TaxTMI 
TaxTMI 
2020 (8) TMI 825
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.... a total income of Rs. 6,94,99,29,995/-. Subsequently, the return was revised due to assessee claiming additional TDS credit. The case was selected for scrutiny and during the course of assessment proceedings, the assessee was directed vide order dated 28.03.2014 to get its account audited u/s 142(2A) of the Act (Special Audit). The assessee's case was also referred to the Transfer Pricing Officer (TPO) to determine the Arm's Length Price in respect of the international transactions entered into by the assessee during the year under consideration. The draft assessment order was passed wherein the assessee's income was proposed to be assessed at Rs. 97,87,82,85,371/- as against the returned income of Rs. 6,94,99,29,995/-. Against the draft assessment order, the assessee filed objections before the Ld. Disputes Resolution Panel (DRP) and subsequent to the directions of the Ld. DRP the final assessment order was passed against which the assessee is now in appeal before this Tribunal. 2.2 It is also to be noted that a survey u/s 133A of the Act was conducted on the assessee at the Gurgaon Corporate Office and the Chennai factory premises on 08.01.2013 and it was noted during the ....
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....ant, for purchase of mobile phones and accessories from Nokia Corp, under Section 40(a)(i) of the Act. 5. The Ld. TPO / Ld. AO/ Hon'ble DRP have erred on facts and in law in enhancing the income of the appellant by INR 2,88,12,58,598 by making a transfer pricing adjustment on account of 'alleged excessive' / 'non-routine' Advertising, Marketing and Promotion ("AMP") expenses incurred by the appellant. The sub-grounds in this respect are as under: 5.1 The Ld. TPO / Ld. AO / Hon'ble DRP have erred in not accepting the arm's length analysis carried out by the appellant, for the NMP Sales segment as a whole, by applying Transactional Net Margin Method ("TNMM") and carrying out separate benchmarking in respect of AMP expenses. 5.2 The Ld. TPO / Ld. AO / Hon'ble DRP have erred in concluding that the AMP expenses incurred by the appellant amount to international transaction under Section 92B of the Act. 5.3 The Ld. TPO / Ld. AO / Hon'ble DRP have erred in presuming the existence of an agreement between the appellant and its Associated Enterprise ("AE"), Nokia Corp, in respect of AMP expenditure incurred by the appellant. 5.4 The Ld. TPO / Ld. A....
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....ons with regard to not using bright line method, adopting alternate approach (i.e. carving out a separate AMP segment to benchmark AMP expenditure) and computation of mark-up. 6. The Ld. TPO/ Ld. AO/ Hon'ble DRP have erred in disallowing a portion of the expense incurred by the appellant amounting to INR 450,259,687/- in respect of software purchased from Nokia Corp. by treating it to be excessive under the transfer pricing regulations. The subgrounds in this respect are as under: 6.1 The Ld. TPO / Ld. AO / Hon'ble DRP have erred in not accepting the arm's length analysis undertaken by the appellant, for the NMP Sales segment as a whole, by applying TNMM and in separately benchmarking the purchase price of software 6.2 The Ld. TPO / Ld. AO / Hon'ble DRP have erred on facts and in law in not appreciating that due to its compensation model, the appellant has already been reimbursed in respect of the alleged excessive software expenses, if any, along with an arm's length mark up. 6.3 The Ld. TPO / Ld. AO / Hon'ble DRP have erred on facts and in law in making an adjustment on the basis of the assumption that software payments made by the appellant we....
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....ables by arbitrarily selecting comparables from the list of companies rejected by the appellant without analysing all the companies rejected by the appellant. 7.7 The Ld. TPO / Ld. AO / Hon'ble DRP have erred on facts and in law in rejecting the comparables, chosen by the appellant, on the basis of incorrect reasons and introducing certain additional, inappropriate, comparables while determining the ALP. 7.8 The Ld. TPO / Ld. AO / Hon'ble DRP have erred on facts and in law in accepting comparables engaged in diverse activities even though sufficient segmental information is not available. 7.9 The Ld. TPO / Ld. AO / Hon'ble DRP have erred on facts and in law in not making an adjustment to account for differences between the risk profile of the appellant and comparables, while determining the ALP. 7.10 The Ld. TPO / Ld. AO / Hon'ble DRP have erred on facts and in law in not making an adjustment to account for difference in depreciation rates charged by the appellant vis-a-vis the comparables, while determining the ALP. 7.11 The Ld. TPO / Ld. AO / Hon'ble DRP have erred in treating 3 line items in the financials of comparables (i.e. foreign....
