Top Stories Relief to Amazon India: Delivery Cost and Warranty Expenses not part of AMP Expenditure, rules ITAT [Read Order] Advertising, Marketing and Promotion Expenses do not include Delivery Cost and Warranty Expenses By Manu Sharma – On March 15, 2024 5:00 pm – 2 mins read The Bangalore Bench of the Income Tax Appellate Tribunal ( ITAT ) made a ruling regarding the treatment of various expenses, including share-based compensation ( SBC ), depreciation, and amortization, as operating expenses. Additionally, it addressed the inclusion of delivery charges and warranty expenses in the Advertisement, Marketing, and Promotion ( AMP ) expenditure. In another case, the CIT( TP ) invoked Section 263, arguing that the Transfer Pricing Officer ( TPO ) had not properly investigated the exclusion of SBC ( in the form of ESOP cost ) and depreciation & amortization from operating costs, as well as the exclusion of delivery and warranty charges from AMP expenses when determining AMP adjustments.

The Income Tax Appellate Tribunal followed a previous ruling related to the assessee’s group company, Amazon Development Centre ( India ) Pvt. Ltd, stating that ESOP expenses are non-operating expenditures. Regarding depreciation & amortization, while the CIT( TP ) was deemed justified in exercising jurisdiction, the inclusion of these expenses as operating costs would not significantly affect the assessee’s margin, remaining within a range of +/- 3%, thus not requiring any additional adjustments.

Regarding the AMP adjustment, the Bangalore Bench of the Income Tax Appellate Tribunal ( ITAT ) noted that the TPO had conducted a thorough investigation during the TP proceedings and reiterated that delivery costs and warranty expenses are not to be considered part of AMP expenditure, as they pertain to post-sales activities and form part of sales expenditure rather than brand development. The Tribunal Bench, consisting of George George K ( Vice President ) and Laxmi Prasad Sahu ( Accountant Member ), stated that these expenses should not be considered as incurred for brand development, as they are post-sales activities and form part of sales expenditure. It was also clarified that there was no lack of inquiry in this regard. After considering all facts, the Income Tax Appellate Tribunal Bench concluded that delivery costs and warranty expenses should not be classified as part of AMP expenditure.