The Delhi High Court has held that the existence of ‘international transaction’ must be established before transfer pricing benchmarking.

The bench of Justice Yashwant Varma and Justice Harish Vaidyanathan Shankar has observed that unless the expenditure pertained to a transaction as defined by Section 92F of the Income Tax and the same meeting the thresholds prescribed therein, it would be wholly impermissible for an international transaction being presumed to exist and a benchmarking analysis being undertaken.

The fundamental question which stands posited is in respect of the AMP expenditure incurred and whether it would constitute an international transaction. On facts, there does not appear to be a serious dispute with respect to the relationship between the respondent-assessee and Fortune Brands, which was the ultimate holding company. 

Beam India Holding, the respondent-assessee, is stated to be a constituent of the Beam Global Group engaged in the business of manufacture, sale, marketing and trading of Indian Made Foreign Liquor. These products are marketed using brands owned by and licensed to it by the global entity.

The Tribunal has essentially intervened and set aside the orders of assessment in light of the department having failed to demonstrate on the basis of any tangible material that an international transaction between the assessee and its Associated Enterprise8 had come into existence. It has thus held that the existence of an international transaction cannot rest on a mere inference or surmise. 

The court held that the tribunal was justified in setting aside the orders of assessment for reasons assigned and consequently merits no interference.

Case Details

Case Title: PCIT Versus Beam Global Spirits & Wine (India) Pvt.Ltd.

Case No.:  ITA 155/2022

Date: 07/03/2025

Counsel For Appellant: Gaurav Gupta

Counsel For Respondent: Deepak Chopra 

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