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2019 (5) TMI 1598 - AT - Income TaxTP adjustment - analysis of advertisement, marketing and sales promotion (AMP) expenses by applying Bright Line Test - international transaction or not ? - TPO held that AMP expenses of sales in case of assessee was at 8.43% which was higher than average AMP expenses incurred by comparables, thereby making an adjustment - HELD THAT:- Since basis on which adjustment has been made being Bright Line Test itself has been rejected in case of Sony Ericson India P.Ltd [2015 (3) TMI 580 - DELHI HIGH COURT] and no further interference is called for at this stage. On perusal of TP order it is observed that Ld.TPO made an effort to analyse whether AMP expenditure is an international transaction or not. It is very interesting to note that Ld.TPO observes that assessee has been licensed the brand “Adidas” by its domestic AE (Adidas India Pvt. Ltd). He also reproduces relevant extract from the agreement, wherein it is recorded that Adidas India Pvt. Limited is the exclusive owner of trademark “Adidas” and enjoys all proprietary rights related thereto. We cannot ignore the submission of the learned DR that the matter is pending before Hon'ble Apex Court and the decision of Hon'ble Apex Court would be binding upon all the authorities. In view of the above, we set aside the orders of authorities below and restore the matter to the file of the Assessing Officer. We hold that as per the facts of the case and the legal position as of now and discussed above in this order, the adjustment made by the TPO/DRP/AO in respect of AMP expenses is not sustainable. However, if the above decisions of Hon'ble Jurisdictional High Court in Soney Ericson Mobile Communications (supra) and Maruti Suzuki Inida Ltd. [2015 (12) TMI 634 - DELHI HIGH COURT] which are under consideration before the Hon’ble Apex Court is modified or reversed by the Hon’ble Apex Court, then the Assessing Officer would pass the order afresh considering the decision of Hon’ble Apex Court. Ground allowed for statistical purposes. TP adjustment with relation to export of goods - HELD THAT:- As observed that assessee had imported finished goods amounting to ₹ 13,76,26,854/- out of which, goods worth ₹ 45,64,209/- has been exported back due to its slow moving nature. The percentage of goods exported is approximately 3.3%. In our opinion as the percentage of goods that was returned back as slow moving is within the permissible limits of less than 10%. Even otherwise the gross margin earned by assessee from imported goods is in excess of 40% vis-à-vis the margin earned by assessee from imported goods is in excess of 40% vis-à-vis the margin earned by AE from sale with third party in case of slow moving goods exported by assessee.We are therefore of considered opinion that no adjustment is called for in this regard. Deduction of bad debts written off being disallowed - HELD THAT:- There are plethora of decisions by various Courts and Hon’ble Supreme Court wherein it has been held that a legitimate claim of assessee should be allowed even if it is raised during assessment proceedings. There is no dispute with the Department that said amount has been written off in accounts of assessee. However merely because it was not claimed in return of income, will not vitiate right of assessee to claim it during pendency of assessment proceedings. Ld.TPO is directed to allow the claim of assessee as per law. Disallowance of interest expenditure u/s 36(1) - HELD THAT:- Assessee has submitted that during year under consideration a sum of ₹ 2,08,31,000/- was shown recoverable as opening balance as on 01/04/2006 from AE. As observed that Ld.AO blindly made addition without appreciating the fact that interest was not charged due to commercial expediency. Respectfully applying ratio laid down by Hon’ble Supreme Court in case of S.A.Builders vs. CIT [2006 (12) TMI 82 - SUPREME COURT] we do not find any infirmity in the view taken by Ld.CIT(A) and the same is upheld.
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