My associated enterprise sends me equipment free of cost for testing and I return or destroy it. Is that a benefit I have to bring to tax?
No, on these facts. The Tribunal deleted an addition of Rs.7,73,50,917 made under s.28(iv), holding that where assets are received only for testing, the recipient has no ownership, the value in the invoice is stated only for customs purposes and the assets are returned or destroyed, no specific benefit arises from their use. The Assessing Officer had made the addition on presumption without demonstrating what benefit was received.
Decided by the ITAT (Waseem Ahmed, Accountant Member and Keshav Dubey, Judicial Member) on 2025-10-17, reported as IT(TP)A Nos. 1858 and 2031/Bang/2024, assessment year 2013-14 (ITAT Bangalore 'C' Bench). It bears on section 28(iv), section 194R of the Income Tax Act 1961, in TDS Defaults, Assessment & Scrutiny and How Tax Law Is Read matters.
This bears directly on the question every s.194R adviser has to answer — whether a thing handed over on a returnable basis is a 'benefit or perquisite' at all. The Board's own answer in Circular 12/2022 on a product given to a social media influencer draws the same line: returned after use, not a benefit; retained, a benefit. So the returnable-versus-retained distinction has support on both sides of the deduction question. Two cautions. This is a s.28(iv) decision and the Tribunal's own reasoning does not turn on s.194R; and the Board's stated position under s.194R is that the deductor need not first satisfy himself that the benefit is taxable in the recipient's hands, so a s.28(iv) authority does not by itself defeat a s.194R demand.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee is a captive service provider billing its associated enterprises on a cost-plus basis. Its associated enterprise supplied it with fixed assets free of cost for testing purposes. The Assessing Officer added Rs.7,73,50,917 under s.28(iv) on the footing that the assets received free of cost constituted a benefit. The Commissioner (Appeals) reasoned that had the assets not been supplied free the assessee would have bought them from the associated enterprise and claimed reimbursement with a twelve per cent mark-up, being a cost-plus entity, and so restricted the addition to twelve per cent of the cost. Both sides appealed. The assessee produced the invoices, at pages 668 to 699 of its paperbook, to show that the assets were received for testing and that a value was given in the invoice only for customs duty purposes, and relied on coordinate bench decisions in Samsung R&D Institute India - Bangalore Pvt Ltd and Tesco Bengaluru Pvt Ltd. The Departmental Representative supported the Assessing Officer and said the Commissioner (Appeals) had erred in restricting the addition to a mark-up.
On this ground the Tribunal directed the Assessing Officer to delete the entire addition of Rs.7,73,50,917 made under s.28(iv); the assessee's ground was allowed and the Revenue's ground dismissed (paragraph 8.7). The Tribunal held that the assets were received for testing purposes with the value stated in the invoice only for customs duty, that the assessee acted on the associated enterprise's instructions in using them and had no ownership of them, that when assets are received for testing purposes no specific benefit arises to the assessee from their use, that the addition was made on presumption without the Assessing Officer demonstrating what benefit was received, and that the assets were used in the process of rendering services (paragraph 8.5).
The Tribunal decided the ground on the material before it — the invoices, the absence of ownership, the instruction-bound use of the items and the testing purpose — and concluded that no specific benefit arose and that the addition rested on presumption, the Assessing Officer never having identified the benefit (paragraph 8.5). It then said its view was supported by the coordinate bench in Samsung R&D Institute India - Bangalore Pvt Ltd and reproduced that decision at length (paragraph 8.6), and respectfully following it directed deletion (paragraph 8.7). The reasoning in the reproduced Samsung decision, which is that bench's and not this one's, was that s.28(iv) taxes only a benefit in the nature of income; that on the Mumbai bench's analysis in Helios Food Improvers the benefit must be irretrievable and received so as to circumvent income; that assets returned or destroyed after testing give no benefit of an enduring nature; and that where the pricing of the services has already been settled, any nexus between the free supply and the price charged could only be corrected by a transfer pricing adjustment and not by a further addition under s.28(iv).
When the assets are received for testing purposes, there is no specific benefit that arises to the assessee with respect to usage of those assets.
