The main legal point established in the judgment is the interpretation and applicability of Section 153 (2A) of the Income Tax Act to the assessment proceedings.

S. Muralidhar, J.

1. This writ petition by Nokia India Pvt. Ltd. (‘Assessee’) seeks the quashing of the notice dated 14th September 2015 issued by the Deputy Commissioner of Income Tax, Circle-18 (2), New Delhi (hereafter the Assessing Officer - ‘AO’) under Section 254 read with Sections 144-C and 143 (3) of the Income Tax Act, 1961 (‘Act’) for Assessment Year (‘AY’) 2007-08. The Assessee also challenges the consequential order dated 2nd December 2015 passed by the AO rejecting the plea of the Assessee that in terms of Section 153 (2A) of the Act, the proceedings under the aforementioned notice dated 14th September 2015 would be time-barred.

Background facts

2. The Petitioner, which is engaged in manufacture and sale of mobile handsets, filed its return of income for the AY 2007-08 on 1st November 2007 declaring an income of Rs. 8,10,62,32,096/-. Since, during the AY in question, the Assessee was involved in international transactions with its Associated Enterprise (‘AE’), a reference was made by the AO to the Transfer Pricing Officer (‘TPO’).

3. The Assessee filed objections to the report of the TPO before the Dispute Resolution Panel (DRP) contesting the transfer pricing (TP) adjustment by which the returned income of the Assessee stood enhanced. These objections were disposed of by the DRP. On the basis of the directions issued by the DRP, the AO completed the assessment by passing an assessment order under Section 143 (3) read with Section 144C (13) of the Act on 29th September 2011. The total income of the Petitioner was assessed at Rs. 12,37,03,19,800/-.

4. In the aforementioned final assessment order, the AO made the following disallowances and additions to the income of the Petitioner:

S. No.	Nature of Addition made	Amount of addition (INR)
1.	Addition on account of disallowance of Marketing Expenses	87,57,71,395/-
2.	Addition on account of allowance of depreciation @ 15% (as against 60%) on computer peripherals.	1,03,96,877/-
3.	Addition on account of disallowance of amount claimed as Price Protection Expenses	62,91,22,970/-
4	Addition on account of transfer pricing adjustment:
	a. Advertising, Marketing and Promotion Expenses	2,53,48,30,000/
	b. Software Development Services	21,07,34,539/
	Total	2,74,55,64,539/

Order of the ITAT

5. Aggrieved by the above assessment order, the Assessee filed an appeal being ITA No. 4559/Del/2011 before the Income Tax Appellate Tribunal (‘ITAT’). The decision of the ITAT rendered in the aforementioned appeal on 18th May 2012 was as under:

(a). As regards disallowance of expenditure incurred on issue of mobile handsets on 'free of cost' basis, the ITAT noted that on an identical issue for AY 2000-01 and 2001-02, as well as for AY 2006-07, the ITAT had set aside the assessment order and remanded the matter to the file of the AO. Accordingly, the impugned assessment order was set aside “to the file of the AO with the directions to decide the issue afresh after affording the assessee a reasonable opportunity of being heard.”

(b). As regards the applicable rate of depreciation on computer peripherals, the ITAT allowed the Assessee's appeal and directed the AO to allow depreciation on computer peripherals at the rate of 60% instead of 15% as allowed in the original assessment order.

(c). As regards disallowance of expenditure on account of price protection expenses, the ITAT observed that “Since we have admitted additional evidence in respect of other distributors to whom trade price protection has been allowed, we set aside this issue to the file of the AO with the directions to examine the case of the assessee in the light of additional evidence filed before this Tribunal and decide the issue on merits. Needless to say the AO