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TMI Blog2021 (6) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts sourced. The assessee bench marked the same under CUP method and in this regard, it had selected 12 companies which had paid commission ranging from 5% to 12%. Accordingly, the assessee claimed that the payment of commission is at arm's length. The TPO however, determined the ALP of commission payment as Nil and accordingly made transfer adjustment of entire claim of Rs. 14.06 crores. Ld DRP also confirmed the same. 3.1 The Ld A.R submitted that an identical issue was examined by the coordinate bench in the assessee's case in IT(TP)A No.3321/Bang/2018 relating to assessment year 2014-15 and the coordinate bench, vide its order dated 14.10.2020, has restored the issue to the file of the TPO for examining it afresh. 3.2 We heard Ld. D.R. on this issue and perused the record. We notice that an identical issue has been examined in the assessee's own case by the coordinate bench in A.Y. 2014-15 and the matter has been restored to the file of the AO/TPO for examining it afresh. The relevant observations made by the coordinate bench in 2014-15 are extracted below. "19. The next issue relates to the Transfer pricing adjustment made in respect of Sourcing Commission payment. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Accordingly he prayed that this issue may be restored to the file of TPO for examining it afresh by duly considering various evidences furnished by the assessee. 19.4 We heard Ld D.R. Having regard to the submissions made by Ld A.R, we are of the view that this issue requires fresh examination at the end of TPO. Accordingly we restore this issue to the file of AO/TPO for examining it afresh by duly considering the various evidences furnished by the assessee. After affording adequate opportunity of being heard, the AO/TPO may take appropriate decision in accordance with law. 3.3 Consistent with the view taken by the coordinate bench, we remand this issue to the file of the AO/TPO with similar directions for examining this issue afresh. 4. The next issue relates to transfer pricing adjustment made in respect of payment of interest on debentures. It is also a recurring issue. The assessee has claimed a sum of Rs. 65.18 crores as expenditure on payment of interest on debentures. The TPO, by relying on certain rulings/RBI Circular, took the view that the CCDs are in the nature of equity capital and accordingly, held that the arm's length price of interest payment on CCDs is Nil. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ganisation for Economic Cooperation and Development. The TPO referred to certain case laws and held that the CCD is in the nature of equity. Accordingly he held that the ALP of interest payable on CCD at NIL. 18.3 The Ld DRP upheld both the views taken by TPO in the above said years. 18.4 The Ld A.R submitted that the TPO has considered the interest payment made in the year relevant to AY 2015-16 and held it to be at arms length. In this regard, the TPO has made enquiries with foreign authorities and it was ascertained that the interest paid by the assessee has been offered as income by the AE in its hands. 18.5 We notice that the TPO has been taking different stand in different years. While he accepted the CCD as debentures in AY 2012-13 and reduced the rate of interest only, the TPO treated CCD as equity in AY 2014-15. However, in AY 2015-16, the TPO has accepted the rate of interest of 12% to be at arms length. We notice that the TPO has made certain enquiries in AY 2015-16 and accordingly came to the conclusion that the interest payment is at arms length. The benefit of those enquiries was not available with the TPO in the two years under consideration. Since the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the business of distribution undertaken by the assessee. It is the contention of the assessee that these expenses incurred towards cross payment charges in the relevant period amounting to Rs. 4,79,96,697 are solely related to the business of the assessee in India. Per Contra, revenue's view is that the assessee has failed to establish and demonstrate that these expenses are to be attributed to the business operations of the assessee. 5.5.2 To understand and appreciate the role and business of the assessee and the interplay it has with its parent company, Nike Inc., USA, in respect of its operations, an examination of the Transfer Pricing Study/Report submitted by the assessee is both informative and useful. In the Transfer Pricing report, under the heading "Brief on the Business", it is mentioned that - "1.2.3 Nike India, a wholly owned subsidiary of NIKE Holdings Inc., is responsible for distribution of footwear, sports apparel and equipment. In addition, NIKE India Provides administrative support in relation to the marketing and brand promotion initiatives of NIKE Group in India. 1.2.4 The development of arm's length price in this analysis recognizes that NIKE India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creasing the product awareness and product acceptability in the market. The submissions made by the assessee before us and before the authorities below have been contradictory to what is stated in the assessee's Transfer Pricing Study and this is not acceptable. Further, as pointed out by the TPO, the assessee has separately booked substantial expenses amounting to approx. Rs. 2.42 Crores towards advertising, marketing and sales promotion which is approx.. 8% of sales turnover and these have been allowed as expenses incurred towards promotion of product sales. The onus for proving that the expense! incurred by the parent, Nike Inc, USA, are towards the sales of the products and not for the purpose of creating brand awareness is on the assessee, which onus is not discharged by the assessee. Also considering that the assessee itself has admitted that the parent, Nike Inc. USA has brand marketing and promotion initiatives in India, it is but natural to conclude that the expenses incurred by Nike Inc., USA are towards creation of brand awareness, for which the parent has the responsibility. In this view of the matter, the expenses on cost of samples, etc., have to be attributed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that these represent couriering expenses, etc. No further details as to the nature of expenses, the purpose for which they were expended etc. has been forthcoming from the assessee. The assessee has also not furnished any evidence to establish that these expenses were indeed incurred for and on behalf of the assessee. In the absence of these details, the claims put forth by the assessee remain unsubstantiated. 