The Tax Publishers2020 TaxPub(DT) 0264 (Del-Trib)

INCOME TAX ACT, 1961

Section 92B

No understanding or arrangement or 'action-in-concert' could be inferred from terms of MDF agreement or the conduct of assessee to show that “excessive” AMP expenditure had been incurred at the behest of brand-owning AE. Assessee being one of the major players in Indian market had carried out its AMP activity and function based on its own judgment and commercial realities. Revenue had not placed any material or evidence to show that there existed an understanding to incur 'excessive' AMP expenditure. The arrangement and 'understanding were limited to amounts agreed to be paid as assistance under MDF Agreement and amounts incurred as AMP expenditure by assessee under MDF Agreement had already been received as reimbursement/assistance and indisputably disclosed as international transaction in Form 3CEB and formed part of the transfer pricing study conducted under rule 10D. Scope and value of international transaction could not be expanded beyond reimbursements received under MDF agreement to cover entire gamut of AMP expenditure incurred by assessee during the year.

Transfer pricing - International transaction - AMP expenses outside the ambit of reimbursement received under MDF agreement with AE -

Assessee incurred advertising, marketing and promotion (AMP) expenses. TPO held that AMP activity was carried out at behest of its AE abroad beyond what was approved and reimbursed under Marketing Fund Agreement (MDF) between assessee and AE regarding AMP and shop display activities and was, therefore, international transaction within meaning of section 92B calling for TP adjustment.Held: No understanding or arrangement or 'action-in-concert' could be inferred from terms of MDF agreement or the conduct of assessee to show that “excessive” AMP expenditure had been incurred at the behest of brand-owning AE. Assessee being one of the major players in Indian market had carried out its AMP activity and function based on its own judgment and commercial realities. Revenue had not placed any material or evidence to show that there existed an understanding to incur 'excessive' AMP expenditure. The arrangement and 'understanding were limited to amounts agreed to be paid as assistance under MDF Agreement and amounts incurred as AMP expenditure by assessee under MDF Agreement had already been received as reimbursement/assistance and indisputably disclosed as international transaction in Form 3CEB and formed part of the transfer pricing study conducted under rule 10D. Scope and value of international transaction could not be expanded beyond reimbursements received under MDF agreement to cover entire gamut of AMP expenditure incurred by assessee during the year.

Supported by:Whirlpool of India Ltd. v. Dy.CIT (2016) 381 ITR 154 (Del) : 2015 TaxPub(DT) 5343 (Del-HC), CIT v. B.c. Srinivasa Setty (1981) 128 ITR 294 (SC) : 1981 TaxPub(DT) 2350 (SC) and Pepsi co India Holdings (P) Ltd. v. Addl. CIT [ITA No. 1334/Chd/2010 : 2018 TaxPub(DT) 7503 (Del-Trib), 1203 Chd/2011 : 2511/Del/2013, 1044 & 4516/Del/2016.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

INCOME TAX ACT, 1961

Section 92C

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