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2022 (7) TMI 1329 - AT - Income TaxTP Adjustment - ALP of AMP expenses - HELD THAT:- There should be existence of an agreement to incur AMP expense between the assessee and the foreign AE either expressed or there must be circumstances indicating compulsion to incur AMP expenses. On this aspect, the TPO in his order has made reference to Intellectual Property License and Exclusive Distribution Agreement dated 01.06.2008 and the terms of the said agreement referred to the order of the AO can be no basis to conclude existence of any understanding between the assessee and the foreign AE for incurring of AMP expenses. The agreement states that "the licensor acknowledges that licensee incurs significant marketing expenses which directly impacts licensee's net operating margin” - the same further strengthens the fact that the assessee is a full fledged distributor requiring to incur marketing related expenses to operate in a competitive market and does not in any way indicate a mandate from NEON to assessee to incur such expenses. Accordingly, we hold that no clause of the royalty agreement requires the assessee to mandatorily incur any AMP expenses in the absence of which it is very clear that no written agreement exists between the assessee and its AE requiring the assessee to incur the AMP expenses. We therefore hold that the incurring of AMP expenses cannot be regarded as an international transaction at all and therefore the impugned addition cannot be sustained and the same is directed to be deleted. Adjustment towards payment of sourcing commission - HELD THAT:- The assessee was free to choose its own contract manufacturers is no bar to the assessee adhering to the standards of the Nike products and approaching the NGTPS for such services. We are also of the view that the proof of rendering of services has to be analyzed based on the available evidence and also the additional evidence now filed by the assessee. The fact that for similar services no payment was made in the past cannot be the basis to hold that the payment in question was not warranted and commercially not expedient. TPO is free to demand any other evidence that he may wish to be produced before being satisfied with the rendering of services by the foreign AE. Thereafter the exercise of benchmarking the payment on the touchstone of Arm’s length price, will have to be carried out in accordance with the requirements of Sec.92 - We are therefore of the view that in tune with the decision of the Tribunal in assessee’s own case for AY 2013-14, the issue should be remanded to the TPO for consideration denovo. Disallowance on purchase of trade samples was also subject matter of TP adjustment by the TPO and to that extent there should be a direction to ensure that there is no double taxation of the same income. We accept the prayer of the learned Counsel for the assessee and direct the AO/TPO to consider the plea of the assessee in this regard and allow necessary relief in the event of the same income getting doubly taxed. Expenditure incurred in the case of retail trader of Reebok Footware and Shoes incurring expenses - HELD THAT:- The decision rendered by the ITAT Delhi in the case of Carrier Air-conditioning [2018 (7) TMI 1087 - ITAT DELHI] was a case of renovation to a leased premises and the finding was that it was a complete replacement of the existing premises. In this case we are concerned with refurbishing a show room to make it attractive for customers to visit and purchase assessee’s products. In the given circumstances, we are of the view that the decision in the case of Emdee Apparels [2012 (12) TMI 238 - ITAT BANGALORE] is applicable. Consequently, the claim made by the assessee is directed to be accepted and the relevant grounds of appeal are allowed.
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