9911796707
TMI Blog2019 (1) TMI 1061X X X X Extracts X X X X X X X X Extracts X X X X ..... l Justice, we direct Ld. AO to tally database of revenue in light of details filed by assessee. Disallowance of expenses u/s 37 incurred by assessee on account of alleged AMP expenses - Held that:- As the issue relating to nature of AMP expenses being international transaction or not has been set aside to Ld.AO in preceding paragraphs, the allowability of such expenses claimed by assessee under section 37 of the Act also deserves to be set-aside. The outcome of this ground raised depends upon decision of Hon’ble Supreme Court in assessee’s own case. Disallowance of expenses of tour packages given to dealers - onus to substantiate its claim with actual figures for such package tools undertaken by employees/dealers as a part of incentives - Held that:- From the records we understand that no documents/evidences have been placed to establish the claim. We are therefore inclined to set aside this issue back to learn the AO/TPO for readjudication. Assessee shall file all requisite details in order to establish the claim. It shall give itemised details regarding the incentives that have been awarded to its employees or dealers as the case may be. Ld. AO/TPO shall then verify the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of alleged difference in the arm s length price of international transactions resulting from the advertisement, marketing and sales promotion expenses (hereinafter referred to as the AMP expenses ) incurred by the appellant on the basis of the order passed by the TPO under section 92CA(3) of the Act. 2.1. That the assessing officer erred on facts and in law in holding that the (i) associated enterprise is the beneficiary of the efforts of the appellant and (ii) the assessee is creating a marketing intangible in favour of the associated enterprise. 2.2. That the DRP erred on facts and in law in holding that the appellant has been developing local marketing intangibles for its associated enterprise in India by (i) promoting brands owned by the associated enterprises and creating awareness among Indian customers and (ii) developing and maintaining network of sub distributors, dealers, retailers and other business partners. 2.3. That the DRP erred on facts and in law in not appreciating that by virtue of agreements entered into with Indian distributors, dealers, and retailers the distribution network in India is owned by the appellant. 2.4. That the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been benchmarked by aggregating the same with other closely linked transactions undertaken by the appellant 2.12. Without prejudice that the DRP/TPO erred on facts and in law in not appreciating that since the operating profit margins of the appellant were higher than margins of the comparable companies, the appellant was adequately compensated for the allegedly excess AMP expenses incurred by the appellant. 2.13. That the DRP/TPO erred on facts and in law in holding that the entity in control of the intangible asset is treated as the owner, not appreciating that the appellant, by performing the critical decision making functions is controlling the intangible, and accordingly shall be considered as owner of such intangible. 2.14. That the DRP/TPO erred on facts and in law in holding that the appellant has developed marketing intangible for Whirlpool brand by bearing significant cost and risks and was accordingly entitled to get reimbursement of the cost incurred by it in excess of routine distributor. 2.15. That the DRP/TPO erred on facts and in law in holding that benefit accruing to the associated enterprise is not incidental and instead the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaken by the appellant. 2.24. That the DRP/TPO erred on facts and in law in not excluding the Rebate Discount/Pricing adjustment of ₹ 204,55,83,442 from the quantum of AMP expenditure, allegedly holding that the question being investigated is marketing intangible and not just brand promotion alone in the instant case. 2.25. That the DRP/TPO erred on facts and in law in holding that commission on sales or sales discount etc. help the company to create loyalty among distributors not appreciating that such expenses are incurred only for effecting the sales and not for promoting the brand. 2.26. That the DRP erred on facts and in law in holding that selling expenses are incurred by the appellant for promotion of the brand through creation of a net work of dealers and shops and are leading to the creation of marketing intangibles. 2.27. That TPO erred on facts and in law in excluding salary paid to product demonstrators amounting to ₹ 9,97,38,593/- from the AMP expenses, despite the direction of the DRP to not to include such expenses if they have no direct nexus with the creation of intangibles. 2.28. That the TPO/DRP erred on facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of ₹ 3,60,76,000 invoking the provisions of section 40(a)(ia) of the Act, allegedly on account of shortfall in tax deducted at source on the basis of the individual transaction statement /AIR information. 10. That the Assessing Officer/DRP erred on facts and in law in making disallowance of ₹ 3,25,50,000/- being provision for expenses of package tour holding the same to be contingent in nature. 11. That the Assessing Officer erred on facts and in law in levying interest under section 234B, Section 234C and Section 234D of the Act. 12. That the Assessing Officer erred on facts and in law in initiating penalty proceedings under section 271(1)(c ) of the Act. The appellant craves leave to add, amend, alter or vary, any of the aforesaid grounds of appeal before or at the time of hearing of the appeal. Asst: Yr:2010-11 2. Brief facts of the case are as under: Assessee filed its return of income declaring Nil under normal provisions of the Act and income of ₹ 2,11,96,44,616/- under section 115JB of the Act, on 14/10/2010. The same was processed under section 143(1) of the Act, and subsequently was selected for scrutiny. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of bright line 2,16,75,68,881 Mark-up at 12.50% 27,09,46,110 Reimbursement that assessee received should have received 2,43,85,14,991 Reimbursement actually received Nil Adjustment to assessee s income 2,43,85,14,991 3. Aggrieved by adjustment made, assessee raised objections before the DRP. DRP in their direction dated 18/12/14 directed Ld.TPO/AO to examine nature of salary and remuneration amounting to ₹ 9,97,38,593/-, spent by assessee. Ld.TPO upon verification did not make any changes in addition proposed in draft order. Thereafter, upon receipt of such intimation from Ld.TPO, Ld.AO passed final assessment order by determining the total income of assessee at ₹ 4,45,55,89,972/-, as against returned income of ₹ 1,94,13,16,860/-. 