TMI Blog2018 (3) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... ities. We find that the issue under dispute before us is squarely addressed by this tribunal in assessee’s own case for the Asst Year 2011-12 thus the upward adjustment made by the ld TPO and upheld by the ld DRP in the sum of ₹ 1,03,59,000/- is hereby directed to be deleted. Lease rental paid for motor car taken on finance lease - Held that:- We find that the issue under dispute is covered by the decision of the Hon’ble Supreme Court in the case of ICDS Ltd. (2013 (1) TMI 344 - SUPREME COURT) in favour of the assessee Depreciation on moulds - Held that:- AR stated that the moulds were owned by the assessee and used for the purpose of its business. Further, the moulds were exclusively used in the plastic factory by the job workers/co-makers to whom moulds were given by the assessee to be used in the plastic factory, under its control and supervision and prayed that depreciation @ 30% would be eligible on the said moulds. We find that this issue has been considered by this tribunal in assessee’s own case for the Asst Year 2011-12 as held AR has just verbally submitted that in most of the products which appears to be true. But as such no documentary evidence was filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance and Personal Care : This division makes a wide range of electrical products for personal care and household convenience. (iii) Philips Lighting: This division is the global leader in lamps, luminaries, lighting electronics, automotive lighting, special lighting, UHP LCD backlighting and lumileds. (iv) Philips Medical Systems : This division is one of the world leaders in diagnostic imaging systems and related services. (v) Philips Semiconductors : This division supplies silicon system solutions for mobile communications, consumer electronics, digital displays, contactless payments and connectivity and in-car entertainment and networking. (vi) Other Activities : relates to Corporate Technology, Corporate Investments etc. The assessee had made international transaction with its associated enterprises (AEs) during the year and the same was referred to the Transfer Pricing Officer (TPO) u/s 92CA of the Act for determination of ALP. The assessee submitted sector wise transfer pricing study report along with functional analysis and information required u/s 92D(1) of the Act before the ld TPO. The assessee has undertaken international transactions during the year u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fined) no market price can reasonably be established with reference to comparable situations in the market place ; WHEREAS, it is further recognized that in view of the continuous flow of information such a system of separate payments would in any event be very difficult, if not impossible, to administer and would involve very costly and burdensome accounting procedures ; and WHEREAS, it is finally recognized that such a system of separate payments does no justice to the continuous efforts of Philips to generate and obtain new resources for the benefit of the Company and other member companies of the Philips concern and, accordingly, the parties have agreed on a remuneration system which is based on the relation existing from year between the activities of the Company and the activities of Philips and its Associated Companies. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS ARTICLE 1 - DEFINITIONS . . Concern Services : Any and all activities performed by Philips in respect of the matters specified in Article 2 hereto. ARTICLE 2 - Services in commercial, accounting, auditing, financial, fiscal, social an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over; and (b) a surcharge of 10% on the amounts as calculated according to a) above. The amount calculated at (a) above would exclude any costs in respect of Concern Services rendered inside the Country. 3.3 The assessee stated that the reason of entering into the MSSA has been described in the preamble to the Agreement. It mentions that KPENV (acting at the same time for its Associate Companies, and referred to as Philips jointly and severally in the MSSA) has substantial resources in commercial, financial, accounting and other matters which would be beneficial to successfully conducting a business. These resources would be employed for the benefit of individual member companies of the Philips concern (i.e KPENV and its Associated Companies). Thus, it would appear that KPENV, on the basis of the resources available at its disposal, has decided to employ those resources for the benefit of its Associated Companies. The assessee also stated that it is mentioned in the Preamble that it is PEIL (assessee) which, wishing to ensure the continuity in its business operations, is interested to take advantage of and secure access to the aforementioned resources. Further, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is based on sharing among the beneficiaries, in proportion to the benefits received or expected, the actual costs incurred in providing the services. It was stated that KPENV has applied the indirect method for allocating the costs to the assessee under the MSSA and then added a margin of 10% on the costs while making the charge. So far as the margins are concerned, they have been benchmarked through a separate benchmarking study which has relied on data from Pan-Asia comparables. It needs to be mentioned that this selection of the comparables is not appropriate as the recipient of services, with its specific functional profile of a low-risk distributor for consumer life style sector and speciality lighting sector and a near zero-risk distributor in case of health care sector and a general manufacturer for domestic consumption in case of lighting sector, is based in India with its specific economic and market conditions. If the margins are at all to be compared, then the comparables need to be selected from India. 