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TMI Blog2017 (5) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions entered into by the assessee during the Financial Year 2010-11 relevant to the Assessment Year 2011-12. The TPO passed an order dated 29/1/2015 and determine the adjustment/difference in respect of international transactions as under:- Advertisements Marketing and Sales Promotion Rs. 194,02,13,185/- Gross sales of assessee 13,116,894,000/- AMP % of assessee 14.79% Arm's Length level of AMP% 4.55% Arm's Length level of AMP expenses 59,68,18,677/- Amount spent in excess of bright line and on creation of marketing in tangible 1,343,394,508/- Mark up% 12.26% Mark up (Rs.) 16,47,00,167/- The amount by which the assessee company should have been reimbursed by A.E 1,50,80,94,675/- 3. In view of the TPO's direction an addition of Rs. 1,50,80,94,675/- was made to the income of the assessee company. The assessee claim the deduction u/s 80 IC of the Act to the extent of Rs. 149,89,32,563/- as against the total income from business and profession to the extent of Rs. 92.33 crores. The assessee has three units out of which deduction u/s 80IC was claimed only on one unit situated in Rudrapur (Uttrakhand). The assessee has other units at Manesar (Gurgaon) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, the amount of subsidy received has to be deducted from the cost of the asset to arrive at the actual cost for the purpose of depreciation. He further observed that the assessee has not actually reduced cost of the Plant and Machinery by subsidy receipt, therefore, depreciation and additional depreciation was claimed in excess. The subsidy received was not reduced from the cost of the Plant and Machinery excess claim of depreciation and additional depreciation to the extent of 35% was disallowed by the Assessing Officer. 5. The assessee challenged these additions before the DRP and filed the objections. The DRP observed that all the Transfer Pricing Grounds of objections of the assessee was related to the transfer pricing adjustment towards AMP expenses. The DRP further observed that the TPO did not have the benefit of the decision of the Hon'ble High Court in case of Sony Ericsson. The DRP upheld the decision of the TPO that it is an international transaction. The DRP held that the TPO has given valid reasons for the adjustment made and the assessee has not been able to controvert the findings of the TPO. The DRP upheld the order of the TPO as regards to the AMP adjustment ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how try and improve their case against the Assessee. The Ld. AR further submits that as all the material relevant for deciding the issue as also case laws were available to lower authorities the critical issue about existence of international transaction deserves to be decided by this Tribunal. 6.3 As relates to issue no. 2, the Ld. AR further submitted that this is the fourth year of the assessee for claiming the benefit of Section 80IC. The Ld. AR further submitted that the Assessing Officer misinterpreted certificate issued by chartered accountant, ignored the explanation offered by the assessee and denied the benefit of this deduction. The Ld. AR submitted that the claim of the assessee is under Section 80IC(2)(a) of the Act i.e. not related to manufacturing of any items specified in thirteenth Schedule (negative list) and the same has been certified by the auditor in Form 10CCB. The Ld. AR further submitted that the fulfillment of conditions of either Section 80IC(2)(a) or Section 80IC(2)(b) is required to claim the deduction under Section 80IC of the Act and the assessee fulfills the conditions of Section 80IC (2)(a) of the Act as it is not manufacturing any product mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49 crores. However, the deduction claimed by the assessee was restricted to Gross Total Income i.e. upto Rs. 120 crores. The Ld. AR submits that no loss/excess deduction was carried forward by the assessee. Section 80AB of the Act provides for computation of taxable business profits of that unit. While computing Gross Total Income, all the heads of income have to be considered including Income from Other Sources. Thus, the Ld. AR submits that the assessee is eligible for claiming deduction of Rs. 102 crores. 6.4 As relates to issue no. 3, the Ld. AR further submitted that depreciation disallowed on capital subsidy by the AO is not proper as the same is allowable since the amount of capital subsidy was not received during the subject year. The Ld. AR submits that if the disallowance if any made, the same should be restricted to Rs. 9,37,500/-. 7. The Ld. DR submits that the AMP issue has been duly considered by the TPO and the DRP as per the decisions of the Hon'ble Delhi High Court in case of Sony Ericson and the same should be remanded back to the TPO. 7.1 The Ld. DR submits that as regards ground nos. 14 to 16 related to disallowance of claim of deduction of Rs. 102,31,58,679/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s judicata is not applicable in case of the assessment proceeding and every assessment year is different. Though the principle of consistency has held to be applicable by the Hon'ble Courts but the Hon'ble Courts have also held in various judicial pronouncements that this principle cannot be stretched beyond a limit in cases where erroneous views were taken in past. Some of those landmark judgments are of the Hon'ble Delhi High Court in case of Krishak Bharati Cooperative Ltd. [2012] 23 taxmann.com 265 (Delhi) wherein it has been held that there cannot be a wild application of the principle of consistency after interpreting the judgment given by the Hon'ble Apex Court in case of Radhasoami Satsang which has been relied upon by the assessee. 7.3 It is now necessary to take up the submission that the Tribunal erred in departing from the "consistency" rule. This is based on the fact that for the period of about 15 years, the income tax authorities had accepted the assessee's submissions and permitted annual amortization of the initial lease consideration, as advance rent. The assessee has relied on the "consistency" rule enunciated in Radhasoami Satsang( supra). The Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round No. 19, on maintenance of separate Books of Accounts for the eligible unit, the Ld. DR submitted that Separate Profit and Loss Account and Balance Sheet is required to be maintained as per the Rule 18BBB of the Income tax Rules a separate report is to be furnished by each undertaking or enterprise of the assessee claiming deduction under section 80-1 or 80-1 A or 80-IB or 80-IC and shall be accompanied by the Profit and Loss Account and Balance Sheet of the undertaking or enterprise as if the undertaking or the enterprise were a distinct entity. 7.5 The Ld. DR further submitted that in the case of an enterprise carrying on the business of developing or operating and maintaining or developing, operating and maintaining an infrastructure facility, the form shall be accompanied by a copy of the agreement of the enterprise with the Central Government or the State Government or the local authority for carrying on the business of developing or operating and maintaining or developing, operating and maintaining the infrastructure facility. In any other case, the form shall be accompanied by a copy of the agreement, approval or permission, as the case may be, to carry on the activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as non-levy of Excise Duty, only distinguishing factor between the Manesar Unit and Rudrapur Unit, in the Rudrapur Unit cannot justify such huge difference between the profits of these units. The fact that the assessee has not maintained separate books of accounts and has not submitted separate Profit and Loss Account and Balance Sheet as mandated by the Rules 18BBB of the IT Rules establishes the shifting of profit by the assessee to lower its tax liability. From the bare perusal of the unit-wise profit and loss estimated by the assessee it is evident that the assessee has attributed less expenses on account of AMP and Operating to the Rudrapur Unit. If the above expenses, which are common expenses and in absence of separate books of account have to be distributed in pro-rata basis (on turnover), are computed in ratio of the respective sales of the three units then instead of Rs. 7379 lakhs Rs. 10,993 Lakhs should be attributed on account of AMP Expenses and instead of Rs. 10,679 lakhs Rs. 14,144 Lakhs should be attributed on account of Operating and other Expenses for the Rudrapur Unit Thus, the Net profit of the Rudrapur unit will be Rs. 7601 Lakhs instead of Rs. 14681 Lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, the Hon'ble J&K High Court has held in case of Asian Cement Industries v. Income Tax Appellate Tribunal [2012] 28 taxmann.com 290 (Jammu & Kashmir) that interest income on FDRs cannot be regarded as income flowing from business activity of industrial undertaking and, thus, it cannot be computed for deduction under section 80-IB. Identical view has been taken by the ITAT Delhi in case of M/s. A. T. Kearney India Pvt. Ltd. v. ITO ITA No. 1403/Del/2010. 7.9 As regards to Ground No. 26 and 27 related to claim of depreciation on assets on which Capital Subsidy was received, the Ld. DR submits that the assessee cannot claim the depreciation on the assets or part of the assets which have been acquired through Capital Subsidy received from the Government. 8. We have heard both the sides and perused all the records. The issues involved in these particular appeals are three folds. Ground No. 2 to 13 is related to AMP adjustment of Rs. 146.19 crores, Ground No. 14 to 25 is related to denial of deduction u/s 80IC of Rs. 102.31 crores and Ground Nos. 26 & 27 are related to disallowance of depreciation to the extent of capital subsidy Rs. 13.12 lakhs. The assessee is engaged in manufacturi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia 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). Respectfully following the predominant view of the Hon'ble High Court, we are of the considered opinion that it would be in the fitness of things if the impugned order is set aside and the matter is restored to file of TPO/AO for fresh determination of the question as to whether there exists an international transaction of AMP expenses. If the existence of such an international transaction is not proved, the matter would end there and then, calling for no transfer pricing addition. If on the other hand, the international transaction is found to be existing, then the TPO will determine the ALP of such an international transaction in the light of the relevant judgments of the Hon'ble High Court, after allowing a reasonable opportunity of being heard to the assessee. 8.1 To sum up, we set aside the impugned order on the issue of transfer pricing additions towards ..... X X X X Extracts X X X X X X X X Extracts X X X X
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