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....nse under Section 40(a)(i), resulting in double disallowance of the same amount. 14 The above grounds of appeals are independent and without prejudice to one another. 15. The appellant craves leave to add / withdraw or amend any ground of appeal at the time of hearing." 3.0 At the time of hearing, it was brought to notice of the Bench by the Ld. AR that in addition to filing the appeal before this Tribunal, the assessee had also filed an application under Article-24 of the India Finland Double Taxation Avoidance Agreement for initiation of Mutual Agreement Procedure (MAP) before the Indian and Finnish Competent Authorities on the following issues: (i) Disallowance u/s 40(a)(i) of the Act on the issue of withholding tax on payments made to Nokia Corporation towards purchase of end user operating software and purchase of finished Mobile Phones. (ii) Transfer Pricing Adjustment on account of contract research and development activities, advertising marketing and promotion expenditure (AMP) and excessive software purchase price. 3.1 The Ld. AR submitted that a resolution has been arrived at between Indian and Finnish Competent Authority on thes....
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....loyees, dealers and After Marketing Service Centres ("AMSC's") on the ground that the same would give enduring benefit and cannot be claimed as revenue expenditure. 5. The Ld. AO and the Hon'ble DRP have erred in not allowing current year depreciation in respect of the FOC phones given to AMSC's for warranty purposes and to dealers for promotional purposes even though these expenses were treated as capital expenses. The Ld. AO lias also erred in not allowed earlier years' depreciation in respect of the FOC phones, despite the Hon'ble DRP's directions in this regard. 6. The above grounds of appeals are independent and without prejudice to one another. 7. The appellant craves leave to add/withdraw or amend any ground of appeal as the time hearing." 6.0 Arguing for the surviving grounds after the MAP proceedings, it was submitted by the Ld. AR that ground No.2 challenges the disallowance made u/s 40(a)(ia) of the Act on account of trade offers amounting to Rs. 7,16,24,39,495/- provided to the distributors. The Ld. AR submitted that Department had held these trade offers to be liable to the provisions of withholding tax u/s 194H of the Act on the groun....
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....0 Per contra, the Ld. CIT-DR placed extensive reliance on the directions of the Ld. DRP and vehemently argued that the Ld. DRP had give its directions after due consideration of all the relevant facts and the law and, therefore, these direction could not simply be brushed aside. The Ld. CIT-DR, however, could not controvert the fact that these issues had been decided in favour of the assessee and against the Revenue in the immediately preceding assessment year 2010-11 by this Tribunal. 8.0 We have heard both the parties and have also perused the material on record. We have also perused the order of the Tribunal in the immediately preceding year in the assessee's own case for Asst. Year: 2010-11 in ITA No.5791/Del/2015 vide order 20.02.2020 and we are in agreement with the contention of the Ld. AR that the issues are squarely covered in favour of the assessee on the issues now surviving before us by the said order of the Tribunal. With respect to ground No.2 relating to disallowance 40(a)(ia) on account of trade offers amounting to Rs. 7,16,24,39,495/-, we find that this issue has been decided in favour of the assessee vide paragraph 8 of the said order and the same is reproduced....
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....ompetitors, change in life of mobile model, change in market demand of particular model which affects the sales, the distributor is protected by the Trade Price Protection. This is actually a commercial expediency in modern day technological changes which are very fast and vast. Besides, Trade Price Protection is offered to distributors on handsets which have not been subject to trade offers/discounts. This is evidenced by specific clause in the Trade Schemes filed before the Assessing Officer vide submission dated 10.03.2014 trade scheme. In-fact, it was pointed out during the course of hearing that in Assessment Year 2008-09, even the Assessing Officer has allowed the deduction for the instant like expenditure. In Assessment Year 2008-09, the matter was remanded back to the file of the Assessing Officer, who has allowed the deduction with respect to the expenditure, where confirmations have been obtained from the recipients. In any case, so far as the instant year is concerned, we have already noted in the earlier paragraph that the requisite confirmations were filed before the Assessing Officer. Thus, this expenditure is allowable as revenue expenditure under Section 37(1) of th....