3.5 The ld TPO applied the Comparable Uncontrolled Price (CUP) Method as the MAM for determination of Arm s Length Price (ALP) in respect of this transaction. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the service (or the willingness of the recipient to pay for such services). Therefore, the determination of an arm s length charge must take into consideration the amount that an arm s length entity is prepared to pay for such a service in comparable circumstances. (f) Mere description of the various services will not suffice to justify the price charged in intra group services. The taxpayer has to prove with proper documentation and evidence that the services are actually rendered and payment is commensurate with the benefit derived therefrom. (g) Understandably, when expenditure is incurred for the benefit of the group as a whole, no charging of such expenditure is required as such expenditure is not incurred in connection with any individual member of the group and the benefit of such expenditure would be available to all the members of the group. Similarly, if no benefit is received or the benefit is remote or for the benefit of entire group, the same should not be charged. Therefore, unless it is shown that tangible and direct benefit has been derived by such payment and that the payment made is commensurate to the benefit derived or expected to be derived when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating the cost to respective companies. As the services provided by AE under MSSA are vast and on continuous basis, the relative share (in %) of services provided to third parties as compared to Philips is negligible and hence not comparable. The assessee submitted that the intra group services from AE have been accounted under different segments as follows:- MSSA R D Services Total Lighting 204,56,74,673 16,86,34,000 221,43,08,673 CL 53,52,94,985 14,01,63,749 67,54,58,734 Healthcare 43,83,20,392 28,67,403 44,11,87,795 Healthcare (CM) 6,57,99,588 20,65,84,406 27,23,83,995 Corporate 30,66,93,969 3,85,04,214 34,51,98,183 Total 339,17,83,606 55,67,53,773 394,85,37,379 The assessee provided the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allocated based upon : 5a: Production value ; or 5b: Production quantities (mostly at AG level). 5c: Purchase value in case of outsourced production or contract manufacturing (internal or external Philips) The services as per Module 3 are Nil for Indian entity. The assessee has allocated costs in proportion of the turnover for Modules 1, 2, 4 whereas the allocation for Module 5 is basis production value ratios. It held that it has to be seen in the context of these services as to whether these result in some tangible benefit to the assessee or not. The services as they appear are routine services and it may be just to standardize the output of the assessee. The unique factors of the Indian market cannot be governed and strategized through guidance from the parent set up which may not have enough expertise. Further, the production by the Indian entity may be as per specification from the parent, but this cannot extend to the office and market operations of the sourcing etc. of the assessee. The ld DRP observed that the ld Counsel for the assessee contended that assessee is a risk bearing manufacturer - in this context it is quite illogical that the entity is magnifyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven in A.Y. 2008-09 and 2010-11 be taken into consideration, does not survive. The payment for Intra Group Services to AEs is separate international transaction independent of financial results and capable of verifiable separately. Therefore, the TPO was right in his action to determine the ALP separately, rather than aggregating it with other transactions under TNMM. The documents field before the Panel shows that the assessee company have received hardware/software from third parties directly and the biling was also raised by those third parties on the assessee. Only the said transaction was routed through the AE, those invoices were to the tune of ₹ 13,87,84,117/- and invoices amounting to ₹ 97,99,091/- which was raised by the third parties on the AE for the services rendered by them to the assessee. Thus, the DRP rightly directed the TPO to examine these invoices and allowability of the same as expense to be decided. From the review of the services and benefit report and the supporting documents submitted by the assessee, it can be seen that the assessee company is benefited from the supervision and guidance of the group s functional experts. Though, the annexures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd of uncontrolled transactions to be taken into account in analysing the comparability of the international functions entered into by the assessee. It, therefore, is obligatory on part of the appellant to maintain such record and produce the same before the TPO to show that it has benchmarked the international transaction at ALP. This obligation, however, has not been discharged by the assessee. 