Tribunal Rejects Appeals, Upholds AMP Expenditure Ruling; Revenue's 2007-08 Appeal Dismissed Due to Low Tax Effect.

The Tribunal dismissed all appeals, concluding that the AMP expenditure by the assessee did not qualify as an international transaction. It upheld the economic adjustment allowed by the Commissioner (Appeals) for AMP expenditure. Additionally, the Revenue's appeal for the assessment year 2007-08 was dismissed due to the tax effect being below the monetary limit set by CBDT Circular no.17/2019.

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Issues Involved:
1. Maintainability of Revenue's appeal due to tax effect being below the monetary limit.
2. Deletion of addition made on account of transfer pricing adjustment related to Advertisement, Marketing, and Promotion (AMP) expenditure.
3. Adjustment proposed by the Transfer Pricing Officer (TPO) while determining the arm's length price of the price paid towards the import of goods from the Associated Enterprises (AEs).

Issue-wise Detailed Analysis:

1. Maintainability of Revenue's Appeal:
The Revenue's appeal for the assessment year 2007-08 was dismissed as the tax effect on the amount disputed was below the monetary limit of Rs. 50 lakh, as per CBDT Circular no.17/2019. The Tribunal noted that the revised monetary limit applies to all pending appeals and gave the Revenue the liberty to seek recall if the appeal is later found to be protected under any exceptions provided in the Circulars.

2. Deletion of Addition Made on Account of Transfer Pricing Adjustment Related to AMP Expenditure:
- Facts and Submissions: The assessee, engaged in manufacturing and trading various food products, had incurred AMP expenditure to promote new products. The TPO treated this expenditure as an international transaction, applying the Bright Line Test (BLT) and made an adjustment of Rs. 3,97,49,084. The assessee argued that the AMP expenditure was for its own benefit to penetrate the market and not for the benefit of the AEs.
- First Appellate Authority Decision: The Commissioner (Appeals) deleted the addition, relying on the Delhi High Court decision in Maruti Suzuki India Ltd., holding that AMP expenditure paid to third parties in India cannot be considered an international transaction.
- Tribunal's Analysis: The Tribunal upheld the Commissioner (Appeals)'s decision, noting the absence of any agreement between the assessee and the AEs for incurring AMP expenditure. It emphasized that the AMP expenditure was incurred in India and paid to unrelated parties. The Tribunal also pointed out that the BLT method used by the TPO was invalid as per the Delhi High Court's ruling in Maruti Suzuki India Ltd. and other Tribunal decisions. Therefore, the AMP expenditure did not come within the purview of international transactions.

3. Adjustment Proposed by the TPO While Determining the Arm's Length Price of the Price Paid Towards Import of Goods from the AEs:
- Facts and Submissions: The TPO included AMP expenditure in the margin computation, leading to a negative margin of (-)7.20% for the assessee, compared to 3.29% for comparables, and suggested an adjustment of Rs. 1.8 crore. The Commissioner (Appeals) allowed 50% of the AMP expenditure towards economic adjustment, consistent with the TPO's decision in the assessee's case for the assessment year 2007-08.
- Tribunal's Analysis: The Tribunal upheld the Commissioner (Appeals)'s decision, noting that the TPO had allowed similar adjustments in previous years and that the Revenue had not contested the relief granted in the assessment year 2012-13. Therefore, the Tribunal found no reason to interfere with the Commissioner (Appeals)'s decision.

Conclusion:
All the appeals were dismissed. The Tribunal concluded that the AMP expenditure incurred by the assessee did not constitute an international transaction and upheld the economic adjustment allowed by the Commissioner (Appeals) for the AMP expenditure. The Tribunal also dismissed the Revenue's appeal for the assessment year 2007-08 due to the tax effect being below the prescribed monetary limit.

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