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2019 (4) TMI 753 - AT - Income TaxTP adjustment - AMP expenditure treated as an international transaction u/s 92B(1) read with clause (v) of section 92F - Taking a leaf out of Bright Line Test BLT - HELD THAT - Nowhere the DRP has brought on record or referred to any tangible material which could suggest that there are expenses of international transaction in so far as AMP spend is concerned. The DRP was well aware with the decision of the Hon ble Delhi High Court in the case of Maruti Suzuki 2015 (12) TMI 634 - DELHI HIGH COURT , yet neither the DRP itself brought on record any material to suggest that the AMP spend is an international nor it directed the TPO to do the same. Therefore, we see no reason to remit the matter to the file of the TPO as is prayed for by the ld. DR. Remand to the assessment stage cannot be a matter of routine. It has to be so done only when there is anything in the facts and circumstances to so warrant or justify - no new facts have emerged and all the facts brought on record during the course of scrutiny assessment proceedings do not indicate legally sustainable basis for remitting the matter to the file of the TPO. Revenue has failed to demonstrate by bringing any tangible material evidence on record to show that international transaction does exist so far as AMP expenditure is concerned. Therefore, we hold that the incurring of expenditure in question does not give rise to any international transaction as per judicial discussion hereinabove. - Decided in favour of assessee Adjustment to transaction pertaining to receipt of Information Technology Support Services - Arm s Length principle satisfaction - HELD THAT - We find that a similar quarrel arose in A.Y 2010-11 and the matter travelled upto the Tribunal and hold that the international transaction of Receipt of I.T. Support Services is required to be separately benchmarked, distinct from the international transactions of purchase etc. Since the view of the TPO as regards the receipt of no services etc. has been set aside by us, we remit the matter to the AO/TPO for determining the ALP of this international transaction afresh as per law after allowing a reasonable opportunity of being heard to the assessee Allowable revenue expenses - proof of payment in relation to the services received from M/s Bhumi Consultants - HELD THAT - There is no dispute that the impugned transaction took place in F.Y. 2010-11. The Inspector carried out his inspection in the month of March 2015. There is every possibility that M/s Bhumi Consultants must have moved away from the given address. Be that as it may, the assessee should have filed documentary evidences to prove that the assessee did receive services from M/s Bhumi Consultants. Before us also, no such evidence has been brought on record. Whatever evidences the assessee has furnished only establishes the identity of M/s Bhumi Consultants and that the payments have been made through banking channel after deducting tax at source. But not a single evidence has been place on record which could conclusively prove that the assessee did receive services from M/s Bhumi Consultants in lieu of which payments were made. We are of the considered view that unless such evidences are brought on record, the expenses cannot be considered as allowable expenditure. We, therefore, remit this issue to the file of the Assessing Officer.
Issues Involved:
1. Additions/adjustments on account of Advertisement, Marketing, and Promotion (AMP) expenditure. 2. Enhancement of income by ?1,71,32,019/- due to the transaction pertaining to receipt of Information Technology Support Services not satisfying the Arm’s Length Price. 3. Disallowance of ?83,70,085/- being payment made to M/s Bhumi Consultants. Detailed Analysis: 1. Additions/Adjustments on Account of AMP Expenditure: The assessee was aggrieved by the adjustments made by the TPO regarding AMP expenditure, which was treated as an international transaction under Section 92B(1) read with clause (v) of Section 92F of the Income-tax Act, 1961. The TPO used the Bright Line Test (BLT) to benchmark the AMP expenditure and determined that the expenditure in excess of the bright line should be compensated by the AE. The DRP upheld the TPO's approach, leading to an addition of ?53,11,37,361/-. The Tribunal noted that the Hon’ble Delhi High Court in the case of Sony Ericsson Mobile Communications India Pvt Ltd vs CIT discarded the BLT. The Tribunal emphasized that the existence of an international transaction must be demonstrated by tangible evidence and cannot be inferred merely based on the BLT. The Tribunal further referred to the judgments of the Hon’ble Delhi High Court in Maruti Suzuki India Ltd, Whirlpool of India Ltd, and Mary Kay Cosmetic Pvt Ltd, which held that the Revenue must establish the existence of an international transaction before undertaking benchmarking of AMP expenses. The Tribunal concluded that the Revenue failed to demonstrate the existence of an international transaction regarding AMP expenditure and allowed the assessee's ground on this issue. 2. Enhancement of Income by ?1,71,32,019/- Due to IT Support Services: The assessee received IT support services from its AE, BMW Group, for which it paid certain charges. The TPO treated this as a separate international transaction and determined the ALP separately rather than aggregating it with other transactions under TNMM. The DRP upheld the TPO's findings. The Tribunal referred to its decision in the assessee's own case for A.Y. 2010-11, where the matter was remitted to the AO/TPO for fresh determination of the ALP of the international transaction of receipt of IT support services. Following the coordinate bench's findings, the Tribunal directed the AO/TPO to determine the ALP of this international transaction afresh as per law after allowing a reasonable opportunity of being heard to the assessee. This ground was treated as allowed for statistical purposes. 3. Disallowance of ?83,70,085/- Being Payment Made to M/s Bhumi Consultants: The assessee claimed legal and professional expenses, including payments made to M/s Bhumi Consultants. The Assessing Officer disallowed the expenditure after an Inspector's report indicated that the company did not exist at the given address. The DRP upheld the disallowance, stating that the assessee failed to discharge the onus satisfactorily. The Tribunal noted that the impugned transaction took place in F.Y. 2010-11, while the inspection was conducted in March 2015. There was a possibility that M/s Bhumi Consultants had moved from the given address. However, the assessee failed to provide conclusive evidence that services were received from M/s Bhumi Consultants. The Tribunal remitted the issue to the Assessing Officer, directing the assessee to demonstrate that the payment was for services received from M/s Bhumi Consultants. The Assessing Officer was instructed to examine the claim and decide the issue afresh after giving a reasonable opportunity of being heard to the assessee. This ground was treated as allowed for statistical purposes. Conclusion: The appeal by the assessee was allowed in part for statistical purposes, with directions for fresh determination of certain issues by the Assessing Officer/TPO. The Tribunal emphasized the necessity of tangible evidence to establish the existence of international transactions and adherence to judicial precedents.
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