2016 (6) TMI 787 - AT - Income Tax

Transfer pricing adjustment - difference in the arm's length price of the international transaction of incurring of advertisement, marketing and promotion (AMP) expenses relating to creation of marketing intangibles - Held that:- TNMM has been applied as the most appropriate method, which method has not been disturbed by the TPO, then, the international transactions of AMP and Distribution activities should be clubbed. It further held that for determining the ALP of such transactions under a combined approach, only such comparables should be chosen which conform to the AMP functions and other distribution functions conducted by the assessee. If there is some difference in the functions under these international transactions, including that 'of AMP, between the assessee and the comparables, then, suitable adjustment should be made to bring both the transactions at par. If probable comparables are not performing similar functions as done by the assessee and no adjustment is possible for bringing the international transactions of the assessee in an aggregate manner at par with those undertaken by the com parables, then, segregation should be done and the international transaction of AMP spent, should be separately processed under the transfer pricing provisions for the purposes of determining its ALP separately.

In such determination of ALP of AMP expenses in a segregated manner, proper set off on account of excess purchase price adjustment should be allowed.We accordingly dispose of the appeals of the assessee for assessment years 2009-10, 2010-11 and 2011-12, we restore the matter to the file of TPO / AO for deciding the issue in conformity with the directions as deduced from the judgment of the Hon'ble Delhi High Court in the case of Sony Ericson Mobile Communication India (P) Ltd [2015 (3) TMI 580 - DELHI HIGH COURT]