2015 (10) TMI 1373 - AT - Income Tax

Transfer Pricing Adjustment on account of AMP expenses - Held that - We agree in principle with the contention that the expenses directly connected with sales should be excluded. The Special Bench in LG Electronics (2013 (6) TMI 217 - ITAT DELHI) has specifically dealt with this issue and held that the dealers commission and sales commission etc. are in the nature of the expenses directly connected with sales and hence should not be included within the overall AMP expenses for processing them u/s 92 of the Act. Since, such detail is not available on record, we direct the A.O/TPO to examine the detail of total AMP expenses and exclude such sales specific expenses in line with the decision of LG Electronics for working out the remaining amount to be considered for proceeding with the AMP expenses under the TP provisions. We therefore, set aside the impugned order and remit the matter to the file of the AO / TPO to decide this issue afresh in conformity with the Special Bench decision in the case of LG Electronics (Supra). - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Transfer Pricing Adjustment on account of AMP expenses.

Analysis:
The appeal was against the Transfer Pricing Adjustment on account of AMP expenses for the assessment year 2009-10. The Special Bench of the Tribunal in LG Electronics India Pvt. Ltd. case decided that incurring AMP expenses towards brand promotion constitutes an `international transaction'. The Special Bench listed 14 parameters for determining the correct ALP of AMP expenses, applicable to both manufacturers and distributors. The AO/TPO should ascertain if the Indian AE is a distributor or holds a manufacturing license. The AR argued that selling commission and discount should be excluded from AMP expenses, which the Special Bench agreed with. The matter was remitted to the AO/TPO to decide afresh in line with the LG Electronics case. The assessee will have a reasonable opportunity to be heard in the fresh proceedings.

The AR contended that selling commission and discount should be excluded from AMP expenses, which the Special Bench agreed with. The AO/TPO was directed to exclude sales-specific expenses from the total AMP expenses. The appeal was allowed for statistical purposes, and the matter was remitted to the AO/TPO for fresh determination in line with the LG Electronics case. The Stay Application became infructuous due to the decision on the appeal, and it was dismissed accordingly.