Warranty Costs Are Not Part Of AMP Expenditure, Clarifies Bangalore ITAT

The Bench comprising George George K (Vice President) and Laxmi Prasad Sahu (Accountant Member) observed that “these expenditure cannot be regarded as having been incurred for the purpose of development of brand since these are post sales activities and part of sales expenditure. It is also not a case of lack of enquiry. Considering the entire facts, we hold that the delivery cost and warranty expenses are not part of AMP expenditure”. (Para 9)

As per the brief facts of the case, the CIT(TP) exercised power u/s 263, taking the view that the TPO allowed exclusion of SBC (in the form of ESOP cost) from operating cost and also excluded depreciation & amortization from operating cost without due inquiry/verification, and the TPO excluded delivery charges & warranty charges from AMP expenses without due inquiry/verification while determining AMP adjustment.

With respect to treatment of SBC, the Bench followed the Coordinate bench order in case of assessee's group company i.e. Amazon Development Centre (India) Pvt. Ltd wherein it was held that ESOP expense is non-operating expenditure.

With respect to treatment of depreciation & amortization, the Bench observed that CIT(TP) has rightly exercised his jurisdiction but even after including said expenses as operating cost, assessee's margin will remain within +/- 3% range, and thus no addition is called for.

With respect to AMP adjustment, the Bench noted that the TPO had made detailed enquiry on this issue during the course of TP proceedings, and pointed that these expenditures cannot be regarded as having been incurred for the purpose of development of brand since these are post sales activities and part of sales expenditure.

Thus, the ITAT concluded that delivery cost and warranty expenses are not part of AMP expenditure.

Counsel for Appellant/ Taxpayer: Ajay Vohra & Hardeep Singh Chawla

Counsel for Respondent/ Department: Pradeep Arya

Case Title: Amazon Seller Services Private Limited verses CIT

Case Number: IT(TP)A No 418/Bang/2023

Click here to read/ download the Order