In ITA No. 2269/Mum/2022- ITAT - No arrangement found between L'Oreal India and its AE regarding advertisement, marketing, and promotion expenses; ITAT (Mumbai) rules out international transaction
Members Om Prakash Kant (Accountant) & Kavitha Rajagopal (Judicial) [03-05-2023]

Read Order: L’oreal India Private Limited v. Asst. CIT

Chahat Varma

New Delhi, May 26, 2023: The Mumbai bench of the Income Tax Appellate Tribunal has ruled in favor of L'oreal India Private Limited (assessee) in a case pertaining to advertisement, marketing, and promotion (AMP) expenses. The Tribunal has held that there was no arrangement between L'oreal India and its associated enterprise (AE) regarding these expenses for brand building, and therefore, they did not qualify as an international transaction under the transfer pricing provisions.

In the present case, the assessee, a subsidiary of L'oreal SA, operated as part of the L'oreal group, a French company. The company was primarily involved in the manufacturing, marketing, and sales of cosmetic products. The assessee had challenged the grounds of transfer pricing adjustment on account of AMP expenses.

The assessee had argued that it did not provide any services to its AEs and that the lower authorities mistakenly treated the AMP expenses as an international transaction related to brand promotion services between the assessee and its AEs. The assessee further claimed that the incurred expenses were solely for its own business purposes in India and did not benefit the AEs, nor did it receive any reimbursement for such expenses. Additionally, the assessee stated that there was no specific arrangement between the assessee and its AEs for promoting the AEs' brands by incurring AMP expenses on their behalf.

The bench noted that the issue of AMP expenses was a recurring issue and had been consistently been decided in favor of the assessee, with the Tribunal ruling that there was no arrangement between the assessee and its associated enterprise (AE) regarding such expenses.

The bench observed the decision of the Delhi High Court in the case of Bausch & Lomb Eyecare (India) Pvt. Ltd. & Another v. The Additional Commissioner of Income Tax & Others [LQ/DelHC/2015/2728], wherein it has been held that the disputed transaction was not an international transaction, and thus the transfer pricing officer (TPO) was not entitled to invoke the provisions of Chapter X of the Income Tax Act.

Noting that here has been no change in the factual matrix of the case, the bench allowed the grounds of appeal raised by the assessee.