2016 (8) TMI 1394 - AT - Income Tax

Transfer pricing adjustment - assessee entered into Advance Pricing Agreement (APA) with CBDT covering nine years from assessment years 2010-11 to 2013-14 under roll back provisions - Held that - Where the international transactions entered into by the assessee with its associate enterprises are similar to the international transactions in the succeeding years, then where the APA proceedings have been carried out in the case of assessee and the Board and the assessee have come to a settlement vis- -vis the manner of computation of arm s length price - we restore this issue also back to the file of Assessing Officer, who shall consider the plea of assessee and shall after obtaining report from the TPO in this regard, decide the issue in accordance with law. Reasonable opportunity of being heard shall be afforded to the assessee while deciding the issue. The grounds of appeal raised by the assessee are thus, allowed.

Summary

Issues:
Transfer pricing adjustment based on international transactions.

Analysis:
The appeal was against the order of the DCIT relating to the assessment year 2009-10 under the Income Tax Act. The appellant raised several grounds of appeal, including errors in proposed additions to the total income, rejection of external CPM and TNMM analysis, and improper application of internal CUP and CPM methods. The appellant argued that the DRP, AO, and TPO erred in comparing domestic and export prices without considering various differences. The appellant also contested the rejection of comparable companies and the failure to allow adjustments for comparability.

The appellant further challenged the rejection of the external TNMM adopted in the previous assessment year and the initiation of penalty proceedings. The appellant requested the deletion of the addition made by the AO and TPO. The appellant highlighted the existence of an Advance Pricing Agreement (APA) with the CBDT covering multiple years and argued for consistent treatment based on the APA provisions. The TPO proposed adjustments due to alleged non-arm's length transactions, resulting in additions to the appellant's income. The AO upheld these adjustments, which were then confirmed by the DRP.

Upon review, the Tribunal found that the international transactions in the year under consideration were similar to those covered in the APA. Considering this, the Tribunal directed the AO to reevaluate the transfer pricing issue in line with the APA provisions and report from the TPO. The Tribunal allowed the appeal on transfer pricing adjustment grounds, granting the appellant a reasonable opportunity to present their case. Other additions were not disturbed as specific grounds were not raised. Consequently, the appeal was allowed, and the order was pronounced in favor of the appellant on August 12, 2016.