TMI Blog2015 (12) TMI 1673X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court. Further, TPO is directed to apply all the principles laid down by the Hon’ble Delhi High Court in the case of Maruti Suziki India Limited vs. CIT [2015 (12) TMI 634 - DELHI HIGH COURT] in the remand proceedings in the matters of the requirement of benchmarking the AMP transactions. Disallowance of depreciation on the plant & machinery and building - Held that:- The issue was decided by the CIT (A) in favour of the assessee for the AY 2007-2008 and the Revenue has not filed any appeal against the said decision of the CIT (A) before the Tribunal. It is not clear, whether the Ld DR is aware of the reasons for not the filing of the appeal before the Tribunal for the AY 2007-2008. Considering the same, we are of the opinion, when the plant and machinery relating to the manufacturing activity is one and the same. The Department is accepted to follow that the set ‘principle of consistency’ in matters relating to the claim of depreciation on the plant & machinery, which is the part of the ‘block of assets’ of plant & machinery. Therefore, after verifying the records pertaining to the assessment year prior to the AY 2009- 2010, thus we are of the opinion that is the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, TPO rejected the comparable companies adopted by the assessee in benchmarking the AMP expenditure and applied Bright Line Test (BLT) and observed that the excess AMP expenditure are required to be reimbursed by the AE to the assessee. As per the TP study, the AMP expenditure to the sales ratio is 11.29%. After picking up the comparables and their study, the comparables AMP is pegged at 5.42% against the assessee s ratio of 11.29%. In the TP studies, the TPO considered 80% : 20% of the total travelling and personal cost after excluding non-business employees related expenses. After rejecting the assessee s comparables, TPO selected five new comparable companies. TPO suggested the adjustment in this regard amounting to ₹ 19.45 Crs (rounded of). 3. During the proceedings before the DRP, despite the assessee s submissions, the DRP gave certain directions to the AO to re-compute the AMP expenses as per the approach adopted in AY 2008-2009. In the said AY, only 50% of the total personal and travelling cost was considered instead of 80% by the TPO for computing the AMP expenses. With the said modifications, AO quantified the adjustments on this account of AMP expenses of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied and the transactions with AE are held to be considered at Arm s Length, no adjustment is warranted. The attempt to segregate AMP transactions from the bundled approach principle was not recommended by the Hon ble High Court, so long as all these all these parameters are also fall within the ALP status. In other words, while picking up the comparables in the TP study, if the assessee has considered the comparables where the AMP expenses of the assessee are at Arm s Length qua the comparables, if the bundled approach principle is cleared successfully by the assessee, no adjustments are warranted. In support of the application of the bundled approach , ie benchmarking of the assessee s AMP to sales ratio is at Arm s Length, after considering the AMP ratio of the comparable in TNM Method, assessee placed reliance on the UN Practical Manual on Transfer Pricing which was discussed in para 101 of the said judgment of the Delhi High Court in the case of Sony Ericsson (supra). The relevant lines from the said para 101 read that However, one the Assessing Officer/TPO accepts and adopts TNM Method, but then chooses to treat a particular expenditure like AMP as a separate internati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Ld DR for the Revenue heavily relied on the Special Bench decision in the case 9of L.G. Electronics (supra) and mentioned that AMP expenses are required to be benchmarked separately even if assessee clears the test by bundled approach . Ld DR erroneously mentioned that the assessee has not done any TP adjustment on AMP expenses by bringing comparables, which was subsequently clarified by the Ld Counsel for the assessee, demonstrating the fact of benchmarking of the AMP expenses during the TP studies by the assessee. Further, Ld DR for the Revenue heavily relied on various decisions to demonstrate that the said judgment of the Hon ble Delhi High Court in the case of Sony Ericsson (supra) was not available to the benefit of the officers below. In such circumstances, in all the cases cited by him, the matters were remanded to the file of the TPO/AO for de novo TP studies. During the rebuttal time, Ld Counsel for the assessee mentioned that they have no objection if the case is remanded for the purpose of verification of figures and calculations. He further argued vehemently for keeping the issues open and against the direction of the de novo proceedings before the TPO/AO. In this r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions with the AE, which were already been accepted by the TPO. 8. We have heard both the parties and perused the orders of the Revenue Authorities ie DRP/TPO/AO and perused the voluminous paper books filed before us. The undisputed facts of the case include the benchmarking analysis of the core international transactions were found to be at Arm s Length. TPO did not suggest any addition on account of the import of the finished goods. There is no disturbance is called for to the method of accounting ie TNM Method adopted by the assessee. It is a legally decided issue now by virtue of the judgment of the Hon ble Delhi High Court in the case of Sony Ericsson (supra), the Special Bench decision in the case of L.G. Electronics (supra) stands reversed on many issues such as adopting the bright line method in matters of benchmarking the AMP transactions. The relevant paras of the Hon ble Delhi High Court (supra) were already extracted/cited in the preceding paragraphs of this order. Factually, the said judgment of the Delhi High Court being dated 16.3.2015, was not available during the proceedings before the Assessing Officer dated 29.1.2014. Therefore, we find that it is fair to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue relating to the TP adjustments raised by the assessee and the Revenue in their cross appeals as well as the Cross Objection of the assessee. Thus, all the relevant grounds raised by the assessee as well as the Revenue in their respective appeals are allowed for statistical purposes. Corporate issues 9. Ground no.13 relates to the disallowance of depreciation on the plant machinery and building amounting to ₹ 3,94,404/-. Briefly stated relevant facts of the case are that the assessee is engaged in both manufacturing and trading in life saving devices since 1993 to 2002. The manufacturing activities of the assessee were discontinued since 2002. Therefore, the relevant plant and machinery, which is part of the gross block of plant machinery , was not used since 2002. Considering the non-use of the assets, the Assessing Officer denied the benefit of depreciation on such assets which amounts to splitting of the plant machinery against the principles of law relating to the block of assets . Same is the case with the plant and machinery. In the assessment proceedings, AO relied on the order of the Tribunal in the case of Allied Photographics India Ltd vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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