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TMI Blog2020 (1) TMI 1591X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had agreed for incurring of AMP expenses for brand building of its AE, viz. L Oreal S.A., France, therefore, the AMP expenses incurred by the assessee had been held by us as not having been incurred by the assessee for brand building of its AE. Accordingly, as no part of the AMP expenses are attributable to rendering of any DEMPE functions for the brands owned by the AE, therefore, the TP adjustment made by the TPO in respect of the distribution segment of the assessee on account of alleged differences in intensity of AMP functions performed by the assessee vis-a-vis the comparable companies in order to align the functions, assets and risks profile of the assessee with that of the comparable companies, cannot be sustained and are liable to be vacated. Alternative adjustment on the manufacturing segment - international transaction on account of payment for availing of marketing support services to AEs - In this case the emails provided by the assessee are not supported any with documentary evidence such as cost allocation sheet, confirmation from parties and the assessee has not demonstrated the benefit provided by the AE from the services. Accordingly, the ALP is tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reservations on the need and benefit to the assessee instead of applying any method of determining the arms length price - we direct that these alternative adjustments as above are liable to be deleted. We order accordingly. - I.T.A. No. 6848/Mum/2018 - - - Dated:- 17-1-2020 - Shri Shamim Yahya (AM) Shri Pawan Singh (JM) Assessee by Shri Niraj Sheth Department by Shri Sunil K. Jha O R D E R Per Shamim Yahya (AM) :- This appeal by the assessee is directed against the order of Assessing Officer dated 18.10.2018 passed pursuant to the order of learned Dispute Resolution Panel dated 11.9.2018 and pertains to A.Y. 2014-15. 2. Though the assessee has raised various grounds the issues arising out of the grounds are as under :- A) Adjustment on account of Advertisement, Marketing and Promotion (AMP) expenses. B1) Alternate adjustment on manufacturing segment on account of payment of royalty for use of technical know-how and trademark. B2) payment made to AEs for use of trademark. C) Alternate adjustment on the distribution segment international transaction of import of finished goods from AEs for resale. D) Alternate adjustment on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on the issue of AMP adjustment. 7. As regards adjustment on account of payment of royalty for the use of technical know-how and trademark also DRP rejected the assessee s objection. Learned DRP also upheld the AMP adjustment in the distribution segment. 8. Against the above the assessee is in appeal before us. 9. We have heard both the counsel and perused the records. Learned Counsel of the assessee submitted that identical issues have been considered by the ITAT in assessee s own case for earlier year except for the alternative adjustment on manufacturing segment. Submission of learned counsel in this regard is summarised as under :- (A) Adjustment on account of advertisement, marketing and brand promotion (AMP) expenses :- (i) Covered by appellant s own ITAT order for A.Y. 2013-14 (page No. 31 para 18) (copy of aforesaid orders were submitted during the course of hearing). (ii) Also appellant s own ITAT order for A.Y. 2008-09 to A.Y. 2010-11 (page 16-17 and para 2.4), A.Y. 2011-12 (page 13 and para 16) and A.Y. 2012-13 (page 23-24 and para 12) (copy of aforesaid orders were submitted during the course of hearing. (B) Alternate adjustment on manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cription of marketing support services availed is described in Annexure 2 to this note). 1. The TPO in his order has instead of examining whether or not the method adopted to determine the ALP is the most appropriate method or whether the comparable companies selected are appropriate or not, has gone into the question of determining the need for such services, proof of rendition of such services, commercial expediency, basis of cost allocation etc. It is submitted that it is not part of the TPO's jurisdiction to consider the above aspects. 2. In this regard, the Appellant relies on the Judgment of Bombay High Court in the case of CIT vs. Lever India Exports Ltd. (supra) 3. In any extent, Appellant has submitted extensive evidences to TPO including advertising creative/concepts developed by AEs, sample story boards for Television Commercial conceptualized by AEs and adopted by the Appellant, agreements, sample invoices, Organisation structure of Marketing support services team, sample email correspondences, product and marketing dossiers, public relationship guidelines, screenshot of global database and websites of AEs accessible to appellant, etc. along detailed write ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction of payment for availing of consulting services. (Brief description 1. The TPO in his order has instead of examining whether or not the method adopted to determine the ALP is the most appropriate method or whether the comparables selected are appropriate or not, has gone into the question of determining the need for such services, proof of rendition of such services, commercial expediency, basis of cost allocation etc. It is submitted that it is not part of the TPO's jurisdiction to consider the above aspects. 