Advertisement, Marketing and promotion expenses: Requirement to benchmark these expenses
Outcome: In favour of Assessee
- The Assessee had incurred Advertising, Marketing and Promotion expenses during the year.
- According to the Transfer Pricing Officer, by incurring excessive Advertising, Marketing and Promotion spend, the Assessee was creating/ adding value to the intangibles legally owned by its Associated Enterprise and therefore, he concluded that such excessive/ non-routine expense constituted an ‘international transaction’ in terms of Section 92B read with section 92F(v) of the Act.
- The Tribunal placed reliance on the decision of co-ordinate bench in Assessee’s own case, wherein it was concluded that it was for the marketing people to look new products which had competition in the national level or grass route level and international level. It was always for the company to decide on what ratio the expenses were to be incurred at grass route and on that ratio for promoting their product.
- Further, it was observed that unless the amount which was found to be not genuine merely because excess amount was spent on advertisement, it would not be a ground for disallowing the expenses.
- Therefore, respectfully following the decision in Assessee’s own case the adjustment on account of Advertising, Marketing and Promotion expenses was directed to be deleted.