9911796707
TMI Blog2018 (3) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... that assessee is only distributor, is not emanating from the records of the lower authorities. We find that the issue under dispute before us is squarely addressed by this tribunal in assessee’s own case for the Asst Year 2011-12 thus the upward adjustment made by the ld TPO and upheld by the ld DRP in the sum of 1,03,59,000/- is hereby directed to be deleted. Lease rental paid for motor car taken on finance lease - Held that:- We find that the issue under dispute is covered by the decision of the Hon’ble Supreme Court in the case of ICDS Ltd. (2013 (1) TMI 344 - SUPREME COURT) in favour of the assessee Depreciation on moulds - Held that:- AR stated that the moulds were owned by the assessee and used for the purpose of its business. Further, the moulds were exclusively used in the plastic factory by the job workers/co-makers to whom moulds were given by the assessee to be used in the plastic factory, under its control and supervision and prayed that depreciation @ 30% would be eligible on the said moulds. We find that this issue has been considered by this tribunal in assessee’s own case for the Asst Year 2011-12 as held AR has just verbally submitted that in most of the products w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Care : This division makes a wide range of electrical products for personal care and household convenience. (iii) Philips Lighting: This division is the global leader in lamps, luminaries, lighting electronics, automotive lighting, special lighting, UHP & LCD backlighting and lumileds. (iv) Philips Medical Systems : This division is one of the world leaders in diagnostic imaging systems and related services. (v) Philips Semiconductors : This division supplies silicon system solutions for mobile communications, consumer electronics, digital displays, contactless payments and connectivity and in-car entertainment and networking. (vi) Other Activities : relates to Corporate Technology, Corporate Investments etc. The assessee had made international transaction with its associated enterprises (AEs) during the year and the same was referred to the Transfer Pricing Officer (TPO) u/s 92CA of the Act for determination of ALP. The assessee submitted sector wise transfer pricing study report along with functional analysis and information required u/s 92D(1) of the Act before the ld TPO. The assessee has undertaken international transactions during the year under considerations as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not impossible, to administer and would involve very costly and burdensome accounting procedures ; and WHEREAS, it is finally recognized that such a system of separate payments does no justice to the continuous efforts of Philips to generate and obtain new resources for the benefit of the Company and other member companies of the Philips concern and, accordingly, the parties have agreed on a remuneration system which is based on the relation existing from year between the activities of the Company and the activities of Philips and its Associated Companies. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS ARTICLE 1 - DEFINITIONS ………………. ………………. "Concern Services" : Any and all activities performed by Philips in respect of the matters specified in Article 2 hereto. ……………… ……………… ARTICLE 2 - Services in commercial, accounting, auditing, financial, fiscal, social and legal matters and in all other fields in which Philips has resources These services for which resources are available with KPENV were sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee stated that the reason of entering into the MSSA has been described in the preamble to the Agreement. It mentions that KPENV (acting at the same time for its Associate Companies, and referred to as 'Philips' jointly and severally in the MSSA) has substantial resources in commercial, financial, accounting and other matters which would be beneficial to successfully conducting a business. These resources 'would be employed for the benefit of individual member companies of the Philips concern' (i.e KPENV and its Associated Companies). Thus, it would appear that KPENV, on the basis of the resources available at its disposal, has decided to employ those resources for the benefit of its Associated Companies. The assessee also stated that it is mentioned in the Preamble that it is PEIL (assessee) which, wishing to ensure the continuity in its business operations, is interested to take advantage of and secure access to the aforementioned resources. Further, it is PEIL which has acknowledged the necessity of 'paying an appropriate consideration for that purpose'. It was further stated that the Preamble also asserts that it is recognized by each party to the Agreement that a system ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... costs to the assessee under the MSSA and then added a margin of 10% on the costs while making the charge. So far as the margins are concerned, they have been benchmarked through a separate benchmarking study which has relied on data from Pan-Asia comparables. It needs to be mentioned that this selection of the comparables is not appropriate as the recipient of services, with its specific functional profile of a low-risk distributor for consumer life style sector and speciality lighting sector and a near zero-risk distributor in case of health care sector and a general manufacturer for domestic consumption in case of lighting sector, is based in India with its specific economic and market conditions. If the margins are at all to be compared, then the comparables need to be selected from India. 