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TMI Blog2022 (12) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... penses was incurred, under the terms of the agreement and under the instructions of the principal, as a part of this composite activity, and that the sale promotion activity, on behalf of the overseas AE, is not a standalone activity. It is also important to bear in mind that the margins of the assessee have been accepted to be at an arm s length, on the basis of the arithmetic mean of the margins of the selected comparables with admittedly similar activity, and, therefore, whether the additional profits on account of the mark-up are taken into account or not, the profits of the assessee cannot be subjected to the arm s length price adjustment. We, therefore, deem it fit and proper to delete the impugned ALP adjustment - The assessee get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and CIT(A) erred in not appreciating the fact that the LRD ideally bears expenses (selling, distribution, incentives, discounts) incurred toward selling the products. However, in addition to higher gross margins, AE have compensated these cost incurred by the Appellant to ensure that it does not incur any losses. Further, AE have not charged any fee for providing support services and the IPR rights for carrying the business in India. 4. Learned TO and CIT(A) erred in concluding that market support services are provided without considering the fact that expenditure incurred by the Appellant wholly and exclusively for its domestic business operations. Further erred in not providing any evidence of incurring these expenses corresponds t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt services to the AE, and the assessee needs to be compensated for the same adequately. It was in this backdrop that the TPO recommended an ALP adjustment of 6.86% on the amount spent on behalf of the AE, and this figure of 6.86% was arithmetic mean of seven comparables that the TPO picked up for market support services margin. Accordingly, the Assessing Officer made an ALP adjustment of Rs. 17,63,878/-. Aggrieved, assessee carried the matter in appeal before the CIT(A) who confirmed the action of the authorities below, and, while doing so, he observed as follows:- I have gone through the AO/PO's finding and assessee's submission. It can be seen that the entire expenses related to business promotion were reimbursed by its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d this sale promotion expenses was incurred, under the terms of the agreement and under the instructions of the principal, as a part of this composite activity, and that the sale promotion activity, on behalf of the overseas AE, is not a standalone activity. It is also important to bear in mind that the margins of the assessee have been accepted to be at an arm s length, on the basis of the arithmetic mean of the margins of the selected comparables with admittedly similar activity, and, therefore, whether the additional profits on account of the mark-up are taken into account or not, the profits of the assessee cannot be subjected to the arm s length price adjustment. We, therefore, deem it fit and proper to delete the impugned ALP adjustme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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