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TMI Blog2019 (4) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... any of the circumstances specified in clauses (a) to (d) of sub-section (3) of section 92C of the Act. 3. The Ld. TPO/AO/ Hon'ble DRP have erred in computing an adjustment of INR 6,95,45,557/- to the total income of the Appellant on account of adjustment in arm's length price ("ALP") of the alleged international transaction pertaining to Advertisement, Marketing and Promotional ("AMP") expenditure entered into by the Appellant with its Associated Enterprise ("AE"). 4. The Ld. TPO/ AO/ DRP have erred in holding AMP expenditure as a separate international transaction under section 92B of the Act and assuming jurisdiction to determine the ALP thereof, when such expenditure represents only domestic transactions with unrelated parties and does not satisfy the requisites of being an international transaction under section 92B read with section 92F(v) of the Act. 5. The Ld. TPO/ AO has erred in treating expenses incurred by the Appellant on account of AMP as an 'international transaction', without considering the fact that the Appellant is a full risk bearing licensed manufacturer. 6. The Hon'ble DRP/Ld. TPO/ Ld. AO erred in not considering that the Gross Profit ("GP") rate of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case. in: a. Holding that advertising is done for brand promotion and not for product promotion; and b. Computing adjustment thereon, without appreciating that no expenditure attributable to brand promotion can be separately identified. Corporate tax Ground of Appeals 12. That on facts and in laws, the Ld. AO erred in holding that the appellant has furnished inaccurate particulars of income in respect of each item of disallowance/ additions and in initiating penalty proceedings under section 274 read with section 271 (1) (c) of the Act. The appellant craves leave to submit such further grounds at or before the hearing of the appeal, so as to enable your Honour to decide the appeal according to law." 2. Brief facts of the case are as under: Assessee filed its return of income on 29/11/11 declaring loss of Rs. 33,73,17,454/-, which was processed under section 143 (1) of the Income Tax Act, 1961 (the Act). The case was selected for scrutiny and statutory notices under section 143(2) of the Act was issued. In response to statutory notices, representative of assessee appeared before Ld. AO and filed requisite details as called for. 2.1. Ld.AO observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marketing intangibles in India and such brands are owned by its AEs outside India and therefore expenditure incurred on AMP activities was for advantage of AEs. Ld.TPO accordingly applied bright line approach and computed adjustment as under: Particulars Amount (Rs.) Total expenditure on AMP 6,45,14,654 Sale of assessee 10,19,46,703 AMP as a % of sales of assessee 63.28% Arm's length level of AMP % (as per the 'bright line') 0.75% Arm's length level of AMP expenses 7,64,600 Amount spent in excess of 'bright line' and on creation of marketing intangible 6,37,50,054 Mark-up (PLR of SBI) 12.25% Amount by which the assessee should have been reimbursed by AE 7,15,65,810 2.6. Aggrieved by proposed AMP adjustment, assessee raised objections before DRP, who upheld stand of Ld.TPO regarding AMP being an international transaction. However following decision of Hon'ble Delhi High Court in case of Sony Ericson Mobile Communication India (P) Ltd vs. CIT reported in (2015) 55 Taxmann.com 240, DRP directed for exclusion of routine selling and distribution expenses while computing AMP of comparables. DRP also directed that only comparables where similar expenses have been incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ak-even in the next couple of years. 4.2. It is submitted that, adjustment made by Ld.TPO is not sustainable for various reasons. Ld.Counsel submitted following prepositions: (i) No "international transaction" involved: Placing reliance upon Section 92B(1) of the Act, Ld.Counsel submitted that 'international transaction' has been defined to mean 'transaction' between two or more 'associated enterprises', either or both of whom are non-residents, for purchase, sale or lease of tangible or intangible property, or provisions of services, etc. He submitted that, said section provides that, term 'international transaction' would include 'mutual agreement' or 'arrangement' between two or more associated enterprises for allocation or apportionment of, or contribution to any cost incurred in connection with any benefit or service provided to any such enterprise. (ii) He submitted that section 92B, for a transaction to be termed as International transaction, it has to fit into either of two limbs, viz; * There must be a transaction and such transaction must be between associated enterprises. or * There should be mutual agreement or arrangement between two or mor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the absence an arrangement, understanding, or action in concert (e.g. pre-arranged plan, or design agreed by parties), between parties, cannot be termed as a transaction. 4.6. He thus submitted that, in order to construe a transaction, there has to be an express arrangement, understanding or action in concert between parties which cannot be inferred or implied. 