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2013 (8) TMI 594 - AT - Income TaxTransfer pricing adjustment on account of royalty for brand name Rs. 981,406,624/- - Assessee in this case is a license manufacturer of cars in India of its Associated Enterprise SMC - In terms of the license assessee has paid lumpsum royalty as well as running royalty SMC. TPO was of the opinion that the royalty paid should be split towards technical assistance and brand – TPO concluded Suzuki brand was weak/worthless – Held that:- TPO has imputed a very large T.P. adjustment in respect of AMP expenses on the basis that the said expenses incurred by the assessee year after year since 1982 have resulted in a significant increase in Suzuki's brand value - Suzuki cannot be considered to be a weak brand which is only reinforcing on Maruti's brand and taking away value from it - TPO was not justified in making adjustment of Rs. 98,13,53,745/- Payment of above sum as royalty to SMC was attributable to use of brand name is not sustainable - No disallowance is required in payment of royalty by MSIL to SMC – Decided in favor of assessee. Transfer Pricing Adjustment on account of AMP amounting to Rs. 1,54,12,00,000/- in relation to advertisement, marketing and sales promotion expenses (AMP expenses) incurred by the assessee – Held that:- Relying upon the decision in the case of M/s L.G. Electronics India (P) Ltd. Vs. ACIT [2013 (6) TMI 217 - ITAT DELHI], expenses in connection with the sales do not lead to brand promotion and thus cannot be brought within the ambit of advertisement, marketing and promotion expenses for determining the cost/value of the international transaction - Assessing officer to exclude the expenses incurred by the assessee in connection with the sales as the same do not fall within the ambit of AMP expenses and hence not to be considered for computing the cost/ value of international transaction - The TPO has to decide the rate of AMP expenses by applying the proper comparables after hearing the assessee, in view of the Special Bench directions in this behalf in the case of of M/s L.G. Electronics India (P) Ltd. (2013 (6) TMI 217 - ITAT DELHI) - Issue remitted with regard to the transfer pricing adjustment in respect of AMP expenses to the file of the TPO.
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