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2015 (11) TMI 1197 - ITAT MUMBAI

2015 (11) TMI 1197 - ITAT MUMBAI - TMI - Adjustment in respect of Advertisement/Marketing Promotional (AMP) and selling expenses - TPA - TPO concludeD that the assessee had incurred non-routine AMP expenses contributed in the brand development of the assessee’s parent company - Held that:- The assessee has a prima facie good case on merit in the appeals for both the years under consideration. The contention put forth by the ld. Counsel for the assessee that in view of the decision in the case of .....

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e purposes of the provisions of section 40(a)(ia) of the Act and no disallowance is warranted in the hands of the assessee. The existence of a prima facie good case in its favour leads to the balance of convenience tilting in favour of the assessee. Therefore, finding that the assessee is likely to suffer substantial mischief, damage and injury otherwise the assessee’s request for stay for both the years i.e. the years under consideration is accepted. The recovery for both the years shall remain .....

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O/TPO/DRP followed the decision of the Special Bench of the Delhi Tribunal in the case of LG Electronics India Private Limited V/s ACIT (2013) 22 ITR (T) 1 (Delhi-Trib) (SB)= 152 TTJ (Del)(SB)273, to conclude that the assessee had incurred non-routine AMP expenses contributed in the brand development of the assessee s parent company. The above position was confirmed by the DRP for both the years. 2. The petitioner/appellant/assessee has contended that it has a prima facie good case in as much as .....

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s and not for the benefit of AE. Thereby, the petitioner is the economic owner of the long-term distribution rights. iii) Further, in the event of termination of the distribution license, BDF AG and NIVEA India shall mutually evaluate and agree on the arm's length compensation that BDF AG shall pay NIVEA India towards the long-term distribution rights of NIVEA India. iv) The residual or entrepreneurial profits/losses from sale of goods in the Indian market are enjoyed by the Petitioner, and .....

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ended that for the above, the issue of Marketing intangible property is relevant in context of the assessee/petitioner, which is a licensee in the Indian market and is entitled to residual profit associated with such business. 4. Relying on the decision of the Hon ble Delhi High Court in the case of Sony Ericsson Mobile Communications India Private Limited and others (in ITA No.16/2014) and other connected matters, which was on the issue of Marketing intangible, the ld. Counsel for the assessee .....

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to judicial legislation, which is unwarranted. The ld. Counsel for the assessee has contended that in view of the decision in the case of Sony Ericsson Mobile Communications India Private Limited and others (supra), the adjustment made on AMP expenses by the authorities below, needs to be deleted. Alternatively, it has been contended that the TPO has erroneously computed the assessee s AMP expenditure and that the comparables have wrongly been chosen. 5. Apropos the adjustment made on account o .....

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eur licensee of the Indian Territory; that it has procured finished goods from overseas manufactures, Associated Enterprises who are low risk manufacturers, manufacturing at a cost plus mark -up of 4 percent basis; that further, while the manufacturing the AEs earn a steady arm s length return and the entire residual profit/(loss) is retained by the assessee in its capacity as an entrepreneur for the Indian Market; that this is in line with the high-risk functional profile of the assessee; that .....

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the assessee has relied on the OECD TP Guidelines and the United Nations Manual on Transfer Pricing, as well as the following Tribunal decisions: i) Tata Motors European Technical Centre Plc -ITA No.7630/Mum/2012 and ITA No.1698/Mum/2014 ii) General Motors India Pvt Ltd V/s DCIT (TS-215-ITAT-2013) (Ahd)-TP iii) Development Consultants Pvt.Ltd V/s DCIT (115 TTJ-577) iv) Ranbaxy Laboratories Ltd V/s Addl.CIT (2012(345)ITR-0193-DEL. 6. It has been contended that the Bench Marking analysis justifie .....

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) R B Jessa Ram Fatesh Chand V/s CIT 81 ITR 409; d) CIT V/s C Parakh and Co (India) Ltd 29 ITR 661; and e) CIT V/s VMRP Firm, Muar (SC) 56 ITR 67 7. It has been submitted that the above information was meticulously presented before the authorities below, which, however, has not found favour, with any of them. 8. Apropos the issue of adjustment on account of cost recovery expenses of super stockists/distributors, pertaining to AY 2010-11, it has been contended that during the year; the assessee m .....

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has been held in the following case laws : a) CIT V/s Vector Shipping Services Private Limited (SLP CC No.(s) 8068/2014(SC) b) CIT V/s Vector Shipping Services Private Limited (38 Taxmann.com 77) (All) c) United Hotels Ltd V/s ITO (2 SOT 267) Del (ITAT); d) Bhagyanagar Gas Itd V/s ACIT (29 taxmann.com 220)(Hyd ITAT) 9. It has been further contended that the payment of expenses without any profit element embedded in it does not constitute income in the hands of the recipient and such payments ar .....

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307 ITR (A.T.) 295 (ITAT[Bang]) g) ACIT V/s Modicon Networks (P) Ltd Ltd (14 SOT 204) (Del) ITAT) h) ITO V/s Dr.Willmar Schwabe India (P) Ltd (95 TTJ 53) (Del) ITAT i) Circular No.1/2014 dated 13 January 2014 issued by the Central Board of Direct Taxes. 10. In the alternative, it has been contended that since the recipient would have already discharged their tax liability on the amounts, the assessee cannot be treated as an assessee in default and that tax payment by the recipient ought to be r .....

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Beverages Pvt ltd V/s CIT (293 ITR 226) (SC) b) Jagran Prakashan Ltd V/s DCIT (345 ITR 288) (All); c) Mahindra and Mahindra Ltd V/d DCIT (22 DTR 361)(Mum) ITAT, (SB) d) Vodafone Essar Ltd V/s DCIT (45 SOT 82) (Mum ITAT) e) Crompton Greaves Ltd V.DCIT (50 SOT 562) (Mum) ITAT f) Ramkrishna Vedanta Math V/s ITO (55 SOT 417) (Kol ITAT) The assessee also relied on the following decisions: a) CIT V/s Vector Shipping Services Private Limited (SLP CC No.(s) 8068/2014(SC) b) CIT V/s Vector Shipping Serv .....

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er stockiest and distributor, which are outstanding /payable at the end of the year. 12. It has been further contended that for AY 2009-10, the assessee has already paid about 65% of the tax demanded and 40% of the total demand, including interest, whereas for AY 2010-11, 80% of the tax demanded and 50% out of the total demand including interest has been paid. 13. It has further been contended that for the Assessment year 2010- 11, the assessee had filed its return of income declaring a loss of .....

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