2019 (10) TMI 1536 - HC - Income Tax

Court upholds appeal despite delay, rejects Bright Line Method, emphasizes legal unsustainability. Precedents key.

The Court allowed the appeal filed by the Department despite a 30-day delay in filing. The Tribunal's decision to set aside the protective assessment ... TP Adjustment - adoption of the Bright Line Method - determination of the price adjustment on protected basis - HELD THAT:- This Court has already rendered its decision in Sony Ericsson [2015 (3) TMI 580 - DELHI HIGH COURT] rejecting the adoption of the Bright Line Method by the TPO, in our view, the AO could not have proceeded to make the protective assessment by applying the Bright Line Method. However, we make it clear that we have not examined the legality of the observation made by the Tribunal and the said issue shall be considered in an appropriate case. Issues:1. Delay in filing the appeal.2. Application of Bright Line Method for price adjustment.3. Protective assessment made by the Assessing Officer.4. Tribunal's decision in ITA No. 6565/Del/2017.5. Legality of the observation made by the Tribunal.6. Dismissal of the appeal.1. Delay in filing the appeal:The Department filed an appeal challenging the order passed by the Income Tax Appellate Tribunal (ITAT) for the assessment year 2014-15. The delay in filing the appeal was 30 days, which was accepted by the respondent's counsel without opposition. The Court allowed the application due to the acknowledged delay.2. Application of Bright Line Method for price adjustment:The Transfer Pricing Officer applied the Bright Line Method for price adjustment on a protective basis. However, the Tribunal set aside this protective assessment, citing previous decisions and judicial precedents. The Tribunal emphasized that the Bright Line Method was held to be unsustainable in law by the jurisdictional High Court, and the concept of protective assessment was deemed irrelevant in this case.3. Protective assessment made by the Assessing Officer:The Assessing Officer made a protective assessment using the Bright Line Method, which was deemed inappropriate by the Court based on previous rulings. The Court clarified that the Assessing Officer should not have proceeded with the protective assessment using the Bright Line Method, as it had been rejected in a previous case.4. Tribunal's decision in ITA No. 6565/Del/2017:The Tribunal's decision in ITA No. 6565/Del/2017 was referenced, where the Tribunal had ruled against the Revenue authorities' ALP adjustment. The Tribunal emphasized the binding nature of judicial precedents and the need to adhere to them unless overturned by a higher forum. The Tribunal's decision in this case was crucial in determining the outcome of the present appeal.5. Legality of the observation made by the Tribunal:The Court did not examine the legality of the observation made by the Tribunal in para 6 of its decision in ITA No. 6565/Del/2017. It was stated that this issue would be considered in an appropriate case, indicating that the specific legal aspects raised by the Tribunal's observation would be addressed separately when necessary.6. Dismissal of the appeal:Ultimately, the Court dismissed the appeal as it had already rendered a decision rejecting the adoption of the Bright Line Method by the Transfer Pricing Officer. The Court clarified that no question of law arose for consideration in the present appeal, leading to the dismissal of the case.In conclusion, the judgment addressed various issues related to the application of the Bright Line Method for price adjustment, the validity of protective assessments, adherence to judicial precedents, and the dismissal of the appeal based on existing legal decisions and interpretations.