2013 (4) TMI 267 - AT - Income Tax

Transfer pricing adjustment u/s. 92CA(3) - Enhancing the income of the appellant - resorting to arbitrary rejection of low profit / loss making companies from comparables - Held that - As in this case the assessee sought permission to file additional evidence in support of the grounds of the said appeal with regard to Annual Repot of comparables i.e. Oil Field Instrumentation (India) Limited for Financial year 2006-07,Year 2007-08, Annual Report of Fugro Geotech Limited for Financial year 2006-07, Internet reference for products and services for Furgo Geotech Limited & Relevant extract of OECD guidelines (Para 3.59) Thus assessee should be granted permission to file the additional evidences as the same will go to the root of the matter and facilitate adjudication of the issue raised in the appeal. Henc the additional evidences admitted & the AO should be provided an opportunity to go through the same and give his perspective in this regard. The AO shall adjudicate the issue afresh, after considering the additional evidences submitted by the assessee - Assessee s appeal allowed for statistical purposes.

Summary

Issues:
Transfer pricing adjustment u/s. 92CA(3) of the Income Tax Act, 1961 - Manipulation of arm's length price - Inclusion of high profit-making companies in comparables - Disregarding judicial pronouncements - Arbitrary rejection of low profit/loss-making companies - Admission of additional evidence.

Transfer Pricing Adjustment:
The appeal was against the Assessing Officer's order enhancing the Assessee's income by a specific amount due to transfer pricing adjustment u/s. 92CA(3) of the Income Tax Act for the assessment year 2007-08. The Assessee contested the enhancement, arguing that the Disputes Resolution Panel and the Assessing Officer erred in law and fact by subjectively disregarding the arm's length price (ALP) determined through the transfer pricing assessment process. The Assessee claimed that the inclusion of high profit-making companies in the comparables set was improper, contrary to judicial pronouncements, and involved arbitrary rejection of low profit/loss-making companies based on erroneous reasons.

Additional Evidence Admission:
During the appeal, the Assessee sought permission to submit additional evidence related to the annual reports of certain companies and relevant OECD guidelines. The Tribunal granted permission for the submission of additional evidence, considering its significance in adjudicating the appeal. The case was remitted to the Assessing Officer for fresh adjudication after considering the additional evidence. The Assessing Officer was directed to provide his perspective on the new evidence, ensuring a fair assessment based on the additional information presented.

Conclusion:
The Tribunal allowed the Assessee's appeal for statistical purposes, emphasizing the importance of considering all relevant evidence and ensuring a fair assessment process in transfer pricing matters. The decision highlighted the need for a comprehensive evaluation of the arm's length price and comparables, as well as the significance of admitting additional evidence to facilitate a thorough adjudication of tax disputes.