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2012 (4) TMI 752 - AT - Income TaxExpenditure on Advertisements - Revenue or Capital Expenditure? - The AO stated that the advertisement expenditure resulted in creating benefit of enduring nature, thus is capital in nature where as CIT(A) treated it as revenue expenditure - HELD THAT:- In the case of CIT VERSUS M/S. GEOFFREY MANNERS & CO. LTD. (NOW KNOWN AS WYETH LIMITED) [2009 (2) TMI 13 - BOMBAY HIGH COURT], it was held that the expenditure was incurred in respect of promoting ongoing products of the assessee and, therefore, the expenditure is for promotion of the products of the assessee which is revenue in nature. In the present case, the expenditure has been incurred by the assessee for production of ‘ad-films’, advertisement in electronic and print media, in respect of promotion of its ‘on-going products’. Hence, we hold that the said expenditure has rightly been treated as revenue in nature by CIT(A), which was incurred by the assessee wholly and exclusively for the purpose of its business - Decision in favour of Assessee. TP Adjustment - Computation of Arms Length Price in respect of Business Activities - TNMM or RPM? - Assessee is a 100% subsidiary company of L’Oreal SA France and is engaged in the business of manufacturing and distribution of products. In respect of business of distribution, the TPO while rejecting the Resale Price Method (RPM) as adopted by assessee, has suggested some adjustment by applying Transactional Net Margin Method (TNMM) - HELD THAT:- We agree with ld CIT(A) that there is no order of priority of methods to determine ALP. RPM is one of the standard method and OECD guidelines also states that in case of distribution and marketing activities when the goods are purchased from AEs which are sold to unrelated parties, RPM is the most appropriate method. Accordingly, the appellant’s international transaction in respect of imports of finished goods can be said to be at arm’s length. Therefore, RPM method is accepted - Decision in favour of Assessee. Receipt of services and benefit from AEs in lieu of the marketing fee payments - Assessee has paid to its overseas AEs some amount as cost contribution, wherein certain common marketing services were rendered by group entities. TPO stated that in the absence of any direct evidence to indicate the benefit to the assessee, it is concluded that the assessee has not benefited at all from the cost sharing arrangement and has considered the cost sharing arrangement at ALP for the same at Nil. HELD THAT:- We consider it prudent to set aside the orders of authorities and restore the matter to the file of the AO with a direction that he will get it examined from TPO as to whether the assessee has received any benefit under cost sharing arrangement for which assessee made the payment. In case assessee is able to produce requisite documents to the satisfaction of the TPO that the assessee received benefit under cost sharing arrangement, he will decide the claim of the assessee accordingly - Matter Restored back.
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