TUPPERWARE INDIA PVT. LTD.,NEW DELHI V. ACIT CIRCLE-25(2), NEW DELHI

ITA 9727/DEL/2019

AI Insights

Tupperware India Private Limited appealed against the assessment orders passed by the Assistant Commissioner of Income Tax, which were based on the TPO's adjustments concerning international transactions with its Associated Enterprises (AEs). The primary issues revolved around whether the AMP expenses and royalty payments made by Tupperware India to its AE were international transactions and if they were at arm's length. The Tribunal examined the nature of these transactions, the applicable legal provisions, and relevant judicial precedents. It was concluded that the AMP expenses did not qualify as international transactions, while the royalty payments did, leading to specific transfer pricing adjustments.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471527 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2015-2016
• Other Referred Cases: Maruti Suzuki India Ltd vs CIT, Sony Ericsson Mobile Communications India Pvt. Ltd. vs CIT, Whirlpool of India Ltd vs DCIT, Bausch & Lomb Eyecare (India) Pvt. Ltd. vs CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: TUPPERWARE USA
• Keywords: Set aside; Opportunity of being heard; Transfer pricing; International transaction; Question of law; Onus to prove; Gift; Double taxation relief; Tangible material
• Section: 143(3); 195; 271(1)(c); 92CA; 274; 92; 144C; 92B; 92F

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “I”: NEW DELHI BEFORE SHRI ANUBHAV SHARMA , JUDICIAL MEMBER AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 9727/DEL/2019 A. Yr: 2015-16 ITA No. 670/DEL/2021 A. Yr: 2016-17 Tupperware India Private Limited, 204-206, Tolstoy House, 15 Tolstoy Marg, Connaught Place, New Delhi-110001. PAN: AAACT 3770 D Vs ACIT, Circle 25(2), New Delhi. APPELLANT RESPONDENT Assessee represented by Shri Rohit Tiwari, Adv.; Ms. Tanya, Adv.; & Ms. Shivani, Adv. Department represented by Shri Dharamvir Singh, CIT( DR) Date of hearing 19.12.2024 Date of pronouncement 12.03.2025 O R D E R PER ANUBHAV SHARMA, JM: The assessee has come in appeal against the assessment orders passed by the Assistant Commissioner of Income Tax, Circle 25(2), Delhi, under Section 143(3) read with Section 144C(13) of the income-tax Act, 1961 pertaining to the assessment years 2015-16, 2016-17 in pursuance to directions of learned Dispute 2 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, Resolution Panel (DRP). All the appeals were heard together and are being disposed of by a common order for the sake of convenience. 2. Heard and perused the record. Ld. Representatives have referred to the facts, evidences and impugned decisions of AY 2015-16 (Appeal No. ITA 9727/DEL/2019), thus same is being taken as the lead case. The basic facts are that the Appellant is a private limited company engaged in the business of manufacturing and distribution of moulded plastic kitchenware products, carrying out manufacturing activities from its plant located at Dehradun. The Appellant filed its return of income on 30.11.2015 declaring total income of INR 97,70,39,530. Since the Appellant company, during the impugned financial year, had entered into international transactions with its Associated Enterprises (“AEs”), covered under section 92CA of the Act, AO referred the matter to the Learned Transfer Pricing Officer (“TPO”) for determination of the Arm’s Length Price (“ALP”) of the international transactions. As per the Transfer Pricing documentation, the Appellant has earned an operating margin of 21.94%. On the other hand, the comparables have earned a working capital adjusted margin of 3.77% (35th Percentile) to 7.82% (65th Percentile) with a median of 5.90%. Hence, the transactions of Tupperware India have been claimed to be at arm’s length. 3 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, 3. During the course of the TP assessment proceedings, the TPO requested for various information/ documents which were filed time to time. Subsequently, the TPO issued show cause notice dated October 03, 2018 (F. No. DCIT/TPO- 3(2)(1)/SCN/2018-19/264) (available at pages 991 to 1001 of PB), wherein the Appellant was asked to show cause as to why certain adjustments should not be undertaken by the Ld. TPO. Subsequently, the Ld. TPO issued another show cause notice dated October 08, 2018 (F. No.: DCIT/TPO-3(2)(1)/SCN/2018-19/275) (available at pages 982 to 990 of PB) wherein adjustments only on account of alleged Advertising, Marketing and Promotion (“AMP”) expenses and payment of royalty, were proposed by the Ld. TPO. Then based on a clarification sought from the office of the TPO, it was made clear to the Appellant that a reply was required to be furnished in respect of the latter show cause notice i.e. dated October 08, 2018. So, vide reply dated October 16, 2018, Tupperware India mentioned this fact in the submission for a confirmation with respect to the same. The said submission was duly accepted and acknowledged by the office of the Ld. TPO. Then Ld. TPO proceeded to undertake transfer pricing adjustments vide TP order dated October 30, 2018 and the Ld. AO passed the draft assessment order dated December 19, 2018 incorporating the adjustments undertaken by the Ld. TPO. Aggrieved by the same, the Appellant filed its objections before the Dispute Resolution Panel ( “DRP”) and DRP upheld the findings of the Ld. TPO. 4 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, 4. Ld. AR has provided a summary of TP adjustments, post DRP directions as follows: S. No. International transaction TPO’s approach / allegation Amount (INR) 1 Alleged excessive AMP expenditure incurred by Appellant and Payment of Royalty Substantive addition: Residual Profit Split Method (“RPSM”) 34,10,29,024 3 Payment of royalty Protective addition: Arbitrarily determined ALP as 2% of sales by applying CUP 4 Payment of management services fee No evidence submitted for management support services received and failure to demonstrate the need for such services 5 Interest on outstanding receivables Imputation of interest beyond specified credit period 5. Aggrieved by the observations of Ld. TPO, Ld. AO and Ld. DRP, the assessee is in appeal before this Tribunal, raising following grounds:- “1. The assessment order passed by the Learned Assessing Officer ('Ld. AO') under section 143(3) read with section 144C of the Act pursuant to the directions of Hon'ble Dispute Resolution Panel (\"Hon'ble DRP\") is bad in law and void ab-initio as it not in conformity with provisions of section 144C of the Act. 5 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, 2. That on the facts and circumstances of the case and in law, the Ld. AO erred in passing the impugned assessment order whereby making an adjustment of Advertisement, Marketing and Promotion (\"AMP\") both on substantive as well as on protective basis which is not in consonance with provisions of the Act. 3. That on the facts and circumstances of the case and in law, the Ld. AO erred in following the directions of the Hon'ble DRP and thereby erred in assessing the returned income of the Appellant of INR 97,70,39,530 at INR 1,53,55,51,410. TRANSFER PRICING (TP) GROUNDS: 4. That the Hon'ble DRP/Ld. AO/ the Deputy Commissioner of Income Tax, Transfer Pricing Officer-3(2) (1) (\"Ld. TPO\") have erred in proposing an addition of INR 38,83,59,955 holding that the Appellant's international transaction does not satisfy the arm's length principle envisaged under the Act. 5. That the Hon'ble DRP/Ld. AO/Ld. TPO have erred in undertaking adjustment on account of Advertisement, Marketing and Promotion (\"AMP\") expenses and payment of royalty by: 5.1. not appreciating the characterization of the Appellant, that it functions in the capacity of a licensed manufacturer and is entitled to appropriate share of residual profit/loss arising in the business; 5.2. not appreciating that in the case of an entrepreneurial entity, if the payment of royalty is demonstrated to be at arm's length and appropriate share of residual profits reside in India, having regard to the functional, asset and risk analysis of the Appellant, the question of any adjustment does not arise; 6 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, 5.3. not appreciating that the Appellant is the economic owner of marketing intangibles commensurate with the functions performed in India, 5.4. not appreciating that the Appellant incurs such expenses on its own account for selling its products in India and derives adequate risks/rewards thereof, 5.5. not appreciating the fact that AMP expenses incurred by Appellant is not an international transaction; 5.6. not providing any reason/documentary evidence to demonstrate that the AMP expenses incurred by the Appellant constitute an international transaction, 5.7. not appreciating that in case any incidental benefits arise to the associated enterprise (\"AE\") on account of incurring AMP expenses, these do not constitute intra-group services so as to constitute an international transaction; 5.8. not appreciating the contribution profit split analysis (\"CPSM\") and Residual Profit Split Method (RPSM) furnished by the Appellant during assessment proceedings, 5.9. selecting an inappropriate set of comparable companies for the purposes of determining routine return for application of RPSM; and 5.10. determining the weightage of split for application of RPSM on an adhoc basis, thus violating the fundamental principle of transfer pricing. 6. That the Hon'ble DRP/Ld. AO/Ld. TPO have erred in proposing adjustment on protective basis amounting to INR 16,20,31,560 for excessive AMP expenses applying Bright Line Test (\"BLT\"). In doing so, Hon'ble DRP/Ld. TPO/Ld. AO have erred by: 7 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, 6.1. not appreciating that BLT has been expressly rejected by the several judicial pronouncements of Hon'ble Delhi High Court; 6.2. not appreciating that such adjustment has no statutory mandate; and 6.3. arbitrarily applying a mark-up of 19.12% on the alleged AMP expenses. 7. That the Hon'ble DRP/Ld. AO/Ld. TPO have erred in undertaking adjustment, on a without prejudice basis, on account of payment of royalty by rejecting the transfer pricing documentation maintained by the Appellant and determining arm's length royalty rate as 2% of the sales. In doing so, Hon'ble DRP/Ld. AO/Ld. TPO have erred: 7.1. in assuming that 'no benefit' has been conferred on the Appellant from the use of trademarks and know-how for which royalty was paid by the Appellant. 7.2. in not giving due cognizance to the information and documents submitted by the Appellant during the course of proceedings; 7.3. by disregarding the economic analysis performed by the Appellant, thereby rejecting the comparable agreements selected by the Appellant in the transfer pricing documentation; and 7.4. by arbitrarily determining the royalty rate of 2% based on the fresh search undertaken by the Ld. TPO during the course of proceedings by adopting the methodology similar to that adopted by the Appellant in the transfer pricing documentation. 8. That on the facts and circumstances of the case and in law, the Hon'ble DRP/Ld. AO/Ld. TPO have erred in undertaking an adjustment on account of payment of management service fees. In doing so, the Hon'ble DRP/Ld. AO/Ld. TPO have erred in rejecting the transfer pricing documentation maintained by the Appellant in 8 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, respect of payment of management service fees and arbitrarily determining arm's length price as 'Nil' by applying Comparable Uncontrolled Price Method (\"CUP\") Method in contravention of the provisions of Rule 108 of the Income Tax Rules (\"the Rules), thereby resulting in an adjustment of INR 4,68,73,507. 