Renault India Pvt. Ltd. Vs DCIT (ITAT Chennai)
The Income Tax Appellate Tribunal (ITAT), Chennai partly allowed the assessee’s appeal for Assessment Year 2022-23, holding that advertisement, marketing and promotion (AMP) expenditure incurred in India without any agreement or arrangement with the Associated Enterprise (AE) does not constitute an international transaction for transfer pricing purposes, and directing the Assessing Officer (AO) to allow set-off of brought-forward business losses and unabsorbed depreciation in accordance with law.
The assessee, a subsidiary of Renault Group BV, Netherlands, engaged in the manufacture of Renault cars in India, filed its return declaring nil income. During scrutiny, the Transfer Pricing Officer (TPO) observed that the assessee had incurred Rs. 327.57 crore towards advertisement and sales promotion (AMP) expenses. The TPO proposed a transfer pricing adjustment by treating 50% of the AMP expenditure as brand-building services rendered to the foreign AE and ultimately made an adjustment of Rs. 173.40 crore. The Dispute Resolution Panel (DRP) confirmed the adjustment, following which the assessee appealed before the Tribunal.
The assessee contended that the AMP expenditure was incurred entirely in India for promoting its own sales and was paid to unrelated domestic parties. It argued that there was no agreement, arrangement or understanding with the foreign AE requiring reimbursement or allocation of AMP expenses and, therefore, the expenditure could not be regarded as an international transaction. The assessee relied on the Tribunal’s decisions in its own cases for earlier assessment years as well as the decision in Hyundai Motors India Ltd.
