ITAT Rules in Favor of MakeMyTrip: AMP Expenses Held as Revenue Expenditure, No TDS on Payment Gateway Charges

ITAT Rules in Favor of MakeMyTrip: AMP Expenses Held as Revenue Expenditure, No TDS on Payment Gateway Charges

The Income Tax Appellate Tribunal (ITAT), adjudicated a series of appeals involving M/s. Make My Trip (India) Pvt. Ltd. for multiple assessment years, primarily focusing on Assessment Year 2009-10. The Revenue challenged the deletion of significant additions made by the Transfer Pricing Officer (TPO) and the Assessing Officer (AO). Key disputes centered on Advertisement, Marketing, and Promotion (AMP) expenses, which the TPO characterized as an international transaction benefiting the foreign parent company, MMT Mauritius, rather than the Indian entity.

The Revenue contested the non-deduction of Tax Deducted at Source (TDS) on payment gateway charges paid to banks and the treatment of loyalty signing bonuses as deferred revenue income. The assessee said that it was the legal and economic owner of the ‘MakeMyTrip’ brand in India and that banking charges were standard automated services not falling under “commission” or “technical services.”

Main Issue: Whether AMP expenses incurred by an Indian brand owner qualify as an international transaction requiring TP adjustment, and whether payment gateway charges to banks are subject to TDS under Sections 194H or 195 of the Income Tax Act.

ITAT’s Ruling: The Tribunal dismissed the Revenue’s appeals, upholding the findings of the CIT (Appeals). Regarding AMP expenses, the ITAT found that since MakeMyTrip India is the registered owner and sole beneficiary of the brand in India, the “Bright Line Test” was inapplicable, and the expenses were wholly for business purposes, thus deductible as revenue expenditure.

The Bench followed its own precedent, ruling that these payments are for standard automated banking facilities and do not constitute “commission” under Section 194H, meaning no TDS was required. The Tribunal also confirmed that reimbursements to MMT USA for air ticket costs were not “Fees for Technical Services” and that ESOP expenses were legitimate business deductions.

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