Facts of the Case

The Revenue filed two appeals under Section 260A of the Income-tax Act, 1961 challenging a common order dated 12.03.2025 passed by the Income Tax Appellate Tribunal in ITA No. 9727/Del/2019 for Assessment Year 2015–16 and ITA No. 670/Del/2021 for Assessment Year 2016–17. The controversy related to benchmarking of royalty paid by the assessee, Tupperware India Pvt. Ltd., to its associated enterprise.

The Transfer Pricing Officer as well as the Dispute Resolution Panel accepted the Comparable Uncontrolled Price method as the most appropriate method for benchmarking royalty but differed on the selection of comparable royalty agreements. The ITAT allowed the assessee’s appeal by accepting inclusion of certain royalty agreements operating in the same industry and geography and directed inclusion of eight comparables for determining arm’s length price.

Issues Involved

Whether the Income Tax Appellate Tribunal erred in directing inclusion of royalty comparables selected by the assessee under the CUP method, whether geographical and product similarity filters were correctly applied, and whether such findings gave rise to any substantial question of law under Section 260A.

Appellant’s Arguments

The Revenue contended that the Tribunal failed to appreciate the findings of the Transfer Pricing Officer and the Dispute Resolution Panel regarding functional and geographical dissimilarity of the comparables proposed by the assessee. It was argued that the Tribunal erred in interfering with the comparability analysis carried out by the tax authorities.

Respondent’s Arguments

The assessee submitted that the Tribunal had undertaken a detailed factual examination of royalty agreements and correctly held that comparables from the same geography and industry were valid. It was argued that the Revenue had not demonstrated any perversity in the findings and that identical issues had already been decided in favour of the assessee for earlier assessment years.

Court Order / Findings

The Delhi High Court noted that identical issues relating to benchmarking of royalty under the CUP method had already been decided against the Revenue and in favour of the assessee for Assessment Years 2013–14 and 2014–15 by earlier judgments of the Court. The Court observed that the Tribunal had carefully examined the comparability analysis, including geographical location and product similarity, and had found that the royalty agreements selected by both the Transfer Pricing Officer and the assessee pertained to the same industry, namely kitchenware and home furnishing items, and the same geographical region.

The Court held that inclusion or exclusion of comparables is a factual exercise and unless perversity is shown, such findings do not give rise to a substantial question of law. The Revenue was unable to point out any perversity in the Tribunal’s findings. Accordingly, the Court declined to interfere.

Important Clarification

The Court clarified that determination of arm’s length price through selection of comparables under the CUP method is essentially a question of fact. Where the Tribunal records well-reasoned findings based on industry similarity and geographical comparability, interference under Section 260A is not warranted.

Final Outcome

Both appeals filed by the Revenue were dismissed. The Delhi High Court held that no substantial question of law arose for consideration for Assessment Years 2015–16 and 2016–17 and upheld the order of the Income Tax Appellate Tribunal in favour of Tupperware India Pvt. Ltd.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769503596_PR.COMMISSIONEROFINCOMETAX7DELHIVsTUPPERWAREINDIAPVT.LTD..pdf

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