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Amadeus India Pvt. Ltd. E-9, Connaught House, Connaught Place, New Delhi vs. ACIT, New Delhi
February, 27th 2019
            IN THE INCOME TAX APPELLATE TRIBUNAL
                  DELHI BENCH: `I' NEW DELHI

       BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER
                           &
     SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER

            Stay Application no. 475-476/Del/2018
        (Arising out of ITA no. 1811 & 7691/Del/2017)
              (Assessment Year: 2012-13, 2013-14)

Amadeus India Pvt. Ltd.   Vs. ACIT,
E-9, Connaught House,        New Delhi
Connaught Place, New
Delhi
PAN : AAACA0364L

Appellant                    Respondent


 Assessee by : Sh. Tarundeep Singh & Tarun Singh, Adv.
 Revenue by : Shri Sanjay I.Bara, CIT-DR & Sh. Sandeep Kr.
               Mishra, Sr. DR

                 Date of Hearing         30.01.2019
              Date of Pronouncement      27.02.2019

                    ITA no. 1662/Del/2016
                   Assessment Year : 2011-12


Amadeus India Pvt. Ltd.   Vs. ACIT,
E-9, Connaught House,        New Delhi
Connaught Place, New
Delhi
PAN : AAACA0364L

Appellant                    Respondent



 Assessee by : Sh. Tarundeep Singh, Adv.
 Revenue by : Shri Sanjay I.Bara, CIT-DR
                                 2    Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                                    (Amadeus India P. Ltd.)

                        Date of Hearing                     29.01.2019
                     Date of Pronouncement                  27.02.2019

                                           ORDER

PER SUDHANSHU SRIVASTAVA, J.M.                         :

      These          appeals     have      been     filed    challenging       additions/

disallowances made by the Assessing Officer (AO) in the final order of

assessment passed u/s 144C/143(3) of the Income Tax Act, 1961

(hereinafter called `the Act') for Assessment Years 2011-12 to 2013-

14. Since, both the parties agree that facts for all the years are

common          we    first    take   up     for   consideration       appeal         in   ITA

No.1662/Del/2016 for AY 2011-12.

2.0      This appeal has been filed by assessee being aggrieved against

final order of assessment dated 30th January, 2016 passed by the Dy.

Commissioner of Income Tax, Circle 2(2), New Delhi. The impugned

order has been passed by the AO in conformity with the directions

issued by Ld. Disputes Resolution Panel (DRP) vide order dated 31st

December, 2015.

2.1      Following grounds of appeal have been raised:-

      "1.   That on facts and in law the orders passed by the Assessing
      Officer (hereinafter referred as the "AO") / Dispute Resolution
      Panel (hereinafter referred as the "DRP) / Transfer Pricing Officer
      (hereinafter referred as the "TPO") are bad in law and void ab-
      initio.
                       3     Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                           (Amadeus India P. Ltd.)

1.1   Without prejudice, on facts and in law, the TPO/DRP erred in
not granting a proper opportunity of being heard and thereby
violating the settled principals of audi alteram partem.

2.    That on facts and in law the AO/TPO/DRP erred in making /
proposing/upholding           an     addition       to    total     income   of
Rs.114,98,39,926/- under Chapter X of the Income Tax Act, 1961
(hereinafter referred as "the Act").

3.    That on facts and in law the AO/TPO/DRP erred in making /
proposing/upholding            Transfer        Pricing       adjustment      of
Rs.114,98,39,926/- on account of Advertisement, Marketing and
sales promotion expenses

3.1.That on facts and in law the AO/TPO/DRP erred in not
appreciating that in absence of a "transaction" as envisaged
under section 92F of the Act between appellant and its AE for
brand promotion or for establishing a marketing intangible the
TPO had no jurisdiction to propose adjustment on account AMP
expenses.

3.2.That on facts and in law the TPO erred in holding and the DRP
inter alia erred in upholding / observing that the :

      (i)   Appellant had incurred AMP expenditure totaling to
            Rs.94,31,24,844/- on promotion of proprietary marks
            and for development of marketing intangible for the
            benefit of AE.

      (ii) AMP expenditure of Rs. 94,31,24,844/- incurred by the
            assessee is an "International Transaction" u/s 92B of
            the Act.
                           4     Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                               (Amadeus India P. Ltd.)

           (iii) AMP transaction is being made at the behest and under
               control of the AE.

           (iv) AE is directly benefited by any expenditure incurred by
               assessee on AMP.

           (v) Legal ownership of the marketing intangible would get
               transferred to the AE without any consideration on
               termination of the Distribution Agreement.

           (vi) Applying       transaction-by-transaction          approach      AMP
               transaction is to benchmarked in a segregated manner.

           (vii) "International Transaction" on account of AMP expenses
               cannot be benchmarked applying TNMM as the Most
               Appropriate method.

    4.     Without prejudice, that on facts and in law the AO/TPO/DRP
    erred in not appreciating that the alleged transactions of AMP
    were "closely linked" with the main activity carried on by the
    appellant and hence it cannot be segregated and benchmarked on
    a stand-alone basis.

    5.     That on facts and in law the TPO erred in making TP
    adjustment     of   Rs.      114,89,41,243/-         disregarding       following
    directions issued by DRP ;

    (a)    Rejecting use of "Bright Line" method for benchmarking AMP
expenses

    (b)    Excluding Selling Expenses from the ambit of AMP.

    5.1    That on facts and in law the TPO erred in making TP
    Adjustment on account of AMP expenses invoking "Bright Line
    Method".
                   5   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                     (Amadeus India P. Ltd.)

5.2   That on facts and in law the TPO erred in treating
Expenditure of Rs.89,50,72,373/- incurred by the assessee as
"incentives" akin to AMP expenditure.

6.    That without prejudice on facts and in law the TPO/DRP
erred in making / upholding the applicability of a markup of
26.42% on the alleged excessive AMP expenses incurred by the
appellant on behalf of the Associated Enterprise.

7.    That on facts and in law the TPO/AO/DRP erred in
proposing/making/upholding an adjustment of Rs.8,98,683/- on
account of alleged "transaction" for notional interest attributable
to delayed payments receivable from the AE.

7.1   Without prejudice, that on facts and in law the TPO/DRP
erred in not appreciating that once the "international transactions"
executed by the appellant under the Distribution Agreement with
Amadeus Spain have been accepted to be at ALP applying TNMM
as the Most Appropriate Method then no further adjustment on
account of advertising, marketing and promotional expenditure
(hereinafter referred to as "AMP") or notional interest attributable
to delayed payments receivable from the AE was called for.

8.    Without prejudice, that on facts and in law the AO/TPO/DRP
erred in not appreciating that the alleged transactions of AMP and
notional interest are "closely linked" with the main activities
carried out under the Distribution Agreement and hence they
cannot be segregated and benchmarked on a stand-alone basis.

9.    That on facts and in law the AO/ DRP erred in restricting
allowance for deduction u/s 10A of the Act to Rs.59,39,683/- as
                           6     Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                               (Amadeus India P. Ltd.)

      against a deduction of Rs.17,70,80,634/- claimed by the
      appellate in its return of income.

      9.1   That on facts and in law the AO/DRP erred in holding /
      upholding that Data Processing Receipts pertaining to Unit-II are
      not eligible for claiming benefit of deduction u/s 10A of the Act.

      9.2   That on facts and in law the AO/DRP erred in denying
      benefit of deduction u/s 10A of the Act as claimed in the return by
      erroneously being influenced by the findings recorded by
      appellate courts in cases relating to the AE.

      9.3   That on facts and in law the AO/DRP erred in holding that
      the appellant has not been able to establish with evidence that it
      has rendered data processing services which are eligible for claim
      of deduction u/s 10A of the Act.

      10.   That   on    facts    and     in   law     the    AO/DRP        erred   in
      charging/upholding levy of interest u/s 234A, 234B & 234C of
      the Act.

      11.   That on facts and in law, the assumption of jurisdiction by
      the AO/TPO to determine Arm's Length Price is bad in law and
      void ab-initio."

2.2         Thus, in crux, the assessee is aggrieved by the following

additions/disallowances made by the AO in the instant case:-

      (a)   Transfer Pricing Adjustment on account of alleged excessive

      Advertising Marketing and Promotion (AMP) expenditure of

      Rs.114.89 crores.
                                7    Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                                   (Amadeus India P. Ltd.)

       (b)    Transfer Pricing Adjustment of Rs.8,98,683/- on account of

       alleged transaction for notional interest on receivables.

       (c)    Disallowance u/s 10A of the Act

2.3       The first issue in dispute arising out of grounds 2 to 6 of

appeal pertains to Transfer Pricing Adjustment on account of

excessive AMP expenditure of Rs.114.89 crores.                      Briefly stated, the

relevant facts in this regard are that the assessee M/s Amadeus India

Pvt. Ltd. is an Indian Company whose share holding is as under:-

      M
                                                 Bird Travels Private Limited
      Mrs. Radha Bhatia and Family
                                              (100% ownership with Mrs. Radha
           (all Indian nationals)
                                                      Bhatia and Family)




Shareholding 95%                                                   5% shareholding


                                Amadeus India Private Limited




                                     Board of Directors



                                       Mrs. Radha Bhatia
                                       Mr. Ankur Bhatia
                                       Mr. Vijay Bhatia
                         8   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                           (Amadeus India P. Ltd.)

2.4      As per the deeming provisions of section 92A (2)(g) of the Act,

the Associated Enterprise (AE) of the assessee i.e., M/s Amadeus IT

Group SA {also known as "Amadeus Spain"} has developed a fully

automated reservation and distribution system i.e., Computerized

Reservation System (CRS) with an ability to perform comprehensive

information, communications, reservations, ticketing and related

function on world-wide basis. Undisputedly, the deemed AE has no

ownership, control or any share-holding in the assessee company and

neither does it participate in management of the assessee. The AE

relationship is owing to the deeming provisions of section 92A(2)(g).

The said CRS system is used by airlines, hotels, tour operators, car

rental companies and others to market or distribute their service

products for other information.

2.5      The assessee entered into an agreement with M/s Amadeus

Spain on 1st October, 2004. The main activity of the assessee is to

provide connectivity to the subscribers in India to the host the CRS

system     by    creation/modification/up-gradation             of     computer

programmes online. The assessee has a data processing centre, which

provides the above services to the deemed AE. In the Transfer Pricing

(TP) Study, the assessee has declared the following international

transactions with its deemed AE:
                             9   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                               (Amadeus India P. Ltd.)


 Nature of Transaction                    Method                       Value (Rs)

Provision of Information                  TNMM                     231,71,32,514
Technology        Enabled
Services (ITeS)

Receipt      of       Data                                             9,40,17,116
Processing Services




2.6       In the Transfer Pricing study, the assessee had followed the

Transaction Net Margin Method (TNMM) to substantiate the Arm's

Length Price (ALP) of above disclosed international transaction/s

pertaining to provision of ITES Services with its deemed AE and

accordingly it compared the net operating profit/total cost (OP/TC)

earned by it with the mean OP/TC of the comparable companies

selected by it and concluded that since the OP/TC of the assessee is

higher than the mean OP/TC of comparable companies, the disclosed

international transaction are at Arms' Length Price. In order to verify

this, the AO made a reference to the Transfer Pricing Officer (TPO).

The TPO has accepted the benchmarking of the above declared

international      transactions.     In    this    regard      after     a   detailed

benchmarking of the disclosed international transaction/s, the TPO

has, at page 69 of order dated 20th January, 2015, held that "from

above it can be seen that the international transaction of taxpayer in

respect of ITES is within + / - 5% of arms length price".
                              10     Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                                   (Amadeus India P. Ltd.)

2.7    The TPO, however, observed that the assessee had incurred

more than normal AMP expenses to build "Amadeus" brand in India

which is legally owned by M/s Amadeus Spain. The TPO held that the

assessee should have been reimbursed with appropriate mark-up on

such excessive AMP expenditure identified by him by applying the

Bright Line Test (BLT). In his order, the TPO has identified the said

abnormal AMP expenses by applying the bright line method i.e., by

comparing the AMP as a percentage to sales of the assessee with

average AMP as a percentage of the comparable companies finally

selected by him for benchmarking the main functions of the assessee.

Thereafter, by applying a mark-up of 11.69%, the TPO has computed

the final adjustment for the alleged transaction of brand promotion as

under:-

                                              TPO Order dated 20-   TPO      order    dated
                                              01-2015               28.02.2016        giving
                                                                    effect to DRP

       Value of Gross Sales                     Rs 231,73,07,014        Rs 231,73,07,014

       AMP/Sales of the Comparables                        1.48%                     1.48%

       Amount that represent bright line           Rs 3,42,96,144          Rs 3,42,96,144

       Expenditure on AMP by assessee            Rs 94,31,24,844          Rs 94,31,24,844

       Expenditure in excess of bright line      Rs 90,88,28,700          Rs 90,88,28,700

       PLI                                               11.69 %                     26.42%

       Markup                                    Rs 10,62,42,075          Rs 24,01,12,542

       Cumulative addition                      Rs 101,50,70,775        Rs 114,89,41,243
                             11   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                                (Amadeus India P. Ltd.)

2.8      Being aggrieved by the above proposed transfer pricing

adjustment, the assessee filed detailed objections before the Ld. DRP.

The Ld. DRP, while referring to decision of the Hon'ble Delhi High

Court in the case of Sony Ericsson Mobile Communications reported

in 374 ITR 118(Del), has examined the contentions put forth by the

assessee before it as under:-


Sub Grounds of Appeal summarized Sony Ericsson High Court order dt.16
as per issue from Form 35A                March, 2015

Re-characterization    of   expenses Upheld at Para 64 page 48 of 142 and
incurred for own business as a service para 147, page 111
to AE is not justified                 The burden is on the assessed to
                                       select and justify the method adopted
                                       and the arm's length price declared
                                       under sub-section (3) to section 92C,
                                       the Assessing Officer can proceed to
                                       determine the arm's length price in
                                       accordance with Section 92C(1) and
                                       (2) on the basis of material,
                                          Information or documents in his
                                          possession,       if    any of the
                                          circumstances mentioned in clauses
                                          (a) to (d) are satisfied -

The AMP expenses incurred by the          AMP expense is an international
assessee, qua independent parties,        transaction. (Paras 52 & 53 of the
are domestic transaction and not          judgment) :
international transaction as defined in   The TPO has jurisdiction to determine
section 92B of the Act.                   the     ALP   of  the    international
                                          transaction of AMP expenses (para 50
                                          of the judgment);
                                          Discussion under the heading C para
                                          51-57, the substantial question of law
                                          answered in favor of Revenue.
                            12   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                               (Amadeus India P. Ltd.)

