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2015 (8) TMI 923 - AT - Income TaxDisallowance of Marketing expenditure claims - Held that:- Constantly the Co-ordinate Benches have been restoring the issue to the file of the AO for earlier AY's with the direction to consider the issue afresh after affording a reasonable opportunity of being heard to the assessee. Respectfully following the orders of Tribunal on the said issue, ground no-3 is restored to the file of the AO with an identical direction. - Decided in favour of assessee for statistical purposes. Price Protection Policy - Held that:- Evidence filed before the DRP should be sent back to the AO for considering the same. The arguments advanced on behalf of the assessee that the confirmations filed in similar format are the result of guidance given to the distributors/dealers by the assessee to show how the confirmation should be filed. This fact does not necessarily lead to the conclusion that the statements in the confirmations are not true. However the correctness/genuineness of the same needs to be enquired into. We also hold that the fresh evidences which the assessee is now seeking to file should be admitted as the arguments that they could not be filed before the DRP in the absence of any fact on record cannot be disbelieved especially since the evidences filed before the DRP itself were filed during the fag end of the proceedings - Decided in favour of assessee for statistical purposes. Obsolescence of Inventory disallowance - Held that:- In the immediately preceding assessment years and the judgement of the Hon’ble High Court where for want of necessary evidences the action of the AO was confirmed. It is seen that the Hon’ble High Court while deciding against the assessee also observed that the assessee was not precluded from placing necessary evidences in subsequent years in support of its claim. Accordingly, following the orders of the Co-ordinate Benches which are supported by the judgement and order of the Jurisdictional High Court, the issue is restored to the AO. While doing so, it is directed that the assessee shall place necessary supportive evidences justifying its claim by way of it Global Obsolescence Policy, establishing that specific models/accessories etc. had gone out of the market based on their surveys and marketing Reports based on the sales data of the relevant period etc and any other information/material fact the AO may so desire. The assessee necessarily shall be at liberty to file fresh evidences in support of its claim and the AO shall be duty-bound to consider the same before the passing of his order. Transfer Pricing Issues - Advertising, Marketing, Promotional Expenses (AMP) - Held that:- We also concur with the departmental stand and hold that the application of bright line test applying the precedent settled by the Special Bench and so hold that the same has been correctly applied in principle in order to determine the nonroutine functions which have been performed by the assessee applying the mean AMP sales ratio of the comparables. It is also upheld that the assessee has contributed to building the brand of the AE who holds the legal rights of the brand as such the grounds assailing the action of the TPO and the DRP in upholding the bright-line test are dismissed; the ground that it is not an international transaction is also dismissed, relying upon the precedent settled by the Special Bench. The grounds assailing the application of the mark-up are also dismissed as nothing has been argued to show as to why the mark-up of 12.5% being the SBI PLR for the said year is excessive. In principle the application of mark-up to be calculated on the AMP spend on creating the marketing intangibles is also upheld as no un-related party would have blocked its funds and provided service to the AE for building the brand belonging to the AE without any expectation of remuneration over and above the cost incurred.There is no justification to deny oneself the benefit of jurisprudence available in the public domain. As long as these do not run contrary to the Indian Transfer Pricing Laws ignoring the same would be an act of cutting the nose to spite the face. With the passage of time where India is becoming a global commercial hub with the advent of Multinational Companies new transfer pricing issues are thrown up and keeping the aim of transfer pricing in ensuring that the tax base of the country is not eroded the action of the TPO in referring to the International Guidance in order to determine the ALP of the international transaction cannot be faulted with unless we repeat the said action is contrary to the Indian Transfer Pricing Legislation which is not so in the facts of the present case. - Decided in favour of revenue. Double Disallowance - Held that:- Accordingly in the light of the submissions advanced by the parties, we direct the AO to consider the submissions of the assessee that there may be no double disallowance qua the expenditure on cell phones and accessories given free of cost to service centres etc. and the AMP expenditure. Contract Software Development - TPO show caused the assessee to explain why the filters applied by the assessee for selecting the comparables be not rejected and substituted by the filters of the TPO as the assessee has used multiple years data and selected inappropriate 12 comparables with an average margin of 8.42% - Held that:- TPO/Revenue has resorted to ‘cherry picking” is found to be not supported by record. Since no arguments have been advanced to assail the appropriateness of the reasoning of the DRP to uphold the filters selected by the TPO and no arguments have also been advanced on facts assailing the reasoning of the DRP to retain the 13 comparables with arithmetical correction in OP/TC percentage, the correctness of the same is not being gone into. On the appropriateness of the filters and the comparables no finding is being given as the assessee has confined itself only to making a request for remand on the ground that the TPO has not confronted the assessee with the basis of the search process which on facts is found to be incorrect. It is seen that at no stage either before the TPO or the DRP, the assessee has sought to demonstrate applying the 7 filters of the TPO that the results would vary. It is also seen that no such request was made either before the TPO or the DRP despite sufficient opportunity and before us the request made is found to be incorrect on facts. It is further seen nothing has been placed before us to demonstrate that by carrying out a fresh search applying the 7 filters of the TPO the results would vary. In the absence of any cogent fact or arguments, the request for remand cannot be acceded to in vacuum. No doubt the Tribunal has the power to remand however the said request is to be exercised judiciously and matters cannot and should not be remanded for the mere asking and that too when the arguments on facts are found to be not borne out by record. There must be some evidence or fact available on record to justify the remand in order to set the machinery of the Government working and merely on casual requests and whim the process cannot be caused to be started. It is also a fact to be kept in mind while remanding that the entire demand qua the issue gets wiped out and such a drastic action should be resorted to only if justice demands that facts supporting the said request are available on record. Since no other arguments was advanced on behalf of the assessee. Benefit of deduction of 5% under proviso to Section 92C(2) for the purposes of bench-marking has to be rejected - Held that:- The amendment made with retrospective effect by the Finance Act, 2002 makes it clear that benefit of deduction of 5% under the proviso to Section 92C(2) shall not be allowed for the purposes of computation of arms’s length price.
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