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Delhi ITAT allows Samsung India appeals, deletes over ₹7,800 crore tax adjustments
The Delhi bench of the has allowed appeals filed by Samsung India Electronics Pvt. Ltd. (SIEL), deleting totalling over ₹7,800 crore across assessment years 2016-17 and 2017-18. The bench, comprising Judicial Member Anubhav Sharma and Accountant Member Naveen Chandra, delivered a on , addressing recurring issues that have plagued the consumer electronics major for over a decade.
A long-running dispute over brand-building expenses
At the heart of the dispute lay the question of whether Samsung India's advertising, marketing and promotion (AMP) expenditure could be treated as a separate with its Korean parent, Samsung Electronics Co. Ltd. (SEC). The had argued that the company incurred "excessive" AMP expenditure to promote the 'Samsung' brand, which is owned by the parent entity, and sought to benchmark such expenses under both the (BLT) and an intensity-based approach.
The tribunal rejected this position outright, noting that the issue was "no longer " for the assessee, with ten prior assessment years consistently holding in Samsung India's favour. The ITAT observed that without evidence of any arrangement, understanding, or action in concert between Samsung India and its parent requiring such expenditure, the AMP spend could not be characterised as an .
"In the absence of an
as defined under the Act, no benchmarking of AMP can be undertaken,"
the tribunal held, while deleting AMP adjustments of ₹1,338.82 crore (substantive) and ₹1,783.92 crore (protective) for AY 2016-17, and ₹1,813.71 crore for AY 2017-18.
Royalty benchmarking under struck down
The tribunal also deleted the ₹1,732.93 crore royalty adjustment for AY 2016-17 and ₹2,172.68 crore for AY 2017-18. Samsung India had benchmarked royalty payments alongside other manufacturing segment transactions under , but the TPO rejected this aggregation and applied the method, relying on three third-party agreements involving agricultural biotechnology companies—Rosetta Inpharmatics, Monsanto, and Paradigm Genetics.
The ITAT found these comparables wholly unsuitable.
"These transactions are
and do not have even a modicum of similarity at transactional level,"
the bench observed, highlighting that
requires the highest level of similarity in terms of subject matter, contractual terms, and economically relevant characteristics—none of which were satisfied. The tribunal further noted that cherry-picking royalty for separate benchmarking after
had been accepted for the manufacturing segment resulted in an "
."
Networking segment: upheld, service comparables excluded
For AY 2017-18, the tribunal examined Samsung India's decision to benchmark its networking segment transactions separately—using the (GP/VAE) for equipment distribution and with OP/OC for network support services availed from SEC's Indian Project Office. The TPO had aggregated these transactions and benchmarked them against service-sector comparables, leading to an adjustment of ₹177.72 crore.
The ITAT upheld Samsung India's segregated approach, finding that the company operated as a low-risk merchanting trader in the networking segment, obtaining only "
" to goods that moved directly from the supplier to customers on a
basis. The tribunal observed that the assessee
"cannot be precluded from adopting a method different from that employed in earlier years, if such method is demonstrably more appropriate and scientific in capturing the economic substance of the underlying transactions."
The tribunal also directed the exclusion of eight service-provider comparables—including Verizon Communications, PCS Technologies, Hughes Communication, and Bharti Airtel—from the networking segment benchmarking.
"A company primarily engaged in provision of services cannot be regarded as a valid comparable for benchmarking Assessee's pre-dominantly trading-based networking business,"
the bench noted, pointing out that Verizon derived 99.99% of its revenue from services while Samsung India earned about 92% of networking revenue from trading.
Manufacturing comparables and working capital
On the manufacturing segment, the tribunal partly allowed the assessee's grounds, directing the inclusion of Value Industries, Videocon, IFB Industries, and Penguin Electronics as valid comparables, while excluding Frog Cellstat Ltd. Trend Electronics was remanded to the TPO for verification of its financial year-ending. The ITAT also directed the TPO to allow in both manufacturing and networking segments, following the principle of consistency with prior years, and to treat foreign exchange gains as operating income in line with the jurisdictional High Court's ruling in Samsung India's own case for AY 2011-12.
deleted
The tribunal deleted the ₹193.80 crore disallowance for AY 2016-17 and ₹224.65 crore for AY 2017-18 on account of salary paid to expatriate employees. The had directed the deletion of this adjustment, but the AO had ignored these binding directions to keep the issue alive. The ITAT noted that the issue had attained finality, with the revenue preferring no appeal against the tribunal's deletion of identical disallowances in AY 2014-15.
A decisive victory with re-computation directions
Both appeals were allowed in their entirety, with the ITAT directing re-computation of wherever required—particularly for manufacturing and networking segments where comparables were modified. The were dismissed as .
The ruling reinforces that consistency in transfer pricing determinations cannot override demonstrable factual and legal positions, and that revenue authorities must establish the existence of an with tangible evidence before undertaking benchmarking exercises. For multinational enterprises operating in India, the judgment provides clarity that AMP expenditure incurred in the ordinary course of domestic business—without a parent-mandated arrangement—cannot be second-guessed through artificial constructs like the .
