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2019 (3) TMI 326 - AT - Income TaxTransfer Pricing Adjustment - excessive AMP expenditure - international transaction - HELD THAT - Issue in dispute has been decided in favour of the assessee by the coordinate Bench of this Court in earlier assessment years and the order passed by the coordinate Bench for A.Y.2009-10 2017 (10) TMI 998 - ITAT DELHI 2017 (2) TMI 650 - ITAT DELHI has also been upheld by the Hon ble Jurisdictional High Court 2017 (5) TMI 1223 - DELHI HIGH COURT Transfer Pricing Adjustment - transaction for Notional Interest attributable to delayed payments receivable from the AE - HELD THAT - The revenue has not filed any appeal before the Hon ble High Court against the above decision of the Tribunal on the issue in dispute in A.Y. 2009-10 2017 (2) TMI 650 - ITAT DELHI . Moreover, following the decision of A.Y. 2009-10, the coordinate Bench, in A.Y. 2010-11, has again decided the issue in favour of the assessee. It will also be relevant to note that there is no adjustment proposed on this issue by the TPO in A.Ys. 2011-12 2013-14. - Decided in favour of assessee Disallowance of deduction u/s 10A - Data Processing Receipts derived by the assessee from Units 1 and 2 would not be eligible for deduction u/s 10A - HELD THAT - As decided in assessee's own case 2017 (10) TMI 998 - ITAT DELHI the impugned order of the ITAT in the case of AIPL for AY 2009-10 on the issue of allowing the deduction under Section 10A suffers from no legal infirmity either in its analysis of the legal provisions or in its conclusions. The Court is not inclined to frame any question of law on the issue concerning a Section 10A deduction in the appeal of the Revenue against AIPL for AY 2009-10. Disallowance u/ 14A - HELD THAT - Since undisputedly, there is no exempt income derived by assessee/appellant in the instant case, in our considered opinion, the issue merits to be decided in favour of the assessee/appellant following the Hon ble jurisdictional High Court s decision in the case of Mc Donald India Pvt. Ltd 2018 (11) TMI 1057 - DELHI HIGH COURT and M/s Cheminvest Ltd. 2015 (9) TMI 238 - DELHI HIGH COURT .
Issues Involved:
1. Transfer Pricing Adjustment on account of excessive Advertising, Marketing, and Promotion (AMP) expenditure. 2. Transfer Pricing Adjustment on account of notional interest on receivables. 3. Disallowance of deduction under Section 10A of the Income Tax Act. 4. Charging of interest under Sections 234A, 234B, and 234C of the Income Tax Act. Issue-Wise Detailed Analysis: 1. Transfer Pricing Adjustment on Account of Excessive AMP Expenditure: Facts and Arguments: - The assessee challenged the addition of ?114.89 crores on account of excessive AMP expenditure. - The assessee argued that there was no "transaction" for brand promotion between the assessee and its AE, and thus the TPO had no jurisdiction to propose the adjustment. - The TPO applied the Bright Line Test (BLT) to identify abnormal AMP expenses and proposed an adjustment. Tribunal's Findings: - The Tribunal referred to previous decisions in the assessee’s own case for earlier years, where it was held that in the absence of an agreement or understanding for incurring AMP expenses for the AE, the expenses could not be considered an international transaction. - The Tribunal relied on the Delhi High Court's decisions in Maruti Suzuki, Whirlpool of India, and Bausch & Lomb, which clarified that AMP expenses do not constitute an international transaction without a clear agreement. - The Tribunal concluded that the TPO wrongly invoked Chapter X of the Act and directed the deletion of the addition of ?114.89 crores. 2. Transfer Pricing Adjustment on Account of Notional Interest on Receivables: Facts and Arguments: - The TPO proposed an adjustment of ?8,98,683/- for notional interest on delayed payments receivable from the AE. - The assessee argued that the benchmarking of the main international transactions was accepted, and thus no further adjustment was needed. Tribunal's Findings: - The Tribunal referred to its decision in the assessee’s case for A.Y. 2009-10, where it was held that no arm's length price adjustment could be made for delay in realization of sale proceeds. - It was noted that the revenue did not appeal against this decision for A.Y. 2009-10. - The Tribunal followed the jurisdictional High Court’s decision in Kusum Healthcare, which held that working capital adjustment subsumes the adjustment on account of overdue receivables. - The Tribunal directed the deletion of the addition of ?8,98,683/-. 3. Disallowance of Deduction Under Section 10A: Facts and Arguments: - The AO disallowed the deduction under Section 10A for data processing receipts, treating them as commission for distribution and marketing activities. - The assessee argued that its activities were export-oriented and eligible for the deduction. Tribunal's Findings: - The Tribunal referred to its decision for A.Y. 2009-10, where it was held that the assessee’s data processing activities were eligible for deduction under Section 10A. - The Tribunal noted that the revenue accepted the decision for A.Y. 2009-10. - The Tribunal followed the decision in the assessee’s own case and directed the AO to allow the deduction under Section 10A as claimed by the assessee. 4. Charging of Interest Under Sections 234A, 234B, and 234C: Facts and Arguments: - The assessee challenged the charging of interest under Sections 234A, 234B, and 234C of the Act. Tribunal's Findings: - The Tribunal directed the AO to provide consequential relief regarding the charging of interest under Sections 234A, 234B, and 234C. Conclusion: The Tribunal allowed the appeals filed by the assessee for A.Y. 2011-12, 2012-13, and 2013-14, directing the deletion of the transfer pricing adjustments on account of excessive AMP expenditure and notional interest on receivables, and allowing the deduction under Section 10A. The Tribunal also directed consequential relief for the charging of interest under Sections 234A, 234B, and 234C.
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