TaxTMI 
TaxTMI 
2026 (8) TMI 1248
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....the Ld. Transfer Pricing Officer [in short, "TPO"], vide order dated 14.07.2023 passed under section 92CA(3) of the Act. 3. The Ld. Counsel for the Assessee, by drawing our attention to the order dated 21.03.2018 passed by the Hon'ble Coordinate Bench of the Tribunal in the Assessee's own cases for the A.Ys. 2008-09 to 2012-13 in ITA Nos. 7744/Mum/2012, 1792/Mum/2014, 1105/Mum/2015, 903/Mum/2016 and 674/Mum/2017, claimed that the Hon'ble Coordinate Bench had also dealt with an identical issue relating to the transfer pricing adjustment on account of AMP expenses under the manufacturing and distribution segments and had ultimately allowed the Assessee's claim qua AMP expenses by observing and holding as under: " 5. We have heard the rival submissions and perused the material before us. We find that adjustment of AMP expenses, under the heads manufacturing and distribution, are the subject matter of additional grounds number 29,5,12,1 and 1 for the AY.s. 2008-09, 2009-10, 2010-11, 2011-12, 2012-13 respectively. 5.1. We are of the opinion that in the absence of an agreement or arrangement between an assessee and the AE, for incurring AMP expenses, nо Т....
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.... narrated as 'trademark owner-licensor' in the letter, that the assessee is narrated as economic owner of long term distribution rights, that the assessee was not supposed to pay royalty to its AE, that the assessee had advertised the products as per the conditions and the requirements of the local market. Two products- a deodorant for women and a face wash product -manufactured and advertised by it had the flavor of the local market. One thing more has to be remembered herethat the assessee was a new entrant in the field of manufacturing and sale of cosmetic and personal care, that there were already old players-like HUL, P & G and Colgate Pamolive-that manufactured same products. Naturally to compete with established manufacturers and brands it had to incur huge advertisement expenses, so that new products would become popular. In our opinion, there is a subtle but definite difference between the product promotion and brand promotion. In the first case product is the focus of the advertisement campaign and the brand takes secondary or backseat, whereas in second case, brand is highlighted and not the product. In the case under consideration the assessee was introducing ne....
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....e issue. Here, we would also like to refer to the case of Bosch and Lomb (supra) wherein all the arguments raised by the TPO & FAA/DRP have been deliberated upon in length and the relevant portion of the order reads as under: 53. A reading of the heading of Chapter X ['Computation of income from international transactions having regard to arm's length price"] and Section 92 (1) which states that any income arising from an international transaction shall be computed having regard to the ALP and Section 92C (1) which sets out the different methods of determining the ALP, makes it clear that transfer pricing adjustment is made by substituting the ALP for the price of the transaction. To begin with there has to be an international transaction with a certain disclosed price. The transfer pricing adjustment envisages substitution of the price of such international transaction with the ALP. 54. Under Sections 92B to 92F, the pre-requisite for commencing the TP exercise is to show the existence of an international transaction. The next step is to determine the price of such transaction. The third step would be to determine the ALP by applying one of the f....
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....ort is had to the residuary part of clause (b) to contend that the AMP spend of BLI is "any other transaction having a bearing" on its "profits, incomes or losses", for a 'transaction' there has to be two parties. Therefore, for the purposes of the 'means' part of clause (b) and the 'includes' part. of clause (c), the Revenue has to show that there exists an 'agreement' or 'arrangement' or' 'understanding' between BLI -and B&L, USA whereby BLI is obliged to spend excessively on AMP in order to promote the brand of B & L, USA. As far as the legislative intent is concerned, it is seen that certain transactions listed in the Explanation under clauses (i) (a) to (e) to Section 92B are described as an 'International transaction'. This might be only an illustrative list, but significantly' it does not list AMP spending as one such transaction. 58. In Maruti Suzuki India Ltd. (supra), one of the submissions of the Revenue was: "The mere fact that the service or benefit has been provided by one party to the other would by itself constitute a transaction irrespective of whether the consideration for the same has been p....
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....s relationship coming into existence by accident or chance. The relationship' can come into being only by design, by meeting of minds between two or more persons leading to the shared common objective or purpose of acquisition of substantial acquisition of shares etc. of the target company. It is another matter that the common objective or purpose may be in pursuance of an agreement' or informal; 'the acquisition of shares etc. may be direct or indirect or the persons acting in concert may cooperate in actual acquisition of shares etc. or they may agree to, cooperate in such acquisition. Nonetheless, the element of the shared common objective or purpose is the sine qua non for the relationship of "persons acting in concert" to come into being. 60. The transfer pricing adjustment is not expected to be made by deducing from the difference between the 'excessive' AMP expenditure incurred by the Assessee and the AMP expenditure of a Comparable entity that an international transaction exists and then proceeding to make the adjustment of the difference in order to determine the value of such AMP expenditure incurred, for the AE. In any event, after the decisi....
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....harged by one entity from another in uncontrolled situations then that would be the ALP. The Court does not see this as a machinery provision particularly -in-light of the fact that-the-BLT has been expressly negatived by the Court in Sony Ericsson. Therefore, the existence of an international transaction will have to be established de hors the BLT, 70. What is clear is that it, is the 'price' of an international transaction which is required to be adjusted: The very existence of an international transaction cannot be presumed by assigning some price to it and then deducing that since it is not an ALP, an adjustment had to be made. The -burden is on the Revenue to first show the existence of an international transaction. Next, to ascertain the disclosed 'price' of such transaction and thereafter ask whether it is an ALP. If the answer to that is in objective of Chapter X is to make adjustments to the price of an international transaction which the AE's involved may seek to shift from one jurisdiction to another. An 'assumed' price cannot form the reason for making an ALP adjustment. " 71- Since a quantitative adjustment is not permissible f....
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....ard. In practical terms, absent a clear statutory guidance, this may encounter further difficulties. The strength of a brand, which could be product specific, may be "impacted by numerous other imponderables not limited to the nature of the industry, the geographical peculiarities, economic trends both international and domestic, the consumption patterns, market behaviour and so on. A simplistic approach using one of the modes similar to the ones contemplated by Section 92C may not only be legally impermissible but will lend itself to arbitrariness. What is then needed is a clear statutory scheme encapsulating the legislative policy and mandate which provides the necessary checks against arbitrariness while at the same time addressing the apprehension of tax avoidance." 64. In the absence of any machinery provision, bringing an imagined transaction to tax is not possible. The decisions in CIT v. B. C. Srinivasa Setty (1981) 128 ITR 294 (SC) and PNB Finance Ltd. v CIT (2008) 307 ITR 75 (SC) make this position explicit. Therefore, where the existence of an international transaction involving AMP expense with an ascertainable price is unable to be shown to exist, even if such....