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Facts
The appellant, Samsung India Electronic Pvt Ltd, filed two appeals for AYs 2020-21 and 2021-22 against assessment orders which included transfer pricing adjustments, disallowance of salary paid to expatriates, and disallowance of deduction under Section 80G for Corporate Social Responsibility (CSR) expenditure. The assessee sought to withdraw the transfer pricing grounds following the signing of an Advance Pricing Agreement (APA) with CBDT.
Held
The Tribunal dismissed the transfer pricing grounds as withdrawn due to the APA. The disallowance of salary paid to expatriates was allowed for both AYs, relying on prior judgments in the assessee's own case. The issue of Section 80G deduction was set aside to the Assessing Officer for verification, with directions for the assessee to provide requisite details within one month.
Key Issues
1. Whether transfer pricing adjustments should be contested when an Advance Pricing Agreement (APA) has been signed. 2. Whether disallowance of salary paid to expatriates is justified. 3. Whether deduction under Section 80G for CSR expenditure should be allowed.
Sections Cited
143(3), 144C(13), 144B, 80G, 37(1), 192, 92C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘I’ BENCH,
Before: SHRI CHALLA NAGENDRAM PRASAD, & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-
Both the above appeals by the assessee are directed against the order dated 29.10.2024 u/s 143(3) r.w.s 144C(13) r.w.s 144B of the Income-tax Act, 1961 [the Act, for short] for AY 2021-22 and order dated
Page 1 of 14 & 3724/DEL/2024 [A.Ys 2020-21 & 2021-22] Samsung India Electronics 31.07.2024 u/s 143(3) r.w.s 144C(13) r.w.s 144B of the Income-tax Act, 1961 for A.Ys 2020-21.
ITA No. 3724/DEL/2024 A.Y 2020-21
Ground No. 1 is general.
At the very outset, the ld. counsel for the assessee has filed an application dated 29.04.2025 and sought permission for withdrawal of transfer pricing grounds. The said petition reads as under:
“This petition is in relation to the request for withdrawal of transfer pricing grounds in the appeal filed before the Hon'ble Income Tax Appellate Tribunal ('ITAT' or 'Tribunal') on 16 August 2024 in Form 36 in Appeal No with respect to the Assessment Year ('AY') 2020-21 (attached Ann to this letter).
Brief summary of the proceedings
The Learned Transfer Pricing officer ('TPO') vide order dated 31 July 2023, proposed the transfer pricing adjustment of INR 74,03,17,47,154 (including substantive adjustment of INR 52,10,87,34,294; and protective adjustment of INR 21,92,30,12,860); which was subsequently incorporated and confirmed vide the draft assessment order issued by the Ld. Assessing Officer ('AO') dated 26 September 2023. In addition, in the addition, in the said draft assessment order, the Ld. AO also made adjustment on account of corporate tax matters i.e. (i)
Page 2 of 14 & 3724/DEL/2024 [A.Ys 2020-21 & 2021-22] Samsung India Electronics disallowance on account of salary paid to expatriates; and (ii) disallowance of deduction under section 80G of the Income- tax Act, 1961 (the Act'); amounting to INR 257,10,11,680; and INR 35,00,199 respectively. This resulted in total adjustment amount of INR 76,60,62,59,033; in the said draft assessment order.
Consequently, the Appellant then filed the objections against the said draft assessment order, before the Hon'ble Dispute Resolution Panel ('DRP') on 20 October 2023. The Hon'ble DRP issued its directions dated 30 June 2024, wherein relief was provided with respect to certain transfer pricing grounds. Hereinafter, the Ld. TPO issued the order on 30 July 2024, giving effect to the directions of Hon'ble DRP, resulting in the revised transfer pricing adjustment of INR 55,24,75,64,890 (including substantive adjustment of INR 33,32,45,52,030; and protective adjustment of INR 21,92,30,12,860); in addition to the adjustment on account of corporate tax matters namely (i) disallowance on account of salary paid to expatriates and (ii) disallowance of deduction under section 80G of the Act; amounting to INR 257,10,11,680; and INR 35,00,199 respectively. The Ld. AO then issued the final assessment order dated 31 July 2024, incorporating the transfer pricing adjustment of INR 55,24,75,64,890 and making the corporate tax adjustment of INR 2,57,45,11,879.
