TaxTMI 
TaxTMI 
TaxTMI 
2022 (10) TMI 1144
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.... advertisement, marketing and promotion (AMP) of the brand of Associated Enterprises (AEs) 3.1 Briefly the facts relating to this issue are, the assessee is a resident corporate entity and is a part of Xerox group of companies. As stated by the Assessing Officer, the assessee is engaged in the business of providing a range of office equipments, software solution and document management services. The assessee sells xerographic equipments, printers, scanners, multifunctional devices, high-end equipments etc. In course of proceeding under section 92CA of the Act, the Transfer Pricing Officer (TPO) noticed that the assessee had incurred expenditure on AMP. After calling for and examining the necessary details, he observed that by incurring such expenditure, the assessee is extending the reach of the brands owned by the AEs. Thus, the final beneficiary of the expenditure incurred by the assessee on AMP is the AE, as, the brand owned by it are gaining in value due to marketing efforts of the assessee. In other words, by incurring such expenditure, the assessee has created marketing intangibles of the AE. Accordingly, he issued a show-cause notice to the assessee to explain, why incurrin....
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....528/Del/2012, dated 16.12.2019, the Coordinate Bench has held that the AMP expenses incurred by the assessee does not fall within the definition of international transaction. The Bench further disapproved the determination of ALP by applying BLT method. Ultimately, the adjustment made on account of AMP expenses was deleted. Identical view was expressed by the Tribunal while deciding the issue in assessment year 2010-11 in ITA No. 2060/Del/2015, dated 05.08.2020. In the latest order passed for the assessment year 2011-12, the Bench has deleted the adjustment holding as under:- "6.5 As question of existence of international transaction of AMP and adjustment on account of the same in the case of assessee have been deleted in the assessment year 2008-09 and 2010-11, thus, respectfully following the finding of the Tribunal (supra), we hold that no international transaction of AMP exist in the case of assessee. Hence, we deleted the adjustment made on account of the AMP transaction. Corresponding grounds raised by the assessee are accordingly allowed. Accordingly, the appeal of the assessee is allowed." 3.7 For the sake of completeness, we must observe, learned Departmental Representa....
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....ted, though, an application for rectification under section 154 of the Act was filed before the TPO, however, it is still pending. Proceeding further, he submitted, assessee's business model is unique and not akin to routine distributors of office automation products. He submitted, as far as the assessee is concerned, there are two revenue streams, one is from sale of equipment and other from lease rental of equipment. He submitted, as far as sale of products is concerned, the pricing could not be set in similar way as the pricing for equipments given on lease to customers. In respect of leased of equipments, the assessee will not be able to recover the cost of equipment given on lease in one go. Rather, it would be recovered over a period of years considering the useful life of such equipments/components. 4.3 Drawing our attention to the computation of margin by the TPO, he submitted that the gross margin computed is by taking total cost of purchases from the AE but including only the revenue from the resale of equipments/components, which gives a distorted result under RPM. He submitted, such a comparable analysis cannot be done even when compared to a routine distributor of off....
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....al submissions and perused the materials on record. Undisputedly, the assessee has benchmarked the transaction relating to purchase of goods from AE for resale by applying TNMM. Whereas, the TPO as well as learned DRP have held that RPM is the most appropriate method to benchmark the transaction. On perusal of Rule 10(1)(b), it is observed that RPM can be applied in a case where the goods are purchased from the AE simply for the purpose of resale. However, in the facts of the present appeal, it is the say of the assessee that the imported goods are not only utilized for resale but were also leased out to customers to be installed at their premises on rental basis. Therefore, in case, there are two streams of revenue being generated by the assessee in respect of imported goods, one resale and second leasing, the issue which requires to be considered is, whether in such a scenario RPM can be applied as the most appropriate method to determine the ALP. In case, RPM is applied, what adjustments are required to be made. On a careful perusal of the order passed by the TPO and learned DRP, it is observed that assessee's claim regarding two streams of revenue earned in relation to goods im....
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....e no adjustment. Since, the aforesaid aspects have not been considered by the departmental authorities and needs to be considered qua the facts available on record, in our view, it has to be examined at the level of AO/TPO. Accordingly, we are inclined to restore this issue to the Assessing Officer for fresh adjudication, keeping in view the discussions made hereinabove. 4.9 Needless to mention, the assessee must be provided reasonable opportunity of being heard before deciding the issue. These grounds are allowed for statistical purposes. 5. In ground no. 10 and its sub-grounds, the assessee has challenged disallowance of depreciation on capital assets converted into stock in trade. 5.1 We have heard learned Representatives appearing for the parties. It is a common point before us that the issue is squarely covered in favour of the assessee by the decisions of the Tribunal in assessee's own case in assessment years 2007-08 and 2008- 09. It is further submitted that the decision of the Tribunal in assessment year 2007-08 has been upheld by the Hon'ble Delhi High Court. 5.2 Having considered rival submissions and perused the materials on record, we are convinced that the issue i....