Transfer pricing over AMP spend, royalty and service fees: adjustments deleted; 14A expenses partly remanded, forex loss allowed.

TP adjustment on AMP spend was rejected because absent evidence of an arrangement to incur AMP on behalf of the AE, a notional/indirect brand benefit is not an "international transaction" under Ch. X; the AMP adjustment was deleted. TP adjustment on royalty was covered by prior year findings under the same agreement and was deleted. TP adjustments on regional and global service fees were held unsustainable as the TPO determined ALP on ad hoc salary/man-hour estimates without applying a method under s.92C(1); both adjustments were deleted. Under s.14A r/w r.8D, no interest disallowance lay due to sufficient own funds; verification of direct/indirect expenses was remanded. Forex loss on cancelled forward contracts was treated as business loss and allowed. Deduction u/s 80-IC was allowed; AIR-based addition was deleted; MAT credit and s.234C interest were remanded; s.234A interest was deleted.

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Issues Involved:
1. Adjustment on account of Advertisement, Marketing, and Promotion (AMP) expenses.
2. Disallowance of payment of royalty on technology paid to Cadbury Adams USA LLC.
3. Disallowance of payment of royalty on technology paid to Cadbury Enterprises Pte Ltd.
4. Disallowance of regional service fees paid to Cadbury Enterprises Pte Ltd. Singapore.
5. Disallowance of global service fees paid to Cadbury Holdings Limited.
6. Disallowance under section 14A of the Act read with Rule 8D.
7. Treating foreign exchange loss on cancellation of contracts as speculative.
8. Allocation of expenditure at Baddi Unit-I & II.
9. Addition on account of Annual Information Report.
10. Non-grant of MAT credit.
11. Levy of interest under section 234A of the Act.
12. Levy of interest under section 234C of the Act.

Summary of Judgment:

1. Adjustment on account of Advertisement, Marketing, and Promotion (AMP) expenses:
The Tribunal followed its previous decisions in the assessee's own case for AY 2005-06, 2006-07, and 2009-10, holding that AMP expenses incurred by the assessee were not international transactions as defined under section 92B of the Act. The Tribunal deleted the TP adjustment made by the TPO/AO towards AMP expenses.

2. Disallowance of payment of royalty on technology paid to Cadbury Adams USA LLC:
The Tribunal noted that the issue of royalty payment was consistently decided in favor of the assessee in earlier years. It held that the payment of royalty to Cadbury Adams USA LLC, and Cadbury Enterprises Pte Ltd was at arm's length and deleted the TP adjustment.

3. Disallowance of payment of royalty on technology paid to Cadbury Enterprises Pte Ltd:
Similar to the above, the Tribunal followed its earlier decisions and deleted the TP adjustment, holding that the payment of royalty was at arm's length.

4. Disallowance of regional service fees paid to Cadbury Enterprises Pte Ltd. Singapore:
The Tribunal found that the TPO's computation of ALP was based on adhoc estimation and not on any prescribed method under section 92C(1). It deleted the TP adjustment, following the decision in Kodak India Pvt. Ltd.

5. Disallowance of global service fees paid to Cadbury Holdings Limited:
The Tribunal applied the same reasoning as for the regional service fees and deleted the TP adjustment, noting that the TPO's method was not tenable.

6. Disallowance under section 14A of the Act read with Rule 8D:
The Tribunal held that no disallowance was warranted as the investments were made out of the assessee's own funds. It remitted the issue of verification of direct/indirect expense disallowance to the AO for re-adjudication.

7. Treating foreign exchange loss on cancellation of contracts as speculative:
The Tribunal followed its earlier decision in the assessee's own case for AY 2009-10, holding that the loss arising from the cancellation of forward contracts was in the normal course of business and should be allowed as a deduction.

8. Allocation of expenditure at Baddi Unit-I & II:
The Tribunal upheld the method of allocation of expenses as followed by the assessee and deleted the disallowance made by the AO, allowing the deduction under section 80IC as claimed in the return of income.

9. Addition on account of Annual Information Report:
The Tribunal deleted the addition made solely based on AIR information, following the decisions in Reliance Apex Networks Ltd and Zee Media Corporation Ltd.

10. Non-grant of MAT credit:
The Tribunal remitted the issue back to the AO to examine the status of the assessment order passed for AY 2010-11 and accordingly give credit for the carried forward MAT for the year under consideration.

11. Levy of interest under section 234A of the Act:
The Tribunal deleted the interest levied under section 234A, noting that the assessee had filed the return of income before the due date.

12. Levy of interest under section 234C of the Act:
The Tribunal remitted the issue back to the AO to re-compute the interest under section 234C as per the provisions of the said section.

Conclusion:
The appeals for AY 2011-12 and AY 2012-13 were allowed in favor of the assessee.

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