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Canon India Pvt. Ltd. 7th & 8th Floor,, Tower-B, Building No. 5, DLF Cyber Terraces DLF Phase-III vs DCIT Circle-5(2) New Delhi
August, 23rd 2018

Subject: Act read with Rule 10D of the Income-tax Rules,1962

Referred Sections:
Section 144C of Income tax Act,
Section 143(3) / 144C of the Income Tax Act,
Sections 92C(1) and 92C(2) of the Act
Section 92B of the Act.
Section 92C(2) of the Act.
Section 234B of the Act.
Section 143 (1) of the Income Tax Act,
Section 143(2) of the Act
Sction 92CA of the Act
Sb-section (2B)
Sction 92E of the Act.
Sbsection (2A)
Sctions 4 & 5 of the I.T. Act

Referred Cases / Judgments
Rama synthetics (India) Pvt. Ltd. vs. ACIT (2016) 386 ITR 665 (DEL)
Shri Vishnu Etables (India) Ltd. vs. DCIT (2016) 387 ITR 385
Alpha Nipon Innovatives Ltd. vs.DCIT (2016) 291 CTR 309.
Maruti Suzuki India Ltd. vs. CIT (2016) 381 ITR 154 (Del)
CIT vs. Whirlpool of India Ltd. (2016) 381 ITR 154 (Del)
Bausch & Lomb Eyecare (India) (P) Ltd. vs. ACIT (2016) 381 ITR 227 (Del)
Sony Ericsson Mobile Communication India (P) Ltd. vs. CIT
Nikon India Private Ltd. vs. DCIT (ITA No. 4574/DEL/2017)
Van Melle India Pvt. Ltd. vs. DCIT (ITA No. 1073/Del/2017)
Haier Appliances India P. Ltd. vs. DCIT (204) 146 ITD 730 (Del)
Glaxo Smithkline Consumer (ITA Nos. 1148/Chd/2011 and 290/Chd/2014)
Healthcare Ltd. vs. ACIT No. 577/Mum/201
A.W. Faber Castell (India) Pvt. Ltd. vs. DCIT ITA
Reebok India Co. vs. ACIT (2014) 146 ITD 469
Panasonic Sales & Services India Pvt. Ltd. vs. ACIT (2013) 157 TTJ 615

                                1            ITA No. 1405/Del/2015 & 2275/Del/2015
Ita




               IN THE INCOME TAX APPELLATE TRIBUNAL
                    DELHI BENCH: `I-1' NEW DELHI

            BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER
                                  AND
              MS SUCHITRA KAMBLE, JUDICIAL MEMBER

                I.T.A .No. 1405/DEL/2015 (A.Y 2010-11)

Canon India Pvt. Ltd.            Vs            DCIT
 th    th
7 & 8 Floor,, Tower-B, Building                Circle-5(2)
No. 5,                                         New Delhi
DLF Cyber Terraces DLF Phase-III
Gurgaon    AAACC4175D
                                               (RESPONDENT)
(APPELLANT)

                    I.T.A .No. 2275/DEL/2015 (A.Y 2010-11)

DCIT                                    Vs     Canon India Pvt. Ltd.
Circle-5(2)                                    7th & 8th Floor,, Tower-B,
New Delhi                                      Building No. 5,
                                               DLF Cyber Terraces DLF
                                               Phase-III Gurgaon
                                               AAACC4175D
      (APPELLANT)                              (RESPONDENT)

                I.T.A .No. 832/DEL/2016 (A.Y 2011-12)

Canon India Pvt. Ltd.                  Vs      DCIT
7th & 8th Floor, Tower-B, Building No.         Circle-5(2)
5,                                             New Delhi
DLF Cyber Terraces DLF Phase-III
Gurgaon
AAACC4175D
                                                (RESPONDENT)
 (APPELLANT)
                                     2             ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




                      I.T.A .No. 1052/DEL/2016 (A.Y 2011-12)

     DCIT                                     Vs     Canon India Pvt. Ltd.
     Circle-5(2), Room No. G-22C,                    2nd Floor, Tower A & B,
     C. R. Building, I. P. Estate                    Cyber Greens DLF Phase-III
     New Delhi                                       Gurgaon AAACC4175D
     (APPELLANT)                                     (RESPONDENT)


                 Appellant by       Sh. Vishal Kalra, Adv, Sh.
                                    S. K. Aggarwal, Adv & Sh
                                    Ankit Sahni, Adv
                 Respondent by      Sh. Sanjay. I. Bara CIT DR

                  Date of Hearing              23.05.2018
                  Date of Pronouncement        21.08.2018

                                     ORDER

PER SUCHITRA KAMBLE, JM

      These four appeals are filed against the separate Assessment Orders
dated 16/02/2015 and 01.01.2016 passed by DCIT, Circle 5(2), New Delhi
u/s 143(3) r/w Section 144C of Income tax Act, 1961 by the assessee and the
Revenue.

2.    The grounds of appeal are as under:-

I.T.A .No. 1405/DEL/2015

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

A.    Transfer Pricing Grounds

1.    That on the facts and circumstances of the case and in law, the AO has
erred in assessing the total income of the Appellant under section 143(3) r.w.s
                                      3           ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




144C(13) of the Act for the relevant assessment year at Rs 147,41,69,894 as
against the returned income of Rs 47,55,95,410.

2.    That on facts and circumstances of the case and in law the Learned
AO/DRP /TPO erred in making an adjustment of Rs 77,26,36,692 in respect
of alleged international transaction pertaining to excess advertisement,
marketing and promotion (`AMP') expenditure, alleging that the same to be not
at arm's length in terms of the provisions of Sections 92C(1) and 92C(2) of the
Act read with Rule 10D of the Income-tax Rules,1962 ("the Rules").

3.     That on the facts and circumstances of the case and in law, the DRP/AO
have erred in not appreciating that suo moto adjustments proposed by the TPO
in relation to Advertisement, Marketing and Promotion ("AMP") expenses
incurred by the Appellant, without any reference from the AO, was beyond
jurisdiction and bad in law.

4.     That on the facts and in the circumstances of the case and in law, the
Learned AO /DRP /TPO erred in alleging that AMP expenses paid to unrelated
third parties in India are excessive, not for the purposes of its business and is
an "international transaction" within the meaning of section 92B of the Act.

5.     That on the facts and in the circumstances of the case and in law, the
Learned AO/DRP/TPO erred in holding that the Appellant by incurring
excessive AMP expenditure has resulted in creation of marketing intangible in
favor of AE, for which it should be compensated along with a mark-up by the
AE.

6.     That on the facts and in the circumstances of the case and in law, the
Learned AO /DRP /TPO have erred in holding that incurrence of excessive AMP
expenditure would constitute a separate activity of rendition of brand building
services and needs to benchmarked separately along with mark-up.

7.     That on the facts and circumstances of the case and in law, the AO /
DRP / TPO have erred in using the "Bright Line" test, which is not a prescribed
method under the TP regulations in place in India, as a method for
benchmarking the AMP expenditure incurred by the Appellant without correctly
applying any of the methods in the manner prescribed under Rule 10B of the
Rules.

Without prejudice to the above grounds that the AMP expenditure
incurred is not amenable to Chapter-X, the Appellant craves to raise
                                     4           ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




following grounds of appeal on merits.

8.    That on the facts and in the circumstances of the case and in law, the
Learned AO / DRP / TPO erred by including trade discounts, volume rebates,
commission, subsidy and other sales related expenses as part of AMP
expenditure and further erred in not following the decision of the Tribunal in
Appellant's own case for assessment years 2006-07 to 2008-09, wherein such
expenses have been held to be excluded before benchmarking the alleged
excessive AMP expenditure.

9.     That on the facts and circumstances of the case and in law, the AO/ TPO
have erred in arbitrarily rejecting and selecting comparable companies for
benchmarking the AMP expenditure and, further, erred in not considering the
functionally comparable companies for such alleged brand building services.

10. That on the facts and circumstances of the case and in law, the DRP/
AO/ TPO have erred in not granting the benefit of quantitative adjustments
(such as non-payment of royalty / expenditure incurred on new product
launches), while computing the alleged excessive AMP expenditure.

11. That the AO / DRP/ TPO erred on the facts and circumstances of the
case and in law in not appreciating that mark-up could not be levied on the
AMP expenditures incurred by the Appellant.

11.1.       Without prejudice to the above and not admitting, if at all a mark-up
should have been charged by the Appellant, assuming it to be a brand building
service provider, the said mark-up could have been charged only on the value
addition expenses incurred by the Appellant for such alleged brand promotion
service and not the entire amount incurred / paid to third party vendors.

12. That on facts and circumstances of the case and in law, the Learned
AO/DRP/TPO have erred in not providing the Appellant the benefit of 5 percent
range as provided by the proviso of section 92C(2) of the Act.

13. That on the facts and in the circumstances of the case and in law, the
Learned AO / DRP / TPO erred by applying Comparable Uncontrolled Price
Method in a manner that is not prescribed or justified under the law.

14. That on the facts and in the circumstances of the case and in law, the
Learned AO / DRP / TPO has erred by not carrying out the determination of
arm's length price as required under section 92C of the Act read with rule 10D
of Income Tax Rules, 1962.
                                     5           ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




15. That on the facts and circumstances of the case and in law       the   AO
/DRP/ TPO erred in not appreciating that all the transactions of the Appellant
were established to be at arm's length by applying the Resale Price Method,
and thereafter the AMP expenses, separately, cannot be alleged to be
excessive.

