TaxTMI 
TaxTMI 
2023 (8) TMI 627
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....contrary to the facts and circumstances of the case and is liable to be quashed. Grounds relating to transfer pricing ('TP') matters 2. On the facts and in the circumstances of the case and in law, the Hon'ble Dispute Resolution Panel ('Hon'ble DRP') erred in not appreciating that the order of the learned Deputy Commissioner of Income-tax (Transfer Pricing) - 1(3)(1), Bangalore ('learned Transfer Pricing Officer' or 'learned TPO') passed under section 92CA of the Act is contrary to law and, thus, liable to be quashed. 3. On the facts and in the circumstances of the case and in law, the Hon'ble DRP/ learned AO/ learned TPO, erred in determining the arm's length price of an alleged international transaction of an alleged advertising, marketing and sales promotion ('AMP') expenses of INR 2,705,042,061. 4. Adjustment with respect to alleged advertising, marketing and promotion expenses On the facts and in the circumstances of the case and in law, the Hon'ble DRP / learned AO erred in upholding the learned TPO's approach of 4.1 assuming that there is an arrangement and understanding bet....
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....ins under transactional net margin method ('TNMM') higher than the comparables for the subject year, concluding that the Appellant is a contract manufacturer and has asserted that separate compensation is required for the alleged excess AMP expenses; 4.10 disregarding the multiple submissions furnished by the Appellant to provide a detailed representation of facts in relation to the FAR profile of the Appellant and its AEs; 4.11 determining the ALP separately for the alleged excess AMP expenses and disregarded that marketing function forms an intrinsic part of the manufacturing along with sales process of the Appellant; 4.12. concluding that the alleged excessive AMP expenditure amounted to a 'service' being rendered by the Appellant to its AE and that a mark-up was required to be charged in respect of such services; 4.13 rejecting the comparability analysis carried out by the Appellant in the TP documentation and in conducting a fresh comparability analysis for the licensed manufacturing segment. 4.14 the learned TPO has erred in performing a fresh comparability analysis to determine the alleged excess AMP expense. In ad....
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....es of the case, the learned AO failed to give due merit to the assessee's contentions, the favourable order obtained in the Assessee's own case and the jurisdictional judicial precedents pronounced by the Hon'ble Bangalore Bench of the Income-tax Appellate Tribunal, pursuant to which the CSR expenditure which is eligible for deduction under section 803 of the Act should be allowed subject to satisfaction of the conditions mentioned therein. 5 4. On the facts and in the circumstances of the case, the learned AO failed to distinguish the Assessee's reliance on favourable judicial precedents on the issue. (Tax Effect: INR 3,218,544) 6. Incorrect levy of interest 6.1. On the facts and in the circumstances of the case, the learned AO erred in computing the interest under section 234B of the Act amounting to INR 473,078,485. (Tax Effect: INR 473,078,485) 7. Penalty Proceedings 7.1. On the facts and in the circumstances the Learned AO erred in initiating penalty proceedings under section 274 read with section 270A of the Act and penalty proceedings under section 274 read with section 271AA of the Act. That the ....
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....er dated 17.05.2023. He submitted that the factual position of assessee in the immediately preceding assessment year is identical and similar with the present year under consideration. He has relied on and referred to the arguments advanced therein in support of these grounds for the year under consideration. On the contrary, the Ld.DR placed reliance on orders passed by authorities below. We have perused the submissions advanced by both sides in the light of records placed before us. 4.1 We note that this issue has been considered by Coordinate Bench of this Tribunal in the following manner: "We have perused the submissions advanced by both sides in the light of records placed before us. 3.15 In rejoinder the Ld.Counsel submitted that the DRP without appreciating the Business model adopted by the assessee took the view in 2.3.19 that the assessee merely purchases the products from AE and sells it further to the distributors / dealers in India. The DRP failed to appreciate that the products are sold to end customers by Direct Selling model and all the incentives / payouts to the agents are subjected to TDS. 3.16 He also referred to para 2.3.16 wh....
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....[2015] 64 taxmann.com 150, held that there should be an understanding between the domestic company and the associated enterprises for incurring AMP expenditure for it to be considered an international transaction. 3.20. Now, it is fairly well established that determination of arm's length price of AMP expenditure by applying BLT method is not valid. In a catena of decisions, the Hon'ble Delhi High Court while disapproving the decision of Hon'ble Delhi Special Bench in L.G. Electronics India (P.) Ltd. (supra) have held that, BLT method is invalid as it is not prescribed in the statute. In this context, we may refer to the decision of the Hon'ble Delhi High Court in Maruti Suzuki India Ltd. (supra). Following the decision of the Hon'ble Delhi High Court in Maruti Suzuki India Ltd. (supra) and various other decisions, different Benches of the Tribunal have also held that in absence of an express arrangement/agreement between the assessee and the AE for incurring AMP expenditure to promote the brand of the AE, AMP expenditure incurred by making payment to third parties for promoting and marketing the product manufactured by the assessee, does not come within th....
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....MP as a separate international transaction without bifurcation/ segregation, it would as noticed above lead to unusual and incongruous results as AMP expenses is the cost or expense and is not diverse. It is factored in the net profit of the inter-linked transaction. This would be also in consonance with Rule 10B(J)(e), which mandates only arriving at the net profit margin by comparing the profits and loss account of the tested party with the comparable. The TNM Method proceeds on the assumption that functions, assets and risk being broadly similar and once suitable adjustments have been made, all things get taken into account and stand reconciled when computing the net profit margin. Once the comparables pass the functional analysis test and adjustments have been made, then the profit margin as declared when matches with the com parables would result in affirmation of the transfer price as the arm's length price. Then to make a comparison of a horizontal item without segregation would be impermissible" 3.23 We also find merit in the submission of the Ld.Counsel that, if the net profit margin meets the Arm's length price, then no separate addition needs to be made.....
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....under section 80G are claimed while computing "Total Taxable income" in the hands of assessee. The point of claim under these provisions are different. 16. Further, intention of legislature is very clear and unambiguous, since expenditure incurred under section 30 to 36 are excluded from Explanation 2 to section 37(1) of the Act, they are specifically excluded in clarification issued. There is no restriction on an expenditure being claimed under above sections to be exempt, as long as it satisfies necessary conditions under section 30 to 36 of the Act, for computing income under the head, "Income from Business and Profession". 17. For claiming benefit under section 80G, deductions are considered at the stage of computing "Total taxable income". Even if any payments under section 80G forms part of CSR payments( keeping in mind ineligible deduction expressly provided, the same would already stand excluded while computing, Income under the head, "Income form Business and Profession". The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing "Total Taxable Income" cannot be denied....