9.3 The appellant in the present case is also not shown to be willing to pay any amount for such services, if it were, so provided by an independent enterprise or if the same would have been performed in house. The DRP is found to have considered these services as non-beneficial for the recipient and did not take it as chargeable services. The perusal of e-mails and other contemporaneous record only goes to reveal that incidental and passive association benefit has been provided by the associate enterprise. In this view of the matter there could neither be any cost contribution or cost reimbursement nor payment for such services to the AE. The TPO, therefore, has rightly adopted Nil value for benchmarking the arm s length price in respect of both these services. We, therefore, do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n satisfied by the Appellant so as to merit allowance of such expenses; 2.6 Rejecting/Not taking cognizance of the transactional level economic analyis undertaken by the Appellant in the TP study to substantiate the arm s length price of such transaction; 2.7 Not appreciating the fact that percentage of sales increased in the future years after the Appellant started receiving management support services ; 2.8 Erred in concluding that no specific benefit was received by the Appellant from the services received ; 2.9 Not appreciating that the Appellant being a part of multinational enterprise wherein many processes are centralized to facilitate the group entities to attain operational efficiency and a competitive edge in their respective countries. These arrangements are meant for the beneficiary of such pooled services; 2.10 Not taking cognizance of the fact that rational and scientific allocation keys for the payment of Management support service fees were provided by the Appellant and that the Appellant has maintained proper documentation and global auditor s certificate to demonstrate the basis of the charge; 2.11 Without prejudice to the above argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra-group services. Reliance is thus, placed on the international tax practices followed in the UN TP Manual, OECD Guidelines, the United States Transfer Pricing regulations etc. both by the taxpayer and the Revenue while undertaking the compliance and the audit exercise respectively The test for an intra-group service generally involves examination of the following factors : The nature of activities; The associated need and benefits; Documentary evidence in support of the transaction; The charge-out mechanism; and The ALP of the transaction. Nature of activities In Transfer Pricing s context, it is essential to draw a line of distinction between a business activity and a service. Essentially the guiding principle that goes in determining the existence of an intra-group service is whether an independent enterprise in comparable circumstances would have been willing to pay for the activity if performed for it by an independent enterprise or would have performed the activity in-house for itself. An in-depth analysis, following the aforementioned conceptual difference between business activities and services, clears the air on many common bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent remuneration arrangement. The Delhi Tribunal in the case of M/s Knorr-Bremse India Pvt. Ltd. v. ACIT TS-700-ITAT-2012 (Del) held that professional consultancy and management fee paid by the appellant were only towards incidental and passive association benefits, therefore the Transfer Pricing Officer had rightly adopted nil value as the ALP. Activities leading to duplication of benefits: A third party would never make payment for receiving the same service twice since the incremental benefit is lost. Keeping this in mind, an activity leading to duplication of benefits cannot be construed as a service and therefore does not require any remuneration. Surmising the above, for an activity to qualify as a service, the fundamental factor that need to be considered is: Whether an independent enterprise would have been willing to pay for the activity; or Whether an independent enterprise would have performed the activity in-house itself. Evaluating the needs and benefits of Intra-group services It involves identifying the incremental economic or commercial value that has arisen to the services recipient. A direct nexus between the services received and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determining the payment for various categories of services. In case the all or a part of the service is outsourced to a third party, the same may be mentioned in the agreement along with the mark-up, if any charged on the third party costs. It is advisable that the service agreement contains a clause providing the parameters