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TMI Blog2018 (12) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... r. At the same time, we cannot ignore the submission of the learned DR that the matter is pending before Hon'ble Apex Court and the decision of Hon'ble Apex Court would be binding upon all the authorities. In view of the above, we set aside the orders of authorities below and restore the matter to the file of the Assessing Officer. We hold that as per the facts of the case and the legal position as of now and discussed above in this order, the adjustment made by the TPO/DRP/AO in respect of AMP expenses is not sustainable. Addition u/s 37 - large amount incurred by the taxpayer as AMP expenditure was not for the purpose of business of the taxpayer - Held that:- when the issue as to ALP adjustment of AMP expenses has already been dealt with and decided in favour of the taxpayer in view of the series of decisions rendered by Hon’ble Delhi High Court u/s 92 of the Act, the same AMP expenses cannot be dealt with u/s 37 of the Act which would amount to double addition if the addition made u/s 92 of the Act found to be sustainable. So, when ALP adjustment of AMP expenses is found to be not sustainable for lack of existence of any international transaction between taxpayer and AE, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent of business expenditure. 2.3 The DRP erred on facts and in law in not appreciating that the Transfer Pricing adjustment sought to be made by the TPO in the present case was a mere quantitative adjustment, on the footing that the appellant had incurred an excessive amount of AMP expenditure, and not on the footing that there was a difference between the ALP and the contract or declared price, and that a Transfer Pricing adjustment was not at all permitted or authorized by Chapter X of the Act. 2.4 The DRP/TPO erred on facts and in law in holding that expenditure incurred by the appellant which incidentally resulted in brand building for the foreign AE, was a transaction of creating and improving marketing intangibles for and on behalf of its foreign AE and further that such a transaction was in the nature of provision of a service by the appellant to the AE. 2.5 The DRP/TPO erred on facts .and in law in not appreciating that the AMP expenses, etc., unilaterally incurred by the appellant in India could not be characterized as an international transaction as per section 92B,in the absence of any proved understanding / arrangement between the appellant a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without appreciating that in absence of specific provision in the Transfer Pricing statutory provisions in India., adjustment on account of the arm's length price of the advertisement and brand promotion expenses could not be made. 2.14 The DRP/TPO erred on facts and in law in not appreciating that such a Transfer Pricing adjustment cannot at all be made in law without determining the Arm's Length Price ( ALP ) by applying one of the methods specified in section 92C of tl e Act. 3. That the DRP/TPO erred on facts and in law in rejecting the benchmarking analysis undertaken by the appellant by considering closely linked transactions together and instead benchmarking such international transactions separately. 3.1 That the DRP/TPO erred on facts and in law in accepting Transactional Net Margin Method (TNMM') as the most appropriate method on one hand, and yet seeking to question appropriateness of individual elements of operating cost on the other. 3.2 Without prejudice that the DRP/TPO erred on facts and in law in considering a sum of ₹ 1,33,06,66,909 under sub head Pricing Adjustments being the incentives, rebates and discounts give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in respect of AMP expenses, the assessing officer erred on facts and in law in alternatively disallowing ₹ 1,29,44,62,939 under section 37 of the Act, alleging that the amount spent by the assessee was not incurred for the purpose of business conducted by the assessee. 5. That the assessing officer erred on facts and in law in levying interest under Section 2348 and Section 234C of the Act. 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : are : M/s. Whirlpool of India Limited, the taxpayer is a subsidiary of Whirlpool Corporation, USA, is into manufacturing, selling and distribution of home appliances. During the year under assessment, the taxpayer entered into international transactions with its Associated Enterprises (AEs) as under :- Nature of International transactions Method Amount (in Rs.) Purchase of raw materials, components spares TNMM 111,466,016 Sale of Spares TNMM 29,913,546 Purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. GROUND NO.1 7. Ground No.1 is general in nature and does not require any adjudication. GROUNDS NO.2 to 2.14 3 to 3.7 8. Undisputedly, the ld. TPO in order to make upward TP adjustment on account of ALP of reimbursement of AMP prices applied BLT. It is also not in dispute that Whirlpool Corporation, USA, an overseas entity is the owner of brand Whirlpool . It is also not in dispute that BLT method applied by the TPO for reimbursement on account of AMP expenses incurred by the taxpayer has been discarded by Hon ble Delhi High Court in a number of cases. It is also not in dispute that the taxpayer is a manufacturer and distributor of household products under trademark Whirlpool and that a trademark and trade name license agreement is in existence between the taxpayer and its AE for the year under consideration. It is also not in dispute that the decision rendered by Special Bench of the ITAT in LG Electronics India Pvt. Ltd. (ITA No.5140/Del/2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the AE, and that that was wholly and exclusively for the business purposes of the Assessee, allowable under Section 37 of the Act? 14. Hon ble Delhi High Court, after examining the provisions contained in trademark and trade name license agreement and after examining the provisions under section 92B to 92F of the Act and by following the decision rendered by Hon ble Delhi High Court in in Maruti Suzuki India Ltd. v. CIT (2016) 328 ITR 210 (Del.) and decision rendered by Hon ble Supreme Court in case cited as CIT vs. B.C. Srinivasa Setty (1981) 128 ITR 294 (SC) and PNB Finance Ltd. vs. CIT (2008) 307 ITR 75 (SC) , returned the following findings :- 47. For the aforementioned reasons, the Court is of the view that as far as the present appeals are concerned, the Revenue has been unable to demonstrate by some tangible material that there is an international transaction involving AMP expenses between WOIL and Whirlpool USA. In the absence of that first step, the question of determining the ALP of such a transaction does not arise. In any event, in the absence of a machinery provision it would be hazardous for any TPO to proceed to determine the ALP of such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... csson India Pvt. Ltd. v. CIT (supra), Bausch Lomb Eye Care (India) Pvt. Ltd. v. Additional CIT (2016) 381 ITR 227 (Del.) and Honda Siel Power Products Ltd. v. Dy. CIT (2016) 237 Taxman 304 are lying challenged before the Hon ble Apex Court, hence this appeal be kept pending till the decision of Hon ble Apex Court. 17. After considering the legal position as discussed in the preceding paragraphs and following the decision rendered by Hon ble Delhi High Court in taxpayer s own case for AY 2008-09, we are of the considered view that TP adjustment of ₹ 1,29,44,62,939/- involving AMP expenses is not sustainable in the eyes of law, we are of the considered opinion that the ALP of an international transaction involving AMP expenses, the adjustment made by the TPO/DRP/AO is not sustainable in the eyes of law, hence Grounds No.2 to 2.14 3 to 3.7 are determined in favour of the taxpayer. 18. At the same time, we cannot ignore the submission of the learned DR that the matter is pending before Hon'ble Apex Court and the decision of Hon'ble Apex Court would be binding upon all the authorities. In view of the above, we set aside the orders of authorities below a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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