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TMI Blog2025 (4) TMI 1442X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, therefore, he referred the case of the assessee to the TPO for working out the transfer pricing adjustments. The TPO passed the order u/s 92CA(3) wherein TPO proposed AMP adjustments of Rs. 1,31,72,21,192/- based on intensity test. The TPO has proposed Nil adjustment under BLT approach on protective basis. Thereafter, a draft assessment order was passed by AO on 29.09.2023 where the variations were proposed on account of AMP adjustment of Rs. 1,31,72,21,192/- as proposed by TPO and further variation of Rs. 50,00,000/- is proposed on account of disallowance of deduction claimed u/s 80G. Against such draft order, the assessee filed objections before the Hon'ble Dispute Resolution Penal (Hon'ble DRP). The Hon'ble DRP vide its impugned order dated 30.06.2024 has supported the order of the TPO and held that the AMP expenditure claimed by the assessee is international transaction and further observed that the assessee is not a mere distributor of the products of the AE, rather it is providing large number of marketing and technical services attached which had resulted into substantial value additions to the products of the AE and accordingly confirmed the action of the TPO in making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l AMP expenses of Rs. 503.68 crores which includes a sum of Rs. 439.08 crore paid to distributors as commission. The ld. AR stated that the assessee company is engaged in the manufacturing and selling of consumable products such as nutrition products, personal care products, beauty products and home care products through direct sellers where they are allowed to build their business through their own sales effort and by inviting others to become direct seller in the chain. It is submitted that, assessee is taking all key decisions and performing all significant functions with respect to its business and thus bears the entrepreneurial risk in India. All expenses including revenues earned by assessee, are entirely on its own account and not on behalf of any of its AE. 7. While explaining the nature of commission paid, the ld.AR submitted that, assessee's business model is a direct selling model, where assessee is direct selling entity and distributes and sells its products through a network of independent members through the direct selling channel (chain of people referred to as associates / supervisors / members / distributors), which is vastly different from a normal retail sale mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration no addition was made in order passed by TPO. (Paper Book Page No.764 to 784) 2014-15 -----do-----(Paper Book Page No.785 to 812) 2015-16 Adjustment of Rs. 216,39,19,833/- was made on protective basis and adjustment of Rs. 226,12,38,588/-was made on substantive basis by the TPO. (Paper Book Page No. 813 to 868) Hon'ble DRP considered the entire facts and circumstances of the matter in exhaustive details and deleted both the substantive and the protective additions. (Paper Book Page No. 869 to 918) The TPO passed the order giving effect to the order of Hon'ble DRP and in the final order passed by the TPO no adjustment on account of AMP was made. (Paper Book Page No. 919 to 922) 2016-17 In the aforesaid order the TPO himself did not treat commission amounting to Rs. 427.07 crores to ABOs as AMP expenditure. (Paper Book Page No. 923 to 963) Adjustment of Rs. 68,74,84,700/- only was made by the TPO taking all other AMP expenses to be non-routine. The approach of the TPO was on account of the incorrect understanding of the order of the Hon'ble DRP for the preceding AY 2015-16. Hon'ble DRP in the proceeding for the AY 2016-17 did not deal with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AMP adjustment is contradictory to assessee's own settled history. He further submitted that in Assessment Year 2016-17, the Co-ordinate Bench of ITAT in assessee's own case has deleted the TP adjustment made on AMP expenses. He thus prayed to delete the addition made in this regard. For the Rule of principle of consistency, the Ld. AR relied upon the following judicial pronouncement: Radhasoami Satsang v. CIT [1992] 60 Taxman 248 (SC) 13. We are aware of the fact that strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 14. On these reasonings in the absence of any material change justifying the revenue to take a different view of the matter-and if there was no change it was in support of the assessee-we do not think the question should have been reope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to notice of Assessing Officer - Assessing Officer issued intimation under section 143(1) determining tax liability of AOP - On revision, Commissioner upheld intimation under section 143(1) holding that assessee was liable to pay tax as an AOP as shares of members of AOP were indeterminate - Whether though principle of res judicata would not apply to tax matters, yet there being no change either in facts or in law, views expressed in one year are binding for subsequent years and, therefore, if impugned order wanted to depart from consistent view taken earlier, it must so justify Held, yes [Para 6][Matter remanded/In favour of assessee. [2016] 71 taxmann.com 30 (Delhi): JCB India Ltd. "The Revenue has not been able to persuade the court that an error has been committed in any of the previous assessment years where the assessee's explanation was accepted and the expenditure on development charges was treated as revenue expenditure. In the facts and circumstances of the case, the court is additionally persuaded to adopt the rule of consistency as explained in Radhasoami Satsang v. CIT [1992] 193 ITR 321/60 Taxman 248 (SC) and decline the plea of the Revenue to remand the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... might take of his right, nor could the existence or absence of entries in the books of account by decisive or conclusive in the matter. In view of the above discussion, we do not find any justification to sustain the addition. We, accordingly, set aside the Orders of the authorities below and delete the entire addition." 