5.5.7 Another contention of the assessee is that since the same set of expenses has been held to be at arm's length in the assessee's own case for Assessment Year 2008-09, therefore, they should be treated as arm's length in the year under consideration. We are unable to accept the contention that the transfer pricing adjustment made in the two years under consideration has to be negated only on the ground that such an adjustment was not made in the subsequent year. It is a well settled position in law that the assessment of every year stands on its own legs and the 'principle of res judicata' does not apply to income tax assessment proceedings. The ALP for each year is determined based on the set of facts applicable to each of the individual years and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n making the T.P. adjustment of Rs. 4,79,96,697 for assessment year 2005-06 and dismiss the grounds raised by the assessee." Accordingly, following the decision rendered by the co-ordinate bench referred above, we decide this issue against the assessee and confirm the Transfer Pricing adjustment made by the TPO." 5.4 Consistent with the view taken by the coordinate bench on this issue in the other years, we decide his issue against the assessee and confirm the transfer pricing adjustment made by TPO/AO. 6. The next issue relates to transfer pricing adjustment in respect of royalty payment amount to Rs. 12.02 crores. 6.1 The ld. A.R. fairly admitted that an identical issue has been decided against the assessee by the coordinate bench in other years. 6.2 The assessee has paid royalty of Rs. 2.02 crores. The TPO noticed that the ITAT has confirmed the transfer pricing adjustment made in respect of royalty payment in A.Y. 2005-06 & 2006-07. Following the same, TPO determined the ALP of royalty payment as Nil and accordingly, made transfer pricing adjustment of Rs. 2.02 crores. 6.3 We notice that an identical issue has been examined by the coordinate bench in A.Y. 2014-15 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been furnished. Hence, the TPO has taken the view that this expenditure is not related to the business of the assessee and accordingly he has determined the ALP at NIL. Before us also, no further details were furnished. In view of the above, we are of the view that there is no infirmity in the order so passed by the TPO/AO." 6.4 Following the decision rendered by the coordinate bench in A.Y 2005-06, we decide this issue against the assessee and confirm the TP adjustment made by the TPO/AO. 7. The next issue relates to transfer pricing adjustment made in respect of Advertisement, Marketing and Promotion expenses (AMP expenses). The assessee had incurred expenditure of Rs. 83.13 crores towards AMP expenses. The A.O. made an adjustment of Rs. 85.58 crores in respect of this expenditure. The Ld. A.R. submitted that an identical adjustment was made by the TPO in other years also and this issue was examined by the coordinate bench in assessment year 2014-15. He submitted that the assessee was having an agreement with it's A.E. with regard to the expenses incurred during Cricket Tournaments conducted by BCCI. The agreement was relevant to the assessment years 2010-11 & 2011- 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal. Only in the years relevant to assessment year 2010-11 & 2011-12, there was an agreement between the assessee and its A.E for reimbursement of 50% of the BCCI expenses. The TP adjustment made in those years has been restored to the file of AO/TPO. Since the facts available in the present year is akin to A.Y. 2009-10 and since it is stated that there is no agreement between the assessee and its A.E. for reimbursement of expenses, we are of the view that the decision rendered by Hon'ble Delhi High Court in the case of Maruti Suzuki Ltd. (supra) is applicable to the facts of the present case. Accordingly, following the decision rendered by the coordinate bench in other years, we hold that the TP adjustment made in respect of AMP expenses is not justified. Accordingly, we direct the A.O. to delete the same. 8. The next issue relates to the disallowance of claim of purchase of samples. An identical issue has been decided against the assessee in assessment year 2012-13 & 2014-15. For the sake of convenience, we extract below the decision rendered by the coordinate bench on this issue:- "20. The remaining issues are corporate issues and the additions have been made by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 2011-12, wherein we have confirmed the transfer pricing adjustment by following the decision rendered by the co-ordinate bench in the assessee's own case in AY 2005-06 & 2006-07. In those years, the Tribunal has decided the issue against the assessee with the following observations:- "The onus for proving that the expense! incurred by the parent, Nike Inc, USA, are towards the sales of the products and not for the purpose of creating brand awareness is on the assessee, which onus is not discharged by the assessee. Also considering that the assessee itself has admitted that the parent, Nike Inc. USA has brand marketing and promotion initiatives in India, it is but natural to conclude that the expenses incurred by Nike Inc., USA are towards creation of brand awareness, for which the parent has the responsibility. In this view of the matter, the expenses on cost of samples, etc., have to be attributed to the parent, Nike Inc., USA and therefore it is not correct to conclude that these expenses have to be borne by the assessee." In our view, the view expressed by the co-ordinate bench can be taken as guidance for deciding the issue in the years under consideration also. There ..... X X X X Extracts X X X X X X X X Extracts X X X X
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