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2019 (12) TMI 1621 - ITAT DELHIValidity of order passed u/s 143(3) pursuance to the direction passed by DRP u/s 144C(5) - TP Adjustment on AMP expenditure - DRP power to confirm, reduce or enhance the variations proposed in the draft order - arm’s length value of international transactions on account of AMP expenditure by the taxpayer by applying BLT - HELD THAT:- DRP is not empowered to set aside any proposed variation or issue any direction under sub-section (5) for further enquiry for passing of the assessment order. So, in the instant case, the ld. DRP has indirectly remanded the case back to the AO by observing that these (AMP) expenses are to be disallowed u/s 37(1) and directed the AO to allow the taxpayer an opportunity to file its submissions and thereafter to pass final assessment order, which certainly amounts to remand of the case as there was no such observations made by TPO or AO, as the case may be. AO is not empowered to make fresh determination while passing final assessment order which was not proposed by him in his draft assessment order. So, on these grounds also, disallowance made by the AO u/s 37(1) is not sustainable. Coordinate Bench of the Tribunal while deciding the identical issue in case of PGS Geophysical as (Successor of PGS Exploration (Norway) AS) v [2014 (10) TMI 143 - ITAT DELHI] held that, “DRP has no authority either to direct the AO/TPO to make further enquiry and to decide the matter and at the best, the DRP can call for the remand report from the Income-tax authority.” Also “in terms of section 144C (8), DRP does not have power to set aside any proposed variation or issue for further enquiry to the AO”. So, we are of the considered view that disallowance made by the AO u/s 37(1) of the Act pursuant to the directions issued by the DRP is not sustainable in the eyes of law. So, question framed is answered in affirmative. Allowability of AMP expenditure - Assessee has undisputedly incurred advertisement and sales promotion expenses periodically, and not at once just to refresh the product and quality to be sold in the memory of its customers. So, it cannot be held to be in the nature of enduring benefit for a trader - Advertisement and sales promotion expenses have been incurred by the assessee just to enhance its sales and profit and cannot be treated as capital in nature. Consequently, advertisement and sales promotion expenses debited by the assessee are ordered to be treated as revenue in nature and addition made/confirmed by the ld. AO/CIT (A) on this score is ordered to be deleted. Thus we are of the considered view that AMP expenditure cannot be considered as capital expenditure by any stretch of imagination, hence the same are revenue in nature having been incurred for commercial expediency. When undisputedly identical AMP expenses have been incurred by the taxpayer since 2009-10 and has been allowed by the Tribunal in AYs 2009-10 & 2010-11, converse stand taken by the taxpayer in AY 2011-12 is not sustainable being hit by rule of consistency as has been hel in Radhasoami Satsang [1991 (11) TMI 2 - SUPREME COURT] and Municipal Corporation of City of Thane vs. Vidyut Mettalics Ltd. [2007 (9) TMI 399 - SUPREME COURT] In view of what has been discussed above, disallowance made by the AO/DRP on account of AMP expenses is not sustainable, hence ordered to be deleted. - Decided in favour of assessee.
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