TaxTMI 
TaxTMI 
TaxTMI 
2022 (1) TMI 886
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....ince the same is not in accordance with the procedure laid down under the provisions of section 144B of the Act. 4. On the facts and circumstances of the case, Ld. DRP has failed to adjudicate critical grounds of objections raised by the assessee. 5. Without prejudice, impugned demand has been wrongly quantified considering incorrect additions to returned income. GROUNDS AGAINST ADJUSTMENT MADE IN RELATION TO ADVERTISEMENT. MARKETING AND PROMOTION ("AMP") EXPENSES 6. That on the facts and circumstances of the case and in law, Ld. AO/TPO/DRP erred in treating routine selling expenses incurred by the Appellant as non-routine Advertisement, Marketing and Promotion ("AMP") expenses which have further been assumed to have been incurred solely towards brand promotion of foreign associated enterprise ("AE"). While doing so, Ld. AO/TPO/DRP have completely disregarded the nature of industry and business realities of the Appellant A. Determination of selling expenses as non-routine brand promotion expense is also in violation of order of the Hon'ble High Court ('HC') in the case of Sony Ericson Mobile Communications India Pvt. Ltd. 7. That on the facts and in circumst....
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....ot benchmarking AMP using the adjusted Resale Price Method ('RPM'). 14. Ld. AO/TPO/DRP proposes adjustment to the value of AMP expenses; direct selling expenses should be excluded from the value of such AMP expenses. 15. Ld. TPO erred in including sales promotion expenses amounting to INR 86,61,031 in the ambit of alleged AMP 16. Ld. AO/TPO/DRP erred on facts and circumstances of the case by considering Residual Profit Split Method ("PSM") as the Most Appropriate Method ("MAM") given multiple fallacies in application of the method. 17. while applying PSM, Ld. TPO again resorted to Bright Line Test in order to compute non-routine AMP expenditure, which has been overruled by the Hon'ble High Court. 18. in the absence of any supernormal profits vis-a-vis comparable companies, PSM cannot be applied to benchmark the alleged transaction of AMP. 19. that on the facts and in circumstances of the case and in law, Ld. TPO/AO/DRP grossly erred in assessment of functional and risk profile of the Appellant/AE while applying PSM. 20. the TPO/AO/DRP grossly erred in allotting weights to FAR of AE/Appellant in an arbitrary manner for computing profit split ratio to alloca....
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....fice of Ld. TPO propose any adjustment to the Appellant's income using Bright Line or any other variant of the same approach. GROUNDS AGAINST ADJUSTMENT IN RELATION TO OUTSTANDING RECEIVABLES 30. That Ld. AO/TPO/DRP has erred, in law and on facts and circumstances of the case by recharacterizing inter-company receivables as unsecured loan in the absence of a statutory provision and have also erred in benchmarking the same using Comparable Uncontrolled Price ("CUP") Method. GROUNDS PERTAINING TO ADDITION UNDER SECTION 36(1)(iii) OF THE ACT 31. The AO has erred in law and facts of the case by imputing adjustment on account of disallowance of expenses u/s. 36(1)(iii) of the Income Tax Act, 1961 ("Act") amounting to INR 13,97,914 which was deleted by the DRP. GROUNDS PERTAINING TO PENALTY PROCEEDINGS 32. That on facts and in laws, the AO erred in holding that the Appellant has furnished inaccurate particulars of income in respect of each item of disallowance/additions and in initiating penalty proceedings under section 271(1)(c) of the Act. The Appellant craves leave to add, alter, modify or delete such other objections before or during the course of hearing before th....
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....ar. In Maruti, the brand was not owned by the foreign AE whereas in this case the brand is owned by the foreign AE. The facts in Maruti were also different because in this case, the margin earned by the assessee is not significantly more than the margin of comparables and the assessee has not been able to demonstrate that it has been adequately compensated for the AMP functions, apart from the compensation it has received for its routine functions. The facts in Maruti were also different because in this case, the assessee's agreement with its AE stipulates that the AE would compensate the assessee for the advertising expenditure. IV. Department's SLP admitted in the Hon'ble Supreme Court According to Taxsutra, the Hon'ble Supreme Court has admitted the Department's SLP in several cases involving AMP where the Hon'ble Delhi High Court has decided the issue against the Revenue. This has been reported by Taxsutra as follows: (I) Canon India Pvt. Ltd. [TS-748-SC-2016-TF] Supreme Court (SC) admits Canon's SLP challenging Delhi HC ruling on Marketing Intangibles issue. Also admits appeals in the cases of Daikin Air-conditioning India Private Limited, S....
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....naccuracies in margin calculation o' comparable companies, Further, the Hon'ble DRP has issued directions for inclusion/exclusion of certain comparable companies. ii) In respect of interest on receivables, the Hon'ble DRP has directed to recompute the applying the Interest as directed by the Delhi High Court in the case of Cotton Naturals Pvt LTd. Therefore, 6 month LIBOR + 400 basis points is being considered the Arms length interest rate i.e. 4,609% as calculated below. Rs. 3,79,72,194/- Substantive Basis) 4,21,71,914/- Protective Basis] 1,82,361/- 10. As per the directions of the DRP, in the final set of comparables, Hicks Thermometer [India] Pvt. Ltd. was included and EDCIL [India] Ltd. was excluded. However, we find that in the final assessment order dated 18.05.2021, the Assessing Officer has repeated the draft assessment order verbatim. The relevant part of the final assessment order reads as under: "The Hon'ble DRP, Delhi vide its order dated 17.03.2021 has upheld the findings of the TPO. Since the objections of the assessee to the draft assessment order u/s. 143(3) r.w.s. 144C of the Act dt. 21.12.2019 have been disposed off by the Hon'ble DRP, Delhi vide i....
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....sing Officer to pass final order of assessment in conformity with the DRP directions. 13. We have given thoughtful consideration to the submissions of the ld. DR qua the factual matrix. We find that the coordinate bench at Bangalore in Flextronics Technologies [India] Pvt. Ltd. IT[TP] A No. 832/BANG/2017 had the occasion to consider identical grievance wherein it followed the decision of the co-ordinate bench in the case Software Paradigms Infotech Pvt. Ltd. 89 Taxman 339 and on identical facts, this Tribunal in ITA No. 1980/DEL/2014 Global One India Pvt. Ltd. order dated 10.12.2019, after considering the decision of the co-ordinate bench, has decided the issue. The relevant findings of the Tribunal in ITA 832/BANG/2017 read as under: "9. We have considered the rival submissions. We find that on identical facts, this Tribunal in the case of Software Paradigms Infotech (P.) Ltd. (supra) has quashed the final order of assessment observing as follows:- "3.3.1 We have heard the rival contention of both parties in the matter and perused and carefully considered the material on record. The undisputed facts on record, as brought out by the discussions above, is that the AO, as per la....