M/S. BOSE CORPORATION INDIA PVT. LTD.,NEW DELHI vs. ACIT, NEW DELHI

ITA 1595/DEL/2017Status: DisposedITAT Delhi23 January 2026AY 2007-0834 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Bright Line Test (BLT) is not a valid tool for calculating the Arm's Length Price (ALP) in this case. It found that the assessee's disclosed gross margins, as well as the adjusted gross margins, were substantially higher than those of the comparables for both assessment years 2007-08 and 2008-09. This significant excess in profitability indicated that the assessee was adequately compensated for the AMP expenses incurred, whether they were considered excessive or not. Therefore, the Tribunal concluded that no upward adjustment was warranted. The action of the DRP/TPO in making such adjustments could not be supported. The Tribunal also noted that the DRP had not considered the Delhi High Court's order dated 23.08.2016, which was passed prior to the DRP's order. Consequently, the upward adjustment made in the case of the assessee was struck down. The findings for AY 2007-08 were applied mutatis mutandis to AY 2008-09.

What were the facts?

The assessee, Bose Corporation India P. Ltd., a wholly-owned subsidiary of Bose Corporation, USA, is engaged in selling Bose audio products and non-Bose products for institutional customers. The assessment years under appeal are 2007-08 and 2008-09. The appeals arise from orders passed by the ACIT, Circle 5(1), New Delhi, under Section 254/143(3) r.w.s. 144C of the Income Tax Act, 1961. These are second round proceedings after the ITAT had remanded certain issues. The Transfer Pricing Officer (TPO) benchmarked the assessee's AMP expenses and proposed adjustments. The Dispute Resolution Panel (DRP) upheld the adjustments, leading to a final addition of Rs. 8,67,50,494/-. The Delhi High Court had previously dismissed revenue's appeals on certain aspects. The ITAT had directed the DRP to file a remand report on whether AMP expenses constituted an international transaction and, if so, to determine the adjustment amount.

What were the issues?

1. Whether the Assessing Officer/DRP/TPO erred in treating the Advertising, Marketing, and Promotion (AMP) expenses incurred by the assessee as an international transaction requiring adjustment under the arm's length principle, contrary to the assessee's characterization as a buy-sell distributor? 2. Whether the methodology adopted by the TPO and DRP, including the use of the Bright Line Test (BLT) and the calculation of mark-up on alleged excessive AMP expenses, was appropriate and legally sustainable? Assessee's Contentions: - The assessee argued that its activities were that of a buy-sell distributor and that its AMP expenses had not been benchmarked. It relied on the principle that if gross profit margins are adequate or exceed comparables, no upward adjustment for AMP expenses is required, citing *Sony Ericsson Mobile Communications India Private Limited v. CIT* and *Sony India (P.) Ltd.*. Revenue's Contentions: - The revenue, through the TPO and DRP, contended that the AMP expenses constituted an international transaction and sought to make upward adjustments to arm's length price (ALP) by benchmarking these expenses. The TPO initially proposed substantive and protective adjustments, and the DRP retained the protective adjustment on a substantive basis, directing a specific mark-up.

Which sections of the Income-tax Act were involved?

Section 254,Section 143(3),Section 144C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “I”NEW DELHI

Before: SHRIVIKAS AWASTHY

For Appellant: Shri Ajay Vohra, Sr. Advocate &, Shri Ravi Pratap Mall, Advocate
For Respondent: Shri Dharm Veer Singh, CIT DR
Hearing: 05.01.2026

PER SANJAY AWASTHI, ACCOUNTANT MEMBER:

1.

This is a batch of two appeals pertaining to the same assessee for AY 2007-08 & 2008-09. both the years, these two cases are being disposed of through a common

order.

2.

ITA No.1595/Del/2017 arises from order u/s 254/143(3) r.w.s. 144C of the Income Tax Act, 1961 (hereafter as “the Act”), dated 30.12.2016,

passed by Ld. ACIT, Circle 5(1), New Delhi.

No.1596/Del/2017

arises from order dated 30.12.2016, passed by Ld.

Sinc

The order continues below.

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