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Handle my notice → Ask a CA on WhatsAppNo, on these facts. The Tribunal deleted an addition of Rs.7,73,50,917 made under s.28(iv), holding that where assets are received only for testing, the recipient has no ownership, the value in the invoice is stated only for customs purposes and the assets are returned or destroyed, no specific benefit arises from their use. The Assessing Officer had made the addition on presumption without demonstrating what benefit was received. This was decided by the ITAT (Waseem Ahmed, Accountant Member and Keshav Dubey, Judicial Member) and bears on section 28(iv), section 194R of the Income Tax Act 1961. It is reported as IT(TP)A Nos. 1858 and 2031/Bang/2024, assessment year 2013-14 (ITAT Bangalore 'C' Bench). This bears directly on the question every s.194R adviser has to answer — whether a thing handed over on a returnable basis is a 'benefit or perquisite' at all. The Board's own answer in Circular 12/2022 on a product given to a social media influencer draws the same line: returned after use, not a benefit; retained, a benefit. So the returnable-versus-retained distinction has support on both sides of the deduction question. Two cautions. This is a s.28(iv) decision and the Tribunal's own reasoning does not turn on s.194R; and the Board's stated position under s.194R is that the deductor need not first satisfy himself that the benefit is taxable in the recipient's hands, so a s.28(iv) authority does not by itself defeat a s.194R demand. If it applies to you, the first step is this: Document the returnable character before the goods move: the terms on which they are supplied, the fact that ownership does not pass, and the record of return or destruction — that is the evidence the Tribunal relied on.
The assessee is a captive service provider billing its associated enterprises on a cost-plus basis. Its associated enterprise supplied it with fixed assets free of cost for testing purposes. The Assessing Officer added Rs.7,73,50,917 under s.28(iv) on the footing that the assets received free of cost constituted a benefit. The Commissioner (Appeals) reasoned that had the assets not been supplied free the assessee would have bought them from the associated enterprise and claimed reimbursement with a twelve per cent mark-up, being a cost-plus entity, and so restricted the addition to twelve per cent of the cost. Both sides appealed. The assessee produced the invoices, at pages 668 to 699 of its paperbook, to show that the assets were received for testing and that a value was given in the invoice only for customs duty purposes, and relied on coordinate bench decisions in Samsung R&D Institute India - Bangalore Pvt Ltd and Tesco Bengaluru Pvt Ltd. The Departmental Representative supported the Assessing Officer and said the Commissioner (Appeals) had erred in restricting the addition to a mark-up. The matter was decided on 2025-10-17 by the ITAT (Waseem Ahmed, Accountant Member and Keshav Dubey, Judicial Member). On those facts the ITAT held as follows. On this ground the Tribunal directed the Assessing Officer to delete the entire addition of Rs.7,73,50,917 made under s.28(iv); the assessee's ground was allowed and the Revenue's ground dismissed (paragraph 8.7). The Tribunal held that the assets were received for testing purposes with the value stated in the invoice only for customs duty, that the assessee acted on the associated enterprise's instructions in using them and had no ownership of them, that when assets are received for testing purposes no specific benefit arises to the assessee from their use, that the addition was made on presumption without the Assessing Officer demonstrating what benefit was received, and that the assets were used in the process of rendering services (paragraph 8.5).
The Tribunal decided the ground on the material before it — the invoices, the absence of ownership, the instruction-bound use of the items and the testing purpose — and concluded that no specific benefit arose and that the addition rested on presumption, the Assessing Officer never having identified the benefit (paragraph 8.5). It then said its view was supported by the coordinate bench in Samsung R&D Institute India - Bangalore Pvt Ltd and reproduced that decision at length (paragraph 8.6), and respectfully following it directed deletion (paragraph 8.7). The reasoning in the reproduced Samsung decision, which is that bench's and not this one's, was that s.28(iv) taxes only a benefit in the nature of income; that on the Mumbai bench's analysis in Helios Food Improvers the benefit must be irretrievable and received so as to circumvent income; that assets returned or destroyed after testing give no benefit of an enduring nature; and that where the pricing of the services has already been settled, any nexus between the free supply and the price charged could only be corrected by a transfer pricing adjustment and not by a further addition under s.28(iv). In the words reproduced by the source cited on this page: "When the assets are received for testing purposes, there is no specific benefit that arises to the assessee with respect to usage of those assets." The decision followed or applied Samsung R&D Institute India - Bangalore Pvt Ltd v. JCIT, IT(TP)A No. 625/Bang/2020 (ITAT Bangalore) — followed; Tesco Bengaluru Pvt. Ltd. v. JCIT, IT(TP)A Nos. 2898/Bang/2018 and 2387/Bang/2019 (ITAT Bangalore) — relied on by the assessee.
