TMI Blog2020 (7) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue relate to the sole issue of deletion of adjustment made on account of advertisement, marketing and promotion (AMP) expenses. 3. Brief facts are, the assessee, a company incorporated in India, is engaged in the business of atta, semiya (vermicelli), pizza kits, dry cake mix and Indian frozen breads viz. rotis, parathas nans and trading in canned corn niblets, cream style sweet corn and asparagus spears which are sold under the brand name green giant . The assessee also provides software development service, business process service and procurement support service to its Associated Enterprises (AEs). It is also evident that the assessee is a 100% subsidiary of General Mills Mauritius Inc. In the audit report submitted in Form no.3CEB, the assessee furnished the details of the international transactions undertaken with the AEs and also the details of benchmarking of such transactions. As per the transfer pricing study report, the assessee benchmarked the import of food products from AEs for resale by applying TNMM as the most appropriate method and the transactions with the AEs were claimed to be at arm s length price. In the course of proceedings before him, the Transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentative, though, fairly submitted that identical issue has been decided in favour of the assessee in assessment year 2011 12 and 2012 13, however, he submitted that the assessee being a distributor, the AMP expenses incurred by him for building the brand of AEs comes within the definition of international transaction. Further, he submitted that since the Revenue has filed a Special Leave Petition before the Hon'ble Supreme Court challenging some of the decisions of the Hon'ble High Courts holding that the AMP expense is not international transaction and the Hon'ble Supreme Court s decision on such SLP is yet to come, the matter may be restored back to the Assessing Officer with a direction to decide the issue after the decision of the Hon'ble Supreme Court. 7. We have considered rival submissions and perused the material on record. After carefully examining the orders passed by the Transfer Pricing Officer, learned Commissioner (Appeals) as well as other facts and materials on record, we are of the view that the facts on the basis of which similar adjustment to AMP expenses incurred by the assessee in assessment years 2011 12 and 2012 13 were made by the Transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the entire purpose of incurring expenditure is to increase the sale and not to create any marketing intangible of the AEs. Further, it is evident, the assessee has also explained the nature of expenditure incurred by furnishing supporting evidences. On a perusal of the facts on record, it is noticed that the AMP expenditure was incurred for giving incentives, free samples, etc. Thus, from the aforesaid facts, it is very much clear that 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 Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held so, the Transfer Pricing Officer has still proceeded to determine the arm's length price of the AMP expenditure on the reasoning that the compensation required in the arrangement between the assessee and the AE for improving the brand intangible of the owner has to be determined. Further, he has observed that the AMP expenditure incurred by the assessee not only benefits the assessee but also the AE in terms of increase in the brand 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 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorised Representative, including the decision of the Hon'ble Delhi High Court in Martuti Suzuki India Ltd. (supra), it has to be concluded that the AMP expenditure incurred by the assessee in India cannot come within the purview of the international transaction. Hence, the Transfer Pricing Officer has no jurisdiction to determine the arm's length price of AMP expenditure. 13. 9. Having held so, it is now necessary to deal with the contention of the learned Departmental Representa tive 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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