Income Tax Appellate Tribunal - Delhi
Haier Appliances India P.Ltd,New Delhi vs Acit, Circle-10(1), New Delhi on 15 July, 2025
1
SA No. 327/Del/2025
A.Y. 2018-19
Haier Appliances India P. Ltd. v. ACIT
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "I": NEW DELHI
BEFORE SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER
AND
SHRI SUDHIR KUMAR, JUDICIAL MEMBER
S.A. Nos. 327/Del/2025
( In ITA Nos. 1521/DEL/2022)
AssttYr: 2018-19
Haier Appliances India Pvt. Ltd., ADDL. CIT, Circle 10(1),
Building No. 1, Okhla Industrial v. New Delhi.
Estate, Okhla Phase-3, New Delhi-
110020.
PAN- AABCH 3162 L
APPLICANT RESPONDENT
Assessee represented by Shri Nageswar Rao, Adv. &
Shri Parth, Adv.
Department represented by Shri Vikram Singh Sharma, Sr. DR
Date of hearing 04.07.2025
Date of pronouncement 04.07.2025
ORDER
PER RAMIT KOCHAR, AM:
The assessee has filed this stay application bearing S.A. no. 327/Del/2025 which has arisen from ITA no. 1521/Del/2022 for assessment year 2018-19, seeking stay on recovery of outstanding demand towards income-tax and interest, aggregating to Rs. 20,29,20,307/-.
1 2 SA No. 327/Del/2025A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT
2.It was submitted by Ld. Counsel for the assessee that the assessee is a Private Limited Company domiciled in India, and primarily engaged in distribution of various home appliances products which mainly includes freezers, refrigerators, color televisions, washing machine, air conditioners, water heaters, microwave ovens etc. . The assesseealso had a manufacturing plant located in Pune where it is stated to be primarily producing refrigerators.It was submitted that for A.Y. 2018- 19, the assessee filed its original return of income on 29.11.2018, declaring total loss of INR 22,09,49,746/-, which was processed by Revenue u/s 143(1) of the Act on 15.11.2019 determining the total current loss of Rs. 21,05,08,945/-. The case was selected by Revenue for framing complete scrutiny. Statutory notices were issued by the respective statutory authorities. It is stated that the assessee participated in assessment proceedings. It is stated that the assessed entered into international transactions to the tune of Rs. 917,10,69,685/- with its AE's. The AO referred the matter to TPO u/s 92CA(1) for computation of ALP in relation to international transactions entered into by the assessed with its AEs. Order u/s 92CA(3) was passed by the TPO on 31.7.2021. The TPO proposed adjustment to ALP, and the draft assessment order was passed by the AO on 29.09.2021 u/s 144C(1) read with Section 143(3) of the Act. The assessee filed objections before the Ld. DRP-I , New Delhi, and the Ld. DRP-I vide orders dated 16.03.2022 2 3 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT confirmed substantive addition to the tune of Rs. 17,27,07,682/- towards ALP adjustment (Rs. 14,92,24,397/- under Manufacturing Segment and Rs.
2,34,83,285/- under trading segment) which is substantive adjustment (intensity), and further ALP adjustment on account of AMPExpenditure to the tune Rs.
8,24,25,016/- (Rs. 6,93,52,768/- under Manufacturing Segment and Rs.
1,30,72,248/- under trading segment) on protective basis by applying Bright Line Test, by holding as under:
"3.2.1 The Panel finds that these grounds are similar to the ones raised during AY. 2017-18, which were decided by the Panel in the following words:
"3.2.1 The first contention which is raised in this behalf is that the TPO treated AMP as a separate international transaction in an arbitrary manner. It is submitted that the assessee has a robust mechanism for deciding the marketing policies and advertisement spend. The assessee prepares its budgets pertaining to marketing of products for sale in India after taking into consideration various commercial and economic factors such as level of competition in the consumer electronics industry in which it operates, desired sales objectives of the product(s), etc. The assessee employs sales force which is responsible for pushing product sales in India. The sales force is also responsible for negotiating prices with distributors/direct customers. The assessee also determines the distribution channel such as new market place or new dealers to be added for products to be sold in India. Local marketing strategy is independently planned and executed. The appropriate advertising and marketing mix in television, newspaper, magazine, cinema, print, road shows, and technical training seminars are determined at a local level. It is also submitted that AMP spend is intended to boost product sales of Haier India. The benefit to AEs, if any, is purely incidental which does not require a separate compensation. It is also argued that even if it is 3 4 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT assumed for argument's sake that AMP constitutes a separate international transaction, routine sales promotion and selling expenditure should be excluded from the AMP expenses. 3.2.2 The Panel has considered the submission. It may be noted, right at the outset, that law regarding the existence of an international transaction qua the AMP expenses is fairly settled. The law in this regard underwent a comprehensive explication by the jurisdictional High Court in Maruti Suzuki India Ltd v CIT, (2016) 381 ITR 117 (Del), Bausch & Lomb Eyecare (India) (P) Ltd АСГГ ([2016] 381 ITR 227 (Delhi)), Yum Restaurants (India) Pvt. Ltd. v ITO (2016) 380 ITR 637 (Del) and Whirlpool of India v DCIT (TS-622-HC-
2015(DEL)- TP. In Maruti Suzuki India, the Delhi High Court held that the alleged excess AMP expenditure incurred by Maruti Suzuki could not be regarded as an international transaction in the absence of any agreement or arrangement between the company and its AE. In Bausch & Lomb Eyecare, the High Court observed that a distinction was required to be drawn between a 'function' and a 'transaction' and that every expenditure forming part of the function, cannot be construed as a 'transaction'. The revenue is bound to prove that the assessee was obliged to incur AMP expenses of certain level for promoting its AE's brand and that indirect benefit accruing to AE by incurring AMP expenditure was not sufficient to constitute an international transaction. The High Court further added that unless the existence of an international transaction was proved, transfer pricing provisions were not applicable. The Hon'ble Delhi High Court in Yum Restaurants has reiterated this principle in the following words:
"............... In that scenario, there would be a need for a detailed examination of the operating Agreement between Yum India, Yum Marketing and the franchisees to ascertain if any part of the AMP expenses is for the purpose of creating marking intangibles for the AE of Yum India. It is only after an international transaction involving Yum India and its AEs in relation to AMP expenses is shown to exist, that the further question of determining the ALP of such international transaction would arise." (Para 26) 4 5 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT In Whirlpool, the High Court observed that the existence of an international transaction would have to be established de hors the Bright Line Test and that there was nothing in the Act which Indicated how, in the absence of the BLT, one could discern the existence of an international transaction as far as AMP expenditure was concerned. 3.2.3 There are other decisions as well in this regard. While the Panel will not go into a detailed analysis of various decisions rendered in this regard, suffice it to say that the legal requirement of a transfer pricing adjustment on account of AMP expenses has, inter alia, two aspects: firstly, the existence of an international transaction qua the AMP expenses are to be proved. Secondly, if any part of the AMP expenses is for the purpose of creating marketing intangibles for the AEs, it forms an international transaction. It was also laid down in the case of Sony Ericson Mobile Communications (India) Pvt Ltd v CIT (2015) 374 ITR 118 (Del) that a distinction must be made between AMP expenses and the selling expenses in the nature of trade discounts, volume discounts, rebates and commission paid to retailers/dealers and the latter must be excluded from the domain of such AMP expenses which constitute an international transaction. The relevant observation of Hon'ble Delhi High Court in Sony Ericson in as follows:
"196. Common questions raised by the Revenue in their appeals:-
1. Whether the Income Tax Appellate Tribunal was right in distinguishing and directing that selling expenses in the nature of trade/volume discounts, rebates and commission paid to retailers/dealers etc. cannot be included in the AMP Expenses? In terms of and subject to our discussion under the headings O and P, the substantial question of law has to be answered against the Revenue and in favour of the assessee."
