Commercial Expediency Cannot be Rewritten by TPO: Delhi HC upholds Avery Dennison’s Intra-Group Services at Arm’s Length
The Court refused to interfere with the Tribunal’s findings, holding that the Revenue failed to raise any substantial question of law on intra-group services.
The Delhi High Court has dismissed an appeal filed under Section 260A of the IncomeTax Act, 1961, holding that no substantial question of law arose from the findings accepting the arm’s length nature of payments made towards intra-group services and rejecting the re-characterisation attempted by the Transfer Pricing Officer (TPO). The appeal was filed by the Principal...
The Delhi High Court has dismissed an appeal filed under Section 260A of the IncomeTax Act, 1961, holding that no substantial question of law arose from the findings accepting the arm’s length nature of payments made towards intra-group services and rejecting the re-characterisation attempted by the Transfer Pricing Officer (TPO).
The appeal was filed by the Principal Commissioner of Income Tax, Delhi-1, against an order dated 05.06.2023 passed by the Income Tax Appellate Tribunal (ITAT) in the case of M/s Avery Dennison (India) Private Limited, the assessee, for A.Y. 2012-13 and 2015-16.
The dispute originated from transfer pricing adjustments proposed by the TPO, who determined the arm’s length price of payments made for intra-group services as nil on the ground that the assessee had failed to establish commercial expediency and actual rendition of services. The Tribunal, after examining agreements and supporting material, deleted the additions, leading to the present appeal by the Revenue.
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The Revenue contended that the ITAT erred in deleting the transfer pricing adjustment by treating the payments for intra-group services as being at arm’s length. It was argued that the TPOhad not merely questioned commercial expediency but had concluded, on the basis of the material on record, that no services were actually rendered.
The assessee submitted that the issue of intra-group services had been consistently decided in its favour in earlier assessment years and that there was no change in facts or contractual arrangements. It was argued that comprehensive documentation, agreements and evidence demonstrating receipt of services were placed on record and duly considered by the Tribunal.
The Division Bench comprising Justice V. Kameswar Rao and Justice Mini Pushkarna observed that the issues raised by the Revenue had been repeatedly examined in earlier years in the case of the same assessee. The Court noted that neither the Dispute Resolution Panel nor the ITAT had found any justification to take a view contrary to earlier years.
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The Bench held that the TPO had failed to rely on any cogent material to support the conclusion that no services were rendered. Applying the principle of consistency, the Court concluded that no substantial question of law arose for consideration and dismissed the appeal.
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