Stryker India Pvt. Ltd., Gurgaon v. DCIT, New Delhi

ITA 606/DEL/2014 | 2009-2010
Pronouncement Date: 15-04-2014 | Result: Allowed

Appeal Details

RSA Number 60620114 RSA 2014
Assessee PAN AAECS2513F
Bench Delhi
Appeal Number ITA 606/DEL/2014
Duration Of Justice 2 month(s) 12 day(s)
Appellant Stryker India Pvt. Ltd., Gurgaon
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 15-04-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted I1
Tribunal Order Date 15-04-2014
Date Of Final Hearing 30-05-2016
Next Hearing Date 30-05-2016
Assessment Year 2009-2010
Appeal Filed On 03-02-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I NEW DELHI BEFORE SH. R. S. SYAL AM AND SH. RAJPAL YADAV JM ITA NO. 606/DEL/2014 : ASST T. YEAR : 2009-10 STRYKER INDIA PVT. LTD C-5 FIRST FLOOR SDA COMMERCIAL COMPLEX NEW DELHI-110016 VS DCIT CIRCLE-9(1) NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAECS2513F ASSESSEE BY : SHRI ROHIT TIWARI REVENUE BY : SHRI PEEYUSH JAIN DATE OF HEARING : 15.4.2014 DATE OF PRONOUNCEMENT : 15.4.2014 ORDER PER R. S. SYAL AM: THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) R.W.S 144C(13) OF THE ACT IN RELATION TO THE ASSESSMENT YEAR 2009-10. 2. THE ONLY ISSUE PRESSED IN THIS APPEAL IS AGAINST THE TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF AMP EXPENSES. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE SPECIAL BENCH OF THE TRIBUNAL IN LG ELECTRONICS INDIA PVT. LTD. VS. ACIT 2013 152 TT J (DEL) (SB) 273 ITA NO. 606/DEL/2014 ST RYKER INDIA PVT. LTD. 2 BY MAJORITY DECISION HAS DECIDED THIS VERY ISSUE B Y INTER ALIA HOLDING THAT INCURRING OF AMP EXPENSES TOWARDS PROMOTION OF BRAND LEGALLY OWNED BY THE FOREIGN AE FIRSTLY CONSTITUTES A ` TRANSACTION AND THEN AN `INTERNATIONAL TRANSACTION . THE CONTENTION THAT NO DISALLOWANCE CAN BE MADE OUT OF AMP EXPENSES BY BENCHMARKING THEM SEPAR ATELY WHEN THE OVERALL NET PROFIT RATE DECLARED BY THE ASSESSEE IS HIGHER THAN OTHER COMPARABLE CASES CAME TO BE SPECIFICALLY JETTISONED BY THE SPECIAL BENCH. RESULTANTLY THE TRANSFER PRICING ADJUSTMENT IN REL ATION TO SUCH AMP EXPENSES HAS BEEN HELD TO BE SUSTAINABLE IN PRINCIP LE. IN THE EVENTUAL ORDER THE SPECIAL BENCH RESTORED THE MATTER TO THE FILE OF THE AO/TPO FOR FRESH DETERMINATION OF TRANSFER PRICING ADJUSTM ENT IN RELATION TO AMP EXPENSES. IN ORDER TO ENABLE THE DETERMINATION OF CORRECT ALP OF AMP EXPENSES THE TRIBUNAL LISTED OUT 14 PARAMETERS AT PARA 17.4 OF ITS ORDER WHICH SHOULD BE EXAMINED BY THE AO/TPO BEFORE REACHING THE FINAL CONCLUSION ABOUT THE WARRANT FOR A TP ADJUSTM ENT ON THIS SCORE. IT IS RELEVANT TO NOTE THAT THERE WERE 22 INTERVENERS IN THIS CASE SOME OF WHICH WERE DISTRIBUTORS WHILE OTHERS WERE LICENSED MANUFACTURERS. WHILE SETTING OUT 14 PARAMETERS THE SPECIAL BENCH HAS HELD VIDE FIRST PARAMETER THAT THE AO/TPO SHOULD ASCERTAIN AS TO WH ETHER THE INDIAN AE IS SIMPLY A DISTRIBUTOR OR IS HOLDING A MANUFACTURI NG LICENSE FROM ITS FOREIGN AE. THE SECOND PARAMETER TALKS OF EXAMINING AS TO WHETHER OR NOT THE INDIAN AE IS A FULL FLEDGED