3.2.4 International Transaction' under section 92B(1) has been defined as a transaction between two or more enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money, or any other such transaction having a bearing on the profits, income, losses or assets of such enterprise, and shall include a mutual agreement or arrangement between two or more associated enterprises for 5 6 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises. The 2012 amendments to section 92B further clarify that international transaction shall include the purchase, sale, transfer, lease or use of intangible property, including the transfer of ownership or the provision of use of licenses, franchises, customer list, marketing channel, brand commercial secret, know-how, industrial property right, exterior design or practical and new design or any other business or commercial rights of similar nature. [Vide Explanation (i)(v)]. The expression "Intangible property" shall include marketing related intangible assets, such as, trademarks, trade names, brand names, logos. [Vide Explanation (ii)(a)] 3.2.5 In this regard, any formal legal structure is not relevant. What is relevant is the overall arrangement/substance of the transactions. As per section 92F(v), a transaction includes an arrangement, understanding or action in concert, whether or not such arrangement, understanding or action is formal or in writing. It is, thus, plain and clear that arrangement between two AEs for allocation or apportionment of or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises is an international transaction.
3.2.6 In the case at hand, the TPO has noted at para 9 of his order that the expenditure on AMP has been incurred to promote the brand/trade names which are owned by the AEs and such expenditure has resulted into brand building and increased awareness of the products bearing the brand/trade name as detailed above. Thus, the expenditure incurred is for the advantage of its AEs, since the brand/trade names are owned by the AE and in such a situation, the assessee should have been suitably compensated by the AEs. It is also noted that as per its submission dated 25.12.2020, the assessee has received reimbursement for expenses on account of 'Advertising and Sales Promotion' from its AEs in form of 'Revenue Grant'. It means that the assessee has an agreement or an arrangement or an action in concert with its AEs, and it is according to this agreement or arrangement that the assessee has been compensated by its AEs against AMP expenditure which requires to be appropriately benchmarked in accordance with the arm's length principle.
6 7 SA No. 327/Del/2025A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT 3.2.7 As per the revised definition of the term 'marketing intangibles', a marketing intangible is an intangible, in terms of para 6.6 of the OECD guidelines, that relates to marketing activities, aids in the commercial exploitation of a product or service and/or has an important promotional value for the product concerned. In the present case, the large-scale marketing and promotional activities undertaken by the assessee for the product distribution of the group has a direct, not incidental, nexus with the promotion of the automation Industry of the parent company. The relevant report reads as follows:
"Marketing intangible' An intangible (within the meaning of paragraph 6.6) that relates to marketing activities, aids in the commercial exploitation of a product or service, and/or has an important promotional value for the product concerned. Depending on the context, marketing intangibles may include, for example, trademarks, trade names, customer lists, customer relationships, and proprietary market and customer data that is used or aids in marketing and selling goods or services to customers."
3.2.9 The contention of the ld. AR that there was no arrangement, understanding or action in concert between the assessee and the AE to incur AMP expenditure or development of marketing intangibles is, therefore, not acceptable. The law does not posit a written agreement as a sine qua non for a transaction being an international transaction. Secondly, the concept of marketing intangible developed in international transfer pricing jurisprudence, which, inter alia, includes trade names, customer lists, customer relationships, and proprietary market and customer data that is used or aids in marketing and selling goods or services to customers also brings the transaction within the fold of an international transaction. Since the assessee has incurred the cost of AMP for the benefits of its AE as discussed in the TPO order, AMP expenditure incurred by it clearly falls in the domain of an international transaction u/s 92B(1) read with clause (v) of section 92F.
3.2.10 The Panel, accordingly, upholds the action of the TPO of treating the AMP expenses as an international transaction and proceeding to appropriately benchmark it. However, the contention of the assessee that the selling expenses in the nature of trade discounts, volume discounts, rebates 7 8 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT and commission paid to retailers/dealers must be excluded from the domain of such AMP expenses is in order in terms of the law laid down by the Delhi High Court in Sony Ericsson cited supra. The Panel, accordingly, directs exclusion of the selling expenses in the nature of trade discounts, volume discounts, rebates and commission paid to retailers/dealers, after due verification in this regard. As for the contention that revenue grant received by the assessee during the relevant period exceeds the total AMP spend, the TPO is directed to verify this contention and take necessary action if called for in terms of facts obtaining in this case.
3.2.11 The assessee also contests the benchmarking of the international transaction of AMP carrying out AMP intensity adjustment. It is submitted that intensity adjusted TNMM is nothingbut use of BLT i.e. AMP/Sales ratio under the garb of TNMM, which has been struck down by High Courts in various cases - including Delhi HC's landmark ruling in case of Sony and others wherein the assessee itself was an Applicant. It is stated that intensity of functions with reference to level of expenses incurred, is not a comparability condition prescribed anywhere in the Act/Rules. If intensity of expense is not required to be matched while selecting a comparable, the question of adjusting the same while computing arm's length margins doesn't arise. Thus, according to the assessee, intensity adjusted TNMM is based on arbitrary/unrealistic expectation that assessee would have earned return on every extra rupee of AMP spend. This assumption is completely divorced from business realities that all advertisement and marketing activities need not result in successful sales activities. 3.2.12 The Panel has considered the submission. The TPO has stated in his order that in order to have appropriate comparability, the comparables should have comparable intensities of expenses incurred for sales and marketing as is present in your case, since the assessee had incurred substantial expenditure for carrying out marketing function. In a situation where such a comparable is not available, comparability adjustment are required to be carried out in line with the provisions of rule 10B(3) of the Income Tax Rules 1962. The TPO, accordingly, held that since the comparables identified had low intensity of marketing function being carried out by them, comparability adjustment was required to be carried out before comparing the PLI. He, accordingly, carried out the comparability adjustment in the margin of the comparables by identifying the excess intensity of AMP expenditure incurred by the assessee vis-à-vis the 8 9 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT comparables and then, increased the expenditure incurred by the comparable in order to equalize the intensities. Since the marketing function provides a return in the market, the average profit margins returned by entities providing market support functions were used for working out a mark-up on the enhanced cost base of the comparables. The Panel, therefore, finds no infirmity in the order of the TPO/AO for making this adjustment on a protective basis.
3.2.13 The Panel is fortified in its view by the judgment of the jurisdictional High Court in Sony Ericsson Mobile Communications India (P) Ltd v CIT [2015] 374 ITR 118/231 Taxman 113/55 taxmann.com 240 (Delhi) where, at para 166, the argument of the assessee that the TPO cannot account for or treat AMP as a function, was held to be 'flawed and fallacious for several reasons' as there were inherent flaws in the said argument'. The High Court gave reasons for it at para 165 that 'an external comparable should perform similar AMP functions.... Comparable analysis of the tested party and the comparable would include reference to AMP expenses.