4.7. Ld.Counsel submitted that, in present case, AMP expenses had been incurred by assessee unilaterally, at its own discretion through unrelated Indian parties, for purpose of its own business, in order to cater to local market needs. Such AMP expenditure was not incurred at instance of overseas AEs. 4.8. He further submitted that, no material brought on record by Ld.TPO, to establish existence an arrangement, understanding or action in concert with AEs. He submitted that Ld.TPO held such AMP expenditure unilaterally incurred by assessee locally, for and on behalf of it, to be amounting to "international transaction" in terms of section 92B, warranting invocation of transfer pricing provisions. 4.9. Ld.Counsel placing reliance on decision of Hon'ble Delhi High Court in the case of Moser Baer vs. ACIT reported in (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ALP. 64. The transfer pricing adjustment is not expected to be made by deducing from the difference between the 'excessive' AMP expenditure incurred by the Applicant and the AMP expenditure of a comparable entity that an international transaction exists and then proceed to make the adjustment of the difference in order to determine the value of such AMP expenditure incurred for the AE. And, yet, that is what appears to have been done by the Revenue in the present case. It first arrived at the 'bright line' by comparing the AMP expenses incurred by MSIL with the average percentage of the AMP expenses incurred by the comparable entities. Since on applying the BLT, the AMP spend of MSIL was found 'excessive' the Revenue deduced the existence of an international transaction. It then added back the excess expenditure as the transfer pricing 'adjustment'. This runs counter to legal position explained in] CIT v. EKL Appliances Ltd. (2012) 345 ITR 241 (Del) which required a TPO "to examine the 'international transaction' as he actually finds the same." In other words the very existence of an international transaction cannot be a matter for inference or su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is any 'machinery' provision for determining the existence of an international transaction involving AMP expenses, Mr. Srivastava only referred to Section 92F (ii) which defines ALP to mean a price "which is applied or proposed to be applied in a transaction between persons other than AEs in uncontrolled conditions". Since the reference is to 'price' and to 'uncontrolled conditions' it implicitly brings into play the BLT. In other words, it emphasises that where the price is something other than what would be paid or charged by one entity from another in uncontrolled situations then that would be the ALP. The Court does not see this as a machinery provision particularly in light of the fact that the BLT has been expressly negatived by the Court in Sony Ericsson. Therefore, the existence of an international transaction will have to be established de hors the BLT. 69. There is nothing in the Act which indicates how, in the absence of the BLT, one can discern the existence of an international transaction as far as AMP expenditure is concerned. The Court finds considerable merit in the contention of the Applicant that the only TP adjustment authorised and permit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be presumed that AMP expense incurred by assessee are at the instance, or on behalf of associated enterprises. Placing reliance upon view by Hon'ble Delhi High Court, Ld.Counsel submitted that initial onus is on Revenue to demonstrate through some tangible material that assessee and associated enterprise acted in concert and further that there was an agreement to enter into an international transaction concerning AMP expenses. 4.12. It was vehemently submitted that Ld.TPO erroneously held that performance of Development, Enhancement, Maintenance, Protection and Enhancement ('DEMPE') functions by assessee lead to international transaction between assessee and associated enterprise, without appreciating that such functions are performed by assessee independently, unilaterally and without any influence of associated enterprises. It was submitted by Ld.Counsel that since DEMPE functions relating to AMP expenses are performed by assessee and returns attributed to such functions are also enjoyed by assessee in the form of higher sales and profitability, no compensation for AMP expenses incurred by assessee is warranted. He placed reliance upon a chart forecasting profits in futur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 92(2) of the Act, so as to be subjected to arm's length test under Transfer Pricing provisions. 