3.5 The ld TPO applied the Comparable Uncontrolled Price (CUP) Method as the MAM for determination of Arm's Length Price (ALP) in respect of this transaction. In this regard, the ld TPO observed as under:- (a) The application of the arm's length principle would be to see whether the charges paid by the taxpayer for intra group services reflect the same charges for the services that would ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a service in comparable circumstances. (f) Mere description of the various services will not suffice to justify the price charged in intra group services. The taxpayer has to prove with proper documentation and evidence that the services are actually rendered and payment is commensurate with the benefit derived therefrom. (g) Understandably, when expenditure is incurred for the benefit of the group as a whole, no charging of such expenditure is required as such expenditure is not incurred in connection with any individual member of the group and the benefit of such expenditure would be available to all the members of the group. Similarly, if no benefit is received or the benefit is remote or for the benefit of entire group, the same should not be charged. Therefore, unless it is shown that tangible and direct benefit has been derived by such payment and that the payment made is commensurate to the benefit derived or expected to be derived when parties deal with each other at arm's length, the arm's length price of such payment for intra group services is to be treated either as Rs. Nil or to the extent of the benefit actually derived from such payment. Thus, payment for intra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. The assessee submitted that the intra group services from AE have been accounted under different segments as follows:- MSSA R&D Services Total Lighting 204,56,74,673 16,86,34,000 221,43,08,673 CL 53,52,94,985 14,01,63,749 67,54,58,734 Healthcare 43,83,20,392 28,67,403 44,11,87,795 Healthcare (CM) 6,57,99,588 20,65,84,406 27,23,83,995 Corporate 30,66,93,969 3,85,04,214 34,51,98,183 Total 339,17,83,606 55,67,53,773 394,85,37,379 The assessee provided the details about the receipt of services and the benefits from them by way of mails received from KPENV and Group entities and on the basis of these mails and their description, it was of the belief that the benefit test was substantiated. The assessee submitted the entire series of emails for each division under MSSA and voluminous documents submitted vide their letters dated 15.10.2015, 27.10.2015 15.1.2016 and 20.1.2016 and demonstrated the benefits received on account of such services received. The ld TPO analysed the entire emails and other correspondences filed before him supra and rejected the same. The ld TPO by placing reliance on the decision of the Hon'ble Supreme Court in the case of Morgan St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be governed and strategized through guidance from the parent set up which may not have enough expertise. Further, the production by the Indian entity may be as per specification from the parent, but this cannot extend to the office and market operations of the sourcing etc. of the assessee. The ld DRP observed that the ld Counsel for the assessee contended that assessee is a risk bearing manufacturer - in this context it is quite illogical that the entity is magnifying its costs by availing of services which at best can be duplicate in nature and content. It observed that the examination of the financials leads to this conclusion. It finally held that the service content does not appear to be of the nature of stewardship nature and the ld TPO is well within his statutory domain to determine the ALP for the intra group services rendered apparently per force to the assessee. The ld DRP placed reliance on the decision of the Hon'ble Delhi High Court in the case of CIT v. EKL Appliances[2012] 345 ITR 241 wherein it was held that :- 22. "Even Rule 10B(1)(a) does not authorise disallowance of any expenditure on the ground that it was not necessary or prudent for the assessee to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was raised by the third parties on the AE for the services rendered by them to the assessee. Thus, the DRP rightly directed the TPO to examine these invoices and allowability of the same as expense to be decided. From the review of the services and benefit report and the supporting documents submitted by the assessee, it can be seen that the assessee company is benefited from the supervision and guidance of the group's functional experts. Though, the annexures show that the assessee was benefitted significantly from the intra-group services received from its AEs, it failed to give the supporting evidence such as invoice, confirmation from parties to prove the same. The assessee has also undertaken a detailed cost benefit analysis in order to demonstrate the cost savings achieved by it by availing the said services from the AEs. Therefore, when AEs transact with each other, for the purpose of transfer pricing, they must replicate the dynamics of market forces, as there is no concept of free lunch in business dealings. Thus, the DRP rightly held that the benefit test which is well recognized by OECD and other developed countries Tax regime have to be seen for allowing the paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eable services. The perusal of e-mails and other contemporaneous record only goes to reveal that incidental and passive association benefit has been provided by the associate enterprise. In this view of the matter there could neither be any cost contribution or cost reimbursement nor payment for such services to the AE. The TPO, therefore, has rightly adopted Nil value for benchmarking the arm's length price in respect of both these services. We, therefore, do not find any reason to interfere with the well reasoned conclusion reached by the AO on this count. The grounds raised in appeal in this respect, therefore, stand rejected." 