IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘D’: NEW DELHI BEFORE SHRI VIMAL KUMAR, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No.1191/Del/2025 [Assessment Year: 2022-23]

[Assessment Year: 2022-23]

[Assessment Year: 2022-23]

[Assessment Year: 2022-23]

[Assessment Year: 2022-23]

[Assessment Year: 2022-23]

[Assessment Year: 2022-23]

[Assessment Year: 2022-23]

[Assessment Year: 2022-23]

Assessee by Shri Ajay Vohra, Sr. Adv.

Shri Kunal Pandey, Adv.

Revenue by Shri Rohit Garg, CIT-DR Date of Hearing 10.10.2025 Date of Pronouncement 07.01.2026 ORDER PER BRAJESH KUMAR SINGH, AM, This appeal by the assessee is directed against the order of the Assistant Commissioner of Income Tax (Assessing Officer), Gurgaon, dated 29.01.2025 passed u/s 143(3)/144C (13) of the Income Tax Act, 1961 (hereinafter ‘the Act’) arising out of directions of Dispute Resolution Panel dated 13.12.2024 pertaining to Assessment Year 2022-23

2. The Assessee e-filed its return of income vide acknowledgment No.820838021251122 declaring an income of Rs. 19,90,73,130/- on 25/11/2022. Subsequently, the case was selected for scrutiny through CASS & notice undersection 143(2) of the Income-tax Act, 1961 ('the Act' for brevity) was issued by Asst./Dy. Commissioner of Income Tax (International Taxation), Circle- 1(1)(1), Delhi (Prescribed Income Tax Authority) on 31/05/2023 and duly served upon the assessee. Thereafter, notices under section 142(1) of the Act along with questionnaire were issued to the assessee. Response filed by the assessee are as per records. The Assessing Officer passed a draft assessment order (DAO) u/s 144C of the Act on 31.03.2024 proposing an addition of Rs. 23,11,82,270/- on supply of goods by the assessee to its subsidiary on account of the income attributable to the PE of the assessee in India. Aggrieved with the proposed addition, the assessee filed objections before the Ld. DRP. The Ld. DRP partly accepted the plea of the Assessing Officer as well as of the Assessee which is discussed in detail issue wise later in this order. After the receipt of the directions of the Ld. DRP, the Assessing Officer passed the final assessment order (FAO) u/s 143(3) r.w.s. 144C(13) of the Act on 29.01.2025, making an addition of Rs. 17,33,86,700/-. Aggrieved with the said order, the Assessee is in appeal before us.

2.1 Brief facts of the case are: The assessee SAIC Motor Corporation Limited (hereinafter referred to as ‘SAIC’) is a tax resident of the Republic of China engaged in the business of research, production and sale of passenger cars and commercial vehicles. It is engaged in Automobile business under the brand "MG". In 2017 MG Motor India Private Limited (hereinafter referred to as ‘MGMIPL’) was incorporated in India as a wholly owned subsidiary of SAIC Motor HK Investment Limited which in turn is 100% subsidiary of SMCL and MGMIPL was engaged in assembling vehicles under the brand "MG" in India. During the subject year, the assessee SAIC entered into two types of agreements with MGMIPL viz. Technology License Agreement and KD (Knocked Down) Parts Supply Agreement, for granting of license to MGMIPL for production of the Licensed Products and for offshore supply of KD Parts to be used by MGMIPL for manufacture of motor vehicles. The details of the said agreement as submitted by the assessee are reproduced as under:

“ a. Knocked Down parts (‘KD parts’) supply agreement - Pursuant to KD parts supply agreement [placed at pages 220 to 267 of the paper book], the appellant supplies parts of the car in completely knocked down state to MGMIPL, as offshore supply on principal-to-principal basis. The risks and rewards in relation to the KD parts are transferred by the appellant to MGMIPL outside India.

b. Technology License agreement - The appellant had also entered into a technology license agreement with MGMIPL [placed at pages 274 to 389 of the paperbook], pursuant to which MGMIPL pays 1% of the sale value of the cars to the appellant as Royalt