SHREE ULKA LLP ,MUMBAI vs. ACIT, CENTRAL CIRCLE 1, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “J” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER

ITA No. 9233 & 9234/Mum/2025 Assessment Year: 2021-22 & 2022-23 Shree Ulka LLP Vs. The Assistant Commissioner of Income-tax, Central Flat No- 1501 Gold Crest, Circle-1, Thane Nawda Phase-2 Panvel, Ashar IT Park, Wagle Industrial Raigarh– 410206, Maharashtra. Estate, Thane-400604, Maharashtra. (Appellant) (Respondent) PAN: ADJFS8842A

Assessee by Shri K. Shivaram Sr. Advocate & Sashi Bekal, Adv Department by Shri Saurabh Deshpande, CIT DR. & Ms. Jayshree Thakur, SR DR. Date of Hearing 20.08.2026 Date of Pronouncement 27.08.2026

ORDER Per: SHRI JAGADISH, A.M.: These two appeals filed by the assessee are directed against the final assessment orders passed under section 143(3) read with sections 92CA and 144C(13) of the Income-tax Act, 1961 (“the Act”) for the assessment years 2021–22 and 2022–23, pursuant to the respective directions issued by the Dispute Resolution Panel (“DRP”). Since common facts and identical issues are

ITA No.9233 & 9234/MUM/2025 Shree Ulka LLP involved, both the appeals were heard together and are disposed of by this consolidated order. With the consent of the parties, the appeal for A.Y. 2021– 22 is taken as the lead case.

ITA No. 9233/Mum/2025 – A.Y. 2021–22

(i) disallowance of deduction under section 10AA of the Act amounting to ₹4,46,69,638 on the ground that the eligible undertaking was formed by splitting up or reconstruction of a business already in existence; and (ii) transfer-pricing adjustment of ₹7,47,46,398 in respect of specified domestic transactions of purchase of goods from its associated enterprise, Ulka Sea Foods Private Limited (“USFPL”). The assessee has also contended that the transfer-pricing adjustment would be revenue neutral if the deduction under section 10AA is allowed and that the benchmarking undertaken by it under the “other method” prescribed in rule 10AB ought not to have been rejected. 4. Briefly stated, the assessee is a limited liability partnership engaged in production, processing and preservation of fish and fish products from its unit situated in Mangalore Special Economic Zone. A.Y. 2020–21 was the first year in which the assessee claimed deduction under section 10AA. For the year under consideration, the assessee filed its return declaring nil income after claiming deduction of ₹4,46,69,638 under section 10AA. It had entered into specified domestic transactions with USFPL, including purchase of goods amounting to ₹115,17,16,462.

ITA No.9233 & 9234/MUM/2025 Shree Ulka LLP observed that USFPL identified and selected vendors, negotiated procurement terms and coordinated procurement logistics, while the raw material moved directly from third-party vendors to the assessee. On the basis of the functional analysis and material gathered during search proceedings in the group, the TPO in the ex parte order, rejected the benchmarking adopted by the assessee. By applying an average EBIT margin of 9.17 per cent, he determined the arm’s-length price of the purchases at ₹122,64,62,860 and proposed an adjustment of ₹7,47,46,398. 6. In the draft assessment order, the Assessing Officer also proposed disallowance of the deduction under section 10AA. He relied substantially upon the findings recorded for A.Y. 2020–21 and held that the SEZ undertaking was formed by splitting up or reconstruction of the existing business of USFPL. The objections raised by the assessee were rejected by the DRP. Pursuant to the directions of the DRP, the Assessing Officer passed the final assessment order determining total income at ₹11,94,16,036 after making the transfer-pricing adjustment of ₹7,47,46,398 and disallowing deduction under section 10AA of ₹4,46,69,638. 7. Before us, the learned Authorised Representative submitted that the principal issue in both the appeals is the eligibility of the assessee’s SEZ undertaking for deduction under section 10AA. He submitted that A.Y. 2020– 21 is the first year of the claim and the appeal for that year is presently pending before the learned CIT(A). The Assessing Officer has relied upon the findings for A.Y. 2020–21 while denying the claim in the years before us. Therefore, according to him, the material and the eventual determination for the first year have a direct bearing upon the present appeals. 8. The learned Authorised Representative further submitted that the assessee has filed additional evidence under rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963. The additional evidence includes the 3