Aggrieved by the final assessment order, the Appellant filed the subject appeal in Form 36, before the Hon'ble Tribunal dated 16 August 2024, bearing appeal no. ITA No. 3274/DEL/2024.
Page 3 of 14 & 3724/DEL/2024 [A.Ys 2020-21 & 2021-22] Samsung India Electronics It is noteworthy that, in the interim period, pursuant to the rectification application filed by the Appellant before the Ld. TPO, the Ld. TPO issued the rectified TP order dated 14 November 2024, thereby rectifying the mistakes apparent from the TPO's order giving effect to the Hon'ble DRP directions reducing the transfer pricing adjustment from INR 55,24,75,64,890 to INR 48,12,56,57,472. Further, the AO issued the rectified final assessment order dated 18 December 2024, incorporating the revised transfer pricing adjustment.
Coverage of transfer pricing grounds under the Advance Pricing Agreement
It is noteworthy that the following facts were brought to the attention of the Hon'ble Tribunal in the hearing scheduled on 14 January 2025, for the AYs 2020-21 and 2021-22:
• An Advance Pricing Agreement ('APA') application was filed by the Applicant dated 30 March 2017, covering the financial year ('FY') 2017-18 to FY 2021-22 (corresponding to AY 2018- 19 to AY 2022-23). The transfer pricing related grounds (i.e. Ground no. 2 to Ground no. 27) in the subject appeal are directly covered and relate to the 'covered transactions' under the said APA application;
• Under the APA process, the mutual agreement had been signed between the Central Board of Direct Taxes ('CBDT') and the National Tax Service, Korea ('KNTS');
Page 4 of 14 & 3724/DEL/2024 [A.Ys 2020-21 & 2021-22] Samsung India Electronics
• The Appellant has provided the in-principle consent to the Indian Competent Authority for entering into the afore-mentioned APA; and • After signing of the APA, the Appellant would be required to file a modified return 92C f the Act, within three months from the end of the month in which the APA is entered into. Consequently, the Hon'ble Tribunal issued the order dated 14 January 2025 (attached as Annexure 2 2), 2), wherein the Hon'ble Tribunal took cognizance of the afore-mentioned facts submitted by the Appellant during the course of hearing. Furthermore, vide the said order, Hon'ble Tribunal adjourned the matter for both the AYs 2020- 21 and 2021-22; sine die, till the signing of the said APA; and directed the Appellant to file an application for the withdrawal of captioned appeal once the APA is signed between the Appellant and the CBDT. The Appellant now submits that the APA has been signed between the Appellant and the CBDT on 25 February 2025. Accordingly, the Appellant submits that the following transfer pricing grounds/issues covered by the APA as mentioned below:
• Adjustment on account of excessive alleged advertising and marketing promotion ('AMP') expenditure (Ground no. 2 to Ground no. 12);
• Adjustment on account of determination of arm's length price for networking segment (Ground no. 13 to Ground no. 15);
Page 5 of 14 & 3724/DEL/2024 [A.Ys 2020-21 & 2021-22] Samsung India Electronics • Adjustment on account of determination of arm's length price for contract software development segment (Ground no. 16 to Ground no. 18); • Adjustment on account of determination of arm's length price for device solution segment (Ground no. 19 and Ground no. 20); • Adjustment on account of determination of arm's length price for contract manufacturing segment (Ground no. 21 to Ground no. 24); and • Adjustment on account of royalty payment (Ground no. 25 to Ground no. 27).
Accordingly, the Appellant request your Hon'ble Tribunal to withdraw the aforementioned grounds i.e. Ground no. 2 to Ground no. 27.
It is noteworthy that in the aforementioned appeal (ITA No. 3274/DEL/2024), the Appellant had also filed the grounds / issues in relation to the corporate tax matters as mentioned below: • Disallowance on account of salary paid to expatriates (Ground no. 28 to Ground no. 32); and • Disallowance of deduction under section 80G of the Act (Ground no. 33 to Ground no. 35).
