Income Tax Appellate Tribunal - Delhi
Msd Pharmaceuticals (P) Ltd, New Delhi vs Dcit, New Delhi on 22 November, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : I-1 : NEW DELHI
BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER
AND
SHRI LALIET KUMAR, JUDICIAL MEMBER
ITA No.1423/Del/2015
Assessment Year : 2010-11
MSD Pharmaceuticals (P) Ltd., Vs. DCIT,
15444, Level 15 Eros Corporate Circle 17(1),
Towers, CR Building,
Nehru Place, New Delhi.
New Delhi.
PAN: AAECM1106C
(Appellant) (Respondent)
Assessee By : Ms Rashmi Chopra, Advocate
Department By : Shri Amrendra Kumar, CIT, DR
Date of Hearing : 21.11.2016
Date of Pronouncement : 22.11.2016
ORDER
PER R.S. SYAL, AM:
This appeal by the assessee is directed against the final assessment order passed by the Assessing Officer (AO) u/s 143(3) read with section ITA No.1423/Del/2015 144C of the Income-tax Act, 1961 (hereinafter also called 'the Act') in relation to the assessment year 2010-11.
2. The only issue argued by the ld. AR in this appeal is against the addition of transfer pricing adjustment on account of AMP expenses.
3. At the outset, the ld. AR submitted that the assessee did not incur any expenditure on advertisement, marketing and promotion (AMP) and all the expenses taken note of by the authorities below were in the nature of Selling expenses. She referred to The Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954 and The Drugs and Magic Remedies (Objectionable Advertisements) Rules, 1955, to buttress that the assessee, under law, is debarred from incurring any expenditure on advertisement, marketing and promotion. In view of the above, it was argued that the disallowance was not warranted.
4. Without prejudice to the above argument, the ld. AR also contended that the incurring of AMP expenses is not an international transaction and, hence, there can be no question of determining the arm's length price of this transaction or making any addition thereon. 2 ITA No.1423/Del/2015 She relied on some of the judgments of the Hon'ble Delhi High Court including CIT vs. Whirlpool of India Ltd. (2015) 94 CCH 156 DEL-HC to contend that the AMP expenses could not be considered as an international transaction. In the light of these judgments, it was submitted that there was no international transaction of AMP expenses on the basis of principles laid down in these judgments and, hence, the entire exercise of determining its ALP and, consequently, the making transfer pricing adjustment, be set aside.
5. Au contraire, the ld. DR relied on the judgment of the Hon'ble Delhi High Court in Sony Ericson Mobile Communications (India) Pvt. Ltd. vs. CIT (2015) 374 ITR 118 (Del) in which AMP expenses have been held to be an international transaction and the matter of determination of its ALP has been restored. It was submitted that there is no blanket rule of the AMP expenses as a non-international transaction. He further stated that the Hon'ble High Court in Whirlpool (supra) has made certain observations, which should be properly weighed for ascertaining if an international transaction of AMP 3 ITA No.1423/Del/2015 expenses, exists. It was argued that the Tribunal in several cases has restored this issue to the file of TPO to be decided afresh in the light of the judgment of the Hon'ble Delhi High Court in Sony Ericson Mobile Communications (India) Pvt. Ltd. vs. CIT (2015) 374 ITR 118 (Del) and others. He also relied on still another judgment dated 28.1.2016 of the Hon'ble Delhi High Court in Sony Ericson Mobile Communications (India) Pvt. Ltd. (for the AY 2010-11) in which the question as to whether AMP expenses is an international transaction, has been restored for a fresh determination. He still further referred to three recent judgments of the Hon'ble Delhi High Court, viz., Rayban Sun Optics India Ltd. VS. CIT (dt. 14.9.2016), Pr. CIT VS. Toshiba India Pvt. Ltd. (dt. 16.8.2016) and Pr. CIT VS. Bose Corporation (India) Pvt. Ltd. (dt. 23.8.2016) in all of which similar issue has been restored for fresh determination in the light of the earlier judgment in Sony Ericsson Mobile Communications India Pvt. Ltd. (supra). The ld. DR argued that the Hon'ble Delhi High Court in its earlier decision in Sony Ericson Mobile Communications (India) Pvt. Ltd. vs. CIT (2015) 374 ITR 118 4 ITA No.1423/Del/2015 (Del) has held AMP expenses to be an international transaction. It was argued the matter should be restored for a fresh determination.
6. We have heard the rival submissions and perused the relevant material on record. We are not inclined to accept the primary contention that the assessee did not incur any AMP expenses simply on the basis of the provisions of The Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954 and The Drugs and Magic Remedies (Objectionable Advertisements) Rules, 1955, debarring not incurring of advertisement expenses in certain circumstances. This, in itself, cannot lead to a presumption that the assessee did not incur any AMP expenses. It is the reality of the actual facts and circumstances which needs to be seen. As such, we set aside the impugned order and direct the TPO/AO to verify the assessee's contention in this regard that no AMP expenses were incurred. If, in reality, the assessee incurred only Selling expenses and not AMP expenses, then, of course, there cannot be any question of disallowance. If the total bucket of these expenses includes certain 5 ITA No.1423/Del/2015 AMP expenses also, then, to that extent, the contention of the ld. AR becomes meaningless.
7. Coming to the without prejudice contention of the ld. AR and save as held in the preceding para, we find that she tried to fortify her argument that there was no international transaction on account of AMP expenses in terms of the judgment in the case of Whirlpool (supra) etc. On perusal of the order of the TPO, it emerges that while holding the AMP expenses to be an international transaction, he did not have the benefit of the judicial precedents now available for consideration, in some of which the transaction of AMP has been held as an international transaction, in others as not an international transactions, while still in some others, the matter has been restored for fresh consideration in the light of the judgment in Sony Ericsson (supra), in which the AMP expenses as an international transaction has been accepted. Respectfully following the predominant view of the Hon'ble High Court, we are of the considered opinion that it would be in the fitness of things if the impugned order is set aside and the matter is restored to the file of 6 ITA No.1423/Del/2015 TPO/AO for a fresh determination of the question as to whether there exists an international transaction of AMP expenses. If the existence of such an international transaction is not proved, the matter would end there and then, calling for no transfer pricing addition. If, on the other hand, the international transaction is found to be existing, then the TPO would determine the ALP of such an international transaction in the light of the relevant judgments of the Hon'ble High Court, after allowing a reasonable opportunity of being heard to the assessee.
8. No other ground was argued by the ld. AR. These grounds are, therefore, dismissed as not pressed.
9. In the result, the appeal is allowed for statistical purposes.
The order pronounced in the open court on 22.11.2016.
Sd/- Sd/-
[LALIET KUMAR] [R.S. SYAL]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated, 22nd November, 2016.
dk
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ITA No.1423/Del/2015
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT
AR, ITAT, NEW DELHI.
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