AMWAY INDIA ENTERPRISES PRIVATE LIMITED,NEW DELHI V. DCIT, CIRCLE 1(1), DELHI / NFAC, DELHI

SA 337/DEL/2025

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Amway India Enterprises Pvt. Ltd., a subsidiary of Amway Corporation engaged in direct selling, filed a stay application against the recovery of an outstanding tax demand for the assessment year 2021-22. The demand arose from adjustments made by the Transfer Pricing Officer (TPO) regarding the Arm's Length Price (ALP) of certain international transactions, particularly related to Advertising, Marketing, and Promotion (AMP) expenses. The TPO had proposed a significant adjustment to the ALP, which was upheld by the Dispute Resolution Panel (DRP). The assessee contested these adjustments, citing consistency in treatment over several years and previous ITAT decisions that favored their position. The Tribunal, after considering the precedents and the nature of the business model, granted the stay, emphasizing the need for a detailed examination of facts during the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 705262 (ITAT-DELHI)
• Appeal Type: Stay Application
• Pronouncement Date: 04-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2021-2022
• Other Referred Cases: Sony Ericson case, Maruti Suzuki India Ltd. Vs. CIT, CIT (LTU) v. Whirlpool of India Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Transfer pricing; International transaction; Rule of consistency; Wholly owned subsidiary; Application of stay
• Section: 143(3); 6; 10; 2; 80G

Judgement Text

"1 SA No. 337/Del/2025 A.Y. 2021-22 Amway India Enterprises P Ltd. v. DCIT,Circle-1(1), Delhi IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “I”: NEW DELHI BEFORE SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER AND SHRI SUDHIR KUMAR, JUDICIAL MEMBER S.A. Nos. 337/Del/2025 ( In ITA Nos. 5912/DEL/2024) Asstt. Yr.: 2021-22 Amway India Enterprises Pvt. Ltd., Ground Floor, Elegance Tower, Plot No. 8, Non-Heirarchical Commercial Jasola, New Delhi-110025. PAN- AAACA 5603 Q v. DCIT, TP Circle 1(1)(1), New Delhi./NFAC, New Delhi APPLICANT RESPONDENT Assessee represented by Shri Sudesh Garg, Adv.; & Shri Prince Bansal, CA Department represented by Shri Vikram Singh Sharma, Sr. DR Date of hearing 04.07.2025 Date of pronouncement 04.07.2025 O R D E R PER RAMIT KOCHAR, AM: The assessee has filed this stay application bearing S.A. no. 337/Del/2025 which has arisen from ITA no. 5912/Del/2024,for assessment year 2021- 22, seeking stay on recovery of outstanding demand towards income-tax and interest, aggregating to Rs. 90,64,11,840/-. 2. The Ld. Counsel for the assessee submitted that the assessee is a wholly owned subsidiary of Amway Corporation , and is engaged in the 2 SA No. 337/Del/2025 A.Y. 2021-22 Amway India Enterprises P Ltd. v. DCIT,Circle-1(1), Delhi business of direct selling of consumer products. Amway India sells its products through Multi-level Marketing(MLM). MLM marketing allows direct sellers to build a business through their own sales efforts and inviting other to become direct sellers. The return of income was filed by the assessee for the impugned assessment year declaring total income at Rs. 77,89,22,110/- and Book Profit under MAT at Rs. 58,05,43,816/- . The case of the assessee was selected for framing scrutiny assessment through CASS. Statutory notices were issued. TPO received the reference u/s 92CA(3) from National Faceless E-Assessment Centre for determining the ALP in respect of ‘international transactions’ entered into by the assessee during the financial year 2020-21 relevant to impugned assessment year:2021-22. TPO observed that the assessee has applied TNMM as MAM for benchmarking both manufacturing and trading activities. The TPO observed that the assessed has incurred significant amount of AMP expenses, as follows: Particulars Amount in INR Lakhs Advertisement 1,373 Sales Promotion Expenses 1877 Commission 58,748 Literature, Postage and Others 884 Total 62,882 3 SA No. 337/Del/2025 A.Y. 2021-22 Amway India Enterprises P Ltd. v. DCIT,Circle-1(1), Delhi 2.2 The TPO observed that the expenditure incurred by the assesseeis part of AMP function of the assessee, because as per TPO in MLM , the commission agents are actually the marketing agents who are responsible for selling as well as popularizing the products of the brand ‘AMWAY’. The brand is owned by AE and not by the assessed. The TPO observed that since all these costs are being captured in operating profit, TNMM is the most appropriate method(MAM), with PLI of OP/OR along with intensity adjustment, as upheld by Hon’ble High Court in the case of Sony Ericson case. After giving opportunity to the assessee and perusing the material on record, The TPO observed that the commission paid by the assessee result in brand building of the brand owned by AE ,and the assessee is creating intangibles for its AE, this AMP expenditure incurred by the assessed