Accordingly, the Appellant is not withdrawing the Ground no. 28 to Ground no. 35; and will contest the appeal based on these grounds, in the upcoming hearings before the Hon'ble Tribunal.
Page 6 of 14 & 3724/DEL/2024 [A.Ys 2020-21 & 2021-22] Samsung India Electronics In light of the above, it is prayed that Hon'ble Tribunal may kindly be pleased to permit the Appellant to withdraw the Transfer Pricing grounds (Ground no. 2 to Ground no. 27) and affix a fresh date of hearing for the corporate tax matters (Ground no. 28 to Ground no. 35).” 4. In view of the above facts and circumstances, the grounds no 2 to 27 relating to transfer pricing are dismissed as withdrawn.
Ground Nos. 28 to 32 relate to disallowance on account of salary paid to expatriates.
At the very outset, the ld. counsel for the assessee submitted that this issue is squarely covered in favour of the assessee and against the Revenue by the decision of the co-ordinate bench in assessee’s own case for A.Y 2014-15 in ITA 9481/Del/2019 dated 31.08.2020.
The relevant observations of the co-ordinate bench read as under:
“46. AO disallowed salary expenditure of Rs.167,75,31,950/- paid to the expatriate employee of SEC, Korea u/s 37(1) of the Act. This issue has already been decided in favour of the taxpayer by the coordinate Bench of the Tribunal in case of taxpayer’s parent company, SEC, Korea, in to 70/Del/2013 for AYs 2004- 05 to 2009-10, for AY 2011-12 and ITA Nos.4705 & 4706/Del/2017 for AYs 2012-13 & 2014-15, copy of order is available at pages 226 to 2465 of the case Law Compilation.
Page 7 of 14 & 3724/DEL/2024 [A.Ys 2020-21 & 2021-22] Samsung India Electronics 47. However, ld. DRP passed a conditional order that in case appeal against the order passed by the Tribunal has not been filed before the Hon’ble High Court, AO has to delete the disallowance. Undisputedly, order passed by the Tribunal in AYs 2005-06 to 2011-12 (supra) has been challenged before the Hon’ble High Court. But we are of the considered view that mere pendency of the appeal before the Hon’ble High Court unless operation of the impugned order has not been stayed is not a ground for the AO to decline the relief to the taxpayer.
Ld. DR for the Revenue supported the order of the AO by contending that since there is no termination clause in the employment contract of the expatriate employee, the same has been rightly disallowed. However, we are of the considered view that since DRP after examining the issue has directed the AO to delete the disallowance but subject to a condition that Tribunal’s order is not challenged before the Hon’ble High Court, the contentions raised by the ld. DR for the Revenue is not sustainable.
Ld. AR for the taxpayer contended that expatriate employee was engaged on the basis of local employment contract and placed on record their employment letters, available at pages 865 to 872 of the paper book. Perusal of the employment letters show that the taxpayer is the employer of expatriate employees engaged for carrying out the day-to-day business efficiently and that they were governed by the conditions of the employment. Moreover, salary to the expatriate employees have been paid in India after deducting tax u/s 192 of the Act. Moreover, when SEC, Korea /AE is having no Permanent Establishment in India the expatriate employees were working under the control of taxpayer to carry out its business. Page 8 of 14 & 3724/DEL/2024 [A.Ys 2020-21 & 2021-22] Samsung India Electronics 50. However, this issue is covered in case of taxpayer’s parent company, SEC, Korea, vide order dated 22.03.2018 reported in (2018) 64 ITR (T) 99 (Delhi-Trib). In these circumstances, disallowance made by the AO and accepted by the ld. CIT (A) is ordered to be deleted.”
Facts and circumstances being identical, and not controverted by the ld DR, respectfully following the same, ground Nos. 28 to 32 are allowed.
Ground Nos. 33 to 35 pertain to disallowance of deduction u/s 80G of the Act forming part of the Corporate Social Responsibility Expenditure.
