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M/s. Nikon India (Pvt.) Ltd Versus DCIT, Circle-3, Gurgaon

2015 (10) TMI 1008 - ITAT DELHI

Transfer pricing adjustment - TPO treating the AMP spend as a separate international transaction, he applied the Cost plus method and proposed the extant adjustment and segregated routine AMP expenses incurred by the assessee for his business from the non-routine AMP expenses by treating such non-routine AMP expenses leading to the creation of marketing intangible for its AE - Held that:- AMP spend is an international transaction, which is required to be processed under Chapter X of the Act by t .....

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rison of the AMP functions performed by the assessee and comparables and then making an adjustment, if any, due to differences between the two, so that the AMP functions performed by the assessee and comparable are brought to a similar platform

No detail of the AMP functions performed by the assessee is available on record. Similarly, there is no reference in the order of the TPO to any AMP functions performed by comparables. In fact, no such analysis or comparison has been undertaken .....

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the impugned order and send the matter back to the file of the TPO/AO for determining the ALP of the international transaction of AMP spend afresh in accordance with the manner laid down by the Hon'ble High Court in Sony Ericsson Mobile Communications India (P.)Ltd. (2015 (3) TMI 580 - DELHI HIGH COURT). Ex consequenti, the ground raised about the TPO having no jurisdiction to determine the ALP of AMP expenses, is dismissed following the judgment in the case of Sony Ericsson Mobile Communication .....

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the final order passed by the Transfer Pricing Officer (TPO) / Assessing Officer (AO) on 05.01.2015 u/s 143(3) read with section 144C of the Income-tax Act, 1961 (hereinafter also called 'the Act') in relation to the assessment year 2010-11. 2. Briefly stated, the facts of the case are that the assessee, is a wholly owned subsidiary of Nikon Corporation, Japan ("Nikon Japan"). It is engaged in the distribution and marketing services for Nikon products in India. 2.1 The assessee .....

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and service support income TNMM 1,19,11,847 4 Commission income TNMM 17,51,40,980 5 Purchase of fixed assets CUP 16,74,880 6 Cost of reimbursements received CUP 2,29,50,609 7 Cost of reimbursements paid CUP 28,54,154 2.3 The assessee employed the Transactional Net Margin Method (TNMM) in respect of three international transactions; the Comparable Uncontrolled Price (CUP) method in respect of three transactions; Resale Price Method in respect of one international transaction. On a reference made .....

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comparable company Gross Margin(%) OP/Sales (%) 1 Allied Photographics India Ltd. 9.83 0.85 2 CCS Infotech Ltd. 6.31 2.31 3 CompuageInfocom Ltd. 6.03 2.41 4 Computer Point Ltd. 6.27 -0.48 5 Empower India Ltd. 2.89 0.03 6 General Sales Ltd. 23.66 -4.79 7 MVL Industries Ltd. 11.08 8.58 8 Mobile Telecommunications Ltd. 6.20 0.51 9 Salora international ltd. 9.32 2.24 10 Spice Mobiles Ltd. 18.87 2.07 Average 10.05 1.37 Nikon India 17.65% -1.76% 2.4 The assessee's contention was that for above men .....

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s to the tune of ₹ 37,62,75,469/- during the year in question. 2.5 The TPO observed that the international transactions relating to marketing expenditure have been benchmarked by aggregating it with other transactions in different business segments which have been analyzed under RPM/TNMM without any further analysis as can be observed from the TPO's order which reads as under: "(Benchmarking of international transactions relating to Advertisement and Sales Promotion:- 2. It is see .....

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zed under RPM/TNMM without any further analysis." 2.6 The TPO after considering the TP documentation observed that the assessee, by incurring expenditure on advertisement marketing and promotional activities (AMP), was developing marketing intangible for Nikon Japan. The TPO, for benchmarking the AMP expenditure, took the following companies as comparable and rejected the other companies by stating that some of these companies are either developing brands or are not comparable companies. Fo .....

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55 3.45 0.66 Average 0.69 2.7 The TPO computed the mean of the "expenditure incurred on AMP/Sales" of such comparable companies is the "bright line". Any expenditure in excess of the bright line is for the development of marketing intangible (which is owned by the AE) that needs to be suitably compensated by the AE. The amount which represents the bright line and the amount that should have been compensated to the assessee company were computed as under: Particulars Amount Ad .....

