TOSHIBA INDIA PVT. LTD.,GURGAON vs. DCIT, CIRCLE- 25(2), NEW DELHI

Briefly stated, relevant facts are that the assessee i.e. Toshiba India P. Ltd. is a Japanese technology company specializing in advanced electronics and has been engaged in manufacturing and marketing information and communication systems, electronic components, heavy electrical apparatus, consumer products, medical diagnostic imaging equipment etc. For the Asstt. year 2014-15 they have filed their return of income on 30.11.2014 declaring a loss of Rs.36,08,68,474/-.

It was noticed that during the year under consideration, the assessee had entered into international transaction with its associate enterprises, as such, the matter was referred to the TPO for determination of the arm’s length price. It was contended before the TPO by the assessee that the AMP expenditure incurred by them does not constitute an international transaction; that the assessee had undertaken DEMPE function associated with brand and it could be construed as the economic owner of the brand and entitled to residual profits in India; that inasmuch as it is a manufacturer and not just distributor, the judgment of the Hon’ble jurisdictional High Court in the case of Sony Ericsson (2015) 55 Taxmann.com 240(Del) has no application.Assessee placed reliance on the decision of the Delhi High Court in the case of Maruti Suzuki India Ltd., in support of their contentions and that AMP expenditure is not a transaction in case of manufacturers.

Learned TPO, however, brushed aside the contentions of the assessee and proposed to enhance the income of the assessee by Rs.2,23,63,226/- and addition of Rs.78,87,40,908/- on protective basis on account of Bright Light Test (BLT). An addition of Rs.81,11,04,134/- was, accordingly, proposed in the draft assessment order u/s 144C of the Income-tax Act,,1961.

Assessee filed objections with the learned DRP and the learned DRP vide order dated 10.9.2018 gave certain directions to the learned TPO. Pursuant thereto, inasmuch as no direction has been issued by the learned DRP on the issue of substantive basis, the adjustment to the income of the tax payer on the AMP based on substantive basis was revised to nil, and in so far as the addition on protective basis is concerned, after excluding the comparable M/s Cerebra Integrated Technologies Ltd., TPO revised the same from Rs.78,87,40,910/- to Rs.73,42,99,419/- following the BLT method on the ground that the department is in appeal against the order of the Hon’ble jurisdictional High Court in the case of Sony Ericson (supra) before the Hon’ble Supreme Court.

In a coordinate bench of this Tribunal vide para 6.3 followed the decision of the another coordinate bench of this Tribunal in the case Nikon India P. Ltd., ITA No.4574/Del/2017 dated 20.9.2017 and held that in the light of the decision of the Hon’ble jurisdictional High Court in the case of Sony Ericson Mobile Communications (India (P) Ltd.(supra), no adjustment by application of BLT method could be sustained on protective basis having no statutory mandate. This finding of the Tribunal in ITA No.6531/Del/2017 for the Asstt. year 2013-14 was followed in assessee’s own case for the Asstt. year 2009-10 in ITA No.1438/Del/2018 and deleted the addition made on protective basis by following the method of BLT.

Since the facts are similar, that too in assessee’s own case and the decisions of the coordinate benches are rendered by following the decision of the Hon’ble jurisdictional High Court in the case of Sony Ericsson (supra), this Bench cannot hold the issue in some other way by taking a different view. Rule of consistency as laid down by the Hon’ble Apex court in the case of Radhasoami Satsang, 1992 AIR 377, does not permit such a course. We, therefore, while respectfully following the same, hold that the addition on protective basis by following the BLT method cannot be sustained. We answer the issue accordingly in favour of the assessee,

In the result, appeal of the assessee is allowed.