TaxTMI 
TaxTMI 
2021 (8) TMI 953
X X X X Extracts X X X X
X X X X Extracts X X X X
....e: "(1) Whether Ld. DRP was justified in not appreciating the fact that bright line is a mere step [of the most appropriate method for benchmarking the AMP service] carried out to estimate and bifurcate expenditure pertaining to the taxpayer for its own routine distribution function and the expenditure incurred on AMP service provided to the AE in a situation where the assessee has not reported the international transaction pertaining to marketing function? (2) Whether in the facts and circumstances of the case and in law the DRP was justified in stating that routine selling and distribution expenses would not form part of AMP expenses (disregarding the fact that these expenses contribute to creation of marketing intangibl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Act was in respect of the difference between the arm's length price (ALP) and the contract or declared price, but the said provision could not be invoked to determine the 'quantum'/extent of business expenditure. 1.3 That the DRP/TPO erred on facts and in law in holding that expenditure incurred by the appellant which incidentally resulted in brand building for the foreign AE, was a transaction of creating and improving marketing intangibles for and on behalf of its foreign AE and further that such a transaction was in the nature of provision of a service by the appellant to the AE. 1.4 Without prejudice, the DRP/TPO erred on facts and in law, in not appreciating that the AMP expenses incurred by the appellant ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....benchmarking analysis of the advertisement, marketing and sales promotion ('AMP') expenses incurred by the assessee for the products having brand name 'HAIER', applying Bright Line Test ('BLT'), made an adjustment of Rs. 25,17,20,341/- being the purported difference on account of advertisement and sales promotion expenses incurred by the assessee. 7. The ld. DRP following the decision of Hon'ble High Court in the case of Sony Erickson Mobile Communication India Pvt. Ltd. 374 ITR 118 rejected the application of BLT and directed the computation by considering Cost Plus Method (CPM) as the most appropriate method leading to adjustment of Rs. 11,19,14,589/-. 8. Further, we find that the similar issue has been a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m 15% to 9%. Giving effect to the order of the DRP, the TPO, vide order dated 24th February, 2014, recomputed the transfer pricing adjustment on account of AMP at Rs. 11,46,01,751/-. The assessee has claimed that in the above working, the TPO has considered the rebate and discount of Rs. 22,64,61,618/- which is evident from paragraph 4 of the TPO's order. Hon'ble Jurisdictional High Court in the case of Sony Ericsson Mobile Communications (supra) held as under:- "176. The aforesaid argument, when AMP expenses are segregated from the composite transaction including distribution and marketing function, is flawed and has to be rejected. The respondent-appellants are engaged in distribution and marketing of consumer goods. Dist....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncessions would not form part of AMP expenses. Admittedly, the TPO has considered the rebate and discount of Rs. 22.64 crores as part of AMP expenses which is to be excluded from AMP expenses as per the above decision of Hon'ble Jurisdictional High Court. After excluding the same, the net AMP expenses work out to Rs. 24.14 crores as under:- Particulars Amount ( Rs.) Total AMP expenses determined by the TPO 46 , 78 ,74 ,750 Less: Rebate & Discount 22 , 64 ,61 ,618 Net AMP expense incurred by the appellant 24 , 14 ,13 ,132 9. When, on the above figure, the mark up of 9% as upheld by the DRP is applied, then the arm's length price of AMP would be worked out to Rs. 26,31,40,313/-. The grant received by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee's own case, the benchmarking is undertaken by comparing the gross profit earned by the assessee net of AMP expense with similar adjusted gross profit margin earned in undertaking uncontrolled transactions: Particulars Trading AE Trading Non AE Sale 1,050,027,873 1,856,821,011 Service Income 16,218,717 2,097,007 Total Revenue A 1,066,246,591 1,858,918,018 Opening Stock -FG 109,636,499 144,855,566 Purchase & Direct Expenses 1,101,541,914 1,699,044,802 Less: Closing Stock -FG 350,359,681 218,759,982 Total Cost of Goods Sold B 860,818,732 1,625,140,386 &nbs....