TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>ITAT affirms CIT(A) on revenue nature of ad expenses & Resale Price Method for ALP</h1> <h3>ACIT 6 (3), Mumbai Versus L’Oreal India P. Ltd.</h3> The ITAT upheld the CIT(A)'s decision to treat advertisement expenditure as revenue in nature, following precedents emphasizing business realities over ... - Issues Involved:1. Deletion of advertisement expenditure u/s 37(1) of the Income Tax Act, 1961.2. Determination of Arm's Length Price (ALP) using the Resale Price Method (RPM) for international transactions.Summary:Issue 1: Deletion of Advertisement Expenditure u/s 37(1) of the Income Tax Act, 1961The Revenue challenged the CIT(A)'s decision to delete the expenditure of Rs. 2,02,86,576/- incurred on advertisement under the head Media-Technical, arguing it created a benefit of enduring nature and thus is capital in nature. The assessee, engaged in manufacturing and trading cosmetic products, contended the expenditure was revenue in nature due to the competitive market requiring continuous advertisement. The CIT(A) followed the decision in Geoffrey Manners & Co. Ltd and ITAT's decision in DCIT vs. Metro Shoes (P) Ltd, holding the expenditure as revenue in nature. The ITAT upheld this view, noting the similar issue was decided in favor of the assessee in AY 2003-04, emphasizing the purpose and business realities over the 'enduring benefit' test.Issue 2: Determination of Arm's Length Price (ALP) Using the Resale Price Method (RPM)The Revenue disputed the CIT(A)'s acceptance of the Resale Price Method (RPM) for determining the ALP of the assessee's international transactions concerning imports of finished goods. The Transfer Pricing Officer (TPO) had applied the Transaction Net Margin Method (TNMM) instead, citing the assessee's consistent losses, product differences, and insufficient similarity in functions performed, assets employed, and risks assumed. The CIT(A) upheld the RPM as the most appropriate method, deleting the TPO's addition of Rs. 4,55,34,000/-. The ITAT agreed with this, referencing the ITAT's decision in the assessee's case for AY 2003-04, which supported the RPM for distribution activities where goods are purchased from AEs and sold to unrelated parties without further processing. The ITAT found no reason to deviate from the CIT(A)'s order, dismissing the Revenue's ground.Conclusion:The appeal filed by the Revenue was dismissed, with the ITAT upholding the CIT(A)'s decisions on both issues.Order pronounced in the open court on 31st October, 2012.
TaxTMI 
TaxTMI 