of the measuring the expected benefits and linking the charges to such benefits. Such an arrangement help in establishing the cost benefit nexus before the Indian Revenue. Cost benefit analysis: Details of cost benefit analysis, if any undertaken at the time of entering into the agreement. Third party quotes for similar services if arranged for at the time of entering into the agreement, should also be made available Functional analysis: The functional analysis should cover all basic questions like: Who is doing what and for whom; Where are they doing it; Why are they doing it; Who are they doing it; What property is being used or transferred in connection therewith; Benefit test documentation: Services may be received by way of conference calls, occasional visits and mails/presentations/tool kits exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t along with the amount paid for the product / services and the quantity; - Role of recipient company s personnel engaged in information technology operations vis.a vis. The role of the service provider so as to establish nonduplicity of services. - Presentation / reports containing benefits obtained from having a centralised information technology function in terms of cost saving and economics of scale; - Screenshots / emails showing IT services actually being received (troubleshooting problems, creation of logins for employees); - Third party invoices raised on the service provider and agreements for the services and software licenses procured; Human resource and training - Email invitation and attendance sheet of the employees attending the training programme; - Documents depicting any review of employment contracts by the service provider on behalf of recipient; - Reports demonstrating benefits of a centralized human resource system like lowering of attrition rate, lesser personnel employed in the human function than required, people survey results. Before proceeding with determining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and demonstrate the value received on account of the payment. Here it is worth mentioning that the High Court in this judgment has sought to create a distinction between the In the case of Deloitte Consulting India (P.) Ltd. v. DCIT [2012] benefit test i.e. examining services exists or benefits have accrued and the arm s length test. High Court held that the powers of the TPO is limited to determination of ALP, however the TPO may determine the arm s length price as nil in situations where an independent entity in a comparable transaction would not pay any amount. In the case of Deloitte Consulting India (P) Ltd. v. DCIT[2012] 150 TTJ 824 (Mumbai) the tribunal on the issue as to whether the TPO was empowered to determine the ALP at nil, held that the taxpayer had to establish before the TPO that the payments made were commensurate to the volume and quality of the service and that such costs were comparable. The Tribunal further held that when commensurate benefit against the payment of service is not derived, the TPO is justified in making an adjustment under ALP. The Tribunal had determined the ALP at nil keeping the factual position as to whether in a comparable case, similar pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote that the Hon ble ITAT in the own case of the assessee has decided impugned issue in favour of assessee in ITA No. 1141/Kol/2016 for the AY 2009-10 vide order dated 5.4.2017. The relevant extract of the order is reproduced below: 4. We have heard the rival submissions and perused the materials available on record including the paper book of the assessee. We find that the ld AR referred to the Agreement entered into by the assessee which is enclosed in page 194 of Volume 1 of Paper Book as under:- 5.2 Concern Services furnished by Philips In general, when a qualified Philips subsidiary entered into GSA agreement with Philips, it will be provided Concern Services. The major concern activities performed by Philips is related to services in commercial, accounting, auditing, financial, fiscal, social and legal matters and in all other fields in which Philips has know-how and experience. Philips shall make available to the Company such know-how, expertise and experience in the aforesaid areas as Philips now and in the future may possess and may freely and unconditionally furnish to the Company, and render assistance in this connection, all to the extent reasonably requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of their operations. Functions can be divided into broad categories: -strategic management functions are those activities that determine the overall strategy and organization of the firm ; -corporate service functions assist in the day-to-day management of the organization (e.g. finance, human resources, information systems, etc.,); -product and process development functions relate to design, research and development activities ; -procure functions are those activities related to the sourcing and purchase of raw materials and other inputs to the production process; -make functions are activities that impact the manufacture of a company s products including production planning and control and process improvement; -move functions focus on the organization of outbound logistics to deliver products to the customer ; and -sell functions include marketing, advertising, sales and distribution activities. 