16. That on the facts and in the circumstances of the case and    in law, the
Learned AO / DRP / TPO has erred by ignoring the provisions of Rule 10B(3) of
the Rules and judicial pronouncements, which advocate usage of multiple year
data of comparable companies for the purpose of determination of  the arm's
length price;

B.    Corporate Tax Grounds

B.1 Addition of subsidy received from CanonSingapore Pte. Ltd. but
not utilized within the previous year - Rs. 3,23,31,873/-

1.     On the facts and in the circumstances of the   case, the learned AO
and the Hon'ble DRP have erred in making the addition of Rs. 3,23,31,873/- to
the total income of the appellant.

1.1    On the facts and in the circumstances of the case, the learned AO has
erred in proposing and the Hon'ble DRP has further erred in confirming that the
amount of subsidy received in advance for meeting specific advertisement and
sales promotion expenditure, but not utilized within the previous year, is
taxable as revenue receipt.

1.2    On the facts and in the circumstances of the case, the learned AO and
the Hon'ble DRP have erred in not appreciating that the unutilized/ unspent
amount of subsidy is treated as current liability and not income in the books of
account and the unspent amount is liable to be refunded if not utilized for the
specified purpose.

2.    Without prejudice to above, on the facts and in the circumstances of the
case, The deduction for the unspent subsidy amount added to the income in
Assessment Year 2010-11 should be allowed in the Assessment Year 2011-12
where such sum has been utilized for the specified purpose and included in
income for Assessment Year 2011-12.

B.2 Without prejudices to the above, the Learned A.O has erred, in law
and on facts, in not granting the claim of prepaid taxed and foreign
tax credit claimed by the appellant.
                                     6           ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




1.    On the facts and in the circumstances of the case, after having computed
a taxable income in cases of Appellant, the Ld. A.O has erred in not allowing
the entire credit of prepaid taxes (TDS, advance tax and self assessment taxes)
amounting to Rs.16,94,07,775/-.

2.    On the facts and in the circumstances of the case, after having computed
a taxable income in cases of Appellant, the Ld. A.O has erred in not allowing
appropriate credit of foreign taxes amounting to Rs.13,28,981/-.

C.     The Ld. A.O has erred, in law and on facts, in not allowing and granting
the credit of set off of brought forward of losses of Rs.19,32,08,420/- claimed
by the appellant.

D.   The Ld. A.O has erred in law and on facts, in not allowing the deduction
under Chapter VI-1 of the Act of Rs.3,97,500/- claimed by the appellant.

E.    The Ld. A.O has erred, in law and on facts, in charging interest under
section 234B of the Act.

F.    The Ld. A.O has erred, in law and on facts, in charging interest u/s 234D
of the Act.

G.     The Ld. A.O had erred in making computational errors while determining
the net amount payable by the appellant.

H. On the facts and in the circumstances of the case, the Ld. A.O has erred in
initiating penalty proceedings u/s 271 (1) (C) of the Act.

I.T.A .No. 2275/DEL/2015

The Assessing Officer DCIT, Circle - 5(2), New Delhi is hereby directed to file
appeal in the above mentioned case before the ITAT, New Delhi on the following
ground of appeal.

i)     On the facts and in the circumstances of the case and in law, the Hon'ble
DRP has erred in directing the AO to allow an amount of Rs. 43,26,35,542/-
from the total amount of subsidy received in advance amounting to Rs.
46,49,73,415/- by considering the same as spent for purpose of advertisement
ignoring the fact that the amount of subsidy received in advance had not been
spent during the previous year under consideration

ii)   On the facts and in the circumstances of the case, the Hon'ble DRP has
                                      7           ITA No. 1405/Del/2015 & 2275/Del/2015
         Ita




erred in deleting the addition made by the AO on account of low GP by ignoring
the fact that the assessee had not offered any explanation/justification
whatsoever regarding fall in GP.

iii)   The appellant craves leave for reserving the right to amend, modify, alter,
add or forego any ground(s) of appeal at any time before or during the hearing
of this appeal."


       I.T.A .No. 832/DEL/2016
Based on the facts and circumstances of the case, Canon India Private
Limited (hereinafter referred to as "the Appellant"), respectfully submits in
respect of the order passed by the learned Deputy Commissioner of Income
Tax, Circle 5(2), New Delhi under section 143(3) / 144C of the Income Tax Act,
1961 (hereinafter referred to as the "Act") the following grounds:

A   Transfer Pricing Grounds
1.    That on the facts and circumstances of the case and in law, the
Assessing Officer ("AO") has erred in assessing the total income of the
Appellant under section 143(3) r.w.s 144C(13) of the Act for the relevant
assessment year ("AY") at Rs 150,12,20,810 as against the returned income of
Rs 55,79,77,442.

2.    That on the facts and circumstances of the case and in law, the orders
passed by the AO / Transfer Pricing Officer ("TPO") were bad in law as the pre-
requisite for applying Chapter-X, ie, existence of an international transaction
between two Associated Enterprises ("AE") under the provisions of section 92B
of the Act, was not satisfied or existed in the present case.

2.1. That on the facts and circumstances of the case and in law, the order
passed by the TPO was also bad in law for proposing a suo moto adjustment
in relation to Advertisement, Marketing and Promotion (`AMP') expenditure
incurred by the Appellant. Further, the AO / Dispute Resolution Panel ("DRP")
erred in not appreciating that such adjustment was beyond jurisdiction of the
TPO, therefore, ultra-vires, bad in law and void ab-initio.

2.2. That on the facts and circumstances of the case and in law, the AO /
DRP / TPO have erred in holding that the unilateral arrangement between the
Appellant and Indian third parties for advertisement and promotion would be a
"transaction" much less an "international transaction" within the meaning of
Chapter X of the Act.
                                       8           ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




3.    That on the facts and circumstances of the case and in law the AO / DRP
/ TPO have erred in making an adjustment of Rs. 74,59,78,403 in respect of
alleged international transaction pertaining to excess AMP expenditure,
alleging that the same to be not at arm's length in terms of the provisions of
sections 92C(1) and 92C(2) of the Act read with Rule 10B of the Income-tax
Rules, 1962 ("the Rules").

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

Without prejudice to the above grounds that the AMP expenditure
incurred is not amenable to Chapter-X, the Appellant craves to raise
following grounds of appeal on merits.

5.    That on facts and circumstances of the case and in law, the AO / DRP /
TPO erred in law and on facts, in applying Profit Split Method ("PSM") to
benchmark the alleged international transaction of incurring excessive AMP
expenditure without establishing as to how PSM was the most appropriate
method in terms of section 92C read with Rule 10B of the Rules and had
applicability to the facts of the instant case.

5.1. That on the facts and circumstances of the case, DRP/ TPO erred in re-
characterizing the functional analysis of the appellant and further erred in
alleging that in the instant case the overseas entities is an entrepreneur and
AE has assigned vital function that otherwise should have been carried out by
itself.

5.2. That on       the facts and circumstances of the case and in law, the
TPO/ DRP erred in holding       that the appellant is contributing to the
intangible of the AE and thus, contributing to the global profit and therefore, the
PSM is the most appropriate method for benchmarking the alleged international
transaction pertaining to excessive AMP spent.

5.3. Without prejudice and notwithstanding to above, that on the facts and
circumstances of the case and in law, the AO / DRP / TPO have erred in
arbitrarily holding taxability of global profits proportionate to AMP expenditure
                                     9           ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




incurred in India and further erred in arbitrarily allocating (1.8% of 35% of
global profits) global profits using PSM method alleging that the appellant is
contributing/ creating intangible on behalf of the AE and global profits need to
be apportioned since various factors are effecting the accrual of income.

6.    That on facts and circumstances of the case and in law, the AO / DRP /
TPO have erred in not appreciating that distribution and marketing functions
being interconnected and intertwined should be benchmarked on an aggregate
basis as was established by the Appellant.

6.1. That on facts and circumstances of the case and in law, the AO / DRP
have erred in arbitrarily rejecting comparable companies for the aggregate
approach for the purpose of benchmarking the alleged excessive AMP expenses
and holding that there are no appropriate comparable companies available to
benchmark on an aggregate basis.

7.     The AO / DRP / TPO have erred in holding that Distribution & Marketing
(incurrence of AMP) should be benchmarked separately applying PSM method
and further erred in not appreciating that the same would result in over
taxation and is contrary to the computation machinery provided in Chapter X.

7.1. That on the facts and circumstances of the case and in law, the AO /
DRP/ TPO have erred in not allowing the setoff excess margin earned by the
Appellant from distribution function against the adjustment made on account of
AMP expenditure even if the same was to be segregated and benchmarked
separately.






8.   That on facts and circumstances of the case and in law, the AO / DRP /
TPO have erred in including subsidy from the scope of AMP expenditure while
benchmarking the same on segregated basis.

8.1. That on facts and circumstances of the case and in law, the AO / TPO
have erred in not excluding selling / business promotion expenses from the
scope of AMP expenditure and further erred in not following the directions of
the DRP to exclude the selling / business promotion expenses as per the details
filed and the decision of the Tribunal in Appellant's own case for assessment
years 2006-07 to 2008-09.
                                     10          ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




9.    That on the facts and circumstances of the case and in law, the AO /
DRP / TPO have erred in not granting the benefit of quantitative / economic
adjustments (such as non-payment of royalty / expenditure incurred on new
product launches), while computing the alleged excessive AMP expenditure.

