In a relief to Pepsico India, the Income Tax Appellate Tribunal (ITAT), Delhi Bench deleted the addition on account of Advertisement, Marketing and Promotion (AMP) Expenses.
The assessee, Pepsico India Holdings Pvt. Ltd. a subsidiary of PepsiCo Inc. USA, was engaged inter-alia in manufacturing soft drink/ juice based concentrates for aerated/ non-aerated drinks for its deemed associated enterprises (AOs) in Bangladesh, Nepal, Bhutan and Sri Lanka, besides local sales thereof to its franchisee bottlers in India.
For the purpose of carrying the above-mentioned activity in designated areas, it obtained a license for the technology to manufacture concentrates, use and exploitation of brands of AEs and use of trademarks in India. During the year under consideration, the assessee incurred AMP Expenses.
The Transfer pricing Officer held that since incurring of the said AMP expenses by the assessee had also benefited the AEs thereby promoting their brands and trademark, the assessee had essentially incurred cost in connection with the services it provided to the AEs under a mutual arrangement, which although not reduced into writing, was ascertainable from the conduct of the assessee itself.
Accordingly, the TPO stated that incurrence of AMP expenses qualified as an ‘international transaction’ under the terms of section 92B(1) read with section 92F(v) of the Income-tax Act, 1961.
The coram Amit Shukla and Dr. B. R. R. Kumar while deleting the additions held that there is no international transaction in the form of any agreement or arrangement on AMP expenditure incurred by the assessee company; and under FAR analysis also, no such benefit from the AMP expenditure having any kind of bearing on the profits, income, losses or assets as accrued to the AE or any kind of benefit has arisen to the AE.
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