9. That on the facts and circumstances of the case and in law, the Hon'ble DRP/Ld. AO/ld TPO have erred by challenging the commercial/business wisdom of the Appellant in relation to payment of royalty and payment of management service fees. 10. That on the facts and circumstances of the case and in law, the Hon'ble DRP/Ld. AO/Ld. TPO have erred in enhancing the income of the Appellant by INR 4,57,424 by imputing interest on receivables from the AEs. In doing so, Hon'ble DRP/Ld. AO/Ld. TPO have erred in: 10.1. re-characterization of overdue receivable amount as a deemed loan and treating it as a separate international transaction; 10.2. not appreciating the fact that arm's length price determination for outstanding receivables is subsumed within the arm's length price determination of the principal international transaction itself, and 10.3. ignoring the judicial pronouncement of Hon'ble Delhi High Court in the case of Kusum Healthcare Private Limited (ITA No. 765/HC/Del/2016). Corporate Tax 11. That on the facts and circumstance of the case, and in law, the Hon'ble DRP/Ld. AO erred in making disallowance under section 40(a)(i) of the Act in respect of reimbursements of expenses amounting to INR 81,20,366 made by the Appellant to Dart Industries Inc. (\"Dart\") by erroneously holding that the same are in the nature of Royalty under Article 12 of the India- USA Double tax avoidance agreement (\"DTAA\") as well as Explanation 9 (1)(vi) of the Act. 9 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, 12. That on the facts and circumstances of the case, and in law, the Hon'ble DRP/Ld. AO erred in making a disallowance under section 40(a)(i) of the Act without appreciating that no disallowance under section 40(a)(i) of the Act can be applied in the facts of the present case in view of the provisions of the India- USA DTAA. 13. That on the facts and circumstances of the case, and in law, the Hon'ble DRP/Ld. AO erred in disregarding the submission of the Appellant that the amount in question are pure reimbursements of expenses based upon proper allocation key and without any mark up. While doing so, the Hon'ble DRP has disregarded the third party invoices and allocation methodology. 14. Without prejudice to Ground No. 11 to 13, that on the facts and circumstances of the case, and in law, the Hon'ble DRP/Ld. AO failed to appreciate that the amounts in question are held not liable to be taxed in the hands of Dart for the year under consideration, thereby disallowance under section 40(a)(i) of the Act unwarranted and liable to be deleted. 15. That on the facts and circumstances of the case and in law, the Ld. AO erred in not granting the MAT credit available to the Appellant while computing the tax liability. 16. That on the facts and circumstances of the case and in law, the Ld. AO erred in calculating interest u/s 234A/234B/234C of the Act. 17. That on the facts and circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings under section 274 read with section 271(1)(c) of the Act. That the above grounds of appeal are without prejudice to each other. That the Appellant reserves its right to add, alter, amend or withdraw any ground of appeal either before or at the time of hearing of this appeal.” 10 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, 6. We have considered the material and submissions as made . 7. AMP expenses issue. The Ld. Counsel for the appellant has mentioned that AMP expenses issue is covered by grounds no. 4, being general and ground no. 5 and ground no. 6 of the Appeal. He pointed out that during course of TP assessment proceedings, the ld. TPO held that AMP expenses incurred by the Appellant are significantly higher than that of comparable companies and applied BLT by charging a mark-up of 19.12% for alleged brand building services provided to the AE. The DRP upheld the view of the TPO in characterizing AMP expenses as an international transaction. Further, the TPO proceeded to apply RPSM for the alleged international transaction of AMP and payment of royalty. 8. Ld. Counsel has submitted that primarily the case of assessee is that AMP is not an international transaction. It is submitted that the AMP expenses are incurred by the Appellant in the course of carrying on its business in India. Such AMP expenditure are neither incurred at the instance of overseas AEs, nor there any mutual agreement or understanding or arrangement as to allocation or contribution towards reimbursement of any part of AMP expenditure incurred by the Appellant for the purpose of its business. In absence of any understanding, arrangement, etc., no ‘transaction’ or ‘international transaction’ could be said to be involved with 11 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, respect to such AMP expenditure incurred by the domestic enterprise, which may be covered within the ambit of Transfer Pricing Regulations. 9. The Ld. Counsel highlighted that the alleged AMP expenses incurred by the Appellant do not constitute an international transaction under the provisions of the Act since section 92B of Act does not list incurrence of AMP expense as an international transaction. Hence, the same is not required to be disclosed in the Form 3CEB and benchmarked in the TP Study maintained by the Appellant. 10. He furthermore, submitted that AO/TPO have brought no record or any material evidence to establish how the expenditure incurred by the Appellant had contributed to the promotion of the brand name. The Ld. Counsel relied heavily upon the decision of Hon’ble Delhi High Court in case of Maruti Suzuki India Ltd Vs CIT (ITA 110/2014 & ITA 710/2015), in which, accordingly to him, the Hon’ble High Court, has cast the onus to prove an international transaction arising from AMP expense, upon the Revenue authorities. It is contended that the Hon’ble High Court has held that the onus to demonstrate that an AMP expense incurred by a taxpayer constitutes an international transaction would rest upon the Revenue authorities. The existence of an international transaction would have to be established by the Revenue authorities without application of bright line test, based upon documentary evidence of an arrangement between the Appellant and its AEs. 12 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, The relevant extracts of the Hon’ble High Court decision in this regard, as relied by Ld. Counsel is reproduced below: “..the very existence of an international transaction cannot be presumed by assigning some price to it and then deducing that since it is not at ALP, 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 as to whether it is an ALP.” 11. Then referring to Para 44 and Para 61 of the decision in Maruti Suzuki ruling (supra), it is submitted that the Hon’ble High Court has laid that in the absence of existence of any agreement, understanding or arrangement between the Company and its AE for the expenditure to be incurred on AMP, it cannot be presumed that an international transaction exists. We consider it appropriate to reproduce the observations relied here below; “61. The submission of the Revenue in this regard is: \"The mere fact that the service or benefit has been provided by one party to the other would by itself constitute a transaction irrespective of whether the consideration for the same has been paid or remains payable or there is a mutual agreement to not charge any compensation for the service or benefit.\" Even if the word 'transaction' is given its widest connotation, and need not involve any transfer of money or a written agreement as suggested by the Revenue, and even if resort is had to Section 92F (v) which defines 'transaction' to include 'arrangement', 'understanding' or 'action in concert', 'whether formal or in writing', it is still incumbent on the Revenue to show the existence of an 'understanding' or an 'arrangement' or 'action in concert' between MSIL and SMC as regards AMP spend for brand promotion. In other words, for both the ‘means’ part and the ‘includes’ part of 13 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, Section 92B (1) what has to be definitely shown is the existence of transaction whereby MSIL has been obliged to incur AMP of a certain level for SMC for the purposes of promoting the brand of SMC. 12. The Ld. Counsel for appellant further relied the decision in case of Sony Ericsson Mobile Communications India Pvt. Ltd. (ITA No. 16/2014 and connected matters) wherein, accordingly to him, the Hon’ble High Court ruled that value of a brand depends upon the nature and quality of goods and services sold or dealt with. Treating brand building as equivalent to or direct resultant of advertisement and sales promotion would be largely incorrect. It is contended that the Hon’ble High Court further has held that the taxpayers do not undertake advertisement with a purpose to increase the value of brand but to increase sale and thereby earn higher profits. In this respect, the relevant part of decision as relied is reproduced as under: “105. There is a line of demarcation between development and exploitation. Development of a trademark or goodwill takes place over a passage of time and is a slow ongoing process. In cases of well recognised or known trademarks, the said trademark is already recognised. Expenditures incurred for promoting product(s) with a trademark is for exploitation of the trademark rather than development of its value. A trademark is a market place device by which the consumers identify the goods and services and their source. In the context of trademark, the said mark symbolises the goodwill or the likelihood that the consumers will make future purchases of the same goods or services. Value of the brand also would depend upon and is attributable to intangibles other than trademark. It refers to infrastructure, know-how, ability to compete with the established market leaders. Brand value, therefore, does not represent 14 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, trademark as a standalone asset and is difficult and complex to determine and segregate its value. Brand value depends upon the nature and quality of goods and services sold or dealt with. Quality control being the most important element, which can mar or enhance the value. 106. Therefore, to assert and profess that brand building as equivalent or substantial attribute of advertisement and sale promotion would be largely incorrect. It represents a coordinated synergetic impact created by assortment largely representing reputation and quality. There are a good number of examples where brands have been built without incurring substantial advertisement or promotion expenses and also cases where in spite of extensive and large scale advertisements, brand values have not been created. Therefore, it would be erroneous and fallacious to treat brand building as counterpart or to commensurate brand with advertisement expenses. Brand building or creation is a vexed and complexed issue, surely not just related to advertisement. Advertisements may be the quickest and effective way to tell a brand story to a large audience, but just that is not enough to create or build a brand. Market value of a brand would depend upon how many customers you have, which has reference to brand goodwill, compared to a baseline of an unknown brand. It is in this manner that value of the brand or brand equity is calculated. Such calculations would be relevant when there is an attempt to sell or transfer the brand name. Reputed brands do not go in for advertisement with the intention to increase the brand value, but to increase the sales and thereby earn larger and greater profits. It is not the case of the Revenue that the foreign AEs are in the business of sale/transfer of brands.” Unquote (Emphasis supplied) 13. It is further submitted that the appellant incurs such expenses on its own account for selling its products and derives adequate risks/ rewards thereof. These expenses are essential for the Appellant to devise the margin and incentive schemes for its direct selling partners in order to increase the market reach of 15 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, Tupperware products and drive the sales in India, thereby remaining competitive in the market. 14. On a without prejudice basis, it is pleaded before us that the Appellant has earned higher profits than the comparables and any profit earned on account of AMP expenses incurred by the Appellant by way of economic exploitation of the trademark/ brand in India already stands captured in the profit and loss account for the Appellant company and the same has been duly offered to tax and hence there was no logic to compute or make any Transfer Pricing Adjustment on this account. It is submitted by ld. Counsel that in the case of an entrepreneur, once all transactions are at arm’s length, there is no need to test the AMP expense separately. As per the contentions of the Appellant, the TP study demonstrates that the international transactions have been undertaken at arm’s length. Comparing individual element cost, i.e., of AMP expenses would amount to comparison or reconstruction of profit and loss account of Tupperware India to make it identical – cost-to-cost, to that of the comparable companies which is not the intent of transfer pricing regulations. The Appellant functions as an entrepreneur, once payment of royalty as well as import of raw material is demonstrated to have been undertaken at arm’s length, the issue of AMP expense would be a misnomer. 