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11-02-2019, Canon India, Section 144C, 92B, 92C(1), Tribunal Delhi

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6 months 6 days ago #8634 by amit
Section - 144C, 92B, 92C(1), 40(a)(i), 195, 9(l)(vii)
Order Date - 11-02-2019
Favouring - Assessee
Court - Tribunal Delhi
Appellant - Canon India Pvt.Ltd.
Respondent - ACIT
Justice - R.K.PANDA AM & BEENA A PILLAI JM
Citation - 219Taxpundit130
Appeal No. - ITA No. 6742/Del/2017
Asstt. Year - 2013-14

Order

PER : BEENA A PILLAI

Present appeals have been filed by assessee against final assessment orders dated 31/01/17 and 10/10/17 passed by Ld.ACIT, Circle 5 (2), New Delhi for Assessment Years 2012-13 and 2013-14 respectively. It has been submitted by Ld.Counsel that transfer pricing issues raised by assessee in these two appeals are similar and identical. Further it has been brought to our notice that only for Assessment Year 2012-13 there are corporate tax issues raised by assessee.

2. We shall first take up Assessment Year 2012-13 in ITA No.1627/Del/2017.

Grounds of appeal raised by assessee for year under consideration are as follows:

“Based on the facts and circumstances of the case Canon India Private Limited (hereinafter referred to as "the Appellant”), respectfully submits in respect of the order passed by the learned Assistant Commissioner of Income Tax, Circle 5(2), New Delhi (hereinafter referred to as the “Ld. AO”) under section 143(3) / read with section 144C of the Income Tax Act, 1961 (hereinafter referred to as the ‘’Act”) the following grounds:

A. Transfer Pricing Grounds

1. That on the facts and circumstances of the case and in law, the Assessing Officer (“AO”) has erred in assessing the total income of the Appellant under section 143(3) read with section 144C( 13) of the Act, for the relevant assessment year (“AY”) at INR 146,04,58,050 as against the returned loss of INR 33,76,80,930.

2. That on the facts and circumstances of the case and in law, the AO / Dispute Resolution Panel ('DRP') / Transfer Pricing Officer (‘TPO’) have erred in making adjustment of INR 175,91,11,274 to the arm’s length price (‘ALP’) of alleged international transaction of Advertisement, Marketing and Promotion (“AMP”) expenditure.

3. That on the facts and circumstances of the case and in law, the orders passed by the AO/TPO were bad in law as the prerequisite for applying Chapter-X, i.e., existence of an international transaction between two Associated Enterprises (“AE”) under section 92B of the Act, was not satisfied or existed as there was no agreement, understanding or arrangement between the Appellant and the AE for incurrence of such expenditure by the Appellant. Further, the DRP erred in upholding the action of the lower authorities.

3.1. That on the facts and circumstances of the case and in law, the AO / DRP / TPO have erred in holding that the unilateral arrangement between the Appellant and Indian third parties for advertisement and promotion would be a “transaction” much less an “international transaction” within the meaning of Chapter X of the Act.

4. Notwithstanding and without prejudice, the orders passed by the AO / TPO were bad in law as the unilateral AMP expenditure incurred by the Appellant was categorized as 'international transaction’ under chapter X of the Act, contrary to law in as muchthe AO neither granted the Appellant a proper opportunity of being heard, nor recorded his satisfaction in respect thereof.

5. That on the facts and circumstances of the case and in law, the TPO erred in recharacterizing the unilateral AMP expenditure being payments made by Appellant to independent third parties as an ‘international transaction' under chapter X of the Act and particularly when the jurisdiction of the TPO is limited only to compute ALP of the international transaction. Further, the DRP erred in not adjudicating the objections challenging the jurisdiction of the TPO in this regard.

6. That on the facts and circumstances of the case and in law the AO / DRP / TPO have erred in making an adjustment of INR 175,91,11,274 in respect of alleged international transaction pertaining to excess AMP expenditure, alleging that the same to be not at arm’s length in terms of the provisions of sections 92C(1) and 92C(2) of the Act read with Rule 10B of the Income-tax Rules, 1962 (“the Rules”).

7. That on the facts and in the circumstances of the case and in law, the AO / DRP / TPO erred in alleging that AMP expenses paid to unrelated third parties in India are excessive and further erred in holding that the incurring of excessive AMP expenditure has resulted in creation of marketing intangible in favor of AE, for which it should be compensated by the AE.

8. That on the facts and circumstances of the case and in law, the AO / DRP / TPO have erred in re-characterizing the Appellant as service provider rendering brand building services to its AE, without appreciating that it is a full risk bearing distributor incurring AMP expenditure in the course of its own business to promote its sales in India.

Notwithstanding and without prejudice to the above grounds that the AMP expenditure incurred by the Appellant does not constitute an international transaction under

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