It was decided by the ITAT on 2025-10-17 and is reported as IT(TP)A Nos. 1858 and 2031/Bang/2024, assessment year 2013-14 (ITAT Bangalore 'C' Bench). Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 28(iv), section 194R, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. On this ground the Tribunal directed the Assessing Officer to delete the entire addition of Rs.7,73,50,917 made under s.28(iv); the assessee's ground was allowed and the Revenue's ground dismissed (paragraph 8.7). The Tribunal held that the assets were received for testing purposes with the value stated in the invoice only for customs duty, that the assessee acted on the associated enterprise's instructions in using them and had no ownership of them, that when assets are received for testing purposes no specific benefit arises to the assessee from their use, that the addition was made on presumption without the Assessing Officer demonstrating what benefit was received, and that the assets were used in the process of rendering services (paragraph 8.5). It arises in TDS Defaults, Assessment & Scrutiny and How Tax Law Is Read matters, on section 28(iv), section 194R of the Income Tax Act 1961, and was decided by Waseem Ahmed, Accountant Member and Keshav Dubey, Judicial Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If the invoice states a value, record why — here the value was stated only for customs purposes, and the Tribunal accepted that. Make the Assessing Officer identify the benefit. The addition failed because it rested on presumption and the officer had not demonstrated what benefit the assessee received from the use of the assets. In a transfer pricing setting, take the further point the coordinate bench took: if the free supply really did affect the price, the correction is a transfer pricing adjustment, not a second addition under s.28(iv). Keep the s.194R question separate. Deduction under s.194R is governed by the Board's guidelines issued under s.194R(2), and a finding that no income arises under s.28(iv) does not automatically answer a s.194R notice.
Searched for later treatment; none was found. That is not the same as a source affirming it. The citator returns nothing. A search pairing the assessee with s.28(iv) returns a further Bangalore order of 11 December 2025 in the same assessee's name for the same year, AY 2013-14, covering the same transfer pricing and s.28(iv) grounds, but that order contains no reference to this one and appears to be a parallel record rather than later treatment; the Supreme Court daily order of 28 November 2022 in PCIT v. AMD India Pvt. Ltd. predates this order. Nothing applies or doubts the holding that assets received for testing and returned are not a benefit under s.28(iv). No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This entry covers the s.28(iv) ground alone. The order is a long transfer pricing order disposing of cross-appeals, and paragraphs 8 to 8.7 carry the Tribunal's own treatment of that ground. The entry states the outcome on that ground only and makes no claim about the result of the appeals as a whole. A trap in this document must be flagged. Within paragraph 8.6 the Tribunal reproduces a long extract from the coordinate bench decision in Samsung R&D Institute India - Bangalore Pvt Ltd, and that extract carries its own paragraph numbers 9 to 18. Those are Samsung's paragraph numbers, not this order's, and citing them as paragraphs of this order would be wrong. The reference to CBDT Circular 12/2022 on the social media influencer appears inside that quoted extract, at Samsung's paragraph 11(x), as counsel's submission in that case — it is not this Tribunal's own reasoning, and it is recorded here as such. The quoted extract also gives the circular's date as 16.02.2022, which conflicts with the date of 16 June 2022 recorded elsewhere in this library for Circular 12/2022; the conflict is noted and not resolved here. The sentence quoted below is from the Tribunal's own paragraph 8.5. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
On this ground the Tribunal directed the Assessing Officer to delete the entire addition of Rs.7,73,50,917 made under s.28(iv); the assessee's ground was allowed and the Revenue's ground dismissed (paragraph 8.7). The Tribunal held that the assets were received for testing purposes with the value stated in the invoice only for customs duty, that the assessee acted on the associated enterprise's instructions in using them and had no ownership of them, that when assets are received for testing purposes no specific benefit arises to the assessee from their use, that the addition was made on presumption without the Assessing Officer demonstrating what benefit was received, and that the assets were used in the process of rendering services (paragraph 8.5).
TaxSphere, “DCIT v AMD India Private Limited”, https://taxnotice.vittsphere.com/caselaw/case/amd-india-28iv-assets-received-for-testing-returned-not-benefit/ (validity last checked 2026-09-08)
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