4.19. Economic vs. legal ownership of intellectual property. Ld.Counsel submitted that, assessee is a joint-venture between Yakult Japan and Danone Singapore. He submitted that there is no economic sense in joint-venture incurring huge expenditure in India for benefit of only one party of joint-venture. It has been submitted that, both Yakult Japan and Danone Singapore are 50:50 shareholders of joint-venture, and any expenditure incurred in India would be for the benefit of both parties involved and Danone Singapore, would not have allowed assessee to incur excessive AMP spent only for benefit for Yakult Japan, as it would lower the share profits which Danone Singapore is entitled for. 4.20. It has thus been submitted by Ld.Counsel that all decisions made in context of AMP functions within India are undertaken by assessee and any benefit arising out of same, directly accrues to assessee. It has also been submitted that if any benefit are accrued to AEs is indirect, and purely incidental. Ld.Counsel submitted that assessee is operating in India since 2007 and has been exclusivel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for its promotional expenditures by the owner of the marketing intangible. In that case, the distributor would be entitled to compensation appropriate to its agency activities alone and would not be entitled to share in any return attributable to the marketing intangible. 6.38. Where the distributor actually bears the cost of its marketing activities (i.e. there is no arrangement for the owner to reimburse the expenditures), the issue is the extent to which the distributor is able to share in the potential benefits from those activities. In general, in arm's length transactions the ability of a party that is not the legal owner of a marketing intangible to obtain the future benefits of marketing activities that increase the value of that intangible will depend principally on the substance of the rights of that party. For example, a distributor may have the ability to obtain benefits from its investments in developing the value of a trademark from its turnover and market share where it has a long-term contract of sole distribution rights for the trademarked product. In such cases, the distributor share of benefits should be determined based on what an independent distributor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner. The position may be different where there is a long term contract of sole distribution rights of the trademarked products, thereby acquiring economic ownership benefit. In some cases, where the distributor bears extraordinary> marketing expenses, he would be entitled to additional or higher return, through decreased price or reduction of royalty rate. The difficulty in attributing advertisement and other promotional expenditures towards trademark valuation or towards marketing activities, i.e. contributing to manufacture and current income and the impracticability of division in the case of such attribution is highlighted in paragraph 6.39." 4.23. Ld.Counsel thus submitted that economic ownership of brand 'Yakult' rests with assessee and accordingly, assessee cannot be expected to seek compensation for expenditure incurred on asset economically owned by it. 4.24. In view of aforesaid, it is respectfully submitted that adjustment on account of AMP expenses made by Ld.TPO is not permissible. 5. On the contrary, Ld.CIT DR submitted that huge spending of AMP expenses amounts to brand building and trademark of AEs, and therefore gives benefit to AE by enhancing its brand val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets used by assessee to the transaction. 4.2.2 Functions performed by Yakult Danone India The functions performed by Yakult Danone India are: a) Procurement of raw materials and packing materials: Yakult Danone India is primarily engaged in the manufacture and sale of dairy products i.e. probiotic milk. The manufacturing plant of the company is located in Sonepat. Hence, it is involved in the procurement of raw materials and packaging materials in respect of its operations. These materials are procured by Yakult Danone India based on sales forecasts and consumption estimates. b) Production of milk: Yakult Danone India is engaged in preparation of probiotic milk from skimmed milk. The main ingredients of the product are skimmed milk powder, sugar, glucose, friendly bacteria and water. The bacteria is cultured and mixed with other ingredients to prepare the probiotic milk. The company is engaged in routine functions of inventory scheduling, production scheduling and monitoring as a part of its production operations. Yakult Danone India purchases capital equipment from its Group Companies for production of milk. These equipments purchased are in the nature of dairy machines, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a after production. e) General Management Functions: Apart from the above, Yakult Danone India also undertakes certain general management functions that are carried out by any business irrespective of its size and type. These functions (mentioned below) are drivers of every business and are indispensable in the economic environment: * Corporate Strategy Determination: All policies relating to various processes and issues within Yakult Danone India are determined by its own management which continuously monitors the economic environment surrounding the Indian entity, assesses their strategic position within the industry and targets to comply with the overall longterm corporate goals. * Finance, Accounting, Treasury, HR and Legal Function: Yakult Danone India is responsible for managing its finance, treasury and accounting functions. Yakult Danone India is also responsible for compliance with all legal/ statutory requirements applicable to the Indian entity. It also undertakes its routine administration and HR functions. 