The Delhi High Court quashed Rs 2,800 crores tax demand, thereby granting a major relief to Pepsico India.
The case was related to the taxation of its advertising, marketing, and promotion (AMP) expenses.
The assessing officer (AO) had taken part of AMP expenses as international transactions to contend that Pepsico India undertook brand-building activities for its foreign parent. The AO concluded the tax demand on the basis of the bright line test (BLT) in transfer pricing. AMP expenses are compared with the industry average and excess expenses are taken as brand-building expenses of foreign parents which are to be taxed under the BLT Test.
The Income Tax Authority went to the high court against the Delhi-based Income Tax Appellate Tribunal’s ( ITAT ) order of deleting an addition of more than Rs 2,800 crore made by the assessing officer on AMP expenses of Pepsico.
Earlier in a Sony Ericsson case, the Delhi High Court held that BLT is not a valid methodology under transfer pricing rules in India. The Delhi High Court dismissed the appeal by the tax authorities against Pepsico Holdings.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
