENT OR ACTION IN CONCERT BETWEEN MSIL AND SMC AS REGARDS AMP SPEND F OR BRAND PROMOTION. IN OTHER WORDS, FOR BOTH THE MEANS PA RT AND THE INCLUDES PART OF SECTION 92B(1) WHAT HAS TO BE DE FINITELY SHOWN IS THE 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. 2.15 FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT TH E TP REGULATIONS WOULD BE APPLICABLE TO ANY TRANSACTION WHICH IS HEL D TO BE AN INTERNATIONAL TRANSACTION. IN THE INSTANT CASE, TH E AO HAS REFERRED THE INTERNATIONAL TRANSACTION IN THE CASE OF PURCHA SE OF RAW MATERIALS, FINISHED GOODS, PURCHASE OF GOODS, PURCHASE OF SOFT WARE MANAGEMENT CONSULTANCY REIMBURSEMENT FOR TP STUDY A ND TO DETERMINE THE ALP. DURING THE TP PROCEEDINGS, THE TPO FOUND THAT THERE WAS A HUGE AMP SPENT AND BROUGHT IT UNDER THE PURVIEW OF INTERNATIONAL TRANSACTION. THE AMP SPENT WAS NOT O BLIGATED BY AE. THE EXPENDITURE WAS INCURRED BY THE ASSESSEE AS SAL ES PROMOTION EXPENSES FOR THE PURPOSE OF ITS OWN CAUSE. ACCORD ING TO THE ASSESSEE, THERE WAS NO BINDING AGREEMENT TO PROMOTE THE BRAND OF NIPPON INDIA BY THE ASSESSEE. THE REVENUE COULD NO T DEMONSTRATE THAT THERE WAS AN AGREEMENT OR ARRANGEMENT OR ACTIO N OF CONCERT FORMAL OR INFORMAL TO PROMOTE THE BRAND OF NIPPON I N INDIA AND TO SPEND TOWARDS AMP. THE REVENUE HAS NOT PROVED THAT THE BENEFITS OF AMP EXPENSES ARE FOR IMPROVING THE NIPPON BRAND IN INDIA WHO IS THE ECONOMIC OWNER OF NIPPON JAPAN. THEREFORE, WE HOLD THAT THE AO/TPO/DRP IS NOT CORRECT IN MAKING UPWARD ADJUSTME NT OF BRAND PROMOTION EXPENSES AND THE MARK-UP ON BRAND PROMOTI ON. THE CASE IT (TP) A NO.73/CHNY/2019 :: 8 :: OF ASSESSEE IS SQUARELY COVERED BY THE DECISION O F MARUTI SUZUKI INDIA LTD., VS. DCIT 381 ITR 117 CITED SUPRA. 2.16 RESPECTFULLY FOLLOWING THE JUDICIAL PRONOUNCEM ENTS DISCUSSED ABOVE, WE HOLD THAT THE AMP SPENT OF THE ASSESSEE I S NOT AN INTERNATIONAL TRANSACTION AND THE ADDITION IS DELET ED AND GROUND NOS.2.1 TO 2.8 OF THE ASSESSEE ARE ALLOWED. 6. BY FOLLOWING THE ABOVE DECISION AS WELL AS THE D ECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S.MARUTI SUZUKI I NDIA LTD., REPORTED IN 381 ITR 117, THE LD.CIT(A) DIRECTED THE AO TO DELET E THE TRANSFER PRICING UPWARD ADJUSTMENT OF RS.3,26,29,475/-. THE LD.DR C OULD NOT CONTROVERTED TO THE ABOVE FINDINGS OF THE TRIBUNAL BY FILING TH E HIGH COURT DECISION HAVING MODIFIED OR REVERSED OR ALTERED. WE, THEREF ORE, FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A). ACCORDINGLY, TH E GROUND RAISED BY THE REVENUE IS DISMISSED. 7. THE NEXT GROUND RAISED BY THE REVENUE RELATES TO CONFIRMATION OF DISALLOWANCE OF EMPLOYEES CONTRIBUTION AMOUNT TO R S.8,03,227/- TOWARDS PF AND RS.1,02,686/- TOWARDS ESI. 7.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS MADE REMITTANCE OF RS .9,05,913/- PERTAINING TO EMPLOYEES CONTRIBUTION TO PF & ESI BEYOND THE D UE DATES. ACCORDINGLY, THE ABOVE AMOUNT WAS DISALLOWED UNDER SECTION 36(1) (VA) R.W.S. 2(24)(X) OF THE ACT AND BROUGHT TO TAX. ON APPEAL, AFTER CON SIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING THE DECISION OF HO N'BLE HIGH COURT OF MADRAS IN THE CASE OF CIT V. INDUSTRIAL SECURITY & INTELLIGENCE INDIA PVT. IT (TP) A NO.73/CHNY/2019 :: 9 :: LTD. IN TCA NOS.585 AND 586 OF 2015 VIDE ORDER DATE D 24.07.2015, THE LD.CIT(A) DIRECTED THE AO TO ALLOW THE DEDUCTION. 