TP adjustments by a TPO for such international transactions which are not reported by AO – Effect of Retrospective amendment

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.

Assessee’s contentions

  • AMP expenditure incurred does not represent international transactions between the two associated enterprises within the meaning of sec. 92B read with sec. 92F(v) of the Act. The transactions between unrelated parties can be held to be international transactions only if conditions u/s 92B(2) are fulfilled.
  • The show cause notice issued by the TPO to the assessee did not contain any allegation of such prior agreement/arrangement.
  • AMP expenditure promotes sales of Nokia India only and any benefit derived by overseas group companies is incidental.


  • Finance Act, 2012 has proposed amendment in the provisions of sec. 92B by insertion of Explanation clarifying the term “International transactions”, according to which AMP expenses will fall under international transactions.

‘Explanation.—For the removal of doubts, it is hereby clarified that— (i) the expression “international transaction” shall include—
(d) Provision of services, including provision of market research, market development, marketing management, administration, technical service, repairs, design, consultation, agency, scientific research, legal or accounting service

  • With regard to the power of the TPO for determination of arm’s length price in respect of international transaction which were not referred to him by the AO, Finance Act, 2012 has amended the provisions of sec. 92CA of the Act retrospectively to empower the TPO to determine the arm’s length price of international transactions noticed by him in the course of proceedings before him, even if said transaction was not reported by the assessing officer.

92CA(2B) Where in respect of an international transaction, the assessee has not furnished the report under section 92E and such transaction comes to the notice of the Transfer Pricing Officer during the course of the proceeding before him, the provisions of this Chapter shall apply as if such transaction is an international transaction referred to him under sub‐section (1)

Other matters:

Issues of (i) disallowance of price protection expenses allowed to distributor, (ii) working capital adjustment while computing the arm’s length price and (iii) transfer pricing adjustment pertaining to advertisement, marketing and promotion expenditure incurred by the assessee, were remanded back for fresh adjudication.

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