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TMI Blog2018 (11) TMI 1052X X X X Extracts X X X X X X X X Extracts X X X X ..... ignore the submission of the learned DR that the matter is pending before Hon'ble Apex Court and the decision of Hon'ble Apex Court would be binding upon all the authorities. In view of the above, we set aside the orders of authorities below and restore the matter to the file of the Assessing Officer. We hold that as per the facts of the case and the legal position as of now and discussed above in this order, the adjustment made by the TPO/DRP/AO in respect of AMP expenses is not sustainable. However, if the above decisions of Hon'ble Jurisdictional High Court which is under consideration before the Hon'ble Apex Court is modified or reversed by the Hon'ble Apex Court, then the Assessing Officer would pass the order afresh considering the decision of Hon'ble Apex Court. In those circumstances, he will also allow opportunity of being heard to the assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant has reported reimbursement received from associated enterprises on account of AMP expenses as an international transaction in form 3CEB 3.2 The DRP/TPO erred on facts and in law in not appreciating that AMP expenses, etc., unilaterally incurred by the appellant in India could not be characterized as an international transaction as per section 92B of the Act, in the absence of any proved understanding / arrangement between the appellant and the associated enterprise (hereinafter referred to as 'AE'). 3.3 The DRP/ TPO erred on facts and in law in not appreciating that the only Transfer Pricing adjustment permitted by Chapter X of the Act was in respect of the difference between the arm's length price (ALP) and the contract or declared price, but the said provision could not be invoked to determine the 'quantum' / extent of business expenditure. 3.4 The TPO/DRP erred on facts and in law in relying upon the decision of the Special Bench of the Tribunal in case of LG Electronics (ITA No. 5140/De1/2011) to hold that AMP expenses incurred by the appellant constitutes an international transaction, not appreciating that the said judgment has been over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons India Pvt Ltd 374 ITR 118 3.12 Without prejudice that the DRP/TPQ erred on facts and in law, in not appreciating that the AMP expenses incurred by the appellant was appropriately established to be at arm's length applying TNMM. 3.13 That the DRP on facts and in law erred in not holding that the AMP expenditure I function, being closely linked with its operation of sales and distribution of headphones etc. and the profit margin of the appellant being higher than the comparable companies and application of Transactional Net Margin Method (TNMM) having been accepted by the Revenue, no separate adjustment was required to be made in respect of such AMP expenses 3.14 That the DRP erred on facts and in law in relying upon the BEPS report not appreciating that the recommendations of the said report are not part of the Indian Transfer Pricing legislation. 3.15 Without prejudice that the DRP erred on facts and in law in relying upon examples 8-13 of the BEPS report not appreciating that the said examples provide for compensation in respect of AMP expenses in various forms including by way of adjustment to purchase price of goods 3.16 The DRP erred on facts and in law in alt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er entered into international transactions with its AE as under :- S.No. Type of international transaction Method Selected Total value of transaction (Rs.) MAM PLI i. Purchase of goods Transactional Net Margin Method Operating profit/ Operating sales 192,717,790 ii. Provision of services 19,992,561 iii. Allocation of expenses paid 978,832 iv. Reimbursement of expenses paid 926,903 v. Interest expenses paid 487,203 4. During the TP proceedings, TPO noticed that the taxpayer has incurred significant amount of ₹ 402,42,425/- on account of Advertisement, Marketing and Promotional (AMP) expenses, which is 10.26% of its sales which is tabulated as under :- Particulars Amount (in INR) Sales 392,060,969 AMP expenses 40,242,425 AMP Sales 10.26% 5. Two major issues have cropped up before TPO - one : whether there is a resistance of international transactions on account of enhanced AMP expenses; and two : that the benchmarking needs to be carried out for its international transaction including the reimbursement that has been made by the Associated Enterprises (AE). Out of AMP expenses of ₹ 402,42,425/-, taxpayer received reimburs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is also not in dispute that the TPO has relied upon Special Bench decision of the Tribunal rendered in LG Electronics India Pvt. Ltd. (supra) in applying the BLT for determining the existence of international transactions in order to compute the ALP of such transactions, which has since been over-ruled. It is also not in dispute that the TPO made TP adjustment on AMP expenses on the ground that the taxpayer has incurred huge expenses of AMP which has benefited its AE by developing marketing intangibles and brand name of its AE. It is also not in dispute that the TPO has taken into consideration that the taxpayer has not only deployed its funds but also deployed his trained manpower for providing AMP services. 12. In the backdrop of the aforesaid facts and circumstances of the case, the sole question arises for determination in this case is :- "as to whether BLT applied by TPO/DRP in this case is an appropriate method for determining the international transactions and in return to further calculate the ALP of such international transactions ?" 13. Undisputedly, TPO/DRP followed the LG Electronics India Pvt. Ltd. (supra) decided by Special Bench of the Tribunal applied the BLT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this account is not sustainable in the eyes of law. We are further of the considered view that ALP expenses incurred by the taxpayer were not for the benefit of AE but only to enhance sales of the taxpayer. Identical issue has already been decided by the coordinate Bench of the Tribunal in favour of the taxpayer in taxpayer's own case for AY 2013-14 having identical facts and same business model as in the year under consideration wherein the TPO had also computed the ALP of the international transactions by applying BLT. 18. Learned DR for the Revenue, although admitted the legal position enunciated in the preceding paragraphs, but he contended that since all the aforesaid decisions are lying challenged before the Hon'ble Apex Court, the matter may be kept pending till the decision by Hon'ble Apex Court. However, we are of the considered view that since it is a stay granted matter and the proceedings before the second appellate authority have not been stayed by any higher forum, the same cannot be kept pending. 19. After considering the legal position as discussed in the preceding paragraphs, we are of the considered opinion that the ALP of an international transaction ..... 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