RENAULT INDIA PVT. LTD.,CHENNAI V. DCIT, CIRLCE-1, LTU, CHENNAI

ITTPA 43/CHNY/2024

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The case involves Renault India Private Limited (RIPL), a subsidiary of Renault Group BV, Netherlands, which appealed against the order of the Deputy Commissioner of Income Tax, Circle 1, LTU, Chennai. The dispute centered on the Transfer Pricing Officer's (TPO) adjustment of INR 211.70 Crores to the assessee's advertisement, marketing, and sales promotion expenses, which were deemed as brand-building activities for its Associated Enterprises (AEs). The TPO's adjustment was based on the premise that these expenses constituted an international transaction with AEs, necessitating a mark-up recovery. The Tribunal examined the TPO's order and the Dispute Resolution Panel's (DRP) directions, and found that similar issues had been previously adjudicated in favor of the assessee in earlier assessment years, leading to the conclusion that the current year's facts were analogous.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472388 (ITAT-CHENNAI)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 24-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2020-2021
• Other Referred Cases: Maruti Suzuki India Pvt vs. CIT, Renault India Pvt Ltd. (AY 2012-13) vs. ITAT-Chennai, Hyundai Motor India Pvt Ltd vs. ITAT-Chennai, Nippon Paint India (P) Ltd vs. ITAT-Chennai, Ford India (P) Ltd vs. ITAT-Chennai
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APPELLANT OWN BUSINESS; A. SASIKUMAR
• Assessee Lawyers: SRIRAM SESHADRI
• Keywords: Business income; Transfer pricing; International transaction; Depreciation; Additional depreciation; Fair market value; Deemed to accrue or arise in india
• Section: 143(3); 143(2); 13; 37; 92B; 10B; 92C

Judgement Text

" आयकर अपीलीय अिधकरण ‘’डी’’ Ɋायपीठ चेɄई मŐ। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI माननीय ŵी मनोज क ुमार अŤवाल ,लेखा सद˟ एवं माननीय ŵी मनु क ुमार िगįर, Ɋाियक सद˟ क े समƗ। BEFORE HON’BLE SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER AND HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER आयकरअपील सं./ IT(TP)A No.43/Chny/2024 (िनधाŊरणवषŊ / Assessment Year: 2020-2021) Renault India Private Limited, 7/1, 7/3, 8/1, 9,10,11 Work Easy Space Solution, Block No.20, Velacheri Main Road, Velachery, Chennai 600 042. [PAN: AADCR 2042M] Vs. The Deputy Commissioner of Income Tax, Circle 1, LTU, Chennai. (अपीलाथȸ/Appellant) (Ĥ×यथȸ/Respondent) अपीलाथȸ कȧ ओर से/ Appellant by : Shri Sriram Seshadri, C.A., Ĥ×यथȸ कȧ ओर से /Respondent by : Shri A. Sasikumar, CIT सुनवाई कȧ तारȣख/Date of Hearing : 09.01.2025 घोषणा कȧ तारȣख /Date of Pronouncement : 24.02.2025 आदेश / O R D E R PER MANU KUMAR GIRI (Judicial Member) This appeal by the assessee is arising out of the order of the Assessing Officer, Assessment unit, in order No.ITBA/AST/S/143(3)/2024-25/1066268517 (1), dated 29.06.2024 for the assessment year 2020-2021. 2. Ground No.1 is general in nature hence need not be adjudicated. During hearing ground No.2 relating to validity of the assessment proceeding barred by 2 IT(TP)A No.43/Chny/2024 limitation is not pressed by the ld. counsel for the assessee. Ground No. 3 (3.1-3.5) is as under:- ‘’3.1. The lower authorities have, erred in not considering the decision of the Honorable Income Tax Appellate Tribunal (ITAT') in the favour of the Assessee on the said issue. Specifically, the Honorable ITAT in the Assessee own's case for AY 12-13, has held that Assessee's advertisement and sales/product promotion expenses towards third parties does not lead to an international transaction. 3.2. The lower authorities have, in the fact and circumstances of the case and in law, erred in treating the advertisement and sales/product promotion expenses which are in nature of payment to third parties and incurred for the purpose of own business, as an \"international transaction with Associated enterprises\", 3.3. The lower authorities erred in making an upward TP adjustment of INR 211.70 Crores, towards alleged brand building activities undertaken by the Appellant for its AEs, holding that the said alleged expenditure is to be recovered along with a mark-up. 3.4. The lower authorities erred in alleging that the expenses incurred by the Appellant towards third parties, is brand-building services to its AE, despite the absence of any underlying agreement/arrangement with its AE and without appreciating that the said expenditure was incurred for Appellant own business with domestic unrelated parties. 3.5. The Ld. TPO adopted an arbitrary approach of considering advertisement and sales/product promotion expenses as brand promotion expenses and erred in arbitrarily determining the arm's length price of the alleged AMP, without applying any of the prescribed methods under the Act’’. 