3.2.14 Following the aforesaid view of the jurisdictional High Court, the Hon'ble Delhi Bench of the ITAT in Luxottica India Eyeware (P) Ltd v ACIT [2017] 82 taxmann.com 361 (Delhi Trib.)/[2017] 187 TTJ 157 upheld the intensity approach in the following words:
"16. We have heard the rival submissions and perused the relevant material on record. It is noticed that there is a significant departure from the course of action adopted by the TPO in this year vis-à-vis the earlier years. Whereas up to the assessment year 2011-12, the TPO was treating AMP expense as a separate international transaction and determining its ALP independently, in this year, such a line of action has been dispensed with. Treating the marketing activity as a function performed by the assessee as a part of its role and responsibility as a distributor, the TPO has not treated AMP expense as a separate international transaction. Instead, he made AMP intensity adjustment to the profit rates of the comparables for bringing the intensity of AMP functions of the assessee at par with theirs in computing the ALP of the international transaction of Import of goods. This view of treating AMP as a function has been taken by considering the judgment of the Hon'ble jurisdictional High Court in 9 10 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT the case in the case of Bausch & Lomb Eyecare India (P.) Ltd. v. Addl.CIT CIT [2016] 381 ITR 227/237 Taxman 24/65/taxmann.com 141 (Delhi) in which it has been held: "that a distinction is required to be drawn between 'a function' and 'a transaction' and that every expenditure forming part of the function cannot be construed as a transaction." We are satisfied with the view taken by the TPO in this regard, which is also supported by the judgment in Sony Ericsson Mobile Communications India (P.) Ltd. (supra) in which it has been observed in para 166 that: 'On behalf of the assessee, it was initially argued that the TPO cannot account for or treat AMP as a function. This argument on behalf of the assessee is flawed and fallacious for several reasons. There are inherent flaws in the said argument'. Then, it has been held in para 165 that: An external comparable should perform similar AMP functions.... Comparable analysis of the tested party and the comparable would include reference to AMP expenses"."
3.2.15 Thus, the approach adopted by the TPO/AO is in conformity with the judgment of the jurisdictional High Court. The assessee's contention that the TPO erred in enhancing the TP adjustment by a sum of Rs.6,72,42,792/- in the remand proceeding was beyond the competence and jurisdiction of the TPO is also not legally tenable as this assessment was restored to the file of the Assessing Officer/TPO to determine the ALP of this international transaction in the light of the relevant judgments of the Hon'ble High Court, after allowing a reasonable opportunity of being heard to the assessee. Thus, on such consideration of the judgments of the jurisdictional High Court, both the possibilities, i.e., the possibility of an enhancement of income or a reduction thereof, are equally open and, therefore, any objection to the consequential enhancement or reduction of income cannot be legally or judicially countenanced. The reliance placed by the TPO on the international practices as well as the latest BEPS Guidance is quite in order. The Panel, accordingly, rejects this contention as well and upholds the action of the TPO/AO on this count.
3.2.16 The assessee has also contested the inclusion of the following comparables in respect of which the Panel adjudicates as follows:
Husys Consulting Limited 10 11 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT 3.2.16.1 This comparable is contested on the ground of functional variation.
The assessee states that this company provides human resource function management HR solutions to various organizations in the nature of employee management, performance management, payroll services, talent acquisitions etc. It earns its revenue mainly from activities such as HR function outsourcing, recruitment fee, HR consulting etc. The Panel has considered the argument and is of the considered opinion that such functions cannot be compared to the AMP functions of the assessee. The TPO is directed to exclude this comparable from the final set of comparables adopted by the TPO.
Kitco Limited 3.2.16.2 The argument of functional dissimilarity is also pressed into service to resist this comparable, which is said to be is a multi-disciplinary engineering, management and technical consulting firm. Its services include techno economic feasibility studies, detailed project reports, project consultancy, master planning, detailed design and engineering, contract management, corporate debt restructuring (CDR), transaction advisory, recruitment, training & development etc. The Panel is of the opinion that providing of advisory services, irrespective of the field in which such services are rendered makes Kitco comparable in terms of core competence and functions in view of the Hon'ble Bombay High Court decisions dated 27 February 2020 in PCIT Eight Roads Investments advisors in ITA no 1125 of 2017. However, in view of the fact that Kitco is a 100% government owned undertaking, rendering services primarily to central/state government undertaking and PSUs, that the majority revenue of Kitco is earned from government run projects and that Kitco is getting preferential treatment in obtaining contracts from the government it, the same cannot form an appropriate comparable vis-à-vis the assessee The Delhi Bench of the ITAT in Bechtel (India) Pvt. Ltd. (ITA No. 6779/Del/2015), Boeing International Corporation (India) Pvt. Ltd. (ITA no 1127 /Del/2015), Rolls-Royce (India) Pvt. Ltd. (ITA no. 1310/Del/2015) and Fluor Daniel (India) Pvt. Ltd. v ACIT (ITA no 973/Del/2016), Kitco was excluded as comparable in view of the aforesaid facts. The Hon'ble Delhi High Court in PCIT WSP Consultants 11 12 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT India (Pvt.) Ltd. (ITA no 935/ 2017) also upheld the exclusion of Kitco on the aforesaid facts. Accordingly, in this view of the matter, Kitco is directed to be excluded from the final set of comparables adopted by the TPO.
EDCIL (India) Limited 3.2.16.3 The assessee contests this comparable as this company is engaged in providing services related to Online testing and assessment services, educational Infrastructural services, educational procurement services, digital education system, advisory services, overseas education services, technical support group, skilling and training services. Thus, this Panel is of the view that there is a striking dissimilarity in the functional profiles of EdCIL and those of the assessee and therefore, the objection of the assessee, qua functional dissimilarities of EdCIL, is, accordingly, sustained. The TPO, therefore, is directed to exclude this comparable from the final set of comparables.
Info Edge (India) Limited 3.2.16.4 The assessee assails this comparable, being engaged in providing recruitment, matrimony, real estate, education and related services. The Panel has considered the argument. Internet based business services in the field of recruitment, matrimony, education etc., cannot be said to be comparable with the AMP functions performed by the assessee. This comparable, therefore, must be excluded from the final set of comparables. The Panel directs accordingly.
Interactive Manpower Solution Private Limited 3.2.16.5 The plea of functional dissimilarity is also raised by the assessee qua this comparable as this company is said to be engaged in providing recruitment process outsourcing services and staffing solutions. The Panel has considered the submission. It is noticed that apart from offshore recruitment services, it is into assisting staffing firms globally with its extensive range of tailored services, from recruitment & administrative services to accounting support and bespoke one-off creative solutions, in order to give a commercial advantage to clients in their marketplaces through innovative cost-effective expertise. These services clearly fall within 12 13 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT the ambit of AMP functions comparable to the assessee. The Panel, accordingly, directs the retention of this comparable. 3.2.17 It is also stated that AMP function of the assessee can also be benchmarked using adjusted RPM, which was arguably upheld in the assessee's own case by ITAT for AY 2008-09 and that the assessee would be glad to furnish the computation of adjusted gross margin/sales of comparables selected by the TPO for the subject assessment year. The Panel, however, is of the opinion that this contention is in the realm of hypothetical meandering as there are admittedly various competing methods for benchmarking an international transaction and the Panel would express its opinion only in respect of the most appropriate method selected by the TPO and contested by the assessee on the basis of precise data and working. The Panel, therefore, finds no merit in the contention and the same is rejected.
