M/S OLYMPUS MEDICAL SYSTEMS INDIA PVT LTD,GURGAON V. ASST UNIT INCOME TAX DEPT NATIOANAL FACELESS ASSESSMENT CENTRE NEW DELHI, NEW DELHI

SA 213/DEL/2025

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Olympus Medical Systems India Pvt. Ltd. filed a stay application against the recovery of an outstanding demand arising from a transfer pricing adjustment related to Advertising, Marketing, and Promotion (AMP) expenses for the assessment year 2012-13. The Tribunal considered previous rulings and the ongoing legal debate on the application of the Bright Line Test and TNMM Intensity Test for determining the Arm's Length Price (ALP) of AMP expenses. The Tribunal noted that the assessee had previously complied with similar conditions and had deposited the required amount, leading to the decision to grant a partial stay on the recovery of the outstanding demand.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 30517 (ITAT-DELHI)
• Appeal Type: Stay Application
• Pronouncement Date: 28-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Other Referred Cases: Whirlpool of India Ltd vs. CIT, Sony Ericsson Mobile Communication India Pvt. Ltd vs. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: OM PARKASH
• Assessee Lawyers: PRASHANT MEHARCHANDANI; JAINENDER SINGH KATARIA; AN AMOUNT OF RS..; . WHILE
• Keywords: Transfer pricing; International transaction; Principle of natural justice; Application of stay
• Section: 143(3); 92CA; 6; 2

Judgement Text

"1 SA no. 213/Del/2025 A.Y. 2012-13 Olympus Medical Systems India Pvt. Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: ‘I’: NEW DELHI) BEFORE SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER AND SHRI SUDHIR KUMAR, JUDICIAL MEMBER SA no. 213/Del/2025 (In ITA no. 1238/Del/2025) Assessment Year.: 2012-13 Olympus Medical Systems India Pvt. Ltd., Sector-38, the MedicityComplex,Gurugram- 122001, Haryana v. The Assessment Unit, Income Tax Department, National Faceless Assessment Centre, New Delhi PAN No: AABCO 2131 L APPLICANT RESPONDENT Assesseeby : Shri Prashant Meharchandani, Adv.; & Shri Jainender Singh Kataria, Adv. Revenue by : Shri Om Parkash, Sr. DR Date of Hearing : 28.03.2025 Date of Pronouncement : 28.03.2025 ORDER PER RAMIT KOCHAR, AM: The assessee has filed this stay application seeking stay on recovery of the outstanding demand of Rs. 3,21,37,009/- which has arisen in pursuance to assessment order for assessment year 2012-13 dated 27.12.2024 (DIN–ITBA/AST/S/143(3)/2024-25/1071601470(1)) 2 SA no. 213/Del/2025 A.Y. 2012-13 Olympus Medical Systems India Pvt. Ltd. passed by the Assessing Officer u/s 143(3) read with section 254 read with section 144B of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), which application has arisen from the ITA no. 1238/Del/2025 filed by the assessee for the assessment year 2012- 13. Computation sheet dated 27.12.2024 (DIN & Doc No. ITBA/AST/S/88/2024-25/1071604037(1)) is also enclosed. 2. It is submitted by the learned counsel for the assessee that this is third round of litigation before the Tribunal. The only addition which has been made is with respect to the TP adjustment to the tune of Rs. 5,70,78,459/-by computing Arm’s Length Price w.r.t. AMP expense. It was submitted that so far as computationof ALP with respect to AMP expenses incurred by the assessee, the Tribunal has already held in favour of the Revenue that this is an international transaction. So far as determination of the ALP with respect to TP adjustment on account of AMP expenses, it was submitted that the Hon’ble Delhi High Court has already held that ALP cannot be computed w.r.t. AMP expenses by applying Bright Line Test. Our attention was drawn to the judgment and orders of the Hon’ble Delhi High Court in the cases of Whirlpool of India Ltd(ITA No. 610/2014)and judgment and order of Sony Ericsson Mobile Communication India Pvt.Ltd v. CIT (ITA no. 16/2014; (2015)374 ITR 118). It was submitted that assessee has incurred actual AMP expenses to the tune of Rs. 6.78 crores being 9.12% of the gross sales ,while the learned DRP determined the Arm’s Length AMP expenses @ 1.45% of gross sale