AMP expenditure is not an international transaction without a sharing arrangement with the associated enterprise; TP adjustment deleted.

Advertisement, marketing and promotion expenditure could not be characterised as an international transaction for transfer pricing purposes in the absence of any agreement, arrangement or understanding with the associated enterprise to share or incur such spend for its benefit; the Chapter X adjustment was therefore deleted. The section 14A disallowance was not independently sustained and was accepted in favour of the assessee. Computation mistakes in the assessment order were found to require correction, and the Assessing Officer was directed to amend the computation in accordance with law.

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Issues: (i) Whether advertisement, marketing and promotion expenditure could be treated as an international transaction justifying transfer pricing adjustment; (ii) whether the disallowance under section 14A of the Income-tax Act, 1961 survived; (iii) whether the computation mistakes in the assessment order required correction.

Issue (i): Whether advertisement, marketing and promotion expenditure could be treated as an international transaction justifying transfer pricing adjustment.

Analysis: The dispute on AMP expenditure was governed by earlier jurisdictional decisions in the assessee's own case. Those decisions had held that, in the absence of an agreement, arrangement, or understanding with the associated enterprise for sharing AMP expenditure or incurring it for the sole benefit of the associated enterprise, such spend could not be characterised as an international transaction. The Tribunal followed the binding precedent and held that Chapter X could not be invoked for the impugned AMP adjustment.

Conclusion: The AMP expenditure was not held to be an international transaction, and the transfer pricing adjustment was deleted in favour of the assessee.

Issue (ii): Whether the disallowance under section 14A of the Income-tax Act, 1961 survived.

Analysis: The disallowance was treated as consequential to the main transfer pricing issue and was not independently sustained.

Conclusion: The disallowance under section 14A was accepted in favour of the assessee.

Issue (iii): Whether the computation mistakes in the assessment order required correction.

Analysis: The assessment computation contained errors requiring correction in accordance with law.

Conclusion: The assessee's objection on computation errors was allowed and the Assessing Officer was directed to correct them.

Final Conclusion: The appeal succeeded, and the impugned additions and related adjustments did not survive.

Ratio Decidendi: In the absence of an agreement, arrangement, or understanding between the assessee and its associated enterprise for sharing or incurring AMP expenditure for the associated enterprise's benefit, such expenditure cannot be characterised as an international transaction for transfer pricing purposes.

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