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2017 (1) TMI 1050 - AT - Income TaxTransfer pricing adjustment - most appropriate method for determining ALP of business activity carried on by assessee with its AE - Held that:- the incurring of high advertisement and marketing expenses by the assessee. does not in any manner affect the determination of ALP under the RPM. It is but natural that only those expenses can have bearing on the gross profits that are debited to the Trading account. As the amount of advertisement and marketing expenses finds its place in the Profit and loss account, the higher or lower spend on it cannot affect the amount of gross profit and the resultant ALP under the RPM. As observed from the order passed by the Ld. TPO for assessment year 2005 - 2006 and 2006 -2007 that the Ld. TPO has accepted RPM as the most appropriate method and gross profit/sales as the relevant profit level indicator for benchmarking international transactions of the assessee . on similar facts. For the year under consideration Ld. TPO appears to have made the transfer pricing adjustment only on account of losses incurred in the year under consideration. In such circumstances we hold assessee to be a Distributor and hold that RPM prima facie appears to be the most appropriate method in the facts and circumstances of the instant case.
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