TMI Blog2011 (12) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... to refer some of those international transactions for the purposes of computing the arm's length price while in respect of others, he may compute the arm's length price himself - The provisions of section 92-CA(2A) are prospective in nature and will not apply for the assessment year under consideration i.e. assessment year 2002-03 - Decided in favor of the assessee - IT Appeal No. 3017 (Delhi) of 2009, - - - Dated:- 16-12-2011 - I.P. Bansal, K.D. Ranjan, JJ. G.C. Srivastava for the Appellant Salil Mishra for the Respondent ORDER 1. This appeal by the assessee for assessment year 2002-03 arises out of order of the ld. CIT (Appeals)-XX, New Delhi. 2. The grounds of appeal raised by the assessee are reproduced as under:- "1. That on facts and in law the ld. Commissioner of Income Tax (Appeals) [CIT(A)] erred in upholding the adjustment of Rs.1,55,52,470.00 in determining the alleged arms length price for alleged services support on account of advertising expenses incurred by the appellant on its own behalf; 2. Without prejudice to the above on facts, the adjustment upheld is incorrect in law in as much as:- (a) The statements that the franchis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee on its own behalf. The facts of the case stated in brief are that McDonalds India Pvt. Ltd. [MIPL] was established as a wholly owned subsidiary of McDonalds Corporation, US [MDC] in 1993 for the purpose of setting up McDonalds restaurants in India. These restaurants are being operated by the assessee through joint ventures between the assessee and Indian partners and by Indian licensees. McDonalds Corporation is a global food service retailer with more than 30,000 restaurants in 21 countries. The assessee entered into a Master License Agreement [MLA] with McDonalds [MDC] under which it acquired a non-exclusive right, license and privilege to adopt and use the McDonald system in restaurants in India. Under the agreement, in consideration of such license the assessee was required to pay to McDonalds [MDC] a royalty equal to 5 per cent of the gross sales, and an initial franchise fee at the rate of US $ 45,000 for each new restaurant opened during the year. Under the terms of Master License Agreement, McDonalds [MDC] was obliged to provide certain know-how and business processes and to render certain services in order to introduce McDonalds systems in India. 4. During the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Delhi High Court in their judgement delivered on 28th November, 2011 in I.T.A. No. 938 of 2011 in the case of CIT v. Amadeus India (P.) Ltd. [2011] 16 taxmann.com 43 (Delhi) Therefore, it has been submitted that addition made by the assessing officer and upheld by the ld. CIT (A) in respect of determination of arms length price in relation to advertising expenses is bad in law. On the other hand, the ld. Sr. DR supported the order of the ld. CIT (Appeals). 7. We have heard both the parties and gone through the material available on record. Under section 92-CA(1) where any person being the assessee has entered into an international transaction in any previous year, and the assessing officer considers it necessary or expedient to do so, he may, with the previous approval of the Commissioner refer the computation of arm's length price in relation to the said international transaction under section 92-C to the Transfer Pricing Officer. Under Section 92CA(2) where a reference is made under sub section (1) of section 92CA, the Transfer Pricing Officer shall serve a notice on the assessee requiring him to produce or cause to be produced on a date to be specified therein, any evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w for the consideration of Their Lordships was as under:- "Whether, on the facts and circumstance of the case, the Income Tax Appellate Tribunal erred in deciding that the Transfer Pricing Officer [TPO] could not take cognizance suo moto of any international transaction for adjustment in the Arm's Length Price [ALP] under Section 92-CA of the Income Tax Act, 1961?" 9. Hon'ble Delhi High Court after discussing the issue in detail has upheld the view taken by the ITAT. It has also been held that provisions of sub section (2A) of section 92CA can have prospective effect from 1/6/2011. Hon'ble Delhi High Court while deciding the issue in favour of the assessee has held as under:- "24. We do not agree with the submission made by the learned counsel for the revenue that when a reference is made by an Assessing Officer to the Transfer Pricing Officer, the reference includes the entire gamut of transactions between the assessee and its associated enterprise. The assessing officer is the person who has been entrusted with the duty to determine as to whether a transaction is an international transaction or not. Then, if it is an international transaction of the nature specified i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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