4.2 We find that no adjustment on account of Management Support Service Charges were made in the past by the revenue from Asst Years 2005-06 to 2008-09 though the agreement is effective from 22.10.2004 onwards. We also find that Article 6 of MSSA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fits derived are enclosed in pages 965 to 981 of the Paper Book. The ld AR also drew our attention to the order of the ld DRP dated 23.12.2013 passed in the hands of KPENV for the Asst. Year 2009-10 (enclosed in pages 1018 to 1043 of Paper Book), wherein the ld DRP agreed that KPENV had rendered services which are in the nature of Fee for Technical Services on going through each and every clause of the MSSA and Management Support Charges were paid by Philips India Ltd (assessee herein) to KPENV for receiving such services. We find that in Para 38 of the said order of ld DRP in the hands of KPENV, it was held as below:- 38. In view of the above, it is evident that in order to ensure the survival and success of PIL (i.e. Philips India Ltd), the assessee has been involved in the selection and training of PIL s personnel and in the process, made available technical knowledge, experience, skill to the personnel, which will enable the personnel to fulfill such specialized tasks on their own. Therefore the assessee s claim of not fulfilling the make available condition is rejected. The ld DRP in para 39 of the said order (enclosed in page 1040 of paper book) had further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... percentage prior to rendering of management support services and thereafter :- Sr. No. Year Ended Sales (Rs Crores) % increase (taking year 200-01) as the base year Remarks 1 March 2001 15313 - No Management support services received during this period 2 March 2002 15709 3% 3 March 2003 16379 7% 4 March 2004 16293 6% 5 March 2005 21484 40% Management support services were received from FY 2004-05 onwards (i.e., first year of receipt of management support services) 6 March 2006 23829 56% Subsequent years in which Management support services continued to be received by the Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mparable transaction would not pay any amount. However, this is different from the Transfer Pricing Officer stating that the assessee did not benefit from these services, which amounts to disallowing expenditure. That decision is outside the authority of the Transfer Pricing Officer. . .. 36. In this case, the issue is whether an independent entity would have paid for such services. Importantly, in reaching this conclusion, neither the Revenue, nor this Court, must question the commercial wisdom of the assessee, or replace its own assessment of the commercial viability of the transaction. The services rendered by CWS and CWHK in this case concern liaising and client interaction with IBM on behalf of the assessee- activities for which, according to the assessee s claim-interaction with IBM s regional offices in Singapore and the United States was necessary. These services cannot - as the Income-tax Appellate Tribunal correctly surmised-be duplicated in India insofar as they require interaction abroad. Whether it is commercially prudent or not to employ outsiders to conduct this activity is a matter that lies within the assessee s exclusive domain, and cannot be second- gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to the present case. 28. The following aspects would require consideration in order to identify intragroup services requiring arm s length remuneration: - Whether services were received from related party. - Nature of services including quantum of services received by the related party. - Services were provided in order to meet specific need of recipient of the services. - The economic and commercial benefits derived by the recipient of intragroup services. - In comparable circumstances an independent enterprise would be willing to pay the price for such services? - An independent third party would be willing and able to provide such services? Whether payment made to AE meets ALP criterion will be determined, keeping in mind all the above factors, as well. 29. Keeping in mind the principles emanating from the aforesaid decisions, we shall now proceed to examine the material on record to see the nature of services received by the Assessee and as to whether the same were at Arm s Length. 