Document Fragment View

Matching Fragments

This is an appeal filed by the assessee. The relevant assessment year is 2013-14. The appeal is directed against the order of the Assistant Commissioner of Income Tax, Cir.-10(1)(1), Mumbai (hereinafter the 'AO') passed u/s 143(3) r.w.s. 144C(13) of the Income Tax Act 1961, (the 'Act').

2. The 1st ground of appeal is general in nature. The 2nd to 27th grounds of appeal are transfer pricing grounds on Advertising, Marketing and Promotion (AMP) adjustment.

India Medtronic Pvt. Ltd. 2 2.1 We begin with the AMP adjustment. The appellant is an Indian company being a 100% subsidiary of Medtronic International, Hong Kong, which in turn is a subsidiary of Medtronic Inc., a US based global leader in medical technology engaged in development and manufacture of wide range of medical products. The appellant is engaged in marketing and distribution of products of the group companies.

Without prejudice to the above, the TPO held that in case the adjustment with respect to AMP is not upheld by the ITAT, then an amount of Rs.31,20,82,850/- spent as convention expenses by the appellant should be compensated by the AE as these expenses were spent for brand intangibles in India.

India Medtronic Pvt. Ltd. 3 The AO in the final assessment order upheld the transfer pricing adjustment of Rs.13,34,52,541/- on account of AMP expenses made by the TPO and also as per the direction issued by the Dispute Resolution Panel (DRP).

Further, relying on the order of the ITAT in its own case for AY 2008-09 (ITA No. 7555/Mum/2012) dated 04.05.2018 and for AY 2011- 12 (ITA No. 1246/Mum/2016) dated 02.05.2018, the Ld. counsel submits that in the said cases the Tribunal relied on the above ruling with the same distribution agreements and held the matter in favour of the appellant.

In connection with the above the Ld. counsel submits that the distribution agreements are effective from 28.04.2007 and are renewable automatically on a year-to-year basis. Further, the appellant India Medtronic Pvt. Ltd. 4 entered into an agreement with another AE effective from 28.04.2012 on similar terms. It is explained that additionally, the terms of the distribution agreements have not changed/modified and the ITAT relied on the same distribution agreements, while passing the above orders in favour of the appellant in the prior years. Thus the Ld. counsel submits that the distribution agreements and activities have remained same in the prior year as well as subsequent years as compared to the year under consideration. Therefore, it is argued by him that based on the above ITAT orders, there is no arrangement for sharing AMP expenses with AEs and hence the alleged AMP expenses cannot be held as an international transaction. Reliance is placed by him on the following High Court decisions, wherein it is held that in absence of any arrangement with AE, there cannot be said to be an international transaction:

2.4 We have heard the rival submissions and perused the relevant materials on record. It would be pertinent to refer here to the order of the Tribunal in assessee's own case, facts being similar. The ITAT, in India Medtronic Pvt. Ltd. 5 appellant's own case for AY 2010-11 (ITA No. 1600/M/2015) dated 17.01.2018 held as under:

"3.4.We have heard the rival submissions. We find that the TPO had held that assessee should have been compensated by its AE for the AMP expenditure incurred by it. We have gone through the agreements entered in to by the AE.s with the assessee, that in the agreements there is no condition about sharing of AMP, that the agreements talks of using best efforts to market and distribute the product or promote the products in a commercially reasonable manner. In our opinion, these terms do not give any indication that the AE and the assessee had to share AMP expenses. Secondly, if the AE was benefitted indirectly by the AMP expenditure incurred by the assessee, it cannot be held that it had entered into agreement for sharing AMP expenses. We are also of the opinion that Bright Line Method should not have been applied by the TPO. We would like to reproduce the relevant portion of the order of the Thomas Cook(supra), wherein the identical issue has been dealt in length, and it reads as under: