BOSE CORPORATION INDIA PVT. LTD. Vs. ACIT
LAWS(IT)-2014-7-23
INCOME TAX APPELLATE TRIBUNAL
Decided on July 31,2014

Bose Corporation India Pvt. Ltd. Appellant
VERSUS
ACIT Respondents

JUDGEMENT

Diva Singh, Member (J) - (1.) THESE are two appeals filed by the assessee against the orders U/s. 143(3) r.w.s. 144C of the Income Tax Act, 1961 pertaining to 2007 -08 & 2008 -09 assessment years on various grounds. Since the arguments on facts and law qua the grounds raised in ITA No. -263/Del/2013, are similar to the grounds raised in ITA No -5178/Del/2011 as facts and circumstances remained identical, it was a common stand of the parties that the arguments advanced in ITA No -5178/Del/2011 would cover the grounds raised in ITA No -263/Del/2013.
(2.) FOR ready -reference, we reproduce the grounds from ITA No -5178/Del/2011: - 1. That on the facts and in the circumstances of the case and in law, the order passed by the Ld. Assessing Officer ("Ld. AO") under section 143(3) read with section 144C of the Act is bad in law. 2. That on the facts and in circumstances of the case and in law, the Ld. AO erred in assessing the returned income of the appellant of Rs. 5,22,98,469 at Rs. 16,06,44,060 on the directions of Learned Dispute Resolution Panel ("Ld. DRP") under section 144C of the Act. That the Ld. AO/Transfer Pricing Officer ('TPO') grossly erred on facts and in law in making the Transfer Pricing adjustment of Rs. 5,66,19,363 under section 92CA of the Act on alleged ground that the appellant company incurred expenditure on Advertisement, marketing and promotional expenses excessively on the basis of applying the "bright line limit" and in doing so: 3.1 The Ld. TPO/AO erred in holding that AMP expenses incurred by the appellant are covered under the purview of Section 92B of the Act on surmises and conjectures. 3.2 The Ld. TPO/AO erred in concluding that the associated enterprise (AE'), being the legal owner of the brand, should have compensated the appellant for Advertising, Marketing and Promotion (AMP') expense as AE derives benefit from such expenses incurred by the appellant and it also results in creation of marketing intangible. 3.3 The Ld. TPO/AO erred in disregarding the correct characterization of the appellant's business i.e. being a routine distributor undertaking all the risks relating to its business of distribution and instead, wrongly characterizing the appellant as a limited risk distributor. 3.4 The Ld. TPO/AO erred in disregarding that all the key decisions and functions with respect to AMP expenses incurred by the appellant for sale are taken by appellant and all related risks and reward, are to be borne by the appellant and not by the AE. 3.5 That the Ld. AO/TPO on the facts and the circumstances of the case erred in not adhering to the principles of comparability and in using inappropriate comparables to determine the bright line limit. 3.6 That Ld. AO/TPO erred on the facts and circumstances of the case in characterising the appellant as a services provider and in applying a mark -up on the excess AMP spend, and also failed to take cognizance of the disallowance of AMP expenditure made under the normal provisions of the Act.
(3.) THE Ld. AO (following the directions of the Ld. DRP), erred on facts and in law disallowing the provision for warranty amounting to Rs. 31,00,166/ - on the ground that same was a contingent liability. 4.1. While making the aforesaid disallowance, the Ld. AO erred on facts in observing that provision for warranty is not based on actuarial or scientific method, 4.2. While confirming above disallowance, the Ld. DRP erred on facts in observing that the addition had not reached finality and the department is at various stages of appeal without considering that the revenue appeal in the matter for Assessment Years 2001 -2002 and 2005 -2006 has been dismissed by the Hon'ble Delhi High Court.;


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