2018 (10) TMI 1502 - AT - Income Tax

TPA - Arm s length price adjustment - international transactions of sale/resale of manufactured goods in export, payments of sales margins, services rendered etc. to its associate enterprises - admission of additional evidence - Held that - The fact remains that the TPO is already seized of the very issue is earlier assessment years 2011-12 & 2012-13. This consequential adjudication would indeed carry all ramifications in the impugned assessment year as well. We adopt judicial consistency in these peculiar facts and circumstances to restore the impugned ALP adjustment issue back to the TPO for his simultaneous adjudication in all these assessment years. The Revenue s argument strongly supporting the impugned adjustment are rejected to this limited extent at this stage. - Decided in favour of assessee for statistical purposes.

Summary

Issues: Arm's length price adjustment of ?65,02,40,000 for international transactions with overseas associate enterprises under Income Tax Act, 1961.

Analysis:
1. Arm's Length Price Adjustment: The appeal challenged the arm's length price adjustment related to international transactions involving sale/resale of goods, payments of sales margins, and services to associate enterprises. The issue was recurring between the parties, with a previous order directing the matter back to the Transfer Pricing Officer (TPO) for further consideration. The appellant submitted additional evidence, including organization structures, invoices, agreements, benchmarking reports, and financial information to support its case. The new law firm advised adopting a transaction-by-transaction method instead of an entity-level benchmarking approach. Citing legal precedent, the Tribunal set aside the TPO's adjustment, emphasizing that the appellant should not be penalized for earlier legal advice and directed a fresh adjudication considering the submitted documents.

2. Judicial Consistency: The Tribunal noted that the TPO was already examining the same issue for earlier assessment years, 2011-12 & 2012-13. Despite the appellant not filing additional evidence for the current assessment year, the Tribunal decided to restore the ALP adjustment issue back to the TPO for simultaneous adjudication across all relevant assessment years. The Revenue's arguments supporting the adjustment were rejected to this limited extent, ensuring judicial consistency and comprehensive review across multiple years.

3. Decision: The Tribunal allowed the appeal for statistical purposes, indicating a procedural victory for the appellant without delving into the substantive merits of the case. The decision highlighted the importance of fair play, justice, and correcting past legal errors to ensure a just outcome for the appellant. The judgment emphasized the need for a fresh adjudication based on the submitted evidence and in consideration of the earlier legal advice's shortcomings, aligning with principles of equity and substantial justice.

In conclusion, the judgment focused on the arm's length price adjustment issue for international transactions, emphasizing the need for a fair and comprehensive review across multiple assessment years, guided by legal precedents and principles of justice. The decision underscored the importance of correcting past legal errors, ensuring a just outcome for the appellant through a fresh adjudication process.