IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’: NEW DELHI BEFORE SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.3205/Del/2023 (ASSESSMENT YEAR 2016-17)

Starkey Laboratories Dy. CIT, India Pvt. Ltd., Circle-24(2), C-2, Sector-7, Vs. New Delhi.

Gautam Buddha Nagar-201301, Uttar Pradesh.

PAN-AAKCS6072R (Appellant) (Respondent)

Assessee by Shri Ram Avtar Sharma, CA, Shri Bhupesh Aggarwal and Shri Tanya Sharma, CA.

Department by Shri Manish Gupta, Sr. DR Date of Hearing 11.09.2025 Date of Pronouncement 05 .12.2025

O R D E R

PER MANISH AGARWAL, AM:

This appeal is filed by the Assessee against the order of the Ld. Commissioner of Income Tax, Delhi-12, [‘the CIT(A)’ in short] dated 21.09.2023 passed u/s 250 of the Income Tax Act, 1961 in Appeal No. CIT(A) Delhi-8/10690/2019-20 against the assessment order dated 29.12.2019 passed u/s 143(3) of the Act for Assessment Year 2016-17.

2. Brief facts of the case are that assessee is a company engaged in the business of assemble, manufacture, integrate, test, sell, install, operate, maintain and repair all kind of hearing aid products and equipment. The return of income was filed on

28.11.2016 declaring total income of Rs.2,80,78,750/-. The case of the assessee was selected for scrutiny and various statutory notices were issued from time to time which were replied by the assessee. The AO has referred the case for determining of Arm’s Length Price (‘ALP’) with respect to international transaction to the TPO u/s 92CA(3) of the Act who vide order dated 29.10.2019 has not proposed any adjustment with respect to such transaction. Thereafter the AO observed that assessee has claimed expenses to the tune of Rs.1,09,96,986/- towards the Provision for Marketing expenses of Rs.54,43,284/-, Advertisement of Rs.3,38,336/- and Discount of Rs.52,15,366/- which were claimed in the Profit and Loss (P&L) Account and these expenses were not incurred during the year and are contingent in nature. Therefore, the AO disallowed all these expenditures and added back to the total income of the assessee. Accordingly, the total income of the assessee was computed at Rs.3,90,75,736/-.

3. Against this order, the assessee preferred an appeal before the Ld. CIT(A) who vide impugned order dated 21.09.2023 dismissed the appeal of the assessee and confirmed the disallowance so made.

4. Aggrieved by the said order, the assessee is in appeal before the Tribunal by taking the following grounds of appeal:

“1. On the facts and circumstances of the case the Ld. CIT(A) has erred in upholding the disallowance of Rs.1,09,96,986/- of the Provision for expenses for Discount, Marketing and Advertisement expenses claimed by the appellant under Section 37(1) of the Income Tax Act, 1961.

2. The order of the CIT(A) is not sustainable in law in as-much-as the order has been passed without affording adequate opportunity of being heard to the Assessing Officer as required u/s 250(1)(b) of the Income Tax Act, 1961.

3. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”

5. Since, both the grounds of appeal are with respect to the disallowance of Rs.1,09,96,986/- made by AO on account of provisions for expenses for Discount, Marketing and Advertisement expenses which were confirmed by the Ld. CIT(A), thus, they are taken together for consideration.

6. Before us, the Ld. AR of the assessee reiterated what was stated before the lower authorities and submits that the assessee has made the sales of hearing aids where targets were fixed for the distributors for making sales. He submits that for achieving such sales, distributors were allowed to incur marketing expenses in terms of the dealership agreement as per which they were provided per unit marketing expenses. As per the said agreements, during the year under appeal total marketing expenses to be reimbursed was computed at Rs.1,20,25,