In a relief to Nike India, the Income Tax Appellate Tribunal (ITAT), Bangalore Bench deletes TP adjustment made in respect of Advertisement, Marketing and Promotion expenses (AMP).
The assessee company, Nike India is engaged in the business of wholesale trading of footwear, apparel and sports equipment in India of NIKE Brand. The assessee is a wholly-owned subsidiary of NIKE Holding B.V. Netherlands, which in turn is held by M/s. NIKE Inc., USA.
The assessee had incurred expenditure of Rs.83.13 crores towards AMP expenses. The A.O. made an adjustment of Rs.85.58 crores in respect of this expenditure. The Ld. A.R. submitted that an identical adjustment was made by the TPO in other years also and this issue was examined by the coordinate bench in assessment year 2014-15. He submitted that the assessee was having an agreement with it’s A.E. with regard to the expenses incurred during Cricket Tournaments conducted by BCCI. The agreement was relevant to the assessment years 2010-11 and 2011- 12.
The assessee submitted that the second category “AMP expenses relating to BCCI” actually referred to the years in which the assessee had an agreement with its AE for reimbursing part of expenses incurred on BCCI tournaments. The TP adjustment with regard to the first category of expenses was deleted by the tribunal and the TP adjustment in respect of AMP expenses relating to BCCI, which arose in 2010-11 & 2011-12 was restored to the file of the A.O. In assessment years 2010-11 & 2011-12, the assessee had an agreement with its A.E. for reimbursement of 50% of the expenses incurred on the tournaments held by BCCI.
In view of the existence of the agreement, the issue was restored to the file of AO/TPO. The assessee does not have any agreement with its A.E. for reimbursement of BCCI cost from assessment years 2012-13 onwards.
Accordingly, the expenses incurred by the assessee during the year under consideration on BCCI tournaments would fall under the first category only.In the cases, where no agreement exists with the AE, the coordinate bench has decided the issue in A.Y. 2010-11, 2011- 12, 2012-13 & 2014-15 in favour of the assessee.
The coram of Judicial Member, George George K. and Accountant Member, B.R. Baskaran observed that the AMP expenses incurred by the assessee in the years, other than the year in which there was partial reimbursement of expenses by A.E. of the assessee, has been held to be fully allowable by the coordinate bench. Those years are A.Y. 2009-10, 2010-11, 2011-12, 2012-13 & 2014-15. Accordingly, the TP adjustment made in those years has been deleted by the Tribunal. Only in the years relevant to assessment year 2010-11 & 2011-12, there was an agreement between the assessee and its A.E for reimbursement of 50% of the BCCI expenses. The TP adjustment made in those years has been restored to the file of AO/TPO. Since the facts available in the present year is akin to A.Y. 2009-10 and since it is stated that there is no agreement between the assessee and its A.E. for reimbursement of expenses.
The ITAT opined that the TP adjustment made in respect of AMP expenses is not justified and directed the AO to delete the same.
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