Appeal partly allowed, remanded for fresh consideration on jurisdiction, evidence, expenses, transfer pricing, and working capital adjustments.

The appeal was partly allowed for statistical purposes, with several issues remanded back to the Assessing Officer (AO) for fresh consideration and adjudication in light of additional evidence and amended provisions. Key issues included jurisdiction of the Transfer Pricing Officer (TPO), admissibility of additional evidence, disallowance of certain expenses, transfer pricing adjustments, and working capital adjustments. The Tribunal directed the AO to re-examine these matters, providing the assessee with opportunities to present their case.

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Issues Involved:
1. Jurisdiction of the Transfer Pricing Officer (TPO)
2. Admissibility of additional evidence
3. Disallowance of marketing expenses on free-of-cost mobile handsets
4. Depreciation on computer peripherals
5. Disallowance of price protection expenses
6. Transfer Pricing Adjustments related to software development services
7. Working capital adjustment in Transfer Pricing
8. Transfer Pricing adjustment related to Advertisement, Marketing, and Promotion (AMP) expenses
9. Power of TPO to determine arm's length price of international transactions not referred by the AO

Detailed Analysis:

1. Jurisdiction of the Transfer Pricing Officer (TPO):
The assessee argued that the show cause notice issued by the TPO on October 12, 2010, was without jurisdiction as the reference from the AO was received only on October 8, 2010. The Tribunal admitted the additional ground raised by the assessee as it was a pure question of law going to the root of the matter.

2. Admissibility of Additional Evidence:
The assessee filed additional evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, regarding the Trade Protection Policy. The Tribunal admitted the additional evidence as it was necessary to decide the issue of price protection charges paid to other distributors, which was not supported by necessary evidence earlier.

3. Disallowance of Marketing Expenses on Free-of-Cost Mobile Handsets:
The AO disallowed the marketing expenses claimed for mobile handsets issued free of cost, treating them as assets on which depreciation could be claimed. The Tribunal noted that similar issues for earlier assessment years were remanded back to the AO for fresh consideration and directed the AO to decide the issue afresh for the current assessment year as well.

4. Depreciation on Computer Peripherals:
The AO allowed depreciation at 15% instead of 60%. The Tribunal, following its earlier decision for the assessment year 2006-07, directed the AO to allow depreciation at 60% on computer peripherals.

5. Disallowance of Price Protection Expenses:
The Tribunal, after admitting the additional evidence, set aside the issue to the file of the AO to examine the case in light of the additional evidence and decide on merits, providing the assessee a reasonable opportunity of being heard.

6. Transfer Pricing Adjustments Related to Software Development Services:
The assessee contended that the DRP used third-party information without disclosing it, violating principles of natural justice. The Tribunal set aside the assessment order to the AO for fresh adjudication after providing the assessee an opportunity to rebut the information.

7. Working Capital Adjustment in Transfer Pricing:
The DRP denied the working capital adjustment. The Tribunal, following its earlier decision for the assessment year 2006-07, directed the AO to grant the working capital adjustment and decide the issue afresh.

8. Transfer Pricing Adjustment Related to Advertisement, Marketing, and Promotion (AMP) Expenses:
The assessee argued that the DRP's order was non-speaking and failed to consider critical factors, including the global transfer pricing policy. The Tribunal noted the proposed amendment in Finance Bill 2012 regarding AMP expenses as international transactions and set aside the issue to the AO to decide in light of the amended provisions.

9. Power of TPO to Determine Arm's Length Price of International Transactions Not Referred by the AO:
The Tribunal noted the retrospective amendment by Finance Act, 2012, empowering the TPO to determine the arm's length price of noticed international transactions. Hence, this ground of appeal was dismissed as academic.

Conclusion:
The appeal was partly allowed for statistical purposes, with several issues remanded back to the AO for fresh consideration and adjudication in light of additional evidence and amended provisions.

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