TaxTMI 
TaxTMI 
2018 (9) TMI 1810
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....national transaction by the assessee." 2. "Whether on the facts and in the circumstances of the cases, the DRP is justified in holding that the 'Bright Line Test' (BLT) was not mandated in law and hence impermissible without considering the fact that BLT was not used as a method to determine the price but only as an economic tool to arrive at the cost of services rendered to the foreign enterprise by the Indian Entity and the TPO has the mandate to 'determine' such 'cost' as a primary step in ALP determination as provided under the Rules." 3. "Whether on the facts and in the circumstances of the case and in law, the Hon'ble DRP was justified in ignoring the provisions of section 92C(1)(b) of the Act which specifically prescribes 'any other method' for determination of ALP as held by the Hon'ble Delhi High Court in the case of M/s. Toll Global Forwarding India Pvt. Ltd. vide order No. 5025/Del/10 and M/s. Turn Restaurant (I) Pvt. Ltd. Vs. ITO - ITA No. 349/2015 and CIT vs. Yum Restaurant India Pvt. Ltd. - ITA No. 388/2015." 4. "Whether, on the facts and in the circumstances of the case and in law, the Hon'ble DRP....
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....etermined at Nil The CIT(A) erred in determining the ALP of trade mark royalty at NIL and making adjustment of Rs. 13.49 Crores on account of trademark royalty paid to AE; The CIT(A) erred in concluding on the basis of factual assumption that the Appellant is the economic owner of the intangibles and hence should not pay any trademark royalty to its AE; Rejection of transfer pricing analysis under CUP The CIT(A) erred in rejecting the transfer pricing analysis undertaken by the Appellant by applying CUP with respect to payment of trademark royalty to AE without providing any cogent reasons for the same; 5. Adjustment in respect of technical know-how royalty paid to AE of Rs. 17.99 Crores The CIT(A) erred in restricting the ALP of technical know-how royalty at 3% instead of 5% and thereby making adjustment of Rs. 17.99 Crores on account of excess technical know-how royalty paid to AE; Inappropriate use of CUP The CIT(A) erred in rejecting the transfer pricing analysis undertaken by the Appellant by applying CUP with respect to payment of technical know-how royalty to AE without providing any cogent reasons for t....
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....istence of international transaction; 3. Without prejudice to above, the learned Transfer Pricing Officer (TPO')/DRP should be directed not to make any separate AMP adjustment as excess gross profit earned by respondent adequately compensates the respondent for the alleged excessive AMP expenses; 4. Without prejudice to above, the learned TPO/DRP should be directed not to make any separate AMP adjustment as AMP adjusted margin of respondent are better than AMP adjusted margin of its comparables; 5. Without prejudice to above, the learned TPO/DRP should be directed to consider the following expenses as selling expenses and not part of AMP expenditure while computing the adjustment: * Marketing promotions run at malls and retail site outlet on various occasions * Customer relations maintenance expenses and sales promoter salary * Expenses towards Point of Sales materials * Rent cost of hiring spaces at various Point of sales * Expenses incurred in respect of product animation, training and simulation * Expenses relating to market research * Marketing fees paid to AE 6. Without preju....
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....national transactions with its AEs: Nature of transaction Value of international transaction (Rs.) Import of raw material / packing material for manufacture of finished goods 96,222,828 Export of raw material / packing material for manufacture of finished products 120,394 Import of finished goods for resale in India 525,349,576 Export of finished goods manufactured by L'Oreal India 1,001,228,856 Rendering evaluation and technical testing Services 7,645,866 Royalty payments for use of technical know-how,brand name, trademark, etc. 584,766,594 Availing marketing support services 184,491,457 Availing consultancy services 26,100,995 Import of fixed assets 1,987,666 Reimbursement of expenses (receipts) 44,707,919 Reimbursement of expenses (payments) 105,533,065 6. The arm's length price of the international transactions in the manufacturing segment and in the distribution segment is determined by applying cost plus method and the resale price method respectively, which is stated to be the most appropriate method in the facts and circumstances of the case. The gross margin to sales ratio is tak....