4.3 Assets Tangible Assets Yakult Danone India utilized routine tangible assets for its manufacturing operation like plant and machinery, factory build ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der-utilisation of the existing capacity of the organisation in terms of manufacturing facility/ service capacity etc. Yakult Danone India is exposed to the risk of under utilisation of its capacity. As Yakult Danone India was engaged in commercial operations only from December 2007, during the year, it operated at a capacity of only 8% of its installed capacity. The AEs do not bear the capacity utilisation risk with respect to the Indian operations. Manpower risk Manpower is one of the most valuable resources employed by an organisation for carrying out its day-to-day operations. The increasing competition in the market place combined with other uncontrolled variables result in exposure to manpower risk. Yakult Danone India bears this risk in respect of the India personnel. Yakult Danone Group does not bear any risk associated with manpower of Indian operations. Price Risk This risk arises on account of fluctuations of prices in the market. As Yakult Danone India competes in the open market it is exposed to this risk. Yakult Danone India initiated commercial production of milk in December 2007 only. Accordingly to penetrate the market it under-priced its bottles by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esearch & Development - √ 6. Procurement of Raw Material and Packing Material √ - 7. Local production of Milk √ - 8. Local Sales Promotion √ - 9. Local Quality Control √ - 10. General Management Functions √ - RISKS BORNE 11. Market Risk √ - 12. Customer Credit Risk √ - 13. Foreign Exchange Risk √ - 14. Capacity Utilisation Risk √ - 15. Man Power Risk √ - 16. Price Risk √ - 17. Research and Development Risk - √ 18. Technology Risk - √ 19. Inventory Risk √ - ASSETS USED 20. Tangible Assets √ - 21. Intangible Assets - √ 6.2. Admittedly, assessee is a joint venture between Yakult Honsha of Japan and Groupe Danone of France with 50:50 shareholdings. There is no dispute that this company has been set up to manufacture and sell Probiotic milk in India. In TP study, assessee categorised itself to be a manufacturer of Probiotic milk. Admittedly, assessee started its commercial sale in financial year 2007-08 and made significant losses at operating level during year. It is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts are sold via convenience stores, on the street or in office, schools, hospitals and elderly care facilities. It is also observed that assessee is exposed to market risk, customer credit risk, foreign exchange risk, capacity utilisation risk, manpower risk and inventory risk. 6.6. From the above, it is clear that all necessary functions of strategizing, advertising and marketing activities, its implementation and controlling across country is conducted by assessee for market penetration in India. Thus, in a way assessee is economic owner of brand, though not the legal owner. As a fullfledged manufacturer, assessee has been assuming all risks for promoting its sales, and thereby entire profitability is subject to tax in India, and no residual profits are enjoyed by AE. It is observed that AE is only paid royalty and technical service fee at 1% each of net turnover. 6.7. Ld.TPO concluded that assessee created marketing intangibles only for promotion of brand and products of AE. Ld.TPO was of opinion that, as AE recovering AMP expenditure incurred by it from assessee, and that AE is controlling AMP activity of assessee, indicates that, there was some arrangement between assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured by foreign AEs. The said Assessees were themselves not manufacturers. In any event, none of them appeared to have questioned the existence of an international transaction involving the concerned foreign AE. It was also not disputed that the said international transaction of incurring of AMP expenses could be made subject matter of transfer pricing adjustment in terms of Section 92 of the Act. 44. However, in the present appeals, the very existence of an international transaction is in issue. The specific case of MSIL is that the Revenue has failed to show the existence of any agreement, understanding or arrangement between MSIL and SMC regarding the AMP spend of MSIL. It is pointed out that the BLT has been applied to the AMP spend by MSIL to (a) deduce the existence of an international transaction involving SMC and (b) to make a quantitative 'adjustment' to the ALP to the extent that the expenditure exceeds the expenditure by comparable entities. It is submitted that with the decision in Sony Ericsson Mobile Communications India (P.) Ltd. (supra) having disapproved of BLT as a legitimate means of determining the ALP of an international transaction involving AMP exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 92CB which provides for the "safe harbour" rules for determination of the ALP, can be applied only if the TP adjustment involves substitution of the transaction price with the ALP. Rules 10B, 10C and the new Rule 10AB only deal with the determination of the ALP. Thus, for the purposes of Chapter X of the Act, what is envisaged is not a quantitative adjustment but only a substitution of the transaction price with the