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2023 (1) TMI 658 - AT - Income TaxTP Adjustment - AMP expenditure - international transaction between the assessee and A.E. for brand promotion in India - whether the AMP expenditure incurred by the assessee can be regarded as an international transaction or not? - HELD THAT - The identical issue came up for consideration before the Tribunal in assessee s own case for the Assessment Year 2008-09 2019 (12) TMI 1483 - ITAT DELHI the Co-ordinate Bench has held that AMP Expenses incurred by the assessee does not fall within the definition of International Transaction. Further, the Bench has disapproved the determination of ALP by applying BLT Method. Accordingly, the adjustment made on account of AMP expenses was deleted. The similar view has been expressed in Assessee s own case for the Assessment Year 2009-10, 2010-11 and 2011-12. By following the principles of consistency, since the facts being identical and by following the order made in Assessee s own case as discussed above, we delete the addition made by the AO by allowing the Ground No. 1 2. Addition made in respect of AMP expenditure incurred by the assessee by applying the of Bright Line Test - HELD THAT - Since by following the Coordinate Bench decisions, we already held that there is no such International Transaction for brand promotion and by following Assesssee s own case mentioned supra, in our opinion, there is no basis available to the TPO for making such a comparability adjustment under TNMM. Accordingly, by following the principals of consistency, we restore the issue to the file of TPO for bench marking the analysis applying TNMM in accordance with law. In the result, Ground No. 3 of the assessee is allowed for statistical purpose.
Issues Involved:
Transfer Pricing Adjustment Existence of International Transaction for AMP Expenditure Protective Addition for AMP Expenditure Correct Segmental Accounts Consideration Inclusion of Selling & Distribution Expenses in AMP Penalty Proceedings Initiation Interest Levied Transfer Pricing Adjustment: The assessee appealed against the final assessment order, challenging the adjustment made by the Transfer Pricing Officer (TPO) in relation to profit margins of comparable companies and the arm's length testing process. The grounds of appeal included errors in computation, selection of comparable companies, and application of alleged economic adjustments without legal sanction. The TPO's adjustments were contested, and the issue was whether the adjustments were valid under the Indian TP provisions. The Tribunal referred to previous cases and held that the adjustments made by the TPO were not sustainable, leading to the deletion of the addition. Existence of International Transaction for AMP Expenditure: The primary issue revolved around whether the AMP expenditure incurred by the assessee constituted an international transaction. The TPO had determined that such transactions existed, leading to adjustments in the margins of comparable companies. However, the Tribunal, following consistent decisions in the assessee's own cases, concluded that the AMP expenses did not fall within the definition of international transactions. The Tribunal disapproved the TPO's approach and deleted the adjustments made, emphasizing the lack of legal basis for the comparability adjustment. Protective Addition for AMP Expenditure: Regarding the protective addition made by the TPO for AMP expenditure based on the Bright Line Test, the Tribunal found no basis for such adjustments as there was no international transaction for brand promotion. By maintaining consistency with previous decisions, the Tribunal directed the issue to be reevaluated by the TPO applying the TNMM method in accordance with the law, leading to the allowance of the ground raised by the assessee for statistical purposes. Correct Segmental Accounts Consideration: The issue of not considering the correct segmental accounts for calculating the Profit Level Indicator (PLI) of the distribution segment was raised. However, due to the resolution of other primary issues, this issue became inconsequential and required no further adjudication. Inclusion of Selling & Distribution Expenses in AMP: The contention regarding the inclusion of selling and distribution expenses within the ambit of AMP for benchmarking purposes was noted. As the primary issues were resolved in favor of the assessee, this ground became irrelevant and did not require separate consideration. Penalty Proceedings Initiation and Interest Levied: The initiation of penalty proceedings under section 271(1)(c) and the levying of interest under various sections of the Income Tax Act were challenged. However, these issues were not addressed in detail in the judgment, suggesting that they were not central to the decision-making process and were likely dismissed without significant discussion. Overall, the Tribunal partly allowed the appeal filed by the assessee, primarily focusing on the transfer pricing adjustments and the determination of international transactions for AMP expenditure, while directing further evaluation by the TPO on specific aspects for statistical purposes. The judgment emphasized consistency in decisions and adherence to legal provisions in transfer pricing assessments.
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