Case Analysis of: Haier Appliances India Pvt. Ltd., New Delhi VS DCIT

IN THE INCOME TAX APPELLATE TRIBUNAL
 DELHI BENCH: ‘I-1’ NEW DELHI
 BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER
AND
 MS SUCHITRA KAMBLE, JUDICIAL MEMBER
 I.T.A. No. 2279/DEL/2018 (A.Y 2008-09)

 (THROUGH VIDEO CONFERENCING)

Haier Appliances India Pvt.Ltd.
Building No. 1, Okhla PhaseIII, New Delhi
PIN: 110020
PAN: AABCH3162L
(APPELLANT)

Vs.

DCIT
Circle-11(1)
New Delhi
(RESPONDENT)

Appellant by Sh. Ajay Vohra, Sr. Adv,
Sh. Neeraj Jain, Adv, Sh.
Abhishek Agarwal, Adv
Respondent by Sh. Surender Pal, CIT(DR)

Date of Hearing 05.08.2020
Date of Pronouncement 21.09.2020 

ORDER
PER SUCHITRA KAMBLE, JM

This appeal is filed by the assessee against the order dated 31/1/2018 passed under Section 254/143(3) read with Section 144 C of the Income Tax Act, 1961 passed by DCIT, Circle-11(1), New Delhi (Assessing Officer ), for Assessment Year 2008-09.

2. The grounds of appeal are as under:-

1. That the assessing officer erred on facts and in law in making addition of Rs. 13,50,86,400 on account of arm’s length price of alleged international transactions resulting from advertisement, marketing and sales promotion expenses (‘AMP expenses’) incurred by the appellant on the basis of the order passed by-the TPO under section 92CA(3) read with section 254 of the Act and sustained by the Dispute Resolution Panel (‘DRP’).

1.1. That the TPO/DRP erred on facts and in law in not discharging the onus of bringing on record any tangible material to demonstrate existence of the international transaction in relation to the advertisement, marketing and brand promotion expenses unilaterally incurred by the appellant, so as to establish that the same constituted an international transaction.

1.2 That the DRP erred on facts and in law in allegedly holding that “the conduct of the appellant, in brand promotion per the displays and showroom arrangements apart from other functional innovations etc., clearly point to the existence of the AMP transaction.”

1.3 That the TPO/ DRP erred on the facts and in law in rejecting Resale Price Method (‘RPM’) directed to be applied by the Hon’ble High Court in the appellant’s own case for benchmarking the transaction of AMP expenses, allegedly holding that:

a. In appellant’s case, AMP expenditure is very significant in quantum.

b. Appellant is adding value to the goods by incurring considerable AMP expenditure creating market intangibles and enhancing brand value of the product.

c. Appellant is carrying out two distinct functions (i) Distribution and (ii) Brand Building for its AE

d. the external comparables are legal owner of the brand name and therefore, even external comparable cannot be considered.

1.4. That the TPO erred on facts and in law in allegedly holding that AMP expenditure are to be benchmarked in segregation by taking comparables which are functionally similar and providing same type of marketing services like advertising, marketing, brand building through promotional activities, applying TNMM as the most appropriate method.

1.5 Without prejudice, that while giving effect to the direction of ITAT, the TPO erred on facts and in law in including sales promotion expenses within the ambit of AMP expenses.

1.6 Without prejudice, the TPO erred on facts and in law in not appreciating that mark-up, if at all, had to be restricted to the value added expenses incurred by the appellant for providing the alleged service in the nature of brand promotion.

To read / download the full judgment, find the enclosed file