Supreme Court Dismisses IT Dept's Appeal Against Pernod Ricard In Advertising Expense Tax Dispute Over Delay

The Supreme Court on Tuesday dismissed the Income Tax Department's challenge to a Delhi High Court ruling in favour of Pernod Ricard India Pvt Ltd.

It declined to interfere with the judgment that had held AMP and brand-building expenses could not be disallowed in the absence of evidence showing an arrangement with the foreign associated enterprise.

The top court declined to entertain the Revenue's plea on account of a 384-day delay in filing the appeal.

A Bench of Justices J.B. Pardiwala and Vijay Bishnoi thus left undisturbed the Delhi High Court's August 29, 2024 ruling, which found no evidence of any arrangement between Pernod Ricard India and its associated enterprise for brand promotion.

The High Court had held, “However, in the absence of any material or evidence which may have tended to establish the existence of an arrangement between the Indian entity and its AE, or which may have been viewed as evidence of them acting in concert, the view expressed by the TPO is untenable and the order of the Tribunal is liable to be upheld.”

The dispute related to assessment years 2007-08 to 2011-12. It involved transfer pricing adjustment on AMP expenditure, disallowance of brand-building expenses, disallowance under Section 14A, and additions based on seized materials.

The High Court had also upheld the Tribunal's finding that no disallowance under Section 14A could be made since Pernod Ricard India had earned no exempt income in the relevant assessment years.

It further held that additions based on seized material from assessment year 2002-03 could not be sustained for later years, as there was no incriminating material relating to those assessment years.