This legal case involves Perfetti Van Melle India Pvt. Ltd., a company engaged in the manufacturing and selling of confectionery products in India, and the Assistant Commissioner of Income Tax, Circle-3(1), Gurgaon. The dispute concerns the assessment year 2016-17 and focuses on transfer pricing adjustments related to advertising and marketing promotions (AMP) expenses.
Perfetti Van Melle India Pvt. Ltd., part of the global Perfetti group, operates its business in India manufacturing popular confectionery products like Alpenliebe and Mentos. The company faced scrutiny from the Income Tax Department regarding the allocation and deduction of AMP expenses which were deemed excessive and argued to benefit the parent company’s branding.
The core issue in this appeal was whether the AMP expenses could be considered an international transaction, potentially requiring adjustments to ensure they met arm’s length pricing standards under Indian Transfer Pricing regulations. The tribunal examined various aspects, including the nature of the expenses, the involvement of related parties, and the operational autonomy of the Indian entity.
The Income Tax Appellate Tribunal (ITAT) ruled on several key points:
This case highlights the complexities of transfer pricing in multinational operations, particularly how associated costs are allocated and justified under tax regulations. It underscores the need for clear documentation and justification of expense allocations, especially when they involve related parties across borders.
Perfetti Van Melle India Pvt. Ltd. vs. ACIT, Circle-3(1), Gurgaon – ITA 463/DEL/2021
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