16 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, 15. It is next contended for the assessee that incidental benefits (if at all any) to the AE, do not constitute intra-group services. Ld. Counsel has submitted that any AMP activity undertaken by the Company primarily benefits the Company and AE is only benefitted in the form of increased royalty, which has been separately demonstrated to be at arm’s length. 16. Ld. DR has countered it by submitting that assessee admits of supporting the global market strategy of the foreign AE thus benefits the brand owned by the said AE. It was further submitted that case of assessee is not of mere distributor but a manufacturer. The judgment of Delhi Benches in the case of BMW India (P) Ltd. Versus DCIT, Gurgaon ]2017]88 taxmann.com 26 (Delhi-Trib) was relied to contend that AMP as distinct transaction is liable to be tested for ALP. It was submitted that TPO has extensively examined the conduct of assessee to establish the concert action. As with regard to reliance of Ld. AR on the decision of Maruti Suzuki (supra) it was contended that was a case of local brand and no distributive function. 17. We have given thoughtful consideration to the claim of assessee that in the case of assessee AMP expenditure is not an international transaction. It is pertinent to mention that in assessee’s own case for AY 2013-14 and 2014-15 the co- ordinate bench has held that application of Bright Line test is not sustainable for 17 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, examining ALP of AMP expenditure. However, the question as to if AMP expenditure of assessee is at all an international transaction was left open in AY 2013-14, vide ITA No. 7580/DEL/2017 order dated 1.08.2022 and relevant part of decision in para 10.2 and 11 are reproduced below: “10.2 Based on the above, it is amply clear that BLT as an approach is not permissible for undertaking any addition on account of AMP expenses incurred by the assessee. We, therefore, set aside this issue to the file of the Ld. AO/ TPO to decide it afresh in light of the decisions of the Hon'ble Delhi High Court in the case of Maruti Suzuki India Ltd. (supra) and Sony Ericsson Mobile Communications India Pvt. Ltd. (supra) after giving reasonable opportunity of hearing to the assessee. 11. Before us, the assessee has prayed that if the AMP adjustment is determined at Rs. NIL by application of jurisdictional High Court decisions (supra) the issue whether this is an international transaction would become academic and thus the assessee will not press this ground. However, leave may be granted to the assessee to argue this issue in the subsequent assessment years if so required. We have no objection and allow the assessee to argue on this issue in future.” 18. It is relevant here to understand as to how the issue was dealt by the DRP, and for sake of convenience the relevant part of the DRP order is reproduced below; ““DRP Directions: 2.21 This is a legacy issue arising since AY 2013-14, and the DRP has confirmed the proposed adjustment. 2.2.2 The assessee is manufacturer and distributor of molded plastic kitchenware products under the brand name of the AE, i.e. 18 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, \"Tupperware\". The assessee has objected to treatment of AMP expenses as International transaction and adjustment of ALP on this count. This issue has been recently examined in detail by the ITAT as also Hon'ble Delhi High Court in Sony Ericsson Mobile Co Pvt. Limited (ITA 16/2014- [2015] 55 taxmann.com 240 (Delhi)) and other cases and such transactions have been held to be International transactions and subject to TP provisions. The TPO has held it to be an International transaction in view of clear and unambiguous ownership of the Brand by the AE and the promotional activities undertaken result in a clear benefit to the AE as the assessee is just a transit point for the product towards the end user. The assessee is not subject to the related risks of a brand owner producer. This panel has also considered the order of the TPO, who has discussed it in details in para 32 to 35.08 pages-101 to 136 of the TP order. 2.2.3 The assessee seeks relief relying on the judgment of the Hon'ble Delhi High Court in the case of Maruti Suzuki India Limited [ITA No. 110/ 2014 and ITA 710/2015). This ruling is in different context as it involves a different entity with an entirely different functional and risk profile. The interlacing of AMP function in such a different risk profile cannot be the basis of deciding applicability of the ruling in case of the assessee. The panel is not able to agree with the assessee on this count. This spending results in extending the reach of the marketing intangible owned by the AE's. The AE is the ultimate beneficiary as the intangibles owned by it are gaining in value due to the marketing efforts of the assessee. The assessee is in effect creating marketing intangibles in favour of the assessee by the AMP efforts that it carries out in the Indian sub-continent. The TPO has considered the AMP expenditure for promotion of the brand name. This resulted in creation of marketing intangible of the AE in India by the assessee and has not implied that the AMP is for the use of brand name. The TPO has examined and analysed the Promotion of brand and creation of marketing intangible for benchmarking the international transaction in relation to AMP expenditure. The short facts are that the assessee incurred expenses on account of AMP. 2.24 The assessee failed to show that the AMP expenditure done by them was compensated by the AE through a set-off in any other trade off transaction. The onus to show any such setoff is on the assessee 19 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, but the assessee has failed to establish any such setoff. The assessee argued that its overall results have been accepted by the TPO therefore, the AMP transaction cannot be separately examined. This argument is unacceptable. The TPO was justified in benchmarking the AMP expenses as a separate transaction. 2.2.5 The conduct of the assessee, in brand promotion per the displays and other promotional activities apart from various functional innovations etc, clearly point to the existence of the AMP transaction. The assessee had submitted that the International Transaction because the AMP spend could not be viewed as such in the absence of agreement/arrangement/understanding to incur AMP expenses or excessively incur AMP expenses, AMP expenditure incurred by the assessee does not result in an international transaction. Mere absence of a formal agreement doesn't help the case of the assessee, whereas the conduct has the transaction written all across. In such a scenario, it does not help the case of the assessee as the assessee indeed undertakes the AMP action resulting in promotion of the brand. The TPO concluded that the Assessee incurs. excessive AMP expenditure; by this act the assessee renders a service to the AE. Such service is in the form an international transaction and calls for a higher remuneration on the part of the Assessee. The absence of adequate compensation is also concluded by the TPO. The fact that year after year the assessee has been carrying out high intensity of AMP activities is itself proof that there exists an arrangement between the Assessee and the AE that compels the Assessee to carry out this level of expenditure. Here we may refer to clause (v) of Section 92F which defines 'transaction'. The same is reproduced below: (v)\"transaction\" includes an arrangement, understanding or action in concert - (A) whether or not such arrangement, understanding or action is formal or in writing: or (B) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceeding.] 2.2.6 In this regard, mere absence of explicit agreement or non- furnishing of an agreement does not really establish the case of the assessee. Conduct and its nature whether 'collusive' or 'independent' 20 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, has to be considered and it should form the fundamental test of determination of the nature of transaction in the ambit of International transaction. The existence of International Transaction in respect of AMP spend by the assessee is to be seen through the prism of 'conduct of the Parties' and the 'Ownership of IRPs' and their usages. The assessee carries out activities that significantly enhance the brand value/ Marketing. 2.2.7 The above contentions are meant to indicate that the assessee is required to carry out ad campaigns to promote its products. But the assessee has not specifically responded to the findings of the TPO about excess expenditure on AMP that results in buildup of the intangible heft. The assessee submission indicate to existence of an arrangement so structured so as to benefit the AE through rub off impact of the AMP spend but absolving the AE of any obligations to pay up for the benefits. Though the AE retains the ownership and control over the IPRs the assessee carries out activities that significantly enhance the brand value/ Marketing. The jurisprudence referred to by Ld AR though presented very meticulously, is clearly distinguishable on facts of each case 2.2.8 It is seen that the parent AE not only owns the Intangibles but also controls further development and growth of its intangibles This factum clearly demonstrates that the AE has ingeniously segregated the functions of Intangible management and product related operational aspects to reduce exposure to routine business risks and to protect and enhance margins through Intangibles. The study of these indicates clear delineation of the functions pertaining to the intangibles and the increase in volumes/turnover. The assessee furnished a set of comparables to the TPO for examining under TNMM. The TPO has accepted the same for comparability analysis. The panel upholds the action of the TPO in the above terms subject to the final direction. 2.2.9 As regards the contention of the assessee that the said AMP is not an international transaction, while in Sony Ericsson Mobile Communications India (P.) Ltd. v. Commissioner of Income-tax -III [2015] 55 taxmann.com 240 (Delhi) the Hon'ble Delhi High Court has disapproved the bright line test for finding out the cost/value of 21 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, international transaction, which is the first variable under the TP provisions, the Hon'ble Court has held that the TPO has authority to examine and determine the international transaction of AMP spend. The Hon'ble High Court has observed and held as under in this regard: \"3..... the assessed were engaged in distribution and marketing of imported and branded products, manufactured and sold to them by the foreign AEs resident abroad. Intangible rights in the brand- name/trademark/trade-name were owned by the foreign AEs. There is no dispute or lis that the assessed are AEs who had entered into controlled transactions with the foreign AEs. It is also uncontested that the controlled international transactions can be made subject matter of the transfer pricing adjustment in terms of Chapter X of the Income Tax Act... 43 where an assessee has failed or not furnished a report in respect of an international transaction, a specific reference for the said transaction under sub-section (1) is not required. It is sufficient, if arm's length pricing issue of any international transaction has been referred to the TPO..... 52. The contention that AMP expenses are not international transactions has to be rejected... 