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2017 (10) TMI 1609 - AT - Income TaxTP Adjustment - valid reference made u/s 92CA(1) by the AO to the Transfer Pricing Officer (TPO) - HELD THAT - From a perusal of the above records produced by the ld. DR, we find that the Assessing Officer has not made a reference as per law to the T.P.O. u/s 92CA(1) - AO of the assessee has to address a communication to the T.P.O. making the reference u/s 92CA(1) of the Act by mentioning as to which are the international transaction which require determination of ALP. From the above, it is clear the revenue could not demonstrate that there was a valid reference u/s 92CA(1) of the Act, for both the impugned assessment years by the Assessing Officer to the T.P.O. Only letters of approval obtained for making the reference are available on record, right from the stage of assessment proceedings. We agree with the contentions of assessee that the assessment orders passed for both the assessment years are barred by limitation as there is no valid reference by the Assessing Officer to the T.P.O and consequently the limitation specified u/s 153(1) of the Act, applies. From a perusal of the above records produced by the ld. DR, we find that the Assessing Officer has not made a reference as per law to the T.P.O. u/s 92CA(1) of the Act. The Assessing Officer of the assessee has to address a communication to the T.P.O. making the reference u/s 92CA(1) of the Act by mentioning as to which are the international transaction which require determination of ALP. It is clear the revenue could not demonstrate that there was a valid reference u/s 92CA(1) of the Act, for both the impugned assessment years by the Assessing Officer to the T.P.O. Only letters of approval obtained for making the reference are available on record, right from the stage of assessment proceedings. We agree with the contentions of the ld. Counsel for the assessee, that the assessment orders passed for both the assessment years are barred by limitation as there is no valid reference by the Assessing Officer to the T.P.O and consequently the limitation specified u/s 153(1) of the Act, applies. Appeal of assessee allowed.
Issues Involved:
1. Validity of the reference made by the Assessing Officer (AO) to the Transfer Pricing Officer (TPO) under Section 92CA(1) of the Income Tax Act. 2. Determination of whether the Project Office and the Head Office in China are Associated Enterprises (AEs) and whether domestic activities carried out by the Project Office are international transactions. 3. Appropriateness of the Transfer Pricing adjustment made by the AO/TPO/Dispute Resolution Panel (DRP). 4. Treatment of interest on income tax refund. 5. Grant of Tax Deducted at Source (TDS) credit. 6. Levy of interest under Section 234D of the Act. 7. Grant of interest credit under Section 244A of the Act. 8. Initiation of penalty proceedings under Section 271(1)(c) of the Act. Detailed Analysis: 1. Validity of the Reference to TPO: The core issue was whether a valid reference was made by the AO to the TPO under Section 92CA(1) of the Income Tax Act. The assessee argued that no such reference was made, and thus the assessment orders were barred by limitation. The AO claimed that the reference was made on 27/12/2011, supported by an approval letter from the DIT(IT). However, the Tribunal found that there was no actual reference letter from the AO to the TPO, only an approval for such a reference. Consequently, the Tribunal held that the assessment orders were barred by limitation as the statutory requirement of a reference was not fulfilled. 2. Determination of Associated Enterprises and International Transactions: The assessee contended that the Project Office and the Head Office in China were not AEs and that there were no international transactions. The Tribunal did not delve into this issue as it was rendered academic due to the finding on the first issue. 3. Transfer Pricing Adjustment: The assessee disputed the application of the Transactional Net Margin Method (TNMM) and the selection of comparables by the TPO. The Tribunal did not address this issue in detail due to the primary finding on the invalid reference to the TPO. 4. Treatment of Interest on Income Tax Refund: The assessee argued that the interest on income tax refund should be treated as business income and not as income from other sources. This issue was not adjudicated due to the primary finding on the invalid reference to the TPO. 5. Grant of TDS Credit: The assessee claimed that there was a short grant of TDS credit. This issue was also not adjudicated due to the primary finding on the invalid reference to the TPO. 6. Levy of Interest under Section 234D: The assessee disputed the levy of interest under Section 234D. This issue was not adjudicated due to the primary finding on the invalid reference to the TPO. 7. Grant of Interest Credit under Section 244A: The assessee claimed that there was a short grant of interest under Section 244A. This issue was not adjudicated due to the primary finding on the invalid reference to the TPO. 8. Initiation of Penalty Proceedings under Section 271(1)(c): The assessee contested the initiation of penalty proceedings. This issue was not adjudicated due to the primary finding on the invalid reference to the TPO. Conclusion: The Tribunal allowed the appeals of the assessee for both assessment years, primarily on the ground that the assessment orders were barred by limitation due to the absence of a valid reference made by the AO to the TPO under Section 92CA(1) of the Income Tax Act. The other issues raised by the assessee were not adjudicated as they were rendered academic by the primary finding.
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