2022 (1) TMI 1082 - AT - Income Tax

TP Adjustment - adjustment of AMP - international transaction or not? - case of the assessee has been that the primary engagement of the assessee is in manufacturing operations and the AMP expenditure incurred by it is to the benefit of its operations in India - HELD THAT - The alleged excessive AMP expenditure does not fall in the category of international transaction and therefore the adjustment made by the Revenue on account of incurrence of AMP expenses is not sustainable in law and set aside the orders of the authorities below. We however in consonance with the view taken by the Tribunal in assessee s own case for the assessment year 2011-12 as in the Hon ble jurisdictional High Court 2018 (12) TMI 1852 - ITAT DELHI restore the matter to the file of the learned Assessing Officer to act in accordance to be given in the pending matters. We accordingly allow ground No. 2 of assessee s appeal. Disallowance of professional fees on account of short deduction of TDS - HELD THAT - This issue is no longer res integra and squarely covered by the decision in the case of CIT vs. M/s SK Tekriwal . 2012 (12) TMI 873 - CALCUTTA HIGH COURT and also the decision of PV Rajagopal 1998 (4) TMI 127 - ANDHRA PRADESH HIGH COURT as held that section 201 has 2 limbs one is that where the employer does not deduct the tax and the 2nd is where after deducting the tax fails to remit it to the government and there cannot be assumption that if there is any shortfall due to any difference of opinion as to the taxability of any item the employer can be declared to be an assessee in default. In view of this settled position of law we allow the ground of appeal. Disallowance of provision of stamp duty - HELD THAT - The assessee incurred the stamp duty expenditure in respect of the instrument for 3 years learned Assessing Officer was of the opinion that for each year of the 3 years assessee is entitled only for 1/3rd of such an expense and on that premise disallowed 2/3rd of the stamp duty. Ld. CIT(A) recorded a finding that in order to secure expenditure to be deferred Revenue expenditure such an expense must result in a benefit in Revenue field and inasmuch as by incurring the stamp duty the assessee does not get any enduring benefit of creation of a capital asset so as to have any enhanced income. We agree with this finding of the Ld. CIT(A) and dismiss this ground of appeal.

Summary

Issues Involved:
1. Adjustment of Advertisement, Marketing, and Promotion (AMP) expenses.
2. Disallowance of professional fees due to short deduction of TDS.
3. Disallowance of advances written off.
4. Disallowance of provision for stamp duty.

Detailed Analysis:

1. Adjustment of Advertisement, Marketing, and Promotion (AMP) Expenses:
The primary issue revolves around the adjustment of AMP expenses. The assessee argued against the use of the bright line method, citing the Hon'ble jurisdictional High Court's decision in the case of Sony Ericsson, which disregarded this method. The Tribunal had previously upheld the deletion of AMP adjustments for the assessment year 2011-12. The Revenue contended that the Ld. CIT(A) erred by not considering the need to benchmark AMP services separately and argued that the bright line test (BLT) is permissible as an economic tool. However, the Tribunal referred to the Hon'ble High Court's decisions in Sony Ericsson and Maruti Suzuki, which invalidated the use of BLT for determining AMP adjustments. Consequently, the Tribunal concluded that the AMP expenditure does not qualify as an international transaction and set aside the orders of the authorities below, restoring the matter to the Assessing Officer to act in accordance with the Supreme Court's pending decision.

2. Disallowance of Professional Fees Due to Short Deduction of TDS:
The assessee challenged the disallowance of professional fees due to short deduction of TDS, arguing that section 40(a)(ia) of the Act deals with non-deduction rather than short deduction of TDS. The Ld. CIT(A) upheld the disallowance, but the Tribunal referred to precedents from the Kolkata Tribunal and the Hon'ble Calcutta High Court, which clarified that section 201 has two limbs: non-deduction and failure to remit deducted tax. The Tribunal concluded that short deduction does not render the assessee in default and allowed the assessee's appeal on this ground.

3. Disallowance of Advances Written Off:
The Revenue appealed against the Ld. CIT(A)'s decision to allow the disallowance of advances written off. The Ld. CIT(A) followed precedents from the Tribunal in the assessee's own case for previous assessment years. The Tribunal found no error in the Ld. CIT(A)'s decision, given the absence of any contrary higher forum decision, and dismissed the Revenue's appeal on this ground.

4. Disallowance of Provision for Stamp Duty:
The Revenue also contested the disallowance of provision for stamp duty, arguing that only 1/3rd of the expense should be allowed each year over three years. The Ld. CIT(A) found that the stamp duty did not result in any enduring benefit or creation of a capital asset, thus qualifying as a Revenue expense. The Tribunal agreed with this finding and dismissed the Revenue's appeal on this ground.

Conclusion:
The Tribunal allowed the assessee's appeal regarding the AMP expenses and short deduction of TDS, while dismissing the Revenue's appeal concerning advances written off and provision for stamp duty. The matter of AMP expenses was restored to the Assessing Officer to act in accordance with the Supreme Court's pending decision. The order was pronounced on November 16, 2021.