7.2 AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD.DR HAS SUBMITTED THAT THE DECISION OF THE JURISDICTION AL HIGH COURT IN THE CASE OF M/S.INDUSTRIAL SECURITY & INTELLIGENCE INDIA PVT . LTD., HAS NOT BEEN ACCEPTED AND A REVIEW PETITION HAS BEEN FILED BEFOR E THE HONBLE HIGH COURT OF MADRAS. FURTHER, THE LD.DR HAS SUBMITTED THAT T HE ITAT SMC B BENCH, CHENNAI, VIDE ORDER IN ITA NO.2105/MADS/2015 DATED 21.06.2017 IN THE CASE OF M/S.MAGICK WOODS EXPORTS PVT. LTD., HAS UPHELD THE ORDER OF THE AO ON THIS ISSUE, HOLDING THAT IT IS CRYSTAL CL EAR FROM SECTION 36(1)(VA) OF THE INCOME TAX ACT THAT WITH RESPECT TO REMITTAN CE OF EMPLOYEES CONTRIBUTION TO RECOGNIZED PROVIDENT FUND, DEDUCTIO N WILL BE ALLOWABLE TO THE ASSESSEE ONLY IF THE SAME IS REMITTED WITHIN TH E DUE DATE MENTIONED IN THE RELEVANT P.F.ACT. ON THE OTHER HAND, THE LD.C OUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE LD.CIT(A) AS WE LL AS THE DECISION OF HON'BLE HIGH COURT OF MADRAS IN THE CASE OF CIT V. INDUSTRIAL SECURITY & INTELLIGENCE INDIA PVT. LTD. IN TCA NOS.585 AND 586 OF 2015 VIDE ORDER DATED 24.07.2015. 7.3 WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS DISALLOWED AN AMOU NT OF RS.9,05,913/- BEING BELATED REMITTANCE OF THE EMPLOYEES CONTRIBU TION TO PF & ESI AS IT IS THE INCOME OF THE ASSESSEE IN VIEW OF THE PROVISION S OF SECTION 2(24)(X) OF IT (TP) A NO.73/CHNY/2019 :: 10 :: THE ACT READ WITH SECTION 36(1)(VA) OF THE ACT. BEF ORE THE LD. CIT(A), THE ASSESSEE HAS SUBMITTED THAT SINCE THE ENTIRE AMOUNT HAS BEEN REMITTED BEFORE THE DUE DATE FOR FILING OF RETURN OF INCOME, THE SAME SHOULD BE ALLOWED AS DEDUCTION UNDER SECTION 43B OF THE ACT. 7.4 BY FOLLOWING THE DECISION OF HON'BLE HIGH COURT OF MADRAS IN THE CASE OF CIT V. INDUSTRIAL SECURITY & INTELLIGENCE INDIA PVT. LTD. IN TCA NOS.585 AND 586 OF 2015 VIDE ORDER DATED 24.07.2015 AND THE LD.CIT(A) DIRECTED THE AO TO ALLOW THE DEDUCTION. JUST BECAUSE, THE RE VENUE HAS PREFERRED THE REVIEW PETITION BEFORE THE HONBLE HIGH COURT OF MA DRAS, THE DECISION ALREADY RENDERED BY THE HONBLE MADRAS HIGH COURT C ANNOT BE HELD AS INVALID UNTIL AND UNLESS THE SAID ORDER IS MODIFIED OR ALTERED. THUS, WE ARE OF THE VIEW THAT THE LD.CIT(A) HAS RIGHTLY FOLLOWED THE DECISION OF THE HONBLE MADRAS HIGH COURT AND WE FIND NO INFIRMITY IN THE APPELLATE ORDER PASSED BY THE LD.CIT(A) ON THIS ISSUE. ACCORDINGLY , THE GROUND RAISED BY THE REVENUE STANDS DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I N IT(TP)A NO.73/CHNY/2019 IS DISMISSED. ORDER PRONOUNCED ON THE 30 TH DAY OF SEPTEMBER, 2021, IN CHENNAI. SD/- SD/- ( . ) ( G. MANJUNATHA ) /ACCOUNTANT MEMBER ( . . ) (DUVVURU R.L. REDDY) /JUDICIAL MEMBER IT (TP) A NO.73/CHNY/2019 :: 11 :: /CHENNAI, /DATED: 30 TH SEPTEMBER, 2021. TLN /COPY TO: 1. /APPELLANT 4. ' /CIT 2. /RESPONDENT 5. /DR 3. ' ( ) /CIT(A) 6. /GF