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TPO conducted a search in respect of business services companies by applying the following filters: (i) Use of correct keywords (ii) Use of current year data (iii) Reject companies having different financial year (iv) Reject companies where turnover is less than ₹ 1 Crore (v) Select companies where the ratio of service income to total income is at least 75% (vi) Reject companies where related party transactions exceed 25% of sales (vii) Reject companies that have employee cost less than 2 .....

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TPO further computed the opportunity cost for the funds blocked by the assessee on the basis that half of the funds should have been reimbursed and considering a nominal interest rate of 12% on half of funds, opportunity cost comes out to be 6%, therefore, total mark-up was held to be 18.36% (12.36% + 6%) which in his view should have been charged by the assessee and calculated the arm's length price of the international transaction related to the AMP expenditure leading to the creation of .....

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of AMP expenditure accrue to the assessee only and so expenditure is wholly and exclusively for assessee's business - No disallowance u/s 37(1) possible (iii) Any benefit to AE is incidental in nature (iv) Arguments on the use of 'Bright line' concept (v) India's position as stated in UN transfer pricing manual needs to be applied (vi) Assessee has a long term royalty free distribution right (vii) Selling expenses (expense in connection with sales) should be excluded from AMP exp .....

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an be applied to the assessee. (Para 8.4 of the TPO order) (iii) The benefit of AMP expenditure will not be with the assessee but with the AE as it is the legal owner of the brand. Hence, the assessee is working for the benefit of AE by promoting its brand by making excessive AMP expenditure for penetration of brands in India which is much more than the functionally comparable companies taken by the assessee. (Para 9.4 of the TPO order) (iv) The payment for additional functions is deferred till .....

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final word which is determined by the statute. Un view of the same, the argument of the assessee is not acceptable. (Para 12.3 of the TPO order) (vii) Selling expenses should not be excluded in assessee's case. (Para 13.4 of the TPO order) (viii) The Ld. TPO in Para 14.4 of his order held that the adjustment which the assessee is seeking to make in respect of advertisement of new products is not permissible in view of LG's case. Because, bright line is for determining the routine expendi .....

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selected the following comparables for determining mark-up on AMP expenses :- Sr. No. Company name OP/OC 1 Crystal Hues Ltd. (corrected margin by the assessee) 8.68% 2 Quadrant Communications Ltd. 13.11% 3 Cyber Media Research Ltd. 14.85% Average 12.21% 2.15 Further, a mark-up of 6% was proposed to be charged to cover the return on funds that have been blocked and remuneration for the services provided, i.e. interest rate of 12% on half of funds which should have been reimbursed. The assessee c .....

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ted the arm's length price of value of the remuneration for services at ₹ 40,64,33,832/- which is shown as under :- Total Sales Rs.203,87,33,264/- Arm's length level of AMP expense (0.69% of sales) ₹ 1,40,67,260/- AMP expenses actually incurred ₹ 37,62,75,469/- AMP expenditure which should have been reimbursed ₹ 36,22,08,209/- Mark-up @ 12.21% ₹ 4,42,25,622/- Adjustment u/s 92CA ₹ 40,64,33,832/- 2.17 The AO, accordingly, after giving opportunity to the .....

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djustment to the assessee's alleged international transaction with Associated Enterprises("AEs"), thereby resulting in the enhancement of returned income of the assessee by ₹ 40,64,33,832 3 That the reference made by the ld. AO suffers from jurisdictional error as the ld. AO has not recorded any reasons in the draft assessment order based on which he reached the conclusion that it was "expedient and necessary" to refer the matter to the ld. TPO for computation of th .....

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Act, and in doing so have grossly erred in: 4.1 disregarding that the AMP expenses incurred by the Assessee represent purely domestic transaction(s) undertaken towards third parties, not covered under the purview of section 92 of the Act and that the analysis of "domestic" transactions undertaken with third parties, in respect of which no TP reference has been made by the Ld. AO to the Ld. TPO, is beyond the powers vested with the TPO under section 92CA of the Act. 4.2 disregarding th .....

