Samsung India Electronics Pvt. Ltd. Vs ACIT (ITAT Delhi)
Summary: The Delhi Bench of the Income Tax Appellate Tribunal disposed of appeals and Stay Applications filed by Samsung India Electronics Pvt. Ltd. for AYs 2016-17 and 2017-18 arising from assessments involving substantial transfer pricing adjustments. The principal disputes concerned Advertising, Marketing and Promotion (AMP) expenditure, manufacturing and networking segment comparables, margin computation, foreign exchange gain, working capital adjustment, proportionate adjustment, royalty payment, expatriate employee salary and, for AY 2017-18, the use of the Berry Ratio for benchmarking networking transactions. The Tribunal held that AMP expenditure could not be treated as a separate international transaction in the absence of an arrangement, understanding or agreement with the associated enterprise requiring such expenditure for brand promotion. It consequently directed deletion of substantive and protective AMP adjustments made under the Bright Line Test and intensity-based approach. The Tribunal also directed re-computation of the manufacturing segment adjustment after specified inclusion and exclusion of comparables, excluded service companies from the networking segment and directed exclusion of Verizon Communications Pvt. Ltd. as functionally incomparable. Margin computation was remanded to the AO/TPO, while foreign exchange gain was directed to be treated as operating income and working capital adjustment was directed to be granted.
