ALCON LABORATORIES (INDIA) PRIVATE LIMITED,BENGALURU vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 1(1)(1), BENGALURU

ITTPA 1189/BANG/2026Status: DisposedITAT Bangalore21 September 2026AY 2022-2323 pages
AI SummaryPartly Allowed

What were the facts?

The assessee, Alcon Laboratories (India) Private Limited, filed an appeal against the assessment order dated January 31, 2026, for Assessment Year 2022-23. The order was passed under section 143(3) read with sections 144C(13) and 144B of the Income-tax Act, 1961, following directions from the Dispute Resolution Panel (DRP). The total income was assessed at ₹1,370,363,240, an increase from the revised returned income of ₹1,224,242,860. The dispute involves additions made by the Assessing Officer (AO)/Transfer Pricing Officer (TPO)/DRP, including ₹14,61,20,380 on account of alleged excessive Advertisement, Marketing and Promotion (AMP) expenditure, interest on delayed receivables, and disallowance of expenses.

What did the Tribunal hold?

The Tribunal decided on the issues as follows: Regarding the addition on account of AMP expenditure, the judgment does not explicitly state a finding on this specific issue, but it mentions that the assessee has raised grounds related to it. However, the operative part of the decision addresses other grounds. Concerning the recharacterization of outstanding receivables as a loan and interest thereon, the Tribunal held that the Explanation to section 92B of the Act brings capital financing, including lending, within the scope of an international transaction. Thus, the assessee effectively extended capital financing. Ground No. 21 challenging this was dismissed. For the computation of interest on delayed receivables, the Tribunal found merit in the assessee's submission that interest ought to be computed with reference to each overdue invoice. Ground No. 22 was allowed, directing the AO to recompute interest based on invoice-wise ageing. Regarding the benchmarking of interest on foreign-currency receivables, the Tribunal agreed that a LIBOR-based rate is appropriate for foreign-currency invoices, not the SBI rate. Ground No. 23 was allowed, directing the AO to benchmark overdue foreign-currency receivables using a LIBOR-based rate. For the disallowance of seminar and convention expenses, the Tribunal found no merit in the assessee's contentions, respectfully following the Hon'ble Supreme Court's decision in Apex Laboratories Private Limited v. DCIT. Grounds 24 to 28 were dismissed, confirming the disallowance of ₹19,609,183. The Tribunal also directed the AO to verify the computation sheet and rectify any errors (Ground No. 29 allowed). Penalty proceedings under section 270A were dismissed as premature (Ground No. 30 dismissed).

What were the issues?

1. Whether the AO/TPO/DRP erred in making an addition of INR 14,61,20,380 to the total income, specifically concerning INR 8,40,93,552 on account of alleged excessive AMP expenditure, INR 4,24,17,645 on account of interest on delayed receivables, and INR 1,96,09,183 on account of disallowance of expenses, contrary to the assessee's position that it operates as a Limited Risk Distributor (LRD) and that AMP expenses were incurred on its own account. 2. Whether the AO/TPO/DRP erred in making an upward adjustment in relation to AMP expenditure, despite the Bangalore Tribunal having deleted similar adjustments in Alcon India's own case for earlier years, and in the absence of machinery provisions in the Act for such adjustments. 3. Whether the AO/TPO/DRP erred in recharacterizing outstanding receivables as a loan transaction and charging interest thereon, and if so, whether the interest computation should consider invoice-wise ageing details and be benchmarked using a LIBOR-based rate for foreign-currency invoices. 4. Whether the disallowance of seminar and convention expenses of ₹19,609,183 was justified, considering the assessee's contention that it should be restricted to honorarium expenses and that earlier Tribunal orders allowed such expenses except for travel and stay charges for doctors and honorarium. Assessee's Contentions: - AMP expenditure was incurred on its own account for its business, and any benefit to the Associated Enterprise (AE) was incidental. - No machinery provisions exist for AMP expense adjustments. - Earlier Tribunal orders in its own case deleted AMP adjustments. - Interest on delayed receivables should be computed invoice-wise and benchmarked using LIBOR for foreign currency. - Disallowance of seminar expenses should be restricted. Revenue's Contentions: - The revenue, through the AO/TPO/DRP, argued for the addition on account of AMP expenditure, interest on delayed receivables, and disallowance of seminar expenses, relying on specific judgments and DRP directions.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 144B,Section 92CA,Section 92B,Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDARARAJAN K.

PER SHRI PRASHANT MAHARISHI, VICE PRESIDENT

This appeal by Alcon Laboratories (India) Private Limited [ The 01. Assessee/ Appellant] for assessment year 2022–23 is directed

IT(TP)A 1189/BANG/2026 ALCON LABORATORIES (INDIA) PRIVATE LIMITED against the assessment order dated 31 January 2026, passed under secti

The order continues below.

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