INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Determination of ALP - AMP expenses - TPO determined ALP without carrying out examination of AMP functions carried out by assessee and the probable comparables

Assessee-company, a wholly-owned subsidiary of Selvic Netherlands BV, incurred advertisement, marketing and promotional (AMP) expenses of Rs. 41 Crores. TPO held that assessee has incurred excessive AMP expenses which resulted in brand promotion for AEs without any commensurate compensation from AEs in this regard. Therefore, TPO rejected segmental data of assessee and allocated excessive expenses to manufacturing and distribution segment of assessee in ratio of sales. Held: There was an agreement and arrangement between assessee and AE for incurring AMP expenses on behalf of overseas AE and getting reimbursement of the same. However, examination of AMP functions carried out by assessee and the probable comparables was sine qua non in the process of determination of ALP of the international transaction of AMP spend, either in a segregate or an aggregate manner and same was not done by TPO. Accordingly, matter regarding determination of ALP of AMP expenses was remanded back to TPO for adjudication afresh.

Applied:BMW India (P) Ltd. v. Asstt. CIT (2014) 166 TTJ (Del) 657 : 2014 TaxPub(DT) 4165 (Del-Trib)

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2010-11

INCOME TAX ACT, 1961

Section 37(1)

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