Case Law Details
PCIT Vs Amway India Enterprises (Delhi High Court)
In the present appeal, the learned counsel for the Appellant states that the ITAT erred in confirming the order of the CIT(A) and failed to appreciate the fact that the royalty payment is excessive and not at arm’s length on consideration of Advertisement, Marketing and Promotion (‘AMP’) expenses incurred by the assessee for the benefit of the AE’s trademark and brand. He states that the ITAT erred in not appreciating that the foundation of the adjustment with respect to royalty payment suggested by the TPO was that the assessee was incurring huge commission expenditure, which has created marketing intangibles for its AEs, and, for incurring this expenditure, the assessee should be compensated with a payment from the AE and that there may not be a need for a huge payment of royalty as rightly noted by the TPO. He also states that the ITAT and CIT(A) has wrongly placed reliance on the judgment of this Court in Chrys Capital Investment Advisors (India) Pvt. Ltd. v. Deputy Commissioner of Income Tax, ITA No. 417/2014, passed on 27.04.2015.
He further states that the ITAT erred in confirming the order of CIT(A) whereby it was held that the rejection of two comparables, namely, Columbia Laboratories Inc. and Premier Consumer Products Inc., by the TPO while retaining the balance four comparables was based on a summary fashion and that no cogent reason was provided for arriving at this opinion.
A perusal of the above order reveals that the ITAT and CIT (A), both fact finding authorities have concurrently held that the rejection of the two comparables by the TPO is based on conjectures and surmises and thus, deleted the addition made on account of transfer pricing adjustment for transaction related to royalty. Learned Counsel for the appellant concedes that if the rejected two comparables are taken into consideration, the payment made by the assessee to its AEs towards royalty would be at arm’s length and no adjustment would be merited. He also concedes that the said two comparables comply with all the filters prescribed by the TPO.
In this view of the matter, no substantial questions of law arise for consideration and accordingly, the appeal is dismissed.
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