3.2.18 The assessee raises another contention, on a without prejudice basis, to the effect that re-computation of segmental results by the TPO is arbitrary. It is stated that the assessee does not prepare segmental information as the same is not applicable to the facts of its business. However, the same were drawn on specific request of the TPO. It is stated that the company manufacturers products at its plant located in Pune. Expenses incurred at Pune plant, towards manufacturin6RTIFIED activities at captured at this location and were hence, allocated to the manufacturing segment. It is also stated that all selling and distribution activities of the company are undertaken at head office level. These activities are said to be common for manufacturing products and distribution products. Therefore, all selling, general and administrative expenses were admittedly allocated to both manufacturing and trading segments. However, the TPO re-drawn the segmental financials submitted by the assessee in the TP order without providing any basis or rationale of doing so. The only dispute raised by the TPO in respect of such segmental financial information is said to be relating to the treatment of certain items as operating/non-operating in nature. A certificate by an external chartered accountant was submitted as additional evidence before this Hon'ble Panel in order to substantiate the authenticity and geniuses of such segmental financial information. Accordingly, it was pleaded that the segmental working submitted by the assessee be restored and the correct profitability of the respective segments be applied. The Panel, however finds that the TPO has given detailed reasoning about the 13 14 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT correct treatment of certain expenditure and as a result thereof has proceeded to recast the segmental results in his order itself. In his remand report, the TPO has rightly stated that the segmental operating margin provided by the assessee is not in accordance with CBDT notification dated 19.09.2013. In its rebuttal dated 14.10.2021, the assessee has merely stated that various actions of the TPO are arbitrary without furnishing any basis in respect thereof. The Panel, therefore, is not inclined to accept the contention and the same is rejected.
3.2.19 The assessee is also aggrieved with the treatment of foreign exchange gain as non-operating. It is stated that forex fluctuation is arising out of normal business transactions. Please refer additional evidence letter dated 3 September 2021, which highlight Note 31 and 32 of the financial statements. It is evident from audited financial statements of the assessee that the transactions undertaken by the assessee in foreign exchange during FY 2016-17 were w.r.t. "Foreign travel", "Export of goods" and "Revenue grant from group companies" which pertains to normal business operations of the assessee. Hence, such loss/income arising out of fluctuation in foreign exchange should also be considered as operating in nature. 3.2.19.1 The Panel has considered the submissions. While the legal proposition is well-settled to the effect that foreign exchange gain/loss arising out of sale transactions are operating in nature, but its consideration in the computation of the operating margins is not automatic and one has to see whether foreign exchange fluctuation gain/loss is on the sale of the present year or of an earlier year. If it does not form part of the sale of the present year, it cannot be considered in the computation of operating margins because in such a situation it will increase the numerator, i.e.. the profit but not the denominator, i.e., the turnover because the corresponding turnover was factored in the computation of the operating margins of the earlier years. This aspect of law was explained by the Bangalore Bench of the Hon'ble ITAT vide its order dated 06th April, 2018 in M/s. Marvell India Pvt Ltd v ACIT in ITA No.2173/Bang/2017 in the following words:
"7. ..........As per this ground nos. 2 and 3, the issue in dispute was regarding considering foreign exchange loss as operating loss. The Tribunal in that case followed another Tribunal order rendered in the case of Capital IQ Information Systems India (P.) Ltd. vs. DCIT (International Taxation) as reported in 57 SOT 14 (Hyd. - Trib.). In 14 15 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT that case, the issue in dispute was regarding foreign exchange fluctuation gain and it was held that foreign exchange fluctuation income is forming part of the sales proceeds of the assessee. There cannot be any dispute on this aspect but for such issue also, it has to be seen as to whether foreign exchange fluctuation gain is on sale of the present year or of an earlier year. If such foreign exchange fluctuation gain is in respect of sale of the same year then such foreign exchange gain has to be considered for the purpose of TP analysis and computation of ALP but if such gain is in respect of sale of an earlier year then the same cannot be considered for the purpose of ALP because in that situation also, the numerator will increase i.e. the profit but not the denominator i.e. the turnover because the turnover was considered in the earlier year. In this Tribunal order, there is no discussion on this aspect of the matter and therefore, for the purpose of deciding this aspect, this Tribunal order is also not applicable and the assessee does not get any help from this Tribunal order. This ground is rejected."
[Emphasis Supplied] 3.2.19.2 In the case at hand, since the assessee has not been able to argue on the basis of any evidence that foreign exchange gain/loss pertains to the sale of the year under consideration, the same cannot be considered for TP analysis and for the determination of ALP. The Panel, accordingly, upholds the TPO's action of excluding foreign exchange gain/loss in the computation of operating margins of the assessee and the comparables. The objection of the assessee, accordingly, stands rejected.
3.2.20 The assessee also assails the TPO action of treating liabilities written back as non-operating. It is stated that outstanding payables by Haier India w.r.t import of finished goods from AEs were waived off by the AEs. It is stated vide letter dated 5th September 2021 that during AY 2017-18, the assessee had written back liabilities/ provisions no longer required, amounting to INR 49,90,32,654/-, which was considered non-operating by the TPO stating that the same do not pertain to the assessee's business operations. The assessee has furnished in Form 35A that these liabilities pertain to core business operations of Haier India such as purchase of products and grant received. The detailed bifurcation (line by line basis) along with nature of expenses against which liabilities were written off 15 16 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT during the relevant period have also been furnished before this Panel, along with the waiver confirmation letter received from supplier of goods against which the said liabilities have been written off. It is, accordingly, submitted that the liabilities written back during the relevant period should be treated as operating income.
