Bright Line Test AMP adjustments and SAD write-off treatment were examined alongside PF/ESIC contribution timing.

Protective transfer-pricing adjustment to advertising, marketing and promotion expenses based on the Bright Line Test was not sustained because binding precedent had rejected that method, and the rule of consistency supported deletion of similar additions in the assessee's own cases. SAD written off was disallowed where the related goods remained in closing stock, as the amount formed part of purchase cost and could not be separately claimed as a deduction while the stock continued to be held. Disallowance of employees' contribution to PF/ESIC was deleted on the basis of binding jurisdictional precedent recognising timely deposit within the permissible framework. The appeal was thus partly allowed, with relief on the AMP and PF/ESIC issues and the revenue succeeding only on SAD.

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Issues: (i) Whether the protective adjustment to arm's length price of advertising, marketing and promotion expenses by application of the Bright Line Test could be sustained; (ii) Whether the disallowance of SAD written off was justified; (iii) Whether the disallowance for late deposit of employees' contribution to PF/ESIC was justified.

Issue (i): Whether the protective adjustment to arm's length price of advertising, marketing and promotion expenses by application of the Bright Line Test could be sustained.

Analysis: The adjustment was made only on a protective basis by applying the Bright Line Test. The binding jurisdictional precedent had invalidated the use of the Bright Line Test for making AMP adjustments, and coordinate bench decisions in the assessee's own cases for earlier and later years had deleted similar protective additions. Following those decisions and the rule of consistency, the Tribunal held that no protective addition could survive. Since no substantive addition was made, the question of benchmarking was left open for a future case where a substantive adjustment may arise.

Conclusion: The protective AMP adjustment was deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether the disallowance of SAD written off was justified.

Analysis: The corresponding goods remained in closing stock, and a coordinate bench in the assessee's own case had held that such SAD forms part of the purchase price and cannot be separately claimed as a deduction while the goods continue to be treated as stock-in-trade. No reason was shown to depart from that view.

Conclusion: The disallowance of SAD written off was upheld and the issue was decided in favour of the revenue.

Issue (iii): Whether the disallowance for late deposit of employees' contribution to PF/ESIC was justified.

Analysis: The relief granted by the DRP was based on the binding jurisdictional precedent holding that employees' contribution deposited within the permissible framework could not be disallowed in the manner proposed. No basis was shown to treat that precedent as inapplicable.

Conclusion: The deletion of the disallowance was upheld and the issue was decided in favour of the assessee.

Final Conclusion: The revenue succeeded only on the SAD written off issue, while the assessee succeeded on the AMP protective adjustment and employees' contribution issues, leaving the appeal partly allowed and the assessee's appeal allowed.

Ratio Decidendi: A protective transfer-pricing adjustment based on the Bright Line Test cannot be sustained where binding precedent has rejected that method, while a deduction cannot be allowed for SAD relating to goods still forming part of closing stock.

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