2019 (2) TMI 1774 - AT - Income Tax

TP Adjustment - excessive AMP expenses - International transaction - HELD THAT - Since basis on which adjustment has been made being bright line test itself has been rejected by Hon ble Delhi High Court in assessee s own case for 2015 (12) TMI 1188 - DELHI HIGH COURT no further interference can be called for at this stage. Further reliance placed by Ld.Sr.DR on BEPS guidelines and action plan 8-10 cannot be applied as the same is yet to be implemented. As submitted by both sides that facts and circumstances in present appeal are in no manner different from that of Assessment Year 2008-09 2010-11 2011-12 to 2012-13 that was for consideration before this Tribunal and thereafter before Hon ble High Court. In our considered opinion under such circumstances no purpose will be served by keeping present appeal pending as issues raised by revenue in assessee s own case along with other cases have not yet been listed before Hon ble Supreme Court. We are therefore inclined to follow view taken by this Tribunal in assessee s own case which has been upheld by Hon ble High Court for Assessment Year 2008-09. 2015 (12) TMI 1188 - DELHI HIGH COURT Disallowance of expenses u/s 37 incurred by assessee on account of alleged advertisement and marketing expenses - HELD THAT - As the issue relating to nature of AMP expenses being international transaction or not has been set aside to Ld.AO in preceding paragraphs allowability of such expenses claimed by assessee under section 37 of the Act also deserves to be setaside Mismatch in 26 AS - HELD THAT - Perusal of record it appears that differential amount reflected in form 26 A-S were not properly reconciled. As now assessee has all relevant information for the same in the interest of natural Justice we direct Ld. AO to tally database of revenue in light of details filed by assessee. We are therefore inclined to set aside ground no.5 to Ld.AO for reconciliation and to allow the claim as per law. Double taxation relief sought u/s 90-91 - HELD THAT - Since the assessee was in the process of obtaining the certificates from the associated enterprises the same could not be furnished before the Assessing Officer during the course of assessment proceedings. The A.O. in the absence of such certificates disallowed the claim of assessee towards foreign tax credit. As submitted that assessee is now in possession of all Certificates and can reconcile the payment. Both parties agreed for issues to be set aside for verification.We are therefore inclined to set aside ground no.6 to Ld.AO for reconciliation and to allow the claim as per law.

Summary

Issues Involved:
1. Validity of assessment order under Section 143(3) read with Section 144C of the Income Tax Act, 1961.
2. Limitation of the assessment order.
3. Determination of income and adjustments related to Advertisement, Marketing, and Sales Promotion (AMP) expenses.
4. Disallowance of expenses under Section 37(1) of the Act.
5. Addition due to mismatch in TDS claimed and reported.
6. Claim of double taxation relief under Sections 90/91 of the Act.

Issue-wise Detailed Analysis:

1. Validity of Assessment Order:
The appellant challenged the assessment order framed by the officer as being "bad in law, violative of principles of natural justice and void ab-initio." However, this ground was general in nature and was not pressed by the counsel during the hearing.

2. Limitation of the Assessment Order:
The appellant contended that the assessment order was barred by limitation and thus liable to be quashed. This ground was also not pressed by the counsel.

3. Determination of Income and Adjustments Related to AMP Expenses:
The main contention revolved around the adjustment of Rs. 42,59,009 on account of AMP expenses. The appellant argued that the AMP expenses incurred unilaterally in India could not be characterized as an international transaction under Section 92B in the absence of any proved understanding/arrangement with the associated enterprise (AE). The Tribunal noted that the TPO applied the Bright Line Test (BLT) to propose the adjustment, which was overruled by the Delhi High Court in the appellant’s own case for AY 2008-09 (Sony Ericsson Mobile Communications case). The Tribunal set aside the issue to the AO/TPO to pass a fresh order considering the decision of the Supreme Court, as the matter is pending before it.

4. Disallowance of Expenses Under Section 37(1):
The appellant argued that the AMP expenses were incurred wholly and exclusively for the purpose of its business and were deductible as business expenditure. The Tribunal noted that this issue is interconnected with the main issue of AMP expenses as an international transaction, which is pending before the Supreme Court. Therefore, the Tribunal set aside this issue to the AO for reconsideration based on the Supreme Court's decision.

5. Addition Due to Mismatch in TDS Claimed and Reported:
The appellant contended that there was a mismatch in the TDS claimed and the amount reported in the individual transaction statement/AIR information. The Tribunal allowed the appellant to file a reconciliation statement and directed the AO to verify the details and allow the claim as per law.

6. Claim of Double Taxation Relief Under Sections 90/91:
The appellant argued that the AO disallowed the claim for foreign tax credit due to the absence of certificates from the associated enterprises. The appellant now possesses all relevant certificates. The Tribunal set aside this issue to the AO for verification and to allow the claim as per law.

Conclusion:
The Tribunal allowed the appeals for AY 2013-14 and 2014-15 for statistical purposes, setting aside the issues to the AO/TPO for fresh consideration based on the Supreme Court's decision and verification of the appellant's claims.