Subject: Briefly stated relevant facts are that the Assessee is a company engaged in the business of trading of consumer durable etc and also has been providing representative and marketing support services to Toshiba workgroup companies worldwide.
Referred Sections:
Section 90 2CA (3) of the Income Tax Act, 1961
Referred Cases / Judgments:
Sony Ericsson Mobile Communications Private Limited vs. CIT 374 ITR 118
CIT vs.AIMIL Ltd (2009) 321 ITR 508.
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `I2, NEW DELHI
BEFORE SHRI. N. S. SAINI, ACCOUNTANT MEMBER
AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER
ITA No. 1611 /Del/2016
Assessment Year: 2011-12
DCIT, Circle 25(1), New Delhi vs M/s Toshiba India Pvt. Ltd.,
3rd Floor, Building No. 10,
Tower B, DLF, Cyber City Phase-II,
Gurgaon, Haryna 122002
PAN No AABCT4829N
( Appellant) (Respondent)
ITA No. 7340 /Del/2018
Assessment Year: 2011-12
M/s Toshiba India Pvt. Ltd., vs DCIT, Circle 25(1), New Delhi
rd
3 Floor, Building No. 10,
Tower B, DLF, Cyber City
Phase-II, Gurgaon, Haryna
122002
PAN No AABCT4829N
( Appellant) (Respondent)
Appellant by: Shri Nageshwar Rao, Advocate
Respondent by: Shri H.K.Choudhary, CIT DR
Date of hearing: 11.06.2019
Date of pronouncement: 11.06.2019
ORDER
PER NARASIMHA K. CHARY, JM
Aggrieved by the final order dated 28/1/2016 passed by the AO
pursuant to the directions dated 15/12/2015 given by the Ld. Dispute
Resolution Panel (DRP), the Revenue preferred the ITA No.
1611/del/2016 whereas aggrieved by the assessment order dated
2
19/9/2018 pursuant to the order of remand dated 8/4/2016 by the
Tribunal, M/S Toshiba India private limited (the assessee) preferred ITA
No. 7340 /Del/ 2018.
2. Briefly stated relevant facts are that the Assessee is a company
engaged in the business of trading of consumer durable etc and also has
been providing representative and marketing support services to Toshiba
workgroup companies worldwide. For the assessment year 2011-12, they
have filed their return of income on 30-11-2011declaring a total income
of Rs. 12,90,03,431/-.
3. Ld. TPO by order dated 30/1/2015 passed under section 90 2CA
(3) of the Income Tax Act, 1961 (for short "the Act" ), suggested an
adjustment of Rs. 71,23,76,838/-to the returned income of the assessee
on account of AMP adjustment. Apart from this, learned Assessing
Officer found that the deductions claimed by the assessee on account of
alleged deposit of employees' contribution to PF/ESIC and Special
Additional Duty (SAD) written off were to be disallowed. Learned
Assessing Officer, accordingly, passed the draft assessment order on
12/3/2015.
4. Against the draft assessment order, the assessee filed objections
before the Ld. Dispute Resolution Panel (DRP). DRP vide order dated
15/12/2015 directed the Ld. TPO to exclude routine AMP expenses.
They have also deleted the disallowance on account of alleged deposit of
employees' contribution to PF/ESIC and a SAD written off. Ld. TPO
gave effect to the directions of the directions of the Ld. DRP and worked
out the AMP adjustment at Rs. 21,73,99,859/-as against
Rs.71,23,76,838/- initially proposed by him by order dated 30/1/2015. In
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conformity with the findings of the Ld. TPO, learned Assessing Officer
passed the final assessment order dated 28/1/2016. Aggrieved by such
final assessment order, both the assessee and the revenue preferred
appeals.
