VIVO MOBILE INDIA PRIVATE LIMITED,HARYANA V. ASSISSTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 30, DELHI, JHANDEWALAN EXTN.

SA 604/DEL/2025

AI Insights

Vivo Mobile India Private Limited, a subsidiary of Multi-Accord Limited, faced a substantial tax demand following a transfer pricing adjustment and other assessments by the Assessing Officer (AO) and the Dispute Resolution Panel (DRP). The adjustments included significant additions for royalty payments, release fees to Qualcomm, and advertising expenditures, among others, leading to an assessed income far exceeding the returned income of nil. The Tribunal's decision to grant a partial stay on the demand was based on the prima facie merits of the case, the legal interpretations presented, and the balance of convenience favoring the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 791791 (ITAT-DELHI)
• Duration Of Justice: 7 day(s)
• Appeal Type: Stay Application
• Pronouncement Date: 08-12-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2021-2022
• Appeal Filed On: 01-12-2025
• Laws Referred To: Income Tax Act, 1961, Income Tax (Appellate Tribunal) Rules, 1963
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANKUSH KALRA
• Assessee Lawyers: AJAY VOHRA
• Keywords: Transfer pricing; Capital expenditure; Wholly owned subsidiary; Recovery proceedings; Application of stay; Bogus
• Section: 143(3); 2; 37(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “H”, NEW DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI ANUBHAV SHARMA, JUDICIAL MEMBER SA No.604/Del/2025 (in IT(TP)A No.16/Del/2025) (Assessment Year : 2021-22) Vivo Mobile India Private Limited, vs. ACIT, Central Circle 30, 10th and 11th Floor, Palm Spring Plaza, New Delhi. Wazirabad, Gurgaon – 122 003 (Haryana). (PAN : AAECV8538M) (APPLICANT) (RESPONDENT) APPLICANT/ASSESSEE BY: Shri Ajay Vohra, Sr. Advocate Shri K.M. Gupta, Advocate Shri Jaskaran Singh, CA Ms. Shruti Khimta, AR REVENUE BY : Ms. Ankush Kalra, Sr. DR Date of Hearing : 05.12.2025 Date of Order : 08.12.2025 O R D E R PER S.RIFAUR RAHMAN, AM: 1. Applicant/Assessee, Vivo Mobile India Private Limited (hereinafter referred to as ‘the assessee’) filed the present stay application seeking to stay the demand of Rs.4,77,62,81,000/- for the AY 2020-21 under Rule 35A of the Income Tax (Appellate Tribunal) Rules, 1963 (for short ‘the Rules’). 2. At the time of hearing, ld. AR of the assessee submitted that the assessee is a wholly owned subsidiary of Multi-Accord Limited, a Hong Kong based company which holds Printed from counselvise.com 2 SA No.604/Del/2025 99.99% of share capital of the assessee, incorporated in 2014, the company is in the business of manufacturing and selling smart phones, smart phones accessories and spare parts and is having its manufacturing plant at Greater Noida, Uttar Pradesh. He further submitted that the assessee and Vivo Mobile Communication Co. Ltd. has entered in License Agreements pursuant to which Vivo Mobile Communication Co. Ltd. provides intellectual property rights to the assessee relating its business of trading, import, exports, manufacturing and distribution of mobile communication devices and its accessories pertaining to Vivo and IQOO brands. Under this agreement, royalty was paid to Vivo Mobile Communications Co. Ltd. at the rate of 1% of the sales turnover as the royalty agreement for the year under consideration. 2.1 He submitted that the assessee’s case was selected for scrutiny assessment under section 143 of the Income tax Act, 1961 (for short 'the Act'). The Ld. TPO vide its order dated October 25, 2024 proposed an upward adjustment to income on account of: (a) Royalty to Vivo Mobile Communications Co. Ltd. amounting to Rs.2,45,35,04,978; (b) Release fees to Qualcomm amounting to Rs.5,28,58,22,628; and (c) Advertising, Marketing & Promotion (‘AMP') expenditure on substantive basis amounting to Rs.305,46,06,000. 2.2. Further, he submitted that the Ld. TPO proposed an addition on protective basis amounting to Rs.497,71,37,127/- on the issue of purchase of goods from foreign trading companies. 