Pr. Commissioner Of Income Tax -7 v. Rayban Sun Optics India Ltd

$~S-15 IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 291/2022 PR. COMMISSIONER OF INCOME TAX -7..... Appellant Through:Mr.Puneet Rai, Sr.Standing Counsel withMs.Adeeba Mujahid, Jr.Standing Counseland Mr.Nikhil Jain, Advocate. versus RAYBAN SUN OPTICS INDIA LTD. Through: ..... Respondent %Date of Decision: 31[st]August, 2022 CORAM: HON’BLE MR. JUSTICE MANMOHAN HON’BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA J U D G M E N T MANMOHAN, J: (ORAL) 1.Present Income Tax Appeal has been filed challenging the Order dated22[nd]January, 2021 passed by the Income Tax Appellate Tribunal (‘ITAT’) inITA Nos.1619/Del/2016 and 1727/Del/2016 for the Assessment Year 2007-08. 2.Learned counsel for the appellant states that the ITAT has erred in relying upon the judgment of this Court in Sony Ericsson Mobile Communication vs.CIT reported in 374 ITR 118 (Del), as the Department has not accepted thedecision passed in Sony Ericsson (supra) and has preferred an appeal against thesaid decision before the Supreme Court. 3.He also states that the ITAT has erred in holding that the Bright Line Testwas not mandated in law and hence impermissible without considering the factthat the Bright Line Test was not used as a method to determine the price butonly as an economic tool to arrive at the cost of services rendered to the foreignenterprise by the Indian entity and the TPO has the mandate to ‘determine’ such‘cost’ as a primary step in ALP determination as provided under the Rules. 4.This Court in Sony Ericsson (supra) has categorically held that BrightLine Test has no statutory mandate. The relevant extract of the judgement isreproduced hereinbelow: “The 'bright line test' has no statutory mandate and a broad-brushapproach is not mandated or prescribed. We disagree with the Revenueand do not accept the overbearing and orotund submission that theexercise to separate 'routine' and 'non-routine' AMP or brand buildingexercise by applying 'bright line test' of non-comparables should besanctioned and in all cases, costs or compensation paid for AMPexpenses would be 'NIL', or at best would mean the amount orcompensationexpresslypaidforAMPexpenses.Itwouldbeconspicuouslywrongandincorrecttotreatthesegregatedtransactional value as 'NIL' when in fact the two AEs had treated theinternational transactions as a package or a single one andcontribution is attributed to the aggregate package. Unhesitatingly, weadd that in a specific case this criteria and even zero attribution couldbe possible, but facts should so reveal and require.” 5.Further, this Court in the cases of Bausch & Lomb Eyecare (India) (P.)Ltd. vs. Addl. CIT [2016] 65 taxmann.com 141 (Delhi) following the decisionin Sony Ericsson (supra) held that the question of applying the Bright Line Testto determine the existence of an international transaction involving AMPexpenditure does not arise. 6.Though the judgments of this Court have been challenged and are pendingadjudication before the Supreme Court, yet there is no stay of the said judgments till date. Consequently, in view of the judgments passed by the Supreme Courtin Kunhayammed and Others vs. State of Kerala and Another, (2000) 6 SCC359 and Shree Chamundi Mopeds Ltd. Vs. Church of South India TrustAssociation CSI Cinod Secretariat, Madras, (1992) 3 SCC 1, the present appealis dismissed being covered by the judgments passed by the learned predecessorDivision Bench in Sony Ericsson (supra) & Bausch & Lomb Eyecare India P.Ltd. (supra). 7.However, it is clarified that the order passed in the present appeal shallabide by the final decision of the Supreme Court in the SLP filed in the case ofSony Ericsson (supra). MANMOHAN, J AUGUST 31, 2022TS MANMEET PRITAM SINGH ARORA, J