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2014 (1) TMI 1130 - AT - Income TaxTransfer pricing adjustment - Held that - Following Sony India Pvt. Ltd. vs. CBDT 2006 (10) TMI 88 - DELHI HIGH COURT - The expression having regard to in Section 92C(4) and 92CA(4) enables the AO to consider not only the report of the TPO but any other material that may be placed before him by the assessee to arrive at a different conclusion - The report of the TPO is not binding on the AO - The Assessing Officer is not bound to accept the ALP as determined by the TPO but has to determine the ALP, only after giving an opportunity of hearing to the assessee. In this case, admittedly no such opportunity has been given in terms of sub-section 4 of section 92C read with section 92CA - The issue has been restored for fresh adjudication. Transfer pricing adjustment for A.Y. 2005-06 - Held that - The TPO has taken into consideration the figure of foreign exchange gain, which was not there in the A.Y.2005-06 - The assessee's explanations for the A.Y. 2005-06 and all its objections and documents have not been considered at all - This shows that the ld. TPO has passed the order without application of mind, which he is required to do so under the provisions of law and equity - Such an order shows an unprecedented bias and pre-determined mind without going into the merits of the case - The issue has been restored for fresh adjudication. Validity of the assessment order passed under section 143(3) r.w.s. 144C(13) Held that - Following Commissioner of Income-Tax Versus Bhan Textiles P. Limited. 2006 (9) TMI 129 - DELHI High Court As per The Central Board of Direct Taxes Circular No.549, dated October 31, 1989 - A proviso to sub-section (2) provides that a notice under the sub-section can be served on the assessee only during the financial year in which the return is furnished or within six months from the end of the month in which the return is furnished, whichever is later - The Department must serve the said notice on the assessee within this period, if a case is picked up for scrutiny - It follows that if an assessee, after furnishing the return of income does not receive a notice under section 143(2) from the Department within the aforesaid period, he can take it that the return filed by him has become final and no scrutiny proceedings are to be started in respect of that return - The impugned assessment order passed by the Assessing Officer is void ab initio as the same has been passed without the mandatory requirement of serving the notice under section 143(2) upon the assessee within the time provided in the second proviso Decided in favour of assessee. Transfer pricing adjustment in respect of marketing services provided Held that - The TPO has not examined properly the assessee's contention and submissions made before him -How the comparables selected by the assessee were functionally different and how the TPO has selected his own comparables and bench marked the margin The TPO has not properly appreciated the entire marketing expenditure which has been reimbursed by the A.E. - The principal agreement has not been filed before the Tribunal - Even the manner in which the operating income has been shown has not been properly clarified as to whether it forms part of the income or it is a compensation received from the A.E. - The issue has been restored for fresh adjudication keeping in view the principal agreement and all other documents filed by the assessee. Disallowance on account of AIR information Held that - The details of information have not been provided to the assessee - The assessee has not been given opportunity to examine this information and make proper submissions - The issue has been restored for fresh adjudication. Disallowance of set- off of brought forward unabsorbed business loss Held that - Following General Motors India Pvt. Ltd. v/s DICT 2012 (8) TMI 714 - GUJARAT HIGH COURT - The amendment in section 32 is applicable from the assessment year 2002-03 and subsequent years and unabsorbed depreciation available in the earlier years will be allowed to be carried forward to the succeeding years and if any unabsorbed depreciation or part thereof could not be set-off till the assessment year 2002-03, then it would be carried forward till the time it is set-off against the profits and gains of subsequent years - The issue has been restored for fresh adjudication in the light of aforesaid judgement.
Issues Involved:
1. Transfer Pricing Adjustments 2. Validity of Assessment Order 3. Depreciation and Unabsorbed Depreciation 4. Foreign Exchange Gain 5. Use of Contemporaneous and Multiple Year Data 6. Procedural Irregularities in Issuance of Notice 7. Credit of TDS and Levy of Interest under Sections 234B and 234D Issue-Wise Detailed Analysis: 1. Transfer Pricing Adjustments: The primary issue revolves around transfer pricing adjustments made by the Assessing Officer (AO) based on the Transfer Pricing Officer's (TPO) suggestions. The assessee contested the adjustments, arguing that valid comparable companies were rejected, and the use of contemporaneous data was not considered. The Tribunal noted that the AO failed to provide an opportunity for the assessee to explain the adjustments, which was a requirement under the pre-amendment Section 92CA(4). The Tribunal restored the matter to the AO for fresh adjudication, ensuring due and effective opportunity for the assessee. 2. Validity of Assessment Order: The validity of the assessment order was challenged on the grounds that the notice under Section 143(2) was not served within the statutory period. The Tribunal found that the notice was sent to an old address despite the assessee having informed the AO of the change of address. Consequently, the Tribunal held that the assessment order was void ab initio as it was passed without the mandatory service of notice within the prescribed period, thereby quashing the entire assessment. 3. Depreciation and Unabsorbed Depreciation: The assessee sought directions for the AO to allow depreciation on certain assets and determine unabsorbed depreciation and business loss for future set-off. The Tribunal noted that the assessee had filed a rectification petition under Section 154, which had not been disposed of. The Tribunal directed the AO to address this petition in accordance with the law. 4. Foreign Exchange Gain: The department's appeal contested the inclusion of foreign exchange gain in computing the operating income of the assessee. The Tribunal noted that since the entire transfer pricing adjustment matter was being set aside to the AO, this issue should also be reconsidered by the AO. 5. Use of Contemporaneous and Multiple Year Data: The assessee argued that the CIT(A) erred in rejecting the use of contemporaneous and multiple year data for computing the Profit Level Indicator (PLI). The Tribunal, having set aside the entire transfer pricing adjustment, directed the AO to reconsider this aspect afresh. 6. Procedural Irregularities in Issuance of Notice: The Tribunal observed that the AO did not serve the notice under Section 143(2) within the statutory period, which is a mandatory requirement. The failure to serve the notice within the prescribed time rendered the assessment order null and void. The Tribunal quashed the assessment order on this ground. 7. Credit of TDS and Levy of Interest under Sections 234B and 234D: The assessee raised issues regarding the non-granting of credit for TDS and the levy of interest under Sections 234B and 234D. The Tribunal directed the AO to verify the TDS credit and levy interest in accordance with the law, ensuring the assessee's contentions were addressed. Conclusion: The Tribunal's judgment primarily focused on procedural compliance and the necessity of providing the assessee with a fair opportunity to present its case. The matters were largely restored to the AO for fresh consideration, emphasizing adherence to statutory requirements and principles of natural justice.
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