10. That on facts and circumstances of the case and in law, the AO / DRP /
TPO have erred in not providing the Appellant the benefit of 5 percent range as
provided by the proviso of section 92C(2) of the Act.

11. That on the facts and in the circumstances of the case and in law, the AO
/ DRP / TPO has erred by ignoring the provisions of Rule 10B(3) of the Rules
and judicial pronouncements, which advocate usage of multiple year data of
comparable companies for the purpose of determination of the arm's length
price.

Corporate Tax Grounds

B.1 Addition of subsidy received from Canon Singapore Pte. Ltd. but
not utilized within the previous year - Rs. 197,264,964/-

1.   That on the facts and in the circumstances of the case and in law, the AO
/ DRP have erred in making the addition of Rs. 197,264.964/- to the total
income of the appellant.

1.1. That on the facts and in the circumstances of the case and in law, the AO
has erred in making and the DRP has further erred in confirming that the
amount of subsidy received in advance for meeting specific advertisement and
sales promotion expenditure, but not utilized within the previous year, is
taxable as revenue receipt.

1.2. That on the facts and in the circumstances of the case and in law, the AO
/ DRP have erred in not appreciating that the unutilized/ unspent amount of
subsidy is treated as current liability and not income in the books of account
and the unspent amount is liable to be refunded if not utilized for the
specified purpose.

1.3. That on the facts and in the circumstances of the case and in law, the
Assessing Officer / DRP have erred innot following the Hon'ble Delhi High
Court's order in appellant's own case.
                                     11          ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




2.    Without prejudice to above, that on the facts and in the circumstancesof
the case and in law, the deduction for the unspent subsidy amount added to
the income in AY 2011-12 should be allowed in the AY 2012-13 where such
sum has been utilized for the specified purpose and included in income for AY
2012-13.

B.2 Without prejudice to the above, the Learned AO has erred, in law
and on facts, in not granting the claim of prepaid taxes.

1.    That on the facts and in the circumstances of the case and in law, after
having computed a taxable income in case of Appellant, the learned AO has
erred in not allowing the credit of TDS amounting to Rs.385,168/-.

B.3 That on the facts and in the circumstances of the case and in law, in not
allowing the deduction under Chapter Vl-A of the Act of Rs. 500,000/- claimed
by the Appellant.

B.4. That on the facts and in the circumstances of the case and in law, in
charging interest under section 234B of the Act.

I.T.A .No. 1052/DEL/2016

 1.   On the facts and in the circumstances of the case and in law, Hon'ble
DRP has erred in restricting the ALP from Rs. 74,59,78,408/- to Rs.
53,21,45,194/- u/s 92CA(3) of the Income Tax Act 1961.

 2.    On the facts and in the circumstances of the case and in law, the Hon'ble
DRP-1 has ignored the facts that such expense i.e. selling expenses are
included in the AMP expense of the AE, which is taken as a base for the profit
split. If selling and distribution expenses are to be excluded from the
assessee's AMP expense, the same should be excluded from the AMP expense f
the AE. However, that information is not available in public domain. If only the
selling and distribution expense of the assessee are removed and not of the AE,
the PSM (Profit Split Method) calculation will go wrong.

3.   The appellant craves to amend, modify, alter, add or forego any
ground(s) of appeal at any time before or during the hearing of this appeal."


3.    We are taking up the factual matrix for A.Y. 2010-11. The assessee
company is engaged in the business of trading of photocopiers, fax machines,
                                     12          ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




printers, scanners, digital cameras and projectors, printer cartridges, toners
and software development and export. In this case, the assessee company
filed return of income declaring income of  47,55,95,410/- after set off of
brought forward losses of  19,32,08,420 on 27.09.2010. The return was
process under section 143 (1) of the Income Tax Act, 1961. The notice under
section 143(2) of the Act was issued for selecting the case for scrutiny. Notice
under section 142(1) of along with a detailed questionnaire was issued for
furnishing the details. In response to the said notices Chartered Accountants
and Authorized Representatives of the assessee company attended from time
to time and filed the necessary details. During the year, the assessee entered
into international transaction with its associated enterprises. The case was
referred to Transfer Pricing Officer for determination of Arm's Length Price
under section 92CA(1) of the Act in respect of international transaction
entered into by the assessee during the Finance year 2009-10. The TPO vide
order dated 23.01.2014 determined the Arm's Length Price with respect to the
international transaction carried out by the assessee and directed the
Assessing Officer to add a sum of  86,84,79,282 to taxable income of the
assessee. Vide notice under section 143(2) dated 29.01.2014, the assessee
was asked to explain why a sum of  86,84,79,282 should not be added to the
taxable income of the assessee as directed by the TPO. The assessee
reiterated the submissions as were put before the TPO. As per the directions
of the TPO, the Assessing Officer adopted the Arm's Length Price determined
by the TPO and accordingly an amount of  86,84,79,282 being the difference
in the Arms Length Price determined by the TPO was added back to the total
income of the assessee. In this regard a draft of the proposed order of
assessment was passed and sent to the assessee. The assessee filed
objections before the Dispute Resolution Panel challenging the variation
proposed to be made in the draft order. The DRP vide order dated 24.12.2014
has restored the matter to the file of the transfer pricing officer for
verification. The TPO vide report dated 21.01.2015 revised the value of
                                    13          ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




compound adjustment to 77,26,36,692/-instead of  86,24,79,282/-as
proposed in the draft assessment order. In compliance to the directions of the
DRP and the order of TPO, the addition amounting to 77,26,36,692/-was
made on account of ALP. The Assessing Officer also made an addition of 
3,23,31,873 being subsidy received from Canon Singapore Pte. Ltd. but not
utilised within the previous year. During the year assessee claimed set-off of
brought forward losses and unabsorbed depreciation to the extent of 
19,32,08,420/-. On going through the Assessment Order for the A.Y. 2009-10
it is seen that there is no losses/unabsorbed depreciation carried forward for
set off. Hence the set off claimed by the assessee was not allowed by the
Assessing Officer.

4.    Being aggrieved by the assessment order, the assessee as well as the
Revenue filed appeals before us.

5.    Firstly we are taking up the Assessee's appeal for A.Y. 2010-11. As
regards Ground Nos. 1 and 2, the same are general in nature. Hence Ground
Nos. 1 and 2 are dismissed.

6.    Ground No. 3 relating to jurisdiction of the TPO to determine ALP of an
international transaction and not to re-characterize transaction as an
international transaction. The Ld. AR submitted that the TPO while
examining this issue suo moto, held that there exists an international
transaction by incurring excessive AMP expenditure. The Ld. AR submitted
that the provisions of section 92CA of the Act, enables the TPO only to
compute the Arm's Length Price for transaction and it is the Assessing Officer
who has to arrive at a satisfaction that there exists an international
transaction. Sub-section (2B) to section 92CA only enables the TPO to
benchmark an international transaction which has not been reported under
section 92E of the Act. However, the TPO does not have jurisdiction to
adjudicate / determine the character of transaction, that is, whether it is an
international transaction or not. Further sub-section (1) to section 92CA of
                                     14          ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




the Act requires that Assessing Officer with the prior approval of the Principal
Commissioner or the Commissioner, to refer for the computation of ALP of an
international transaction to the TPO under section 92C of the Act. The Ld. AR
further submits that the intent of legislature has been clarified by the CBDT
vide instruction No 3/2016. The Board has clarified that role of the TPO
begins only after a reference is received from the Assessing Officer and is
limited to determination of ALP in relation to the international transactions
referred by the assessing officer. Further the satisfaction to be arrived at by
the Assessing Officer regarding the existence of the international transaction
for making the reference to the TPO. The Ld. AR relied on the decision of the
Hon'ble Delhi High Court case of Indo- Rama synthetics (India) Pvt. Ltd. vs.
ACIT (2016) 386 ITR 665 (DEL) wherein the Hon'ble High Court has rejected
revenues contention that CBDT instruction 3/2016 dated March 10, 2016
which was replaced by instruction 15/2015 specifically lays down procedure
to be followed by Assessing Officer making TPO reference prospective. The
Hon'ble High Court has held that the instruction clarifies the correct legal
position and cannot be construed as not applying to the facts on hand. Being
procedural it requires to be applied even the case where a reference was made
by the Assessing Officer to the TPO prior to the issue is of the circular. The
Ld. AR relied on the decision of Hon'ble Punjab and Haryana High Court in
the case of Shri Vishnu Etables (India) Ltd. vs. DCIT (2016) 387 ITR 385 and
Hon'ble Gujarat High Court in the case of Alpha Nipon Innovatives Ltd. vs.
DCIT (2016) 291 CTR 309. In the present case, the TPO had first
constructed/determine that the inference of AMP expenditure as a deemed
international transaction based upon conjecture and surmises though none
existed on facts and law and then arbitrarily determined the ALP of the said
international transaction. The Ld. AR submitted that the provisions of the Act
provides that the TPO can only determine ALP of an international transaction
however jurisdiction of the TPO includes adjudication of characterization of
transaction to be an international transaction. The Ld. AR further submitted
                                         15          ITA No. 1405/Del/2015 & 2275/Del/2015
        Ita




that if Ground No. 3 of the appeal of the assessee is decided in favour of the
assessee then all the other grounds of assessee's appeal pertaining to
Transfer Pricing addition becomes academic.

7.      The Ld. DR relied upon the provisions of Section 92CA of the Act and
submitted that the reference made to the TPO was rightly done and the TPO
has the power to decide the issues which are having direct bearing to the
reference. The Ld. DR submitted that the CBDT circular is also reiterating the
provisions of Section 92CA of the Act.

