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2020 (7) TMI 466 - AT - Income TaxTP Adjustment - adjustment made on account of advertisement, marketing and promotion (AMP) expenses - internatinal transaction - HELD THAT - Referring to decision of the Hon'ble Delhi High Court in Martuti Suzuki India Ltd. 2015 (12) TMI 634 - DELHI HIGH COURT it has to be concluded that the AMP expenditure incurred by the assessee in India cannot come within the purview of the international transaction. Hence, the Transfer Pricing Officer has no jurisdiction to determine the arm's length price of AMP expenditure. - Decided against revenue.
Issues Involved:
1. Deletion of adjustment made on account of advertisement, marketing, and promotion (AMP) expenses. Issue-Wise Detailed Analysis: 1. Deletion of Adjustment Made on Account of Advertisement, Marketing, and Promotion (AMP) Expenses: The appeal filed by the Revenue challenges the order dated 30th January 2017, passed by the learned Commissioner of Income Tax (Appeals)–56, Mumbai, for the assessment year 2013–14. The sole issue pertains to the deletion of adjustment made on account of AMP expenses. The assessee, a company incorporated in India, engaged in the business of various food products and software development services, is a 100% subsidiary of General Mills Mauritius Inc. The assessee benchmarked the import of food products from Associated Enterprises (AEs) using the Transactional Net Margin Method (TNMM) and claimed the transactions to be at arm's length price. However, the Transfer Pricing Officer (TPO) noticed certain expenses for promotion and marketing of the products and proposed an adjustment on account of excessive AMP expenses, suggesting these expenses aided in building the brand of the AE. The TPO applied the Bright Line Test (BLT) and made an adjustment of ?2,53,48,648, which the Assessing Officer added while framing the assessment order. The assessee contested this addition before the learned Commissioner (Appeals). The learned Commissioner (Appeals) found that identical issues had been decided in favor of the assessee in previous assessment years 2011–12 and 2012–13, and thus, following the earlier orders, deleted the addition made on account of transfer pricing adjustment. The Revenue appealed against this decision. The Tribunal noted that the facts for the assessment year 2013–14 were identical to those in the previous years. The Tribunal had upheld the decision of the learned Commissioner (Appeals) in those years, observing that the TPO treated the AMP expenditure as part of international transactions primarily on the reasoning that it promoted the brand of the AEs. However, no factual finding demonstrated any arrangement/agreement between the assessee and its AEs for incurring AMP expenditure to promote the brand of AEs. The AMP expenditure was incurred in India by making payments to unrelated parties, and the assessee claimed it was the sole beneficiary of the expenditure. The Tribunal found that the TPO's reliance on the Special Bench decision in LG Electronics India Pvt. Ltd. was misplaced as it was disapproved by the Hon’ble Delhi High Court in Maruti Suzuki India Ltd., which held that the BLT method is invalid as it is not prescribed in the statute. The Tribunal further noted that various Benches of the Tribunal, following the decision of the Hon’ble Delhi High Court, consistently held that AMP expenditure incurred in India does not come within the purview of international transactions. The Tribunal also rejected the learned Departmental Representative's contention to restore the issue to the Assessing Officer pending the Hon'ble Supreme Court's decision on a related Special Leave Petition, stating that as per the prevailing legal position, the AMP expenditure incurred by the assessee in India cannot come within the purview of international transactions. Therefore, the Tribunal upheld the decision of the learned Commissioner (Appeals) and dismissed the Revenue’s appeal, concluding that the adjustment made by the TPO could not survive. The order was pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963, on 14.07.2020.
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