2022 (11) TMI 1391 - HC - Income Tax

TP Adjustment - ALP of the transaction involving Advertising Marketing and Promotion (AMP) expenses - HELD THAT - This Court in Bausch Lomb Eyecare (India) Pvt. Ltd 2015 (12) TMI 1332 - DELHI HIGH COURT Sony Ericsson Mobile Communications India Pvt. Ltd. 2015 (3) TMI 580 - DELHI HIGH COURT and Maruti Suzuki India Ltd. 2015 (12) TMI 634 - DELHI HIGH COURT has held that merely because there is an incidental benefit to the foreign AE would not mean that AMP expenses have been incurred by the assessee for promoting the brand of the foreign AE . The Court further held that provisions of Chapter X cannot be invoked in cases wherein the existence of an international transaction is unable to be shown. No substantial question of law arises for consideration in the present appeal

Summary

Issues:
1. Delay in refiling appeal condonation.
2. Challenge to ITAT order on ALP of AMP expenses.
3. Interpretation of judgments in similar cases.
4. Application of Chapter X provisions.
5. Existence of international transaction involving AMP expenses.
6. Precedence of previous court judgments.
7. Consideration of pending Supreme Court case.
8. Dismissal of appeal with clarification.

1. Delay Condonation:
The High Court condoned the delay in refiling the appeal based on the averments in the application, leading to the disposal of the application.

2. Challenge to ITAT Order:
The present income tax appeal challenged the ITAT's order regarding the Arms Length Price (ALP) of Advertising, Marketing, and Promotion (AMP) expenses for the Assessment Year 2010-11. The appellant argued that the ITAT erred in its decision, especially in considering the Bright Line Test method for AMP adjustment as unsustainable while the matter is sub-judice and pending with the Supreme Court.

3. Interpretation of Judgments:
The Court referred to previous judgments like Bausch & Lomb Eyecare (India) Pvt. Ltd. and others, highlighting that incidental benefit to a foreign AE does not imply AMP expenses were incurred for promoting the brand of the foreign AE. The Court emphasized that Chapter X provisions cannot be invoked without the existence of an international transaction involving AMP expenses.

4. Application of Chapter X Provisions:
The Court reiterated that bringing an imagined transaction to tax is not feasible without an ascertainable price for an international transaction involving AMP expenses. The judgments emphasized that provisions of Chapter X cannot be applied if the existence of such a transaction is unverifiable.

5. Existence of International Transaction:
The Court held that the Revenue failed to demonstrate the existence of an international transaction involving AMP expenses between the Assessee and its AE, leading to a ruling in favor of the Assessee and against the Revenue.

6. Precedence of Previous Judgments:
Citing the judgments challenged before the Supreme Court, the Court noted that there was no stay on those judgments. The appeal was considered in light of previous decisions, leading to the dismissal of the appeal without any substantial question of law arising.

7. Consideration of Pending Supreme Court Case:
The Court considered the pending Supreme Court case related to the challenged judgments, clarifying that the present appeal's order would abide by the final decision of the Supreme Court in the pending case.

8. Dismissal of Appeal:
Ultimately, the Court dismissed the appeal, stating that no substantial question of law arose for consideration. However, it clarified that the order in the present appeal would align with the final decision of the Supreme Court in the pending case.