2014 (3) TMI 885 - AT - Income Tax

Addition made u/s 92CA(A) of the Act Transfer pricing adjustment Held that - There is no worthwhile discussion about the objections taken by the assessee in Form No. 35A - it is summary of the view canvassed by the AO/TPO for making addition without properly noting or dealing with the objections raised by the assessee - if the assessee s similar transactions with non-Associated enterprises are available then it is always better to go by such internally comparable uncontrolled transactions for benchmarking the price charged/paid from/to its associated enterprises in comparable transactions- At the same time, it is relevant to observe that if complete data of such comparable uncontrolled transaction is not available, then the Revenue is at liberty to discard the CUP method and resort to any other suitable method - assessee contended that it has provided full details to satisfy the authorities below as regards the application of CUP method and hence the matter should be restored to the file of TPO instead of DRP, who had also failed to appreciate the contentions made before him - thus, the order set aside and the matter remitted back to the TPO Decided in favour of Assessee.

Summary

Issues:
- Addition due to Transfer Pricing Adjustment under section 92CA(A) of the Income Tax Act, 1961.

Detailed Analysis:
1. The main issue in this appeal pertains to the addition of Rs. 7,23,59,322/- made by the Assessing Officer due to Transfer Pricing Adjustment. The dispute revolves around the Arm's Length Price (ALP) of international transactions, specifically 'Sale of traded goods' and 'Purchase of traded goods' benchmarked using the Comparable Uncontrolled Price (CUP) method by the assessee. The Revenue rejected CUP and applied the Transactional Net Martin Method (TNMM) to determine ALP, resulting in the addition. The Tribunal emphasized the importance of using internally comparable uncontrolled transactions for benchmarking if available, and the Revenue's discretion to choose another method if necessary data is incomplete.

2. The Tribunal analyzed the specifics of the case, noting details of export transactions of Soyabean meal, Sesame seed, and Iron ore to associated enterprises (AEs) alongside transactions with non-AEs. The assessee provided evidence of comparable pricing with non-AEs, which was not adequately considered by the authorities. The Tribunal highlighted the lack of detailed discussion by the Dispute Resolution Panel (DRP) on the assessee's objections, leading to a decision to restore the matter to the Transfer Pricing Officer (TPO) for a more thorough review. The Tribunal stressed the importance of using actual uncontrolled transactions for comparison under the CUP method and granted the assessee the opportunity to present additional material in support.

3. The Tribunal set aside the impugned order and directed the matter to be reconsidered by the TPO, emphasizing the need for a comprehensive review of the assessee's contentions regarding the application of the CUP method. While allowing the appeal for statistical purposes, the Tribunal underscored the significance of utilizing accurate and relevant data for transfer pricing adjustments, ensuring a fair and transparent assessment process. The Tribunal's decision aimed to uphold the principles of fairness and procedural justice in determining the Arm's Length Price of international transactions, emphasizing the importance of thorough analysis and consideration of all relevant factors.