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TMI Blog2020 (10) TMI 1396X X X X Extracts X X X X X X X X Extracts X X X X ..... act on 30 January 2016 which was subject to the direction of the learned Dispute Resolution Panel dated 9 December 2016 relating to determination of ALP of AMP expenses. 3. The addition is pertaining to the adjustment on account of AMP expenditure amounting to Rs. 94,120,248 based on Bright line test selecting four comparables whose average AMP/sales ratio was 0.83% whereas the ratio in the case of the assessee is 57.44 %. The learned transfer pricing officer further determined arm's-length price using the Transactional Net Margin Method as an alternative approach and made an adjustment of Rs. 79,887,754/-. Consequently the lower of the addition was made resulting into an addition of Rs. 79,887,754/- by the order passed u/s 92 CA (3) of the income tax act on 30 January 2016. The assessee objected same before the learned Dispute Resolution Panel-2, New Delhi who passed direction on 9 December 2016 directing the learned transfer pricing officer to reduce the adjustment to Rs. 79,258,314/-. Accordingly the assessment order u/s 143 (3) read with Section 144C (1) of the income tax act, 1961 was passed on 16th of January 2017 determining total loss of the assessee at Rs. 254,406,708 aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case and in law by adopting adjusted margin using TNMM as alternative approach on adhoc basis and considering the amount of AMP expenditure in the amount of international transactions during the year. 9. The learned TPO/AO/DRP erred in not allowing economic adjustments (working capital adjustment, import duty adjustment, capacity utilization adjustment and penetration policy) for differences on account of risks assumed by the Appellant vis-a-vis the comparable companies 10. That on the facts and circumstances of the case and in law, the Ld. AO/TPO/Hon'ble DRP have incorrectly applied the "Bright Line test" while computing the protective/primary adjustment. 11. That on the facts and circumstances of the case and in law, while computing the protective/primary adjustment, Ld. AO/TPO DRP were not justified in considering sales promotion expenses while calculating the AMP expenditure of the Appellant 12. Without prejudice to all other contentions of the Appellant, the learned TPO/AO/DRP has grossly erred in law by enhancing the income of the Appellant by INR 79,887,754 vis-a-vis adjustment of INR 17,644,396 as per the show cause notice dated 18 January 2016. 13. Wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he noted that assessee has incurred advertisement and sales promotion expenditure of Rs. 95,571,222/- against the sales of Rs. 166,382,422/- which is resulting into ratio of AMP/sales of 57.44 percent. He noted that assessee is also paying royalty at the rate of 1 % of sales to associated enterprise for use of trademark. According to him AE is the legal owner of the brand and assessee is promoting it in India as per the decision of associated enterprise in relation to how the brand has to be used. Factually by itself it establish that the assessee has incurred huge non routine expenditure to promote the brand of the associated enterprise and to develop marketing and intangible is for the associated enterprise. According to him for encouraging this nonroutine AMP expenditure, assessee should have been reimbursed which was not done. He thereafter referred to the brand building strategy of the brand owned by associated enterprise by looking at publicly available information. Based on this he noted that the brand strategy of the assessee is guided by the Japanese associated enterprise. The choice of creative marketing agencies which are themselves off-shoots of Japanese firms shows ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the international transaction and the ALP amounting to Rs. 79,887,754/- . Accordingly he proposed an adjustment of Rs. 79,887,754 u/s 92CA of the act. Draft order was passed accordingly . The learned dispute resolution panel held that addition of Rs. 94,190,248/- applying the bright line test shall be made on protective basis whereas the alternative approach of the assessee adopting the transactional net margin method should be upheld. Accordingly the adjustment after certain direction of the learned dispute resolution panel was made at Rs. 79,258,314/-.Thus the only dispute in this appeal is the adjustment on account of the arm's-length price of the AMP expenditure incurred by the assessee. Assessee has challenged the transfer pricing adjustment as per ground number 2-15. Ground number 1 is general in nature and ground number 16 is a corporate ground against initiation of penalty proceedings u/s 271 (1) ( c) of the act. 7. Adverting to ground number 2-15 learned authorised representative submitted that appeal for this year is for assessment year 2012-13 whereas the appellant's appeal for assessment year 2011-12 in ITA number 996/Del/2016 is already decided by the coordinate ben ..... X X X X Extracts X X X X X X X X Extracts X X X X
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