8.      We have heard both the parties and perused all the records. As regards
to Ground No. 3 of the Assessee's appeal, it is pertinent to note here sub-
section (2A) of Section 92CA which reads as under:

     "92CA. (1) Where any person, being the assessee, has entered into an
     international transaction [or specified domestic transaction] in any previous
     year, and the Assessing Officer considers it necessary or expedient so to do,
     he may, with the previous approval of the 1 [Principal Commissioner or]
     Commissioner, refer the computation of the arm's length price in relation to
     the said international transaction [or specified domestic transaction] under
     section 92C to the Transfer Pricing Officer.

     (2) Where a reference is made under sub-section (1), the Transfer Pricing
     Officer shall serve a notice on the assessee requiring him to produce or
     cause to be produced on a date to be specified therein, any evidence on
     which the assessee may rely in support of the computation made by him of
     the arm's length price in relation to the international transaction [or specified
     domestic transaction] referred to in sub-section (1).

     (2A) Where any other international transaction [other than an international
     transaction referred under sub-section (1)], comes to the notice of the
     Transfer Pricing Officer during the course of the proceedings before him, the
     provisions of this Chapter shall apply as if such other international
                                       16          ITA No. 1405/Del/2015 & 2275/Del/2015
         Ita




     transaction is an international transaction referred to him under sub-section
     (1). "

It is clear that any transfer pricing issue can be taken up by the TPO as the
same is referred to the TPO by the Assessing Officer as per sub-section 1 of
Section 92CA of the Act. In fact, sub-section 2 of Section 92CA itself is clear
in that respect that where a reference is made under sub-section (1), the
Transfer Pricing Officer shall serve a notice on the assessee requiring him to
produce or cause to be produced on a date to be specified therein, any
evidence on which the assessee may rely in support of the computation made
by him of the arm's length price in relation to the international transaction [or
specified domestic transaction] referred to in sub-section (1) of the Act. Thus,
Ground No. 3 is dismissed.

9.       Ground no. 4 is relating to non-existence of international transaction.
Ground no. 5 is relating to no creation of marketing intangible in favour of
AE. Ground no. 6 is relating to non rendition of any brand building services.
For these three grounds, the Ld. AR submitted that existence of an
international transaction is sine qua non to invoke the provisions of transfer
pricing. The AMP expenditure incurred does not fall within the definition of
international transaction and therefore the same was not reported in form
3CEB as the same expenditure was incurred in relation to third-party
vendors in India. The AMP expenditure by assessee is unilateral action. The
TP regulation would be applicable to transaction began arrangement
understanding reaction in consort in relation to purchase sale or lease/use of
tangibles/intangible property or any other transaction having bearing on
profits, income, losses or assets of such enterprises. In other words to be an
international transaction it should be pursuant to an arrangement,
understanding or action in consort between the assessee and it's AE
transaction to be classified as an international transaction under chapter X of
the Act per se involves a bilateral contract/understanding between the parties
                                            17          ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




under unilateral action without any binding obligation cannot be termed as
transaction. The Ld. AR further submitted that in the present case the
following table depicts the varying degree of AMP/sales ratio. The varying
AMP/sales pattern for the assessee over the years suggested that the
assessee was under no obligation from its AE to incur AMP expenditure,
contrary to the situation where AMP/sales would have been a fixed
percentage on account of an agreement:




Year (A.Y)   2006-07         2007-08         2008-09        2009-10         2010-11
Sales        292,09,04       389,42,11,23    516,54,36,62   668,00,97,48    920,22,02,00
(refer TP    1               1               8              1               7
study)
AMP          9,70,90,07      15,40,05,865    25,47,70,,50   24,47,27,290    30,14,20,000
             3                               3
AMP/Sale     3.32            3.95            4.93           3.66            3.30
s (in %)



The Ld. AR further submitted that the benefit of AMP expenditure is clearly
evident from the enhanced sales of the assessee. It is apparent that the
marketing activities conducted by the assessee led to a greater penetration of
the assessee in the market. This can be seen from the table demonstrating
the increase of sales of assessee. The Ld. AR further submitted that there is a
relationship with AE that of principal to principal. The assessee is a
distributor of Canon products imported from its AEs and these transactions
are carried out on principal to principal basis. The assessee is only
responsible for improving its business market in India and increasing the
sales of products. The assessee had incurred expenditure on AMP to cater to
local market needs. It is to be appreciated that the AMP expenditure has been
incurred     in   relation    to    local   product   advertisements     into   domestic
independent third parties, thus the domestic unilateral expenditure incurred
by the assesee for the purpose of its business cannot be classified as
intentional international transaction under section 92B (2) of the Act. The Ld.
                                      18          ITA No. 1405/Del/2015 & 2275/Del/2015
       Ita




AR further submitted that onus to prove existence of international
transaction has not been discharged by the revenue. It is settled law that the
onus to prove the existence of arrangement regarding incurrence of unilateral
AMP expenditure by the taxpayer is solely for the brand promotion of its
foreign AE is on the revenue. Existence of an international transaction cannot
be a matter for inference or surmise and the burden to prove the existence of
an agreement/arrangement prior to incurring of the AMP expenses is on the
revenue. Unless revenue definitely shows that the Assessee was obliged to
incur AMP expenses of certain level for promoting its AE's Brand, an
international transaction cannot be inferred. The Ld. AR relied on the
following decisions:

   ·   Maruti Suzuki India Ltd. vs. CIT (2016) 381 ITR 154 (Del)
   ·   CIT vs. Whirlpool of India Ltd. (2016) 381 ITR 154 (Del)
   ·   Honda Siel Power Products (2016) 283 CTR 322 (Del)
   ·   Bausch & Lomb Eyecare (India) (P) Ltd. vs. ACIT (2016) 381 ITR 227
       (Del)
   ·   Widex India Pvt. Ltd. vs ACIT: [2017] 78 taxmann.com 348 (Chandigarh
       - Trib.)
   ·   Nippon Paint India Pvt vs ACIT: [2017] 79 taxmann.com 8 (Chennai -
       Trib.)
   ·   Essilor India Private Limited Vs DCIT: [2016] 178 TTJ 69 (Bangalore -
       Trib.)
   ·   Goodyear India Ltd v DCIT: [2016] 70 taxmann.com 67 (Delhi - Trib.)
   ·   Loreal India Private Limited v DCIT: [2016] 49 ITR(T) 473 (Mumbai -
       Trib.) Heinz India Private Limited: [TS-194-ITAT-2016(Mum)-TP]
   ·   Thomas Cook (India) Limited: 2016] 49 ITR(T) 178 (Mumbai - Trib.)
   ·   Mondelez India Foods Pvt Ltd: [2016] 70 taxmann.com 112 (Mumbai -
       Trib.)
                                           19           ITA No. 1405/Del/2015 & 2275/Del/2015
          Ita




      ·   India Medtronic Private Limited: [2016] 66 taxmann.com 218 (Mumbai
      - Trib.)
      ·   Johnson & Johnson Limited: [TS-19-ITAT-2016(Mum)-TP]
      ·   Toshiba    India   Pvt.   Ltd:   ITA   No.   944/Del/2016       (TS-159-ITAT-
          2016(DEL)-TP)
      ·   Honda Siel Power Product Ltd: TS-238-ITAT-2016(DEL)-TP
      ·   Fujifilm India Pvt. Ltd: [TS-237-ITAT-2016(DEL)-TP]

In the present case also, the assessee has contested the very existence of
international transaction between itself and its AE, concerning AMP
expenditure. As a result, the question of existence of the alleged international
transaction has to be decided in accordance with law. The Ld. AR relied upon
the following decisions, wherein the Hon'ble Delhi High Court has held that
the issue of existence of international transaction, has to be examined afresh
for each assessment year, separately:

i.          Sony Ericsson Mobile Communications India Pvt. Ltd. vs DCIT: ITA
            638/2015 & 648/2015 (Delhi HC)

ii.         Daikin Air conditioning India Pvt. Ltd. vs ACIT: ITA 269/2016 (Delhi
            HC) -

The Ld. AR submitted that if the above ground no. 4, 5, 6 of the Assessee's
appeal are decided in favour of the assessee then all other grounds of
assessee's appeal and Departmental appeal shall be academic.

10.       The Ld. DR relied upon the order of the TPO and Assessment Order.

11.       We have heard both the parties and perused all the records. This issue
is not verified properly by the TPO and therefore, it requires verification as
there is no mention of the specific agreements to the effect of the AMP
whether is a international transaction or not. Therefore, we direct the
TPO/AO to verify this issue in light of the agreements signed by the assessee
                                     20          ITA No. 1405/Del/2015 & 2275/Del/2015
       Ita




with its AEs as well as the main company. Needless to say the assessee be
given the opportunity of hearing by following principles of natural justice.
Ground No. 4, 5 and 6 of the assessee's appeal are partly allowed for
statistical purpose.

12.    The Ld. AR further submitted that without prejudice to the aforesaid,
AMP expenditure is not amenable to Chapter ­ X, the assessee's contentions
in relation to benchmarking of the alleged international transaction are as
under:

   ·   Ground No. 7 is relating to wrong application of Bright Line Test by the
       AO/DRP/TPO.
   ·   Ground No. 13 is relating to wrong application of CUP method in a
       manner not prescribed under law by the AO/DRP/TPO.
   ·   Ground No. 14 is relating to wrong determination of ALP of the alleged
       international transaction as per Section 92C of the Act, read with,
       Income Tax Rules, 1962.