which amounts to the tune of Rs. 3 SA no. 213/Del/2025 A.Y. 2012-13 Olympus Medical Systems India Pvt. Ltd. 107,87,526/- by applying TNMM intensity methodology . It was submitted that the Tribunal in earlier round of appeal has already granted stay on recovery of outstanding demand in first round of litigation vide order dated 23.02.2017 in SA no. 104/Del/2017 arising out of ITA no. 890/Del/2017 for A.Y. 2012-13 , with the pre-condition that the assessee would deposit Rs. 30,00,000/-. A copy of the stay order of the Tribunal in SA no. 104/Del/2017 is placed on record by the assessee. It was submitted that the assessee has duly complied with the directions of the Tribunal ,and Rs. 30,00,000/- was duly deposited by the assesseewith the Government Treasury. It was submitted that although Bright Line test has been rejected by the Hon’ble Delhi High Court , but matter is pending before the Hon’ble Supreme Court at the behest of Revenue.The Department has in fact again applied the Bright Line Test while making ALP adjustment to AMP expenses, in different form by calling the same as TNMM Intensity Test. It was submitted that similar methodology was adopted by the Department for A.Y. 2014-15 , and the matter was restored back by the Tribunal to the TPO vide order dated 27.03.2019 in ITA no. 7414/Del/2018 for fresh adjudication. It was prayed that stay on recovery of outstanding demand be granted on similar terms and conditions on which earlier stay was granted by the Tribunal vide order dated 23.02.2017. It was submitted that the learned DRP has rejected Bright Line Test and no addition has been made on protective basis, but now TNMM intensity method was applied to compute ALP of AMP expenses incurred by the assessee which is nothing but the 4 SA no. 213/Del/2025 A.Y. 2012-13 Olympus Medical Systems India Pvt. Ltd. mirror image of BLT . Thus, it was prayed that the stay on recovery of outstanding demand be granted. Our attention was drawn to the order giving effect passed by the TRP in pursuance to the directions of the ld. DRP, as under: 4. Objection 4: Without prejudice to other grounds, the Ld. TPO has erred in not providing proportionate adjustment and adjusting the entire profit & loss account of the assessee. 4.1 Directions of the DRP: \"7(1) In view of the Panel, as has been discussed in detail on Ground of Objection No. 1. the TPO has correctly benchmarked the AMP expenses under the TNMM intensity approach as discussed at para 10 of its order by using a bundled approach under TNMM. (ii) The TPO has given detailed description of the steps followed in benchmarking the AMP expanse and for using the denominator base in the PLI calculation (AMP as percentage of Sales) which is reasonable considering the nature of the AMP expense by comparing its intensity on the sales of the assessee vis-a-vis the comparables. (iii) Hence, as the AMP expense is benchmarked under TNMM by comparing AMP/Sales %age of the assessee with the AMP/Sales %age of the comparable companies, the Panel is of the view that the arm's length price shall be the AMP expense of the assessee equal to the AMP/Salas %age of the comparable companies (iv) The approach adopted by adding a margin over and above the AMP expense incurred is not a suitable approach (V) Therefore, the Panel is of the view that the arm's length price of the AMP expense shall be 1.45% of the Sales instead of 9.27%) (or as correctly determined after adjusting for the direct selling expenses as adjudicated by the Panel in disposal of ground of Objection No. 2 & 3 (supra)). Hence, the TPO is directed to consider the arm's length price of the AMP expense at a 5 SA no. 213/Del/2025 A.Y. 2012-13 Olympus Medical Systems India Pvt. Ltd. percentage of 1.45% as determined in the case of the comparable companies at Para 11.2 of TPO Order.