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Jt. Commissioner of Income Tax, Circle 6(1), Room No. 413, CR Bldg., New Delhi 110 002 VS. M/s Mailbu Estate Pvt. Ltd., 38, DDA Commercial Complex, Kailash Colony Extn., New Delhi 110 048
December, 17th 2013
            DELHI BENCH: `I' NEW DELHI

                      I.T.A .No.-6135/Del/2012
                  (ASSESSMENT YEAR-2007-08)

ACIT                           Vs. M/s Casio India Co.
Circle-3(1)                        (P)Ltd., 210 1st Floor,
New Delhi                          Okhla Industrial Estate-
                                   III, New Delhi.
                                   PAN: AAACC3448H

(APPELLANT)                               (RESPONDENT)
                     I.T.A .No.-5611/Del/2012
                  (ASSESSMENT YEAR-2008-09)

M/s Casio India Co.            Vs.        DCIT
(P)Ltd., 210 1st Floor,                   Circle-3(1)
Okhla Industrial Estate-                  New Delhi
III, New Delhi.
 (APPELLANT)                              (RESPONDENT

                Revenue by:- Sh. Peeyush Jain, CIT. DR
                Assessee by:- Shri Deepak Chopra, Adv.



     These two appeals - one by the Revenue for the
Assessment Year 2007-08 and the other by the assessee for

the Assessment Year 2008-09 involve common issue about
the Transfer Pricing Adjustment in respect of Advertising,
Marketing & Promotion (AMP) expenses.      Since both the
appeals are based on similar facts, we are therefore,
proceeding to dispose them off by this consolidated order
for the sake of convenience.

A.Y. 2007-08
2.   The only issue raised by the Revenue through various
grounds is about the deletion of addition on account of
AMP expenses. The facts apropos this issue are that the
assessee is a wholly owned subsidiary of Casio and
Computer Company Ltd., Japan (hereinafter called `Casio
Japan'). The assessee distributes watches and consumer
information products and other related products of Casio
Japan, in India. The assessee entered into certain
international transactions with Casio Japan which were
benchmarked on `Transactional Net Margin Method'
(TNMM). On a reference made by the AO, the Transfer
Pricing Officer (TPO) noticed that the assessee incurred a
certain sum on the AMP expenses. Out of that, a sum of

Rs.2,63,50,982/- was held to be towards developing
marketing intangibles for the Associated Enterprise (AE).
As against that, only a sum of Rs.1,02,13,645/- was
reimbursed by the AE. Adding in mark-up of 14.93% on
the differential amount, the TPO proposed adjustment
accordingly. The assessee challenged the same before the
ld. first appellate authority, who vide the impugned order
dated 28.9.2012, deleted the addition by holding that the
assessee is a sole distributor of Casio products in India and
all the products imported from Casio Japan were sold as
such without any further value addition. The AMP
expenses were found to have been incurred as a part of its
distribution function and the benefit accruing to the AE was
only incidental benefit. Since the assessee was a full fledge
distributor, the ld. CIT(A) held that there was no
justification in calculating some benefit of AMP expenses
going to Casio Japan and resultantly no further mark-up
was warranted. This resulted in the deletion of addition.
The Revenue is in appeal against this deletion.

3.   We have heard the rival submissions and perused the
relevant material on record. It is noticed that the Special
Bench of the Tribunal in LG Electronics India Pvt. Ltd. Vs.
ACIT 2013 152 TTJ (Del) (SB) 273, by majority decision,
has inter alia held that incurring of AMP expenses towards
promotion of brand, legally owned by the foreign AE,
constitutes a `transaction'.       The contention that no
disallowance could be made out of AMP expenses by
benchmarking them separately when the overall net profit
rate declared by the assessee was higher than other
comparable cases also came to be specifically rejected by
the special bench. Resultantly, the transfer pricing
adjustment in relation to such AMP expenses was held to
be sustainable in principle. In the eventual order, the
Special Bench restored the matter to the file of the AO/TPO
for fresh determination of Transfer Pricing Adjustment in
relation to AMP expenses. In order to enable the
determination of correct ALP of AMP expenses, the
Tribunal listed out 14 parameters in Para 17.4 of its order
which should be examined by the AO/TPO before reaching
the final conclusion about the warrant for a TP Adjustment

