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Bausch & Lomb India Pvt. Ltd. Versus ACIT, Circle-4 (1) , New Delhi

2017 (12) TMI 348 - ITAT DELHI

Transfer pricing adjustment in AMP expenses - Held that:- It is noticed that similar issue cropped up in the assessee’s appeals for preceding years. The Hon'ble jurisdictional High Court in the assessee’s own case for the assessment years 2006-07 to 2010-11 has held that there is no international transaction of AMP expenses and the resultant additions were deleted. - DRP contention that the facts and circumstances of the instant year are different inasmuch as the assessee did only ‘distribu .....

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act lenses and ophthalmic intra ocular lenses and surgical equipments.’ It is, therefore, palpable that the nature of activity carried out by the assessee during the instant year is similar to that done in the earlier years, being that of manufacturing and trading as well. In the absence of any difference in the factual position prevailing in the year under appeal vis-à-vis the earlier years and respectfully following the precedents, we order for the deletion of the addition. - Addition on a .....

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the assessee by deleting the additions. Following the view of the Hon'ble High Court, the Tribunal, for the assessment year 2011-12 has directed the deletion of similar addition. As the facts and circumstances of the issue for the year under consideration are mutatis mutandis similar to those of preceding years, respectfully following the precedents, we order for the deletion of addition. - ITA No.1399/Del/2017 - Dated:- 25-8-2017 - SHRI R.S. SYAL, VICE PRESIDENT AND MS SUCHITRA KAMBLE, JUDICIA .....

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he addition of ₹ 33,11,21,660/- made by the Assessing Officer on account of transfer pricing adjustment in AMP expenses. 3. Briefly stated, the facts of the case as recorded in the assessment order are that the assessee is engaged in the manufacturing and trading of soft contact lenses, eyecare solution and protein removing enzyme tablets. The assessee is also involved in the trading of surgical equipments, such as, Excimer Laser System and Cataract Machines and Intra Ocular lenses. The as .....

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penses incurred by the assessee as contributing to the brand promotion of the AE plus gross profit margin rate earned by the assessee. The assessee remained unsuccessful before the DRP. That is how, the Assessing Officer made an addition of ₹ 33.11 crore on account of AMP expenses on substantive basis against which the assessee has come up in appeal before us. 4. We have heard the rival submissions and perused the relevant material on record. It is noticed that similar issue cropped up in .....

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xpenses by following the judgment of the Hon'ble High Court. 5. The ld. DR contended that the facts and circumstances of the instant year are different inasmuch as the assessee did only distribution activity in the year under consideration as against the manufacturing and distribution activities done for earlier years. This contention does not appear to be correct. It is apparent from the first page of the TPO s order wherein he has recorded that: the assessee is engaged in manufacturing and .....

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ll. In the absence of any difference in the factual position prevailing in the year under appeal vis-à-vis the earlier years and respectfully following the precedents, we order for the deletion of the addition. 6. The only other issue is against the addition of ₹ 15,15,98,787/- made by the Assessing Officer on account of transfer pricing adjustment in intra group services. 7. Briefly stated the factual matrix of this issue is that the TPO did not propose any transfer pricing adjustm .....

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ied out such benchmarking analysis and determined Nil ALP of such a transaction. The DRP, after due notice to the assessee and having entertained its objections, directed to make transfer pricing adjustment of ₹ 15,15,98,787/-. That is how, the AO made such an addition in the impugned order, against which the assessee is in appeal before us. 8. The ld. AR contended at the outset that the DRP overstepped its jurisdiction in directing the AO to make such an addition. It was stated that the D .....

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PO or the AO in the draft order did not propose any transfer pricing adjustment or addition on account of intra group services. It was done at the instance of the DRP. Now the question is whether the DRP is empowered to adopt this course of action. At this stage, it is relevant to take note of the mandate of sub-sections (7) and (8) of section 144C as under : - (7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),- (a) make such further enquiry, as i .....

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on Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee . 10. It is clear from the mandate of sub-section (8) that the DRP is empowered, inter alia, to enhance the variations proposed in the draft order. The Explanation to this sub-section inserted retrospectively from 1.4.2000 clari .....

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ce the variations include not only increasing the amount of transfer pricing adjustment already proposed, but also making a new transfer pricing adjustment, which was omitted to be proposed/made by the AO/TPO. There is no doubt and cannot be that the power of the DRP is co-terminus with that of the AO/TPO. In other words, the DRP can also do all such things, which the authorities could have done but omitted to do. If the language of the provision is read as disabling the DRP to exercise the powe .....

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. In the instant case, the DRP has impliedly taken recourse to clause (b) of sub-section (7) by causing the further enquiry to be made by the TPO before issuing direction u/s 144C(5). In view of the foregoing discussion, it is clear that no exception can be taken to the course adopted by the DRP in making the enhancement. 12. Now, we espouse the other contention of the ld. AR that if there was some mistake in the order of the TPO or the draft order, then the remedy was with the CIT to revise the .....

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on is an order of the AO and that too, if it is prejudicial to the interest of the revenue. An order can be prejudicial to the interest of the revenue only when it crystallizes the liability of the assessee to pay and notice of demand is issued, which in the opinion of the authority is prejudicial to the interest of the revenue. If no final liability, pursuant to which a demand notice can be issued, is capable of determination at that stage, such a draft order ceases to be characterized as an or .....

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