3.7.3 Based on the aforesaid observations and judicial precedents relied upon, the ld DRP held that the services are not of the nature of stewardship in nature but also not meeting the benefit test so as to merit allowance of the same and accordingly upheld the ALP determined by the ld TPO though not as stewardship service. Aggrieved, the assessee is in appeal before us on the following grounds:- 2. Determination of arm's length price by the AO, TPO and DRP for Management Support Services received by the Appellant On the facts and circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untries. These arrangements are meant for the beneficiary of such pooled services; 2.10 Not taking cognizance of the fact that rational and scientific allocation keys for the payment of Management support service fees were provided by the Appellant and that the Appellant has maintained proper documentation and global auditor's certificate to demonstrate the basis of the charge; 2.11 Without prejudice to the above arguments, not taking cognizance of the fact that the AO in the case of KPENV (i.e the associate enterprise of Philips India from which it avails MSSA services), for the same AY, has held that the services provided by KPENV to the Appellant are for the survival and success of the Appellant, which view has also been upheld by the DRP Panel in the case of KPENV and thereby resulting in a contradictory approach. 4. Rule of consistency 4.1 The Learned AO, DRP and TPO erred in disallowing the payments made for management support services by the Appellant in the year under appeal without appreciating that the same have been accepted to be at arm's length in the Appellant's own case in all preceding years (i.e. for all the assessment years preceding to AY 2009-10) by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining the existence of an intra-group service is whether an independent enterprise in comparable circumstances would have been willing to pay for the activity if performed for it by an independent enterprise or would have performed the activity in-house for itself. An in-depth analysis, following the aforementioned conceptual difference between business activities and services, clears the air on many common business activities erroneously perceived to be in the nature of intra-group services. This includes: • Activities without any benefit: any activity which does not lead to an incremental commercial or economic value addition for the recipient cannot be regarded as a service. In the case of Gemplus India (P.) Ltd. v. Asstt. CIT, [2010] 8 taxmann.com 170 the Bangalore Tribunal upheld the adjustment made by the TPO where the payments to be made to AE were not dependent on the nature and volume of service and even the appellant failed to prove any commensurate benefit against such payments. The Tribunal ruled that the TPO was justified in holding that assessee had not proved any commensurate benefits against payments of management service charge, therefore, upheld the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is: • Whether an independent enterprise would have been willing to pay for the activity; or • Whether an independent enterprise would have performed the activity in-house itself. Evaluating the needs and benefits of Intra-group services It involves identifying the incremental economic or commercial value that has arisen to the services recipient. A direct nexus between the services received and the corresponding value created should be established. An intra-group service should be analysed to see how it helps the service recipient make gains through increased profitability be it by increasing sales or by reducing costs. In order to understand the value creation aspect of intra-group services, it is necessary to break the same into bits and pieces and analyse it further. The value of an Intra-group services can segregated into its reference value and its differential value. The reference value of an Intra-group service would necessarily constitute the price of the next best alternative. Whereas, the differential value of the service is essentially the net benefit it delivers to the recipient over and above those rendered by competitive reference service providers i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is: The functional analysis should cover all basic questions like: • Who is doing what and for whom; • Where are they doing it; • Why are they doing it; • Who are they doing it; • What property is being used or transferred in connection therewith; • Benefit test documentation: Services may be received by way of conference calls, occasional