WHIRLPOOL OF INDIA LTD. vs ASSISTANT COMMISSIONER OF INCOME TAX

Case Commentary: Whirlpool of India Ltd. vs. ACIT (ITA No. 1307/Del/2022) – A Landmark Ruling on AMP Expenses and Transfer Pricing

Introduction

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, in its order dated 30.03.2026, delivered a significant ruling in the case of Whirlpool of India Ltd. vs. ACIT for Assessment Year (AY) 2017-18. The core issue revolved around the transfer pricing adjustment on Advertisement, Marketing, and Sales Promotion (AMP) expenses, which the Assessing Officer (AO) and the Dispute Resolution Panel (DRP) had treated as an international transaction under Section 92B of the Income Tax Act, 1961. The ITAT, following binding precedents from the Delhi High Court and the Supreme Court, held that AMP expenses incurred by the assessee do not constitute an international transaction, thereby deleting the substantial addition of Rs. 57.11 crore. This commentary delves into the facts, legal reasoning, and implications of this judgment, which reinforces the principle that routine business expenses cannot be recharacterized as a deemed service to an associated enterprise (AE) without tangible evidence.

Facts of the Case

Whirlpool of India Ltd., a subsidiary of Whirlpool USA, is engaged in the production, sales, and distribution of Whirlpool appliances. For AY 2017-18, the assessee adopted the Transactional Net Margin Method (TNMM) to justify the arm’s length price of its international transactions. However, the Transfer Pricing Officer (TPO) and the AO were dissatisfied with the AMP expenses incurred by the assessee, alleging that these expenses benefited the foreign AE by enhancing the global brand value. Consequently, the AO made a primary adjustment of Rs. 57,11,67,349 and a protective adjustment of Rs. 58,67,18,782 using the Bright Line Test (BLT). The assessee challenged these additions before the ITAT, arguing that AMP expenses are not an international transaction under Section 92B, and that the BLT has been rejected by the Delhi High Court in Sony Ericsson Mobile Communications India Pvt. Ltd. vs. CIT (374 ITR 118).

Reasoning and Legal Analysis

The ITAT’s reasoning is anchored in judicial discipline and the doctrine of precedent. The Tribunal observed that the issue of AMP expenses being treated as an international transaction is no longer res integra for the assessee. In its own case for AY 2008-09, the Delhi High Court had categorically held that AMP expenses do not constitute an international transaction under Section 92B. This decision was subsequently upheld by the Supreme Court, which dismissed the Revenue’s appeal. The ITAT noted that the same principle has been consistently applied by the Coordinate Bench for AYs 2009-10 to 2016-17, where adjustments on account of AMP expenses were deleted.

The Tribunal rejected the Revenue’s reliance on the Bright Line Test, citing the Delhi High Court’s ruling in Sony Ericsson (374 ITR 118), which held that the BLT is not a valid method to infer the existence of an international transaction. The ITAT emphasized that the BLT has no statutory mandate under the Indian transfer pricing provisions, and its application to make protective adjustments is legally untenable. Furthermore, the Tribunal noted that for AY 2022-23, no AMP adjustment was made, indicating a change in the Revenue’s stance.

On the issue of the daughter marriage fund (Ground No. 4), the ITAT remitted the matter to the AO for verification, as the assessee had offered the provision for taxation in the return and claimed the actual payment as a deduction. Similarly, the foreign tax credit claim (Ground No. 5) was remitted for verification, following the principle that such claims must be examined on merits. The additional ground regarding warranty expenditure (Rs. 4,63,14,580) was admitted and remitted, with the Tribunal noting that a provision for warranty is deductible under Section 37(1) as per Rotork Controls India Ltd. vs. CIT (314 ITR 62).

Conclusion

The ITAT’s decision in Whirlpool of India Ltd. vs. ACIT is a reaffirmation of the settled legal position that AMP expenses incurred by a taxpayer for its own business cannot be recharacterized as an international transaction in the absence of a specific agreement or arrangement with the AE. The Tribunal’s reliance on the Delhi High Court’s decision in the assessee’s own case and the Supreme Court’s dismissal of the Revenue’s appeal underscores the finality of this issue. By rejecting the Bright Line Test, the ITAT has prevented the Revenue from using a non-statutory tool to create artificial transfer pricing adjustments. The remittance of ancillary issues (daughter marriage fund, foreign tax credit, and warranty expenditure) ensures that the assessee gets a fair opportunity to substantiate its claims. This judgment provides much-needed clarity for multinational enterprises operating in India, reinforcing that routine business expenses cannot be subjected to transfer pricing scrutiny without concrete evidence of a deemed service.

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