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TMI Blog2017 (5) TMI 1305X X X X Extracts X X X X X X X X Extracts X X X X ..... na and Uttarakhand. The assessee's products include Big Babool, Alpenliebe, Centre fresh, Centre fruit, etc. These brands are owned by the associated enterprises (AE) of the assessee and are licensed to it. During the year under consideration, the assessee reported certain international transactions in Form No.3CEB. On a reference made by the AO for the determination of the arm's length price (ALP) of the international transactions, the Transfer Pricing Officer (TPO) observed that the assessee incurred AMP expenses amounting to Rs. 223.05 crore and also paid royalty of Rs. 24.50 crore to its AE at varying rates depending on the products. Considering the Agreement between the assessee and its AE, the TPO noticed that para 3 of it provides for extensive support in marketing activity by the AE through its specialized brand teams. Para 10 of the Agreement was found to entitle the assessee for compensation in lieu of advertising expenses, but, not on the termination of the Agreement. Considering all these facts, the Assessing Officer came to hold that the assessee incurred AMP expenses for promoting the brand/trade name which was owned by its AE and, hence, the same constituted an inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethod and without excluding the selling expenses. However, it was found by him that no adjustment was required by using AMP intensity as directed by the DRP in view of the fact that the operating margin earned by the assessee was higher than the average margin of comparables, after using AMP intensity. The Assessing Officer, in his final order, made an addition of Rs. 308.19 crore which was proposed by the TPO on substantive basis. The assessee is aggrieved against this addition. 4. We have heard the rival submissions and perused the relevant material on record. The ld. AR contended that the incurring of AMP expenses is not an international transaction at all and, hence, there can be no question of determining the arm's length price of this transaction or making any addition thereon. He relied on the judgments of the Hon'ble Delhi High Court in Maruti Suzuki India Ltd. & Another vs. CIT (2015) 129 DTR 25 (Del) and CIT vs. Whirlpool of India Ltd. (2015) 94 CCH 156 DEL-HC to contend that the AMP expenses could not be considered as an international transaction. In the light of these judgments and some other Tribunal orders, it was submitted that there was no international transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which similar issue has been restored for fresh determination in the light of the earlier judgment in Sony Ericsson Mobile Communications India Pvt. Ltd. (supra). The ld. DR argued that the Hon'ble Delhi High Court in its earlier decision in Sony Ericson Mobile Communications (India) Pvt. Ltd. vs. CIT (2015) 374 ITR 118 (Del) has held AMP expenses to be an international transaction. It was argued the matter should be restored for a fresh determination. 6. We find that when the TPO held AMP expenses to be an international transaction, he had the benefit of only some of judgments of the Hon'ble jurisdictional High Court. Now, several other judgments on the issue, including those which have been delivered after the passing of the order by the TPO, are available for consideration. As the entirety of the judicial position as laid down by the Hon'ble High Court is now required to be applied to the factual position prevailing in this case, we direct that a fresh determination of the ALP of AMP expense be done at the end of the TPO/AO. 7. It has been brought to our notice that similar issue came up for consideration before the Tribunal in assessee's own case for the immediately precedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment put forth on behalf of the assessee in this regard is partly correct. It is seen that though the TPO has referred to certain rulings of the Hon'ble jurisdictional High Court on the point in coming to the conclusion that there was a separate international transaction, yet, there are certain other important judgments of the Hon'ble High Court, delivered after the passing of the order by the TPO, which could not be considered, as those were not in existence at that point of time. In this regard, it is noted that there are at least three later judgments of the Hon'ble Delhi High Court, referred to above, viz., Rayban Sun Optics India Ltd. VS. CIT (dt. 14.9.2016), Pr. CIT VS. Toshiba India Pvt. Ltd. (dt. 16.8.2016) and Pr. CIT VS. Bose Corporation (India) Pvt. Ltd. (dt. 23.8.2016) in all of which similar issue has been restored for fresh determination in the light of the earlier judgment in Sony Ericsson Mobile Communications India Pvt. Ltd. (supra). The contention of the ld. AR, claiming departure from the earlier years on this score, is not tenable. 12. In the light of the non-sustainability of the objections taken by the ld. AR and following the consistent view taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cost plus method as is evident from Rule 10B(1)(c) which contains the modus operandi for determining the ALP of an international transaction, reading as under:- '(c) cost plus method, by which,- (i) the direct and indirect costs of production incurred by the enterprise in respect of property transferred or services provided to an associated enterprise, are determined ; (ii) the amount of a normal gross profit mark-up to such costs (computed according to the same accounting norms) arising from the transfer or provision of the same or similar property or services by the enterprise, or by an unrelated enterprise, in a comparable uncontrolled transaction, or a number of such transactions, is determined ; (iii) the normal gross profit mark-up referred to in sub-clause (ii) is adjusted to take into account the functional and other differences, if any, between the international transaction and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect such profit markup in the open market ; (iv) the costs referred to in sub-clause (i) are increased by the adjusted profit mark-up arrived at under sub-clause (iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 80IC was not eligible. Without prejudice to the above, the Assessing Officer held that the claim of the assessee was excessive. He aggregated income from all the three units at Rs. 42.63 crore and apportioned it to the Rudrapur unit in the ratio of its turnover to the total turnover from all the three units. In this way, income pertaining to the Rudrapur unit on the basis of the turnover was determined at Rs. 24.78 crore. The AO also observed that the assessee had claimed deduction u/s 80IC in respect of items of income falling under the head 'Income from other sources.' He held that no deduction was allowable in respect of such items of income. In the ultimate conclusion, he refused to grant any deduction u/s 80IC of the Act, against which the assessee has come up in appeal before us. 20. We have heard the parties and perused the relevant material on record. It is palpable that the only issue under consideration for this year is the quantification of income for the purpose of granting deduction u/s 80-IC. The eligibility condition is not disputed as is apparent from para 5.1 of the final order, in which the AO considered granting of 'deduction u/s 80IC(a)(2).' 21. It is obse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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