NEST CHILDCARE SERVICES PRIVATE LIMITED,MUMBAI vs. DCIT 15(1)(2), MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH “B” MUMBAI
BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT
MEMBER)
AND SHRI RAJ KUMAR CHAUHAN (JUDICIAL MEMBER)
ITA No. 6072, 6073, 6074/MUM/2025
Assessment Year: 2012-13 to 2014-15
Nest Childcare Services Private
Limited.
1st Floor, C Wing Shah Industrial
Estate, Sakivihar Road,
Sakinaka, Andheri (East),
Mumbai – 400072. PAN – AADCN3297Q
Vs.
DCIT 15(1)(2)
Aayakar Bhawan, New Marine
Lines, Churchgate, Mumbai –
400020. Appellant
Respondent
I.T.A. No. 6215/MUM/2025
Assessment Year: 2014-15
ACIT – 15(1)(2),
126 B, 1st Floor, Aaykar Bhavan,
M.K. Road, Mumbai - 400020. Vs.
Nest Childcare Services Private Limited.
1st Floor, C Wing Shah Industrial Estate,
Sakivihar Road, Sakinaka, Andheri (East),
Mumbai – 400072. PAN – AADCN3297Q
Appellant
Respondent
Assessee by :
Ms. Namrata R. Dedhia
Revenue by :
Ms. Beena Santosh, CIT DR. & Shri
Leyaqat Ali Aafaqui, Sr. DR.
Date of Hearing
:
27/11/2025
Date of pronouncement
:
03/12/2025
Per Bench The Assessm cross-app separate tax (App [“Ld. CIT matters, disposed and avoid
We first t 13 as th the decis to the rem
The grou reproduc “1. The le jurisp Comm made in ign ITA N I.T Nest Ch
ORDER h captioned appeals by the ent Years (AYs) 2012-13 to 20
peal by the Revenue for AY 201
orders of the learned Commissi peals), National Faceless Appea
T(A)”]. Since common issues they were heard together d of by this consolidated order d repetition of facts.
take up the appeal of the assess he lead case. Both parties fairly sion therein may be applied m maining matters.
unds of the appeal for assessmen ced as under:
earned Commissioner has erred in not prudence in the case of Flipkart In missioner of Income tax mentioned in e wherein it is clearly stated that the A noring the book results of the assesse
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hildcare Services Private Limited assessee for 014-15 and the 4-15, arise from ioner of Income- al Centre, Delhi pervade these and are being for convenience see for AY 2012- y submitted that mutatis mutandis nt year 2012-13
t considering the ndia v Assistant the submissions
AO was not right ee and resorting to a p in the 2. The le incom incom
3. The le busin adop
Furth mark the n suppo
4. The disall reject
5. The addit basis affect referr thoug publis the co order
The mate is engage care and ITA N I.T Nest Ch process of estimating the total income e manner which was inappropriate. earned commissioner has erred in not me actually earned OR arisen and me which could have been earned shou earned commissioner has erred in con ness loss is not genuine merely becau ted a penetration pricing model with h her, the learned commissioner ass ket practice is to earn a minimum profi numerous documents, emails and publ ort of market practice. learned Commissioner has erred in lowance of loss made by the learn ting the books of the accounts of the a learned Commissioner has erred in tion of net profit margin at 10% of s, relying upon theoretical explana ting net profit margin and profit ring to research papers and publis gh no details of any such resea shed data have been provided to the ourse of the appellate proceedings OR r.” erial facts, briefly stated, are th ed in the business of online re d mother-care products through No. 6072,6073,6074/MUM/2025 T.A. No. 6215/MUM/2025 3 hildcare Services Private Limited e of the assessee t considering the assuming that uld be taxed. ncluding that the use the assessee heavy discounts. sumed that the fit, while ignoring lished articles in n upholding the ned AO without assessee. n upholding an sale on ad hoc ation of factors tability and by shed data, even rch papers OR assessee during R in the appellate hat the assessee etailing of baby- h its web portal.
For the y return of total loss scrutiny the Incom and com
4.1 Duri noted th loss o consump against s that its competit adopted early yea on the p sell at pr pricing
Consequ estimated officer m below pu excessive allegedly
ITA N
I.T
Nest Ch year under consideration, the a f income on 30th September 2
s of ₹7,90,94,532/-. The return and statutory notices under s me-tax Act, 1961 (“the Act”) w plied with.
ing assessment, the Assessing hat the assessee had incurred of ₹1,18,450/- and h ption/purchase of goods at sales of ₹5,49,55,550/-. The ass pricing model was dictate ion and that, being an e-comm a discount-driven penetration ars. The AO, however, rejected t premise that no prudent busine rices lower than the purchase co policy to be commercially uently, he disallowed the en d profit at 20% of turnover.
mainly concluded that (i) prod urchase cost;(ii) discounts were e and commercially inexpedi y failed to consider fixed, variable
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hildcare Services Private Limited assessee filed its 012 declaring a was selected for ection 143(2) of were duly issued g Officer (“AO”) an operational had disclosed
₹5,50,73,952/- sessee explained ed by market merce retailer, it strategy in the this explanation ess entity would ost and held the y unjustifiable.
ntire loss and The Assessing ducts were sold e claimed to be ient;(iii) pricing e and incidental costs; a demonst
Officer is “4. Perus show asses
Rs.7, consu
Rs.55
of Rs
Furth incurr purpo asses
The a detail applic produ
03.03
reply
For th comp
4.1 The same reply sale o www
ITA N
I.T
Nest Ch and(iv) no “futuristic” busin rated. The relevant finding of s reproduced here under :- sal of the details filed by the ass ws that during the year under con ssee company has incurred
90,94,532/Further, it is also s umption of materials/goods
5073952/-against which there is a sa s. 54955502/-, thus, incurring a loss her, it is also seen that assessee red Rs.76940322/-being other expens ose of business. In the backgroun ssee company was asked to justify it assesse company was also asked to f ls of its fixed cost, overheads and cable to the costing and pricing uct. The assesse company vide i
3.2015 and 10.03.2015 has submi justifying the claim of loss incurred b he sake of brevity, the submission any are placed on record.
submissions are carefully perused e are not acceptable. The assessee has suggested that the assessee is e of child care and baby products thro w.babyove.com. The business module
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hildcare Services Private Limited ness plan was f the Assessing sessee company nsideration, the net loss of seen that the were shown ale consideration s of Rs.118450/
e company has ses spent for the nd of this, the ts pricing policy.
furnish complete d variable costs of a particular its letter dated itted a detailed by the assessee.
of the assessee
. However, the company in its engaged in retail ough its website of the assessee comp webs mark made asses
Child indus and t comp
These own p the p strate and a this r this p good disco comp
4.2 The a the fa make acqui that a is pri on e- denie whole
ITA N
I.T
Nest Ch any is that it buys and sells its p ites. There is another module being et wherein an online platform tor o e available for selling of the products ssee company buys almost entire pro dcare. The pricing policy of the assesse stry is decided by the competitors pric the companies offers huge discount to etition which is unheard off in tradi e discounts are often offered by the e- pockets thereby effecting sales at pr prices of the products. Thus, the pen egy allows the product to be priced as attract customers and generate trade resulted in gross loss, the long term policy is to penetrate the market fully base for loyal customers. Once th unts offered would gradually be re any would eventually start making pr assessee company in its reply is tryin act that this is a new business and h e it mandatory to price the product b isition of such products. There is no d a particular item which is available a ced higher than the same product wh
-tailers platform. However, the fact c ed that in a e-tailers platform, the esaler and the retailers are not in No. 6072,6073,6074/MUM/2025
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hildcare Services Private Limited products through operated in the other retailers is of retailers. The oduct from Moms ee as well as the ces in the market o beat the acute itional business.
tailers from their rices lower than netration pricing s low as possible volume. Even if strategy behind y and develop a his is done, the educed and the rofits.
ng to harp upon heavy discounts below the cost of denying the fact at a retailer shop hich is available can also not be e distributor the picture and the produ end u distri price cheap shop.
produ the m margi platfo comp
4.3 Furth asses for it margi not in margi the p or the cheap chain retaile distri platfo no c manu in tur are le
ITA N
I.T
Nest Ch uct is directly delivered by the man use customer. Hence, the margins a butor/wholesaler/retailer do not fo of the product and hence a particular per on the e-tailer platform in compari
Therefore, the submission of the as uct is much cheaper due to heavy dis manufacturers does not hold good. On in available to a manufacturer is muc orm as competitively, the prices are arison to a retailer shop.
