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TMI Blog2019 (6) TMI 995X X X X Extracts X X X X X X X X Extracts X X X X ..... - ITAT MUMBAI] we direct Ld. AO to allow depreciation @60% on the computer peripherals. Ground No. 1 stand allowed. Addition being un-reconciled amount reflected in Annual Information Return [AIR] - HELD THAT:- The perusal of directions of Ld. DRP reveal that this issue was not raised by the assessee before Ld. DRP. The letter stated to be issued by the bank, as placed before us, is after the date of directions of Ld. DRP. Therefore, while concurring with the stand of Ld. Sr. Counsel that mistaken reporting in AIR could not entail addition in the hands of the assessee, we deem it fit to restore the matter back to Ld. AO with a direction to the assessee to reconcile the stated discrepancy. AO is free to peruse latest AIR information of the assessee and seek information from the bank so as to arrive at logical conclusion TP adjustment - ALP of Export Sales - HELD THAT:- As no further appeal has been preferred by revenue for AY 2009-10 against the order of the Tribunal, on this issue. The revenue is unable to controvert the same. Therefore, respectfully following the consistent view of the Tribunal, we delete TP adjustment of ₹ 129.83 Lacs on account of export sales and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposed in the final assessment order. - Decided in favour of assessee. - I.T.A. No.1102/Mum/2015, I.T.A. No.1211/Mum/2015 - - - Dated:- 19-6-2019 - Shri Saktijit Dey, JM And Shri Manoj Kumar Aggarwal, AM For the Assessee : Shri Farrokh V.Irani- Ld. AR For the Revenue : Shri Anand Mohan-CIT-DR ORDER PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1.1 Aforesaid cross-appeals for Assessment Year (AY) 2010-11 contest final assessment order dated 27/12/2014 passed by Ld. Assistant Commissioner of Income Tax-Circle 14(1)(2), Mumbai [AO] u/s 143(3) r.w.s 144C(13) pursuant to the directions of Ld. Dispute Resolution Panel-III, Mumbai [DRP] u/s 144C(5) dated 14/11/2014. 1.2 The Grounds raised by assessee reads as under: - This Appeal is against the Order issued u/s.143(3) r.w.s.144C(13) of the Act dated December 5, 2014, of the Assistant Commissioner of Income Tax, Circle - 14(1)(2), Mumbai, in pursuance of the directions of the Hon'ble Dispute Resolution Panel - 3, Mumbai (DRP), and relates to the Assessment Year 2010-2011. 1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to have charged. 9) The learned DRP erred in confirming the action of the Transfer Pricing Officer in cherry picking companies out of the companies selected, without giving any cogent reasons. 10) The Assessing Officer erred in ignoring the explanation and submissions made by the Appellant Company and in making an addition of ₹ 42,51,508/- in respect of the un-reconciled amount of AIR. 1.3 The effective grounds raised by revenue reads as under: - 1. On the facts and in the circumstances of the case and in law, the Dispute Resolution Panel erred in directing the AO not to allocate certain expenses from 80IB non-eligible Units to the eligible Units. 2. On the facts and in the circumstances of the case and in law, the Dispute Resolution Panel erred in directing the AO, without any supportive justification, to not to apply the average rate of profit margin within the 80-IC eligible units of Guwahati with that of Pondicherry belonging to the assessee company, thereby erred in allowing the assessee to claim higher deduction u/s 80-IC in respect of Guwahati Units to the extent of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear, the assessee did not claim any deduction u/s 80- IB. Some of the units incurred losses during the year. The Ld. AO opined that expenses pertaining to miscellaneous expenses, conveyance travelling, rates and taxes, advertising and publicity and schemes and promotions were incorrectly allocated between such units as held in earlier assessment years. From the perusal of profitability chart, it was observed that undertaking engaged in manufacturing mosquito repellant, mats and coils in Meghalaya earned profit @2.31%, two units situated in Assam earned margins ranging between 36%-38% whereas similar units located in Pondicherry incurred losses. The units situated at Meghalaya Assam were eligible to claim