2024 (10) TMI 869 - HC - Income Tax

TP Adjustment - AMP expenditure incurred during the year by the assessee constitute an 'International Transaction' or not? - HELD THAT - Issue pertain to Advertisement, Marketing and Promotion AMP expenditure, the same would merit being answered against the appellant bearing in mind the decision rendered 2024 (8) TMI 1461 - DELHI HIGH COURT ITAT was justified in its decision in holding that AMP (advertisement, market promotion) expenditure incurred during the year by the Assessee does not constitute an 'International Transaction' rested its view on Sony Ericsson Mobile Communications India Pvt. Ltd. 2015 (3) TMI 580 - DELHI HIGH COURT Foreign exchange gain/loss - to be considered as an item of operating revenue/cost - Those questions too stand answered against the appellant in light of the judgment rendered in ITA 206/2016 2016 (3) TMI 1272 - DELHI HIGH COURT ITAT has in the impugned order noted the fact that the foreign exchange gain earned by the Assessee is in relation to the trading items emanating from the international transactions. Since the foreign exchange loss directly resulted from trading items, it could not be considered as a non-operating loss. As noted by the Dispute Resolution Panel that the service agreement between the Associated Enterprise (AE) and the Assessee stated that for the specified products and services provided by the Assessee, it shall raise invoices on Ameriprise USA on the basis of a cost plus pricing methodology. ITAT was therefore right in holding that the AO was not justified in considering the foreign exchange loss as a non-operating cost.

Summary

Issues:
1. Condonation of delay in re-filing the appeal
2. Impugning the order of the Income Tax Appellate Tribunal regarding AMP expenditure
3. Examination of findings regarding comparables in the trading segment
4. Foreign exchange gain/loss treatment

Condonation of Delay:
The High Court condoned the delay of 807 days in re-filing the appeal after considering the disclosures made, and subsequently disposed of the application.

Impugning ITAT Order on AMP Expenditure:
The Principal Commissioner challenged the ITAT order regarding Advertisement, Marketing, and Promotion (AMP) expenditure, raising several legal questions. The Court noted that previous decisions had answered similar questions against the appellant, particularly emphasizing the decision in a previous appeal (ITA 419/2024). The Court found that questions related to AMP expenditure should be answered against the appellant, aligning with the previous rulings.

Examination of Findings on Comparables:
The Court examined the findings related to three comparables in the trading segment. The appellant, engaged in manufacturing and distributing Samsung products, was specifically concerned with the trading segment in this appeal. The Court analyzed the issues surrounding comparables in detail.

Treatment of Foreign Exchange Gain/Loss:
The Court addressed the treatment of foreign exchange gain/loss, citing a previous judgment (ITA 206/2016). The Court upheld the view that foreign exchange gain/loss should be considered as an item of operating revenue/cost, especially when related to trading items from international transactions. The Court dismissed the appeal, finding no substantial question of law raised.

In conclusion, the High Court's judgment covered various aspects, including condoning the delay in re-filing the appeal, addressing legal questions regarding AMP expenditure, examining findings related to comparables in the trading segment, and providing clarity on the treatment of foreign exchange gain/loss. The Court's decision was based on previous rulings and detailed analysis of the issues raised in the appeal.