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2016 (8) TMI 204 - AT - Income TaxTransfer pricing adjustment - MAM - TNMM v/s RPM - Held that:- We find that there is a substance in the reasons assigned by the TPO while rejecting the resale price method and particularly in view of the fact that the assessee has incurred huge expenditure on account of sale and distribution as well as sales promotion. The assessee has carried out the trading activity only in the goods imported from the AE and such expenditure incurred by the assessee it is not found in the comparable cases would be relevant factor. As regards the resale price method accepted by the TPO for the Assessment Year 2006-07, we are of the view that res judicata is not applicable in the matter of taxation and further when there is no such similar expenditure on account of selling and distribution expenses and sales promotion expenses in the said year then the rule of consistency cannot be applied. Accordingly, we do not find any error or illegality in the orders of the authorities below in adopting the TNMM as MAM instead of RPM. Appropriate adjustment towards the extra-ordinary expenses - Held that:- There is no dispute on the fact that the assessment under consideration is the initial years of the distribution activity of the assessee and therefore it cannot be ruled out that the expenditure incurred by the assessee towards the marketing, advertisement and sales promotion activity is substantially higher because of the initial year. We do agree with the view taken in the case of Skoda Auto India Pvt. Ltd. [2009 (3) TMI 249 - ITAT PUNE-A] that if the abnormal expenditure towards the advertisement, marketing and sales promotion is only on account of the beginning of the activity of distribution-ship then an appropriate adjustment has to be allowed while determining the ALP under TNMM. We may clarify that the Assessing Officer has to verify by comparing this expenditure during the year with the subsequent years to find out that the significant expenditure towards the marketing, advertisement and sales promotion is only during the initial year and not in the later year. Accordingly, we set aside this issue to the record of the A.O./TPO for re-examination and adjudication in the above terms.
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