TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 1491
X X X X Extracts X X X X
X X X X Extracts X X X X
....olly owned subsidiary of Epson Singapore PTE Ltd. The assessee is primarily engaged in distribution of Epson group products like printers, cartridges, scanners, projectors, spares and other consumables. In terms of the provisions of Sec.92-A of the Act, the assessee and its wholly owned holding company were Associated Enterprises ("AEs"). In terms of Sec.92B(1) of the Act, the transaction of providing distribution services was an "international transaction" and in terms of Sec.92(1) of the Act, any income arising from an international transaction shall be computed having regard to the arm's length price. 3. The assessee filed its return of income AY 2015-16 on 24.11.2015 by declaring a total income of Rs.50,94,90,730. The assessing off....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... made to the TPO when the assessee has raised objection to the reopening u/s.147 before the AO. During the course of hearing the Ld AR pressed only for grounds on merits with respect to AMP expenses. Therefore the issue for our consideration is whether the assessing officer is correct in treating the AMP expenses as a separate international transaction from the distribution segment, and making a TP adjustment for the same. 5. The assessee is involved in two segments viz., (i) Trading (Distribution) segment & (ii) Business Support Services. The Business Support Services Segment was accepted as at Arm's lengyh by the TPO. The assessee has chosen Resale Price Method (RPM) as the most appropriate method for the Trading (Distribution) segment a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hi) has held that the workings of section 92F and that Rule 10A explicitly states that the term transaction includes a number of closely linked to transaction thus making it clear that it was never the intent of the Legislature to abandon the general principles of plurality. Therefore the contention of the TPO of adopting 'transaction by transaction approach' is not liable to be rejected. (iii) Under the net operating margins the assessee has earned an Operating margin of 3.12 % as against the operating margin of 1.08% (Page 7 Para 4.6 of TPO's order) In the process of arriving at this margin the advertising and sales promotion expenses were considered as part of operating cost. Once the assessee has established that it has earned adequat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed the materials on record. The assessee has chosen RPM as the most appropriate method (MAM) for arriving at ALP. The assessee has chosen 7 comparables based on various filters applied and the median of weighted average of adjusted gross profit on sales % of these comparables was 4.44% (page 189 to 190 of paper book). The gross profit margin of the assessee from undertaking distribution activities during the year under consideration resulted in gross profit of 17.87% on sales (Page 254 of the paper book). Since the assessee's margin is more than the arm's length range, the margin of the assessee from its distribution activities is considered to be at arm's length from TP perspective. In a corroborative analysis done under Transaction Net Ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oceeds on the assumption that functions, assets and risk being broadly similar and once suitable adjustments have been made all things get taken into account and stand reconciled when computing the net profit margin. Once the comparables pass the functional analysis test and adjustments have been made, then the profit margin as declared when matches with the comparables would result in affirmation of the transfer price as the arm's length price. Then to make a comparison of a horizontal item without segregation would be impermissible. 9. The coordinate bench of the Tribunal in the case of Himalaya Drug Company (supra) has held that for the AMP expenses to fall under the category of 'international transaction' the revenue should show th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be made in respect of AMP expenses on this account also. 10. We have considered the Ld DR's submission that the coordinate bench of the Tribunal in assessee's own case (supra) has remanded the case back to the TPO. In the said assessment years, the case was remanded back mainly for the purpose of determining whether the AMP expenses in an international transaction or now. The relevant para from the judgment is reproduced here for reference "In the present case also TPO had not brought anything on record to show existence of international transaction whereby the assessee was obliged to incur AMP expenditure for the purpose of promoting brand, intangible to its AE. Similarly the assesseecompany also has not furnished FAR analysis of AMP fu....