sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
« Transfer Pricing »
 Transfer pricing review and adjustments in Germany
 Indian advance pricing agreement uses customs value as arm’s length price
 Indian advance pricing agreement uses customs value as arm’s length price
  How advance pricing agreement helps India-Singapore business ties
 Doing business in India: ‘Substance’ over ‘form’ in transfer pricing regime
 How advance pricing agreement helps India-Singapore business ties
  CBDT to accept transfer pricing MAP sans riders
 How transfer pricing documentation can make you a happier person
 Transfer pricing review and adjustments in Luxembourg
 Here is what Modi government can do for transfer pricing
 Transfer Pricing In International Transactions – An Overview

Ad expenses of Indian arm of MNCs fall under transfer pricing: Delhi High Court
March, 18th 2015

The Delhi High Court has held that money spent by Indian subsidiaries of foreign companies on advertising, marketing and promotion (AMP) of their global brand here are international transactions and fall under the purview of transfer pricing rules.

A bench of justices Sanjiv Khanna and V Kameswar Rao, while ruling in favour of the tax department that expenses on AMP are international transactions, however, refused to accept the method employed by the authorities to calculate tax payable by the subsidiaries.

Instead, the bench laid down a number of guidelines to be adopted by the authority for calculating the tax payable by the subsidiary for expenses incurred on AMP.

The bench also remanded back to the Income Tax Appellate Tribunal (ITAT) the issue of calculation of tax payable by subsidiaries for fresh consideration based on the guidelines laid down by the court.

It directed all the stakeholders to appear before the Tribunal on April 20, on which date ITAT will decide the date for hearing the issue of calculating tax payable by the subsidiaries.

The ruling and guidelines came on the pleas of several Indian subsidiaries of multinational companies including Sony, Daikin, Haier, Reebok, Canon and Casio.

The companies in their pleas had primarily opposed the tax authority's view that AMP beyond the 'bright line' is a separate and independent international transaction undertaken by the Indian subsidiary for promoting the brand of the parent company.

'Bright line', as per tax authorities, is the industry standards of spending on AMP and any expenditure over and above this limit is taxable.

The companies had opposed the same saying such a methodology is inflexible.

While disposing of their pleas, the court held "the bright line method has no statutory mandate and a broad-brush approach is not mandated or prescribed."

The court in its 142 page judgement laid down several guidelines including that,"When segmentation or segregation of a bundled transaction is required, the question of set off and apportionment must be examined realistically and with a pragmatic approach."

"Transfer pricing is an income-allocating exercise to prevent artificial shifting of net incomes of controlled taxpayers and to place them on parity with uncontrolled, unrelated taxpayers. The exercise undertaken should not result in over or double taxation," it also said.

It also held that "to include and treat the direct marketing expenses like trade or volume discount or incentive as brand-building exercise would be contrary to common sense and would be highly exaggerated.

"The expenses, being in the nature of selling expenses, have an immediate connect with price/consideration payable for the goods sold. They are not incurred for publicity or advertisement. Direct marketing and sale-related expenses or discounts/concessions would not form part of the AMP expenses," the court said.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - About Us

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions