The Delhi High Court has held that AMP expenses incurred cannot be termed as an international transaction in absence of evidence and upheld the order of the ITAT.
M/s. Amadeus India Pvt. Ltd, the Assessee filed its return of income (ITR) for AY 2010-11. The Assessing Officer (‘AO’) observed that the Assessee had entered into international transactions with its Associated Enterprises (AEs) and to determine the Arm’s Length Price (‘ALP’) of the said international transactions, the AO referred to the Transfer Pricing Officer (‘TPO’).
During the transfer pricing, the TPO observed that the Assessee has incurred more than normal sales and marketing expenses to build the ‘Amadeus’ brand in India, which is legally owned by the AE i.e. M/s Amadeus IT Group SA (‘Amadeus Spain’). The TPO concluded that AMP constitutes an international transaction between the Assessee and its AE and computed the adjustment by applying the Bright Line method.
The AO issued a draft order dated 29th March 2014, incorporating the additions made by the TPO. In response to the said draft order, the Assessee filed its objections before the Dispute Resolution Panel (‘DRP’), which were dismissed and the additions made by the AO were upheld. The AO passed the final assessment order dated 23rd February 2015, and made additions which included an additional transfer pricing adjustment for the AMP expenses at Rs. 81,16,72,668/-.
On appeal, the ITAT allowed the appeal and relied upon the order passed by its predecessor bench in Assessee’s case for the AY 2009-10, to delete the said addition of transfer pricing adjustment made on account of AMP expenditure after holding that it does not constitute an international transaction.
Justice Manmohan and Justice Manmeet Pritam Singh Arora observed that AMP expenses incurred by the Assessee cannot be termed as an international transaction and there was no evidence on record to enable the TPO to hold that the expenses were not incurred for the business carried out by the Assessee in India.
The Court held that the ITAT has properly and correctly assessed the fact and law while concluding that the services of AMP are not international transactions in light of the provisions of sub-clause (d) of clause (i) of Explanation to Section 92B of the IT Act, 1961.
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