her, nothing has been brought on ssee company to suggest as to why it to sell its products below the cost pric ins of the distributor, wholesaler and ncluded in the cost of the product. Ev ins charged by a e-tailer is higher in roduct when it is sold to the distribut e customer still gets the same comm per prices since the highest margin i n from manufacturer to consumer are ers, then the wholesalers and to s butors. Further, the entire product wh orm have a cash on delivery system redit period available to the end ufacturer gets the price of the product rn helps it to control its cost further as ess. In the case of the distribution cha
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hildcare Services Private Limited nufacturer to the available to the orm the part of product is much ison to a retailer ssessee that the count offered by the contrary, the ch higher on a e- e much lower in record by the was compulsory ce even when the the retailer were ven if, the profit n comparison to tor, the end user modity at much in any assemble e availed by the some extent the hich is sold on e- wherein there is user and the t instantly which s the borrowings ain network The distri good manu extern
4.4 Furth entire the va added pertin incide the m and f the in not o other sellin asses with agenc huge busin financ comp futuri the so 4.5 Hence asses
ITA N
I.T
Nest Ch butor, wholesaler and the retailer credit period for making paym ufacturer in turn has to do the defi nal borrowings which further adds to her, while fixing the price of a particu e cost including the fixed cost, the ov ariable cost are accounted for. Also, a d to the cost to arrive at the sel nent to mention that even notional ental cost, unforeseen market forces market, competitive edge etc. is also ta forms a part of the cost to arrive at the nstant case, the assessee company h only below the purchase cost, but a costs have been taken into account ng price. Therefore, the entire pricin ssee is neither commensurate with i the normal pricing policy adopted b cy. Non-inclusion of all these costs loss of 7,90,94,532/-which not o ness non sustainable but also ec cially non-viable. Vide its submission any could not substantiate the loss i istic path/planning has been indica o called market forces hurdle.
e, the loss of Rs.7,90,94,532/-c ssee is disallowed as not justiciab
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hildcare Services Private Limited generally takes ment and the icit financing by its cost.
ular product, the erhead cost and profit element is ling price. It is costs such as s, competition in aken into account e selling price. In has sold its price also none of the t to arrive at the ng policy of the its business nor by any prudent has resulted in only makes the conomically and ns, the assessee incurred nor any ted to overcome laimed by the ble. Further, the profit
Rs. 1
5. On appe policy unaccept loss, albe to 10% b relevant is as un
“6.1 In Gr conte mode busin retaile retaile manu major retaile appel produ appel was c when suppo deter subm
ITA N
I.T
Nest Ch t of the assessee is estimated at 20% o
09,91,100/-is added to the total incom eal, the Ld. CIT(A) concurred t and resultant loss were table and sustained the disal eit reducing the estimated profi by relying on unspecified “resear part of decision disallowing th der :- rounds No. 1 to 4 of the Appeal, th nted that the AO has not appreciate el of e-commerce in India and in ness dynamics of the appellant who is er with those of a manufacturer and h er platforms, product is directly ufacturer to the end user customer, rity of entities in the e commerce ers and market places. It is also su llant that the AO has erred in s ucts have been sold below cost and ob llant has brought nothing on record to compulsory for it to sell its products b n in fact, it has made detailed su orting evidences to demonstrate how mined in order to be competitive mitted by the appellant that the AO
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hildcare Services Private Limited of its sales being me.”
that the pricing commercially llowance of the it rate from 20%
rch papers”. The he business loss he appellant has ed the business comparing the s an e commerce holding that in e- y delivered by , when in fact, e business are ubmitted by the stating that the bserving that the o suggest why it below cost price, ubmissions with w its pricing was e. It is further
O has erred in conclu was n other has i driven thus, consid busin
1.1 From subm record in bu care a its w produ throug produ the M appel mater have 16,00 includ 41,53 show of R consu show ITA N I.T Nest Ch uding that the pricing policy adopted not justifiable on the basis that it doe fixed, variable and overhead costs. ignored the fact that pricing of the n by market forces and not on a cost the AO was wrong in disallowing th dering the pricing policy as not jus ness as not sustainable economically a m the facts of the case, observations m missions made by the appellant and ds, it is observed that appellant comp usiness of online selling of baby prod and mother care products on wholesa website www.Babyoye.com after ucts from suppliers and advertise gh online platforms to the target m ucts on website with claimed substan MRP. During the year under con llant has shown cost of co rial/goods at Rs. 25,52,68,464/- and incurred business expenses am 0,34,150/-. Thus, total effective cost ding expenses was claimed by the a 3,02,614/- against which sale realiz wn only at Rs. 29,81,56,703/- thus, c Rs. 11,71,45,911/-. These quantu umption, expenses and sales shown b w that appellant has declared loss at No. 6072,6073,6074/MUM/2025 T.A. No. 6215/MUM/2025 10 hildcare Services Private Limited by the appellant es not include all In doing so, he e appellant was t plus model and he entire loss by stifiable and the and financially. made by the AO, d documents on pany is engaged ducts and baby ale basis through purchasing its ed its products market by listing ntial discount to nsideration, the onsumption of d had claimed to ounting to Rs. of products sold appellant at Rs. zation has been claiming net loss um of cost of by the appellant t 39.29% of total sale a 71.29 profit busin which price busin no bu situat strate and g would includ the tu MRP and overh incide the m seller margi is ma cost manu that e the g custo perso ITA N I.T Nest Ch and the sale price realized by the app 9% of the effective cost price, leave asi t margin, which is expected to be ness entity in any business which is b h a business is established to run. fixed by the appellant, based on wh ness loss has been declared is clearly usiness entity including the appellan tion including stated reasons of pen egy as a long term perspective to a generate trade volume, fix sale price a d result sale realization of just 71.2 ding expenses resulting into such a su une of 39.29% of the sale amount. Eve of any product is fixed taking into acc direct and indirect expenses (includ head cost, variable cost and notio ental cost, unforeseen market forces manufacture, expected expenses of dis rs, retailers etc and a handsome re in of all these chain constituents and arked at an amount substantially hig plus profit margin of all these ufacture, distributors, whole-sellers, even after giving substantial discoun eneral practice in the market to attra mers in the name of heavy discount on in the chain earns a lucrative and r No. 6072,6073,6074/MUM/2025 T.A. No. 6215/MUM/2025 11 hildcare Services Private Limited ppellant was just ide a reasonable e earned by a basic motive, for Thus, the sale hich, substantial unbelievable as nt would, in any netration pricing ttract customers at such rate that 29% of total cost ubstantial loss to en, generally the count all the cost ding fixed cost, onal costs like etc) incurred by stributors, whole- easonable profit d thereafter, MRP gher than all the e persons viz. retailers etc so nt on MRP as is act and lure the t on MRP, every reasonable profit to su appel subst claim the comm pricin
1.2. The its pr fixed costin appel been asses the p indus mark acute even such above includ so as appel thereb the p accep of run ITA N I.T Nest Ch ustain in the market. Therefore, sub llant that the products were listed on tantial discount to MRP resulting in med loss, does not hold a good and p submission made by the app mensurate with its business nor w ng policy adopted by any prudent busi e appellant company was asked by t ricing policy and to furnish the com cost, overheads and variable cost a ng and pricing of particular product. llant company submitted its reply, wh discussed in earlier paras of this ord ssment order. The submission of the ricing policy of the appellant company stry is decided by the competitor’s et and companies offer huge disco e competition unlike traditional busine then, the claimed huge discount offer ratio so as to result huge loss of 39.29 e. At the most, discount is offered ding e-traders so as to earn at least a s to run their business. So, the su llant that discounts were given from by effecting sales price even below t products which resulted in gross pted in view of market practice and g nning a business. No. 6072,6073,6074/MUM/2025 T.A. No. 6215/MUM/2025 12 hildcare Services Private Limited bmission of the its website with nto such a huge practical logic as ellant do not with the normal inessman. the AO to justify mplete details of applicable to the Thereafter, the hich has already der as well in the e appellant that y as well as the s prices in the unt to beat the ss, is correct but red cannot be of 9% as discussed by any trader a minimum profit ubmission of the m its own pocket the cost price of loss cannot be general principle
1.3 Furt platfo custo distri availa appel distri to the price comp as ap was n too a distri the p that where and t price furthe distri credit manu financ cost. loss d the A ITA N I.T Nest Ch her, this fact also cannot be denied t orm, the sales are made directly t mers which do not include any butors and retailers etc, hence, m able to the manufacturer and wh llant, as it does not need to share its m butor and retailer etc and therefore, m e chain of distributor and retailer do of product and therefore, it is clear th any has failed in the assessment proc ppeal proceedings, to justify the reas necessary to sell its product below the at loss of about 39.29%, even when butors and retailers were not include product. Further, the AO is also right one platform, there is cash on d ein, there is no credit period available the manufacturer/whole seller like ap of product instantly, which helps to er as the borrowings are less a bution chain network, where the ch t period for making payme ufacturer/whole-seller in turn has to cing by external borrowings which fur Therefore, in my opinion, in view of declared by the appellant was rightly O and the same is hereby confirmed.” No. 6072,6073,6074/MUM/2025 T.A. No. 6215/MUM/2025 13 hildcare Services Private Limited that in e retailer to the end use middlemen like more margin is hole seller like margins with the margin available not form part of hat the appellant ceedings as well son as to why it e cost price, that the margins of ed in the cost of t in pointing out delivery system, e to the end user ppellant, gets the o control its cost as compared to hain takes good ent and the o do the deficit rther adds to the above facts, the y disallowed by ”
But, the profit fro of the p various r CIT (A) is “7.1 From loss d of the asstt. decla the ap or co indus AO w be he regar in the variou are as Cost with p Opera mark Pricin impac ITA N I.T Nest Ch
Ld. CIT (A) however, reduced e om 20% adopted by the AO to 10
published data of e-commerce research papers. The relevant fi s reproduced as under :- the asstt. order, it is noticed that a declared by the appellant, the AO esti e appellant at 20% of its sales witho
. order, it is noticed that after d ared by the appellant, the AO estima ppellant at 20% of its sales without g omparable net profit rates of e com stry. Accordingly, this net profit marg without assigning any justification for t eld to be justified. Hence, the data p rd has been examined and as per the e e-commerce landscape, it is a fact th us factors affecting Net Profit Margin s under:
of Goods Sold (COGS): The direct c producing or acquiring the products so ating
Expenses:
Costs such as eting, and employee salaries.
ng Strategy: How a business sets its cts its profit margin.
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hildcare Services Private Limited stimation of net
0%, on the basis e landscape in nding of the Ld.
after disallowing imated net profit out 7.1 From the disallowing loss ated net profit of giving any basis mmerce business gin taken by the the same cannot published in this published data, hat there may be n, some of which costs associated old.
rent, utilities, s prices directly
Sales costs
Indus have Mark can in Opera optim
Inven minim
A includ
Comp comp mana
Logis suppl espec
Cash highe
Gover regula
Comm for e-r
ITA N
I.T
Nest Ch s Volume: Higher sales volume can h and improve overall profitability.
stry: Different retail sectors (e.g., a different average profit margins.
et Shifts: Economic conditions and con nfluence retail profits.
ational
Efficiency:
Streamlining p mizing expenses can boost margins.
ntory Management: Efficient invento mize losses from spoilage or obsolesce
Additional factors influencing profit de petition: The Indian e-commerce m etitive, requiring businesses to di age costs effectively.
tics and Infrastructure: Challenges ly chain management can impa cially in remote areas.
on Delivery (COD): The popularity of er return rates, affecting margins.
rnment Initiatives and Regulations: P ations and ONDC
(Open
Netwo merce) can create both opportunities retailers.
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hildcare Services Private Limited help offset fixed apparel, grocery) nsumer behavior processes and ory control can nce.
tability in India market is highly ifferentiate and in logistics and act profitability,
COD can lead to Policies like FDI ork for Digital and challenges
B lands data, avera cost margi may Howe indus comm publis factor profit in pla to tak i.e.
Accor
7. Before us book com upon her
We have perused the cas disallowa ITA N I.T Nest Ch
Based on above factors, in India, in scape, as per various research papers a net profit margin of 10% is gene age, while 20% is considered high in management and profitability and in is considered low suggesting tha need to improve cost control or pr ever, net profit margins can vary stry and even by the specific business merce. Therefore, based on above re shed data, it would be justified if, b rs related to the business of the ap t margin of the appellant is taken at av ace of 20% taken by the AO. Therefore ke net profit of the appellant company
2,98,15,670/- in place of R rdingly, this ground of appeal is partly s the Ld. Counsel for the assess mbining various judicial pronou r.
heard the rival submission of the relevant material available se two issues are involved ance of business loss claimed b
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hildcare Services Private Limited the e-commerce s and published rally considered ndicating strong d 5% net profit at the business ricing strategies.
significantly by s model within e- esearch papers/
ased on various ppellant, the net verage i.e.@ 10%
e, AO is directed y @ 10% of sale
Rs.5,96,31341/-.
y allowed.”
