Facts of the Case

The Revenue filed an appeal under Section 260A of the Income-tax Act, 1961 challenging the order dated 19.07.2022 passed by the Income Tax Appellate Tribunal for Assessment Year 2017-18. The Tribunal had allowed the appeal of the respondent-assessee by relying on earlier decisions of co-ordinate benches in the assessee’s own cases, wherein adjustments made on account of Advertisement, Marketing and Promotion (AMP) expenses were deleted. The Transfer Pricing Officer had treated AMP expenditure as an international transaction and proposed adjustments using the Bright Line Test.

Issues Involved

Whether AMP expenses incurred by the assessee for brand promotion constitute an international transaction under transfer pricing provisions, whether such expenses can be separately benchmarked in the absence of tangible evidence of an agreement or arrangement with the associated enterprise, and whether any substantial question of law arose in view of settled precedents.

Petitioner’s Arguments

The Revenue contended that the Tribunal erred in deleting AMP adjustments and that excessive AMP expenditure resulted in brand building for the foreign associated enterprise. It was argued that the issue required reconsideration and that the Tribunal had wrongly relied on earlier decisions without independent analysis.

Respondent’s Arguments

The assessee submitted that identical issues had already been decided by the Delhi High Court in its own cases for earlier assessment years, including AYs 2011-12 and 2015-16. It was argued that AMP expenses do not automatically constitute an international transaction and that the Bright Line Test has been rejected by the Delhi High Court in Sony Ericsson Mobile Communications India Pvt. Ltd. and consistently followed in Casio’s cases.

Court Order / Findings

The Delhi High Court noted that identical issues had already been examined and decided in favour of the assessee in Pr. Commissioner of Income Tax-1 vs. Casio India Company Pvt. Ltd., ITA 211/2022, as well as in other connected appeals relating to different assessment years. The Court reiterated that AMP expenses cannot be treated as an international transaction in the absence of tangible material establishing an arrangement for brand building on behalf of the associated enterprise. The Court observed that the Bright Line Test has been consistently rejected and that no distinguishing feature was pointed out by the Revenue for the year under consideration. Accordingly, the Court held that no substantial question of law survived for adjudication.

Important Clarification

The Court clarified that where issues have been conclusively settled in an assessee’s own case by earlier binding decisions, subsequent appeals on identical facts do not give rise to any substantial question of law and are liable to be dismissed on grounds of judicial consistency.

Final Outcome

The appeal filed by the Revenue was dismissed. The order of the Income Tax Appellate Tribunal allowing deletion of AMP adjustments for Assessment Year 2017-18 was upheld, and it was held that no substantial question of law arose for consideration.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769505695_PR.COMMISSIONEROFINCOMETAX1VSCASIOINDIACO.PVTLTD..pdf

 

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