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TMI Blog2011 (12) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... lant on its own behalf; 2. Without prejudice to the above on facts, the adjustment upheld is incorrect in law in as much as :- (a) The statements that the franchises have not incurred the marketing spend (advertisement expenditure) is an incorrect premise; (b) The ld. CIT (A) has erred in ignoring the submission that the Appellant/franchisees had met the obligation of incurring the required 5 per cent of gross sales as advertising expenses; and (c) Reasonably accurate adjustment to eliminate the difference between the uncontrolled transactions and controlled transactions though available has been denied on incorrect position of its not having been quantified before TPO or at Appellate stage; 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Appellant; 5. That the ld. CIT (A) failed to appreciate that interest under S. 234 B and S. 234 D of the Act was wrongly levied; in fact S. 234 D was not even on the statute book; 6. That the impugned orders are bad in law and void ab initio. " 3. The first issue for consideration relates to determining the arms length price on account of advertising expenses incurred by the assessee on its own behalf. The facts of the case stated in brief are that McDonalds India Pvt. Ltd. [MIPL] was established as a wholly owned subsidiary of McDonalds Corporation, US [MDC] in 1993 for the purpose of setting up McDonalds restaurants in India. These restaurants are being operated by the assessee through joint ventures betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s length price in respect of above-mentioned international transactions. The TPO accepted all the three transactions to be at arm's length price. The TPO also accepted the comparables used by the assessee and the computation of their operating margins in its Rule 10-D documentation. However, TPO desired a return on the advertisement expenses at cost plus mark up of 8.37 per cent, which was the same as that of transaction S.No. 3. The TPO after carrying out detailed exercise, determined arm's length price of advertisement support services provided to MDC, computed at cost plus 8.37 per cent which worked out to be Rs. 1,55,52,470/-. The assessing officer was asked to enhance the total income of the assessee by an amount of Rs. 1,55,52,470/- o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on being the assessee has entered into an international transaction in any previous year, and the assessing officer considers it necessary or expedient to do so, he may, with the previous approval of the Commissioner refer the computation of arm's length price in relation to the said international transaction under section 92-C to the Transfer Pricing Officer. Under Section 92CA(2) where a reference is made under sub section (1) of section 92CA, the Transfer Pricing Officer shall serve a notice on the assessee requiring him to produce or cause to be produced on a date to be specified therein, any evidence on which the assessee may rely in support of computation made by him of the arm's length price in relation to international transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpower the TPO to determine arm's length price in respect of an international transaction, which was not referred to him by the assessing officer. ITAT, Delhi Bench "A" in the case of CIT v. Amadeus India Pvt. Ltd. (supra) has held that as per section 92CA(1), the TPO can suggest adjustment in international transaction entered into by an assessee with its associate enterprises, which were sent to him for computation of arms length price by the assessing officer. Suo moto, he cannot take cognizance of any international transaction for suggesting adjustment in arms length price. 8. The Revenue filed appeal before Hon'ble Delhi High Court against the decision of ITAT, Delhi Bench in the case of Amadeus India Pvt. Ltd. and substantial question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e computation of the arm's length price of specific international transactions, after obtaining the prior approval of the Commissioner of Income Tax, to the Transfer Pricing Officer. It is quite possible that in the case of a particular assessee, there may be several international transactions and the Assessing Officer may only wish to refer some of those international transactions for the purposes of computing the arm's length price while in respect of others, he may compute the arm's length price himself. Thus, the jurisdiction of the Transfer Pricing Officer is limited and restricted to computing the arm's length price of only those international transactions which have been specifically referred to him by the Assessing Officer. We once ..... X X X X Extracts X X X X X X X X Extracts X X X X
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