Pr. Commissioner Of Income Tax -7 v. Sharp Business Systems (India) Pvt. Ltd

$~S-16 IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 292/2022 PR. COMMISSIONER OF INCOME TAX -7..... AppellantThrough:Mr.Puneet Rai, Sr.Standing Counsel withiMs.Adeeba Mujahid, Jr.Standing Counseland Mr.Nikhil Jain, Advocate. versus SHARP BUSINESS SYSTEMS (INDIA) PVT. LTD...... Respondent Through:Mr.Himanshu S.Sinha, Advocate withMr.Bhuwan Dhoopar, Advocate. %Date of Decision: 31[st]August, 2022 CORAM: HON’BLE MR. JUSTICE MANMOHANHON’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 dated10[th]December, 2020 passed by the Income Tax Appellate Tribunal (‘ITAT’) inITA No.1114/Del/2016 for the Assessment Year 2011-12. 2.Learned counsel for the appellant states that the ITAT has erred inrejecting the bright line test which is in substance a mere methodology ofdetermining the quantum of AMP expense by solely taking recourse to thedecision of this Court in Sony Ericsson Mobile Communication vs. CIT, 374ITR 118 (Del) and ignoring the larger issue of reimbursement of AMP expensesby the AE to the assessee. He states that the ITAT has erred in directing the exclusion of routine sales and distribution expenses when the TPO has explicitlyhighlighted that the assessee in this case necessarily trades the branded productsmanufactured by the AE and hence the benefit of any intangible created in theprocess is directly accruing to the AE. 3.He also states that the ITAT has erred in not appreciating the finding ofthe TPO where the AMP expense incurred on various advertisements andmarketing/sales promotion activities by the assessee was under the brand name‘SHARP’ and not ‘SHARP India’. 4.He further states that the ITAT has erred in its order to reject the AMPadjustment using the Bright line method by relying on the judgment in the caseof Sony Ericsson (supra) when an appeal in this case is pending adjudicationbefore the Supreme Court of India. 5.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.” 6.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.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. 7.Though the judgments of this Court have been challenged and are pendingadjudication before the Supreme Court, yet there is no stay of the said judgmentstill 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). However, it is clarified that the order passed in the present appealshall abide by the final decision of the Supreme Court in the SLP filed in thecase of Sony Ericsson (supra). MANMOHAN, J AUGUST 31, 2022TS MANMEET PRITAM SINGH ARORA, J