2022 (12) TMI 1257

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....- Assessment Centre (hereinafter referred to as the learned 'AO') under section 143(3) read with section 144C of the Act in pursuance of the directions dated 28 October 2020 issued by the Hon'ble Dispute Resolution Panel (hereinafter referred to as 'Hon'ble DRP'). 1. Impugned final assessment order dated 30.04.2021 is invalid and void ab initio since the same is not in accordance with the procedure laid down under the provisions of section 144B of the Act. In the facts and circumstances of the case and in law, the learned AO/ Transfer Pricing Officer ('TPO') and the Hon'ble DRP has: 2. erred in passing the impugned order without properly following the provisions of the Income-tax Act, 1961 3. erred in law and on facts, by making addition of INR 17,40,55,504 to the total income of the Appellant. 4. erred in adding the adjustment made on protective basis on account of Advertising, Marketing & Promotion ('AMP') expenses to the total income of the Appellant and computed the tax demand. While doing so, the learned AO has not followed the directions of Hon'ble DRP mentioning that no demand is to be computed on protective adjustment. G....

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.... Court in the case of Sony Ericsson Mobile Communications India Pvt. Ltd. 13. erred in quantifying AMP expenses by considering certain selling and distribution expenses while performing arm's length analysis without giving cogent reasons for the purpose of benchmarking alleged AMP expenditure, disregarding the principles and findings laid down by the Hon'ble High Court in the case of Appellant. 14. erred in rejection of comparable companies selected by the Appellant in the transfer pricing documentation for the purpose of computing the adjustment. 15. erred in levying a further mark-up of service providers on AMP expenses for determination of the arm's length price of the alleged brand-promotion services rendered by the Appellant to its AEs. 16. erred in making inappropriate selection of comparable companies for the mark-up on alleged AMP expenditure while computing adjustment. Grounds in relation to Substantive adjustment using Residual Profit Split Method approach 17. erred on facts and circumstances of the case and in law in holding Residual Profit Split Method ('RPSM') as the most appropriate method ('MAM') for benchmarking ....

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....he Act on 21/12/2019 by incorporating the adjustment made by the TPO, wherein an amount of Rs. 7,77,54,318/- on substantive basis and Rs. 14,41,74,836/- on protective basis as proposed by TPO was to be added back to the total income. However, demand for protective adjustment has not been enforced awaiting the judgment of Hon'ble Supreme Court over the concerned issue. An appeal has been filed by the assessee before the DRP and vide order dated 28/10/2020 heard the matter and given the direction. Consequently, giving effect to the order of the DRP, the final assessment order came to be passed on 30/04/2021 u/s. 143(3), 144C(13) r/s 144B of the Act which is the order impugned in the present appeal. 4. The Assessee's Grounds No. 1 to 4 are general in nature. Grounds No. 5 to 9 are in respect of treatment of AMP as international transaction, Grounds No. 10 to 16 are in respect of protective adjustment using bright line approach. Grounds No 17 to 18.3 are in respect of substantive adjustment using RPSM approach. Ground No. 19 is consequential in nature. The Ld. Counsel for the assessee submitted that in Assessee's own case for the year 2010-11, Assessment Year 2011-12, 2012-13, 2....

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....taking defence that Revenue has already filed the Special Leave Petition before the Hon'ble Supreme Court. It is also not in dispute that the ld. DRP mentioned in para 3 of its order that during AY 2014-15, the matter as to whether routine AMP spent is an "international transaction" is pending before the Hon'ble Supreme Court for final decision and thereby upheld AMP adjustment made by the AO. 16. We have perused the aforesaid order dated 24.02.2019 passed by the coordinate Bench of the Tribunal having identical issue, which the ld. DR for the Revenue has opposed on the sole ground that the enforcement of protective adjustment would depend on final outcome of the decision of Hon'ble Supreme Court in case of CIT vs. Sony Ericsson Mobil Communication India Ltd. reported in (2015) 55 taxman.com 240 decided by the Hon'ble Delhi High Court vide which bright line approach has been discarded. 17. Hon'ble Delhi High Court in Sony Ericsson India Pvt. Ltd. v. CIT (2015) 374 ITR 118 (Del.) and subsequently in Maruti Suzuki India Ltd. v. CIT (2016) 328 ITR 210 (Del.) has categorically held that BLT is not a valid basis for determining the existence of inte....

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....f the TPO and DRP has been purely based on hypothesis and one of the agreement entered in the earlier year for a limited period of six months and this has been stated to be a material so as to determine that there was an international transaction qua AMP expenditure in this year. Such a presumption based on said agreement cannot be inferred in this year at all as, firstly, it was for a very limited period in one of the earlier year as stated above; and secondly, each year has to be seen independently and if no such material act is permeating then presumption cannot be drawn for perpetuity. Thus, Revenue has failed to bring on record any material or any kind of arrangement existing between the AE and Assessee Company that there was separate international transaction with regard to AMP expenditure. Thus, on the facts and circumstances of the case, we hold that AMP expenditure cannot be treated as separate international transaction which needs separate benchmarking and accordingly we delete the entire AMP adjustment made by the Assessing Officer." 22. So, in view of what has been discussed above and following the order passed by the Tribunal in taxpayer's own cas....