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TMI Blog2014 (2) TMI 1288X X X X Extracts X X X X X X X X Extracts X X X X ..... are directed against order passed by Ld. CIT(A) dated 22/7/2010. ITA No.20/Mum/2012 is departmental appeal directed against order passed by Ld. CIT(A)-15, dated 13/10/2011 for assessment year 2005-06. Grounds of appeal in all these appeals are as under: Grounds of appeal in ITA No.7089/M/2010-Assessees' Appeal: The appellant being aggrieved by the order dated 22.07.2010 passed by the Commissioner of Income-tax (Appeals)-15, Mumbai [hereinafter referred to as the CIT(A) ], places for your consideration the following grounds of appeal: 1. The learned CIT(A) erred both on facts and in law in confirming the reduction of 90% of the gross interest i.e. Rs. 4,77,31,000 from the profit of the business for the purpose of deduction u/s 8OHHC. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justment of Rs. 1,61,47,000/- in respect of advertisement expenses paid to Associate Enterprise u/s. 92CA(3) of the I.T. Act." Grounds of appeal in ITA No.6866/Mum/2010- Revenue's Appeal: 1. Whether on the facts and in the circumstances of the case, and ion law the CIT(A) erred in deleting the adjustment of Rs. 88,83,650/- in respect of advertisement expenses paid to Associate Enterprise u/s. 92CA(3) of the I.T. Act." 2. Since all these appeals relate to common issues, all of them were argued together by both the parties and for the sake of convenience all these appeals are disposed of by this common order. 2.1 ITA No.7089/Mum/2010 and 7090/Mum/2010 being appeals filed by the assessee raise a common issue. It was stated that it is now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e products 81,73,23,226 TNMM 2. Advertising Expenses paid to AEs 1,39,12,066 TNMM 3 Others 3,93,900 TNMM The assessee has bench marked these transactions at entity level on the basis of method described as TNMM. It was the case of the assessee that its operating margin is 47.17% as compared to operating margin of the comparable companies at 8.08%. Reference can be made to the following two tables. A. Operating Margin of the Company: Figures in'000' Particulars Amount Gross Sales 850,709 Net Sales 850,709 Less: Operating Expenses & Depreciation 449,405 Operating Profit 401,304 OM 47.17% A. Operating Margin of the comparable Companies: Company Name OM 1. Ajay Home Products Ltd. -6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to promote new products in foreign markets, therefore, assessee company collaborates with its AE who operates in that foreign market and provide support in their marketing effort. It was submitted that the advertisement expenses reimbursed to Unilever Gulf FZE represent the support provided for a small part of total expenses incurred on advertisement in respect of two products namely "Fair and Lovely" and "Fair and Lovely end Eyecream" in order to enable them to launch these new products in the markets and to build awareness and trials. Similarly, the expenses in respect of Unilever (Malaysia) Holdings Sdn. the assessee company has provided support for brand for sharing a small part of the expenditure incurred on advertisement which helped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of the assessee on the ground that TPO has made this addition in adhoc manner without adopting any method prescribed to determine ALP of a transaction. It was obligatory upon TPO to determine ALP as per prescribed methods. The assessee launched two new products which involved huge advertisement expenditure. To share such type of expenditure cannot be isolated or seen as incidental phenomena but it was the strategy to develop the business. In this manner the addition has been deleted. The department is aggrieved, hence, has filed aforementioned grounds. 3.4 Relying upon the order passed by TPO it was submitted by Ld. DR that the transaction between AE and assessee was on principal to principal basis. The assessee was not required to incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly" for the purpose of business and nothing more. Ld. AR submitted that such observation of Hon'ble Delhi High Court are in the context of transfer pricing provisions. 3.6 Ld. AR further submitted that ALP of an international transaction is required to be determined as per method described in the statute and if it is not so done then the adjustment is required to be struck down. For this purpose Ld. AR relied upon the decision of Tribunal in the case of Kotak India Pvt. Ltd. vs. Addl.CIT, 88 DTR (Mum)(Trib) 242. Ld. AR also relied upon the decision of ITAT, Mumbai in the case of C.A.Computer Associates Pvt. Ltd. vs. DCIT in ITA No.5420 & 5421/Mum/06, 2010 TOIL 68 (ITAT)(Mum). 3.7 We have heard both the parties and their contentions have c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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