2023 (8) TMI 1272 - AT - Income Tax

ITAT Upholds Transfer Pricing Officer's Decision on AMP Expenses

Amadeus India Pvt. Ltd. Versus DCIT, Circle 1 (1), New Delhi.

The Tax Appellate Tribunal (ITAT) upheld the Transfer Pricing Officer's decision on proposing adjustments for Advertisement, Marketing, and Sales ... TP Adjustment - AMP expenses - international transaction or not? - HELD THAT:- As decided in assessee own case [2017 (2) TMI 650 - ITAT DELHI] considering the material facts like the absence of an agreement, arrangement or understanding between the appellant and ifs associated enterprise for sharing the advertisement, marketing and promotion expenses or for incurring the advertisement, marketing and promotion expenses for the sole benefit of the associated enterprise, payments made by the appellant under the head 'advertisement, marketing and promotion' to the domestic parties cannot be termed as an 'international transaction' specifically when the TPO has not been able to prove that the expenses incurred were not for the business carried out by the appellant in India. Disallowance u/s 14A - when assessee has earned no exempt income - HELD THAT:- Upon hearing both the sides and perusing the records, we find that this issue is squarely covered in favour of the assessee by the Decision of Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT] and CIT vs. Holcim India (P) Ltd. [2014 (9) TMI 434 - DELHI HIGH COURT]. Accordingly, this issue is decided in favour of the assessee. Issues involved:The judgment involves issues related to Transfer Pricing adjustments on Advertisement, Marketing, and Sales Promotion (AMP) expenses, jurisdictional dispute regarding the existence of an 'International Transaction' for Brand Promotion, and disallowance under section 14A of the Act.Transfer Pricing Adjustment on AMP Expenses:The Tax Appellate Tribunal (ITAT) upheld the Transfer Pricing Officer's (TPO) decision to propose adjustments on account of AMP expenses. The TPO considered the excessive AMP expenditure incurred by the assessee as creating marketing intangibles for which compensation should have been provided by the associated enterprise. The TPO applied the Bright Line Test (BLT) for Protective Adjustment and the Cost Plus Method for Substantive Adjustment, resulting in total adjustments of Rs 11,18,03,968 and Rs 11,85,61,930, respectively.Jurisdictional Dispute on Existence of 'International Transaction' for Brand Promotion:The assessee disputed the existence of an 'International Transaction' for Brand Promotion between the assessee and its Associated Enterprise (AE). The ITAT and the Delhi High Court had previously ruled in favor of the assessee, stating that in the absence of a transaction for brand promotion, no TP adjustment for alleged AMP expenses should be made. The ITAT held that payments made for advertisement, marketing, and promotion expenses could not be termed as an 'international transaction' without evidence that the expenses were not for the business carried out by the assessee in India.Disallowance under Section 14A of the Act:The issue of disallowance under section 14A of the Act was raised, despite the assessee earning no exempt income. The ITAT cited previous decisions by the jurisdictional High Court, such as Cheminvest Ltd. vs. CIT and CIT vs. Holcim India (P) Ltd., to rule in favor of the assessee, stating that the disallowance was not applicable in this case.Conclusion:The ITAT partly allowed the assessee's appeal, ruling in favor of the assessee on the jurisdictional dispute and the disallowance under section 14A. The issue of errors in the assessment order was remitted to the Assessing Officer for further review and decision.