AMP Spend: LG Ruling Prevails in Canon's Case

In an important ruling in the case of Canon India Private Limited ("Canon India"), the Delhi Divisional Bench of the Income Tax Appellate Tribunal ("Tribunal") has laid down important principles in relation to Transfer Pricing adjustments relating to the issue of creation of marketing intangibles.

In this case, the Tribunal remanded back the matter to the Transfer Pricing Officer ("TPO") with specific instructions that Advertisement, Marketing and Promotion (‘AMP') expenditure should be benchmarked in light of guidelines laid down by the Special Bench ("SB") in the case of LG Electronics India Limited vs. ACIT[1]  ("LG India") and Chandigarh Bench in the case of Glaxo Smithkline Consumer Healthcare Limited vs. ACIT[2] ("GSK India").

While doing so, the Tribunal has directed the TPO to exclude subsidy [received from associated enterprise ("AE")], trade discount & volume rebates, commission and cash discount from AMP. This serves as a significant relief to majority of taxpayers facing this issue. This BMR Advisors alert summarizes the Delhi ITAT ruling.

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