Bacardi India Pvt Ltd vs Addl. CIT
Bacardi Ltd. is a Bermuda based holding company while the operations are control led by Bacardi International Ltd. The assessee “Bacardi India Pvt. Ltd” is an AE by virtue of common capital and control. The TPO observed that the assessee incurred Rs.92.61 Cr. towards advertisement and market promotion (AMP) expenditure. The main contention of the assessee is that the AMP expenditure do not constitute an international transaction. The ld. DRP held it constitutes an international transaction based on Sections 92B(1) and 92F(v).
Regarding the BLT, the Hon’ble High Court of Delhi in Sony Ericsson Mobile Communications India Pvt. Ltd. held that BLT could not be applied for either determining the existence of an international transaction involving AMP expenses or for determining ALP of such transaction. The assessee is not engaged in distribution and marketing of branded products but selling its own manufacturing goods to the extent of 95% and paying royalty to the AE. A perceived/notional indirect benefit to the AE, due to incurring of certain expenditure by an assessee in India, is not covered by the TP provisions. The Courts held that the existence of an international transaction will have to be established de hors the BLT, the burden is on the Revenue to first show the existence of an international transaction. An ‘assumed’ price cannot form the reason for making an ALP adjustment. Since a quantitative adjustment is not permissible for the purposes of a TP adjustment under Chapter X, equally it cannot be permitted in respect of AMP expenses either. In the result, the appeal of the assessee is allowed.