2017 (6) TMI 1381 - AT - Income Tax

TP Adjustment - ALP determination - arrangement between the assessee and its AE - HELD THAT - Since the issue in dispute is arising from identical facts and circumstances as in the earlier/later years, it is, therefore, covered by the decision of the co-ordinate bench of the Tribunal in the assessee's own case for asst. years 2004-05 to 2007-08 and asst. year 2009-10. In this factual view of the matter, and following the aforesaid decisions of the co-ordinate benches of the Tribunal (Supra), we hold that where the TPO has accepted the transaction to be at ALP in the hands of the AE, then he cannot take a different stand in the case of the other party to the transaction, i.e, the assessee therein in the case on hand and accordingly set aside the orders of the AO/TPO on this issue. Consequently, the grounds raised by the assessee are allowed as indicated above. Assessee appeal allowed.

Summary

Issues:
- Final order of assessment for assessment year 2008-09 passed under sections 143(3) and 144C of the Income-tax Act, 1961.
- Transfer pricing adjustment proposed by the Transfer Pricing Officer.
- Objections raised by the assessee before the Dispute Resolution Panel.
- Applicability of previous decisions by the Tribunal in the assessee's own case for earlier years.
- Consideration of loss incurred by the assessee and reasons for the same.
- Determination of arm's length price and margin analysis.

Analysis:
The judgment pertains to the final order of assessment for assessment year 2008-09 passed under sections 143(3) and 144C of the Income-tax Act, 1961. The assessee, engaged in engineering and construction work, filed its return declaring a loss. The Transfer Pricing Officer proposed a transfer pricing adjustment for international transactions with associated enterprises. The Dispute Resolution Panel rejected the assessee's objections, upholding the transfer pricing adjustment. The Tribunal considered the assessee's appeal, citing previous decisions in the assessee's favor for similar issues in earlier years.

Regarding the loss incurred by the assessee, various reasons were presented, including delays, increased unit rates, operating cost losses, and compensation claims. The Tribunal noted that the authorities had not adequately considered these reasons for the loss. The Transfer Pricing Officer was required to determine the arm's length price by analyzing the margin compared to comparable companies and considering extraordinary events. The Tribunal found that the TPO's determination was not justified and should have considered the circumstances leading to the loss.

The Tribunal emphasized the principle that if the transaction is at arm's length for one party, it should be the same for the other party. Therefore, the Tribunal set aside the orders of the AO and TPO, allowing the assessee's appeal for assessment year 2008-09. The judgment highlighted the importance of considering all relevant factors in determining the arm's length price and ensuring consistency in treatment between associated parties in a transaction.