The Pr. Commissioner of Income-tax-6 v. MSD Pharmaceuticals Pvt. Ltd
[Citation -2019-LL-1011-77]

Citation 2019-LL-1011-77
Appellant Name The Pr. Commissioner of Income-tax-6
Respondent Name MSD Pharmaceuticals Pvt. Ltd.
Court HIGH COURT OF DELHI AT NEW DELHI
Relevant Act Income-tax
Date of Order 11/10/2019
Assessment Year 2014-15
Judgment View Judgment
Keyword Tags protective assessment • protective addition • bright line method • bright line test • alp adjustment • amp expenses
Bot Summary: ITA 891/2019 The Department has preferred the present appeal to assail the order dated 07.03.2019 passed by the Income Tax Appellate Tribunal Delhi Bench: I-1 , New Delhi in ITA No. 7569/Del/2018 in respect of the respondent assessee for the assessment year 2014-15. The Transfer Pricing Officer had sought to apply the Bright Line Method for determination of the price adjustment on protected basis since this Court has already rendered its decision in the case of Sony Ericsson Mobile Communications India Private Limited Vs. Commissioner of Income Tax, 374 ITR 118. The Tribunal has set aside the protective assessment made by the Assessing Officer by following its earlier decisions in the case of the assessee itself relating to assessment year 2013-14 in ITA No. 6565/Del/2017. The extract from the order passed by the Tribunal in ITA No. 6565/Del/2017 reads as follows: 6. There is no dispute that the application of bright line test, for making ALP adjustments in respect of the AMP expenses, is held to be unsustainable in law by Hon'ble jurisdictional High Court, and the TPO himself states so in so many words. In our humble understanding the concept of protective assessment', as is known to the income tax law, has no application in the cases like the one before us. Considering the fact that this Court has already rendered its decision in Sony Ericsson rejecting the adoption of the Bright Line Method by the TPO, in our view, the Assessing Officer could not have proceeded to make the protective assessment by applying the Bright Line Method.


$ 45. * IN HIGH COURT OF DELHI AT NEW DELHI + ITA 891/2019 PR. COMMISSIONER OF INCOME TAX-6 Appellant Through: Mr. Ruchir Bhatia, Advocate. versus MSD PHARMACEUTICALS PVT. LTD. Respondent Through: Ms. Rashmi Chopra and Ms. Asiya, Advocates. CORAM: HON'BLE MR. JUSTICE VIPIN SANGHI HON'BLE MR. JUSTICE SANJEEV NARULA ORDER % 11.10.2019 CM APPL. 44786/2019 Issue notice. Learned counsel for respondent accepts notice. Considering fact that delay in filing appeal is 30 days, learned counsel for respondent fairly does not oppose application. Accordingly, same is allowed. application stands disposed of. ITA 891/2019 Department has preferred present appeal to assail order dated 07.03.2019 passed by Income Tax Appellate Tribunal (ITAT) Delhi Bench: I-1 , New Delhi in ITA No. 7569/Del/2018 in respect of respondent assessee for assessment year 2014-15. Transfer Pricing Officer had sought to apply Bright Line Method for determination of price adjustment on protected basis since this Court has already rendered its decision in case of Sony Ericsson Mobile Communications India Private Limited Vs. Commissioner of Income Tax, (2015) 374 ITR 118. At same time, he applied intensity adjustment as alternative approach on substantive basis. Tribunal has set aside protective assessment made by Assessing Officer by following its earlier decisions in case of assessee itself relating to assessment year 2013-14 in ITA No. 6565/Del/2017. It appears that no further appeal was filed by Revenue from said decision. extract from order passed by Tribunal in ITA No. 6565/Del/2017 reads as follows: 6. Having heard rival contentions and having perused material on record, we are unable to see any merits in impugned ALP adjustment of Rs. 23,83,92,783 on, what has been termed as, protective basis. Learned Departmental Representative has not even disputed that issue is covered against revenue authorities by binding judicial precedents, but his worry is about protecting legitimate interests of revenue. These apprehensions, however, are not really justified. There is no dispute that application of bright line test, for making ALP adjustments in respect of AMP expenses, is held to be unsustainable in law by Hon'ble jurisdictional High Court, and TPO himself states so in so many words. It is also elementary that it is not, cannot be, open to us to disregard binding judicial precedents and uphold application of bright line test, for determining ALP adjustment in respect of AMP expenses, merely because binding judicial precedent from Hon'ble jurisdictional High Court has been challenged by revenue authorities before Hon'ble Supreme Court. binding nature of judicial precedent, as long as it holds field i.e. is not overturned, remains unaffected by whether or not it has been challenged before higher forum. As corollary to this legal position, impugned addition of Rs.23,83,92,783 must stand deleted. very concept of protective addition is relevant only when income is to be added in hands of more than one taxpayer, in situation in which there is element of ambiguity as to in whose hands said income can be rightly brought to tax. That's not case before us. In our humble understanding, therefore, concept of protective assessment', as is known to income tax law, has no application in cases like one before us. Considering fact that this Court has already rendered its decision in Sony Ericsson (supra) rejecting adoption of Bright Line Method by TPO, in our view, Assessing Officer could not have proceeded to make protective assessment by applying Bright Line Method. However, we make it clear that we have not examined legality of observation made by Tribunal in para 6 of its decision in ITA No. 6565/Del/2017, and said issue shall be considered in appropriate case. In view of aforesaid position, no question of law arises for our consideration in present appeal. Dismissed. VIPIN SANGHI, J SANJEEV NARULA, J OCTOBER 11, 2019 B.S.Rohella Pr. Commissioner of Income-tax-6 v. MSD Pharmaceuticals Pvt. Ltd
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