TaxTMI 
TaxTMI 
2019 (3) TMI 2002
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....n law and facts, to the extent of adjustment of Rs. 381,440,197 /- made in the impugned order. Alleged excessive Advertising. Marketing and Promotion (AMP) expenses 2. The facts and circumstance of the case and in law, the Ld. AO/Ld. TPO/ Hon'ble DRP has grossly erred both in facts & law, in enhancing the income of the Appellant by Rs. 271,284,352/- on account of non receipt of the income for "allegedly excessive" AMP expenses incurred by the Appellant and in doing so have grossly erred in: 3.1. assuming jurisdiction in respect of the AMP expenditure when such expenditure did not satisfy the requisites of being an international transaction under Section 92B read with Section 92F(v) of the Act; 3.2. not appreciating that expenditure incurred by the Appellant w as on account of sales activity and, could not be regarded as a 'transaction' in absence of any understanding/ arrangement between the Appellant and the associated enterprise (AE) for the promotion of brand and therefore cannot be termed as an 'international transaction' between the Appellant and the AE; 3.3. not holding that the existence of international transaction in respect of ....
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....ly excess AMP expenses incurred by the Appellant; 3.14. erred in considering selling and distribution expenses within the ambit of AMP expenses which is against the binding principles laid down by the Hon'ble Delhi High Court in case of Sony Mobile Communications (supra) 3.15. without prejudice, Ld. AO/ Ld. TPO/ Hon'ble DRP has erred on facts and in law in giving an erroneous finding of using companies selected by Ld. TPO, which are, neither functionally comparable, nor into similar business activities to benchmark the AMP expenses of the Appellant Adjustment on account of provision of coordination and other support services 4. That on the facts and circumstance of the case and in law', the Ld. AO/Ld. TPO/ Hon'ble DRP has erred in proposing TP adjustment on account of co-ordination & other support sendees provided by the Assessee and in doing so have grossly erred in: 4.1. ignoring the principle of consistency in tax proceedings. 4.2. computing the entity level operating margin of the Assessee instead of co-ordination and other support service segment by disregarding the segmental analysis and not appropriately excluding non....
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....objections. The above grounds are without prejudice to each other." 3. Vide application dated 23.12.2018 the assessee sought permission to file additional evidence in support of the appeal. The contents of the said application read :- 1. "In the captioned appeal preferred by Appellant, against the order dated October 26, 2018 passed by the Joint Commissioner of Income Tax, Special Range -6, New Delhi under section 143 (3) read with section 144C of the Income Tax Act, 1961, the appellant has interalia raised grounds of appeal against an addition of INR 25,450,280 on account of provision of coordination and support services. 2. In this regard, Appellant humbly submits that Learned Transfer Pricing Officer (Ld. TPO) has computed the entity level operating margin instead of support service segment by disregarding the segmental analysis documented by Appellant in transfer pricing documentation and stating that reliable segmental information is not available. 3. In this regard, we submit herewith the certificate from the independent auditor authenticating the margin earned from the each segment of business including provision of coordinatio....
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....n of expenses in this segment. We don't find adequate reason to disagree with the TPO's action and hence uphold the same. Assessee's objection in this regard are rejected. It is further added that there is no reliable segmental data available with the assessee, hence could not be allowed. Based on the above update average PLI of comparables @6.11% in respect of provision of co-ordination and other Support Service Segment, ALP is being revised as follows :- Total Operating Cost 5,567,691,546 Arm's Length Price at a margin of 6.11% 5,907,877,500 Transfer Price received by the taxpayer 5,442,979,466 Shortfall of Transfer price from ALP 46,48,98,033 International transaction related to support services 297,971,174 % of transaction 5.47% Proportionate Adjustment 2,54,50,280 b. Purchase of Trading Goods from the AE:- Following the directions of Hon'ble DRP, the final set of comparable with WCA updated margins are as follows:- Name of comparable company Intensity adjusted OP/OC (%) Working Capital Adjusted Margin Brawn Biotech Ltd. 2.38% 0.36% Emami Frank Ross Ltd. 5.43% 0.04% Infugen Pharma 2.....
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.... carried out for the AE for which the assessee company was not adequately compensated is required to be carried out However, benchmarking carried out above is on protective basis. 6. A perusal of the above shows that the grievance of the assessee has boiled down to adjustment of Rs.27,12,84,352/- to the total income of the assessee on account of marketing and marketing development function carried out for the AE however this bench marketing is carried out on protective basis. 7. At the outset the counsel for the assessee stated that an identical issue on identical set of facts was considered by the Tribunal in ITA No.6565/Del/2017. It is the say of the counsel that since the facts for the year under consideration are identical to the facts considered in A. Y. 2013-14, the grievance raised by the assessee has been decided by the Tribunal in favour of the and against the revenue. 8. Per contra the DR stated that though bright line test (BLT ) has been discarded by the Hon'ble Jurisdictional High Court in case of Sony Mobile Communications 374 ITR 118, therefore, the matter should be restored to the file of the TPO to decide the AMP adjustment without applying BLT. 9. We h....
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....pt of 'protective assessment', as is known to the income tax law, has no application in the cases like the one before us. 7. In view of the above discussions, the addition of Rs 23,83,92,783 stands deleted. 8. So far as the question of set off of the brought forward business losses is incurred, learned representatives fairly agree that the matter is required to be remitted to the file of the Assessing Officer for fresh adjudication in the light of the result of the appellate proceedings in respect of the preceding assessment years in which the related disputed additions have been made. It is pointed out by the learned counsel that, in any event, the assessee has claimed set off of the loss of Rs 26,25,85,933 incurred in the assessment year 2012-13 which could not have been set off for the prior years, and the only year following the said assessment year is the year before us. It is also pointed out that the ALP adjustment, in respect of AMP expenses by applying the bright line test (BLT), which is now decided in favour of the assessee. While learned Departmental Representative did not really address on all these aspects, he fairly agreed to our suggestion that....