DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-17, DELHI, DELHI V. HAVELLS INDIA LTD, DELHI

ITA 4740/DEL/2025

AI Insights

The case involves the Revenue's appeal against the order of the CIT(A) concerning Havells India Ltd. for the Assessment Year 2010-11. The primary issues revolved around the adjustment rate for corporate guarantees provided to associated enterprises and the disallowances related to the Shahenshah Scheme and deductions under Section 80IC for interest income. The Tribunal referenced previous decisions in the assessee's own cases for earlier assessment years, which had set precedents favoring the assessee. The Tribunal found no infirmity in the CIT(A)'s decision and upheld the deletion of disallowances and the adjustment rate for corporate guarantees at 0.5%.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 834283 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 31-07-2025
• Other Referred Cases: Vodafone India Services Pvt. Ltd. vs. Shell India Markets Pvt. Ltd., Redington India Pvt. Ltd. vs. DCIT, CIT vs. Everest Kento Cylinders Ltd., CIT vs. Thomas Cook (India) Ltd., PCIT vs. Bharat Sanchar Nigam Ltd., NHPC Ltd vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DEL; ITA NO
• Keywords: Set aside; Transfer pricing; International transaction; Bad and doubtful debts
• Section: 92B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘I’: NEW DELHI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER ITA No.4740/Del/2025 Assessment Year 2010-11 DCIT Central Circle-17 Delhi Vs. Havells India Ltd. 904, 9th Floor, KG Marg, Surya Kiran Building, New Delhi PAN No. AAACH0351E Appellant Respondent Appellant Sh. Dharm Veer Singh, CIT DR Respondent Sh. Akshat Jain, AR Date of Hearing 18.12.2025 Date of Pronouncement 03.02.2026 ORDER PER C.N. PRASAD, JM, This appeal is filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals), Delhi-44 dated 07.04.2025 for the A.Y. 2010-11 arising out of final assessment order dated 26.05.2024 passed u/s.143(3) r.w.s. 144C (1) of the Act. 2. The revenue in its appeal raised following grounds : - “1. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in ignoring the principle Printed from counselvise.com Page | 2 that the factors/ parameters for issuing the Corporate Guarantee are different in every case and varies depending upon the tenure, T & C, risk-borne capacity, currency fluctuations, economic / business conditions etc. 2. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in restricting the rate of adjustment from 4.71% as determined by TPO in order u/s 92CA(3) to 0.5% in respect of corporate guarantee provided by the assessee company to its associated enterprises. 3. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in ignoring the fact the assessee has given the CO without taking any margin OR security from the AE, raising the risk concerns associated with the transaction. 4. Whether on the facts and circumstances of the case, the Ld. CITIA) has erred in deciding a universal rate of fee for issuance of CG inspite of the fact that the conditions in assessee's case and case law referred to differ in various aspects/parameters 5. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in ignoring the fact that the fee rate adopted by 5 the TPO is not out of assumption but is based on the real time actual data retrieved from various financial institutions giving such guarantees. 6. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting disallowance made of Rs 3,41,53,427/- on account of provision of Shahenshah Scheme, as the expense claimed by the assessee are in the nature of contingent liability, which is not an allowable expenditure during the year under consideration. 7. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting disallowance of Rs.7,64,363-on account of claim of deduction u/s 80 IC of the IT Act. 1961 ignoring that the deduction u/s 801C for interest income is only available when it is derived from business activities of industrial undertaking only. Whereas, in this case interest income was earned from fixed deposits i.e. in the nature of passive income which cannot be related to the active business activity of the assessee.” Printed from counselvise.com Page | 3 3. The Ld. Counsel for the assessee at the outset submitted that ground Nos. 1 to 5 are in respect of adjustment made towards corporate guarantee and this issue came up for consideration before the Tribunal for the A.Y.2014-15 in ITA No.6509/Del/2018 dated 09.05.2022 in Assessee’s own case, wherein the Tribunal held that the adjustment in respect of corporate guarantee provided to AE’s by the assessee be determined @0.5% instead of 1.3% determined by the revenue. 4. On the other hand the Ld. DR fairly submitted that issue is decided in favour of the assessee by the Tribunal. 