2016 (4) TMI 1139 - AT - Income Tax

Addition on account of AMP adjustment - Held that - In the present case it is an admitted fact that the T.P.O. proposed the adjustment by applying the Bright Line Test on account of excessive AMP incurred by the assessee on behalf of the A.E. But subsequently the D.R.P. held that the application of Bright Line Test has been over ruled in the case of M/s. Sony Ericsson Mobile Communication India Pvt. Ltd. 2015 (3) TMI 580 - DELHI HIGH COURT . However the D.R.P. declined to apply the decision of Maruti Suzuki India Ltd. 2015 (12) TMI 634 - DELHI HIGH COURT on the ground that it was rendered in the context of a manufacturer and not a distributor. Recently the Hon ble Delhi High Court subsequent to the said decision of Maruti Suzuki India Ltd. (supra) examined this aspect and applied the same principle to the distribution business also in the cases of Bausch & Lomb Eyecare (India) Pvt. Ltd. vs. A.C.I.T. 2015 (12) TMI 1332 - DELHI HIGH COURT and C.I.T. & Ors vs. Whirlpool of India Ltd. 2015 (12) TMI 1188 - DELHI HIGH COURT . These decisions of the Hon ble Jurisidctional Court which are applicable to the facts of the present case were not considered by the T.P.O. and the D.R.P. since these were not available to them. We therefore by considering the totality of the facts and the ratio laid down by the Hon ble Delhi High Court in the aforesaid judicial pronouncements deem it appreciate to set aside the issue relating to the adjustment on account of AMP to the file of the TPO/AO to be decided afresh in accordance with the law after providing due and reasonable opportunity of being heard to the assessee. Claim of warranty expenses - Held that - It is noticed that the objection of the assessee before the DRP was that the AO had not corrected the claim of warranty expenses made by the assessee with respect to the warranty provisions while computing the taxable process. The DRP directed the AO to verify and correct if any errors were detected. It appears that the AO did not follow the said directions given by the D.R.P. relating to warranty claim therefore this issue is set aside to the file of the AO to be decided afresh as directed by the DRP.

Summary

Issues Involved:
1. Transfer pricing adjustment on account of AMP expenses
2. Claim of warranty expenses
3. Charging of interest under sections 234B and 234C
4. Allegation of furnishing inaccurate particulars of income

Transfer Pricing Adjustment on Account of AMP Expenses:
The appeal was against the order passed by the AO under the Income Tax Act, involving a stay application for an outstanding demand. The grounds raised by the assessee included objections to the computation of total income, transfer pricing adjustments, and AMP expenditure. The TPO recommended enhancing the return income due to AMP expenses, leading to a significant adjustment. The AO also disallowed an amount claimed for SAD written off. The DRP directed the TPO to exclude certain comparables, resulting in a reduced AMP adjustment. The assessee argued that recent court decisions supported their position, highlighting errors in the TPO/AO/DRP's approach. The Tribunal set aside the AMP adjustment issue for fresh consideration by the TPO/AO in line with the law and court rulings.

Claim of Warranty Expenses:
The issue related to the claim of warranty expenses, with the assessee contending that the AO did not follow directions from the DRP in this regard. The DRP had instructed the AO to verify and correct any errors in the warranty expense claim. As the AO did not comply with the DRP's directions, the matter was remitted back to the AO for a fresh decision as directed.

Charging of Interest Under Sections 234B and 234C:
Both parties agreed that the issue of charging interest under sections 234B and 234C was consequential in nature, and the Tribunal made an order accordingly.

Allegation of Furnishing Inaccurate Particulars of Income:
The common contention was that the allegation of furnishing inaccurate particulars of income was consequential and, as the appeal was decided in favor of the assessee, the stay application was dismissed as infructuous. The appeal was allowed for statistical purposes.

This detailed analysis covers the key issues raised in the legal judgment before the Appellate Tribunal ITAT Delhi, providing a comprehensive understanding of the grounds, proceedings, and outcomes related to each issue involved.