This case, designated as ITA No. 1800/DEL/2022, features Nikon India Pvt. Ltd., located in Gurgaon, Haryana, as the appellant, and the Assistant Commissioner of Income Tax, Circle-3(1), Gurgaon, as the respondent. The dispute revolves around the assessment year 2017-18 and primarily concerns the transfer pricing adjustments related to Advertising, Marketing, and Promotion (AMP) expenses.
The core issue in this appeal is whether the AMP expenses incurred by Nikon India could be subject to transfer pricing adjustments. The case was adjudicated by the Income Tax Appellate Tribunal, Delhi Bench, with the judgment pronounced on July 27, 2023.
Nikon India, part of the globally recognized Nikon group, is involved in a broad spectrum of businesses centered around precision equipment and imaging products. The company operates through divisions that include precision equipment, imaging products, and instruments businesses, providing after-sales services for Nikon imaging and instruments products.
The Tribunal’s deliberation focused on whether these expenses were rightly considered international transactions and whether they were appropriately benchmarked. After extensive hearings and considering precedents, the Tribunal found significant issues with how the AMP expenses were treated and benchmarked by the authorities.
The Tribunal’s decision took into account various judicial precedents and the consistent approach in the assessee’s earlier assessments, which advocated for a more measured attribution of profits related to AMP expenses to the foreign affiliate’s operations. The final judgment reversed significant portions of the adjustment, aligning with the assessee’s arguments that the AMP expenses directly related to sales should not be included in the brand enhancement expenses and thus outside the purview of transfer pricing adjustments.
The decision is pivotal as it underscores the Tribunal’s stance on the treatment of AMP expenses in transfer pricing cases, highlighting the need for clarity and consistency in handling such expenses. It provides significant relief to Nikon India and sets a precedent for similar disputes in the future. The Tribunal’s comprehensive analysis and final ruling affirm the necessity of accurate benchmarking and fair treatment of multinational enterprises in transfer pricing assessments.
Transfer Pricing Dispute Over AMP Expenses: Nikon India Pvt. Ltd. vs ACIT, Case ITA 1800/DEL/2022
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