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TMI Blog2020 (12) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 154(1A) of the Act wherein it has been laid that where any matter has been considered and decided in any proceedings by way of appeal or revision relating to an order referred to in sub section (1), the authority passing such order, may notwithstanding anything contained in any law for the time being in force, amend the order under that sub section in relation to any matter other than the matter which has been so considered and decided. The order of the Appellate Tribunal having become final and after the final decision of the Appellate Tribunal, the Revenue could not initiate fresh assessment proceedings, as the order of the Tribunal was binding on the Revenue. It was noted that various High Court had expressed a similar view. Thus, the questions which are expressly raised before or decided by the appellate or revisional authority cannot be re-agitated and no rectification proceedings will be maintainable in respect thereof, under section 154 of the Income Tax Act, 1961, before the TPO/Assessing Officer in the garb of amending his/her own order. Thus, the assumption of jurisdiction by the TPO/AO u/s 154 is bad in law and void ab intio. Therefore, the assessment order passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case and in law, the AO / TPO have grossly erred in applying Bright Line Test ( BLT ) to propose transfer pricing adjustment amounting to INR 30,99,61.631, on protective basis, without appreciating that BLT has been rejected by the Hon'ble Tribunal vide its order dated July 15, 2016 (in first round ) thus the order is bad in law and void-ab-initio. Notwithstanding and without prejudice; 7. That on the facts and circumstances of the case and in law, the AO / TPO. have erred in not allowing the benefit of (+/-) 5% as per second proviso to section 92C(2) of the Act. 8. That on the facts and circumstances of the case and in law, the AO / TPO erred in not granting quantitative / economic adjustments while quantifying arm's length price of the alleged international transaction of AMP expenditure. 9. That on the facts and circumstances of the case and in law, the AO have erred in levying / charging interest under sections 234B and/or 234C of the Act. Each of the above grounds are independent and without prejudice to the other grounds of appeal preferred by the Appellant. 3. Nikon India Private Limited (the assessee company) is a wholl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the TPO and determined the total income of the assessee company at ₹ 80,85,90,910/- as against the returned income of ₹ 12,35,25,748/-. The assessee company filed objections dated 26.03.2015 against the said draft order before the Dispute Resolution Panel (DRP). The DRP vide order dated 30.09.2015 rejected the objections of the assessee company and upheld the adjustment proposed in relation to AMP expenditure. Pursuant to the directions of the DRP, the TPO passed order giving effect to the directions of DRP on 04.11.2015 without excluding direct selling / distribution expenditure from the ambit of AMP. Thus, the TPO enhanced transfer pricing adjustment from ₹ 68,50,65,162/- to ₹ 75,02,87,734/-. The final assessment order was passed by the Assessing Officer on 13.11.2015, determining income as under: Particulars Amount (INR) Returned income under the normal provisions of the Act 12,35,25,748 Add: TP Adjustment pursuant to directions of DRP 75,02,87,734 Aggrieved by the assessment order, the assessee company preferred an appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was requested to show-cause why the earlier order dated 10.11.2016, be not amended as per the TP order for Assessment Year 2010-11. A response was filed by the assessee company in this regard vide submissions dated 30.03.2017 and it was elaborately submitted that the said order could not be rectified under Section 154 of the Act. Notwithstanding it was also submitted that even if an intensity adjustment is carried out, then also, the ALP of the international transaction of the assessee company are at arm s length. The TPO passed another order dated 16.05.2017 under Section 92CA(3) read with Section 254 of the Act. The TPO vide above stated subsequent order dated 16.05.2017 re-determined the adjustment relating to AMP expenditure on substantive as well as protective basis, as under: Basis Method for benchmarking Adjustment u/s 92CA read with Section 254 of the Act (in INR) Substantive AMP intensity adjustment (without granting benefit of +/- 5% as per proviso of Section 92C(2) of the Act) 4,30,85,529 (which falls within 5% range) Protective B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice, the TPO stated that there are certain discrepancies in the order dated November 10, 2016 and therefore, why the said order should not be rectified in terms of the transfer pricing order passed for AY 2010-11. Meaning thereby, the TPO intended to make transfer pricing adjustment on account of alleged excessive AMP expenditure as an international transaction on substantive basis using intensity method and bright line method on protective basis, as was done in AY 2010-11 in the second round of proceedings (i.e., post remand by the Tribunal). The Ld. AR pointed out that nowhere in the above-mentioned rectification notice, proposing rectification of the earlier order the TPO has given reasons as to what were the mistakes