TaxTMI 
TaxTMI 
2018 (12) TMI 1208
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....he following grounds. Each of the below grounds of appeal is without prejudice to and independent of one another. The Learned AO/DRP have erred in law and facts: 1. in making a reference of the Appellant's case to the Learned TPO, which is not in accordance with Section 92CA, and then making a transfer pricing adjustment of Rs. 15,92,54,270 to the total income of the Appellant for AY 2011-12; 2. in making a transfer pricing adjustment of Rs. 15,92,54,270 under Section 92C(4) of the Act to the total income of the Appellant on the premise that there exists an international transaction under Section 92B of the Act between the Appellant and its Associated Enterprise ('AE') on account of alleged Advertisement, Marketing and Promotion ('AMP') expenses incurred by the Appellant; 3. in failing to appreciate that there are no machinery provisions under the Act to determine AMP as international transaction; 4. in holding that the alleged AMP expenses is an international transaction without bringing anything on record to prove that there is an understanding/ arrangement/ or an action in concert between the Appellant and the AE for the promotion of brand/ tr....
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....n TP regulations 17. in making an adjustment on account of the alleged AMP expenses incurred by the Appellant although in the very same order, it has been held that the profits earned by the Appellant in its distribution activity, which was computed after taking into account these alleged AMP expenses, meets the arm's length test; without prejudice to the above, erred in not determining the 'excessive' alleged AMP spend and marking the transfer pricing on the entire alleged AMP spend incurred by the Appellant; 18. in concluding that the alleged AMP expenses lead to brand building without appreciating the Appellant's facts and in particular the nature of expenses incurred; 19. in erroneously using an incorrect cost base for the purpose of making the adjustment in respect of alleged AMP expenditure; 20. in erroneously not giving effect to the directions of the Hon'ble DRP that has allowed this objection raised by the Appellant in the DRP directions in the favour of the Appellant. 21. In failing to consider the fact that where the alleged AMP expenses are considered to be a separate international transactions, the same ought to be reduced f....
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.... was selected for security. The audited balance sheet, profit and loss account and supported annexure were filed by the assessee before the Assessing Officer. In response, to notices u/s 143(2)/142(1) followed by the questionnaire, Chartered Accountant/Authorized Representative of the assessee company attended the proceedings from time to time and furnished requisite details. Reference to the Transfer Pricing Officer was made to determine Arms Length Price u/s 92CA(3) of the Income Tax Act after obtaining prior approval of the Commissioner of Income Tax-V, New Delhi. The Transfer Pricing Officer passed order u/s 92CA (3) of the Income Tax Act, on 30/1/2015, after considering the objections filed before him. The Transfer Pricing Officer made an addition of Rs. 16,62,47,629/- in light of detailed discussions made in the order passed u/s 92CA (3) of the Income Tax Act, 1961 dated 30/1/2015. The upward adjustment Arms Length Price of international transactions was made at Rs. 16,62,47,629/- and accordingly an addition of this amount was propose to be made to the income of the assessee. Thereafter, draft order proposing the said addition was passed on 26/3/2015 and duly served upon the ....
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....01.2016. therefore, the adjustment on account of ALP of international transactions entered into by the assessee is being made at Rs. 15,92,54,270/-.For the reasons mentioned above, as the assessee has furnished inaccurate particulars of its income, penalty proceedings under section 271(l)(c) of the Income Tax Act are initiated against the assessee for which notice under section 274 of the Act is being issued separately." 5. The Ld. AR submitted that the assessee is disputing the very existence of international transaction of alleged AMP expenses. The Ld. AR submitted that there is no mechanical provision under the Act to determine AMP as International Transactions. The TPO/DRP did not bring anything on record to prove that there is an understanding/arrangement / or an action between the assessee Company and the A.E for the promotion of brand/trademark name owned by A.E. The Ld. AR relied upon the decision of the Delhi Tribunal in case of Sony Mobile Communications (India) (P.) Ltd. vs. Addl. CIT (2018) 96 taxmann.com 312 as well as the decision of the Hon'ble Delhi High Court in case of Maruti Suzuki India Ltd. vs. CIT (2016) 282 CTR 1 (Del.). The Ld. AR further submitted that t....
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....essee in a separate international transaction with it's A.E u/s 92B (1) of the Act and subjected the same to the transfer pricing provisions. Without prejudice to these submissions the Ld. AR further submitted that the TPO/AO above that failed to appreciate that the warranted approach should be adopted for determining the Arms Length Price of its alleged AMP Expenses since the same is not linked to the distribution function. The Ld. AR further submitted that the TPO failed to appreciate that Bright Line Method suffers from various short comings and is not prescribed method under the TP Regulations in making an adjustment on account of the alleged AMP Expenses incurred by the assessee Company. Although in the very same order, it was held that the profits earned by the assessee company in its distribution activity which was computed after taking into account, these alleged AMP expenses meets the Arms Length test. Without prejudice to these submissions, the Ld. AR further submitted that the TPO erred in not determining the excessive alleged AMP expenses and the marketing transfer pricing on the entire alleged AMP Expenditure incurred by the assessee Company. The Ld. AR further submitt....
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....ee wholly and exclusively on account of its own business and any benefit to the AE was only incidental. From the records, it can be seen that the assessee is incurring its own selling and distribution expenses. There was no advertisement in media nor the products are available in the shop. It is made available only through order placed. There exist a distinction between product promotion and brand promotion. The mechanism used by the assessee company is altogether different for its product promotion. From the records, it can be seen that there is only a mail order marketing use as promotion for products sales. The Ld. AR has aptly relied on the various decisions regarding involvement of AMP expenses but in the present case, the facts are altogether different as here the method for using product sales and promotion are totally different. The assessee company's products are not available in market as such in general. Therefore, the TPO/DRP ignored these basic differences while holding that these expenses are international transaction itself. Besides that both the revenue authorities failed to bring on record as to how the said activity of the assessee company is having an element of ....