5. Heard rival submissions, perused the orders of the authorities below and the decision of the Tribunal for the A.Y.2014-15 in assessee’s own case in ITA No.6509/Del/2018 dated 09.05.2022. On perusal of the order of the Tribunal we observe that the Tribunal considering the submissions of the assessee and various decisions the Tribunal held as under :- “5. The amount guarantee provided by Havells Holdings Ltd. was Rs.143.13 crores against which the TPO has calculated guarantee fee @ 1.3% amounting to Rs.1.86 crores. 6. At the outset, the Id. AR argued that providing corporate guarantee is in the nature of shareholders activities and is not an 'International transaction' as investment in subsidiary company is not an 'international transaction' as held in the case of Vodafone India Services Pvt. Ltd. and Shell India Markets Pvt. Ltd. It was argued that the assessee has not incurred any cost for issuing corporate guarantee and such transaction has no bearing on the profits, income, losses or assets of the assessee and it cannot be considered as an 'International transaction' in terms of Section 92B of the Act. It was further argued that the corporate guarantee issued by the assessee was purely on the commercial consideration with anticipation of Printed from counselvise.com Page | 4 significant benefit in the form of profit income in the later years and to protect the interest of the assessee company. It was argued that the bank guarantee and corporate guarantee are different and distinct matters and cannot be compared with. 7. The Id. DR argued that Hon'ble Madras high court's latest decision in Redington India Pvt. Ltd., Vs. DCIT, Tax Appeal No.590 and 591 of 2019, dt.10-12-2020 has settled the law that a corporate guarantee indeed forms an international transaction. Relying on the order of the TPO, the Id. DR argued that corporate guarantees given by the assessee is indeed an international transaction amenable to adjustment. 8. alternatively Rebutting the argument of the Id. DR, the Id. AR argued that determination of the corporate guarantee at 1.3% is on a higher side and relied on the judgment of Hon'ble High Court of Bombay in the case of CIT Vs. Everest Kento Cylinders Ltd. 58 Taxmann 254 and also on the judgment of Hon'ble High Court of Bombay in the case of CIT Vs Thomas Cook (India) Ltd. in ITA No. 712 of 2017 order dated 26.08.2019. Keeping in view, the judgments of the Hon'ble Bombay High Court and in the absence of any other judgment contrarily brought to our notice, we hereby direct that the adjustment in respect of corporate guarantee provided to AEs be determined at date of 0.5% instead of 1.3% determined by the revenue.” 6. Since the Tribunal in assessee’s own case had directed that the adjustment in respect of corporate guarantee provided to AE’s be determined at 0.5%, following the order of the Tribunal in assessee’s own case for the A.Y’s 2011-12 to 2014- 15, the Ld. CIT(A) directed the AO to restrict the interest rate to 0.5% as against 4.56% adopted by the AO on the issue of corporate guarantee to the AE’s for the Assessment Year under consideration, therefore, we see no infirmity in the order passed by the Ld. CIT(A) on this issue. Accordingly, ground Nos. 1 to 5 of grounds of appeal of revenue are rejected. Printed from counselvise.com Page | 5 7. Coming to ground No.6 i.e. with respect to deletion of disallowance made on account of provision of Shahensha Scheme the Ld. Counsel for the assessee submitted that this issue is also decided by the Tribunal for the A.Y.2014-15 wherein the Tribunal following the order for the A.Y.2006-07 deleted the addition. 8. On the other hand the Ld. DR fairly submitted that the issue stand covered in favour of the assessee by order of the Tribunal in assessee’s own case. 9. Heard rival submissions and perused the orders of the authorities below. We find that the issue has been decided in favour of the assessee by the Tribunal in various assessment years and the Tribunal while deciding the issue for the A.Y.2014-15 in ITA No.6509/Del/2018 dated 09.05.2022 held as under :- “Shahenshah Scheme: 9. This issue stands covered in the case of the assessee by the order of the Co-ordinate Bench of the Tribunal in ITA No. This issue stands covered in the case of the assessee by 6194/Del/2015 and ITA No. 463/Del/2016 vide order dated 19.01.2021. The relevant part of the said order is reproduced for ready reference: “15. Ground No.3 is with respect to disallowance of Rs.2,47,68,964/- in respect of provision made for sales incentive under \"Shahenshah Scheme\". 