2016 (9) TMI 1293 - HC - Income Tax

Transfer pricing adjustment in the light of the then prevailing ruling in L.G. Electronics India Pvt. Ltd. v. ACIT, (2013 (6) TMI 217 - ITAT DELHI) - AMP expenses - ssessee urges that the ruling in L.G. Electronics (supra) has been preceded by the Sony Ericsson Mobile Communications India Pvt. Ltd. v. CIT (2015 (3) TMI 580 - DELHI HIGH COURT) - Held that - Having regard to the facts of the case - as discernable from the ITAT‟s order specially paragraph 3 & 4, we are of the opinion that the matter should be remitted for proper investigation in the first instance to the ITAT. It is so directed.

Summary

Issues:
- Correctness of transfer pricing adjustment in light of previous rulings
- Application of rulings in L.G. Electronics, Sony Ericsson, and Maruti Suzuki
- Remittance of the matter for proper investigation to the ITAT

Analysis:
The judgment revolves around the correctness of a transfer pricing adjustment made in respect of the assessee's declared income in light of previous rulings. The main question of law raised was whether the ITAT acted correctly in upholding the transfer pricing adjustment in line with the ruling of the Special Bench in L.G. Electronics India Pvt. Ltd. v. ACIT. The assessee argued that the ruling in L.G. Electronics was preceded by the Sony Ericsson case and emphasized that the transfer pricing adjustments in question related to AMP expenses towards manufacturing activities. Additionally, the assessee relied on the subsequent ruling in Maruti Suzuki India Ltd. v. CIT.

The counsel for the Revenue contended that the applicability of the ruling in Maruti Suzuki or the treatment of AMP expenses should be determined by the concerned Transfer Pricing Officer (TPO). The High Court, after considering the facts of the case as presented in the ITAT's order, specifically paragraphs 3 & 4, concluded that the matter required further investigation. Therefore, the High Court directed the remittance of the matter for proper investigation to the ITAT. Consequently, the appeal was allowed on these grounds, emphasizing the need for a thorough examination by the ITAT to determine the correct application of transfer pricing rules in the case.