LOUIS VUITTON INDIA RETAIL PRIVATE LIMITED,GURGAON V. DCIT CIRCLE-1(1), GURGAON

ITA 4348/DEL/2024

AI Insights

The case involves Louis Vuitton India Retail Pvt. Ltd. appealing against the final assessment order passed by the Deputy Commissioner of Income Tax (DCIT), which included significant transfer pricing adjustments. The primary contention was regarding the inclusion of certain comparables in the transfer pricing analysis and the application of the Bright Line Test for advertising, marketing, and promotion (AMP) expenditures. The Tribunal examined the selection of comparables and the application of the Bright Line Test, ultimately deciding in favor of the appellant on both counts.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396983 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2020-2021
• Other Referred Cases: Sony Ericsson Mobile Communications India Private Limited & Others, Bausch& Lomb Eye care (India) Pvt. Ltd., Whirlpool of India Ltd., Rayban Sun Optics India Ltd. Vs. CIT, Pr. CIT VS. Toshiba India Pvt. Ltd., Pr. CIT VS. Bose Corporation (India) Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROHIT GARG
• Assessee Lawyers: AJIT JAIN; INR
• Keywords: Set aside; Opportunity of being heard; Transfer pricing; International transaction; Principle of natural justice
• Section: 143(3); 139; 92C; 92D

Judgement Text

" 1 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘H’ NEW DELHI) BEFORE SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER (ITA No. 4348/Del/2024 (A.Y. 2020-21) Louis Vuitton India Retail Private Limited 901-A, 9th Floor, Time Tower, MG Road, Gurgaon, Haryana PAN: AAACL8230E Vs. DCIT Circle-1(1) Gurgaon, Haryana Appellant Respondent Assessee by Sh. Ajit Jain, CA Revenue by Sh. Rohit Garg, CIT DR Date of Hearing 26/03/2025 Date of Pronouncement 28/05/2025 ORDER PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Assessee against the final assessment order dated 23/07/2024 passed u/s 143(3) r.w.s 144C(13) read with Section 144B of the Income Tax Act, 1961 ('Act' for short) pertaining to the Assessment Year 2020-21. 2. The Grounds of Appeal are as under:- “Appeal under section 253(1) of the Income Tax Act, 1961 (\"the Act\") against the order passed under section 143(3)r.w.s 144C(13) read with section 144B of the Act dated July 23, 2024 for the Assessment Year 2020-21 passed by the Assessment Unit, Income Tax Department (\"Ld. AO\"). 2 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT 1.That the Learned Assessing Officer (\"Ld. AO\") erred in assessing the income of the Appellant for the relevant assessment year at INR 43,75,27,320 as against the returned income shown as INR 39,14,89,430. 2. The impugned assessment order passed by Ld. AO and Learned Transfer Pricing Officer (\"Ld. TPO\") are bad in law, null and void-ab-initio as being passed basis a faulty reason of reference in Computer Assisted Scrutiny Selection (\"CASS\") as well as for Transfer Pricing reference. Grounds against transfer pricing (\"TP\") adjustment 3. On facts and circumstances of the case and in law, the Ld. AO/ Learned Transfer Pricing Officer (\"Ld. TPO\") erred on facts and in law in enhancing the income of the Appellant by INR 4,34,45,060/-pertaining to international transaction of sale of goods - felt packing material that do not satisfy the arm's length principle envisaged under the Act and in doing so, have grossly erred in. 3.1. erroneously rejecting the arm's length price ('ALP\") as determined by the Appellant in the TP documentation maintained by it in terms of section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 (\"Rules\"); 3.2. conducting a fresh comparability analysis based on the application of erroneous additional /revised filters in determining the ALP for the Appellant and rejecting the filters applied by the Appellant in its TP documentation; 3.3. undertaking an opaque analysis and acting in violation of natural justice by not sharing the detailed search methodology and process used for the purpose of making impugned adjustment, thereby not allowing the sufficient opportunity to the Appellant to present its case. 3.4. erroneously including certain companies in the final comparable set that are functionally dissimilar as compared to the functional profile of the Appellant, 3 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT 3.5. disregarding various economic adjustments under Rule 10B(1) (e) (iii) and Rule 10B(3) of the Rules to account in determining the arm's length profit margin; and 3.6. disregarding judicial pronouncements in India and international guidance while undertaking the TP adjustment. 4. That on the facts and circumstances of the case and in law, the Ld. AO/Ld. TPO/ Ld. DRP erred in proposing adjustment to the income of the Appellant of INR 1,84,35,150 on protective basis alleging excess Advertisement, Marketing and Promotion (\"AMP\") expenditure and in doing so, have grossly erred in: 41. proposing the AMP adjustment, which is bad in law as the pre-requisite for applying Chapter-X Le.. existence of an international transaction between two Associated Enterprises ('AE') as envisaged under section 928 of the Act, is not satisfied, as there is no agreement, understanding or arrangement for incurrence of expenditure by the Appellant on behalf of the AE 4.2. not appreciating that assumption of existence of an international transaction without having any valid agreement as basis has been overruled by the Hon'ble High Court in numerous instances. 4.3. proposing adjustment to the income of the Appellant on protective basis without appreciating that there are no underlying provisions in the Act that support protective adjustment making the order bad in law. 4.4. not appreciating the functional and risk profile of the Appellant (ie, distributor) which is solely responsible for all key decisions and that it is the primary benefactor of all expenses (including AMP expenses) incurred by it 4.5. erroneously considering that the Appellant has rendered brand promotion services to its AE and the same requires to be compensated / remunerated on a cost-plus mark-up by the AE for rendering such services. 4 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT 4.6. erroneously stating that the Appellant is not only creating marketing intangibles in favor of the AE, but also maintaining, enhancing and promoting the brand owned by AE 4.7. violation of orders of various High Court rulings by treating the routine selling expenses incurred by the Appellant as non-routine AMP expenses which have further been assumed to have been incurred solely towards brand promotion of the AE. 4.8. proposing protective adjustment applying bright line test (\"BLT\") as a 'tool to benchmark the alleged international transaction, even though BLT is not a prescribed method under the purview of section 92C of the Act and has been rejected by the Hon'ble High Court 4.9. re-characterizing the Appellant's business profile and carrying out a flawed intensity based net margin analysis, which applies the same parameters as were used for application of bright line analysis. 4.10. not appreciating that the margins earned by the Appellant compensates it for alleged excessive AMP expenses. 4.11. erroneously not sharing detailed search methodology and wrongfully selecting the inappropriate comparable companies and applied incorrect margins for the purpose of adjustment using bright line approach and intensity based net margin analysis approach. Grounds against Corporate tax adjustment 5. That on the facts and circumstances of the case and in law, Ld. CPC has erred in making a disallowance of INR 25,92,830 on account of late deposit of employees contribution to provident fund under section 36(1)(va) of the Act. The Ld. CPC has failed to appreciate the fact that the contributions were deposited with the relevant authorities prior to the due date of filing of return of income under section 139 of the Act and is an allowable expenditure as held by various judicial precedents. 5 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT Other Grounds 6. On the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 270A and section 271AA of the Act. The above grounds are without prejudice to each other. The Appellant craves leave to alter, amend or withdraw all or any objections herein or add any further grounds as may be considered necessary either before or during the hearing.” 3. Brief facts of the case are that, the Assessee filed its return of income for Assessment Year 2020-21 by declaring total income of Rs. 39,14,89,430/-. The case of the Assessee was selected under CASS scrutiny with reasons that ‘Large value of international transactions in nature of Guarantee (TP Risk Parameter) and Foreign Remittance made to person(s) located in low tax jurisdiction countries'. As one of the reasons for selection of the case of the Assessee was ‘large value of international transaction in the nature of guarantee’, a reference was made to TPO u/s 92CA (1) of the Act for determination of Arm’s Length Price u/s 92CA(3) of the Act in respect of international transactions entered into by the Assessee during the year under consideration. The TPO vide order u/s 92CA(3) of the Act dated 31/07/2023, proposed cumulative TP adjustment of Rs. 4,34,45,060/-. Further draft assessment order u/s 144C (1) of the Act came to be passed on 21/09/2023 determining the taxable income at Rs. 43,75,27,320/- and forwarded to the Assessee. The Assessee filed its objection against the draft assessment 6 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT order passed u/s 144C of the Act before the Dispute Resolution Panel. After considering the objection of the Assessee, the DRP vide order dated 30/06/2024 issued directions u/s 144C(5) of the Act. In compliance with the directions of the DRP, a final assessment order came to be passed on 23/07/2024 u/s 143(3) r.w. Section 144C(13)r.w. Section 144B of the Act by making TP adjustment of Rs. 4,34,45,060/-. Aggrieved by the final assessment order dated 23/07/2024, the Assessee preferred the present Appeal on the Grounds mentioned above. 