AMP Expenses incurred not Amounts to International Transaction: Delhi HC upholds ITAT’s order [Read Order]

The Delhi High Court upheld the order of the Income Tax Appellate Tribunal (ITAT) wherein it was held that Advertising, Marketing and Promotion (“AMP”) expenses incurred did not amount to international transactions.

The appellant/revenue challenged the order dated 25.09.2018 passed by the Income Tax Appellate Tribunal [ “Tribunal”]which was in favour of  M/S Wrigley India Pvt Ltd, the respondent assessee.

Mr Sanjeev Menon, the standing counsel, who appeared on behalf of the appellant/revenue, stated that the short issue which arises for consideration is whether the respondent/assessee, which is a wholly-owned subsidiary of its Associated Enterprise (“AE”), is required to be compensated for AMP expenses incurred by it on behalf of its AE.

The Transfer Pricing Officer (“TPO”) has adjusted Rs.73,23,49,876/- on account of Arm’s Length Price for what was construed as an international transaction concerning AMP expenditure. The Tribunal, relying upon the decision rendered in the respondent’s/ assessee’s case for AY 2007-08 to AY 2009-10, ruled in favour of the respondent/assessee.  The Tribunal had concluded that the AMP expenses incurred by the respondent/assessee did not amount to an international transaction.

Mr Ajay Vohra, the senior advocate, who appeared on behalf of the respondent/assessee, had placed before us a copy of the order dated 11.03.2020, which indicated that MAs preferred by the appellant/revenue with the Tribunal had been dismissed. Mr Menon affirmed that the MAs have been dismissed. On being queried further, Mr Menon also affirms that the appellant/revenue has not taken recourse to any legal remedy up until today. 

Since there has been no change in the circumstances concerning the respondent/assessee (something which has been noted by the Tribunal), the division bench of Justice Rajiv Shakdher and Justice Girish Kathpalia upheld the impugned order passed by the Tribunal. 

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