13.    The Ld. AR submitted that the AO/TPO/DRP determined transfer
pricing adjustments relating to the AMP expenditure by applying the Bright
Line Test which is not recognized under the Indian transfer pricing
regulations, as a prescribed method under Section 92C of the Act for
benchmarking of the Assessee's AMP expenditure. The Ld. AR relied upon the
decision of the Hon'ble Delhi High Court in the case of Sony Ericsson Mobile
Communication India (P) Ltd. vs. CIT (Supra), Maruti Suzuki (supra) and
several other cases, whereby, the High Court has held that Bright Line Test is
ultra-vires the provisions of the Act and cannot be applied for computing the
ALP or benchmarking the AMP expenditure. The Ld. AR also relied upon the
decision of the Delhi Benches of ITAT in case of Nikon India Private Ltd. vs.
DCIT (ITA No. 4574/DEL/2017) and Van Melle India Pvt. Ltd. vs. DCIT (ITA
No. 1073/Del/2017) wherein it is held that transfer pricing adjustment
should not be made by applying Bright Line Test, even on protective basis,
                                       21         ITA No. 1405/Del/2015 & 2275/Del/2015
       Ita




because the Hon'ble High Court has not approved the application of Bright
Line Test in several cases. Thus, in view of the aforesaid, the AO/TPO/DRP
have grossly erred in determining the AMP adjustment, applying the BLT
method.

14.    The Ld. DR relied upon the orders of the AO, TPO and directions of the
DRP.

15.          We have heard the submissions made by both the parties and of the
view that since the main issue of AMP is remanded back to the file of the
TPO/AO it will be appropriate to send this issue to the file of TPO/AO as well.
Thus, Ground No. 7, 13, 14 are partly allowed for statistical purpose.

16.    As regards to Ground No. 8 relating to exclusion of direct selling and
distribution expenses along with subsidy from ambit of AMP expenditure, the
Ld. AR submitted that AMP expenditure is not an international transaction.
The Ld. AR further submits that the AO/TPO/DRP have not given due
cognizance to the nature of expenses when benchmarking AMP expenditure,
incurred by the assessee during the year under consideration. The Ld. AR
submitted that during the relevant assessment year, the Assessee incurred
expenditure in relation to sales commission, trade discounts, selling &
administration, along with certain expenditure out of special purpose
subsidy. However, the TPO considered whole of these expenditures, including
subsidy, as part of the AMP expenditure as under:

                     Particulars                           Amount (INR)

AMP spent of Assessee                                                30,14,21,790

Trade Discount                                                       30,44,59,945

Commission                                                               85,86,473
                                     22          ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




Selling & administrative expenses                                   19,66,32,788

Subsidy                                                             46,49,73,415

Total AMP considered by TPO                                       127,60,74,411

The Ld. AR submitted that the trade discount, commission and other sales
related expenses are not in the nature of "brand promotion", i.e. they are not
directly or immediately related to "brand building", in fact, these expenditures
have live link and direct connect with increase in sales or turnover. Further,
selling and administrative expenses primarily pertain to direct selling
activities being conducted by the Assessee to push its sales in the Indian
market and accordingly should be excluded for the purpose of AMP analysis
of Assessee. The Ld. AR pointed out that TPO itself in its order dated
01.01.2016, for subsequent A.Y. 2011-12 has not included trade discount,
commission and other selling and administrative expenditure in the ambit of
AMP expenditure for benchmarking purposes. The Ld. AR further pointed out
that the Tribunal vide order dated 03.05.2013 for A.Y. 2006-07 to 2008-09
held that all selling expenditure including trade discount and commission
along with subsidy should be excluded from the ambit of AMP expenditure.
Thus, the same read with the subsequent directions of the Hon'ble Delhi High
Court in Assessee's own case i.e. judgment in batch of cases of Sony Ericsson
(supra) case, the TPO should be directed to exclude Trade discount,
commission and special purpose subsidy from the ambit of the AMP
expenditure. Thus, following the order of the Tribunal for A.Y. 2006-07 to
2008-09 read with the subsequent directions of the Hon'ble Delhi High Court
in Assessee's own case, the TPO should be directed to exclude Trade
discount, commission, selling and administrative expenses and special
purpose subsidy from the ambit of the AMP expenditure, tabulated as under:

Particulars                               Amount (INR)
                                      23           ITA No. 1405/Del/2015 & 2275/Del/2015
        Ita




Trade Discount                             30,44,59,945

Commission                                 85,86,473

Selling & administrative expenses          19,66,32,788

subsidy                                    46,49,73,415

Total                                      97,46,52,621

 In addition, the Ld. AR pointed out that the amount of Rs. 30,14,21,790 i.e.
AMP spent of assessee, further has certain sales related expenses included in
it, which TPO in A.Y. 2011-12 have deleted and which accordingly, warrants
reduction. For which a detailed break up was placed by the Ld. AR at page
no. 967 of the Paper Book 3. The Ld. AR also relied on the following decisions:

Particulars                                Expenses not forming part of AMP

Haier Appliances India P. Ltd. vs.           ·   Dealer Gift
DCIT (204) 146 ITD 730 (Del)                 ·   In-shop demonstrator expenses
                                             ·   Freebies items/ free gifts

Glaxo         Smithkline     Consumer        ·   Sales promotion
Healthcare Ltd. vs. ACIT (ITA Nos.           ·   Sales promotion (others)
1148/Chd/2011 and 290/Chd/2014)

A.W. Faber Castell (India) Pvt. Ltd. vs.     ·   Freebies items/ free gifts
DCIT ITA No. 577/Mum/201

Reebok India Co. vs. ACIT (2014) 146         ·   Scheme or incentive
ITD 469

Panasonic Sales & Services India Pvt.        ·   Dealer Gift
Ltd. vs. ACIT (2013) 157 TTJ 615
                                      24          ITA No. 1405/Del/2015 & 2275/Del/2015
       Ita




(Chennai)

LG Electronics India Pvt. Ltd. vs.          ·   Dealer Gift
ACIT (2015) 153 ITD 591 (Del)

Thus, the Ld. AR submitted that the TPO be directed to exclude sales related
expenses and subsidy from AMP expenditure while bench marking the same.

17.    The Ld. DR relied upon the order of the AO/TPO and directions of the
DRP.

18.    We have heard both the parties and perused all the relevant material
available on record. The TPO vide order dated 01.01.2016, for subsequent
A.Y. 2011-12 has not included trade discount, commission and other selling
and administrative expenditure in the ambit of AMP expenditure for
benchmarking purposes. The Tribunal vide order dated 03.05.2013 for A.Y.
2006-07 to 2008-09 held that all selling expenditure including trade discount
and commission along with subsidy should be excluded from the ambit of
AMP expenditure. Thus, the same read with the subsequent directions of the
Hon'ble Delhi High Court in Assessee's own case i.e. judgment in batch of
cases of Sony Ericsson (supra) case, the TPO should be directed to exclude
Trade discount, commission and special purpose subsidy from the ambit of
the AMP expenditure. Thus, following the order of the Tribunal for A.Y. 2006-
07 to 2008-09 read with the subsequent directions of the Hon'ble Delhi High
Court in Assessee's own case, it will be appropriate to direct the TPO to
exclude Trade discount, commission, selling and administrative expenses and
special purpose subsidy from the ambit of the AMP expenditure, as given in
the tabulated form hereinabove after verifying the same in accordance with
the records available with the TPO/AO. Thus, this issue is remanded back to
the file of the TPO/AO. Needless to say, the assessee be given opportunity of
hearing by following principles of natural justice. Ground No. 8 of the
assessee's appeal is partly allowed for statistical purpose.
                                       25          ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




19.   Ground No. 9 is relating to final comparables selected by AO/TPO/DRP
for benchmarking AMP expenditure. Ground No. 10 is relating to quantitative
adjustments. Ground No. 11 and 11.1 are relating to mark-up. Ground No.
12 is relating to benefit to proviso of section 92C(2) of the Act. Ground No. 16
is relating to multiple year data. The Ld. AR submitted that since
AO/TPO/DRP has applied Bright Line Test which is not a statutory method
for benchmarking AMP expenditure, the aforesaid grounds become academic
as at the outset the main issue is covered against the department. The Ld. AR
further submitted that without prejudice to the above, even otherwise, the
AO/TPO/DRP erred in not appreciating that the assessee had not provided
any value added / brand building services by incurring AMP expenditure, and
therefore, no mark-up can be charged.

20.   The Ld. DR relied upon the orders of the AO and TPO as well as
directions of the DRP.

21.   We have heard both the parties and perused all the relevant records. It
is pertinent to note that the issue of AMP has been remanded back to the file
of the TPO/AO. Therefore, these grounds become infructuous. Hence Ground
No. 9, 10, 11, 11.1, 12 and 16 are dismissed.

