9911796707
TMI Blog2012 (6) TMI 449X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO) on October 12, 2010 whereas he received reference from the AO to determine the Arm's Length Price of the Advertisement, Marketing and Promotion Expenditure (AMP) only on 8.10.2010. Since the order passed by the learned TPO was based on the show-cause notice issued without jurisdiction, the said order is bad in law and consequently entire adjustment needs to be deleted. The learned AR of the assessee further submitted that the question of jurisdiction is a pure question of law and goes to the very root of the matter. He placed reliance on the decision of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383. 4. We have heard both the parties and gone through the material available on record. Since the issue relating to jurisdiction is a pure question of law and goes to the very root of the matter, the additional ground raised by the assessee was admitted. 5. The assessee also filed additional evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963 in respect of Trade Protection Policy. It has been submitted that during the course of assessment proceedings the AO asked the assessee to submit a note and basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the price protection money paid to other distributors was not supported by necessary evidence. The assessee has now received the evidence in respect of other distributors. We, therefore, are satisfied that this additional evidence is necessary to decide the issue before us. Accordingly, we admit the additional evidence which is necessary for disposal of ground of appeal taken by the assessee in respect of addition in relation to trade protection policy. 7. At the time of hearing the assessee has given written synopsis in respect of Corporate Tax as well as Transfer Pricing issue. First we will decide the corporate tax issue involved in the appeal. 8. The first issue for consideration relates to disallowance of expenditure incurred on issue of mobile handsets on free of cost basis (FOC). The facts of the case relating to this ground are that the assessee claimed marketing expenses of Rs. 337,13,58,000/- in the profit & loss account. The AO while examining the case found that marketing expenditure included cost of mobile handsets issued free of cost to after marketing service centres, dealers and employees. The AO further noted that the cell phone and accessories given to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended by the learned AR for the assessee that for Assessment Year 2006-07 ITAT has set aside the issue to the file of the AO for deciding the issue afresh. We have gone through the order of ITAT Delhi Bench 'E' dated 22.09.2011 for A.Y. 2000-01 & 2001-02 (ITA No.2781 & 5151/Del/2004 and 24.11.2011 in ITA No.551/Del/2011 in the assessee's own case for Assessment Year 2006-07. ITAT in Para 9 of its order for Assessment Year 2006-07 has set aside the issue to the file of the AO with the directions to consider the issue afresh after affording a reasonable opportunity of being heard. The Tribunal has set aside the issue for A.Y. 2000-01 & 2001-02 also. Since on identical issue the ITAT has set aside the matter to the file of the AO vide order dated 24.11.2011 in ITA No.551/Del/2011 for Assessment Year 2006-07, we also set aside the issue for Assessment Year 2007-08 to the file of the AO with the directions to decide the issue afresh after affording the assessee a reasonable opportunity of being heard. 11. Next issue for consideration relates to depreciation on computer peripherals amounting to Rs. 1,38,62,903/-. The AO allowed depreciation @ 15% as against 60%. The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33(6) for selection of comparables without disclosing this information to the assessee during the course of DRP proceedings. The use of this information privately by the DRP came to the knowledge of the assessee for the first time when it received the DRP order under which some of the receipts of the comparable companies were annexed. Use of the said information obtained by the DRP without providing opportunity to the assessee of dealing with and rebutting the same is in gross violation of justice. In the light of these facts it has been submitted that the order passed by the AO in accordance with the directions of the DRP should be set aside for fresh adjudication after providing assessee a reasonable opportunity of rebutting the information obtained by the DRP. It was also submitted that the assessee has right to cross examine the information obtained by the DRP from various parties. The learned AR of the assessee placed reliance on the following decisions:- (i) Kisinchand Chellaram v. CIT, [1980] 125 ITR 713/4 Taxman 29 (SC); & (ii) State of Kerala v. KT Shaduli Yusuf AIR [1977] SC 1627. On the other hand Ld. CIT(DR) supported the order of DRP/AO vehemently. 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has been provided the working capital adjustments in the preceding assessment years. Under the circumstances, in our considered opinion, it was incumbent upon the TPO to consider the same in the current year. 6.1 In this regard we place reliance upon the decision of the Hon'ble Jurisdictional High Court in the case CIT v. Dalmia Promoters Developers (P) Ltd. 281 ITR 346 wherein it was held that for rejecting the view taken in earlier assessment years, there must be material change in the fact, situation or in law. In this case, clearly there is neither any change in the fact, situation or in law. Hence, on the anvil of the Hon'ble Jurisdictional High Court decision (Supra), the TPO should grant the assessee appropriate working capital adjustment. Accordingly, the matter is remitted to the file of the Assessing Officer. The Assessing Officer should remit the matter to the TPO to consider the same in light of the directions as above." 21. The facts of the case are identical to the facts of Assessment Year 2006-07. Since DRP has not given the benefit of working capital adjustment while computing the arm's length price in respect of international transaction, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsement of all AMP and other expenses incurred by the assessee with a mark-up added thereto. Therefore, there was no question at all of Nokia India benefiting Nokia Corporation, Finland (Nokia Finland) by incurring such expenditure. No question therefore, arises of any taxable income being transferred away from India to a foreign jurisdiction which is the basic condition for invoking the transfer pricing provisions and making transfer pricing addition as laid down by CBDT Circular 14, 2001. It was further submitted that DRP has failed to consider the cost credit of Rs. 144 crores received by the assessee during the current assessment year to achieve the targeted operating profit margin as profit margin as per the global TP policy. This cost credit covers the AMP expenses incurred by the assessee and also enable it to earn the targeted profit margin. Therefore, no transfer pricing adjustment was at all warranted. He further submitted that TPO has applied Brightline method for determination of arm's length price. Brightline method is not a prescribed method u/s 92C of Indian Transfer Pricing Regulations. Further more, the Brightline principle was laid down under the US transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom Rs. 271 crores to Rs. 1033 crores. Therefore, under no circumstances, the AMP expenditure incurred by the assessee can be attributed to Nokia Finland. The learned AR of the assessee further submitted that the assessee had incurred expenditure on AMP u/s 37(1) of the Act. The expenditure incurred by the assessee on advertisement, marketing and promotional expenses has been incurred wholly and exclusively for the purpose of business which is allowable in view of various decision. The learned AR of the assessee referring to OECD Guidelines submitted that no compensation is required for any incidental benefits derived by group companies. Accordingly, even if certain incidental benefits is derived by the overseas group companies on account of AMP expenses incurred by Nokia India, the same does not require reimbursement to Nokia India. He therefore, submitted that no transfer pricing adjustment was required to be made. 25. On the other hand, the learned CIT-DR submitted that Finance Bill 2012 has proposed amendment in sec. 92B of the Act with effect from 1.04.2002 according to which AMP expenses will fall under international transactions. Finance Bill has inserted Explanation afte ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
