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TMI Blog2018 (12) TMI 1264X X X X Extracts X X X X X X X X Extracts X X X X ..... unication India P. Ltd read as under: "We would not like to go into several factual aspects for the first time, for the factual matrix has not been examined and ascertained by the Tribunal. Moreover, in terms with our legal finding, factual findings will have to be examined. An order of remand for de novo consideration to the Tribunal would be appropriate because the legal standards or ratio accepted and applied by the Tribunal was erroneous. On the basis of the legal ratio expounded in this decision, facts have to be ascertained and applied. If required and necessary, the assessed and the Revenue should be asked to furnish details or tables. The Tribunal, at the first instance, would try and dispose of the appeals, rather than passing an order of remand to the Assessing Officer/TPO. The endeavour should be to ascertain and satisfy whether the gross/net profit margin would duly account for AMP expenses. When figures and calculations as per the TNM or RP Method adopted and applied show that the net/gross margins are adequate and acceptable, the appeal of the assessed should be accepted. Where there is a doubt or the other view is plausible, an order of remand for reexamination by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accurate necessarily decreases. (iv) The assessed, i.e. the domestic AE must be compensated for the AMP expenses by the foreign AE. Such compensation may be included or subsumed in low purchase price or by not charging or charging lower royalty. Direct compensation can also be paid. The method selected and comparability analysis should be appropriated and reliable so as to include the AMP functions and costs. (v) Where the Assessing Officer/TPO accepts the comparables adopted by the assessed, with or without making adjustments, as a bundled transaction, it would be illogical and improper to treat AMP expenses as a separate international transaction, for the simple reason that if the functions performed by the tested parties and the comparables match, with or without adjustments, AMP expenses are duly accounted for. It would be incongruous to accept the comparables and determine or accept the transfer price and still segregate AMP expenses as an international transaction. (vi) The Assessing Officer/TPO can reject a method selected by the assessed for several reasons including want of reliability in the factual matrix or lack / non-availability of comparables. (see Section 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be conspicuously wrong and incorrect to treat the segregated transactional value as "NIL" when in fact the two AEs had treated the international transactions as a package or a single one and contribution is attributed to the aggregate package. Unhesitatingly, we add that in a specific case this criteria and even zero attribution could be possible, but facts should so reveal and require. To this extent, we would disagree with the majority decision in L.G. Electronics India Pvt. Ltd. (supra). This would be necessary when the arm's length price of the controlled transaction cannot be adequately or reliably determined without segmentation of AMP expenses. (xi) The Assessing Officer/TPO for good and sufficient reasons can de-bundle interconnected transactions, i.e. segregate distribution, marketing or AMP transactions. This may be necessary when bundled transactions cannot be adequately compared on aggregate basis. (xii) When segmentation or segregation of a bundled transaction is required, the question of set off and apportionment must be examined realistically and with a pragmatic approach. Transfer pricing is an income allocating exercise to prevent artificial shifting of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, as on date, the assessee from being a manufacturer and distributor of goods, has changed its model and has become full-fledged distributor of goods. 8. Thus, it can be safely concluded that the core business of the assessee is distribution of goods and in furtherance of this core business activity, the assessee is also doing marketing. 9. The assessee does not own any intangibles in the nature of brand name or marketing intangibles. The assessee has incurred the following expenses relating to AMP: Advertisement expenses - Rs. 38,62,51,002/- Sales Promotion expenses - Rs. 77,54,79,113/- Selling expenses - Rs. 2,64,50,161/- Reimbursement of expenses - Rs. 72,63,324/- 10. Since the assessee has not bench marked the international transaction of reimbursement received from its AE, the TPO was of the opinion that the same has not been shown by the assessee in the T.P. report as to whether the assessee has been suitably compensated by the AE in this respect or not. 11. The TPO observed that the assessee has developed marketing intangibles by incurring expenditure of Rs. 1,19,54,43,600/- on advertisement, marketing and promotion. The TPO was of the firm belie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Sony Ericson Mobile Communication India Private Limited [supra] has discarded BLT. The relevant finding of the Hon'ble High Court reads as under: "27. We agree and accept the position in the portion reproduced above in bold and italics. The object and purpose of Transfer Pricing adjustment is to ensure that the controlled taxpayers are given tax parity with uncontrolled taxpayers by determining their true taxable income. There should be adequate and proper compensation for the functions performed including AMP expenses. Thus, we disagree with the Revenue and do not accept the overbearing and orotund submission that the exercise to separate 'routine' and 'non-routine' AMP or brand building exercise by applying 'bright line test' of non-comparables and in all case, costs or compensation paid for AMP expenses would be 'NIL', or at best would mean the amount or compensation expressly paid for AMP expenses. Unhesitatingly, we add that in a specific case this criteria and even zero attribution could be possible^ but facts should so reveal and require. To this extent, we would disagree with the majority decision in L.G. Electronics India Pvt. Ltd. (supra). " 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the benefit of the brand building of the AE. Moreover, in our considered opinion, multiple opportunities are not permissible to any authority to experiment in setting up case as held by the Hon'ble Gujarat High Court in the case of Rajesh Babubhai Damania 251 ITR 541. 22. It would not be out of place to refer to the clarification given by the Hon'ble High Court of Delhi in the case of Casio India Pvt Ltd in ITA No. 814/2017 and CM 34273/2017 and the same reads as under: "Learned counsel for the appellant states that clarification is required that the directions given in paragraph 8 of the impugned order should not be construed as if the Assessing Officer/Transfer Pricing Officer (TPO) would examine Advertisement Marketing and Sales Promotion (AMP) expenses as a separate international transaction. AMP expenses were part and parcel of the expenses incurred of the distribution. While determining Arms Length Price, the said aspect would be taken into consideration by the Assessing /Officer/TPO." 23. The benefit, if any, gone to the AE can only be termed as incidental benefit. Merely because there is an incidental benefit to AE, Sony Company, it cannot be stated that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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