2017 (9) TMI 1986 - HC - Income Tax

TP Adjustment - intra-group services - issue to be decided by the ITAT by giving reasons was whether the issue as to the payment on account of other group charges made by the Assessee to its AE for services rendered was to be determined by the TPO/DRP or it was to be determined by the AO under Section 37 (1) of the Act? - Whether the ITAT erred in not deciding the issue before it instead of remanding it to the AO/TPO - HELD THAT - The Court is of the view that remanding the matter to the AO again, when all the relevant material on record was available, was not warranted. Repeatedly remanding the matter results in delay in resolution of the issue arising in a particular AY. A remand would be necessary only where the relevant facts necessary for deciding the issue are not available. In the circumstances, the impugned order of the ITAT is set aside and the Assessee s appeal for AY 2007-08 is restored to the file before the ITAT for a decision on merits, in accordance with law, on the above issue regarding the payment of group charges by the Assessee to its AE. The appeal will be decided on the basis of the documents already on record before the ITAT.

Summary

Issues:
Appeal under Section 260A of the Income Tax Act, 1961 against ITAT order for AY 2007-08 - Whether ITAT erred in not deciding the issue and remanding it to AO/TPO?

Analysis:
The case involved an appeal under Section 260A of the Income Tax Act, 1961, filed by the Assessee against the order passed by the Income Tax Appellate Tribunal (ITAT) for the Assessment Year 2007-08. The primary question framed for consideration was whether the ITAT erred in not deciding the issue before it and instead remanded it to the Assessing Officer (AO) or Transfer Pricing Officer (TPO).

The Assessee in this case was engaged in developing, designing, and executing Engineering, Procurement, and Commissioning (EPC) contracts for hydro power projects. The issue at hand pertained to the arm's length price (ALP) of international transactions involving provision of intra-group services by the Assessee's Associated Enterprise (AE).

In the initial stages of litigation, adjustments were made by the Transfer Pricing Officer (TPO) based on which a draft assessment order was passed by the AO. Subsequently, after objections were considered by the Dispute Resolution Panel (DRP), the final assessment order was issued by the AO, adding a specific sum to the Assessee's income due to overlapping with royalty payments.

Following an appeal by the Assessee, the matter reached the High Court after the ITAT dismissed the initial appeal. The High Court, in a previous order, remanded the case back to the ITAT to record fresh reasons after considering arguments from both the Assessee and the Revenue.

Upon remand, the ITAT passed an order remanding the matter once again to the AO for redetermination of the ALP for group services provided by the AE to the Assessee. The High Court, after hearing arguments from both parties, set aside the ITAT's order, emphasizing that repeated remands causing delays are only warranted when relevant facts necessary for decision-making are not available.

Consequently, the High Court restored the Assessee's appeal to the ITAT for a decision on merits regarding the payment of group charges by the Assessee to its AE. The appeal was to be decided based on the existing documents on record before the ITAT. The question of law framed was answered in favor of the Assessee, and the appeal was disposed of accordingly.