TMI Blog2018 (12) TMI 1208X X X X Extracts X X X X X X X X Extracts X X X X ..... only a mail order marketing use as promotion for products sales TPO/DRP ignored these basic differences while holding that these expenses are international transaction itself. Besides that both the revenue authorities failed to bring on record as to how the said activity of the assessee company is having an element of international transaction itself. These factors were not at all verified by the revenue authorities. The issue of Bright Line Test method is now settled by the judicial precedence in case of the decision of the Hon ble Delhi High Court in case of PR. CIT vs. Mary Kay Cosmetic Pvt. Ltd.[2018 (9) TMI 1761 - DELHI HIGH COURT] Thus, this also should be looked into by the AO/TPO. Therefore, it will be appropriate to remand back this entire issue to the file of the AO/TPO for fresh adjudication. - I.T.A .No. 1080/DEL/2016 And I.T.A .No. 1621/DEL/2016 - - - Dated:- 20-12-2018 - SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER For The Appellant : Sh. Percy Pardiwala, Sr. Adv. For The Respondent : Sh. A. Sreenivasa Rao, Sr.DR ORDER PER SUCHITRA KAMBLE, JM These two appeals are filed by the assessee and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering expenses incurred in connection with sales as AMP expenditure incurred toward brand promotion; 8. in considering postage expenses amounting to ₹ 4,07,65,295 as part of the alleged AMP expenditure, which is absurd since postage expenses cannot contribute to brand building; 9. in disregarding the expert opinion of Mr Ranjan Kapur, which gives credence to the fact that selling and distribution expenditure incurred by the Appellant has not lead to brand creation/ promotion; 10. in not appreciating that the concept of marketing intangible is not applicable to the Appellant s case; 11. in failing to understand that the alleged AMP expenses were incurred by the Appellant wholly and exclusively on its own account and for its own business and any benefit to the AE can only be incidental; 12. in characterizing the Appellant as a limited risk distributor from an entrepreneurial entity 13. in treating Appellant s own selling and distribution expenses as having been incurred for and on behalf of its AE and accordingly holding that the Appellant should have recovered the same from the AE; 14. in arbitrarily holding that the alleged A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 5,867 while computing the tax liability for the year; 25. in levying interest of ₹ 8,02,908 under Section 234A of the Act without appreciating that the Appellant has filed its return of income before the due date; 26. in levying interest of ₹ 2,32,84,332 under Section 234B of the Act; 27. in not appreciating that the entire addition has been made due to transfer pricing adjustment and hence, could not have been envisaged, while paying advance tax; 28. in levying interest of ₹ 28,22,518 under Section 234D of the Act; 29. in initiating penalty proceedings u/s 271 (1 )(c) of the Act. I.T.A .No. 1621/DEL/2016 1. Whether under the facts and circumstances of the case and in law the Hon ble DRP was correct in holding that PLR cannot be the basis for computing markup on AMP expenses without appreciating the Revenue s case wherein the PLR of bank has been used as an uncontrolled comparable to benchmark the opportunity cost of money involved and locked up in AMP expense? 2. Whether on the facts and in the circumstances of the case and in law , the Hon ble DRP-2 was justified in stating that routine selling a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Billing Materials 11,17,612 Excluded 2 Promotion freight 32,68,074 32,68,074 3 personalization 79,85,056 Excluded 4 List rentals and other promotions 31,53,009 Excluded 5 Premiums 2,43,81,740 2,43,81,740 6 Sweeptakes Judging 33,40,985 33,40,985 7 Paper and printing of brouchers 5,47,56,672 5,47,56,672 8 Bad debts 1,83,79,127 Excluded 9 Postage 4,07,65,295 4,07,65,295 TOTAL 15,71,47,570 12,65,12,766 Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal Transactions. The TPO/DRP did not bring anything on record to prove that there is an understanding/arrangement / or an action between the assessee Company and the A.E for the promotion of brand/trademark name owned by A.E. The Ld. AR relied upon the decision of the Delhi Tribunal in case of Sony Mobile Communications (India) (P.) Ltd. vs. Addl. CIT (2018) 96 taxmann.com 312 as well as the decision of the Hon ble Delhi High Court in case of Maruti Suzuki India Ltd. vs. CIT (2016) 282 CTR 1 (Del.). The Ld. AR further submitted that the existence of AMP being an international transaction has to be proved dehors of Bright Line Method which has not been otherwise substantiated by the TPO/A.O. The Ld. AR relied upon the decision of the Delhi Tribunal in case of Cengage Learning India Pvt. Ltd. vs. ACIT (ITA No. 19/Del/2016 A.Y. 2011-12 order dated 13.02.2018) as well as the decision of the Hon ble Delhi High Court in case of PR. CIT vs. Mary Kay Cosmetic Pvt. Ltd. (ITA 1010/2018 order dated 18.09.2018). The Ld. AR further submitted that the TPO/DRP failed to understand that the components of the assessee s Advertising and Sales promotion and postal expenses are different from what is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AMP Expenses incurred by the assessee Company. Although in the very same order, it was held that the profits earned by the assessee company in its distribution activity which was computed after taking into account, these alleged AMP expenses meets the Arms Length test. Without prejudice to these submissions, the Ld. AR further submitted that the TPO erred in not determining the excessive alleged AMP expenses and the marketing transfer pricing on the entire alleged AMP Expenditure incurred by the assessee Company. The Ld. AR further submitted that the TPO while concluding that the alleged AMP expenditure were for brand building without appreciating the nature of expenses incurred by the assessee. The Ld. AR further submitted that the TPO used an incorrect cost based for the purpose of making the adjustment in respect of alleged AMP expenditure. The Ld. AR further submitted that the Assessing Officer has not given effect to the directions of the DRP that has allowed the objections raised by the assessee in favour of the assessee. The TPO failed to consider the fact that where the alleged AMP expenditure incurred the same ought to be reduced from the total expenses for computation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious decisions regarding involvement of AMP expenses but in the present case, the facts are altogether different as here the method for using product sales and promotion are totally different. The assessee company s products are not available in market as such in general. Therefore, the TPO/DRP ignored these basic differences while holding that these expenses are international transaction itself. Besides that both the revenue authorities failed to bring on record as to how the said activity of the assessee company is having an element of international transaction itself. These factors were not at all verified by the revenue authorities. The issue of Bright Line Test method is now settled by the judicial precedence in case of the decision of the Hon ble Delhi High Court in case of PR. CIT vs. Mary Kay Cosmetic Pvt. Ltd. Thus, this also should be looked into by the AO/TPO. Therefore, it will be appropriate to remand back this entire issue to the file of the AO/TPO for fresh adjudication as also done in the earlier Assessment years i.e. 2008-09 to 2010-11. Needless to say that the assessee be given opportunity of hearing by following principles of natural justice. Thus, Ground No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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