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TMI Blog2015 (12) TMI 1673X X X X Extracts X X X X X X X X Extracts X X X X ..... eclaring the total income under the normal provisions of loss of Rs. 2.59 Crs (rounded of) and the book profits u/s 115JB of the Act was shown at Rs. 21.40 Crs (rounded of). During the assessment proceedings, AO noticed many international transactions with the Associated Enterprises (AEs) abroad. Assessee is the 100% subsidiary of Medtronic International Ltd, Hong Kong, which in turn is subsidiary of Medtronic USA. Assessee purchased finished goods for resale and the nature of the activity is the subject matter of dispute before us. Assessee booked huge AMP expenses in the P & L Account. In the TP study filed by the assessee, applying the TNMM method the PLI (OP/OR) is determined at 13.12%. In the TP study, assessee benchmarked the PLI at 5.37%. Considering the assessee's PLI of 13.12%, assessee held that the international transactions with AE are at Arm's Length Price (ALP). Assessee's TP study also includes ALP analysis of the AMP expenses. During the proceedings before the TPO, the TP analysis of the assessee was considered and they were rejected by the TPO. While accepting the fact that the international transactions entered into with the AE are at Arm's Length, the TPO proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Special Bench decision in the case of LG Electronics India Limited 152 TTJ 273. Further, Ld Counsel for the assessee submitted that the said Special Bench decision in the case of LG Electronics India Pvt Ltd (supra) was overruled by the Hon'ble Delhi High Court in the case of Sony Ericsson Mobile Communications India Private Limited (374 ITR 118), dated 16.3.2015, copy of which is placed at page 313 to 454 of the paper book. Referring to para 121 of the said High Court judgment (supra), Ld Counsel for the assessee read out stating that "There is nothing in the Act or the Rules to hold that it is obligatory that the AMP expenses must and necessarily should be subjected to 'bright line test' and the non-routine AMP expenses as a separate transaction to be computed n the manner as stipulated." Referring to various other paras of the said Delhi High Court judgment (supra), Ld Counsel for the assessee submitted that the BLT has not statutory mandate and a 'broad bash approach' is not mandated or prescribed. He also submitted that the Hon'ble High court is in favour of adopting the 'bundled approach'. Explaining the 'bundled approach', Ld Counsel for the assessee submitted that so long a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure notwithstanding the 'bundled approach'. Further, on the selling expenses, Ld Counsel for the assessee submitted that by no stretch of imagination, selling expenses shall contribute to the brand building of the AE abroad. Therefore, Ld Counsel for the assessee relied on para 176 of the said Delhi High Court judgment in the case of Sony Ericsson (supra) and submitted that the selling expenses of all kinds ie trade discounts, sales commission, volume discounts etc paid to the subdistributors/retailers since unconnected to the brand promotion, should be excluded from the scope of AMP expenditure before benchmarking by the TPO. It is the submission of the Ld Counsel for the assessee that TPO is required to consider the 'bundled approach' in ALP analysis while upholding the requirement of benchmarking the AMP transactions simultaneously. If the 'bundled approach' gives rise to the conclusions that the international transactions are at Arm's Length as per the principles enshrined in the TNM Method, the adjustments are unwarranted. In this regard, Ld Counsel for the assessee relied on the findings of the Hon'ble Delhi High Court enlisted at pages 236 to 238 ITR 374. 7. On the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decisions viz., (i) decision of the ITAT in the case of Toshiba India (P) Ltd vs. DCIT [2015] 59 taxmann.com 169 (Delhi.Trib); (ii) Casio India Co. (P) Ltd vs. DCIT [2015] 58 taxmann.com 375 (Delhi. Trib); (iii) Valvoline Cimmins (P) Ltd vs. DCIT [2015] 58 taxmann.com 285 (Delhi. Trib) and (iv) Reebok India Company vs. DCIT [2015] 58 taxmann.com 326 (Delhi.Trib). Referring to the above said decisions of the Tribunal, Ld Counsel for the assessee submitted that in these cases, the Tribunal ordered for de novo TP study on the AMP issues but there are no details of comparables relating to the benchmarking of the AMP expenses. These decisions were cited by the Ld DR in support of remanding the matter for examining the issue of benchmarking the AMP expenses without any fetters. Whereas, in assessee's case, no such remanding is warranted considering the undisputed fact of benchmarking of the AMP expenses both by the assessee in the TP studies and also by the TPO during the proceedings u/s 92CA(3) of the Act. Therefore, Ld Counsel for the assessee seeks to remand this issue to AO and restrict him to verify the margins, comparable companies in the TP study. TPO should not verify any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fetters to the AO, we find that the assessee has considered the benchmarking of the AMP transactions in his TP studies. The TPO's order is selfexplanatory regarding the rejection of the said comparables and thrusting of his five comparables. On these facts, we find that in the remanding proceedings, AO/TPO shall consider the same comparables when resorting to any search in this regard. The question of benchmarking other international transactions, which were accepted by the TPO and the AO should not arise in the remanding proceedings as they should not be given second chance merely because of the Hon'ble Delhi High Court judgment in the case of Sony Ericsson (supra). However, TPO is free to re-use his data, which is already on record so far as benchmarking of the AMP transactions considering the rejection of the BLT, by the 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 in ITA No. 110/2014 and ITA 710/2015, dated 11th December, 2015 in the remand proceedings in the matters of the requirement of benchmarking the AMP transactions. With these directions, we remand the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agro Mills Ltd. (197 Taxman 25) (Delhi) and the decision of the Tribunal in the case of Swaty Synthetics Ltd vs. ITO (38 SOT 208) (Mumbai ITAT) and the Allied Photographics (supra). 10. On the other hand, Ld DR for the Revenue heavily relied on the order of the AO and the DRP. 11. On hearing both the parties on this issue, we find 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, and also after considering the above cited binding coordinate Bench decision as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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