10. On the other hand, the ld. CIT-DR supports the order of the lower authorities and requested for the confirmation of the adjustments so made on account of AMP expenses to the total income of the assessee as the commission paid is ultimately improve the brand image of the products of AE. 11. We have heard the rival submissions and perused the material available on record. In the instant case, from the perusal of the chart given by the assessee, it is seen that in preceding assessment years except in one year i.e. AY 2015-16 either no adjustment was made on account of AMP expense or while making the adjustment on account of AMP expense the commission paid to distributors was not considered as part of the AMP expenses. It is for the first time, the TPO and Hon'ble DRP has uphold the inclusion of commission paid to the local distributors as part of AMP expenses fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee in the business of selling of consumer products through MLM where persons were appointed as direct sellers who create a chain below them where they further appoint direct sellers and all the individuals coming in such chain were benefited by way of commission on the sales achieved through them. This is a unique kind of marketing technique where payment of commission is fully dependent upon the sales achieved and has nothing to do with the product building exercise. 13. With regard to the application of bright line test (though no addition is made), the Hon'ble Delhi High Court in the case of Maruti Suzuki India Ltd. Vs. CIT 381 ITR 117 (Delhi) and further the Hon'ble Delhi High Court in the case of CIT (LTU) v. Whirlpool of India Ltd., 381 ITR 154 held that bright line test is not a valid method for determination of existence of international transaction or determination of arm's length price. Therefore, in the instant case, even otherwise though no addition has been made of bright line test on protective basis, however, by following the judgements of Hon'ble Jurisdictional High Court in above cases, we hold that bright line test cannot be applied. 14. In the case of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the details of which have already been reproduced in the preceding paragraph. Therefore, in view of the rule of consistency from AY 2009-10 to 2015-16 and considering the fact that the assessee had the same business model and the facts and circumstances of the matter for the impugned assessment year are the same, we set aside the order of the AO/TPO/DRP and direct the AO/TPO to delete the addition." 15. In view of the fact that the commission paid was not AMP expenses and further looking to the past history of the assessee and by following the principle of the consistency and by respectfully following the aforesaid judgements of various Courts on this principle, we hold that AMP expenses including the amount of commission paid to distributors at Rs. 439.08 crores are not international transaction. Accordingly, we set aside the order of TPO/AO/DRP and delete the addition made at Rs. 131,72,21,192/- made by TPO/AO toward AMP adjustment. The Ground of appeal No.1 of the assessee is allowed. 16. Next ground of appeal No.2, is in relation to the deduction u/s 80G of Rs. 37,50,000/- when the said sum was not allowed being part of CSR expenses. 17. Before us ld. AR submitted that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction for 'any sums paid by the assessee in the previous year as donations', thus except the donations paid to the Swachh Bharat Kosh and Clean Ganga Fund, all other donation made to the eligible institutions / funds as per section80G(2) are eligible for deduction u/s 80G of the Act. The coordinate bench of ITAT Bangalore in case of First American (India) Pvt. Ltd v. ACIT in ITA No.1762/Bang/2019 vide its order dt. 29.04.2020 has allowed the deduction under Section 80G by making following observations: "15. In our view, expenditure incurred under section 30 to 36 are claimed while computing income under the head, 'Income form Business and Profession", whereas monies spent under section 80G are claimed while computing "Total Taxable income" in the hands of assessee. The point of claim under these provisions are different. 16. Further, intention of legislature is very clear and unambiguous, since expenditure incurred under section 30 to 36 are excluded from Explanation 2 to section 37(1) of the Act, they are specifically excluded in clarification issued. There is no restriction on an expenditure being claimed under above sections to be exempt, as long as it satisfies nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l business expenditure and the same applies only to the extent of computing business income under Chapter IV-D. The said Explanation cannot be extended or imported to CSR contributions which are otherwise eligible for deduction under any other provision or Chapter, to say donations made by a charitable trust registered under Section 80G and if the same denied merely because such payment forms part of CSR, it would lead to double disallowance, which is not the intention of Legislature. Accordingly, we allow the deduction of Rs. 37.50 lacs as claimed by the assessee u/s 80G of the Act. This ground of appeal of the assessee is allowed. 22. Next ground of appeal No.3 is with regard to disallowance of deduction of Rs. 12,50,000/- claimed u/s 80G of the Act. From the perusal of the orders of the lower authorities, we find that the AO has disallowed the claim of the assessee for the sole reason that assessee has field to produce the receipts of the donation of Rs. 25.00 lacs made to Prayas Society, Hamirpur, Himachal Pradesh. During the course of hearing ld.AR requested that the matter may be sent back to the AO for submission of the receipts which was misplaced earlier and now is availa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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