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Facts
The assessee, Leadadvance Private Limited, appealed an order of the Assessing Officer (AO) that assessed total income at INR 14,30,46,000 against a NIL returned income. The AO's order was based on a Transfer Pricing (TP) adjustment pursuant to directions from the Dispute Resolution Panel (DRP). The assessee contended that the transaction was between two domestic entities and not an international transaction, thus TP provisions should not apply. The AO also allegedly failed to consider brought forward unabsorbed depreciation.
Held
The Tribunal noted that the issue of applicability of TP provisions was raised for the first time before it. Since the DRP's order did not address this aspect, the matter was restored to the Assessing Officer. The AO was directed to examine if the transaction was between two domestic companies, in which case TP provisions would not apply.
Key Issues
Whether a transaction between two domestic entities is an international transaction attracting Transfer Pricing provisions. Whether the Assessing Officer erred in not considering brought forward unabsorbed depreciation.
Sections Cited
92(3), 92C(1), 50B, 234B, 234C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘H’: NEW DELHI
(ASSESSMENT YEAR 2017-18) Leadvance Private Limited, DCIT, 1201-1202, Signature Tower-A, Circle-2(1), 12th Floor, South City-I, Vs. Delhi. Gurugram-122001, Haryana PAN-AAACO0160A (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.
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.
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.
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.
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.
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.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 25/07/2025.