\" 4.2 Comments of the TPO: As directed by the Hon'ble DRP. the arm's length price of the AMP expense is taken at a percentage of 1.45% and the expenses in excess of arm's length is recomputed as below: Particulars Amount in Rs. Value of Sales Rs. 74,39,67,336 Arm's Length AMP expenses @1.45% 1,07,87,526/- Actual AMP expenses of assessee Rs.6,78,65,985/- (9.12% of gross sales) Proposed adjustment u/s 92CA on Expenditure in excess of arm's length Rs. 5,70,78,459/- 5. In view of the above, the Assessing Officer shall enhance the income of the assessee by an amount of Rs.5.70,78.459/- while computing its total income. This shall be treated as the cumulative adjustment u/s 92CA. Following the well-established Principles of Natural Justice, the assessee has been given adequate opportunities of representing its case. The Assessing Officer may examine issue of initiation of panalty under section 270A of the Income-tax Act. 1961. *** *** *** 6 SA no. 213/Del/2025 A.Y. 2012-13 Olympus Medical Systems India Pvt. Ltd. 4.6. Conclusion drawn:- Considering the above facts, assessment u/s. 143(3) rws (254) rws 92CA(3) 144B is completed and the total income of the assessee is calculated as under:- Loss returned Rs. (1,79,27,970) Add: TP Adjustment as per the Giving Effect order Rs. 5,70,78,459/- Income Assessed Rs. 3,91,50,489 3. Learned Sr. DR opposed the grant of stay on recovery of outstanding demand but fairly left the matter to the discretion of the Bench. 4. After hearing both the parties and considering the contentions made by both the parties and without adverting to the merits of the issue arising in the appeal in ITA no. 1238/Del/2025 for assessment year 2012-13 filed by the assessee, we are of the view that the assessee has made out a prima-facie case for grant of partial stay on recovery of the outstanding demand subject to pre-deposit of Rs. 30,00,000/-. The assessee has claimed that the said amount stood already deposited in compliance to the stay order in SA no. 104/Del/2017 dated 23.02.2017(challan number 11760 dated 14.03.2017 for Rs. 15,00,000/-(BSR code 0011352) in the first round of litigation ,and challan number 35234 dated 30.03.2017 for Rs. 15,00,000/- (BSR code 0013283), both challans of SBI) are placed on record by the assessee. The AO is directed to verify the aforesaid 7 SA no. 213/Del/2025 A.Y. 2012-13 Olympus Medical Systems India Pvt. Ltd. deposit of Rs. 30,00,000/- by the assessee , and we grant stay on the recovery of the balance outstanding demand for a period of 180 days or till the disposal of the corresponding appeal in ITA no. 1238/Del/2025, whichever is earlier. The appeal of the assessee in ITA no. 1238/Del/2025 is now directed to be fixed for hearing before the Division Bench on 19.05.2025, and the date was announced in the open court in the presence of both the parties. Further, the assessee will co-operate in speedy disposal of the appeal by ITAT and will not seek any un-necessary adjournments before the Tribunal in the appellate proceedings in ITA No. 1238/Del/2025. The terms of stay of demand were announced by Division Bench during the course of hearing of stay application in open Court. We once again clarify that we have not commented on the merits of the issues arising in the appeal. We order accordingly. 5. The stay application is partially allowed in the manner as indicated above. Order pronounced in the open court on 28th March, 2025. Sd/- Sd/- (SUDHIR KUMAR) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 03/04/2025. *MPV* 8 SA no. 213/Del/2025 A.Y. 2012-13 Olympus Medical Systems India Pvt. Ltd. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. DRP 5. DR 6. Guard File Asst. Registrar, ITAT, New Delhi 1. Date of dictation of Tribunal Order 02.04.2025 2. Date on which the typed draft Tribunal Order is placed before the Dictating Member 02.04.2025 3. Date on which the typed draft Tribunal Order is placed before the Other Member 03.04.2025 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6.. Date on which the signed order comes back to the Sr. P.S./P.S. 7. Date on which the final Tribunal Order is uploaded by the Sr.P.S./P.S. on official website. 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed off files on the judisis portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor(Judicial) 11. The date on which the file goes to the Assistant Registrar for endorsement of the order.. 12. Date of Dispatch of the order "