2021 (3) TMI 1037 - HC - Income Tax

TP adjustment - Addition of advertising marketing and promotion expenditure ( AMP expenditure ) - Tribunal deleted the addition - HELD THAT - As per tribunal ALP of an international transaction involving AMP expenses the adjustment made by the TPO/DRP/ AO is not sustainable in the eyes of law. At the same time we cannot ignore the submission of the learned DR that the matter is pending before Hon ble Apex Court and the decision of Hon ble Apex Court would be binding upon all the authorities. We set aside the orders of authorities below and restore the matter to the file of the Assessing Officer. We hold that as per the facts of the case and the legal position as of now and discussed above in this order the adjustment made by the TPO/DRP/AO in respect of AMP expenses is not sustainable. Revenue says that the impugned order has been passed to protect the interest of the respondent/revenue in the event it were to succeed in the civil appeals pending adjudication before the Supreme Court. Senior Advocate on the other hand says that TPO was only required to give effect to the order passed by the tribunal and therefore ought not to have passed the impugned order. Does not deny that if the respondent/revenue were to succeed before the Supreme Court then consequences would follow and perhaps the adjustment made by the TPO in the transfer pricing qua AMP would have to be factored in. Having regard to the aforesaid facts and contentions of the learned counsel for the parties in our view the best way forward would be to stay the operation of the impugned order and give liberty to TPO to take next steps in the matter albeit in accordance with the law once a decision is rendered by the Supreme Court in the pending civil appeals.

Summary

Issues:
Challenge to order by Transfer Pricing Officer under Income Tax Act, 1961 regarding advertising, marketing, and promotion expenditure adjustment.

Analysis:
The writ petition challenged the order passed by the Transfer Pricing Officer (TPO) under Section 92CA (3) in compliance with the Income Tax Act, 1961. The TPO's order aimed to implement the directive of the Income Tax Appellate Tribunal (ITAT) dated 26.11.2018 concerning the assessment year 2011-2012. The ITAT's decision involved the deletion of a transfer pricing adjustment (TPA) amounting to ?21,98,34,275 related to advertising, marketing, and promotion expenditure (AMP expenditure) incurred by the petitioner-assessee. This direction was based on previous decisions by the court on the same issue, as highlighted in paragraph 16 of the ITAT's order. The tribunal emphasized that the adjustment made by the TPO/DRP/AO regarding AMP expenses was not sustainable in light of the legal position and facts of the case.

The tribunal's order referenced judgments that have been challenged by the respondent/revenue through special leave petitions pending adjudication. The TPO issued the impugned order in the context of the pending civil appeals before the Supreme Court to safeguard the interests of the revenue. The respondent/revenue argued that the TPO's order was necessary to protect their position if successful in the Supreme Court appeals. On the other hand, the petitioner's counsel contended that the TPO should have merely implemented the tribunal's order and not issued the impugned order. However, it was acknowledged that if the revenue succeeded in the Supreme Court, adjustments might need to be made by the TPO regarding transfer pricing concerning AMP.

Considering the arguments presented, the court decided to stay the operation of the impugned order and granted liberty to the TPO to proceed according to the law after the Supreme Court's decision on the pending civil appeals. The writ petition and related application were disposed of accordingly. Additionally, the petitioner's counsel assured that no objection would be raised concerning the limitation period if the revenue succeeded in the Supreme Court, with this statement being duly noted and the petitioner being bound by it.