TMI Blog2022 (12) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Income Tax Act, 1961, in pursuant to the directions of Dispute Resolution Panel-2, New Delhi. 2. Facts before this Bench are that the assessee company is a part of Merck group. It is engaged in import and resale of pharmaceutical products in the Indian market (including vaccines) developed by the Merck group. It filed return of income on 28.11.2015 declaring total income of Rs 67,01,81,320/-. The case was selected for scrutiny. Accordingly, notice u/s 143(2) of the Act dated 30.08.2016 was sent to the assessee. 2.1 During the year under consideration, the assessee company has entered into transactions with associated enterprises. Therefore, a reference was sent by the Assessing Officer to Transfer Pricing Officer for determining the arms length price u/s 92CA(3) in respect of international transactions entered into by the assessee during the AY. 2014-15. 2.2 Finalizing the TP proceedings, the TPO has passed an order u/s 92CA(3) of the Income Tax Act, 1961 on 26.10.2018 proposing the substantive adjustment amounting to Rs. 22,28,05,068/- following RPSM and protective adjustment of Rs. 37,47,33,203/- following BLT on account of marketing and market development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O assessed income of the assessee company with following recomputation: Income as per return of income Rs. 67,01,81,320/- Add. Transfer Pricing Adjustment (as discussed in para 3 above) Rs. 36,93,24,653/- Total income Rs. 103,95,05,973/- Rounded off Rs. 103,95,05,970/- 3. Assessee has come in appeal raising following grounds : That on facts and circumstances of the case and in law: 1. The Learned ('Ld.') Assessing Officer ('AO') / Transfer Pricing Officer ('TPO') / Hon'ble Dispute Resolution Panel ('DRP') erred in determining the total income of the Appellant at Rs.1,03,95,05,970 as against Rs.67,01,81,320 reported by the Appellant in the return of income. Transfer Pricing issues 2. The Ld. AO/ TPO/ Hon'ble DRP grossly erred, both in facts and in law, in enhancing the income of the Appellant by Rs. 36,93,24,653 on account of non-receipt of income for allegedly excessive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO/ TPO/ Hon'ble QRP erred in wrongly assuming that the Appellant is operating under directions and for the purposes of the AE. 3.9 The Ld. AO/ TPO/ Hon'ble DRP erred in applying Bright Line Test (BLT) for computing adjustment on account of expenditure on AMP on protective basis without appreciating that in absence of specific provision under the Transfer Pricing regulations in India, an adjustment on account of the arm's length price of AMP expenses could not be made. 3.10 The Ld. AO/ TPO/ Hon'ble DRP erred in applying BLT against the binding precedent as laid down by the Hon'ble Delhi High Court in case of Sony Ericson Mobile Communications [374 ITR 118 (Del)] and Appellant's own case in previous assessment years. 3.11 The Ld. AO/ TPO/ Hon'ble DRP erred in not appreciating that 'bright line limit' is not a prescribed method under the purview of section 92C of the Act. 3.12 The Ld. AO/ TPO/ Hon'ble DRP erred not appreciating that Transactional Net Margin Method (TNMM) analysis included AMP expenses and could not be benchmarked and adjusted as a part of the adjustment pertaining to marketing intangibles. Notwiths ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. 4. Heard and perused the record. 5. During the course of arguments, ld. Counsel appearing for the assessee submitted at Bar that although the appeal has been filed against the addition of Rs. 36,93,24,653/- in respect of ALP adjustment made on protective basis by applying BLT and appellant has filed various grounds against this addition however, given the main ground of contention being use of BLT approach by the TPO the other grounds are not being pressed upon. It was further submitted that as such the issue that survive are covered by ground no. 2 read with 3.9 and 3.10. 5.1 The Ld. Counsel submitted that application of BLT to the facts and circumstances on account of marketing and market development functions carried out for the AE is not sustainable as held in appellant s own case for the assessment year 2013-14 and further reliance was also placed on decision of Hon ble Delhi High Court in case of Sony Ericsson Mobile Communications India Pvt. Ltd. vs. Commissioner of Income Tax - III, (2015) 374 ITR 118 (Delhi). 6. Now it can be observed from the matter on record that the Ld. TPO has observed in para 13.1 13.1 Benchmarking of AMP expenditure - Bright l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t with regard to validity of Bright Line test as also on excluding selling and distribution expenses, discount and rebates, and other sales promotion expenses to the expenses relating to marketing intangibles for the brand owned by the AE. 8. However, as a matter of fact in assessee s own case for the assessment year 2013-14, ITA No. 6565/Del/2017 it was held in para no. 8 as follows :- So far as the question of set off of the brought forward business losses is incurred, learned representatives fairly agree that the matter is required to be remitted to the file of the Assessing Officer for fresh adjudication in the light of the result of the appellate proceedings in respect of the preceding assessment years in which the related disputed additions have been made. It is pointed out by the learned counsel that, in any event, the assessee has claimed set off of the loss of Rs 26,25,85,933/- incurred in the assessment year 2012-13 which could not have been set off for the prior years, and the only year following the said assessment year is the year before us. It is also pointed out that the ALP adjustment, in respect of AMP expenses by applying the bright line test (BLT), whi ..... 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