MANUFACTURER AN D WHETHER IT IS SELLING THE GOODS PURCHASED FROM THE FOREIGN AE AS SUCH OR IS MAKING SOME ITA NO. 606/DEL/2014 ST RYKER INDIA PVT. LTD. 3 VALUE ADDITION TO THE GOODS PURCHASED FROM ITS FORE IGN AE BEFORE SELLING IT TO CUSTOMERS. THUS THERE IS NOT EVEN A SLIGHTE ST DOUBT THAT THE SPECIAL BENCH ORDER NOT ONLY APPLIES TO A `MANUFACTURER BUT ALSO EXTENDS TO A DISTRIBUTOR WHETHER HE IS A BEARING FULL RISK OR L EAST RISK. THUS SUCH TESTS ARE APPLICABLE WITH FULL VIGOR TO THE EXTENT APPLIC ABLE TO THE DISTRIBUTORS. THERE IS NOTHING IN THE SPECIAL BENCH ORDER WHICH R ESTRICTS ITS OPERATION ONLY TO THE `MANUFACTURERS. THOUGH THERE IS A SPE CIFIC GROUND FOR THE RELIEF IN THE LIGHT OF THE ORDER BY THE DELHI TRIBU NAL IN THE CASE OF BMW INDIA PRIVATE LIMITED BUT THE LD. AR WAS FAIR ENOU GH NOT TO PRESS THIS GROUND BY ADMITTING THE MATTER BE DECIDED AS PER TH E MANDATE OF THE SPECIAL BENCH ORDER IN THE CASE OF LG ELECTRONICS ( SUPRA). 4. THE LD. AR ARGUED THAT THE AUTHORITIES BELOW ERR ED IN INCLUDING SELLING COMMISSION AND DISCOUNT ETC. WITHIN THE AMB IT OF AMP EXPENSES. IT WAS SUBMITTED THAT SUCH EXPENSES SHOULD BE EXCLU DED AT THE VERY OUTSET FROM CONSIDERATION UNDER THE BROADER SCOPE O F AMP EXPENSES. THE LD. DR RELIED UPON ON THE IMPUGNED ORDER. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SED THE RELEVANT MATERIAL ON RECORD WE FIND THAT THERE IS A MERIT I N THE CONTENTION OF THE LD. AR THAT THE SELLING COMMISSION AND DISCOUNT ET C. SHOULD BE EXCLUDED FROM AMP EXPENSES FOR WORKING OUT THE TP ADJUSTMENT IF ANY. THE SPECIAL BENCH IN LG ELECTRONICS (SUPRA) HAS SPECIFI CALLY DEALT WITH THIS ISSUE IN PARA 18 OF ITS ORDER AND HELD THAT THE SAL ES SPECIFIC EXPENSES ITA NO. 606/DEL/2014 ST RYKER INDIA PVT. LTD. 4 SUCH AS COMMISSION AND DISCOUNT ETC. SHOULD NOT BE INCLUDED WITHIN THE OVERALL AMP EXPENSES FOR PROCESSING THEM U/S 92 OF THE ACT. FOLLOWING THE SPECIAL BENCH DECISION WE HOLD THAT THE SALES SPECIFIC EXPENSES SUCH AS DISCOUNT PAID BY THE ASSESSEE ETC. SHOULD BE EXC LUDED FROM THE TOTAL OF AMP EXPENSES AND THEREAFTER A FRESH DETERMINATION S HOULD BE MADE FOR ASCERTAINING THE EXTENT OF TP ADJUSTMENT IF ANY IN ACCORDANCE WITH THE DIRECTIONS GIVEN BY THE SPECIAL BENCH IN THE CASE O F LG ELECTRONICS (SUPRA). 6. WE THEREFORE SET ASIDE THE IMPUGNED ORDER AND R EMIT THE MATTER TO THE FILE OF THE AO / TPO TO DECIDE THIS ISSUE AFRES H IN CONFORMITY WITH THE SPECIAL BENCH DECISION IN THE CASE OF LG ELECTR ONICS (SUPRA). NEEDLESS TO SAY THE ASSESSEE WILL BE ALLOWED A RE ASONABLE OPPORTUNITY OF BEING HEARD BY THE AO/TPO IN SUCH FRESH PROCEEDI NGS. 7. IN THE RESULT THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15/4/2014. SD/- SD/- (RAJPAL YADAV) (R. S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBE R DATED: 15/4/2014 *SUBODH* ITA NO. 606/DEL/2014 ST RYKER INDIA PVT. LTD. 5 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR DATE INITIAL 1. DRAFT DICTATED ON 15.4.2014 PS 2. DRAFT PLACED BEFORE AUTHOR 15.4.2014 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. *