4. Ground No. 1 & 2 are general in nature and Ground No. 5 of the Assessee’s Appeal has been not pressed. Hence, Ground No. 1, 2 and 5 of the Assessee are dismissed. 5. Ground No. 3 is regarding TP Adjustment of Rs. 4,34,45,060/- pertaining to international transaction of sale of goods /felt packing material. The Assessee purchased felt bags for the purpose of resale to its AE and such felt bags are used as first layer covering for LV bags. During the TP study, TPO accepted all the 5comparables selected by the Assessee in its TP documentation and the same were included in the final set of comparables. The Ld. TPO included additional 10 comparables and as per the TPO, the Arm’s Length Range of total 15 comparable companies ranges from 10.49% to 17.03% with a median of 11.43%. 7 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT 6. The ld. Counsel for the Assessee vehemently submitted that the TPO has accepted all the five comparables selected by the appellant, the TP has also accepted the method selected by the appellant as well as the search process carried out by the appellant in its documentation. Further submitted that the TPO has not carried out any independent search process and there is no dispute in so far as the search methodology and the process taken by the appellant. The Ld. Assessee's Representative further submitted that the Ld. TPO itself applied a filter of ‘Screening Companies with trading income >75% from similar produce in its order, however, the economic analysis undertaken by the TPO is grossly incorrect as despite selecting the filter, the Ld. TPO has selected the Companies which are engaged in functions like manufacturing, retail which are dissimilar from the trading of goods rendered by the appellant. The Ld. Counsel for the Assessee made elaborate submissions on the 10 comparable companies selected by the Ld. TPO and also taken us through the Paper Book wherein the Annual Report of the comparables and other documents are well used. Thus, the Ld. Assessee's Representative submitted that those 10 Companies selected by the TPO should not be considered as comparable for bench marking the subject transaction. 8 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT 7. Per contra, the Ld. Department's Representative submitted that the functional comparability of all the 10 Companies selected by the TPO found to be engaged in market support services which is similar to the Assessee, therefore, those Companies have been rightly selected as comparable. The Ld. Department's Representative relying on the orders of the Lower Authorities, sought for dismissal of Ground No. 3 of the Assessee. 8. We have heard both the parties and perused the material available on record. In the Transfer Pricing Study, the Assessee has selected 5 Companies which have been accepted by the TPO and in addition to the same, the Ld. TPO added 10 more comparable and in total 15 comparable Companies have been selected for trading segment by the TPO and made the adjustment. The details of the comparable selected for trading segment are as under:- Table: Comparables selected for Trading Segment by the Ld. TPO Sl. No. Company Name TPO/TP Study OP/OC(%) 1 Vicky Fashion Ltd. TP Study -0.71% 2 A M Textiles &Knitwear’s Ltd. TP Study 3.00% 3 Kewalram Textile Pvt. Ltd. TP Study 3.95% 4 Lahoti Overseas Ltd. TP Study 5.15% 5 NandiniTexcom (India) Ltd. TP Study 5.29% 6 Shiva Suitings Ltd. TPO 10.49% 9 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT 7 NivakaFashins Ltd. TPO 10.53% 8 7NR Retail Ltd. TPO 11.34% 9 Aarnav Fashions Ltd. TPO 11.56% 10 Euro Vistaa India Ltd. TPO 17.03% 11 New India Retailing & Investment Ltd. TPO 34.05% 12 V2 Retail Ltd. TPO 44.47% 13 V-mart Retail Ltd. TPO 47.54% 14 Raymond Apparel Ltd. TPO 71.48% 15 Tengerine Design Pvt. Ltd. TPO 71.54% Median 11.34% 35th Percentile 10.49% 65th Percentile 17.03% 9. In the Ground No. 3, the Appellant seeking exclusion of 10 comparables, which were included by the TPO mentioned at Serial No. 6 to 15 of the above mentioned chart. Considering the submissions of both the parties, those comparables are adjudicated as under:- 10. Tangerine Design Private Limited This company has been held to be suitable on the ground that the above Company is engaged in the similar type of functions. Further TNMM provides wider flexibility to select comparable in terms of FAR Analysis. Further, observed that this company passes all filters. Thus, rejecting the contention of the Appellant, the TPO/A.O. retained the above Company in the final list of comparable. 