The Bangalore Bench of the Income-tax Appellate Tribunal held in the case of: Essilor India vt. Ltd. v. DCIT [IT(TP) No. 29/Bang/2014 and IT(TP) No. 227 /Bang/2015] that advertising, marketing, and sales promotion expenses to promote brand value were incurred only for increasing the taxpayer’s sales, and not those of the foreign related party. Accordingly, even when these expenses were greater than those of comparable companies, without an agreement between the taxpayer and the foreign related party, these expenses was not an “international transaction” and, as such, the arm’s length price standard does not arise.
The advertisement, marketing and sales promotion expenditure was not included as part of the cost base for computing the Profit Level Indicator. The Tribunal therefore directed the Transfer Pricing Officer to include these expenses as part of the cost base for the purpose of determination of arm’s length price.
