Case Law Details
Brief of the case:
ITAT held in Haier Appliances India Ltd Vs DCIT and Haier Appliances India Ltd Vs ACIT after relying on the case of Sony Ericsson Mobile Communications India Pvt Ltd reported in (2015) 374 ITR 118 (Delhi) that the above transaction of AMP( Advertisement, Marketing, Promotion) was an international transaction and the ALP of that international transaction should be calculated using the cost plus method. Comparing the gross profit of the assessee company with the comparable company as assessee had presented the Resale Price method for calculating the ALP before the ITAT was not tenable because if the gross profit of the comparable’s were compared then the AMP transactions would not remain an international transactions anymore which would be against the decision given in Sony Ericsson Mobile Communications India Pvt Ltd. So, the Resale Price Method adopted by the assessee was wrong. Cost plus method with comparable performing similar functions should be adopted. So the file was remanded back with the AO/TPO for calculating the ALP of AMP as per the decision given in Sony Ericsson Mobile Communications India Pvt Ltd.
Facts of the case:
The assessee company is a wholly owned subsidiary company of ‘Haier Electrical and Appliances Corporation Ltd.’, China and is engaged in the business of distribution of consumer durable products, for example Air Conditioner, Washing machine, refrigerator, television etc., purchased from foreign associated enterprise ( in short ‘AE).However, the intangible rights contained in brand name or trademark/ trade name in respect of goods so purchased and distributed were owned by the foreign AE only. In the year under appeal assessee had incurred advertising, marketing and promotion (AMP) expenses of Rs 74,04,23,369/- out of which it had received back only Rs 13,11,47,568/- as a capital grant towards such expenses. TPO held that the as the above expenses was for the advertisement, marketing, promotion of trademark/brand name which was in the name of AE so, it was an international transaction so transfer pricing should be applicable and the adjustment should be made of the balance amount not received by the assessee.
Contention of the assessee:
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Funny, how Bright line test is not allowable, still poker facing it with CUP method.