M/S TE CONNECTIVITY INDIA PRIVATE LIMITED,BENGALURU vs. PRINCIPAL COMMISSIONER OF INCOME TAX-2, BANGALORE

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ITTPA 738/BANG/2022Status: DisposedITAT Bangalore19 November 2025AY 2015-165 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the Hon'ble High Court had restored the issue to be decided on the merits of the case. However, the Tribunal found no grounds raised before it that challenged the merits of any allowance or disallowance. The earlier appeal before the ITAT was only on the issue of the validity of the revisionary order passed under Section 263. The PCIT had directed the AO to examine the allowance of commission on sales and consider disallowance under Section 40(a)(ia). The Tribunal noted that if it proceeded to decide the issue of disallowance of sales commission, it would run contrary to the High Court's decision upholding the PCIT's order. Since both parties confirmed the absence of grounds to decide the allowability of sales commission expenditure, the Tribunal dismissed the assessee's appeal. Liberty was granted to reinstate the appeal if the Hon'ble High Court directed otherwise in the Review Petition.

What were the facts?

The assessee, TE Connectivity India Pvt. Ltd., filed an appeal for assessment year 2015-16 against a revisionary order passed by the Principal Commissioner of Income Tax (PCIT) on March 30, 2022. The Hon'ble High Court of Karnataka, in ITA No. 53 of 2024 dated June 5, 2024, set aside the previous ITAT order and remanded the matter back to the Tribunal for consideration of the appeal on merits. The High Court noted that the previous ITAT decision was based on the AO having examined the transaction in detail, without delving into the merits. The High Court directed the Tribunal to examine the issue of disallowance under Section 40(a)(ia) on merits. The assessee's original grounds of appeal before the ITAT were solely on the validity of the PCIT's Section 263 order, not on the merits of the disallowance.

What were the issues?

1. Whether the Tribunal needs to examine the issue of disallowance under Section 40(a)(ia) of the Income Tax Act, 1961, on its merits, as directed by the Hon'ble High Court of Karnataka. Assessee's contentions: The assessee argued that the grounds of appeal before the Tribunal were not on the merits of the issue but only on the validity of the Section 263 order. They contended that if the Tribunal decides the allowance or disallowance of commission on sales, there would be nothing left for the Assessing Officer (AO) to do. The assessee also referred to a pending Review Petition before the Hon'ble High Court stating no grounds on merits were raised before the Tribunal. Revenue's contentions: The learned Departmental Representative confirmed that there were no grounds in the assessee's appeal challenging the merits of the disallowance, and the assessee had only challenged the validity of the revisionary order passed under Section 263.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 263

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH : BANGALORE

Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDARARAJAN K.

For Appellant: Shri Ram Sheshadri & Sumit Khurana, CAs
For Respondent: Shri N. Balusamy, Jt.CIT(DR)(ITAT), Bengaluru
Hearing: 17.11.2025Pronounced: 19.11.2025

Per Prashant Maharishi, Vice President 1. IT(TP)A No.738/Bang/2022 is filed by TE Connectivity India Pvt. Ltd. (the assessee/appellant) for the assessment year 2015-16 against the revisionary order passed by the Principal Commissioner of Income Tax, Bengaluru-2, [ld. PCIT] dated 30.3.2022 which is restored back

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to the file of the ITAT by the Hon’ble High Court of Karnataka in ITA No.53 of 2024 dated 5.6.2024 vide para 19 as under:-

“19. We also note that, the Senior Counsel for the respondent has made submissions on the merit of the issue to say that the conclusion drawn by the PCIT in the order under Section 263 of the Act that a disallowance under Section 40(a)(ia) of the Act ought to be made is incorrect and erroneous is concerned, we find that the Tribunal has decided the appeal and set aside the order of PCIT only on the ground that the Assessing Officer has examined the impugned transaction in-detail during the course of the assessment, without going into the merits of the case. So, we are of the view that, the Tribunal need to examine the issue on merits. We accordingly set aside the impugned order passed by the Tribunal and remand the matter back to the Tribunal for consideration of the appeal filed by the respondent herein on merits in accordance with law. All the contentions of the parties on merits are kept open. We accordingly dispose of the appeal as allowed. No costs.” 2. The Hon’ble High Court has directed the Tribunal to examine the issue of disallowance u/s. 40(a)(ia) of the Act on its merits.

3.

The ld. AR submitted that the grounds of appeal raised before the Coordinate Bench are not on the merits of the issue, but on the issue that whether the provisions of section 263 of the Act has rightly been invoked by the ld. PCIT or not. He stated that in the absence of any ground on the merits, the appeal cannot be decided and further if the issue of allowance or disallowance of commission on sales of Rs.36,34,10,000 is decided by the Tribunal in this appeal, there is

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nothing to be left to be done by the AO. He further referred to the order of the Hon’ble High Court in ITA No.53/2024 dated 5.6.2024 wherein the appeal of the PCIT is allowed reversing the order of the coordinate bench dated 14.6.2023 wherein the Tribunal has allowed the appeal filed by the asse challenging the order dated 30.3.2022 passed by the ld. PCIT u/s. 263 of the Act.

4.

The ld. DR also confirmed that there are no grounds in the appeal of the assessee and the assessee has only challenged the validity of revisionary order passed u/s. 263 of the Act.

5.

The ld. AR also placed on record the pending Review Petition filed on 27.9.2025 filed before the Hon’ble High Court wherein it is stated in para III(2) that there is no ground on merits raised before the Tribunal at all.

6.

We have considered the rival contentions and perused the grounds of appeal. We have also perused the order of the Hon’ble High Court and find that before us the Hon’ble High Court has restored the issue to be decided on the merits of the case. We do not find any ground raised before us which challenges the merits of any allowance/disallowance for the reason that the appeal before the ITAT earlier was only on the issue of validity of revisionary order passed u/s. 263 of the Act, wherein the ld. PCIT directed the ld. AO to examine the issue of allowance of commission sales of Rs.36,34,10,000 by conducting necessary enquiries in accordance with the law and CBDT guidelines. The ld. PCIT has also directed the AO to consider the disallowance u/s.

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40(a)(ia) of the Act on the transactions. Thus, the issue needs to be decided by the ld AO , as per order u/s 263 of the act upheld by the honourable High court. If we proceed to decide the issue of disallowance of the sales commission, it will run contrary to the decision of the honourable high court as it has upheld the order passed by the ld PCIT. Further, as both the parties before us have categorically stated that there is no ground before the Tribunal to decide the allowability or otherwise of the sales commission expenditure as stated above, we dismiss the appeal of the assessee.

7.

However, we grant liberty to the assessee/ ld AO that if in the Review Petition the Hon'ble High Court directs otherwise, the appeal would be reinstated forthwith and would be decided in accordance with the direction of the Hon’ble High Court.

8.

In the result, the appeal by the assessee is dismissed.

Pronounced in the open court on this 19th day of November, 2025.

Sd/- Sd/-

( SOUNDARARAJAN K. ) ( PRASHANT MAHARISHI ) JUDICIAL MEMBER VICE PRESIDENT

Bangalore, Dated, the 19th November, 2025.

/Desai S Murthy /

IT(TP)A No.738/Bang/2022 Page 5 of 5

Copy to:

1.

Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order

Assistant Registrar ITAT, Bangalore.

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