                                        AO/TPO can segregate AMP expenses
                                        as an independent international
                                        transaction, but only after elucidating
                                        the grounds and reasons for not
                                        accepting the bunching adopted by the
                                        assessed and examining and giving
                                        benefit of set off under 92(3).

Assessee is already remunerated for Para 134 Page 103
the activities performed by it.     Owner of the marketing intangible
                                    should adequately compensate the
                                    domestic AE incurring costs towards
                                    marketing activities by reimbursement
                                    of expenses or by sufficient and
                                    appropriate return.

Bright Line Test, applied by the Ld. Para 194, sno X, page 139
TPO/LD. AO, is not permitted by the
                                     Bright Line Test has no statutory
transfer pricing regulations         mandate.
                                        Bright Line test cannot be applied to
                                        work out non-routine AMP expenses
                                        for benchmarking [Para 194 (x)];

The AMP expenses incurred by the        Page 140
assessee already benchmarked by         AO for good and sufficient reasons
applying   TNMM       so  separate
                                        can       de-bundle     interconnected
benchmarking not required               transactions,       is      segregated
                                        distribution,   marketing    or   AMP
                                        transactions       when        bundled
                                        transactions cannot be adequately
                                        compared on an aggregate basis.
                                        ALP of AMP expenses should be
                                        determined preferably in a bundled
                                        manner with the distribution activity
                                        (Paras 91,121 & others);

Value     of    alleged international Page. 137
transaction    has been determined The assessed, i.e., the domestic AE
incorrectly                           must be compensated for the AMP
                                      expenses by the foreign AE. Such
                                      compensation may be included or
                                      subsumed in low purchase price or by
                            13     Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                                 (Amadeus India P. Ltd.)

                                          not charging or charging lower royalty.
                                          Direct compensation can also be paid.
                                          The      method      selected     and
                                          comparability analysis should be
                                          appropriate and reliable so as to
                                          include the AMP functions and costs.

The Ld.AO/Ld.TPO has             selected AMP is a separate function. An
inappropriate comparables                 external comparable should perform
                                          similar AMP functions. [Paras 165 &
                                          166];
                                          For determining the ALP of these
                                          transactions in a bundled manner,
                                          suitable      comparables       having
                                          undertaken     similar  activities  of
                                          distribution of the products and also
                                          incurring of AMP expenses, should be
                                          chosen (Paras 194(i), (ii), (viii) &
                                          others);
                                          The AO/TPO can reject a method
                                          selected by the assessed for several
                                          reasons including want of reliability in
                                          the factual matrix or lack / non-
                                          availability of comparables (see
                                          Section 92C(3) of the Act). Page 138
                                          When the AO/TPO rejects method
                                          adopted by assessed, he is entitled to
                                          select    MAM,    and      undertake
                                          comparability analysis. Selection of
                                          method and comparables should be
                                          as per the command and directive of
                                          the Act and Rules and justified by
                                          giving reasons.
                                          The choice of comparables cannot be
                                          restricted only to domestic companies
                                          using any foreign brand (para 120);
                                          If no comparables having performed
                                          both the functions in a similar manner
                                          are     available,     then,    suitable
                                          adjustment should be made to bring
                                          international      transactions     and
                                          comparable transactions at par [para
                       14   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                          (Amadeus India P. Ltd.)

                                   194(iii)];
                                   If adjustment is not possible or
                                   comparable is not available, then, the
                                   TNMM on entity level should not be
                                   applied [Paras 100, 121, 194(iii) & (vi)]
                                   For determining the ALP of these
                                   transactions in a bundled manner,
                                   suitable      comparables       having
                                   undertaken     similar  activities  of
                                   distribution of the products and also
                                   incurring of AMP expenses, should be
                                   chosen [Paras 194(i), (ii), (viii) &
                                   others]; The choice of comparables
                                   cannot be restricted only to domestic
                                   companies using any foreign brand
                                   [Para 120];

Arbitrary Mark up                  PLR cannot be the basis for computing
                                   markup on AMP expenses as an
                                   international transaction. Mark-up as
                                   per sub-clause (ii) to rule 10B(1)©
                                   would be comparable gross profit on
                                   the cost or expenses incurred as AMP.
                                   The mark-up has to be benchmarked
                                   with      comparable       uncontrolled
                                   transactions or      transactions for
                                   providing similar service/product. The
                                   Revenue's stand in some cases
                                   applying the prime lending rate fixed
                                   by the Reserve Bank of India with a
                                   further mark-up, is mistaken and
                                   unfounded. Interest rate mark-up
                                   would      apply    to    international
                                   transactions granting/availing loans,
                                   advances, etc.




2.9        The Ld. DRP has, however, upheld the transfer pricing

adjustment proposed by the TPO. In this regard it is noted by the Ld

DRP that tax department has filed an SLP before the Hon'ble Apex
                         15   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                            (Amadeus India P. Ltd.)

Court and, thereafter, to the extent the decision of the Hon'ble Delhi

High Court in case of Sony Mobile (supra) is prejudicial to the interest

of the revenue, relief cannot be granted to the assessee at this stage.

Thus, even on issues decided in favor of the assessee by the Hon'ble

High Court in Sony Mobile (supra), relief has been withheld by the Ld

DRP.

2.10 .      Being aggrieved, the assessee is now in appeal before us.

3.0      In this regard, the Ld. AR Sh. Tarandeep Singh, at the outset,

submitted that in absence of a "transaction" between the assessee

and its deemed AE for incurring AMP expenditure on behalf of the AE,

the impugned adjustment deserved to be deleted. It is submitted that

this is a jurisdictional issue which merits adjudication at the outset.

It was submitted by the Ld. AR that lower authorities have held that

there exists an international transaction for brand promotion

premised following facts/material:

(a)    Distribution Agreement dated 01st October 2004;

(b)    Loyalty Agreement with various subscribers;

(c)    Findings recorded by the ITAT in case of AE {reported in 113 TTJ
       767 (Del)} wherein it is held that the assessee constitutes a
       Dependent Agency Permanent Establishment of the AE;

(d)    Amendments made to provisions of section 92B by Finance Act
2012;
                         16   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                            (Amadeus India P. Ltd.)

(e)   Decision given by the Special Bench of ITAT in case of LG
      Electronics reported in 140 ITD 41 (Del) (Trib);

(f)   Decision of the Hon'ble Delhi High Court in the case of Sony
      Ericsson Mobile (supra).

3.1     In this regard, the Ld. AR, in his written synopsis, has

submitted as under:-

      "1. At the outset it is relevant to note that a detailed analysis
      was conducted by the TPO vis a vis benchmarking analysis
      adopted by the `A' for reported International Transactions of
      Provision of ITeS Services and Receipt of Data Processing
      Services. TPO accepts that the margins disclosed are within
      Arm's Length....conclusion at @ pages 309 to 313, para 10 and
      10.1

      2.   Issue as to whether there exists a "transaction" for brand
      promotion in the instant case is now settled by appellate orders
      passed in case of `A' for earlier assessment years. Kind
      reference in this regard is invited to the decision of Hon'ble ITAT
      in for AY 09-10 reported in 52 ITR(T) 83 {copy enclosed at pages
      409 to 447 of PB filled in Stay Nos 475 & 476/Del/2018}.
      Hon'ble ITAT after considering the facts of the case has held that
      in absence of a "transaction" for brand promotion between `A'
      and its AE no TP adjustment for alleged AMP expenses can be
      made. Kind reference is invited to following extracts of Hon'ble
      ITAT decision:

      (a) TPO accepts that "International Transaction" for Provision of
      ITeS Services are at ALP applying TNMM....page 421, para 8
                   17   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                      (Amadeus India P. Ltd.)

(b) Jurisdictional Issue questioning existence of "transaction" for
brand promotion merely premised benefit to AE taken up for
consideration.....page 421-422, para 8

(c)   Argument of DR praying for remand rejected. Held, that all
necessary facts are on record ­ effect is to be given to decisions
of Jurisdictional High Court which are direct on this issue....page
422, para 8.1

(d) Jurisdictional High Court decisions in case of Maruti Suzuki
India Ltd. reported in 381 ITR 117(Del), Whirlpool of India
Ltd. reported in 381 ITR 154(Del) and Bausch & Lomb Eyecare
(India) (P.) Ltd. reported in 381 ITR 227(Del) followed .... pages
422 to 425, para 8.1

(e) TPO's reliance on Distribution Agreement for construing
existence of "transaction" rejected ...page 425-426, para 8.2

(f)   At page 426, para 8.3 Hon'ble ITAT rejected following
findings /observations made by lower authorities:

-     Special Bench decision in case of LG Electronics (supra) no
more a good law

-     Amendments made to section 92B by Finance Act 2012 do
not support the case of revenue

-     The fact that `A' has been held to be a DAPE in assessment
of its AE is irrelevant to determination of issue under
consideration

Premised above factual findings it has been held (refer page 427,
para 8.4) by Hon'ble ITAT in AY 09-10 that "Considering the
material facts like the absence of an agreement, arrangement or
understanding     between     the   appellant      and     its   associated
                   18   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                      (Amadeus India P. Ltd.)

enterprise   for   sharing   the    advertisement,       marketing      and
promotion expenses or for incurring the advertisement, marketing
and promotion expenses for the sole benefit of the associated
enterprise, payments made by the appellant under the head
"advertisement, marketing and promotion" to the domestic parties
cannot be termed as an "international transaction" specifically
when the learned Transfer Pricing Officer has not been able to
prove that the expenses incurred were not for the business
carried out by the appellant in India."

Since the jurisdictional issue was decided in favour of `A' it was
held that other grounds of appeal have become infructuous.

3.   Decision rendered by Hon'ble ITAT in AY 09-10 has been
upheld by Hon'ble High Court vide order dated 26.04.2017 in
ITA No. 154/2017....copy enclosed at pages 515-516.

4.   The above decisions have thereafter also been followed by
Hon'ble ITAT in case of `A' for AY 2010-11 in ITA No.
1835/Del/2015 vide order dated 23.10.2017.....copy enclosed at
pages 448 to 492 ­ conclusions on this issue are at pages 463 to
475, para 4.4 to 4.7.






5.   In AY 2011-12 TPO has also relied upon Loyalty Agreement
with various Subscribers. Payment of Loyalty incentive to
Subscribers has been held to be a Selling Expense by Hon'ble
ITAT in AY 2008-09 vide order dated 06.03.2014 reported in 149
ITD 496(Del) copy enclosed at pages 405 to 408, relevant
conclusions at page 408, paras 7 and 8."
                           19   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                              (Amadeus India P. Ltd.)

4.      On the other hand, the Ld. CIT (DR) vehemently opposed the

submissions made by the Ld. AR. By relying on the orders passed by

the TPO and the Ld. DRP it was submitted by him that the lower

authorities have, for fair reasons, concluded that there exists an

international transaction between the assessee and its AE for brand

promotion.

5.0      We have carefully considered the submissions made by both

the sides and have also perused the material available on record. It is

seen that the issue in dispute has been decided in favour of the

assessee by the coordinate Bench of this Court in earlier assessment

years and the order passed by the coordinate Bench for A.Y.2009-10

has also been upheld by the Hon'ble Jurisdictional High Court. In

earlier years the issue in dispute has been decided in favour of the

assessee by the coordinate Bench by taking into consideration the

following decisions of the Hon'ble Jurisdictional High Court:-

(i)     Maruti Suzuki India Ltd. vs. CIT reported in 381 ITR 117 (Delhi);

(ii)    CIT vs. Whirlpool of India Ltd. reported in 381 ITR 154 (Delhi);

(iii)   Honda Siel Power Products Ltd. vs. Dy. CIT reported in 237
Taxman 304 (Delhi);

(iv)    Bausch and Lomb Eyecare (India) Pvt. Ltd. v. Addl. reported in
CIT 381 ITR 227 (Delhi);
                         20   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                            (Amadeus India P. Ltd.)

5.1         In the year under consideration there is no change in the

facts and circumstances of the case as compared to A.Y. 2009-10 and

even the agreements between assessee and the AE continue to be

operational for the year under consideration. We, therefore, concur

with the reasoning given by the coordinate Bench for A.Y. 2009-

10,wherein, it is held as under:-

      "8. We have considered the submissions made by the parties and
      have also perused the material available on record. Undisputedly,
      the main data processing and subsidiary distribution activities of
      the appellant have been held to be at the arm's length price
      applying the transactional net margin method. Provision of the
      information technology enabled services to associated enterprise
      under the agreement has been thoroughly benchmarked by the
      Transfer Pricing Officer. Most appropriate method being the
      transactional net margin method has not been doubted and after
      an in-depth analysis of comparable companies selected by the
      appellant and by tinkering with the same the learned Transfer
      Pricing Officer has given a finding that OP/OC of the assessee is
      20.27 per cent and OP/OC of revised comparable set is 23.94 per
      cent. No adjustment made on this account has been made as the
      difference is within + five per cent range. The learned Transfer
      Pricing Officer, however, has segregated the advertisement,
      marketing and promotion expenses and held that being an
      independent   transaction     it   requires     to    be     benchmarked
      independently. In these circumstances, in our opinion, the
      fundamental question to be answered is to decide as to whether in
                        21   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                           (Amadeus India P. Ltd.)

the absence of any agreement, arrangement or understanding for
either incurring the advertisement, marketing and promotion
expenses on behalf or for the benefit of the associated enterprise or
for payment of the advertisement, marketing and promotion
expenses by the associated enterprise can it be held that there was
an     "international   transaction"     only    on    the    basis    that     the
advertisement, marketing and promotion expenditure, incurred by
the appellant, would have benefited the associated enterprise, who
owned the brands used by the appellant. The learned authorised
representative has rightly submitted that this is a jurisdictional
issue, which requires a foremost adjudication and only if the
answer to this issue is against the appellant that the matter then
required a de novo adjudication in the light of the jurisdictional
High     Court   decision    in   the   case     of Sony     Ericsson        Mobile
Communications (supra). The above line of adjudication is also
supported by the decision of the honourable jurisdictional High
Court in the case of Diakin Airconditioning India (P.) Ltd. (supra)
wherein it is held as under:

        "Accordingly, the court directs as under:
       (a) The impugned order dated October 8, 2015, passed by the
       Income-tax Appellate Tribunal in I. T. A. No. 5090/DEL/2010
       for the assessment year 2006-07 is set aside and the said
       appeal is restored to the file of the Income-tax Appellate
       Tribunal ;
       (b) The Income-tax Appellate Tribunal will first decide the
       question regarding the existence of an international
       transaction involving AMP expenses between the assessee
       and its associated enterprise.
       This question will not be remanded by the Income-tax
       Appellate Tribunal to any other authority for decision. If the
       said question is answered in favour of the assessee, then no
                    22   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                       (Amadeus India P. Ltd.)

