Supreme Court Dismisses Revenue's SLPs in Samsung Transfer Pricing Case Due to 609-Day Delay

In a significant procedural setback for the Income Tax Department, the Supreme Court on 31 August dismissed the Revenue's Special Leave Petitions challenging the Delhi High Court's judgment in the Samsung India Electronics Pvt. Ltd. transfer pricing dispute. The dismissal came not on the merits of the tax controversy but on the ground of gross, unexplained delay.

A Division Bench comprising Justices J.B. Pardiwala and K. Vinod Chandran found that the Revenue had failed to provide any satisfactory explanation for delays of 609 days and 457 days in filing the two separate SLPs. The court expressly kept the questions of law open for future adjudication.

The Road to the Supreme Court

The dispute traces back to the Income Tax Appellate Tribunal's (ITAT) order dated 14 December 2020 concerning Samsung India's transfer pricing adjustments. The Revenue appealed to the Delhi High Court, which on 5 August 2024 dismissed the appeal, holding that no substantial question of law arose.

Before the High Court, the Revenue had challenged the ITAT's findings on several key issues: whether advertisement, marketing and promotion (AMP) expenditure constituted an international transaction, whether the Brightline Test could be applied to such expenditure, and whether AMP costs could be separately benchmarked when the Transactional Net Margin Method (TNMM) was applied at the segmental or entity level. The Revenue also contested the selection of comparable companies, including the exclusion of OTS E-Solutions Pvt Ltd and the inclusion of Redington India Ltd and HCL Infosystems Ltd.

The Delhi High Court upheld the ITAT's conclusions on the AMP issues, relying on its earlier precedent in Sony Ericsson Mobile Communications India Pvt. Ltd. v. Commissioner of Income Tax , and also affirmed the findings on comparable companies.

The Delay That Proved Fatal

When the Revenue sought to challenge the High Court's judgment before the Supreme Court, it faced a steep procedural hurdle. The first SLP was filed with a delay of 609 days, and the second with a delay of 457 days. The Revenue moved applications for condonation of delay, but the court found the explanations wholly insufficient.

"There is a gross delay of 609 days and 457 days respectively in filing the Special Leave Petitions which has not been satisfactorily explained by the Revenue ," the court observed in its order.

Keeping the Questions Alive

While dismissing the petitions on limitation grounds, the court made a deliberate choice to preserve the underlying legal issues for future consideration. It added: "Question of law is kept on."

This means that although the Delhi High Court's judgment in Samsung's favour stands, the Revenue is not barred from raising the same legal questions in an appropriate future case. The court's decision leaves unresolved whether AMP expenditure can be treated as an international transaction, whether the Brightline Test survives after the Sony Ericsson ruling, and how comparable companies should be selected in transfer pricing analyses.

Implications for Taxpayers and the Revenue

For Samsung India, the dismissal means the end of this particular litigation. The ITAT's order, which had been favourable to the company, remains final. For the broader taxpayer community, the Supreme Court's refusal to entertain the SLPs on delay grounds—while expressly leaving the legal questions open—signals that the Revenue cannot bypass limitation rules even for important tax disputes.

The order also underscores the high standard required for condonation of delay, especially when the delay is measured in years rather than days. As the court noted, the Revenue provided no satisfactory explanation, leaving the bench with no option but to dismiss the petitions.

With the questions of law kept open, the door remains ajar for the Revenue to pursue these arguments in a future case—provided it files within time.