2020 (1) TMI 552 - HC - Income Tax

TP Adjustment - application for early hearing and stay application was rejected by the ITAT - assessee is aggrieved by the Nil arm s length pricing fixed by the Transfer Pricing Officer (TPO) in respect of its transaction with its associated enterprise - HELD THAT - In the light of the aforesaid submissions, the questions of law framed above are answered in favour of the appellant. We, therefore, dispose of this appeal by directing the Tribunal to hear the appeal of the appellant, pending before it. List on 28.01.2020 before the Tribunal. Till then, no coercive steps be taken against the appellant, for recovery of the tax demand.

Summary

Issues involved:
1. Jurisdiction of Transfer Pricing Officer to assess arm's length pricing.
2. Rejection of stay application by the Tribunal.
3. Grant of early hearing of the case.

Jurisdiction of Transfer Pricing Officer:
The appeal was against the Income Tax Appellate Tribunal's order related to the Assessment Year 2014-15. The appellant contested the 'Nil' arm's length pricing set by the Transfer Pricing Officer (TPO) for a transaction with its associated enterprise. Citing precedent, the appellant argued that the TPO had no authority to question the transaction and determine the price as Nil. The appellant highlighted that the transferred amount had already been taxed in the hands of the associated enterprises. The Tribunal had rejected the appellant's stay application, leading to the appeal. The appellant raised questions of law concerning the Tribunal's justification in dismissing the stay application in connection with the demand raised by the Respondent.

Rejection of stay application:
The appellant contended that the Tribunal erred in law by rejecting the stay application and the request for an early hearing of the case. The appellant questioned the Tribunal's decision that she failed to substantiate her case for an early hearing. After hearing the arguments, the Court framed specific questions of law related to the rejection of the stay application and the request for early hearing. The Court ruled in favor of the appellant, directing the Tribunal to proceed with the appeal. The case was scheduled for further hearing before the Tribunal, and no coercive actions for tax recovery were permitted until the next hearing date.

This judgment primarily addressed the jurisdiction of the Transfer Pricing Officer in determining arm's length pricing and the Tribunal's decision to reject the stay application. The Court emphasized the appellant's arguments regarding the TPO's authority, citing a previous case as precedent. Additionally, the Court examined the appellant's contentions against the Tribunal's dismissal of the stay application and the request for an early hearing. Ultimately, the Court ruled in favor of the appellant, directing the Tribunal to hear the appeal without coercive tax recovery measures until the next hearing date.