2013 (1) TMI 886 - AT - Income Tax

Summary

Issues involved: Deletion of addition u/s 92CA(3) of the Income Tax Act, 1961.

Summary:
The appeal was against the deletion of an addition made by the Assessing Officer under section 92CA(3) of the Income Tax Act, 1961. The case involved transactions with Associated Entities (AEs) and independent parties. The Transfer Pricing Officer (TPO) rejected the Comparable Uncontrolled Price (CUP) method adopted by the assessee and applied the Transactional Net Margin Method (TNMM) instead, resulting in a proposed adjustment of Rs. 3.59 crores. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, considering the CUP method as the most appropriate. The Tribunal upheld the CIT(A)'s decision, stating that the TPO was not justified in rejecting the CUP method and that the geographical and date differences in transactions were adequately addressed by the assessee.

The TPO's rejection of the CUP analysis based on geographical domain differences was considered valid by the Tribunal. However, the Tribunal noted that the assessee had mitigated the impact of geographical differences by comparing the FOB value of transactions with AEs and Non-AEs. The TPO's objection regarding the difference in dates of comparable transactions was also addressed by the Tribunal, emphasizing the need for comparison within the same financial year as per Rule 10B(4) of the IT Rules 1962. As the assessee had compared transactions with AEs and Non-AEs within the same financial year, the Tribunal found no justification for the TPO's rejection of the CUP method based on date differences. The Tribunal concluded that there was no infirmity in the CIT(A)'s order and dismissed the appeal filed by the revenue.