     other question would arise. If answered against the assessee,
     then the Income-tax Appellate Tribunal will decide the further
     issues that arise in the appeal in accordance with law."
8.1 The case records further show that both the lower authorities
have categorically given a finding that there existed a "transaction"
for brand promotion between appellant and its associated
enterprise. This is also under challenge before us. Hence, it cannot
be said that necessary facts are not on record. With regard to the
submissions of the learned Departmental representative that the
issue of advertisement, marketing and promotion expenses be
restored back to the file of the learned Transfer Pricing Officer, we
would like to state that since facts necessary to determination are
on record the law laid down by the honourable jurisdictional High
Court has to be given effect to. It is not even the argument of the
learned Commissioner of Income-tax (Departmental representative)
that any fresh fact is required for such a determination. Under the
circumstances, a direction for remand is not called for. The
honourable jurisdictional High Court in various cases have
highlighted the tests to be applied for ascertaining whether there
exists a transaction for brand promotion in a particular case. The
learned authorised representative has impartially summarised the
relevant propositions from these decisions in his note, which we
have reproduced above. We find that in the cases of Maruti Suzuki
India Ltd. v. CIT [2015] 64 taxmann.com 150/[2016] 237 Taxman
256/381    ITR   117, CIT v. Whirlpool      of    India    Ltd. [2015]    64
taxmann.com      324/[2016]    237      Taxman       49/381       ITR    154
(Delhi), Bausch & Lomb Eyecare            (India)    (P.) Ltd. [2016]     65
taxmann.com 141/237 Taxman 24/381 ITR 227 (Delhi) the
honourable High Court on the issue of the advertisement,
                    23   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                       (Amadeus India P. Ltd.)

marketing   and   promotion      expenses       has    deliberated       upon
extensively on each and every argument raised by the Transfer
Pricing Officer/Dispute Resolution Panel and has analysed the
same threadbare. We would like to reproduce the relevant portion
of the judgment of Bausch & Lomb Eyecare (India) (P.) Ltd.'s case
(supra) as under (page 251):

      "A reading of the heading of Chapter X ('Special provisions
      relating to avoidance of tax') and section 92(1) which states
      that any income arising from an international transaction
      shall be computed having regard to the arm's length price
      and section 92C(1) which sets out the different methods of
      determining the arm's length price, makes it clear that the
      transfer pricing adjustment is made by substituting the
      arm's length price for the price of the transaction. To begin
      with there has to be an international transaction with a
      certain disclosed price. The transfer pricing adjustment
      envisages the substitution of the price of such international
      transaction with the arm's length price.
      Under sections 92B to 92F, the pre-requisite for commencing
      the transfer pricing exercise is to show the existence of an
      international transaction. The next step is to determine the
      price of such transaction. The third step would be to
      determine the arm's length price by applying one of the five
      price discovery methods specified in section 92C. The fourth
      step would be to compare the price of the transaction that is
      shown to exist with that of the arm's length price and make
      the transfer pricing adjustment by substituting the arm's
      length price for the contract price.
      Section 92B defines 'international transaction' as under:
       '92B. Meaning of international transaction.--(1) For the
     purposes of this section and sections 92, 92C, 92D and 92E,
     "international transaction" means a transaction between two
     or more associated enterprises, either or both of whom are
     non-residents, in the nature of purchase, sale or lease of
               24   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                  (Amadeus India P. Ltd.)

tangible or intangible property, or provision of services, or
lending or borrowing money, or any other transaction having
a bearing on the profits, income, losses or assets of such
enterprises, and shall include a mutual agreement or
arrangement between two or more associated enterprises for
the allocation or apportionment of, or any contribution to, any
cost or expense incurred or to be incurred in connection with a
benefit service or facility provided or to be provided to anyone
or more of such enterprises.
(2) A transaction entered into by an enterprise with a person
other than an associated enterprise shall, for the purposes of
sub-section (1), be deemed to be a transaction entered into
between two associated enterprises, if there exists a prior
agreement in relation to the relevant transaction between
such other person and the associated enterprise; or the terms
of the relevant transaction are determined in substance
between such other person and the associated enterprise.'
Thus, under section 92B (1) an 'international transaction'
means--
'(a) a transaction between two or more associated enterprises,
either or both of whom are non-resident,
(b) the transaction is in the nature of purchase, sale or lease
of tangible or intangible property or provision of service or
lending or borrowing money or any other transaction having a
bearing on the profits, incomes or losses of such enterprises,
and
(c) shall include a mutual agreement or arrangement between
two or more associated enterprises for allocation or
apportionment or contribution to the any cost or expenses
incurred or to be incurred in connection with the benefit,
service or facility provided or to be provided to one or more of
such enterprises.'
Clauses (b) and (c) above cannot be read disjunctively. Even if
resort is had to the residuary part of clause (b) to contend that
the AMP spend of BLI is 'any other transaction having a
               25   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                  (Amadeus India P. Ltd.)

bearing' on its 'profits, incomes or losses', for a 'transaction'
there has to be two parties. Therefore, for the purposes of the
'means' part of clause (b) and the 'includes' part, of clause (c),
the Revenue has to show that there exists an 'agreement' or
'arrangement' or 'understanding' between BLI and B&L, USA
whereby BLI is obliged to spend excessively on AMP in order
to promote the brand of B&L, USA. As far as the legislative
intent is concerned, it is seen that certain transactions listed
in the Explanation under clauses (i)(a) to (e) to section 92B are
described as an 'international transaction'. This might be only
an illustrative list, but significantly it does not list
advertisement, marketing and promotion spending as one
such transaction.
In Maruti Suzuki India Ltd. [2016] 381 ITR 117 (Delhi), one of
the submissions of the Revenue was (page 144) : 'The mere
fact that the service or benefit has been provided by one party
to the other would by itself constitute a transaction
irrespective of whether the consideration for the same has
been paid or remains payable or there is a mutual agreement
to not charge any compensation for the service or benefit'.
This was negatived by the court by pointing out (page 144):
      'Even if the word "transaction" is given its widest
      connotation, and need not involve any transfer of
      money or a written agreement as suggested by the
      Revenue, and even if resort is had to section 92F(v),
      which defines "transaction" to include "arrangement",
      "understanding" or "action in concert", "whether formal
      or in writing", it is still incumbent on the Revenue to
      show the existence of an "understanding" or an
      "arrangement" or "action in concert" between MSIL and
      SMC as regards advertisement, marketing and
      promotion spend for brand promotion. In other words,
      for both the "means", part and the "includes" part of
      section 92B(1) what has to be definitely shown is the
      existence of transaction whereby MSIL has been
      obliged to incur AMP of a certain level for SMC for the
      purposes of promoting the brand of SMC.'
              26   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                 (Amadeus India P. Ltd.)

In Whirlpool of India Ltd. [2016] 381 ITR 154 (Delhi), the
court interpreted the expression 'acted in concert' and in that
context referred to the decision of the Supreme Court
in Daiichi Sankyo Co. Ltd. v. Jayaram Chigurupati [2010]
157 Comp Cas 380 (SC) ; [2010] 6 MANU/SC/0454/2010,
which arose in the context of acquisition of shares of
Zenotech Laboratory Ltd. by the Ranbaxy group. The
question that was examined was whether at the relevant
time the appellant, i.e., 'Daiichi Sankyo Company and
Ranbaxy' were 'acting in concert' within the meaning of
regulation 20(4)(b) of the Securities and Exchange Board of
India (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997. In paragraph 44, it was observed as
under (page 408 of 157 Comp Cas):
     'The other limb of the concept requires two or more
     persons joining together with the shared common
     objective and purpose of substantial acquisition of
     shares, etc., of a certain target company. There can be
     no "persons acting in concert" unless there is a shared
     common objective or purpose between two or more
     persons of substantial acquisition of shares, etc., of the
     target company. For, dehors the element of the shared
     common objective or purpose the idea of "person acting
     in concert" is as meaningless as criminal conspiracy
     without any agreement to commit a criminal offence.
     The idea of "persons acting in concert" is not about a
     fortuitous relationship coming into existence by
     accident or chance. The relationship can come into
     being only by design, by meeting of minds between two
     or more persons leading to the shared common
     objective or purpose of acquisition of substantial
     acquisition of shares, etc., of the target company. It is
     another matter that the common objective or purpose
     may be in pursuance of an agreement or an
     understanding, formal or informal ; the acquisition of
     shares, etc., may be direct or indirect or the persons
     acting in concert may co-operate in actual acquisition of
     shares, etc., or they may agree to co-operate in such
     acquisition. Nonetheless, the element of the shared
     common objective or purpose is the sine qua non for the
              27   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                 (Amadeus India P. Ltd.)

     relationship of "persons acting in concert" to come into
     being.'
The transfer pricing adjustment is not expected to be made
by deducing from the difference between the 'excessive' AMP
expenditure     incurred  by    the   assessee    and     the
advertisement, marketing and promotion expenditure of a
comparable entity that an international transaction exists
and then proceeding to make the adjustment of the
difference in order to determine the value of such
advertisement, marketing and promotion expenditure
incurred, for the associated enterprise. In any event, after
the decision in Sony Ericsson [2015] 374 ITR 118 (Delhi), the
question of applying the bright line test to determine the
existence of an international transaction involving the
advertisement, marketing and promotion expenditure does
not arise.
There is merit in the contention of the assessee that a
distinction is required to be drawn between a 'function' and
a 'transaction' and that every expenditure forming part of the
function, cannot be construed as a 'transaction'. Further, the
Revenue's attempt at recharacterising the advertisement,
marketing and promotion expenditure incurred as a
transaction by itself when it has neither been identified as
such by the assessee or legislatively recognised in the
Explanation to section 92B runs counter to the legal position
explained in CIT v. EKL Appliances Ltd. [2012] 345 ITR 241
(Delhi) which required a Transfer Pricing Officer 'to examine
the "international transaction" as he actually finds the same'.
In the present case, the mere fact that B&L, USA through
B&L, South Asia, Inc. holds 99.9 per cent. of the share of the
assessee will not ipso facto lead to the conclusion that the
mere increasing of the advertisement, marketing and
promotion expenditure by the assessee involves an
international transaction in that regard with B&L, USA. A
similar contention by the Revenue, namely that even if there
is no explicit arrangement, the fact that the benefit of such
advertisement, marketing and promotion expenses would
              28   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                 (Amadeus India P. Ltd.)

also enure to the associated enterprise is itself sufficient to
infer the existence of an international transaction has been
negatived by the court in Maruti Suzuki India Ltd. [2016]381
ITR 117(Delhi) as under (page 146):
     'The above submissions proceed purely on surmises
     and conjectures and if accepted as such will lead to
     sending the tax authorities themselves on a wild-goose
     chase of what can at best be described as a "mirage".
     First of all, there has to be a clear statutory mandate
     for such an exercise. The court is unable to find one. To
     the question whether there is any "machinery"
     provision for determining the existence of an
     international transaction involving advertisement,
     marketing and promotion expenses, Mr. Srivastava
     only referred to section 92F(ii) which defines arm's
     length price to mean a price "which is applied or
     proposed to be applied in a transaction between
     persons other        than    associated enterprise in
     uncontrolled conditions". Since the reference is to
     "price" and to "uncontrolled conditions" it implicitly
     brings into play the bright line test. In other words, it
     emphasises that where the price is something other
     than what would be paid or charged by one entity from
     another in uncontrolled situations then that would be
     the arm's length price. The court does not see this as a
     machinery provision particularly in light of the fact that
     the bright line test has been expressly negatived by the
     court in Sony Ericsson. Therefore, the existence of an
     international transaction will have to be established
     dehors the bright line test. . . .
     What is clear is that it is the "price" of an international
     transaction which is required to be adjusted. The very
     existence of an international transaction cannot be
     presumed by assigning some price to it and then
     deducing that since it is not an arm's length price, an
     'adjustment' has to be made. The burden is on the
     Revenue to first show the existence of an international
     transaction. Next, to ascertain the disclosed "price" of
     such transaction and thereafter ask whether it is an
     arm's length price. If the answer to that is in the
     negative the transfer pricing adjustment should follow.
            29   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                               (Amadeus India P. Ltd.)

    The objective of Chapter X is to make adjustments to
    the price of an international transaction which the
    associated enterprises involved may seek to shift from
    one jurisdiction to another. An "assumed" price cannot
    form the reason for making an arm's length price
    adjustment.
    Since a quantitative adjustment is not permissible for
    the purposes of a transfer pricing adjustment under
    Chapter X, equally it cannot be permitted in respect of
    advertisement, marketing and promotion expenses
    either. As already noticed hereinbefore, what the
    Revenue has sought to do in the present case is to
    resort to a quantitative adjustment by first determining
    whether the advertisement, marketing and promotion
    spend of the assessee on application of the bright line
    test, is excessive, thereby evidencing the existence of
    an international transaction involving the associated
    enterprise. The quantitative determination forms the
    very basis for the entire transfer pricing exercise in the
    present case. . . .
    The problem with the Revenue's approach is that it
    wants every instance of an advertisement, marketing
    and promotion spend by an Indian entity which
    happens to use the brand of a foreign associated
    enterprise to be presumed to involve an international
    transaction. And this, notwithstanding that this is not
    one of the deemed international transactions listed
    under the Explanation to section 92B of the Act. The
    problem does not stop here. Even if a transaction
    involving an advertisement, marketing and promotion
    spend for a foreign associated enterprise is able to be
    located in some agreement, written, (for e.g., the
    sample agreements produced before the court by the
    Revenue) or otherwise, how should a Transfer Pricing
    Officer proceed to benchmark the portion of such,
    advertisement, marketing and promotion spend that
    the Indian entity should be compensated for?'
Further, in Maruti Suzuki India Ltd. [2016] 381 ITR 117
(Delhi) the court further explained the absence of a
machinery provision qua the advertisement, marketing and
promotion expenses by the following analogy (page 149):
              30   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                 (Amadeus India P. Ltd.)

