Facts of the Case

The present appeals were filed by the Revenue challenging a common order passed by the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2011-12.

The central issue revolved around whether routine selling and distribution expenses should be included within Advertising, Marketing and Promotion (AMP) expenses for the purpose of transfer pricing analysis.

The Revenue contended that such expenses contributed to the creation of marketing intangibles and therefore should be considered as part of AMP expenses.

Issues Involved

  1. Whether routine selling and distribution expenses form part of AMP expenses under transfer pricing provisions.
  2. Whether the ITAT erred in excluding such expenses from AMP calculations.
  3. Whether the issue was already covered by binding precedent of the jurisdictional High Court.

Petitioner’s Arguments (Revenue)

  • The ITAT erred in holding that routine selling and distribution expenses are not part of AMP expenses.
  • Such expenses contribute to the creation of marketing intangibles.
  • Different accounting heads should not affect comparability analysis in transfer pricing.

Respondent’s Arguments (Assessee)

  • The issue raised by the Revenue does not arise in one of the appeals.
  • The matter is already covered by earlier judgments of the Delhi High Court in assessee’s own case.
  • The settled law laid down in Sony Ericsson Mobile Communications (India) Pvt. Ltd. vs. CIT (2015) 374 ITR 118 (Del) applies squarely.

Court’s Findings / Judgment

  • The Court observed that the issue is already covered by binding precedent of the Delhi High Court.
  • The reliance was placed on:
    • Sony Ericsson Mobile Communications (India) Pvt. Ltd. vs. CIT (2015)
    • Earlier judgment in assessee’s own case (AY 2009-10)
  • The Court held:
    • Mere pendency of appeal before the Supreme Court does not dilute the binding nature of the High Court judgment unless stayed.
    • Following Supreme Court rulings in:
      • Kunhayammed vs. State of Kerala (2000)
      • Shree Chamundi Mopeds Ltd. vs. Church of South India Trust (1992)
  • Result:
    • ITA No. 331/2022: Dismissed as covered by binding precedent
    • ITA No. 330/2022: Dismissed as not maintainable

Important Clarification by Court

  • The order shall be subject to the final outcome of the Supreme Court decision in:
    Canon India Pvt. Ltd. vs. Deputy Commissioner of Income Tax (Civil Appeal No. 132/2016).

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3670-DB/MMH14092022ITA3302022_193410.pdf

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