10 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT 10.1. The above Company is engaged in the business of design, manufacture and export of wide range of leather goods and accessories which can be corroborated from general information provided in the Annual Report of the said Company. Further, principal business activity of the Company i.e. 100% is design manufacture and export of wide range of leather goods. Further, there is no segmental information available in its report and the principal source of revenue of the above Company is from manufacture and export of leather goods. Tangerine Design Private Limited is engaged in manufacturing of leather belts, bags and other accessories, which are not suitable for benchmarking the subject transaction of the Assessee. The pricing, value drivers, and market dynamics for branded consumer goods differ significantly from those of packaging material. Further, Tangerine Design Private Limited is not appearing in the detailed accept reject matrix for the benchmarking conducted by the Appellant for the transaction of sale of felt packing material. Apart from the same, the above Company is engaged in the business of manufacturing of leather goods, whereas the Appellant is engaged in the business of trading of felt packing material. Therefore, Tangerine Design Private Limited is not an appropriate comparable. 11 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT 11. Raymond Apparel Limited This company has been held to be suitable on the ground that the above Company is engaged in the similar type of functions. Further TNMM provides wider flexibility to select comparable in terms of FAR Analysis. Thus, rejecting the contention of the Appellant, the Ld. TPO/A.O. retained the above Company in the final list of comparables. 11.1. The above Company is engaged in the business of manufacturing of fabric. The primary source of the Revenue of operation of the Company is sale of manufactured goods. Raymond is one of the largest branded Apparel Company, it operates a highly brand-drive industry. Raymond has a wide range of operation in local as well as foreign market. The Company sells in India through independent retailers, large format stores and its own retail outlets. The above facts can be corroborated with the Annual Report of the said Company placed at the Paper Book Volume 2. The Appellant is selling felt packaging material which serve as protective outer layer for its bags, hence, the fundamental nature of business and product differs significantly. Therefore, Raymond Apparel Limited is not appropriate comparable. 12 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT 12. Shiva Suitings Limited This company has been held to be suitable on the ground that the above Company is engaged in the similar type of functions and it passes the filters. Further, TNMM provides wider flexibility to select comparable in terms of FAR Analysis. Rejecting the contention of the Appellant, the Ld. A.O/TPO retained the above Company in the final list of comparables. 12.1. The above Company is mainly engaged in the business of trading and manufacturing of textile which is evident from the Annual Report for financial year 2019-20 produced by the Appellant at Page No. 945 of Paper Book Volume 2. Since Shiv Suiting Limited is engaged in the manufacturing of textile which is not similar to the trading of goods made by the Appellant, further the segment details for its trading activity is not available in the financial statements, the said Company is not appropriate comparable. 13. V-Mart Retail Limited This company has been held to be suitable on the ground that this company is mainly engaged in similar type of functions and it is passing the filters. Further, TNMM provides wider flexibility to select comparable in terms of FAR Analysis. Thus, rejecting the contention of the Appellant, the Ld. A.O./TPO retained the above Company in the final list of comparables. 13 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT 13.1. The above Company is a retail store chain offering apparel, footwear and accessories for men, women and kids. The Company also offers a wide range of home furnishing, general merchandise, toys tableware, utensils and other home utility items which is evident from the website of the company. The above company is in retail business of readymade garments, accessories etc. and the value retailing through the chain of stores situated in various cities and the principal business activity of the company is retail sale via stall and markets. Whereas the Appellant is engaged in sale of felt packing materials to its AE, thus, the transaction of sale of felt packing material cannot be compared to a retailer as a retailer invests heavily in store operations, inventory management and has altogether a different asset base, risk profile and functional focus. 