Tribunal directs re-examination of Transfer Pricing Adjustment on AMP Expenses, confirms depreciation on Intangible Assets.

The Tribunal partly allowed the appeal, directing the AO/TPO to re-examine the Transfer Pricing Adjustment of AMP Expenses to establish the existence of international transactions separately. It confirmed the assessee's entitlement to depreciation on Intangible Assets and the deduction of Education Cess and Secondary Higher Education Cess, citing relevant case law precedents.

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Issues Involved:
1. Transfer Pricing Adjustment of AMP Expenses
2. Depreciation on Intangible Assets
3. Deduction of Education Cess and Secondary Higher Education Cess

Detailed Analysis:

1. Transfer Pricing Adjustment of AMP Expenses (Ground Nos. 4 to 21):
- The assessee incurred Rs. 45.68 crore on advertisement and sales promotion expenses (AMP) but did not disclose AMP expenses as an international transaction in the transfer pricing study.
- The Transfer Pricing Officer (TPO) applied the bright line test, splitting AMP expenses into routine and non-routine expenses, and adopted the Profit Split Method to benchmark both royalty and AMP expenses.
- The TPO reworked the profit margin of the assessee, determining a non-routine profit of 18.35% and allocated 25% of this profit to the Associated Enterprise (AE), resulting in a transfer pricing adjustment of Rs. 32.50 crore.
- The Dispute Resolution Panel (DRP) confirmed the TP adjustment.
- The Tribunal, referencing its own decision for the assessee's case in the previous year, restored the issue of ALP determination for AMP expenses to the AO/TPO for fresh examination, emphasizing the need to establish the existence of international transactions separately.

2. Depreciation on Intangible Assets (Ground Nos. 22 to 27):
- The AO disallowed the depreciation claim of Rs. 1,35,90,554 on intangible assets such as Design and Technical Knowhow and Vendor Network Relationship, consistent with past years.
- The DRP upheld the AO's disallowance.
- The Tribunal referenced its prior decisions in the assessee’s own case for previous assessment years, where it was held that the assessee is entitled to depreciation on intangible assets.
- The Tribunal reiterated that the expenses incurred for business purposes should not be disallowed on a technical basis and upheld the assessee's entitlement to depreciation on the said intangible assets.

3. Deduction of Education Cess and Secondary Higher Education Cess (Additional Ground):
- The assessee sought to claim education cess and secondary higher education cess as a deduction under section 37(1) of the I.T. Act, which was omitted in the original return.
- The Tribunal admitted the additional ground, noting it as a pure legal issue.
- Citing the Hon'ble Bombay High Court's decision in Sesa Goa Limited v. JCIT and the Hon'ble Rajasthan High Court's judgment in CIT v. Chambal Fertilizers and Chemical Limited, the Tribunal held that education cess is an allowable expenditure.
- The Tribunal emphasized that the term "cess" is absent from section 40(a)(ii) of the I.T. Act, thus allowing the deduction of education cess.

Conclusion:
- The appeal was partly allowed, with the Tribunal directing the AO/TPO to re-examine the AMP expenses and confirming the assessee's entitlement to depreciation on intangible assets and the deduction of education cess.

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