is an international transaction. Thus, after detailed analysis as are recorded in his order dated 29.10.2023 u/s 92CA(3), the TPO proposed adjustment to ALP to the tune of Rs. 1,70,31,42,080/- towards AMP Expenditure u/s 92CA(4) on account of TP Adjustment, on substantive basis. The Draft assessment order was passed by the AO. Thereafter, the assessed filed its objection before ld. DRP u/s 144C(2)(b) of the 1961 Act. The ld. DRP upheld the adjustment proposed by the TPO to the tune ofRs. 1,70,31,42,080/- in proposing the adjustment on account of AMP expenses incurred by the assessee. There was , further, addition of Rs. 3,75,000/- made by the AO u/s 80G w.r.t. donation of Rs. 7,50,000/- (50% u/s 80G) made by the assessee and stood disallowed. The AO framed assessment order dated 28.10.2024 passed u/s 143(3) read with Section 144C(13) read 4 SA No. 337/Del/2025 A.Y. 2021-22 Amway India Enterprises P Ltd. v. DCIT,Circle-1(1), Delhi with Section 144B of the 1961 Act, making the aforesaid two additions. The learned counsel for the assessee filed its appeal with the ITAT which is listed as ITA No. 5912/Del/2024. The ld. Counsel for the assessee stated the major expenses on account of the AMP expenditure are towards commission paid to the dealers which is to the tune of Rs. 587.48 crores out of Rs. 628.82 crores. The assessee has same business model over several years which is Multi-level Marketing. The ld. Counsel for the assessee submitted that no adjustments have been made for assessment years 2009-10 to 2012-13, towards adjustment in ALP towards AMP expenditure. It was further submitted that for assessment year(s): 2013-14 and 2014-15 that the AO proposed addition towards ALP adjustment towards AMP expenses, but finally no additions were made. It was submitted by ld. Counsel for the assessed that for ay: 2015-16 , the TPO proposed additions both on substantive basis as well protective basis with respect to Adjustment to ALP towards AMP expenditure , but ld. DRP deleted the additions both on protective as well on substantive basis. It was further submitted that for ay:2016-17 the TPO itself did not treated the commission expenditure to the tune of Rs.427.07 crores to ABOs as AMP expenditure. ALP adjustment to the tune of Rs. 68.75 crores was made by the TPO taking all other AMP expenses to be non routine , but later ITAT deleted the additions made by the AO, vide order dated 30.03.2022. It was further submitted that TPO did not treated the commission amounting to Rs. 403.69 crores to ABOs as AMP expenditure, for the assessment year 2017-18. Only adjustment of Rs. 57.58 crores was 5 SA No. 337/Del/2025 A.Y. 2021-22 Amway India Enterprises P Ltd. v. DCIT,Circle-1(1), Delhi made by TPO on account of AMP by treating them as non-routine. It is stated that the appeal is pending with ld. CIT(A). It was further submitted that for ay:2018-19 ,TPO himself did not treated the commission amounting to Rs. 457.07 crores to ABOs as AMP expenditure. Only adjustment of Rs. 17.85 crores was made by the TPO by treating them to be non-routine. The appeal is pending with ld. CIT(A). It was further submitted by ld. Counsel for the assessed that no TPO/assessment proceedings were carried out by the Revenue in the case of the assessee for the assessment year 2019-20. It was further submitted that for assessment year 2020-21 , TPO made adjustment amounting to Rs. 131.72 crores on account of AMP intensity. The ld. DRP confirmed the additions. The Hon’ble ITAT vide order dated 23.04.2025 deleted the addition towards ALP adjustment towards AMP expenditure as was made by the AO, for ay: 2020-21 in ITA No. 4181/Del/2024. It was submitted that for ay: 2020-21 , the Tribunal granted stay on recovery of outstanding demand vide order dated 28.11.2024 in SA no. 429/Del/2024.It was submitted that the assessee’s business is same during the year under consideration as was in the earlier years. It was submitted that principles of consistency is to be followed. It was submitted that the Tribunal vide order dated 23.04.2025 in ITA No. 4181/Del/2024 for assessment year 2020-21 held as under: “11. We have heard the rival submissions and perused the material available on record. In the instant case, from the perusal of the chart given by the assessee, it is seen that in preceding assessment years except in one year i.e. AY 2015-16 either no adjustment was made on account of AMP expense or while making the adjustment on account of AMP expense the commission paid to distributors was not considered as part of the AMP expenses. It is for the first time, the TPO and Hon’ble DRP has uphold the inclusion of commission paid to the local distributors as 6 SA No. 337/Del/2025 A.Y. 2021-22 Amway India Enterprises P Ltd. v. DCIT,Circle-1(1), Delhi part of AMP expenses for making adjustments. The Hon’ble DRP while deleting the proposed adjustment by TPO in AMP adjustments in AY 2015-16 where such commission