Search Results Page
Search Results
1 - 10 of 19 (0.03 seconds)The Income Tax Act, 1961
Section 92C in The Income Tax Act, 1961 [Entire Act]
Maruti Suzuki India Ltd. (Earlier Known ... vs Commissioner Of Income Tax Delhi on 26 February, 2019
The problem does not stop here. Even
if a transaction involving an AMP spend for a foreign AE is able to be located
in some agreement, written (for e.g., the sample agreements produced before
the Court by the Revenue) or otherwise, how should a TPO proceed to
benchmark the portion of such AMP spend that the Indian entity should be
compensated for? 63. Further, in Maruti Suzuki India Ltd. '(supra) the Court
further explained the absence of a 'machinery provision qua AMP expenses by
the following analogy: "75. As an analogy; and from other purpose; in the-
context of a domestic transaction involving two or more related parties,
reference may' be made to Section 40 A (2) (a) under which certain types of
expenditure incurred by way of payment to related parties is not deductible
where the AO is of the opinion that such expenditure is excessive or
unreasonable having regard to the fair market value of the goods." In such
event, so much of the expenditure as is so considered by him to be excessive
or unreasonable shall not be allowed as a deduction." The AO in such an
instance deploys the 'best judgment' assessment as a device to disallow what
he considers to be an excessive expenditure. There is no corresponding
'machinery' provision in Chapter X which enables' an AO to determine what
should be the fair 'compensation' an Indian entity would be entitled to if it is
found' that there is an International transaction in that regard. In practical
terms, absent a clear statutory guidance, this may encounter further
difficulties. The strength of a brand, which could be product specific, may be
"impacted by numerous other imponderables not limited to the nature of the
industry, the geographical peculiarities, economic trends both international
and domestic, the consumption patterns, market behaviour and so on.A
simplistic approach using one of the modes similar to the ones contemplated
by Section 92C may not only be legally impermissible but will lend itself to
arbitrariness. What is then needed is a clear statutory scheme encapsulating
the legislative policy and mandate which provides the necessary checks
against arbitrariness while at the same time addressing the apprehension of
tax avoidance." 64. In the absence of any machinery provision, bringing an
imagined transaction to tax is not possible.
Sony Ericsson Mobile Communication ... vs Commissioner Of Income Tax-Iii on 11 February, 2016
It was also observed by him that the issue of
aggregation/segregation was also to be decided in light of the
judgment of the Hon‟ble High Court of Delhi in the case of Sony
Ericsson Mobile Communications India Pvt. Ltd. (supra). Further, it
was noticed by the DRP that the TPO was also directed not to alter the
comparables which were selected by him. The DRP after necessary
deliberations observed, that in the case of Maruti Suzuki India Pvt. ltd.
Vs. CIT (2016) 381 ITR 117 (Del) the Hon‟ble High Court of Delhi was
dealing with a different category of assesse viz. a licensed
manufacturer. In the backdrop of the aforesaid facts, it was observed
by the DRP that as the case of the assessee before them was that of a
pure distributor and not as that of a manufacturer, therefore, the
various decisions relied upon by it could not be followed for arriving at
a proper conclusion. It was further observed by the DRP that the claim
of the assessee that the advertising activity carried out by it was an
independent activity and was not done in close co-ordination with the
actual brand owner, or that it was being done only with the view to
ensure efficient distribution/routine marketing and had no
Page |9
ITA Nos.1997/Mum/2018 &ITA No.2168/Mum/2014 &
C.O. No.213/Mum/2014 (Arising out of ITA No. 2121/Mum/2014)
ITA No. 2121/Mum/2014 & AY. 2009-10
relationship with the DEMPE functions, could not be accepted. Also, it
was observed by the DRP that though the assessee had tried to follow
the aggregated approach, however, it had not discussed the AMP
expenditure in its TP study report and there was no evidence that its
