The Income Tax Appellate Tribunal Bangalore Benches “C”, has recently in an appeal filed by Nike, held that disallowance on purchase of trade samples is to be safeguarded against double taxation.
The aforesaid observation was made by the Tribunal when the assessee, a wholesale distributor of Nike brand products in India filed the return of income for the assessment year 2016-2017, declaring total loss of Rs.164,42,63,191.
The assessment being selected for scrutiny and a notice u/s 143(2) of the I.T. Act being served, during the course of assessment proceedings the matter was referred to the Transfer Pricing Officer (TPO) to determine the Arm’s Length Price (ALP) of the international transaction undertaken by the assessee with its Associate Enterprises (AEs).
Following the same, the TPO vide an order dated 31.10.2019, passed u/s 92CA of the I.T.Act, proposed the TP adjustment totaling to Rs.63,27,41,494 under various segments. And pursuant to the same, a draft assessment order was passed on 26.12.2019 incorporating the above said TP adjustments, with the Assessing Officer too making certain corporate tax additions / disallowances.
Aggrieved by the same, the assessee filed objections before the Dispute Resolution Panel (DRP), who vide its order dated 05.02.2021, disposed of the objections raised by the assesse, partially granting relief to him. And pursuant to the draft assessment order, the impugned final assessment order was passed on 27.03.2021, agitated by which Aggrieved, the assessee had filed the present appeal before the Tribunal.
The grounds of the appeal being the question as to whether the Assessing Officer (AO), the Transfer Pricing Officer (TPO) and the Dispute Resolution Panel (DRP) erred in rejecting the transfer pricing documentation maintained by the Appellant, by invoking provisions of sub section (3) of92C of the Income-tax Act, 1961, thereby proposing a transfer pricing adjustment of INR 63,27,41,494 under section 92CA of the Act, one of the disputed contentions raised was that the Learned AO / Learned TPO / DRP, has grossly erred in not appreciating the fact that there was no agreement” or “arrangement” or “understanding” between the Appellant and AE for incurring AMP expenses on behalf of the latter.
Hearing the contentions, perusing the materials on record and finally allowing the assessee’s appeal in part, the Tribunal observed:
“Respectfully following the order of the Tribunal rendered in assessee’s own case, for the assessment year 2013- 2014 , we reject grounds 1 to 6. The learned AR, however, submitted that disallowance on purchase of trade samples was also subject matter of TP adjustment by the TPO and to that extent there should be direction to ensure that there is no double taxation of the same income. We accept the prayer of the learned AR and direct the AO / TPO to consider the plea of the learned AR in this regard and allow necessary relief in the event the same income gets doubly taxed.
It is ordered accordingly.”
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