2019 (9) TMI 259 - AT - Income Tax

Rectification u/s 254 - TP adjustments - determination of ALP - Expenditure towards payment of Technical Fee and Project Management Fee was capitalized by the assessee and capital transactions are outside the purview of transfer pricing mechanism - HELD THAT - As decided in own case 2019 (3) TMI 1537 - ITAT PUNE undisputed fact that the assessee has not claimed the expenditure toward payments of Technical Assistance fees and Project Management fees. The assessee has capitalized the same as the project was not complete in the period relevant to the assessment year under appeal. The capital transactions are outside the purview of Transfer Pricing mechanism. There is no denying the fact that in the subsequent years the assessee would be claiming depreciation on the cost of capital asset which would include payment of fees for Technical Assistance and Project Management. Therefore, determination of ALP of such services in the year of payment of such fees would be relevant. While concluding, a mistake has crept in the order. In para 12 of the order, it was wrongly mentioned that ground No.1 and 2 are restored to the file of Assessing Officer. In fact, it is ground No.3 which needs to be restored to the file of Assessing Officer for determination of ALP. Further, in para 13 while summing up the finding on ground No.3, it was wrongly observed that ground No.3 becomes academic and hence, is not deliberated upon. In para 10 of the order there is specific finding on the issue of determination of ALP by the Assessing Officer. The mistake crept in paras 12 and 13 of the order dated 15-02-2019 therefore, needs to be rectified

Summary

Issues: Rectification of Tribunal Order under Section 254(2) of the Income Tax Act, 1961 regarding determination of Arm's Length Price (ALP) for Technical Fee Assistance and Project Management Fee paid by the assessee for the assessment year 2010-11.

The judgment pertains to a Miscellaneous Application filed by the assessee under Section 254(2) of the Income Tax Act, 1961 seeking rectification in the order of the Tribunal dated 15-02-2019. The Tribunal had allowed the appeal of the assessee in ITA No.847/PUN/2015 for the assessment year 2010-11 for statistical purposes. The assessee raised three grounds of appeal, with the Tribunal allowing ground No.1 and 2 related to the nature of Technical Fee Assistance and Project Management Fee. The Tribunal observed that the determination of Arm's Length Price (ALP) would be necessary, which was raised in ground No.3. However, there was an error in the Tribunal's concluding remarks regarding the restoration of grounds to the Assessing Officer and the failure to deliberate on ground No.3. The Department admitted the need to determine ALP for ground No.3. The Tribunal rectified the mistake in the order, directing the restoration of ground No.3 to the Assessing Officer for determining the ALP of international transactions under dispute. The Tribunal clarified that the capital transactions were outside the scope of transfer pricing mechanism, leading to the allowance of ground No.1 and 2. The rectification did not alter the final outcome of the appeal.

In conclusion, the Tribunal rectified the error in the order by restoring ground No.3 to the Assessing Officer for determining the Arm's Length Price of the international transactions. The rectification clarified the treatment of capital transactions and upheld the allowance of ground No.1 and 2. The rectification did not impact the final outcome of the appeal, and the Miscellaneous Application filed by the assessee was allowed in the specified terms.