53. We also fail to understand the contention or argument that there is no international transaction, for the AMP expenses were incurred by the assessed in India. The question is not whether the assessed had incurred the AMP expenses in India. This is an undisputed position. The arm's length determination pertains to adequate compensation to the Indian AE for incurring and performing the functions by the domestic AE. The dispute pertains to adequacy of compensation for incurring and performing marketing and 'non-routine' AMP expenses in India by the AE.... DRA 56. Chapter X of the Act being a specific statutory provision has to be given effect to and in view of the said provisions arm's length price can be determined. The arm's length procedure prescribed in Chapter X, once applicable has to be given full application. As noticed above and subsequently, provisions of Chapter X are applicable to 22 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, international transactions between two related enterprises. The purpose of determination of arm's length price is to find out the fair and true market value of the transaction and accordingly the adjustment, if required, is made. The said exercise has its own object and purpose.\" 2.2.9.1 Further, we find that the issue of AMP adjustment is pending before the Hon'ble Supreme Court for final decision. According to Taxsutra/Taxmann, the Hon'ble Supreme Court has admitted the Department's SLP in several cases involving AMP, in respect of a distributor as also a manufacturer-distributor, where the Hon'ble Delhi High Court has decided the issue against the Revenue.” 19. The relevant conclusions of the TPO, as considered vital by the DRP to sustain order of TPO to hold the AMP expenditure to be international transaction, have been culled out in para 2.2.10 of the order of DRP and same are also worthy to be reproduced herein below:- “2.2.10 The TPO, in the TP order, has made detailed discussion on the treatment of the AMP spend as international transactions basis facts of the case and the legal position related thereto, not repeated for sake of brevity. The TPO has made certain pertinent and noteworthy observations, which inter alia are,  The taxpayer had incurred INR 373427630/- on account of AMP expenditure which represents 7.85% of its sales,  The taxpayer does not have any agreements for use of trademarks and patent owned by the parent entity. The said trademarks/formulations (intellectual property) was owned by the taxpayer's US based AE ie. M/s Tupperware Brands Corporation US. This implied that third parties could be granted licenses to use the trademarks. Therefore, it is clear that any creation of marketing intangible by the taxpayer could be utilized by third party manufacturers licensed by M/s Tupperware Brands Corporation US also; 23 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021,  Hence, the benefit of AMP expenditure incurred by the taxpayer was not found to be exclusively for its own purpose. Accordingly, the benefit of the AMP expenditure is inuring to the US based AE as the latter clearly retained the rights to pass on the benefit of developed marketing intangibles to third-party manufacturers as per its own wish:  The taxpayer was asked to provide its global advertisement policy along with global transfer pricing policy... to provide if there is any correspondence between the marketing head of the taxpayer and that of the foreign parent AE... to provide a certificate that the AE does not associate, involve or approve the procedure/process of relating to advertising and marketing and the basis of adoption of common theme for the advertisements. In its reply, the taxpayer submitted that an advertisement conceptualized by it is within the global best practices as shared by the AEs on a time to time basis. The rationale being since the foreign AE is the legal owner of the brand, the advertisement must adhere to the standards of the foreign AE. The taxpayer also contended that the strategy for advertisement and marketing in India have been conceptualized and determined by the AE in USA;  During the TP proceedings for A.Y. 2014-15, following observations were made: On page 3 of the show cause reply submitted in this office on 04.10.2016, assessee himself admits that one among the major functions of the assessee is the implementation of global direct selling/ marketing policy. Assessee in its submissions has admitted stated many times that policy formulation and brand promotion is the work done by AEs. Since, it is clear from that assessee Implements the global marketing strategy formulated by AEs, there can be no denial in the fact that assessee is contributing to the brand promotion of the brands owned by AES  8.2 On page 16 of the TP study submitted by the assessee, assessee himself admits to the fact the assessee provides support in the implementation of the global marketing policy. This function read 24 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, along with other functions clearly indicates towards the steps taken by Tupperware India to promote the brand name owned by AEs (Extract of the same has been reproduced in the TP order at pages-36 & 37 of TP order)  12.1 The \"Tupperware\" brand and the trademark, copyrights etc is owned by Tupperware Group As per the information available from the website of Tupperware India, it is seen that the brand Tupperware is always displayed. It is also seen that the AEs undertake functions relating to formulation of marketing strategy and brand building for their global operations. The Tupperware Group also has a separate sales and marketing team that is responsible for formulation of marketing strategy and distribution of products in the Indian market. Therefore, it appears that the AEs bear significant business and entrepreneurial risks of product acceptability in the market. On the other hand, the Assessee does not own any interest in the intangible and is only a manufacturer and seller of \"Tupperware\" products in India.  12.2 Tupperware has taken worldwide initiatives to protect its brand name. The taxpayer has further added that the AE(s) has knowledge and resources required for legal protection of the brands and protecting the brand from infringement is extremely critical for the business and the registration of brands with AE has benefitted the Taxpayer since it is absolved of the responsibility of protection of the brands  The above facts indicate the absence of independence of choice of theme, application of mind and decision making while selecting the advertisements.  There is sufficient evidence that it is discharging marketing function, function of market development including adding value to the intangibles of its AE and is not merely engaged in dealing of plastic products.  The above-mentioned analysis of the facts clearly substantiate that the taxpayer is promoting brand of the AE in India. For this it is required to maintain a trained sales force, maintain full distribution ad sales presence etc. The taxpayer is also required to undertake advertising promotion and merchandising programs for products for which it has only a limited, non-exclusive and non-transferable authorization to use names trademarks etc. Unless the licensing 25 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, agreement states that Indian company has exclusive, long term rights for usage of brand in India, the excessive non-routine AMP spend actually adds to the brand value of foreign AE which can withdraw the license at any point of time. Agreeably, the routine AMP spend will also give some incidental benefit to the brand owner but at the same time it is for promoting domestic sales. In an uncontrolled environment, if an Indian company does incur non-routine AMP spend it will ask for a compensation from foreign AE for the services rendered by it for maintaining, enhancing and promoting its brand  Assessee employed a sales force which, along with the marketing is responsible for both identifying and developing new business opportunities in domestic market thereby helping in market penetration.  The above analysis of the taxpayer that substantiates the sales promotion and marketing expenditure is to promote the AE brand and corresponding marketing intangible in India.  Accordingly the marketing function carried out by the assessee is required to be considered while carrying out the benchmarking of the international transactions  Taxpayer has incurred excessive non-routine AMP spend of Rs 37.34,27,630 as compared to other comparable companies This exercise was conducted only to find out if any International Transaction in marketing intangible has happened due to extra AMP spend The very fact that assessee has excessively spend on AMP activity proves that substantial services were rendered to the AE for which it should have been compensated  The taxpayer is not only creating marketing intangibles for the AEs but also maintaining and expanding the scope of the existing brand owned by AE  In an independent party scenario, the entity developing the brand would seek the remuneration for the efforts and risks being undertaken for developing the brand. Since the taxpayer has not denied the fact that the brand has been developed in India with its own efforts, in a third party scenario the risks and rewards for the brand development should also lie with the taxpayer. 26 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, 2.2.11 To benchmark the transaction related to AMP spend and to determine the cost of AMP spend, the TPO adopted segregated approach. The TPO has, inter alia, observed as under  In this case, the assessee and comparables are undertaking different levels of AMP functions. The difference in the routine AMP spend of assessee and comparables would not have similar effect on their respective margins. In the absence of data related to value of brand, value of marketing intangible created and incidental benefits to assessee and AE, ALP of non-routine AMP spend cannot be accurately calculated if the transactions are aggregated. Therefore, TNMM cannot be applied considering the facts of the case and accordingly. AMP transaction is being benchmarked separately using segregation approach.  It is important to clarify that TPO has used the comparables only for the purpose of determining non-routine AMP spend. This does not mean that comparables have been accepted at entity level using bundled approach. Therefore, non-routine AMP expense is treated as a separate international transaction for ALP determination. 2.2.12 In view of the DRP directions in the assessee's case for AYs 2013-14 and 2014-15 and the above factual and legal position, the panel holds 'the AMP spend and lack of suitable compensation by the AE' as an International transaction based on the facts of the case and in agreement with the findings of the TPO, and therefore the TPO’s action of treating the said excess AMP spend as international transaction and making adjustment thereto is upheld.” 20. As this issue of AMP expenses goes to the root of other grounds on merits about benchmarking and correct comparables as should be applicable, we proceed to determine it first and we find that assessee had not reported any international transaction related to this disputed AMP expenses. No benchmarking has been carried out in this regard. After going thoroughly with the ld. TPO order as 27 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, sustained by DRP, we find that not a word is discussed on the basis of any fact or evidences in the form of any agreement between the assessee or its AE, no document in the form of any invoice or work order of the AMP expenses, nothing from the financials of the assessee or AE, the business module or customer base targeted, segmental sales etc. forms basis of discussion as to what is the nature of products and services which assessee is manufacturing or trading, so as to question, if AMP expenses were to be compensated by the AE. 21. It is pertinent to mention that assessee is in manufacturing and trading of consumer or house hold product used in kitchen and is not some niche area of technology or products. The customer base is households which is localized and market potential is based on numerous individual, local and personal preferences. This necessitates to bring on record on the basis of some material that AMP expenses were integral part of assessee’s business functions to create some marketing intangibles benefiting the brand of AE in the other markets or to other customers where the similar products are sold by the AE or any of its affiliates. However, no such exercise is done by TPO and the DRP merely relied the order of TPO, on first principles as to in which cases AMP as separate transaction should be examined for its ALP. We are of considered view that the AMP expenses cannot be alleged to be excessive or for creating any brand for AE or adding to its worth 28 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, on the basis of theoretical principles without establishing on the basis of material and evidences that expenditure does not commensurate to the functions carried out and risk assumed by the assessee to its manufacturing or distribution business. 