Court: Delhi Income-tax Appellate Tribunal
Citation: McDonald’s (India) Pvt Ltd. Vs. ACIT [ITA No. 3890 (Del) of 2004]
Brief: Advertisement expenditure incurred by a resident entity on behalf of another resident entity does not invoke the provisions of section 92 of the Income-tax Act, 1961
Background
In a recent ruling’ , the Delhi Income-tax Appellate Tribunal (“the Tribunal”) in the case of McDonald’s (India) Pvt Ltd v. ACIT [ITA No. 3890 (Del) of 2004], has held, on evaluation of available facts, that the old provision of section 92 of the Income Tax Act, 1961 (“the Act”) does not apply in case of advertisement expenditure incurred by the resident assessee on behalf of other resident entity.
It is pertinent to note that this ruling dealt with the old provisions under section 92 of the Act as was applicable prior to the introduction of the Indian transfer pricing regulations. The old provisions of section 92 provided for computation of income from transactions with non-resident by the assessing officer (“AO”) in certain cases. This provision was applicable when it appeared to the AO that due to close connection between resident and the non-resident, the business between them was so arranged that it resulted in either no profit or less than ordinary profit for the resident entity.
Facts
