Sony India Private Limited V. Assistant Commissioner of Income Tax

ITA/177/2023

AI Insights

The case involves Sony India Private Limited appealing against the order of the ITAT, which had not adequately addressed several grounds of appeal related to transfer pricing adjustments and the application of the Bright-line Test. The appellant challenged the ITAT's decision, arguing that it failed to consider the impact of its rulings on the earlier grounds of appeal and did not adjudicate on significant issues concerning transfer pricing adjustments related to Advertising, Marketing, and Promotion (AMP) expenses and royalty payments. The High Court found that the ITAT had indeed overlooked these grounds and remitted the matter back for a thorough examination. Additionally, the court noted that the issue of the Bright-line Test had been conclusively addressed in a previous ruling and thus did not require further discussion in this appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 679875 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 23-01-2025
• Assessment Year: misc
• Other Referred Cases: Sony Ericsson Mobile Communications India P. Ltd. vs. CIT (374 ITR 118), Sony Ericsson Mobile Communications India P. Ltd. vs. CIT [2015 SCC OnLine Del 8083]
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RUCHIR BHATIA; ANANT MANN; ABHISHEK ANAND
• Assessee Lawyers: NAGESWAR RAO; ANSHIKA AGARWAL
• Keywords: AMP adjustment; Bright Line Test; Income Tax; Royalty Payment; Transactional Net Margin Method; Transfer pricing
• Section: 147; 148; 143(3); 153A; 68

Judgement Text

"ITA 177/2023 Page 1 of 3 $~30 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 177/2023 SONY INDIA PRIVATE LIMITED .....Appellant Through: Mr. Nageswar Rao and Ms. Anshika Agarwal, Advs. versus ASSISTANT COMMISSIONER OF INCOME TAX .....Respondent Through: Mr. Ruchir Bhatia, SSC with Mr. Anant Mann, JSC and Mr. Abhishek Anand, Adv. CORAM: HON'BLE MR. JUSTICE YASHWANT VARMA HON'BLE MR. JUSTICE HARISH VAIDYANATHAN SHANKAR O R D E R % 23.01.2025 1. The appellant/assessee impugns the order of the Income Tax Appellate Tribunal [„ITAT‟] dated 17 October 2022 and poses the following questions of law for our consideration: - “(a) Whether impugned order is perverse and not in accordance with law to the extent it concludes that grounds of appeal nos. 1 to 40.6 have become otiose, even while noting that decision in grounds of appeal nos. 40 to 40.6 will have an impact on ground of appeal nos. 1 to 39? (b) Whether Tribunal erred in not adjudicating grounds of appeal nos. 3 to 39 raised challenging transfer pricing adjustment made (both on substantive and protective basis) in relation AMP adjustment? (c) Whether Tribunal, after deleting separate transfer pricing adjustment made towards royalty payment by application of CUP method, ought to have held that royalty expenditure need not be considered as cost for application of Transactional Net Margin Method (hereinafter referred to as „TNNM‟)? (d) Without prejudice to above, whether Tribunal erred in not adjudicating grounds of appeal nos. 15 and 33 (seeking exclusion This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 27/01/2025 at 12:02:57 ITA 177/2023 Page 2 of 3 of (i) United Telelinks (Bangalore) Pvt. Ltd. and (ii) OTS E- Solutions Pvt. Ltd.) and 21 and 36 (seeking exclusion of Fcbulka Advertising Pvt. Ltd.) which were argued by the Appellant during the course of hearing? (e) Without prejudice to question of law (d), whether Tribunal failed in not following consistent approach for ground of appeal nos. 15, 21, 33, 36 raised in relation to adjustment made towards AMP expenses, as in the context of comparables relating to international transaction of provision of advisory services (refer para 36 to 38 of impugned order), even though directions of Dispute Resolution Panel (hereinafter referred to as „DRP‟) and the submissions of both parties remained identical? (f) Whether Tribunal erred in not adjudicating grounds of appeal nos. 23-39 challenging protective adjustment applying BLT which deserved to be finally and conclusively allowed following decision of Hon‟ble Delhi High Court in case of Sony Ericsson Mobile Communications India (P.) Ltd. vs. CIT (374 ITR 118)?” 2. However, by the time the appeal was taken up for final consideration today, Mr. Rao, learned counsel for the appellant submitted that insofar as Grounds 23 to 39 as taken in the appeal were concerned, the same pertained to the applicability of the Bright-line Test and which issue has been authoritatively ruled upon by this Court in Sony Ericsson Mobile Communications India P. Ltd. vs. CIT [2015 SCC OnLine Del 8083]. According to learned counsel, the said decision would clearly bind, notwithstanding the appeal of the Department which is pending consideration before the Supreme Court. 3. The grievance of the appellant essentially is in respect of the conclusions rendered by the Tribunal insofar as Grounds 1 to 39 are concerned. It becomes pertinent to note that the Tribunal at the outset had an occasion to observe that the outcome of Grounds 40 to 40.6 would have an impact on the issues as comprised in Grounds 1 to 39. 4. However, and while proceeding to ultimately allow Grounds 40 to 40.6 in favour of the appellants, it has failed to render any finding with respect to Grounds 1 to 39 on merits and has merely observed This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 27/01/2025 at 12:02:57 ITA 177/2023 Page 3 of 3 that they had become „otiose‟. To this extent, it is conceded by the respondents also that there has been an inadvertent failure on the part of the Tribunal to engage with and rule on Grounds 1 to 39. 5. In view of the aforesaid submission, we set aside the order of the Tribunal to the aforesaid extent and remit the matter back for consideration of Grounds 1 to 39 as taken in the appeal preferred by the appellant. 6. Insofar as the issues emanating from the applicability of the Bright-line Test are concerned, the same need not be independently examined in this appeal in light of the position in law at least and insofar as this Court is concerned having been settled by its decision in Sony Ericsson. 7. The appeal shall stand disposed of on the aforesaid terms. YASHWANT VARMA, J. HARISH VAIDYANATHAN SHANKAR, J. JANUARY 23, 2025/akc This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 27/01/2025 at 12:02:57 "