Case Number: ITA 1093/DEL/2020
Appellant: JCIT (OSD)-Circle-4(2), New Delhi
Respondent: Beam Global Spirits & Wine (India) Private Limited, Gurgaon
Assessment Year: 2010-11
Result: Final Tribunal Order
Case Filed On: 2020-03-16
Date of Order: 2022-07-18
Pronounced On: 2022-07-18
This case revolves around whether the expenses incurred on advertisement, marketing, and promotion (AMP) by Beam Global Spirits & Wine (India) Private Limited can be considered an international transaction under the India-UK Double Taxation Avoidance Agreement (DTAA). The primary issue in this appeal was the taxability of AMP expenses, which the Transfer Pricing Officer (TPO) had adjusted, leading to a dispute between the Indian Tax Authority and Beam Global Spirits & Wine (India) Pvt. Ltd.
The Joint Commissioner of Income Tax (OSD)-Circle-4(2), New Delhi, filed an appeal against the order dated 03/12/2019 passed by the Commissioner of Income Tax (Appeals)-42, New Delhi for the assessment year 2010-11. The Revenue contended that the AMP expenses incurred by Beam Global Spirits & Wine (India) Pvt. Ltd. for promoting the brand owned by the associated enterprise should be considered an international transaction, referencing the judgment in the case of Sony Ericsson Mobiles Communications India Pvt. Ltd. vs CIT.
The TPO adopted the Bright Line Test (BLT) to ascertain the amount of AMP expenses incurred by the assessee for promoting the brand owned by the associated enterprise. The TPO argued that the AMP expenses should be treated as services rendered to the foreign enterprise by the Indian entity, and therefore, an adjustment was made to the Arm’s Length Price (ALP).
The Commissioner of Income Tax (Appeals)-42, New Delhi, rejected the TPO’s application of BLT and concluded that the AMP expenses incurred by Beam Global Spirits & Wine (India) Pvt. Ltd. were not international transactions. The Commissioner directed the adoption of the Transactional Net Margin Method (TNMM) with AMP intensity approach on a segregated basis for manufacturing and distribution segments.
Beam Global Spirits & Wine (India) Pvt. Ltd. appealed to the Income Tax Appellate Tribunal (ITAT). The key points discussed were:
Appellant: Mr. Rishabh Malhotra, AR
Department: Shri Vivek Verma, CIT(DR)
The learned counsel for the assessee submitted that competent authorities of India and the UK had agreed to resolve the issue of double taxation arising due to the TP Adjustments made by the Indian Tax Authority. The counsel presented a communication of the Resolution of Dispute dated 17/07/2020 under the Mutual Agreement Procedure (MAP) with the UK, issued by the Government of India, Ministry of Finance, Department of Revenue. Under the MAP, complete relief was granted to the assessee, and the adjustment made by the TPO on account of AMP expenses was reduced to NIL.
The learned Departmental Representative conceded to the submissions made by the counsel for the assessee, acknowledging the MAP resolution and the subsequent order passed by the TPO giving effect to the MAP resolution.
The Tribunal analyzed the submissions and verified the MAP resolution dated 17/07/2020 and the order of the TPO dated 19/02/2020 giving effect to the MAP resolution. The key findings were:
Therefore, the Tribunal dismissed the appeal filed by the Revenue for being infructuous.
The ITAT concluded that the adjustment of AMP expenses made by the TPO was nullified by the MAP resolution, which granted complete relief to Beam Global Spirits & Wine (India) Pvt. Ltd. As a result, the appeal filed by the Revenue was dismissed for having become infructuous.
Order pronounced in the open court on 18th July 2022 by G.S. Pannu, President, and Yogesh Kumar U.S., Judicial Member.
Manage the increasing number of hearings effortlessly by leveraging the legal AI revolution We are India's Leading revolutionary AI-powered legal platform where you can get enough insights into top cases and judgements.
Research Platform