3.2.20.1 The Panel has considered the argument. It is trite that both the provision of bad debts and debts written back fall in the realm of normal business operations and therefore, there is no warrant for treating them generally as non-operating. Reliance, to that effect, on Techbooks International, Kenexa Technologies and Sony India is well-placed, but its consideration in the computation of the operating margins is not automatic and one has to see whether provision for doubtful debts is on the sale of the present year or of an earlier year. If it does not form part of the sale of the present year, it cannot be considered in the computation of operating margins because in such a situation it will increase the numerator, i.e. the profit but not the denominator, i.e., the turnover because the corresponding turnover was factored in the computation of the operating margins of the earlier years. Any receipt or expenditure, although operating in nature cannot be considered for this purpose unless it pertains to the current year turnover because if it relates to earlier years, it will lead to absurd results, since the numerator will stand increased or decreased as the case may be but the denominator will not reflect the inclusion of the corresponding turnover, while calculating the percentage of profit of the assessee and comparables. The Panel is fortified in its reasoning by the decision of the Bangalore Bench of the Hon'ble ITAT vide its order dated 27th November, 2018 in M/s. Marvell India Pvt Ltd v ACIT in MP No 338/Bang/2018 (in ITA No.2173/Bang/2017). The Tribunal, distinguishing Kenexa Technologies and Sony India in this regard, explained the law, thus:
"6. But before deciding the issue on the basis of these three paras of this tribunal order, we feel it proper to take note of the manner in which the profit of the tested party and comparables is considered for TP analysis. When we do so, we find that the actual profit in absolute terms of the tested party and the comparable companies are not compared for this purpose. What is compared is the percentage of profit of the tested party and average percentage of profit of the comparables, Percentage of profit is worked out by dividing the profit by the corresponding turnover. Hence, any receipt or expenditure although operating in nature but for which the corresponding 16 17 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT turnover of which is not the part of the turnover of the present year cannot be considered for this purpose because it will result in absurd result since the numerator will stand increased or decreased as the case may be but the denominator will not reflect the inclusion of the corresponding turnover. In fact, in Para 7 of the impugned tribunal order as reproduced above, although a wrong Para is considered in respect of foreign exchange fluctuation gain but the main reason for deciding this issue against the assessee was this that if such gain is not in respect of the turnover of the same year, adding such gain in the numerator will lead to absurd result because the corresponding turnover is not reflected in denominator. We have seen that by the same logic, in case of Provision for bad or doubtful debts also, even after holding that the same is an operating expenditure, it has to be held that it cannot be taken into account for TP analysis because the denominator will not reflect the inclusion of the corresponding turnover. In the tribunal order rendered in the case of Kenexa Technologies (P.) Ltd. Vs. DCIT (Supra), this aspect was neither discussed nor decided and therefore, this tribunal order does not lay down a binding precedence in this regard.
7. From the above paras reproduced from this Tribunal order it is seen that in that case the Tribunal has considered another Tribunal order of the Delhi Bench of the Tribunal rendered in the case of Sony India (P.) Ltd. Vs. DCIT as reported in [2008] 114 ITD 448 and the relevant portion of that Tribunal order was also reproduced. From the same, it is seen that only this aspect was decided as per this Tribunal order that it cannot be said that provisions or writing back of liability is part of operating profit. Following this Tribunal order of Delhi Bench of the Tribunal, it was held by Tribunal in the case of Kenexa Technologies (P) Ltd v DCIT (supra) that bad debts and provision for bad and doubtful debts are part of operating expenses. To this extent, there is no quarrel but even after holding that bad debts and provision for bad and doubtful debts are operating expenses, it has to be seen and decided as to whether the same can be considered for the purpose of computing the profit margin of the tested party or of the comparable company. In para no. 7 of the impugned Tribunal order which is reproduced above, it has been held by the Tribunal that in regard to foreign exchange gain, it is operating profit but even after that, it was required to be seen as to whether such foreign exchange fluctuation gain is on the sale of the of the present year or of an earlier year and it was held that if the foreign 17 18 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT exchange fluctuation gain is in respect of sale of the same year then such foreign exchange gain has to be considered for the purpose of TP analysis and computation of ALP but if such gain is in respect of sale of an earlier year then the same cannot be considered for the purpose of ALP because in that situation, the numerator will increase i.e. the profit but not the denominator i.e. the turnover because the turnover was considered in the earlier year. In our considered opinion, this ratio laid down in para no. 7 of the impugned Tribunal order has to be applied with regard to provision for bad debts and doubtful debts also even after holding that such provision to bad and doubtful debts is operating expenses. It has to be seen that whether such provision is against turnover of the present year or against the turnover of a preceding year because if such provision is in respect of the turnover of the preceding year, in that situation the relevant turnover is not forming part of the denominator and therefore, no effect can be considered for numerator also by reducing the provision for bad and doubtful debts from the profit margin. Such details are generally not available particularly in case of comparable companies although in case of tested party, the assessee can provide such detail but this is also true that in normal cases, provision for bad and doubtful debts are not made in the year of sale and generally they are made in the subsequent years only and hence, unless it is established by the assessee b bringing evidence on record that such provision is against the turnover for the current year, it should be held that such provision is against turnover of an earlier year and not against the turnover of the present year and the same cannot be reduced from the profit margin of the tested party or of comparable company for the purpose of ALP computation because it will give absurd result since the profit margin will be reduced in the year in which the provision is made although neither the profit nor the turnover in respect of the corresponding turnover is part of numerator or denominator being profit margin (numerator) and turnover (denominator). Hence even after considering para nos. 40 to 42 of this Tribunal order, we hold that in the facts of present case and in view above discussion, such provision for bad and doubtful debts cannot be considered for working out the profit margin of the comparable companies. We are aware that when the precedence is pointed out, we should follow the same unless it is seen that there is some difference in facts or such earlier Tribunal order has no precedence value. In the present case, we find that this Tribunal order and Tribunal order rendered in the case of Sony India (P.) Ltd. Vs. DCIT (supra) has not considered and examined this aspect as 18 19 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT to whether the provision for bad and doubtful debts or excess provision written back is in respect of turnover of the same year or of an earlier year and whether by considering the same as part of operating expenses/operating profit, the result will be an absurd result and hence, in our considered opinion, both these Tribunal orders have no precedence value once we examine this aspect as to whether by considering the provisions for bad and doubtful debts as operating expenses for the working of ALP for TP analysis, it will give absurd result if such provision for bad and doubtful debts is not made in the year of sale and it is made in the subsequent year after the same.
8. In view of above discussion, we rectify the impugned Tribunal order by saying that this Tribunal order rendered in the case of Kenexa Technologies (P.) Ltd. Vs. DCIT (supra) is discussing about this aspect also as to whether the provision for bad and doubtful debts is operating expenses or not and we hold that the same is definitely an operating expense but still the same cannot be considered for TP analysis because it has not been shown that such provision for bad and doubtful debts is for the current year's turnover."
[Emphasis Supplied] 3.2.20.2 Respectfully following the Tribunal's decision in Marvell India cited supra, the Panel, accordingly, holds that the provision for bad and doubtful debts is definitely an operating expense but still the same cannot be considered for TP analysis because it has not been shown that such provision for bad and doubtful debts is for the current year's turnover. The objection, accordingly, stands rejected.
3.2.21 The assessee raises another contention that the protective adjustment has been erroneously included by AO while computing the assessed income of the assessee The TPO/AO has gone one step further in the assessee's case where the assessed income in the draft assessment order has been computed after including the amounts of protective adjustments. This is even beyond the intent of TPO for imputing protective adjustment i.e. to protect the interest of revenue in case of a favourable decision by the Apex court on the issues raised by the TPO. Such an approach would lead to undue hardship and uncertainty on the assessee's part which is not the intent of law. The Panel, however, is of the opinion that there is no question of enforcing a protective addition as per law and, accordingly, the same would not cause 19 20 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT any hardship to the assessee. The AO is directed to bear this principle in mind that a protective addition is not to be enforced unless it becomes substantive. He would, thus, enforce only the substantive part of the addition made to the returned income.
