The Income Tax Appellate Tribunal (ITAT), Mumbai bench has granted relief to L’Oreal India Private Limited and deletes Transfer Pricing (TP) adjustments.
The appellant, L’Oreal India Private Limited is a wholly-owned subsidiary of L’Oreal S.A., France. It has entered into a license agreement with L’Oreal France, which awarded the exclusive right to the assessee to import, manufacture by itself or through another L’Oreal affiliate, market, distribute and sell branded products of the L’Oreal group.
During the assessment year, the Transfer Pricing Officer (TPO) made a primary adjustment in respect of AMP expenses to the extent of Rs.281.99 crore, which consisted of Rs. 119.97 crores relating to the marking and sales segment and Rs. 162.02 crores relating to manufacturing segment. The TPO also made a secondary adjustment of Rs.3.51 crores on the AMP adjustment made in the manufacturing segment of Rs. 162.05 on account of payment made for training to saloon customers and promotional goods treated the same as advance payments.
The counsel for the appellant submitted that identical adjustments have been made by the TPO in the earlier years and those adjustments have been deleted by the Coordinate Bench of the Tribunal in various years.
The Tribunal observed that the ITAT in the assessee’s case has observed that perusal of the agreement Clause reveals that there is no agreement between the assessee and the AEs for sharing the expenses and the payments made by the assessee for the expenses of AMP. The TPO has also not brought any fact on record that there exists an agreement between the assessee and its AE to share or reimburse the AMP expenses. Moreover, there is no material change in the facts for the year under consideration.
The Coram of Mr. B.R. Baskaran (AM) and Mr. Rahul Chaudhary (JM) has held that “We noticed that the Coordinate Benches are consistently taking the view that the primary and secondary adjustments made in the hands of the assessee in respect of AMP expenses are not sustainable. Since there is no change in the facts, following the decision rendered by the Coordinate Benches in the earlier years in the assessee’s case, we direct the Assessing Officer/TPO to delete the primary transfer pricing adjustment made in respect of AMP expenses in both AY 2016-17 and secondary adjustment made in AY 2016-17”.
Mr. Niraj Sheth and Mr. Dr. Yogesh Kamat appeared for the appellant and the respondent respectively.
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