Tribunal remands TP adjustments for AMP expenses and ALP determination for cookies sale.

The Tribunal allowed both appeals for statistical purposes, remanding the issues of TP adjustment related to AMP expenses and the determination of ALP for the sale of cookies back to the Transfer Pricing Officer (TPO)/Assessing Officer (AO) for fresh consideration. The Tribunal emphasized the importance of considering the Transfer Pricing study and other details submitted by the assessee in determining the Arm's Length Price (ALP) for the transactions with the Associated Enterprise (AE).

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Issues Involved:
1. Transfer Pricing (TP) adjustment related to Advertisement, Marketing & Sales Promotion (AMP) expenses.
2. Correctness of determination of Arm's Length Price (ALP) for the sale of cookies to Associated Enterprise (AE).

Detailed Analysis:

1. Transfer Pricing (TP) Adjustment Related to AMP Expenses:

The primary issue in the appeals concerns the addition of Rs. 9,91,86,369 as a TP adjustment related to AMP expenses incurred by the assessee. The TPO observed that the assessee incurred Rs. 10,11,83,218 on AMP expenses, which was 18.22% of its net sales. The TPO held that these expenses indirectly promoted the brand of the AE and applied the Bright Line Test to determine the ALP. The TPO suggested an addition of Rs. 9,91,86,369 based on the AMP expenses of comparable companies, which was confirmed by the DRP. The DRP justified the TPO's approach, emphasizing that the AMP expenses were excessive and promoted the AE's brand. However, the Tribunal found that the DRP failed to consider the TP study filed by the assessee, which demonstrated that the 'Unibic' trademark was owned by the assessee and not the AE. The Tribunal remanded the issue back to the TPO/AO for fresh consideration, emphasizing that if the trademark is owned by the assessee, AMP expenses should be treated as business expenses and not as an international transaction.

2. Correctness of Determination of ALP for Sale of Cookies to AE:

The second issue concerns the ALP determination for the sale of cookies by the assessee to its AE, Unibic Australia. The TPO, in the absence of a TP study from the assessee, conducted a fresh search and selected five comparable companies, determining an ALP adjustment of Rs. 39,99,056. The DRP upheld this adjustment, noting the assessee's non-compliance in furnishing necessary documents. The Tribunal, however, noted that the DRP did not consider the TP analysis submitted by the assessee, which showed higher profit margins on transactions with the AE compared to unrelated parties. The Tribunal remanded the issue back to the AO/TPO for fresh consideration, instructing them to review the TP study and other details provided by the assessee.

Separate Judgments:

The Tribunal delivered a common judgment for both assessment years (AY 2011-12 and AY 2012-13) due to the identical nature of issues involved. For AY 2012-13, the Tribunal remanded the issue of AMP expenses back to the TPO/AO for fresh consideration, similar to the directions given for AY 2011-12.

Conclusion:

The Tribunal allowed both appeals for statistical purposes, remanding the issues of TP adjustment related to AMP expenses and the determination of ALP for the sale of cookies back to the TPO/AO for fresh consideration, emphasizing the need to consider the TP study and other relevant details submitted by the assessee.

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