     'As an analogy, and for no other purpose, in the context
     of a domestic transaction involving two or more related
     parties, reference may be made to section 40A(2)(a)
     under which certain types of expenditure incurred by
     way of payment to related parties is not deductible
     where the Assessing Officer "is of the opinion that such
     expenditure is excessive or unreasonable having regard
     to the fair market value of the goods". In such event, "so
     much of the expenditure as is so considered by him to
     be excessive or unreasonable shall not be allowed as a
     deduction". The Assessing Officer in such an instance
     deploys the "best judgment" assessment as a device to
     disallow what he considers to be an excessive
     expenditure. There is no corresponding "machinery"
     provision in Chapter X which enables an Assessing
     Officer to determine what should be the fair
     "compensation" an Indian entity would be entitled to if
     it is found that there is an international transaction in
     that regard. In practical terms, absent a clear statutory
     guidance, this may encounter further difficulties. The
     strength of a brand, which could be product specific,
     may be impacted by numerous other imponderables not
     limited to the nature of the industry, the geographical
     peculiarities, economic trends both international and
     domestic, the consumption patterns, market behaviour
     and so on. A simplistic approach using one of the
     modes similar to the ones contemplated by section 92C
     may not only be legally impermissible but will lend
     itself to arbitrariness. What is then needed is a clear
     statutory scheme encapsulating the legislative policy
     and mandate which provides the necessary checks
     against arbitrariness while at the same time
     addressing the apprehension of tax avoidance.'
In the absence of any machinery provision, bringing an
imagined transaction to tax is not possible. The decisions
in CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294 (SC) ;
[2002-TIOL-587-SC-IT-LB]           and PNB            Finance
Ltd. v. CIT [2008] 307 ITR 75 (SC) make this position explicit.
Therefore, where the existence of an international
transaction involving AMP expense with an ascertainable
price is unable to be shown to exist, even if such price is nil,
                    31   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                       (Amadeus India P. Ltd.)

      Chapter X provisions cannot be invoked to undertake a
      transfer pricing adjustment exercise.
      As already mentioned, merely because there is an incidental
      benefit to the foreign associated enterprise, it cannot be said
      that the advertisement, marketing and promotion expenses
      incurred by the Indian entity was for promoting the brand of
      the foreign associated enterprise. As mentioned in Sassoon
      J. David [1979] 118 ITR 261, 276 (SC) 'the fact that
      somebody other than the assessee is also benefitted by the
      expenditure should not come in the way of an expenditure
      being allowed by way of a deduction under section 10(2)(xv)
      of the Act (Indian Income-tax Act, 1922) if it satisfies
      otherwise the tests laid down by the law'."
8.2 On a careful consideration of the facts on record we are of the
opinion that there is nothing on record to show that the appellant
by incurring the advertisement, marketing and promotion expenses
wanted to promote its associated enterprise. The learned Transfer
Pricing Officer has failed to prove that the appellant by incurring
the advertisement, marketing and promotion expenses wanted to
benefit the associated enterprise and not to promote its own
business. The submission of the learned Transfer Pricing Officer
that clauses 10.02, 10.05, 11.01 and article XVI of the agreement
indicate the existence of a "transaction" for brand promotion is not
supported by contents of those clauses. The appellant's objections
before the learned Dispute Resolution Panel, which we have quoted
above, are acceptable. These clauses nowhere provide that the
appellant will be incurring brand promotion expenses for and on
behalf of its associated enterprise or solely for its business
purposes and interests. The agreement dated October 1, 2004,
between the appellant and its associated enterprise is based upon
the revenue sharing model in which 46 per cent revenue is being
                       32    Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                           (Amadeus India P. Ltd.)

shared by Amadeus Spain with the appellant and, hence, it is
difficult to visualise that the appellant will not be incurring routine
advertisement expenses in its entrepreneur capacity. Excluding the
payment of incentives, which in the earlier years have been held, to
be pure selling expenses the ratio of the AMP/sales of the appellant
is mere 2.29 per cent. The learned authorised representative is also
right in relying upon the decision of the honourable jurisdictional
High    Court     in        the    case      of Sony       Ericsson          Mobile
Communications (supra) for submitting that events which would
transpire on termination of distribution require a transfer pricing
adjustment at that stage but the same will be immaterial to
presume    the   existence        of   an   agreement,       arrangement         or
understanding in the year under consideration. In this regard the
honourable High Court at paragraph 153 of its reported judgment
has been pleased to be hold as under (page 217):

       "Economic ownership of a brand is an intangible asset, just
       as legal ownership. Undifferentiated, economic ownership
       brand valuation is not done from moment to moment but
       would be mandated and required if the assessed is
       deprived, denied or transfers economic ownership. This can
       happen upon termination of the distribution-cum-marketing
       agreement or when economic ownership gets transferred to a
       third party. Transfer pricing valuation, therefore, would be
       mandated at that time. The international transaction could
       then be made a subject matter of transfer pricing and
       subjected to tax."
8.3 As held above, the appellant has raised objections before the
learned Dispute Resolution Panel that none of the above clauses of
the agreement make it mandatory for the appellant to incur the
brand promotion expenses for and on behalf of the associated
enterprise. The learned Dispute Resolution Panel has not disturbed
                     33   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                        (Amadeus India P. Ltd.)

these objections but has upheld the case of the learned Transfer
Pricing Officer on some other grounds, i.e., (i) by relying upon the
Special Bench decision in the case of L. G. Electronics India (P.)
Ltd. v. Asstt. CIT [2013] 29 taxmann.com 300/140 ITD 41 (Delhi -
Trib.) [SB] ; (ii) by holding that since the appellant is a dependent
agency permanent establishment of its associated enterprise hence
all the expenses on advertisement, marketing and promotion are
being incurred by it for the benefit of the associated enterprise, and
(iii) by relying upon the amended provisions of section 92B. We do
not find any substance in the above approach of the learned
Dispute Resolution Panel. The decision of the Special Bench in L.G.
Electronics (P.) Ltd. (Supra) is no more good law post above
decisions of the jurisdictional High Court. We have already
reproduced the above findings of the jurisdictional High Court in
the case of Bausch & Lomb Eyecare (India) (P.) Ltd. (supra) wherein
it is held that (page 253) ". . . As far as the legislative intent is
concerned, it is seen that certain transactions listed in the
Explanation under clauses (i)(a) to (e) to section 92B are described
as an 'international transaction'. This might be only an illustrative
list but significantly it does not list advertisement, marketing and
promotion spending as one such transaction . . ." hence the
amendments to section 92B by the Finance Act, 2012, also do not
support the case of the Revenue lastly on the observations made by
the learned Dispute Resolution Panel that since the appellant is a
dependent agency permanent establishment of its associated
enterprise, hence, all its expenses on advertisement, marketing and
promotion are being incurred by it for the benefit of associated
enterprise we would like to state that this is also entirely irrelevant.
While alleging as the above the learned Dispute Resolution Panel
                    34   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                       (Amadeus India P. Ltd.)

has not appreciated that the appellant has been held to be a
dependent agent permanent establishment of Amadeus Spain for
determination of Amadeus Spain's income, which is taxable in
India. Moreover, we may refer here the decision of the honourable
jurisdictional High Court in the case of Whirlpool of India
Ltd. (supra) wherein it is held by the honourable High Court as
under (pages 175, 179 of 381 ITR):

      "The provisions under Chapter X do envisage a 'separate
      entity concept'. In other words, there cannot be a
      presumption that in the present case since WOIL is a
      subsidiary of Whirlpool USA, all the activities of WOIL are in
      fact dictated by Whirlpool USA. Merely because Whirlpool
      USA has a financial interest, it cannot be presumed that the
      advertisement, marketing and promotion expense incurred
      by the WOIL are at the instance or on behalf of Whirlpool
      USA. There is merit in the contention of the assessee that the
      initial onus is on the Revenue to demonstrate through some
      tangible material that the two parties acted in concert and
      further that there was an agreement to enter into an
      international transaction concerning the advertisement,
      marketing and promotion expenses . . . .
      As already mentioned, merely because there is an incidental
      benefit to Whirlpool, USA, it cannot be said that the
      advertisement, marketing and promotion expenses incurred
      by WOIL was for promoting the brand of Whirlpool, USA. As
      mentioned in Sassoon J. David [1979] 118 ITR 261 (SC) 'the
      fact that somebody other than the assessee is also benefited
      by the expenditure should not come in the way of an
      expenditure being allowed by way of a deduction under
      section 10(2)(xv) of the Act (Indian Income-tax Act, 1922) if it
      satisfies otherwise the tests laid down by the law."
8.4 Considering the material facts like the absence of an
agreement, arrangement or understanding between the appellant
and its associated enterprise for sharing the advertisement,
                           35   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                              (Amadeus India P. Ltd.)

      marketing   and     promotion     expenses       or    for    incurring   the
      advertisement, marketing and promotion expenses for the sole
      benefit of the associated enterprise, payments made by the
      appellant   under   the    head     "advertisement,          marketing    and
      promotion" to the domestic parties cannot be termed as an
      "international transaction" specifically when the learned Transfer
      Pricing Officer has not been able to prove that the expenses
      incurred were not for the business carried out by the appellant in
      India. We are thus of the opinion that the Transfer Pricing Officer
      had wrongly invoked the provisions of Chapter X of the Act for the
      said advertisement, marketing and promotion spent. The addition
      of Rs. 75,40,09,515 is, therefore, directed to be deleted. Ground
      Nos. 4 to 4.4 are therefore allowed. Considering our conclusions
      above ground Nos. 5 and 5.1 do not require any adjudication."

5.2         The order passed by the coordinate Bench for A.Y. 2009-10

has also been followed by the Tribunal vide order dated 23rd October,

2017 in ITA No.1835/Del/2015 for A.Y. 2010-11. Moreover, the

decision of the coordinate Bench for A.Y.2010-11 has also been

upheld by the Hon'ble Jurisdictional High Court in ITA No. 154/2017

vide order dated 26th April, 2017 as under:-

        "3. The first issue concerns the deletion of the transfer pricing
        adjustment of Rs.75,40,09,515/- on account of Advertising,
        Marketing and Sales Promotion Expenses (AMP Expenses) relying
        upon the decisions of this Court including the decision in Bausch
        & Lomb Eyecare (India) Pvt. Ltd. vs. Additional Commissioner of
        Income Tax (2016) 381 ITR 227 (Del).
                        36    Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                            (Amadeus India P. Ltd.)

      4.   As far as the above issue is concerned, it is covered by the
      earlier decisions of this Court against the Revenue. This Court is
      not inclined to frame any substantial question of law on this
      issue."

5.3        Respectfully following the above binding precedents, it is

concluded that the TPO has wrongly invoked the provisions of

Chapter X of the Act. The addition of Rs.114.89 crores, is therefore,

directed to be deleted. Ground Nos. 3 & 3.1 are, therefore, allowed.

Considering our conclusions, other grounds challenging various other

facets of the impugned addition do not require any adjudication as

having become in fructuous.

6.0        The next issue in dispute arising out of grounds 7, 7.1 & 8

of the Appeal pertains to the Transfer Pricing Adjustment of

Rs.8,98,683/- on account of alleged transaction for Notional Interest

attributable to delayed payments receivable from the AE. In this

regard, the TPO records that at year-end, the assessee had

receivables from its AEs. An inference is drawn by the TPO that the

payment for invoices raised by the assessee were not been realized

within the stipulated time as provided in the invoice/ agreement. The

TPO, therefore, holds that this is also a separate international

transaction which requires a separate bench marking. The TPO has

further recorded that, as per the market practice, such receivables
                          37    Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                              (Amadeus India P. Ltd.)

ought to have been realized within a span of 30 days of the invoice

and   any    excess    period    of   credit    would      require     a    suitable

compensation for delay with interest @ 11.69% (i.e., SBI Base Rate).

Concluding as such, the TPO has proposed an adjustment of

Rs.8,98,683/-. Being aggrieved, the assessee filed objection before the

Ld. DRP. The Ld. DRP has held that overdue receivables would

construe a separate international transaction and has upheld the

action of the TPO in separately bench marking the same. Further, the

Ld. DRP has also rejected the contention raised by the assessee that

the working capital adjustment would subsume adjustment on

account of overdue receivables. Being aggrieved, the assessee is now

in appeal before us.

7.0         The Ld. AR opposed the impugned addition and in this

regard it is submitted by the Ld. AR as under:-

      "Issue decided in favour of `A' by Hon'ble ITAT in AYs 2009-10
      and 2010-11. References:

      ·     AY 2009-10 ITAT order reported in 52 ITR(T) 83 {copy
      enclosed at pages 409 to 447 of PB filled in Stay Nos 475 &
      476/Del/2018} relevant issue discussed at page 427, para 9
      onwards and conclusions are at pages 428 to 430, para 11

      ·     ITAT order for AY 09-10 accepted by revenue on this issue
      no further appeal to High Court.
                        38   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                           (Amadeus India P. Ltd.)

      AY   2010-11    ITAT   order    dated      23.10.2017       in    ITA   No.
      1835/Del/2015 {copy enclosed at pages 448 to 492 of PB filled
      in Stay Nos 475 & 476/Del/2018} relevant issue discussed at
      page 475, para 5 onwards and conclusions are at pages 475 to
      479 at paras 5.3 to 5.5."

7.2        The Ld. AR also referred to the orders passed by the TPO

for Assessment Years 2012-13 and 2013-14 wherein, after issuing

show cause proposing an adjustment on account of outstanding

receivables, the issue has, thereafter, been dropped and no further

adjustment is proposed by the TPO for those years. In support, the

Ld. AR also relied on the decision of Hon'ble Jurisdictional High Court

in the case of Pr. CIT vs. Kusum Healthcare Pvt. Ltd. reported in

2017-TII-28-HC-DEL-TP.

8.0        On the other hand, the Ld. CIT (DR) opposed the

arguments and contentions taken by the Ld. AR. Relying on orders

passed by the lower authorities, it was submitted by him that the

reasoning given by the Ld. DRP requires no interference. However, on

query being raised by the Bench, the Ld. CIT (DR) was fair enough to

admit that in earlier assessment years, identical issue has been

decided in favour of the assessee and that the department has

accepted the order passed by the coordinate Bench for A.Y. 2009-10

on this issue.
                        39   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                           (Amadeus India P. Ltd.)

