2017 (5) TMI 1367 - AT - Income Tax

Addition on account of transfer pricing adjustment AMP expenses - AR contended that the TPO for the A.Y. 2012-13 in assesse’s own case has not made any transfer pricing adjustment on account of AMP expenses but has factored in the AMP intensity adjustment in the profit margin of the comparables and made transfer pricing addition on account of the international transaction of `Import of finished goods’ - Held that:- We are not convinced with the proposition put forth on behalf of the assessee because the entire proceedings before the TPO/DRP/AO have proceeded on the basis of a separate international transaction of AMP and its independent benchmarking. There is not even a whisper in the orders about carrying out AMP intensity adjustment instead of treating AMP as an international transaction. If the contention of the ld. AR is accepted, it will change the entire complexion of the case and would amount to travelling beyond the impugned order. As the TPO has considered AMP as a separate international transaction and determined its ALP; and further that the tribunal in assessee’s own case for the immediately preceding A.Y. 2009-10 has dealt with the determination of the AMP as a separate international transaction, we cannot now concur with the request of the assessee in allowing the setting up of an altogether different case. This contention, ergo, fails.

To sum up, since the facts and circumstances of the instant appeals are mutatis mutandis similar to the immediately preceding year, respectfully following the precedent, we set aside the impugned order and send the matter back to the A.O./TPO for deciding this issue afresh in light of the foregoing discussion and the directions given by the Tribunal in its order for the immediately preceding year in the second round. Needless to say, the assessee will be allowed a reasonable opportunity of hearing in the resulting fresh proceedings.

Transfer pricing adjustment AMP expenses - Assessment Year 2012-13 - Held that:- Respectfully following the decision taken for the A.Y. 2009-10, we hold that, firstly, the RPM should be applied as the most appropriate method for determining the ALP of the international transaction of purchase of material from the AE, but, by carrying out the AMP intensity adjustment in the profit rate of comparables. If, however, it turns out that such an adjustment cannot be done due to one reason or the other, then the RPM should be discarded and another suitable method be adopted, which encompasses the effect of AMP intensity adjustment. Our view is fortified by the judgment in the case of Sony Ericsson (2015 (3) TMI 580 - DELHI HIGH COURT), in which it has been held in para 165 that : `Comparable analysis of the tested party and the comparable would include reference to AMP expenses. In case of a mismatch, adjustment could be made when the result would be reliable and accurate. Otherwise, RP Method should not be adopted’.

We, therefore, set aside the impugned order and remit the matter to the file of Assessing Officer/TPO for re-determining the ALP of the international transaction of ‘Import of finished goods’ in the manner delineated above. The assessee should be given an adequate opportunity of hearing in such fresh proceedings.