Case offers clarification on marketing intangibles issue

By Pranay Bhatia and Darshi Shah, Economic Laws Practice
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BMW India imports completely built units (CBUs) of BMW motor vehicles, related spare parts and accessories from its associated enterprises (AEs) and resells these in the Indian market. The company also assembles completely knocked down car kits (CKDs) for resale in India.

Pranay Bhatia
Pranay Bhatia

Under an agreement between the company and one of its AEs, BMW India was appointed as an importer and distributor of CBUs, CKDs and original automobile parts accessories in India as well as to advertise, promote sales and create a well-ordered distribution network in India.

The transfer pricing officer (TPO), seeing advertising, marketing and promotion (AMP) expenses as an international transaction, held that by incurring AMP expenses over and above the “bright line test”, the taxpayer provided brand promotion services to its AE, leading to an adjustment.

The company disputed the adjustment before a dispute resolution panel (DRP). The DRP substantially confirmed the TPO’s findings, only excluding after-sales support costs and salesperson’s bonus from the AMP calculation.

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Economic Laws Practice is a full-service law firm with headquarters in Mumbai and offices in New Delhi, Pune, Ahmedabad, Bengaluru and Chennai. Pranay Bhatia is a partner at the firm and Darshi Shah is an associate.

ELP

Economic Laws Practice

109 A Wing, Dalamal Towers

Free Press Journal Road

Nariman Point, Mumbai – 400 021, India

Tel: +91 22 6636 7000

Fax: +91 22 6636 7172

Email: pranaybhatia@elp-in.com

darshishah@elp-in.com

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