2012 (10) TMI 12 - AT - Income Tax

Transfer Pricing DRP reject the contention of assessee raised in appeal on the basis that appeal filed by assessee before CIT(A) for previous AY is pending - Held that - As the draft order of the assessing authority on TP issues without considering the objections and arguments of the assessee. DRP has not followed any of the mandatory provisions contained in the law before disposing of the reference placed before it u/s 144C. Therefore, we find that the DRP was not justified in upholding the draft order framed by the assessing authority. Appeal decides in favour of assessee & remand back to DRP Whether issues on Transfer pricing is decided by DRP and Non Transfer pricing issues are decided by Tribunal Held that - The various issues raised in the appeal filed by the assessee for a particular assessment year will be placed before different authorities at different levels, issuewise and groundwise, then it will very difficult for the AO to pass the final order to give effect to the appellate and court directions and it will be difficult for the assessee as well to appear before different authorities for arguing different points. Entire file remit back to DRP

Summary

Issues involved:
1. Transfer pricing matters
2. Non-transfer pricing matters

Transfer pricing matters analysis:
The appellant filed an appeal against the assessment order passed under section 143(3) of the Income-tax Act, 1961, concerning the relevant assessment year 2006-07. The appeal included two sets of grounds, the first set addressing transfer pricing matters. The appellant raised various grounds related to transfer pricing, such as reliance on earlier year's proceedings, rejection of the assessee's search, conditions under section 92C(3) not satisfied, non-consideration of multiple year data contention, rejection of segmental financials, inappropriate benchmarking analysis, denial of economic adjustments, and denial of deviation margin of 5%. The Dispute Resolution Panel (DRP) in Chennai upheld the order of the Transfer Pricing Officer without considering the objections and arguments of the assessee. The DRP's failure to follow the mandatory provisions led the Tribunal to set aside the proceedings and remit the file back to the DRP for a fresh consideration in accordance with the law.

Non-transfer pricing matters analysis:
The second set of grounds in the appeal addressed non-transfer pricing matters, including provision for doubtful debts, payment of compensation to vendors, provision for stock obsolescence, community development expenses, deduction under section 35D, and disallowance under section 40(a). The Tribunal emphasized the importance of considering all issues raised by the assessee in a consolidated manner to ensure a coherent and efficient assessment process. Therefore, the Tribunal set aside the entire proceedings of the DRP and remitted the entire file back to them to consider the reference afresh on both transfer pricing and non-transfer pricing issues. As a result, the appeal filed by the assessee was treated as allowed for statistical purposes.

This comprehensive analysis highlights the key legal issues and the Tribunal's decision regarding the transfer pricing and non-transfer pricing matters in the appeal.