apparent from record which form the basis for rectifying that earlier order; besides summarily stated that there are certain discrepancies. At the outset, it may be pointed out that from the perusal of the impugned rectification notice, it is apparent that the TPO has used the term certain discrepancies , which clearly shows that even if there were any mistakes, termed as discrepancies the same were debatable and were beyond the purview of section 154 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t come within the purview of section 154 of the Act, chose to remain silent and passed a non-speaking TP order dated May 16, 2017. The Ld. AR submitted that when the earlier order has not been rectified or reversed in the subsequent TP order passed by the TPO, two transfer pricing orders for the same assessment year cannot co-exist. The same is undisputed from the subsequent order dated May 16, 2017, passed by the TPO that not only the TPO has ignored the submissions of the assessee filed against rectification notice issued section 154, but was also not diligent enough to mention the earlier TP order dated November 10, 2016 stands modified/ rectified. Nowhere in the of the order, an averment/ reference has been made to the earlier TP order, making it apparent that the lower authorities were well aware that rectification of the earlier TP order would not stand the test of assumption of jurisdiction under section 154 of the Act, as the mistake (if any, though there was none on the facts and circumstances of the instant case) sought to be rectified was debatable chose to conveniently ignore the earlier TP order. In view of the above, the Ld. AR submitted that; (a) the subsequent TP or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. The TPO has simply placed reliance on the decision of the Delhi High Court in the case of Sony Ericsson Mobile Communications India P. Ltd. vs. CIT: [2015] 374 ITR 118 (Delhi) and stated that the expenditure incurred by the assessee company is excessive, thus, is an international transaction. There is no understanding, what so ever in the agreement to depict that Nikon India is incurring excessive expenditure owing to any arrangement between Nikon India and its AE with the intention to promote the brand of foreign AE in India. The expenses incurred by the assessee company are required in the routine course of business to increase the sale of its products within India. It is clear that assessee company s marketing efforts only cater for promoting the products that it deals in, solely with an intention to boost its sales in India. The marketing decisions taken by Nikon India are independent and not controlled or driven by the AEs. The Ld. AR, in this regard, draws attention of the Bench to the following judgments of the Hon ble High Court and Tribunal wherein, it was held that AMP is not an International transaction under the purview of Section 92 the Act: Maruti Suzuki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of enhanced brand value in India and increased sales of their products. The Ld. DR relied upon the order of the TPO and submitted that the AMP expenditure constitutes an International Transaction within the meaning of Section 92B(1) of the Act. The Ld. DR pointed out the amendments made by Finance Act, 2012 to Section 92B of the Act which added an explanation, wherein it was stated that the international transaction shall include the purchase, sale, transfer, lease or use of intangible property, including the transfer of ownership or the provision of use of licenses, franchises, customer list, marketing channel, brand, commercial secret, know-how, industrial property right, exterior design or practical and new design or any other business or commercial rights of similar nature. The explanation further described intangible property as marketing related intangible assets, such as, trademarks, trade names, brand names, logos. Thus, the legislative intention has been clarified by these amendments. The transfer pricing regulations also require that it is not only the form but the overall arrangement/substance of the transactions that must be kept in mind. Thus, the TPO right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ambit of AMP expenses in the case of Amadus India Ltd., does not alter the legal position prevailing as on today. As per the directions of the Tribunal, the TPO vide order dated 10.11.2016 passed the following order: Order Giving Effect to the Directions of the Hon'ble ITAT, New Delhi The Hon'ble ITAT, New Delhi vide his order dated 15.07.2016 has set aside the case and the matter is restored to the file of TPO/AO for fresh determination of question as to whether there exists an international transaction of AMP expenses. The selling expenses directly incurred in connection with sales not leading to brand promotion, should not be brought within the ambit of AMP. Therefore, in view of the direction of the Hon'ble the ITAT, the earlier adjustment of ₹ 75,02,87,734/- is being revised to Nil. But on 15/3/2017, the TPO issued Show Cause Notice relating to rectification of order dated 10/11/2016 thereby asking why earlier order passed for Assessment Year 2011-2 be not amended as per order passed for Assessment Year 2010-11. It is pertinent to note that while remanding back the question as to whether there exists an international transaction o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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