22.   As regards to Ground No. 15, the Ld. AR submitted that the AO/ TPO/
DRP erred in not appreciating that when all the transactions of assessee were
established to be at arm's length, AMP expenditure, separately, cannot be
alleged to be excessive. The Ld. AR submitted that the issue pertaining to
determination of ALP for the AMP expenditure has been elaborately dealt with
by the Hon'ble Delhi High Court in the case of Sony Ericsson Mobile
Communication (supra). The Hon'ble High Court while laying down the
principles for determination of ALP in relation to AMP expenditure, has
prescribed   that   in   case   the   main   transaction   of   import   has    been
benchmarked following Resale Price Method (RPM) then at first place
aggregated approach should be adopted, and if taxpayer is able to
                                     26         ITA No. 1405/Del/2015 & 2275/Del/2015
       Ita




demonstrate that the international transaction of distribution and marketing
is at arm's length there should be any adjustment. The Ld. AR submitted that
in fact, the Hon'ble Delhi High Court in the case of distributor has upheld the
use of RPM as one of the most appropriate method. Further, the court under
no circumstances propounded that the PSM is one of the most appropriate
method to benchmark the AMP expenses. Applying the said principles laid
down by the Hon'ble High Court, the assessee has computed the adjusted
gross margin of the comparable companies to demonstrate that the adjusted
gross margin of the assessee vis-à-vis the comparable companies is better
and therefore, the alleged transaction / attribution of marketing function of
the assessee (which was at principle to principle basis) is at arm's length and
no adjustment is required for the same. A tabulation showing the aforesaid
adjusted gross margins was annexed to the synopsis by the Ld. AR. The Ld.
AR submitted that from the perusal of the adjusted gross margins would
show that the assessee's margins were better than that of the comparable
companies and therefore, no adjustment on account of AMP expenditure was
required to be made. The adjustment made by the AO/TPO, is therefore,
prima facie untenable and deserves to be deleted. The Ld. AR alternatively,
submitted that comparability adjustment can be carried out in line with
provisions of Rule 10B(3) of the Rules in respect of the intensities of the AMP
expenditure incurred by comparables vis-à-vis assessee. The Ld. AR further
pointed out that TPO for A.Y. 2014-15 has proposed and done the
benchmarking of alleged international transaction following the intensity
approach, vide order dated 17.10.2017.

23.    The Ld. DR relied upon the orders of the AO, TPO and directions of the
DRP.

24.    We have heard both the parties and perused all the relevant records. It
is pertinent to note that the issue of AMP has been remanded back to the file
                                      27          ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




of the TPO/AO. Therefore, these grounds become infructuous. Hence Ground
No. 15 is dismissed.

25.   As relates to Corporate tax issues specifically Ground No. B, B.1, 1,
1.1, and 1.2, the Ld. AR relied upon the ITAT decision in assessee's own case
for A.Ys. 2006-07, 2007-08 and 2008-09 (ITA Nos. 4602/Del/2010,
5593/Del/2011 & 6086/Del/2012 order dated 03.05.2013) wherein the
unutilized subsidy is allowed by the Tribunal. The said view is affirmed by the
Hon'ble High Court vide order dated 03.08.2015 in assessee's own case .

26.   The Ld. DR relied upon the order of the AO and TPO as well as
directions of the DRP.

27.   We have heard both the parties and perused all the relevant records
available. It is pertinent to note that this issue has been allowed by the
Tribunal in earlier assessment years in assessee's favour. The Tribunal held
as under:

   "14. Apropos unrealized subsidy, it is a trite law that every receipt does not
   tantamount to income, as per charging sections 4 & 5 of the I.T. Act. While
   examining whether the receipt is chargeable as income or not, relevant facts
   and circumstances are to be seen. From the record it clearly emerges that
   the subsidy provided by CSPL is in lump sum with specific direction that
   this amount is to be spent only for specified purposes and the unspent
   amount is to be held in trust for and on behalf of CSPL. This is duly
   confirmed by CSPL and this fact is further corroborated by the fact that
   unutilized amount is not credited to the P&L A/c but taken to balance-sheet
   as a current liability. Once it is acknowledged as current liability assessee
   does not become owner of this amount and the receipt of unspent amount
   does not Canon India Pvt. Ltd. become income of the assessee. Besides,
   this method of accounting has been followed by the assessee consistently.
   In these circumstances, we are of the view that unspent subsidy being not
                                     28          ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




   income of the assessee but a liability to be spent for specified purposes and
   recoverable for non-utilization for specific purposes cannot be treated as
   income of the assessee. Therefore, this ground of the assessee is also
   allowed. Since we have allowed the main ground, there is no need to go into
   alternate arguments."

28. The said view taken by the ITAT has been affirmed by the Hon'ble
Jurisdictional High Court in ITA Nos. 137 & 138/2014 vide order dated
03.08.2015 in assessee's own case and relevant findings have been given in
para 20 of the said order which read as under:

   "20. We are, therefore, unable to accept the Revenue's contention that the
   unutilized subsidy is required to be recognized as income of the Assessee in
   the year of its receipt. This would be contrary to the matching concept,
   which is the substratal principle for computing income during a relevant
   period. It is necessary that income be recognized along with the
   corresponding expenditure incurred for earning the income. Thus, where an
   Assessee follows the Accrual/Mercantile system of Accounting - as in this
   case - income can be recognized only when the matching expenditure is also
   accounted for irrespective of the cash outflows/inflows during the year. It
   would thus, not be correct to recognize the subsidies received for incurring
   specific expenditure Canon India Pvt. Ltd. as income without accounting for
   the corresponding expenditure."

Thus, the issue is squarely covered in favour of the assessee. Therefore,
Ground Nos. B.1, 1, 1.1, 1.2 are allowed.

29.   As relates to Ground No. B.2, 1, 2 regarding not granting the claim of
prepaid taxes and foreign tax credit claimed by the assessee, the Ld. AR
submitted that the Assessing Officer has not allowed the entire credit of
prepaid taxes (TDS, advance tax and self assessment taxes) which should
have been done by the Assessing Officer. Therefore, the Ld. AR requested to
                                      29          ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




remand back this matter to verify the same by the Assessing Officer. The Ld.
DR did not object for the same.

30.   We have heard both the parties and perused all the relevant records
available before us. From the records it can been seen that the Assessing
Officer has not allowed credit of pre-paid taxes to the assessee which should
have been taken into consideration. Therefore, it will be appropriate to
remand back this issue to the file of the Assessing Officer. Thus, this issue is
remanded back to the file of the Assessing Officer. Needless to say, the
assessee be given opportunity of hearing by following principles of natural
justice. Ground No. B.2, 1, 2 of the assessee's appeal are partly allowed for
statistical purpose.

31.   As relates to Ground Nos. C, D, E regarding not allowing and granting
the credit of set off of brought forward of losses of Rs. 19,32,08,420/- claimed
by the assessee, not allowing the deduction under Chapter VI-A of the Act of
Rs. 3,97,500 and charging interest under Section 234B of the Act
respectively, the Ld. AR submitted that the same may be remanded back to
the file of the Assessing Officer for verification and decide these issue a fresh.
The Ld. DR relied upon the Assessment Order.

32.   We have heard both the parties and perused all the relevant records
available before us. The Assessing Officer has not verified these claims of the
assessee in proper way given under the Income Tax Act. Therefore, it will be
appropriate to remand back this issue to the file of the Assessing Officer.
Thus, this issue is remanded back to the file of the Assessing Officer.
Needless to say, the assessee be given opportunity of hearing by following
principles of natural justice. Ground No. C, D, E of the assessee's appeal are
partly allowed for statistical purpose.

33.   As regards to Ground No. F, G, and H the same are consequential,
hence dismissed.
                                     30          ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




34.   In result, assessee's appeal being ITA No. 1405/DEL/2015 for A.Y.
2010-11 is partly allowed for statistical purpose.

35.         As regards Revenue's appeal, the Ld. AR submitted that the same
should not be allowed as per the submissions made in the appeal filed by the
assessee. The Ld. DR relied upon the directions of the DRP.

36.   We have heard both the parties and perused all the relevant records
available before us. Ground No. i) of the Revenue's appeal is already decided
in favour of the assessee as per Ground Nos. B, B.1, 1, 1.1, 1.2. Therefore,
Ground No. i) of the Revenue's appeal is dismissed. As relates to Ground No.
ii) is regarding deletion of the addition made by the Assessing Officer on
account of low GP by the DRP by ignoring the fact that the assessee had not
offered any explanation/ justification whatsoever regarding fall in GP. From
the records, the Assessee has given the explanation regarding the fall in GP
rates and the same was totally ignored by the Assessing Officer. Therefore,
DRP rightly deleted this addition. Ground No. ii) of the Revenue's appeal is
dismissed. Ground No. iii) is general in nature, hence dismissed.

37.   In result, Revenue's appeal being ITA No. 2275/Del/2015 for A.Y.
2010-11 is dismissed.

Now we are taking up the appeal for A.Y. 2011-12

38.   The Ld. AR submitted that Grounds of appeal Nos. 1 and 3 are general.
Therefore, Ground No. 1 and 2 are dismissed.

39.   As regards to Ground No. 2.1 relating to jurisdiction of TPO limited to
determination of ALP of an international transaction and not to re-
characterize transaction as an `international transaction', the same are
identical with Ground no. 3 of the Appeal filed by the Assessee for A.Y. 2010-
11. Therefore, the observations made in that respect are applicable in the
present appeal as well. Hence Ground No. 2.1 is dismissed.
                                           31             ITA No. 1405/Del/2015 & 2275/Del/2015
          Ita




40.       As regards to Ground No. 2 & 2.2 relating to non-existence of
International transaction and Ground No. 4 relating to no creation of
marketing intangible in favour of AE, the same are identical with Ground no.
4 & 5 of the Appeal filed by the Assessee for A.Y. 2010-11. Therefore, the
observations made in that respect are applicable in the present appeal as
well. This issue is not verified properly by the TPO and therefore, it requires
verification as there is no mention of the specific agreements to the effect of
the AMP whether is a international transaction or not. Therefore, we direct
the TPO/AO to verify this issue in light of the agreements signed by the
assessee with its AEs as well as the main company. Needless to say the
assessee be given the opportunity of hearing by following principles of natural
justice. Ground No. 2, 2.2 and 4 of the assessee's appeal are partly allowed
for statistical purpose.