visits and mails/presentations/tool kits exchanged from time to time. The actual evidence of receipt of services can be established with the help of the policies/e mails/guidelines/presentations used during the rendition of services. In addition to these, copies of time sheets of the service provider's personnel, cost centre reports and global Transfer Pricing documentation can also be helpful in substantiating and justifying Intra-group services. The table below gives an illustrative list of few generic services and the corresponding benefit test documents that may be submitted: Nature of services Examples of benefit test documents Finance and treasury Legal - Email correspondence and documents showing financial reporting and accounting guidelines received; - Manuals governing investment and trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lesser personnel employed in the human function than required, people survey results. Before proceeding with determining the ALP, it is essential to establish the charge-out mechanism for the intra-group services rendered. For this, it is essential to distinguish between services that benefit a particular affiliate directly and services that benefit several affiliates or the group as a whole. There are two charge-out mechanisms: • The direct charge mechanism • The indirect charge mechanism The direct charge mechanism involves charging AEs directly for specific services. The DECD advocates the use of direct charge mechanism in cases where similar services are provided to AEs. Essentially, the cost pool for services rendered to associate concerns needs to be distinguishable and there should be a comparable open market transaction to facilitate pricing. Under the indirect charge method, the chargeable cost pool is identified, aggregated and allocated or apportioned amongst the members of MNE group on the basis of some degree of estimation or approximation. DECD advocates use of an indirect charge method which is sensitive to the features of the individual case, con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal had determined the ALP at nil keeping the factual position as to whether in a comparable case, similar payment would have been made or not in terms of the agreements Similarly, in the cases of M/s Knorr-Bremse India Pvt. Ltd. v. ACIT and Gemplus India (P.) Ltd. v. ACIT, discussed above, the payments made in congruence of intra-group service arrangement were disallowed by determining their as nil on the grounds that they failed the benefit test. Therefore, in this case the TPO in his order has exhaustively discussed with reasons 'as to why the services rendered amount to shareholder activities and in the absence of proper documentary evidence, he arrived ALP at NIL and adjustment accordingly. Even the DRP has at length dealt the issue and further on the failure of assessee to prove conclusively with necessary evidences has upheld the order of TPO. In view of the factual position of the assessee and also the case laws discussed the order of TPO may kindly be upheld." The ld DR further argued that the email correspondences did not clearly quantify the benefits derived by the assessee and that they are general in nature. Accordingly he pleaded that the assessee had not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Company, and render assistance in this connection, all to the extent reasonably required to improve the Company's business operation. The assistance may relate to : a. the distribution and trading of products, particularly with respect to advertising, sales promotion, public relations, market research (in particular, information and trends on the world market), labeling, packaging, shipping and forwarding, long-term export business and international public tendering and purchasing from Third parties; b. advice and support with respect to the supply of requirements of the Company from other resources ; c. financial, accounting and auditing matters relating to such subjects as: i. accounting and auditing principles and methods; ii. budgeting methods; iii. capital structure, loans, exchange risks, financial research, warranties and guarantees, credit management, the establishment and management of finance and lease companies and all further banking activities, including long-term finance plans; iv. development of data processing d. fiscal and legal matters, including patents, trademarks and customs duties, particularly in international transactions ; e. person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 of MSSA enclosed in page 294 of the Paper Book on 'Taxes' is as under:- The costs, taxes, stamp duties and similar charges arising out of this agreement shall be borne by the Company (assessee) if such amounts are due in the Country, and by Philips if such amounts are due outside the Country with the exception of : a. taxes which can be claimed back or credited against tax by the Company in accordance with the legal provisions which shall be chargeable to the Company; and b. taxes which can be claimed back or credited against tax by Philips in accordance with the legal provisions, which shall be chargeable to Philips. The ld AR argued that the assessee had complied with the TDS obligations on the subject mentioned payments and the same has been accepted by the department. He also referred to the summary of emails from Pages 333 to 378 and further emails which are enclosed in Exhibit