47. In the light of the discussion in paragraphs 30 to 46, We hold that the Assessee has established the nature of services including quantum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rketing (AMP) in each of its business segments. As per the assessee, such expenses were critical for its business in India and it has also benefited from such expenses. The assessee also claimed that it had incurred similar expenditure in earlier years and the ld TPO accepted the same. The assessee, in order to promote its sales in the Indian region, has undertaken marketing and sales promotion activities which is a pre-requisite of any independent company competing to thrive in such competitive market. The marketing activties undertaken by the assessee were aimed at capturing the market to enable it to enhance its market shares and hence increase the revenue and profitability of the company. This is immensely critical to the assessee s own domestic business due to the intense competition in the market place. It is difficult for companies to penetrate the market, sustain and subsequently increase the customer s base. All the marketing activities of the assessee are products specific i.e. the lights, consumer lifestyle and healthcare products. Therefore it clearly demonstrates that the purpose of such promotional activities is to position our products in target customers mind rathe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92B(1) of the Act defines the term international transaction to mean transactions between associated enterprises . In this regard, it is noted that section 92B(2) of the Act, extends the scope of section 92B(1) by introducing a deeming fiction with regard to international transactions to include transactions between an unrelated entity and the assessee resulting from the existence of a prior arrangement between the AE of the assessee and such unrelated entity. From the above, it is evident that the purview of section 92 of the Act is limited to only such transactions that are either between two AEs or governed by a prior arrangement between the AEs and any unrelated party. Here, it may be noted that the AMP expenses do not form part of the international transaction of the assessee since the expenditure has been entirely incurred in India and with unrelated domestic parties by the assessee. Assessing domestic transactions entered into by the company with independent third parties is beyond the scope of powers vested with the ld TPO under the said section. It was pleaded that relying on the judgement of Hon ble Delhi High Court in the case of Sony Ericsson Mobile Communications ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Consumer Lifestyle and Healthcare Sector and soft copy of audio/video advertisements for lighting/consumer lifestyle sector in DVD along with the written submissions thereon. 7.3 The assessee stated that AMP expenses are already factored in TNMM in the distribution segments and hence the same are not required to be evaluated separately. It was pleaded that the business and pricing model of the assessee in relation to its distribution activties should be evaluated before concluding applicability of the Special Bench Ruling of LG Electronics. Where the Indian entity has been adequately and properly compensated for incurring such expenditure, no separate TP adjustment is warranted. Application of Bright Line Test (BLT) is not in consonance with Indian Transfer Pricing Regulations. It was argued that without prejudice to the above, even if BLT is applied, a proper comparable set is important to establish the BLT. 7.4 With regard to the comparables chosen by the ld TPO, the assessee mentioned that if the comparables taken by the ld DRP in Asst Year 2011-12 are considered, assessee s AMP expenses were less than that of comparables in % terms. 7.5 However, the ld TPO rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed. Such adjustment may be consistent with what independent enterprises would have earned in similar transactions. 7.6.1 The ld DRP held that the assessee is into manufacturing as well as distribution activities. The ld TPO had rightly invoked TNMM in view of the facts of this case. The choice of comparables has been accepted by the assessee. The mark up for services is required and it has been upheld by BEPS guidance also. The ld TPO without invoking the BLT is therefore directed to re-compute the mark up basis the above example by BEPS. The ld DRP directed the ld TPO to exclude two Government owned entities (Webel Technologies Ltd and Shreetron India Ltd) from the list of comparables as the FAR of Government owned companies is not comparable with privately owned business groups. Subject to the above directions, action of the ld TPO was upheld in line with BEPS example. The ld DRP placed reliance on the decision of Sony Ericsson and held AMP to be an international transaction. 8. Aggrieved, the assessee is in appeal before us on the following grounds:- 3. Determination of arm s length price for AMP expenses 3.1 The AO, DRP and TPO erred on facts and in law, in ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RP and TPO erred in making transfer pricing adjustment on the alleged excess cost incurred for AMP expenses as brand promotion for AE. The payment for AMP expenses have been accepted as not excessive in the Appellant s own case in preceding years by the AO, TPO and the DRP. 4.3 The learned TPO erred in not applying the rule of consistency to transfer pricing proceedings when the facts of the case including the underlying arguments have not altered. 9. The ld AR vehemently relied on the order of this tribunal passed in assessee s own case for the Asst Year 2011-12 in ITA Nos. 863 539/Kol/2016 dated 15.12.2017 wherein it was held that AMP expenditure incurred by the assessee in the facts and circumstances of the case cannot be construed as an international transaction by placing reliance on the decision of Hon ble Delhi High Court in the case of Maruti Suzuki India Ltd referred to supra. 