Tribunal's Transfer Pricing Methodology and Remand Order Under Scrutiny in High-Profile Income Tax Appeal
In a significant development, the Delhi High Court has raised critical questions regarding the Tribunal's handling of a transfer pricing dispute involving American Express Banking Corp. (India Branch) and the Deputy Commissioner of Income Tax. The court, presided over by Justices Dinesh Mehta and Rajneesh Kumar Gupta, has admitted the appeal filed by American Express, challenging the Tribunal's decision to uphold the Transfer Pricing Officer's (TPO) approach without explicitly rejecting the appellant's transfer pricing methodology.
The case, which revolves around complex transfer pricing adjustments, has brought to the fore several contentious issues related to the methodology adopted by the TPO and the Tribunal's subsequent remand order. The court has identified key questions of law, questioning whether the Tribunal erred in allowing the TPO to substitute the appellant's transfer pricing approach without clear rejection, contrary to established decisions of the High Court.
The appeal also challenges the Tribunal's decision to remand the matter to the TPO for a re-examination of evidence that is nearly a decade old, rather than making a definitive ruling on the validity of the transfer pricing adjustment. American Express contends that the Tribunal failed to recognize the differences between the current assessment year and the assessment year 2009-10, particularly in the approach adopted by the TPO.
Furthermore, the court will examine whether the Tribunal's reliance on the Bright Line Test (BLT), labeled as Comparable Uncontrolled Price (CUP), is valid given the absence of a prescribed methodology to benchmark the transactions in question. The appellant argues that the Tribunal's decision is contrary to law, as it upholds the rejection of foreign Associated Enterprises as tested parties based on unsubstantiated assumptions.
The court has stayed the effect and operation of the draft assessment order dated June 29, 2026, and has scheduled the next hearing for October 29, 2026. The outcome of this appeal could have significant implications for the interpretation and application of transfer pricing laws in India.
Bottom line:-
Transfer Pricing Adjustment - Tribunal's approach in substituting transfer pricing methodology without explicit rejection of appellant's transfer pricing methodology contrary to settled decisions of the High Court - Tribunal's order of remand questioned in light of evidence and past assessments.
Statutory provision(s): Income Tax Act, 1961, Section 151 of the Code of Civil Procedure, 1908
