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2019 (11) TMI 1189 - AT - Income TaxTP Adjustment - export sales made to AE - HELD THAT:- The assessee’s submissions that the expenditure was incurred in India for advertisement of a particular product and the same pertained only to Indian market and had a target audience in India, remained uncontroverted. The documents placed in the paper book, in the shape of media service agreements, invoices etc. support the said submissions. Another relevant fact is that assessee’s AE were incurring similar expenditure in the respective markets and the assessee was not incurring any expenditure in respect of products being exported. Lastly, the assessee had benchmarked these transactions using TNMM method, external as well as internal and had demonstrated that the stated transactions were at Arm’s Length. The same has also remain uncontroverted and no fallacy has been found in the same. The Ld. DRP dismissed this ground treating the same as redundant, which could not be held to be correct approach. Therefore, keeping in mind all these factors, the impugned adjustment made in final assessment order, in this regard, could not be sustained. By deleting the same, we allow Ground Nos. 1 & 2. Payment of trademark royalty @5% & R & D Royalty @1.4% - HELD THAT:- In line with view taken by Tribunal in assessee’s own case for AY 2007-08, we deem it fit to restore the matter of trademark royalty as well as R & D royalty back to the file of Ld. AO / TPO with similar directions as given in para-12 of the order for AY 2007- 08. Ground Nos. 3 & 4 stands allowed for statistical purposes. Allowability of brand development expenses - HELD THAT:- As per the terms of the agreement, the AE was, inter-alia, to make available and give assessee access to achievement in its product conception / development and marketing activities relating to Global brands. The assessee was also granted a non-exclusive, non-transferable and indivisible license under all existing and future intangible property rights for the products marketed and sold by the assessee under the Global Brands. In turn, the assessee was to pay to its AE a compensation in proportion to assessee’s share in costs of such services computed on the basis of Net Sales Value in certain segment. The perusal of these documents would demonstrate that the impugned payments were made by the assessee pursuant to well defined contractual terms under an agreement. The nature of services being availed by the assessee were clearly spelt out in the agreement and the fact that the allocations were on cost basis, remain uncontroverted. It is also noteworthy that Ld. TPO, without determining the ALP of these transactions by adopting any of the prescribed method, disallowed the entire payment. The same, in our opinion, could not be said to be correct approach. Another fact is that similar payments have been made by the assessee in preceding years which emanates from the same agreement but no such adjustment has bene made in earlier years. Therefore, the given factual matrix does not inspire us to confirm the impugned additions. Hence, by deleting the same, we allow Ground of assessee.
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