see filed a paper uncements relied the parties and e on record. In d, firstly, the by the Assessee and seco the Asses
1 As far considere view tha products justified reasonin products prudence allowable
2 In our o cannot b court in Income as under “34. We ag vs. Da it is expen neces Reven of the ITA N I.T Nest Ch ondly, estimation of the profit ssee. as the disallowance of bu ed, the lower authorities have m at the pricing policy of the Ass s even lower than their purchas as a business model. The cr ng is that the assessee’s pri s below purchase cost, defi e and, therefore, the resulta e. Tax (Appeals) 2007 288 ITR r: gree with the view taken by the Delhi almia Cement (Bhart) Ltd. (2002) 254 established that there was nex nditure and the purpose of the busine ssarily be the business of the as nue cannot justifiably claim to put itse e businessman or in the position of the No. 6072,6073,6074/MUM/2025 T.A. No. 6215/MUM/2025 17 hildcare Services Private Limited on the sales of usiness loss is mainly are of the sessee of selling se value was not rux of the AO’s icing of selling ies commercial ant loss is not uthorities below Hon’ble Supreme mmissioner Of 1(SC) has held i High Court in CIT 4 ITR 377 that once xus between the ess (which need not sessee itself), the elf in the arm-chair e board of directors and expen No bu incom the as The a view stated funds exped amou 8.3 The Hon Commis Walchan 1967 AI commerc expenditu purpose Expendit the busin 8.4 The Hon Keshavla (Gujrat) lesser va price , ITA N I.T Nest Ch assume the role to decide how m nditure having regard to the circumst usinessman can be compelled to maxi me tax authorities must put themselv ssessee and see how a prudent busin authorities must not look at the mat point but that of a prudent busines d above, we have to see the transfe s to a sister concern from the point of diency and not from the point of unt was advanced for earning profits.” n’ble Bombay High Court in sioner Of Income-Tax, Bom nd & Co. (Pvt.) Ltd., Bomba IR 1435 held that in apply cial expediency for determinin ure was wholly and exclusively of the business, reasonab ture has to be adjudged from the nessman and not of the Revenue ’ble Gujrat High Court in the al Chandulal reported in (196 held that when a person di alue than the market value or at there is nothing in income No. 6072,6073,6074/MUM/2025 T.A. No. 6215/MUM/2025 18 hildcare Services Private Limited much is reasonable tances of the case. imize its profit. The ves in the shoes of nessman would act. tter from their own ssman. As already er of the borrowed view of commercial view whether the ” n the case of mbay vs M/S. ay reported in ing the test of ng whether the y laid out for the bleness of the e point of view of e. case of CIT vs 66) 59 ITR 120 spose goods at t a concessional tax law which compels market. 8.5 Following considere Assessin manner The pric evidently the e-co commerc expansio Officer n bogus pu of profits adoption rests en disagreem an appro genuine because not conf what is assessee authoriti ITA N I.T Nest Ch the him to sell at a price whi g the aforesaid precedents, ed view that it is not within the ng Officer to dictate to a bu in which his business ought to cing strategy adopted by the y driven by competitive compuls ommerce market and forme cial judgment for business on. In the present case, neithe nor the CIT(A) has identified a urchases, sham or suppressed s to related parties, inflation n of any colourable device. Th ntirely on the Assessing Offic ment with the assessee’s pricin oach is contrary to settled prin business loss cannot be dis the pricing policy adopted by th form to the Assessing Officer’ commercially prudent or placed reliance on a c ies, including Flipkart India Pv No. 6072,6073,6074/MUM/2025 T.A. No. 6215/MUM/2025 19 hildcare Services Private Limited ich realizable in we are of the authority of the usinessman the o be conducted. e assessee was ions inherent in ed part of its survival and r the Assessing any instance of sales, diversion of expenses, or he disallowance cer’s subjective ng model. Such nciples of law. A sallowed merely he assessee does ’s perception of desirable. The compilation of vt. Ltd. v. ACIT
(2022) 4
online r strategie hypothet considers
Hon’ble
Ltd. (su known in pricing i cannot commerc cannot p necessar in pari adverse fictitious
(d) any tr
8.6
In such book res model u commerc
Accordin authoriti losses.
