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2023 (7) TMI 1138 - AT - Income TaxTP Adjustment - MAM - adjustment made towards the AMP expenses by adopting an approach similar to bright line test - international transaction or not? - as submitted TPO used bright line test to bench mark the alleged AMP expenditure under CUP - HELD THAT:- It is fairly well established that determination of arm's length price of AMP expenditure by applying BLT method is not valid. In a catena of decisions, the Hon'ble Delhi High Court while disapproving the decision of L.G. Electronics India (P.) Ltd. [2013 (6) TMI 217 - ITAT DELHI] have held that, BLT method is invalid as it is not prescribed in the statute. Thus in absence of an express arrangement/agreement between the assessee and the AE for incurring AMP expenditure to promote the brand of the AE, AMP expenditure incurred by making payment to third parties for promoting and marketing the product manufactured by the assessee, does not come within the purview of international transaction. Admittedly, in the present facts of the case, the assessee is a distributor and is functioning its activities under the MLM sales model. On perusal of the records and the activities carried out by the assessee described in the TP study reports, no action foised it as an international transaction. The entire sales of the assessee is effectuated in India and the entire profits are also assessee’s own profit. The expenditure incurred by assessee is to carry out its day to day business activity of distribution and are directly linked with the business carried out by assessee in India. It is not disputed by the revenue that TDS has been deducted by the assessee on the royalty earning, production bonus u/s. 194H of the Act, and thus payouts are made only when the members / associates /distributors effectuate a successful sale. In any event, all these expenses have been considered by the assessee while computing the margin under the manufacturing segment which already has been held to be at arms length by the Ld. TPO in the transfer pricing order u/s. 92CA. We also find merit in the submission that, if the net profit margin meets the Arm's length price, then no separate addition needs to be made. No adverse inference is drawn by the Ld. TPO in respect of the Manufacturing segment which means that the Ld. TPO has accepted the overall margins of the said segment and respectfully following decision of the Hon'ble Delhi Court in the case of Sony Ericsson [2015 (3) TMI 580 - DELHI HIGH COURT] we direct the Ld. TPO to delete the adjustment made towards the AMP. Seeking correction of computation errors of total income and incorrect levy u/s. 234A - HELD THAT:- We direct the Ld.AO to compute the total income correctly in accordance with law. In respect of levy of interest u/s. 234A, we note that the assessee has filed its return on time and therefore 234A interest cannot be levied. Accordingly the same is directed to be deleted.
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