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TMI Blog2014 (3) TMI 810X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant facts and issues. It merely rejected the application on the ground that the petitioner had not made out a case of irreparable loss which cannot be compensated in terms of money in the case stay is not granted. This Court in the case of KEC International Limited vs. B.R. Balakrishnan [2001 (3) TMI 32 - BOMBAY High Court] set out the parameters for considering applications for stay. These observations have been repeatedly referred to in subsequent judgments of this Court. In the case before us the petitioner has serious issues to urge, some of which have so far not been dealt with either in the assessment order or in the orders on the stay application. We would ourselves have considered the application for stay but we refrain from doing so for two reasons. Firstly, the entire material is not on record. The respondents may well rely upon further material in support of their case, especially in view of the order in L.G. Electronics. Secondly, the Tribunal has expedited the hearing. – Decided in favour of Assessee. - Writ Petition No. 1214 of 2014 - - - Dated:- 4-3-2014 - S. J. Vazifdar And B. P. Colabawalla,JJ. For the Petitioner : S. E. Dastur, P. Pardiwala, R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the petitioner had incurred expenditure of about Rs.1.91 crores on account of advertising and sales promotion and about Rs.94.20 crores on account of marketing support expenses. He further noted that as the petitioner does not own non-routine intangibles, the brand development activities undertaken by it confers the benefits to the ultimate owner of the brands i.e. the petitioner's Associated Enterprise (AE). The TPO came to the conclusion that as the petitioner had rendered intra group services to its AE it ought to be compensated for the same by its AE at the ALP. He also came to the conclusion that the petitioner had incurred expenditure of Rs.94.20 crores on account of the marketing support expenses, including sales product volume rebates, bottler incentives, concessions etc. which is a part of the AMP expenditure incurred to develop the market for the AE's products and to create the brand loyalty in the minds of the customers and dealers. The TPO refused to accept the petitioner's contention that to compute the AMP / sales ratio value of the sales of the bottlers should be taken into consideration and not the value of its sales of concentrate. The TPO observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO, additions on account of disallowances were being made without prejudice to the merits and independent application of the TPO order. The AO assessed the total income of the assessee to be about Rs.420.00 crores together with interest and directed penalty proceedings to be initiated separately. 11. The petitioner challenged the above orders before the ITAT. The appeal is pending. 12. On 05.11.2011, prior to the appeal being filed, the petitioner made an application before the AO, seeking a stay against the recovery. As regards the disallowance of the AMP, the petitioner stated that the issue had been decided in its favour for the previous years i.e. for AY's 1998-1999 to 2004-2005. During the pendency of the stay application, a Special Bench of the ITAT delivered a judgment in respect of the assessment of L.G. Electronics India Private Limited case. We will refer to the L.G. Electronics case later. The order pertains to transfer pricing in such cases relating to AMP. The petitioner also recorded its submissions regarding the transfer pricing adjustment. Suffice it to note at this stage that the written submissions with respect to the order of the Special Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 20.09.2013. The application was in considerable detail. It raised various issues dealing with several aspects. For instance, the AO's attention was invited to the fact that in all the matters that had come up after the judgment of the Special Bench in the L.G. Electronics case, the Tribunal had remanded the matters to the AO / TPO for recomputing the adjustment in the light of the principles laid down in the judgment. It was contended that considering the facts of the case, there is every possibility of a similar order being passed in the petitioner's case. It was also contended that the assessee had been granted refund of Rs.43.08 crores in respect of the advertising charges for AYs 1999- 2000 to 2004-2005. The same however, was adjusted against the demand raised towards the marketing expenses and service charges for AY's 2005-2006 and 2006-2007 though the issues arising in those assessments were covered in favour of the petitioner. Relying upon a circular of the CBDT dated 06.03.1989, it was contended that the demand for those years ought to have been kept in abeyance. It was therefore, contended that the refund of Rs.43.08 crores could always be adjusted against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stay petitions were disposed of. 19. Mr.Dastur's submission that the authorities had not considered the applicability of the decision in L.G. Electronics case to the facts of the present case, is well founded. We have referred to the orders in some detail only to establish the same. In the application for stay, the authorities are not expected to deal with the issues in detail but deal with them they must, howsoever briefly. The impugned orders do not indicate any process of reasonings by which the authorities decided the applicability of the L.G. Electronics case to the petitioner's case. 20. The decision of the Special Bench in L.G. Electronics case is obviously not binding on this Court. It is however, certainly an important factor as far as the AO and the Tribunal are concerned. It was incumbent upon them to consider the effect of the order on the petitioner's case. It is necessary therefore, to consider the observations of the Special Bench for that reason viz. to ascertain whether the judgment was even considered while rejecting the petitioner's application for stay. We find they have not. 21. The Special Bench found that the assessee in that case ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on this score. As in the case of an express agreement, the incurring of AMP expenses for brand building draws strength from such express agreement; in the like manner, the incurring of proportionately more AMP expenses coupled with the advertisement of brand or logo of the foreign AE, gives strength to the inference of some informal or implied agreement in this regard. 9.11. Adverting to the facts of the instant case, it is noticed that the ld. DR has amply shown that the assessee not only promoted its name and products through advertisements, but also the foreign brand simultaneously, which has remained uncontroverted on behalf of the assessee. This factor together with the fact that the assessee s AMP expenses are proportionately much higher than those incurred by other comparable cases, lends due credence to the inference of the transaction between the assessee and the foreign AE for creating marketing intangible on behalf of the latter. Thus the Special Bench rejected the revenue's contention that merely because an assessee has spent a higher amount on advertising than similarly placed enterprises, it would lead to the conclusion that the assessee acted in concert w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the Indian entity for the promotion of its brand in any form, such as subsidy on the goods sold to the Indian AE ? 10. Where such subsidy is allowed by the foreign AE , whether the amount of subsidy is commensurate with the expenses incurred by the Indian entity on the promotion of brand for the foreign AE ? 11. Whether the foreign AE has its presence in India only in one field or different fields ? Where it is involved in different fields, then is there only one Indian entity looking after all the fields or there are different Indian AEs for different fields ? If there are different entities in India, then what is the pattern of AMP expenses in the other Indian entities ? 12. Whether the year under consideration is the entry level of the foreign AE in India or is it a case of established brand in India ? 13. Whether any new products are launched in India during the relevant period or is it continuation of the business with the existing range of products ? 14. How the brand will be dealt with after the termination of agreement between AEs ? 22. At the cost of repetition, it was necessary for the authorities to indicate some reasons at least before rejecting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeds the returned income, the authority will consider whether the assessee has made out a case for unconditional stay. If not, whether looking to the questions involved in appeal, a part of the amount should be ordered to be deposited for which purpose, some short prima facie reasons could be given by the authority in its order. (c) In cases where the assessee relies upon financial difficulties, the authority concerned can briefly indicate whether the assessee is financially sound and viable to deposit the amount if the authority wants the assessee to so deposit. (d) .............................................................................. (e) ........................................................................... The above parameters are not exhaustive. They are only recommendatory in nature. Unfortunately these guidelines are now being breached by the Revenue. In exercising his power, the Income-tax Officer should not act as a mere tax gatherer but as a quasijudicial authority vested with the power of mitigating hardships to the assessee. These are, we may say so with respect, sage observations which must be borne in mind by the assessing authori ..... X X X X Extracts X X X X X X X X Extracts X X X X
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