Brand Promotion Expenses incurred by BMW India constitute ‘International Transaction’: ITAT [Read Order]

Advertising, marketing and promotional expenses incurred by BMW India for the brand promotion of BMW Gropu would constitute ‘international transaction’ within the meaning of section 92 of the Income Tax Act, the Delhi bench of the Income Tax Appellate Tribunal, on Friday said.

Assessee entered into an agreement with its parent company wherein it was responsible for marketing and promotion of the products latter. As per the agreement, the assessee.

Assessing Officer noted that AMP expenses incurred by the assessee constitute ‘international transaction’ within the Act. He thereafter computed Arm’s Length Price and made an addition of 85.83 crores.

Against the order, the assessee approached the Tribunal contending that no international transaction of AMP expenses is present in the case and as such there can be no question of determining its ALP.

The bench, after perusing the agreement, found that the assessee represented the interest of BMW AG in India and is responsible for the sales promotion in India. Further, the Assessee was bound to follow the global guidelines of BMW Group and the AE was reimbursing AMP expenses incurred by it.

After hearing both parties, the bench overruled the contentions of the Assessee and ruled that “It is not a case where the assessee on its own volition took up such a huge advertisement, marketing and promotion of the brand owned by its AE. In fact, it was the `responsibility’ of the assessee and it `undertook’ the function of `performance of an adequate advertisement and sales promotion’ pursuant to the Agreement dated 1.1.2006 with BMW AG. Thus it is apparent that the assessee was under a binding obligation to advertise and promote the brand of its AE.”