PCIT Vs Wrigley India Pvt. Ltd. (Delhi High Court)
Introduction: In a recent decision related to the Assessment Year 2010-11, the Delhi High Court addressed the contentious issue of whether Wrigley India Pvt. Ltd., a wholly-owned subsidiary of its Associated Enterprise (AE), should be compensated for Advertising, Marketing, and Promotion (AMP) expenses incurred on behalf of its AE. The appellant, seeking to challenge the order, claimed that the Transfer Pricing Officer (TPO) had made an adjustment on the Arm’s Length Price for what was perceived as an international transaction concerning AMP expenditure.
Detailed Analysis: The core of the issue revolved around the determination of whether AMP expenses incurred by Wrigley India Pvt. Ltd. constituted an international transaction. The TPO had made a substantial adjustment based on this premise. However, the Income Tax Appellate Tribunal (ITAT), relying on its earlier decisions for AY 2007-08 to AY 2009-10 and considering the principle of consistency, ruled in favor of Wrigley India Pvt. Ltd. The Tribunal had previously concluded that the AMP expenses did not amount to an international transaction.
The Tribunal’s decision also referenced the judgment in Maruti Suzuki India Ltd. v CIT (2016) 381 ITR 117, further supporting the stance that AMP expenses, in certain contexts, may not be considered an international transaction.
The appellant, represented by Mr. Sanjeev Menon, standing counsel, sought to challenge the ITAT’s decision before the Delhi High Court. However, during the proceedings, it was clarified that the Miscellaneous Applications (MAs) filed by the appellant/revenue for AY 2007-08 to AY 2009-10 had been dismissed, and no legal remedy had been pursued further.
The court, considering the principle of consistency and finding no change in the circumstances of the case, declined to interfere with the ITAT’s decision. It affirmed that no substantial question of law arose for consideration.
Conclusion: The Delhi High Court, in its recent judgment, upheld the ITAT’s decision, emphasizing that AMP expenses incurred by Wrigley India Pvt. Ltd. did not amount to an international transaction. The principle of consistency played a pivotal role in the court’s decision, and it concluded that no substantial question of law warranted further consideration. The case sheds light on the complex interplay between Transfer Pricing regulations and expenses incurred by subsidiaries on behalf of their Associated Enterprises.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. This appeal concerns Assessment Year (“AY”) 2010-11.
2. Via the instant appeal, the appellant/revenue seeks to assail the order dated 25.09.2018 passed by the Income Tax Appellate Tribunal [in short, “Tribunal”]
3. Mr Sanjeev Menon, standing counsel, who appears on behalf of the appellant/revenue, says that the short issue which arises for consideration is whether the respondent/assessee, which is a wholly owned subsidiary of its Associated Enterprise (“AE”), is required to be compensated for Advertising, Marketing and Promotion (“AMP”) expenses incurred by it on behalf of its AE?
4. To be noted, the Transfer Pricing Officer (“TPO”) has made an adjustment of Rs.73,23,49,876/- on account of Arm’s Length Price for what was construed as an international transaction concerning AMP expenditure.
5. The Tribunal, relying upon the decision rendered in the respondent’s/assessee’s case for AY 2007-08 to AY 2009-10, ruled in favour of the respondent/assessee.
5.1 To be noted, in the aforementioned AYs, the Tribunal had concluded that the AMP expenses incurred by the respondent/assessee did not amount to an international transaction. In this context, the Tribunal also notes (something which came up even in the aforementioned AYs) the decision of this court passed in Maruti Suzuki India Ltd. v CIT (2016) 381 ITR 117.
6. We may note that on the previous date i.e., 11.09.2023, we had asked Mr Menon to seek instructions with regard to the Miscellaneous Applications (MAs) that the appellant/revenue had filed with the Tribunal concerning AY 2007-08 to AY 2009-10.
6.1 This direction had been issued as Mr Ajay Vohra, learned senior advocate, who appears on behalf of the respondent/assessee, had placed before us a copy of the order dated 11.03.2020, which indicated that MAs preferred by the appellant/revenue with the Tribunal had been dismissed.
7. Mr Menon affirms that the MAs have been dismissed. On being queried further, Mr Menon also affirms that appellant/revenue has not taken recourse to any legal remedy up until today.
8. Given the aforesaid position and the fact that there has been no change in the circumstances concerning the respondent/assessee (something which has been noted by the Tribunal) according to us, in this matter, the principle of consistency would apply. Therefore, we are not inclined to interfere with the impugned order passed by the Tribunal.
9. According to us, no substantial question of law arises for our consideration.
10. The appeal is accordingly, closed.
