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2023 (12) TMI 721 - HC - Income TaxTP Adjustment - whether the reimbursement of advertising, marketing and promotion expenses (AMP), incurred by assessee on behalf of its AE was at arm’s length - whether any upward adjustment was required to be carried out in the amount received by assessee from its AE? - Whether TPO ought to have used the bright line test (BLT) in computing the arm’s length price (ALP) concerning AMP activities carried out by the respondent/assessee? - whether the respondent/assessee was adequately compensated for expenses incurred for AMP activities carried out in India? - HELD THAT:- As in the period in issue, the respondent/assessee was only in the business of import and distribution of Sony products. The amount spent on AMP activities by the respondent/assessee in the relevant FY was Rs. 119,54,43,600/-.The compensation for this expense was, according to the Tribunal, received by the respondent/assessee in terms of higher profitability for the product sold. Even according to the TPO, the AMP expenditure incurred by the respondent/assessee resulted in increased sales in India for products, albeit developed by the AE but sold by the respondent/assessee. The fact that the comparables chosen by the TPO had a net margin lower than that registered by the respondent/assessee would persuade us to hold that no upward adjustment concerning AMP expenses ought to have been made. Lastly, the application of the BLT tool, by the TPO, in determining ALP, injected the order issued by him, which was incidentally approved by the DRP, with a legal error. [See Sony Ericsson Mobile Communications India case [2015 (3) TMI 580 - DELHI HIGH COURT]]. We are not inclined to interfere with the impugned order passed by the Tribunal, as no substantial question of law arises for our consideration. Thus, for the foregoing reasons, we are not inclined to interfere with the impugned order passed by the Tribunal, as no substantial question of law arises for our consideration.
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