3.2.22 The assessee also contests the adjustment made by the TPO on the entire trading segment ignoring the fact that the assessee has purchased more than 75% of finished goods from third parties. It is submitted that the adjustment with respect to the transfer pricing matters should be restricted only to the value of international transaction as worked out in the following table:
Particlars Amount (INR)
Total operating cost [As per TP order] 11,94,49,51,008
Value of goods imported [Page 2 of the TP 1,89,47,39,215
order]
Ratio of Goods imported/Total cost 15.89%
TP Adjustment (substantive) 1,68,86,67,646
TP Adjustment (protective) 1,42,79,46,430
3.2.22.1 The TPO is, accordingly, directed to verify the aforesaid working and restrict the transfer pricing adjustments to the transactions with the AE on a proportionate basis after due verification, in view of the law laid down by the Hon'ble Delhi High Court in CIT v Keihin Panalfa Ltd. [2016] 381 ITR 407/70 taxmann.com 328, and the Hon'ble Bombay High Court in CIT v Thyssen Krupp Industries India (P.) Ltd. [2016] 381 ITR 413/70 taxmann.com 329,"
3.3 Following its direction for AY 2017-18, the Panel directs the TPO/AO to follow the same directions for AY 2018-19. As for the new comparables, it is noticed that the TPO has given adequate reasons in this regard and, therefore, no interference is required."
Based upon the direction of the Ld. DRP, the TPO passed an order giving effect dated 28.04.2022, wherein final ALP adjustment was computed as under:
20 21 SA No. 327/Del/2025A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT Substantive Adjustment (In Rs.) Manufacturing Segment 14,92,24,397/-
Trading Segment 2,34,83,285/-
Total Substantive Adjustment 17,27,07,682/-
Protective Adjustment (In Rs.)
Manufacturing Segment 6,93,52,768/-
Trading Segment 1,30,72,248/-
Total Protective Adjustment(BLT 8,24,25,016/-
basis)
2.2 The AO made the aforesaid TP adjustments to ALP in the final assessment order. On substantive basis , the AO made adjustment to ALP on the trading and manufacturing segment to the tune of Rs. 17,27,07,682/- . The AO made adjustment to ALP to the tune of Rs. 8,24,25,016/- on protective basis towards AMP by applying BLT , to the tune of Rs. 6,92,52,768/- towards manufacturing segment and Rs. 1,30,72,248/- towards trading segment . There was another addition made by the AO in the final assessment of Rs. 9,92,03,093/- on account of interest incomebeing brought to income-tax. The assessee has declared such interest income in its Profit and Loss Account, but while filing return of income, the assessee reduced said interest income from the fixed assets. The assessee claimed that it raised share capital from the parent company, which funds were raised for capacity expansion and for purchase of fixed assets. The assessee kept such funds in short term deposits and earned interest. It was submitted that the proceeds of FDR were utilized for the purpose of acquiring fixed assets and for capacity expansion. The Department has relied upon AS-9 and AS-18 and also department relied upon ICDS 04 , to make aforesaid addition by treating the same as Revenue Income. As per department interest income is to be brought to income-
tax on time basis. The AO relied upon the decision of Hon'ble Supreme Court in 21 22 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT the case of Tuticorin Alkali and Fertilizers Limited , Madras v. CIT, Madras, dated 08.07.1997, to bring said interest income to income-tax. Thus, the said interest income was brought to tax by the AO in the assessment order framed.
2.3 Thus, finally the addition were made by the AO ,as under:
Particulars Amount (Rs.)
Current year Loss as per order u/s 143(1) dated 21,05,08,945
15.11.2019
Additions:-
Substantive Adjustment as per the order of 92CA(3) 17,27,07,682
Protective Adjustment as per the order of 92CA(3) 8,24,25,016
Disallowance of interest income capitalized 9,92,03,093
Total assessed income 56,48,44,736
Rounded off u/s 288A 56,48,44,740
2.4 Aggrieved, the assessee filed appeal with the ITAT. This is second round of litigation before the Tribunal.In the first round of litigation before the ITAT, the assessee did not argue the issues arising in the appeal on meritsby 'not pressing' the ground number 1 to 4 and 6 to 36. These grounds were not pressed by the assessee keeping in view that on limitation ground, the similar issue was decided in favour of the assessee in the immediately preceding assessment year by the Tribunal. The only ground that was argued by the assessee in the first round of litigation before the Tribunal was Ground No. 5 which was legal ground challenging the assessment proceedings as being time barred and hence not sustainable in the eyes of laws, which reads as under:
22 23 SA No. 327/Del/2025A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT "5. On the facts and circumstances of the case and in law, the assessment proceedings are time barred as the same has not been completed within prescribed timelines."
2.5 The Tribunal being the last fact finding authority , delved into the facts for the year under consideration and came to the conclusion that the assessment order was not barred by limitation,and hence Ground No. 5 was decided against the assessee.
The assessee did not pressed the other grounds bearing number 1 to 4 and 6 to 36 and no arguments were made , and hence the same were not adjudicated by the Tribunal as not being pressed. Although , it might be so that in immediately preceding year, as contended by the assessee that for ay:2017-18, the assessment order was barred by limitation. Each year is different and fact may vary from year to year. This ground number 5 was decided against the assessee by the Tribunal vide orders dated 20.09.2024 in ITA no. 1521/Del/2024 for the impugned assessment year, as the factual position as turned out after detailed finding of facts by the tribunal was that the assessment proceedings were not barred by limitation for the impugned assessment , wherein Tribunal recorded its ultimate conclusion as under:
"15. Since, the facts undisputedly proved that the order of ld. DRP has been received on 06.04.2022 , the final Assessment Order passed on 30.05.2022 is held to be passed within the time limit and legally valid.23 24 SA No. 327/Del/2025
A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT
16. Ergo, the ground raised by the assessed is hereby dismissed.
17. We would like to keep it on record , the admirable arguments put forward by Sh. Nageswar Rao, Ld. AR and Sh, Rajesh Kumar, CIT-DR.
18. Since the other grounds have not been argued by the ld. AR, they are not been adjudicated.
19.As the appeal of the assessee is dismissed , the Stay Application of the assessed stands dismissed as infructuous.
20. In the result, the appeal of the assessed is dismissed."
2.6 Obviously , it was the assessee who was seriously prejudiced and aggrieved by the dismissal of its appeal owing to arguments being not advanced by the assessee before the Tribunal by not pressing ground number 1 to 4 and 6 to 36, while ground number 5 concerning limitation was adjudicated by the Tribunal which was decided against the assessee.
2.7 Aggrieved, the assessee filed MA bearing No. 372/Del/2024 seeking recall of the order dated 20.09.2024 for adjudication of other grounds i.e. 1 to 4 and 6 to 36, although ground number 5 concerning limitation was adjudicated against the assessee, praying that in the immediately preceding year on identical ground of limitation has been decided in favour of the assessee vide order dated 17.10.2023, but in this year the same has been decided against the assessee. Despite the fact that each year is different year and facts may vary from year to year which may 24 25 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT lead to different conclusions based on changed factual circumstances, the assessee took a big risk and by not arguing and not pressing ground number 1 to 4 and 6 to 36 while confining arguments to Ground No. 5 concerning limitation, but it was the Tribunal who is mother of all Tribunal lived up-to its esteem and glory, and was kind enough as well gracious to see the difficulties assessee was put into, wherein the Tribunal observed that since , justice is not only to be done but seen to have been done, in the interest of substantial justice, recalled the order dated 20.09.2024 and restored the appeal to its original number keeping in view the interest of justice, and that the assessee should not suffer due to the non-pressing of the ground nos. 1-4 and 6 to 36, by observing as under:
"Miscellaneous application under Section 254(2) of the Income Tax Act, 1961 is for rectification of order dated 20th September 2024.