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....are then subsequently sold in the Indian market. He observed that brand intangible is a major factor driving revenues in Cosmetic sector. He noted that tax payer is not the owner of the brand which it is creating in India by spending huge amounts of advertisement and marketing expenses in India. He noted that on net sales of Rs. 1182.17 crores for the financial year (F.Y. for short) 2010-11, L'oreal India spent an amount of Rs. 392.85 crores on advertisement, marketing and promotion. The TPO observed that however no company would agree to develop an intangible without asking for ownership in the intangible that is created or enhanced by it. That by spending huge amounts on advertisement and marketing, L'oreal India is enhancing the brands 'L'oreal', 'Garnier' and others in India. The TPO rejected the assessee's submission that AMP expenses are payments to third parties in India and hence not an international transaction. The TPO further rejected the assessee's reliance upon several decisions of the ITAT to contend that AMP expenditure incurred by the assessee for the product sold by it in India, do not result in any kind of direct benefit to its foreign affiliates. The TPO further ....
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....se of distributor would be different from the AMP analysis in case of a manufacturer. 2.3. The assessee is a distributor and also a manufacturer. Applying Delhi High Court decision, BIT cannot be applied. I, therefore, request you to examine the AMP transaction in the light of Delhi High Court decision and recompute the adjustment and give your report by 30.11.2015. 3. It may kindly be noted that this matter/gets time barred on 31.12.2015. Therefore, the report may be provided latest by 30.11.2015." The conclusion of the TPO's response was noted by the DRP which are as under: Conclusion : The adjustment proposed by the TPO in his order u/s.92CA for this year may be upheld as the Revenue has not accepted the decision of the Hon'ble Delhi High Court in the case of Sony Ericson regarding rejection of BLTand SLP has been filed against the said decision before the Supreme Court. 2. In case, the Hon'ble DRP is of the view that the transaction of AMP expenditure incurred by the assessee is an international transaction and, the decision of Hon'ble Delhi High Court in the case of Sony Ericson is applicable both to the manufacturing....
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....t of intra group services towards availing support services. In this regard, the DRP noted that the assessee has challenged the jurisdiction of TPO to examine the issue of royalty, intra group services and other international transaction in pursuance to a remand by the DRP on the AMP issue. But the DRP held that regarding the royalty and intra group services, the TPO had given fresh information to the panel which he was empowered. Subsequently, the directions of the DRP in this regard are as under: Regarding the trademark royalty, we have considered the facts of the case and submissions made by the assessee on 23.12.2015. We agree with the TPO that there is no reason for payment of trademark royalty on facts of the case. Therefore the.AO is directed to made adjustment on account of trademark royalty as proposed by TPO of Rs. 13,49,46,137/- @ 1.5% of sales. We find that the Mennen agreement is an internal CUP for know-how royalty. Though agreement was entered in F.Y. 2005-06 but it is still a valid agreement and acted on by the parent of the assessee, therefore we are of the considered opinion that royalty @ 3% charged by the parent to Mennen is a valid internal CU....
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....nd Whirlpool of India Ltd. (in ITA No. 610/2014). 16. Upon hearing both the counsel and perusing the records. We find in Revenue's appeal, the issue raised pertains to the deletion of international transaction addition consisting of AMP transaction by the Transfer Pricing Officer following the decision by ITAT in assessee's own case and also decision of Hon'ble Delhi High Court in the case of Sony Ericson Mobile Communications (India) Pvt. Ltd. (now known as Sony India Ltd.) v. CIT [2015] 374 ITR 118 (Delhi), Maruti Suzuki India Ltd. vs. ACIT [2016] 381 ITR 117 (Del) and Whirlpool of India Ltd (supra). Since the DRP's direction is supported by the Hon'ble High Court's decision, we do not find any infirmity in the same. Hence, the Revenue's appeal is dismissed. 17. As regards the assessee's appeal, one issue relates to power of transfer pricing officer to suggest alternative than that asked by the DRP in remand. In this regard, the ld. Counsel of the assessee has referred to case law from the Hon'ble Allahabad High Court for the jurisdiction of remand proceedings. However, we note that this decision is with reference to the Wealth Tax Act and is not applicable to the f....