ITA No.9233 & 9234/MUM/2025 Shree Ulka LLP procurement and payment agreement between the assessee and USFPL dated 08.07.2019, the corresponding resolution, the factory design/outline approved by the Karnataka Industrial Area Development Board, factory licence, approval for commencement of production issued by the Development Commissioner, Mangalore Special Economic Zone, consent for operation issued by the Karnataka State Pollution Control Board, and bills for machinery. It was submitted that these documents are relevant to demonstrate that the assessee’s unit was established with fresh capital and independent plant and machinery, at a separate geographical location, for distinct manufacturing activity, without transfer of the fixed assets of USFPL. The evidence, therefore, goes to the root of the allegation of splitting up or reconstruction and requires examination by the lower authority. 9. As regards the transfer-pricing issue, the learned Authorised Representative submitted that it is interlinked with the claim under section 10AA because any alteration in the purchase price affects the profit of the eligible undertaking and consequently the quantum of deduction. He explained that USFPL facilitated payment to fishermen and supplied raw material at cost without retaining a margin; the goods moved directly from the Mangalore coast to the assessee’s SEZ unit; and the pricing was also governed by the applicable customs framework. It was accordingly prayed that, having regard to the additional evidence , the pendency of the appeal for the first year and ex parte order of TPO , both issues may be restored to the Assessing Officer for a fresh and holistic examination. 10. The learned Departmental Representative relied upon the orders of the TPO, the Assessing Officer and the directions of the DRP. He, however, submitted that if the additional evidence is admitted and the matter is restored, the Assessing Officer should be given liberty to verify the evidence and decide the issues in accordance with law.

ITA No.9233 & 9234/MUM/2025 Shree Ulka LLP 11. We have heard the rival submissions and perused the material available on record. The additional evidence consists substantially of statutory approvals, licences, contemporaneous agreements and invoices relating to establishment and operation of the SEZ undertaking. These documents have a direct bearing on whether the undertaking was newly established or was formed by splitting up or reconstruction of an existing business. The Hon’ble Supreme Court in Tek Ram v. CIT [2013] 357 ITR 133 (SC) has, in substance, held that relevant documents having a bearing on the issue should be considered while deciding the controversy. Having regard to the nature of the evidence and the controversy before us, we admit the additional evidence in the interest of substantial justice. 12. We also find that the eligibility of the undertaking under section 10AA was first examined in A.Y. 2020–21. The Assessing Officer has expressly drawn support from the findings recorded for that year while denying the deduction in A.Y. 2021–22. The appeal for the first year is stated to be pending before the learned CIT(A), where similar additional evidence is also proposed to be filed. Thus, the foundational facts concerning the formation of the undertaking, source and deployment of capital, acquisition of plant and machinery, nature of products, geographical separation, continuity or otherwise of USFPL’s business, customer profile and the functional arrangement between the two entities require a coordinated examination. 13. The transfer-pricing issue cannot be examined in isolation from these facts. The functional analysis of USFPL and the assessee, the commercial arrangement for procurement and payment, the movement of raw material, applicable customs requirements, and the impact of the arm’s-length determination upon the profit of the eligible unit are interconnected with the claim under section 10AA. Since the relevant primary evidence has not been examined by the lower authorities and the determination for the first year is

ITA No.9233 & 9234/MUM/2025 Shree Ulka LLP still pending, we are of the considered view that the entire matter should be examined afresh by the Assessing Officer. 14. Accordingly, without expressing any opinion on the merits, we set aside the final assessment order for A.Y. 2021–22 on the issues raised in the present appeal and restore the matter to the file of the Assessing Officer. The Assessing Officer shall consider the additional evidence filed before the Tribunal, permit the assessee to place such further evidence as may be relevant, and examine the claim under section 10AA as well as the transfer- pricing adjustment afresh in accordance with law. While doing so, he shall also take into consideration the relevant material and the outcome of the appellate proceedings for A.Y. 2020–21, if available by the time of fresh adjudication. Needless to state, a reasonable opportunity of being heard shall be granted to the assessee. The assessee is directed to cooperate and furnish the requisite details promptly. All contentions on merits are left open. ITA No. 9234/Mum/2025 – A.Y. 2022–23 15. The parties submitted that the facts and issues involved in A.Y. 2022– 23 are identical to those in A.Y. 2021–22. In this year, the assessee has challenged the disallowance of deduction under section 10AA amounting to ₹4,38,66,415 and the transfer-pricing adjustment of ₹11,71,94,036 in respect of the specified domestic transactions of purchase of goods from USFPL. The additional evidence and the submissions concerning the first year of the claim are also common. 16. For the reasons recorded while deciding the appeal for A.Y. 2021–22, the issues arising in A.Y. 2022–23 are also set aside and restored to the file of the Assessing Officer with identical directions. The Assessing Officer shall decide the claim under section 10AA and the transfer-pricing issue afresh after considering the additional evidence, the relevant material and the outcome of the proceedings for A.Y. 2020–21, if then available, and after 6

ITA No.9233 & 9234/MUM/2025 Shree Ulka LLP affording reasonable opportunity of hearing to the assessee. All contentions on merits are left open.

Sd/- Sd/- (PAWAN SINGH) (JAGADISH) Judicial Member Accountant Member

Mumbai, Dated: 27/08/2026 Kunal Kr. Private Secretary

Copy of the order forwarded to: 1. Appellant 2. Respondent 3. The CIT 4. The CIT (Appeals) 5. The DR, I.T.A.T. By order

(Assistant Registrar) ITAT, Mumbai