2015 (4) TMI 498 - AT - Income Tax

Application of stay of demand - Transfer pricing adjustment - AMP expenses - TPO has included the discount and free samples given by the assessee to the distributors - Held that - TPO while determining the AMP expenses which in view of the TPO are to be reimbursed by the owner of the brand intangible has included various expenses - It is apparent from the details of expenses included by the TPO that for the purpose of determining the AMP expenses, the TPO apart from sales promotion and without prejudice AMP expenses admitted by the assessee of ₹ 5,770,313/- has also included the various amounts of free samples to distributors, additional discount to distributors, trade discount etc. Thus the inclusion of free samples to distributors, additional discount to distributors and buyers prima facie supports the case of the assessee. Accordingly, in view of the facts and circumstances of the matter, we find that the assessee has good prima facie case for grant of stay - Stay granted.

Summary

Issues:
Stay of outstanding demand arising from assessment order passed u/s 144C(13) of the Income Tax Act for the A.Y. 2010-11.

Analysis:
The assessee sought a stay of the outstanding demand of Rs. 53.24 Lakhs resulting from a TP adjustment made by the TPO on account of AMP expenses. The Authorized Representative argued that the inclusion of free samples and various discounts in determining the AMP expenses was unjustified. The Ld. DR objected to the stay, suggesting the assessee deposit part payment of the demand. The TPO included various expenses such as free samples and discounts in the AMP expenses, supporting the assessee's case. Consequently, the Tribunal found that the assessee had a prima facie case for the grant of stay and stayed the outstanding demand for 180 days or till appeal disposal, whichever is earlier. The appeal was scheduled for an out-of-turn hearing, and unnecessary adjournments could lead to the vacation of the stay.

This judgment revolves around the stay application filed by the assessee concerning the outstanding demand resulting from a TP adjustment on AMP expenses. The Authorized Representative contended that the inclusion of free samples and discounts in the AMP expenses calculation was unwarranted. The Tribunal noted the TPO's inclusion of various expenses beyond sales promotion in determining AMP expenses and found that such inclusion prima facie supported the assessee's case. Consequently, the Tribunal granted a stay on the outstanding demand, emphasizing the assessee's prima facie case and scheduling an expedited appeal hearing to avoid unnecessary delays.

The key issue in this judgment was the determination of AMP expenses by the TPO, particularly the inclusion of free samples and discounts in the calculation. The Authorized Representative argued against this inclusion, asserting that excluding these items would negate the need for any adjustment. The Tribunal analyzed the expenses included by the TPO, highlighting the inclusion of free samples, additional discounts, and trade discounts, which seemed to support the assessee's position. Consequently, the Tribunal granted a stay on the outstanding demand, acknowledging the assessee's prima facie case and directing an expedited appeal hearing to resolve the matter promptly.