Facts of the Case

The Revenue filed an appeal under Section 260A of the Income-tax Act, 1961 challenging the order dated 05.06.2023 passed by the Income Tax Appellate Tribunal in ITA Nos. 7960/Del/2019 and 7961/Del/2019 relating to Assessment Years 2012–13 and 2015–16. The present appeal before the High Court concerned Assessment Year 2012–13.

The dispute related to transfer pricing adjustments made on account of intra-group services received by the assessee, M/s Avery Dennison (India) Pvt. Ltd., from its associated enterprises. The Transfer Pricing Officer determined the arm’s length price of certain intra-group services at NIL. The DRP and the ITAT ultimately deleted the adjustment, holding that services were actually rendered and that similar claims had been consistently accepted in earlier years.

Issues Involved

Whether the ITAT erred in deleting the transfer pricing adjustment on intra-group services, whether the TPO was justified in determining the arm’s length price at NIL, whether reliance on earlier years’ decisions was permissible despite pending SLPs, and whether the appeal raised any substantial question of law.

Appellant’s Arguments

The Revenue contended that the ITAT erred in holding that the intra-group services were received for commercial expediency and in observing that the TPO had re-characterised the transactions. It was argued that the ITAT failed to appreciate that the TPO had disallowed the services on multiple grounds and not merely for lack of substantiation. The Revenue further argued that reliance on earlier years was misplaced as the Supreme Court had not finally adjudicated the issue due to low tax effect.

Respondent’s Arguments

The assessee submitted that the issue of intra-group services had been consistently decided in its favour from Assessment Year 2007–08 onwards and that detailed evidence demonstrating receipt of services had been placed on record. It was argued that the ITAT had undertaken a detailed factual analysis and that the findings did not suffer from perversity.

Court Order / Findings

The Delhi High Court noted that identical issues had been raised by the Revenue in earlier assessment years and had consistently been decided in favour of the assessee. The Court relied upon its own earlier judgments, including the order dated 05.09.2024 in ITA 430/2024 arising from the same impugned ITAT order for AY 2015–16, where the appeal had already been dismissed.

The Court observed that the ITAT had given detailed reasons for accepting the assessee’s claim, including noting that the DRP had accepted the assessee’s ALP determination for certain services in earlier years and that extensive evidence of services rendered through electronic means had been furnished. The Court held that the view taken by the ITAT was a plausible one based on appreciation of evidence and that no perversity was demonstrated. It further held that the principle of consistency applied, and no justification existed to take a contrary view for the year under consideration.

Important Clarification

The Court clarified that where the ITAT records detailed factual findings on receipt of intra-group services and applies the principle of consistency across assessment years, interference under Section 260A is not warranted. Determination of arm’s length price and evaluation of evidence relating to services rendered are essentially factual matters.

Final Outcome

The appeal filed by the Revenue was dismissed. The Delhi High Court held that no substantial question of law arose for consideration for Assessment Year 2012–13 and upheld the order of the Income Tax Appellate Tribunal deleting the transfer pricing adjustment on intra-group services in favour of M/s Avery Dennison (India) Pvt. Ltd.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769503752_PRINCIPALCOMMISSIONEROFINCOMETAXDELHI1VsMSAVERYDENNISONINDIAPVT.LTD..pdf

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