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2018 (9) TMI 140 - ITAT DELHITPA - jurisdiction of the TPO to determine ALP of an international transaction and not to re-characterize transaction as an international transaction - Held that:- Any transfer pricing issue can be taken up by the TPO as the same is referred to the TPO by the Assessing Officer as per sub-section 1 of Section 92CA of the Act. In fact, sub-section 2 of Section 92CA itself is clear in that respect that where a reference is made under sub-section (1), the Transfer Pricing Officer shall serve a notice on the assessee requiring him to produce or cause to be produced on a date to be specified therein, any evidence on which the assessee may rely in support of the computation made by him of the arm's length price in relation to the international transaction [or specified domestic transaction] referred to in sub-section (1) of the Act. Thus, Ground No. 3 is dismissed. Non-existence of international transaction - no creation of marketing intangible in favour of AE - non rendition of any brand building services. - AR submitted that existence of an international transaction is sine qua non to invoke the provisions of transfer pricing - Held that:- This issue is not verified properly by the TPO and therefore, it requires verification as there is no mention of the specific agreements to the effect of the AMP whether is a international transaction or not. Therefore, we direct the TPO/AO to verify this issue in light of the agreements signed by the assessee Ita with its AEs as well as the main company. Needless to say the assessee be given the opportunity of hearing by following principles of natural justice. Ground No. 4, 5 and 6 of the assessee’s appeal are partly allowed for statistical purpose. AMP expenditure not amenable to Chapter – X - selection of MAM - wrong application of Bright Line Test by the AO/DRP/TPO - Held that:- since the main issue of AMP is remanded back to the file of the TPO/AO it will be appropriate to send this issue to the file of TPO/AO as well Exclusion of direct selling and distribution expenses along with subsidy from ambit of AMP expenditure - Held that:- As read with the subsequent directions of the Hon’ble Delhi High Court in Assessee’s own case i.e. judgment in batch of cases of Sony Ericsson [2016 (1) TMI 1234 - DELHI HIGH COURT] case, the TPO should be directed to exclude Trade discount, commission and special purpose subsidy from the ambit of the AMP expenditure. Thus, following the order of the Tribunal for A.Y. 2006- 07 to 2008-09 read with the subsequent directions of the Hon’ble Delhi High Court in Assessee’s own case, it will be appropriate to direct the TPO to exclude Trade discount, commission, selling and administrative expenses and special purpose subsidy from the ambit of the AMP expenditure, as given in the tabulated form hereinabove after verifying the same in accordance with the records available with the TPO/AO. Unutilized subsidy required to be recognized as income of the Assessee in the year of its receipt - Held that:- As decided in assessee's own case [2013 (7) TMI 380 - ITAT DELHI] we are unable to accept the Revenue's contention that the unutilized subsidy is required to be recognized as income of the Assessee in the year of its receipt. This would be contrary to the matching concept, which is the substratal principle for computing income during a relevant period - where an Assessee follows the Accrual/Mercantile system of Accounting - as in this case - income can be recognized only when the matching expenditure is also accounted for irrespective of the cash outflows/inflows during the year. It would thus, not be correct to recognize the subsidies received for incurring specific expenditure as income without accounting for the corresponding expenditure. Claim of prepaid taxes and foreign tax credit claimed - Held that:- From the records it can been seen that the Assessing Officer has not allowed credit of pre-paid taxes to the assessee which should have been taken into consideration. Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer. Thus, this issue is remanded back to the file of the Assessing Officer.
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