2018 (4) TMI 742 - AT - Income Tax

TPA - benefit available under proviso to section 92C(3) - Held that - The Tribunal in the earlier years have examined the issue in detail and having relied upon the order of the Mumbai Bench, accepted the contention of the assessee and has held that assessee was justified in claiming the benefit available to it under proviso to section 92C(3) of the Act. We accordingly have no hesitation in setting aside the order of the AO passed consequent to the direction of the DRP. Accordingly we hold that assessee is entitled for the benefit available to it under proviso to section 92C(3) of the Act. Accordingly the additions made by the AO are hereby deleted. - Decided in favour of assessee

Summary

Issues:
Transfer pricing adjustment, Application of Reserve Bank of India's reference exchange rates, Benefit of plus or minus three percent for adjustments to ALP, Adjudication based on previous Tribunal orders.

Transfer Pricing Adjustment:
The assessee appealed against the transfer pricing adjustment made by the AO, arguing that the adjustment was not in line with the Tribunal's judgment in the assessee's own case for previous assessment years. The Tribunal examined the nature of the assessee's business involving foreign inward money transfers and buying/selling of foreign currencies. The AO had proposed a TP adjustment based on the CUP method as the assessee did not export foreign currency to its AE at the RBI reference rate, and the permissible range of +/- 3% under section 92C(2) was not considered. However, the Tribunal referred to a previous Mumbai Bench decision regarding the application of the second proviso to section 92C(2) and held that the assessee was justified in claiming the benefit under proviso to section 92C(3), ultimately deleting the TP adjustment.

Application of Reserve Bank of India's Reference Exchange Rates:
The Tribunal analyzed the contention that the RBI rates of foreign exchange were based on averaging, similar to the LIBOR rates considered in a previous Mumbai Tribunal decision. The Tribunal found that the principle from the Mumbai decision applied, and the assessee's prices were within the acceptable range of the RBI rates. Therefore, the Tribunal held that the assessee was entitled to the benefit under the proviso to section 92C(3) of the Act, and no transfer pricing adjustment was necessary.

Benefit of Plus or Minus Three Percent for Adjustments to ALP:
The assessee argued that the benefit of plus or minus three percent for adjustments to ALP should have been granted, as per the second proviso to section 92C(2). The Tribunal examined the orders of the authorities below and found that the assessee was indeed entitled to this benefit based on the Tribunal's previous decision and the nature of the foreign exchange transactions involved. Consequently, the Tribunal deleted the additions made by the AO, holding in favor of the assessee.

Adjudication Based on Previous Tribunal Orders:
The Tribunal emphasized the importance of following its own previous orders until they are reversed. The Tribunal criticized the DRP for not adhering to the Tribunal's order and stated that subordinate authorities must comply with the Tribunal's decisions. The Tribunal set aside the AO's order based on the DRP's direction and held that the assessee was entitled to the benefit under the relevant provisions, ultimately allowing the assessee's appeal.

In conclusion, the Tribunal allowed the assessee's appeal, deleted the transfer pricing adjustment, and emphasized the significance of following previous Tribunal orders until they are overturned.