2016 (5) TMI 1449 - HC - Income Tax

Transfer pricing adjustment consequent to arriving at Arms Length Price(ALP) - international transactions or this adjustment is to be done in respect of all the business transactions of the assessee i.e. at the entity level - this Appeal was on board and detailed orders were passed indicating that the Revenue has not been bringing to the notice of the Court orders of admission in its favour in the subsequent Appeals filed by it an identical questions - Held that - We find that the affidavit of the Principal Chief Commissioner of Income Tax merely indicates that the Department has decided to add a legal corner on its website where all questions of law which are admitted or dismissed by this Court will be entered section-wise. However, no indication is there in the affidavit as to when the proposed system of entering those questions on the website which have been admitted/dismissed would come into force. During the hearing, Dr. Shivram who appears for the respondent-assessee suggested that the legal corner on the website should also indicate whether the question of law framed by the Revenue is rejected as the same been accepted by the Income Tax Department. We find that the fields presently provided on entry into the website under the head legal corner only mentions the question which have been admitted or rejected. It is suggested that the Income Tax Department may add one more field viz. to cover cases where the question has been answered in the affirmative or in the negative. These are suggestions for the Income Tax Department to consider and if thought appropriate the manner in which it could be implemented. To us it appears that if these suggestions are implemented, we could have transparency and consistency in the stand taken by the Revenue. We direct the Principal Chief Commissioner of Income Tax to file an affidavit on or before 13th June, 2016 and a copy of the affidavit may also be served upon Dr. Shivram, the learned counsel appearing for the Respondent.

Issues:
1. Whether transfer pricing adjustment for Arms Length Price (ALP) should be done only for international transactions or for all business transactions.
2. Lack of consistency in bringing relevant court orders to the notice of the court by the Revenue.
3. Need for a system to record questions of law admitted or dismissed by the court for consistent stand by the Revenue.
4. Affidavits filed by the Principal Chief Commissioner of Income Tax and two Commissioners regarding steps taken to ensure consistency.
5. Proposal to add a legal corner on the Income Tax Department's website for recording admitted/dismissed questions of law.
6. Lack of clarity on the timeline for implementing the proposed system on the website.
7. Request for a further affidavit from the Principal Chief Commissioner of Income Tax regarding the implementation timeline.
8. Suggestion to include information on whether questions of law framed by Revenue are accepted or rejected by the Income Tax Department on the website.
9. Proposal to add a field on the website to cover cases where questions are answered in the affirmative or negative.
10. Recommendations for the Income Tax Department to consider implementing the suggestions for transparency and consistency.
11. Direction for the Principal Chief Commissioner of Income Tax to file an affidavit by a specified date and serve a copy to the respondent's counsel.
12. Listing of the Appeal along with other Income Tax Appeals on a specific date.

Analysis:
1. The appeal raised the issue of whether transfer pricing adjustment for Arms Length Price (ALP) should be limited to international transactions or extended to all business transactions of the assessee at the entity level. The court emphasized the need for clarity on this matter.
2. The court noted the Revenue's failure to bring relevant court orders to the notice of the court, resulting in dismissal of subsequent appeals raising identical questions. This highlighted the importance of consistency in presenting legal arguments.
3. Recognizing the necessity for a system to record questions of law admitted or dismissed by the court, the Principal Chief Commissioner of Income Tax was directed to file an affidavit outlining steps to ensure a consistent stand by the Revenue.
4. Affidavits were filed by the Principal Chief Commissioner and two Commissioners detailing the measures being taken to address the lack of consistency in bringing court orders to the court's attention.
5. The court suggested adding a legal corner on the Income Tax Department's website to record questions of law admitted or dismissed, aiming to enhance transparency and consistency in the Revenue's legal stand.
6. Concerns were raised regarding the timeline for implementing the proposed system on the website, with the Revenue's counsel indicating a possible functionality date of 15th June, 2016.
7. In response to the lack of clarity on the implementation timeline, the court directed the Principal Chief Commissioner to file a further affidavit specifying the date for the system's functionality.
8. Suggestions were made to include information on whether questions of law framed by the Revenue are accepted or rejected by the Income Tax Department on the website to provide a comprehensive view of legal proceedings.
9. Additional proposals included adding a field on the website to cover cases where questions are answered in the affirmative or negative, further enhancing transparency and consistency.
10. The court recommended the Income Tax Department to consider implementing the suggestions to achieve transparency and consistency in legal matters.
11. A directive was issued for the Principal Chief Commissioner to file an affidavit by 13th June, 2016, and serve a copy to the respondent's counsel, ensuring compliance with the court's orders.
12. The Appeal was scheduled to be listed on 20th June, 2016, along with other Income Tax Appeals, emphasizing the importance of addressing the issues raised promptly and consistently.

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