Case Law Details
Philips India Ltd. vs ACIT (ITAT Kolkata)
In many cases, licensed manufacturers operate as risk-bearing entrepreneurs, and there is no existence of an ‘agreement’ or ‘arrangement’ or ‘understanding’ with the AE regarding AMP expenditure, the initial onus is on the revenue to show that there is an international transaction for AMP spend.
The mere fact that the Indian entity is engaged in the activity of creation, promotion or maintenance of certain brands of its foreign AE or for the creation/promotion of new/existing markets for the AE, cannot by itself be enough to demonstrate that there is an arrangement with the parent company for this activity. The Revenue has to show that there exists an ‘agreement’ or ‘arrangement’ or ‘understanding’ between the AEs whereby the assessee is obliged to spend on AMP in order to promote the brand of the AE. As held by the Supreme Court in CIT v. B.C. Srinivasa Setty (1979) 128 ITR 294 (SC) and PNB Finance Ltd. vs. CIT (2008) 307 ITR 75 (SC), in the absence of any machinery provision, bringing an imagined international transaction to tax is fraught with the danger of invalidation.
This would be notwithstanding the fact that –
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