9911796707
TMI Blog2017 (3) TMI 1725X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions. The assessee in ITA No. 1045/Mum/2014 for AY 2009-10 has raised the following grounds of appeal: 1. The order passed by the Ld. D.C.I.T. is bad in law, unjust and unfair. 2. The Ld. D.C.I.T. failed to appreciate that the AMP expenses were incurred in India by the assessee-company and therefore, the said expenses cannot be treated as 'International transaction. 3. The Ld. D.C.I.T. erred in alleging that there exists an arrangement between CD India and CO France and thereby erred in contending that CD France needs to compensate CD India towards AMP expenses. 4. The Ld. D.C.I.T. failed to appreciate that the assessee-company opened its second Store in DLF Emporio, Delhi in the year under consideration and therefore, the expenses of Rs. 1,25,60,261/- incurred towards opening of the Store is an extra ordinary item of expenses and therefore, it cannot be considered as AMP expenses. 5. The Ld. D.C.I.T. erred in applying bright line test for determining compensation towards AMP expenses incurred by CD India. 6. The Ld. D.C.I.T. failed to appreciate that in the two comparables chosen and applied by him, no mark-up was charged on the AMP expenses and therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as there was no reference made by the ACIT to TPO in this regard. The ACIT / TPO erred in concluding that AMP expenses of CD India, which is incurred by way of payments to third parties, as an international transaction. The ACIT / TPO failed to appreciate that this does not constitute an international transaction under the Indian transfer pricing regulations e) The learned ACIT erred in applying bright line test for determining compensation towards AMP expenses incurred by the Assessee Company. f) Without prejudice to the above, the learned ACIT erred - in arbitrarily selecting comparables for bright line test without following a structured search process. - in arbitrarily rejecting the comparables proposed by the assessee on a without prejudice basis and in arbitrarily considering the comparable companies and arriving the percentage of AMP to sales of 1.42% as ordinary/ routine AMP expenses for determining the arm's length compensation. - in alleging this as a service transaction and thereby considering a mark-up of 11.72% along with reimbursement of AMP expenses. g) Without prejudice to the above, learned ACIT has erred in not granting the assessee the option to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was not accepted by TPO holding that the AMP expenditure of Rs. 2.45 Crore and the assessee itself make it clear that Rs. 2.02 Crore pertains to non-marketing expenses while balance expenditure of Rs. 4.76 Crore create brand value. After rejecting the contention of assessee the ld TPO included M/s Central Cottage Industries Corporation of India Ltd and M/s Cravatex Ltd as comparable companies and after comparing the total sale, Advertisement expenses the average margin was taken at 2.68%. The assessee objected for inclusion of these two comparables. The assessee was further asked to furnish its set of comparables and after considering them the LD TPO determined ALP related to AMP for marketing the intangible and suggested the adjustment of Rs. 2,40,48,821/- in the following manner. Trade sales made Rs.11,29,79,019/- ALP of AMP expenses (2.68% of sale) Rs.30,27,838/- Amount actually spent on AMP expenses Rs.2,45,00,000/- Amount spent on creation of marketing intangible Rs.2,14,72,162/- Mark up @12% Rs.25,76,660/- Adjustment u/s 92CA Rs. 2,40,48,821/- On the basis of report of TPO under section 92CA(3) dated 29.01.2013, the AO made the adjustment of Rs. 2,48 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erating expenses, conveyance, press and magazine subscription, gifts to press and gift to customers. During the year ended on 31st March 2009, the assessee had opened the second restore at DLF Emporio Delhi. For opening the store, the assessee company incurred an aggregate expenditure of Rs. 1,25,60,261/- which is forming part of AMP expenses. The perusal of this expenditure reveals that these expenses were incurred on the date of opening of Second store and therefore, these expenses are one-time expenses which cannot be considered to be AMP expenses. In support of his submission learned Counsel relied upon the decision of Capgemini India Private Limited Vs ACIT (147 ITD 330 Mum), ACIT Versus Camtax Global Engineers Private limited (147 ITD 448 Mum) and Vishay Component India private Limited ITA/PN/11. The AMP expenses incurred by assessee were Rs. 1,20,00,000/-against the total turnover of Rs. 11.30 Crore, thus the percentage of AMP to the sales of workout is 10.57% as against the PLI determined by DRP at 6.13%. In support of the contention with regard to the incorrect rejection of comparable by TPO the learned counsel argued that TPO wrongly rejected M/s Mahindra Retail Private L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Jewellery