22. We are of considered view that AMP necessarily does not result in brand building. The Hon’ble High Court in the Sony Ericsson Mobile Communications India (P.) Ltd. case (supra), vide para 106 as reproduced earlier in para 12 has held that advertisement may not be the only tool for brand building. Hence, it cannot be held that AMP necessarily leads to brand building. 23. Thus in our considered view ld. Tax authorities should establish on facts that the gross margin remuneration is adjusted to AMP expenses to benefit the AE. The AMP expenditure is not unilateral and out of some discernible arrangement which is reflected in concert action between the assessee and AE. A mere allegation is made of foreign AE being a beneficiary but nothing on that account is available in impugned orders in terms of any overt act of either of the assessee or its AE. 24. Further we are of the considered view that since Bright Line Test method is used for protective adjustment and Residual Profit Split Method for substantive adjustments, so that shows that the ld. TPO has not found anything from the 29 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, transactions between the assessee and AE or specific heads of expenditures incurred by the assessee, or specific transactions of AMP expenses of assessee with independent entities, which will establish as evidence of necessity of some compensation from the AE. It is only on the basis of examination of the quantum of AMP expenses the opinion of benefit to AE, has been drawn, which certainly is not sustainable, where the law is that onus is on Revenue to establish existence of an international transaction. 25. Then as far as the contention of department is concerned that since the assessee is buying the moulds from its AE the expenditure on AMP is benefiting the AE. We are of the considered view that indeed the assessee is making purchase of moulds but that is a input to manufacturing for which there is no dispute that price paid to the AE is at arms length. So that does not add anything to the brand of the AE. On that basis no inferences can be drawn about the benefits of to the brand of AE. 25.1 The identification of customers in India is at the discretion of the assessee. Thus, it is assessee’s marketing and sales team which is executing the policy of the assessee company with regard to identification of customers, medium of advertisement and promotional activities, discounts and the same is independent and without any understanding or an arrangement with the AE. The fact of 30 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, implementation of global direct selling marketing policy by the assessee in itself cannot be a basis to hold that the same benefits the foreign AE. International brands have their own marketing, selling and advertisement parameters to be followed throughout the world and as the owners of reputed brands the foreign AE have an inherent right to see that their affiliates in developing markets do not resort to any selling or marketing policy which is not according to the standards set. It has taken years of strategic costs for the foreign brand to create the brand so requiring Indian entity to follow the minimum of standards cannot be equated with a concert action to build the brand further. It is incorrect to say that the assessee is just a transit point of the products towards the end user and the assessee is not subject to the related risks of a brand owner producer. Therefore, the assessee should be compensated for the AMP expenses. In the case before us, the assessee is not merely a mediator or an intermediary, but, admittedly, has its own manufacturing activity. Therefore, even if the brand is owned by the foreign AE, the assessee carries a risk of its own in the local market. We find that the ld. tax authorities have repeatedly observed that mere absence of a formally agreement does not help the assessee whereas the ‘conduct’ has the transaction written all across. 31 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, 25.2 We are of the considered view that merely on the basis of high intensity of AMP activities no presumption can be drawn so as to impute existence of an international transaction by an artificial component of ‘conduct’ which is not otherwise supported by any evidence. Conduct as a basis of imputing an element of concert action so as to invoke the provisions of the Act, to allege there is a ‘implied transaction’, should be on the basis of some ‘overt act’ of both the AEs, which is not pointed out at all. The ld. DR’s contention on the basis of judgement of the Hon’ble Delhi High Court in the case of Sony Ericsson Mobile Communication India (P) Ltd. (supra) that the TPO has authority to examine and determine the international transaction of AMP spend cannot be extended so as to draw a conclusion on the basis of the ‘conduct’ alone whereby the conduct is not reflected by any concerted action. 25.3 The rights, if any, with the US based AE to extend benefit of its marketing intangibles to third party manufacturers as per its own wishes also does not establish a case of the tax authorities without any enquiry being conducted in that regard. The benefit derived is by the assessee in terms of quantum of sales. There is nothing to show that even without these AMP expenses the assessee would have procured the same quantum of sales from same set of customers and market, so as 32 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, to allege that some excessive AMP expenses were for benefit of the AE for which assessee should have been compensated. 26. Thus we find substance in the contention of ld. AR that in the absence of any ‘understanding’, ‘arrangement’ or ‘action in concert’, the AMP expense cannot be held as an international transaction as per Section 92B read with Section 92F(v) of the Act. Reliance in this regard is rightly placed by him on the decision of Hon’ble Delhi High Court in the case of Maruti Suzuki (supra), wherein the Hon’ble Delhi High Court held that even if the word ‘transaction’ is given its widest connotation, it is still incumbent on the Revenue to show the existence of an ‘understanding’ or an ‘arrangement’ or ‘action in concert’ as regards AMP spend for brand promotion. The relevant extract is provided below for ready reference. “59. Nevertheless, there is no specific mention of AMP expenses as one of the items of expenditure which can be deemed to be an international transaction. For this purpose, Section 92B(i) read with Section 92(1) becomes significant. Under Section 92B(1) an 'international transaction' means- (a) a transaction between two or more AEs, either or both of whom are non-resident (b) the transaction is in the nature of purchase, sale or lease of tangible or intangible property or provision of service or lending or borrowing money or any other transaction having a bearing on the profits, incomes or losses of such enterprises, and (c) shall include a mutual agreement or arrangement between two or more AEs for allocation or apportionment or contribution to the any cost or expenses incurred or to be incurred in connection with the benefit, service or facility provided or to be provided to one or more of such enterprises. …… 33 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, 61. The submission of the Revenue in this regard is: \"The mere fact that the service or benefit has been provided by one party to the other would by itself constitute a transaction irrespective of whether the consideration for the same has been paid or remains payable or there is a mutual agreement to not charge any compensation for the service or benefit.\" Even if the word 'transaction' is given its widest connotation, and need not involve any transfer of money or a written agreement as suggested by the Revenue, and even if resort is had to Section 92F (v) which defines 'transaction' to include 'arrangement', 'understanding' or 'action in concert', 'whether formal or in writing', it is still incumbent on the Revenue to show the existence of an 'understanding' or an 'arrangement' or 'action in concert’ between MSIL and SMC as regards AMP spend for brand promotion. In other words, for both the ‘means’ part and the ‘includes’ part of Section 92B (1) what has to be definitely shown is the existence of transaction whereby MSIL has been obliged to incur AMP of a certain level for SMC for the purposes of promoting the brand of SMC.” 27. Thereafter, the Hon’ble High Court went on to hold that in the absence of there being an international transaction involving AMP spend with an ascertainable price, neither the substantive nor the machinery provisions of Chapter X of the Act are applicable to the transfer pricing exercise. Thus, the inevitable conclusion is that Chapter X as a whole does not permit such an adjustment. The relevant extract is reproduced below:- “76. As explained by the Supreme Court in CIT v. B.C Srinivasa Setty (1979) 128 ITR 294 (SC) and PNB Finance Ltd vs. 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.” 34 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, 28. Further, the reliance placed by the Ld. TPO on the judgment of Hon’ble Delhi High Court in the case of Sony Ericsson Mobile Communications India (P.) Ltd. v. CIT ([2015] 55 taxmann.com 240 (Delhi) while benchmarking the AMP expenses as a separate international transaction seems erroneous. As in a subsequent judgment of the Hon’ble Delhi High Court in the case of Maruti Suzuki India Ltd. (supra), the existence of an international transaction was discussed in light of judgement of Sony Ericsson (supra) wherein it was held as under:- “47. As regards the submission regarding the BLT having been rejected in the decision in Sony Ericsson is concerned, the Court notes that the decision in Sony Ericsson Mobile Communications India (P.) Ltd. (supra) expressly negatived the use of the BLT both as forming the base and determining if there is an international transaction and secondly for the purpose of determining the ALP. Once BLT is negatived, there is no basis on which it can be said in the present case that there is an international transaction as a result of the AMP expenses incurred by MSIL. Although the Revenue seems to contend that the BLT was used only to arrive at the quantum of the TP adjustment, the order of the TPO in the present case proceeds on the basis that an international transaction can be inferred only because the AMP expenses incurred were significantly higher that what was being spent by comparable entities and it was also used for quantifying the amount of the TP adjustment. Consequently, the Court does not agree with the submission of the learned Special counsel for the Revenue that de hors the BLT, which has been rejected in the Sony Ericsson Mobile Communications India(P.) Ltd. (supra) judgment, the existence of an international transaction on account of the incurring of the AMP expenses can be established. ………. 51. The result of the above discussion is that in the considered view of the Court the Revenue has failed to demonstrate the existence of an international transaction only on account of the quantum of AMP 35 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, expenditure by MSIL. Secondly, the Court is of the view that the decision in Sony Ericsson Mobile Communications India(P.) Ltd. case (supra) holding that there is an international transaction as a result of the AMP expenses cannot be held to have answered the issue as far as the present Assessee MSIL is concerned since finding in Sony Ericsson to the above effect is in the context of those Assessees whose cases have been disposed of by that judgment and who did not dispute the existence of an international transaction regarding AMP expenses.” 