Tupperware India Private Limited Vs National Faceless Assessment Centre (ITAT Delhi)
Tupperware India Private Limited Vs National Faceless Assessment Centre
Tupperware India shifted from its long-standing Direct Selling Model to an Omni-Channel model that included retail & e-commerce. This change adversely affected its existing distributors, & to retain them & avoid disputes, the company paid a one-time compensation of ₹15.22 crore. AO disallowed the payment, but ITAT held that the expenditure was incurred out of commercial necessity, did not create any capital asset, & was therefore fully allowable u/s 37.
TPO also made a large transfer pricing adjustment on AMP expenses by applying the Bright Line Test. Tribunal relied on Delhi High Court rulings in Maruti Suzuki, Whirlpool, Bausch & Lomb & the Supreme Court’s dismissal of Revenue’s SLP in Whirlpool to hold that AMP cannot be treated as an international transaction in the absence of any agreement with AE. Since no such arrangement existed, AMP adjustment was deleted in full.
TPO further disallowed management fee & imputed interest on AE receivables. Tribunal noted that similar issues in Assessee’s own earlier year were remanded with clear directions. Following consistency, both issues were remanded again for limited verification, with an observation that business prudence cannot be questioned & working capital adjustment must be considered.
Thus, Tribunal allowed substantial relief by permitting distributor compensation as revenue expenditure & deleting AMP adjustment, while remanding the remaining TP issues only for limited examination.
FULL TEXT OF THE ORDER OF ITAT DELHI