3. Brief facts of the case are that the assessee ‘Renault India Private Limited’ (‘RIPL’ in short) incorporated on 14.11.2005, is a subsidiary of Renault Group BV, Netherlands. The assessee is engaged in the distribution of ‘Renault’ brand cars in the domestic as well as the export market and provision of engineering design services. The appellant filed its return of Income for the impugned assessment year on 03.02.2021 declaring loss of Rs.1044.57 Crores. Subsequently, the case of the assessee was selected for complete scrutiny and notice u/s 143(2) of the Act, was 3 IT(TP)A No.43/Chny/2024 issued vide DIN & Document No.: ITBA/AST/S/143(2)/2021-22/1033762066(1) for AY 2020-21 dated 29/06/2021. The case was selected for the following issues: \"Substantial increase in share capital in a year, Very Low PBDIT ratio in specific business code and turnover range where deficiency is reported in audit report, Large \"any other amount allowable as deduction\" claimed in Schedule BP of return, High liabilities as compared to low income/receipts, Large difference in opening stock of current year and closing stock of previous year, Debt has been written off and the debtor has not shown deemed income u/s 41. High risk International Transactions 3 (Entity reported in Cb CR data) (TP Risk Parameter), Large business loss set off against other heads of income, Reduction in profit because of application of Income Computation & Disclosure Standards, International transaction(s) in respect of lending or borrowing of money (TP Risk Parameter), Reduction in profit because of application of Income Computation & Disclosure Standards, Inflow of funds in an entity consistently showing loss before depreciation, Depreciation claimed at significantly higher rates / Large additional depreciation claimed.\" The case was referred to Jurisdictional Transfer Pricing Officer (‘TPO’ in short) u/s 92CA(1) of the Act, on 05.02.2022 with the prior approval of Ld. CIT. The TPO passed an order dated 17.07.2023 making an upward adjustment towards advertisement, marketing and sales promotion (‘AMP’ in short) expenses for brand building amounting to Rs.211.70 Crores. Pursuant to the TPO’s order, the AO issued a draft order dated 20.09.2023 under section 143(3) r.w.s 144C(1) of the Act incorporating the aforesaid TP adjustment. Aggrieved, assessee filed objections against the draft assessment order before the ld. Dispute Resolution Panel (‘DRP’ in short) and ld. DRP issued its directions dated 28.05.2024 wherein it upheld the TP adjustment proposed in the draft assessment order. The AO subsequently passed the final assessment order dated 29.06.2024 u/s 143(3) r.w.s. 144C(13) r.w.s. 144B of the Act. Now assessee is in further appeal before us u/s 253(1)(d) of the Act. 4. At the outset, the ld. Counsel submitted that with regard to the upward adjustment towards AMP expenses for brand-building, the Co-ordinate Bench of the 4 IT(TP)A No.43/Chny/2024 Tribunal in assessee’s own case in ITA No.1078/Mds/2017, for assessment year 2012-2013 dated 30.01.2018 has held that Assessee’s advertisement and sales/product promotion expenses towards third parties does not lead to an international transaction. 5. The ld. Counsel also placed reliance on the following judgments/decisions:- Sl. No Name of the case High Court/ ITAT decisions Citation 1 Maruti Suzuki India Pvt HC- Delhi 381 ITR 117 2 Renault India Pvt Ltd. (AY 2012-13) ITAT-Chennai. 193 TTJ 542 3 Hyundai Motor India Pvt Ltd ITAT-Chennai. 187 TTJ 97 4 Hyundai Motor India Pvt Ltd ITAT-Chennai. IT(TP)A70/18 5 Hyundai Motor India Pvt Ltd ITAT-Chennai. 2022 (1) TMI 1030 6 Nippon Paint India (P) Ltd ITAT-Chennai. 79 taxmann.com 8 7 Ford India (P) Ltd ITAT-Chennai. 34 taxmann.com 8 Ford India (P) Ltd ITAT-Chennai. ITA No.669/2017 6. After query from the Bench regarding the other assessment years, the ld. Authorized Representative submitted as under:- A.Y AMP Adjustment made by TPO Status 2012-13 Yes Favourable order by Hon’ble ITAT on AMP Hon’ble Madras HC dismissed the Revenue appeal filed against the ITAT order, since the appeal pending before HC was settled under VSV Scheme of 2020 2013-14 Yes Hon’ble ITAT dismissed the appeal since appeal was settled under VSV Scheme of 2020. 2014-15 Yes Hon’ble ITAT dismissed the appeal since appeal 5 IT(TP)A No.43/Chny/2024 was settled under VSV Scheme of 2020. 2015-16 Yes Hon’ble ITAT dismissed the appeal since appeal was settled under VSV Scheme of 2020. 2016-17 Yes Was pending before DRP which was settled under VSV Scheme of 2020 2017-18 Yes Hon’ble ITAT allowed on jurisdictional time barred ground, hence ITAT did not get into merits issues. 2018-19 Yes Hon’ble ITAT allowed on jurisdictional time barred ground, hence ITAT did not get into merits issues. 2019-20 Yes Not picked up for assessment. 8. Per contra, the ld.DR Mr. A. Sasikumar CIT relied upon the ld.DRP order and pleaded for the dismissal of the assessee’s appeal. 