41.       Grounds of appeal Nos. 5, 5.1, & 5.2 are relating to incorrect approach
of the TPO to benchmark the alleged international transaction using Profit
Split Method ("PSM"). The Ld. AR submitted that the TPO made TP
adjustment of INR 74,59,78,403 in the AY 2011-12 on the following basis:

      >         TPO   concluded    that   Assessee   is     incurring    excessive     AMP
                expenditure in India basis higher AMP expenditure of Assessee (as a
                percentage of sales) compared to Canon Inc., AMP percentage to
                sales (at consolidated level) (refer para 20 at page 96 of paper-book
                1);


      >         Thereafter, TPO observed that such excessive AMP expenditure:


                i.    Adds to the brand value of Canon group, i.e., Assessee is
                      contributing to valuable intangible to its AE; and

                ii.   Leads to increased global profits for Canon group.
                                             32          ITA No. 1405/Del/2015 & 2275/Del/2015
            Ita




      >           Accordingly, TPO concluded that Canon Inc. should compensate
                  Assessee for excessive AMP expenditure, being an international
                  transaction for creation of marketing intangible in India.

The Ld. AR pointed that the TPO under the grab of PSM, has applied BLT
only, by comparing the AMP expenditure to sales ratio of the Assessee with
the AE. By comparing the AMP expenses to sales ratio of the Assessee and
the AE, in a way the TPO is comparing two controlled transactions, which is
against the very premise of transfer pricing, as the intend of the legislature
under transfer pricing is, that controlled transaction is to be compared with
uncontrolled transaction. The Ld. AR submitted that the TPO placed reliance
on the decision of the Rolls Royce Plc [2011] 339 ITR 147 (Delhi) for the
purpose of attributing global profit to the various functions undertaken by
Canon Inc. The TPO, accordingly attributed the global profits in the following
ratio:

      >           Manufacturing - 50 percent
      >           Research and development - 15 percent
      >           AMP - 35 percent

42.         In view of the above, the Ld. AR submitted that the TPO incorrectly
applied the PSM method and computed the adjustment as under: -

      i.          As Canon Inc. follows calendar year, TPO estimated global operating
                  profit of Canon group from the consolidated financial statements of
                  Canon Japan at of 385,181 million yen, arrived at by adopting a
                  weighted average approach. (75 percent from financials ended
                  December, 2010 and 25 percent from financials ended 2011).

      ii.         Allocated 35 percent of aforesaid operating profit to AMP function.
                  The same resulted in 134,813 Million Yen (equivalent to INR
                  7455,15,89,000)
                                            33          ITA No. 1405/Del/2015 & 2275/Del/2015
           Ita




      iii.       Thereafter, compared the Assessee's AMP expenditure to global
                 AMP expenditure and determined the average AMP ratio 1.8%.

      iv.        The 1.8% computed above was multiplied with the 35% profits
                 amounting to INR 7455,15,89,000 for arriving          at the amount
                 attributable to India (as per Rolls Royce Plc decision) and added the
                 same to the income of the Assessee as a transfer pricing adjustment
                 amounting to INR 134,19,28,602.

      v.         Lastly, the amount of subsidy being INR 48,06,63,749 and 35% of
                 net profit earned by the Assessee in India being INR 11,52,86,450,
                 was reduced from the above amount calculated at S No. (iv) above,
                 and the final adjustment was computed at INR 74,59,78,403.

43.        The Ld. AR submitted that the DRP upheld the use of PSM by TPO as
well as the computation of adjustment, however, directed the TPO to examine
the nature of Assesse's AMP expenditure and exclude selling expenses.
Consequently, the TPO vide order dated January 28, 2016 giving effect to the
DRP directions recomputed the adjustment after excluding selling expenses
from ambit of AMP expenditure. The same resulted in TP adjustment being
reduced to INR 53,21,45,104 as against adjustment of INR 74,59,78,403.






44.        The Ld. AR further submitted that the lower authorities have erred in
applying PSM as a method to benchmark the alleged international
transaction of brand building services and further the same has also been
applied incorrectly, de-hors conditions laid down in Rule 10B(1)(d) of the
Income-tax Rules, 1962 (`Rules'). The Ld. AR submitted that PSM is
applicable only in situation cases where there is a transfer of intangible
between AEs or where there are multiple inter-related international
transactions which cannot be separately benchmarked. In this regard, the
Ld. AR pointed out table herein under, which as per the Ld. AR culls out the
intent of legislature as provided in Rule 10B(1)(d) of the Rules for applying
                                                     34          ITA No. 1405/Del/2015 & 2275/Del/2015
         Ita




the PSM method:


S. No.         Rule 10B(1) (d) of the Rules                     Assessee's submissions


               "profit split method, which may                  As per sub-clause (d) of Rule
               be     applicable          mainly           in   10B(1) PSM is applicable where
               international       transactions           [or   the      transaction         involves
               specified    domestic       transactions]        transfer of unique intangible or
               involving     transfer          of     unique    multiple          inter         related
               intangibles     or         in         multiple   international transactions from
               international       transactions           [or   which      arm's     length          price
               specified    domestic       transactions]        cannot        be           separately
               which are so interrelated that                   determined.
               they      cannot      be             evaluated
                                                                In the instant case, the alleged
               separately    for    the    purpose         of
                                                                transaction       sought        to     be
               determining     the      arm's          length
                                                                benchmarked         by    the     lower
               price of any one transaction, by
                                                                authorities    is    rendition         of
               which--
                                                                brand building services to the
                                                                AEs. In other words, it is to be
                                                                appreciated that (a) there is no
                                                                allegation of transfer of unique
                                                                intangibles and (b) there are
                                                                no inter related transactions
                                                                between     the     AE     and        the
                                                                Assessee, from which arm's
                                                                length     price         cannot        be
                                                                determined                separately,
                                                                because the allegation is that
                                                                the   Assessee       is    rendering
                                           35            ITA No. 1405/Del/2015 & 2275/Del/2015
     Ita




                                                       brand building services and
                                                       not that the Assessee and the
                                                       AE are jointly rendering brand
                                                       building services to a third
                                                       party.


2.         (i)   the combined net profit of the As            per   the    Sub-Rules,       the
           associated       enterprises      arising combined net profit of the AEs
           from the international transaction (Assessee and the AEs) from
           [or      the     specified      domestic the international transaction in
           transaction] in which they are which they are engaged is to be
           engaged, is determined;                     determined / attributed. In the
                                                       instant case, there is no such
           the relative contribution made by
                                                       transaction        that   has    been
           each of the associated enterprises
                                                       alleged by the lower authorities
           to the earning of such combined
                                                       from which the combined net
           net profit, is then evaluated on
                                                       profit is to be determined. It is
           the      basis   of   the      functions
                                                       the respectful submission of
           performed, assets employed or to
                                                       the Assessee that as per this
           be employed and risks assumed
                                                       Sub-Rule one would appreciate
           by each enterprise and on the
                                                       that     there      should      be    a
           basis of reliable external market
                                                       combined transactions by the
           data which indicates how such
                                                       AEs to third party from which
           contribution would be evaluated
                                                       the profit earned by the AEs is
           by        unrelated          enterprises
                                                       to be separately determined /
           performing comparable functions
                                                       split.
           in similar circumstances;
                                                       It will be appreciated that the
           the combined net profit is then
                                                       combined contribution as well
           split amongst the enterprises in
                                                       as combined earning of profits
           proportion       to   their      relative
                                         36             ITA No. 1405/Del/2015 & 2275/Del/2015
        Ita




              contributions, as evaluated under    is      absent      in       the     alleged
              sub-clause (/'/);                    transaction,              because        the
                                                   transaction              being       alleged
                                                   herein is rendition of brand
                                                   building by the assessee to the
                                                   A.E.


Ground        iv) the profit thus apportioned to Sub-rule            (iv)       contemplates
No. 3         the assessee is taken into account that          the          profits,     thus,
              to arrive at an arm's length price apportioned               by     the    above
              in relation to the international steps should be taken into
              transaction    [or   the   specified account to arrive at the ALP in
              domestic transaction] :              relation to the international
                                                   transaction by comparing the
              Provided
                                                   same with the uncontrolled
                                                   transaction. The TPO in the
                                                   instant case has not brought
                                                   on         record            any       such
                                                   uncontrolled             transaction      to
                                                   benchmark the alleged profit
                                                   held to be attributable to the
                                                   Assessee          for        rendition    of
                                                   brand building services.




