Appeal is raised by the assessee against the addition of Rs. 40,64,33,832/- made by Assessing Officer (A.O.) in its order issued u/s 143(3) read with section 144C of the Income Tax Act , 1961 (herein after refer as “the Act”) in relation to A.Yr. 2010-11.
Brief of the Case
In the case M/s Nikon India (Pvt) Ltd. Vs. DCIT, ITAT held that the AMP (Advertising, Marketing & Promotion) is an international transaction and bright line test cannot be applied on it. Considering the Rule 10 B & relying on the judgment of Honable High Court in Sony Ericsson Mobile Communication Private Limited, Transfer pricing officer is directed to make fresh assessment of Arm Length Price of AMP transaction in accordance with the rules generated in the judgment. Matter resorted back to the file of A.O., as T.P.O in the light of “Bright Line Test”, didn’t make any detailed working of comparables and ITAT, in the absence of documentation, not able to make decision on the ALP of AMP Expense.
Facts of the case
a. The assessee is wholly owned subsidiary of Nikon Corporation, Japan and it is handling the distribution and marketing services for Nikon products in India.
b. The assessee filed a return claiming a loss of Rs. 22,93,287/- and during the assessment proceedings, assessing officer refers certain transaction to TPO U/s 92CA of the Act. While assessing the international transaction, TPO comes to know that assessee company had incurred a very huge amount on business promotion and advertisement amounting Rs. 37,62,75,469 against the net sale of Rs. 203,87,33,264/.
c. TPO held that such excessive expenditure incurred by assessee company was to create an intangible asset i.e penetration of brand for the associate enterprise and take it under the preview of International Transfer Pricing. TPO shortlist certain comparables of assessee and applied CUP method for the determination of ALP. Further, he also added a markup of opportunity cost lost on the blockage of fund with respect to this expenditure.
DRAFT ORDER
Total Sales