9. We have heard both the parties and perused the orders of the lower authorities and order of the co-ordinate bench of Tribunal in assessee’s own case. The decision of Co-ordinate Bench of the Tribunal in assessee’s own case in ITA No.1078/Mds/2017, for assessment year 2012-2013 dated 30.01.2018, which is reproduced hereunder:- ‘’20. ’We have considered the rival contentions and perused the orders of the authorities below. Ld. TPO had found expenditure of ₹123.80 crores incurred by the assessee towards advertisement and sales promotion expenses as helping the promotion of ‘’Renault’’ brand in India. According to him, assessee had mentioned this in its own business plan. Though the assessee argued against any adjustment on brand promotion, relying on the judgment of Hon’ble Delhi High Court in the case of Maruti Suzuki India Ltd (supra), ld. TPO did not accept it. According to him, in the case of the assessee there was an admission that it was promoting ‘’Renault’’ brand. In our opinion, just because assessee mentioned that marketing expenditure incurred by it helped promotion of Renault brand in India, it cannot be presumed that such expenditure resulted in any ‘’international transaction. What was observed by the ld. TPO in its order on this issue is reproduced hereunder:- ‘’ Here it is the assessee’s own admission that its business plan is ‘’distribution of Renault Cars in India and to promote the Renault brand in India and to create a market share for Renault cars in India. Therefore no 6 IT(TP)A No.43/Chny/2024 further evidence is required to make out an international transactions either by going through BLT or otherwise’’. Expenditure was incurred by the assessee, to create market share for its Cars and marginal benefits derived by its principal abroad, as an off shoot cannot in our opinion convert it to a international transaction. Hon’ble Delhi High Court in the case of Maruti Suzuki India Ltd (supra), had held as under at paras 68 to 86 of its judgment:- ‘’68. The above submissions proceed purely on surmises and conjectures and if accepted as such will lead to sending the tax authorities themselves on a wild-goose chase of what can at best be described as a \"mirage\". First of all, there has to be a clear statutory mandate for such an exercise. The court is unable to find one. To the question whether there is any \"machinery\" provision for determining the existence of an international transaction involving AMP expenses, Mr. Srivastava only referred to section 92F(ii) which defines arm's length price to mean a price \"which is applied or proposed to be applied in a transaction between persons other than associated enterprises in uncontrolled conditions\". Since the reference is to \"price\" and to \"uncontrolled conditions\" it implicitly brings into play the bright line test. In other words, it emphasises that where the price is something other than what would be paid or charged by one entity from another in uncontrolled situations then that would be the arm's length price. The court does not see this as a machinery provision particularly in light of the fact that the bright line test has been expressly negatived by the court in Sony Ericsson. Therefore, the existence of an international transaction will have to be established dehors the bright line test. 69. There is nothing in the Act which indicates how, in the absence of the bright line test, one can discern the existence of an international transaction as far as AMP expenditure is concerned. The court finds considerable merit in the contention of the assessee that the only transfer pricing adjustment authorised and permitted by Chapter X is the substitution of the arm's length price for the transaction price or the contract price. It bears repetition that each of the methods specified in section 92C(1) is a price discovery method. Section 92C(1) thus is explicit that the only manner of effecting a transfer pricing adjustment is to substitute the transaction price with the arm's length price so determined. The second proviso to section 92C(2) provides a \"gateway\" by stipulating that if the variation between the arm's length price and the transaction price does not exceed the specified percentage, no transfer pricing adjustment can at all be made. Both section 92CA, which provides for making a reference to the Transfer Pricing Officer for computation of the arm's length price and the manner 7 IT(TP)A No.43/Chny/2024 of the determination of the arm's length price by the Transfer Pricing Officer, and section 92CB which provides for the \"safe harbour\" rules for determination of the arm's length price, can be applied only if the transfer pricing adjustment involves substitution of the transaction price with the arm's length price. Rules 10B, 10C and the new rule 10AB only deal with the determination of the arm's length price. Thus for the purposes of Chapter X of the Act, what is envisaged is not a quantitative adjustment but only a substitution of the transaction price with the arm's length price. 