higher deduction of 100% u/s 80-IC in comparison to loss making unit at Pondicherry, which was eligible for lower deduction of 30% u/s 80-IB. Accordingly, the assessee as asked to explain the discrepancies. It was submitted that product mix at various locations were different. However, not satisfied, invoking provisions of Section 80-IA(10), Ld. AO concluded that the assessee arranged his affairs in such a way that profit of Guwahati (Assam) Units were astronomically high and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for AY 2008-09 has already been dismissed by Hon ble Bombay High Court. Respectfully following binding judicial pronouncement, we upheld the stand of Ld. DRP. Ground No. 1 stand dismissed. 4.2 The Ld. DRP has overruled application of provisions of Section 80- IA(10) by following the decision of Ld. DRP in AY 2008-09 2009-10. It has been brought to our notice that department assailed the stand of Ld. DRP for AY 2009-10 before this Tribunal vide ITA No.1356/Mum/2014 order dated 18/11/2015 wherein the stand of Ld. DRP was confirmed. Therefore, taking consistent stand in the matter, we confirm the directions of Ld. DRP, in this year also. Ground Nos. 2 3 stands dismissed. 5. Resultantly, the revenue s appeal stands dismissed. Assessee s Appeal: ITA No. 1102/Mum/2015 6. Ground No. 1 10 are corporate tax grounds whereas grounds nos. 2 to 9 arises out of certain Transfer Pricing adjustments. Corporate Tax Grounds 7.1 In ground No.1, the assessee is aggrieved by the fact that Ld. AO has restricted the depreciation claim on computer peripherals to 15% as against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the assessee and seek information from the bank so as to arrive at logical conclusion. The balance discrepancy of ₹ 3.15 Lacs shall also be reconciled by the assessee. This ground stand allowed for statistical purposes. Transfer Pricing Grounds 9.1 Certain International transactions as reported by the assessee in Form No.3CEB were referred u/s.92CA (1) to Ld. Transfer Pricing Officer-I(8), Mumbai [TPO] for determination of their Arm s Length Price [ALP]. The issue of determination of ALP of following international transactions are the subject matter of dispute before us: - No. Nature of Transactions 1. Export of Goods 2. Provision of Bank Guarantee 3. Reimbursement of Market Survey Expenses 4. Advertising, Marketing Promotional Expenditure 9.2 The assessee made export sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sale of Kiwi products in India as compared to the worldwide sale of Kiwi products of the group. Accordingly, the assessee reimbursed an amount of ₹ 49.83 Lacs to Sara Lee international BV. Since the payment was stated to be mere reimbursement and stated to be made to a third party, Comparable Uncontrolled Price [CUP] method was relied upon to benchmark the same and no TP adjustment was proposed by the assessee. 9.5 However, since the assessee could not substantiate the basis on which the said amount of ₹ 49.83 Lacs were reimbursed and no evidences / third party invoices were given in support, ALP of the same was determined as Nil and TP adjustment of ₹ 49.83 Lacs was proposed by Ld. TPO. The Ld. DRP while confirming the stand of Ld. TPO, directed Ld. AO to verify the allowability of same u/s 37(1). 9.6 The last TP addition stem from the fact that upon perusal of financial statements, it transpired that the assessee was incurring considerable expenditure on Advisement, Marketing and Sales Promotion [AMP]. These transactions were not reported as international transactions in Form 3CEB. The expenditure am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . DRP. This order has subsequently been followed by Tribunal in AY 2009-10 also vide ITA No.1251/Mum/2014 order dated 18/11/2015. It has been submitted that revenue s further appeal for 2008-09, on this issue, has already been dismissed by Hon ble Bombay High Court whereas no further appeal has been preferred by revenue for AY 2009-10 against the order of the Tribunal, on this issue. The revenue is unable to controvert the same. Therefore, respectfully following the consistent view of the Tribunal, we delete TP adjustment of ₹ 129.83 Lacs on account of export sales and allow ground no. 2 of assessee s appeal. 