2. Learned Authorized Representative for the appellant/assessee submitted that a Co-ordinate Bench of the Tribunal decided identical ground no.4 for assessment year 2017-18 vide order dated 17th October 2023. For assessment year 2018-19, submissions were firstly addressed on ground no.5 of the appeal as a preliminary issue. Learned Authorized Representative on the basis of legitimate expectation and judicial proprietary of following order of Co-ordinate Bench had made the submissions. Ground nos. 1 to 4, 6 to 35 were not stressed upon. However, ground no. 5 has been dismissed. So, the appellant/assessee prays for recalling of impugned order and adjudication of afore-mentioned grounds of appeal.
4. Learned Authorized Representative for the Revenue submitted that the application does not mention error apparent on record.25 26 SA No. 327/Del/2025
A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT
5. From examination of record in light of aforesaid rival contentions, it is crystal clear that order dated 20th September, 2024 is regarding adjudication of ground no.5 of the appeal. Ground of appeal nos. 1 to 4 and 6 to 36 have not been adjudicated upon. Appellant/assessee prays for suitable opportunity of hearing for adjudication of all the grounds of appeal. Therefore, since, justice is not only to be done but seen to have been done, in the interest of substantial justice, the order deserves to be recalled. Accordingly, impugned order dated 20.09.2024 is recalled. The appeal is restored to its original number for fresh decision in accordance with law. Registry is directed to List the appeal for hearing on 28.04.2025.
6. In the result, the miscellaneous application of the appellant/assessee is allowed."
17. We would like to keep it on record, the admirable arguments put forward by Sh. Nageswar Rao, Id. AR and Sh. Rajesh Kumar, CIT-DR.
18. Since the other grounds have not been argued by the Ld.AR, they are not being adjudicated.
2.8 Ld. Counsel for the assesseedrew our attention to the computation sheet and notice of demand u/s 156 of the Act by pointing out that even the loss which was determined by Revenue u/s 143(1) at Rs. 21,05,08,945/- has been added to the additions made by the AO instead of being subtracted from the addition made by the AO. Thus, it was submitted that this is an arithmetical error which has taken place that instead of loss being deducted from the additions being made by the AO, the loss is added to the double additions made by the AO which has led to the addition to the tune of Rs. 42,10,17,890/-.Further it was submitted that while 26 27 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT drawing the computation of income as well as the notice of demand issued by the AO u/s 156, the AO made additions towards protective adjustments of Rs.
8,24,25,016/- towards ALP adjustment on account of AMP by applying BLT which should not have been taken into account while computing demand towards income-tax and interest payable by the assessee, as Hon'ble Delhi High Court has already held that ALP adjustment towards AMP by applying BLT is not sustainable in the eyes of law.The said issue is now pending with Hon'ble Supreme Court. The assessee relied upon following orders of the ITAT to submit that even substantive addition on account of adjustment to ALP on account of AMP ,cannot be taken into account while imposing condition of pre-deposit for grant of stay on recovery of outstanding demand :-
1. Decision of Chandigarh Tribunal in the case of Widex India (P.) Ltd. v.
ACIT Circle 2(1), Chandigarh [2019] 108 taxmann.com 125 (Chandigarh - Trib.) - Para 18.2
2. Decision of Delhi Tribunal in the case of Addl. CIT v. Bacardi India Pvt. Ltd.,ITA No. 4069/DEL/2019 dated 20.05.2022
3. Decision in the case of Samsung India Electronics Pvt. Ltd. v. DCIT, [2020] 120 taxmann.com 283 (Delhi-Trib.) 2.9 Thus, it was submitted that the addition being made by the AO on substantive basis on intensity basis keeping in view trading as well manufacturing results ought not to have been made by the AO. It was submitted that the protective addition weremade on BLT which has already been decided against the Revenue 27 28 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT by the Hon'ble Delhi High Court. The issue is pending for adjudication before Hon'ble Supreme Court.
2.10 With respect to interest income being brought to tax, it was submitted that the assessee has deducted the said interest income from fixed assets while filing the return of income, although it was credited to the P&L A/c in the audited financial statement. It was submitted that to that effect, less depreciation as per prescribed rates has been claimed since interest income was deducted from the cost of fixed assets, and higher depreciation ought to have been allowedby the AO to the assessee, if the same is to be added to the income of the assessee and brought to income-tax.
2.11 It was also submitted that if the protective additions being made towards ALP adjustment towards AMP expenditure by applying BLT as well as loss as computed under Section 143(1) are reduced from the other additions so made by the AO, the revised computation will be computed as under:
Current year loss as per order dated 15.11.2019 u/s 143(1) = -Rs. 21,05,08,945 Substantive adjustment as per order u/s 92CA(3) = + Rs. 17,27,07,682 Protective Addition as per order u/s 92CA(3) ALP Adjustment to AMP(Rs. 8,24,25,016-not included For limited purpose of computing pre-deposit for stay --
28 29 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT on recovery of outstanding demand) Disallowance of interest income capitalized = + Rs.9,92,03,093 Total : = +Rs. 6,14,01,850
2.12 It was also submitted that the assessee has filed rectification application u/s 154(1) for rectifying certain mistakes which are apparent from record which, inter alia, included treating the loss at Rs. 21,05,08,945/- as the positive income of the assessee to the additions made by the AO while computing assessed income, which has been led to the double addition to the income as instead of loss being reduced from the additions so made by the AO , the loss is added to the additions made by the AO, while led to double addition wherein assessed income stood enhanced by Rs. 42,10,17,890/-. It was also submitted that even the loss computed u/s 143(1) being reduced to Rs. 21,05,08,945 ,instead of loss of Rs. 22,09,49,746 claimed by the assessee in the return of income. It was submitted that the assessee has now filed rectification application. The rectification application is pending before the Department. Thus, it was prayed that keeping in view the aforesaid contentions, the complete stay be granted on recovery of the outstanding demand.
2.13 Ld. Sr. DR on the other hand submitted that this is a stay petition filed by the assessee, and in the first round of litigation, the assessee did not press ground nos.29 30 SA No. 327/Del/2025
A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT 1 to 4 and 6 to 36 and no arguments were advanced with respect thereto while arguments were advanced only on the ground number 5 that the assessment is barred by limitation. The Tribunal has dismissed the appeal of the assessee by adjudicating ground No. 5 holding that the assessment order was passed in time and is not barred by limitation, the other grounds being 1-4 and 6 to 36 were not pressed by the ld. Counsel for the assessee and no arguments were advanced and hence these grounds were dismissed. It was submitted that so far as contention on merits are concerned presently we are considering stay petition, and merit can only be considered at the time of adjudication of the appeal.
