Msd Pharmaceuticals (P)Ltd vs Additional Commissioner Of Income Tax & Anr

S. Ravindra Bhat, J

CM No.40914/2017 (for exemption) in ITA 971/2017

CM No.40915/2017 (for exemption) in ITA 972/2017

Exemptions are allowed subject to all just exceptions.

ITA No. 971/2017 & ITA No.972/2017

Issue notice. Mr. Asheesh Jain, Advocate accepts notice.

With the consent of the parties, the matters are heard.

These two appeals â€" both by the assessee â€" concern the same Assessment Year 2011-2012. The issue involved is the transfer pricing

adjustment due to the expenditure attributed to the Advertising Marketing Promotion, held to be a part of the international transaction by the assessing

authorities in the course of the arms length price (ALP) determination process.

It is undeniable that the TPO â€" while determining the ALP, adopted ‘Bright Line Test’ (BLT) then prevailing in terms of the ruling of the

Special Bench of the Income Tax Appellate Tribunal in the case of LG Electronics. That decision was set aside by this Court in Sony Ericsson Mobile

Communications India Pvt. Ltd. vs. Commissioner of Income Tax, (2015) 374 ITR 118 (Delhi). The ITAT, in these circumstances, directed to remand

the matter to the TPO for fresh determination of the ALP, in the circumstances of the case, having regard to the substantial ruling of this Court.

The assessee’s grievance is that, firstly, for another AY 2010-11, this Court restored its appeal before the ITAT for a fresh finding on the

issues involved. The second ground urged is with respect to the matter which had obtained finality and for which the ITAT did not render any finding;

the matter ought not to be remitted to the AO.

We notice that this Court in ITA Nos.432/2017 (Pr. Commissioner of Income Tax vs. MSD Pharmaceuticals Pvt. Ltd.) and 524/2017 (MSD

Pharmaceuticals Pvt. Ltd. vs. Additional Commissioner of Income Tax) i.e. the Revenue and Assessee’s appeals for AY 2010-11, has observed

as follows:-

“4. The dispute before the Tribunal concerns the addition of transfer pricing adjustment on account of Advertisement, Marketing and

Promotion (AMP) Expenditure purportedly incurred by the Assessee. The ITAT in the impugned order has referred to the decision of this

Court in Sony Ericson Mobile Communications (India) Pvt. Ltd. v. CIT (2015) 374 ITR 118 (Del) and also some of the subsequent judgments

where the Court has held that in matters of transfer pricing the first exercise that is to be undertaken is to determine if in fact there existed

an international transaction between the Assessee at its Associated Enterprise. Only if the said question is answered in the affirmative, the

further question of determining its arm's length price would arise. Counsel on both sides state that all the necessary documents and

information for determining the above question already form part of the record of the case in the ITAT.

In view of the above submissions, the Court sets aside the order dated 22nd November, 2016 and restore the aforementioned appeal to

the file of the IT AT for a fresh de novo adjudication on merits without reference to the order of the IT AT that has been set aside by this

judgment.

It will be open to both sides to urge their respective contentions on merits before the IT AT which will be decided afresh without reference

to the order of the IT AT that has been set aside by this judgment.â€​

Following the above order in these two appeals, which was rendered on 19.07.2017, the impugned order is, hereby, modified; the ITAT shall

consider deciding the appeals on the questions urged by the parties. It goes without saying that the appellant’s contentions with respect to what it

considers to be the matters settled shall also be gone into and a finding on the merits rendered.

The appeals are partly allowed in the above terms.