Varun Beverages Limited Vs ACIT (ITAT Delhi)
ITAT Deletes Transfer Pricing Adjustment on Receivables Because Higher Profit Margins Already Covered Interest Element; Interest on Foreign Currency Loans to Subsidiaries Held at Arm’s Length Because Rate Exceeded Internal CUP Benchmark; ITAT Removes TP Additions on AE Loans Because LIBOR+400 bps Applied by TPO Ignored Actual Borrowing Benchmark; Transfer Pricing Adjustment on Receivables Deleted Because Transactions Were Linked to Main Sales and Services; ITAT Allows Appeals After Finding AE Loan Interest and Receivables Already at Arm’s Length; TP Adjustments on Receivables and AE Loans Deleted Because Benchmarking Using Internal CUP Was Valid.
The appeals were filed before the Income Tax Appellate Tribunal against the orders of the Commissioner of Income Tax (Appeals) dated 22 March 2025 relating to Assessment Years (AYs) 2016–17, 2017–18, and 2018–19. As the issues involved were identical for all years, the Tribunal heard the matters together and treated AY 2017–18 as the lead case.
During the relevant financial year, the assessee company was engaged in manufacturing, bottling, selling, and distributing beverages of the Pepsi brand in specified territories. The tax authorities noticed that the company had entered into various international and specified domestic transactions with its associated enterprises (AEs). Consequently, the matter was referred to the Transfer Pricing Officer (TPO) under section 92CA of the Income-tax Act. The TPO passed an order proposing transfer pricing adjustments on multiple counts, including interest on receivables and interest on loans advanced to foreign subsidiaries. For AY 2017–18, the TPO proposed an overall adjustment of ₹3,42,31,778. Similar adjustments were made for AY 2016–17 and AY 2018–19.
