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INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)
Anubhav Sharma, Judicial Member, Manish Agarwal, Accountant Member
Tupperware India Private Limited – Appellant
Versus
National Faceless Assessment Centre – Respondent
ITA No. 4475/Del/2024
| Table of Content |
|---|
| 1. jurisdiction and nature of assessment of the assessee. (Para 1 , 3 , 4) |
| 2. summary of the grounds of appeal regarding corporate tax and transfer pricing. (Para 2) |
| 3. allowability of compensation paid to distributors as business expenditure under section 37. (Para 5 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18) |
| 4. amp expenses are not international transactions absent evidence of concerted action. (Para 19) |
| 5. remand of management service fees and interest on receivables for fresh inquiry. (Para 20 , 21) |
| 6. final outcome of the appeal. (Para 22) |
O R D E R
PER ANUBHAV SHARMA, JM:
The assessee has come in appeal against the assessment orderpassed by the Dy. Commissioner of Income Tax, Circle 25(1), Delhi, under Section 143(3) r.w.s. 144C(13)r.w.s. 144B of the income-tax Act, 1961 pertaining to the assessment year 2020-21 in pursuance to directions of learned Dispute Resolution Panel (DRP).
2. The appeal of assesse raised following grounds;
“General Grounds:
1. On the facts and circumstances of the case, the assessment order passed by the Learned Assessment Unit (hereinafter referred to as ‘Learned Assessing officer’ or ‘Ld. AO’) under section 143(3) r.w.s. 1440(13) r.w.s 144B of the Income-tax Act, 1961 (‘the Act’) after following directions of the Dispute Resolution Panel -I (‘Ld. DRP’) is bad in law and barred by limitation.
2. On the facts and circumstances of the case and in law, the Ld. AO has erred in determining the total income of the Appellant at INR 29,357,707 as against the returned loss of INR 211,001,542 claimed by the Appellant in its return of income, thereby making additions/disallowances of INR 235,001,701 in the final assessment order.
Corporate Tax Grounds:
3. On the facts and circumstances of the case, and in law, while computing assessed income of the Appellant, the Ld. AO erred in considering income of INR (-)205,643,994 as computed under section I43(1) of the Act instead of INR (-)211,001,542 as reported in the return of income filed for the year under consideration.
4. On the facts and circumstances of the case, and in law, the Ld. AO erred in disallowing amount of INR 15,22,95,235 towards distributor expenses claimed by the Assessee alleging expenditure does not satisfy the conditions laid down in section 37 of the Act.
Transfer Pricing Grounds:
5. That on the facts and circumstances of the case and in law, the Ld. AO/ Learned Transfer Pricing Officer (‘Ld. TPO’) [in pursuance to the directions of the Ld. DRP] have erred in undertaking adjustment on account of Advertising, Marketing and Promotion (“AMP”) expenses by INR 5,35,18,215. In doing so, the Ld. AO / Ld. TPO erred in:
5.1. not appreciating the fact that AMP expenses incurred by Appellant is not an international transaction in terms of the Section 92B of the Act, thereby violating the principles laid down by the jurisdictional High Court;
5.2. not providing any reason/documentary evidence to demonstrate that the AMP expenses incurred by the Appellant constitute an international transaction;
5.3. not appreciating the characterization of the Appellant, that it functions in the capacity of a licensed manufacturer and is entitled to the residual profit/loss arising in the business;
5.4. not appreciating that in the case of an entrepreneurial entity, if the payment of royalty as well as import of raw material is demonstrated to be at arm's length and the residual profit/loss reside in India, having regard to the functional, asset and risk analysis of the Appellant, the question of any adjustment , on account of AMP expenses does not arise;
5.5. not appreciating that the Appellant is the economic owner of any marketing intangibles commensurate with the functions performed in India;
5.6. not appreciating that the Appellant incurs such expenses on its own account for selling its products in India and derives adequate risks / rewards thereof;
5.7. applying Residual Profit Split Method (‘RPSM’) using Bright Line Test (BLT) approach and
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