PR. COMMISSIONER OF INCOME TAX - 9 vs. TUPPERWARE INDIA PVT. LTD

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ITA/418/2015HC DelhiDLHC01198202201516 May 2016Bench: HON'BLE DR. JUSTICE S.MURALIDHAR,HON'BLE MR. JUSTICE VIBHU BAKHRU2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court of Delhi, in the case of Commissioner of Income Tax v. Keihin Panalfa Ltd. (2016) 381 ITR 407 (Delhi), had previously clarified that transfer pricing adjustments for international transactions cannot presume that all expenses of an entity are attributable to such transactions. The adjustment must be proportionate to the international transactions' share of the total transactions. Applying this principle to the present case, even if the Revenue's argument were accepted, only 12.87% of the total operating costs would be attributable to international transactions. Given that the tax effect of this figure is below Rs. 20 lakhs, the appeal is considered not pressed in terms of Circular No. 21/2015 dated 10th December 2015. Consequently, the appeal is dismissed as not pressed. No specific issue was left undecided; the appeal was disposed of on procedural grounds related to tax effect.

What were the facts?

The appeal was filed by the Pr. Commissioner of Income Tax – 9 (Revenue) against Tupperware India Pvt. Ltd (Assessee) for the assessment year not specified. The appeal challenges an order or action not explicitly detailed but relates to transfer pricing adjustments. The procedural history indicates that the High Court of Delhi is hearing the appeal. The core of the matter revolves around the attribution of total expenses to international transactions. The Revenue's case, if accepted, suggests that only 12.87% of total operating costs can be attributed to international transactions. The tax effect of this figure is stated to be below Rs. 20 lakhs.

What were the issues?

1. Whether a transfer pricing adjustment can be made by presuming that total expenses incurred by an entity, which also carries on other transactions, should be attributed entirely to international transactions? (Question of law, concerning transfer pricing provisions). Assessee's Contention: The judgment does not record any specific contentions made by the Assessee. The decision appears to be based on a legal principle clarified by the High Court. Revenue's Contention: The Revenue's case, as presented in the judgment, suggests that a certain percentage of total operating costs (12.87%) can be attributed to international transactions. The Revenue's appeal is being treated as not pressed due to the tax effect.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

$~ * IN THE HIGH COURT OF DELHI AT NEW DELHI 22. +

ITA 418/2015, CM APPL. 31117/2015

PR. COMMISSIONER OF INCOME TAX – 9 ..... Appellant Through: Mr. Ruchir Bhatia, Sr. Standing Counsel with Mr. Puneet Rai, Adv.

versus

TUPPERWARE INDIA PVT. LTD

..... Respondent

Through: Dr. Rakesh Gupta, Adv. with Mr. Somil Agarwal, Adv. and Ms. Monika Ghai, Adv.

CORAM: JUSTICE S.MURALIDHAR JUSTICE VIBHU BAKHRU

O R D E R %

16.05.2016 1. This Court has in Commissioner of Income Tax v. Keihin Panalfa Ltd. (2016) 381 ITR 407 (Delhi) clarified that there cannot be a transfer pricing adjustment in respect of international transaction by presuming that the total expenses incurred by an entity, which is carrying on other transactions as well, should be attributed entirely to the international transactions. In other words, it was clarified that the transfer pricing adjustment should be proportionate to the percentage of international transactions constituting a portion of the total transactions.

ITA 418/2015

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2.

In the present case, given the factual situation, it transpires that if the above legal principle is applied then even accepting the case of the Revenue, only 12.87% of the total operating costs can be attributed to the costs of the international transactions. The tax effect qua the resultant figure is below Rs. 20 lakhs. Therefore in terms of Circular No. 21/2015 dated 10th December 2015, this appeal would have to be treated as not pressed. The appeal is accordingly dismissed as not pressed.

S.MURALIDHAR, J

VIBHU BAKHRU, J MAY 16, 2016 radhika

ITA 418/2015

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