ACIT v Casio India Co P Ltd I.T.A .No.-6135/Del/2012 (Delhi ITAT) Dated 13/12/2013 Background: Assessee is a wholly owned subsidiary of Casio and Computer Company Ltd., Japan (hereinafter called `Casio Japan’). The assessee distributes watches and consumer information products and other related products of Casio Japan, in India. The assessee entered into certain international transactions with Casio Japan which were benchmarked on ‘Transactional Net Margin Method’ (TNMM). On a reference made by the AO, the Transfer Pricing Officer (TPO) noticed that the assessee incurred a certain sum on the Advertising, Marketing & Promotion (AMP) expenses. Out of that, a sum of Rs.2,63,50,982/- was held to be towards developing marketing intangibles for the Associated Enterprise (AE). As against that, only a sum of Rs.1,02,13,645/- was reimbursed by the AE. Adding in mark-up of 14.93% on the differential amount, the TPO proposed adjustment accordingly. 

LG Electronics ruling on AMP Expenses is applicable even for distributors – Del ITAT

Welspun Zucchi Textiles Ltd. v ACIT [ITA No 6539 (MUM.) OF 2009 & 898 (Mum.) of 2010] dtd 11.1.2013 Background: During the year under consideration, the assessee company had exported bathrobes to its associated enterprises in Italy. The said transactions were benchmarked by the assessee using CUP method as the most appropriate method. In order to determine the arms length price of these transactions, a reference was made by the AO to the TPO u/s 92CA(1) of the Act. Before the TPO, the assessee submitted the comparative chart of sales to AEs and non AEs. It was submitted that out of the total bathrobes exported to non AEs, about 95% bathrobes were exported to Wallmart USA at an average unit price of US Dollars 6.42 while the average unit price of export made by the assessee to its AEs in Italy was US Dollars 8.80. It was contended that since the price charged to AEs was more than the price charged to non AEs, the international transactions with AEs involving export of bathrobes should be considered at arms length.

CUP method fails where there are differences in location, market size and product prices sold ...

Based on the recommendations of Supreme Court in the case of CIT Vs. Glaxo SmithKline Asia (P) Ltd. (195 Taxman 35) (SC), Finance Minister introduced transfer pricing regulations applicable to specified domestic transactions in Finance Act, 2012. Please find attached in the link below an overview of the Domestic Transfer Pricing regulations applicable with effect from Assessment Year 2013-2014 Click here to download the overview

Domestic Transfer Pricing Overview

Mainetti India (P.) Ltd. v. ACIT [IT APPEAL NO. 1789 (MDS.) OF 2011] Chennai ITAT Background: The assessee is in the business of manufacturing plastic garment hangers. As the assessee is a part of the Mainetti global group, it used to buy and sell the hangers from/ to its group concerns. The assessee has purchased from its AE in Hongkong, Srilanka, Malayasia, Pakistan and RANDY Asia and has sold to its AE in Srilanka, Korea, Hongkong, Gulf, Egypt, Bangladesh, Malayasia, Taiwan, UK and Pakistan. On the purchase, the assessee has a positive differential i.e. the assessee purchases at a lower price from its AE than the non-AE and when its sales to the AE, its selling price is lower than the selling price as compared with the non-AE When computing the ALP, the AO had taken into account only those transactions where the sale price to Associate Enterprise (AE) was lower than the sale price to non-Associated Enterprise (non-AE) and ignoring the instances where the purchase-price from and sale price to AE exceeded the purchase-price from and the sale price to non-AE. Thus, while applying CUP method for determining the ALP, TPO had considered only positive deviations and had ignored negative deviations.

TP Update: Both positive & negative adjustments to be considered while computing ALP – Chennai ...

Nokia India (P.) Ltd. v Addln CIT [2012] 22 109 (Delhi – Trib.) Facts of the case Assessee incurred certain advertisement, marketing and promotion expenditure. The AO in order to determine the arm’s length price of international transaction with associated enterprise referred the matter to TPO u/s 93CA(3) of the act. The TPO passed an order u/s 92CA(3) of the Act, wherein he determined the arm’s length price on Advertisement, Marketing and Promotion (AMP) expenses amounting to Rs. 253,48,30,000.

TP adjustments by a TPO for such international transactions which are not reported by AO ...