2019 (5) TMI 1798 - AT - Income Tax

TP Adjustment - international transaction be presumed to exist due to “excessive” AMP expenses incurred by the assessee distributor - Adjustment on protective basis - arms length calculation resorted to by the TPO on the directions of the DRP by applying the intensity adjustment is opposed in principle by the assessee as it is invalid in law and a mirror image to Bright Line Test which does not have any judicial approval - HELD THAT:- We are of the view that there is nothing in the conduct of the assessee referred to by the Revenue to show that the incurring of AMP was an international transaction and not a function of the assessee as a distributor. There is no reference to any instance of concerted action or design so as to suggest that the advertising, marketing and promotion expenses were not for the benefit of the assessee and were infact for the benefit of the AE.

In the facts as they stand, the expenses incurred for the benefit of the assessee exploiting the brand of the AE cannot be termed as an international taxation on presumptions where at best benefit to the AE may be incidental. The settled legal position as discussed at length is that the supporting facts have to be brought on record by the Revenue to discharge the onus placed on it and presumption alone that expenses are excessive by way of some arbitrary parameters which lack judicial and statutory support cannot be subscribed to. In the absence of any such fact which has been referred to by the Revenue, the presumption drawn has no legal legs to stand on and deserves to fail.

Co-ordinate Bench in the immediately preceding assessment year where Joint Venture Agreement existed between Widex A/S Denmark and Mr. T.S. Anand in the ratio of 78.43% and 21.57% wherein a similar issue was considered and the issue was stated to be covered by the assessee and contested by the Revenue.

We find that the parties were in agreement that change in shareholding pattern in the year under consideration had no impact is a position which has not been varied despite the fact that the change was pointed out by the Bench. In the facts as they stand, we then find that since the said factor is stated to be not a relevant or material fact and when considered in the context of the case laws cited and relied upon, it is seen that the assessee's claim stands addressed.

There is no material referred to whatsoever on record to show that the AMP expenses were “excessive” and thus be presumed to be an international transaction. We have also seen that the reliance placed by the assessee in the order passed by the Co-ordinate Bench in the immediately preceding assessment year is not misplaced. Accordingly, we hold that the claim of the Revenue fails on the primary threshold itself as we hold AMP expenses incurred by the assessee in the facts as they stand is not an international transaction. - Decided in favour of assessee