5. Assessee also challenged the assessment order in ITA No.
944/Del/2016 in respect of the adjustment on account of AMP; whereas
Revenue preferred ITA 1611/del/2016 challenging the direction given by
the Ld. DRP to the Ld. TPO to exclude the routine AMP expenses and
also the disallowance on account of alleged deposit of employees'
contribution to PF/ESIC and SAD written off. Appeal of the assessee in
ITA No. 944/del/2016 was disposed of by order dated 8/4/2016 by the
Tribunal by setting aside the issue relating to the adjustment on account
of AMP and remanding the matter to the file of the Ld. TPO/AO for
deciding it afresh.
6. Pursuant to the remand order dated 8/4/2016 passed by the
Tribunal, Ld. TPO passed the order dated 27/10/2017 making the
adjustment of NIL on substantive basis and an adjustment of Rs.
98,53,39,049/-on protective basis following the Bright Line Test (BLT)
method. Assessee filed objections before the Ld. DRP and the Ld. DRP
by order dated 24/8/2018 confirmed the adjustment on protective basis.
Ld. DRP, however, the computed the adjustment at Rs. 91,46,45,639/- as
against the adjustment of Rs. 98, 53, 39, 049/- suggested by the Ld. TPO.
In consonance with the directions of the Ld. DRP, learned Assessing
Officer passed the final assessment order on 19/9/2018. Aggrieved by
such an order, assessee preferred ITA 7340 /Del/ 2018. Since both the
appeals had anorigin initially in the order dated 12.03.2015 passed by the
4
learned Assessing Officer, we deem it just and proper to dispose of these
2 appeals by way of this common order.
7. Insofar as the adjustment on protective basis following the BLT is
concerned, at the outset, Ld. AR brought to our notice that the Hon'ble
jurisdictional High Court in the case of Sony Ericsson Mobile
Communications Private Limited vs. CIT 374 ITR 118 invalidated the
application of BLT for making any adjustment in respect of AMP. He
further submitted that in assessee's own case for the assessment year
2009-10 and assessment year 2014-15, a coordinate Bench of this
Tribunal in ITA No. 1438/del/2018 and ITA No. 7547/del/2018
respectively by orders dated 18/6/2018 and 10/1/2019 respectively
deleted the protective adjustment following the BLT. He submits that
though the very existence of international transaction is challenged by
the assessee while grounds No. 5 to 10, if the contentions of the assessee
in respect of the validity of the protective adjustment is allowed, the
adjustment made on account of AMP would be totally deleted and the
issue relating to the nonexistence of international transaction would be
academic in this proceedings, and the assessee would seek the leave of
the Tribunal to rise such an issue at any appropriate stage.
8. Ld. DR submitted that for the assessment year 2012-13 a
coordinate Bench of this Tribunal held that the issue of AMP involves an
international transaction and therefore, it is necessary to benchmark such
a transaction. Ld. AR submitted that the issue of benchmarking the
transaction in this case does not arise because under identical
circumstances the protective addition on account of AMP following the
BLT was deleted for the earlier and subsequent years by the coordinate
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Bench of this Tribunal, and such an issued arise only when the revenue
makes a substantive addition.
9. There is no denial from the Revenue as to the decision of the
Hon'ble jurisdictional High Court in the case of Sony Ericsson (supra) or
the Tribunal deleting the protective adjustment following the BLT in
ITA ITA No. 1438/del/2018 and ITA No. 7547/del/2018 respectively by
orders dated 18/6/2018 and 10/1/2019 respectively for the assessment
years 2009-10 and 2014-15 respectively.
10. We have gone through the order dated18/6/2018 and 10/1/2019 in
ITA No. 1438/del/2018 and ITA No. 7547/del/2018 respectively in
respect of the assessment year 2009-10 and 2014-15 to be found at page
numbers 871 and 860 respectively in the paper book. Inthe order dated
10/1/2019 in ITA No. 7547/del/2018, the Tribunal held that,-
8. In ITA No.6531/Del/2017, a coordinate bench of this Tribunal
vide para 6.3 followed the decision of the another coordinate bench
of this Tribunal in the case Nikon India P. Ltd., ITA
No.4574/Del/2017 dated 20.9.2017 and held that in the light of the
decision of the Hon'ble jurisdictional High Court in the case of Sony
Ericson Mobile Communications (India (P) Ltd.(supra), no
adjustment by application of BLT method could be sustained on
protective basis having no statutory mandate. This finding of the
Tribunal in ITA No.6531/Del/2017 for the Asstt. year 2013-14 was
followed in assessee's own case for the Asstt. year 2009-10 in ITA
No.1438/Del/2018 and deleted the addition made on protective basis
by following the method of BLT.
