TMI Blog2017 (3) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... ter allowing a reasonable opportunity of being heard to the assessee. Admission of additional ground : “i. That on the facts and circumstances of the case and in law, the AO/DRP have erred in not granting set-off of brought forward loss and unabsorbed depreciation, as per the provisions of section 72 and section 32 of the Act, before determining total income of the Appellant.” - ITA No.775/Mum/2015 - - - Dated:- 1-1-2017 - SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER For The Assessee : Shri Vishal Kalra, Shri Gaurav Gupta and Shri Ankit Sahin, Advocates For The Department : Shri Peeyush Jain, CIT, DR ORDER PER R.S. SYAL, AM: This appeal filed by the assessee is directed against the final assessment order dated 27.11.2014 passed by the Assessing Officer (AO) u/s 143(3) read with section 144C of the Income-tax Act, 1961 (hereinafter also called the Act ) in relation to the assessment year 2010-11. 2. The first ground is against the addition on account of transfer pricing adjustment towards Advertisement, marketing and promotion expenses amounting to ₹ 4,48,09,156/-. 3. Briefly stated, the facts of the case ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... international transaction under chapter X of the Income-tax Act, 1961 ( Act ) is erroneous as TPO exceeded his jurisdiction particularly when section 92CA of the Act enables the TPO only to compute the arm s length of international transaction. 5. The ld. DR did not object to the admission of the above additional grounds. We, therefore, admit the same and take them up for disposal on merits. 6. Before taking up the issues, it is relevant to mention that the ld. AR argued similar issues as have been raised in the instant appeal before the Delhi tribunal in Nikon India Pvt. Ltd. vs. DCIT (ITA No. 6314/Del/2015 firstly, challenging the jurisdiction of the Transfer Pricing Officer (TPO) in determining the arm s length price (ALP) of the international transaction of Advertising, marketing and promotion expenses (AMP expenses) and secondly, contending that the incurring of AMP expenses is not an international transaction. The tribunal vide its order dated 15.7.2016 since reported as (2016) 47 CCH 0458 DelTrib rejected both the contentions of the assessee. Certain additional arguments have been instantly made, which we will advert to at the appropriate place. 7. Through these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , who, similar to Nikon s case (supra), submitted that the Instruction dated 10th March, 2016 is procedural in nature and, hence, can never have a retrospective effect. To be more specific, he submitted that no Instruction issued by the CBDT laying down a particular procedure to be followed by the authorities can ever be retrospective in nature. It was submitted that since the language of section 92CA(2A) and (2B) is clear and unambiguous which does not admit of any doubt in providing that the jurisdiction of the TPO is not limited to the international transactions either reported by the assessee or referred to by the AO, there is no need to look into the Instruction, at least before the date of its applicability. 10. We find that there are two aspects of this issue requiring our decision, first, the content of the Instruction and second, the prospective or retrospective effect of the Instruction. 11. The ld. AR, similar to Nikon s case (supra), relied on para 3.4 of the Instruction to bolster his argument that the AO could not have referred the matter of ALP of AMP expenses to the TPO without recording his satisfaction and such satisfaction could have recorded only after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case (supra), submitted that his case falls under the second bullet point of the para inasmuch as the assessee did not report AMP expenses as an international transaction. 13. We find that the language of the above para makes it clear that before making a reference by the AO to the TPO, there is a jurisdictional requirement on the part of the AO to record his satisfaction that there is an income or a potential of an income arising on determination of the ALP of an international transaction before seeking approval of the CIT where the assessee, inter alia , has not declared a particular transaction as international transaction in its report filed u/s 92E. Before recording such a satisfaction, it is incumbent on the part of the AO to provide an opportunity of hearing to the assessee and, thereafter, pass a speaking order, if the assessee objects to the AO s version. It is only when the taxpayer fails to declare an international transaction, which comes to the notice of the AO, who makes reference to the TPO for determining its ALP, that the satisfaction has to be recorded by him after giving an opportunity of hearing to the assessee. We do not find the assessee s case falling un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... going through