Introduction:

In a recent ruling, the Delhi High Court dismissed a transfer pricing demand raised against Casio India Company Pvt. Ltd., a wholly-owned subsidiary of the Japanese watchmaker, relating to advertising, marketing, and promotion (AMP) expenses for the assessment year 2017-18. The Division Bench comprising Justice V. Kameswar Rao and Justice Vinod Kumar observed that the matter had been settled in Casio’s favour in previous years, and principles of parity necessitated similar treatment in the present case. The decision reflects the Court’s adherence to precedent and consistency in transfer pricing disputes, and reinforces the application of settled principles under the Income Tax Act to recurring issues between a taxpayer and the Revenue.

The present matter was adjudicated before the Delhi High Court, involving the Pr. Commissioner of Income Tax-1 as the appellant and Casio India Company Pvt. Ltd. as the respondent. Casio India, a subsidiary of the global Japanese watchmaker, faced a transfer pricing adjustment on the contention that the company had claimed AMP expenses that allegedly benefitted its foreign Associated Enterprise (AE). The Revenue sought to compute an upward adjustment by invoking the Bright Line Test and claiming that such AMP expenses amounted to an international transaction requiring arm’s length benchmarking. Casio India, represented by Advocates Kamal Sawhney and Puru Medhira, opposed the demand, arguing that the matter had been conclusively addressed in earlier years, including assessment years 2011-12, 2012-13, 2013-14, and 2014-15, and relied upon binding judicial precedents. The Revenue, represented by Advocates Sanjay Kumar, Monica Benjamin, and Easha, argued for revisiting the AMP expense adjustments in line with prior appeals pending before the High Court.

Arguments of the Revenue (Appellant):

The Revenue contended that Casio India had incurred AMP expenses which indirectly benefited its foreign Associated Enterprise, thereby qualifying as an international transaction under Section 92B of the Income Tax Act, 1961. It submitted that the Transfer Pricing Officer (TPO) had rightly applied the Bright Line Test to compute an upward adjustment to reflect arm’s length pricing. The appellant emphasized that two earlier appeals involving Casio India for assessment years 2011-12 and 2015-16 had raised similar issues, which had been admitted for consideration by the High Court. The Revenue argued that the repeated nature of the AMP expenses meant that the principle of arm’s length benchmarking should apply consistently and cannot be ignored, asserting that adjustments must be made to prevent transfer pricing manipulation. Additionally, the appellant urged the Court to distinguish the facts of the present assessment year from previous years, suggesting that the particular AMP expenditure in 2017-18 had unique features justifying separate scrutiny and treatment.

Arguments of Casio India (Respondent):

Casio India contended that the AMP expenses were ordinary business expenditures incurred in India and did not confer direct or indirect benefit to any foreign Associated Enterprise. The respondent submitted that the Income Tax Appellate Tribunal (ITAT) had already examined the matter for the same period and had deleted the upward adjustment in its order dated July 19, 2022. Casio India relied on the principle of judicial consistency and parity, noting that identical AMP expenditures had been adjudicated in its favour in earlier assessment years, including AYs 2011-12, 2012-13, 2013-14, and 2014-15, and that any fresh demand for AY 2017-18 would violate the principle of consistency in transfer pricing rulings. The company also emphasized that the ITAT’s findings were binding, and that the Revenue could not reopen settled issues without demonstrating substantial and material differences in the facts or computations. Furthermore, Casio India submitted that AMP expenditures are by their nature incurred for brand promotion and marketing in India, benefiting the local operations and not the foreign AE, and therefore could not be treated as an international transaction attracting transfer pricing adjustment.

Court’s Analysis:

The Division Bench analyzed the submissions in light of earlier judicial precedents and the ITAT’s decisions. The Court noted that in a decision dated 12.09.2025, the ITAT had ruled in favour of Casio India in ITAs 385/Del/2016, 341/Del/2017, and 6733/Del/2017, relating to AYs 2011-12, 2012-13, and 2013-14, on similar AMP expense claims. The High Court underscored that the principle of judicial consistency requires that settled issues in transfer pricing, particularly where the facts and nature of expenditures remain unchanged, must be treated in the same manner unless new material differences are shown. The Court reproduced the reasoning adopted in Pr. Commissioner of Income Tax-1 v. Casio India Company Pvt. Ltd., ITA 211/2022, where prior appeals had been dismissed, and the ITAT’s deletion of upward adjustment on similar grounds was upheld.

Justice V. Kameswar Rao and Justice Vinod Kumar observed that the Revenue failed to demonstrate any substantial question of law or material distinction between the prior assessment years and the year in question. The Court rejected the argument that AMP expenses should be newly benchmarked, emphasizing that the expenses were consistent, routine, and necessary for business promotion, and did not provide a direct or indirect benefit to the foreign Associated Enterprise. The Court further noted that revisiting settled issues without fresh material would undermine legal certainty and the principle of finality in transfer pricing adjudication. The Bench held that permitting repeated litigation on identical AMP expenses would contravene principles of natural justice, judicial discipline, and fairness in tax administration.

Judgment:

Relying on binding precedents, prior ITAT rulings, and principles of consistency, the Delhi High Court dismissed the appeal filed by the Revenue. The Bench held that no substantial question of law arises for consideration, and the AMP expense claim for AY 2017-18 should be treated in the same manner as prior settled assessment years. The Court explicitly recognized that the ITAT’s deletion of the upward adjustment was lawful and justified, and that Casio India had complied with the provisions of the Income Tax Act. By dismissing the Revenue’s appeal, the High Court reinforced the doctrine of judicial consistency in transfer pricing matters, and provided clarity on the treatment of AMP expenses, affirming that recurring and similar expenditures cannot be repeatedly adjusted unless materially different circumstances arise.

The ruling is significant in providing certainty to multinational companies operating in India, particularly in the context of transfer pricing audits involving AMP and other indirect expenses. It underscores that settled judicial findings, particularly those of the ITAT, must be respected and followed in subsequent assessment years unless new material facts are presented. The decision also highlights the importance of consistency in tax administration to avoid repetitive litigation and undue burden on taxpayers, especially in cases where expenditures are routine and business-oriented.