II from pages 800 to 854 of Paper Book. He also referred to the exclusion of 12000000 Euros towards the Shareholder function costs in the overall cost allocation to the assessee company which is enclosed in page 795 of the Paper Book. We find that the assessee had also furnished before the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the consideration of all these facts leads to the conclusion that the deliverables under the MSSA are predominantly in the form of 'commercial knowhow' and not commercial services and therefore covered by the definition of the term 'Royalty' under Article 12 of the DTAA. 4.3.3.4 From the above it would be clear that the receipts in respect of MSSA would be taxable either as FTS (to the extent they are services rendered) or Royalty (to the extent it is providing commercial know-how or commercial experience). As both FTS and Royalty are taxable at the same rate under the DTAA, it does not matter that there is no clear cut separation or quantification in the MSSA of the service and the know-how portions. The entire receipts would be chargeable to tax in India under the DTAA as well as the I.T. Act. 4.2.1 Hence based on the aforesaid order of ld DRP in the hands of KPENV for the Asst Year 2009-10, we find that the ld DRP had treated the receipts of Management Support Services Charges from assessee herein (i.e. Philips India Ltd) in the hands of KPENV as FTS or Royalty and made it taxable in India. So once the same is accepted as FTS or Royalty in the hands of KPENV, the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the very same MSSA by the ld TPO for the assessee. We find that the principles of consistency need to be followed and cannot be given a go by when there is no change in the facts and circumstances of the case from the earlier years. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of Radhasaomi Satsang v. CIT reported in (1992) 193 ITR 321 (SC). 4.6 We find that the decision relied upon by the ld AR on the Hon'ble Delhi High Court in the case of CIT v. Cushman and Wakefield (India) (P) Ltd reported in (2014) 367 ITR 730 (Del) is well founded wherein it was held that :- "35. The Transfer Pricing Officer's report is, subsequent to the Finance Act, 2007, binding on the Assessing Officer. Thus, it becomes all the more important to clarify the extent of the Transfer Pricing Officer's authority in this case, which is to determining the arm's length price for international transactions referred to him or her by the Assessing Officer, rather than determining whether [such services exist or benefits have accrued. That exercise - of factual verification is retained by the Assessing Officer under Section 37 in this case.] Indeed, this is not to sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndered similar ruling as was rendered in the case of Dresser-Rand India (P.) Ltd. (supra). In the case of Cushman & Wakefield India (P.) Ltd. (supra), the Hon'ble Delhi High Court observed that whether a third party - in an uncontrolled transaction with the Taxpayer would have charged amounts lower, equal to or greater than the amounts claimed by the AEs, has to perforce be tested under the various methods prescribed under the Indian TP provisions. In the context of cost sharing arrangement, the Hon'ble High Court opined that concept of base erosion is not a logical inference from the fact that the AEs have only asked for reimbursement of cost. This being a transaction between related parties, whether that cost itself is inflated or not only is a matter to be tested under a comprehensive transfer pricing analysis. The basis for the costs incurred, the activities for which they were incurred, and the benefit accruing to the Taxpayer from those activities must all be proved to determine first, whether, and how much, of such expenditure was for the purpose of benefit of the Taxpayer, and secondly, whether that amount meets ALP criterion. In the present case however, the arrangement be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara 21] We find that this judgement had approved the earlier decision of Hon'ble Delhi High Court in the case of Cushman and Wakefield (India) (P) Ltd (supra) and also the decision of EKL Appliances supra. 4.9 In view of the aforesaid findings and respectfully following the judicial precedent relied upon hereinabove, we hold that the determination of ALP for Management Support Services at Rs. NIL is unwarranted and accordingly the upward adjustment made by the ld TPO in the sum of ₹ 125,27,30,863/- is deleted. Accordingly, the Ground Nos 2 & 3 raised by the assessee are allowed. We find that there is no change in the facts and circumstances during the year under appeal with regard to MSSA when compared to that in the earlier years and hence respectfully following the judicial precedents relied upon hereinabove, we hold that the determination of ALP for Management Support Services at Rs. NIL is unwarranted and accordingly the upward adjustment made by the ld TPO in the sum of ₹ 339,17,83,606/- is deleted. Accordingly, the Ground Nos. 2, 4.1. and 4.3. raised by the assessee are allowed. 7. DETERMINATION OF ALP FOR AMP EXPENSES Ground No. 3.1. to 3.11 and 4.2 & 4.