29. Further, the reliance of ld. AR on the decision of Hon’ble Delhi High Court’s in the case of Bausch & Lomb Eyecare (India) Pvt. Ltd. (ITA 643/2014) is also relevant wherein the Hon’ble High Court distinguished between a ‘function’ and a ‘transaction’ and held that AMP expenditure is not an international transaction. The relevant extracts are reproduced below for ready reference:- “61. There is merit in the contention of the Appellant that a distinction is required to be drawn between a 'function' and a 'transaction' and that every expenditure forming part of the function cannot be construed as a 'transaction'. Further, the Revenue's attempt at re-characterising the AMP expenditure incurred as a transaction by itself when it has neither been identified as such by the Appellant or legislatively recognised in the Explanation to Section 92 B runs counter to legal position explained in CIT v. EKL Appliances Ltd. (supra) which required a TPO \"to examine the ‘international transaction’ as he actually finds the same.” 64. In the absence of any machinery provision, bringing an imagined transaction to tax is not possible. 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.” 36 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, 30. It is also pertinent to add that subsequent to the decision in the case of Maruti Suzuki India Ltd. (supra) which is a manufacturer, the Hon’ble jurisdictional High Court has passed judgment specific to Distributor as well. Reliance in this regard is placed on the decision of Moet Hennessy India (P.) Ltd. (2023) 146 taxmann.com 551 (Delhi) wherein it was held as under:- “13. We are also unable to agree with submission of the learned counsel for the Revenue that in the judgment of Maruti Suzuki India Ltd. (supra) and Bausch & Lomb Eyecare (India) (P.) Ltd. (supra), the findings of this Court with respect to absence of international transaction emanated from the fact that the assessee therein were a manufacturer in addition to being a seller. 14. The issue with respect to deletion of transfer pricing adjustment on account of AMP expenses, determined on BLT method, by the ITAT is squarely covered by t he decisions of this Court in the case of Maruti Suzuki (supra) and Bausch & Lomb Eyecare (India) (P.) Ltd. (supra). We are, therefore, not inclined to frame any substantial question of law on this issue. The facts and law have been correctly assessed by the ITAT and we therefore, do not find any merits in the appeal and the accordingly, the same are dismissed” 31. Then we find that DRP has specifically mentioned that the issue of AMP adjustment is pending before the Hon'ble Supreme Court for final decision. DRP observed “According to Taxsutra/Taxmann, the Hon'ble Supreme Court has admitted the Department's SLP in several cases involving AMP, in respect of a distributor as also a manufacturer-distributor, where the Hon'ble Delhi High Court has decided the issue against the Revenue.” However, now, Hon’ble Supreme Court has dismissed the Revenue's SLP finding no international 37 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, transaction involving AMP expenses in case of Whirlpool India. The issue there in also have in its background the claim of Revenue department that excess AMP expenses incurred by an Indian associated enterprise lead to creation of “marketing intangibles”, adds to the brand value and expands brand identity and image for the foreign associated enterprise so the same amounts to a transaction where a service is being performed by the Whirlpool India for its AE. Hence Revenue claimed that Indian AE should then be compensated for this on an arm’s-length basis, given that such expenses come under the ambit of “international transactions” subject to transfer pricing. However, Whirlpool India argued that such costs are incurred wholly to build the business in India and part of its independent functions so shouldn’t be subject to transfer pricing. The decision of the Hon’ble Supreme Court in Whirlpool India Case (SLP(C) 29270/2016 order dated 20/11/2024 has recognised the cardinal principles covering this issue that there should be concrete evidence to establish international transactions. The Hon'ble Delhi High Court in case of Whirlpool of India Ltd vs DCIT 381 ITR 154 has held that there should be some tangible evidence on record to demonstrate that there exists an international transaction in relation with incurring of AMP expenses for development of brand owned by the AE. In our considered opinion, in the absence of such demonstration, there is no question of undertaking any benchmarking of AMP expenses. The 38 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, relevant findings of the Hon'ble High Court in the case of Whirlpool of India Ltd [supra] read as under:- \"32. Under Sections 92B to 92F, the pre-requisite for commencing the TP exercise is to show the existence of an international transaction. The next step is to determine the price of such transaction. The third step would be to determine the ALP by applying one of the five price discovery methods specified in Section 92C. The fourth step would be to compare the price of the transaction that is shown to exist with that of the ALP and make the TP adjustment by substituting the ALP for the contract price. XXX XXX XXX 34. The TP adjustment is not expected to be made by deducing from the difference between the 'excessive' AMP expenditure incurred by the Assessee and the AMP expenditure of a comparable entity that an international transaction exists and then proceed to make the adjustment of the difference in order to determine the value of such AMP expenditure incurred for the AE. 35. It is for the above reason that the BLT has been rejected as a valid method for either determining the existence of international transaction or for the determination of ALP of such transaction. Although, under Section 92B read with Section 92F (v), an international transaction could include an arrangement, understanding or action in concert, this cannot be a matter of inference. There has to be some tangible evidence on record to show that two parties have \"acted in concert\". XXX XXX XXX 37. The provisions under Chapter X do envisage a 'separate entity concept'. In other words, there cannot be a presumption that in the present case since WOIL is a subsidiary of Whirlpool USA, all the activities of WOIL are in fact dictated by Whirlpool USA. Merely because Whirlpool USA has a financial interest, it cannot be presumed that AMP expense incurred by the WOIL are at the instance 39 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, or on behalf of Whirlpool USA. There is merit in the contention of the Assessee that the initial onus is on the Revenue to demonstrate through some tangible material that the two parties acted in concert and further that there was an agreement to enter into an international transaction concerning AMP expenses. XXX XXX XXX 39. It is in this context that it is submitted, and rightly, by the Assessee that there must be a machinery provision in the Act to bring an international transaction involving AMP expense under the tax radar. In the absence of any clear statutory provision giving guidance as to how the existence of an international transaction involving AMP expense, in the absence of an express agreement in that behalf, should be ascertained and further how the ALP of such a transaction should be ascertained, it cannot be left entirely to surmises and conjectures of the TPO. XXX XXX XXX 47. For the aforementioned reasons, the Court is of the view that as far as the present appeals are concerned, the Revenue has been unable to demonstrate by some tangible material that there is an international transaction involving AMP expenses between WOIL and Whirlpool USA. In the absence of that first step, the question of determining the ALP of such a transaction does not arise. In any event, in the absence of a machinery provision it would be hazardous for any TPO to proceed to determine the ALP of such a transaction since BLT has been negatived by this Court as a valid method of determining the existence of an international transaction and thereafter its ALP.\" 32. Thus we are of the considered view that on the basis of AMP expenditure quantum alone assessee cannot be said to have benefitted the AEs’ brand. Brands are not product or services centric, but, more of customer centric. In exercise of brand building or enhancement, it is essential to establish as to how the AMP 40 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, expenses generated awareness of the brand which was more useful to the foreign AE than to help the assessee in procuring its share of market. The AO was, thus, required to establish that the AMP expenses were not for tearing into the local market alone, but, were made at the instance of foreign AE for enhancement and creating a brand value beyond the local market. In the absence of any such facts coming out of a concerted action of the assessee with its foreign AE, or in absence of independent inquiry on the basis of nature of product, services or retail brands catered by the assessee the AO cannot draw any presumption on the basis of AMP expenses quantum or sales that the expenses must have resulted into any benefit to the AE. Therefore, we are inclined to accept the case of assessee that in the given facts and circumstances, the ld. Tax authorities were unable to demonstrate that AMP expenses incurred by the assessee were in any way beneficial to the brand of foreign AE requiring TP adjustment. Thus this issue is decided in favour of the assessee and as a consequence of same the grounds no. 5 and 6 are decided in favour of assessee. 33. In regard to grounds No.7 and 9 arising out of payment of royalty, we find that in AY 2013-14 the coordinate Bench had examined the issue if the tax authorities have erred in rejecting the transfer pricing documentation maintained by the assessee in respect of payment of royalty and erroneously determined arm’s 41 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, length royalty rate at 2% of the sales of the assessee and while examining this, the coordinate Bench had made the following relevant observations:- “13. In the backdrop of the above factual matrix, the Ld. AR submitted that the assessee has entered into a License Agreement with Tupperware USA (copy of License Agreement at pages 165-172 of Paper Book-Convenience Compilation) for the use of Tupperware registered trademarks, trademark applications and marketing information to sell the products in India. While the registered trademarks include trademarks like \"Tupperware®\", \"Tuppercraft®\", \"Tuppertoys®\" and other trademarks which include the derivative \"Tupper\", the 'marketing information received by the assessee from Tupperware USA pertains to brand guidelines, product portfolio, details on products/product lines (such as guides for usage, utility, positioning ideas) including training material for sales force, sales force management guidelines, consumer flyers, marketing ideas including sharing of global best practices and successful campaign ideas, use of social media for advertising etc. 13.1 The Ld. AR also submitted that the approach adopted by the Ld. TPO does not constitute a valid CUP as the conditions stipulated by RBI/ FIPB for royalty payments are for ease of doing business and cannot be considered as a valid CUP for transfer pricing purposes. In support thereof, the Ld. AR relied upon the decision in the case of Sara Lee TTK Limited (TS- 663-ITAT-2016(Mum)-TP) wherein the Hon'ble Tribunal has held that the purpose of the RBI/FIPB approvals is entirely different and cannot be equated with the arm's length principles. 