TaxTMI 
TaxTMI 
2020 (8) TMI 927
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....,196 returned by the appellant. 2. That the assessing officer erred on facts and in law in making transfer pricing adjustment of Rs.17,29,19,161 in relation to the advertisement, marketing and sales promotion expenses (hereinafter referred to as 'the AMP expenses') incurred by the appellant. 3. That the DRP/TPO erred on facts and in law in not appreciating that the AMP expenses, etc., unilaterally incurred by the appellant in India could not be characterized as an international transaction as per section 928, in the absence of any proved understanding / arrangement between the appellant and the associated enterprise, so as to invoke the provisions of section 92 of the Act. 4. That the DRP/TPO erred on facts and in law in holding that there exists an international transaction in connection with incurring of AMP expenses without placing on record any tangible material or evidence to substantiate the existence of such transaction. 5. That the DRP/TPO erred on facts and in law in holding that valuable marketing intangible has been created by the appellant in India in favor of the associated enterprises. 6. That the TPO/DRP erred on f....
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....g adjustment permitted by Chapter X of the 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. 13. That the DRP/TPO erred on facts and in law in not appreciating that by virtue of long term right to use the 'Suzuki' brand in India, the appellant has gained economic ownership of the said brand. 14. That the DRP/TPO erred on facts and in law in not appreciating that adjustment on account of allegedly excess AMP expenses is not warranted in the case of the appellant, a full risk bearing entrepreneur. 15. That the TPO erred on facts and in law in holding that the associated enterprise is benefiting from the AMP expenses incurred by the appellant on account of royalty, sale of goods etc. not appreciating that such transactions have been separately bench marked and accepted to be at arm's length. 16. That the TPO erred on facts and in law in holding that the associated enterprise is benefiting from the AMP expenses on account of development of brand without appreciatin....
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....demark of its Associated Enterprises (AE), Suzuki Motor Company, Japan, entered into international transactions with its AE for carrying out its manufacturing activities as under :- S. No. Nature of International Transaction Amount in INR Most Appropriate Method 1. Import/Purchase of component/raw material Transactional Net Margin Method ('TNMM') 1.1 Import of components/consumables 8425780 1.2 Purchase of raw material and component 4625788711 2. Sale of motorcycle/scooters 9644921 3. Sale of components 14990823 4. Purchase of manufacturing machineries, tools and equipments 4591533 5. Royalty payment 97559309 6. Supervision fee paid 2 7380184 7. License fee paid 170776 8. Reimbursement of expenses to AEs 33383056 9. Recovery of expenses from AEs 386045879 10. Rent paid 18792582 11. Salary of deputed employee paid 14317532 12. Repair and Maintenance paid 76700 13. Director's remuneration paid 12102309 14. Purchase of traded motorcycle 100026522 3. Ld. Transfer Pricing Officer (TPO) accepted the benchmarki....
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....Rs.26,01,37,110/-. 7. The taxpayer carried the matter before the ld. Disputes Resolution Panel (DRP) by way of objections who has excluded two comparable companies, namely, Atul Auto and Limited and Mahindra Two Wheelers Ltd. from the final set of comparables chosen by the TPO for the purpose of applying the BLT and also directed the TPO to verify the margin of the comparable companies for the purpose of computing adjustment. After DRP order, AO computed the adjustment at Rs.17,29,19,161/- on account of AMP expenses. Feeling aggrieved, the taxpayer has come up before the Tribunal by way of filing the present appeal. 8. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the Revenue authorities below in the light of the facts and circumstances of the case. 9. Undisputedly, the taxpayer is a manufacturing entity and its AMP/sales ratio is 6.23% as against 2.29% of the comparables by applying the BLT. It is also not in dispute that the AE has compensated the taxpayer with an amount of Rs.32,42,62,780/- on account of expenditure made by it. Ld. TPO also applied the mark up of 15.43% of AMP e....
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....een found to be not sustainable on the ground that no international transactions held to be involved and that economic/legal ownership of the brand seeking compensation for AMP expenditure is inconsistent with the characterization and business model of the taxpayer and that adjustment on account of AMP expenses is not permissible within the scheme of "Chapter - X". 14. In view of the backdrop of the aforesaid facts and circumstances of the case, the sole question arises for determination in this case is :- "as to whether Revenue has discharged its onus of proving the international transactions between the taxpayer and the AE and as to whether existence of international transactions can be inferred merely on the basis of BLT? 15. Coordinate Bench of the Tribunal in taxpayer's own case for AY 2010-11 (supra) decided this issue by returning following findings :- "10. Hon'ble Delhi High Court in Maruti Suzuki India Ltd. v. CIT (2016) 381 ITR 117 (Del.) has decided the identical issue of AMP expenses in case of manufacturing entity in favour of the assessee by distinguishing Sony Ericsson India Pvt. Ltd. vs. CIT - (2015) 374 ITR 118 (Del.) case wherein the assess....
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....te Ltd. vs. DCIT in ITA 158/2016 order dated 31.07.2016 by holding that "the mere fact that the assessee was permitted to use the brand name will not automatically lead to the inference that any expenses that the assessee incurred towards AMP is only to enhance the brand/trademark Valvoline." So, in the absence of any arrangement or agreement, it is difficult to infer that the AMP expenses incurred by assessee are not for its own benefit but for the benefit of its AE. So, when the factual foundation i.e. BLT method to determine the existence of or the ALP of international transactions involving AMP expenses is held to be not sustainable, the entire adjustment made by TPO/DRP/AO is not sustainable. 15. In view of what has been discussed above, we are of the considered view that following the series of decisions rendered by Hon'ble Delhi High Court discussed in preceding paras, when the taxpayer has disputed the existence of international transaction qua its AMP expenses the Revenue has failed to discharge its initial onus to prove on the basis of tangible material that there exists an international transaction qua incurring of AMP expenses between the taxpayer and its AE or....