Transfer Pricing – Disallowance of excess advertisement expense by comparing with average advertisement expense of companies is an adhoc method &not TNMM

Advertisement Transfer Pricing Officer  recomputed the expenditure relating to reimbursement of business promotion expenses by Assessee to its associated enterprise based in Cyprus. The TPO had compared the said expense with the average of promotional expenditure incurred by 17 pharmaceutical companies, to compute arm’s length price (ALP) using Transaction Net Margin Method (TNMM). The Honourable Mumbai Tribunal held that the TPO had adopted an adhoc method and not TNMM to disallow the said expenses under the guise of Transfer Pricing provisions; hence the addition on account of disallow...