TMI Blog2015 (6) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... see applied for extension and also claimed that the export remittances were realized within 12 months. We, therefore, considering the totality of the fact deem it appropriate to remand this issue back to the file of the AO to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee. - ITA No. 469/Del/2013 - - - Dated:- 10-6-2015 - Sh. N. K. Saini and Sh. I. C. Sudhir,JJ. For the Petitioner: Sh. Tarandeep Singh, Adv. For the Respondent: Sh. Rahul Garg, Sr. DR ORDER Per N. K. Saini, AM: This is an appeal by the assessee against the order dated 27.11.2012 of the AO. 2. Following grounds have been raised in this appeal: 1. That on facts and in law the orders passed by the Assessing Officer (hereinafter referred as the AO )/Dispute Resolution Panel (hereinafter referred to as the DRP)/ Transfer Pricing Officer (hereinafter referred as the TPO: ) are bad in law and void abinitio. 2. that on facts and in law, the assumption of jurisdiction by the AO/TPO to determine Arm s Length Price is bad in law and void ab-initio. 2.1 That on facts and in law the show cause notice dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ₹ 18,48,62,009/- as against ₹ 18,82,54,651/- claimed by the assessee. 8.1 That on facts and in law while computing deduction u/s 10A of the Act the AO/DRP erred in reducing/upholding reduction of Export Turnover by ₹ 1,26,20,436/- being the amount unrealized till 30th September, 2008. 9. That on facts and in law the AO/DRP erred in charging/upholding the interest u/s 234B 234C of the Act. That the appellant prays for leave to add, alter, amend and/or vary the grounds of appeal at or before the time of hearing. 3. Ground Nos. 1 to 7 are co-related and relates to the addition of ₹ 5,06,86,319/- made by the AO under Chapter X of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 4. Facts related to this issue in brief are that the assessee was engaged in the business of providing data processing and relating services to its associated enterprises (AE s). It enables software access to the subscribers of the Amadeus products and computer database within Indian subcontinent, for that purpose it provides connectivity to host systems by creation/modification of computer programs online. The assessee claimed deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred for the benefit of the Associate Enterprise called for a reimbursement of the same; (d) Holding the percentage of advertisement, marketing and promotional ( AMP ) expenses/sales incurred by the Assessee company at 36.50% which is actually 2.61%; (e) Holding/observing that the economic ownership of the marketing intangible is with the Assessee and its legal ownership is with the Associate Enterprise; (f) Holding/observing that the legal ownership of the marketing intangible would get transferred to the Associate Enterprise without any consideration on termination of the contact; (g) Presuming that the Associate Enterprise has received benefits from the enhanced brand value and increase in sale of products; (h) Holding that AMP expenditure of ₹ 55,13,71,181/- is an international transaction u/s 92B(1); (i) Holding/observing that the nature and purpose of providing incentive to the subscribers is to generate more revenue for the Associate Enterprise. 4. That on facts and in law the AP/TPO has erred in proposing that the Assessee was required to be reimbursed with the mark-up of PLR + 2.5% (i.e. 15%) on the non-routine AMP expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,687,606 5,027,002 2,088,999 Incentive 511,935,575 547,544,112 398,231,608 Promotional Expenses 15,509,155 19,956,432 6,496,601 Exhibition and Conference 3,988,146 4,925,396 6,160,675 Public Relation Service 3,261,928 3,046,084 2,861,100 Total AMP expenses as per TPO 551,371,181 586,630,490 426,114,219 % of AMP with Revenue 36.50% 44.11% 40.87% AMP Expenses as per ITAT order for AY 07-08 (i.e. excluding incentives) 3,94,35,606 AMP/Sales as per ITAT order AY 07-08 2.61% Comparable AMP/Sales as per TPO order page 114 33.58% 8. It was submitted that if the incentive amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se proceedings including incentives paid to distributors and dealers for services rendered are treated as AMP expenses and, therefore, held to be excluded from the determination of transfer pricing. In the light of this decision, this Court is of the opinion that the main question as to the correctness of the ITAT s decision with respect to ₹ 54.75 crores is concerned, we notice that the matter was remitted for fresh consideration to the AO who was bound by the decision in Sony (supra). The revenue s appeals ITA 535/2014 and ITA 729/2014, therefore, do not involve any substantial question of law. 11. We, therefore, in view of the above findings given by the Hon ble Jurisdictional High Court direct the AO to deduct the incentive expenses amounting to ₹ 51.19 crores from the total AMP expenses. As regards to the remaining expenses of ₹ 3.94 crores, the AO is directed to determine the AMP afresh in accordance with the terms and guidelines issued by the Hon ble Jurisdictional High Court in the case of M/s Sony Ericsson Mobile Communications India Pvt. Ltd. Vs CIT (supra). 12. The next issue vide Ground No. 8 8.1 relates to the claim for deduction u/s 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.07.2012 (ITAT) (Del) CIT Vs Pentasoft Technology Ltd. (HC)(Bom) The DRP directed the AO to consider the exchange fluctuation as eligible for deduction u/s 10A of the Act and accordingly sustained the objection of the assessee. 15. As regards to the claim of the assessee on sale proceeds in foreign exchange amounting to ₹ 1,26,20,436/- which remained unrealized even after the end of six months. The assessee submitted before the DRP that the requisite applications was filed on 16.10.2008 seeking extension of time of six months for realization of the export proceeds and since the export proceeds were realized within the time for which extension was sought the conditions specified u/s 10A(3) of the Act had been duly satisfied. With reference to the filing of the applications belated on 16.10.2008 for seeking extension of time, it was stated that there was no irregularity if the application was filed after the 30th day of September of the relevant year. It was also stated that there was no irregularity if the application for seeking extension of time was moved by the assessee through its bankers who are the authorized dealers as per the RBI Regulations. The reliance was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um of ₹ 1,26,20,436/- from the Export turnover in later part of this order. The AO followed the directions of the DRP while passing the assessment order dated 27.11.2012. 17. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee specifically explained to the AO vide letter dated 09.11.2011 that requisite foreign exchange had been duly realized against Invoice No. SW/07-08/001 dated 31.12.2007 for US Dollars 2,25,941 (Rs.87,48,436/-) and against Invoice No. SW/07-08/002 dated 31.12.2007 for US Dollars 1,00,000 (Rs.38,74,000/-) vide FIRCs No. 191644 dated 30.12.2008 and No. 195924 dated 23.03.2009 respectively. It was further stated that the provisions of section 10A(3) of the Act provides that the export proceeds can also be realized within such further period as competent authority may allow in this behalf. It was submitted that the assessee applied for extension of time vide letter dated 23.09.2008 to Standard Chartered Bank Ltd., Connaught Place, New Delhi and American Express Bank Ltd., Connaught Place, New Delhi for the outstanding amount of US Dollars 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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