[Opinion] Problematic Situation – Tribunal’s Decision to Club Grounds of Appeal Draws Criticism

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  • Last Updated on 30 January, 2023

Grounds of Appeal

Gopal Nathani – [2023] 146 taxmann.com 489 (Article)

Grounds of appeal

Drafting of Grounds of Appeal in appeal memorandum is key in the preparation of any appeal. Rule 8 of the Income tax (Appellate Tribunal) Rules, 1963 describe the manner of preparation of an appeal as under.

Contents of memorandum of appeal

Every memorandum of appeal shall be written in English and shall set forth, concisely and under distinct heads, the grounds of appeal without any argument or narrative; and such grounds shall be numbered consecutively.

And often the Courts and Tribunal denounce the nebulous practice of including descriptive or argumentative grounds of appeal in the appeal memorandum. Such grounds are not addressed or included in the actual disposal of appeals.

In the case of Pepsico India Holdings (P.) Ltd. v. Asstt. CIT [2023] 30 ITR (Trib.)-OL 1 (ITAT[Del]) the subject matter of appeal was essentially covered by the previous orders of the Tribunal in favour of the assessee company based on which the AO/TPO was asked to delete the transfer pricing adjustment made on account of AMP expenses.

Long list of grounds of appeal

However, there is one aspect that is worth noticing in this case before the Delhi Tribunal and that is as many as 31 grounds of appeal are made out on the single effective subject of AMP expenses Transfer Pricing adjustment out of which as many as 29 grounds are taken as effectively connected to main ground by the Tribunal. Noticeably each of the 29 grounds begins with the words “without prejudice” meaning therefore that each of such grounds explicitly refer to the contention of the assessee company without anything more. For instance, let us take a sample of three such grounds out of 29 which read as under:

6. Without prejudice, the Transfer Pricing Officer/Dispute Resolution Panel/Assessing Officer erred in observing that the appellant was a subsidiary of Holland based company and was carrying out distribution activities as well as development of marketing intangibles for its associated enterprise (‘AE’), all of which is factually incorrect.

7. Without prejudice, the Transfer Pricing Officer/Dispute Resolution Panel/Assessing Officer erred in ignoring that the appellant was a full-fledged licenced manufacturer in India.

8. Without prejudice, the Transfer Pricing Officer/Dispute Resolution Panel/Assessing Officer erred in ignoring various decisions of the hon’ble jurisdictional High Court/Tribunal, which clearly state that no adjustment can be made on account of AMP expenses in the case of a licenced manufacturer, until and unless the Department demonstrates the existence of an explicit agreement/arrangement between the assessee and its associated enterprise for the purposes of incur ring AMP expenses.”

In a literal sense all of these three grounds raise certain contentions. The Tribunal did not choose to answer such grounds by simply proceeding on the basis that the only effective ground of appeal in the grounds of appeal is in respect of transfer pricing adjustment made on account of advertisement, marketing and promotion (AMP) expenses.

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