9.0       We have carefully considered the submissions made and

perused the material available on record. It is observed that the

coordinate Bench in A.Y. 2009-10 had adjudicated upon the identical

issue in favour of the assessee as under:-

       "11. We have considered the arguments advanced by the
       parties   and   perused    the    material     available     on       record.
       Undisputedly, in the present case the benchmarking of the main
       international transactions applying the transactional net margin
       method has been accepted by the Transfer Pricing Officer.
       Considering this, we find that the ratio laid down by the
       Mumbai      Income-tax       Appellate         Tribunal        in Rusabh
       Diamonds' case (supra) is clearly applicable to the facts of
       instant case. In the said judgment, it has been held by a co-
       ordinate Bench of the Tribunal as under (head note from
       Rusabh Diamonds):

          "The interest income is an integral part of the PBIT inasmuch
          as interest income, in cases other than finance companies, is
          required to be included in the 'other income' and thus affects
          the profit before interest and taxes. While profit before
          interest and taxes does not take into account 'interest
          expenditure', it does take into account 'interest income'
          because the interest income is part of the 'other income',
          under pre-amended as well as post-amended Schedule VI to
          the Companies Act, which is duly taken into account into
          computation of PBIT. In a way PBIT is a misnomer, as while
          PBIT does not take into account interest expenditure, it does
          take into account interest income appearing in the other
          income. Once the profitability, as per PBIT, is found to be
          comparable, there cannot be a separate adjustment for
              40   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                 (Amadeus India P. Ltd.)

interest income on delayed realisation, which is an integral
part of the PBIT figure. (paragraph 12)
As for the Revenue's suggestion that it is to be verified
whether the comparables include interest income, if any, all
one can say is that the statutory provisions require the
interest income, unless it is an interest income of the finance
and banking companies, to be included in the other income
which is taken into account for computing PBIT. The
presumption, therefore, is that the accounts are drawn up as
per the statutory requirements, and the exclusions from
'other income' are specifically discussed on the facts of each
case, and as such constitute integral part of the transfer
pricing documentation. There is nothing on record to show
these exclusions. (paragraph 15)
As regards the contention that normally all interest incomes
are excluded in the computation of PBIT as such incomes
rarely constitute operational income, there is no need to be
guided by such hypothesis and generalities. There is nothing
on the records, to show such exclusions on the facts of this
case. In any event, setting off of interest expenditure with
interest on account of delay in realisation of debts, even if
so, is not too common an occurrence and more of exceptions
than the rule. The apprehensions of the Revenue are purely
hypothetical and, therefore, devoid of legally sustainable
merits. (paragraph 16)
In view of these discussions, as also bearing in mind
entirety of the case, no arm's length price adjustments can
be made, in respect of delay in relation of sale proceeds.
Such being conclusion, there is no need to address the
specific factual arguments advanced by the assessee. In
effect thus the grievance of the assessee, is upheld and
direct the Assessing Officer to delete the impugned arm's
length price adjustment. (paragraph 17)
              41   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                 (Amadeus India P. Ltd.)

Explanation to section 92B
There is, however, one more aspect of the matter for which
the impugned arm's length price adjustment must be
deleted. (paragraph 19)
It is noted that everything hinges on application of
the Explanation to section 92B, vide Finance Act, 2012,
though with retrospective effect from April 1, 2002.
(paragraph 20)
The amendment so made by the Finance Act, 2012, stated to
be with retrospective effect April 1, 2002, inserts
an Explanation to section 92B. In plain words, this
amendment, inter alia, implies that capital financing of any
type, including by way of 'deferred payment or receivable or
any other debt arising during the course of business' will
constitute an international transaction under section 92B.
Going by this definition 'any debts arising during the course
of business' will constitute an international transaction. A
trade debt is, accordingly, covered by this definition.
However, since the assessment year that one is dealing with
is prior to the assessment year 2012-13, the next important
question is whether this amendment could be held to be
applicable in the assessment year before as well.
Undoubtedly, the amendment is said to be retrospective but
then the question really is whether just stating the law to be
retrospective will make it retrospective in effect. (paragraph
29)
It is very important to bear in mind the fact that right now
one is dealing with amendment of a transfer pricing related
provision which is in the nature of a SAAR (specific anti-
abuse rule), and that every anti-abuse legislation, whether
SAAR (specific anti-abuse rule) or GAAR (general anti-abuse
rule), is a legislation seeking the taxpayers to organise their
affairs in a manner compliant with the norms set out in such
anti-abuse legislation. An anti-abuse legislation does not
trigger the levy of taxes; it only tells you what behaviour is
acceptable or what is not acceptable.
              42   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                 (Amadeus India P. Ltd.)

What triggers levy of taxes is non-compliance with the
manner in which the anti-abuse regulations require the
taxpayers to conduct their affairs. In that sense, all anti-
abuse legislations seek a certain degree of compliance with
the norms set out therein. It is, therefore, only elementary
that amendments in the anti-abuse legislations can only be
prospective. It does not make sense that someone tells you
today as to how you should have behaved yesterday, and
then goes on to levy a tax because you did not behave in
that manner yesterday. (paragraph 36)
When this is put to the Department, his stock reply is that
the amendment only clarifies the law, it does not expand the
law. (paragraph 37)
Well, if the 2012 amendment does not add anything or
expand the scope of international transaction defined under
section 92B, assuming that it indeed does not this provision
has already been judicially interpreted, and the matter rests
there unless it is reversed by a higher judicial forum.
However, if the 2012 amendment does increase the scope of
international transaction under section 92B, there is no way
it could be implemented for the period prior to this law
coming on the statute, i.e., May 28, 2012. The law is well
settled. It does not expect anyone to perform an
impossibility. (paragraph 38)
It is for this reason that the Explanation to section 92B,
though stated to be clarificatory and stated to be effective
from April 1, 2002, has to be necessarily treated as effective
from at best the assessment year 2013-14. In addition to
this reason, in the light of the Delhi High Court's guidance in
the case of DIT v. New Skies Satellite BV [2016] 382 ITR 114
(Delhi) ; 68 taxmann.com 8 ; [2016-TII-6-HC-DEL-INTL] also,
the amendment in the definition of international transaction
under section 92B, to the extent it pertains to the issuance of
corporate guarantee being outside the scope of 'international
transaction', cannot be said to be retrospective in effect. The
fact that it is stated to be retrospective, in the light of the
                        43    Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                            (Amadeus India P. Ltd.)

          aforesaid guidance of the Delhi High Court would not alter
          the situation, and it can only be treated as prospective in
          effect, i.e., with effect from April 1, 2012, onwards.
          (paragraph 39)
          For the detailed reasons set out above, the amendment in
          section 92B, at least to the extent it dealt with the question
          of issuance of corporate guarantees, is effective from April 1,
          2012. The assessment year being an assessment year prior
          to that date, the amended provisions of section 92B have no
          application in the matter. (paragraph 43)."
       Respectfully following the above, ground Nos. 7 and 8 of the
       appeal are allowed and the Assessing Officer is directed to
       delete the addition"

9.1       It is not disputed that the revenue has not filed any appeal

before the Hon'ble High Court against the above decision of the

Tribunal on the issue in dispute in A.Y. 2009-10. Moreover, following

the decision of A.Y. 2009-10, the coordinate Bench, in A.Y. 2010-11,

has again decided the issue in favour of the assessee. It will also be

relevant to note that there is no adjustment proposed on this issue by

the TPO in A.Ys.2011-12 & 2013-14. The contention of the Ld. DRP

that working capital adjustment would not subsume adjustment on

account of overdue receivables is no more good law. Support, in this

regard is found from the Hon'ble jurisdictional High Court's decision

in case of Kusum Healthcare (supra) wherein Hon'ble High Court has

held as under:-
                   44   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                      (Amadeus India P. Ltd.)

"10. The Court is unable to agree with the above submissions. The
inclusion in the Explanation to Section 92B of the Act of the
expression 'receivables' does not mean that de hors the context
every item of 'receivables' appearing in the accounts of an entity,
which may have dealings with foreign AEs would automatically
be characterised as an international transaction. There may be a
delay in collection of monies for supplies made, even beyond the
agreed limit, due to a variety of factors which will have to be
investigated on a case to case basis. Importantly, the impact this
would have on the working capital of the Assessee will have to be
studied. In other words, there has to be a proper inquiry by the
TPO by analysing the statistics over a period of time to discern a
pattern which would indicate that vis-à-vis the receivables for the
supplies made to an AE, the arrangement reflects an international
transaction intended to benefit the AE in some way.

11. The Court finds that the entire focus of the AO was on just one
AY and the figure of receivables in relation to that AY can hardly
reflect a pattern that would justify a TPO concluding that the
figure of receivables beyond 180 days constitutes an international
transaction by itself. With the Assessee having already factored in
the impact of the receivables on the working capital and thereby
on its pricing/profitability vis-à-vis that of its comparables, any
further adjustment only on the basis of the outstanding
receivables would have distorted the picture and re-characterised
the transaction. This was clearly impermissible in law as
explained by this Court in CIT v. EKL Appliances Ltd. (2012) 345
ITR 241 (Delhi)"
                                 45     Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                                      (Amadeus India P. Ltd.)

9.2            Respectfully        following         the   above    binding       precedents,

grounds 7 & 7.1 are allowed and the AO is directed to delete the

addition of Rs.8,98,683/-.

10.0           The next issue which requires our deliberations pertains to

disallowance of deduction u/s 10A of the Act. This issue is raised in

Ground Nos. 9, 9.1, 9.2 & 9.3 of the appeal. The relevant facts in this

regard are that in the computation of income, deduction u/s 10A of

the Act amounting to Rs.17,70,80,624/- has been claimed by the

assessee. During the course of assessment, unit-wise computation of

total income was filed by the assessee and on perusal of that, the AO

records that the following revenue has been earned by the assessee

from Units 1 and 2:

Sl.             Income                      Unit-I              Unit-II              Total
No.


1.    Data Processing Receipts /      Rs.188,21,57,319/-   Rs.22,91,81,909/-   Rs.211,13,39,228/-
      Software Export Services


2.    IT Support Services              Rs.19,74,96,375/-     Rs.84,71,411/-     Rs.20,59,67,787/-


3.    Other Income                     Rs.11,74,97,153/-    Rs.1,18,61,127/-    Rs.12,93,58,281/-


4.    Total                           Rs.219,71,50,847/-   Rs.24,95,14,447/-   Rs.244,66,65,295/-




10.1           The AO further notes that in A.Y.2009-10, the Ld. DRP had

made an enhancement to the total income by disallowing the claim for

deduction u/s 10A of the Act. In this regard, the AO has extensively
                          46   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                             (Amadeus India P. Ltd.)

quoted and relied on the order passed by the Ld. DRP for A.Y. 2009-

10 wherein it is held that Data Processing Receipts derived by the

assessee from Units 1 and 2 would not be eligible for deduction u/s

10A of the Act. In nutshell, it is held by the AO (following the order of

the Ld. DRP for A.Y. 2009-10 & 2010-11) that there is no export

activity carried on by the assessee and as such it is not eligible for

claiming deduction u/s 10A of the Act. However, it is accepted that IT

Support services and call center receipts would be eligible for benefit

u/s 10A of the Act. The AO has, therefore, restricted the claim for

deduction     u/s   10A   to   Rs.59,39,683/-        and    the    difference   of

Rs.17,11,40,951/- (Rs.17,70,80,634/- - Rs.59,39,683/-) has been

disallowed.

10.2        Being aggrieved, the assessee filed objections before the Ld.

DRP. The Ld. DRP has upheld the disallowance by observing as

under:-

            "This is a legacy issue. The fact pattern remains the same
            this year as in AY 2010-11. We are in agreement with the
            views of the DRP on this issue. The taxpayer has not been
            able to controvert the arguments of the AO discussed
            comprehensively at assessment order. Thus following the
            Rule of Consistency, the DRP following the decision of DRP in
            AY 2010-11 approves the AO's order and the action of the
            AO in the proposed draft assessment order for not allowing
                           47   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                              (Amadeus India P. Ltd.)

             deduction u/s 10A on the alleged "Data Processing Fee"
             which is held to be of the nature of commission on rendering
             of distribution and marketing activities."

10.3         Being aggrieved, the assessee/appellant is now in appeal

before us.

11.0         In this regard, the Ld. AR has submitted as under:-

        "Issue decided in favour of `A' by Hon'ble ITAT in AYs 2009-10
        and 2010-11. References:

        · AY 2009-10 ITAT order reported in 52 ITR(T) 83 {copy
        enclosed at pages 409 to 447 of PB filled in Stay Nos 475 &
        476/Del/2018} relevant issue discussed at page 430, para 12
        onwards and conclusions are at pages 437 to 447, para 15 to
        16.

        · ITAT order for AY 09-10 on this issue has been upheld by
        Hon'ble Delhi High Court vide order dated 22.05.2017 in ITA
        154/2017 {copy enclosed at pages 493 to 514 relevant
        conclusions at page 507, para 32} .

        AY 2010-11 ITAT order dated 23.10.2017 in ITA No.
        1835/Del/2015 {copy enclosed at pages 448 to 492 of PB
        filled in Stay Nos 475 & 476/Del/2018} relevant issue
        discussed at page 479, para 6 onwards and conclusions are at
        pages 480 to 491 at paras 6.4 to 6.6."
                          48    Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                              (Amadeus India P. Ltd.)

12.0      On the other hand, the Ld. DR was unable to controvert the

above arguments. The Ld. DR relied upon orders passed by the lower

authorities.

13.0      We have heard the rival submissions and also perused the

material available on record. It is seen that the coordinate Bench of

Tribunal, while adjudicating upon the issue of deduction u/s 10A of

the Act in A.Y. 2009-10, has relied upon the decision in the

assessee/appellant's own case for A.Ys.1996-97 & 1997-98 reported

in 79 ITD 407(Del) and also the decision of the Tribunal in the case of

M/s Interglobe Technology Contents Private Limited for Assessment

Years    2007-08     to        2010-11       in     ITA      Nos.419/Del/2011,

5830/Del/2011,      1463/Del/2011             and      6144/Del/2013.           The

Coordinate Bench, for A.Y. 2009-10, has held as under:-

    "15.1 Above conclusions of coordinate bench clearly highlight the
    nature of data processing activities carried on by the appellant. We
    find no reason for not following the above binding precedent.
    Moreover tax department has also accepted the above decision. Ld
    DRP has vehemently harped upon the fact that nature of activities
    carried on by the appellant is solely distribution and marketing and
    not export oriented. We are unable to convince ourselves in this
    regard. Similar allegations were raised by the AO in his order of
    assessment for AYs 1997-98 and 1998-99. On further appeal ITAT
    in AY 1997-98 and the learned CIT(A) in 1998-99 following ratio
    propounded in 79 ITD 407(Del) has allowed appellant's claim for
                     49   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                        (Amadeus India P. Ltd.)

deduction u/s 10A in those years. Even these orders have been
accepted by the tax department and there is no further challenge
thereto. Ld DRP's action in enhancing the total income in AY 2009-
10 and disallowing the claim for deduction u/s 10A in the instant
case is contrary to the decision of Hon'ble Jurisdictional High Court
of Delhi in case of Neo Poly Pack (P) Limited reported in 245 ITR
492(Del) wherein the Hon'ble Court has held as under:

".........we are of the view that no fault can be found with the order
of the Tribunal declining to make reference on the proposed
question. It is true that each assessment year being independent of
each other, the doctrine of res judicata does not strictly apply to the
income-tax proceedings, but where an issue has been considered
and decided consistently in a number of earlier assessment years
in a particular manner, for the sake of consistency, the same view
should continue to prevail in the subsequent years unless there is
some material change in facts. In the present case, the learned
counsel for the revenue has not been able to point out even a single
distinguishing feature in respect of the assessment year in question
which could have prompted the Assessing Officer to take a view
different from the earlier assessment years in which the same
income was brought to tax as income from business."

