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Facts
The assessee challenged an order by the Assistant Commissioner of Income Tax for the assessment year 2020-21. The dispute concerns the correct computation of royalty income and the non-granting of interest. The assessee had entered into an Advance Pricing Agreement (APA), which led to a modified return of income, but this was allegedly not considered by the lower authorities.
Held
The Tribunal noted that this was a second round of litigation and that in the first round, the matter was remitted back to the Assessing Officer (AO) to verify records and determine royalty as per the APA. The Tribunal observed that the modified return filed pursuant to the APA was not considered by the lower authorities. Relying on a previous decision in the assessee's own case, the Tribunal allowed the ground in principle but remitted it back to the AO for verification of factual elements.
Key Issues
Whether the royalty income was correctly computed considering the Advance Pricing Agreement (APA) and whether interest under Section 244A of the Income Tax Act should be granted.
Sections Cited
143(3), 254, 144C, 92CD, 244A, 44DA, 147
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “I” BENCH MUMBAI
Gemological Institute of Vs. ACIT (International America Taxation), Range - 5345, The Robert Mouawad 2(3)(2) Mumbai Campus, Armada Drive, Room No. 610, 6th Carlsbad, Floor, Kautilya Bhavan, California - 092008 Bandra Kurla Complex, Bandra (East) Mumbai – 400051 PAN/GIR No. AADCG7962K (Applicant) (Respondent) Assessee by Shri J.D. Mistry-Sr. Adv./Gunjan Kakkad Revenue by Shri Krishna Kumar (SR. DR.) Date of Hearing 03.02.2026 Date of Pronouncement 09.03.2026 आदेश / ORDER
PER SANDEEP GOSAIN, JM:
The present appeal has been filed by the assessee challenging the impugned order 03.09.2025 passed u/s 143(3) r.w.s. 254 of the Income Tax Act, 1961 (‘the Act’), by the Office of the Assistant Commissioner of Income Tax, Circle 2(3)(2), Mumbai, for the assessment year 2020-21. The following grounds are reproduced below:
“1:0 Re.: Non-consideration of the correct amount of royalty for the year: 1 1 The Assessing Officer / the Dispute Resolution Panel have erred in holding that the Appellant's income by way of royalty for the year is Rs. 3,78,49,90,577/- 12 The Appellant submits that considering the facts and circumstances of its case, and the law prevailing on the subject, the amount of royalty taxable in its hands for the year under consideration should be restricted to Rs. 3,12,12,95,549/- being the amount of royalty received for the year. 1:3 The Appellant submits that the Assessing Officer be directed to consider the royalty income on the basis of the actual income earned for the year in accordance with the directions of the Hon'ble Income Tax Appellate Tribunal vide its Order dated 25 August 2023 and to re-compute its total income and tax thereon accordingly. 1:4 The Appellant requests that the Assessing Officer be directed to expunge his remark on page No. 07 of the impugned Final Assessment Order dated 03 September 2025 wherein it has been mentioned that "Royalty income attributable to PE as discussed in the original assessment order dt. 12/01/2023". 2:0 Re.: Non-granting of interest u/s. 244A of the Act: 2:1 The Assessing Officer has erred in not granting interest u/s. 244A of the Income-tax Act, 1961. 2:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the stand taken by the Assessing Officer is erroneous, misconceived and not in accordance with the law. 2:3 The Appellant submits that the Assessing Officer be directed to grant interest u/s. 244A of the Act in accordance with the law. 3:0 Re.: General:
3.1 The Appellant craves leave to add, alter, amend and/or substitute all or any of the foregoing grounds of appeal at or before the hearing of the appeal.”
2. Ground No.1: This ground raised by the assessee relates to challenging the of the Assessing Officer in not considering the correct amount of royalty for the year under consideration.
We have heard the learned counsels for both the parties, perused the material available on record, the impugned order, and the judicial precedents relied upon. From the records, we noticed that this is the second round of litigation before the Tribunal. In the first round, the Coordinate Bench of the Tribunal, while adjudicating the grounds raised by the assessee with regard to taxation of royalty income, had remitted the matter back to the file of the Assessing Officer with a direction to verify the records submitted by the assessee on merits and in accordance with law, and further to determine the royalty in accordance with the directions contained in the Advance Pricing Agreement (APA).
As per the records, the assessee had filed a detailed chart containing the relevant particulars, which is being reproduced herein below:
After having gone through the submission of the parties and considering the facts, it is evident that the royalty income originally offered by the assessee amounted to ₹3,78,49,90,577/-. Subsequently, an APA was entered into on 27.03.2025 between GIA India Laboratory Pvt. Ltd. and the Central Board of Direct Taxes (CBDT). Consequent thereto, the assessee filed a modified return of income on 30.06.2025 under section 92CD of the Act, after the date of hearing before the Dispute Resolution Panel (DRP), incorporating the revised computation of royalty in accordance with the APA.
However, the DRP passed its directions under section 144C(5) of the Act on 21.08.2025 without considering the modified return of income filed by the assessee. Thereafter, the order giving effect under section 143(3) r.w.s. 254 of the Act was passed on 03.09.2025. Thus, it is evident that the modified return of income filed pursuant to the APA, wherein the revised amount of royalty was offered, was not considered at any stage by the lower authorities.
We further observe that the Coordinate Bench of the Tribunal, in assessee’s own case in for AYs 2019-20 and 2022-23, while dealing with an identical issue, has passed an order dated 09.09.2025. The operative portion thereof reads as under:
Ground No. 9 relates to taxing the royalty received during the year u/s 44DA of the Act. The issue for both the AYs under consideration can be understood from the following charts:-
Respectfully following the findings of the Coordinate Bench in assessee’s own case, we also accept the claim of the assessee in principle, however remit it back to the AO for verification of factual elements embedded in the scheme of things as held by the Coordinate Bench in its order discussed herein above, accordingly this ground raised by the assessee stands allowed in terms of above directions.
In the net result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 09.03.2026
Sd/- Sd/- (PRABHASH SHANKAR) (SANDEEP GOSAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 09/03/2026 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : अपीलार्थी / The Appellant 1. प्रत्यर्थी / The Respondent. 2. संबंधित आयकर आयुक्त / The CIT(A) 3. आयकर आयुक्त(अपील) / Concerned CIT 4. धिभागीय प्रधतधिधि, आयकर अपीलीय अधिकरण,मुम्बई/ DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. 6. आदेशानुसार/BY ORDER, सत्याधपत प्रधत //True Copy//
उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai