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2019 (8) TMI 184

..... A-UK as agreed by the parties from time to time and the assessee retains the right to perform itself, or retain third parties to perform, any of the marketing services. It clearly shows that performance of the marketing services is the responsibility of the assessee and whether the assessee does it on their own or through some third parties is not the concern of the TA-UK and it is the convenience of the assessee. This clause makes it amply clear that TA-UK does deal with the third parties through the assessee but the assessee as per their needs and performance of the contractual obligations under the agreement may retain the third parties to perform such functions. As rightly observed by the CIT(A) inasmuch as the assessee has only eight employees at their disposal, discharge of this obligation to perform the marketing services, the assessee has to engage the third parties, not on behalf of the AE but as their own agents to fulfill their own obligations. We, therefore, are of the considered opinion that the assessee is working as an independent marketing agency and the payments made to the third parties for discharging the obligations of the assessee as envisaged in, are the cost .....

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..... Assessment Year 2011-12 passed by the Assessing Officer, New Delhi, assessee preferred this appeal. 2. Brief facts of the case are that M/s. Trip AdvisorTravel India Pvt.Ltd. ( the assessee ) is a subsidiary of Trip Advisor APAC Holding Corporation, and was incorporated on 30.07.2008 under the provision of Companies Act, 1956. The parent company operates user generated travel information website under several brands including trip advisor, independent and traveller, smart traveller, Virtual tourist, holiday Watchdog, travel pod, seat guru, booking Budy and airfair Watchdog. The assessee performs the marketing support services and generally the activities to promote and market trip advisors India website, trip advisor.in under the direction and management of trip UK. 3. For the assessment year 2011-12, they have filed their return f income 29.11.2011 declaring income of ₹ 62,04,883/-. 4. During the Financial year 2010-11, the assessee had undertaken two international transactions with its AEs, namely, Provision of Marketing Support Services by Trip India to Trip UK and reimbursement of expenses. The determination of arm s length price of the international transaction was refer .....

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..... the assessee only 100% of the assessee s third party cost. 7. Ld.CIT(A) observed that apart from not considering its own marketing cost while claiming the allowance for working capital, the assessee claimed the creditors in respect of those advertisement expenses as its own creditors, thereby claim a higher allowance for working capital. Ld.CIT(A) therefore, directed the Ld.AO to consider the compensation for marketing expenses as classified in its financial accounts as a part of the total cost, for the purpose of calculating of PLI of the assessee. 8. It is argued by the Ld.AR that the assessee provide marketing support services to its AEs and as per the service agreement with AEs, the AE remunerates the assessee at mark-up of 10% in respect of the direct and indirect cost incurred by the assessee; whereas in respect of the third party marketing cost borne by the assessee on half of the AEs on cost to cost basis without any mark-up being charged. In respect of the observations of the Ld.CIT(A), it s submitted that the agreement defines the direct cost on which the mark-up can be charged as cost incurred by the assessee that are attributable on the employees directly engaged in pe .....

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..... that the assessee is working as an independent marketing agency and the payments made to the third parties for discharging the obligations of the assessee as envisaged in, are the cost of the assessee alone. We reject the contention of the assessee that the assessee is only a conduit and deal with the third parties agencies on behalf of the AE. With this view of this matter, we uphold the findings of the Ld.CIT(A) and dismiss Ground No.4. 13. Now, coming to the question of inclusion or exclusion of Goldmine Advertising Ltd. and MRUC, firstly, we deem it necessary to note the functions of the assessee as captured by the authorizes below and there is no dispute on the nature of the functions performed by the assessee. Functions performed by the assessee include the activities to promote and market TripAdvisor group s Indian website, tripadvisor.in under the direction and management of Trip-UK, identifying new Indian advertisers for the group websites, maintaining relationships with existing advertisers, and marketing and promoting the TripAdvisor websites in India, and are determining the market conditions in India and informing Trip-UK of the local terms and pricing levels. 14. Now .....

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..... taken as comparables by the assessee. 19. Ld. CIT(A) also opined that MRUC is completely involved in conducting surveys and in respect of requirement of its members, carries out a media research to understand the choice, test and preferences of people and these activities are actually identical to the activity being conducted by the assessee. On this premise, Ld. CIT(A) reached a conclusion that this company is very much comparable on its FAR analysis with the assessee. 20. With reference to the annual report of this company, Ld. AR demonstrates that MRUC is registered as not-for-profit body of members representing advertisers, advertising agencies, publishers and broadcast/other media totally 249 in number; that it is engaged in undertaking surveys, research into readership, viewership, listenership of various media for advertising; that MRUC works for the benefit of its exclusive members only without any objective of profit and making; that the major sources of income earned by the MRUC was in the form of membership and subscription fees for Indian readership survey and Indian outdoor survey reports; and that this company was outsourcing most of its activities to third-party rese .....

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