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2018 (7) TMI 1991 - AT - Income TaxTP adjustment - adjustment relating to Advertisement, Marketing and Promotion [AMP] - HELD THAT:- No force in the findings of the lower authorities that the above said expenditure on AMP has been incurred exclusively to promote the brand/trade name ‘Sony Ericsson’ and such expenditure has resulted into brand building and increased awareness of the products bearing brand/trade name ‘Sony Ericsson’ and also that such expenditure incurred by the assessee company is for the advantage of its AE. Testing the functions performed by the assessee vis a vis AMP expenses incurred by it, we do not find that the assessee has incurred AMP for the benefit of its AE. All the expenditure incurred by the assessee are in relation to its business and its promotion. Moreover, as mentioned elsewhere, the net margin is much higher than the comparables and looking from that angle also, we do not find any merit in the transfer pricing adjustments. It is incorrect to say that the amount of ₹ 73.83 crores received by the assessee by way of credit notes represents the excess price charged by AE which has been credited to the assessee. The business model of the assessee with its AE is such that the AE ensures that the assessee achieves an arms’ length return on sales made by it. Assuming, yet not accepting that the assessee should have been compensated by its AE towards AMP and such compensation as worked out by the TPO is ₹ 69.94 crores, then also no adjustment is required since the assessee has received credit notes worth 74.83 crores and has been suitably compensated. If the AMP expenses are considered as an independent transaction and combined transaction approach is not considered, then also excessive profit derived by bench marking of distribution segment should be adjusted with alleged excessive AMP expenditure thereby providing benefit of set off. This view finds support from the judgment of SONY ERICSSON MOBILE COMMUNICATIONS INDIA PVT. LTD. (NOW KNOWN AS SONY INDIA LIMITED) & OTHERS VERSUS COMMISSIONER OF INCOME TAX – III [2015 (3) TMI 580 - DELHI HIGH COURT] But this will only be considered when the AO/TPO has rejected the comparables adopted by the assessee as a bundled transaction. In the case in hand, and as mentioned elsewhere, the Assessing Officer/TPO has accepted the comparables adopted by the assessee as bundled transaction and, therefore, it would be illogical and improper to treat the AMP expenses as separate international transaction as mentioned by the Hon'ble High Court in its list of findings at clause (v) at page 138 of its order. Considering the guidelines/findings of the Hon'ble High Court of Delhi [supra] and considering the facts of the case in hand from all possible angles, we are of the considered view that the assessee company has been suitably compensated by its AEs and, therefore, no further adjustment is required. - Decided in favour of assessee.
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