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Tax Publishers The Himalaya Drug Company v. ACIT [IT(TP)A No. 3071/Bang/2018, dt. 7-12-2020] : 2020 TaxPub(DT) 5146 (Bang.-Trib.) 1. Demand notice with draft assessment order whether invalidates the assessment? 2. Additions of AMP -- Advertising, Marketing and Promotional spend under TP on brand not owned by the assessee *Facts:* Assessee firm had two partners which were two corporates -- Himalaya Global Holdings Pvt. Ltd. (HGH) -- Cayman islands registered entity -- 88% Himalaya Drug Company Pvt. Ltd. (HDC) -- 12% 1. The 100% shareholder of HGH was one Meeraj Alim Manal and his holding in HDC was all except one share. The assessing officer referred the AE transactions to TPO who sustained certain additions one of it being AMP. Along with the draft assessment order the assessing officer issued demand notice under section 156 as well. It was contested by the assessee that this demand notice issuance invalidated the entire assessment as the demand notice once issued finalizes the tax liability which was contrary to the mechanism under which a draft order was to be issued. On higher appeal -- 2. The brand and intellectual property rights were not owned by the Indian firm, as a firm owning these would not be respectable besides creating structural difficulties. The IP rights were all held by HGH the offshore entity in Cayman Islands which was owned 100% by the promoter. It was the case of the assessing officer that the assessee made sizeable AMP spends for promoting its foreign parent owned brand and added back by the same. On higher appeal -- 1. Held against the assessee -- the demand notice issued with the draft assessment order cannot invalidate the assessment. A demand notice issued with the draft asst. order creates no demand so is a nullity. 2. Held in favour of the assessee -- AMP additions cannot be sustained under TP. The brand is owned by the assessee firm virtually from a beneficial interest angle so there was no foreign parent's brand which was getting promoted it was the assessee's own brand. As to whether AMP is a TP transaction the ITAT held it was a TP transaction but the application of BLT -- Bright Line Test was negated by the ITAT as it was done in many other AMP cases in the case of the assessee as well. The revenue did not bring forth the argument as to what was excess in the AMP spend and what part of the spend promoted the offshore brand besides the brand itself being beneficially held by the assessee themselves.

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The Himalaya Drug Company v. ACIT [IT(TP)A No. 3071/Bang/2018, dt. 7-12-2020] : 2020 TaxPub(DT) 5146 (Bang.-Trib.)

1. Demand notice with draft assessment order whether invalidates the assessment?

2. Additions of AMP -- Advertising, Marketing and Promotional spend under TP on brand not owned by the assessee

Facts:

Assessee firm had two partners which were two corporates --

Himalaya Global Holdings Pvt. Ltd. (HGH) -- Cayman islands registered entity -- 88%

Himalaya Drug Company Pvt. Ltd. (HDC) -- 12%

1. The 100% shareholder of HGH was one Meeraj Alim Manal and his holding in HDC was all except one share. The assessing officer referred the AE transactions to TPO who sustained certain additions one of it being AMP. Along with the draft assessment order the assessing officer issued demand notice under section 156 as well. It was contested by the assessee that this demand notice issuance invalidated the entire assessment as the demand notice once issued finalizes the tax liability which was contrary to the mechanism under which a draft order was to be issued. On higher appeal --

2. The brand and intellectual property rights were not owned by the Indian firm, as a firm owning these would not be respectable besides creating structural difficulties. The IP rights were all held by HGH the offshore entity in Cayman Islands which was owned 100% by the promoter. It was the case of the assessing officer that the assessee made sizeable AMP spends for promoting its foreign parent owned brand and added back by the same. On higher appeal --

1. Held against the assessee -- the demand notice issued with the draft assessment order cannot invalidate the assessment. A demand notice issued with the draft asst. order creates no demand so is a nullity.

2. Held in favour of the assessee -- AMP additions cannot be sustained under TP. The brand is owned by the assessee firm virtually from a beneficial interest angle so there was no foreign parent's brand which was getting promoted it was the assessee's own brand. As to whether AMP is a TP transaction the ITAT held it was a TP transaction but the application of BLT -- Bright Line Test was negated by the ITAT as it was done in many other AMP cases in the case of the assessee as well. The revenue did not bring forth the argument as to what was excess in the AMP spend and what part of the spend promoted the offshore brand besides the brand itself being beneficially held by the assessee themselves.