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Income Tax Appellate Tribunal, DELHI BENCH ‘I’, NEW DELHI
Before: Dr. B. R. R. KumarSh. Yogesh Kumar US
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order dated 25.01.2022 passed by the National Faceless Centre, Delhi u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961.
The assessee company is engaged in the business of manufacturing and distribution of various types of air- conditioning equipments and home appliances.
AMP Adjustment:
The TPO took seven comparables to determine the AMP/Sales in their trading segment with the AMP/Sales of the assessee and further added a margin of 5.96% using the net margin of market/advertising companies, thus, making an adjustment of Rs.3,28,37,480/- as follows:
Value of Gross Sales 1,614,118,894 AMP/Sales of the comparables 2.93% Amount that represent Bright Line 47,293,684 Expenditure on AMP by the Appellant 78,284,133 Expenditure in excess of arm’s length 30,990,449 Markup @ 5.96% 18,47,031 Proposed adjustment on AMP 32,837,480
The issue before us narrows down as to “whether Bright Line Test is a prescribed method u/s 92C or not.”
On this issue, we are guided by the judgment of Hon’ble Delhi High Court in the case of Valvoline Cummins Pvt. Ltd. Vs DCIT in ITA 158/2016 vide order dated 31.07.2017, Maruti Suzuki Ltd. Vs. CIT 381 ITR 117 (Del.), Sony Ericsson India Pvt. Ltd. Vs CIT 374 ITR 118 (Del.), Le Passage to India Tour & Travels (P) Ltd. Vs DCIT (2017) 391 ITR 207, Bausch & Lomb Eye Care (India) Pvt. Ltd. Vs. Addl. CIT (2016) 381 ITR 227 (Del.), Honda Siel Power Products Ltd. Vs. DCIT (2016) 237 Taxmann 304 and L.G. Electronics India Pvt. Ltd. Vs. ACIT (2013) 22 ITR (Trib.)1.
The Hon’ble High Court in Sony Ericsson India Pvt. Ltd. (supra) categorically found that the BLT was not an appropriate yardstick for determining the existence of an international transaction or for that matter for calculating the ALP of such transaction. The decision of the Full Bench of ITAT in L.G. Electronics India Pvt. Ltd. Vs. ACIT (supra) which sought to make BLT the basis was set aside by this Court.
Once, the BLT has been declared by the Court in Sony Ericsson India Pvt. Ltd. (supra) to no longer be a valid basis for determining the existence of or the ALP of an international transaction involving AMP expenses, the order of the TPO was unsustainable in law. Hence, the adjustment made by the TPO is liable to be deleted.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 13/03/2023.