2012 (7) TMI 663 - HC - Income Tax

Determination of Arm s Length price to the Transfer Pricing Officer - Held that - Any changes in the most appropriate method of computing the arms length price is to be dealt with by way of a speaking order. T.P.O. is also at liberty to collect independent relevant information of comparable uncontrolled transactions. Let the revenue authorities determine fresh ALP in the light of above observation and in accordance with the regulations.

Summary

Issues:
1. Appeal under Section 260-A of the Income Tax Act, 1961 against the Tribunal's order.
2. Company engaged in software development and export.
3. Request for accommodation due to company merger.
4. Tribunal's order remanding the matter to the Assessing Officer.
5. 30 substantial questions of law raised by the assessee.
6. High Court's decision not to examine the appeal on merits and dismissal.

Analysis:
1. The appeal was filed under Section 260-A of the Income Tax Act, 1961 against the Tribunal's order dated 12-07-2007 in I T A No.584/Bang/2006. The assessee, a software development and export company, was the appellant for the assessment year 2002-03.

2. The appellant's counsel requested a short accommodation due to the company's merger with another entity, necessitating the successor company to come on record. The respondent, represented by learned counsel Sri.M.V.Seshachala, highlighted the Tribunal's order directing the matter back to the Assessing Officer for determination of Arm's Length Price (ALP).

3. The Tribunal's order set aside the Commissioner of Income Tax (Appeals) order and remanded the matter to the Assessing Officer for reconsideration. Despite the appellant raising 30 substantial questions of law, the High Court found it unnecessary to address these questions as the Tribunal's order was not adverse but remanded the matter for redetermination.

4. The High Court emphasized that in a remanded matter, unless there is a patent illegality or a perverse order, there is no need for the High Court to examine the appeal on merits under Section 260-A of the Act. Thus, the Court dismissed the appeal without expressing an opinion on any aspect, allowing the assessee to raise contentions before the authority to which the matter is remanded.

5. Another appeal by the same assessee for the assessment year 2002-03, partially allowed by the Tribunal in relation to the revenue's appeal, was also disposed of similarly. The orders of the CIT(Appeals) and the Tribunal were set aside, remanding the matter for reconsideration without the High Court examining the appeal on merits, leading to the dismissal of both appeals.

6. Ultimately, both appeals were dismissed by the High Court without delving into the merits, following the principle that in remanded matters, the High Court need not intervene unless there are glaring errors or perversities in the lower authorities' orders. The Court upheld the remand orders and allowed the parties to present their contentions before the appropriate authority.