2018 (3) TMI 1212 - HC - Income Tax

Appeal admitted on question (ii) Whether in the facts and circumstances of the case and in law, was the Tribunal correct in holding that the sales made to its associate enterprises has to be benchmarked on the basis of the average price of a number of transaction and not with regard to the price of each individual transaction for arriving at the Arm s Length Price(ALP)?

Summary

Issues involved:
1. Challenge to the order of the Income Tax Appellate Tribunal for Assessment Year 2006-07.
2. Reframed questions of law regarding interest payment on external commercial borrowings, benchmarking sales to associate enterprises, and determination of Arm's Length Price (ALP).
3. Review of Tribunal's decision on interest payment and benchmarking.
4. Consideration of questions not raised before the Tribunal.
5. Admission of appeal on the reframed question related to benchmarking sales to associate enterprises.
6. Explanation provided by the Assistant Commissioner of Income Tax regarding non-filing of appeal in a related case.

Analysis:

1. The appeal challenges the order of the Income Tax Appellate Tribunal for Assessment Year 2006-07. The appellant raises reframed questions of law regarding interest payment on external commercial borrowings, benchmarking sales to associate enterprises, and the determination of Arm's Length Price (ALP).

2. Regarding the first question on interest payment, the Tribunal had previously decided in favor of the respondent for Assessment Year 2000-01, a decision accepted by the Revenue. Subsequent years' decisions were also in favor of the respondent. As there were no differences in facts or law for the subject assessment years, this question was not entertained.

3. Questions (iii), (iv), and (v) regarding the determination of ALP and related issues did not arise from the Tribunal's order and were not raised before the Tribunal. The Court can only decide on questions raised before the Tribunal, as per precedent. Thus, these questions were not considered substantial for review.

4. The appeal was admitted on the substantial reframed question related to benchmarking sales to associate enterprises. An affidavit by the Assistant Commissioner of Income Tax explained the circumstances leading to the non-filing of an appeal in a related case, supporting the argument that the question raised should be entertained as it gives rise to a substantial question of law.

5. The Court directed the Registry to inform the Tribunal about the order to ensure the availability of relevant papers and proceedings for the appeal. The respondent's counsel waived service, indicating their cooperation in the process.