2017-TII-17-SC-TP

DCIT Vs LE PASSAGE TO INDIA TOURS AND TRAVELS PVT LTD: SUPREME COURT OF INDIA (Dated: September 4, 2017)

Income tax - AMP expenses - overseas agent - representative fee & outbound business segment

The assessee is engaged in the business of organising tours and arrangements for foreign tourists coming to India and going out of India. In order to promote business in foreign countries the assessee had appointed agents in various countries to market its services and in lieu thereof representation charges was paid to them. The TPO was of the view that assessee was creating market intangibles in favour of associate entrepreneur and accordingly he made adjustment in the outbound business segment by applying the bright line test and by comparing AMP expenses incurred by comparables engaged in inbound business segment. When the matter reached before High Court, it was held that mere reporting of AMP expenses in regard to outbound business, was not sufficient to conclude existence of international transaction warranting ALP adjustment.

Having heard the parties, the Supreme Court condones the delay and grants leave to the Revenue Department to defend their case on the issue of TP adjustment required on reporting of AMP expenses in regard to outbound business.

Leave granted

2017-TII-68-HC-DEL-TP

HAIER APPLIANCES INDIA PVT LTD Vs DCIT: DELHI HIGH COURT (Dated: September 1, 2017)

Income tax - AMP expenses - International transaction - TP adjustment

The Assessee had preferred present appeal challenging the action of ITAT in restoring the matter of TP adjustment made on account of AMP expenses incurred by the Assessee for its AE, back to the file of TPO for denovo consideration.

On appeal, the ITAT held that,

Whether remanding the issue concerning TP adjustment to the file of TPO for fresh determination, would not serve any purpose, if existence of international transaction between Assessee and its AE is not sufficiently established - YES: ITAT

+ counsel for Assessee points out that the ITAT had committed a factual error in recording that the Assessee is a distributor of various consumable durable products of its AE. He points out that the Assessee is in fact a manufacturer which gets its products manufactured through other entities. Secondly, it is pointed out that at the time the ITAT passed the order, it did not have the benefit of order subsequently passed by this Court in Sony Ericsson Mobile Communications v. CIT - 2016-TII-05-HC-DEL-TP and Daikin Airconditioning India Pvt. Ltd - 2016-TII-42-HC-DEL-TP wherein this Court had emphasised that prior to commencing a TP exercise, the existence of an international transaction involving the Assessee and its AE has to first be established;

+ the counsel for the revenue is unable to dispute that the ITAT has failed to examine in the first place whether there does exist an international transaction involving the assessee and its AE. In the absence of such a finding, there would be no purpose in remanding, as the ITAT has done by the impugned order, the issue concerning TP adjustment to the TPO for a fresh determination. For the aforesaid reasons, the Court sets aside the impugned order of the ITAT and restores the assessee’s appeal to the file of ITAT;

+ the Assessee's counsel submitted a chart indicating that the subsidy/grant received by Assessee from its AE during the AY in question exceeded the net AMP expense incurred by Assessee, thereby obviating any TP adjustment on that score as proposed by the TPO. The said details will be taken into consideration by the ITAT while dealing with the appeal on merits. This Court is not inclined to express any opinion on the merits one way or the other.

Case disposed of