TROPICAL INDUSTRIES INTERNATIONAL PRIVATE LIMITED,NEW DELHI vs. NFAC, DELHI

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ITTPA 70/DEL/2026Status: DisposedITAT Delhi25 August 2026AY 2022-235 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the assessee had filed its return declaring NIL taxable income after setting off brought forward losses. The case was selected for scrutiny under TP risk parameters due to large international transactions with very low profit before interest and taxes, high liabilities compared to low income/receipts, and a large asset base. The assessee's primary contention was that the Ld. AO/DRP/TPO erred in disregarding the segmental analysis and instead considering an entity-wide approach. The assessee also argued that the Hon'ble DRP failed to consider the segmental break-up of income and expenses. In light of these contentions and in the interest of justice, the Tribunal set aside the impugned order dated 16.12.2025 of the Ld. AO. The matter was restored to the file of the Ld. TPO for re-doing the segmental analysis separately in accordance with law, after affording a fresh opportunity of hearing to the assessee. The Tribunal explicitly mentioned that the DRP failed to consider the segmental break-up of income and expenses while deciding objections. The principle derived is that segmental analysis is crucial in transfer pricing, and an entity-wide approach may be inappropriate if segments have distinct profitabilities. The Tribunal did not decide the merits of the TP adjustment itself but remanded the matter for proper segmental analysis.

What were the facts?

The assessee, Tropical Industries International Pvt. Ltd., filed its income tax return for Assessment Year (AY) 2022-23 declaring NIL taxable income. The case was selected for scrutiny under Transfer Pricing (TP) risk parameters due to large international transactions. The Transfer Pricing Officer (TPO) proposed a TP adjustment of Rs. 1,48,99,072, leading to a draft assessment order. The assessee filed objections before the Dispute Resolution Panel (DRP), which partly accepted the objections and directed the TPO. The TPO, giving effect to the DRP's directions, reduced the adjustment to Rs. 79,83,481. Subsequently, the Assessing Officer (AO) passed the final assessment order dated 16.12.2025, assessing the total income at Rs. 79,83,480. The assessee is in appeal before the ITAT against this final assessment order.

What were the issues?

1. Whether the Assessing Officer/DRP/TPO erred in assessing the total income of the assessee at Rs. 79,83,480 against the declared NIL income for AY 2022-23, contrary to the provisions of Section 143(3) r.w.s. 144C(13) & 144B of the Income Tax Act, 1961? (Mixed law and fact) 2. Whether the Assessing Officer/DRP/TPO erred in making an adjustment to the arm's length price against the provisions of Section 92C of the Income Tax Act, 1961? (Law) 3. Whether the Assessing Officer/DRP/TPO erred in disregarding the segmental analysis and instead considering an entity-wide approach for determining the arm's length price? (Mixed law and fact) 4. Whether the Assessing Officer/DRP/TPO erred in computing the Profit Level Indicator (PLI) for determination and comparison of the arm's length price? (Mixed law and fact) 5. Whether the Assessing Officer/DRP/TPO erred in rejecting the "Other Method" and/or "CUP" for benchmarking the purchase of Cashew nuts and Oil cakes? (Mixed law and fact) 6. Whether the Assessing Officer/DRP/TPO erred in rejecting the comparables and selection criteria considered by the assessee for determination of arm's length price? (Mixed law and fact) 7. Whether the Assessing Officer/DRP/TPO erred in adopting comparables and selection criteria arbitrarily for determination of arm's length price? (Mixed law and fact) Assessee's Contentions: The Ld. AO rejected the assessee's accounts. The Ld. TPO failed to consider segmentals separately. The Hon'ble DRP did not discuss the merits, and therefore, the matter may be restored to the file of the Ld. TPO. The Ld. AO/DRP/TPO erred in disregarding segmental analysis and considering an entity-wide approach. The Hon'ble DRP failed to consider the segmental break-up of income and expenses. The adjustment was made mechanically without application of mind and by applying parameters chosen without considering the facts of the case, making the order bad in law. The adjustment was made without paying heed to the provisions of law, making the assessment bad in law. The adjustment was made against the principles of natural justice. Revenue's Contentions: The Ld. Departmental Representative relied on the impugned order.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 144B,Section 92CA(1),Section 92CA(3),Section 144C(1),Section 144C(5),Section 92C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “H”, NEW DELHI

Before: SHRI S. RIFAUR RAHMAN & SHRI VIMAL KUMAR

Hearing: 04.06.2026Pronounced: 25.08.2026

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “H”, NEW DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER IT(TP)A No. 70/Del/2025, A.Y. 2022-23 Tropical Industries Vs. National Faceless Centre, International Pvt. Ltd. Income Tax Department, F-04 & 05, Triveni New Delhi Commercial Complex, Sheikh Sarai, Phase-1, Delhi- 110017 New Delhi �थायीलेखासं./जीआइआरसं./PAN/GIR No: AADCT5044P Appellant .. Respondent

Appellant by : Sh. Sameer Kapoor, CA Respondent by : Sh. Bhopal Singh, CIT-DR Date of Hearing 04.06.2026 Date of Pronouncement 25.08.2026

O R D E R PER VIMAL KUMAR, JM:

The appeal filed by the assessee is against the final assessment order dated 16.12.2025 passed by Ld. Assessing officer/Assessment Unit (hereinafter referred to as ‘the AO’) u/s 143(3) r.w.s 144C(13) r.w.s. 144(B) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for A.Y. 2022-23.

P a g e | 2 IT(TP)A No. 70/Del/2026 Tropical Industries International Pvt. Ltd. 2. The brief facts of the case are that as pleaded by Assessee are : “1. The assessee is a Private Limited Company incorporated under the Companies Act, 1956 and having PAN No. AADCT5044P. 2. The assessee Company has filed its Income Tax Return for the Assessment Year 2022-2023 on 28/02/2022 declaring taxable income at NIL. 3. The case was selected for scrutiny through CASS for the AY 2022-23 under TP risk parameters for the reason of large value of international transactions. Notice u/s 143 (2) was issued on 01.06.2023. 4. The case was referred to the Transfer Pricing Officer (TPO) u/s 92CA(1) of the Income Tax Act, 1961 on 20/06/2023. 5. The TPO, Addl. /Joint CIT (TP)- 3(2), New Delhi passed order u/s 92CA(3) dated 29.01.2025 having DIN & order No. ITBA/TPO/F/92CA3/2024 25/1072658485(1) with total TP adjustment on international transactions of Rs.1,48,99,072. Accordingly, draft order u/s 144C(1) of the Act was passed on 28.02.2025 having DIN & Order No: ITBA/AST/F/144C/2024-25/1073810550(1) assessing total income at Rs.1,48,99,072/- 6. The assessee Company being aggrieved with this order, filed objection vide Form 35A against the proposed assessment on 26.03.2025 before the Dispute Resolution Panel (DRP)-2, New Delhi. The Dispute Resolution Panel- 2, New Delhi vide order & DIN ITBA/DRP/M/144C(5)/2025-26/1083037426(1) dated 26.11.2025 partly accepted the objection of the assessee Company and gave suitable directions to the TPO u/s 144C(5) of the Act. 7. Accordingly, the TPO 3 (2) (1) passed an order dt. 5/12/2025 giving effect to the directions of the DRP, reducing the adjustment to the income returned to Rs. 79,83,481/-. 8. Subsequently, the AO passed order u/s 143 (3) r.พ.ร. 144C(13) r.w.s. 1448 assessing the income for the Assessment Year 2022-23 at Rs. 79,83,480/-.”

3.

Being aggrieved of the final assessment order dated 16.12.2025 of Ld. AO, Appellant/assessee preferred present appeal on following grounds: “Transfer Pricing Adjustment of Rs. 79,83,481/- Ground No. 01 Ld. AO has erred in law and facts of the case in assessing the total income of the assessee u/s 143(3) r.w.s. 144C(13) & 144B of the Income Tax Act, 1961 for Ayr 2022-23 at Rs. 79,83,480/- against the NIL declared income by the assessee. Ground No. 02 Ld. AO/DRP/TPO has erred in making an adjustment in arm's length price against the provisions of section of 92C of Income Tax Act, 1961. Ground No. 03

P a g e | 3 IT(TP)A No. 70/Del/2026 Tropical Industries International Pvt. Ltd. Ld. AO/DRP/TPO has erred in law and facts of the case in disregarding the segmental analysis and instead, considering entity's wide approach for determination of arm's length price. Ground No. 04 Ld. AO/DRP/TPO has erred in law and facts of the case in computing Profit Level Indicator (PLI) for determination and comparison of arm's length price. Ground No. 05 Ld. AO/DRP/TPO has erred in law and facts of the case in rejecting "Other Method" and/or "CUP" for benchmarking for purchase of Cashew nuts and Oil cakes. Ground No. 06 Ld. AO/DRP/TPO has erred in law and facts of the case in rejecting the comparables and selection criteria considered by the assessee for determination of arm's length price. Ground No. 07 Ld. AO/DRP/TPO has erred in law and facts of the case in adopting comparables and selection criteria arbitrarily for determination of arm's length price. Ground No. 08 The assessee may please be allowed the right to add/delete/modify any of the above grounds of appeal at any stage. Ground No. 09 That the Learned Assessing Officer & TPO have erred in law in making this adjustment as the same has been made mechanically without application of mind and by applying parameters chosen without considering the facts of the case, making the order bad in law. Ground No. 10 That the Learned Assessing Officer & TPO have erred in making this adjustment as the adjustment has been made without paying heed to the provisions of law as applicable to the case of the assessee, making the assessment bad in law. Ground No. 11 That the Learned Assessing Officer & TPO have erred in making the adjustment, as in doing so they have gone against the principles of natural justice.”

4.

Ld. Authorized Representative for appellant/assessee submitted that Ld. TPO in the earlier assessment year 2022-23 and subsequent assessment year 2023-24, Ld. TPO did not make any additions. In the present assessment year, ld. AO rejected assessee’s accounts. Ld. TPO failed to consider segmentals separately

P a g e | 4 IT(TP)A No. 70/Del/2026 Tropical Industries International Pvt. Ltd. Hon’ble DRP did not discuss the merits, therefore, the matter may be restored to the file of ld. TPO. 5. Ld. Departmental Representative relied on impugned order. 6. From examination of record in light of aforesaid rival contention, it is crystal clear that the appellant/assessee company filed return of income on 28.02.2022 declaring taxable income of Rs. Nil after setting off of brought forward losses of Rs. 3,97,25,200/-. The case was selected for scrutiny through CASS under TP Risk Parameters for the reasons “Large value of international transactions with very low profit before interest & taxes even after more than 5 years of incorporation for manufacturing industry sector having large assets base (TP Risk Parameter) and high liabilities as compared to low income/ receipts”. The copy of assessment and TP order for assessment year 2023-24 is at page No. 346 to 352 of paper book which mentions in respect of adjustment made by TP Nil. In ground of appeal No. 3, it is specifically mentioned that Ld. AO/DRP/TPO erred in disregarding the segmental analysis and instead of considering entity vide approach for determination of arm’s length price. The appellant has prayed for restoration of matter to the file of Ld. TPO. Hon’ble DRP failed to consider the segmental break up of income and expenses while deciding objections in ground No. 4 to 8.

P a g e | 5 IT(TP)A No. 70/Del/2026 Tropical Industries International Pvt. Ltd. 7. In view of above fact and in the interest of justice, impugned order dated 16.12.2025 of ld. AO is set aside and the matter is restored to the file of Ld. TPO for re-doing the segmental analysis separately in accordance with law, after affording a fresh opportunity of hearing to the appellant/assessee. 8. In the result, the appeal filed by the appellant/assessee is allowed for statistical purposes. Order pronounced in the open court on 25.08.2026

Sd/- Sd/- (S. RIFAUR RAHMAN) (VIMAL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 25.08.2026 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI

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