4. Aggrieved by order of Ld. AO, assessee is in appeal before us now. 5. At the outset, Ld. Counsel submitted that Ground No. 1 raised by assessee is general in nature, and therefore do not require any adjudication. Accordingly the same is dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such a transaction since BLT has been negatived by this Court as a valid method of determining the existence of an international transaction and thereafter its ALP. 48. Question (i) in the Assessee's appeal viz., Was there an international transaction between WOIL and its AE involving the AMP expenses within the meaning of Section 92B of the Act read with Section 92F(v) of the Act? is answered in the negative, i.e., in favour of the Assessee and against the Revenue. Consequently Question (ii) in the Assessee's appeal is not required to be answered. Further, the only question framed in the Revenue's Appeal viz., Whether the ITAT erred in deleting the addition of ₹ 180,73,10,769 made by the AO/TPO on account of AMP expenses under Section 37 of the Act? is answered in the negative, i.e. in favour of the Assessee and against the Revenue. 49. The impugned order of the ITAT and the corresponding orders of the DRP and the TPO, on the above issues are hereby set aside. The appeal of the Assessee, ITA No. 228 of 2015 is allowed and the appeal of the Revenue, ITA No. 610 of 2014 is dismissed in the above terms, but in the circumstances with no orders as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration before this Tribunal and thereafter before Hon ble High Court. In our considered opinion under such circumstances, no purpose will be served by keeping present appeal pending, as issues raised by revenue in assessee s own case along with other cases, has not been listed before Hon ble Supreme Court. We are therefore inclined to follow view taken by this Tribunal in assessee s own case which has been upheld by Hon ble High Court for Assessment Year 2008-09. We therefore, reject prayer advanced by Ld.Sr.DR for adjournment. It is observed that similar view has been taken by this Tribunal in assessee s own case for assessment year 2009-10 in ITA No.1254/del/2014 vide order dated 26/11/18. 8.2. However, we appreciate the concern raised by Ld.Sr.DR that decision of Hon ble Supreme Court will be binding upon assessee as well as revenue. We are therefore, inclined to set aside this issue to Ld.AO/TPO to pass fresh order considering decision of Hon ble Supreme Court. Needless to say that proper opportunity shall be granted to assessee of being heard. Accordingly Grounds 2 to 2.29 stand allowed for statistical purposes. 9. Amongst corporate grounds raised by assessee, Ld.Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground raised by assessee stands allowed for statistical purposes. 11. Ground No. 10 is in respect of disallowance of ₹ 3,25,50,000/- giving provision for expenses of tour packages given to dealers. 11.1. Ld.Counsel submitted that dealers are given tour packages. It has been submitted that vision for tool packages were made on accrual basis to account for achievement of sales targets and necessary to and resultant expenses these were accounted for in subsequent financial years. 11.2. Ld.AO disallowed it by holding that expenses are of contingent in nature which depends upon happening of certain event and therefore not allowable for year under consideration. Is it is also submitted by Ld.Sr.DR that provision made towards expenses were not actual expenses incurred which has been crystallised during year under consideration and therefore same is not allowable. 11.3. We have perused submissions advanced by both sides in light of records placed before us. No doubt, unless expenditure is actually incurred, or it is accrued during relevant year, it would not be allowed as deduction. Liability has to be in praesenti. However at the same time, in present scenario where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form rate, and whether the deduction in respect of bonus was granted in the assessment year 1952-53 or in the assessment year corresponding to the accounting year 1952, that is in the assessment year 1953-54, should be a matter of no consequence to the Department; and one should have thought that the Department would not fritter away its energies in fighting matters of this kind. But, obviously, judging from the references that come up to us every now and then, the Department appears to delight in raising points of this character which do not affect the taxability of the assessee or the tax that the Department is likely to collect from him whether in one year or the other. 11.5. The aforesaid observations of Hon ble Bombay High Court has been reiterated by Hon ble Delhi High Court in the case of CIT v. Shri Ram Pistons Rings Ltd. Reported in [2008] 174 Taxman 147, as under : Finally, we may only mention what has been articulated by the Bombay High Court in Commissioner of Income Tax, Delhi, Ajmer, Rajasthan and Madhya Pradesh v. Nagri Mills Co. Ltd. [1958] 33 ITR 681 as follows : In the reference that is before us there is no doubt that the Assessee had incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of legal position recently clarified by Hon ble Delhi High Court in case of Maruti Suzuki India Ltd vs Union of India reported in (2017) 84 Taxmann.com 45 wherein, Hon ble Delhi High Court while clarifying the position of law in this regard held that, section 35 (2 AB) clearly provides that, any expenditure incurred by a party on its R D facility except, insofar as it relates to land and building liable to be allowed to be claimed as deduction. 14.2. Ld.Counsel submitted that Hon ble Delhi High Court further held that for availing benefit under section 35 (2AB), what is relevant is not date of recognition or cut-off date mentioned in Certificate of DISR or even date of approval, but existence of recognition. He further submitted that Hon ble Delhi High Court thus opined through this decision that, if an R D centre is not recognised, it is not entitled to deduction under section 35 (2 AB) of the Act. He placed reliance upon decision of Hon ble Gujarat High Court in case of CIT vs Claris Lifesciences Ltd., reported in 326 ITR 251, which has been referred to and relied upon by Hon ble Delhi High Court while deciding the case of Maruti Suzuki India Ltd (supra). 14.3. Consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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