70. What is clear is that it is the \"price\" of an international transaction which is required to be adjusted. The very existence of an international transaction cannot be presumed by assigning some price to it and then deducing that since it is not an arm's length price, an \"adjustment\" has to be made. The burden is on the Revenue to first show the existence of an international transaction. Next, to ascertain the disclosed \"price\" of such transaction and thereafter ask whether it is an arm's length price. If the answer to that is in the negative the transfer pricing adjustment should follow. The objective of Chapter X is to make adjustments to the price of an international transaction which the associated enterprises involved may seek to shift from one jurisdiction to another. An \"assumed\" price cannot form the reason for making an arm's length price adjustment. 71. Since a quantitative adjustment is not permissible for the purposes of a transfer pricing adjustment under Chapter X, equally it cannot be permitted in respect of AMP expenses either. As already noticed hereinbefore, what the Revenue has sought to do in the present case is to resort to a quantitative adjustment by first determining whether the AMP spent by the assessee on application of the bright line test, is excessive, thereby evidencing the existence of an international transaction involving the associated enterprise. The quantitative determination forms the very basis for the entire transfer price exercise in the present case. 72. As rightly pointed out by the assessee, while such quantitative adjustment involved in respect of AMP expenses may be contemplated in the taxing statutes of certain foreign countries like U.S.A., Australia and New Zealand, no provision in Chapter X of the Act contemplates such an adjustment. An AMP transfer pricing adjustment to which none of the substantive or procedural provisions of Chapter X of the Act apply, cannot be held to be permitted by Chapter X. In other words, with neither the substantive nor the machinery provisions of Chapter X of the Act being applicable to an AMP transfer pricing adjustment, the inevitable conclusion is that Chapter X as a whole, does not permit such an adjustment. 8 IT(TP)A No.43/Chny/2024 73. It bears repetition that the subject matter of the attempted price adjustment is not the transaction involving the Indian entity and the agencies to whom it is making payments for the AMP expenses. The Revenue is not joining issue, the court was told, that the Indian entity would be entitled to claim such expenses as revenue expense in terms of section 37 of the Act. It is not for the Revenue to dictate to an entity how much it should spend on AMP. That would be a business decision of such entity keeping in view its exigencies and its perception of what is best needed to promote its products. The argument of the Revenue, however, is that while such AMP expense may be wholly and exclusively for the benefit of the Indian entity, it also enures to building the brand of the foreign associated enterprise for which the foreign associated enterprise is obliged to compensate the Indian entity. The burden of the Revenue's song is this : an Indian entity, whose AMP expense is extraordinary (or \"non-routine\") ought to be compensated by the foreign associated enterprise to whose benefit also such expense enures. The \"non-routine\" AMP spent is taken to have \"subsumed\" the portion constituting the \"compensation\" owed to the Indian entity by the foreign associated enterprise. In such a scenario what will be required to be benchmarked is not the AMP expense itself but to what extent the Indian entity must be compensated. That is not within the realm of the provisions of Chapter X. 74. The problem with the Revenue's approach is that it wants every instance of an AMP spent by an Indian entity which happens to use the brand of a foreign associated enterprise to be presumed to involve an international transaction. and this, notwithstanding that this is not one of the deemed international transactions listed under the Explanation to section 92B of the Act. The problem does not stop here. Even if a transaction involving an AMP spend for a foreign associated enterprise 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 Transfer Pricing Officer proceed to benchmark the portion of such AMP spend that the Indian entity should be compensated for ? 75. As an analogy, and for no other purpose, in the context of a domestic transaction involving two or more related parties, reference may be made to section 40A(2)(a) under which certain types of expenditure incurred by way of payment to related parties is not deductible where the Assessing Officer \"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 Assessing Officer 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\" 9 IT(TP)A No.43/Chny/2024 provision in Chapter X which enables an Assessing Officer 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. 