Income Tax, Issue Update

Advertisement, Marketing and promotion expenses: Requirement to benchmark these expenses

Case: Dy. CIT vs. General Mills India Pvt Ltd, Mumbai ITAT

Outcome: Assessee

Facts

  • During the year under consideration, the Assessee had incurred certain expenses for promotion and marketing of the products.
  • However, the Assessing Officer was of the view that by incurring such expenses the Assessee had helped in building the brand of the Associated Enterprise. Hence, he treated the said expense within the purview of international transaction.

Key points

  • The Tribunal placed reliance on the decision laid down in Assessee’s own case, wherein it was concluded that in the absence of an express arrangement/ agreement between the Assessee and the Associated Enterprise for incurring Advertising, Marketing and Promotion expenditure to promote the brand of the Associated Enterprise the expenditure incurred by making payment to third parties for promoting and marketing the product manufactured by the Assessee does not come within the purview of international transaction.
  • In the present facts of the case, by merely stating that there was an arrangement between the Assessee and the Associated Enterprise, the Transfer Pricing Officer could not bring the Advertisement, Marketing and Promotion expenditure within the purview of international transaction.
  • Therefore, the Advertising, Marketing and Promotion expenditure incurred by the Assessee in India could not come within the purview of international transaction.

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