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TMI Blog2014 (12) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is stated to be a wholly owned subsidiary company of Haier Electrical Appliances Corp. Ltd., China engaged in the business of distribution of consumer durables such as air conditioners, refrigerator, washing machines, television sets etc. In the year under consideration the assessee is found to have filed a loss return which was referred by the AO to the Transfer Pricing Officer (hereinafter referred to as to the "TPO"). The TPO vide his order dt.24.10.2008 u/s 92CA(3) proposed adjustment of Rs. 26,26,83,454/- in the arm's length price (hereinafter referred to as "ALP") of the assessee. 3. It is seen that the tax payer in appeal is found to have contended that it had exclusive right for use of the trade mark "HAIER" in India and the tax payer further is also the exclusive distributor in India of consumer durables products manufactured by Haier Group of companies under the brand name of Haier. Referring to the Trade Mark License Agreement dated 27.01.2004 with Haier Electrical Appliances Corp. Ltd, China with its AE (hereinafter referred to as "Associate Enterprises"). The tax payer is found to have claimed that the aforesaid Agreement provided that no payment for royalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of a detailed finding. The appeals for 2006-07 and 2007- 08 assessment years came to be decided earlier as they were stay granted appeals. 6. Considering the above situation, Ld. CIT DR addressing the issues agitated by the assessee in Ground Nos.-1 to 1.13 which are on the AMP issue on its various facets and Ground 1 to 6 raised in the Revenue's appeal which was against the relief granted by the CIT(A) had no objection if the issue is restored to the TPO in its entirety with the direction to take into consideration the mandate of the Special Bench in the case of LG Electronics case. 7. In the light of the submissions advanced by the parties before the Bench we set aside the orders and restore the issue to the TPO directing him to decide the issues afresh in terms of the mandate of the Special Bench in L.G. Electronics case. The TPO shall also take into consideration the orders of the Tribunal relied upon by the assessee in its own case for 2004-05; 2006-07 and 2007-08 assessment year. Needless to say that the TPO following the judicial precedent shall exclude from the AMP bundle of expenses the expenditure incurred in connection with sales following the order of the Co-ordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is addressed in Ground No.-3 which reads as under:- 3. "That the Commissioner of Income-tax (Appeals) erred on facts and in law in sustaining the disallowance of deduction amounting to Rs. 68,59,797 being 10% of the advertisement expenditure of Rs. 6,85,97,975 not reimbursed by the AE, holding it to be capital expenditure on the ground that the same was incurred for launching and building the appellant's brand in India." 13. The issue is stated to be a recurring issue for the assessee. The relevant facts are found discussed in para 25 to 25.10 of CIT(A)'s order. A perusal of the same shows that the AO considering the claim of advertising and publicity expenses incurred amounting to Rs. 25.87 crores odd treated it as a deferred Revenue expenditure and allowed 1/5 of the same thereby resulting in the addition of Rs. 20.69 crores odd. The CIT(A) considering the fact that the assessee had received subsidy of Rs. 19.01 crores odd excluded the same and held 10% of the remaining was to be disallowed as capital expenditure as he was of the view that the expenditure does give use to an enduring benefit. 14. In the said background the Ld. AR referring to the order of the Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of L.G. Electronics rendered on 23.01.2013 submitted that the very fact that a Special bench had to be constituted to decide whether it is an international transaction or not would show that the issue was debatable. The Special Bench it was submitted considering the arguments of various interveners who argued that AMP was not a separate transaction let alone an international transaction though has held by a majority view that it was an "international transaction". However it was submitted that it is only after the said date that it can be said that the issue may no longer be debatable as far as the present forum is concerned. It was argued that the existence of a "minority view" shows that the issue continues to remain a debatable issue as far as the penalty proceedings are concerned. Referring to the record it was submitted that the decision of L.G .Electronics was the very first case in which the said transaction was held to be an international transaction and the concept of bright line introduced was upheld. The disclosure in these circumstances by the assessee based on the past position it was submitted was made on a bonafide belief that the said issue is not an internationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a concept was introduced for the first time as far as the assessee is concerned in the year under consideration and even otherwise as would be demonstrated from the arguments advanced before the Special Bench. In these peculiar facts and circumstances we are inclined to agree with the arguments advanced by the Ld. AR that there was a reasonable cause on account of which the specific transaction was not disclosed as an international transaction in its Form 3CEB. In view of the bonafide belief of the assessee that the documentation placed on record is correct and as per the requirement of the law at the relevant point of time, we hold that in these peculiar facts and circumstances penalty u/s 271AA was not attracted. The Ld. AR had placed reliance upon the order dated 09.11.2011 in ITA No.-5779/Mum./2007 in the case of ACIT, Range-8(3), Mumbai vs M/s Smith & Newphew Healthcare P. Ltd. in support of its ground. However we do not deem it necessary to refer thereto as the finding arrived at therein is fact specific. 22. In the result ITA No.-507/Del/2011 of the assessee is allowed. 23. In the result, ITA No.3549/Del/2010 is allowed for statistical purposes; ITA No.-507/Del/2011 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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