PCIT Vs Sony India Private Limited (Delhi High Court)
Delhi High Court held that separate transfer pricing adjustment for AMP was uncalled for given that the distribution business of assessee was already benchmarked separately and the transaction was benchmarked correctly.
Facts- Vide the present appeal, revenue has mainly contested that the Hon’ble ITAT was justified in holding that a separate AMP adjustment was uncalled for given that the distribution business of the Respondent was already benchmarked separately, when the TPO had treated it as a separate class of transaction and benchmarked it correctly. Further, it is also contested that Hon’ble ITAT was right in directing the AO/TPO to add 20% of the reimbursement of expenses and complete the benchmarking of the international transaction when the TPO had benchmarked the AMP expenses based on Bright Line Test (“BLT”) method and the issue of AMP is still sub-judice, pending before the Hon’ble Apex Court in assessee’s own case?
Conclusion- This Court in Pr Commissioner of Income Tax-8 v. M/s Sony India Pvt Limited it is held that even according to the TPO, the AMP expenditure incurred by the respondent/assessee resulted in increased sales in India for products, albeit developed by the AE but sold by the respondent/assessee. The fact that the comparables chosen by the TPO had a net margin lower than that registered by the respondent/assessee would persuade us to hold that no upward adjustment concerning AMP expenses ought to have been made. Lastly, the application of the BLT tool, by the TPO, in determining ALP, injected the order issued by him, which was incidentally approved by the DRP, with a legal error.
