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Income Tax Appellate Tribunal, MUMBAI BENCH “K” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the Revenue. The relevant assessment year is 2011-12. The appeal is directed against the order of the Dispute Resolution Panel (DRP)-1, Mumbai passed u/s 144C(5) of the Income Tax Act 1961, (the ‘Act’). 2. The grounds of appeal filed by the Revenue read as under:
1. Whether on the facts and in the circumstances of the case and in law, the Hon'ble DRP was justified in deleting the addition of Rs.92.85 crore in M/s Heinz India Pvt. Ltd. respect of advertising and market research and management services without appreciating the facts that the assessee company is not an economic owner of the brand and the cost incurred by the assessee company for developing, promoting, maintaining the brand, is on account of the registered owner of the brand.
2. Whether on the facts and in the circumstances of the case and in law, the Hon'ble DRP was justified in deleting the addition of Rs.92.85 crore in respect of Advertising and market research and management services (AMP) expenditure without appreciating the facts that the Bright line test is tool to identify the comparable uncontrolled expenses on AMP. 3. Whether on the facts and in the circumstances of the case and in law, the Hon'ble DRP was justified in deleting the addition of Rs.92.85 crore in respect of AMP expenditure without appreciating the facts that the TPO/AO has conducted exercise to determine the expenditure incurred by other entities on AMP in respect of own brands/brand not owned by foreign principals to determine the level of expected expenditure on AMP in uncontrolled transactions by similarly placed parties. 4. Whether on the facts and in the circumstances of the case and in law, the Hon'ble DRP was justified in holding that there existed to agreement or understanding or arrangement between the assessee and the AE. In view of the clause 2.3(ii) and (iii) of trademark license agreement dated 25.06.1995 as per which the assessee was required to create, maintain and increase the market for the products and promote the products. 5. Whether on the facts and in the circumstances of the case and in law, the Hon'ble DRP was justified in holding that the TPO has not shown anything except BLT to benchmark the AMP expenditure in view of the clause 2.3(ii) and (iii) of trademark license agreement dated 26.06.1995. 6. The appellant prays that the Directions of the Ld. DRP-1, Mumbai on the above grounds be set aside to the file of the A.O. or confirm the order of the AO.
M/s Heinz India Pvt. Ltd.
Briefly stated, the facts of the case are that the assessee, Heinz India Pvt. Ltd., is a wholly owned subsidiary of Heinz Italia S.r.l. It is engaged in manufacture and sale of well-known beverage and instant food products under the brand names Heinz Ketchup, Complan, Glucon D, Nycil and Sampriti ghee. The assessee also acts as a distributor for trading goods, but the sales in this segment are much less than in the manufacturing segment. The Assessing Officer (AO) forwarded a draft assessment order dated 18.03.2014 for the impugned assessment year to the DRP u/s 144C(1). The assessee also filed objections before the DRP along with Form No. 35A in respect of variations proposed to be made by the AO in the draft order. The DRP found that the assessee is a manufacture of goods. It has also distributed goods of its Associated Enterprise (AE) in India, but the import of such goods is only Rs.2.73 crores as against its turnover of around Rs.1,200/- crores. During the course of proceedings, the assessee furnished before the DRP its agreement with the AE Heinz Italia S.p.A (Heinz Italy) and H.J. Heinz Company (Heinz USA). The DRP observed that nothing is discernible from the said documents that can be construed as an agreement between the assessee and the AEs for AMP expenses on behalf of AEs. The Transfer Pricing Officer (TPO) has also not brought out anything on record that can be held to be an understanding or arrangement between the assessee and its AEs for AMP expenses. The DRP having gone through the judgment of the Hon’ble Delhi High Court in Maruti Suzuki 64 taxmann.com 150, Bausch