15.2 Even otherwise on merits we are unable to sustain the view
adopted by Ld DRP. Ld AR is justified in submitting that the
learned DRP has written factually incorrect findings in its order.
Moreover the details ,filed by the appellant have also been partially
taken into consideration. Ld DRP takes note of top 25 employees
but omits to take into consideration crucial fact that director of
appellate company Shri Ankur Bhatia is a Software Engineer with
                    50   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                       (Amadeus India P. Ltd.)

16 years of experience. Moreover division wise break up of total
employee strength has also partially been reproduced by Ld DRP in
its order. Appellant vide submissions dated 29th November 2011
has submitted following details:

....     ......

Above details clearly show that appellant did possess requisite
technical staff for carrying out data processing activities. We
further observe that Ld DRP has erroneously been influenced by
the fact that appellant is having branches in various locations.
Facts on record clearly show that those branches belong to Unit I
and not to Unit II. As regards Unit II the STPI registration has been
granted to the appellant only for one location i.e Vasant Vihar, New
Delhi. Ld AR has also drawn our attention towards application
seeking STPI registration wherein it is stated that applicant will not
have any STP unit in any other location (refer page 447 of paper
book). Annual return to STPI authorities also clarify that Unit II was
operating only from one location. Registration granted by STPI
Authorities to UNIT II is solely for manufacture of "Computer
Software / IT Enabled Services". Once STPI authorities do not
doubt the factum of export activities of Unit II, we failed to
apprehend how learned DRP can take a contrary view. We may
refer here to the decision of Special Bench of Tribunal in case of
Mitsui & Co. reported in 39 ITD 59(Del)(SB), wherein it is held as
under:

"One is not to be led away by the enormity of the expenditure
incurred in running an office in India. That would depend upon the
level of the country to which the office belongs. We have to judge
the expenditure incurred from that angle and not from our angle. It
                     51   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                        (Amadeus India P. Ltd.)

is not the case of the Revenue that the expenditure incurred was so
camouflaged as to cover the expenditure incurred in a trading
activity to show it as expenditure incurred on liaison activity. Nor is
it the case of the Revenue that the work carried on by the assessee
in India which according to them amounted to trading activity
produced income in India or anywhere else. Ibis expenditure
incurred in India was met out of the remittances received by the
Indian Branches again through the Reserve Bank of India. There
was no evidence brought on record at any stage that the Indian
Branches had exceeded the limits prescribed for it by the Reserve
Bank of India. As long as the Indian Officers were conducting the
operations within the restricted area and so long as those activities
were not considered by the Reserve Bank of India, which is the
concerned authority as amounting to anything other than carrying
on of liaison work no inference adverse to the assessee can be
drawn or is possible to draw. To repeat what all that was done by
the assessee fell within the parameters of supplying of information
which is preparatory to and auxiliary to the formation of the final
contracts."

Appellant has clarified above that like earlier years in the year
under consideration also the sole activity carried on by it was that
of providing the travel agents an access to the Amadeus CRS
System by rendering ITeS data processing services. Facts on record
also show that the appellant has not carried on any "distribution"
functions though the agreement provided for same DRP's action in
the present case is motivated by the "distribution" part of
agreement which was not actually carried on by the appellant.
Since fee to be paid to appellant as per Annexure A of the
                     52   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                        (Amadeus India P. Ltd.)

agreement was defined in aconsolidated manner probably that has
lead to the present confusion in Ld DRP's action of making
disallowance of deduction u/s 10A. As held by the Tribunal in
appellant's own case for AY 1996-97 (supra) it merely provides
ITeS services to Amadeus Spain. Appellant renders no services to
the travel agents but does render data processing services only to
Amadeus Spain and for this it is being remunerated on a profit
sharing basis. The meaning ascribed to term "distribution" by Ld
DRP in this year has formed part of appellant's agreements % with
Amadeus Spain since inception from AY 1996-97. Hence it does not
wipe out the past history of the case. It is admitted by learned DRP
that facts are common and there is no change in modus operandi.
Hence action of learned DRP in now doubting the claim made when
after a detailed technical examination of appellant's activities,
eligibility of its sole data processing activity for claiming deduction
u/s 10A has already been settled by the Tribunal in AY 1996-97
and accepted by tax department is unsustainable.

15.3 The view adopted by Ld DRP has further been influenced by
the fact that Amadeus Spain has a PE in India in form of Amadeus
India Private Limited (i.e the appellant). We find that this fact is
totally irrelevant in adjudication of appellant's claim for deduction
u/s 10A. Foreign company's DAPE and DA are two separate
taxable entities as per law. DAPE is a creation of Article 5 of the
relevant DTAA, wherein the object is to tax profits of foreign
company in the source state. This distinction has efficiently been
highlighted by a Coordinate Bench of tribunal in case of Set
Satellite (Singapore) (supra) as under:
                     53   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                        (Amadeus India P. Ltd.)

"11. The particular difficulty in the case of a dependent agent
permanent establishment is that DAPE itself is hypothetical
because there is no establishment-permanent or transient of the GE
in the PE state. The hypothetical PE, therefore, must be visualized
on the basis of presence of the GE as projected through the PE,
which in turn depends on functions performed, assets used and
risks assumed by the GE in respect of the business carried on
through the PE. The DAPE and DA has to be, therefore, be treated
as two distinct taxable units. The former is a hypothetical
establishment, taxability of which is on the basis of revenues of the
activities of the GE attributable to the PE, in turn based on the FAR
analysis of the DAPE, minus the payments attributable in respect
of such activities. In simple words, whatever are the revenues
generated on account of functional analysis of the DAPE are to be
taken into account as hypothetical income of the said DAPE, and
deduction is to be provided in respect of all the expenses incurred
by the GE to earn such revenues, including, of course, the
remuneration paid to the DA. The second taxable unit in this
transaction is the DA itself, but this taxability is in respect of the
remuneration of the DA. The provisions of the tax treaty are silent
on this issue, and rightly so, because the taxability of the DA is
quite distinct of the taxability of the enterprise of the contracting
state which is in respect of PE of such an enterprise. At the cost of
repetition, it is not the DA who constitutes PE of the GE, but it is by
the virtue of a DA that the GE is deemed to have a PE, a DAPE
though, in the other contracting state. We are of the considered
view that in addition of the taxability of the DA in respect of
remuneration earned by him, which is in accordance with the
domestic law and which has nothing to do with the taxability of the
                      54    Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                          (Amadeus India P. Ltd.)

foreign enterprise of which he is dependent agent, the foreign
enterprise is also taxable in India, in terms of the provisions of
Article 7 of the tax treaty, in respect of the profits attributable to the
dependent agent permanent establishment. As we have elaborated
earlier in this order, a dependent agent permanent establishment is
distinct from the dependent agent. While computing the profits of
this dependent agent permanent establishment, a deduction is to
be allowed for the remuneration paid to the dependent agent as
that is cost of operation of the dependent agent permanent
establishment and as it has been incurred for generating the
revenues     attributable      to     such      hypothetical        permanent
establishment"

Tribunal has also maintained the above distinction while deciding
the case of Amadeus Spain. A deduction has been allowed to
Amadeus Spain for 46% revenue it has passed on to the appellant,
as it is a legitimate business expense of Amadeus Spain and
income taxable in hands of the appellant. It will be relevant here to
refer to the decision of Amadeus Spain (supra) wherein Tribunal
has held as under:

" .........Thus where the entire activity of an enterprise are not
carried out in a Contracting State where the PE is situated, than
only so much of the profit as is attributable to the functions carried
through the PE can be taxable in such source State. While dealing
with the question as to what is such part of income as is
reasonably attributable to the operations carried out in India, we
have held that only 15% of the revenue generated from the
bookings made within India is taxable in India. The same
proportion has to be adopted here while computing profit
                     55   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                        (Amadeus India P. Ltd.)

attributable to the PE. We have also held that since the payment to
the agent in India is more than what is the income attributable to
the PE in India, it extinguish the assessment as no further income
is taxable in India. It is to be noted that even in the first
assessment framed by the Assessing Officer, the entire expenses in
the form of remuneration paid to AIPL was held as allowable
deduction and was reduced while computing the income of
appellant If that be the case, the income attributable to PE in India
being less than the remuneration paid to the dependent agent, it
extinguishes the assessment and requires no further exercise for
computation of income. We accordingly hold so and in view of the
same the income of the appellant for assessment years 1997-98
and 1998-99 will be 'Nil'."

15.4 Before concluding we would like to mention over here that
identical issue had also came up for the consideration of the
Tribunal in case of M/s Interglobe Technology Quotient Private
Limited for AYs 2007-08 to 2010-11 in ITA Nos. 419/Del/2011,
5830/Del/2011, 1463/Del/2013 and 6144/Del/2013. Vide order
dated 26th July 2016 division bench of this Tribunal allowed the
claim for deduction u/s 10A of the Act by M/s Interglobe Quotient,
which is a competitor of the appellant. Both the assessees have
similar business model and are rendering data processing activity.
Factual allegations levied by the authorities below are also same.
In the said order, after following Tribunal's decision of appellant for
AY 1996-97 (supra), the Tribunal has opined as under:

"We find that the learned CIT(Appeals) while dealing with the issue
has basically followed the decision of the IT AT in the case of
Amadeus India (supra). He has elaborately discussed the terms of
                    56   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                       (Amadeus India P. Ltd.)

distribution agreement between the assessee and Galileo and has
compared the activities of the assessee with that of Amadeus India
before coming to the conclusion that the assessee before us is very
much eligible for claiming deduction under section 10AA of the Act
with this finding that the Assessing Officer was not justified in
denying the claimed deduction under section 10AA of the Act in the
present case. In para No.5.2, the Learned CIT(Appeals) firstly has
discussed the terms of distribution agreement and on the basis of
those description of services, he has come to the conclusion that the
assessee had undertaken export of software /data processing
services at the rate of % of GDP as part of the distribution services
provided to Galileo and the consideration paid by Galileo for such
services qualified for deduction under section 10AA of the Act. The
Learned CIT (Appeals) has met out the objections raised by the
Assessing Officer to justify his denial of the claimed deduction. The
services rendered by the assessee to Galileo have been compared
by the Learned CIT(Appeals) with the services rendered by
Amadeus India to Amadeus Group of Companies. If we compare
the working of the assessee with Amadeus India undisputedly was
in the same line of business. In the case of Amadeus India (supra),
the ITAT has held that the Amadeus India was performing the
functions of a program exporter. They do not add more entries to
the data base as done by the travel agent. In fact, it has no direct
interest in adding to, or drawing extracts from the data base built
into the computers like the several operators all the world over but
what it does actually is to supplement the function of the Amadeus
Group by preparing and transmitting programs to the latter for the
incorporation into the portion or "partition" in its mega - computers
at Erding in Germany, so as to enable the travel agent in marketing
                     57   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                        (Amadeus India P. Ltd.)

reason drawn on the available information for their benefit. Its
activities are to issue instructions to the master computer to
recognize the operators, identify them and provide them excess to
specific portion of the data base. There can be no doubt whatever,
for the reasons discussed above that the assessee manufactures,
produces and export software within the meaning of the three
specified sections of the Act. It is open to it to claim exemption
under any of these sections and as is well established by
pertaining to interpretation of taxing statute it is entitled to choose
that one which is most favourable to it in any particular
assessment year, held the IT AT. The IT AT in that case also noted
some material facts that assessee company submits their monthly
returns for export to the competent authority which has accepted
the same in discharge of export obligation. The ITAT noted further
that the export of software as per the statutory requirement are
also declared on exporters declaration form SOFTES (specimen of
SOFTES Form has been filed). The competent authority Le.,
Department of Electronics authorized official also certified that the
software described in the SOFTES form was actually transmitted
and the export value declared by the exporter has been found to be
in order and accepted by the authorized officer. Similar are the
functions of the assessee in the present case before us and similar
types of certificates have been issued to the assessee about the
transmission of software and the export value declared by the
exporter has been found to be in order and accepted by the
authorized officer. We are thus of the view that the Learned
CIT(Appeals) was justified in equating the facts of the present case
with that of the Amadeus India, also in the same line of business
and following the decision of the IT AT on an identical issue, in the
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                                        (Amadeus India P. Ltd.)






case of Amadeus India, in para No. 5.2 of the first appellate order
reproduced     hereinabove,      the     Learned       CIT(Appeals)       has
summarized the fulfillment of all the requirements of the eligibility
of the deduction claimed under sec. 10AA of the Act in the case of
the assessee, which we are not reiterating here for the sale of
brevity. Besides, Software export dealer action form shows the
assessee in the data entry jobs and conversion software, data
processing, the profit and loss account show data processing
software export, software development services income, auditor's
report has certified that the assessee has been engaged in the
development of computer software and information technology
enabled product and services. The auditor's report also talks about
the Revenue depicted under data processing software" has been /
is being certified by the Office of Development Commissioner,
Noida, Noida Special Economic Zone. Export as per the Special
Economic Zones Act, 2005" in relation to the "Special Economic
Zones" means taking goods, or providing services out of India from
a Special Economic Zones" means taking goods, or providing
services out of India from a Special Economic zone by land, sea air
or by any other mode whether physical or otherwise. And above
all, as per section 51 of the SEZ, Act, notwithstanding anything
inconsistent therewith contained in any other law for the time being
in force, the provisions of SEZ Act will prevail. We thus do not find
infirmity in the first appellate order in coming to the conclusion that
the assessee is very much eligible for the claimed deduction under
sec. 10AA of the Act in view of the of decision of the ITAT in the
case of Amadeus India (surpa). The Learned CIT(Appeals) was thus
right in deleting the disallowance made by the Assessing Officer in
this regard.
                     59   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                        (Amadeus India P. Ltd.)

