TMI Blog2021 (5) TMI 382X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the BLT for computing Arm s Length Price of AMP transaction has already been rejected by the Hon ble Delhi High Court in the case of Sony Ericsson [2015 (3) TMI 580 - DELHI HIGH COURT ] and thus adjustment even protective basis cannot be sustained. The decision of the Hon ble Jurisdictional High Court is a binding precedent and the lower authorities cannot disregard it merely because the Revenue has challenged it before the Hon ble Supreme Court. Thus, respectfully following the above decision of the Tribunal, we direct the Ld. AO/TPO to delete the protective addition. Accordingly, we allow the relevant grounds of the appeal of the assessee. - ITA No. 126/Del/2018 - - - Dated:- 26-4-2021 - Amit Shukla, Member (J) And Dr. B.R.R. Kumar, Member (A) For the Appellant : Nageshwar Rao, Adv. For the Respondents : Surendrapal, CIT-DR ORDER Per Dr. B.R.R. Kumar, Accountant Member The present appeal has been filed by the assessee against the order dated 17.10.2017 passed by the AO u/s. 143(3) r.w.s. 144C of the Income Tax Act, 1961. 2. Following grounds have been raised by the assessee: Re: General Grounds 1. That on the facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 That on the facts and circumstances of the case and in law, the Hon'ble DRP/Ld. AO/Ld. TPO erred in not appreciating that the AMP expenses were incurred by the Appellant as a part of its role and responsibility as a distributer and not for the purpose of providing any benefit to its AE and thus could not be considered to be a transaction under section 92F(v) of the Act, in the absence of any understanding or arrangement or action in concert for any provision of service. 3.5 That on the facts and circumstances of the case and in law, the Hon'ble DRP/Ld. AO/Ld. TPO erred in not appreciating that there are no machinery provisions in the Act to make adjustment in relation to AMP expenses. Re: No arrangement/Agreement/Understanding/Contract with AEs 3.6 That the Hon'ble DRP/Ld. AO/Ld. TPO grossly erred on facts and in law in not appreciating that AMP expenditure incurred by the Applicant at its own behest could not be regarded as a 'transaction, much less than an international transaction under section 92B of the Act, in the absence of any understanding/arrangement/agreement between the Appellant and its AEs (which own the trademarks) for incurrence of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of intensity adjustment has been upheld by the Hon'ble IT AT, on the erroneous and false assumption that the respondent was in the process of filing an appeal against the order of Hon'ble ITAT before higher forum. 3.12 That on the facts and circumstances of the case and in law, the Hon'ble DRP/Ld. AO/Ld. TPO have erred in using total operating revenue instead of total operating cost as the base for computing the proportionate value of transfer pricing adjustment. 3.13 That the Hon'ble DRP/Ld. AO/Ld. TPO have erred in using an unjust approach of cherry picking a set of 11 companies for the purpose of determining the mark up of 15.43%, that should be earned by the Appellant on the alleged AMP expenses as a service provider without providing any source or search strategy and without appreciating that the said companies were functionally not comparable. Re: Use of BLT approach for computing transfer pricing adjustment on a protective basis 3.14 That on the facts and circumstances of the case and in law, Hon'ble DRP/Ld. AO/Ld. TPO have grossly erred in applying the BLT to propose transfer pricing adjustment of ₹ 28,40,13,614 on a pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for the purpose of computing the TP adjustment. 4.6 That the Hon'ble DRP/Ld. AO/Ld. TPO erred in undertaking intensity adjustment by following an inconsistent approach of using operating cost (excluding employee cost) as a percentage of sales instead of using AMP expense (on non-licensed brands) as a percentage of sales for the purpose of adjusting the net profit margin of comparable companies under intensity adjustment. Re: Consequential Grounds 5. That on the facts and circumstances of the case, the Ld. AO erred in levying interest under section 234B and 234C of the Act. 6. That on the facts and circumstances of the case, Ld. AO erred in initiating penalty proceedings under section 271(1)(c) of the Act. 3. Luxottica India was incorporated in India in 15.11.2007 and commenced actual operations from February 2008. It has been established primarily for the purpose of carrying on the business of trading of sunglasses and spectacles frames in India. Luxottica India being a closely held company, 99.99 per cent of its equity shares are held by Luxottica Holland. 4. The primary issue relates to determination of Most Appropriate Method (MAM) for the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year is same as that of A.Y 2012-13. From TPO's report it is clear that the department has not accepted Tribunal's decision and is likely to challenge it in higher forum. Basis above conclusions emanating from the discussion supra, the action of the TPO is upheld. 7. The relevant portion of the order of the ITAT in the assessee's own case in ITA No. 344/Del/2017 for the assessment year 2012-13 dated 26.05.2017 19. The ld. AR next contended that the assessee applied Resale Price Method (RPM) as the most appropriate method in its Transfer pricing study report and the TPO used the Transactional Net Margin Method (TNMM) as the most appropriate method for making the transfer pricing adjustment. The ld. AR argued that the Tribunal in its order for the assessment year 2009-10 has approved the RPM as the most appropriate method and the Hon'ble High Court has not interfered with the Tribunal order on this issue. This was opposed by the ld. DR who submitted that the Hon'ble High Court has simply chosen not to interfere in the Tribunal order without giving any separate reasons and, hence, it cannot be said that the Tribunal order on this issue has been af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , by carrying out the AMP intensity adjustment in the profit rate of comparables. If, however, it turns out that such an adjustment cannot be done due to one reason or the other, then the RPM should be discarded and another suitable method be adopted, which encompasses the effect of AMP intensity adjustment. Our view is fortified by the judgment in the case of Sony Ericsson (supra), in which it has been held in para 165 that: 'Comparable analysis of the tested party and the comparable would include reference to AMP expenses. In case of a mismatch, adjustment could be made when the result would he reliable and accurate. Otherwise, RP Method should not be adopted.' 21. We, therefore, set aside the impugned order and remit the matter to the file of Assessing Officer/TPO for re-determining the ALP of the international transaction of 'Import of finished goods' in the manner delineated above. The assessee should be given an adequate opportunity of hearing in such fresh proceedings. 8. Since, the matter stands covered in favour of the assessed for the earlier years and in the absence of any material change in the facts of the case brought to our notice, we hereby ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Transaction Adjustment as per the order of the Transfer Pricing Officer Adjustment after the directions issued by the Hon' ble DRP 1 AMP- Distribution ( Protective Addition) 1 , 31 , 21 , 90 , 000 51 , 09 , 87 , 000 3.3 Thus, we find that substantive addition on AMP adjustment on AMP stands already deleted by the Ld. DRP, and only the addition made on protective basis following the BLT method was sustained by the ld. DRP, against which, the assessee is in appeal before us. 4. The Ld. counsel submitted that ground No. 1 and 1.1 of the appeal are general in nature. Since the ground being general in nature we are not required to adjudicate upon specifically and accordingly dismissed as infructuous. 5. Further, during the hearing of the case, the Ld. counsel did not press the ground Nos. 1.2 to 1.5 and 2.1 to 2.4 and ground No. 3, accordingly all these grounds are dismissed as infructuous. 6. The ground Nos. 2, 2.5 to 2.6 relates to protective addition made applying the BLT. 6.1 Before us, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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