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 7.1 The assessee submitted that the AMP expenses incurred by it cannot be treated as marketing & distribution services rendered to the AEs and thereby as an international transaction as these AMP expenses represent purely payments made to third party vendors and are not covered under the purview of section 92 of the Act. The relevant extract of section 92F(v) of the Act which governs the definition of transaction is reproduced below:- "transaction includes an arrangement, understanding or action in concert.- (A) whether or not such arrangement, understanding or action is formal or in writing ; or (B) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings". Mere presumption just because of the assessee being a subsidiary which is owned by AE, an arrangement between AE and the assessee exists is erroneous. The assessee is a separate legal entity with its own management and functions independently. There is no substantial evidence to justify that there exists an arrangement. Therefore, it was pleaded that the expenses incurred by the assessee on AMP cannot be said to be an international transaction as at first place it doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee also placed reliance on two more decisions of Hon'ble Delhi High Court in the case of CIT v. Whirlpool of India Ltd.[2015] 64 taxmann.com 324/[2016] 237 Taxman 49 and Honda Siel Power Products Ltd. v. Dy. CIT[2015] 64 taxmann.com 328/[2016] 237 Taxman 304 (Delhi). The assessee stated before the ld TPO that since it does not believe AMP to be an international transaction, the assessee is not mandated to maintain TP documents in terms of section 92D read with Rule 10D of the Act. 7.2 The assessee submitted the details of AMP expenditure for the financial year 2011- 12 as under:- Media Spend Agency Fees Lighting 16,11,58,309 13,32,70,087 Consumer lifestyle 26,45,19,614 5,97,95,416 Health care 4,20,92,304 1,16,65,041 Corporate 0 (23,12,896) Total 46,77,70,228 20,24,17,649 Without prejudice to the claim of the assessee that AMP is not an international transaction, the assessee however furnished the sample copy of invoices on account of media and agency fees for Consumer Lifestyle and Healthcare Sector and soft copy of audio/video advertisements for lighting/consumer lifestyle sector in DVD along with the written submissions thereon. 7.3 The assessee stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amp action resulting in promotion of the brand. Accordingly the ld DRP held that the AMP expenditure to be an international transaction. The ld DRP on perusal of the tabulation of AMP expenses division wise done by the ld TPO observed that the profile of those expenses indicated direct and conspicuous role in buildup of the intangibles. Those expense heads have therefore been correctly categorized as AMP expenses. The ld TPO computed the ALP on such AMP expenses by imputing a mark up of 5% on such eligible expenses. The same is in line with Example 10 of BEPS guidelines. The said Example concluded that an entity, performing functions and incurring marketing expenditure substantially in excess of the level of function and expenditure of independent marketer/distributor/manufacturer in comparable transactions, is required to be compensated and the appropriate tax administration must propose a transfer pricing adjustment based on such compensation for such AMP activity performed. Such adjustment may be consistent with what independent enterprises would have earned in similar transactions. 7.6.1 The ld DRP held that the assessee is into manufacturing as well as distribution activitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on facts and in law in ignoring the fact that the AMP expense incurred by the Appellant were in respect of its own business purpose and requirements and that all the benefits resulting from such expenditure are to its own account; 3.9 The AO, DRP and TPO erred in completely disregarding the business and pricing model of the Appellant which compensates the Appellant for the AMP expenses incurred by it; 3.10 Without prejudice to the above arguments, the AO, DRP and TPO erred and failed to appreciate that comparable considered by the TPO for the purpose of determining the excess AMP spend are not valid comparables; 3.11 Without prejudice to the above arguments, the AO, DRP and TPO erred in not appreciating/acknowledging that DRP in Assessee's own case for A.Y. 2010- 11 and A.Y. 2011-12 has accepted certain companies as comparables for AMP analysis and there is no occasion to deviate from such comparables. 4.2 The Learned AO, DRP and TPO erred in making transfer pricing adjustment on the alleged excess cost incurred for AMP expenses as brand promotion for AE. The payment for AMP expenses have been accepted as not excessive in the Appellant's own case in preceding years by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord. The preliminary issue here arises whether the AMP expenses constitute the international transactions so as to attract the provisions of transfer pricing of the Income Tax Act, 1961. The claim of the Ld. AR is that the AMP transaction does not represent the international transaction between the AE's therefore no question of determining the ALP of AMP transactions. We find force in the argument of the ld. AR in the given facts and circumstances. Therefore, in our considered view the AMP cannot be regarded as international transaction. In holding so we find the support & guidance from the judgment of Hon'ble Delhi High Court in the case of Maruti Suzuki India Limited. v. CIT reported in 381 ITR 117 wherein it was held as under: "51. The