At the very outset, the ld. counsel for the assessee stated that even if such a disallowance were to be made, deduction u/s 80G of the Act is to be allowed. However, the ld. CIT(A) rejected the claim of the assessee on the ground that the assessee has not claimed the expenditure as donation u/s 80G of the Act and therefore, CSR cannot be directed to be treated as donation u/s 80G of the Act. The ld. counsel for the assessee contended that the issue is covered in favour of the assessee vide several orders of ITAT. The ld AR relied on the cases of Interglobe Technology Quotient P Ltd in 114 ITR(T0611(Del-Trib) and in Cheil India Pvt Ltd 169 taxmann.com 507(Del-Trib). Page 9 of 14 & 3724/DEL/2024 [A.Ys 2020-21 & 2021-22] Samsung India Electronics
Per contra, the ld. DR fairly conceded to the same.
We have heard the rival submissions and have perused the relevant material on record. We find that the issue is squarely covered in favour of the assessee and against the Revenue by the order of the various co- ordinate Delhi bench as relied upon by the assessee. The co-ordinate order dated 22.04.2019, in the case of Max New York Life Insurance Company for A.Y 2006-07 has held as under:
“41. The 2nd additional ground is with respect to the claim of deduction u/s 80 G of the income tax act with respect to the donation disallowed in the hands of the assessee. As the donation expenditure has been disallowed in the hence of the assessee and added to the total income of the assessee naturally, the assessee is entitled to deduction under Chapter VI- A of the income tax act with respect to the donation u/s 80 G of the act. As the requisite details as required by that section has not been furnished before us we direct the assessee to furnish the relevant information before the assessing officer in accordance with the law to claim any deduction under section 80G of the income tax act along with all donation receipts and the 80G certificates issued by the Donee to the assessee within one month of this order. The learned assessing officer may verify the detail in accordance with the law and if found proper, may grant the deduction. Accordingly, the 2nd
Page 10 of 14 & 3724/DEL/2024 [A.Ys 2020-21 & 2021-22] Samsung India Electronics additional ground of the appeal of the assessee is allowed with above direction.”
Respectfully following the same, we set aside the issue of deduction u/s 80G to the file of the Assessing Officer for verification with same direction that as the requisite details as required by section 80G has not been furnished before us, the assessee shall furnish the relevant information before the AO to claim deduction under section 80G of the Income Tax Act along with all donation receipts and the 80G certificates issued by the Donee to the assessee within one month of this order. The Assessing Officer shall verify the detail in accordance with the law and if found proper, may grant the deduction. We accordingly allow the ground Nos 33 to 35 with the above direction.
Ground Nos. 36 and 37 are consequential.
In the result, the appeal of the assessee is partly allowed.
ITA 5256/DEL/2024 [A.Y 2021-22]
Ground No. 1 and 2 are general in nature.
Ground Nos. 3 to 27 pertain to Transfer Pricing grounds.
Page 11 of 14 & 3724/DEL/2024 [A.Ys 2020-21 & 2021-22] Samsung India Electronics 18. At the very outset, we find that the ld. counsel for the assessee has filed an application dated 29.04.2025 and sought permission for withdrawal of transfer pricing grounds. In view of the same, grounds no 3 to 27 are dismissed as withdrawn as done in the A.Y 2020-21.
Ground Nos. 28 to 32 relate to disallowance on account of salary paid to expatriates. We have decided this issue for AY 2020-21 above in favour of the assessee following the decision of the co-ordinate bench in assessee’s own case for A.Y 2014-15 in ITA 9481/Del/2019 dated 31.08.2020. The facts being identical, the decision for AY 2020-21 applies for the AY 2021-22. The grounds no 28 to 32 is accordingly allowed.
Ground Nos. 33 to 35 pertain to disallowance of deduction u/s 80G of the Act forming part of the Corporate Social Responsibility Expenditure. These grounds have been discussed and decided by us hereinabove while dealing with similar grounds in A.Y 2020-21.
Respectfully following the same, we allow these grounds of appeal with the same directions.
21. Ground Nos. 36 and 37 are consequential.
& 3724/DEL/2024 [A.Ys 2020-21 & 2021-22] Samsung India Electronics 22. In the result, appeals of the assessee in and 3724/DEL/2024 are partly allowed.
The order is pronounced in the open court on 25.09.2025.