comparables had been selected with a view to ensure that they were
performing similar marketing functions. On the contrary, it was
observed by the DRP that in addition to the significantly high AMP
expenses, the nature of the services which were necessary for selling
the products which admittedly were not being rendered by the AEs in
India clearly revealed that the assessee was performing the DEMPE
functions on behalf of its AE. Also, it was observed by the DRP that
though the assessee had claimed that as it had adopted an aggregate
approach, therefore, the AMP transactions should be treated as having
been aggregated with the other transactions while conducting the
TNMM analysis did not merit acceptance in the absence of any
supporting evidence. Further, it was observed by the DRP that just
because the AMP expenses formed part of the expenditure incurred
while conducting the TNMM, it could not be held that the TNMM
included the AMP expenditure. Accordingly, it was observed by the
DRP that the aggregation approach could not be taken as the correct
approach in the case of the assessee. Infact, it was observed by the
DRP that as the AMP expenses had not been benchmarked by the
assessee at all, therefore, they were required to be identified as a
separate transaction for the purpose of their benchmarking. The DRP
also declined to accept the claim of the assessee that the AMP
expenses incurred were in context of its own sales efforts and any
benefit to the AE was incidental. On the basis of the aforesaid
observations, it was concluded by the DRP that the assessee had
rendered significant DEMPE services to its AE which constituted an
P a g e | 10
ITA Nos.1997/Mum/2018 &ITA No.2168/Mum/2014 &
C.O. No.213/Mum/2014 (Arising out of ITA No. 2121/Mum/2014)
ITA No. 2121/Mum/2014 & AY. 2009-10
independent international transaction and was required to be
benchmarked separately. Further, the claim of the assessee that the
TPO had wrongly rejected the „bundled approach‟ that was adopted by
the assesse for benchmarking the transactions of purchase of finished
goods and other associated transactions, and was thus in error in
separately benchmarking the AMP expenses also did not find favour
with the DRP. On the basis of its aforesaid observations the DRP
directed the TPO to recompute the adjustments as per the directions
contained in its order.
Section 115JB in The Income Tax Act, 1961 [Entire Act]
India Medtronic Private Limited vs Deputy Commissioner Of Income Tax on 6 February, 2019
In Whirlpool of India Ltd. (supra), the Court interpreted the expression
"acted in concert" and in that context referred to the decision of the Supreme
Court in Daiichi Sankyo Company Ltd. v. Jayaram Chigurupati
2010(6)MANU/SC/0454/2010, which arose in the context of acquisition of
shares of Zenotech Laboratory Ltd. by the Ranbaxy Group. The question that
was examined was whether at the relevant time the Appellant, i.e., 'Daiichi
Sankyo Company and Ranbaxy were "acting in concert" within the meaning
of Regulation 20(4) (b) of the Securities and Exchange Board of India
(Substantial Acquisition of Shares and Takeovers) Regulations, 1997. In. para
44, it was observed as under:"
Commissioner Of Income Tax, Bangalore ... vs B. C. Srinivasa Setty, Etc. Etc on 19 February, 1981
The decisions in CIT v. B.C.
Srinivasa Setty (1981) 128 ITR 294 (SC) and PNB Finance Ltd. v, CIT (2008)
307 ITR 75 (SC) make this position explicit. Therefore, where the existence of
an international transaction involving AMP expense with an ascertainable
price is- unable to be shown to exist, even if such price is nil, Chapter X
provisions cannot be invoked to undertake a TP adjustment exercise. 1261 &
1238/M/15 Thomas Cook 33 65.
Pnb Finance Ltd vs Commissioner Of Income Tax-I, New Delhi on 6 November, 2008
The decisions in CIT v. B.C.
Srinivasa Setty (1981) 128 ITR 294 (SC) and PNB Finance Ltd. v, CIT (2008)
307 ITR 75 (SC) make this position explicit. Therefore, where the existence of
an international transaction involving AMP expense with an ascertainable
price is- unable to be shown to exist, even if such price is nil, Chapter X
provisions cannot be invoked to undertake a TP adjustment exercise. 1261 &
1238/M/15 Thomas Cook 33 65.