2015 (9) TMI 484 - AT - Income Tax

Transfer Pricing adjustment - TPO/AO/DRP held that advertising, marketing and promotional ( AMP ) expenditure as a separate international transaction under Section 92B - Held that - TP issue on the same facts and circumstances i.e., AMP expenses, arose in the case of the assessee in the preceding year i.e. AY 2008-09 which has been set aside and restored to the file of the Assessing Officer to decide the same afresh in view of the Special Bench judgment of ITAT in the case of LG Electronics (2013 (6) TMI 217 - ITAT DELHI) - Decided in favour of assessee for statistical purposes. Disallowance of 10 percent of total advertisement and selling expenses on the ground that it resulted in enduring benefit to the appellant, and was, thus, capital in nature - Held that - Since the corporate tax addition has direct connection with the TP addition inasmuch as it is claimed that because of the TP adjustment it is claimed to be double disallowance, this issue is also restored to the file of the Assessing Officer for deciding the same afresh in the light of TP addition and Hon ble High Court judgment in the case of associated concern i.e. Sony India P.Ltd. 2012 (2) TMI 493 - DELHI HIGH COURT - Decided in favour of assessee for statistical purposes.

Summary

Issues involved:
1. Transfer Pricing Issues
2. Corporate Tax Issues

Transfer Pricing Issues:
The appellant raised grounds related to the Transfer Pricing Officer (TPO) treating advertising, marketing, and promotional (AMP) expenses as a separate international transaction under Section 92B of the Act. The appellant argued that the AMP expenses were part of its distributor role and its remuneration was fixed accordingly. Additionally, the appellant contended that the TPO erred in considering sales promotion and selling expenditure as part of AMP expenses. The appellant also highlighted that there was double disallowance/addition as the expenditure on advertising and sales promotion was treated as 'capital' by the Assessing Officer. The ITAT decided to restore the transfer pricing issues to the file of the Assessing Officer based on the previous year's judgment and the High Court's decision in a similar case.

Corporate Tax Issues:
Regarding the corporate tax issues, the appellant challenged the disallowance of a specific amount as capital in nature due to enduring benefits. The appellant also argued that the Assessing Officer erred in not following a previous ITAT decision while making the disallowance. Since the corporate tax addition was linked to the transfer pricing adjustment and the alleged double disallowance, the ITAT decided to restore this issue to the file of the Assessing Officer for fresh consideration. Consequently, the appeal of the assessee was allowed for statistical purposes, and the stay petition filed by the assessee was dismissed as the matter had been set aside.

In conclusion, the ITAT Delhi decided to restore both the transfer pricing and corporate tax issues to the file of the Assessing Officer for reevaluation based on the previous year's judgment and the High Court's decision in a similar case. The appeal of the assessee was allowed for statistical purposes, and the stay petition was dismissed as it became infructuous.