9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (12) TMI 855 - AT - Income TaxTransfer pricing adjustment - entire transaction of the assessee needs to be taken into consideration for the purpose of transfer pricing adjustment or the TPO and DRP have to confine themselves only to international transaction? - Held that - For the purpose of transfer pricing adjustment, the transaction of the assessee with Associated Enterprise outside the country alone has to be taken into consideration. The domestic transaction unless it is a Specified Domestic Transaction, cannot be a basis for making any adjustment. See CIT v. Keihin Panalfa Ltd. 2016 (5) TMI 203 - DELHI HIGH COURT and Alstom Projects India Limited (2016 (12) TMI 1408 - BOMBAY HIGH COURT). This Tribunal is of the considered opinion that under the scheme of the Income-tax Act, the transfer pricing adjustment has to be made only in respect of the transaction of the assessee being a tested party, with Associated Enterprise outside the country after comparing the transaction made by similarly placed company in uncontrolled transaction with non-Associated Enterprise. Therefore, we are unable to uphold the order of the Dispute Resolution Panel Accordingly the order of the DRP is set aside and the entire issue is remitted back to the file of the Assessing Officer. - Decided in favour of assessee for statistical purposes.
Issues:
1. Violation of principles of natural justice by the Dispute Resolution Panel in transfer pricing adjustment. 2. Consideration of entire transaction, including domestic transaction, for transfer pricing adjustment. 3. Justification of royalty reversal removal from operating income by the Dispute Resolution Panel. Issue 1 - Violation of Principles of Natural Justice: The appeal challenged the order passed by the Assessing Officer following the directions of the Dispute Resolution Panel for the assessment year 2012-13. The appellant contended that the Dispute Resolution Panel breached the principles of natural justice by making a downward adjustment at the entity level instead of considering the transaction as an Associated Enterprise transaction. The appellant argued that under Chapter X of the Income-tax Act, transfer pricing adjustments should only involve transactions with Associated Enterprises outside the country, not domestic transactions. Citing the judgment of the Bombay High Court in CIT v. Alstom Projects India Limited, the appellant emphasized that transfer pricing adjustments should not include domestic transactions. Issue 2 - Consideration of Entire Transaction for Transfer Pricing Adjustment: The Tribunal deliberated on whether the entire transaction of the assessee should be considered for transfer pricing adjustment or if the focus should be solely on international transactions. Referring to judgments by the Delhi High Court and the Bombay High Court, the Tribunal concluded that transfer pricing adjustments should only pertain to transactions with Associated Enterprises outside the country. The Tribunal held that domestic transactions, unless specified as Specified Domestic Transactions, should not form the basis for adjustments. Consequently, the Tribunal set aside the Dispute Resolution Panel's order and remitted the issue back to the Assessing Officer for reconsideration. Issue 3 - Justification of Royalty Reversal Removal: The appellant also contested the Dispute Resolution Panel's removal of royalty reversal from the operating income of the assessee without proper justification. The Tribunal acknowledged this concern and directed that the reversal of royalty, amounting to ?1,27,05,764, should be reevaluated. The Tribunal set aside the orders of the Transfer Pricing Officer and the Dispute Resolution Panel, instructing the Assessing Officer to refer the matter back to the Transfer Pricing Officer for a fresh examination. The Tribunal emphasized the need for compliance with the prescribed procedures under Section 144C of the Act for both the assessee and the Dispute Resolution Panel. In conclusion, the Tribunal allowed the appeal filed by the assessee for statistical purposes, indicating that the issues related to transfer pricing adjustment and royalty reversal required further examination and adherence to the provisions of the Income-tax Act.
|
