This legal document provides an in-depth review of the ITAT Delhi’s decision in the case of Pepsico India Holdings Pvt Ltd against the Assistant Commissioner of Income-Tax, Central Circle-07, New Delhi, concerning a substantial transfer pricing adjustment on AMP Expenses for the assessment year 2016-17.
The case revolves around a significant adjustment made by the Transfer Pricing Officer (TPO) to Pepsico India’s financial results related to Advertisement, Marketing, and Promotion (AMP) Expenses. The adjustment was based on the contention that these expenses benefited the associated enterprises (AEs) globally, thereby necessitating a transfer pricing adjustment.
The main issue before the Tribunal was whether the AMP expenses incurred by Pepsico India should attract a transfer pricing adjustment. The Tribunal noted that similar adjustments had been previously deleted in Pepsico’s own cases for earlier assessment years. Despite this, the TPO, supported by the Dispute Resolution Panel (DRP), made a substantial adjustment, which was contested by Pepsico.
The Tribunal, referencing decisions from earlier years, reiterated that there was no justification for the TPO to deviate from earlier rulings where no such transfer pricing adjustments were warranted. The Tribunal directed the deletion of the adjustment, emphasizing the continuity in judicial thinking and the need for consistency in legal interpretations.
The Tribunal’s decision to delete the transfer pricing adjustment on AMP Expenses for Pepsico India highlights the importance of consistency in legal proceedings and supports the principle that non-recurring adjustments should not be made unless there is clear evidence of benefit to the AEs beyond the normal business operations of the appellant.
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