TMI Blog2015 (9) TMI 1701X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee and desires to adopt a different method, the TPO is required to give his reasoning which is absent in the case before us. We deem it fit and proper to remand the issue to the file of the TPO for determination of the most appropriate method for determination of the ALP. Further we direct that if the TPO holds that the RPM is to be adopted as the most appropriate method, then the TPO shall also take into consideration the comparable companies selected by the assessee in addition to the companies selected by him for determination of the ALP.- Ground of assessee is treated as allowed for statistical purposes. TDS u/s 194C - contribution towards sponsorships - HELD THAT:- The assessee relying upon Board Answer to Q. No.1 to lay stress on his argument that only if a payment is made to an advertising agency, the TDS provision of section 194C is applicable. However, we find that the Question Nos. 18 and 19 and answers to these questions are relevant to the case before us. In the case before us, as stated in the earlier paragraphs of this order, we find that the assessee had advertised itself by display of banners etc., during the seminars etc, sponsored by it. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mparable companies. The TPO, however, held that the resale price method can be used only in a situation where the products are closely comparable. He, therefore, issued a show cause notice dated 2.11.2012 to the assessee asking for its explanation as to why TNNM method may not be selected as the most appropriate method in place of RPM. Assessee filed its reply dated 20.11.2012 stating that (i) the assessee is engaged in resale of medical devices purchased from its AE; (ii) the comparable companies chosen by the assessee are also engaged in trading of medical products similar to the trading activity of the assessee; (iii) the reliable data on the gross margin of the comparable companies could be found; (iv) the TNNM is generally appropriate for the purchase of goods where RPM cannot adequately be applied; and (iv) as per the OECD guidelines the traditional transaction methods are preferable to transactional profit method. Assessee placed reliance on various decisions of the ITAT in support of its contention that the RPM is the most appropriate method in the circumstances of the case. However, TPO held that the RPM method is applied where an enterprise purchases a property or service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eas the assessee has shown gross margin at 26.64% of the sales and therefore, the margin of the assessee was treated by the assessee to be at ALP. He submitted that though the assessee has made detailed submissions before the TPO as to why RPM, is the most appropriate method, the TPO except reproducing the parameters to be taken into consideration for applying the RPM, has not stated as to how the assessee does not meet those parameters for rejection of the Resale Price Method. He submitted that the TPO has relied upon the decision of the DRP in the case of M/s Spacelabs Healthcare Systems Ltd to hold that RPM is not the most appropriate method which has however, been set aside by the B Bench of this Tribunal in the case of M/s. OSI Systems (P) Ltd in ITA No.683/Hyd/2014. A copy of the same is filed before us. He further submitted that in assessee s own case for A.Y 2006-07, the TPO had accepted the Resale Price Method to be the most appropriate method. In evidence thereof, assessee filed a copy of the order of this Tribunal of A Bench in ITA No.1626/Hyd/2010. He submitted that the TPO, therefore, must follow a uniform and consistent method in determination of the ALP of simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ropriate method for determination of the ALP. Further we direct that if the TPO holds that the RPM is to be adopted as the most appropriate method, then the TPO shall also take into consideration the comparable companies selected by the assessee in addition to the companies selected by him for determination of the ALP. 7. In the result, Ground No.2 filed by the assessee is treated as allowed for statistical purposes. 8. As regards Ground No.3, brief facts are that during the course of assessment proceedings, AO observed that the assessee had incurred expenditure of ₹ 52,10,000 under the head marketing sponsorship . On perusal of the expenditure incurred by the assessee, AO observed that the expenditure is towards sponsorship fee for sponsoring various events, seminars and stalls where the assessee advertises about itself. He observed that such expenses attract the provisions of section 194C and the assessee has to make TDS on these expenses. He relied upon the CBDT Circular No.715, dated 8.8.1995 for applying the provisions of section 194C and since the assessee has failed to make TDS on these expenses, he held that it attracts the provisions of section 40(a)(ia) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the said questions and answers are reproduced herewith: Question 1 : What would be the scope of an advertising contract for the purpose of section 194C of the Act? Answer : The term advertising has not been defined in the Act. During the course of the consideration of the Finance Bill, 1995, the Finance Minister clarified on the Floor of the House that the amended provisions of tax deduction at source would apply when a client makes payment to an advertising agency and not when advertising agency makes payment to the media, which includes both print and electronic media. The deduction is required to be made at the rate of 1 per cent. It was further clarified that when an advertising agency makes payments to their models, artists, photographers, etc., the tax shall be deducted at the rate of 5 per cent as applicable to fees for professional and technical services under section 194J of the Act. Question 18 : Whether deduction of tax is required to be made under section 194C for sponsorship of debates, seminars and other functions held in colleges, schools and associations with a view to earn publicity through display of banners, etc., put up by the organisers ? Answ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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