ITA N
I.T
Nest Ch
441 ITR 618 (Karnataka HC), retailers adopting deep-discou s cannot be subjected to tical income additions merely b s the pricing commercially in Karnataka High Court in Flipk pra) has held (a) Deep-discou ndustry practice; (b) Losses ari n a highly competitive e-comm be disallowed merely becaus cially imprudent to the AO an proceed on the presumption that rily earn profits in every year. Th materia to the assessee’s cas material to show that (a) p
; (b) expenses inflated; (c) sales ransaction was accommodation- circumstances, the Revenue ca sults merely because it conside unprofitable. A business is per cial risks, including incu ngly we reject the finding ies on the issue of disallowance
No. 6072,6073,6074/MUM/2025
T.A. No. 6215/MUM/2025
20
hildcare Services Private Limited to contend that unt penetration o notional or because the AO nexpedient. The kart India Pvt.
unt pricing is a ising from such merce landscape se they appear nd (c) Revenue t business must his ratio applies se. There is no purchases were s suppressed, or -like.
annot disregard ers the business rmitted to take urring losses.
of the lower of the business
The seco on the sa that prof of accoun 9.1 Before u that the (3) of the accounts of any co 20%. Th profit all various r has not c profitabil 9.2 In our o rejected the Act. pointed the book 9.3 Further, compara the auth arbitrary ITA N I.T Nest Ch ond issue is regarding estimati ales of the Assessee. Section 1 fits can be estimated only after nt on specific defects. s, the Ld. Counsel for the Asse Assessing Officer neither invok e Act for the purpose of rejection s and nor estimated the profit ra omparable data and applied n e learned CIT (A) has further r owed to 10% on the basis of da research paper. But in the impu cited the name of any research lity of e-commerce platform. opinion, firstly, the Assessing books of accounts invoking Se Secondly, no defects in the out. Therefore, he is not justif ked results of the Assessee. neither the AO nor the CI able cases or industry gross pr horities have applied the net pr y manner. The CIT(A)’s reliance No. 6072,6073,6074/MUM/2025 T.A. No. 6215/MUM/2025 21 hildcare Services Private Limited ion of the profit 145(3) mandates rejecting books essee submitted ked Section 145 n of the books of ate on the basis net profit rate of reduced the net ata published in ugned order, he paper regarding Officer has not ection 145(3) of accounts were fied in rejecting IT(A) used any rofit data. Both rofit rate on the e on unspecified
“research cannot c estimatio the CIT(A 9.4
Accordin issue of d
10. The grou are iden
2012-13, decided i
11. In Assess
Revenue respect sustainin whereas in net pr by the disallowa net profi
Assessee
Year 20
appeals raised by ITA N
I.T
Nest Ch h papers” is wholly unsub constitute evidentiary material.
on of profits @ 20% by the AO
A) is wholly arbitrary and legally ngly, the grounds of the Assesse disallowance of business losses unds raised in the Assessmen ntical to grounds raised in As , and therefore, all the grounds in mutatis mutandis.
sment Year 2014-15 both the A are in appeal. The Assessee of the disallowance of busin ng of the 10% net profit rate the Revenue is in appeal again rofit rate from 20%, to 10% ,whi
Assessing Officer. Since, both ance of business losses and es t have been adjudicated by us e, while deciding the appeal
12-13 and therefore, the grou of the Assessee are allowed w y the Revenue are dismissed.
No. 6072,6073,6074/MUM/2025
T.A. No. 6215/MUM/2025
22
hildcare Services Private Limited stantiated and . Therefore, the and @ 10% by y untenable.
ee in relation to are allowed.
t Year 2013-14
ssessment Year are accordingly
Assessee and the is in appeal n ess losses and by the CIT (A), st the reduction ich was adopted h the issue of stimation of the in favour of the for Assessment unds raised in whereas grounds
In the re Years 20 whereas 2014-15 Order pro
(RAJ KUM
JUDICI
Mumbai;
Dated: 03/12/
Tarun, Sr. P.S.
Copy of the Or 1. The Appella
2. The Respon
3. CIT
4. DR, ITAT, M
5. Guard file.
////
ITA N
I.T
Nest Ch esult appeals of the assessee
012-13 to Assessment Year 2014
the appeal of the Revenue for A is dismissed.
onounced in the open Court on MAR CHAUHAN)
(OM PRA
AL MEMBER
ACC
M
2025
rder forwarded to :
ant ndent.
Mumbai
B
/
(Assis
IT No. 6072,6073,6074/MUM/2025
T.A. No. 6215/MUM/2025
23
hildcare Services Private Limited for Assessment
4-15 are allowed
Assessment Year n 03/12/2025. AKASH KANT)
COUNTANT
MEMBER
BY ORDER, stant