7.6 The above view that the assessee is eligible for claimed
deduction under sec. 10AA of the Act is also strengthened by the
decision of CESTAT, New Delhi Bench in the case of Acquire Service
(P) Ltd. vs. Commissioner of Service tax (supra). In that case like
the present assessee before us, the assessee were 100% EOUs
registered with software technology park and were granted
exemption under income-tax for export of computer software. The
assessee therein were parts of a group of companies i.e., Amadeus
or Galileo. These groups had evolved and were maintaining a
computer reservation system (CRS), the requisite software and a
huge database comprising a variety of information relating to
several airlines and other travel services provides, for providing
international   travel    related    facilities.    The     core    computer
system/server were established at overseas locations at US,
Germany or Spain as the case may be. The travel agent, with a
computer, merely accesses or utilizes travel information drawn
from the data base of the computers. The travel agent also adds to,
and alters the data available on the computer when he books a
ticket (or other travel facilities like cab services, accommodation at
hotels/resorts etc.) for a customer by feeding in the data regarding
the customer such as airlines, hotel, local travel fare, tickets, the
several intermediary and eventual destination; and the nature of
services to be provided etc. This data enters the composite data
based stream and becomes available to other operators via
computers operating on Amadeus or Galileo system, all over the
world, whenever a fulfilling transactions occurs at the travel agents
end. The assessee's role like the present assessee before us, was
occupying the position of hyphen between the overseas Amadeus
and Galileo which have conceived, evolved, maintained and
                    60   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                       (Amadeus India P. Ltd.)

operates the CRS (Computer Reservation System) facility on the one
hand; and travel agent on the other. What the to assessee do, is to
supplement functions, of the overseas entities (Amadeus or Galileo)
by preparing and transmitting the locally generated travel related
data to them for incorporation and synthesis into the core data
base, maintained in the mega computers overseas, so as to enable
travel agents (operating within the assessee's marketing region) to
draw on the available and updated information, for their benefit.
The assessees issued instructions to the respective master
computer (of Amadeus or Galileo) to enable recognition that
identification of tour operators and facilitate access to them of
specific portion (segment) of the composite data basis. CRS is a
system connected with a data base carrying various kinds of
information pertaining to several airlines and other travel services
provides is used for booking airlines tickets, cabs hotels and like
travel facilities across the globe. Airlines hotels, cabs agencies and
other services providers pay fee to the overseas entities (Amadeus
or Galileo) for bookings made by employing the CRS. The assessee
process the data generated by their accredited travel agent in
India, at their respective STP unit and align and interface such
information as per protocols of the CRS systems of the overseas
entitles-Amadeus or Galileo. On successful booking of a ticket or
others travels related facilities by accredited travel agents, the
relevant data is processed by the assessees and fed into the data
overseas, employing internet facilities and activities amounting to
computer data processing. For providing this service, assessees
received data processing fees from the overseas entities in
convertible foreing exchange, assessees however receive no
fee/consideration from either the airlines, the travel agents or from
                      61   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                         (Amadeus India P. Ltd.)

hotels etc. the CESTAT has thus come to the conclusion that
assessees promote/market CRS services provide by the Overseas
entities (Amadeus/ Galileo) but do so through computers date
processing, amounting to information technology services.

7.7 The functions of assessee have also been discussed by the
ITAT in the case of Galileo International Inc. vs. DCIT (supra)
deciding the issue of holding of any permanent establishment of
Galileo International Inc. in India to examine its income to be
taxable in India. This decision of the IT AT has been upheld by the
Hon'ble High Court.

7.8 The Hon'ble Delhi High Court in the case of CIT vs. M.L.
Outsourcing Services (P) Ltd. (supra) in the para No. 9 of the
decision has been pleased to make observation on the CBDT
Notification No. S0890(E) dated 26.09.2000 in relation to deduction
under sec. 10A, reproduced as under:

"9. A perusal of the said notification would indicate that the Board
has included several distinct types of services under the
expression, "product or services" in the fifteen clauses. The Board,
in the notification has understood that product or services, to be
included within clause (b) of Explanation 2 to Section 10A, need not
be computer software as understood in the common parlance of
even customized electronic data, as generally understood. Any
product or service of similar nature would include in its ambit,
product and services which were enabled by, i.e. would rely upon,
or are driven by information technology. This becomes clear when
we refer to the wide ambit of the divergent and varied services
covered in the different clauses like, "(ii) call centres...(viii) human
resources services...(viii) insurance claim processing... (xii) remote
                        62   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                           (Amadeus India P. Ltd.)

   maintenance" and "(XIV) support centres". These services would not
   necessarily and primarily involve customized data processing, but
   nevertheless, these are information technology enables services. In
   case of call entres, queries and questions from a customer of a
   third company are answered by an employee of the assessee
   based in India. The said task is performed with the aid and help of
   information technology but it would not be a case of customized
   electronic data service or export thereof. Similar exercise may be
   undertaken in case of remote maintenance or support centers,
   which answer queries and gives suggestions by e-mails or through
   voice and/or video communications. These services would not
   normally involve processing or sending customized electronic data
   abroad yet these are information technology enabled services and
   specifically covered under the Notification".

   7.9 In view of the above discussion, we find that the Learned
   CIT(Appeals) has rightly held that the assessee is eligible for the
   claimed deduction under sec. 10AA of the Income-tax Act, 1961."

   16. Following the above view, we direct the Assessing Officer to
   allow the claimed deduction u/s 10A of the Income-tax Act, 1961
   on Unit II of the appellant."

13.1      The order of the coordinate Bench for A.Y.2009-10 has

been followed in A.Y. 2010-11 in ITA No.1835/Del/2015 vide order

dated 23rd October, 2017. Moreover, the Hon'ble Jurisdictional High

Court in ITA No.154/2017, vide order dated 22nd May, 2017, has

upheld the findings of the Tribunal for A.Y. 2009-10 by observing as

under:-
                          63   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                             (Amadeus India P. Ltd.)

       "Conclusion of ITA 154 of 2017 (AIPL)

       32. The Court finds that the impugned order of the ITAT in the
       case of AIPL for AY 2009-10 on the issue of allowing the
       deduction under Section 10A of the Act suffers from no legal
       infirmity either in its analysis of the legal provisions or in its
       conclusions. The Court is not inclined to frame any question of law
       on the issue concerning a Section 10A deduction in the appeal of
       the Revenue against AIPL for AY 2009-10."

13.2        Respectfully following the above binding precedents, the AO

is directed to allow deduction u/s 10A of the Act as claimed by the

Assessee/Appellant in the return of income. Grounds 9, 9.1, 9.2. &

9.3 are, therefore, allowed.

13.3        Ground Nos.1 & 11 are general and, therefore, do not

require specific adjudication.

13.4        In Ground No.10, the assessee/appellant has challenged

charging of interest u/s 234A, 234B and 234C of the Act. The AO is

directed to consequential relief in this regard.

14.0        In the result, ITA No.1662/Del/2016 for AY 2011-12

stands allowed.

15.0        We shall now take up for consideration appeal for A.Y.

2012-13 bearing ITA No. 1811/Del/2017. In this appeal, the following

grounds have been raised by the Assessee/Appellant:
                     64    Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                         (Amadeus India P. Ltd.)

"1.    That on facts and in law the orders passed by the Assessing
Officer (hereinafter referred as the "AO") / Dispute Resolution
Panel (hereinafter referred as the "DRP) / Transfer Pricing Officer
(hereinafter referred as the "TPO") are bad in law and void ab-
initio.

2.     That on facts and in law the TPO/DRP erred in not
appreciating that in absence of a "transaction" as envisaged
under section 92F of the Act between appellant and its AE for
brand promotion or for establishing a marketing intangible, the
TPO had no jurisdiction to propose an adjustment on account of
AMP expenses.

3.     That the Transfer Pricing adjustment of Rs.200,12,15,476/-
on account of Advertisement, Marketing and Sales Promotion
(AMP) expenses being the aggregate of :

(i)    Protective Adjustment                       Rs. 96,63,03,610/-

(ii)   Substantive Adjustment                      Rs.103,39,11,866/-

is bad in law, illegal and uncalled or both on facts and in law.

3.1    That on facts and in law the DRP erred in :

(a)    Enhancing          the        TP         adjustment            vis-à-vis
protective/substantive basis without issuing any show cause
notice.

(b)    Observing that the appellant has not furnished complete /
adequate details in reply to the investigation directed to be
conducted vide letter dated 19th October, 2016.

(c)    Issuing directions contrary to provisions of section 144C(8) of
the Act.
                      65   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                         (Amadeus India P. Ltd.)

3.2   That on facts and in law the TPO/DRP erred in ignoring and
not following the orders of Hon'ble ITAT and High Court in the
appellant's own case for the AYs 2007-08, 2008-09 and 2009-10
duly placed on record.

3.3   That on facts and in law the TPO/DRP erred in disproving
the benchmarking analysis adopted by the appellant without
following the methodology and approach recognized under section
92C(3) of the Act.

4.    That on facts and in law the TPO erred in holding and the
DRP inter alia erred in upholding / observing that :

      (i)     Appellant had incurred AMP expenditure totaling to
      Rs.70,83,04,354/- on promotion of proprietary marks and
      for development of marketing intangible for the benefit of AE.

      (ii)    AMP expenditure of Rs.70,83,04,354/- incurred by the
      assessee is an "International Transaction" u/s 92B of the
      Act.

      (iii)   Expenditure of Rs.66,66,86,509/- incurred by the
      assessee on payment of incentives to subscribers is in the
      nature of AMP.

      (iv)    By incurring excess / extraordinary AMP expense the
      appellant had rendered intra group services to its AE.

      (v)     AE is directly benefited by any expenditure incurred by
      assessee on AMP.

      (vi)    AE directs the AMP strategy and the expenditure
      incurred by appellant in India.
                    66   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                       (Amadeus India P. Ltd.)

      (vii) Legal ownership of the marketing intangible would get
      transferred   to   the   AE   without      any    consideration    on
      termination of the Distribution Agreement.

      (viii) Appellant has failed to furnish any material to
      demonstrate that it enjoyed economic ownership of brand.

      (ix)   Appellant has failed to show that for excessive AMP
      expenditure it was compensated by the AE through a set-off.

      (x)    Margins earned by the appellant (applying TNMM) is
      not significantly more that the margins of the comparable
      companies.

5.    Without prejudice, that on facts and in law the AO/TPO/DRP
erred in not appreciating that the alleged transactions of AMP
were "closely linked" with the main activity carried on by the
appellant and hence it cannot be segregated and benchmarked on
a stand-alone basis.

5.1   That on facts and in law the AO/TPO.DRP erred in holding
that there is no suitable comparable available for benchmarking
the alleged "international transaction" of incurring excessive AMP
expense by applying the aggregated approach.

6.    That on facts and in law the AO/TPO/DRP erred in making /
upholding Protective TP Adjustment on account of AMP expenses
invoking "Bright Line Method".

6.1   That on facts and in law the DRP erred in holding that use of
"Bright Line Method" is supported by Rule 10AB of Income Tax
Rules.
                           67   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                              (Amadeus India P. Ltd.)

       7.     That on facts and in law the TPO/AO/DRP erred in
       making/upholding substantive TP adjustment on account of AMP
       expenses invoking "Cost Plus Method".

       7.1    That Without prejudice, on facts and in law the TPO/DRP
       erred in making/upholding the applicability of a markup of
       45.97% on the alleged excessive AMP expenses incurred by the
       appellant on behalf of the Associated Enterprise.

       8.     That without prejudice on facts and in law the TPO/DRP
       erred in making/upholding the applicability of a markup of
       45.97% on the alleged excessive AMP expenses incurred by the
       appellant on behalf of the Associated Enterprise.

       9.     That on facts and in law the AO/DRP erred in making /
       upholding disallowance of Rs.27,01,152/- u/s 14A of the Act.

       9.1    That on facts and in law the AO/DRP erred in not
       appreciating that provisions of section 14A are not applicable as
       no exempt income was earned by the appellant during the year
       under consideration.

       10.    That on facts and in law the AO erred in levying interest u/s
       234B & 234C of the Act."

15.1          As is apparent, the following two issues are involved in this

appeal:-

       (i)    Transfer Pricing Adjustment on account of excessive AMP

              spend i.e., protective adjustment of Rs.96,73,03,610/- and

              substantive adjustment of Rs.103,39,11,866/-.

       (ii)   Disallowance u/s 14A of Rs.27,01,152/-
                           68   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                              (Amadeus India P. Ltd.)

15.2          Ground No.1 is general in nature and requires no specific

adjudication.

15.3          In grounds 2 to 8, the assessee/appellant challenges the

transfer pricing adjustment on account of alleged excessive AMP

expenditure. A perusal of order passed by the TPO for A.Y. 2012-13

depicts that the facts and circumstances of the case are akin to that

in A.Y. 2011-12. The only distinction we could gather is that the TPO

has proposed a substantive addition and a protective addition.

Protective addition has been made applying the bright line test to the

alleged entire AMP expenditure of the assessee including incentives

paid to the travel agents and the substantive addition has been made

applying cost-plus method to AMP expenditure incurred excluding

payment of incentives to the travel agents. The reason we could

gather for such an action is the decision of the Hon'ble Delhi High

Court in the case of Sony Mobile (supra) wherein the following two

issues have been adjudicated by Hon'ble High Court against the tax

department i.e.:

       (i)    The Hon'ble Jurisdictional High Court has held that bright

       line test cannot be used as a method; and

       (ii)   Selling expenses are to be excluded from the ambit of AMP.
                          69   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                             (Amadeus India P. Ltd.)

15.4         In this regard, it will be relevant to note that incentives

paid to travel agents in the instant case are selling expenses and they

ought to have been excluded from the ambit of AMP {refer ITAT

decision in the case of the assessee/appellant for A.Y. 2007-08

reported in 149 ITD 496(Del)}. The TPO records that since on both the

above issues, the tax department has approached the Hon'ble Apex

Court, to keep these issues alive, Protective and Substantive AMP

adjustments have been made in the year under consideration. It will

be relevant to note that the Ld. DRP for AY 2012-13 has also

specifically considered the jurisdictional issue i.e. as to whether AMP

is an international transaction or not and in this regard it has been

held by the Ld. DRP as under:-

        "Amendment regarding filing of appeals by the Department
        against DRP's directions

        1. The Income Tax Act has recently been amended w.e.f.,
        1.4.2016, to provide that the directions of the DRP cannot be
        appealed against by the Department. The Hon'ble High Court
        in the case of Vodafone India Services Pvt. Ltd. have held that
        proceedings before the DRP are continuation of assessment
        proceedings, and the final assessment order is passed only
        after the directions of the DRP. A similar view has been taken
        in    several   decisions   of   the    Hon'ble     ITAT.     The      recent
        amendment in the Income Tax Act only strengthens the view
                           70     Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                                (Amadeus India P. Ltd.)

        that the DRP is an administrative, rather than an appellate
        body.,

        2. In certain case, the Hon'ble Delhi High Court has decided the
        issue    against    the     Revenue.       As    discussed       above,   the
        Department has filed SLP in the Hon'ble Supreme Court
        against these decisions and the decision of the Hon'ble
        Supreme Court is awaited. In Sony Ericsson, the Department's
        SLP in the Hon'ble Supreme Court on this issue has been
        admitted and the decision of the Hon'ble Supreme Court is
        awaited. With the highest respect to the Hon'ble High Court's
        decision in these cases, we are constrained to observe that if
        the AO's decision on this issue is not approved by the DRP
        following the Hon'ble High Court's decision in these cases, this
        would result in a fait accompli, because after the amendment
        w.e.f. 1.6.2016, the AO cannot file appeal against the
        directions of the DRP. This would be inconsistent with the view
        taken by the AO in earlier years and should not be
        misconstrued       as     the   Department        having      accepted    the
        assessee's view, even when SLP has been filed/admitted
        against the decision of the Hon'ble High Court on this issue, in
        these cases. Considering the facts, it would be premature at
        present, for the DRP to decide this issue against the AO/TPO,
        when the Department's SLP in the Hon'ble supreme Court on
        this issue has been admitted and the decision of the Hon'ble
        Supreme Court is awaited."

