LG Electronics India Pvt. Ltd Vs ACIT (ITAT Delhi)
This consolidated ITAT Delhi order covers multiple years of LG Electronics India Pvt. Ltd. & examines three recurring transfer pricing issues—AMP expenses, royalty payments, & management/HQ service charges. The TPO had treated AMP expenditure as a separate international transaction & applied the Bright Line Test to make huge TP adjustments. The Tribunal noted that in LG’s own earlier years, & as per binding Delhi High Court decisions in Sony Ericsson, Maruti Suzuki & others, AMP cannot be presumed as an international transaction without evidence of any arrangement with the AE, & BLT is invalid. Since TNMM was already applied at the entity level & accepted, no separate AMP adjustment was permissible. Accordingly, all AMP additions were deleted.
On royalty, the Tribunal followed its earlier decisions fixing an arm’s length rate around 4.05%. For years where royalty paid was within tolerance range, the claim was accepted. Only one year was remanded for factual verification of rate. Thus, royalty was largely allowed.
Regarding management / regional HQ service charges, the Tribunal held that business expediency lies with the assessee, the services were substantiated, allocation method was reasonable, & similar claims were allowed in past years. Therefore, TP adjustment was deleted.
In essence, the Tribunal held that the AO/TPO attempted to substitute their own views despite proper enquiries & judicial precedents. TNMM being accepted, no separate AMP adjustment could survive. Most assessee appeals were allowed & Revenue’s appeals were dismissed.
FULL TEXT OF THE ORDER OF ITAT DELHI
