Tribunal clarifies Transfer Pricing on AMP expenses & City Bank Transactions

The Tribunal addressed the Transfer Pricing Adjustment on AMP expenses, emphasizing that incurring such expenses constitutes an international transaction. It listed parameters for determining the correct ALP of AMP expenses and excluded selling commission and discounts. The matter was remitted for fresh determination. Regarding the addition based on City Bank Transactions, the Tribunal found the explanation credible and deleted the addition, allowing the appeal for statistical purposes. The Tribunal's decisions were based on the LG Electronics India (P.) Ltd. case principles and the evidence presented in each case.

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Issues:
1. Transfer Pricing Adjustment on account of AMP expenses.
2. Addition of Rs. 9,52,719 based on City Bank Transactions.

Transfer Pricing Adjustment on account of AMP expenses:
The appeal challenged the Transfer Pricing Adjustment on AMP expenses for the assessment year 2009-10. The Special Bench of the Tribunal in LG Electronics India (P.) Ltd. case addressed this issue, emphasizing that incurring AMP expenses towards brand promotion constitutes a transaction and an international transaction. The Special Bench held that even if the overall net profit rate declared by the assessee is higher than other cases, disallowance of AMP expenses can still be made. The Tribunal listed 14 parameters for determining the correct ALP of AMP expenses, applicable to both manufacturers and distributors. The AR contended that selling commission and discounts should be excluded from AMP expenses. The Tribunal agreed, following the Special Bench decision, and remitted the matter to the AO/TPO for fresh determination in line with the LG Electronics India (P.) Ltd. case.

Addition of Rs. 9,52,719 based on City Bank Transactions:
The AO added Rs. 9,52,719 based on City Bank Transactions, questioning why the amount was not recorded in the books of account. The assessee explained that the expenditure was incurred by a former employee who used the company's credit card for expenses related to his new employer. The former employee admitted to this, and the bank corroborated the explanation. The Tribunal found the explanation credible and deleted the addition. The ground about charging interest was deemed consequential. Consequently, the appeal was allowed for statistical purposes.

In conclusion, the Tribunal addressed the issues of Transfer Pricing Adjustment on AMP expenses and the addition based on City Bank Transactions, providing detailed analysis and rulings for each matter. The Tribunal upheld the principles established in the LG Electronics India (P.) Ltd. case and made decisions based on the facts and evidence presented in each case.

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