16. During the course of assessment proceedings, AO noticed that assessee had made provision in respect of \"Shahenshah Scheme\" and the assessee was asked to Printed from counselvise.com Page | 6 furnish the details of the same. Assessee inter alia submitted that it had made provision of Rs.5,67,26,847/- in respect of \"Shahenshah Scheme towards sales incentive payable to dealers and distributors and had paid Rs.2,61,14,170/- in respect to said the scheme and Rs.58,43,713/- was written back and credited to Excess Provisions of bad debts/sales incentive written back. The assessee also pointed to the relevant features to the \"Shahenshah Scheme\" and it was further submitted that the provision made for the scheme is not a contingent liability but rather a contractual liability which is legally enforceable by the dealers and distributors. The submissions made by the assessee were not found acceptable to AO. AO considering the fact that as against the provision of Rs. 5,67,26,847/-, the actual payment made by the assessee was Rs.2,61,14,170/- and Rs.58,43,713/- was written back, concluded that the provision made by the assessee as not based on any scientific method but was in the nature of contingent liability. He also noted that CIT(A) while deciding the Sue in assessee's own case for A.Y. 2008-09 had analyzed scheme and had confirmed the addition made by the AO. He therefore disallowed Rs.2,47,68,964/-2,61,14,170-(5843713/-)]. 17. Aggrieved by the order of AO, assessee carried the matter before the CIT(A), who following the order of his predecessor in assessee's own case for A.Y. 2008-09, upheld the action of the AO. Aggrieved by the order of CIT(A), assessee is now before us. 18. Before us, Learned AR reiterated the submissions made before the AO and CIT(A) and further submitted that against the order of CIT(A) for A.Y. 2008-09, assessee had carried the matter before the Tribunal. The Tribunal vide order dated 30.09.2019 in ITA No.4695/Del/2012 has decided the issue in favour of the assessee by holding that the provision made in Printed from counselvise.com Page | 7 respect of \"Shahenshah Scheme is on a scientific basis. He further submitted that the Co-ordinate Bench of Tribunal had deleted the similar additions made by AO in A.Y. 2007-08 & 2006-07. He pointed to the relevant findings in the synopsis filed by him. He therefore submitted that since the issue in the year under consideration is identical to that of earlier years, therefore following the order of tribunal in earlier years, the additions made by AO be deleted. 19. Learned DR on the other hand supported the order of AO in CIT(A). 20. We have heard the rival submissions and perused all the materials available on record. The issue in the present ground is with respect to the disallowance of provision made with respect to the sales incentive payable under \"Shahenshah Scheme\". The AO had disallowed the provision by holding that the provision made by the assessee was not based on any scientific method and there is an element of contingent liability and therefore the sum is not allowable. We find that identical issue arose in assessee's own case in AY 2006-07, 2007-08 and 2008-09 before the co-ordinate Bench of Tribunal. The Co-ordinate Bench of Tribunal in earlier v years has decided the issue in favour of the assessee by holding that the provision made by the assessee \"Shahenshah Scheme to be on scientific basis. Before us, no material has been placed by the Revenue to point out any ITA No.6194/Del/2015 ITA No.463/Del/2016 M/s. Havells India Ltd. vs DCIT A.Y. 2009- 10 14 distinguishing feature in the facts of the case in the year under consideration and that of earlier years. Further Revenue has also not placed any material to demonstrate that the decision of the Tribunal in assessee's own case in A.Y. 2006-07, 2007-08, 2008-09 has been set aside/ stayed or over ruled by the higher judicial forum. Considering the totality of Printed from counselvise.com Page | 8 the aforesaid facts and following the order of the Co-ordinate bench in the assessee's own case and for similar reasons, we hold that the Revenue was not justified in making the addition. We therefore set aside the action of AO. Thus the ground of the assessee is allowed.\" 10. As a result, the appeal of the assessee on this ground is allowed and it is to be kept outside the purview of Section 115JB.\" 10. We find that the Ld. CIT(A) deleted the addition following the orders of the Tribunal in assessee’s own case, therefore, we see no infirmity in the order passed by the Ld. CIT(A) and the same is sustained. The ground No.6 of grounds of appeal of the revenue is rejected. 