TaxTMI 
TaxTMI 
2021 (2) TMI 857
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....4 November 2019), under Section 143(3) read with section 92CA read with section 144C of the Income Tax Act 1961("the Act") in pursuance of the directions issued by the Dispute Resolution Panel ("DRP"), Bangalore dated 23 August 2019 (received by the Appellant on 31 August 2019) under Section 144C(5) of the Acton the following grounds: Each of the following grounds are without prejudice to each other: 1. The assessment order issued under Section 143(3) read with section 92CA read with section 144C of the Act dated 30 October 2019 (served on the Appellant on 04 November 2019) by the Ld. AO pursuant to DRP directions is based on incorrect facts and wrong interpretation of law and is therefore, bad in law. 2. The Ld. AO has erred in assessing the total income at INR 113,66,49,356 as against the returned income of INR 88,13,25,460 computed by the Appellant in its return of income for AY 2015-16. Grounds relating to transfer pricing matters: 3. Ld. DRP/AO/TPO have erred in applying invalid Bright Line Test (BLT) for purported determination of non-routine AMP expenditure and further in labelling the same as international transaction relating to marketing intangibles contrary to ....
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....ant on mistaken and factually incorrect presumption that all parties chosen as comparable companies are situated outside India and failed to appreciate that Appellant's royalty transaction is in fact at arm's length by applying prescribed method as per law. 13. Ld. DRP/AO/TPO grossly erred by aggregating royalty paid to AE with notional/imaginary transaction of AMP by arbitrarily segregating expenses into routine and non-routine by application of subjective process and further erred in thrusting Residual profit split method (PSM) as most appropriate method. 14. Ld. DRP/AO/TPO have erred in law and in fact by adopting an incorrect subjective mechanism not in accordance with law for computation of profit split between Appellant and AEs. a) Incorrect reasoning applied by Ld. AO/TPO in support of segregation of AMP expenses firstly into "routine" and "non-routine" and subsequently "non-routine" portion into "brand benefit to licensee" and "brand benefit to owner". b) Attribution of higher profit margins only to existence of intangibles. c) Exclusion of royalty and non-routine AMP expenses for computation of profit to be split. d) Arbitrarily allotting weights to con....
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....bjections filed before the DRP. c) Ld. DRP in its directions, stated that Assessee has not placed on record any different view from the TPO for computing the profit split ratio to allocate residual profits while applying PSM. However, contrary to this observation, the Assessee had placed its arguments on record by way of a submission before the DRP during the proceedings. d) Ld. DRP in its directions, stated that multiple year data is allowed only if resale price method ("RPM"), cost plus method ("CPM") or transactional net margin method ("TNMM") have been used as the most appropriate method. However, Ld. DRP failed to appreciate the fact that TPO has applied TNMM to compare the profit earned by Kontoor with that of the comparables, in order to determine the excess that the Assessee is earning on account of the AEs' brand. Grounds relating to corporate tax matters: 21. Ld. AO/DRP has erred in law and in fact, in holding that Design & Technical Know-how, Vendor Network Relationship ("VR") and Customer Network Relationship ("CR") acquired as a part of slump sale are not entitled to depreciation under Section 32(1)(ii) of the Act 22. Ld. AO/DRP has erred in disallowing d....
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....as erred in law and in facts, by computing tax liability of INR 15,95,48,386/- and consequential interest of INR 9,17,41,499 under Section 234B of the Act. 30. Ld. AO/DRP has erred in law and in facts by considering a lower advance tax credit of Rs. 20,69,00,000, when the actual advance tax deposited for the subject AY is Rs. 22,55,73,541. 31. Ld. AO/DRP has erred in law and in facts by not allowing the MAT credit of Rs. 5,71,90,201 claimed by the Applicant in the Return of Income for AY 2015-16. 32. Ld. AO has erred, in law and in facts in initiating penalty proceedings under Section 271(1)(c) of the Act. The Appellant submits that each of the above grounds is independent and without prejudice to one another. The Appellant craves leave to add, alter, amend, vary, omit, or substitute any of the aforesaid grounds of appeal at any time before, or at the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide on the appeal in accordance with the law. 3. The above grounds give rise to the following two issues:- a) Transfer pricing adjustment made in respect of AMP expenditure. b) Rejection of depreciation claimed on intangible assets. 4. The as....
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....l order rendered in the case of DCIT Vs. V.F. Arvind Brands Pvt. Ltd. (supra). Para Nos. 12 to 12.5 of this Tribunal order are relevant in this regard and hence, the same are reproduced hereinbelow. "12. The next question arises about the allowability of the cost incurred by the assessee in connection with the business. In our view, such deductions cannot be disallowed on a technical basis. Supposing the assessee does not allocate the expenses under the head design and technical know-how and it prefers to allocate the same under the head goodwill. There is no dispute for the depreciation on the goodwill as held by the Honourable Supreme Court in the case of Smifs Securities Ltd. reported in 348 ITR 302 wherein it was held as under: 4. Explanation 3 states that the expression 'asset' shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading the words 'any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicates that goodwill would fall under the expression 'any other business or commercial right of a simila....
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....ceding year in its income tax return which was processed under section 143(1) of the Act. Thus, it is clear that there was written down value of these intangible assets which were brought forward in the year under consideration. Thus, in our considered view the opening written down value in the year cannot be disputed. In this regard we find support and guidance from the judgment of Hon'ble High Court of Bombay in case of HSBC asset management India Pvt. Ltd. reported in 47 taxmann.com 286 wherein it was held as under: "Having perused this Appeal Memo including the impugned orders, ITA No. 42/Bang/2017 we are of the opinion that the Delhi High Court judgment has been delivered on 5th November 2012 and the impugned order was passed on 15th June 2011. The Tribunal has essentially based its conclusion on the consistent stand of the Assessee and that of the Assessing Officer. In dealing with the shift in stand for the subject assessment year, the Tribunal found that this claim of depreciation was raised in the assessment year 2003-2004. The Assessee claimed that it is allowable as per the provisions of Income Tax Act on block of assets under the head "intangible assets". The Asse....
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.... of the assessee by considering only routine AMP expenses and the same worked out to 21.58%. The TPO worked out the profit margin of comparable companies without including brand expenses and the average profit margin worked out to 7.76%. Accordingly, the TPO held that the difference between 21.58% and 7.76%, i.e., 13.82% is the non-routine profit. He held that this profit should be shared between the assessee and its AE. The TPO determined the AE's share to be 25% and accordingly worked out AE's share in non-routine profit at Rs. 18.41 crores. The aggregate amount of royalty payment and non-routine AMP expenses was Rs. 40.25 crores. The TPO accordingly held that the difference between the above said amount of Rs. 40.25 crores and Rs. 18.41 crores is liable to be adjusted. Accordingly, he adjusted Rs. 21.94 crores as transfer pricing adjustment. The Ld. Dispute Resolution Panel (DRP) also confirmed the same. 11. We heard the parties on this issue and perused the record. Before us, the Ld. A.R. placed his reliance on the decision rendered by Hon'ble Delhi High Court in the case of Sony Ericsson (374 ITR 118) and submitted that "Residual profit split method" is not approp....