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2016 (9) TMI 1453 - AT - Income TaxRoyalty payment - Held that - Following our decision for the preceding year, we have already decided that the average rate of royalty payment in the industry has to be considered in the case of the assessee for determining the arm s length price and if the same is more than the rate of royalty payment made by the assessee, then no adjustment is required. Since the Ld.A.R has pointed out that in the case of the assessee the rate of Royalty payment is less than the rate prevalent in the industry we hereby direct the learned TPO to verify the same and decide the matter in the light of our above decision. To that extent, the order of the Tribunal stands corrected and modified.
Issues:
1. Brand Promotion expenses determination using Bright line test 2. Advertisement, Marketing & Promotion (AMP) expenses ALP determination using Bright line test 3. Royalty payment disallowance based on industry average rate Brand Promotion Expenses: The assessee filed a Miscellaneous Petition seeking rectification in the Tribunal's order regarding brand promotion expenses. The Tribunal had remanded the issue to the Transfer Pricing Officer (TPO) to determine the value of developing intangible property using the Bright line test. The assessee argued that the Bright line test had already been applied by the Dispute Resolution Panel (DRP), and hence, there was no need to remit the issue back to the TPO. The Tribunal held that since it was not aware of the DRP's decision, there was no mistake in remitting the issue to the TPO. Advertisement, Marketing & Promotion (AMP) Expenses: Similar to the brand promotion issue, the Tribunal remanded the AMP expenses matter to the TPO for determining the Arm's Length Price (ALP) using the Bright line test. The assessee contended that the same decision applied to this issue as well, and there was no need to modify the Tribunal's order. Consequently, the Tribunal found it unnecessary to make any changes to its previous decision. Royalty Payment: The Tribunal disallowed the royalty payment for the assessment year 2008-09. The assessee argued that the industry average royalty rate was 4.7%, higher than the appellant's rate of 3.6%. The Tribunal noted that if the industry rate exceeded the appellant's rate, no adjustment was necessary. Therefore, it directed the TPO to verify the rates and make a decision accordingly. The Tribunal partially allowed the Miscellaneous Petition, correcting and modifying the order related to royalty payments. In conclusion, the Tribunal addressed the issues of brand promotion expenses, AMP expenses, and royalty payment in detail, considering arguments from the assessee and previous decisions. The Tribunal's decision on each issue was based on the application of the Bright line test, industry average rates, and the necessity for corrections or modifications in the original order.
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