TMI Blog2019 (3) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... Mobile Communication India Pvt.Ltd. (hereinafter referred to as the taxpayer ) by filing the present appeal sought to set aside the impugned order dated 30.01.2017 passed by the AO in consonance with the orders passed by the ld. DRP/TPO under section 143 (3) read with section 144C of the Income-tax Act, 1961 (for short the Act ) qua the assessment year 2012-13 on the grounds inter alia that :- 1. That on the facts and circumstances of the case and in law, Assessing Officer ( Ld. AO ) erred in assessing the income of the Appellant at INR 1,59,60,90,0001- as against the returned income of INR 13,58,61,680. 2. That on the facts and circumstances of the case and in law, the Final Assessment order passed under section 143(3) read with section 144C of the Income Tax Act, 1961 ( the Act ) by the Ld. AO is bad in law as the same does not consider complete and relevant facts, are not in accordance with provisions of law and principles of law as laid down by Hon'ble courts. TRANSFER PRICING GROUNDS 3. That the impugned order passed by Ld. AO/Transfer Pricing Officer (Ld. TPO) computing the total income at INR 1,59,60,90,0001- is blatantly erroneous since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibutor. 11. Without prejudice, even if AMP expenses are held to be nonroutine and excessive , the Appellant was not required to be reimbursed compensated by its AE, considering that the purported benefit caused to the AE on account of incurring of AMP expenses incurred by the Appellant was only incidental. 12. Without prejudice, even if AMP expenses are held to be nonroutine and excessive , the Ld. AOITPO/ Hon'ble DRP erred in not appreciating that the 'limited distributor function' performed by the Appellant had already been adequately compensated -by the AE since the Appellant's business model allows it to earn an arm's length margin on all costs incurred including AMP expenses. 13. That the Ld. AO/ Ld. TPO/ Hon'ble DRP erred in not appreciating that the AMP expenses were incurred by the Appellant as part of its distribution business and not for the purpose of providing sole benefit to its associated enterprise and thus could not be considered to be a transaction under section 92F(v) of the Act, since there was no understanding or arrangement or action in concert for provision of service. 14. Without prejudice to the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es while computing the protective adjustment since though the same set was applied for the protective adjustment as well as the substantive adjustment. 21. That the Ld. AO/ Ld. TPO/ Hon'ble DRP failed to appreciate that once the net operating margins of the Appellant had met the arm's length test, no further adjustment was required for any non-routine function or non-routine AMP expenditure. 22. Without prejudice to the other grounds, the Ld. TPO / Hon'ble DRP have erred in facts and circumstances of the case and in law by ignoring the fact that even if the Appellant's remuneration model is to be re-characterised to a service fee for AMP activities, the profit earned by the Appellant over and above the return earned by a distributor undertaking no or limited AMP activities should be considered as a remuneration for its AMP activities, in direct contravention to the principles laid down by the Hon'ble Delhi High Court. Miscellaneous contentions 23. Ld. AO has erred in initiating penalty proceedings under Section 271(1)(c) of the Act on account of an adjustment that was a result of a protective assessment. 24. Ld.AO has erre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 341016698 Selling and distribution expenses 1160939120 Total Expenditure on AMP 1501955818 Value of Gross Sales 6928209949 AMP /Sales of the assessee[%] 21.67% 24.4 The list of comparables selected, as per the SCN, along with the calculation of AMP Sales ratio as per Prowess is as follows.: Comparables Selling Distribution expenses Sales AMP/ Sales Beetel Teletech Ltd. 98.57 1472.4 6.69% Compuazelnfocom Ltd. 0 1544.4 0.00% Ingram Micro India Pvt. Ltd. 8.89 9545.1 0.09% Intex Technologies (India) Ltd. 19.3 782.47 2.47% Iris Computers Ltd. 1.85 1096.17 0.17% Munoth Industries Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C = B/A 218238613 Total expenditure incurred by assessee on AMP D 1501955818 Arm's Length Price of the service/expenditure for creation of marketing intangible in India in favour of the AE E=D-C 1283717205 Mark-up @ 13.75% F=13.75% of E 176511116 The amount by which the assessee company should have been reimbursed by A.E, and for which the adjustment is proposed to be made G=E+F 1460228320 Price Received from the AE for creation of marketing intangibles H 0 Adjustment required to be made for creation of marketing intangibles I=G H 1430228320 24.7 The markup is considered at 13.75%, being the same as consideration alternative analysis discussed below. 24.8. Thus, based on the above computation, an adjustment of ₹ 1460228320/- to the total Income of the assessee on account marketing and market development funct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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