11. Coming to ground No.7 of the revenue’s appeal which is in respect of deletion of disallowance on account of deduction u/s.80IC in respect of interest income, the Ld. Counsel for the assessee again submitted that this issue is also decided in assessee’s own case for the A.Y. 2014-15 wherein the Tribunal following the order for the A.Y. 2006-07 decided the issue in favour of the assessee. The Ld. Counsel for the assessee submitted that following the order of the Tribunal the Ld. CIT(A) granted relief to the assessee, therefore, the order may be sustained. 12. On the other hand the Ld. DR fairly submitted that the issue stands decided in favour of the assessee in assessee’s own case for earlier assessment year. Printed from counselvise.com Page | 9 13. Heard rival submissions and perused the orders of the authorities below. We observe that the Tribunal in ITA No. 6509/Del/2018 order dated 09.5.2022 decided identical issue in favour of the assessee by observing as under :- Deduction u/s.80IC : 11. This issue stands covered in the case of the assessee by the order of the Co-ordinate Bench of the Tribunal in ITA No. 6194/Del/2015 and ITA No. 463/Del/2016 vide order dated 19.01.2021. The relevant part of the said order is reproduced. for ready reference: \"21. Ground No.4 is with respect to the denial of claim of deduction u/s 80IC on interest income. 22. AO noticed that assessee had credited Rs.16,725/- and Rs.6,334/- on account of interest income in the accounts of Baddi Unit and Haridwar Unit. The assessee was asked to show cause as to why the deduction u/s 80IC not be disallowed on such interest income as it was not derived from the business activity of the Industrial undertaking. Assessee made the submissions which were not found acceptable to AO. AO was of the view that as per the provisions of Section 80IC, deduction is available only on income derived from business activity of industrial undertaking and since interest has been derived from fixed deposits, the interest was not eligible for deduction. He accordingly denied the claim of deduction u/s 80IC on such interest income. 23. Aggrieved by the order of AO, assessee carried the matter before the CIT(A) who upheld the order of AO. Aggrieved by the order of CIT(A), assessee is now before us. 24. Before us, Learned AR reiterated the submissions made before the lower Printed from counselvise.com Page | 10 authorities and further submitted that interest income was earned on the fixed deposits which was required to be maintained as per the statutory requirements of the respective state. He submitted that since the interest income was inextricably linked to the main business activity of the assessee, it should be considered to be treated as eligible for claiming deduction. In support of its claim for interest being eligible for deduction, he also relied on the decision of Hon'ble Delhi High Court in the case of PCIT vs. Bharat Sanchar Nigam Ltd. in ITA No.477/2016 dated 01.08.2016 and the decision of ITAT in the case of M/s. NHPC Ltd vs. ACIT in ITA No.3738/Del/2015 in order dated 08.05.2019. 25. Learned DR on the other hand supported the order of lower authorities. 26. 26. We have heard the rival submissions and perused all the materials available on record. The Issue in the present ground is with respect to the denial of claim of deduction u/s 80IC on the interest income earned by the assessee. Before us it is Learned AR's contention that the interest income earned is inextricably linked to the main business activity of the assessee as it was earned from fixed deposits which was required to be maintained as per the statutory requirements. The aforesaid contentions of the assessee have not been controverted by the Revenue. We find that the Hon'ble Delhi High Court in the case of PCIT vs. Bharat Sanchar Nigam Ltd. (supra) and the Co- ordinate Bench of Tribunal in the case of M/s. NHPC Ltd. (supra) has held that the Revenue was not justified in denying the claim of deduction on such income. Before us, Revenue has not pointed any contrary binding decision in its support. We therefore, hold that AO not justified in denying the claim of deduction u/s 80IC of the Act and thus direct the AO to grant deduction u/s 80IC on the interest income Printed from counselvise.com Page | 11 earned by the assessee. Thus the ground of the assessee is allowed.\" 12. As a result, the appeal of the assessee on this ground is allowed\" 14. We observe that following the order of the Tribunal in Assessee’s own case the Ld. CIT(A) granted relief to the assessee. Thus, we see no reason to interfere with the findings of the Ld. CIT(A). Ground No.7 of grounds of appeal of the revenue is rejected. 15. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 03.02.2026. Sd/- Sd/- [AMITABH SHUKLA] [C.N. PRASAD] ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 03.02.2026 NEHA , Sr.P.S.* Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Printed from counselvise.com "