9911796707
Advanced Search 
TMI Blog2020 (2) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... ons provided in CBDT Circular no.3 of 2018, dated 11th July 2018 r/w circular F.no.279/Misc./142/2007-ITJ-(Pt.) dated 20.08.2018, would apply to Revenue's appeal. Thus, learned Counsel for the assessee submitted that Revenue's appeal being covered under the aforesaid Circulars is not maintainable. 3. The learned Departmental Representative agreed that the tax effect on the amount disputed by the Revenue is below the monetary limit of Rs. .50 lakh. 4. Having considered rival submissions and perused the material on record, we are of the view that the tax effect on the amount disputed by the Revenue in the present appeal is below the revised monetary limit of Rs. 50 lakh, as per CBDT Circular no.17/2019, dated 8th August 2019, r/w CBDT Circular no.3/2018, dated 11th July 2018. It also stands clarified by the CBDT that the revised monetary limit of Rs. 50 lakh as per the aforesaid CBDT Circulars would also apply to all pending appeals. In view of the aforesaid, Revenue's appeal deserves to be dismissed. However, the Revenue is given liberty to seek recall of this order, if, at a later point of time it is found that the appeal is protected under any of the exceptions provided in the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agen Daz Ice Cream. Further, it was submitted, three products, namely, Corn Niblet, Cream Style Sweet Corn and asparagus spears which are sold under the brand name Green Giant products were imported for the purpose of re-sale in India. It was submitted by the assessee that it had to incur such expenditure to penetrate target market segment as the products are in initial years, therefore, margin cannot be compared with other established players in the market. After considering the submissions of the assessee, the TPO observed that AMP expenditure incurred by the assessee works out to 21%, whereas, that of comparables is 0.87%. Further, the Transfer Pricing Officer observed, since the assessee has incurred the AMP expenditure for promotion and marketing of branded products of the AEs, it tantamount to providing service to foreign AEs. In this context, he referred to the Special Bench decision of the Tribunal in LG Electronics India Pvt. Ltd. v/s ACIT. The Transfer Pricing Officer observed, incurring of AMP expenditure to promote the brand of AE is an international transaction, therefore, the apportionment of AMP expenditure between the assessee and the AE has to be computed by apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid finding of learned Commissioner (Appeals) is without any factual basis as neither the Transfer Pricing Officer nor learned Commissioner (Appeals) have properly examined the agreement between the assessee and the AE. Therefore, he submitted, the issue may be restored back to the Assessing Officer for fresh examination. 10. The learned Authorised Representative strongly relying upon the decision of the first appellate authority submitted, the Transfer Pricing Officer has treated the AMP expenditure incurred in India as international transaction without establishing whether there is an agreement/arrangement between the assessee and the AEs for incurring such expenditure. He submitted, the assessee has imported products from the AE for re-sale in Indian market. Since these products were new as compared to similar products manufactured by other established companies, the assessee for the purpose of penetrating the market devised a strategy to promote the products vigorously. He submitted, since the products were in their initial lifecycle, the assessee had to incur substantially more expenditure towards AMP compared to similar expenditure incurred by the other established comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MP expenditure incurred by it and if there is any benefit to AEs, it is only incidental. It is also the claim of the assessee that the entire purpose of incurring expenditure is to increase the sale and not to create any marketing intangible of the AEs. Further, it is evident, the assessee has also explained the nature of expenditure incurred by furnishing supporting evidences. On a perusal of the facts on record, it is noticed that the AMP expenditure was incurred for giving incentives, free samples, etc. Thus, from the aforesaid facts, it is very much clear that the AMP expenditure was incurred for penetrating the market and increasing the sales. In any case of the matter, no material has been brought on record by the Transfer Pricing Officer to demonstrate that there is an agreement/arrangement with the AEs for incurring AMP expenditure to promote the brand of the AEs. Further, the entire AMP expenditure has been incurred in India and paid to third parties in India. Thus, keeping in perspective the aforesaid factual position, we have to hold that the AMP expenditure incurred by the assessee cannot come within the purview of international transaction. 12. Further, it is evident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AMP expenditure was incurred with the third parties in India, hence, do not constitute international transaction. Having held so, the Transfer Pricing Officer has still proceeded to determine the arm's length price of the AMP expenditure on the reasoning that the compensation required in the arrangement between the assessee and the AE for improving the brand intangible of the owner has to be determined. Further, he has observed that the AMP expenditure incurred by the assessee not only benefits the assessee but also the AE in terms of increase in the brand value of Kellogg. Thus, the Transfer Pricing Officer has inferred that there is an arrangement between the assessee and the AE with regard to promotion of the brand of the AE by incurring AMP expenditure. However, he has not provided any factual basis on which he has drawn such inference. By merely stating that there is an arrangement between the assessee and the AE, the Transfer Pricing Officer cannot bring the AMP expenditure within the purview of international transaction. If the Transfer Pricing Officer alleges that the AMP expenditure comes within the purview of international transaction by virtue of an arrangement bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruti Suzuki India Ltd. (supra). Thus, viewed in the light of the ratio laid down in the decisions cited by the learned Authorised Representative, including the decision of the Hon'ble Delhi High Court in Martuti Suzuki India Ltd. (supra), it has to be concluded that the AMP expenditure incurred by the assessee in India cannot come within the purview of the international transaction. Hence, the Transfer Pricing Officer has no jurisdiction to determine the arm's length price of AMP expenditure. 13. 9. Having held so, it is now necessary to deal with the contention of the learned Departmental Representative to restore the issue to the Assessing Officer for keeping it pending till the issue is settled by the Hon'ble Supreme Court. In our view, the aforesaid contention of the learned Departmental Representative is not acceptable. As per the prevailing legal position, the AMP expenditure incurred by the assessee in India cannot come within the purview of international transaction. That being the case, the adjustment made by the Transfer Pricing Officer cannot survive. Therefore, we do not find any necessity to restore the issue to the Assessing Officer. Grounds are allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 2012-13, though, learned Commissioner (Appeals) has expressed identical view with regard to the economic adjustment, the Revenue has not preferred any appeal before the Tribunal. Therefore, he submitted, there is no reason to interfere with the decision of learned Commissioner (Appeals). 20. We have considered rival submissions and perused the material on record. As could be seen from the facts on record, while computing its margin with regard to the international transaction relating to import of goods from the AEs, the assessee has claimed economic adjustment towards the AMP expenditure incurred by it. It is the claim of the assessee that compared to the comparables whose marketing expenditure worked out to 0.87% of operating income, assessee's marketing expenditure worked out to 21% of the operating income. Thus, it is the claim of the assessee that necessary adjustment has to be given on account of marketing expenditure while computing the margin. It is observed, while considering similar claim made by the assessee in assessment year 20007-08, the Transfer Pricing Officer has allowed 50% of the adjustment claimed. In fact, in Assessment Year 2012-13, though, lea ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