76. As explained by the Supreme Court in CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294 (SC) and PNB Finance Ltd. v. CIT [2008] 307 ITR 75 (SC) in the absence of any machinery provision, bringing an imagined international transaction to tax is fraught with the danger of invalidation. In the present case, in the absence of there being an international transaction involving AMP spend with an ascertainable price, neither the substantive nor the machinery provision of Chapter X are applicable to the transfer pricing adjustment exercise. Economic ownership of the brand 77. The next issue is concerning the economic ownership and legal ownership of the brand. According to the Revenue, viewing legal ownership as something distinct from economic ownership \"may not be the right way of looking at things\". 78. It is necessary at this juncture to examine the history of the relationship between MSIL and SMC. When the licence agreements were originally entered in 1982, MSIL was known as Maruti Udyog Limited (\"MUL\") and SMC did not hold a single share in Maruti Udyog Limited. In 2003 SMC acquired the controlling interest in MSIL. There are various models of Suzuki motor cars manufactured by MSIL and each model is covered by a separate licence agreement. Under these agreements SMC grants licence to MSIL to manufacture that particular car model ; provides technical know- how and information and right to use Suzuki's patents and technical information. It also gives MSIL the right to use Suzuki's trade mark and logo on the product. Pursuant to the above agreement, MSIL has been using the co-brand, i.e., Maruti-Suzuki trade mark and logo for more than 30 years. As already noted, this co-brand cannot be used by SMC and is not owned by it. 10 IT(TP)A No.43/Chny/2024 79. The clauses in the agreement between MSIL and SMC indicate that permission was granted by SMC to MSIL to use the co-brand \"Maruti- Suzuki\" name and logo. The mere fact that the cars manufactured by MSIL bear the symbol \"S\" is not decisive as the advertisements are of the particular model of the car with the logo \"Maruti-Suzuki\". The Revenue has been unable to contradict the submission of MSIL that the co-brand mark \"Maruti-Suzuki\" in fact does not belong to SMC and cannot be used by SMC either in India or anywhere else. The decision in Sony Ericsson requires that the mark or brand should belong to the foreign associated enterprise. The Revenue also does not deny that as far as the brand \"Suzuki\" is concerned its legal ownership vests with the foreign associated enterprise, i.e., SMC. The Revenue proceeds on the basis that the benefit of the economic ownership also accrues to the foreign associated enterprise by way of increased royalty, increased raw material sales, increased brand value, etc. 80. The Revenue is proceeding on a presumption regarding the comparative benefits to MSIL and SMC as a result of the AMP expenditure incurred by MSIL. The Revenue is unable to deny that MSIL's expenditure on AMP is only 1.87 per cent. of its total sales whereas SMC's expenditure worldwide on AMP is 7.5 per cent. of its sales. In the circumstances, in the absence of some data, it cannot be simply asserted that the benefit of MSIL's AMP spend to SMC is not merely incidental. The court is unable to accept the assertion of the Revenue that the mere fact of incurring AMP expenditure should lead to an inference of the existence of an international transaction. 81. It must be recalled here that the royalty paid to SMC for use of its logo on the product manufactured with its technical know-how is separately subject to transfer pricing. Likewise, payments for use of patents or copyrights are separately assessed. What the present appeals are concerned with is only the AMP expenditure incurred and nothing more. As pointed out by the Revenue the issue is not about the expenditure incurred by MSIL in engaging Indian third parties for AMP but the extent to which the AMP spend can be attributed to enure to the benefit of SMC's brand. This can be a complex exercise and in the absence of clear guidance under the statute and the rules, can result in arbitrariness as a result of proceeding on surmises or conjectures. The Transfer Pricing Officer will need to access data as regards the strength of the foreign associated enterprise's brand and what it commands in the international market and to what extent the presence of the brand in the advertisement actually adds to the benefit of the brand internationally. 82. Para. 6D of the OECD Guidelines deals with \"Marketing activities undertaken by enterprises not owning trademarks or 11 IT(TP)A No.43/Chny/2024 trade names\". It contains a discussion on promotion of trade marks by distributors of branded goods. It acknowledges the difficulties in determining the extent to which the expenses have contributed to the success of a product. It is stated: \"For instance, it can be difficult to determine what advertising and marketing expenditures have contributed to the production or revenue, and to what degree. It is also possible that a new trade mark or one newly introduced into a particular market may have no value or little impression on the market (or perhaps loses its impact). A dominant market share may to some extent be attributable to marketing efforts of a distributor. The value and any changes will depend to an extent on how effectively the trade mark is promoted in the particular market. More fundamentally, in many cases higher returns derived from the sale of trademarked products may be due as much to the unique char acteristics of the product or its high quality as to the success of advertising and other promotional expenditures. The actual conduct of the parties over a period of years should be given significant weight in evaluating the return attributable to marketing activities.\" 83. The Organisation for Economic Co-operation and Development Guidelines set out broad parameters for determining the existence of international transaction and for ascertaining the arm's length price of such transaction. They may not ipso facto become applicable in situations where no studies have been conducted on a scientific basis on the behaviour of market and assessment of brand value. Incidental benefit to SMC 84. The court next deals with the submission of the Revenue that the benefit to SMC as a result of the MSIL selling its products with the co-brand \"Maruti-Suzuki\" is not merely incidental. The decision in Sony Ericsson acknowledges that an expenditure cannot be disallowed wholly or partly because its incidentally benefits the third party. This was in context on section 57(1) of the Act. Reference was made to the decision in Sassoon J. David and Co. Pvt. Ltd. v. CIT [1979] 118 ITR 261 (SC). The Supreme Court in the said decision emphasised that the expression \"wholly and exclusively\" used in section 10(2)(xv) of the Act did not mean \"necessarily\". It said : \"The fact that somebody other than the assessee is also benefited by the expenditure should not come in the way of an expenditure being allowed by way of a deduction under section 10(2)(xv) of the Act if it satisfies otherwise the tests laid down by the law\". 85. The Organisation for Economic Co-operation and Development Transfer Pricing Guidelines, para 7.13 emphasises that there 12 IT(TP)A No.43/Chny/2024 should not be any automatic inference about an associate enterprise group service only because it gets an incidental benefit for being part of a larger concern and not to any specific activity performed. Even paras 133 and 134 of the Sony Ericsson judgment makes it clear that AMP adjustment cannot be made in respect of a full-risk manufacturer. MSIL's higher operating margins 86. In Sony Ericsson it was held that if an Indian entity has satisfied the transactional net margin method, i.e., the operating margins of the Indian enterprise are much higher than the operating margins of the comparable companies, no further separate adjustment for AMP expenditure was warranted. This is also in consonance with rule 10B which mandates only arriving at the net profit by comparing the profit and loss account of the tested party with the comparable. As far as MSIL is concerned, its operating profit margin is 11.19 per cent. which is higher than that of the comparable companies whose profit margin is 4.04 per cent. Therefore, applying the transactional net margin method it must be stated that there is no question of transfer pricing adjustment on account of AMP expenditure’’. Accordingly, we are of the opinion that no Arms Length Price adjustment could have been carried out on the advertisement and marketing expenditure incurred by the assessee. Ground No.3 of the assessee stands allowed. 21 . Since we have held the transactions between assessee and M/s. RNAIPL as not international transactions, grounds 4 & 5 have become academic and are not necessary to adjudicate. 22. In the result, appeal of the assessee is partly allowed’’. 10. Having gone through the order of the co-ordinate bench, we are of the considered view that facts in earlier year are similar to the facts in this year also. Accordingly, we are of the opinion that no Arms Length Price adjustment could have been carried out on the advertisement and marketing expenditure incurred by the assessee. Hence, the grounds in question are fully covered by the co-ordinate bench order referred supra. The ld. Counsel for the parties informed the bench that SLP is still pending against the order in the case of Maruti Suzuki (supra). Hence, we allow the appeal of the assessee. 13 IT(TP)A No.43/Chny/2024 11. In result, appeal of the assessee is allowed. Order pronounced in the open court on 24th day of February, 2025 at Chennai. Sd/- Sd/- (मनोज क ुमार अŤवाल) (मनु क ुमार िगįर) (MANOJ KUMAR AGGARWAL) लेखा सद˟ / ACCOUNTANT MEMBER (MANU KUMAR GIRI) Ɋाियक सद˟ / JUDICIAL MEMBER चेɄई Chennai: िदनांक Dated :24-02-2025 KV आदेश कȧ ĤǓतͧलͪप अĒेͪषत /Copy to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT, Chennai/Coimbatore/Madurai/Salem. 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF "