Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (10) TMI 2621 - ITAT DELHIDetermining the arm’s length price of the international transaction of advertising, marketing and promotion (AMP) spent and royalty payment - Held that:- So far as determination of arm’s length price of AMP expenses is concerned the Hon’ble Court in Sony Ericsson Mobile Communications India Pvt. Ltd. (Now known as Sony India Limited) & others [2015 (3) TMI 580 - DELHI HIGH COURT ] has held that if suitable comparable engaged in both distribution and advertising, marketing and promotion (AMP) functions are found, than, arm’s length price of the transaction should be determined on aggregate basis. If, however, there is some difference in the function of distribution or advertising, marketing and promotion performed by the assessee as compared to the comparables, then attempt should be made to bridge the difference by making a suitable adjustment to the profit margin of the comparables. The Hon’ble Court has gone on to hold that if such adjustment is not possible, then, the chosen comparable should be eliminated and if in the process of comparing, no comparables are left who are engaged in performing such distribution and advertising, marketing and promotion functions, then the International transaction of AMP should be segregated and its arm’s length price should be determined applying a suitable method, however, in determining so, a proper set off, if any available from the distribution activity should be allowed. We find that in the present case details of the advertising, marketing and promotion function performed by the assessee are not available on record. Further advertising, marketing and promotion functions of the comparables have also not analyzed by the TPO as he applied the bright line test for determining the value of International transaction of advertising, marketing and promotion expenses which approach has not been approved of by the Hon’ble High Court. Thus since the Ld. A.R fairly stated that facts need to be addressed afresh as at this stage without a detailed discussion on facts, agreements, conduct etc. of the assessee it was not possible to address the advertising, marketing and promotion function of the assessee as well as comparables, thus request for remitting the matter back to the AO on facts and circumstances of the case is found to be justified. As far as determination of arm’s length of royalty payment is concerned, it is seen that the Hon’ble High Court has held that payment of royalty is a relevant consideration while determining the arm’s length price of international transaction of distribution and marketing, however the tax treatment of royalty being different, the Royalty transaction, may be bench marked separately. Since the determination of arm’s length price of royalty payment is inter connected with advertising, marketing and promotion expenses as held by the Hon’ble High Court we are of the view that determination of arm’s length price of royalty also cannot be done at this stage and needs to be remitted back.- Decided in favour of assessee for statistical purpose.
|