2021 (2) TMI 579 - AT - Income Tax

TP Adjustment - aggregate figure to be adopted between the assessee and its overseas associate enterprise(s) pertaining to the international transactions in the nature of container line income/container line expenses, reimbursement of expenses paid, liner agency services, slot hire income slot expenses disclosed in Form 3-CEB report - HELD THAT - We notice that neither the TPO's order dated 29.01.2015 nor the DRP's above extracted directions under challenge have specified as to whether they have adopted cost/revenues of the international transactions in issue only or that of the entire activities involving the twin entities' gross transactions. We quote CIT Vs. Firestone International P. Ltd. 2015 (6) TMI 1123 - BOMBAY HIGH COURT and restore the instant issue of the correct arm's length price of the assessee's international transactions with its A.Es. which deserves to be adjudicated afresh keeping in mind the said international transactions between them only. It is made abundantly clear before parting that there is no other dispute between the parties regarding the method adopted as well the book results before us. As already indicated in the preceding paragraph, the clinching issue of the entity level or International transaction level's gross receipts/incomes pertaining to this issue still stands unresolved. We thus reiterate our foregoing directions and restore the Revenue's sole substantive grievance back to the TPO for his fresh adjudication to this limited extent. It shall be open for the assessee to place on record all the relevant data in consequential proceedings to be concluded within three effective opportunities of hearing.

Summary

Issues:
1. Appeal against the DCIT's assessment for A.Y. 2011-12 regarding arm's length price adjustment.
2. Appeal against the CIT(A)'s order for A.Y. 2012-13 involving international transactions.
3. ALP adjustment, disallowance of share expenses, and section 40(a)(ia) disallowance.

Issue 1 - Appeal against DCIT's Assessment (A.Y. 2011-12):
The Revenue appealed against the DCIT's assessment for A.Y. 2011-12, challenging the deletion of a ?5.63 crores arm's length price (ALP) adjustment under section 92CA of the Income Tax Act, 1961. The Dispute Resolution Panel (DRP) directed the deletion of the adjustment, arguing that the profit earned from linear agency services was ?10.42 crores, not ?26.73 crores. The Tribunal noted discrepancies in the profit split method applied by the Transfer Pricing Officer (TPO) and directed a fresh adjudication by the TPO to determine the correct arm's length price of international transactions between the assessee and its overseas associate enterprise(s).

Issue 2 - Appeal against CIT(A)'s Order (A.Y. 2012-13):
The assessee appealed against the CIT(A)'s order for A.Y. 2012-13, contesting the ALP adjustment, disallowance of share expenses, and section 40(a)(ia) disallowance. The Tribunal partially allowed the appeal, restoring the ALP adjustment issue back to the TPO for reassessment. The other grounds raised by the assessee were not pressed during the hearing, and the Tribunal allowed the appeal partly for statistical purposes, following judicial consistency and directing the TPO to compute expenses and profit margins related to international transactions with overseas entities.

Issue 3 - ALP Adjustment and Disallowances:
The Tribunal addressed the ALP adjustment, disallowance of share expenses, and section 40(a)(ia) disallowance made by the authorities. It directed a fresh assessment by the TPO for the ALP adjustment issue, while acknowledging the parties' agreement not to press certain grounds. The Tribunal partially allowed both the Revenue's and the assessee's appeals for statistical purposes, with a common order pronounced on 8th February 2021.

This detailed analysis summarizes the legal judgment involving appeals against the DCIT's assessment, challenges to the CIT(A)'s order, and issues related to arm's length price adjustments and disallowances under the Income Tax Act, 1961.