2017 (8) TMI 191 - HC - Income Tax

AMP expenses - International transaction between the Assessee and its AE - Held that - This Court is of the view that the ITAT was not justified in remanding the matter to the AO/TPO for determining the ALP of the alleged international transaction involving AMP expenses, when in fact, the Revenue was unable to show that there existed an international transaction between the Assessee and its AE in the first place.- Decided in favour of the Assessee

Summary

Issues:
Challenge to ITAT order on international transaction involving AMP expenses.

Analysis:
1. The appellant challenged the ITAT order related to an international transaction involving advertising, marketing, and publicity (AMP) expenses for the Assessment Year 2010-11 under Section 260A of the Income Tax Act, 1961.
2. The ITAT remanded the matter to the Assessing Officer/Transfer Pricing Officer for determining the arms length price of the AMP transaction based on the 'Bright Line Test' (BLT) for excess AMP expenses incurred by the appellant.
3. The appellant contended that as a manufacturer, most AMP expenses were incurred for its own benefit, and there was no international transaction requiring compensation for excess AMP expenditure.
4. The appellant relied on the decision in Sony Ericsson India Pvt. Ltd. case, stating that considering excess expenditure beyond the BLT as an international transaction was unwarranted.
5. The ITAT noted the lack of facts and figures for a conclusive determination and directed the matter back to the TPO for fresh assessment.
6. The Revenue argued that the TPO's decision was made without the benefit of the Sony Ericsson India Pvt. Ltd. judgment and requested a re-examination of the issue without BLT considerations.
7. The Court emphasized that the BLT was not a valid basis for determining international transactions involving AMP expenses, citing previous decisions setting aside BLT as a determining factor.
8. It was concluded that the Revenue failed to establish the existence of an international transaction between the appellant and its associated enterprise regarding AMP expenses, rendering the remand to the TPO unnecessary.
9. The Court highlighted the Revenue's initial burden to demonstrate the existence of an international transaction before determining the ALP, as seen in various precedents including Maruti Suzuki Ltd., Bausch & Lomb Eye care, and Honda Siel Power Products Ltd. cases.
10. Consequently, the Court ruled in favor of the appellant, disallowing the remand to the AO/TPO for determining the ALP of the alleged international transaction involving AMP expenses due to the absence of proof of such a transaction.

This comprehensive analysis of the judgment highlights the legal intricacies involved in the dispute over international transactions and AMP expenses, ultimately resulting in a favorable outcome for the appellant based on the failure to establish the existence of the contested transaction.