13.2 The Ld. AR further submitted that the Ld. TPO in his fresh search conducted in the remand report identified three comparables viz. (i) Amen Wardy, Sr.; Amen Wardy, Jr., USA (ii) Mikasa Inc.; American Commercial Inc., Mikasa Licensing Inc.; ARC International, SA, USA (iii) Oneida Ltd., USA. However, he included only one comparable i.e. Amen Wardy, Sr.; Amen Wardy, Jr., USA in the final set of comparables observing that when only trademarks or trade names are involved only nominal payment of 2% is sufficient. The Ld. AR referred to the relevant paras of the remand report which is reproduced below:- 42 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, \"This office, as a further step, searched for similar royalty agreements on a public database, \"Royaltystat\". Though no exact comparable agreements were found, however following agreements are considered suitable for determining the royalty rates which should have been paid by the assessee to its AE: S. NO. Licensor Licensee Agreement Description of agreement in Royalty stats royalty rates (taking net sales as base) 1. Amen Wardy, Sr.; Amen Wardy Jr. St. John Knits Inc. Copyrights, Trade Name, Trademark Exclusive license to use the “St. John Home by Amen Wordy” trademarks, trade names and designs to market and distribute a line of home furnishing products and gifts, including window coverings, wall coverings, paints, floor, coverings, furniture, linens, art objects, accent pieces, architectural treatments, china, dishware, flatware, stemware, cookware, bed and bath items, and home accessories 2.00% 2. Mikasa Inc. American Commercial Inc.; Mikasa Licensing Inc.; ARC TMC Acquisition Inc.; Lifetime Brands, Asset Purchase; Copyrights; Know-how; Patent; Proprietary business which designs, develops, markets, distributes and sells branded and co- branded dinnerware, giftware, stemware, 5.00% 43 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, International, SA Inc. Information; Technology; Trade Name; Trademark; Web content barware, flatware and other products designed for decorative or utilitarian purposes, including inventory, the \"Mikasa\" and \"Oenology\" trademarks and trade names, patents, copyrights, technology, know-how, formulations, web content and domain names, goodwill, marketing materials, a showroom lease, contracts, actions, and raw materials. 3. Oneida Ltd. Robinson Home Products Inc. Copyrights; know-how; Patent, Trademark Exclusive patent, know- how and copyright license to use the ‘Oneida’ trademarks to design, engineer, market, promote, manufacture, distribute, use and sell flatware, dinnerware, kitchen gadgets, tools, barware and cutlery products and other products including cookware, bakeware, glassware, hollowware, stemware, serve ware and storage accessories, for sale to consumers in the retail trade channel, excluding the consumer direct channel and 8.00% 44 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, foodservice or institutional channels Average 5.00% From the aforementioned agreements, it can be noticed that only 2.00% royalty is paid in case of Amen Wardy, Sr.; Amen Wardy, Jr. for the payment of trademarks, tradenames and copyrights. In case of Mikasa Inc.; American Commercial Inc.; Mikasa Licensing Inc.; ARC International, SA, 5.00% royalty is payable for Asset Purchase; Copyrights; Know-how; Patent; Proprietary Information; Technology; Trade Name; Trademark; Web content and in case of Oneida Ltd., 8.00% royalty is payable for Copyrights; Know-how; Patent; Trademark. These three agreements average out to 5.00%. These findings clearly show that when only trademarks or tradenames are involved, only nominal payment of 2.00% is sufficient. With the increase in the royalty rates, various other benefits in the name of Asset Purchase; Copyrights; Know-how; Patent; Proprietary Information; Technology etc. are provided. Thus, from these findings, it can be concluded that the royalty paid by the assessee to AE @ 5.56% does not justify the agreement type of just trademarks. Hence, TPO was justified by allowing royalty @2.00%.\" 13.3 The Ld. AR brought to our notice detailed evidence submitted during transfer pricing assessment proceedings demonstrating receipt of marketing information/know-how for selling Tupperware products in India and submitted that this clearly shows that the royalty paid by the assessee is not only for the use of trade name / trademark but also for use of marketing information / know-how provided by Tupperware USA. 13.4 As regards the objection of the Hon'ble DRP with respect to the comparables operating in different geographical region than that of the assessee, the Ld. AR submitted that in the fresh search conducted by the Ld. TPO, he himself accepted royalty agreements operating in foreign jurisdictions and hence 'geographical region' filter applied by him is inappropriate. The comparables selected by the Ld. TPO have also been upheld by the Hon'ble DRP. Thus, in view of approach adopted by the Ld. TPO, the comparables selected by the assessee in its transfer pricing report should be accepted. 45 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, 13.5 With respect to the 'product similarity' filter applied by the Ld. TPO/Hon'ble DRP, the Ld. AR submitted that royalty is paid for the use of intangibles and that it is a factor of profit generating potential of the intangibles. In transactions relating to payment of royalty, similarity ought to be considered in respect of the use of intangibles, rather than the comparability of products for which license has been granted and hence the comparable selected by the assessee in the transfer pricing documentation should be accepted in the final set of comparable agreements. 14. The Ld. DR relied on the order of the Ld. TPO / Hon'ble DRP. He pointed out certain technical defects in the license agreement such as the effective date being 01.04.2012 and the signing date being 13.11.2012. He submitted that the comparables selected by the assessee are inappropriate as there is no product similarity and that the assessee has not produced any evidence to show that even marketing know-how was provided to the assessee by Tupperware USA. 15. In rebuttal to the DR's contentions above, the Ld. AR submitted that the license agreement clearly shows that the marketing information which is the synonymous of marketing know-how has been provided to the assessee and that copies of all the relevant documentary evidence including the license agreement were provided to the Ld. TPO. 16. We have heard the rival submissions of the Ld. Representative of the parties and perused the material available on records. The Ld. TPO as well as the Hon'ble DRP has upheld CUP as the most appropriate method for benchmarking transactions with respect to payment of royalty. Since the application of CUP is not disputed either by Ld. AR or DR, we hold CUP to be the most appropriate method for benchmarking the payment of royalty. The issue thus remaining for our consideration is with respect to inclusion / exclusion of comparables. 16.1 We note that in the transfer pricing study report, the payment of royalty has been benchmarked by the assessee using CUP method. The benchmarking was done on the basis of the search conducted using the RoyaltyStats online database which resulted into selection of 10 comparable agreements in the final set of comparables. However, the benchmarking analysis of the assessee was rejected by the Hon'ble DRP who proceeded to uphold the ALP determined by the Ld. TPO at 2% of 46 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, sales. The Ld. TPO in para 26 of his order dated 31.10.2016 recorded his finding as under: - \"26. The assessee submitted its reply vide various submissions dated as per order sheet. The same has been studied carefully and issues were discussed with the AR, After considering all the facts of the case and adequate opportunity of being heard duly provided to the Assessee including oral hearing, it was apparent that the license agreement signed by the assessee was only to transfer profit to its foreign AEs. As already discussed in earlier paragraphs that the assessee has failed to provide the comparable Royalty payment data of the Group Entities. The assessee has also not provided the CUP analysis of comparable companies in India having similar FAR as that of the assessee, which can establish that the transaction is at Arm's Length. Such comparables MANUFACTURING PLASTIC KITCHENWARE PRODUCTS need to have similar royalty transactions originating in India providing the royalty to the AEs or Non- AEs in USA where the AE of the assessee is situated. As per the conditions of allowable Royalty Payment laid down by the Reserve Bank of India and the Foreign Investment Promotion Board, in cases where the BRAND is used is around 1% to 2%, As already discussed in earlier paragraphs, the assessee has not received any technical knowhow from its AEs, rather it has used the Brand of its AE the \"Tupperware\". However, considering the various contentions and functions of the Assessee, and in absence of any reliable comparable analysis or the data submitted by the assessee, the undersigned is having view that royalty of 2% of the sales is justifiable in the case of the Assessee, being Arm's Length of Royalty payment, Therefore, the undersigned proposes to make an adjustment against excess royalty being paid by the Assessee Company to its foreign based AEs with the purpose of tax evasion u/s 92CA. Computation of Arm's Length Price: Particulars Amount (In INR) Sales of the Assessee Company (A) 483,79,01,881 Royalty Allowable [ B=A*2%] 9,67,58,038 Total Royalty paid to AE [C] 25,33,48,790 47 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, Adjustment u/s 92CA [D=C-B] 5,65,90,752 16.2 We find force in the contention of the assessee that royalty agreements operating in different geographical regions can be applied as a filter as the Ld. TPO himself has accepted royalty agreements operating in foreign jurisdictions. While the primary objection of the Hon'ble DRP in respect of comparability analysis is that the comparable selected by the assessee are from a different geographical region (i.e. USA), we observe that the three comparables considered by the Ld. TPO in the remand report are from the same geographical location (i.e. USA) and hence in our view the objection relating to difference in geographical region does not hold good. 16.3 So far as the objection of the Hon'ble DRP on the product dissimilarity is concerned, it is observed from the perusal of the description of the agreements as provided in the Royaltstat database, all the three comparables selected by the Ld. TPO and the comparables selected by the assessee belong to same industry i.e. \"kitchenware and home furnishing items\" and hence these are valid comparables. 16.4 The License agreement which is already on record adequately proves that the payment of royalty made by the assessee is for the use of trademark as well as marketing information provided by Tupperware USA and the same is evident from the relevant clauses of the License Agreement reproduced below:- \"WHEREAS, LICENSOR and LICENSEE recognize that LICENSOR has rights that relate to marketing information and know-how that may expand the LICENSEE'S product line; and WHEREAS, LICENSEE desires to utilize the marketing information and know-how of LICENSOR; and j 3. Rights Granted (b) The nonexclusive right to use, in connection with the marketing of Licensed Products, all the Marketing Information provided to LICENSEE under Article 6 hereof. 6. Marketing Information and Assistance LICENSOR will furnish from time to time to LICENSEE, insofar as it is within the possession and control of LICENSOR, and insofar as 48 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, LICENSOR has developed said information into formal programs or reports, commercial and marketing know-how and information and assistance (collectively, the \"Marketing Information\"), including without limitation marketing manuals and sales and marketing information which are necessary or desirable for the most advantageous marketing of Licensed Products. In the event that LICENSOR shall provide LICENSEE with Marketing Information specially developed for use in the Licensed Territory which required extraordinary or particularly time- consuming efforts by LICENSOR, LICENSEE Shall compensate LICENSOR for all of LICENSOR'S actual costs associated therewith, plus an additional amount calculated to cover reasonable allocable overhead expense. For the purpose of this- Agreement, time of the LICENSOR or of its designee which exceeds twenty man days per fiscal year will be considered to be extraordinary. 9. Payments (a) In consideration of the license and rights granted hereunder, LICENSEE agrees to pay a royalty of five percent (5%) of the net sales proceeds of the Licensed Products manufactured and sold by LICENSEE in India, in connection with which LICENSEE utilizes any of the Licensed Trademarks or the Marketing Information, or any part of anyone or more thereof. 1n this connection, the net sales proceeds shall be the gross sales proceeds of the Licensed Products marketed and sold under this Agreement minus the following: (1) sales discounts including any sales rebates; (2) sales returns; and (3) indirect taxes (value added tax, etc.) on sales of goods.