INCOME TAX APPELLATE TRIBUNAL "J" BENCH, MUMBAI SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER SHRI OMKARESHWAR CHIDARA, ACCOUNTANT MEMBER ITA No. 1073/Del/2015 (Assessment Year: 2010-2011)

Vodafone Digilink Limited (Formerly Known As Vodafone Essar Digilink Limited)

C-48, Okhla Industrial Area, Phase – II, New Delhi – 110020. Maharashtra.

[PAN: AAACA3202D] …………. Appellant Vs Deputy Commissioner of Income Tax Circle 26(2), New Delhi …………. Respondent ITA No. 1158/Del/2015 (Assessment Year: 2010-2011)

Deputy Commissioner of Income Tax Circle 26(2), New Delhi …………. Appellant Vs Vodafone Digilink Limited (Formerly Known As Vodafone Essar Digilink Limited)

C-48, Okhla Industrial Area, Phase – II, New Delhi – 110020. Maharashtra.

[PAN: AAACA3202D] … ………. Respondent Appearance For the Appellant/Assessee : Shri Ketan Ved & Shri Ninad Patade For the Respondent/Department : Shri Pankaj Kumar Date Conclusion of hearing : 16.07.2025 Pronouncement of order : 14.10.2025

O R D E R

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Per Rahul Chaudhary, Judicial Member:

1. These are Cross-Appeals pertaining to Assessment Year 2010-2011 arising from the Final Assessment Order, dated 27/01/2015, passed by the Assessing Officer under Section 144C(1) read with Section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], as per the directions issued by Dispute Resolution Panel –II, New Delhi [for short ‘DRP’], on 18/12/2014 under Section 144C(5) of the Act.

1.1. The facts in brief are that the Assessee-Company filed return of income for the Assessment Year 2010-2011 on 11/10/2010 which was processed under Section 143(1) of the Act. Subsequently, Assessee filed revised return of income on 29/03/2012, inter-alia, on account of demerger of passive infrastructure assets. In the revised return the Assessee declared losses of INR.2,19,52,80,641/- under normal provisions of the Act; and Book Losses of INR.11,91,28,65,401/- for the purpose of Minimum Alternative Tax. The case of the Assessee was selected for regular scrutiny. The Assessing Officer noted that the Assessee Company is engaged in the business of providing cellular mobile telephony services in telecom sector of Haryana, Rajasthan and Uttar Pradesh. Since, the Assessee had entered in the international transactions with its Associate Enterprises. A reference was made to the Transfer Pricing Officer-II(4), New Delhi (in short ‘TPO’) under Section 92CA(1) of the Act to determine the Arms Length Price (ALP) of the international transactions. The TPO passed the Order, dated 27/01/2014, under Section 92CA(3) of the Act proposing the following transfer pricing adjustments – (a) Upward adjustment of INR.27,20,28,430/- in relation to brand royalty payments and (b) Upward adjustment of INR.167,83,26,579/- in respect of reimbursement of advertisement & marketing expenses. Accordingly, the Assessing Officer passed the Draft Assessment Order, dated 27/01/2015, proposing Transfer Pricing Adjustments of INR.195,03,55,009/- along with other proposed corporate tax additions/disallowance. The Assessee filed objections before the DRP against the above Draft Assessment Order which were disposed off vide Order dated 18/12/2014, granting partial relief to the Assessee. Thereafter, the Assessing Officer passed the Final Assessment Order, dated 27/01/2015, as per directions issued by the DRP vide Order dated 18/12/2014. Both, the Revenue and the Assessee are in appeal before us against the aforesaid Final Assessment Order.

ITA NO.1158/DEL/2015 (REVENUE’S APPEAL)

2. We would first take up the appeal preferred by Revenue. The Revenue has raised the six grounds of appeal in ITA. No.1158/Del/2015 which are taken up hereinafter in seriatim:

Ground No. I

3. The Ground No. I raised by the Revenue pertains the addition of INR.12,92,91,683/- [i.e. 10% of commission expenses paid to the distributors] proposed by the Assessing Officer and the same reads as under:

“I. On the facts and in the circumstances of the case, the DRP-II erred in directing to delete the ad-hoc addition o