TMI Blog2020 (2) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... so applied BLT method for computing arm's length price. It is relevant to observe, the aforesaid Special Bench decision of the Tribunal in LG Electronics India Pvt. Ltd. ( 2013 (6) TMI 217 - ITAT DELHI ) has been disapproved by the Hon ble Delhi High Court in Maruti Suzuki India Ltd. ( 2015 (12) TMI 634 - DELHI HIGH COURT ) . The Hon ble High Court has held that the BLT method is invalid as it is not prescribed in the statute. Various Benches of the Tribunal following the decision of the Hon ble Delhi High Court in Maruti Suzuki India Ltd. (supra), have consistently held that AMP expenditure incurred by the assessee in India cannot come within the purview of international transaction. Adjustment proposed by the Transfer Pricing Officer while determining the arm's length price of the price paid towards import of goods from the AEs - HELD THAT:- While computing its margin with regard to the international transaction relating to import of goods from the AEs, the assessee has claimed economic adjustment towards the AMP expenditure incurred by it. It is the claim of the assessee that compared to the comparables whose marketing expenditure worked out to 0.87% of operating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revised monetary limit of ₹ 50 lakh, as per CBDT Circular no.17/2019, dated 8th August 2019, r/w CBDT Circular no.3/2018, dated 11th July 2018. It also stands clarified by the CBDT that the revised monetary limit of ₹ 50 lakh as per the aforesaid CBDT Circulars would also apply to all pending appeals. In view of the aforesaid, Revenue s appeal deserves to be dismissed. However, the Revenue is given liberty to seek recall of this order, if, at a later point of time it is found that the appeal is protected under any of the exceptions provided in the Circulars referred to above. 5. In the result, Revenue s appeal is dismissed. IT(TP)A no.249/Mum./2017 Assessment Year 2011 12 6. The first issue arising in the present appeal relates to deletion of addition made on account of transfer pricing adjustment made in respect of advertisement, marketing and promotion (AMP) expenditure. 7. Brief facts are, the assessee, a resident company, is engaged in the business of manufacturing of atta, semiya (vermicelli), pizza kits, dry cake mix and Indian frozen breads and is also trading in canned corn niblets, cream style sweet corn and asparagus spears sold under the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omparables is 0.87%. Further, the Transfer Pricing Officer observed, since the assessee has incurred the AMP expenditure for promotion and marketing of branded products of the AEs, it tantamount to providing service to foreign AEs. In this context, he referred to the Special Bench decision of the Tribunal in LG Electronics India Pvt. Ltd. v/s ACIT. The Transfer Pricing Officer observed, incurring of AMP expenditure to promote the brand of AE is an international transaction, therefore, the apportionment of AMP expenditure between the assessee and the AE has to be computed by applying Bright Line Test (BLT). Having held so, the Transfer Pricing Officer referred to the average margin of two comparables in advertisement and marketing activity and applying the said average margin as a mark up to the AMP expenditure incurred by assessee, he made an adjustment of ₹ 3,97,49,084, towards AMP expenditure. Without prejudice, the Transfer Pricing Officer observed, the AMP expenditure of ₹ 3.59 crore not being capital expenditure cannot be excluded for computing the operating profit. Accordingly, he determined the PLI of the assessee at ( )7.20% as against the PLI of comparables ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is an agreement/arrangement between the assessee and the AEs for incurring such expenditure. He submitted, the assessee has imported products from the AE for re sale in Indian market. Since these products were new as compared to similar products manufactured by other established companies, the assessee for the purpose of penetrating the market devised a strategy to promote the products vigorously. He submitted, since the products were in their initial lifecycle, the assessee had to incur substantially more expenditure towards AMP compared to similar expenditure incurred by the other established companies. He submitted, the AMP expenditure incurred by the assessee is purely for its own benefit and not for the benefit of the AEs. Thus, he submitted, learned Commissioner (Appeals) was justified in deleting the adjustment made by the Transfer Pricing Officer. In support of his contention, learned Authorised Representative relied upon the following decisions: i) Maruti Suzuki India Ltd. v/s CIT, {2016] 381 ITR 117 (Del.); ii) Mondelez India Foods Pvt. Ltd. v/s ACIT, ITA no.1512/Mum./ 2013, dated 28.11.2018; iii) L Oreal India Pvt. Ltd. v/s DCIT, ITA no.7714/Mum./20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the AMP expenditure was incurred for penetrating the market and increasing the sales. In any case of the matter, no material has been brought on record by the Transfer Pricing Officer to demonstrate that there is an agreement/arrangement with the AEs for incurring AMP expenditure to promote the brand of the AEs. Further, the entire AMP expenditure has been incurred in India and paid to third parties in India. Thus, keeping in perspective the aforesaid factual position, we have to hold that the AMP expenditure incurred by the assessee cannot come within the purview of international transaction. 