11. We find that issue of commission on Corporate Guarantee is recurring issue for the assessee. The Chart, as placed before us, in this regard, would reveal that the assessee did not offer any commission against the same for AYs 2005-06 2006-07. The Ld. TPO estimated the same @2.25% 1.15% for these two years which was restricted to 0.50% by the Tribunal in both the years. In 2008-09, the assessee offered a rate of 3% which was accepted by Ld. TPO. In AY 2009-10, the assessee offered a rate of 3% which was estimated by Ld. TPO @5.22%. However, Ld. DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention has bene drawn to Chapter VII-Special Considerations for Intra- Group Services to submit that no evidences were produced by the assessee before lower authorities to demonstrate receipt of any benefit against such services. No details, whatsoever, were furnished in support of the costs reimbursed to its AE. Therefore, no payment was required to be made by the assessee in the absence of any services, as rightly held by Ld. TPO. Arguments have been advanced to submit that when expenditure is incurred by the AE for stewardship / shareholders activities then the same need not be charged to other group entities unless it was shown that direct tangible benefit accrued to the group entity and further, the payment was in commensurate with benefits derived by that entity. Reliance has been placed, inter-alia, on the decision of this Tribunal rendered in Deloitte Consulting India Pvt. Ltd. [ITA No. 579,1272,1273/Mum/2011 30/03/2012]. In the above background, it was submitted that Ld. TPO was right in determining the ALP of the transactions as Nil. 12.3 We have carefully heard the submissions and deliberated on judicial pronouncements as cited before us. The f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the facts that proposed TP adjustment for AMP expenditure is contrary to transfer pricing provisions contained in Chapter-X of the Act as laid down in decisions of this Tribunal in Johnson Johnson Pvt. Ltd. [ITA No.6142/Mum/2017], Hon ble Delhi High Court in Maruti Suzuki India Ltd. [381 ITR 117], Honda Siel Power products Ltd. [283 CTR 322] Whirlpool of India Ltd. [381 ITR 154]. It has been submitted there is no sanction to application of Bright Line Test on the basis of presumed / alleged benefits to the Associated Enterprises [AE]. Our attention is further drawn to the fact that assessee company was joint venture between Godrej Group and Sara Lee Group in the ratio of 49:51. In fact, the assessee purchased 51% stake of Sara Lee Group during May, 2010 and therefore, the allegation that the assessee incurred these expenses to promote the brand owned by Sara Lee Group could not be sustained. Per Contra, Ld. CIT-DR placed reliance on the decision of Delhi Tribunal rendered in Suzuki Motorcycles (I) Pvt. Ltd. V/s DCIT [ITA No. 476/Del/2015 26/11/2018], Sennheiser Electronics India Pvt. Ltd. V/s ACIT [ITA No. 269/Del/2017 19/11/2018] Nikon India P. Ltd. V/s DCIT [81 Taxm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Maruti Suzuki India Ltd. (supra), the assessee before us is involved in manufacturing activity, hence, the AMP expenditure incurred in India by making payment to third parties in India certainly is connected with such manufacturing activities. Moreover, the Department has failed to establish on record that there is an arrangement between the assessee and the AE for incurring AMP expenditure. In any case of the matter, quantification of AMP expenditure by applying the bright line test or any such similar method has not only been disapproved by the Hon'ble Delhi High Court in Sony Ericson Mobile Communications (supra) but also in Maruti Suzuki India Ltd. (supra). In our considered view, the Transfer Pricing Officer was totally wrong in not applying the principle laid down in the decision of the Maruti Suzuki India Ltd. (supra) by taking the alibi that the decision is of a Non Jurisdictional High Court. Further, the Transfer Pricing Officer was totally wrong in determining the arm's length price expenditure by applying the bright line test or routine arm's length price simply relying upon the Special Bench decision of the Tribunal, Delhi Bench, conveniently ignoring the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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