result of the above discussion is that in the considered view of the court the Revenue has failed to demonstrate the existence of an international transaction only on account of the quantum of AMP expenditure by MSIL. Secondly, the Court is of the view that the decision in Sony Ericsson Mobile Communications India (P) Ltd. case (supra) holding that there is an international transaction as a result of the AMP expenses cannot be held to have answ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observation of the ld TPO was not at all considered in the following orders passed by the lower authorities :- (a) Order of the ld DRP dated 19.12.2016 u/s 144C(5) of the Act (b) Order passed by the ld TPO u/s 92CA(3) r.w.s. 92CA(5) & 144C95) of the Act dated 25.1.2017 (c) Final Assessment Order passed by the ld AO u/s 143(3) r.w.s. 144C of the Act dated 27.2.2017. Hence we hold that the passive observations made by the ld TPO had been completely ignored by the ld DRP and in the giving effect order to DRP directions and in the final assessment order. Accordingly, the said observations would have no relevance in the proceedings for the assessee and there is no grievance that could be caused to the assessee in that regard. There is no impact for the assessee pursuant to the aforesaid passive observations of the ld TPO. The various contentions raised by the assessee are left open in view of giving effect order to DRP passed by the ld TPO and final assessment order passed by the ld AO. Hence we are of considered opinion that adjudication of Ground No. 6 raised by the assessee would be superfluous. 14. DISALLOWANCE OF LEASE RENTALS - ₹ 6,86,60,107/- Ground Nos. 7.1 to 7.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the benefit of the depreciation shall be available to owner of the asset. Further the Special Leave Petition (SLP) filed by the department against the said decision before the Hon'ble Supreme Court has been dismissed. He further placed reliance on the co-ordinate bench decision of this tribunal in the case of Royal Bank of Scotland N.V. v. Dy. DIT[2017] 88 taxmann.com 330 (Kol. - Trib.) wherein on identical matter, the issue was decided in favour of the assessee. In response to this, the ld DR fairly conceded that the issue is covered by the decision of the Hon'ble Supreme Court in the case of ICDS Ltd. (supra). 14.2 We have heard the rival submissions. We find that the issue under dispute is covered by the decision of the Hon'ble Supreme Court in the case of ICDS Ltd. (supra) in favour of the assessee. Hence respectfully following the same, we allow the Ground No. 7 raised by the assessee. 15. DEPRECIATION ON MOULDS Ground Nos. 8.1 to 8.4 The brief facts of this issue is that the ld AO during the course of assessment proceedings observed that assessee has claimed depreciation @ 30% on moulds instead of 15%. The ld AO further observed that the assessee is engaged in busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of its business. Further, the moulds were exclusively used in the plastic factory by the job workers/co-makers to whom moulds were given by the assessee to be used in the plastic factory, under its control and supervision and prayed that depreciation @ 30% would be eligible on the said moulds. We find that this issue has been considered by this tribunal in assessee's own case for the Asst Year 2011-12 in ITA Nos. 863 & 539/Kol/2016 dated 15.12.2017 wherein it was held as under:- "27. We have heard the rival contentions and perused the material available on record. In the instant case, issue relates to depreciation claimed by the assessee @ 30% on moulds on the ground that these are used in plastic factories. However, the amount of depreciation claimed by the assessee on moulds was disallowed by the assessee on the ground that higher rate of depreciation on moulds is available only if these are used in the plastic factory. The view taken by the AO was subsequently confirmed by the Ld. DRP. Now the issue before us arose whether assessee is eligible for depreciation on moulds at higher rate in the given facts and circumstances. It is undisputed fact that assessee has been claiming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed for statistical purposes. 17. SHORT CREDIT OF TAX DEDUCTED AT SOURCE Ground No. 10 The ld AO granted credit for tax deducted at source of ₹ 5,17,37,622/- as against the claim by the assessee to the tune of ₹ 5,19,20,101/-. Since the issue involves only verification of certificates/Form 26AS, as the case may be, we hereby direct the ld AO to kindly verify the necessary evidences in this regard and grant TDS credit, if eligible, to the assessee. Accordingly, the Ground No. 10 raised by the assessee is allowed for statistical purposes. 18. LEVY OF INTEREST U/S 234 B OF THE ACT The Ground No. 11 raised by the assessee is with regard to chargeability of interest u/s 234B of the Act which is consequential in nature and does not require any specific adjudication. 19. LEVY OF INTEREST U/S 234 D OF THE ACT The Ground No. 12 raised by the assessee is with regard to chargeability of interest u/s 234D of the Act which is consequential in nature and does not require any specific adjudication. 20. LEVY OF INTEREST U/S 244A OF THE ACT The Ground No. 13 raised by the assessee is with regard to chargeability of interest u/s 244A of the Act which is consequential in na ..... 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