Case Number: ITA 890/DEL/2021
Appellant: Perfetti Van Melle India Pvt. Ltd., Gurgaon
Respondent: ACIT, Circle-3(1), Gurgaon
Assessment Year: 2012-13
Case Filed On: July 22, 2021
Order Type: Final Tribunal Order
Date of Order: May 30, 2023
Pronounced On: May 30, 2023
Perfetti Van Melle India Pvt. Ltd. (hereafter referred to as ‘Perfetti India’) is a manufacturer, distributor, and marketer of candies, gums, jellies, and Ayurvedic products in India. The company operates under a license agreement with its associated enterprise (AE), Perfetti SpA, which grants it the rights to manufacture and sell confectionery items using the technology and trademarks of Perfetti SpA.
The primary issue in this case was the transfer pricing adjustment on account of Advertisement, Marketing, and Promotion (AMP) expenses incurred by Perfetti India. The Assessing Officer (AO) and Transfer Pricing Officer (TPO) made adjustments attributing AMP expenses to the AE, using the Intensity Transactional Net Margin Method (TNMM) and the Residual Profit Split Method (RPSM).
The case involved several assessment years (2011-12, 2012-13, and 2017-18) with similar issues being raised across these years. The appeals were consolidated and disposed of by a common order for convenience.
During the hearings, the counsel for Perfetti India argued that the AMP expenses incurred were solely for the benefit of the local market in India and were not directed or controlled by the AE. They contended that the expenses did not constitute an international transaction under Section 92B of the Income Tax Act.
The revenue, represented by the Departmental Representative (DR), argued that the AMP expenses benefited the AE and should be considered an international transaction requiring transfer pricing adjustments.
The tribunal, after careful consideration, concluded that the AMP expenses incurred by Perfetti India were not international transactions under Section 92B. It was noted that the expenses were incurred to cater to the local market without any mutual agreement or understanding with the AE for reimbursement or allocation of such expenses. Therefore, no transfer pricing adjustment was warranted.
Additionally, the tribunal addressed other issues, such as the disallowance of excess deduction claimed under Section 80-IC and the method of allocation of common expenses between eligible and non-eligible units. These issues were also decided in favor of Perfetti India based on precedents and the facts of the case.
The tribunal allowed the appeals filed by Perfetti Van Melle India Pvt. Ltd. and ruled that no transfer pricing adjustments on account of AMP expenses were required. The detailed judgment and reasoning are provided in the tribunal order dated May 30, 2023.
Perfetti Van Melle India Pvt. Ltd. vs. ACIT, Circle-3(1), Gurgaon – ITA 890/DEL/2021
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