13.2 The V-Mart operates as well-known value/fashion retail chains, catering directly to price-sensitive consumers and their business model relies on brand recognition, customer’s footfall, store experience, and seasonal fashion trends. Whereas appellant is selling felt packaging material which serve as protective outer layer for its bags, apparel and accessories are finished consumer products sold in the retail market. The pricing, value drivers, and market dynamics for branded consumer goods differ significantly from those of packaging material. Since, the 14 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT fundamental nature of business and products differs significantly, the above said Company is not appropriate comparable. 14. V2 Retail Limited This company has been held to be suitable on the ground that this company is mainly engaged in similar type of functions and it is passing the filters. Further, TNMM provides wider flexibility to select comparable in terms of FAR Analysis. Thus, rejecting the contention of the Appellant, the Ld. A.O./TPO, retained the above Company in the final list of comparables. 14.1. The above Company offers large variety of smart, trendy, fashionable apparel across categories. The Company primarily operates in cities with a chain of V2 Retail stores offering apparel and general merchandise. Further, the said Company having three key produce of the company is engaged in retail trade of apparel and garments, retail trade of fashion accessories and retail trade of textile products. The above facts can be corroborated from the Annual Report of the said Company. 14.2 Further, V2 Retail Limited operates as well-known value-fashion retail chains, catering directly to price-sensitive consumers. Their business model relies on brand recognition, customer footfall, store 15 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT experience, and seasonal fashion trends. In contrast, the Appellant is selling felt packaging material which serve as protective outer layer for its bags, apparel and accessories are finished consumer products sold in the retail market. The pricing, value drivers, and market dynamics for branded consumer goods differ significantly from those of packaging material. As fundamental nature of business and product differs significantly, V2 Retail Limited cannot be an appropriate comparable. 15. 7NR Retail Limited This company has been held to be suitable on the ground that this company is mainly engaged in similar type of functions and it is passing the filters. Further, TNMM provides wider flexibility to select comparable in terms of FAR Analysis. Thus, rejecting the contention of the Appellant, the Ld. A.O/TPO, retained the above Company in the final list of comparables. 15.1. The above Company is engaged in the business of whole-selling and retailing of the readymade garments. The Company mainly deals in readymade garments, suiting shirting and other textile products, which can be corroborated from the Annual Report produced at Volume 2 of the Paper Book. The above company which is engaged in retailing of readymade garments, cannot be suitable for benchmarking the subject 16 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT transaction. The Appellant sells felt packing material used as protective outer layers, garments and finished consumer produces sold in the retail markets. The pricing value drivers and market dynamics for branded consumer goods differ significantly from those of packaging material. The above company is engaged in business of readymade garments, suiting shirting, fabrics whereas the Appellant is engaged in sales of felt packing material, therefore, the transaction of sales of felt packaging material cannot be compared to a retailer as a retailer invests heavily store operations, inventory management and has altogether has a different asset base, risk profile and functional focus. Therefore, 7NR Retail Limited cannot be an appropriate comparable. 16. New India Retailing & Investments Limited This company has been held to be suitable on the ground that this company is mainly engaged in similar type of functions and it is passing the filters. Further, TNMM provides wider flexibility to select comparable in terms of FAR Analysis. Thus, rejecting the contention of the Appellant, the Ld. A.O. /TPO retained the above Company in the final list of comparables. 17 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT 16.1. The above Company is engaged in retailing operations having designer store which has showcased worldwide fashion exhibiting the products of international brands, which can be corroborated from the information provided in the Annual Report and the website of the said Company. Thus, the New India Retailing & Investments Limited is engaged in retailing functions and the transaction of sales of felt packaging material of the Appellant cannot be compared to a retailer as retailer invests heavily in store operation, inventory management and has altogether has a different asset base, risk profile and functional focus. Further, the majority of Revenue of the New India Retailing & Investments Limited are from sale of traded products i.e. readymade garments which can be corroborated from Page No. 66 of the Annual Report of the said Company. Whereas Appellant sells felt packaging materials used as protective outer layers, garments are finished consumer products sold in the retail market. The pricing, value drivers, and market dynamics for branded consumer goods differ significantly from those of packaging material. Therefore, New India Retailing & Investments Limited cannot be an appropriate comparable. 18 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT 17. Arnav Fashions Ltd. This company has been held to be suitable on the ground that this company is mainly engaged in similar type of functions and it is passing the filters. Further, TNMM provides wider flexibility to select comparable in terms of FAR Analysis. Thus, rejecting the contention of the Appellant, the Ld. A.O./TPO retained the above Company in the final list of comparables. 17.1. The above Company operates as an integrated financial services company. The company provides diversified financial services and trading of textile, which can be corroborated from the Annual Report of the company at Page No. 920 of the Paper Book volume 2. Since, the Arnav Fashions Ltd. is engaged in business of products that are entirely different from the goods provided by the Appellant, the same cannot be an appropriate comparable. 18. Nivaka Fashions Ltd. This company has been held to be suitable on the ground that this company is mainly engaged in similar type of functions and it is passing the filters. Further, TNMM provides wider flexibility to select comparable in terms of FAR Analysis. Thus, rejecting the contention of the Appellant, the Ld. A.O./TPO retained the above Company in the final list of comparables. 19 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT 18.1. The above Company engaged in trading of textiles & luggage products, fabric trading, apparel retailing, e-commerce and stitching services, which can be corroborated from the information provided in the Annual Report of the Company. Further, the above Company is not appearing in the detailed accept reject matrix for the benchmarking conduct by the Appellant for the transaction of sale of felt packing material. Further, the Ld. TPO has not rejected the search process undertaken by the Appellant. The business of the above Company is entirely different from the business of the Appellant. Therefore, Nivaka Fashions Ltd. cannot be an appropriate comparable. 19. Euro Vistaa India Ltd. This company has been held to be suitable on the ground that this company is mainly engaged in similar type of functions and it is passing the filters. Further, TNMM provides wider flexibility to select comparable in terms of FAR Analysis. Thus, rejecting the contention of the Appellant, the Ld. A.O./TPO retained the above Company in the final list of comparables. 19.1. The above Company offers raw-white, mélange, dyed and fancy yarns made from natural, synthetic and artificial fibers. The company is mainly engaged in export/import/trading or textile products, which is 20 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT evident from Annual Report and company’s web-site. Since, the above company is engaged in wholesale of textiles, fabrics and yarns and whereas, the Appellant is not into wholesale business, Euro Vistaa India Ltd. cannot be an appropriate comparable. 20. In view of the above discussions, we direct the AO/TPO to exclude the above 10 companies included by the TPO i.e., Tangerine Design Private Limited, Raymond Apparel Limited, Shiva Suitings Limited, V- Mart Retail Limited, V2 Retail Ltd., 7NR Retail Limited, New India Retailing & Investments Ltd., Aarnav Fashions Ltd., Nivaka Fashions Ltd. and Euro Vistaa India Ltd., from the final set of comparable for determining the Arm’s Length Price in the international transaction. Accordingly we allow the Grounds of Appeal No.3 of the Assessee. 21. Ground No. 4 is regarding adjustment of Rs. 1,84,35,150/-on protective basis on the ground of excess advertisement, marketing and promotion expenditure. 22. The Ld. Counsel for the Assessee submitted that Bright Line Test does not have a statutory mandate and cannot be applied in order to determine the international transaction relate to incurring of AMP Expenses on behalf of AE. The Ld. Assessee's Representative placed reliance on Assessee’s own case for Assessment Year 2012-13 in ITA No. 21 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT 980/Del/2017, order dated 10/07/2017 and other Judgments of Hon'ble High Court of Delhi mentioned as under and sought for allowing the Ground No. 4.:- i. Sony Ericsson Mobile Communications India Private Limited & Others (ITA No. 16/2014 and connected matters) ii. Bausch& Lomb Eye care (India) Pvt. Ltd. (ITA No. 643/2014) iii. Whirlpool of India Ltd. [ITA No. 610/2014] 23. Per contra, the Ld. Departmental Representative relying on the orders of the Lower Authorities, sought for dismissal of Ground No. 4. 24. We have heard and perused the material available on record and also decisions relied by the Ld. Assessee's Representative. In Assessee’s case for Assessment Year 2012-13 (supra), the Co-ordinate Bench of the Tribunal relying on the ratio laid down by Hon’ble Jurisdictional High Court, held that ‘no transfer pricing adjustment should be made by applying Bright Line Test because the Hon’ble Jurisdictional High Court has not approved the application of Bright Line test in several decisions’. The relevant portion of the order of the Co-ordinate bench of the Tribunal in Assessee’s own case for Assessment Year 2012-13 are as under:- 22 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT “5.2 The other point urged by the Ld. AR was to decide this issue at our end as the TPO had passed order on 29.01.2016 in which he had considered certain High Court judgments on the point. Once such judgments were taken into consideration, the Ld. AR argued, that there was no point in again directing the TPO to consider the effect of the judgments delivered by the Hon'ble High Court on the point. The argument put forth on behalf of the assessee in this regard is partly correct. It is seen that though the TPO has referred to certain rulings of the Hon’ble jurisdictional High Court on the point in coming to the conclusion that there was a separate international transaction, yet, there are certain other important judgments of the Hon'ble High Court, delivered after the passing of the order by the TPO, which could not be considered, as those were not in existence at that point of time. In this regard, it is noted that there are at least three later judgments of the Hon’ble Delhi High Court, referred to above, viz., Rayban Sun Optics India Ltd. Vs. CIT (order dated 14.9.2016), Pr. CIT VS. Toshiba India Pvt. Ltd. (order dated 16.8.2016) and Pr. CIT VS. Bose Corporation (India) Pvt. Ltd. (order dated 23.8.2016) in all of which similar issue has been restored for fresh determination in the light of the earlier judgment in Sony Ericsson Mobile Communications India Pvt. Ltd. (supra). Accordingly, the contention of the Ld. AR, claiming departure from the earlier year, on this score, is not tenable. Therefore, in light of the non-sustainability of the objections taken by the Ld. AR and following the earlier view taken by the ITAT in assessment year 2010- 11 in the case of the assessee, we set aside the impugned order and remit the matter to the file of TPO/AO for a fresh determination of the question as to whether there exists an international transaction of AMP expenses. If the existence of such an international transaction is not proved, the matter will end there and then, calling for no transfer pricing addition. If, on the other hand, the international transaction is found to be existing, then the TPO will determine the ALP of such an international transaction in the light of the relevant judicial position, after allowing a reasonable opportunity of being heard to the assessee. 5.3 It is further clarified that if a situation for determining the ALP of AMP expenses arises, then no transfer pricing adjustment should be made by applying the Bright Line Test because the Hon’ble Jurisdictional High Court has not approved the application of the bright line test in several decisions.” 23 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT 25. By respectfully following the Assessee’s own case for Assessment Year 2012-13 (supra) and Judgments of Hon'ble High Court of Delhi (supra), we hold that if a situation of determining the ALP arises, then no transfer pricing adjustment should be made by applying the Bright Line Test. Accordingly Ground No. 4 is allowed. 26. In the result, the Appeal of the Assessee is partly allowed. Order pronounced in the open court on 28th May, 2025 Sd/- Sd/- (AVDHESH KUMAR MISHRA) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:-28 .05.2025 R.N, Sr.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI 24 ITA No. 4348/Del/2024 Louis Vuitton India Retail Pvt. Ltd. Vs. DCIT "