2017 (11) TMI 386 - AT - Income Tax

TPA - whether AMP adjustment could be made in the case of the assessee on protective basis following the Bright Line Test (BLT)? - Held that - We find that BLT has been discarded as a method for computing arm s length price for international transactions of AMP by the Hon ble Delhi High Court in the case of Sony Ericsson Mobile Communications India Private Limited Vs. CIT (2015 (3) TMI 580 - DELHI HIGH COURT) thus, no addition could be sustained applying the BLT even on protective basis. Since in the year under consideration also, the only addition of AMP adjustment amounting to ₹ 42,90,27,103/- made applying BLT on protective basis has been challenged before us, respectfully following the above decision of the Tribunal, we direct the Assessing Officer to delete the said addition.

Summary

Issues:
1. Whether AMP adjustment could be made on a protective basis following the Bright Line Test (BLT).

Analysis:
The appeal before the Tribunal was against the order of the Assessing Officer assessing the total income of the assessee under section 143(3) of the Income Tax Act, significantly deviating from the returned income. The grounds of appeal primarily revolved around the assessment of AMP expenditure as an international transaction and the application of the Bright Line Test (BLT) for transfer pricing adjustments.

The Tribunal analyzed the case, focusing on the AMP adjustment made on a protective basis using the BLT. The assessee argued that a similar addition in a previous assessment year had been deleted by the Tribunal, making the current addition unsustainable. The Revenue, on the other hand, contended that the addition was made on a protective basis due to the pending issue of applying BLT for benchmarking international transactions of AMP.

In its decision, the Tribunal referred to previous rulings where the application of BLT for determining the arm's length price of AMP expenses had been rejected. Citing decisions by the Tribunal and High Courts, the Tribunal concluded that BLT was not a suitable method for computing arm's length price for AMP expenses. Therefore, the Tribunal directed the Assessing Officer to delete the AMP adjustment made on a protective basis following the BLT.

Consequently, the Tribunal allowed ground No. 6 of the appeal, leading to the deletion of the disputed addition. As a result, the remaining grounds raised by the assessee were deemed academic and dismissed as infructuous. The appeal was partly allowed, and the Stay Petition seeking a stay of recovery of demand was rendered infructuous. The decision was pronounced on 6th November 2017.