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TMI Blog2019 (10) TMI 1070X X X X Extracts X X X X X X X X Extracts X X X X ..... BD is engaged in manufacturing and supply of decorative paints. PBD has three manufacturing plants situated at Hyderabad, Thane and Mohali. ii) National Starch and Chemicals Division (NSC) - NSC division is into Natural Polymers Group (NPG) and Specialty Polymer Group (SPG). It is engaged in the business of surfactants, synthetic specialty polymers and natural polymers, agro chemicals, chemicals used in customer care product, fabric and cleaning. 4. The Transfer Pricing Officer (TPO) noted that assessee has incurred expenditure on advertising, marketing and promotion expenses (AMP Expenses). So he held that by incurring such expenses, the assessee has provided services to its Associate Enterprises (AE). The primary argument of the Ld. AR of the assessee is that the transaction in question is not an international transaction. In support of his submission, the Ld. AR placed reliance on the following judicial precedents: i) Akzo Nobel India Ltd. (ITA No. 560/Kol/2016 & ITA No. 315/Kol/2016) dated 28.08.2019. ii) Maruti Suzuki India Ltd. (ITA 110/2014 & ITA 710/2015 (Del. High Court). iii) Philips India ltd. (ITA Nos. 863,539/Kol/2016 & 612/Kol/2017 (ITAT, Kol.) iv) Organon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining the ALP of AMP transactions. We find force in the argument of the ld. AR in the given facts & 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 Vs. 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 answered the issue as far as the present Assessee MSIL is concerned since finding in Sony Ericsson to the above effect is in the context of those Assessees whose cases have been disposed of by that judgment and who did not dispute the existence of an international transaction regarding AMP expenses." In view of we note that the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by the assessee only for its manufacturing operations and local environmental compliance from HSE perspective and as such is not an international transaction. In support of his submission, the Ld. AR placed reliance on its own case decided by this Tribunal. Akzo Nobel India Ltd. (ITA No. 560/Kol/2016 & ITA No. 315/Kol/2016) dated 28.08.2019. 8. On the other hand, the Ld. DR supported the action of the lower authorities in rejecting the contention of the assessee and relied on the order of the lower authorities and does not want us to interfere in the order of the lower authorities. 9. We have heard rival submissions and carefully gone through the material available on record. We note that in the facts and circumstances of the case of assessee, the R&D expenses incurred by it cannot be regarded as an international transaction as per section 92 B of the Act. We also note that the issue in hand is squarely covered by the decision of this Tribunal in assessee's own case in ITA No. 560/Kol/2016 & ITA No. 315/Kol/2016 wherein this Tribunal by order dated 28.08.2019 has held that the expenses in question covered under R&T Expenses relate to, service fee paid by the company fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chemical industry in India. provided solutions for compliance of environmental regulations governed by various local authorities in India. provided assistance to the production department and the Company's factories in determining the appropriate mixture of various raw material components for achieving the desired colour and texture of the paint to be manufactured. provided technical training on the manufacturing processes to the production team from time to time to ensure technical updation, improvement and refinement of the production team for the overall efficient execution of manufacturing operations of the Appellant. provided other technical support on day to day basis to the manufacturing operations and addressed the manufacturing process gaps. provided training to the marketing team on the product, the nature and feature of the products etc. necessary for sales and marketing of the Appellant's products in the designated market i.e. India. assisted the Quality department in handling product defect/ quality issue or redressing any product complaints from the customers. 8.2. A perusal of the above demonstrates that, on facts the assessee has not carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2014. Though the DRP observes that nature of service provided by ANCR are in the nature of service for strategic and operations and helps in achieving corporate objectives by aligning workforce and organizational objectives in the field of marketing HR, Finance, Management Services, Purchases etc., held it as stewardship services. We note that TPO has not carried out any exercise to determined the arms length price of benefit, service etc. as per the most appropriate method as envisaged in sec. 92C(1) of the Act. Since the TPO has not carried out the exercise which he ought to have carried out as envisaged by the Act on the erroneous plea that agreement between assessee and ANCR was not placed before him, we set aside the order of ld. DRP/AO & TPO and remand the matter back to TPO for fresh consideration and pass order in the light of the Tribunal's detailed analysis of the agreement between assessee and ANPAP which we decided supra. The TPO is directed to pass speaking order after giving proper opportunity to assessee on this issue." 10. Consistent with the view taken therein, as agreed by both the parties, we restore this issue to the file of the Assessing Officer, for fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual errors in the computation of the operating profit margins of the comparables." According to Ld. AR, the AO has taken as comparable, pharma companies which were held to be not comparable to the assessee's activities as held by the Tribunal in the case of assessee's sister concern Akzo Novel Car Refinishes India Pvt. Ltd. vide ITA No. 614/Del/2014 and 5007/Del/2014. He further submitted that this view has also been upheld by the DRP in assessee's own case in AY 2014-15. So, he urged us to remand the matter back to TPO for de novo adjudication. Per contra, the Ld. DR contended that assessee company has to first demonstrate that its sister concern M/s. Akzo Novel Car Refinishes India Pvt. Ltd. is similar in functional profile and product similarly etc. and then only the TPO can consider the decision in M/s. Akzo Novel Car Refinishes and accept/reject comparables as decided by the Tribunal and apply the same to the assessee's case for adjudication of arms length consideration. 13. After hearing the rival submissions, we note that as per the assessee, the adjustment made by TPO towards contract Research & Development Service (Contract R&D) rendered to the AE is erroneous for not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mohamed Sait Vs. CIT (1959) 37 ITR 151 (SC) and iii) State of Orissa Vs. Maharaja Shri B. P. Singh Deo (1970) 76 ITR 690 (SC). The Ld. AR further submitted that the assessee has its policy of giving the cash discount and publicity and advertisement expenses from past several years and the assessee has claimed cash discount expenses and publicity and advertisement expenses in preceding years as well. However, the department has never questioned the said expenses in the past. Accordingly, the said expenditure should be allowed following the principle of consistency. For that, he relied on the following judicial precedents: i) Radhasoami Satsang Vs. CIT (1992) 193 ITR 321. ii) CIT Vs. A.K.J. Security Printers (2003) 264 ITR 276 and iii) CIT Vs. Neo Poly pack (P) Ltd. (2000) 12 Taxman 363. 15. On the other hand, the Ld. DR placed heavy reliance on the orders of the lower authorities and urged before the bench not to interfere in the order of the AO. 16. We have heard rival submissions and gone through the facts and circumstances of the case and the facts are not repeated again for the sake of brevity. The assessee has claimed deduction of the expenditure to the tune of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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