TaxTMI 
TaxTMI 
2019 (6) TMI 1761
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....of appeal:- "1. That on the facts and in the circumstances of the case and in law, the order passed by the Ld. Assessing Officer ("AO") is bad in law and void ab-initio 2. That on facts and circumstances of the case and in law, the Ld. AO/ Ld. Transfer Pricing Officer ("TPO")/ Ld. Dispute Resolution Panel ("DRP") erred on facts and circumstances of the case in determining the arm's length adjustment to the Appellant's alleged international transaction with Associated Enterprises ("AEs"), thereby resulting in the enhancement of returned income of the Appellant by Rs. 7,259,651. 3. That on the facts and circumstances of the case and in law, the reference made by the Ld. AO suffers from jurisdictional error as the Ld. AO has not recorded any reasons in the assessment order based on which he reached the conclusion that it was "expedient and necessary" to refer the matter to the Ld. TPO for computation of the arm's length price, as is required under section 92CA(1) of the Income Tax Act, 1961 ("Act"). Further, the Ld. AO and the Ld. Commissioner of Income-tax failed to provide an opportunity of being heard to the appellant before making the referen....
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.... with product specific programs/ events in relation to orthopedic surgery and have no nexus with brand promotion or creation of marketing intangible, thus contradicting the principles laid down by Hon'ble High Court (in case of M/s Sony Fricsson India Limited and various others); 4.7 by incorrectly holding that the AMP functions need to be analyzed separately from the distribution function and therefore by incorrectly determining a transfer pricing adjustment even when the Appellant's gross margins as well as net margins were found to be at arm's length under Resale Price Method ("RPM") as the primary method corroborated by Transactional Net Margin Method ("TNMM"), thus contradicting the principles laid down by Hon'ble High Court (in case of M/s Sony Ericsson India Limited and various others) 4.8 erroneously holding that the Appellant has rendered services to the AEs by incurring 'excessive' AMP expenses and by holding that a mark-up has to be earned by the Appellant in respect of the "alleged excessive" AMP expenses and erroneously applying an ad-hoc mark-up of 12.21% in respect of Appellant's "alleged excessive" AMP expenses, without ....
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.... 7. Ground number 2 is challenging the overall adjustment on account of the transfer pricing adjustment of INR 7259651/-. This ground is also general in nature and therefore the same is dismissed. 8. Ground number 3 of the appeal is against the challenge for not recording any reasons in the assessment order for the referenced made to the learned transfer-pricing officer. No arguments were advanced by the learned authorised representative during the course of hearing and therefore it is dismissed. 9. Ground number 4 is with respect to the adjustment of AMP of INR 7259651/- on account of alleged expensive advertisement marketing and promotion expenses incurred by the appellant. 10. The ld AR submitted as under:- a. That advertisement marketing, promotion expenditure incurred by the assessee are purely domestic transaction as it incurred with the 3^rd parties and same does not go to benefit to the associated enterprises as they are pertaining to the business of the assessee. He referred to the details of such expenditure and stated that the ld AO has not brought on record anything to establish any arrangement between the assessee and the associated enterprises so as ....
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....cording to him the assessee company should have been suitably compensated by the associated enterprise. Accordingly, the show cause notice was issued. The assessee submitted its reply. The learned TPO held that the assessee is in effect creating marketing intangibles in favour of the assessee by the AMP afford that it carries out in the Indian subcontinent. He further held that the assessee has necessary to use the brand name and logo of the parent company hence if any intangible is being created it is being created by the assessee and the benefit is accruing to the parent. He therefore based on the comparables found that 3.78% is the AMP/sales ratio of the comparable companies and thereafter proceeded to determine the arm's-length price of such AMP expenditure. He found that AMP/sales ratio of the assessee 7.34 percentage. Therefore he stated that the total sales of the assessee 929306967/- and the arm's-length price of AMP expenditure at the rate of 3.78% should have been 35127805 whereas the assessee has incurred actual AMP expenditure of INR 6 8248793/- and therefore the balance amount of INR 3 3120910/- has been incurred by the assessee on creation of intangibles. He added mar....
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....jority decision mandates that in each case where an Indian subsidiary of a foreign AE incurs AMP expenditure should be subjected to the bright line test on the basis of comparables mentioned in paragraph 17.4. Any excess expenditure beyond the bright line should be regarded as a separate international transaction of brand building. Such a broad-brush universal approach is unwarranted and would amount to judicial legislation. During the course of arguments, it was accepted by the Revenue that the TPOs/Assessing Officers have universally applied bright line test to decipher and compute value of international transaction and thereafter applied Cost Plus Method or Cost Method to compute the arm's length price. The said approach is not mandated and stipulated in the Act or the Rules. The list of parameters for ascertaining the comparables for applying bright line test in paragraph 17.4 and, thereafter, the assertion in paragraph 17.6 that comparison can be only made by choosing comparable of domestic cases not using any foreign brand, is contrary to the Rules. It amounts to writing and prescribing a mandatory procedure or test which is not stipulated in the Act or the Rules. This is bey....