Facts of the Case

The Revenue filed appeals under Section 260A of the Income-tax Act, 1961 challenging the common order dated 24.02.2020 passed by the Income Tax Appellate Tribunal, Delhi Bench, deciding ITA Nos. 385/Del/2016, 341/Del/2017 and 6733/Del/2017 relating to Assessment Years 2011-12, 2012-13 and 2013-14.

The present appeals before the High Court related to Assessment Years 2012-13 and 2013-14. The Tribunal had deleted transfer pricing adjustments made on account of Advertisement, Marketing and Promotion (AMP) expenses, holding that AMP expenses did not constitute an international transaction and could not be separately benchmarked.

Issues Involved

Whether AMP expenses incurred by Casio India Company Pvt. Ltd. constituted an international transaction liable to transfer pricing adjustment, whether application of the Bright Line Test was permissible, and whether any substantial question of law arose from the ITAT’s order.

Appellant’s Arguments

The Revenue contended that the ITAT erred in deleting the AMP adjustment and argued that excessive AMP expenditure incurred by the assessee amounted to brand building for its associated enterprise. It was submitted that the Tribunal wrongly relied on earlier decisions and that the issue of AMP adjustment continued to raise substantial questions of law.

Respondent’s Arguments

The assessee relied on binding precedents of the Delhi High Court in its own cases and in Sony Ericsson Mobile Communications India Pvt. Ltd. It was submitted that the issue of AMP expenses had been conclusively settled and that the Bright Line Test stood rejected. The assessee also relied on earlier decisions of the High Court in Casio India’s own cases for other assessment years, where identical adjustments were deleted.

Court Order / Findings

The Delhi High Court noted that the appeal for Assessment Year 2011-12 arising from the same ITAT order had already been decided by the Court in Pr. Commissioner of Income Tax-1 vs. Casio India Company Pvt. Ltd., wherein the Court held that AMP expenses did not constitute an international transaction and that adjustments based on the Bright Line Test were impermissible.

The Court further observed that the issue had also been decided in favour of the assessee in Deputy Commissioner of Income Tax-5(2) vs. Casio India Company Pvt. Ltd. and that the Tribunal had merely followed binding precedent. Applying the principle of parity and judicial consistency, the Court held that no substantial question of law survived for consideration in the present appeals.

Important Clarification

The Court clarified that where the issue of AMP adjustment has been consistently decided by the High Court in favour of the assessee and the Bright Line Test has been rejected, subsequent appeals raising identical issues do not give rise to any substantial question of law.

Final Outcome

The appeals filed by the Revenue were dismissed. The Delhi High Court upheld the order dated 24.02.2020 passed by the Income Tax Appellate Tribunal deleting AMP adjustments for Assessment Years 2012-13 and 2013-14 and held that no substantial question of law arose for consideration, thereby deciding the matter in favour of Casio India Company Pvt. Ltd. and against the Revenue.

Link to download order- https://www.mytaxexpert.co.in/uploads/1769681732_PR.COMMISSIONEROFINCOMETAX1VsCASIOINDIACOMPANYPVT.LTD..pdf

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