HP INDIA SALES PRIVATE LIMITED,BANGALORE V. DCIT, CIRCLE-3(1)(1), BANGALORE

ITTPA 2378/BANG/2024

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The case involves HP India Sales Pvt. Ltd., which is engaged in importing computer peripherals and providing support services in India. The company filed its return for the assessment year 2021-22, declaring a total income of Rs.6.92 Crores. Following a scrutiny, the AO referred the case to the TPO due to international transactions, leading to significant adjustments in income based on the ALP of these transactions. The assessee contested these adjustments, particularly concerning AMP expenses, arguing that these were not international transactions and had been considered in the ALP calculations of the distribution segment. The Tribunal's decision focused on verifying the treatment of AMP expenses and correcting the handling of the earnest money deposit in the accounts.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 706849 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 07-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2021-2022
• Appeal Filed On: 09-12-2024
• Other Referred Cases: CIT Ltu Vs. Whirlpool 610 (2014)
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VILAS SHINDE
• Assessee Lawyers: SHARAD RAO; VAIDHEHI G.; DHIRAJ R.; A.RS
• Keywords: Transfer pricing; International transaction

Judgement Text

"IT(TP)A No.2378/Bang/2024 HP India Sales Pvt. Ltd., Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “C’’ BENCH: BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI PRAKASH CHAND YADAV, JUDICIAL MEMBER IT(TP) No.2378/Bang/2024 Assessment Year: 2021-22 Hp India Sales Private Limited No.24, Kothari Arena, Hosur Main road Adugodi, Bangalore South, Bangalore Karnataka 560 030 PAN NO : AAACC9862F Vs. DCIT Circle 3(1)(1) Bangalore APPELLANT RESPONDENT Appellant by : Sri Sharad Rao, Ms. Vaidhehi G. & Dhiraj R., A.Rs Respondent by : Sri Vilas Shinde, D.R. Date of Hearing : 04.06.2025 Date of Pronouncement : 07.07.2025 O R D E R PER PRAKASH CHAND YADAV, JUDICIAL MEMBER: Present appeal of the assessee is arising from the order of ld. AO dated 9.10.2024 having DIN No. ITBA/AST/S/143(3)/ 2024- 25/1069573673(1) and relates to assessment year 2021-22. 2. The assessee has raised following grounds of appeal: IT(TP)A No.2378/Bang/2024 HP India Sales Pvt. Ltd., Bangalore Page 2 of 9 IT(TP)A No.2378/Bang/2024 HP India Sales Pvt. Ltd., Bangalore Page 3 of 9 IT(TP)A No.2378/Bang/2024 HP India Sales Pvt. Ltd., Bangalore Page 4 of 9 IT(TP)A No.2378/Bang/2024 HP India Sales Pvt. Ltd., Bangalore Page 5 of 9 IT(TP)A No.2378/Bang/2024 HP India Sales Pvt. Ltd., Bangalore Page 6 of 9 3. Brief facts of the case are that the assessee is a company engaged in import of computer peripherals from its Associated Enterprises (AEs) for sale in India and also rendered certain support services. Assessee filed its return of income on 13.7.2022 declaring total income of Rs.6.92 Crores. Thereafter the case of the assessee was selected for scrutiny, observing international transactions, the AO made reference to the TPO, who vide its order dated 17.10.2023 made an adjustment of Rs.100,20,08,556/-. Thereafter, the AO passed draft assessment order on 16.12.2023 making additions as suggested by the TPO. Against the draft assessment order, the assessee filed its objections before the ld. DRP. The ld. DRP vide its order dated 9.9.2024 directed the TPO to verify certain issues and determine the ALP accordingly. Thereafter, the TPO has passed an order on 11.9.2024 in line with the directions of the ld. DRP and recomputed the adjustments made on account of ALP and finally an adjustment of Rs.44,62,25,130/- has been made by the TPO, which is added by the ld. AO while completing the assessment. Besides this, the AO has also disallowed an amount of Rs.66 lakhs on account of writing of earnest money. 4. Aggrieved with the order of AO, the assessee has come up in appeal and has raised so many grounds as reproduced by us in this order. However, only two issues survive for our decision, one is with regard to Transfer Pricing adjustment and the other one is regarding the taxability of Earnest money, wrongly offered for taxation. 5. Ground No.1 is general in nature and hence does not require any specific adjudication. 6. In ground No.2 and other grounds, the assessee has challenged the applicability of bright line test and adjustments made by the TPO with respect to the Advertising, Marketing, Promotion (AMP) expenses. IT(TP)A No.2378/Bang/2024 HP India Sales Pvt. Ltd., Bangalore Page 7 of 9 7. Ld. Counsel for the assessee argued that the transactions of AMP expenses are not per se an international transaction. He has also relied upon the judgement of Delhi High Court in the case of CIT Ltu Vs. Whirlpool 610 (2014) dated 22.12.2015 for the proposition that AMP transactions are not per se international transactions and hence they cannot be subject to TP adjustments. On merits, the ld. Counsel for the assessee argued that the margin declared by the assessee is good enough i.e. 3.83% and the margin of the comparables taken by the TPO is only 2.33% and the assessee has already considered the impact of these expenses while computing ALP in distribution segment. 8. Ld. D.R. relied upon the orders of authorities below. 9. We have heard the rival submissions and perused the material available on record. We observe that it is the contention of the assessee that it has already considered AMP expenses while determining the ALP of the international transactions in distribution segment by applying TNM method at entity level. Therefore, no separate adjustment is called for in this regard. This factual aspect needs verification at the end of TPO. Therefore, we restore this issue to the file of TPO to examine that as to whether the assessee has already considered these expenses while determining the ALP of distribution segment or not. We further direct the TPO that if the assessee has already considered these expenses in distribution segment at entity level, then no further disallowance is called for. So far as the issue whether AMP transaction is an international transaction or not, we are leaving this issue open without going into the legality of this issue. 10. Next issue is disallowance of earnest money deposit and debited under the head Miscellaneous expenses by the assessee. In this regard, the contention of the ld. Counsel for the assessee is that the ld. DRP has grossly misunderstood the issue and wrongly given IT(TP)A No.2378/Bang/2024 HP India Sales Pvt. Ltd., Bangalore Page 8 of 9 directions to the TPO instead of AO. It is the submission of the assessee that in assessment year 2017-18, this amount has been paid and regarded as receivable/asset. In assessment year 2020-21, upon the receipt of this refund, assessee has inadvertently written back and offered this amount under the head Miscellaneous income and the assessee has offered this amount as income in assessment year 2020-21. Now in the impugned assessment year i.e. 2021-22, the assessee is making correction of entries, and has charged of this deposit under the head Miscellaneous expenses. However, the ld. AO disallowed the same. 11. Ld. D.R. relied upon the orders of authorities below. 12. After considering rival submissions, we are of the view that the ld. DRP has wrongly remitted this issue to the TPO instead of remitting the same to the AO. Since the issue involved is related to the corporate tax, TPO has no role to do anything with respect to this issue. Therefore, we restore this issue to the file of AO for examining afresh and in case the assessee is able to establish the nature of transaction, then the AO will grant relief to the assessee. 13. In the result, the appeal of the assessee is allowed for statistical purposes as indicated above. Order pronounced in the open court on 7th July, 2025 Sd/- (Waseem Ahmed) Accountant Member Sd/- (Prakash Chand Yadav) Judicial Member Bangalore, Dated 7th July, 2025. VG/SPS IT(TP)A No.2378/Bang/2024 HP India Sales Pvt. Ltd., Bangalore Page 9 of 9 Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order Asst. Registrar, ITAT, Bangalore. "