AI Drafter 
TaxTMI 
TaxTMI 
2015 (10) TMI 312
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....authorities below that the assessee is engaged in brand building activity on behalf of its AE; the local transaction of the assessee involving advertisement, cash discount, services expenses and business promotion expenses with unrelated parties are international transaction under sec. 92B of the Income-tax Act, 1961 and application of transfer pricing provisions upon them; determination of ALP of the transaction of the assessee using the methodology i.e. not prescribed by the Income-tax Act, 1961 and without substantiating the basis for mark up of 12% on the reimbursement received and addition made; application of the transfer pricing provisions over the domestic transaction of the assessee carried out with the unrelated Indian parties; an....
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....y recorded and as per past history of the assessee's case, it has always been held to have been incurred for the immediate benefit of the assessee for affecting the sales in India, as such, advertisement are released in the regional newspapers/media in different Indian languages to attract the Indian customers for buying the products, which are being sold by the assessee through its retail outlet/distributors etc. Therefore, no part of expenditure can be said to have been incurred by the assessee towards AMP expenditure, as has been the history in the case of the assessee. The Learned AR submitted that there was no change in the facts as has been prevailing in the earlier years on the issue. However, for the first time in the assessment yea....
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....ther attractive sales promotional schemes to its dealer and to the ultimate customers through dealers. He pointed out sales which were about Rs. 357,00,00,000 in assessment year 2002-03 has come down to just about Rs. 66,00,00,000 in the assessment year 2007-08. The selling expenses have varied between 14% to 25% during this period. 6. The learned AR submitted further that assessee has always spent substantial amount on the selling expenses but there has never been an issue of AMP expenses, as such. The issue involved in past was that the amount of advertisement subsidies/support received is not in the nature of operating receipts and while comparing the margins of assessee with the comparables, such amount was excluded from operating in....
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....volume discounts, etc. offered to sub-distributors or retailers are not in the nature and character of "brand promotion". They are not directly or immediately related to "brand building" exercise, but have a live link and direct connect with marketing and increased volume of sales or turnover. The brand building connect is too remote and faint. To include and treat the direct marketing expenses like trade or volume discount or incentive as "brand building" exercise would be contrary to common sense and would be highly exaggerated. These reduce the net profit margin. It would lead to abnormal financial results defying accountancy practices and commercial and business sense. The expenses being in the nature of selling expenses have an immedia....
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....tested parties are at arm's length with that of comparables. The relevant para No.101 of the decision is being reproduced hereunder: "101. However, once the Assessing Officer/TPO accepts and adopts TNM method, but then chooses to treat a particular expenditure like AMP as a separate international transaction without bifurcation/segregation, it would as noticed above, lead to unusual and incongruous results as AMP expenses is the cost or expense and is not diverse. It is factored in the net profit of the inter-linked transaction. This would be also in consonance with Rule 10B(1)(e), which mandates only arriving at the net profit margin by comparing the profits and loss account of the tested party with the comparable. The TNM Method procee....