12. Further, it is evident, the Transfer Pricing Officer has treated the AMP expenditure as part of international transaction following the Special Bench decision of the Tribunal in LG Electronics India Pvt. Ltd. (supra) and has also applied BLT method for computing arm's length price. It is relevant to observe, the aforesaid Special Bench decision of the Tribunal in LG Electronics India Pvt. Ltd. (supra) has been disapproved by the Hon ble Delhi High Court in Maruti Suzuki India Ltd. (supra). The Hon ble High Court has held that the BLT method is invalid as it is not prescribed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and value of Kellogg. Thus, the Transfer Pricing Officer has inferred that there is an arrangement between the assessee and the AE with regard to promotion of the brand of the AE by incurring AMP expenditure. However, he has not provided any factual basis on which he has drawn such inference. By merely stating that there is an arrangement between the assessee and the AE, the Transfer Pricing Officer cannot bring the AMP expenditure within the purview of international transaction. If the Transfer Pricing Officer alleges that the AMP expenditure comes within the purview of international transaction by virtue of an arrangement between the related parties, the burden is entirely upon the Transfer Pricing Officer to demonstrate the existence of such arrangement. A careful reading of the impugned order of the Transfer Pricing Officer does not reveal any such factual basis which can demonstrate the existence of an arrangement between the assessee and the AE for incurring AMP expenditure to promote the brand of the AE. That being the case, the entire approach of the Transfer Pricing Officer in determining the arm's length price of AMP expenditure is fallacious. 7. Moreover, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al with the contention of the learned Departmental Representative to restore the issue to the Assessing Officer for keeping it pending till the issue is settled by the Hon'ble Supreme Court. In our view, the aforesaid contention of the learned Departmental Representative is not acceptable. As per the prevailing legal position, the AMP expenditure incurred by the assessee in India cannot come within the purview of international transaction. That being the case, the adjustment made by the Transfer Pricing Officer cannot survive. Therefore, we do not find any necessity to restore the issue to the Assessing Officer. Grounds are allowed. 14. Thus, keeping in view the ratio laid down in the decisions referred to above, we have to agree with the conclusion arrived at by learned Commissioner (Appeals) with regard to the taxability of AMP expenditure. Accordingly, we uphold the decision of learned Commissioner (Appeals) by dismissing the ground raised. 15. The next issue raised by the Revenue is on the adjustment proposed by the Transfer Pricing Officer while determining the arm's length price of the price paid towards import of goods from the AEs. 16. As discussed earlie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee has claimed economic adjustment towards the AMP expenditure incurred by it. It is the claim of the assessee that compared to the comparables whose marketing expenditure worked out to 0.87% of operating income, assessee s marketing expenditure worked out to 21% of the operating income. Thus, it is the claim of the assessee that necessary adjustment has to be given on account of marketing expenditure while computing the margin. It is observed, while considering similar claim made by the assessee in assessment year 20007 08, the Transfer Pricing Officer has allowed 50% of the adjustment claimed. In fact, in Assessment Year 2012 13, though, learned Commissioner (Appeals) had granted similar relief on account of economic adjustment, however, the revenue has not contested the relief granted by the first appellate authority. Considering the above, we uphold the decision of learned Commissioner (Appeals) on the issue. Grounds raised are dismissed. 21. In the result, Revenue s appeal is dismissed. ITA no.5668/Mum./2017 Assessment Year 2012 13 22. The only issue involved in the present appeal is with regard to the adjustment made on account of AMP expenditure incu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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