Nivea India Private Ltd. (“the assessee”) incurred Advertisement, Marketing and Promotion (AMP) expenses in India for its own business operations. However, the TPO alleged that a portion of these AMP expenses resulted in brand promotion of the foreign Associated Enterprise (AE) and therefore treated it as an international transaction, leading to a TP adjustment of ₹174.48 crore for AY 2020-21.
Assessee’s Contentions | Revenue’s Contentions | Tribunal’s Judgment |
The assessee contended that there was no agreement or arrangement with the AE for incurring AMP expenditure and that the expenditure was incurred for expanding its own business in India. | The Revenue sought to sustain the AMP adjustment treating the expenditure as an international transaction with the AE. | The ITAT held that in the absence of an agreement or arrangement with the AE for incurring AMP expenses, no TP adjustment could be made. |
The assessee relied on the coordinate bench’s earlier decisions in its own case for AYs 2008-09 to 2012-13 and AY 2013-14, where similar AMP adjustments had been deleted. It was submitted that the same principle should continue to apply since there was no material change in the facts or issue. | The Revenue did not demonstrate any material change in facts or the nature of the issue that would justify taking a view different from the coordinate bench’s earlier decisions. The only variation noted by the Tribunal was in the quantum of the AMP expenditure/adjustment. | Following the earlier coordinate-bench rulings in the assessee’s own case and applying the principle of consistency, the ITAT declined to take a contrary view. Accordingly, the ITAT deleted the AMP adjustment. |
Ruling Summary:
Mumbai ITAT held that AMP expenses incurred by the assessee were not an international transaction in the absence of any agreement or arrangement with the AE requiring the assessee to incur such expenditure.
Accordingly, following the earlier decisions in the assessee’s own case, the ITAT deleted the ₹174.48 crore TP adjustment and allowed the assessee’s appeal.