10. In response to this, the ld DR stated that the assessee is only importing goods from its AE and selling it locally in India and as such, it is only a distributor of products. The decision rendered in Sony Ericsson Case was clearly given in the case of Distributor whereas, decision i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the quantum of AMP expenditure by MSIL. Secondly, the Court is of the view that the decision in Sony Ericsson Mobile Communications India (P) Ltd. case (supra) holding that there is an international transaction as a result of the AMP expenses cannot be held to have answered the issue as far as the present Assessee MSIL is concerned since finding in Sony Ericsson to the above effect is in the context of those Assessees whose cases have been disposed of by that judgment and who did not dispute the existence of an international transaction regarding AMP expenses. In view of we note that the facts of the above cases are identical to the present issue, thus, the principle laid down by the Hon ble Delhi High Court in the case of Maruti Suzuki India Limited. (supra) are applicable to the instant case. Respectfully following the same we dismiss the ground of appeal filed by the Revenue . Respectfully following the same, the upward adjustment made by the ld TPO and upheld by the ld DRP in the sum of ₹ 1,03,59,000/- is hereby directed to be deleted. Accordingly, the Grounds 3, 4.2 4.3. raised by the assessee are allowed. 12. The Ground No. 5 raised by the assessee is wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of giving effect order to DRP passed by the ld TPO and final assessment order passed by the ld AO. Hence we are of considered opinion that adjudication of Ground No. 6 raised by the assessee would be superfluous. 14 . DISALLOWANCE OF LEASE RENTALS - ₹ 6,86,60,107/- Ground Nos. 7.1 to 7.3 The brief facts of this issue is that the assessee claimed lease rental paid for motor car taken on finance lease from Citi Corp amounting to ₹ 6,86,60,107/-. The same was treated as capital expenditure by the ld AO based on the reliance placed in assessee s own case for the Asst Year 2003-04 which got confirmed by this tribunal. The ld DRP observed as under:- The lease rentals paid by the assessee for the year 2003-04 were disallowed and the action was upheld by the ITAT. Subsequent matters have been pending/though this adjustment has been allowed in 2011-12, the panel upon consideration of the facts is not inclined to allow relief to the assessee. Aggrieved, the assessee is in appeal before us on the following grounds :- 7. Lease Rental 7.1 The Learned AO and DRP erred in law and on facts in disallowing ₹ 6,86,60,107 being the lease rent paid in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w the Ground No. 7 raised by the assessee. 15 . DEPRECIATION ON MOULDS Ground Nos. 8.1 to 8.4 The brief facts of this issue is that the ld AO during the course of assessment proceedings observed that assessee has claimed depreciation @ 30% on moulds instead of 15%. The ld AO further observed that the assessee is engaged in business of manufacturing, selling and trading of electronics and electrical products, electronic medical equipments and development of software services. Therefore, the assessee is entitled to claim depreciation @ 15% on moulds. The depreciation on moulds @ 30% is available to the assessee if these are used exclusively in rubber and plastic industries. As such, the assessee had no plastic factory. Therefore, the assessee is not entitled for depreciation @ 30% on moulds. Accordingly, the ld AO disallowed the excess depreciation claimed by assessee for ₹ 3,14,04,052/- and added to the total income of the assessee. Aggrieved, the assessee filed objections before the ld DRP. The ld DRP rejected the claim by observing as under:- According to the New appendix 1 to Rule 5 of the IT Rules effective from AY 2006-07 onwards, (vii) of Part A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that higher rate of depreciation on moulds is available only if these are used in the plastic factory. The view taken by the AO was subsequently confirmed by the Ld. DRP. Now the issue before us arose whether assessee is eligible for depreciation on moulds at higher rate in the given facts and circumstances. It is undisputed fact that assessee has been claiming depreciation on moulds @ 30% in all the earlier years which was granted by the Revenue and no dispute with regard to rate of depreciation arose in the earlier years despite the fact that the assessments for earlier years were framed u/s 143(3) of the Act. In this regard, we observe that the assessee was allowed depreciation at higher rate in all the earlier years and no disallowance was made on account of this. However, we note that similar disallowance was also made by the ld. DRP for the A.Y. 2012-13 2013-14. The ld. AR before us has also not brought anything on record evidencing that the assessee had plastic factory. The Ld. AR has just verbally submitted that in most of the products which appears to be true. But as such no documentary evidence was filed in support of the assessee s claim. However in the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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