Sony India Pvt. Ltd. Vs ACIT (ITAT Delhi)
Facts-
1. The assessee, Sony India Pvt. Ltd. (“SID”), appealed against final assessment orders for AY 2015–16 and AY 2017–18, challenging substantive and protective transfer pricing (TP) adjustments, corporate tax disallowances, and book profit computations under section 115JB. SID, a wholly owned subsidiary of Sony Corporation, Japan, is primarily engaged in distribution of consumer electronics in India and also renders advisory services to group companies.
2. International Transactions & TP Method – For FY 2014–15, SID entered into multiple cross-border transactions (including ₹7,453+ crore imports of finished goods, royalty payments, advisory services, and reimbursements) and benchmarked most using a combined TNMM approach, arguing that distribution and marketing functions were closely linked.
3. TPO’s Findings – The TPO held that SID performed additional DEMPE functions (marketing, market development, creation of intangibles) beyond routine distribution, and applied an “intensity adjustment” to comparables’ margins—similar in concept to the invalidated Brightline Test (BLT). Several of SID’s comparables were rejected and replaced, leading to a median OP/OR of 5.75%.
4. The assessee alleged multiple computational errors by the TPO, including double grossing up of credit notes, incorrect inclusion of reimbursements and unrelated expenses in operating cost, and an unjustified 5% cost mark-up. These errors allegedly understated SID’s margins (computed at –8.21%) and inflated the TP adjustment.
