TaxTMI 
TaxTMI 
2017 (10) TMI 535
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....ompanies and resells the same in the Indian markets. The products which are imported in India by the assessee are fashion accessories, leather bags and shoes. 2.1 For the year under consideration, the assessee filed return declaring Nil income and also reported certain international transactions. The AO referred the matter of determination of Arm's Length Price (ALP) of the international transactions to the Transfer Pricing Officer (TPO). The international transactions reported by the assessee included import of finished goods, import of window display, packaging material, brochures and catalogues of goods and reimbursement of expenses (received). For import transactions, the assessee applied Resale Price Method (RPM) as the Most Appropriate Method (MAM), whereas for the reimbursement of expenses, the assessee applied Comparable Uncontrolled Method (CUP). During the course of the proceedings, the TPO observed that the assessee had incurred Advertisement, Marketing and Promotion (AMP) expenses. Treating this as an international transaction, the TPO proposed transfer pricing adjustment on account of AMP expenses at Rs. 9,75,39,656/- on substantive basis by intensity adjustment by ....
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....d particularly when the jurisdiction of the TPO is only to compute arms' length price ('ALP') of the international transaction. Further, the DRP erred in not adjudicating the objections challenging the jurisdiction of the TPO in this regard. 5.1 That on the facts and circumstances of the case and in law, the TPO erred in suo-moto benchmarking the alleged international transaction related to AMP expenditure without their being any order or reference 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 Appellant has failed to demonstrate business purpose / benefit from incurrence of alleged excessive AMP expenditure without providing any cogent reasons and completely ignoring that incurrence of the AMP expenditure has accelerated growth of Appellant's turnover over the years. 7. That on the facts and circumstances of the case and in law, the AO / DRP / TPO have erred in recharacterizing the Appellant as service provider rendering brand building services to its AE, without appreciating that it is a normal risk bearing distributor incurring AMP expenditure in the course of its own ....
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.... have erred in applying cost plus method to benchmark the AMP expenses, and further erred in applying the same de hors the Indian Transfer Pricing Regulations. 13.1 Without prejudice and notwithstanding, that on the facts and circumstances of the case and in law, the AO / DRP / TPO have erred in not granting set-off of excessive gross profit earned by the Appellant from distribution function, against TP adjustment proposed in relation to AMP expenses, even if segregate approach was to be adopted for benchmarking the AMP expenditure. 14. That on the facts and circumstances of the case and in law, AO / DRP / TPO have erred in not appreciating that the Appellant had not provided any value added / brand building services to its AE by incurring AMP expenditure, and therefore, no mark-up could have been charged / levied on such expenditure, even if the same was to be characterized as an 'international transaction'. 15. Notwithstanding and without prejudice to the above ground, even if the mark-up is to be applied, the same could have been charged only on the value added expenses incurred by the Appellant for such alleged brand promotion service and not on t....
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....ic relations, window display, merchandising and brochures & catalogues; from the ambit of AMP expenditure while benchmarking the alleged international transaction of AMP expenditure on protective basis, completely disregarding various decisions of the Hon'ble Delhi High Court 18.2 Notwithstanding and without prejudice, on facts and circumstances of the case and in law, the AO / TPO have erred in rejecting comparable companies proposed by Appellant for applying the BLT in the course of transfer pricing proceedings without proving any cogent reasons for the same. Further, DRP erred in upholding the order of AO / TPO. 19. Notwithstanding and without prejudice to the other grounds, the DRP has erred in not affording opportunity of being heard to the Appellant, which is a sine qua non under section 1440(11) of the Act, before issuing any direction which is prejudicial to the interest of the 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 selecting companies in market support services for carrying out comparability adjustment o....
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.... 775/Mum/2015 had restored the 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 international transaction, he did not have any occasion to consider the ratio laid down in several judgments of the Hon'ble Jurisdictional High Court which were later available. The Ld. AR submitted that, however, for the year under consideration, the situation was factually different, because in this year, the TPO as well as the Hon'ble DRP had the benefit of the various judgments of the Hon'ble 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/orders in the cases of Sony Ericsson Mobile Communications India Pvt. Ltd Vs. CIT of the Hon'ble Delhi High Court reported in 276 CTR 97 (Del), Toshiba India (P) Ltd. Vs. DCIT of ITAT Delhi reported in 2015- TII-191 - ITAT - DEL - TP, Zimmer India (P) Ltd. Vs. DCIT of ITAT Delhi reported in 2015 - TII- 222- ITAT- DEL- TP, Baush & Lomb India Pvt. Ltd. Vs. DCIT of ITAT Delhi reported in 2015- TII- 244- ITAT- DEL- TP, Casio India Company Pvt. Ltd Vs. DCIT of ITAT Delhi reported in 2015- TII- 268 - ITAT - DEL- TP, Nik....
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....transaction, had been restored for a fresh determination. He still further referred to the three later judgments of the Hon'ble Delhi High Court, viz., Rayban 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 Ericsson Mobile Communications India Pvt. Ltd. (supra). The Ld. CIT DR argued that the Hon'ble Delhi High Court in its earlier decision in Sony Ericson Mobile Communications (India) Pvt. Ltd. vs. CIT reported in (2015) 374 ITR 118 (Del) had held AMP expenses to 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 when the TPO held AMP expenses to be an international transaction, he had the benefit of only some of judgments of the Hon'ble Jurisdictional High Court. Now, several other judgments on the issue, including those which have been delivered after the passing of the order by the TPO, are available for consideratio....
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....e 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 order 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 that there are at least three later judgments of the Hon'ble Delhi High Court, referred to above, viz., Rayban 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 has been restored for fresh determination in the light of the earlier judgment in Sony Ericsson Mobile Communications India 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 the 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 ....