paid to distributors on the sales achieved by them was excluded for the purpose of AMP adjustment by observing in para 2.3.9.1 as under: “2.3.9.1 In this view of the matter, on consideration of the submissions of the assessee and observations of the TPO himself/herself in preceding assessment years, we are of the considered view that assessee being engaged in the direct sale model of business wherein commission and incentive/retail margin is paid to the distributors, only linked to sales, in the business model of the assessee, and similar cases, commission and incentives paid to distributors can at no stretch of imagination be considered as advertisement, marketing and promotion expenses. If that be so, in any business of distribution or trading the expenses incurred for creating distributors/dealers, and for enhancing distributor/dealer base or for incentivizing the distributor/dealers for increasing sales in the form of payment of commission/incentives or for rewarding good distributor/dealers would constitute AMP expenses. In view of this conclusion of ours, the TPO's conclusion in this year that the commission agents are actually the marketing agents who are responsible for selling as well as popularizing the products of the brand \"AMWAY\", and that commission \"are earned through firstly, increasing sales and secondly, through introducing new commission agents\" and that \"since a portion of this commission is in fact for introduction of new commission agents, it can be seen that a part of this commission is actually delinked from direct sales and contributing instead to brand awareness and market penetration only is not appropriate in the business model of the assessee, and therefore such conclusion of the TPO cannot be approved. As such, in our considered view the expenses on account of commission paid for creating distributors/dealers, and for enhancing distributor/dealer base or for incentivizing the distributor/dealers for increasing sales, and expenses for similar purposes booked under 'seminars', 'literature, postage and others', 'distributor training', cannot be considered as AMP expenses which could be benchmarked as an international transaction.” 12. It is further seen that the assessee in the business of selling of consumer products through MLM where persons were appointed as direct sellers who create a chain below them where they further appoint direct sellers and all the individuals coming in such chain were benefited by way of commission on the sales achieved through them. This is a unique kind of marketing technique where payment of commission is fully dependent upon the sales achieved and has nothing to do with the product building exercise. 13. With regard to the application of bright line test (though no addition is made), the Hon’ble Delhi High Court in the case of Maruti Suzuki India Ltd. Vs. CIT 381 ITR 117 (Delhi) and further the Hon’ble Delhi High Court in the case of CIT (LTU) v. Whirlpool of India Ltd., 381 ITR 154 held that bright line test is not a valid method for determination of existence of international transaction or determination of arm’s length price. Therefore, in the instant case, even otherwise though no addition has been made of bright line test on protective basis, however, by following the judgements of Hon’ble Jurisdictional High Court in above cases, we hold that bright line test cannot be applied. 7 SA No. 337/Del/2025 A.Y. 2021-22 Amway India Enterprises P Ltd. v. DCIT,Circle-1(1), Delhi 14. In the case of the assessee itself in Assessment Year 2016-17, the TP Adjustment were made on account of AMP expenses (though commission was not included in the same) where the Co- ordinate Bench of the ITAT, Delhi in ITA No.804/Del/2021 vide order dated 30.03.2022 by following the rule of consistency has deleted the TP Adjustment made by AO by observing in para 18 of the order as under: “18. From the various details furnished by the assessee in the paper book, we find no adjustment on account of AMP was made for AY 2009-10 although the assessee had same business model and the facts and circumstances of the matter are the same. The copy of the order of the TPO for AY 2009-10 is placed at page 530 of the paper book. Similarly, the perusal of the TPO order for AY 2010-11, copy of which is placed at paper book page 528, shows that no such addition on account of AMP expenses has been made. Similar is the case for AY 2011-12 and 2012-13 and the orders of the TPO are placed at pages 524 to 527 of the paper book. Similarly, perusal of the paper book page 532 shows that for AY 2013-14, an adjustment of Rs.512,47,66,707/- was proposed in the show cause notice dated 21.10.2016 on account of AMP adjustment, but, after considering the reply of the assessee and the facts and circumstances of the matter which are identical to the facts and circumstances for the year under consideration, no addition was made in the order