2018 (7) TMI 1964 - AT - Income Tax

Assessment u/s 144C - whether final order of assessment was not passed within the time limits prescribed by law and therefore the same being bad in law is liable to be quashed? - HELD THAT:- In the case on hand, the DRP issued its directions on 17.12.2015 and while the same were admittedly received by the Assessing Officer on 29.12.2015, the final order of assessment was passed on 18.02.2016. According to the assessee, this final order of assessment for Assessment Year 2011-12 is bad in law since it was not passed within one month from the end of the month in which the DRP directions were received. This ground was considered and decided against the assessee by a co-ordinate bench of this Tribunal in the assessee's own case for the very same Assessment Year 2011-12 [2017 (8) TMI 409 - ITAT BANGALORE] as held the proceedings cannot be declared as null and void simply because the AO passed the assessment order beyond the period prescribed there under. In the circumstances, grounds relating to limitation, raised by the assessee-company are dismissed

TP adjustment - selection of MAM - TP Study / documentation done adopting TNMM as the Most Appropriate Method (MAM) and the TPO’s adoption of CPM as the MAM in place of TNMM - HELD THAT:- In the case on hand, the net margin earned by the assessee in respect of personal care division in the domestic segment at 11.30% was compared to the net margin from exports to AEs at 15.80%. Since the net margin from exports to AEs was higher than the net margin from domestic sales to unrelated parties, the assessee concluded that its exports to AEs were at arm’s length. The TPO has taken AE sales comprising of both pharma and personal care products and compared the same with the personal care products of the domestic segment. Since the products compared are different, consequently the gross profits are also different.

The number of differences and adjustments to be carried out for comparison purposes of the TPO’s order are large in number and therefore where differences are many, CPM cannot be considered as MAM. CPM adopted by the TPO is incorrect and contrary to the facts of the instant case and that the assessee is justified in adopting TNMM for determining the ALP in respect of finished goods exported to AEs. Transfer Pricing Adjustment made by the TPO by adopting CPM is accordingly deleted. - Decided in favour of assessee.

TP adjustment on Advertisement, Marketing & Sales Promotion (AMP) Expenses - TPO has made the Transfer Pricing Adjustment in respect of AMP expenses on the ground that the said expenditure has resulted in promotion of the brand ‘Himalaya’ owned by M/s. Himalaya Global Holdings Ltd., Cayman Islands and has applied the ‘Bright Line Test’ for this purpose - HELD THAT:- Neither the TPO nor the Assessing Officer has brought on record any material evidence to substantiate the existence of any agreement or arrangement, either express or implied between the assessee and ‘HGH’, Cayman Islands for promotion of its brand. The Hon'ble High Court of Delhi in a series of decisions, inter alia, including the case of Maruti Suzuki India Ltd. Vs. CIT [2015 (12) TMI 634 - DELHI HIGH COURT] emphasized the importance of Revenue having to first discharge the initial burden upon it with regard to showing the existence of an international transaction between the assessee and the AE.

Requirement of there being an international transaction has not been satisfied in the case on hand - the net margin from exports to AEs at 15.80% is more than the net margin earned by the assessee in respect of personal care product division in the domestic argument at 11.30%. In the factual matrix of the case, as discussed above, the ALP of the assessee's international transactions with its AEs were at Arm’s Length and therefore no separate adjustment for AMP expenditure is called for. Transfer Pricing Adjustment made by the TPO in respect of AMP expenditure is to be deleted. - Decided in favour of assessee.

Charging of Interest u/s. 234B & 234C is consequential and mandatory and the Assessing Officer has no discretion in the matter. This proposition has been upheld by the Hon'ble Apex Court in the case of Anjum H Ghaswala [2001 (10) TMI 4 - SUPREME COURT] and we therefore uphold the action of the Assessing Officer in charging the said interest in the case on hand.