Case Law Details
Pepsico India Holdings Pvt. Ltd. Vs ACIT (ITAT Delhi)
Conclusion: Addition made on account of AMP expenses qualified as an ‘international transaction’ under the terms of section 92B(1) read with section 92F(v) was not justified as AMP Expenses did not qualify as an ‘international transaction’ for the purposes of section 92B firstly, there was no international transaction in the form of any agreement or arrangement on AMP expenditure incurred by assessee company; and secondly, 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.
Held: Assessee, 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 assessee incurred AMP Expenses to the tune of INR 920,27,38,000/-. TPO held that since incurring of the said AMP expenses by assessee had also benefitted the AEs thereby promoting their brands and trademark, assessee had essentially incurred cost in connection with the services it provided to AEs under a mutual arrangement, which although not reduced into writing, was ascertainable from the conduct of the assessee itself. Accordingly, TPO stated that incurrence of AMP expenses qualified as an ‘international transaction’ under the terms of section 92B(1) read with section 92F(v). Pursuant thereto, TPO computed adjustment to the tune of INR 571,69,91,000/- on account of AMP Expenses. It was held that AMP Expenses did not qualify as an ‘international transaction’ for the purposes of section 92B firstly, there was no international transaction in the form of any agreement or arrangement on AMP expenditure incurred by assessee company; and secondly, 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. Thus, for the year 2014-15 also, on the same reasoning and following the view taken by Tribunal for the assessment years 2006-07 to 2013- 14 the issue was held in favour of the assessee.
FULL TEXT OF THE ITAT JUDGEMENT
The present appeal and Stay Application have been filed by the assessee against the order dated 22.01.2011 passed by the AO u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961.
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