passed by the TPO, copy of which is placed at pages 536 to 556 of the paper book. Similarly, for AY 2014-15 also no adjustment was made after considering the submissions of the assessee. We find from the various details furnished by the assessee including the TPO appeal effect order for AY 2015-16, copy of which is placed at page 497 of the paper book, that adjustment of Rs.216,39,19,833/- was made on protective basis and adjustment of Rs.226,12,38,588/- was made on substantive basis by the TPO, copy of which is placed at page 279 of the paper book. We find, after the various submissions made by the assessee, the DRP considered the entire facts and circumstances of the matter in exhaustive details and deleted both substantive and protective addition. Copy of the DRP order is placed at page 431 of the paper book. The TPO has already passed the order giving effect to the order of the DRP and, in the final order passed by the TPO, no adjustment on account of AMP has been made, the details of which have already been reproduced in the preceding paragraph. Therefore, in view of the rule of consistency from AY 2009-10 to 2015-16 and considering the fact that the assessee had the same business model and the facts and circumstances of the matter for the impugned assessment year are the same, we set aside the order of the AO/TPO/DRP and direct the AO/TPO to delete the addition.” 15. In view of the fact that the commission paid was not AMP expenses and further looking to the past history of the assessee and by following the principle of the consistency and by respectfully following the aforesaid judgements of various Courts on this principle, we hold that AMP expenses including the amount of commission paid to distributors at Rs. 439.08 crores are not international transaction. Accordingly, we set aside the order of TPO/AO/DRP and delete the addition made at Rs.131,72,21,192/- made by TPO/AO toward AMP adjustment. The Ground of appeal No.1 of the assessee is allowed.” 8 SA No. 337/Del/2025 A.Y. 2021-22 Amway India Enterprises P Ltd. v. DCIT,Circle-1(1), Delhi 2.3 So, far as other issue of disallowance of donations to the tune of Rs. 7,50,000/- for which deduction to the tune of Rs. 3,75,000/- u/s 80G, it was submitted that the said donation was part of CSR expenditure, and now the Tribunal has in several decisions held that there is no bar on claiming deduction of CSR Expenditure u/s 80G, provided all the conditions as stipulated u/s 80G are met . 2.4 Thus, it was prayed that the stay on the recovery of the outstanding demand be granted, and department be restrained from taking any coercive measure against the assessee. 3. The ld. Sr. DR could not controvert the above position , but , however, submitted that the assessee be directed to deposit the entire outstanding demand. 4. After hearing both the parties and without commenting on the merits of the issue , we are of the view that the assessee has made out a prima facie case for grant of stay on recovery of outstanding demand as prima- facie it appears that the issues in the appealfor the year under consideration are covered in favour of the assessee by the order of the Tribunal in the preceding assessment year:2020-21 in ITA no. 4181/Del/2024 dated 23.04.2025. So far as disallowance of donations are concerned, the Tribunal has taken a view in large number of cases that despite being part of CSR expenditure, the same could be allowed u/s 80G of the 1961 Act if the other conditions as are stipulated u/s 80G are met 9 SA No. 337/Del/2025 A.Y. 2021-22 Amway India Enterprises P Ltd. v. DCIT,Circle-1(1), Delhi and there is no absolute bar that CSR expenditure are to be disallowed keeping in Explanation 2 to Section 37(1). However, the Tribunal being last fact finding authority will delve on the facts in details on both the issues, while adjudicating the appeal for the year under consideration, and at this stage we refrain from commenting on the merits of the issue. The ld. Sr. DR could not bring on record any material to take a prima-facie different view on the matter. Thus,we are inclined to grant stay on recovery of the outstanding demand for a period of 180 days or till disposal of the corresponding appeal, whichever is earlier.Needless to say that the assessee will co-operate in early disposal of its appeal in ITA No. 5912/Del/2024 for assessment year 2021-22, and the assessee will not seek any un-necessary adjournment.We once again clarify and reiterate that we have not commented on the merits of the issues in the appeal. We order accordingly. 5. Stay petition filed by the assessee is allowed in the manner indicated above. Order pronounced in open court on 04.07.2025. Sd/- Sd/- (SUDHIR KUMAR ) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 09.07.2025. *MP* 10 SA No. 337/Del/2025 A.Y. 2021-22 Amway India Enterprises P Ltd. v. DCIT,Circle-1(1), Delhi Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "