DCIT CORPORATE CIRCLE 1(1), CHENNAI vs. BYD INDIA PRIVATE LIMITED, CHENNAI

ITTPA 60/CHNY/2023Status: DisposedITAT Chennai16 April 2026AY 2015-1619 pages
AI SummaryDismissed

What were the facts?

The Revenue is in appeal against the order of the CIT(A) for Assessment Year 2015-16. The assessee, BYD India Pvt. Ltd., a wholly owned subsidiary, was engaged in manufacturing and trading. The assessee declared a loss, which was revised. The case was selected for scrutiny, and the AO referred the matter to the TPO due to international transactions. The TPO made a transfer pricing adjustment of Rs. 10,70,45,309/-. The AO also disallowed preliminary expenses of Rs. 43,26,63,304/- and treated the sale of fixed assets as a slump sale, leading to short-term capital gains. The CIT(A) granted relief to the assessee on all these additions/disallowances, leading to the present appeal by the Revenue.

What did the Tribunal hold?

The Tribunal dismissed the Revenue's appeal. Regarding the TP adjustment (Grounds 2-4), the Tribunal noted that the CIT(A) had considered the significant increase in sales to the AE in FY 2014-15, indicating a distress sale due to Nokia's shutdown. The CIT(A) also considered that the goods were resold by the AE to Nokia at a lower price or used as raw materials, resulting in further losses for the AE. The Tribunal found merit in the CIT(A)'s conclusion that FY 2014-15 was an extraordinary year and deleted the TP adjustment. Regarding the disallowance of preliminary expenses (Ground 5), the judgment text provided does not contain the Tribunal's specific finding or reasoning on this issue. Regarding the sale of assets as a slump sale (Ground 6), the Tribunal held that for a transaction to be a slump sale, there must be a transfer of an undertaking for a lump sum consideration without assigning values to individual assets. In this case, individual asset sale values were identified, and the profit/loss was calculated asset-wise. Furthermore, the fixed asset schedule showed that the 'Plant & Machinery' block continued to exist, and the manufacturing unit was not sold as a whole. The Tribunal concluded that the transaction was a sale of individual assets, not a transfer of an undertaking, and upheld the CIT(A)'s deletion of the addition. Grounds 1 and 7 were general.

What were the issues?

1. Whether the Ld. CIT(A) erred in deleting the Transfer Pricing (TP) adjustment of Rs. 10,70,45,239/- made by the TPO, considering the sale of finished goods to an Associated Enterprise (AE)? (Section 92C of the Income Tax Act, 1961) 2. Whether the Ld. CIT(A) erred in holding that a 'distress' sale was made by the assessee to its AE, when the sales were effected in the normal course of business? 3. Whether the Ld. CIT(A) erred in holding FY 2014-15 as an extraordinary year for the assessee, without considering the assessee's awareness of Nokia's shutdown since September 2013? 4. Whether the Ld. CIT(A) erred in deleting the disallowance of preliminary expenses treated as capital in nature? (Section 35D of the Income Tax Act, 1961) 5. Whether the Ld. CIT(A) erred in deleting the disallowance made on account of the sale of core assets treated as a slump sale and charged to Short Term Capital Gains tax? (Section 2(42C) and Section 32 of the Income Tax Act, 1961) Assessee's Contention (implied from CIT(A)'s order and AR's arguments): The sale to AE was a distress sale due to Nokia's shutdown, and the transaction was at arm's length. The sale of assets was of individual items, not an undertaking, and thus not a slump sale. Preliminary expenses were allowable. Revenue's Contention: The CIT(A) erred in deleting the TP adjustment, holding the sale as distress sale, and considering FY 2014-15 extraordinary. The sale of assets was a slump sale, and preliminary expenses were capital in nature.

Which sections of the Income-tax Act were involved?

Section 250,Section 92C,Section 35D,Section 2(42C),Section 32,Section 2(19AA),Section 2(47),Section 47

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & MS. PADMAVATHY.S

Hearing: 12.03.2026Pronounced: 16.04.2026

PER PADMAVATHY.S, A.M: This appeal by the Revenue is against the order of the Commissioner of Income Tax (Appeals)-16, Chennai (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 20.04.2023 for Assessment Year (AY) 2015-16. The grounds of appeal raised by the Revenue are as under:

“1. The order of the CIT(A) is contrary to law, facts and circumstances of the case.

2.

Wheth

The order continues below.

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