2014 (3) TMI 954 - AT - Income Tax

Determination of arm's length price - 'whether the assessee has international transactions with the AE - Held that - A perusal of the draft assessment order dated 05-12-2011 shows that the Assessing Officer has mentioned that the assessee has entered into international transactions worth more than ₹ 35.00 Crores with AE and referred the case to TPO to determine the ALP of the international transaction. The assessee objected to the findings of Assessing Officer with regard to transaction with AE. Before the TPO, the assessee vide letter dated 21-03-2011 categorically stated that the assessee does not have any AE relationship as defined u/s.92A of the Act in the Financial Year 2007-08 with M/s. Oren Hydro Carbon Middle East Incorporation. - This clearly shows that the TPO has not applied his mind to the objection raised by the assessee before proceeding with the determination of ALP - perusal of the orders of the authorities below show that the Assessing Officer has formed his opinion that the assessee has international transactions with its AE on the basis of information available on the website of the assessee and overseas company. The Assessing Officer has not ascertained from documents on record, whether the overseas enterprises is AE of the assessee in the AY under consideration - question whether there is a relationship of AE or not in AY.2008-09 needs re-determination on the basis of the documentary evidence - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Determining if the assessee had international transactions with an Associated Enterprise (AE) in the Assessment Year (AY) 2008-09.

Analysis:
The appeal was filed by the assessee challenging the assessment order under the Income Tax Act for AY 2008-09. The assessee, engaged in the oil and gas exploration industry, had its case referred to the Transfer Pricing Officer (TPO) due to international transactions. The TPO made adjustments in the Arm's Length Price (ALP) of the AE. The Dispute Resolution Panel (DRP) rejected the assessee's objection regarding the AE relationship. The Assessing Officer made additions based on the DRP's directions. The assessee contended that there was no AE relationship with the overseas company in the relevant period. The representatives of both sides presented their arguments, with the assessee denying the AE relationship and the Revenue supporting the authorities' decisions.

The Tribunal observed that the crucial issue was whether the assessee had international transactions with the AE. The Assessing Officer had alleged such transactions based on website information without concrete evidence. The TPO proceeded with ALP determination without addressing the assessee's objection on the AE relationship. The DRP also dismissed the assessee's objections without proper examination. It was noted that the Assessing Officer had not verified if an AE relationship existed in the AY under consideration. The Tribunal concluded that a reassessment based on documentary evidence was necessary to determine the AE relationship for AY 2008-09. Consequently, the matter was remitted to the Assessing Officer for fresh consideration with an opportunity for the assessee to be heard.

In light of the above, the Tribunal set aside the impugned order, allowing the assessee's appeal for statistical purposes. The decision was pronounced during a hearing in Chennai on March 25, 2014.