Alcon Laboratories (India) Private Limited Vs ACIT (ITAT Bangalore)
AMP Adjustment Deleted Following Past Years; Interest on Receivables Restricted; Seminar Expenses & Double Disallowance Remanded
The Bangalore Bench of the ITAT partly allowed the appeal of Alcon Laboratories (India) Pvt. Ltd. for AY 2020-21, dealing with multiple high-value transfer pricing and disallowance issues.
On Advertisement, Marketing and Promotion (AMP) expenditure, the Tribunal deleted the massive adjustment of about ₹922.6 crore. It held that the issue is squarely covered in favour of the assessee by a consistent line of coordinate bench decisions in the assessee’s own cases from AY 2012-13 to AY 2018-19. Respecting judicial discipline and consistency, the ITAT rejected the Revenue’s attempt to recharacterise AMP as a separate international transaction, despite elaborate arguments on DEMPE functions.
On interest on delayed receivables from AEs, the ITAT upheld the principle that overdue receivables constitute a separate international transaction under section 92B. However, it granted partial relief by directing that the arm’s length interest rate be restricted to LIBOR + 200 basis points, instead of LIBOR + 400 basis points adopted by the TPO/DRP.
With respect to seminar and convention expenses disallowed under section 37 in light of the Supreme Court’s decision in Apex Laboratories, the Tribunal restored the matter to the Assessing Officer for item-wise verification, noting that similar expenses had been allowed in earlier years and that the DRP confirmed the disallowance without awaiting the remand report.
On double disallowance of gratuity provision under section 43B, the ITAT remanded the issue to the AO with a direction to delete the adjustment if it was already suo motu disallowed by the assessee in computation.
Levy of interest under sections 234A/B/C/F was held to be consequential, and the ground against initiation of penalty under section 270A was dismissed as premature. Overall, the appeal was partly allowed, granting substantial relief to the assessee
FULL TEXT OF THE ORDER OF ITAT BANGALORE
