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TMI Blog2018 (5) TMI 936X X X X Extracts X X X X X X X X Extracts X X X X ..... ing. Thus the expenses relate to the business of the assessee alone for promotion of the sales of the products i.e. the books and such an expense had nothing to do with the brand promotion of any of them. With this view we are of the considered opinion that the approach of the Transfer Pricing Officer is not in accordance with law laid down in the case of Sony Ericsson Mobile Communications India Pvt. Ltd. (2015 (3) TMI 580 - DELHI HIGH COURT) and cannot be sustained. We, therefore, direct the learned Assessing Officer to delete the same. - Decided in favour of assessee - I. T. A. No. 19/Delhi/2016 - - - Dated:- 13-2-2018 - R. S. Syal (Vice-President) And K. Narsimha Chary (Judicial Member) For the Appellant : Dr. Shashwat Bajpai, Shard Agarwal and Ms. Shina Bhatia, Advocates For the Respondent : Sanjay I. Bara, Commissioner of Income-tax-Departmental representative ORDER 1. K. Narsimha Charry (Judicial Member).-Aggrieved by the assessment order dated October 29, 2015 under section 143(3) read with section 144C of the Income-tax Act (for short hereinafter referred to as the Act ) read with the directions dated August 25, 2015 under section 144C(5) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.1 He further observed that the assessee had incurred the AMP expenditure on the following counts : Name of expenditure Amount (Rs.) Marketing catalogues and brochures 20,88,672 Marketing sales and promotional kits 11,39,738 Marketing Sponsorship 3,99,782 Turnover discount/early payment rebate 1,86,94,337 Free samples cost 56,58,517 Free samples cost Freight, courier and packaging 20,56,795 Total AMP 3,00,37,841 Net sales 30,26,39,132 AMP/Sales ratio 9.93 per cent. 3.2 The learned Transfer Pricing Officer by order dated January 28, 2015 suggested a demand of ₹ 3,13,77,110 based on which the learned Assessing Officer passed draft assessment order dated February 25, 2015. 3.3 Aggrieved by the same, the assessee carried the matter before the learned Dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n arises out of the activities conducted by the assessee. The learned authorised representative further submitted that the expenditure incurred by the assessee is legitimate business expense incurred in the ordinary course of business operations wherein such kind of expenses are routine and are essential to create a market for sale of books in India, and without incurring such expenditure the assessee cannot possibly carry on the business in the Indian market. 4.1 The learned Dispute Resolution Panel on an analysis of the nature of expenses incurred on printing of brochures, price list, other forms etc. held that the expenses on trade discount or printing of price list as selling expenses have to be excepted from the ambit of AMP expenses, such direction covers the other items also categorised as AMP expenses by the learned Assessing Officer, and on that ground the learned authorised representative prayed this Tribunal to exclude them. 4.2 Further argument of the learned authorised representative is that it is necessary for the assessee to distribute free sample of books to the prospective customers/colleges/book stores/authors in order to create awareness of new products in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enterprises with similar directions and conditions renewing from time to time and find that clause 13 of these agreements expressly prohibits the assessee from publicly using the name or trade marks, service marks, trade names and/or logos of these entities in any publicity, promotion, news release, website posting, announcement, client list, marketing materials or other disclosure or otherwise refer to either the associated enterprise or its affiliates' in any way with the media with respect to the agreement or transactions contemplated thereunder unless the assessee has obtained the prior written consent of the associated enterprise in each case. Referring to this learned authorised representative submitted that the agreement clearly prohibits the assessee from using the brand as such brand promotion does not arise. 5.1 Further it is clear from the orders of the learned Transfer Pricing Officer that the Transfer Pricing Officer made the following calculation while applying the bright line to reach the amount for which the adjustment under section 92CA has to be made : 1. Marketing catalogues and brochures 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivities of books to prospective customers/colleges/book stores/authors etc.; and free samples cost-free courier and packaging relate to the freight carrier cost for distribution of free sample copies of books. The Revenue failed to give any interpretation to these expenses other than the one explained by the learned authorised representative. It is not known how any of these expenses relate to the brand building either of the assessee or of the foreign associated enterprise. All the four expenses as the head suggests relate to the promotion of the sales of the product and not in any way connected to the brand building. 5.5 We are, therefore, of the considered opinion that the expense of ₹ 96,32,628 relate to the business of the assessee alone for promotion of the sales of the products i.e. the books and such an expense had nothing to do with the brand promotion of any of them. With this view we are of the considered opinion that the approach of the Transfer Pricing Officer is not in accordance with law laid down by the hon'ble jurisdictional High Court in the case of Sony Ericsson Mobile Communications India Pvt. Ltd. (supra) and cannot be sustained. We, therefore, dir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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