This legal case involves the dispute between DCIT Circle-1(1), New Delhi (Appellant) and Adidas India Marketing Pvt Ltd, located in Vasant Kunj, New Delhi (Respondent) regarding the assessment year 2014-15. The case number ITA 159/DEL/2021 was adjudicated by the Income Tax Appellate Tribunal, Delhi Bench ‘I’. The final tribunal order was pronounced on September 2, 2022.
The dispute centers on the transfer pricing adjustment pertaining to Advertisement, Marketing, and Promotion (AMP) expenses and the disallowance of buying commission. The appellant, DCIT, challenges the CIT(A)’s decision which sided with the respondent, Adidas, by dismissing the bright line approach used by the TPO in determining the arm’s length price for AMP expenses and deleting the disallowance of the buying commission.
The Tribunal in its detailed order discusses the application of judicial precedents and the principles of consistency. The Tribunal refers to its earlier decisions, notably relating to the respondent’s own cases from previous years where similar issues were addressed and resolved in favor of the taxpayer. The Tribunal emphasized the importance of consistency in judicial decisions, especially when dealing with recurring issues in tax litigation.
The Tribunal dismissed the appeal by the Revenue, upholding the CIT(A)’s order. It ruled that the adjustments proposed by the TPO on the AMP expenses were not sustainable in the eyes of the law. Additionally, the disallowance of the buying commission was also deleted, further aligning with earlier precedents which highlighted that such commission payments did not qualify as fees for technical services under the IT Act. This case sets a significant precedent for future cases involving similar disputes over AMP expenses and buying commissions in the context of transfer pricing.
This case exemplifies the intricate nature of transfer pricing disputes and the role of judicial precedents in achieving consistent and equitable outcomes in tax litigation. The decision reaffirms the Tribunal’s approach towards the treatment of AMP expenses and buying commissions, providing a clear guideline for similar cases.
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