LEDVANCE PRIVATE LIMTED,GURGAON V. DCIT, CIRCLE-2(1), DELHI

ITA 540/DEL/2022

AI Insights

The case involves Leadvance Private Limited, which appealed against the order of the Assessing Officer (AO) that assessed the total income of the appellant significantly higher than the returned income. The primary contention was whether the transaction between two domestic entities should be considered an international transaction attracting transfer pricing (TP) provisions. The appellant argued that the transaction was a slump sale to another domestic company, thus not subject to TP provisions. The Department of Revenue contended that the appellant did not provide sufficient evidence to prove the domestic nature of the transaction. The Tribunal found that the issue of the applicability of TP provisions was not addressed by the lower authorities and restored the matter to the AO for further examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711546 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S.K. JADHAV
• Assessee Lawyers: RAVI SHARMA; SHRUTI KHIMTA
• Keywords: Transfer pricing; International transaction; Depreciation; Unabsorbed depreciation

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H’: NEW DELHI BEFORE SHRI PRAKASH CHAND YADAV, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.540/Del/2022 (ASSESSMENT YEAR 2017-18) Leadvance Private Limited, 1201-1202, Signature Tower-A, 12th Floor, South City-I, Gurugram-122001, Haryana PAN-AAACO0160A Vs. DCIT, Circle-2(1), Delhi. (Appellant) (Respondent) Assessee by Shri Ravi Sharma, Adv. & Ms. Shruti Khimta, AR Department by Shri S. K. Jadhav, CIT-DR Date of Hearing 22/07/2025 Date of Pronouncement 25/07/2025 O R D E R PER PRAKASH CHAND YADAV, JM: The present appeal of the assessee is arising out from the order of Ld. Assessing Officer dated 24th February, 2022 having DIN No. ITBA/AST/S/143(3)/2021-22/1040088514(1) and relates to Assessment Year 2017-18. 2. The assessee has raised the following grounds of appeal: “1. The Learned Assessing Officer ('Ld. AO) Transfer Pricing Officer (Ld. TPO) pursuant to the directions of the Hon'ble Dispute Resolution Panel ('Hon'ble DRP'), erred on facts and in law in assessing the total income of the Appellant at INR 14,30,46,000 as against the NIL returned income declared by the Appellant. 2. The Ld. AO/DRP/TPO erred in ignoring the fact that the transaction under consideration is not an international transaction and in doing so have grossly erred in: 2.1. Ignoring that the transaction under consideration is between two domestic entities and hence any adjustment being made results in a decrease in the tax base of India which is in contravention to the provisions of Section 92(3) of the Act. Printed from counselvise.com 2 ITA No.540 /Del/2022 Ledvance Pvt. Ltd. vs. DCIT 3. The Ld. AO/Ld. TPO pursuant to the directions of the Ld. DRP, erred by holding that the transaction pertaining to Transfer of business other than lamp business', does not satisfy the arm's length principle envisaged under the Act and in doing so grossly erred in: “3.1. Not following the directions of the Ld. DRP whereby Ld. TPO was directed to pass a speaking order on the imputation of a 10% mark-up while making a TP adjustment on book value of assets, using Discounted Cash Flow (DCF) method; 3.2. Applying an ad-hoc mark-up of 10% on the book value of net assets transferred without providing cogent reasons/empirical evidence for doing so; 3.3. Applying a methodology to determine the ALP of the transaction on the basis of an arbitrary assumption-based approach which is bad in law and not recognized by any of the six methods mentioned in Section 92C(1) of the Act read with the Income-tax Rules, 1962; 3.4. Disregarding the documentary evidence and various submissions filed by the Appellant to substantiate the computation of arm's length nature of transaction. 3.5. Disregarding the methodology adopted by the Appellant to determine the arm’s length price of the transaction and misconstruing the provisions of Section 50B of the Act: 4. The Ld. AO erred in assessing the total income of the Appellant at INR 14,30,40,000 and not considering the brought forward unabsorbed depreciation amounting to INR 54.46.60.428 available with the Appellant for set-off while computing the assessed income as per the final assessment order. 4.1. In doing so, the Ld. AO grossly erred in incorrectly assessing the tax demand at INR 7,83,20,240 against the correct tax demand of NII. 5. That the Ld. AO has erred in charging interest under section 2348 and 234C of the Act. That the above grounds of appeal are without prejudice to each other. That the Appellant reserves its right to add, alter, amend or withdraw any ground of appeal either before or at the time of hearing of this appeal.” 3. The solitary issue involved in this case is to whether the transaction between two domestic entities would be construed as international transaction and attracts TP provisions. It is the contention of the assessee that the assessee has transferred its business as a going concern(Slump sale) to the other domestic company vide agreement dated 13th June, 2016. And hence the AO has erred in referring the matter to the TPO for computing the ALP. Printed from counselvise.com 3 ITA No.540 /Del/2022 Ledvance Pvt. Ltd. vs. DCIT 5. The Ld. DR appearing on behalf of the Revenue has argued that the assessee has not filed any document before lower authorities to establish that the transaction was between two domestic entities. 6. We have heard the rival submissions and perused the materials available on record. Perusal of the order of the DRP would show that there is absolutely no whisper vis-à-vis the issue of applicability of TP provisions in respect of the impugned transaction. This issue has been raised by the assessee for the first time before the Tribunal. Therefore, we restore this matter to the file of the Assessing Officer with a direction that if the transaction is in fact a transaction between two domestic company, then provisions of transfer pricing would not be applied at all. So far as applicable to domestic transfer pricing provisions is concern, we direct the AO to examine that aspect of the matter if at all the impugned transaction can be subjected to the provisions of domestic TP or not. 7. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 25/07/2025. Sd/- Sd/- (MANISH AGARWAL) (PRAKASH CHAND YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:25/07/2025 PK/Ps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Printed from counselvise.com "