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any distribution agreement 4.4 disregarding detailed submissions made by the assessee to demonstrate that the AMP expenses incurred by the Assessee were in respect of its own business requirement/ considerations/ purposes and that all benefit resulting from such expenditure are to its own account 4.5 incorrectly computing the AMP expenses/ sales by treating the selling expenditure incurred by the Assessee as part of sales promotion expenditure 4.6 not providing quantitative adjustments to take i .....

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applicable to the companies selected for the bright line test by the Ld. TPO 4.7 by rejecting companies that owned domestic brands for the purpose of computing the bright line test and thereby erroneously selecting companies which are not comparable in their asset and risk profile to the Assessee; 4.8 erroneously holding that the Assessee has rendered services to the AEs by incurring 'excessive' AMP expenses and by holding that a mark-up has to be earned by the Assessee in respect of th .....

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AO has erred in initiating penalty proceedings u/s 271(1)(c) of the Act mechanically and without recording any adequate satisfaction for such initiation That the above grounds are independent and without prejudice to each other. The Assessee craves leave to add, amend, alter, delete, rescind, forgo or withdraw any of the above grounds of objection either before during the course of the Dispute Resolution Panel proceedings in the interest of the natural justice." 2.19 The Ld. DRP after consi .....

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prerogative of the AO while passing the assessment order and is based on the facts and circumstances of the case. Hence the DRP is not required to issue any direction on this ground at this stage and objection is therefore rejected as being premature. (iv) Ground of objection no 6: Initiation and imposition of penalty is prerogative of the AO while passing the assessment order and is based on the facts and circumstances of the case. Hence the DRP is not required to issue any direction on this g .....

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e and in law, the AO has erred in assessing the total income of the appellant u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 ("the Act") for the relevant assessment year at INR 40,41,40,545 as against the returned loss of INR 22,93,287/- 2 That on the facts and circumstances of the case and in law, the DRP/AO have erred in not appreciating that suo moto adjustments proposed by the TPO in relation to advertisement, marketing and promotion ("AMP") expenses incurred by t .....

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stances of the case and in law, the DRP/AO/TPO erred in making TP adjustments, alleging that the unilateral AMP expenditure, being payments made to third parties, is an "international transactions" as per the provision of section 92B of the Act, without appreciating that there was no agreement, understanding or arrangement between the appellant and the Associated Enterprises ("AE") for incurrence of such expenditure. 5 That on the facts and circumstances of the case and in la .....

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esulting in creation of marketing intangibles and should have been remunerated at arm's length. 7 That on the facts and circumstances of the case and in law, the TPO has erred in re-characterising the functions of incurring AMP expenditure and holding the appellant to be the services provider engaged in brand building services. 8 That on the facts and circumstances of the case and in law, the DRP/AO/TPO have erred in using the "Bright Line" test, which is not a prescribed method un .....

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pricing regulations of those countries). 10 That on the facts and circumstances of the case and in law, the DRP erred in disposing the objections of appellant by passing a non speaking order, thus, the order passed is non est and bad in law. Without prejudice to the above grounds of the appellant that the AMP expenditure incurred by it does not constitute an international transaction under Chapter X of the Act, the appellant craves to raise following grounds of appeal on merits. 11 That on the f .....

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and did not lead to brand promotion and should have been excluded from the AMP expenditure at the outset, while benchmarking the alleged excessive AMP expenditure. 13 That on the facts and circumstances of the case and in law, the DRP/AO/TPO have erred in not granting the benefit of quantitative adjustments (such as non-payment of royalty/expenditure incurred on new product launches), while computing the alleged excessive AMP expenditure. 14 That on the facts and circumstances of the case and i .....

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e incurred by the appellant. 15.1 Without prejudice to the above and not admitting, if at all a mark up should have been charged by the appellant assuming it to be a brand building service provider, the said markup could have been charged only on the value addition expenses incurred by the appellant for such alleged brand promotion service and not the entire amount incurred/paid to third party vendors. 16 That on the fact and circumstances of the case and in law, the AO has erred in charging int .....

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international transaction despite the same not having been specifically referred to by the AO. On the question of determination of the ALP of this international transaction, the Special bench approved the application of bright line test for working out the amount of non-routine AMP expenses and held that the ALP of AMP expenses should be determined on Cost plus method by treating AMP transaction as a separate and distinct from other international transactions. It was further held that the sellin .....

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penses, restoring the matter to the file of AO/TPO for deciding this issue in conformity with the directions given by the Special Bench in LG Electronics India (P.) Ltd. (supra). Several assessees as well as the Revenue preferred their respective appeals before the Hon'ble High Courts against the tribunal orders following the Special bench order. A batch of such appeals led by Sony Ericsson Mobile Communications India (P.) Ltd. v. CIT [2015] 231 Taxman 113/55 taxmann.com 240 (Delhi) has been .....

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international transaction carried out by the assessee as a distributor, who either simply acts an agent of manufacturer or purchases goods from the manufacturer for resale at his own account. However, in the case of a manufacturer, the import of raw material has been held to be an independent transaction of marketing and distribution. In the case of a distributor, the Hon'ble High Court held that where TNMM has been applied as the most appropriate method, which method has not been disturbed .....

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tment should be made to bring both the transactions at par. If probable comparables are not performing similar functions as done by the assessee and no adjustment is possible for bringing the international transactions of the assessee in an aggregate manner at par with those undertaken by the comparables, then, segregation should be done and the international transaction of AMP spend should be separately processed under the transfer pricing provisions for the purposes of determining its ALP sepa .....

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eld. 5. We can summarize the relevant position emanating from the judgment of the Hon'ble High Court, as under :- AMP expense is an international transaction [Paras 52 & 53 of the judgment] ; The TPO has jurisdiction to determine the ALP of the international transaction of AMP expenses [Para 50 of the judgment]; Inter-connected international transactions can be aggregated and section 92(3) does not prohibit the set-off [Paras 80 & 81]; AMP is a separate function. An external comparab .....

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d be chosen [Paras 194(i), (ii), (viii) & others];T The choice of comparables cannot be restricted only to domestic companies using any foreign brand [Para 120] ; If no comparables having performed both the functions in a similar manner are available, then, suitable adjustment should be made to bring international transactions and comparable transactions at par [Para 194 (iii)] ; If adjustment is not possible or comparable is not available, then, the TNMM on entity level should not be applie .....

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ducts [Para 93] ; Selling expenses cannot be considered as part of AMP expenses [Paras 175 & 176 of the judgment]. 6. With the above background of the ratio decidendi of the judgment of the Hon'ble jurisdictional High Court, let us examine the contention put forth by the ld. AR in support of the deletion of addition. He submitted that Resale price Method (RPM) was selected as the most appropriate method for the distribution activities. For the purpose of applying the method, GP/Sales was .....

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acceptance of such a wide proposition. 7. We are unable to accept the argument advanced on behalf of the assessee for deletion of the addition towards AMP expenses on the plain logic of the assessee that all the transactions were established to be at arm's length by applying TNMM on entity wide basis. There is a basic fallacy in the argument of the ld. AR. It is pertinent to note that the TPO examined and got satisfied with the assessee's profit margin vis-à-vis the comparables o .....

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mination of the AMP functions carried out by the assessee on one hand and the comparables on the other. Now, the Hon'ble High Court in Sony Ericsson Mobile Communications India (P.) Ltd. (supra) has held that AMP expense is a separate international transaction and also bright line test is not applicable for determining the ALP of AMP expenses. The manner for the determination of the ALP of the distribution activity and AMP activity has also been set out by the Hon'ble High Court to be co .....

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ween the AMP expenses and AMP functions. Whereas the AMP functions are the means by which the AMP activity is performed, the AMP expenses are the amount spent on the performance of such means (functions). To put it simply, an examination of AMP functions carried out by the assessee and the probable comparables is sine qua non in the process of determination of the ALP of the international transaction of AMP spend, either in a segregate or an aggregate manner. What Their Lordships have held is to .....

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nctions performed by the assessee under such a transaction need to be compared with similar functions performed by a comparable case. If AMP functions performed by the assessee turn out to be different from those performed by a probable comparable company, then, an adjustment is required to be made so as to bring the AMP functions performed by the assessee as well as the comparable, at the same pedestal. If we concur with the contention of the ld. AR that the addition on account transfer pricing .....

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aggregated. The process of such aggregation does not take away the separate character of the AMP transaction, albeit related. An analysis and examination of the distribution and AMP functions carried out by the assessee must be necessarily done in the first instance, which should be then compared with similar functions performed by some probable comparables. If the distribution and AMP functions performed by the assessee turn out to be different from those performed by probable comparables, then .....

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finding out probable comparables doing such separate functions similarly. For the international transaction of AMP spend, this can be done by, firstly, seeing the AMP functions actually performed by the assessee and then comparing it with the AMP functions performed by a probable comparable. If both are found out to be similar, then the matter ends and a comparable is found and one can go ahead with determining the ALP of such a transaction. If the AMP functions performed by the two entities ar .....

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an adjustment. Crux of the matter is that the AMP functions performed by the assessee must be similar to those done by the comparable, in the same manner as such functions are compared in any other international transaction. However, in computing ALP of AMP spend, the adjustment or set off, if any, available from the distribution function, should be made. The essence of the judgment in the case of Sony Ericsson Mobile Communications India (P.) Ltd. (supra) is that the two international transacti .....

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d by the assessee should not be compared with those performed by the comparable parties. On the contrary, it turned down the contention raised by the ld. AR urging for not treating AMP as a separate function, which is apparent from the extraction from para 166 of the judgment : 'On behalf of the assessee, it was initially argued that the TPO cannot account for or treat AMP as a function. This argument on behalf of the assessee is flawed and fallacious for several reasons. There are inherent .....

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enses. In case of a mismatch, adjustment could be made when the result would be reliable and accurate. Otherwise, RP Method should not be adopted. If on comparable analysis, including AMP expenses, gross profit margins match or are within the specified range, no transfer pricing adjustment is required. In such cases, the gross profit margin would include the margin or compensation for the AMP expenses incurred. Routine or non-routine AMP expenses would not materially and substantially affect the .....

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on an entity level without making comparison of AMP functions done by the assessee as well as the comparable, will render this alternative approach incapable of compliance. Canvassing such a view amounts to treating AMP spend as a non-international transaction, which is patently incapable of acceptance. 8. Further, the Hon'ble Delhi High Court in the case of Sony Ericsson Mobile Communication India (P.) Ltd. case (supra) in para 137 has observed that the aggregation and disaggregation of tra .....

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tions where separate transactions are inter wined and linked or are continuous that they cannot be evaluated adequately on separate basis. Secondly, the controlled transaction should ordinarily be based on the transaction actually undertaken by the AEs as has been struck by them. Hon'ble jurisdictional High Court cautioned that it was not advocating a broad-brush approach but, a detailed scrutinized ascertainment and determination whether or not the aggregation or segregation of transactions .....

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ld to be flawed and fallacious for several reasons. However their Lordships further in para 167 observed that the Revenue before the Hon'ble High Court did not plead that the R.P.Method should not have been adopted. Qua the same their Lordships observed that no final pronouncement was being made. A perusal of the para 168 shows that the Tribunal had upheld adoption of CP method after applying the bright-line test. The finding was found to be not correct as approach and procedure for ascertai .....

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be appropriate when the assessed has incurred considerable (not necessarily extra-ordinary or non-routine) AMP expenses. The reason is obvious; there is no comparability analysis possible. In such cases, it is not possible to examine and compare the functional comparability between the controlled tested transaction and uncontrolled internal party transaction on account of AMP expenses. Internal comparable would not account for the credible gross profit rate, which an AE should be ensured when it .....

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ncluding AMP expenses would give more accurate and precise results. 164. However, it would be wrong to assert and accept that gross profit margins would not inevitably include cost of AMP expenses. The gross profit margins could remunerate an AE performing marketing and selling function. This has to be tested and examined without any assumption against the assessed. A finding on the said aspect would require detailed verification and ascertainment. 165. An external comparable should perform simi .....

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hould not be adopted. If on comparable analysis, including AMP expenses, gross profit margins match or are within the specified range, no transfer pricing adjustment is required. In such cases, the gross profit margin would include the margin or compensation for the AMP expenses incurred. Routine or non-routine AMP expenses would not materially and substantially affect the gross profit margins when the tested party and the comparable undertake similar AMP functions. 166. On behalf of the assesse .....

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(iii), i.e. at stage (iii), from the price ascertained at stage (ii), expenses incurred by the enterprise in connection with the purchase of property or obtaining of services is reduced. Under clause (iv), adjustments have to be made on account of functional difference which would include assets used and risk assumed. It is at stage (iv) of the RP Method that the Assessing Officer/TPO can make adjustments if he finds that an assessee has incurred substantial AMP expenses in comparison to the com .....

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hout adjustment. Contra, Revenue would argue that the Assessing Officer/TPO and the Tribunal have adopted and applied the CUP Method for determining arm's length price of AMP expenses. We do not pronounce a firm and final opinion on the said lis as it should be at first examined by the Tribunal. 168. The Tribunal has upheld adoption of CP Method after applying 'bright line test' in the case of Reebok India Co. Ltd. and Canon India Pvt. Ltd. The 'bright line test' adopted to d .....

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r examination of the factual matrix." 10. Adverting to the facts of the instant case, we find that the TPO espoused the AMP expense as a separate and distinct. Treating the AMP spend as a separate international transaction, he applied the Cost plus method and proposed the extant adjustment. In doing so, he segregated routine AMP expenses incurred by the assessee for his business from the non-routine AMP expenses by treating such non-routine AMP expenses leading to the creation of marketing .....

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or the ALP of AMP spend. Now, when we look at the ratio laid down by the Hon'ble jurisdictional High Court, it becomes crystal clear that the approach adopted by the TPO for determining ALP of AMP expenses has been rendered incorrect. However, the fact remains that as per the verdict of the Hon'ble High Court, AMP spend is an international transaction, which is required to be processed under Chapter X of the Act by taking into account the AMP functions performed by the assessee and then .....

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nt, if any, due to differences between the two, so that the AMP functions performed by the assessee and comparable are brought to a similar platform. In fact, this is also the prescription of Rule 10B(1)(e), which provides as under :- "(e) transactional net margin method, by which,- (i) the net profit margin realised by the enterprise from an international transaction entered into with an associated enterprise is computed in relation to costs incurred or sales effected or assets employed or .....

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arable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect the amount of net profit margin in the open market ; (iv) the net profit margin realised by the enterprise and referred to in sub-clause (i) is established to be the same as the net profit margin referred to in sub-clause (iii) ; (v) the net profit margin thus established is then taken into account to arrive at an arm's length price in relation to the international tran .....

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mandate of sub-clause (iv) of Rule 10B(1)(e). 12. Sub-rule (2) of Rule 10B provides that 'for the purposes of sub- rule (1)', the comparability of an international transaction with an uncontrolled transaction shall be judged with reference to the following, namely - (a) the specific characteristics of the property transferred or services provided in either transaction; (b) the functions performed, taking into account assets employed or to be employed and the risks assumed, such terms ar .....

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and whether the markets are wholesale or retail. Sub-rule (3) of Rule 10B stipulates that an uncontrolled transaction shall be comparable to an international transaction if (i) none of the differences, if any, between the transactions being compared, or between the enterprises entering into such transactions are likely to materially affect the price or cost charged or paid in, or the profit arising from, such transactions in the open market ; or (ii) reasonably accurate adjustments can be made .....

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broadly similar but there is a difference in them because of certain specific characteristics; and/or the products/services in both the transactions are identical, but still there are certain differences due to the contractual terms or the geographical location, etc., then, a reasonably accurate adjustment should be made for eliminating the material effects of such differences so as to bring the international transaction and the comparable uncontrolled transaction on the same podium. If due to .....

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carried out by a comparable entity in determining the AMP of ALP expenses. Difference between the functions, if capable of adjustment, should be given effect to in the profit rate of the comparable and if such difference cannot be given effect to, then, the probable comparable should be eliminated from the list of comparables. Going further, if no proper comparable survives, then the TNMM should be discarded and an alternative method, may be, Cost plus or any other suitable method be applied for .....

