The ITAT has ruled that Advertising and Marketing Promotion (AMP) expenses of Samsung India cannot be subjected to benchmarking due to the absence of any international transactions. This decision clarifies the criteria needed for functional benchmarking under Indian tax laws.
No Benchmarking of AMP Expenses in Absence of International Transaction
The Income Tax Appellate Tribunal (ITAT) has recently overturned a substantial adjustment against Samsung India, amounting to Rs. 4,665 crores, stating that AMP expenses incurred in the company's domestic operations could not be benchmarked in the absence of international transactions. This ruling emphasizes the need for an actual international comparative basis when determining the arm's length price of expenses.
The ITAT found that the AMP expenses were solely related to Samsung India's operations in India, and as such, lacked the requisite cross-border element that would necessitate benchmarking. This reinforces the principle that expenses must have corresponding international transactions to justify comparative analysis.
This decision has significant implications for companies engaged in domestic operations with limited international interaction. Practitioners should note this ruling as it highlights the nuanced application of the arm's length principle in tax assessments, limiting the scope for adjustments based on local marketing expenditures without a cross-border nexus.
Citations
- Samsung India v. CIT (2026) ITAT 124