\" 16.5 Coming to the issue whether the set of comparables selected by the assessee are appropriate for benchmarking the payment of royalty or not, we note that the assessee selected ten comparables in the transfer pricing study (refer para 12.2 above), however, all of them were rejected by the Ld. TPO/Hon'ble DRP. Before us, the assessee is contending inclusion of five comparables out of ten comparables selected in the transfer pricing study and inclusion of all three comparables analysed by the Ld. TPO in the remand report proceedings (refer para 13.2 above). Therefore, the assessee's submission before the Tribunal is to consider eight comparables, three of the Ld. TPO and five from the TP study which will result into the payment of royalty at ALP. The assessee submitted a chart of eight comparables which showing the arithmetic mean for royalty rate at 6% viz. a viz. 5.56% paid by the assessee to Tupperware USA which is reproduced below:- 49 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, S. No. Licensor Royalty Rates Industry Product Geography 1. Amer Wardy Sr.; Amen Wardy Jr. 2.00% Kitchenware &home furnishing items Kitchenware (dishware, flatware, stemware, cookware) USA 2. Mikasa Inc; American Commercial Inc., Mikasa Licensing Inc.; ARC International, SA 5.00% Kitchenware & home furnishing items Kitchenware (dinnerware, giftware, stemware) USA 3. Oneida Ltd. 8.00% Kitchenware & home furnishing items Kitchenware (cookware, bakeware, glassware, hollowware, stemware, serveware and storage accessories) USA 4. Smith & Wesson Corp. 7.00% Kitchenware & home furnishfing items Kitchenware (cutlery and cutlery gift sets) USA 5. Harrow Enterprises Inc. 5.00% Kitchenware & home furnishing itesm Kitchenware (glassware, dinnerware and tableware) USA 6. Colonial Down, LP and Stansley Racing Corn. 7.00 Kitchenware & home furnishing items Kitchenware (plastic bottles; coolers, drink holders) USA 7. FAR –B 5.00% Kitchenware Kitchenware USA 50 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, Acquisition Corp. & home furnishing items (cookware, bakeware) 8. Genius Products, Inc. 9.00% Kitchenware & home furnishing items Kitchenware (juice cap bags, bottle bags) USA 17. Perusal of the above chart shows that five comparables selected by the assessee are from same geography i.e. USA and the same industry i.e. \"Kitchenware and home furnishing items\" as the comparables considered by the Ld. TPO. The Ld. TPO rejected two of his own comparables i.e. Mikasa Inc. and Oneida Ltd. by holding that these two comparables are providing know-how whereas the assessee is not obtaining know-how which in our considered view is incorrect as evident from the license agreement as well as other documentary evidence submitted by the assessee. The assessee has paid royalty for use of trademark and marketing information /marketing know-how. All the eight comparables listed in the chart in para 16.5 above are from the same geography and same industry and hence are valid comparables to that of the assessee. Accordingly, the Ld. AO/TPO is directed to include the aforesaid eight comparables in the final set of comparable agreements for the purpose of benchmarking the payment of royalty by the assessee. Ground No. 6 and 9 are thus allowed.” 34. Thus, we find that in appellant’s own case, the comparable agreements selected by the assessee in its TP documentation maintained for the subject year were rejected by the ld. TPO on account of different geographical reasons, but, the issue was considered in favour of the assessee and further comparable agreements selected by the assessee and the ld. TPO belong to same industry i.e., kitchenware and home furnishing items. Therefore, the rejection of comparable companies selected by the assessee was held to be unjustified. Admittedly, the Revenue’s 51 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, appeal in assessee’s case for AY 2013-14 has been dismissed. Thus we sustain the ground grounds No.7 and 9. 35. In regard to ground No.8 is arising out of addition on account of payment of management service, fee, we find that the issue has been considered in the case of the assessee in AY 2013-14 and 2014-15 and the issue stands set aside to the file of the ld. AO with directions to the assessee to furnish certain information, etc., in support of his claim that the services were actually rendered and the benefit were derived by the assessee. The ld. representatives of both the sides submitted that there is no change in facts and circumstances and, in fact, we find that when in the final order passed by the ld. AO, the DRP directions have been followed wherein only in reference to earlier year orders the DRP had re-asserted any directions. Accordingly, the grounds No.8 and 9 before us are also restored to the file of the ld. AO to proceed in accordance with the law as per the directions issued by the coordinate Benches in AY 2013-14 and 2014-15. The ground is sustained for statistical purposes. 36. Now, coming to ground No.10 arising out of the issue of interest on outstanding receivable, the ld. TPO has imputed adjustments on account of interest on delayed receivables. The ld. AR has submitted that the ld. TPO has ignored the 52 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, fact that the post undertaking working capital adjustment of comparable companies selected in TP documentation, the margins earned by appellant are more than that of comparable companies. In this context, the ld. counsel has taken us through the summary of economic analysis available at page 266 of the paper book. The ld. counsel has also submitted that the aggregated TNMM approach has not been disregarded by the TPO while passing its TP order. Reliance was placed on the tribunal judgement of the in the case of Kusum Healthcare Pvt. Ltd., ITA No.6814/Del/2014 as affirmed by the Hon’ble Delhi High court in ITA 6765/2016. 37. In this regard, we find that there is no case of the ld. AO that the AE was charging any interest on account of trade payables from the assessee. We find that the DRP has dealt with this issue observing that the assessee has merely put legal arguments and no submissions on facts and the computation made by the TPO has been presented and, thus, relying the Hon’ble Delhi High Court judgement in the case of Cotton Naturals, upheld the enhancement done by the ld. TPO. Since the case of assessee is that post undertaking working capital adjustment of comparable companies selected in TP documentation, the margins earned by appellant are more than that of comparable companies. We consider it appropriate to remit the issue with the ld. AO/TPO to examine the issue afresh on the basis if post undertaking working capital adjustment the assessee selected the comparable 53 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, companies and ratio of judgment in the case of Kusum Healthcare Pvt. Ltd.,(supra). The ground is sustained for statistical purposes. 38. As with regard to ground No.11 on account of payments made to ‘Dart’ alleged to be royalty, in assessee’s own case for AY 2013-14, the issue has been dealt by the Bench in ITA No.7580/Del/2017, order dated 01.08.2022 and the facts before us are not in any way different from AY 2013-14. The relevant part of the order of the coordinate Bench being paras 23 to 25 are reproduced below:- “23. We have heard the Ld. Representatives of the parties and perused the material available on record and the judicial precedents relied upon. The facts placed on record with the Ld. AO are that during AY 2013-14 the assessee made reimbursement on account of various expenses inter alia including software charges incurred by the group companies on behalf of the assessee on cost to cost basis without any mark-up. The impugned disallowance of Rs. 46,29,269/- under section 40(a)(i) pertain to software charges of Rs. 13,62,384/- and intranet and IT related charges Rs. 26,66,885/- paid to Dart Industries Inc. USA under an agreement with vendors like JD Edwards, Microsoft Inc. for the purchase of standard software to be used by Tupperware group entities across the globe. The cost of purchase of such software has been allocated amongst various group entities based on allocation key of number of licenses used in each group entity. The said allocation was made at cost and no mark-up was charged. All the group entities including the assessee had reimbursed their share of cost to Dart. The copy of the invoices placed by the vendors on Dart (on sample basis) and allocation key was placed on record before the Ld. AO. Explaining the nature of the software the assessee explained that JD Edwards is an accounting package which offers a holistic enterprise solution, helping organisations manage their business processors, including financials, sales, expenses, etc. 23.1 As against the explanation offered by the assessee that the software supplied to it is a standard/off-the-shelf software, the allegation of the Ld. AO/DRP is that JD Edwards is an ERP software which needs high level of customization before it can be used by any enterprise and hence it must 54 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, have been customized for the assessee as well by Dart. Therefore, the Revenue has contended that the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence P. Ltd. (supra) cited and relied upon by the assessee is not applicable to the facts of the present case which case applies to the payments made for standard/off-the-shelf software and not customized software as in the case of the assessee. 23.2 The issue whether the amounts paid by resident Indian end users / distributors to non-resident computer software manufacturer / supplier as consideration for the resale/use of the computer software through end users license agreements (EULAs) /distribution agreements is the payment of royalty for the use of copyright in the computer software now stands settled by the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence P. Ltd. (supra) wherein the Hon'ble Supreme Court has held that such payments are not royalty payment and the same does not give rise to any income taxable in India, as a result of which such payments are not liable to tax deduction at source under the provisions of section 195 of the Act. The decision (supra) of the Hon'ble Supreme Court will apply to the case of the assessee provided the consideration paid by the assessee is towards purchase of standard/off-the-shelf software from Dart. 24. The issue whether the software supplied by Dart to the assessee is standard/off-the-shelf software or customized software needs verification in the light of observations made by the Hon'ble DRP. We, therefore, deem it fit to restore this issue to the file of the Ld. AO for verification. Needless to say, the assessee will be given adequate opportunity of hearing before the Ld. AO. If, on verification it is found that the software supplied by Dart is standard software without any customization being done by Dart, the Ld. AO shall reconsider this issue in light of the decision of the Hon'ble Supreme Court in Engineering Analysis Centre of Excellence P. Ltd. (supra) and modify the assessment accordingly. 25. As an alternate argument the assessee has also contended that being pure reimbursement in nature and no element of income embedded, the payment made by the assessee to Dart is not liable to tax in India. Since both the Ld. AO / Hon'ble DRP have decided this issue against the assessee holding such payment in the nature of royalty which is yet to be determined based on the directions above, we refrain from adjudicating upon the alternate plea taken by the assessee.” 55 ITA No. 9727/Del/2019 & ITA No. 670/Del/2021, 38.1 In the light of the aforesaid discussion on the issue, we restore the issue to the files of ld. AO/TPO to determine the same afresh in terms of the findings of the coordinate Bench in order dated 01.08.2022 (supra). Accordingly, this issue is sustained in favour of the assessee for statistical purposes. 39. In the light of aforesaid discussion made on the grounds for AY 2015-16, as pressed before us, which are common to both the years, the appeals of assessee are allowed partly with consequences to follow as per the determination of the grounds in favour of the assessee. Order pronounced in open court on 12.03.2025. Sd/- Sd/- (NAVEEN CHANDRA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER *MP*/dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "