2017 (5) TMI 1618 - HC - Income Tax

High Court overturns ITAT's remand decision on international transactions, stresses thorough review on merits

BACARDI INDIA PVT. LTD. Versus DEPUTY COMMISSIONER OF INCOME TAX

The High Court set aside the ITAT's decision to remand a case concerning international transactions related to AMP expenses and arm's length price ... Existence of international transaction concerning the advertisement marketing and promotion (AMP) expenses - determination of the arm's length price - ITAT remanding the issues to the Transfer Pricing Officer for a fresh consideration - Held that:- Case before ITAT was argued at length and the views of the TPO as well as the Dispute Resolution Panel (‘DRP’) were already available to the ITAT. Arguments were advanced on the strength of judgments of this Court in Sony Ericsson Mobile Communications India Pvt. Ltd. vs. Commissioner of Income Tax [2015 (3) TMI 580 - DELHI HIGH COURT] as well as a string of subsequent judgments beginning with Maruti Suzuki India Ltd v. CIT [2015 (12) TMI 634 - DELHI HIGH COURT] Main reason that weighed with the ITAT to remand the matter to the TPO was that the TPO did not have the benefit of the above decisions of this Court when the order was initially passed by the TPO is not acceptable as it can hardly be a ground for remanding the entire matter to the TPO. In fact, this was anticipated by this Court in Sony Ericsson Mobile Communications India Pvt. Ltd.(supra)it cautioned that the ITAT should not simply remand the matter to the TPO but examine it itself, particularly when the facts have already been analysed and considered and no new facts have emerged in the meanwhile. In the present case, all the facts necessary for the ITAT to form an opinion on the issues before it concerning the AMP expenditure were already before it. Remand to the TPO of the entire matter for a decision afresh appears to be unwarranted. Appeal before the ITAT is restored to its file for a decision on merits. Issues:Appeal under Section 260A of the Income Tax Act, 1961 - Existence of international transaction concerning AMP expenses and determination of arm's length price - Remand to Transfer Pricing Officer (TPO) for fresh consideration.Analysis:The appeal before the High Court concerned the order passed by the Income Tax Appellate Tribunal (ITAT) in relation to the Assessment Year 2011-12. The primary issue raised was whether the ITAT should have dealt with the matter concerning the existence of international transactions related to Advertisement, Marketing, and Promotion (AMP) expenses and the determination of the arm's length price, instead of remanding the issue to the Transfer Pricing Officer (TPO) for fresh consideration.The Court observed that the case had been extensively argued before the ITAT, with the views of the TPO and the Dispute Resolution Panel (DRP) already available. Arguments were presented based on previous judgments, including the one in Sony Ericsson Mobile Communications India Pvt. Ltd. vs. Commissioner of Income Tax and subsequent cases like Maruti Suzuki India Ltd v. CIT.Despite the ITAT's decision to remand the matter to the TPO due to the latter not having the benefit of certain court decisions at the time of the initial order, the High Court found this reasoning insufficient. Citing the Sony Ericsson case, the Court emphasized that the ITAT should not merely remand matters to the TPO without proper examination, especially when all necessary facts are already on record and no new developments have occurred.Consequently, the High Court set aside the ITAT's order to remand the matter to the TPO, deeming it unwarranted. The appeal was restored to the ITAT for a decision on merits in accordance with the law. The case was scheduled for further proceedings before the ITAT on a specified date. Ultimately, the appeal was disposed of based on the above terms, emphasizing the need for a thorough examination of the issues at hand without unnecessary remands.