TaxTMI 
TaxTMI 
2018 (12) TMI 113
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....'), is bad in law, violative of principles of natural justice and void ab-initio. 1.1 That the assessing officer ("AO") erred on facts and in law in completing assessment under section 144C/143(3) of the Income-tax Act, 1961 ('the Act') at an income of Rs. 87,90,03,320 as against the income of Rs. Nil returned by the appellant. 2. That the DRPITPO erred on facts and in law in making transfer pricing adjustment amounting to Rs. 1,29,44,62,939 in relation to the advertisement, marketing and sales promotion expenses (hereinafter referred to as 'the AMP expenses') incurred by the appellant. 2.1 That on the facts and in the circumstances of the case, the DRP erred in law in upholding, in principle, transfer pricing adjustment made by the assessing officer / TPO in respect of expenditure incurred on advertising, marketing and publicity ("AMP expenses"). 2.2 The DRP/TPO erred on facts and in law in not appreciating that the only Transfer Pricing adjustment permitted by Chapter X of the Act was in respect of the difference between the arm's length price (ALP) and the contract or declared price but it cannot determine the 'quantum' ....
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.... erred on facts and in law in not appreciating that the advertisement and marketing expenses were incurred by the appellant wholly and exclusively for purposes of its business and not on behalf of or for the benefit of the AE; any benefit to the AE being only incidental. 2.10 The DRP/TPO erred on facts and in law in not appreciating that in absence of any understanding / arrangement between the appellant and the associated enterprise, the associated enterprise was under no obligation to reimburse AMP expenses incurred by the appellant for sale of its products in India. 2.11 Without prejudice that the assessing officer erred on facts and in law in ignoring the fact that, since the appellant earns return commensurate with other brand owners, the appellant is adequately compensated for its functions and AMP expenses. 2.12 Without prejudice that the DRP/TPO erred on facts and in law, in not appreciating that the AMP expenses incurred by the appellant was appropriately established to be at arm's length applying TNMM. 2.13 The DRP/TPO erred on facts and in law in applying Bright Line Test ("BLT") for computing adjustment on account of expenditure o....
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....et of com parables for undertaking benchmarking analysis of the alleged international transaction arising out of AMP expenditure incurred by the appellant. 3.6 Without prejudice, that the DRP/TPO erred on facts and in law in holding that the appellant had rendered service to the AEs by incurring AMP expense and by holding that markup had to be earned by the appellant in respect of the AMP expenses, alleged to have incurred for and on behalf of the AE. 3.7 Without prejudice, the DRP/TPO erred on facts and in law in not appreciating that markup, if at all, had to be restricted to the value added expenses incurred by the appellant for providing the alleged service in the nature of brand promotion. 4. That without prejudice to the Transfer Pricing adjustment made in respect of AMP expenses, the assessing officer erred on facts and in law in alternatively disallowing Rs. 1,29,44,62,939 under section 37 of the Act, alleging that the amount spent by the assessee was not incurred for the purpose of business conducted by the assessee. 5. That the assessing officer erred on facts and in law in levying interest under Section 2348 and Section 234C of the Act....
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....he objections. Feeling aggrieved, the taxpayer has come up before the Tribunal by way of filing the present appeal. 6. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. GROUND NO.1 7. Ground No.1 is general in nature and does not require any adjudication. GROUNDS NO.2 to 2.14 & 3 to 3.7 8. Undisputedly, the ld. TPO in order to make upward TP adjustment on account of ALP of reimbursement of AMP prices applied BLT. It is also not in dispute that Whirlpool Corporation, USA, an overseas entity is the owner of brand "Whirlpool". It is also not in dispute that BLT method applied by the TPO for reimbursement on account of AMP expenses incurred by the taxpayer has been discarded by Hon'ble Delhi High Court in a number of cases. It is also not in dispute that the taxpayer is a manufacturer and distributor of household products under trademark "Whirlpool" and that a trademark and trade name license agreement is in existence between the taxpayer and its AE for the year under consideration. It is also not ....
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....O/TPO for segregating the AMP expenses incurred into the extent attributable to promote the brand of the AE, and that that was wholly and exclusively for the business purposes of the Assessee, allowable under Section 37 of the Act?" 14. Hon'ble Delhi High Court, after examining the provisions contained in trademark and trade name license agreement and after examining the provisions under section 92B to 92F of the Act and by following the decision rendered by Hon'ble Delhi High Court in in Maruti Suzuki India Ltd. v. CIT (2016) 328 ITR 210 (Del.) and decision rendered by Hon'ble Supreme Court in case cited as CIT vs. B.C. Srinivasa Setty (1981) 128 ITR 294 (SC) and PNB Finance Ltd. vs. CIT (2008) 307 ITR 75 (SC), returned the following findings :- "47. For the aforementioned reasons, the Court is of the view that as far as the present appeals are concerned, the Revenue has been unable to demonstrate by some tangible material that there is an international transaction involving AMP expenses between WOIL and Whirlpool USA. In the absence of that first step, the question of determining the ALP of such a transaction does not arise. In any event, in the absence of a machinery....
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....but contended that all decisions rendered by Hon'ble Delhi High Court viz. Sony Ericsson India Pvt. Ltd. v. CIT (supra), Bausch & Lomb Eye Care (India) Pvt. Ltd. v. Additional CIT (2016) 381 ITR 227 (Del.) and Honda Siel Power Products Ltd. v. Dy. CIT (2016) 237 Taxman 304 are lying challenged before the Hon'ble Apex Court, hence this appeal be kept pending till the decision of Hon'ble Apex Court. 17. After considering the legal position as discussed in the preceding paragraphs and following the decision rendered by Hon'ble Delhi High Court in taxpayer's own case for AY 2008-09, we are of the considered view that TP adjustment of Rs. 1,29,44,62,939/- involving AMP expenses is not sustainable in the eyes of law, we are of the considered opinion that the ALP of an international transaction involving AMP expenses, the adjustment made by the TPO/DRP/AO is not sustainable in the eyes of law, hence Grounds No.2 to 2.14 & 3 to 3.7 are determined in favour of the taxpayer. 18. At the same time, we cannot ignore the submission of the learned DR that the matter is pending before Hon'ble Apex Court and the decision of Hon'ble Apex Court would be binding upon all the authorities.....