9911796707
TMI Blog2013 (9) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... d 100% by Luxottica Group SPA, Italy. Luxottica Group is world leader in design, manufacture and distribution of Sunglasses and prescription frames in mid and premium price categories. The assessee had declared total income of Rs. 29,93,34,424/-. The assessee had reported various international transactions and, therefore, the matter was referred by AO to Transfer Pricing Officer for computing Arm's Length Price of international transaction who recommended adjustments as detailed below: Computation of TP adjustment (in Rs.) Value of Gross Sales 95,27,35,250 AMP/Sales of the Comparables 0.84% Amount that represents bright line 79,71,218 Expenditure on AMP by assessee 11,16,14,373 Expenditure in excess of bright line 11,16,43,155 Mark-up at 15% 1,67,46,473 Reimbursement that assessee should have received 12,83,89,628 Reimbursement actually received NIL Adjustment to assessee's income 12,83,89,628 3. The assessee filed objections to the draft assessment order before ld. DRP-II which directed the TPO to recompute the TP adjustment. TPO computed the adjustment at Rs. 8,78,66,465/- as against the earlier adjustment of Rs. 12,83,89,628/-. Accordingly, the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.4 That the ld. DRP has erred in concluding that in light of the explanation added to section 92B(2) by Finance Act, 2012, advertisement expenditure incurred by the Assessee Company qualifies as international transaction under section 92B of the Act. The ld. DRP has failed to take cognizance of the fact that section 92B read with Section 92F(v), which together define an 'international transaction', do not apply in the absence of any arrangement/understanding/action in concert between the Assessee Company and its overseas associated enterprise. 3.5 That on the facts and the circumstances of the caser and in law, the ld. TPO/DRP has erred in ignoring the fact that the advertisement expenses incurred by the Assessee Company represents only domestic transactions undertaken with third parties, not covered under the purview of section 92B of the Act and is thus in excess of his jurisdiction. 3.6 That on the facts and the circumstances of the case and in law, the ld. DRP/TPO has erred in ignoring that "bright line limit" is not a prescribed method under the purview of section 92C of the Act for determining ALP n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the alternative, the ld. TPO without any basis has applied a markup of 12.50% in respect of assessee company's "alleged excessive advertisement expenses". The aforesaid findings and observations resulting into enhancement of income is highly arbitrary and wholly unjustified being without any basis. 3.14 That on the facts and the circumstances of the case and in law, without prejudice, if at all a markup of 12.50% was to be applied, the same should have been applied on the value added expenses (excluding third party costs) incurred by the assessee company for providing the alleged service in the nature of brand promotion as contended by the ld. TPO. 4. That on the facts and the circumstances of the case and in law, the ld. AO has erred in reducing the rate of depreciation on UPS and printer from 60 percent to 15 percent, by treating the same as Plant and Machinery without appreciating that UPS and printer is "integral part of the computer system" and have been held to be in the nature of 'Computers' by the Hon'ble jurisdictional High Court in the case of BSES Rajdhani Powers Ltd. (ITA No. 1266/2010) and by the Hon'ble Special Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stricted the comparable cases to only two without discussing as to how other cases cited by the assessee were not comparable. Further it can be seen that the TPO has not considered the effect of any of the relevant factors as discussed above. A bald comparison with the ratio of AMP expenses to sales of the comparables cases without giving effect to the relevant factors as discussed above, cannot produce correct result. It can be illustrated by a simple example. If there is no subsidy in a comparable case but the assessee has received some amount of subsidy from its foreign AE on imports or in any other manner, which fact otherwise needs to be specifically established by the assessee, then the initial amount so computed would require reduction to the extent of such subsidy or vice versa. As the TPO has neither properly considered the request of the assessee for inclusion of some other comparable cases nor examined the effect of the above discussed relevant factors on the question of determination of the cost/value of international transaction, in our considered opinion the ends of justice will meet adequately if the order of the TPO and that of the AO giving effect to such order is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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