2. In this regard, the Appellant relies on the Judgment of Bombay High Court in the case of CIT vs. Lever India Exports Ltd. (supra) 3. In any event, the Appellant has submitted extensive evidences inter alia including agreements, sample invoices, evidences for technical/ consulting advise provided by AE through sample emails etc. in support of receipt of consultancy services and the benefits derived [Page 536-678 (Paperbook Volume 1 and 2); Page 1092-1193 (Paperbook Volume 3)]. Further, the Appellant submitted additional evidences before DRP comprising of agreement, certificate for costs allocated, evidences for technical/ consulting advise provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. Vs. ACIT-7(1)(2), Mumbai [ITA No. 1417/Mum/2017; dated 30.01.2019], had followed the view earlier taken in the preceding years and had vacated the adjustment of 304.69 crores that was made by the TPO by alleging that the AMP expenses incurred by the assessee was an international transaction under Sec. 92B of the Act. The Tribunal while so concluding had observed as under: 12. We have also perused the agreement of assessee with its AE dated 4th January 2011 executed between assessee and its AE. Clause 7 of the agreement descries about right of distribution of licensed product in the territory. As per Clause 8 of the said agreement the assessee is responsible for the advertising the licensed product in the territory. The territory is defined under clause 1.5 of the agreement, which means the territory of Nepal, Bhutan, Bangladesh, Maldives, Mauritius, India and Sri Lanka. However, it excludes any free trade zone, which may exist or may be created. Further it excludes duty free shops located in the duty free or travel retail area which is specialized in sales against foreign currency to foreigner or diplomatic corps, ship chlanders, airlines companies or shipping companies. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unctions performed by the assessee vis a vis the comparable companies. As observed by us hereinabove, the aforesaid adjustment was carried out by the TPO as per the adjusted RPM in order to align the functions, assets and risks profile of the assessee with that of the comparable companies. As the revenue had failed to establish the existence of any 'understanding' or an 'arrangement' or 'action in concert' as per which the assessee had agreed for incurring of AMP expenses for brand building of its AE, viz. L Oreal S.A., France, therefore, the AMP expenses incurred by the assessee had been held by us as not having been incurred by the assessee for brand building of its AE. Accordingly, as no part of the AMP expenses are attributable to rendering of any DEMPE functions for the brands owned by the AE, therefore, the TP adjustment of Rs. 60.03 crore made by the TPO in respect of the distribution segment of the assessee on account of alleged differences in intensity of AMP functions performed by the assessee vis-a-vis the comparable companies in order to align the functions, assets and risks profile of the assessee with that of the comparable companies, cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as an alternative adjustment and to be considered only if the primary adjustment of AMP spend is not upheld by the appellate authorities. 17 In similar manner alternative adjustment on the manufacturing segment on account of royalty for use of technical knowhow Rs 38.82 crores and trademarks Rs. 25.16 crores was made. 18. DRP on these alternative adjustments has upheld the TPO s action. 19. Now in appeal before us, the assessee contends that it is beyond the TPO s jurisdiction to examine benefit aspect u/s. 37(1). In this regard the assessee has placed reliance upon Hon'ble Bombay High Court decision in the case of CIT Vs. Lever India Exports Ltd. (78 taxmann.com 88). Further the assessee contends that enormous additional evidence has been submitted to DRP and TPO has examined the same on remand proceedings and no adverse comment has been done by the TPO. The assessee has strongly objected again remanding the matter. The learned AR has submitted that TPO has not examined whether the method adopted by the assessee to determine the ALP is correct or not but instead concluded that the payment are excessive. 20. Upon careful consideration, we note that the reference t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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