ALP. 70. What is clear is that it is the 'price' of an international transaction which is required to be adjusted. The very existence of an international transaction cannot be presumed by assigning some price to it and then deducing that since it is not an ALP, an 'adjustment' has to be made. The burden is on the Revenue to first show the existence of an international transaction. Next, to ascertain the disclosed 'price' of such transaction and thereafter ask whether it is an ALP. If the answer to that is in the negative the TP adjustment should follow. The objective of Chapter X is to make adjustments to the price of an international transaction which the AEs involved may seek to shift from one jurisdiction to another. An 'assumed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expense enures. The 'nonroutine' AMP spend is taken to have 'subsumed' the portion constituting the 'compensation' owed to the Indian entity by the foreign AE. In such a scenario what will be required to be benchmarked is not the AMP expense itself but to what extent the Indian entity must be compensated. That is not within the realm of the provisions of Chapter X. 74. The problem with the Revenue's approach is that it wants every instance of an AMP spend by an Indian entity which happens to use the brand of a foreign AE to be presumed to involve an international transaction. And this, notwithstanding that this is not one of the deemed international transactions listed under the Explanation to Section 92B of the Act. The problem does not stop here. Even if a transaction involving an AMP spend for a foreign AE is able to be located in some agreement, written (for e.g., the ample agreements produced before the Court by the Revenue) or otherwise, how should a TPO proceed to benchmark the portion of such AMP spend that the Indian entity should be compensated for? 75. As an analogy, and for no other purpose, in the context of a domestic transaction inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... international transaction and there were other set of cases where the assessee has disputed the international transaction. This is clear from the following passage of the judgment: - "120. Notwithstanding the above position, the argument of the Revenue goes beyond adequate and fair compensation and the ratio of the majority decision mandates that in each case where an Indian subsidiary of a foreign AE incurs AMP expenditure should be subjected to the 'bright line test' on the basis of comparables mentioned in paragraph 17.4. Any excess expenditure beyond the bright line should be regarded as a separate international transaction of brand building. Such a broadbrush universal approach is unwarranted and would amount to judicial legislation. During the course of arguments, it was accepted by the Revenue that the TPOs/Assessing Officers have universally applied 'bright line test' to decipher and compute value of international transaction and thereafter applied 'Cost Plus Method' or 'Cost Method' to compute the arm's length price. The said approach is not mandated and stipulated in the Act or the Rules. The list of parameters for ascertaining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplying separate methods. This will be in terms of the provisions of the Act and the Rules and also as per the general principles of international taxation accepted and applied universally. On the other hand, as recorded by us above, applying 'bright line test' on the basis of parameters prescribed in paragraphs 17.4 and 17.6 would be adding and writing words in the statute and the Rules and introducing a new concept which has not been recognised and accepted in any of the international commentaries or as per the general principles of international taxation accepted and applied universally. There is nothing in the Act or the Rules to hold that it is obligatory that the AMP expenses must and necessarily should be subjected to 'bright line test' and the nonroutine AMP expenses as a separate transaction to be computed in the manner as stipulated." 58. Thus, form the plain reading of the aforesaid principles laid down by the Hon'ble Jurisdictional High Court, the key sequitur is that: (i) International transaction cannot be identified or held to be existing simply because excess AMP expenditure has been incurred by the Indian entity. (ii) International trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; experience and faith. Brand value is not generated overnight but is created ever a period of time, when there is recognition that the logo or the name guarantees a consistent level of quality and expertise. Leslie de Chematony and McDonald have described "a successful brand is an identifiable product, service, person or place, augmented in such a way that the buyer or user perceives relevant, unique, sustainable added values which match their needs most closely". The words of the Supreme Court in Civil Appeal No. 1201 of 1966 decided on February 12, 1970, in Khushal Khenger Shah v. Khorshedbann Dabida Boatwala, to describe "goodwill", can be adopted to describe a brand as an intangible asset being the whole advantage of the reputation and connections formed with the customer together with circumstances which make the connection durable. The definition given by Lord MacNaghten in