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n that because of aggregation, the AMP expense transaction sheds its character of a separate international transaction and hence the AMP functions should not be matched with the AMP functions carried out by probable comparables. If suitable comparables can be found having performed both distribution and AMP functions, then, their ALP should be determined on aggregate basis. If, however, there is some difference in the distribution or AMP functions performed by the assessee vis-à-vis the p .....

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separately by applying a suitable method. However, in so determining the ALP of such an international transaction of AMP expenses on separate basis, a proper set off, if any, available from the distribution activity, should be allowed. 16. The AR of the assessee stressed that AMP functions of the comparables have been examined by the TPO in this case. On being asked to show the examination of AMP functions of the assessee along with comparables, the AR took our attention to pages 7-8 of TPO ord .....

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Ltd. (supra), ld. counsel submitted that in order to determine the AMP functions performed by assessee vis-a-vis comparables, then the matter should be restored back to the file of ld. TPO with following direction that Selling and distribution expenses to be excluded as has been held by Hon'ble Delhi High Court in Sony Ericsson Mobile Communications India (P.) Ltd. case (supra) 18. Reliance was placed on the decision of coordinate Bench in the case of Toshiba India Pvt. Ltd. v. DCIT 41 ITR(T .....

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n applying the cost plus method for determining its ALP. The ld. AR also failed to draw our attention towards any material divulging the AMP functions performed by the assessee as well as comparables. As such, we are handicapped to determine the ALP of AMP expenses at our end, either in a combined or a separate approach. Under such circumstances, we set aside the impugned order and send the matter back to the file of the TPO/AO for determining the ALP of the international transaction of AMP spen .....

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India (P.) Ltd. v. DCIT "15. Turning to the facts of the case, we find that the TPO/AO have followed the Special bench decision in LG Electronics India (P.) Ltd. (supra) for determining the ALP of AMP expenses. There is no discussion about the AMP functions carried out by the assessee or comparables. Now since the Special bench order has been partly modified by the Hon'ble Delhi High Court, including the non-applicability of the bright line test, and no material has been placed on reco .....

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nd Distributors; apply the parts of the judgment as are applicable to a 'Manufacturer'; and ignore the parts of the judgment which pertain exclusively to a 'Distributor'. Needless to say, the assessee will be allowed a reasonable opportunity of hearing in such fresh proceedings." 2. 58 taxmann.com 375 (Del) Casio India Co. (P.) Ltd. v. DCIT "15. Coming back to the facts of the instant case, we find that no detail of the AMP functions performed by the assessee is availab .....

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as comparables. As such, we are handicapped to determine the ALP of AMP expenses at our end, either in a combined or a separate approach. Under such circumstances, we set aside the impugned order and send the matter back to the file of the TPO/AO for determining the ALP of the international transaction of AMP spend afresh in accordance with the manner laid down by the Hon'ble High Court in Sony Ericson Mobile Communications India (P.) Ltd. (supra). It is, however, made clear that the TPO/AO, .....

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es. Now since the Special bench order has been partly modified by the Hon'ble Delhi High Court, including the non applicability of the bright line test, and no material has been placed on record by the ld. AR to, firstly, demonstrate the AMP functions carried out by the assessee and then, to compare such functions with those done by comparables, this issue cannot be decided at our end. Under such circumstances, we set aside the impugned order and remit the matter to the file of the AO/TPO fo .....

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the ld. AR to send the matter back to the TPO/AO for deciding this issue in conformity with the decision yet to be rendered by the Hon'ble High Court in its own case, for which hearing is still going on. This contention, in our considered opinion, is devoid of any merit. It is axiomatic that there can be no direction to follow a forthcoming judgment which is not in existence at the time of giving direction. A direction can be given by a higher authority to the lower authority to follow only .....

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Melle India (supra) has dealt with the manner of computation of the ALP of the AMP expenses incurred by manufacturers in the light of the judgment in the case of Sony Ericsson (supra). No reasons, except the pendency of the matter in the Hon'ble High Court in assessee's own case, have been given by the ld. AR to claim departure from the view taken by the tribunal in earlier cases. We, therefore, turn down the request of the ld. AR in this regard. With these observations, we send the matt .....

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