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TMI Blog2021 (10) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... promotion expenditure (AMP). This amount had been ascribed towards benefit accrued to the foreign principal on account of the AMP expenditure incurred in DTAA. On appeal, the Ld.CIT(A) directed the AO to delete the TP upwards adjustment of Rs. 3,26,29,475/-. 3. Aggrieved, the Revenue is in appeal before the Tribunal. The Ld.DR contended that the Ld.CIT(A) has mechanically following the order of ITAT for assessment year 2011-12, and holding that there was no international transaction on account of AMP functions without examining the actual contractual relationship between the assessee and the AE to ascertain whether the AMP functions was performed by the assessee on 'its own, for its' own benefit or the same was performed by the assessee at the behest of the AE. Further, it was submitted that the Ld.CIT(A) has deleted the AMP adjustment without noting the fact that the assessee performed the AMP function at a much higher intensity as compared to the comparables considered for benchmarking its import transaction as its AMP to sales ratio of 13.33% is much higher than the average AMP to sales ratio of 4.77% of the comparables. Without prejudice to the above, the Ld.DR submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15% on the cost of AMP. There was no evidence with the Revenue to show that the assessee company has not incurred the expenditure towards its sales promotion which is allowable deduction u/s.37(1) of Income Tax Act and no evidence to prove that the expenditure in question was in fact a brand building expenditure incurred towards Nippon, Japan. In the TP study report of the assessee, there was no mention of any AMP expenditure obliged by the assessee by way of any agreement/arrangement or any other mode mentioned in the Income Tax Act. As per Sec.92B(1) of Income Tax Act, international transaction means a transaction between two or more AEs, either or both of whom are non-residents in the nature of purchase, sale or lease of intangible or intangible property or provision of services or borrowing money or any other transaction having bearing on the profits, income, losses or receipts or assets of such enterprise. In the assessee's case, the transaction is not between the AE and the assessee as far as AMP is concerned. The Ld.AR of the assessee stated that there was no arrangement or agreement or action in concert are understanding for incurring the AMP expenditure by the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Question-5: Whether the Income-tax Appellate Tribunal was right in directing that fresh bench marking/comparability analysis should be undertaken by the Transfer Pricing Officer by applying the parameters specified in paragraph 17.4 of the order dated January 23, 2013, passed by the Special Bench in the case of L. G. Electronics India (P) Ltd.?." In terms of and subject to the discussion under the headings D to P, we held that the legal ratio accepted and applied by the Tribunal relying upon the majority decision in L. G. Electronics India Pvt. Ltd. (supra) is erroneous and unacceptable. For the reasons set out above, we have passed an order of remand to the Tribunal to examine and ascertain facts and apply the ratio enunciated in this decision. For the purpose of clarity, we would like to enlist our findings: (x) Parameters specified in paragraph 17.4 of the order dated January 23,2013, in the case of LG Electronics India Pvt. Ltd. (supra) are not binding on the assessee or the Revenue The "bright line test" has no statutory mandate and a broad-brush approach is not mandated or prescribed. We disagree with the Revenue and do not accept the overbearing and orotund submission th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med on the basis of the Bright Line Test. 26. Following the decision in the case of Maruti (supra), Hon'ble 2.12 Hon'ble Delhi High Court in the case of 381 ITR 117 in Maruti Suzuki India Ltd., held that AMP expenses incurred by the assessee is not an international transaction in Paragraph No.71 which is reproduced here as under: "71 Since a quantitative adjustment is not permissible for the purposes of a transfer pricing adjustment under Chapter X, equally it cannot be permitted in respect of AMP expenses either. As already noticed hereinbefore, what the Revenue has sought to do in the present case is to resort to a quantitative adjustment by first determining whether the AMP spent by the assessee on application of the bright line test, is excessive, thereby evidencing the existence of an international transaction involving the associated enterprise. The quantitative determination forms the very basis for the entire transfer price exercise in the present case." 2.13 Similar view was expressed in the case of Whirlpool of India Ltd. by the Hon'ble High Court Delhi. The Co-ordinate Bench of Delhi Tribunal in the case of Goodyear India Ltd., vs. DCIT ITA Nos.5650/Del/2011, 6240/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... level for SMC for the purposes of promoting the brand of SMC." 2.15 From the above discussion, it is clear that the TP Regulations would be applicable to any transaction which is held to be an international transaction. In the instant case, the AO has referred the international transaction in the case of purchase of raw materials, finished goods, purchase of goods, purchase of software management consultancy reimbursement for TP Study and to determine the ALP. During the TP proceedings, the TPO found that there was a huge AMP spent and brought it under the purview of international transaction. The AMP spent was not obligated by AE. The expenditure was incurred by the assessee as sales promotion expenses for the purpose of it's own cause. According to the assessee, there was no binding agreement to promote the brand of Nippon India by the assessee. The Revenue could not demonstrate that there was an agreement or arrangement or action of concert formal or informal to promote the brand of Nippon in India and to spend towards AMP. The Revenue has not proved that the benefits of AMP expenses are for improving the Nippon brand in India who is the economic owner of Nippon Japan. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crystal clear from Section 36(1)(va) of the Income Tax Act that with respect to remittance of employees contribution to recognized Provident Fund, deduction will be allowable to the assessee only if the same is remitted within the due date mentioned in the relevant P.F.Act. On the other hand, the ld.Counsel for the assessee strongly supported the order of the Ld.CIT(A) as well as the decision of Hon'ble High Court of Madras in the case of CIT v. Industrial Security & Intelligence India Pvt. Ltd. in TCA Nos.585 and 586 of 2015 vide order dated 24.07.2015. 7.3 We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In the assessment order, the Assessing Officer has disallowed an amount of Rs. 9,05,913/- being belated remittance of the employees' contribution to PF & ESI as it is the income of the assessee in view of the provisions of Section 2(24)(x) of the Act read with section 36(1)(va) of the Act. Before the ld. CIT(A), the assessee has submitted that since the entire amount has been remitted before the due date for filing of return of income, the same should be allowed as deduction under section 43B of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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