TaxTMI 
TaxTMI 
2026 (7) TMI 674
X X X X Extracts X X X X
X X X X Extracts X X X X
....5 for Assessment Year (AY) 2013-14. The grounds of appeal raised by the assessee are as under: "1. Order of the CIT(A) is contrary to law of facts and circumstances of the case. 2. CIT(A) erred it in confirming the downward adjustment of Rs. 7,32,38,000/- made by the Transfer Pricing Officer in respect of market survey conducted for promotion of Appellant's products in Turkey. 3. CIT(A) should have appreciated that the amounts were paid for carrying out the market survey in Turkey, which was essential as Turkey was a new market where the Appellant intended to introduce and promote the sale of their products. 4. CIT(A) should have appreciated that the sale of the Appellant's products had increased ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mptions and presumptions, without appreciating the reality of business. Importance of a market survey should be considered from the businessman's point of view and not from tax angle alone. 8. Based on the submission and the documents provided, the CIT(A) ought to have upheld the claim of the Appellant and directed the deletion of the adjustment made by TPO in respect of the market survey expenses of Rs. 7,32,38,000/- 9. Appellant craves leave to adduce additional grounds and documents necessary to substantiate their claim in the course of appellate proceedings." 2. The assessee is a company engaged in the business of manufacturing and sale of tractors engineering plastic components and batteries and trading in rela....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e TPO cannot sit in the shoes of businessmen to conclude whether the specific expenditure is required to be incurred or not and that such decision can be taken only based on the commercial expediency. Accordingly, the Ld. AR argued that the TPO is not correct in making the TP adjustment towards the payment made by the assessee for market study to its AE. Without prejudice, the Ld. AR submitted that the A.O has accepted the overall margin which included impugned payments and therefore, the TPO ought to have not made a separate adjustment after accepting the overall margin of the assessee. The Ld. AR in this regard relied on the decision of Hon'ble Delhi High Court in the case of CIT vs. EKL Appliances Ltd. [2012] 24 taxmann.com 199 (Del.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h and therefore the payment made by the assessee is not warranted. The argument of the assessee is that the assessee's decision to carry out the market study through the AE which is a local entity is based on a business requirement to expand operations in Turkey. We notice from the order of the TPO that ALP is determined at Nil stating that the assessee has failed to establish the benefit arising from the market study and that in an uncontrolled environment this kind of payment would not have been made. It is further noticed that the TPO while holding did not accept the submission of the assessee that there has been sizeable increase in sale of tractors in Turkey and held that the increase in sale of tractors and profitability is due to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce with the provisions of Chapter X of the Act read with Rules 10A to 10E. The TPO is required to examine the appropriateness of the method adopted and the comparables selected for determining the ALP and commercial expediency of any expenditure incurred by the assessee cannot be the basis for determining the ALP at Nil. In assessee's case incurring expenditure towards market study is a strategy adopted by the assessee to develop and expand its business in Turkey and as already stated the assessee has also established the fact that there has been significant increase in investments as well as sale of tractors in the subsequent AYs. Determination of ALP at Nil by TPO on the ground that the assessee did not benefit from incurring such exp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onsiderations for the purpose of Rule 10B. Whether or not to enter into the transaction is for the assessee to decide. The quantum of expenditure can no doubt be examined by the TPO as per law but in judging the allowability thereof as business expenditure, he has no authority to disallow the entire expenditure or a part thereof on the ground that the assessee has suffered continuous losses. The financial health of assessee can never be a criterion to judge allowability of an expense; there is certainly no authority for that. What the TPO has done in the present case is to hold that the assessee ought not to have entered into the agreement to pay royalty/brand fee, because it has been suffering losses continuously. So long as the expenditur....