TMI Blog2019 (1) TMI 1651X X X X Extracts X X X X X X X X Extracts X X X X ..... itted fact that the Customs Authorities have raised a demand during the financial year itself and the assessee has made a payment under protest for goods purchased, imported and cleared during the impugned assessment year which has been shown as a current asset in the balance sheet of the assessee company. - ITA No.6870/Del/2018 - - - Dated:- 24-1-2019 - SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER For The Assessee : Shri Vishal Kalra, Shri S.S. Tomar And Shri Ankit Shahni, Advocates For The Revenue : Shri H.K. Choudhalry, CIT, DR ORDER PER R.K. PANDA, AM: This appeal by the assessee is directed against the order dated 9th October, 2018 passed u/s 143(3) read with section 144C of the IT Act, 1961 for Assessment Year 2014-15. 2. Facts of the case, in brief, are that the assessee is a company and belongs to Nikon group of cases which is involved in a broad spectrum of business centred on precision equipment, imaging products, instruments and other business. The activities of the Nikon Group are carried out through the following divisions:- i) Precision Equipment Business, ii) Imaging Products Business, ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te forums. 4.1 He further observed that the assessee has incurred ₹ 55,60,68,553/-as AMP expenses. This, according to the TPO is attributed towards the brand building expenses. Since the AMP expenses were incurred by the assessee purely for its AE, an independent entity under similar circumstances would have charged a mark up on this amount for the money spent and for the service element. Considering the average margin of 12.35% as the mark up of AMP expenses, he proposed an adjustment of ₹ 62,47,42,783/- on substantive basis. 4.2 Based on the order of the TPO, the Assessing Officer, in the draft assessment order, made the addition of ₹ 62,47,42,783/- on substantive basis. The assessee approached the DRP. The DRP reduced the proposed adjustment of ₹ 46,86,45,221/- to ₹ 45,56,72,488/-. So far as the adjustment of ₹ 62,47,42,783/- on substantive basis is concerned, the DRP directed the TPO to compute AMP adjustment, if any, by applying intensity method as applied in assessment year 2011-12 to 2013-14. The Assessing Officer accordingly passed the final order making addition of ₹ 45,56,72,488/- as per the direction of the DRP. 4.3 Aggr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO erred in suo-moto benchmarking the alleged international transaction related to AMP expenditure without there being any order or reference from the AO in relation thereto. Notwithstanding and without prejudice to the above grounds that the AMP expenditure incurred by the Appellant does not constitute an international transaction under Chapter X of the Act, the Appellant craves to raise following grounds on merits: 5. That on facts and circumstances of the case and in law, the AO / DRP / TPO have erred in making an adjustment in respect of alleged international transaction of AMP expenditure, without appreciating that adjusted gross profit margin as well as operating margin of the Appellant was better than the comparable companies. 6. That on the facts and circumstances of the case and in law, the AO / DRP / TPO grossly erred in applying Bright Line Test ( BLT ) for making transfer pricing adjustment amounting to INR 45,56,72,488, on protective basis, without appreciating that BLT has been expressly rejected by the Hon ble Tribunal in Appellant s own case for earlier AYs. 7. That on the facts and circumstances of the case and in law, AO / DRP / TPO have e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at any time before, or at, the time of hearing of the appeal. 5. The ground of appeal No.1 being general in nature is dismissed. 6. The ld. counsel for the assessee submitted that ground of appeal Nos.2 to 4.1 are academic in nature and, therefore, does not require any adjudication. In view of the above and in absence of any objection from the side of the ld. DR, ground of appeal No.2 to 4.1 are dismissed being academic in nature. 7. So far as Ground of appeal No.5 is concerned, the ld. counsel for the assessee fairly conceded that the issue stands decided against the assessee by the order of the Tribunal, therefore, the same is dismissed. 8. So far as ground of appeal No.6 to 7.2 are concerned, the ld. counsel for the assessee, at the outset, submitted that this issue stands decided in favour of the assessee by the decision of the Tribunal in assessee s own case for A.Y. 2010-11 vide ITA No.4574/Del/2007, order dated 20th September, 2017. Following the decision of the Tribunal, the Tribunal, again, in assessee s own case for A.Y. 2013-14, has decided the issue in favour of the assessee. Therefore, this being a covered matter in favour of the assessee, the above grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying the BLT for determining ALP of the AMP in favour of the assessee and has categorically held that BLT has no statutory mandate and it is not obligatory to subject AMP expenses to BLT and considered non-routine AMP as separate transactions by making following observations :- III. Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm's length price (Comparables and adjustments/Adjustments - AMP expenses) - Assessees were several Indian subsidiaries of Multi National Enterprises (MNEs) engaged in distribution and marketing of imported and branded products, manufactured and sold to them by foreign AEs - They had applied TNMM/RPM for computing ALP - TPO accepted methods so applied by assessees, however, found that assessees had incurred AMP expenses towards promotion of brand in India, however, no reimbursement of expenses was made from AEs - Hence, he used bright line test by segregating non-routine expenses and by deducting amount representing bright line from value of gross sales and determined excess AMP incurred by assessee and added same to income of assessee :- Whether where comparables adopted by assessee, with or without making adjustm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 01.03.2003. A show cause notice was issued to the assessee on 19th August, 2014 and an order dated 28th October, 2016 was passed for the period from March 2012 to March, 2014. The assessee filed an appeal before the CESTAT, who, vide order dated 12th December, 2017, decided the issue against the assessee. The assessee is in appeal before the Hon'ble Supreme Court and the appeal filed by the assessee has been admitted vide order dated 5th March, 2018. 14. It was submitted that during the pendency of DRI investigation, the assessee was forced to clear various shipments of digital still image video camera upon payment of duty under protest as the Customs Authorities denied the benefit of BCD exemption available to the assessee under Notification No.25/2005-Cus. The assessee, therefore, paid an amount of ₹ 72,33,57,083/- to the Customs Department as duty under protest from F.Y. 2013-14 to 2016-17. He submitted that during the F.Y. ended 31st March, 2014, relating to assessment year 2014-15, the assessee paid an amount of ₹ 10,06,87,203/- as Customs Duty paid under protest. Thus duty paid under protest was not recovered from the customers. On the basis of the reques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns evidencing payment of total duty corresponding to such bill of entry paid for the financial year ended March 31, 2014. 4 Copy of order dated December 12, 2017 passed by Custom Excise Service Tax Appellate Tribunal'( CESTAT ) in relation to appeal against order passed by Directorate of Revenue Intelligence in Appellant s own case. 5 Copy of the order dated May 13, 2016 passed by Principal Commissioner of Customs (Import), denying the benefit of BCD exemption available under Notification No. 25/2005-Cus, in respect of Bills of Entry pertaining to impugned FY and subsequent FY. 6 Copy of order dated March 5, 2018 passed by Hon ble Supreme Court admitting Appellant s appeal against aforesaid order of Hon'ble CESTAT 15. Referring to various decisions, he submitted that the assessee is entitled to raise additional claim before the appellate authorities that were made earlier in the return of income. He relied on the following decisions:- i) Ahmedabad Electricity Co. Ltd. vs. CIT (1993) 199 ITR 351 (Bombay); ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... current asset in the balance sheet of the assessee company. We find the Hon'ble Bombay High Court in the case of Ahmedabad Electricity Co. Ltd. (supra) has held as under:- 37. The powers of an appellate authority under the Income-tax Act have been recently considered once again by the Supreme Court in the case of Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688. In that case, the Appellate Assistant Commissioner permitted the appellate to raise an additional ground for the first time claiming deduction of purchase tax liability in its return because the assessee had been held liable to pay purchase tax Officer, the Appellate Assistant Commissioner allowed the deduction. On appeal, the Appellate Tribunal placed reliance on the decision of the Supreme Court in the case of Gurjargravures Pvt. Ltd. [1978] 111 ITR 1 and held that the Appellate Assistant Commissioner had no jurisdiction to entertain the additional claim. The Tribunal and the High Court rejected the applications of the application for a reference. On appeal, the Supreme Court said: An appellate authority has all the powers which the original authority may have in deciding the question before it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is quite clear that the Appellate Tribunal has jurisdiction to permit additional grounds to be raised before it even though these may not arise from the order of the Appellate Assistant Commissioner, so long as these grounds are in respect of the subject-matter of the entire tax proceedings. 20. We find the Hon'ble Delhi High Court in the case of DCM Benetton India Ltd. (supra), while deciding an identical issue has observed as under:- 5. The assessee had incurred an expenditure of an amount of ₹ 13,10,566 as business expenditure. This was shown by the assessee as a prior expenditure in its balance sheet for the previous year relevant to the asst. yr. 2003-04. However, the expenditure pertained to the previous year relevant to the asst. yr. 2001-02. 6. The issue was, therefore, not raised by the assessee before the AO when its assessment for the asst. yr. 2001-02 was being completed nor was it raised before the Commissioner of Income-tax(Appeals) [CIT(A)]. 7. Before the Income-tax Appellate Tribunal (the Tribunal), the assessee sought to raise an additional ground in this regard but this was declined by the Tribunal on the ground that the accou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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