DCIT, NEW DELHI vs. M/S. VALVOLINE CUMMINS LTD., NEW DELHI

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ITA 1045/DEL/2016Status: DisposedITAT Delhi30 January 2019AY 2011-126 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the adjustment made by the TPO/DRP/AO in respect of AMP expenses is not sustainable in law. However, the matter was restored to the AO to pass a fresh order if the decision of the Hon'ble Apex Court modifies or reverses the jurisdictional High Court's decision.

What were the facts?

The Revenue appealed against an order that reduced an addition related to international transactions involving AMP expenses. The Assessing Officer (AO) had recommended an addition of Rs. 36.34 crores, which was reduced to Rs. 21.98 crores by the Dispute Resolution Panel (DRP).

What were the issues?

Whether the DRP was justified in reducing the addition for international transactions involving AMP expenses, and the methodology used for benchmarking these expenses.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI ‘B’ BENCH,

Before: SHRI N.K. BILLAIYA, & MS. SUCHITRA KAMBLE

For Appellant: Shri Ajay Vohra, Sr. Adv, Shri Neeraj Jain, Adv
Hearing: 29.01.2019Pronounced: 30.01.2019

PER N.K. BILLAIYA, ACCOUNTANT MEMBER,

1.

This appeal by the Revenue is preferred against the order dated 30.12.2015 framed u/s 143(3) r.w.s 144C of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] pertaining to A.Y 2011- 12.

2.

The grievance raised by the Revenue read as under:

“1. On the facts and in the circumstances of the case, the DRP- 2 erred in directing AO to complete the assessment as per observations made by DRP in the order which resulting in reducing the addition to Rs.21.98,34.275/- in place of original recommended ALP of Rs.36.34.86.455/- for the International transactions undertaken the assessee company with its associate/parent enterprise"’.

"2. Whether the DRP was justified in not appreciating the fact that bright line is a mere step [of the most appropriate method for benchmarking the AMP services] carried out to estimate and bifurcate expenditure pertaining to the taxpayer for its own routine distribution function and the expenditure incurred on AMP service provided to the AE in a situation where the assessee has not reported the international transaction pertaining to marketing function."

3. "Whether under the facts and circumstances of the case and in law the Hon'ble DRP was correct in holding that PLR cannot be the basis for computing markup on AMP expenses without appreciating the Revenue’s case wherein the PLR of banks has been used as an uncontrolled comparable to benchmark the opportunity cost of money involved and locked up in AMP expense?”

4.

"Whether in the facts and circumstance of the case and in law the Hon'ble DRP was justified in stating that routine selling and distribution expenses would not form part of AMP expenses disregarding that fact that these expenses contribute to creation of marketing intangible) even while the same is a factor for comparability analysis as different entities account for such expenditure under different heads?"

3.

At the very outset, the ld. AR stated that the grievance of the Revenue is covered in favour of the assessee and against the Revenue by the order of the Tribunal in assessee’s own case for A.Y 2011-12.

4. The ld. DR could not bring any distinguishing decision in favour of the Revenue.

5.

We have carefully considered the orders of the authorities below and the order of the Tribunal in ITA No. 527/DEL/2016. We find force in the contention of the ld. AR. An identical issue was considered by the Tribunal in vide order dated 26.11.2018. The relevant findings of the co-ordinate bench read as under:

“16. After considering the legal position as discussed in the preceding paragraphs, we are of the considered opinion that the ALP of an international transaction involving AMP expenses, the adjustment made by the TPO/DRP/AO is not sustainable in the eyes of law. At the same time, we cannot ignore the submission of the learned DR that the matter is pending before Hon'ble Apex Court and the decision of Hon'ble Apex Court would be binding upon all the authorities. In view of the above, we set aside the orders of authorities below and restore the matter to the file of the Assessing Officer. We hold that as per the facts of the case and the legal position as of now and discussed above in this order, the adjustment made by the TPO/DRP/AO in respect of AMP expenses is not sustainable. However, if the above decisions of Hon'ble Jurisdictional High Court which is under consideration before the Hon'ble Apex Court is modified or reversed by the Hon'ble Apex Court, then the Assessing Officer would pass the order afresh considering the decision of Hon'ble Apex Court. In those circumstances, he will also allow opportunity of being heard to the assessee.”

6.

Respectfully following the findings of the co-ordinate bench [supra], we decline to interfere. Grounds raised by the Revenue stand dismissed.

7.

In the result, the appeal of the Revenue in is dismissed.

The order is pronounced in the open court on 30.01.2019.

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