2.14 We have considered the contentions of both the parties and perused the material available on record. We are not repeating facts and circumstances as are emerging from records and contentions advanced before. The same in nut-shell are recorded by us in preceding para's. After hearing both the parties and keeping in view facts and circumstances as narrated in preceding para's, without commenting on the merits of the issue , as are brought to our notice from record , we are of the view that the assessee has made out a prima facie case for grant of partial stay on recovery of outstanding demand provided that the assessee pre-deposit 20% of the outstanding demand towards income-tax and interest accrued thereon computed at on the income of Rs. 6,14,01,850/- , worked out as under :
30 31 SA No. 327/Del/2025A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT Current year loss as per order dated 15.11.2019 u/s 143(1) = (-) Rs. 21,05,08,945 Substantive adjustment as per order u/s 92CA(3) = (+) Rs. 17,27,07,682 Protective Addition as per order u/s 92CA(3) ALP Adjustment to AMP(Rs. 8,24,25,016-not included For limited purpose of computing pre-deposit for stay --
on recovery of outstanding demand)
Disallowance of interest income capitalized = (+)Rs.9,92,03,093
Total : = (+)Rs. 6,14,01,850
2.15 The assessee shall work out demand based on above income, and the assessee shall pre-deposit 20% of the demand towards income-tax worked arising on the aforesaid income along with applicable interest under the 1961 Act. This condition of the pre-deposit shall be in consonance of the provisions of Section 254(2A) of the 1961 Act read with Proviso. The assessee has also claimed to have filed its rectification application with the department u/s 154 so far as loss computed u/s 143(1) of Rs. 21,05,08,945/- is being considered as a positive income and added to the additions made by the AO which prima facie appears to be erroneous and led to double additions. No such rebuttal has been filed by the Department. We have also observed that rectification application is pending with the Department on this ground. Further we have also observed that the Department has made the addition 31 32 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT of Rs. 8,24,25,016/- being ALP adjustment towards AMP expenditure on protective basis by applying BLT. We are of the prima-facie view that at this stage since this is a protective addition made by the AO based on judgment of Hon'ble Delhi High Court, It will be fair and appropriate that the same should not be taken into account while computing pre-deposit amount for grant of stay on recovery of outstanding demand. For other additions, it will not be appropriate for us to comment on the merits of the issue as the Tribunal being last fact finding authority will delve in great details while adjudicating the appeal as the conclusions depends upon the detailed fact finding exercise to whom law is to be applied, but the same is to be taken into account while computing condition of pre-deposit. We have observed that in the first round of litigation before the Tribunal, it was assessee did not pressed before the Bench ground nos. 1 to 4 and 6 to 36 and no arguments were advanced and the assessee restricted its arguments in first round of litigation on the ground of limitation vide ground no. 5 which stood dismissed. The Tribunal keeping in view the interest of substantial justice, and that the assessee is not un-
necessarily prejudicedowing to not advancing of arguments wrt ground no. 1 to 4 and 6 to 36 which grounds stood dismissed on account of not being pressed while ground no. 5 wrt limitation stood dismissed on merits, butthe Tribunal, in the interest of substantial justice, recalled its order in ITA no. 1521/Delhi/2022 dated 32 33 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT 20.09.2024 by allowing the MA filed by the assessee vide order dated 17.04.2025.
Thus, the MA bearing No. 372/Del/2024 filed by the assessee seeking recall of the order dated 20.09.2024 for adjudication of other grounds i.e. 1 to 4 and 6 to 36 was allowed by the Tribunal, although ground number 5 concerning limitation was adjudicated against the assessee as the facts differed in this year vis-à-vis immediately preceding year wherein said ground of appeal was stated to be allowed by the Tribunal. The assessee has prayed that in the immediately preceding year on identical ground of limitation has been decided in favour of the assessee vide order dated 17.10.2023, but in this year the same has been decided against the assessee. Despite the fact that each year is different year and facts may vary from year to year which may lead to different conclusions based on changed factual circumstances, the assessee took a big risk by not arguing and not pressing ground number 1 to 4 and 6 to 36 while confining its arguments to Ground No. 5 concerning limitation, but it was the Tribunal, who keeping in view interest of substantial justicerecalled its order , by observing that since , justice is not only to be done but seen to have been done, in the interest of substantial justice, recalled the order dated 20.09.2024 and restored the appeal to its original number keeping in view the interest of justice, and that the assessee should not suffer due to the non-pressing of the ground nos. 1-4 and 6 to 36, by observing as under:
33 34 SA No. 327/Del/2025A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT "Miscellaneous application under Section 254(2) of the Income Tax Act, 1961 is for rectification of order dated 20th September 2024.
2. Learned Authorized Representative for the appellant/assessee submitted that a Co-ordinate Bench of the Tribunal decided identical ground no.4 for assessment year 2017-18 vide order dated 17th October 2023. For assessment year 2018-19, submissions were firstly addressed on ground no.5 of the appeal as a preliminary issue. Learned Authorized Representative on the basis of legitimate expectation and judicial proprietary of following order of Co-ordinate Bench had made the submissions. Ground nos. 1 to 4, 6 to 35 were not stressed upon. However, ground no. 5 has been dismissed. So, the appellant/assessee prays for recalling of impugned order and adjudication of afore-mentioned grounds of appeal.
4. Learned Authorized Representative for the Revenue submitted that the application does not mention error apparent on record.
5. From examination of record in light of aforesaid rival contentions, it is crystal clear that order dated 20th September, 2024 is regarding adjudication of ground no.5 of the appeal. Ground of appeal nos. 1 to 4 and 6 to 36 have not been adjudicated upon. Appellant/assessee prays for suitable opportunity of hearing for adjudication of all the grounds of appeal. Therefore, since, justice is not only to be done but seen to have been done, in the interest of substantial justice, the order deserves to be recalled. Accordingly, impugned order dated 20.09.2024 is recalled. The appeal is restored to its original number for fresh decision in accordance with law. Registry is directed to List the appeal for hearing on 28.04.2025.
6. In the result, the miscellaneous application of the appellant/assessee is allowed."
Thus, it will be fit and appropriate to partly allow this stay petition in the manner as indicated above, by imposing condition of pre-deposit of 20% amount computed on the demand of income-tax and accrued interest arising thereon on the substantive addition(intensity) of Rs. 17,27,07,682/- and interest income of Rs.
9,92,03,093/- after taking into loss determined u/s 143(1) of (-) Rs. 21,05,8,945/-, 34 35 SA No. 327/Del/2025 A.Y. 2018-19 Haier Appliances India P. Ltd. v. ACIT by computing income-tax and interest accrued thereon on this total computed income of Rs. 6,14,01,850/-. Once the aforesaid sum so computed stood deposited by the assessee, the remaining outstanding demand shall stand stayed, for a period of 180 days or till the disposal of the appeal, which ever is earlier. Needless to say that the assessee shall co-operate in early disposal of its appeal in ITA No 1521/Del/2022, and the assessee shall not seek un-necessary adjournments. We reiterate that we have not commented on the merits of the issues arising in the appeal. The AO is directed to dispose off rectification application filed by the assessed expeditiously. We order accordingly.
3. The stay petition is partly allowed in the manner as indicated above.
Order pronounced in open court on 04.07.2025.
Sd/- Sd/-
(SUDHIR KUMAR ) (RAMIT KOCHAR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 15.07.2025.
*MP*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT, NEW DELHI
35