on this score. It is relevant to note that there were 22
interveners in this case, some of which were distributors,
while others were licensed manufacturers. While setting out
14 parameters, the Special Bench has held vide first
parameter that the AO/TPO should ascertain as to whether
the Indian AE is simply a distributor or is holding a
manufacturing license from its Foreign AE. The second
parameter talks of examining as to whether or not the
Indian AE is a full fledge manufacturer and whether it is
selling the goods purchased from the Foreign AE as such or
is making some value addition to the goods purchased
from its Foreign AE before selling it to customers.      Thus
there is not even a slightest doubt that the special bench
order not only applies to a `Manufacturer', but also extends
to a distributor, whether he is a bearing full risk or least
risk. Thus, such tests are applicable with full vigor to the
extent applicable, to the distributors. There is nothing in the
special bench order which restricts its operation only to the

4.   Adverting to the facts of the instant case, it is noticed
that the ld. CIT (A) deleted the addition by observing that
the assessee was a full fledge distributor and as such the
benefit of AMP expenses did not spill over to the foreign
AE. It is manifest that the decision taken by the ld. CIT
(A) is not in confirmity with the Special Bench decision
which also inter alia considered the case of a full fledge
distributor and directed the AO/TPO to decide the ALP of
AMP expenses as per the parameters laid down in the
order. We are, therefore, not inclined to uphold the view
canvassed by the ld. CIT(A).

5.   Before parting with the matter, we would like to
mention that the ld. AR relied on an order dated 16.8.2013
passed by the Delhi Bench of the Tribunal in the case of
BMW India Pvt. Ltd. Vs. Additional CIT (Del). It was
argued that the Tribunal in that case noticed that the
assessee was a full fledge distributor and after considering
the matter at length has held that no adjustment on account
of AMP expenses was called for. It was therefore, argued
that the order in the case of BMW India Pvt. Ltd. should be

followed in preference to the special bench order in LG
Electronics and the deletion of addition be upheld.

6.   In our considered opinion this contention does not
merit acceptance because the Special Bench order in the
case of LG Electronics is applicable with full force on all
the classes of the assessees, whether they are licensed
manufacturers or distributors. As noticed above, it did refer
to a case of distributor as well, whether bearing full or
minimal risk.   It was only thereafter that the matter of
determination of ALP of AMP expenses, in all types of
assessees, was restored to the AO / TPO in the light of the
parameters laid down therein. It is clear that the Bench in
the later order of BMW did not have any occasion to
bestow its attention to the correctness of the application by
the TPO of the aforesaid parameters laid down in the
special bench order as these were naturally not considered
by the Officer since he passed his order much before the
advent of the special bench order. There is no prize for
guessing that Special Bench order has more force and

binding effect over the Division Bench order on the same
issue. This contention raised by the ld. AR, therefore, fails.

7.   We therefore, set aside the impugned order and remit
the matter to the file of the AO / TPO to decide this issue
afresh in confirmity with the Special Bench decision in the
case of LG Electronics (Supra).

A.Y. 2008-09
8.   At the very outset, the ld. counsel for the assessee
candidly accepted that the facts and circumstances of the
appeal for the current year were mutatis mutandis similar to
those for the preceding year, except for the fact that in this
year the addition was confirmed by the ld. CIT (A) as
against its deletion in the preceding year.    No     separate
arguments were advanced by the either side.

9.   In view of the admitted similarity of facts for both the
years, following the view taken hereinabove for the
Assessment Year 2007-08, we set aside the impugned order
for this year as well and remit the matter to the file of the

AO / TPO for fresh determination of ALP in respect of
AMP expenses in accordance with our observations.

10. In the result, both the appeals are allowed for
statistical purposes.

Order pronounced in the open Court on 13/12/2013.

             Sd/-                           Sd/-

     ( A. D. JAIN )                  (R. S. SYAL)
Dated: 13/12/2013
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)

                                    ASSISTANT REGISTRAR

                                            Date     Initial
1.    Draft dictated on                  12-12-                PS
2.    Draft placed before author         13-12-                PS
3.    Draft proposed & placed before the                       JM/AM
      second member
4.    Draft discussed/approved by Second                       JM/AM
5.    Approved Draft comes to the 13/12/13                     PS/PS
6.    Kept for pronouncement on           13/12/13             PS
7.    File sent to the Bench Clerk                             PS
8.    Date on which file goes to the AR
9.    Date on which file goes to the Head
10.   Date of dispatch of Order.
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