TMI Blog2022 (10) TMI 1144X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by the assessee does not fall within the definition of international transaction. The Bench further disapproved the determination of ALP by applying BLT method. Ultimately, the adjustment made on account of AMP expenses was deleted. Identical view was expressed by the Tribunal while deciding the issue in assessment year 2010-11[ 2020 (8) TMI 130 - ITAT DELHI] - thus we delete the addition made by the Assessing Officer. These grounds are allowed. TP adjustment made to the arm s length price of purchase of finished goods for distribution in India - Selection of MAM - HELD THAT:- Imported goods are not only utilized for resale but were also leased out to customers to be installed at their premises on rental basis. Therefore, in case, there are two streams of revenue being generated by the assessee in respect of imported goods, one resale and second leasing, the issue which requires to be considered is, whether in such a scenario RPM can be applied as the most appropriate method to determine the ALP. In case, RPM is applied, what adjustments are required to be made. On a careful perusal of the order passed by the TPO and learned DRP, it is observed that assessee s claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ACCOUNTANT MEMBER For the Appellant : Sh. Tarandeep Singh, Advocate, Sh. Pulkit Verma, Advocate For the Respondent : Sh. Mahesh Shah, CIT (DR) ORDER PER SAKTIJIT DEY, JM: Captioned appeal has been filed by the assessee challenging the final assessment order dated 21.10.2013 passed under section 144C/143 of the Income-tax Act, 1961 (in short the Act ) for the assessment year 2009-10, in pursuance to the directions of learned Dispute Resolution Panel (DRP). 2. At the outset, learned counsel appearing for the assessee did not press ground nos. 1 to 7 by stating that they are of general nature. Accordingly, these grounds are dismissed as not pressed. 3. In ground nos. 8 to 8.14, the assessee has challenged the transfer pricing adjustment of Rs.28,81,09,571/- relating to determination on arm s length price of expenditure incurred by the assessee for advertisement, marketing and promotion (AMP) of the brand of Associated Enterprises (AEs) 3.1 Briefly the facts relating to this issue are, the assessee is a resident corporate entity and is a part of Xerox group of companies. As stated by the Assessing Officer, the assessee is engaged in the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tmental Representative relied upon a decision of the Coordinate Bench in case of M/s. Olympus Medical Systems India Pvt. Ltd., ITA No.838/Del/2021, dated 20.04.2022. 3.5 We have considered rival submissions and perused the materials on record. The issue arising for consideration is, whether the AMP expenditure incurred by the assessee can be regarded as an international transaction. Undisputedly, while deciding the issue, learned DRP has relied upon a decision of the ITAT, Special Bench in case of LG Electronics India Pvt. Ltd. (supra). However, the ratio laid down in case of LG Electronics India Pvt. Ltd. (supra) has been disapproved by the Hon ble Jurisdictional High Court, hence, no more a good law. 3.6 Be that as it may, it is observed, identical issue came up for consideration before us in assessee s own case for the assessment year 2008-09. While deciding the issue in ITA No. 5528/Del/2012, dated 16.12.2019, the Coordinate Bench has held that the AMP expenses incurred by the assessee does not fall within the definition of international transaction. The Bench further disapproved the determination of ALP by applying BLT method. Ultimately, the adjustment made on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proposed an adjustment of Rs.44,11,43,239/-. While doing so, he rejected assessee s claim of working capital adjustment. While considering assessee s objections in this regard, learned DRP concurred with the finding of the TPO. 4.2 Before us, learned counsel appearing for the assessee submitted that neither the TPO, nor DRP have properly appreciated the facts placed before them to understand the function carried on by the assessee in the distribution segment. He submitted, the assessee not only resells the imported equipments but also earns substantial rental and other services income from deployment of equipments at customer s premises. He submitted, before the TPO and DRP, the assessee had furnished the details of receipts from sale of equipments as well as rental received from leasing of equipments. However, these facts have been completely ignored by the departmental authorities. He submitted, though, an application for rectification under section 154 of the Act was filed before the TPO, however, it is still pending. Proceeding further, he submitted, assessee s business model is unique and not akin to routine distributors of office automation products. He submitted, as far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income received from rental while computing RPM. He submitted, if this approach is adopted in the impugned assessment year, there would be no adjustment. 4.5 Learned Departmental Representative submitted, there is no disclosure in the TP study report that the assessee is doing any other activity, except resale. Thus, he submitted, there was no scope either to the AO or DRP to consider assessee s claim. He submitted, if the assessee is earning two streams of revenue from resale and leasing, they cannot be considered as closely linked transaction for adopting aggregate approach. He submitted, however, the departmental authorities are prevented from taking any decision in this regard, as the assessee did not furnish the necessary details regarding resale and leasing. He submitted, in case, the assessee furnishes the necessary details, the matter can be examined by the TPO. 4.6 We have considered rival submissions and perused the materials on record. Undisputedly, the assessee has benchmarked the transaction relating to purchase of goods from AE for resale by applying TNMM. Whereas, the TPO as well as learned DRP have held that RPM is the most appropriate method to benchmark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one from sale of goods and the other from the rentals. In the same way, assessee has to maintain the equipments supplied on lease with replacement of spares or damaged parts. The purchase of equipments and spare parts can be benchmarked only when the two streams of revenue is recognized. It is obvious that the assessee will not be able to recover the cost of equipment given on lease at one go. Therefore, DRP directs the TPO to take into account the total expenses as well as total revenue involved in this segment while determining the ALP of the international transaction. The above submission of the assessee should be examined by the TPO in the light of the above direction of the DRP and calculate the margin of the assessee afresh. 4.8 Learned counsel appearing for the assessee has submitted before us that if DRP s direction in assessment year 2010-11 is followed in the impugned assessment year, there would be no adjustment. Since, the aforesaid aspects have not been considered by the departmental authorities and needs to be considered qua the facts available on record, in our view, it has to be examined at the level of AO/TPO. Accordingly, we are inclined to restore this issue t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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