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TMI Blog2015 (8) TMI 429X X X X Extracts X X X X X X X X Extracts X X X X ..... its business, the Assessee entered into various agreements/transactions with the Canon Group of Companies. These transactions pertained to purchase and resale of Canon products such as photocopiers, printers, scanners and cameras in India. The Assessee is also engaged in software development and as a part of its business, exports software and provides software related services to other Canon Group of Companies. 3. The Assessee filed its return of income for the AYs in question and disclosed the transactions with its Associated Enterprises (hereafter the 'AEs'). The Assessing Officer (hereafter 'AO') made a reference under Section 92CA of the Act to the Transfer Pricing Officer (hereafter 'TPO') for determination of Arm's Length Price (hereafter 'ALP') in respect of various transactions entered into by the Assessee during the relevant AYs. 4. On 28th September, 2010 and 17th October, 2011 the TPO completed the transfer pricing reports for the AYs 2007-08 & 2008-09 respectively. The TPO found that the reported international transactions entered into by the Assessee with its AE's were at arm's length. However, the TPO found that the Assessee had incurred Advertisement, Marketing and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it had been remitted by CSPL. Both, the Revenue and the Assessee, challenged the order of the Tribunal in respect of the AY 2006-07 in this court by filing ITA No. 132/2014 and ITA 521/2013 respectively. These appeals were considered by a Division Bench of this Court in Sony Ericsson Mobile Communications India Pvt. Ltd. v. Commissioner of Income Tax: (2015) 374 ITR 118 (Delhi) and the said appeals were disposed of by remanding the matter to the Tribunal for a de novo consideration in accordance with the principles of law as enunciated in the said decision. 9. Mr. Srivastava, learned counsel for the Revenue submitted that the said decision in Sony Ericsson Mobile Communication India Pvt. Ltd. (supra) would also cover the present appeals in almost all the aspects. However, according to him, two issues still remained for consideration, viz., the issue relating to exclusion of subsidy from AMP expenditure and the issue as to the character of the unutilised subsidy. He referred to questions (A) & (C) proposed by the Revenue which read as under: "A. Whether the Hon'ble ITAT was correct in law and in facts in directing exclusion of the expenses in the nature of (i) Subsidy; (ii)Trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. Insofar as the issue of deducting the subsidy received from the AMP expense is concerned, Mr. Butani submitted that the said issue had been conclusively decided in favour of the Assessee by the decision of the Tribunal's Special Bench in the case of LG Electronics Private Limited 2013 (24) ITR (Trib.) 634 (Del). He referred to paragraph 4.2.2 of the impugned order passed by the Tribunal and submitted that the Tribunal had recorded that the AO had the duty to exclude the amount of subsidy received for meeting AMP expenses at the threshold itself, that is, before commencing the exercise of benchmarking the AMP expenditure. He further submitted that the aforesaid aspect had not been contested by the Revenue before the Tribunal and has been raised for the first time in oral submissions before this Court. He pointed out that the said issue also did not find any specific mention in the petition. Mr. Butani submitted that in the circumstances, it was not open for the Revenue to raise the dispute regarding the stage of exclusion of subsidy in the present proceeding. 14. We have heard the learned counsel for the parties. 15. In the first instance, let us consider the controversy wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the advance in lump sum with a specific direction that such money is to be spent only for the specified purposes and any amount of subsidy remaining unspent/unutilized shall be held by the assessee in trust for and on behalf of CSPL and the same shall not be utilized by the assessee for any other purpose." 17. It is not disputed by the Revenue that subsidies were received by the Assessee from CSPL against specific obligation to incur expenditure on specific activities and it was not open for the Assessee to divert the amount for any purpose other than for which it was remitted. It is also not disputed by the Revenue that Assessee is accountable to CSPL for the amount received. The Tribunal had examined the relevant facts and also concluded that the unspent amount is to be held in trust on behalf of CSPL and this was also confirmed by CSPL. 18. In view of the aforesaid facts, it would, clearly, be impermissible for the Assessee to appropriate and reflect the amount of unutilised subsidy as its income. Therefore, the Assessee has not - in our view rightly so - credited the subsidies received to its Profit & Loss Account, but reflected the same as a current liability. 19. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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