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2022 (10) TMI 989 - HC - Income Tax


Issues Involved:

1. Whether the provisions of services of market development (advertisement, market, and business promotion - AMP) are considered international transactions under Section 92B of the Income Tax Act, 1961.

Detailed Analysis:

1. Background and Procedural History:
The appellant, Revenue, filed an appeal under Section 260A of the Income Tax Act, 1961, to set aside the ITAT's order dated 23rd October 2017 for AY 2010-11. The main question of law framed was whether AMP services are international transactions as per Section 92B of the Act.

2. Scrutiny Assessment and Transfer Pricing Adjustment:
The Assessee's case was selected for scrutiny, and the AO referred the matter to the TPO to determine the Arm's Length Price (ALP) of international transactions with its Associated Enterprises (AEs). The TPO observed that the Assessee incurred higher than normal AMP expenses to build the 'Amadeus' brand in India, which is legally owned by its AE, Amadeus Spain. The TPO concluded that these expenses constituted an international transaction and made adjustments using the Bright Line method.

3. Dispute Resolution Panel and ITAT Findings:
The AO issued a draft order incorporating the TPO's adjustments, which the Assessee contested before the DRP. The DRP upheld the AO's additions, leading to the final assessment order. The Assessee appealed to the ITAT, which allowed the appeal, relying on its earlier order for AY 2009-10, upheld by the High Court.

4. Revenue's Argument:
The Revenue argued that the ITAT erred in holding that AMP services are not international transactions, ignoring sub-clause (d) of clause (i) of Explanation to Section 92B. Despite the ITAT's previous decisions for AY 2009-10 and AY 2011-12, the Revenue contended that the principle of res judicata does not apply to tax proceedings.

5. Assessee's Argument:
The Assessee pointed to consistent ITAT decisions for AY 2009-10 and AY 2011-12, upheld by the High Court, which found no international transaction in AMP expenses. The Assessee also cited the High Court's judgments in Bausch & Lomb Eyecare Pvt. Ltd. and Maruti Suzuki, asserting there is no machinery provision for determining the ALP of AMP expenditure.

6. Court's Analysis and Conclusion:
The Court examined the ITAT's findings, which noted no change in facts and circumstances between AY 2009-10 and AY 2010-11. The ITAT found no evidence that the Assessee incurred AMP expenses to benefit its AE rather than its own business. The Court emphasized the importance of consistency and uniformity in tax matters, referencing the Supreme Court's stance in Maruti Suzuki India Ltd. and Power Links Transmission Ltd.

The Court upheld the ITAT's decision, agreeing that AMP services do not constitute international transactions under Section 92B. The Court noted that the Revenue's appeal for AY 2009-10 is pending before the Supreme Court and clarified that the present judgment would abide by the Supreme Court's final decision.

7. Final Disposition:
The appeal was disposed of, affirming the ITAT's conclusion that AMP services are not international transactions as per the provisions of Section 92B of the Income Tax Act, 1961.

 

 

 

 

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