SANKALP SEMICONDUCTOR PRIVATE LIMITED,HUBLI vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1) & TPS, HUBLI

ITTPA 1564/BANG/2024Status: DisposedITAT Bangalore27 October 2025AY 2020-2164 pages
AI SummaryPartly Allowed

What were the facts?

Sankalp Semiconductor Private Limited (the assessee) filed an appeal for Assessment Year 2020-21 against an assessment order dated July 25, 2024, passed by the Assessment Unit under Section 143(3) read with Sections 144C(13) and 144B of the Income-Tax Act, 1961. The total income was determined at Rs. 33,66,82,538/-, significantly higher than the returned income of Rs. 14,93,11,280/-. The additions included a Transfer Pricing (TP) adjustment of Rs. 15,34,97,051/- on account of IT services, interest on delayed receivables, and corporate guarantee, and a disallowance of Rs. 3,38,74,207/- for lease rent expenditure. The assessee contended that the assessment order was passed beyond the time limit specified under Section 153.

What did the Tribunal hold?

The Tribunal held that the issue of whether the assessment order was barred by limitation (Ground No. 1) was not argued and thus dismissed. Regarding TP adjustments, the Tribunal restored the issue of granting working capital adjustment to the AO/TPO for verification (Ground No. 8). Consequently, the adjustment on account of interest on overdue receivables (Ground No. 13) was subsumed within the working capital adjustment decision. For corporate guarantee (Ground No. 12), the Tribunal found no infirmity in considering it an international transaction but directed the AO/TPO to compute the ALP at 0.5% of the guaranteed amount, considering judicial precedents and the lack of subsidiary company accounts or credit rating. Ground No. 17 concerning short grant of TDS was allowed, directing the AO to grant credit of Rs. 41,840/- after verification. Grounds No. 18 (consequential interest) and 19 (initiation of penalty proceedings) were dismissed as consequential and premature, respectively. All other grounds were also dismissed as not argued. The appeal was partly allowed.

What were the issues?

1. Whether the impugned assessment order is barred by limitation as specified under Section 153 of the Act? (Question of law) 2. Whether the Transfer Pricing adjustment of Rs. 15,34,97,051/- made on account of provision of IT Services, interest on delayed receivables, and corporate guarantee is justified? (Question of mixed law and fact, turning on Section 92C and related provisions) 3. Whether the disallowance of lease rent expenditure amounting to Rs. 3,38,74,207/- is justified? (Question of mixed law and fact) Assessee's contentions: - The assessment order is time-barred. - The economic analysis undertaken by the assessee for TP purposes was wrongly modified. Exceptional bonuses and ESOP costs should not be treated as operating costs. Miscellaneous income, OCI, and provisions for doubtful debts should not be considered non-operating items. The selection criteria for comparables were inappropriate, leading to the inclusion of dissimilar companies and rejection of suitable ones. Adjustments for working capital and risk differences were not made. TP adjustments should be limited to controlled transactions and global profits. The commercial expediency of corporate guarantee was disregarded, and it was not treated as an intra-group service. The recharacterization of receivables as loan advances was incorrect, and the ALP computation based on uncontrolled scenarios was rejected. Provisions of Section 92CE and Rule 10CB were disregarded. - The lease rent expenditure disallowance is contrary to the DRP's directions, and reconciliation of audited financials under Ind-AS 116 was ignored. - Deduction under Section 35DD for stamp duty was wrongly rejected. - Short grant of TDS credit of Rs. 41,840/- - Consequential interest under Sections 234A and 234B is erroneous. - Initiation of penalty proceedings under Section 270A is premature. Revenue's contentions: - The revenue supported the orders of the Transfer Pricing Officer (TPO) and Dispute Resolution Panel (DRP). Outstanding overdue receivables from associated enterprises are a separate international transaction requiring benchmarking. The DRP correctly considered the corporate guarantee as an international transaction and directed benchmarking.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 144B,Section 153,Section 92C,Section 92CE,Section 35DD,Section 270A,Section 234A,Section 234B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH : BANGALORE

Before: SHRI PRASHANT MAHARISHI & SHRI KESHAV DUBEY

For Respondent: Shri Nageshwar Rao, Sr. Advocate, Dr. Divya K J, CIT(DR)(ITAT), Bengaluru
Hearing: 30.07.2025Pronounced: 27.10.2025

Per Prashant Maharishi, Vice President

1.

This appeal is filed by Sankalp Semiconductor Private Limited (the assessee/appellant) for the assessment year 2020-21 against the assessment order u/s. 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income -Tax Act, 1961 [the Act] dated 25.7.2024 passed by the Assessment Unit, Income Tax Department determining the total

IT(TP)A No.1564/Bang/2024 income of the assessee at Rs. 33,66,82,538/- against the Returned income of Rs. 14,93,11,280/-.

2.

The assessee filed its return of income on 22.1.2021 at a total income of Rs

The order continues below.

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