TaxTMI 
TaxTMI 
2018 (7) TMI 2297
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....e PTE. It is engaged in the business of distribution of Epson group products like printers, cartridges, scanner and projector, spares and other consumables. The return of income for the assessment year 2012-13 was filed on 29/11/2912 declaring total income of Rs.17,01,86,550/.-. The assessee also reported the following international transactions in Form 3CED: 3. The assessee-company also submitted transfer pricing study report adopting RPM for bench marking its transactions in trading segment. The Transfer Pricing Officer (TPO) however, observed that the assesseecompany is not confined to activities in trading alone but also undertaken the activity of Advertisement, Marketing and Sales promotion (AMP) of Epson products in India for which assesse-company was not suitably compensated. Therefore, the TPO had proceeded to compute the Arms Length Price (ALP) of the AMP expenditure by alleging that the assessee had incurred AMP expenditure thereby developing intangibles of Associated Enterprises (AE) and also undertaken separate bench marking of pre-sales services rendered by the assessee. Accordingly, the TPO, vide order dated 27/01/2016 passed u/s 92CA of the Act, suggested TP adjus....
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....hese transactions cannot be termed as international transaction as the transaction was not entered into between two or more AE either of them being non-resident entity. He further submitted that the revenue had not brought anything on record to demonstrate that the assessee had agreement or arrangement with its AE with respect to incurring of AMP expenditure. Thus it was submitted that the revenue had failed to prove existence of any international transaction and accordingly no adjustment under Chapter X can be made. He also placed reliance on the decision of the co-ordinate bench of this Tribunal in the case of M/s.Essilor India Pvt.Ltd. vs. DCIT (2016) 68 taxmann.com 311)(Bang). 7. On the other hand, ld.CIT(DR) vehemently submitted that the assessee-company had not furnished TP study giving FAR analysis, functions, marketing promotions undertaken by it. Therefore, the issue requires to be set aside to the TPO for undertaking fresh analysis of these functions. Reliance in this regard was placed on the decision of the coordinate bench of Tribunal Delhi in the case of Transitions Optical India Pvt. Ltd. vs. DCIT in IT(TP)A No.2208/Bang/2016 dated 22/11/2017. 8. We heard rival ....
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....s of FAR of the AMP functions carried out by the appellant and having regard to the actual conduct of the appellant vis-àvis its AE and economic substance of the transactions between the appellant and its AE, if the TPO is of opinion that there existed an international transaction in the form of AMP functions, then, to undertake the exercise of determination of ALP by adopting a suitable method of compensation to the appellant for performing the AMP functions of its AE. 9. In the result, the appeal filed by the assessee for assessment year 2012-13 is allowed for statistical purposes. 10. The assessee raised identical grounds of appeal for assessment year 2013-14 in IT(TP)A No.2479/Bang/2017. For parity of reasons stated in IT(TP)A No.293/Bang/2017 for assessment year 2012-13, we remand the issue of AMP expenditure back to the file of the AO/TPO for the purpose of determination of existence of international transaction between appellant and the AE involving AMP expenses and further the question of determination of its ALP. Thus, the appeal filed by the assessee for assessment year 2013-14 is also allowed for statistical purposes. 11. In the result, the appeals filed ....
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....ct sales made by the AE to the customers in India, the learned TPO/AO and the Hon'ble DRP have erred, in law and in facts in not appreciating the business/ commercial expediencies of the arrangement, the minimal quantum of such sales and also the fact that even in respect of such sales the Appellant is adequately compensated. The learned TPO/AO and the Hon'ble DRP have erred, in law and in facts, by not appreciating that the alleged transaction of enhancement of marketing intangibles is closely linked to other international transactions in the distribution segment and when done so, it is discernable that an appropriate quantum of profits is offered to tax in India. Document 3 2.6 2.7 2.8 3. 3.1 3.2 3.3 4. 4.1 4.2 The learned TPO/AO and the Hon'ble DRP have erred, in law and in facts, by not appreciating that the premium profits in the distribution segment more than compensates any excess AMP expenses incurred by the Appellant. The learned TPO/AO and the Hon'ble DRP have erred, in law and in facts, by not appreciating once the net profit margin is tested on the touchstone of arm's length price under TNMM, it pre-sup....