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Transfer Pricing Officer referred to the average margin of two comparables in advertisement and marketing activity and applying the said average margin as a mark-up to the AMP expenditure incurred by assessee, he made an adjustment of ` 3,97,49,084, towards AMP expenditure. Without prejudice, the Transfer Pricing Officer observed, the AMP expenditure of ` 3.59 crore not being capital expenditure cannot be excluded for computing the operating profit. Accordingly, he determined the PLI of the assessee at (-)7.20% as against the PLI of comparables worked out a @ 3.29%. Thus, he suggested an adjustment of ` 1,80,14,542, on without prejudice basis. However, since the adjustment on account of AMP expenditure was more than adjustment made to the arm's length price of the price paid for import of goods, the Transfer Pricing Officer stuck to the adjustment made of ` 3,97,49,084. On the basis of the aforesaid, the Assessing Officer made addition while computing the income of the assessee. Against the addition so made, the assessee preferred appeal before the first appellate authority.

to AMP expenditure. It is worth mentioning, the Transfer Pricing Officer has also agreed with the assessee that the AMP expenditure was incurred with the third parties in India, hence, do not constitute international transaction. Having held so, the Transfer Pricing Officer has still proceeded to determine the arm's length price of the AMP expenditure on the reasoning that the compensation required in the arrangement between the assessee and the AE for improving the brand intangible of the owner has to be determined. Further, he has observed that the AMP expenditure incurred by the assessee not only benefits the assessee but also the AE in terms of increase in the brand value of Kellogg. Thus, the Transfer Pricing Officer has inferred that there is an arrangement between the assessee and the AE with regard to promotion of the brand of the AE by incurring AMP expenditure. However, he has not provided any factual basis on which he has drawn such inference. By merely stating that there is an arrangement between the assessee and the AE, the Transfer Pricing Officer cannot bring the AMP expenditure within the purview of international transaction. If the Transfer Pricing Officer alleges that the AMP expenditure comes within the purview of international transaction by virtue of an arrangement between the related parties, the burden is entirely upon the Transfer Pricing Officer to demonstrate the existence of such arrangement. A careful reading of the impugned order of the Transfer Pricing Officer does not reveal any such factual basis which can demonstrate the existence of an arrangement between the assessee and the AE for incurring AMP expenditure to promote the brand of the AE. That being the case, the entire approach of the Transfer Pricing Officer in determining the arm's length price of AMP expenditure is fallacious.

promoting and marketing the product manufactured by the assessee, does not come within the purview of international transaction.

8. At this stage, it is relevant to observe, while deciding identical nature of dispute in assessee's own case for the assessment year 2011-12, learned DRP in direction dated 28th December 2015, have deleted the adjustment made by the Transfer Pricing Officer on account of AMP expenditure by recording a factual finding that the Transfer Pricing Officer has failed to demonstrate that there is an agreement/arrangement between the assessee and the AE for incurring AMP expenditure. While doing so, learned DRP has relied upon the decision of the Hon'ble Delhi High Court in Maruti Suzuki India Ltd. (supra). Thus, viewed in the light of the ratio laid down in the decisions cited by the learned Authorised Representative, including the decision of the Hon'ble Delhi High Court in Martuti Suzuki India Ltd. (supra), it has to be concluded that the AMP expenditure incurred by the assessee in India cannot come within the purview of the international transaction. Hence, the Transfer Pricing Officer has no jurisdiction to determine the arm's length price of AMP expenditure.

16. As discussed earlier, the assessee had imported goods from the AEs. for re-sale to third parties in India. The assessee had benchmarked such transaction by applying TNMM as the most appropriate method. Since the margin shown by the assessee was higher than the margin shown by the selected comparables, the assessee claimed the transaction to be at arm's length. While verifying the transfer pricing study report, the Transfer Pricing Officer noticed that while computing the margin, the assessee had excluded the AMP expenditure. However, the Transfer Pricing Officer was of the view that the AMP expenditure being revenue in nature has to be included for computing the margin. After including the AMP, the Transfer Pricing Officer worked out the margin of the assessee at (-)7.20% as compared to the average margin of comparables worked out @ 3.29%. Therefore, he suggested an adjustment of ` 1.8 crore. The aforesaid decision of the Transfer Pricing Officer was challenged before the first appellate authority.