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TMI Blog2025 (4) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure?" 2. The issue itself arose in the context of whether the Advertisement, Marketing and Promotion (AMP) expenses that were incurred would qualify as an international transaction. While dealing with this aspect, the Tribunal has observed that since the judgment of our Court in Maruti Suzuki India Ltd. vs. Commissioner of Income Tax (2015 SCC OnLine Del 13940) had not been taken into consideration, the matter would merit being remanded to the Transfer Pricing Officer (TPO) to determine whether AMP would qualify as an international transaction. 3. This becomes evident from a reading of the following conclusions of the Tribunal:- "8. In view of our discussion above and since the ld. TPO held AMP expenses to be an international transaction, he did not have any occasion to consider these documents in the light of the judicial view now available for consideration. Respectfully following the Tribunal orders of co-ordinate benches, placed on record by the ld. DR, we are of the considered opinion that it would be in the fitness of things if the impugned order is set aside and the matter is restored to the file of TPO/AO for a fresh determination of the question as to whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elinked to be heard separately. 43. Secondly, the cases which were disposed of by the Sony Ericsson Mobile Communications India (P.) Ltd. (supra) judgment, i.e. of the three Assessees Canon, Reebok and Sony Ericsson were all of distributors of products manufactured by foreign AEs. The said Assessees were themselves not manufacturers. In any event, none of them appeared to have questioned the existence of an international transaction involving the concerned foreign AE. It was also not disputed that the said international transaction of incurring of AMP expenses could be made subject matter of transfer pricing adjustment in terms of Section 92 of the Act. 44. However, in the present appeals, the very existence of an international transaction is in issue. The specific case of MSIL is that the Revenue has failed to show the existence of any agreement, understanding or arrangement between MSIL and SMC regarding the AMP spend of MSIL. It is pointed out that the BLT has been applied to the AMP spend by MSIL to (a) deduce the existence of an international transaction involving SMC and (b) to make a quantitative 'adjustment' to the ALP to the extent that the expenditure exceeds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansaction price does not exceed the specified percentage, no TP adjustment can at all be made. Both Section 92CA, which provides for making a reference to the TPO for computation of the ALP and the manner of the determination of the ALP by the TPO, and Section 92CB which provides for the "safe harbour" rules for determination of the ALP, can be applied only if the TP adjustment involves substitution of the transaction price with the ALP. Rules 10B, 10C and the new Rule 10AB only deal with the determination of the ALP. Thus, for the purposes of Chapter X of the Act, what is envisaged is not a quantitative adjustment but only a substitution of the transaction price with the ALP. 70. What is clear is that it is the 'price' of an international transaction which is required to be adjusted. The very existence of an international transaction cannot be presumed by assigning some price to it and then deducing that since it is not an ALP, an 'adjustment' has to be made. The burden is on the Revenue to first show the existence of an international transaction. Next, to ascertain the disclosed 'price' of such transaction and thereafter ask whether it is an ALP. If the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture beyond the bright line should be regarded as a separate international transaction of brand building. Such a broadband universal approach is unwarranted and would amount to judicial legislation. During the course of arguments, it was accepted by the Revenue that the TPOs/Assessing Officers have universally applied 'bright line test' to decipher and compute value of international transaction and thereafter applied 'Cost Plus Method' or 'Cost Method' to compute the arm's length price. The said approach is not mandated and stipulated in the Act or the Rules. The list of parameters for ascertaining the comparables for applying bright line test in paragraph 17.4 and, thereafter, the assertion in paragraph 17.6 that comparison can be only made by choosing comparable of domestic cases not using any foreign brand, is contrary to the Rules. It amounts to writing and prescribing a mandatory procedure or test which is not stipulated in the Act or the Rules. This is beyond what the statute in Chapter X postulates. Rules also do not so stipulate. The argument and reasoning in paragraph 17.6 in a way loses focus on the main issue and controversy; whether the arm& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxation accepted and applied universally. There is nothing in the Act or the Rules to hold that it is obligatory that the AMP expenses must and necessarily should be subjected to 'bright line test' and the non-routine AMP expenses as a separate transaction to be computed in the manner as stipulated." (Emphasis in bold is ours) 26. Thus, form the plain reading of the aforesaid principles laid down by the Hon'ble Jurisdictional High Court, the key sequitur is that: i) International transaction cannot be identified or held to be existing simply because excess AMP expenditure has been incurred by the Indian entity. ii) International transactions cannot be found to exist after applying the BLT to decipher and compute value of international transaction. (iii) There is no provision either in the Act or in the Rules to justify the application of BLT for computing the Arm's Length Price and there is nothing in the Act which indicate how in the absence of BLT one can discern the existence of an international transaction as far as AMP expenditure is concerned. (iv) Revenue cannot resort to a quantify the adjustment by determining the AMP expenses spent by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee for same year under consideration on AMP expenditure by learnt TPO. On objection being raised by assessee before DRP against the adjustment proposed, a direction was issued to Ld.AO/TPO to make adjustment to in respect of AMP expenditure by following intensity method, being the plausible method. xxxx xxxx xxxx 8. In our considered opinion, DRP has followed view of Hon'ble Delhi High Court in case of CIT vs. Sony Ericson Mobile Communication India Pvt.Ltd., (supra), to reject BLT method for proposing adjustment for AMP expenditure. Thus respectfully following Hon'ble Delhi High Court, we hold that adjustment made on protective basis by following bright line test is not sustainable. 9. Accordingly we allow Grounds 8-12 raised by assessee." 7. Further, in AY 2015-16, the Tribunal in ITA No. 9312/Del/2019 again followed the decision of its Coordinate Bench in AY 2010-11 and held that when there is no international transaction, no separate benchmarking qua AMP expenditure can be made. 8. Our attention has also been invited to the order passed in Pr. Commissioner of Income Tax-1 vs. Casio India Company Pvt. Ltd. (ITA 211/2022 decided on 11 December 2024) and Pr. Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issues forming subject matter of consideration in these appeals have already been considered and disposed of by this Court in the case of the respondent-assessee itself in Deputy Commissioner of Income Tax-5(2) v. Casio India Company and where we had held as follows:- "The Revenue has preferred the present appeal to assail the order dated 24.01.2019 passed by the Income Tax Appellate Tribunal (ITAT) in ITA No. 8060/Del/2018 preferred by the respondent for the assessment year 2014-15. A perusal of the impugned order shows that the same proceeds on the basis of the decision of this Court in CIT Vs. Sony Ericson Mobile Communication India Pvt. Ltd., [2015] 55 taxmann.com 240. In that decision, this Court rejected the adoption of the bright line test method for making the protective adjustment by the Assessing Officer. In the present case as well, the Assessing Officer had adopted the bright line test method and the Tribunal by following the decision of this Court in Sony Ericson Mobile Communication India Pvt. Ltd. (supra) has rejected the said method. In view of the fact that this Court has already rendered its decision on the same issue, we dismiss this appeal." 6. Bearin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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