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of <h1>Tribunal Orders AMP Adjustment Deletion; Remands Margin Computation & Capital Adjustments for TPO Review.</h1> <h3>Lenovo India Private Ltd., Versus. The Deputy Commissioner of Income Tax, Circle 4 (1) (1), Bangalore.</h3> Lenovo India Private Ltd., Versus. The Deputy Commissioner of Income Tax, Circle 4 (1) (1), Bangalore. - [2024] 113 ITR (Trib) 560 (ITAT [Bang]) Issues Involved:1. General grounds.2. Transfer Pricing (TP) adjustment on account of excess Advertisement, Marketing, and Promotion (AMP) expenditure.3. TP adjustment in sales facilitation services segment and administrative and business support services segment.Summary:General Grounds:- Ground No.1 and 32 to 34 were general in nature and not specifically addressed in detail within the judgment.TP Adjustment on Account of Excess AMP Expenditure:- The assessee, engaged in manufacturing and distribution of electronic products, incurred AMP expenses for promoting its products in India.- The Transfer Pricing Officer (TPO) argued that these AMP expenses were excessive compared to industry standards and should be treated as an international transaction, requiring reimbursement from the Associated Enterprise (AE) with a markup.- The Dispute Resolution Panel (DRP) upheld the TPO's view that AMP expenses benefitted the AE and constituted an international transaction.- The Tribunal referenced a previous decision in the assessee's own case for AY 2017-18, where it was held that if the net profit margin of the assessee is within the arm's length range, no separate adjustment for AMP expenses is warranted.- The Tribunal noted that the TPO did not make any adjustment in the trading or manufacturing segments, which included AMP expenses as part of operating costs.- Consequently, the Tribunal directed the deletion of the AMP adjustment, following the precedent that accepted overall margins without separate AMP adjustments.TP Adjustment in Sales Facilitation Services Segment and Administrative and Business Support Services Segment:- The assessee contested the exclusion of MCI Management India Private Limited as a comparable and the incorrect margin computation for PR Pundit Public Relations Private Limited and Marketing Communication & Advertising Limited.- The Tribunal remitted the issue back to the TPO to consider the DRP's directions and rectify the margin computations.- Regarding working capital adjustment, the Tribunal acknowledged its necessity in computing the Arm's Length Price (ALP) and directed the AO/TPO to compute the working capital adjustment, following established precedents.Conclusion:- The appeal was partly allowed, with specific directions to delete the AMP adjustment and reconsider the working capital adjustments and margin computations for certain comparables. The Tribunal emphasized adherence to previous decisions and proper application of transfer pricing principles.
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