this mandate of the Instruction, it becomes overt that though the original jurisdiction of the TPO is confined to the international transactions referred to him by the AO for determination of the ALP, but, such jurisdiction is extendable to other international transactions which come to his notice during the course of proceedings before him. It is nowhere laid down that the power of the TPO to determine the ALP of an international transaction is restricted to those referred by the AO alone. This part of the Instruction is in line with the statutory mandate contained in sub-section (2A) and (2B) of section 92CA. 16. The Hon ble jurisdictional High Court in Sony Ericson Mobile Communications India Pvt. Ltd. vs. CIT (2015) 374 ITR 118 (Del) has decided this very issue in favour of the Revenue by holding in para 47 that: `The majority decision of the Tribunal in L.G. Electronics India Pvt Ltd. (supra) has rightly drawn a distinction between sub-section (2B) and subsection (2A) to Section 92CA of the Act. Sub-section (2A) was inserted in 2011, i.e. nearly one year before insertion of Section (2B) by the Finance Act, 2012. Sub- section (2A) has not been given retros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision so as to toy with the possibility of applying the same retrospectively. We are reminded of the decision of the Hon ble jurisdictional High Court in DIT vs. Ericsson A.B. (2012) 246 CTR 422 (Del), in which the assessee, inter alia, relied on Instruction no. 1829 dt. 21.9.1989 to claim that no taxable event took place in India. The Revenue argued before the Hon ble High Court that such Instruction stood withdrawn `with immediate effect by a later Circular No. 7 of 2009 dt. 22nd Oct., 2009, and hence the later Circular be treated as retrospective. The argument of the ld. AR in case before us is similar to that advanced by the Revenue in that case before the Hon ble High Court that the later Instruction implemented `with immediate effect be given retrospective effect. Rejecting the contention of retrospective effect advanced on behalf of the Revenue, the Hon ble High Court held that : `Although Instruction No. 1829 stands withdrawn by virtue of Circular No. 7 of 2009 dt. 22nd Oct., 2009, such withdrawal can have no retrospective effect and the principle laid down in Instruction No. 1829 must continue to govern the assessment for the relevant year . When the language of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6) 74 taxmann.com 89 (P H) , the assesee challenged the validity of reference on the ground that the non-passing of the reasoned order in terms of Instruction no. 3/2016 dated 10.3.2016 as to whether a transaction is an international transaction or not and nonservice of the order upon the assessee would make the reference null and void. Rejecting this contention, the Hon ble High Court held : `As we noted earlier, the purpose of this entire exercise is inter alia to afford the assessee an opportunity of establishing at the threshold that the transaction is not an international transaction. If his objections are overruled it is open for him to challenge the same before the Commissioner of Income Tax (Appeals) or the Disputes Resolution Panel, as the case may be. An assessee is not entitled as a matter of right to invoke the writ jurisdiction at the stage of reference by the Assessing Officer to the TPO. His grievances can be raised in a challenge to the draft assessment order before the Disputes Resolution Panel or the final assessment order before to the Commissioner of Income Tax (Appeals). The requirements of the rules of natural justice and of the said circular dated 10.03.2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmunications (India) Pvt. Ltd. vs. CIT (2015) 374 ITR 118 (Del) in which AMP expenses have been held to be an international transaction and the matter of determination of its ALP has been restored. He also relied on a later judgment of the Hon ble jurisdictional High Court in Yum Restaurants (India) P. Ltd. vs. ITO (2016) 380 ITR 637 (Del) and still another judgment dated 28.1.2016 of the Hon ble Delhi High Court in Sony Ericson Mobile Communications (India) Pvt. Ltd. (for the AY 2010-11) in which the question as to whether AMP expenses is an international transaction has been restored for a fresh determination. It was argued, similar to Nikon s case (supra), that the judgment in the case of Yum Restaurants and Sony Ericson (for AY 2010-11) delivered in January, 2016 is later in point of time to the earlier judgments in the case of Maruti Suzuki and Whirlpool, etc. , and, hence, the matter should be restored for a fresh determination. Similar to Nikon s case (supra) , it was submitted that there is no blanket rule of the AMP expenses as a non-international transaction. He further stated that the Hon ble High Court in Whirlpool (supra) has made certain observations, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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