Case Law Details
Amazon Seller Services Private Limited Vs CIT (ITAT Bangalore)
The Income Tax Appellate Tribunal (ITAT) in Bangalore, comprising Vice President George George K. and Accountant Member Laxmi Prasad Sahu, delivered a crucial verdict on the nature of delivery costs and warranty expenses incurred by Amazon Seller Services Private Limited. The tribunal clarified that these costs do not constitute part of advertising, marketing, and promotion (AMP) expenditures.
During transfer pricing (TP) proceedings, the Transfer Pricing Officer (TPO) had extensively reviewed these expenditures. It was determined that they should not be considered as AMP expenditures because they are incurred after sales, categorizing them as sales expenses rather than efforts to develop the brand. This decision came despite detailed inquiries into these expenditures, affirming that their classification was not due to a lack of investigation.
The backdrop involves Amazon Seller Services Private Limited, a subsidiary of Amazon Corporate Holdings Private Limited, which is engaged in offering marketing support services, marketplace services, and trading in e-book readers and accessories. Following a scrutiny selection through CASS and subsequent notices, the case was referred to the TPO, leading to the final assessment order by the Assessing Officer (AO).
The Commissioner of Income Tax (TP) found the exclusion of certain costs like share-based compensation (SBC) and depreciation from operating costs by the TPO to be without proper inquiry, marking the order as potentially erroneous and prejudicial to revenue interests. Specifically, the exclusion of delivery and warranty expenses from AMP expenses was contested, leading to a directive for a fresh order by the TPO.
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