9. Since the facts are similar, that too in assessee's own case and the
decisions of the coordinate benches are rendered by following the
decision of the Hon'ble jurisdictional High Court in the case of Sony
Ericsson (supra), this Bench cannot hold the issue in some other way by
taking a different view. Rule of consistency as laid down by the
Hon'ble Apex court in the case of Radhasoami Satsang, 1992 AIR 377,
does not permit such a course. We, therefore, while respectfully
6
following the same, hold that the addition on protective basis by
following the BLT method cannot be sustained.
11. Further, the Hon'ble High Court dismissed the appeal in ITA No.
1451/2018 by order dated 15/5/2019 preferred against the order dated 18
60,018 in ITA No. 1438/del/2018 for the assessment year 2009-10. In
the circumstances, since facts fundamental for all these years remain the
same, while respectfully following the decision of the Hon'ble
jurisdictional High Court and also the view taken by a coordinate Bench
of this Tribunal in assessee's own case for the assessment years 2009-10
and 2014-15, we conclude that the addition made on protective basis
following the BLT cannot be sustained. We do not find it necessary to go
into the question of benchmarking the transaction since no addition is
made on substantive basis, and such a question could be gone into when
the need arises and the revenue chooses to make any addition on
substantive basis. We accordingly direct the assessing officer to delete
the same.
12. Now coming to the grievance of the revenue in respect of the
deletion of the disallowance on account of SAD written off, it is brought
to our notice that in assessee's own case for the assessment year 2010-
11, in ITA No. 1101 /Del/ 2015 by order dated 25/5/2015 a coordinate
Bench of this Tribunal held that the amount of the SAD paid in relation
to the goods which are still appearing as closing stock in the books of
accounts of the assessee, cannot be claimed as deduction; that the
payment of SAD in such circumstances is nothing, but a part of the
purchase price; and that the the same cannot be separated from the
purchase price of the goods to be written off separately in the year under
question, when the corresponding goods are still treated as stock in trade.
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13. Ld. DR submitted that so long as the corresponding goods are still
treated as stock in trade and appearing in the books of the accounts of the
assessee as closing stock, the advance amount paid cannot be claimed as
deduction. No circumstances are brought to our notice to disturb such a
finding of the Tribunal under similar circumstances. We, therefore, do
not find any merit in the contention of the assessee and this ground of
appeal of Revenue has to be allowed.
14. Lastly, in respect of the issue of disallowance on account of late
deposit of employees contribution to PF/ESIC, the impugned order
speaks that the Ld. DRP granted relief to the assessee on this aspect by
following the binding precedent of the Hon'ble jurisdictional High Court
in the case of CIT vs.AIMIL Ltd (2009) 321 ITR 508. It is not brought to
our notice by the Revenue as to how this decision of the Hon'ble
jurisdictional High Court is not applicable to the facts of the case and
why the same shall not be followed. Since the Ld. DRP followed the
binding precedent of the jurisdictional High Court, we find it difficult to
hold that there is anything illegality or irregularity in the Ld. DRP
deleting the same. We therefore uphold the finding of the Ld. DRP on
this issue.
15. In the result, appeal of the revenue is allowed in part and the
appeal of the assessee is allowed.
Order pronounced in the open Court on 11th June, 2019.
Sd/- Sd/-
N. S. SAINI K. NARASIMHA CHARY
ACCOUNTANT MEMBER JUDICIAL MEMBER
DATED: 11th June, 2019.
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