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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 ..... ion has been accepted. In another judgment in Sony Ericson Mobile Communications (India) Pvt. Ltd. (for A.Y. 2010-11 - 2016 (1) TMI 1234 - DELHI HIGH COURT), the question as to whether AMP expenses is an international transaction, has been restored for a fresh determination. 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. Benefit of deduction under Section 80IC the same was claimed only for the unit situated in Rudrapur (Uttrakhand). There is net loss in the units of Manessar (Haryana) & Chennai (Tamilnadu) and there is a net profit in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 ₹ 149,89,32,563/- as against the total income from business and profession to the extent of ₹ 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount was included in general reserves which forms part of the capital. The Assessing Officer held that the subsidy was received towards the capital assets and that the cost of the asset to the extent of subsidy was paid by the Government, therefore, in view of the provision of Section 43(1) of the Income tax 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by them) as not only relevant decisions laying down principles applicable in the context were available but specifically pointed out. The Ld. AR further submits that if the authorities chose to ignore/failed to discharge the onus and made determination contrary to law it would be unjust and unlawful to allow them multiple opportunities to somehow 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO wherein no discrepancies were pointed out by him. The claim of deduction under Section 80IC is a fact specific analysis and the facts of one case cannot be squarely applied to the other. Further the case of Japan Exports which was relied by the DRP is incorrect and has distinguishing facts. The assessee is eligible to claim deduction of ₹ 149 crores. However, the deduction claimed by the assessee was restricted to Gross Total Income i.e. upto ₹ 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 ₹ 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of assessment proceeding for the AY 2011-12, was ever raised in the earlier assessment years. Thus, when no opinion was formed in the earlier assessment years then there is no question of any change of opinion in this assessment year by following the ratio decidendi of the above decision of jurisdictional High Court. The Ld. DR further submitted that the principle of res 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 er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any further, it cannot be allowed to flip-flop on the issue and it ought let the matter rest rather than spend the tax payers money in pursuing litigation for the sake of it. This is not the case here thus the above judgement of the Apex Court is not applicable keeping in view the facts of the case which are distinguished from the facts of the above case. 7.4 As regards to Ground 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 agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms. The AO has discussed that the assessee was disclosing good profits in the Manesar Unit till the AY 2007-08 but since the AY 2008-09 when the assessee set-up the Rudrapur Unit the profits in the Manesar Unit started declining and resulted in loss in subsequent assessment years despite the fact that it is producing identical goods. The assessee failed to submit any plausible explanation for this 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that from the perusal of the computation of 80IC deduction submitted by the assessee it is evident that the assessee has claimed deduction on the interest income on FDRs amounting to ₹ 5,54,89,633/-. This issue has been settled by the Hon ble Apex Court that deduction u/s 80IC cannot be allowed on the interest income earned on FDRs in case of Pandian Chemicals Ltd. v. CIT [2003] 129 Taxman 539 (SC). Besides the above, 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. Vs. CIT (2015) 374 ITR 118 (Del), in which the AMP expenses as an international transaction has been accepted. In another judgment dated 28.1.2016 of the Hon ble Delhi High Court in Sony Ericson Mobile Communications (India) Pvt. Ltd. (for A.Y. 2010-11), the question as to whether AMP expenses is an international transaction, has been restored for a fresh determination. There are three recent judgments of the Hon ble Delhi High Court, 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). 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 prove ..... 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