it was argued that the total turnover of this comparable company for the year ended on 31 March 2009 is Rs. 7.31 Crore against which it has incurred business promotional expenses and advertisement expenses aggregating to Rs. 1,57,07,703/- the ratio of AMP expenses to sale is 21.47% which is comparable with the AMP expenses incurred by the assessee company of 10.57%. The DRP wrongly rejected this comparable on the ground that company had incurred substantial loss during the year ended on 31 March 2009. Secondly, its related party transactions purchases, sales and other revenue items are far in excess. The purchases and sales from related parties and exceed 25% of the total purchases and sales. The reasons recorded by DRP are not relevant as much as in the present case. The DRP has held that AMP expenses incurred by the assessee company are higher than the percentage of AMP expenses to sales determined by the TPO applying the bright line method and therefore, the excessive expenses incurred have benefit the AE of the assessee company. Therefore this excess expenses + markup thereon ought to have been paid by the AE to the assessee company as compensation. For ascertaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company and hence the AMP expenses of the assessee company cannot be compared with the AMP expenses of this company. The financial statement of Central Cottage industries Corporation of India Ltd does not own any brand or promote any brand or trademark. Further, the company has not paid any royalty for use of any trademark or brand-name. This fact clearly shows that company does not promote or advertise any specific or reputable and for these reasons the company cannot be regarded as good comparable. Thus, the learned counsel prayed that the adjustment made by assessing officer and approved by DRP by benchmarking the ratio of AMP expenses to the sales may be deleted being contrary to the facts on record. Finally, for addition on account of mark-up the learned counsel argued that TPO added 12% of AMP expenses in excess of benchmark amount of AMP expenses to determine the benefit given to AE, which the AE ought to have compensated to the assessee company and accordingly added Rs. 25,76,660/- to the amount of AMP expenses which is in excess of benchmark level of AMP expenses. The TPO relied on two comparable both are functionally different from the assessee company. M/s Cyber Media In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Delhi High Court in case of M/s Sony Ericsson Mobile Communication (374 ITR 118), The AMP function is to be bench marked clubbing with the closely linked transaction. It was vehemently argued that in subsequent AYs i.e. AY 2012-13 & 2013-14, the assessee has entered into identical transaction but the assessee have changed the method of bench marking. For AY 2012-13 the assessee imported finished goods for trading of Rs. 9.66 Crore and adopted CUP as most appropriate method. For AY 2013-14 the assessee imported finished goods for trading of Rs. 10.90 Crore and adopted recent price method as most appropriate method for bench marking the transaction of finished goods for trading. For AY 2009-10 & 2010-11 the assessee has not considered the re-sale price method (RPM) as most appropriate method for bench marking the transaction for the reasons that products sold by Christian Dior-India (CD India) are unique and it is difficult to find out external comparable for such product. For AY 2012-13 the assessee selected external CUP method as most appropriate method as the data regarding the sale of products by Christian Dior, France (CD France) to non-associated parties outside India was ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icient opportunity to the assessee before passing the order. The other grounds of appeal raised by assessee are consequential in nature and needs no adjudication at our end. 8. In the result, appeal filed by assessee is allowed for statistical purpose. 9. ITA No. 1084/M/2014, as we have already restored the matter to the file of TPO/AO for considering the matter afresh as per our direction, thus the appeal filed by revenue needs no specific adjudication and may be considered as allowed for statistical purpose. 10. ITA No. 1719/M/2015 for AY 2010-11 the assessee has raised four grounds of appeal. Ground No.1 is general in nature and needs no adjudication. Ground No.2 is related with the AMP expenses, which is identical to the grounds of appeal raised in ITA No. 1045/Mum/2014 for AY 2009-10 which we have already restored TPO/AO. Hence, this ground of appeal is also restored to the file of TPO/AO for consideration afresh. In the result, the Ground No.2 of this appeal is also allowed for statistical purpose. 11. Ground No.3 relates to disallowance of expenses and inventory write off of Rs. 1,21,10,685/-. The Ld. Counsel for the assessee argued that the lower authorities denied the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
