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TMI Blog2018 (9) TMI 1232X X X X Extracts X X X X X X X X Extracts X X X X ..... that approach has already been negatived by various Hon’ble Courts above. We see no reasons to remit the matter to the file of the TPO, as is prayed for by the learned Departmental Representative. A remand to the assessment stage cannot be a matter of routine; it has to be so done only when there is anything in the facts and circumstances to so warrant or justify. In any case, there are direct judicial precedents from Hon’ble jurisdictional High Court which clearly suggest that the matter regarding existence of international transaction under section 92B, as far as possible, should be decided at the level of Tribunal itself. - Decided in favour of assessee - ITA No. 1906/Del/2014 - - - Dated:- 23-8-2018 - Pramod Kumar AM And Sudhanshu Srivastava JM For The Appellant : Sumit Mangal and Rashmi Gupta For The Respondent : Sanjay Kumar Yadav and Vatsala Jha ORDER Per Pramod Kumar, AM: 1. By way of this appeal, the assessee appellant has challenged correctness of the order dated 29th January 2014 passed by the Assessing Officer under section 143(3) r.w.s. 144C of the Income Tax Act, 1961, for the assessment year 2009-10. 2. Grievances of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis; g) in following the decision of the Hon'ble Special Bench in the case of LG Electronics (152 TTJ 273) (Del) (SB) without appreciating the fact that the said decision was rendered in the context of licensed manufacturer and hence not applicable to the distributor. The legal proposition canvassed by the Appellant has been upheld by the Hon'ble Delhi Tribunal in the case of BMW India. The Appellant therefore prays that the aforesaid adjustment be deleted. 3. Without prejudice to the above, on the facts and in the circumstances of the case and in law, the AO/TPO/DRP erred in considering expenses such as discounts, rebates, commission, trade component cost, trade incentives, etc. for computing the AMP spend ratio of the Appellant. 3. To adjudicate on this appeal, only a few material facts need to be taken note of. The relevant material facts are like this. The assessee company is a subsidiary of Champagne Moet Chandon France (CMC), one of the leading producers of champagne, which holds 99% equity in the assessee company. The other 1% shareholding in the assessee company is held by another French company by the name of Jas Hennessy Co (JSC) which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne test. Learned counsel submits that this approach has been specifically rejected by Hon ble Delhi High Court in the case of Sony Ericsson Mobile Communications Vs CIT [2015) 374 ITR 118 (Del)]. It is submitted that the very foundation of the impugned thus ceases to hold good in law. He then contends that there has to be explicit agreement or understanding for promotion of brand of the foreign AE in India and existence of an international transaction cannot be a matter of inference or deduction. In support of this proposition, he relies upon the judgment of Hon ble jurisdictional High Court in the cases of Maruti Suzuki India Ltd Vs CIT [(2016) 381 ITR 117 (Del)], CIT Vs Whirlpool of India Ltd [(2016) 381 ITR 154 (Del)] and Bausch and Lamb Eyecare India Pvt Ltd Vs ACIT [(2016) 65 taxmann.com 141 (Delhi)]. In support of the proposition that the Tribunal should determine existence of international transaction when all the material facts are on record, the case should not be remitted back to the TPO for that purpose, learned counsel for the assessee relies upon Hon ble jurisdictional High Court s judgments in the cases of Dainkin Air conditioning India Pvt Ltd VS ACIT (ITA No. 269/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cases are that of a 'manufacturer' which is different from the assessee, who is a 'distributor'. 2. In the case under consideration, the order of the TPO was much before the judgment of the Hon'ble Delhi High Court in the case of M/s Sony Ericsson Mobile Communications Pvt. Ltd. (374 ITR 118-Del) wherein the Hon'ble Court has held the AMP expenses to be an international transaction and matter of determination of its ALP has been restored to the TPO. 3. It is submitted that, coordinate benches of the Tribunal in different cases like M/s Swarovski India Private Limited (ITA No.4080/Del/2015), M/s FUJIFILM Corporation India (ITA No.5826/Del/2011 195), M/s Louis Vuitton India Retail Private Limited (ITA No. 980/Del/2017), M/s Haier Appliances India Ltd. (2016), M/s Perfetti Van Melle India Pvt. Ltd. (2016), and the Hon'ble Delhi High Court in recent judgements in the cases of M/s Rayban Sun Optics India Ltd. (2016), M/s Toshiba India Pvt. Ltd. (2016), M/s Bose Corporation India Pvt. Ltd. (2016), in all of which similar issue of AMP adjustment was considered, has been restored to the TPO for fresh determination in the light of the earlier judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sum of ₹ 6,18,37,549/- has been incurred by it on advertisement and sales promotion (AMP) which amounts to 26.94% of the total sales of the assessee company. It is proposed that the AMP expenditure incurred by the assessee should be considered as an international transaction for which reimbursement should have been received by the assessee as it leads to creation of marketing intangible for the AEs and not for the business purposes of the assessee. 2.1 It has been mentioned Para 4.3.3 of the transfer pricing report that MHIPL does not own any significant intangible and does not undertake any significant Research and Development on its account that leads to the development of nonroutine intangibles. MHIPL uses the trademark, know-how, technical data software, quality standard etc., developed/owned by CMC. All companies of the group leverage from these intangibles for continued growth in revenues and profits. Accordingly, MHIPL does not own any significant non-routine intangibles. 2.2 From the quantum of the advertisement and sales promotion expense incurred by the assessee it is apparent that the assessee is involved in the promotion of a Brand which is not own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any payment in this regard from the AE. Therefore it is clear that the assessee has not been suitably compensated by the AE in respect of the expenditure incurred by it (the assessee) on Advertising and Sales Promotion expenses (AMP) to penetrate the market and to increase the sales by promoting the brand name. 8. What the Assessing Officer considers should have been recovered from the AE, the Assessing Officer does not consider recoverable from the assessment year 2011-12 onwards even though admittedly there is no change in the facts and circumstances of the case. The inference about the international transaction has thus not found favour with the revenue authorities in the subsequent assessment years. While no ALP adjustment has been made in these years, the entire expenditure has been disallowed, firstly as illegal expenditure inadmissible for deduction under section 37(1), and, thereafter, as capital expenditure. As for the stand of the revenue authorities that the AMP expenditure incurred by the assessee was excessive, we have noted that even after assessee s pointing out, vide letter dated 23rd January 2013, that comparable expenses, for the same period, in respect of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Retail schemes : The Assessee offers schemes like a dollar off at duty fee shops. 10. Market visit expenses of marketing personnel plus guests like accommodation, conveyance, food etc. 11. Salary: Staff incentive, brand manager salary at duty free shop, Salary of support staff. 9. On a careful consideration of all these factors, including the inconsistency in the approach of the AO/TPO with respect to the AMP expenditure being in the nature of an international transaction as expenditure incurred on behalf of the assessee, including the quantum and nature of expenditure and including lack of any material to suggest that there was an arrangement, understanding or action in concert with respect of the expenditure incurred by the assessee and including the fact that, in our considered view, the expenditure incurred by the assessee was in nature of bonafide business expenditure in furtherance of its legitimate business interests, we are of the considered view that there is no legally sustainable basis for the TPO coming to the conclusion that there was an international transaction, under section 92B, on the facts of this case. It was only on the basis of bright ..... X X X X Extracts X X X X X X X X Extracts X X X X
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