HINDUSTAN UNILEVER LIMITED,MUMBAI vs. DY.CIT-1(1)(2), MUMBAI

ITA 1041/MUM/2018Status: DisposedITAT Mumbai30 January 2026AY 2004-0566 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal decided the transfer pricing issues in favour of the assessee, following its own prior decisions and the Bombay High Court's judgment for AY 2006-07, which held that once the assessee's margin at the entity level for AE transactions was at arm's length, all other related adjustments (royalty, advertising, R&D cess, service tax, central services) were subsumed. The entire transfer pricing adjustment of Rs 368.79 crores made for AY 2006-07 was deleted, and the Bombay High Court dismissed the department's appeal. The Tribunal found no difference in facts for the current year, except the amount, and thus dismissed the Revenue's grounds related to transfer pricing. Consequently, the Revenue's appeal and the assessee's cross-objection on transfer pricing were dismissed as academic. The assessee's appeal was partly allowed for statistical purposes. The judgment expressly left undecided the grounds related to head office expenses, section 14A, CENVAT on closing stock, section 80HHC, section 10B, trademark premium, loan discount, capital subsidy, and interest under sections 234C and 234D, as these were not elaborated upon in the provided excerpt. The additional grounds regarding dividend distribution tax and allocation of corporate expenses were also not decided in the provided excerpt.

What were the facts?

The appeals and cross-objection are filed by Hindustan Unilever Ltd. (assessee) and the Deputy Commissioner of Income Tax (Revenue) against the order of the CIT(A) for assessment year 2004-05. The assessee's appeal raises numerous grounds concerning the allocation of head office expenses, disallowance under section 14A, adjustment to closing stock for CENVAT, reduction in deduction under section 80HHC, denial of exemption under section 10B for miscellaneous income and internal transfers, classification of premium on trademark termination and discount on loan prepayment, capital subsidy treatment, and interest under sections 234D and 234C. The assessee also raised additional grounds regarding dividend distribution tax and allocation of corporate expenses. The Revenue's appeal and the assessee's cross-objection primarily concern transfer pricing adjustments.

What were the issues?

1. Whether head office expenses unconnected with eligible industrial undertakings should be allocated for calculating deductions under sections 801B and 10B? (Question of law). Assessee argued that only relevant expenses were allocated, and unallocated head office overheads are not dependent on new industrial undertakings. Revenue argued for allocation of common expenses. 2. Whether disallowance under section 14A is warranted for expenditure related to tax-free income? (Question of law). Assessee contested the confirmation of disallowance. Revenue's position is not explicitly recorded. 3. Whether adjustment to closing stock for unutilised CENVAT is correct under section 145A? (Question of law). Assessee contested the adjustment. Revenue's position is not explicitly recorded. 4. Whether export turnover and profits for section 80HHC deduction should be reduced for unrealised sales proceeds, compensation, discount on sales tax prepayment, and interest on income tax refund? (Question of law). Assessee contested these reductions. Revenue's position is not explicitly recorded. 5. Whether deduction under section 80-IB should be reduced from profits for computing section 80HHC deduction? (Question of law). Assessee contested this reduction. Revenue's position is not explicitly recorded. 6. Whether exemption under section 10B should be denied for miscellaneous income and internal transfers? (Question of law). Assessee argued these incomes are related to industrial undertaking operations. Revenue argued they did not arise from export/sales of manufactured articles. 7. Whether premium on trademark termination and discount on loan prepayment are capital or revenue receipts? (Question of law). Assessee argued they are capital in nature. Revenue argued they are taxable revenue receipts. 8. Whether capital subsidy should reduce the WDV for depreciation? (Question of law). Assessee contested this reduction. Revenue's position is not explicitly recorded. 9. Whether interest under section 234D is deductible under section 37(1)? (Question of law). Assessee claimed deduction. Revenue's position is not explicitly recorded. 10. Whether interest under section 234C is correctly charged? (Question of law). Assessee argued advance tax was sufficiently paid. Revenue's position is not explicitly recorded. 11. Whether dividend distribution tax under section 115-O should be at DTAA rates? (Question of law). Assessee argued for DTAA rates and refund. Revenue's position is not explicitly recorded. 12. Whether transfer pricing adjustments made by the TPO are correct? (Question of law). Assessee argued that entity-level benchmarking was accepted in prior years and upheld by the High Court. Revenue argued for adjustments, but later agreed to refer the matter back to the AO/TPO.

Which sections of the Income-tax Act were involved?

Section 14A,Section 37(1),Section 41(1),Section 80-IB,Section 80HHC,Section 10B,Section 115-O,Section 145A,Section 250,Section 234C,Section 234D

AI-generated summary — verify with the full judgment below

Heard together (3 matters)

ITA No.1041/MUM/2018
ITA No.929/MUM/2018
CO No.142/Mum/2019

Read from the judgment's own cause title. This page is filed under one of them.

IN THE INCOME TAX APPELLATE TRIBUNAL

“H” BENCH, MUMBAI

BEFORE SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER

SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER Assessment Year : 2004-05

Hindustan Unilever Ltd. Unilever House B.D. Sawant Marg, Chakala Andheri (E), Mumbai - 400099 PAN: AAACH1004N v/s

Deputy Commissioner of Income Tax - 1(1)(1),

Aayakar Bhavan,

Mumbai - 400020 Assessment Year : 2004-05

Deputy Commissioner of Income Tax, 1(1)(2),

579, Aayakar Bhavan,

M.K. Road,

Mumbai - 400020

v/s

M/s. Hindustan Unilever Ltd. 165/166, Backbay Reclamation, Mumbai - 400020 PAN: AAACH1004N

. Appellant

Respondent

Appellant

.. Respondent

ITA No.1041 & 929/Mum/2018 & CO No.142/Mum/2019 (A.Ys. 2004-05)

CO No.142/MUM/2019

(Arising out of ITA No.929/Mum/2018) Assessment Year : 2004-05

Hindustan Unilever Ltd.

Unilever House, B.D. Sawant Marg,

Chakala, Off Western Express Highway,

Andheri (E),

Mumbai - 400099

PAN: AAACH1004N 0 tttteeteeee Cross Objector (Original Respondent)

v/s

Deputy Commissioner of Income Tax,

1(1)(2), 579, Aayakar Bhavan, M.K. Road, cena Respondent Mumbai - 400020 (Original Appellant) Assessee by : Shri Nishant Thakka

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 14A

All 15,875 judgments and leading authorities on Section 14A →

Recent GST High Court judgments

Search GST case law →