Tribunal upholds CIT(A)'s exclusion of comparables & rejects Bright Line Test for AMP expenses. Revenue appeal dismissed.

The Tribunal upheld the CIT(A)'s decisions to exclude functionally dissimilar comparables and reject the Bright Line Test (BLT) application for Advertising and Marketing Promotion (AMP) expenses. The Revenue's appeal was dismissed, and the assessee's appeal was partly allowed, emphasizing adherence to jurisdictional High Court rulings and the functional comparability of selected companies.

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Issues Involved:
1. Exclusion of comparables by the Transfer Pricing Officer (TPO).
2. Adjustment on account of Advertising and Marketing Promotion (AMP) expenses.
3. Selection of comparables by the CIT(A).
4. Application of the Bright Line Test (BLT) for AMP expenses.
5. Judicial reliance on the verdict of the Hon'ble Delhi High Court in the case of Sony Ericsson.

Detailed Analysis:

1. Exclusion of Comparables by the TPO:
The Revenue raised concerns about the CIT(A)'s decision to exclude certain comparables like Quippo Valuers and Auctioneers Private Limited, Global Procurement Consultants Limited, Power System Operation Corporation Limited, MMTV Limited, Info Edge (India) Limited, and Crystal Hues Limited, arguing that these companies provide marketing services similar to the assessee. The Tribunal upheld the CIT(A)'s decision, noting that these companies were functionally different from the assessee, which provides marketing support services encompassing sponsorship of seminars, conferences, and advertisement campaigns.

2. Adjustment on Account of AMP Expenses:
The TPO had bifurcated AMP expenses into routine and non-routine, applying the Bright Line Test (BLT) and marking up the non-routine expenditure by 15%. This resulted in an addition of Rs. 11,84,67,913/-, later rectified to Rs. 2,80,11,203/-. The CIT(A) deleted this addition, relying on the Delhi High Court's verdict in the case of Sony Ericsson. The Tribunal dismissed the Revenue's appeal on this ground, emphasizing judicial discipline in following the jurisdictional High Court's ratio.

3. Selection of Comparables by the CIT(A):
The assessee contested the inclusion of ICC International Limited and Priya International Limited, which were initially rejected by the TPO. The CIT(A) included these in the final list of comparables. The Tribunal accepted the CIT(A)'s inclusion of these companies, noting their functional similarity to the assessee's operations. Conversely, the Tribunal upheld the exclusion of companies like Indus Technical & Financial Consultant Ltd., India Tourism Development Corporation Ltd., EDCIL (India) Ltd., and In House Production Ltd., due to their functional dissimilarity and lack of segmental data.

4. Application of the Bright Line Test (BLT) for AMP Expenses:
The TPO's application of BLT led to a significant adjustment, which was contested by the assessee. The CIT(A) rejected the BLT application, aligning with the Delhi High Court's stance in Sony Ericsson. The Tribunal supported this rejection, reinforcing the need to adhere to the jurisdictional High Court's rulings.

5. Judicial Reliance on the Verdict of the Hon'ble Delhi High Court in the Case of Sony Ericsson:
The Revenue argued against the CIT(A)'s reliance on the Delhi High Court's verdict in Sony Ericsson, citing a pending SLP before the Supreme Court. The Tribunal dismissed this argument, underscoring the importance of judicial discipline and adherence to the jurisdictional High Court's decisions.

Conclusion:
The Tribunal upheld the CIT(A)'s decisions on excluding functionally dissimilar comparables and rejecting the BLT application for AMP expenses. The Revenue's appeal was dismissed, and the assessee's appeal was partly allowed, with the Tribunal emphasizing the adherence to jurisdictional High Court rulings and the functional comparability of selected companies. The order was pronounced in the open court on 24/01/2023.

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