2020 (6) TMI 698 - AT - Income Tax

TP Adjustment - Adjustment of AMP expenses and restricting the addition for ticketing services and tours and travel services packages - HELD THAT - Hon ble Delhi High Court in the case of Jubilant Foodwork Pvt. Ltd. 2014 (8) TMI 353 - DELHI HIGH COURT has held that the expenditure incurred by the assessee on advertisement expenses is revenue in nature since no permanent character or advantage is achieved via the same and such expenses for advertising consumer products generally are a part of the process of profit earning and not in the nature of capital outlay. Similar view has been taken by the Hon ble Delhi High Court in the case of CIT vs. Monto Motors Ltd. 2011 (12) TMI 50 - DELHI HIGH COURT . In view of the above discussion and in view of the detailed order passed by the CIT(A) on this issue and considering the fact that the Revenue in assessee s own case for AYs 2010-11 onwards has not considered such AMP expenses as international transaction, therefore, we do not find any infirmity in the order of the CIT(A) in deleting the addition on account of adjustment of AMP expenses as computed u/s 92CA(3). Short charge to MMT US for ticketing charges and tours and travel package services - HELD THAT - The assessee had also given the break-up on the basis of the finding given by the CIT(A) in A.Y. 2005-06. Nothing substantial was brought to our notice either by the Ld. AR or by the ld. DR against the finding given by the ld.CIT(A) on this issue. We, therefore, uphold the same and the ground raised by the assessee and the Revenue on this issue are dismissed. Accordingly, ground of appeal Nos.1-7 filed by the Revenue and ground No.1 raised by the assessee are dismissed. Addition u/s 14A r.w.r. 8D - HELD THAT - It is the submission the assessee that he has not received any exempt income during the year and, therefore, he has no objection if the same is restored to the file of the AO for verification of the issue in the light of the decision in the case of Cheminvest Ltd 2015 (9) TMI 238 - DELHI HIGH COURT wherein it has been held that in absence of any exempt income, no disallowance u/s 14A can be made. Since the issue requires verification at the level of AO, therefore, we deem it proper to restore this issue to the file of the AO with a direction to find out as to whether the assessee has, in fact, received any exempt income and decide the issue TDS u/s 195 - Non-deduction of TDS on payment of gateway charges paid to HDFC and ICICI Bank - HELD THAT - The assessee has the option to obtain a No-deduction Certificate from the AO which he has not done in the instant case. It is the submission of the ld. Counsel for the assessee that identical issue had come up before the Tribunal in assessee s own case for A.Y. 2009-10 and the Tribunal 2017 (9) TMI 1775 - ITAT DELHI has decided the issue pertaining to non-deduction of taxes on payment gateway charges in favour of the assessee with certain directions/observations. Further, the appeal filed by the Revenue was dismissed by the Hon ble High Court - we deem it proper to restore this issue to the file of the AO with a direction to decide the issue afresh in the light of the decision of the Tribunal in assessee s own case for A.Y. 2009-10 and decide the issue as per fact and law.

Summary

Issues Involved:
1. Transfer Pricing Adjustment related to AMP expenses and ticketing services.
2. Disallowance under Section 14A.
3. Disallowance under Section 40(a)(ia) for Payment Gateway Charges.

Issue-wise Detailed Analysis:

1. Transfer Pricing Adjustment related to AMP expenses and ticketing services:

The primary issue was the Transfer Pricing Officer's (TPO) adjustment of ?31,81,07,110/- on account of Advertising, Marketing, and Promotion (AMP) expenses and ?1,47,93,024/- for ticketing services and tours/travel packages. The TPO argued that the AMP expenses were excessively high and not entirely for the benefit of the assessee, but also for its parent company, MMT Mauritius. The TPO applied the bright-line test and concluded that the excess AMP expenses were for promoting the MakeMyTrip brand, which should have been compensated by MMT Mauritius.

The CIT(A) deleted the AMP adjustment, stating that the MakeMyTrip brand was owned by the assessee and not the parent company. The CIT(A) also noted that the AMP expenses were wholly and exclusively for the business and not capital in nature. For the ticketing services adjustment, the CIT(A) reduced the addition to ?50,000/- based on a detailed analysis and past decisions.

The Tribunal upheld the CIT(A)'s decision, noting that from AY 2010-11 onwards, the Department had accepted that AMP expenses were not an international transaction. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the grounds raised by the Revenue and the assessee on this issue.

2. Disallowance under Section 14A:

The AO made a disallowance of ?5,71,124/- under Section 14A read with Rule 8D. The CIT(A) restricted this disallowance to ?73,910/-, considering only the investments that yielded exempt income. The Tribunal restored the issue to the AO for verification, directing the AO to determine if the assessee received any exempt income and to decide the issue in light of the Supreme Court's decision in Cheminvest Ltd., which held that no disallowance under Section 14A can be made in the absence of exempt income.

3. Disallowance under Section 40(a)(ia) for Payment Gateway Charges:

The AO disallowed ?11,99,39,901/- paid as payment gateway charges for non-deduction of TDS under Section 194H. The CIT(A) upheld the disallowance but excluded payments made to Citi Bank and American Express Bank, as the assessee had furnished nil TDS certificates from these banks. The Tribunal restored the issue to the AO for fresh adjudication, directing the AO to decide the issue in light of the Tribunal's decision in the assessee's own case for AY 2009-10.

Conclusion:

The Tribunal upheld the CIT(A)'s deletion of the AMP expenses adjustment and the reduction of the ticketing services adjustment. It restored the Section 14A disallowance issue to the AO for verification and the payment gateway charges disallowance issue to the AO for fresh adjudication. The appeals were partly allowed for statistical purposes.