INCOME TAX ACT, 1961

Section 92B

Transfer pricing - International transaction - AMP expenses - TPO taking plea of short-term agreement entered for an earlier year

Assessee incurred AMP expenditure. TPO held the same to be in the nature of international transaction in the nature of brand building exercise for benefit of AE abroad. Held: Entire finding and approach of TPO was purely based on hypothesis and one of the agreements entered in earlier years for a limited period of six months and this had been stated to be a material so as to determine that there was an international transaction qua AMP expenditure in this year. Such a presumption based on said agreement could not be inferred in the concerned year at all as, firstly, it was for a very limited period in one of the earlier year as stated and secondly, each year had to be seen independently and if no such material act was permeating then presumption could not be drawn for perpetuity. Thus, Revenue has failed to bring on record any material or any kind of arrangement existing between the AE and assessee-company that there was separate international transaction with regard to AMP expenditure. Even otherwise, it would be very difficult to determine impact of increased intensity of advertisement function on profit margin as impact of advertisement on sale could not be determined or quantified ina particular year, and therefore, even if AMP expenditure was to be compared with other comparables by applying any method, it would be very difficult to make reasonably accurate adjustment to profit margins of comparables companies. Thus, it would be very difficult to treat AMP as separate international transaction and any attempt to benchmark such a presumed transaction in any manner would be a very difficult exercise. Entire AMP adjustment made by TPO was deleted.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11

INCOME TAX ACT, 1961

Section 10A(1)(1A)

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