The Income Tax Appellate Tribunal ( ITAT ), New Delhi, has recently, in an appeal preferred before it, held that, AMP expenses incurred for own benefit will not amount to international transaction.
The aforesaid observation was made by the Tribunal when an appeal was preferred before it by the Revenue for the Assessment Year 2009- 10 against the order Ld. Commissioner of Income Tax (Appeals)–42, New Delhi, dated 21/01/2019 New Delhi.
The assessee having filed its return of income declaring income of Rs. 21,14,49,000/, an order u/s 92 CA (3) of the Act was passed on 31/03/2009 by the TPO by proposing adjustment of an amount of Rs. 23,90,62,090/-.
The assessment order being passed on 25/03/2013 u/s 143(3) (ii) read with Section/144C of the Act by making an addition of Rs. 20,73,93,115/- on account of AMP expenses, a sum of Rs. 3,16,68,935/- on account of mark up on AMP Expenses, a sum of Rs. 22,55,220/- on account of advance to holding company and a sum of Rs. 5,40,886/- on account of depreciation on computer peripheral, the assessee had preferred an Appeal before CIT (A) as against the same.
Following the same, the CIT(A) vide order 21/01/2019 has allowed the Appeal filed by the assessee by rejecting TPO’s bright line approach in determining the Arm’s Length Price for the AMP expenditure incurred by the assessee and deleted disallowance of Rs. 8,12,57,204/-, wherein he followed the Assessee’s own case for Assessment Years 2006-07, 2011-12 & 2012-13 on similar issues, leaving the Revenue aggrieved to file the present appeal before the Tribunal.
The ground of the Revenue’s appeal being that the CIT(A) has erred in rejecting TPO’s bright line approach in determining Arm’s Length return for the AMP expenditure incurred by the assesse, the Tribunal observed as follows:
“The Revenue’s Grounds of Appeal are in respect of Transfer Pricing Adjustment with respect to AMP expenditure amounting to Rs. 8,12,57,204/- and not accepting the TPO’s view that bright line concept is an internationally accepted economic tool which determines the expenditure incurred by a routine distributor not promoting any marketing intangibles.”
“It is not in dispute that in Assessee’s own case for the Assessment Year 2006-07, 2011-12 and 2012-13, the very same issue involved in the present appeal has been dealt by the Coordinate Bench of the Tribunal and decided in favour of the assessee by dismissing the Appeal of the Revenue in ITA No. 953/Del/2016 & (A.Y 2011-12) and ITA No. 729/Del/2019 (AY 2012-13) vide order dated 31/07/2019, wherein it was held that the main purpose of incurring of huge AMP expenses being largely benefiting the assessee in India, with only an incidental benefit arising to foreign AE, unless Ld.TPO can establish direct benefit accruing to foreign AE, it is very difficult to accept existence of an international transaction.”, the Bench added.
Thus, dismissing the Revenue’s appeal, the Tribunal concluded:
“By following the rule of consistency and judicial discipline, we are inclined to follow the binding precedent orders of the Tribunal Assessee’s own case as was earlier decided. And accordingly we dismiss the Revenue’s Grounds of Appeal”.
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