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TMI Blog2018 (12) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer would pass the order afresh considering the decision of Hon'ble Apex Court. In those circumstances, he will also allow opportunity of being heard to the assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... all, resulted in brand building for the foreign AE, was a transaction of creating and improving marketing intangibles for and on behalf of its foreign AE and further that such a transaction was in the nature of provision of a service by the appellant to the AE. 2.8 That the DRP/TPO erred on facts and in law by questioning the commercial expediency of AMP expenditure incurred by the appellant and assuming that benefit has accrued to AE on account of AMP expenses incurred by the appellant in India. 2.9 That the DRP/TPO erred on facts and in law in not appreciating that even if marketing intangible has been created then the appellant is the economic owner of such intangible. 2.10 That the DRP/TPO erred on facts and in law in not appreciating that no adjustment on account of allegedly excess AMP expenditure is warranted in the case of the appellant as such expense have been found to constitute bonafide and deductible business expenditure. 2.11 The DRP/TPO erred on facts and in law in not appreciating that such a Transfer Pricing adjustment cannot at all be made in law without determining the Arm's Length Price ("ALP") by applying one of the methods specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and cooling system products. The taxpayer also offers Eagle One Car care products for automotive cleaning and maintenance. The taxpayer claims that its products are available in 25,000 retail counters in India. The taxpayer has two primary business segments - manufacturing and trading. 3. During the year under assessment, the taxpayer entered into international transactions with its Associated Enterprises (AE) as under :- No. Nature of Transaction Method used by assessee Amount (Rs.) (in crores) 1. Import of Trading Goods TNMM 1,50,49,694 2. Export of finished goods TNMM 3,08,21,892 3. Provision of support services TNMM 30,52,362 4. Payment of Royalty TNMM 8,28,08,115 5. Allocation of advertisement expenses TNMM 27,72,000 6. Reimbursement of expenses TNMM 9,24,491 Total 13,54,27,555 4. The TPO observed that during the year under assessment, the taxpayer incurred 4.94% of the income on AMP expenditure on the sales of ₹ 703,63,72,162/- as compared to AMP expenditure to sales ratio of 0.28% in the case of comparables finally selected by the TPO and thereby proceeded to conclude that the taxpayer has incurred huge non-routine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilding the already established 'Valvoline' brand name. 10. The TPO observed that the direct and indirect costs of providing the AMP expenses is the actual amount of AMP expenses debited in the P&L account. TPO by taking into account the indirect expenses made by the taxpayer added additional markup of at least 3.00% on the AMP spent amount and has computed total mark-up of 10.84% on AMP spent. So, the TPO computed the percentage AMP to sales as per determination of bright line limit by making adjustment of ₹ 36,34,86,455/-. 11. The ld. AR for the taxpayer by relying upon the decision rendered by Hon'ble Delhi High Court in its own case for AY 2010-11 in ITA 158/2016 order dated 31.07.2017 contended that there was no international transaction between the taxpayer and its AE with regard to AMP expenses and that a Bright Line Test has no statutory mandate and treating the excess expenditure beyond the bright line limit as an international transactions are not sustainable. 12. Hon'ble High Court in the judgment in taxpayer's own case for AY 2010-11 (supra) formulated the question for determination as under :- "Whether in light of the decision in Maruti Suzuki Ltd. v. CIT (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not arise. 13. Mr Vohra submitted that there was in fact no concession made by the Assessee on this score. He submitted that the ITAT ought not to have remanded the matter to the TPO as the material on record before the ITAT was sufficient to arrive at a conclusion on this issue. 14. Mr. Sanjay Kumar, on the other hand, submitted that it was the Assessee's own case before the ITAT that in the absence of facts and figures the matter should be sent back to the TPO for a fresh determination. He further submitted that when the TPO decided the issue in the present case, he did not have the benefit of the decision of this Court in Sony Ericsson India Pvt. Ltd.(supra). He also submitted that if the matter went back to the TPO he would have to examine the issue afresh, de hors the BLT, and this was the reason why the entire matter, and not just the issue regarding determination of ALP, ought to be sent back to the TPO. Mr. Sanjay Kumar also placed reliance on this decision of this Court in Le Passage to India Tour & Travels (P) Ltd. v. The Deputy Commissioner of Income Tax (2017) 391 ITR 207. 15. The decision in Le Passage to India Tour & Travels (P) Ltd.(supra) turned on the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discharge the initial burden upon it with regard to showing the existence of an international transaction between the Assessee and the AE. 19. For the aforementioned reasons, this Court is of the view that the ITAT was not justified in remanding the matter to the AO/TPO for determining the ALP of the alleged international transaction involving AMP expenses, when in fact, the Revenue was unable to show that there existed an international transaction between the Assessee and its AE in the first place." 14. In the face of the undisputed fact that there is no change in the business model of the taxpayer during the year under assessment qua the AMP expenses incurred by the taxpayer. It is also not in dispute that the taxpayer has transacted with its AE on the same terms and conditions; that AE performed marketing support activities for taxpayer by planning and developing advertising formats and determines media to be used, such as magazines, newspapers, etc. For new products, if introduced, the AEs send relevant brochure and materials to the taxpayer for their domestic marketing and the AE also provided online training, if required. The marketing strategy relating to positioning of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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