Delhi Tribunal rules on aggregation of closely-linked transactions and characterisation of reimbursement of advertisement expenses

Court :Delhi bench of the Income-tax Appellate Tribunal

Citation : M/s Panasonic India Pvt Ltd Vs. Income Tax Officer (2010-TII-47-ITAT-DEL-TP)

Brief: Recently, the Delhi bench of the Income-tax Appellate Tribunal (the Tribunal) in the case of M/s Panasonic India Pvt Ltd Vs. Income Tax Officer (2010-TII-47-ITAT-DEL-TP), has upheld the aggregation of transactions where the Functions, Assets & Risks underlying those transactions are similar. The Tribunal also concluded that reimbursement of advertisement expenses received by a Distributor from its Associated Enterprise (AE) must be treated as operating income for computing profitability of the taxpayer under the Transactional Net Margin Method (TNMM) method.

Further, the Tribunal accepted the taxpayer’s claim of relying upon multiple year financial data, both in the case of the taxpayer and the comparable companies, as the taxpayer was able to demonstrate that a fall in its profitability in the year under examination was attributable to business dynamics.

Facts of the case

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