TaxTMI 
TaxTMI 
2014 (1) TMI 1529
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....jurisdiction of the TPO under similar circumstances. However, the ld. AR stated that he wanted to keep this issue alive. In view of the aforesaid Special Bench order deciding this issue against the assessee, we uphold the jurisdictional of the TPO to make the TP adjustment on account of AMP expenses. 3. The second issue raised by the ld. AR is about the exclusion of a sum of Rs.143,36,26,136/-, characterized by the assessee as 'Pricing Adjustment', from the computation of total AMP expenses for the purposes of determination of Arm's Length Price (ALP) in this regard. 4. Briefly stated the facts apropos this issue are that the assessee incurred certain amount of advertisement expenses, the detail of which has been incorporated on page 10 of the TPO's order. The TPO accepted the assessee's contention of all expenses in this list as not falling within the scope of AMP expenses except a sum of Rs.143,36,26136/- described by the assessee as 'Pricing Adjustment'. It was argued before the TPO that such 'Pricing Adjustment' of Rs.143.36 crore was nothing but a leverage in the Maximum retail price of the products sold to the dealers' and distributors' of the assessee company as a prof....
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.... on to the dealers...............'. It shows that the TPO duly accepted the nature of the amount as discount and incentives to the assessee's dealers and distributors. He proceed to include this amount in the total AMP expenses by holding that it was a tool employed by the assessee to create this brand loyalty among the dealers. Thus it is patent that the nature of the amount of Rs.143.36 crore is undisputed, as being discount given to dealers on the sales made. Once it is held that a particular amount is discount and is not in the nature of direct advertisement expenses, the same stands expelled from the qualifying amount which undergoes the process of determination of ALP of the AMP expenses. Respectfully following the mandate of the Special Bench verdict in the case of LG Electronics (supra), we order for the exclusion of the amount of 'Pricing Adjustment' from the total AMP expenses for the purposes of determination of ALP in respect of AMP expenses. 7. Now we take up the next issue raised before us about the other component of the total AMP expenses. It is a sum of Rs.52.70 crore which was included by the TPO in the total AMP expenses. Notwithstanding his submissions as dea....
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....mandate of the Special bench on this issue. As such, we set aside the impugned order on this issue and remit the matter to the file of the AO/TPO for adhering to the modus operandi given by the special bench for selection of comparable cases and, thereafter, proceed to determine the ALP of AMP expenses. 11. Last issue raised by the assessee in this appeal is against the alternative confirmation of disallowance amounting to Rs.180.73 crores by the AO as per the provisions of section 37(1) of the Act. The facts of this issue are that the TPO determined the original qualifying amount spent on creation of marketing intangible at Rs.180.73 crores. By applying 12.5% mark-up, he worked out the TP adjustment of Rs.203 crore, which has been dealt with by us in the earlier part of this order. The AO canvassed the view vide para 6 of the impugned order that without prejudice to the AMP adjustment made by the TPO, the principal amount of Rs.180.73 crore is not allowable u/s 37(1) of the Act. Since the TPO had already proposed adjustment of Rs.203 crore, which the AO made in the final order, he did not specifically make the separate addition of Rs.180.73 crore. The assessee is aggrieved agai....
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....2 operate in different fields. The Special bench in L.G Electronics (supra) has decided this issue by holding that the overall amount of AMP expenses should be processed to find out the amount spent on the brand building for the foreign AE and then disallowance should be made for such amount with the appropriate mark-up by way of TP adjustment. The remaining amount is considered as incurred by the assessee for its own business purpose liable for deduction subject to the regular provisions of the Act. 15. This is what has been decided by us in the earlier part of this order by approving the inclusion of certain amount in the overall AMP expenses for working out the TP adjustment on this count. This automatically implies that the remaining amount is allowable as incurred for the business of the assessee subject to the provisions of the Act. As there is no mandate for allowing the entire common AMP expenses albeit incidentally benefiting the foreign AE partly, equally there is no justification for disallowing the entire amount as not allowable u/s 37(1) as having not been incurred `wholly and exclusively' for the business purpose of the assessee. The crux of the matter is that the ....