2012 (8) TMI 963 - AT - Income Tax

TPA - selection of selection - selection procedure - entitled for deduction u/s 10A as it had established a new unit -

Summary

Issues involved: Transfer pricing adjustments, denial of deduction u/s 10A, interest levied u/s 234B and 234D, penalty proceedings u/s 271(1)(c).

Detailed Analysis:
1. Transfer Pricing Adjustments:
The case involved adjustments made by the Assessing Officer (AO) based on directions from the Dispute Resolution Panel (DRP) under section 144C(5). The appellant challenged the adjustments in the appeal, citing various grounds. These grounds included contentions that the Transfer Pricing Officer (TPO) failed to establish the appellant's case falling under specific clauses of section 92C(3), erred in rejecting the appellant's economic analysis, and used outdated data for determining arm's length margins/prices. The appellant also argued that the TPO selected comparables arbitrarily, ignored risk profile differences, and did not limit adjustments to the lower end of the 5 percent range as per section 92C(2) proviso.

2. Denial of Deduction u/s 10A:
The appellant contested the denial of deduction under section 10A for an STP unit, arguing that the DRP and AO erred in denying the deduction based on the unit's setup after splitting its existing business. The appellant presented arguments supported by judicial precedents from similar cases, asserting that the unit qualified for the deduction as a newly established entity separate from the existing business.

3. Interest Levied and Penalty Proceedings:
The appellant raised objections regarding the interest levied under sections 234B and 234D, contending that the DRP disregarded provisions of the Act and judicial precedents. Additionally, the appellant challenged the initiation of penalty proceedings under section 271(1)(c) by the DRP and AO. However, the judgment noted that no penalty order had been passed, rendering the challenge misconceived.

The Tribunal considered the submissions and precedents cited by both parties, particularly emphasizing the need for natural justice in providing information obtained under section 133(6) to the assessee for verification and objection purposes. The Tribunal referred to a similar case involving Agilent Technologies and directed the matter back to the AO/TPO for reconsideration in light of the principles of natural justice. Ultimately, the Tribunal allowed certain grounds for statistical purposes, including the challenge to transfer pricing adjustments and the denial of deduction u/s 10A, while dismissing other grounds related to interest and penalty proceedings due to the absence of a penalty order.