TaxTMI 
TaxTMI 
2022 (12) TMI 239
X X X X Extracts X X X X
X X X X Extracts X X X X
....der consideration, the assessee company has entered into transactions with associated enterprises. Therefore, a reference was sent by the Assessing Officer to Transfer Pricing Officer for determining the 'arms' length price' u/s 92CA(3) in respect of 'international transactions' entered into by the assessee during the AY. 2014-15. 2.2 Finalizing the TP proceedings, the TPO has passed an order u/s 92CA(3) of the Income Tax Act, 1961 on 26.10.2018 proposing the substantive adjustment amounting to Rs. 22,28,05,068/- following RPSM and protective adjustment of Rs. 37,47,33,203/- following BLT on account of marketing and market development (AMP) function carried out for the AE. Apart from this TPO proposed Adjustment of Rs. 82,97,774/-, on account of support services. TNMM was also applied by the TPO for benchmarking of Support Service Segment rejecting assessee's approach under CPM method. 2.3 Accordingly a Draft Order computing the taxable income of the assessee company at Rs. 90,12,84,160/- under section 143(3) r.w.s. 144C dated 19.12.2018 was forwarded to the assessee. 2.4 The assessee filed its objections against the Draft Order under section 144C of the Act before the Dis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....law, in enhancing the income of the Appellant by Rs. 36,93,24,653 on account of non-receipt of income for "allegedly excessive" AMP expenses incurred by the Appellant. 3.1. The Ld. AO/ TPO/ Hon'ble DRP erred in assuming jurisdiction in respect of the AMP expenditure when such expenditure did not satisfy the requisites of being an international transaction under Section 92B read with Section 92F(v) of the Act. 3.2. The Ld. AO/ TPO/ Hon'ble DRP erred in not appreciating that expenditure incurred by the Appellant was on account of sales activity and, could not be regarded as a 'transaction' in absence of any understanding/ arrangement between the Appellant and that associated enterprise (AE) for the promotion of brand and therefore cannot be termed as an 'international transaction' between the Appellant and the AE. 3.3. The Ld. AO/ TPO/ Hon'ble DRP erred in not holding that the existence of international transaction in respect of AMP has to be seen through the prism of 'conduct of the parties' and the ownership of IPR(s) and their usage. 3.4 The Ld. AO/ TPO/ Hon'ble DRP erred in re-characterizing the unilatera....
X X X X Extracts X X X X
X X X X Extracts X X X X
....od (TNMM) analysis included AMP expenses and could not be benchmarked and adjusted as a part of the adjustment pertaining to marketing intangibles. Notwithstanding and without prejudice to the above grounds, the Appellant craves to raise following grounds on merits: 3.13 The Ld. AO / TPO / Hon'ble DRP erred in not granting setoff of excess profit from distribution of products while benchmarking the alleged international transaction of incurrence of excessive AMP expenditure as has been held by the Hon'ble Delhi High Court in the case of Sony Ericson Mobile Communications [374 ITR 118(Del)]. 3.14. The Ld. AO/ TPO/ Hon'ble DRP erred in not appreciating that the Appellant has not provided any value added/ brand building services to its AE by incurring AMP expenditure, and therefore, no mark-up could have been charged/ levied on such expenditure, even if the same was to be characterized as an 'international transaction'. 3.15. Notwithstanding and without prejudice that no mark-up could have been levied, the Ld. AO/ TPO/ Hon'ble DRP erred in applying an ad-hoc mark-up of 12.15% on allegedly excess AMP expenses incurred by the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Tax - III, (2015) 374 ITR 118 (Delhi). 6. Now it can be observed from the matter on record that the Ld. TPO has observed in para 13.1 "13.1 Benchmarking of AMP expenditure - Bright line concept (Protective Adjustment) As far as the primary reliance of this office on segmentation estimating the segregation of routine promotional expenditure for purchase resale of products from the expenditure on marketing and market development service to the AE termed as brightline approach is concerned, it has already been discussed in great details in the order above that the Revenue Department has proposed a SIP before the Hon'ble Supreme Court of India. The assessee has pointed out that the rejection of stay by the Hon'ble Supreme Court was limited to the objection of the assesse on the existence of the international transaction and the same was not on the rejection of brightline. The assessee has not produced any order of the Hon'ble Court which has led It to believe so. Since the judgment of the Hon'ble High Court has not been stayed and in view of the objections of the Revenue to the judgement in the case of Sony Ericsson coupled with the fact of proposing a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or years, and the only year following the said assessment year is the year before us. It is also pointed out that the ALP adjustment, in respect of AMP expenses by applying the bright line test (BLT), which is now decided in favour of the assessee. While learned Departmental Representative did not really address on all these aspects, he fairly agreed to our suggestion that the matter is required to be examined afresh by the Assessing Officer in the light of outcome of the appellate proceedings for the other assessment years as also by way of a speaking order dealing with the specific contentions of the assessee. In the light of this undisputed position within a narrow compass of material facts, we remit the matter to the file of the Assessing Officer for fresh adjudication in the light of our above observations. We also direct the assessee to fully cooperate with the Assessing Officer in expeditious disposal of the remanded proceedings. Ordered, accordingly." 9. Further in assessment year 2014-15, ITA No. 7569/Del/2018 the Coordinate Benche's order in ITA No. 6565/Del/2017 has been followed. 10. As the matter of fact, the revenue's appeal against the order dated 07.03.2019 in....