TaxTMI 
TaxTMI 
2019 (4) TMI 1773
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.... adjustment of Rs. 7,12,19,145 by holding that the Appellant ought to have received reimbursement for "alleged excessive" Advertising, Marketing and Promotion ('AMP') expenses from its Associated Enterprises. ('AEs'). 2. On the facts and circumstances of the case and in law, the AO / TPO/ DRP erred in: a) disregarding the fact that the premium profits earned by the Appellant compensated for the allegedly excessive AMP expenses, if any, incurred by it; b) disregarding the transfer pricing policy of the Moet Group wherein Moet India is provided with an agreed contribution margin which clearly indicates that Moet Group funds the AMP expenses of Moet India; c) misinterpreting or placing incorrect reliance on the international guidance in relation to the 'marketing intangibles' from Organisation for Economic Co-operation and Development ('OECD'), US TP Regulations and Australian Tax Office ('ATO') and relying on several erroneous/ factually incorrect and contradictory statements/ observations in the Transfer Pricing (TP') order, which are not relevant to the instant case, only in order to justify an otherwise in....
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.... 3. Reimbursement of expenses CUP 8,353,558 - 4. Recovery of expenses CUP 604,740 Total 275,530,003 4. Ld. TPO has accepted all the aforesaid international transactions at arm's length, however disputed the Advertisement, Marking and Promotional (AMP) expenses by noticing that the taxpayer has incurred huge AMP expenditure and beneficiary of the efforts of the taxpayer is its AE because of the increase in the brand value significantly. TPO also taken the view that the taxpayer has created marketing intangibles in favour of the taxpayer. 5. Declining the contentions raised by the taxpayer that any benefit that AE may have drawn is incidental in nature as the brand taxpayer has received from its AE has no intrinsic value, TPO after using "Bright Line Method" selected 5 comparables with average of AMP/Sales at 4.678% as against average of taxpayer at 13.34% and has also added mark-up of 15% on AMP spent and calculated the AMP expenses as under :- Arm's length margin for markup : 15% Total revenue of the assessee 499,154,634 Arm's length price of AMP expenses (%) ....
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....lving AMP expenses, the order of TPO passed by making BLT as basis of the ALP adjustment is not sustainable in the eyes of law. 11. Ld. AR for the taxpayer brought to our notice that the issue in controversy in the present appeal is a covered one in taxpayer's own case for AY 2009-10 decided in ITA No.1906/Del/2014 decided by order dated 23.08.2018, which fact has not been controverted by the dl. DR for the Revenue. 12. Ld. TPO in order to arrive at the decision that AMP expenditure incurred by the taxpayer is an international transaction for which reimbursement should have been received by the taxpayer by making following observations :- "2. It is seen from audited financial of the assessee company that a sum of Rs. 6,18,37,549/- has been incurred by it on advertisement and sales promotion (AMP) which amounts to 26.94% of the total sales of the assessee company. It is proposed that the AMP expenditure incurred by the assessee should be considered as an international transaction for which reimbursement should have been received by the assessee as it leads to creation of marketing intangible for the AEs and not for the business purposes of the assessee. 2.1 I....
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....international transaction relating to the expenditure incurred on AMP has not been discharged. I therefore propose to benchmark the transactions relating to "AMP". 2.5 It has already been stated in the foregoing paragraphs that the expenditure on AMP has been incurred to promote the brand/trade name owned by CMC, France, the AE and such expenditure has resulted into brand building and increased awareness of the products bearing such brands/trade names. I am of the considered view that the expenditure incurred by the assessee company is for the advantage of its AE, since the brand/trade name is owned by the AE. In such a situation the assessee company should have been suitably compensated by the AE. However the assessee has not received any payment in this regard from the AE. Therefore it is clear that the assessee has not been suitably compensated by the AE in respect of the expenditure incurred by it (the assessee) on Advertising and Sales Promotion expenses (AMP) to penetrate the market and to increase the sales by promoting the brand name." 13. From the aforesaid observations of the ld. TPO, we have gathered that the TPO has treated the AMP expenditure as internation....
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.... of the AO/TPO with respect to the AMP expenditure being in the nature of an international transaction as expenditure incurred on behalf of the assessee, including the quantum and nature of expenditure and including lack of any material to suggest that there was "an arrangement, understanding or action in concert" with respect of the expenditure incurred by the assessee and including the fact that, in our considered view, the expenditure incurred by the assessee was in nature of bonafide business expenditure in furtherance of its legitimate business interests, we are of the considered view that there is no legally sustainable basis for the TPO coming to the conclusion that there was an international transaction, under section 92B, on the facts of this case. It was only on the basis of bright line test that the impugned ALP adjustment was made but that approach has already been negatived by Hon'ble Courts above. We see no reasons to remit the matter to the file of the TPO, as is prayed for by the learned Departmental Representative. A remand to the assessment stage cannot be a matter of routine; it has to be so done only when there is anything in the facts and circumstances to so wa....