TMI Blog2018 (12) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... In those circumstances, he will also allow opportunity of being heard to the assessee. - ITA No.527/Del./2016 - - - Dated:- 26-11-2018 - VICE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER For The ASSESSEE : Shri Ajay Vohra, Senior Advocate Shri Neeraj Jain, Advocate S/shri Abhishek Agarwal Ramit Katyal, CAs For The REVENUE : Shri Sanjay I. Bara, CIT DR ORDER PER KULDIP SINGH, JUDICIAL MEMBER : The Appellant, M/s. Valvoline Cummins Pvt. Ltd. (hereinafter referred to as the taxpayer ) by filing the present appeal sought to set aside the impugned order dated 30.12.2015 passed by the AO in consonance with the orders passed by the ld. DRP/TPO under section 143 (3) read with section 144C of the Income-tax Act, 1961 (for short the Act ) qua the assessment year 2011-12 on the grounds inter alia that :- 1. That the assessing officer erred on facts and in law in determining income of the appellant at ₹ 1,300,133,746 against returned total income of ₹ 1,080,299,471. 2. That the assessing officer (AO) I Dispute Resolution Panel (DRP) erred on facts and in law in making addition on account of transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h incidentally, if at all, resulted in brand building for the foreign AE, was a transaction of creating and improving marketing intangibles for and on behalf of its foreign AE and further that such a transaction was in the nature of provision of a service by the appellant to the AE. 2.8 That the DRP/TPO erred on facts and in law by questioning the commercial expediency of AMP expenditure incurred by the appellant and assuming that benefit has accrued to AE on account of AMP expenses incurred by the appellant in India. 2.9 That the DRP/TPO erred on facts and in law in not appreciating that even if marketing intangible has been created then the appellant is the economic owner of such intangible. 2.10 That the DRP/TPO erred on facts and in law in not appreciating that no adjustment on account of allegedly excess AMP expenditure is warranted in the case of the appellant as such expense have been found to constitute bonafide and deductible business expenditure. 2.11 The DRP/TPO erred on facts and in law in not appreciating that such a Transfer Pricing adjustment cannot at all be made in law without determining the Arm's Length Price ( ALP ) by applyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aulic lubricants, automotive chemicals, specialty products, greases and cooling system products. The taxpayer also offers Eagle One Car care products for automotive cleaning and maintenance. The taxpayer claims that its products are available in 25,000 retail counters in India. The taxpayer has two primary business segments manufacturing and trading. 3. During the year under assessment, the taxpayer entered into international transactions with its Associated Enterprises (AE) as under :- No. Nature of Transaction Method used by assessee Amount (Rs.) (in crores) 1. Import of Trading Goods TNMM 1,50,49,694 2. Export of finished goods TNMM 3,08,21,892 3. Provision of support services TNMM 30,52,362 4. Payment of Royalty TNMM 8,28,08,115 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancing the brand name of its AE required to be compensated by the AE. 8. The taxpayer, in its TP study, has selected 6 comparables for benchmarking of transaction of export of finished goods out of which the TPO has rejected 2 comparables. The final companies taken as comparables for determining the BLT are tabulated as under :- Company Name Sales AMP AMP% B G H Exim Pvt. Ltd. 646.13 0.88 0.14 Chandra Prabhu Intl. Ltd. 65.96 0.3 0.45 Daga Global Chemicals Pvt. Ltd. 204.8 1.11 0.54 Taximen s Services Ltd. 100.13 0 0.00 Average 0.28 9. It is also the case of the taxpayer that it does not undertake any aggressive advertising because it leverages on the immense b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. On enquiry from the Bench, Ld. Counsel of the assessee submitted that the facts and figures required for coming to the conclusion pleaded by him were not available on record and an opportunity may be given to him to present the same before the TPO. He further submitted that the Revenue is also required to verify the fresh data to be submitted by the assessee. 11. Ultimately, the ITAT stated that it had, in view of the submissions of the counsel of both sides, no other option, but to set aside the issue in dispute to the file of the AO/TPO on the above issue. Further, the AO/TPO was directed to follow the binding judgment of this Court. 12. It is the submission of Mr. Vohra that, as explained by this Court in Sony Ericsson India Pvt. Ltd.(supra) and later in Maruti Suzuki India Limited v. CIT(2016) 328 ITR 210 (Del), a basic requirement had to be fulfilled prior to commencing the exercise of determining the ALP of an international transaction. The Revenue had to discharge its onus of showing that there was an international transaction involving the Assessee and its AE with regard to the AMP expenses. If the Revenue failed to discharge this onus then the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra) to no longer be a valid basis for determining the existence of or the ALP of an international transaction involving AMP expenses, the order of the TPO was unsustainable in law. The mere fact that the Assessee was permitted to use the brand name Valvoline will not automatically lead to an inference that any expense that the Assessee incurred towards AMP was only to enhance the brand Valvoline . The onus was on the Revenue to show the existence of any arrangement or agreement on the basis of which it could be inferred that the AMP expense incurred by the Assessee was not for its own benefit but for the benefit of its AE. That factual foundation has been unable to be laid by the Revenue in the present case. On the basis of the existing record, the TPO has found no basis other than by applying the BLT, to discern the existence of international transaction. Therefore, no purpose will be served if the matter is remanded to the TPO, or even the ITAT, for this purpose. 18. This Court has in similar circumstances in a series of decisions including Maruti Suzuki Ltd.(supra); Bausch Lomb Eyecare (India) Pvt. Ltd. v. Additional CIT (2016) 381 ITR 227 (Del) and Honda Siel Po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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