TMI Blog2019 (4) TMI 1773X X X X Extracts X X X X X X X X Extracts X X X X ..... dents, impugned ALP adjustment on account of AMP expenses is ordered to be deleted. - ITA No.85/Del/2015 - - - Dated:- 9-4-2019 - SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The ASSESSEE : Shri Sumit Mangal, Advocate And Shri Saksham Singhal, CA For The REVENUE : Shri H.K. Choudhary, CIT DR And Ms. Nimita Pandey, Senior DR ORDER PER KULDIP SINGH, JUDICIAL MEMBER : The Appellant, M/s. Moet Hennessy India Private Ltd. (hereinafter referred to as the taxpayer ) by filing the present appeal sought to set aside the impugned order dated 13.11.2014 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 2010-11 on the grounds inter alia that :- 1. On the facts and in the circumstances of the case and in law, the Assistant Commissioner of Income-tax - Circle 5(1) ('AO')/ Transfer Pricing Officer (TPO')/ Dispute Resolution Panel ('DRP') erred in confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Moet India, the taxpayer held 99% by Champagne Moet Chandon, France ( CMC ) and 1% by Jas Hannessy Co., France ( JHC ). CMC is one of the leading producers of Champagne, which is a sparkling wine manufactured in the Champagne region of France. JHC is a leading producer of Cognac (spirits). 3. The taxpayer is into the business of importing and distributing different kinds of wines and spirits and executing (ex-bonded) warehouse sales in India. The taxpayer undertakes marketing and sales promotion of products in its trading portfolio and is assisted by its Associated Enterprises (AE) in carrying out this function. The taxpayer imports advertising and promotional material from its AE such as wine glasses, menu holders etc. to be given as complimentary products to its customers. 4. During the year under assessment, the taxpayer entered into international transactions with its AE as under :- Sr. No. Nature of Transaction Method used by as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,154,634 Arm s length price of AMP expenses (%) 0.935% Arm s length AMP expenses (A) 46,67,096 AMP expenses incurred by the assessee (B) 66,596,787 Expenditure incurred on creation of intangibles (B) (A) 6,19,29,691 Mark up @ 15% 92,89,454 Arm s length value of AMP expenses 71,219,145 6. The taxpayer carried the matter before the ld. DRP by way of filing objections, who has confirmed the arm s length value of AMP expenses at ₹ 712,19,145/- proposed by the TPO. Feeling aggrieved, the taxpayer has come up before the Tribunal by way of filing the present appeal. 7. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t should have been received by the taxpayer by making following observations :- 2. It is seen from audited financial of the assessee company that a sum of ₹ 6,18,37,549/- has been incurred by it on advertisement and sales promotion (AMP) which amounts to 26.94% of the total sales of the assessee company. It is proposed that the AMP expenditure incurred by the assessee should be considered as an international transaction for which reimbursement should have been received by the assessee as it leads to creation of marketing intangible for the AEs and not for the business purposes of the assessee. 2.1 It has been mentioned Para 4.3.3 of the transfer pricing report that MHIPL does not own any significant intangible and does not undertake any significant Research and Development on its account that leads to the development of nonroutine intangibles. MHIPL uses the trademark, know-how, technical data software, quality standard etc., developed/owned by CMC. All companies of the group leverage from these intangibles for continued growth in revenues and profits. Accordingly, MHIPL does not own any significant non-routine intangibles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eness of the products bearing such brands/trade names. I am of the considered view that the expenditure incurred by the assessee company is for the advantage of its AE, since the brand/trade name is owned by the AE. In such a situation the assessee company should have been suitably compensated by the AE. However the assessee has not received any payment in this regard from the AE. Therefore it is clear that the assessee has not been suitably compensated by the AE in respect of the expenditure incurred by it (the assessee) on Advertising and Sales Promotion expenses (AMP) to penetrate the market and to increase the sales by promoting the brand name. 13. From the aforesaid observations of the ld. TPO, we have gathered that the TPO has treated the AMP expenditure as international transactions merely on the ground that the taxpayer has incurred huge expenses on AMP spent and has made comparison with (i) IFB Agro Inds. Ltd.; (ii) Rajasthan State Ganganagar Sugar Mills Ltd.; (iii J.L. Morison (I) Ltd.; and (iv) Lotus Herbals Ltd. having AMP expenses/sales of 1.32%, 0.55%, 7.32% 9.50% respectively as against taxpayer s AMP expenditure of 18.14% of the total sales. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 Visibility 6,758,964 Total 17,255,570 15. The taxpayer also brought on record the fact that the AMP expenses considered by the TPO i.e. ₹ 90.551.831/- include distribution expenses of ₹ 23,955,044/- which are also required to be excluded by computing the AMP/sales ratio of the taxpayer. It is also the case of the taxpayer that it has incurred ₹ 66,596,787/- towards AMP expenses merely for creating awareness of the product and not for its brand building. 16. From the order passed by the ld. TPO/DRP/AO, it is undisputedly proved on fact that the facts in the case at hand are identical to taxpayer s own case for AY 2009-10 decided by the coordinate Bench of the Tribunal and has not undergone any change in its business model. Coordinate Bench of the Tribunal in taxpayer s own case decided the issue in controversy in favour of the taxpayer by deleting the ALP adjustment on account of AMP expenses by returning following findings :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the above decisions of this Court when the order was initially passed by the TPO. That can hardly be a ground for remanding the entire matter to the TPO. In fact, this was anticipated by this Court in Sony Ericsson Mobile Communications India Pvt. Ltd.(supra). In para 193 of that judgment, it cautioned that the ITAT should not simply remand the matter to the TPO but examine it itself, particularly when the facts have already been analysed and considered and no new facts have emerged in the meanwhile. 7. In the present case, all the facts necessary for the ITAT to form an opinion on the issues before it concerning the AMP expenditure were already before it. In the circumstances, the remand to the TPO of the entire matter for a decision afresh appears to be unwarranted. The assessee thus succeeds in this appeal. 10. In the present case, no new facts have emerged and all the facts brought to record, during the course of the assessment proceedings, donot indicate legally sustainable basis for coming to the conclusion that there was an internal transaction in respect of AMP expenses incurred by the assessee. We are, therefore, of the conside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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