ITAT Delhi Dismisses Multiple Revenue Appeals Against Make My Trip Across TP, TDS Issues

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has dismissed a batch of appeals filed by the Revenue against MakeMyTrip India Pvt. Ltd. It held that advertisement, marketing, and promotion (AMP) expenditure cannot be treated as an international transaction where the Indian entity owns the brand and upheld deletion of a Rs. 31.81 crore transfer pricing adjustment.

The bench comprising Judicial Member C.N. Prasad and Accountant Member M. Balaganesh was dealing with appeals arising from orders of the Commissioner of Income Tax (Appeals). The matters related to assessment years 2009–10, 2011–12, and 2012–13 to 2015–16.

The disputes concerned transfer pricing adjustments on AMP expenditure, tax deduction at source on payment gateway charges, and taxability of deferred revenue.

MakeMyTrip India, an online travel services company, faced multiple additions by the Assessing Officer across the relevant years. These included transfer pricing adjustments proposed by the Transfer Pricing Officer, disallowances for alleged failure to deduct tax at source, and additions relating to recognition of advance receipts.

The Revenue argued that the assessee's AMP expenditure, amounting to about 50.40% of its operating income, was excessive compared to comparable companies. It contended that such expenditure promoted the “MakeMyTrip” brand for the benefit of its foreign associated enterprise.

Rejecting this, the Tribunal upheld the Commissioner (Appeals)'s findings on ownership of the brand. It noted that the trademark stood registered in the name of the Indian entity.

The Tribunal observed that the issue was a recurring one and had been consistently decided in earlier years in favour of the assessee. It noted that similar AMP adjustments had been deleted in prior orders, which were being followed.

It upheld the deletion of the transfer pricing adjustment, holding that the AMP expenditure was incurred wholly for the company's own business and no adjustment was warranted.

On payment gateway charges, the tribunal noted that the disallowance had been made under Section 40(a)(ia) for alleged failure to deduct tax at source. It observed that similar issues had been decided in earlier years and, following those decisions, rejected the Revenue's grounds.

On deferred revenue, including loyalty signing bonuses from Amadeus and receipts from Apollo, the Tribunal upheld the Commissioner's (Appeals) findings. It held that income does not accrue unless the conditions attached to such receipts are fulfilled and that such amounts, being contingent and refundable, could not be taxed fully in the year of receipt.

The tribunal noted that these amounts were tied to specific contractual obligations and could not be treated as income upfront. Since they were liable to be refunded if those conditions were not met, it accepted the assessee's approach of recognising the income proportionately, in line with Accounting Standard 9.

It also found no fault with the Commissioner (Appeals) admitting additional evidence. A remand report had been called for from the Assessing Officer, and in that context, the tribunal held that there was no breach of Rule 46A.

With these findings, the Tribunal dismissed the Revenue's appeals. The deletions relating to AMP adjustment, deferred revenue, and other connected disallowances were left undisturbed.