Tribunal upholds CIT(A) decision on AMP expenses, reduces ticketing services adjustment. Section 14A and payment gateway charges issues remanded.

The Tribunal upheld the CIT(A)'s decision to delete the AMP expenses adjustment and reduce the ticketing services adjustment. The Section 14A disallowance issue was sent back to the AO for verification, considering only investments yielding exempt income. The payment gateway charges disallowance issue was remanded to the AO for fresh adjudication. The appeals were partly allowed for statistical purposes.

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Issues Involved:
1. Transfer Pricing Adjustment related to AMP expenses and ticketing services.
2. Disallowance under Section 14A.
3. Disallowance under Section 40(a)(ia) for Payment Gateway Charges.

Issue-wise Detailed Analysis:

1. Transfer Pricing Adjustment related to AMP expenses and ticketing services:

The primary issue was the Transfer Pricing Officer's (TPO) adjustment of Rs. 31,81,07,110/- on account of Advertising, Marketing, and Promotion (AMP) expenses and Rs. 1,47,93,024/- for ticketing services and tours/travel packages. The TPO argued that the AMP expenses were excessively high and not entirely for the benefit of the assessee, but also for its parent company, MMT Mauritius. The TPO applied the bright-line test and concluded that the excess AMP expenses were for promoting the MakeMyTrip brand, which should have been compensated by MMT Mauritius.

The CIT(A) deleted the AMP adjustment, stating that the MakeMyTrip brand was owned by the assessee and not the parent company. The CIT(A) also noted that the AMP expenses were wholly and exclusively for the business and not capital in nature. For the ticketing services adjustment, the CIT(A) reduced the addition to Rs. 50,000/- based on a detailed analysis and past decisions.

The Tribunal upheld the CIT(A)'s decision, noting that from AY 2010-11 onwards, the Department had accepted that AMP expenses were not an international transaction. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the grounds raised by the Revenue and the assessee on this issue.

2. Disallowance under Section 14A:

The AO made a disallowance of Rs. 5,71,124/- under Section 14A read with Rule 8D. The CIT(A) restricted this disallowance to Rs. 73,910/-, considering only the investments that yielded exempt income. The Tribunal restored the issue to the AO for verification, directing the AO to determine if the assessee received any exempt income and to decide the issue in light of the Supreme Court's decision in Cheminvest Ltd., which held that no disallowance under Section 14A can be made in the absence of exempt income.

3. Disallowance under Section 40(a)(ia) for Payment Gateway Charges:

The AO disallowed Rs. 11,99,39,901/- paid as payment gateway charges for non-deduction of TDS under Section 194H. The CIT(A) upheld the disallowance but excluded payments made to Citi Bank and American Express Bank, as the assessee had furnished nil TDS certificates from these banks. The Tribunal restored the issue to the AO for fresh adjudication, directing the AO to decide the issue in light of the Tribunal's decision in the assessee's own case for AY 2009-10.

Conclusion:

The Tribunal upheld the CIT(A)'s deletion of the AMP expenses adjustment and the reduction of the ticketing services adjustment. It restored the Section 14A disallowance issue to the AO for verification and the payment gateway charges disallowance issue to the AO for fresh adjudication. The appeals were partly allowed for statistical purposes.

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