M/S BOSE CORPORATION INDIA PVT. LTD vs. PR. COMMISSIONER OF INCOME TAX
What did the High Court hold?
The High Court held that the impugned order of the ITAT could not be sustained. It noted that the principles laid down in Sony Ericsson and Maruti Suzuki were clear and that the 'bright line test' was no longer in use. The Court directed the ITAT to examine the merits of the parties' contentions and all grounds urged before it concerning the ALP determination exercise. This examination should be conducted in light of the ruling in Sony Ericsson, as explained in Maruti Suzuki, rather than mechanically remitting the matters. The ITAT was instructed to apply its mind to the facts discernible from the TPO's findings, as confirmed by the Dispute Resolution Panel (DRP).
What were the facts?
The assessee, M/s Bose Corporation India Pvt. Ltd., filed an appeal before the High Court of Delhi against an order of the Income Tax Appellate Tribunal (ITAT). The appeal primarily concerned the determination of the Arm's Length Price (ALP) for Advertising, Marketing, and Promotion (AMP) expenditure. The ITAT had previously held that the 'bright line test', a method propounded by the Tribunal itself, was displaced following High Court rulings in Sony Ericsson Mobile Communications (India) Pvt. Ltd. vs. CIT and Maruti Suzuki India Ltd. & Anr. Vs. CIT. Consequently, the ITAT had remitted the matter back to the Transfer Pricing Officer (TPO) for fresh consideration. The assessee was also aggrieved by the ITAT's failure to adjudicate other grounds raised in its appeal.
What were the issues?
1. Whether the ITAT erred in not deciding the issue of Arm's Length Price (ALP) determination for Advertising, Marketing, and Promotion (AMP) expenditure by benchmarking on the basis of the 'bright line test' method, as propounded by the Tribunal in LG Electronics India Pvt. Ltd. v. Assistant Commissioner of Income Tax, considering the High Court's rulings in Sony Ericsson Mobile Communications (India) Pvt. Ltd vs. CIT and Maruti Suzuki India Ltd. & Anr. Vs. CIT. Assessee's contention: The assessee argued that the ITAT should have decided the ALP determination issue on merits, rather than remitting it, especially in light of established High Court precedents. The assessee also contended that the ITAT failed to adjudicate other grounds raised in its appeal. Revenue's contention: The judgment does not explicitly record the revenue's contentions regarding the specific issues.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
O R D E R %
2019
The assessee’s appeal under Section 260A of the Income Tax Act, complaining that the ITAT did not decide the issue – is principally concerned with the Armed Length Price (ALP) determination, which the Transfer Pricing Officer (TPO) in this case can apply, to the Advertising, Marketing and Promotion (AMP) expenditure by benchmarking on the basis of the pre-existing norm i.e. “the bright line test” method, propounded by the Tribunal itself in its ruling in LG Electronics India Pvt. Ltd. v. Assistant Commissioner of Income Tax, [TS-11-ITAT-2013 (Del)-TP]. The ITAT was of the opinion that the “bright line test” was displaced as it was not approved by the Division and explained in Maruti Suzuki India Ltd. & Anr. Vs. CIT, (2015) 129 Ericsson (supra) was decided almost four years ago; so was Maruti Suzuki (supra). As the principles applicable are now quite clear and the “bright line test” not in use, the ITAT should first apply its mind and decide the respective contentions of the parties on the facts discernible from the TPO’s findings, as confirmed by the DRP rather than remitting the matters mechanically altogether. In these circumstances, the Court is of the opinion that the impugned order cannot be sustained which is hereby set aside. The ITAT is directed to examine the merits of the contentions as well as all the grounds urged before it as to the ALP determination exercise, in the light of the ruling in Sony Ericsson (supra), as explained in Maruti Suzuki (supra).
The appeal is partly allowed in the above terms.
S. RAVINDRA BHAT, J
PRATEEK JALAN, J JANUARY 31, 2019/akv
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