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2020 (12) TMI 517 - HC - Income TaxTP Adjustment - ITAT has remanded the matter back to TPO and directed it to consider the combined effect of 14 factors for determining the cost/ value of international transactions in accordance with order passed immediately preceding year of the respondent-assessee in LG Electronics India Pvt. Ltd. 2013 (6) TMI 217 - ITAT DELHI - HELD THAT - The said judgment of the Special Bench has already been set aside 2016 (1) TMI 582 - DELHI HIGH COURT TPO is directed to determine the cost/ value of international transactions. Accordingly, the impugned order of the ITAT is set aside to a limited extent and the TPO is directed to decide the matter in accordance with the directions contained above.
Issues:
Challenging order of ITAT remanding matter to TPO for determining cost of international transactions based on Special Bench order. Analysis: The High Court judgment dealt with an appeal challenging the order of the Income Tax Appellate Tribunal (ITAT) remanding the matter back to the Transfer Pricing Officer (TPO) to determine the cost/value of international transactions. The ITAT had directed the TPO to consider the combined effect of 14 factors for determining the cost/value of international transactions based on a Special Bench order in LG Electronics India Pvt. Ltd. vs. ACIT. However, the appellant argued that the Special Bench order had been set aside by a Division Bench in a previous judgment. The Division Bench had emphasized the need for a detailed examination of the operating agreement to ascertain the existence of an international transaction involving AMP expenses. The High Court directed the TPO to determine the cost/value of international transactions in accordance with the directions contained in the Division Bench order. The impugned order of the ITAT was set aside to a limited extent, and the TPO was instructed to decide the matter based on the Division Bench's directions. This judgment highlights the importance of following legal precedents and previous court decisions in determining the cost/value of international transactions for tax purposes. The High Court clarified the legal position regarding the determination of international transactions involving advertising, marketing, and promotional expenses (AMP expenses) and emphasized the need for a thorough examination of agreements to establish the existence of such transactions. The judgment underscores the significance of adhering to legal principles and court rulings in transfer pricing matters to ensure a fair and accurate assessment of costs and values related to international transactions. The High Court's decision provides guidance to tax authorities and businesses involved in cross-border transactions on the proper approach to determining the arm's length price (ALP) of international transactions, particularly those involving AMP expenses.
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