Amway India Enterprises Private Limited Vs AO-NFAC (ITAT Delhi)
Overview: In the case of Amway India Enterprises Private Limited for AY 2020-21, the Delhi ITAT ruled that commission paid to local distributors should not be classified as AMP (Advertising, Marketing, and Promotion) expenses for transfer pricing purposes. The ITAT noted that in prior years, commission payments were not treated as part of AMP expenses, and the same principle should apply here. The court emphasized that Multi-Level Marketing (MLM) is a distinct model where commissions depend on sales, not on product branding. The ITAT applied the rule of consistency from previous assessments and deleted the transfer pricing adjustment, concluding that commission payments to distributors are not international transactions.
Facts of the Case: Amway India Enterprises Pvt. Ltd., a subsidiary of Amway Corporation (USA), sells consumer products in India through a Multi-Level Marketing (MLM) model, paying commissions to independent distributors. For AY 2020–21, the TPO proposed a ₹131.72 crore TP adjustment by treating ₹439.08 crore in distributor commissions as AMP expenses. The AO also disallowed ₹50 lakhs under section 80G. The DRP upheld both adjustments, viewing the AMP spend as an international transaction. The assessee appealed to the ITAT, arguing that the commission was wrongly included in AMP expenses, contrary to consistent treatment in earlier years.