Commissioner of Inland Revenue v. Midler and Co. Margarine Ltd. [1901] AC 217 (223) can also be applied with marginal changes to understand the concept of brand. In the context of "goodwill" it was observed: "It is very difficult, as it seems to me, to say that goodwill is not property. Goodwill is bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reputation which the proprietor of the brand has gathered over a passage or period of time in the form of widespread popularity and universal approval and acceptance in the eyes of the customer. To use words from CTT v. Chunilal Prabhudas and Co. [1970] 76 ITR 566 (Cal) ; AIR 1971 Cal 70, it would mean : "It has been horticulturally and botanically viewed as 'a seed sprouting' or an 'acorn growing into the mighty oak of goodwill'. It has been geographically described by locality. It has been historically explained as growing and crystallising traditions in the business. It has been described in terms of a magnet as the 'attracting force'. In terms of comparative dynamics, goodwill has been described as the 'differential return of profit'. Philosophically it has been held to be intangible. Though immaterial, it is materially valued. Physically and psychologically, it is a 'habit and sociologically it is a 'custom'. Biologically, it has been described by Lord Macnaghten in Trego v. Hunt [1896] AC 7 as the 'sap and life' of the business." There is a line of demarcation between development and exploitation. Development of a tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isement with the intention to increase the brand value but to increase the sales and thereby earn larger and greater profits. It is not the case of the Revenue that the foreign associated enterprises are in the business of sale/transfer of brands. Accounting Standard 26 exemplifies distinction between expenditure HJ7 incurred to develop or acquire an intangible asset and internally generated goodwill. An intangible asset should be recognised as an asset, if and only if, it is probable that future economic benefits attributable to the said asset will flow to the enterprise and the cost of the asset can be measured reliably. The estimate would represent the set off of economic conditions that will exist over the useful life of the intangible asset. At the initial stage, intangible asset should be measured at cost. The above proposition would not apply to internally generated goodwill or brand. Paragraph 35 specifically elucidates that internally generated goodwill should not be recognised as an asset. In some cases expenditure is incurred to generate future economic benefits but it may not insult in creation of an intangible asset in the form of goodwill or brand, which meets the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecting the business. Thus, the date of acquisition or the date on which it comes into existence is not possible to determine and it is impossible to say what was the cost of acquisition. The aforesaid observations are relevant and are equally applicable to the present controversy. It has been repeatedly held by the Delhi High Court that advertisement 110 expenditure generally is not and should not be treated as capital expenditure incurred or made for creating an intangible capital asset. Appropriate in this regard would be to reproduce the observations in CTT v. Monto Motors Ltd. [2012] 206 Taxman 43 (Delhi), which read: "4. . . . Advertisement expenses when incurred to increase sales of products are usually treated as a revenue expenditure, since the memory of purchasers or customers is short. Advertisement are issued from time to time and the expenditure is incurred periodically, so that the customers remain attracted and do not forget the product and its qualities. The advertisements published/displayed may not be of relevance or significance after lapse of time in a highly competitive market, wherein the products of different companies compete and are available in abundance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... image is a result of consumerism and a commercial reality, as branded products "own" and have a reputation of intrinsic believability and acceptance which results in higher price and margins. Transborder brand reputation is recognised judicially and in the commercial world. Well known and renowned brands had extensive goodwill and image, even before they became freely and readily available in India through the subsidiary associated enterprises, who are assessees before us. It cannot be denied that the reputed and established brands had value and goodwill. But a new brand/trade mark/trade-name would be relatively unknown. We have referred to the said position not to make a comparison between different brands but to highlight that these are relevant factors and could affect the function undertaken which must be duly taken into consideration in selection of the comparables or when making subjective adjustment and, thus, for computing the arm's length price. The aforesaid discussion substantially negates and rejects the Revenue's case. But there are aspects and contentions in favour of the Revenue which requires elucidation." 60.1 Thus, the Hon'ble High Court after descri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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