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08-03-2019, Sony India, Section 144C, 92B, 271(1 )(c), Tribunal Delhi

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2 weeks 12 hours ago #8764 by amit
Section - 144C, 92B, 271(1 )(c), 154, 92CA
Order Date - 08-03-2019
Favouring - Assessee
Court - Tribunal Delhi
Appellant - Sony India Private Ltd
Respondent - ACIT
Justice - PRASHANT MAHARISHI AM & K.N.CHARY JM
Citation - 319Taxpundit211
Appeal No. - ITA No.6372/Del/2017
Asstt. Year - 2013-14

Order

PER : PRASHANT MAHARISHI

1. This appeal is filed by the assessee against the order dated 15/09/2017 passed u/s 143 (3) read with section 144C of The Income Tax Act [ The Act] by The Additional Commissioner Of Income Tax, Special Range – 8, New Delhi [ The ld AO ] . The only issue involved in this appeal is the transfer pricing adjustment in respect of international transactions for marketing and development of marketing services based on Bright line test approach on protective basis and transfer pricing adjustment in respect of import of finished goods on account of alleged additional advertisement, marketing and promotion related functions carried out by the appellant as per intensity method on substantive basis.

2. The assessee has raised the following grounds of appeal in ITA No. 6372/Del/2017 for the Assessment Year 2013-14:-

“1. That on the facts and circumstances of the case and in law, Ld. AO erred in assessing the income of the Appellant at INR 414,94,12,230/- as against the returned income of INR 183,50,33,230/-.

2. That on the facts and circumstances of the case and in law, the Final Assessment order passed under section 143(3) read with section 144C of the Income Tax Act, 1961 (“the Act”) by the Ld. AO is bad in law as the same does not consider complete and relevant, facts, are not in accordance with provisions of law and principles of law as laid down by Hon‟ble courts. Transfer Pricing Adjustment in respect of Import of finished goods on account of alleged additional Advertisement, Marketing and Promotion related functions (“AMP functions'‟) carried out by the Appellant

3. The Ld TPO/AO have erred in law and facts of the case by not analysing the transaction as entered into but re-writing the same on imaginary basis.

4. Without prejudice to all other grounds, the Ld. TPO/AO have erred in law and facts of the case by not considering Credit Note received by the Appellant against its purchases as an operating item and Hon‟ble DRP has erred by giving ambiguous directions for the treatment, of Credit Note received by the Appellant.

5. Without prejudice to all other grounds, Hon‟ble DRP has erred, in noting that two companies considered comparable by AO/TPO, i.e., Lava International Limited and Micromax Informatics Limited are not, brand owners and hence need to be deleted.

6. Without prejudice to all other grounds, the Ld. TPO/AO have erred in not giving complete effect to directions of the Hon‟ble DRP thereby resulting in erroneous computation of demand arising from the substantive; adju.stment.

7. The Ld. TPO/AO and Hon‟ble DRP have erred in law and circumstances of the case in concluding that Appellant is engaged in performing DEMPE function and such function alleged to be performed by the Appellant are adding value to the intangibles of ALL

8. That on the facts and circumstances of the case and in law, the Ld. AO/ Ld. TPO/ Hon‟ble DRP have erred in using intensity adjustment to adjust the net profit margin of comparable companies without appreciating that intensity adjustment in principle uses the same parameters which were being used for application of Bright Line Test („BLT‟) which has already been held to be unlawful by the Delhi High Court in the case of multiple taxpayers.

9. That on the facts and circumstances of the case arid in law. the Ld. AC)/ Ld. TPO/ Hon‟ble DRP have erred in using intensity adjustment to adjust the net profit margin of comparable companies without appreciating that intensity adjustment is not required within Transactional Net Margin Method (TNMM).

10. That on the facts and circumstances of the case and in law and without prejudice to our other grounds, the Ld. AO/ Ld. TPC)/ Hon‟ble DRP have failed to appreciate that no reliable adjustment can be made for difference in intensity of functions if any, in absence of adequate and accurate data avail able in public domain.

11. That on the facts and circumstances of the case and in law and without prejudice to our other grounds, the Ld. AO/ Ld. TPO/ Hon‟ble DRP have failed to appreciate that intensity of functions is dependent on the actual conduct of the Appellant vs the comparable arid not the quantum of spend.

12. That on the facts and circumstances of the case and in law, the Ld. AO/ Ld. TPO/ Hon‟ble DRP have erred in using intensity adjustment to adjust the net profit margin of comparable companies without appreciating that intensity adjustment leads to the assumption that Appellant has not earned any benefit in terms of sales/profit out of AMP expenses and in arm‟s length situation, it would have earned a 8.5% return on every extra AMP spend. This assumption was negated by Hon‟ble Delhi High Court while rejecting BLT test.

13. Without prejudice to all other grounds, Ld TPO/AO erred in performing the intensity adjustment on all indirect expenses instead of considering the quantum of marketing related function and Hon‟ble DRP erroneously upheld the approach of the Ld. TPO/AO

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