15.5      Both the lower authorities, therefore, accept that subject to

the final outcome in SLP before the Hon'ble Apex Court, the current

legal position, as clarified by the Hon'ble Delhi High Court in case of
                        71   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                           (Amadeus India P. Ltd.)

Maruti Suzuki (supra), Whirlpool of India (supra) and Bausch & Lomb

Eyecare (supra), supports the claim made by the assessee/ appellant.

We have already held above that on facts and circumstances of the

case there is no transaction for incurrence of AMP to promote the

brand of AE. Conclusions drawn in appeal for AY 2011-12 will

therefore apply mutatis mutandis to the present appeal. It is,

accordingly, held that in absence of a transaction for brand promotion

between the assessee/appellant and its AE, the TPO and the Ld DRP

were, therefore, not justified in proposing either protective adjustment

or the substantive adjustment. As a result Ground Nos. 2, 3 and 3.2

is allowed. Since the jurisdictional aspect is decided in favour of the

assessee/appellant, other grounds challenging various other facets of

impugned addition do not require any adjudication as having become

in fructuous.

15.6        Before finally concluding on this issue, we would like to

state that the Ld. AR has fairly invited our attention towards the

findings recorded by the Ld. DRP at pages 62 to 80 of the order

wherein the Ld. DRP has directed that in the alternative an AMP

intensity adjustment be made. In this regard, it has been held by the

Ld. DRP as under:-

       "It may be mentioned that this adjustment is not dependent on
       whether there is an international transaction. As discussed in
                          72   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                             (Amadeus India P. Ltd.)

       para 4, there is clearly an international transaction in this case
       however, if this view is not accepted by higher judicial authorities,
       the AMP intensity adjustment would still stand."

15.7        Thereafter, at page 79 -Para 2, the Ld. DRP has laid down a

methodology for making an adjustment on account of AMP intensity

and has issued directions to the TPO accordingly. Highlighting the

above background, it was submitted by the Ld. AR that post issuance

of directions by the Ld DRP, vide letter dated 10th January, 2017, the

assessee/appellant submitted the necessary details for AMP Intensity

Adjustment before the TPO as under:-

        "In continuation to our letter dated 5th January, 2017 on the
        above mentioned subject and as instructed by you to provide
        AMP intensity adjustment calculations as per formula provided
        by DRP in its directions dated 20th December, 2016.

        Please find enclosed herewith Calculation of AMP intensity
        Adjustment as per DRP Directions for AY 2012-13 ­ marked as
        Annexure A.

        As is evident from the attached calculation, difference in intensity
        of amp is negative so no adjustment is required to be done for
        Assessee since its AMP expenses are loss than the comparables.
        Further, just to bring on record, for ALP purpose prescribed
        formula is OP/OC and not NP/Sales, even so Assessee's
        NP/Sales is much higher than the comparables."

15.8        It is submitted by the Ld AR that the above submissions

have been accepted by the the TPO and in his order dated 10th
                       73   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                          (Amadeus India P. Ltd.)

January, 2017 {i.e order giving effect to directions issued by the Ld.

DRP} no adjustment on account of AMP intensity has been made. We

have mentioned the above facts to clarify that premised present facts,

we need not dwell upon this issue on merits in the present appeal.

15.9      Ground    Nos.    9   &    9.1    challenge       disallowance    of

Rs.27,01,152/- u/s 14A of the Act. It is undisputed that during year

under consideration there is no exempt income derived by the

assessee/appellant. Elaborating upon this, it was submitted by the

Ld. AR that in absence of exempt income, disallowance u/s 14A

cannot be made. In support, he relied on the decision of the Hon'ble

Jurisdictional High Court in the case of McDonald's India Pvt. Ltd.

reported in (2019) 101 Taxmann.com 86 (Del).

15.10     On the other hand, the Ld. DR invited our attention

towards opinion express by the CBDT in Circular dated 11th

February, 2014.

15.11     We have carefully considered the rival submissions. The

claim made by the assessee/appellant had been rejected by the Ld.

DRP by observing as under:-

        "1.    The assessee has challenged the disallowance under
        section 14A. The assessee has reiterated the contentions
        raised before the AO and argued that no disallowance should
        be made as no exempt income has been received during the
                74   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                   (Amadeus India P. Ltd.)

year. The submissions of the assessee and the facts have been
carefully considered. In his order, the AO has discussed the
issue in detail. This discussion is not being repeated here for
the sake of brevity. In his order, the AO has given valid
reasons for his decision. The decision of the AO is supported
by the CBDT circular and judicial decisions. The assessee has
failed to controvert the findings of the AO.

2. The assessee has contended that in AY 2011-12, the DRP
have deleted the disallowance following the decision of the
Hon'ble Delhi High Court in Cheminvest. It is not clear whether
the DRP's decision on this issue was accepted by the
Department on merits, or whether an appeal was filed on this
issue. If the Department has not accepted the DRP's decision
on this issue in AY 2011-12, and if the DRP was to direct
deletion of the disallowance in the present year also, this
would result in a fait accompli, because after the amendment
w.e.f. 1.6.2016, the AO cannot file appeal against the
directions of the DRP. This would be inconsistent with the view
taken by the Department in earlier year and should not be
misconstrued as the Department having accepted the exclusion
of this comparable, even when this is actually not the case.

  3.    In view of the above discussion, this issue is decided
as follows:

(i) If the Department has accepted the decision of the DRP on
this issue in AY 2011-12, and has also accepted the decisions
of the Hon'ble Delhi High Court in Cheminvest and Holcim, the
disallowance under section 14A shall be deleted following the
                           75    Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                               (Amadeus India P. Ltd.)

           decision of the DRP in AY 2011-12 and these decisions of the
           Hon'ble High Court.

           (ii)    If the Department has not accepted the decision of the
           DRP on the issue in AY 2011-12, or has not accepted the
           decision of the Hon'ble Delhi High Court in Cheminvest and
           Holcim, the disallowance under section 14A is upheld. It is
           possible that the DRP's decision and these decisions of the
           Hon'ble High Court have not been accepted on merits however,
           no appeal is filed because of low tax effect. In such a case, as
           the DRP's decision on this issue has not been accepted on
           merits, the disallowance shall be upheld."

15.12         Since undisputedly, there is no exempt income derived by

assessee/appellant in the instant case, in our considered opinion, the

issue merits to be decided in favour of the assessee/appellant

following the Hon'ble jurisdictional High Court's decision in the case

of Mc Donald India Pvt. Ltd(supra) and M/s Cheminvest Ltd. reported

in 378 ITR 33(Del). Respectfully following the above binding

precedents of the Hon'ble Jurisdictional High Court we direct the AO

to delete disallowance u/s 14A.           As a result, grounds 9 & 9.1 are

allowed.

16.0          In the result ITA No. 1811/Del/2017 stands allowed.

17.0          Now we take up the appeal for AY 2013-14 in ITA NO.

7691/Del/2017. In this appeal, following grounds have been raised

by the assessee/appellant.
                     76   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                        (Amadeus India P. Ltd.)

"1.    That on facts and in law the orders passed by the Assessing
Officer (hereinafter referred as the "AO") / Dispute Resolution
Panel (hereinafter referred as the "DRP) / Transfer Pricing Officer
(hereinafter referred as the "TPO") are bad in law and void ab-
initio.

2.     That on facts and in law the TPO/DRP erred in not
appreciating that in absence of a "transaction" as envisaged
under section 92F of the Act between appellant and its AE for
brand promotion or for establishing a marketing intangible, the
TPO had no jurisdiction to propose an adjustment on account of
AMP expenses.

3.     That the Transfer Pricing adjustment of Rs.24,04,09,550/-
on account of Advertisement, Marketing and Sales Promotion
(AMP) expenses being the aggregate of :

(i)    Protective Adjustment                      Rs. 21,18,92,792/-

(ii)   Substantive Adjustment                     Rs.    2,85,16,758/-

Is bad in law, illegal and uncalled or both on facts and in law.

3.1    That on facts and in law the DRP erred in :

(a)    Observing that the appellant has not furnished complete /
adequate details before TPO / DRP.

(b)    Observing that the TPO has carried out an AMP Intensity
Adjustment, and this adjustment not dependent upon existence of
an "international transaction" for AMP.

(c)    Issuing directions contrary to provisions of section 144C(8) of
the Act.
                      77   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                         (Amadeus India P. Ltd.)

3.2     That on facts and in law the TPO/DRP erred in ignoring and
not following the orders of Hon'ble ITAT and High Court in the
appellant's own case for the AYs 2007-08, 2008-09, 2009-10 and
2010-11, duly placed on record.

3.3     That on facts and in law the TPO/DRP erred in disproving
the benchmarking analysis adopted by the appellant without
following the methodology and approach recognized under section
92C(3) of the Act.

4.      That on facts and in law the TPO erred in holding and the
DRP inter alia erred in upholding / observing that :

(i)     Appellant    had   incurred     AMP     expenditure       totaling   to
        Rs.20,21,41,620/- on promotion of proprietary marks and
        for development of marketing intangible for the benefit of AE.

(ii)    AMP expenditure of Rs. 20,21,41,620/- incurred by the
        assessee is an "International Transaction" u/s 92B of the
        Act.

(iii)   Expenditure of Rs.18,19,16,969/- incurred by the assessee
        on payment of incentives to subscribers is in the nature of
        AMP.

(iv)    By incurring excess / extraordinary AMP expense the
        appellant had rendered intra group services to its AE.

(v)     AE is directly benefited by any expenditure incurred by
assessee on AMP.

(vi)    AE directs the AMP strategy and the expenditure incurred by
        appellant in India.
                     78   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                        (Amadeus India P. Ltd.)

(vii) Legal ownership of the marketing intangible would get
       transferred   to   the   AE   without      any    consideration    on
       termination of the Distribution Agreement.

(viii) Appellant has failed to furnish any material to demonstrate
       that it enjoyed economic ownership of brand.

(ix)   Appellant has failed to show that for excessive AMP
       expenditure it was compensated by the AE through a set-off.

(x)    Margins earned by the appellant (applying TNMM) is not
       significantly more that the margins of the comparable
       companies.

5.     Without prejudice, that on facts and in law the AO/TPO/DRP
erred in not appreciating that the alleged transactions of AMP
were "closely linked" with the main activity carried on by the
appellant and hence it cannot be segregated and benchmarked on
a stand-alone basis.

5.1    That on facts and in law the AO/TPO/DRP erred in holding
that there is no suitable comparable available for benchmarking
the alleged "international transaction" of incurring excessive AMP
expense by applying the aggregated approach.

5.2    That on facts and in law the DRP erred in holding that
appellant has not been able to substantiate benchmarking of
alleged AMP "transaction" following an aggregate approach.

6.     That on facts and in law the TPO/AO/DRP erred in
making/upholding Protective TP adjustment on account of AMP
expenses invoking "Bright Line Method".
                           79    Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                               (Amadeus India P. Ltd.)

       6.1   That on facts and in law the DRP erred in holding that use of
       "Bright Line Method" is supported by Rule 10AB of Income Tax
       Rules.

       7.    That on facts and in law the AO/DRP erred in making /
       upholding Substantive Adjustment on account of AMP expenses
       invoking "Cost Plus Method".

       8.    That without prejudice, while benchmarking alleged AMP as
       a separate "transaction" TPO has erred in :

       (a)   applying a mark-up of 41% while computing adjustment on a
             substantive basis, and

       (b)   applying a mark-up of 12.87% (upheld by DRP as an AMP
             intensity Adjustment) while computing adjustment on a
             protective basis.

       9.    That on facts and in law the AO/DRP erred in making /
       upholding disallowance of Rs.37,74,997/- u/s 14A of the Act.

       9.1   That on facts and in law the AO/DRP erred in not
       appreciating that provisions of section 14A are not applicable as
       no exempt income was earned by the appellant during the year
       under consideration.

       10.   That on facts and in law the AO erred in levying interest u/s
       234B of the Act."

18.0         From perusal of record, it is observed that relevant facts

and issue involved in this appeal for A.Y. 2013-14 are similar to those

involved in the appeal for A.Y. 2012-13. This is also accepted by both

the parties before us. As such, it is directed that the findings recorded
                         80   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                            (Amadeus India P. Ltd.)

and conclusions drawn by us for A.Y. 2012-13 would apply mutatis

mutandis to the appeal for AY 2013-14 as well. We direct accordingly.

19.0       In the result, ITA NO. 7691/Del/2017 stands allowed.

20.0       In   the   final   result,    the     three     appeals      filed   by

assessee/appellant are allowed.

21.0       Since we have disposed off the appeals, Stay Petitions for

AYs 2012-13 and 2013-14 in Stay Nos. 475-476/Del/2018 are

dismissed.

       Order pronounced in the open court on 27.02.2019.

          Sd/-                            Sd/-
     (N.S.SAINI)                    (SUDHANSHU SRIVASTAVA)
ACCOUNTANT MEMBER                      JUDICIAL MEMBER

Dated: 27.02.2019


Copy forwarded to:
1.  Appellant
2.  Respondent
3.  CIT
4.  CIT(Appeals)
5.  DR: ITAT
                      TRUE COPY

                                                 ASSISTANT REGISTRAR
                                                  ITAT NEW DELHI
                      81   Stay No. 475, 476/d/2018& ITA no. 1662/d/2016
                                         (Amadeus India P. Ltd.)

Date of dictation                                  Dictated on
                                                   dragon
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dictating Member
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Other Member
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PS/PS
Date on which the fair order is placed before the 27.02.2019
Dictating Member for pronouncement
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website of ITAT
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Registrar for signature on the order
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