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2018 (7) TMI 2297 - AT - Income TaxTP Adjustment - Incurring of AMP expenditure - whether the TPO was justified in making ALP adjustment in respect of alleged expenditure incurred on AMP functions? - HELD THAT:- The important fact to be taken into consideration is that the assessee was assured of minimum return on distribution business. These facts, no doubt, trigger an enquiry into the real nature of relationship between assessee and its AE i.e. whether it is distributor or a trader. The real economic substance of transaction is required to be found out having regard to the actual conduct of the parties. Having regard to the actual conduct of the parties and the real economic substance of the transaction, it requires to be established whether there is any international transaction of AMP expenditure. Needless to mention, the Hon’ble Delhi High Court in a series of judgments subsequent to decision of the Sony Ericsson Mobile Communications India P Ltd. vs. CIT [2015 (3) TMI 580 - DELHI HIGH COURT] AND Yum Restaurants (India) Pvt. Ltd. vs. ITO [2016 (1) TMI 582 - DELHI HIGH COURT] held that AMP expenditure is international transaction but determination of ALP was restored to the file of the AO for the purpose of detailed examination of the agreement between the assessee and its AE to ascertain whether any part of AMP expenditure is for the purpose of creating marketing intangibles for AE of the assessee therein. If it is shown that AMP expenditure is an international transaction, then further question of determination of ALP of such international transaction would arise. In the present case also TPO had not brought anything on record to show existence of international transaction whereby the assessee was obliged to incur AMP expenditure for the purpose of promoting brand, intangible of its AE. Similarly, the assessee-company also has not furnished FAR analysis of AMP functions in its TP study. Thus the matter requires remission to the TPO for undertaking fresh analysis to establish existence of international transaction in respect of AMP expenditure and true nature of transaction between the appellant and its AE. After due analysis of FAR of the AMP functions carried out by the appellant and having regard to the actual conduct of the appellant vis-àvis its AE and economic substance of the transactions between the appellant and its AE, if the TPO is of opinion that there existed an international transaction in the form of AMP functions, then, to undertake the exercise of determination of ALP by adopting a suitable method of compensation to the appellant for performing the AMP functions of its AE. Appeal filed by the assessee allowed for statistical purposes.
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