45.     The Ld. AR submitted that AMP expenditure in India is not for the
purpose of brand promotion of Canon. The TPO erred in stating that the
Assessee should be compensated for enhancing the value of the brand and
global profits of Canon group. The Ld. AR submitted that Delhi High Court in
the Assessee's own case, i.e., decision in Sony Ericsson (supra) case, held
                                    37         ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




that AMP expenses do not necessarily lead to brand promotion of foreign AE.
paras 9.10 and 106 of the order of High Court is in Assessee's own case
(Supra). The Ld. AR pointed out that the Hon'ble Delhi High Court in the
Assessee's own case (supra) has not blessed PSM as an appropriate method
to benchmark the transaction of AMP function. On the contrary, it directed
that the aggregate approach is to be adopted and if taxpayer is able to
demonstrate that the international transaction of distribution and marketing
is at arm's length there should not be any adjustment [Refer paras 164 and
165 of the Sony Ericsson judgment (Supra)in Assessee's own case],

46.   Thus, the Ld. AR submitted that Resale Price Method (RPM) has been
held to be one of the most appropriate methods for distributors in the High
Court ruling. Also, in Assessee's own case the TPO has not disputed /
questioned RPM for benchmarking the distribution function. In view of the
same, RPM should be considered as the most appropriate method for
benchmarking distribution and marketing function on an aggregate basis.

47.   The Ld. AR further submitted that Canon Inc. is following a different
accounting year. The TPO have simply considered 75% of profits for the
calendar year 2010 and 25% of profits for the calendar year 2011 to arrive at
the profit of Canon Inc. for the period corresponding to April 01, 2010 -
March 31, 2011. Thus TPO have made an attempt to reconstruct the profit
and loss account of Canon Inc on an arbitrary basis. Such an approach
would result in unreliable / arbitrary financial results for the period under
consideration. The Ld. AR further submitted that no Function, Asset and
Risk ("FAR") analysis carried out by TPO. As per Rule 10B(1)(d) of the Rules,
while applying PSM the relative contribution made by each of the AEs to the
earning of such combined net profit he evaluated on the basis of the FAR.
However no FAR analysis has been undertaken by TPO.

48.   The Ld. DR relied upon the orders of the AO, TPO as well as the
directions of the DRP.
                                      38        ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




49.   We have heard both the parties and perused all the relevant records
available before us. Since the main issue of AMP is remanded back to the file
of the TPO/AO it will be appropriate to send this issue to the file of TPO/AO
as well. Needless to say, the assessee be given opportunity of hearing by
following principles of natural justice. Thus, Ground No. 5, 5.1 and 5.2 are
partly allowed for statistical purpose.

50.   Ground No. 6, 6.1, 6.2 and 7 is relating to not adopting aggregated
approach. The Ld. AR submitted that the issue pertaining to determination of
ALP for the AMP expenditure has been elaborately dealt with by the Hon'ble
Delhi High Court in the case of Sony Ericsson Mobile Communication
(supra). The Court while laying down the principles for determination of ALP
in relation to AMP Expenditure has prescribed that in case the main
transaction of import has been bench mark following resale price method
(RPM) then at first place aggregate approach should be adopted.

51.   The Ld. DR relied upon the orders of the AO and TPO as well as
directions of the DRP.

52.   We have heard both the parties and perused all the records.             The
submissions made for Ground No. 6, 6.1, 6.2 & 7 are similar to the
submissions made for Ground No. 15 for AY 2010-11 by the Ld. AR.
Therefore, the same directions are given in the present appeal as well.      It is
pertinent to note that the issue of AMP has been remanded back to the file of
the TPO/AO. Therefore, these grounds become infructuous. Hence Ground
No. 6, 6.1, 6.2 & 7 are dismissed.

53.   As regards to Ground No. 8 & 8.1 relating to exclusion of certain selling
and distribution expenditure and subsidy, the same are identical with
Ground no. 8 of the Appeal filed by the Assessee for A.Y. 2010-11. Therefore,
the observations made in that respect are applicable in the present appeal as
well. Thus, following the order of the Tribunal for A.Y. 2006-07 to 2008-09
                                      39         ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




read with the subsequent directions of the Hon'ble Delhi High Court in
Assessee's own case, it will be appropriate to direct the TPO to exclude Trade
discount, commission, selling and administrative expenses and special
purpose subsidy from the ambit of the AMP expenditure, as given in the
tabulated form by the Ld. AR along with the synopsis at the time of hearing
after verifying the same in accordance with the records available with the
TPO/AO. Thus, this issue is remanded back to the file of the TPO/AO.
Needless to say, the assessee be given opportunity of hearing by following
principles of natural justice. Ground No. 8 of the assessee's appeal is partly
allowed for statistical purpose.

54.   As relates to Ground No. 9 regarding not granting quantitative
/economic adjustments, the Ld. AR submitted that the same is academic.
Hence Ground No. 9 is dismissed.

55.   As relates to Ground No. 10 regarding 5% range benefit, the same is
consequential. Hence Ground No. 10 is dismissed.

56.   As relates to Corporate Grounds i.e. Ground Nos. B.1, 1, 1.1, 1.2, 1.3
and 2 regarding addition of subsidy received from Canon Singapore Pte. Ltd.
but not utilized within the previous year, the same are identical to that of the
earlier A.Y. 2010-11's ground Nos. B, B.1, 1, 1.1, and 1.2. The said issue is
squarely covered by the ITAT's decision in assessee's own case for A.Ys. 2006-
07, 2007-08 and 2008-09 (ITA Nos. 4602/Del/2010, 5593/Del/2011 &
6086/Del/2012 order dated 03.05.2013) wherein the unutilized subsidy is
allowed by the Tribunal. The said view is affirmed by the Hon'ble High Court
vide order dated 03.08.2015 in assessee's own case. Hence Ground Nos. B.1,
1, 1.1, 1.2, 1.3 and 2 are allowed.

57.   As relates to Ground No. B.2, 1, and B.3 regarding not granting the
claim of prepaid taxes that of credit of TDS and deduction under Chapter VI-
A of the Act, the same are identical to that of the earlier A.Y. 2010-11 that of
                                       40        ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




assessee's appeal Ground Nos. B.2, 1 and D. Both these grounds have been
remanded back to the file of the Assessing Officer in A.Y. 2010-11. The
Assessing Officer has not verified these claims of the assessee in proper way
given under the Income Tax Act. Therefore, it will be appropriate to remand
back this issue to the file of the Assessing Officer.        Thus, this issue is
remanded back to the file of the Assessing Officer. Needless to say, the
assessee be given opportunity of hearing by following principles of natural
justice. Ground No. B.2, 1 and B.3 of the assessee's appeal are partly allowed
for statistical purpose.

58.   As regards to Ground No. B.4 and B.5 the same are consequential,
hence dismissed.

59.   In result, ITA No. 832/Del/2016 i.e. assessee's appeal for AY 2011-12
is partly allowed for statistical purpose.

60.   As regards Department Appeal, for AY 2011-12, the Ld. DR submitted
that Ground No. 1 and 3 are general in nature. Hence, Ground No. 1 & 3 of
Revenue's appeal is dismissed.

61.   As regards Ground No. 2, the same is related to quantum of AMP
Expenditure to be considered for bench marking AMP, the Ld. DR relied upon
the order of the TPO and submitted that the DRP ignored the fact that
expenses i.e selling expenses are included in the AMP Expense of the AE
which is taken as a base for the profits split.        If selling and distribution
expenses are to be excluded from the assessee's         AMP Expense, the same
should be excluded from the AMP Expenses of the AE. If only the selling and
distribution expense of the assessee's are removed and not of the AE, the
PSM (Profit Split Method) calculation will go wrong.

62.   The Ld. AR submitted that the DRP has rightly directed TPO to verify
the expenditure and exclude selling expenditure. The Ld. AR relied upon the
Hon'ble Delhi High Court decision in case of Sony Ericsion (Supra) has also
                                     41         ITA No. 1405/Del/2015 & 2275/Del/2015
      Ita




directed for the exclusion for sales expenses. The Delhi Bench in assessee's
own case vide order dated 3/5/2013 for AY 2006-07 to 2008-09 also directed
for exclusion of sales related expenses. The Ld. AR further submitted that the
Department is admitting that PSM Method is not workable for determining
the ALP in relation to the alleged international transaction pertaining to
rendition of brand building services. Thus, the Ld. AR submitted that on this
account PSM deserved to be negative.

63.   We have heard both the parties and perused all the relevant material
available on record.   Since, the issue of AMP is set aside to the file of the
AO/TPO, Ground No. 2 of the Revenue's appeal become infructuous. Hence,
Ground No. 2 is dismissed.

64.   In result, ITA No. 1052/Del/2016 being Revenue's appeal for AY 2011-
12 is dismissed.

Order pronounced in the Open Court on 21st August, 2018.


       Sd/-                                                 Sd/-
  (R. K. PANDA)                                       (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER                                      JUDICIAL MEMBER

Dated: 21/08/2018
R. Naheed *

Copy forwarded to:

1.                           Appellant
2.                           Respondent
3.                           CIT
4.                           CIT(Appeals)
5.                           DR: ITAT




                                                 ASSISTANT REGISTRAR

                                                    ITAT NEW DELHI
                          42          ITA No. 1405/Del/2015 & 2275/Del/2015
Ita




      Date of dictation                           23.07.2018

      Date on which the typed draft is placed 23.07.2018
      before the dictating Member

      Date on which the typed draft is placed 23.07.2018
      before the Other Member

      Date on which the approved draft comes to 21/08/2018
      the Sr. PS/PS

      Date on which the fair order is placed 21/08/2018
      before  the   Dictating  Member     for
      pronouncement

      Date on which the fair order comes back to 21/08/2018
      the Sr. PS/PS

      Date on which the final order is uploaded    21/08/2018
      on the website of ITAT

      Date on which the file goes to the Bench 21/08.2018
      Clerk

      Date on which the file goes to the Head
      Clerk

      The date on which the file goes to the
      Assistant Registrar for signature on the
      order

      Date of dispatch of the Order

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