2.3 He further submitted that the AO proposed an addition under Section 37(1) of the Act amounting to Rs.43,22,375 on account of alleged Bogus Capital Expenditure. Consequently, the income of the assessee was proposed to be assessed at a sum of Printed from counselvise.com 3 SA No.604/Del/2025 Rs.10,79,82,55,980 as against the returned income of Nil, vide draft assessment order dated December 31, 2024 passed u/s 144C(1) read with section 144B of the Act. 2.4 Aggrieved by the draft assessment order, the assessee filed its objections before the Ld. Dispute Resolution Panel ('DRP') under the provisions of section 144C of the Act and the Ld. DRP vide its order dated September 19,2025 upheld the draft assessment order passed by the AO on account of transfer pricing adjustment. Further, the addition on account of alleged Bogus Capital Expenditure under Section 37(1) of the Act was deleted by the Ld. DRP. 2.5 He further submitted that pursuant to the directions passed by the Ld. DRP, the AO passed the final assessment order under Section 143(3) r.w.s 144C(13) of the Act dated October 30, 2025 wherein the income of the assessee was assessed at Rs.11,76,54,64,610 as against the returned income of Nil. Summary of the adjustments made to the returned income is tabulated hereunder: Particulars Amount (in INR) Taxable income reported under ROI Nil Transfer Pricing adjustments: - Adjustment on Royalty paid to Vivo China 2,45,35,04,978 - Adjustment on Release fees paid to Qualcomm 5,28,58,22,628 - Substantive adjustment on account of Advertising, Marketing & Promotion CAMP') expenditure 4,02,61,37,000 - Protective Adjustment on the issue of purchase of goods amounting to INR 4,97,71,37,127 Income assessed vide assessment order 11,76,54,64,610 Printed from counselvise.com 4 SA No.604/Del/2025 2.6 He submitted that aggrieved by the final assessment order, the assessee filed an appeal before the ITAT and a consequent tax demand (inclusive of applicable interests) amounting to Rs.4,77,62,81,000 was determined to be payable by the assessee vide notice of demand issued u/s 156 of the Act. He further submitted that an application for stay of demand has been filed before the AO. 2.7 Ld. AR of the assessee requested for stay of demand by giving reasons in detail in the present stay application from pages 7 to 28 and the summary of the prayer before the Tribunal is as under :- (a) There is a prima facie case on merits in favour of the assessee; (b) The Assessing Officer/ld. DRP has disregarded judicial precedent and misinterpreted the legal stance on the grounds and therefore, impugned order passed by the Assessing Officer is bad in law; (c) The balance of convenience is in favour of the assessee. Accordingly, he prayed that the impugned demand may be stayed till the disposal of the quantum appeal, the Assessing Officer may be restrained from taking any coercive action for recovery of tax and interest levied for the relevant assessment year and the hearing of the appeal filed by the assessee may be expedited. 3. On the other hand, ld. DR of the Revenue objected for granting of stay and prayed that assessee may be asked to pay considerable demand as there are no financial constraints in this case. 4. Considered the rival submissions and material placed on record. We noticed that the assessee is seeking complete stay of demand. However, after considering the factual matrix on record, we are inclined to grant the stay with the condition that 20% of the Printed from counselvise.com 5 SA No.604/Del/2025 outstanding demand be given in the form of bank guarantee on or before 31.12.2025. Accordingly, on depositing the bank guarantee of 20% of the outstanding demand, balance outstanding demand is stayed for a period of 180 days from the date of this order or till the date of disposal of present appeal, whichever is earlier, subject to the rider that the assessee shall not take unnecessary adjournment to prolong the appeal otherwise stay order would cease to operate. Further, on the request of the assessee, the appeal is fixed for out of turn hearing and the same is fixed for 16.02.2026. Both the parties are informed in the court. No notice. 5. In the result, the aforesaid stay application is partly allowed as above. Order pronounced in the open court on this 8th day of December, 2025 Sd/- sd/- (ANUBHAV SHARMA) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 08.12.2025 TS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "