×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
These appeals in ITA No.1189/Mum/2017 & 7198/Mum/2017 for A.Yrs.2012-13 & 2013-14 arise out of the order by the ld. Dispute Resolution Panel -1(WZ), Mumbai (ld. DRP in short) in directions dated 02/11/2016.
As the issues are identical, both the appeals are taken up together and disposed off by this common order for the sake of convenience.
2. The first identical issue involved in both the appeals is with regard to arm‟s length price (ALP) adjustment made towards advertising, marketing and promotion expenses (AMP). The assessee is engaged in distribution of cardiovascular products, such as heart valve therapy products, cardiac pulmonary products & RMI products, Critical Care and Vascular product lines etc. The Company predominantly sells its products to hospitals and other medical institutions. It is a subsidiary of Edwards Lifesciences World Trade Corporation, USA. Edwards Lifesciences World Trade Corporation, USA, is a wholly owned subsidiary of Edwards Lifesciences Corporation ('ELC'), USA. Hence, assessee is an indirect subsidiary of Edwards Life Science Corporation (ELC, USA) (Edwards, USA). ELC is a public limited company listed on Nasdaq Stock Exchange and is a global leader in designing, manufacturing and marketing comprehensive line of products and services to render the cardiovascular products which resulted in improved therapeutic outcome for the patients. ELC focuses on the following product areas namely heart valve therapy, cardiac surgery systems, critical care, vascular systems and perfusion products and services.
3. The facts of the A.Y.2012-13 are taken up for adjudication and the decision rendered thereof would apply with equal force for A.Y.2013-14 also except variance in figures.
3.1. The assessee company filed its return for A.Y.2012-13 on 27/11/2012 declaring total income of Rs.2,73,54,540/-. The assessee company reported the following international transactions during the year:-
3.1. During the course of proceedings, the ld. TPO asked the assessee to submit the details in relation to travelling, advertising, conference, marketing and promotion expenses incurred by the assessee during the period under consideration. This information was sought in order to understand if any brand building activities were being conducted by the assessee as a service to its AE‟s. The assessee submitted the relevant information / documents in relation to above mentioned expenses such as back to back invoices, mail correspondence between doctors and the assessee, seminar registration receipt, travel ticket, hotel receipt etc.. The assessee explained the nature of each of the aforesaid expenditure in detail as under:-
Training expenses – These expenses are incurred in relation to the Assessee’s employees growth like soft skill trainings, leadership training, finance related trainings etc.,
Conference expenses – These expenses have been incurred in relation to travel and other costs of doctors in order for them to attend conferences to educate them about Edwards Products offerings.
Marketing promotion expenses – These expenses are incurred in relation to promote / market Edwards products offered by the Assessee. These expenses are incurred by sponsoring CME’s held in different hospitals to create awareness of medical devices available in the market, printing books and video shooting expenses for Continuing Medical Education (CME Programme). etc.
Advertisement expenses: These expenses are incurred for placing advertisements in Indian Journal of Thoracic and Cardiovascular Surgery. Also, some portion of expenses were incurred in relation to advertisement for staff recruitments.
Travelling expenses: The expenses are incurred for employees travelling domestically and to for ign countries for business purposes.
3.2. The assessee also furnished the evidences with regard to the aforesaid expenses by way of a separate annexure. The assessee specifically pleaded that the above expenses incurred by the assessee are in relation to its own business and in respect of selling its products in India. As such, the AE does not garner any benefit from the same. It was specifically pointed out that “Edwards” is an established brand and that the assessee does not sell to end customer i.e., patients in India, the assessee has no reason to expend any amount to help or develop the brand of the AE. It was submitted that alternatively, the purpose of assessee incurring the above expenditure is to train, educate and make aware, the doctors of the latest development in the field of medicine, so as to help, familiarise the doctors who would need to perform the procedures on the patients.