2021 (6) TMI 870 - HC - Income Tax

Reopening of assessment - alternate remedy - TP Adjustment - Arm s Length Price (ALP) towards Corporate Service Fee was considered as Nil - downward adjustment towards corporate support service fees - HELD THAT - Payments made during each of the assessment year may differ. Therefore, the orders passed by the Tribunal in respect of reference made against an order passed under Section 92C(A) for a particular assessment year is not binding for the subsequent assessment years. The decision of the Supreme Court in Union of India vs. Kamalakshi Finance Corporation Ltd., 1991 (9) TMI 72 - SUPREME COURT cannot be quoted as an authority to quash the impugned order of the 1st respondent. There the order of the Assistant Collector s was set aside by the Appellate Collector and the matter was remitted back to the Assistant Collector to pass a speaking order. Instead of following the said order of the Appellate Collector, there the Assistant Collector reiterated the order which had been set aside. It was in that context the decision of the Hon ble Supreme Court made the above observations. In this case, the assessment years are different and the transactions are different and the nature of payments are different. During the assessment year 2013-14 the issue was pertaining to certain payments made to the associated enterprises alone. Whereas the impugned order there are indications that there are adjustments of payments made for the services received and services provided to the associated enterprises. Therefore, it cannot be said that the said order of the Tribunal was binding for the assessment year in question. That apart, the challenge to the impugned order is premature. The petitioner has options under the Act to approach the Dispute Resolution Panel and if such was orders are passed the order, liberty is always available by way of statutory appeal before the income tax appellate Tribunal. Whether the High Court was justified in interfering with the order passed by the Assessing Authority under Section 148 of the Act in exercise of its jurisdiction under Article 226 when an equally efficacious alternate remedy was available to the assessee under the Act? - When in a fiscal statute, hierarchy of remedy of appeals are provided, the party has to exhaust them instead of seeking relief by invoking the jurisdiction of this Court under Article 226 of the Constitution of India and as held in Commissioner of Income Tax and Others vs. Chhabil Dass Agarwal 2013 (8) TMI 458 - SUPREME COURT the Court will have to take into consideration of the legislative intent enunciated in the enactment in such cases. It is not as if the alternative remedy is neither efficacious nor effective . Thus we are not convinced with the present writ petition. Accordingly, this writ petition is dismissed.

Summary

Issues Involved:
1. Determination of Arm's Length Price (ALP) for Corporate Service Fee.
2. Application of Transactional Net Margin Method (TNMM).
3. Jurisdiction and adherence to judicial precedents by lower authorities.
4. Availability and appropriateness of alternate remedies.

Issue-wise Detailed Analysis:

1. Determination of Arm's Length Price (ALP) for Corporate Service Fee:
The petitioner challenged the impugned order dated 13.10.2018 by the Deputy Commissioner of Income Tax, Transfer Pricing Officer (TPO), which concluded that the ALP towards Corporate Service Fee was "Nil," resulting in a downward adjustment of ?5,83,25,839/-. The TPO determined that the petitioner failed to substantiate the receipt of services and demonstrate the economic and commercial benefits of the payments made to its associated enterprise.

2. Application of Transactional Net Margin Method (TNMM):
The petitioner argued that the lower authorities erred in computing the operating margin and selecting comparable companies for benchmarking purposes. They also contended that the authorities failed to consider comparability adjustments, such as idle capacity, and disregarded the segmented financial information and internal TNMM analysis submitted by the petitioner. The Tribunal had previously ruled in favor of the petitioner on similar issues for the assessment year 2013-14, stating that corporate services were intrinsically linked to the petitioner's manufacturing and sales activities and should be allowed as claimed.

3. Jurisdiction and Adherence to Judicial Precedents by Lower Authorities:
The petitioner contended that the TPO's order was contrary to the Supreme Court's decisions and failed to follow the Tribunal's order for the assessment year 2013-14. The petitioner cited several cases, including Union of India vs. Kamalakshi Finance Corporation Ltd. and East India Commercial Co. Ltd. vs. Collector of Customs, to argue that lower authorities are bound by the orders of higher appellate authorities. The petitioner emphasized that the TPO exceeded its jurisdiction by determining the necessity of the services, which should be the Assessing Officer's role.

4. Availability and Appropriateness of Alternate Remedies:
The respondent argued that the writ petition should be dismissed due to the availability of alternate remedies. The petitioner could approach the Dispute Resolution Panel (DRP) under Section 144C of the Income Tax Act, 1961, and subsequently file an appeal before the Income Tax Appellate Tribunal (ITAT) if necessary. The court noted that payments and transactions differ across assessment years, and the Tribunal's order for one year is not binding for subsequent years. The court also referenced the decision in Hyundai Motor India Ltd. vs. Deputy Commissioner of Income Tax, which emphasized exhausting statutory remedies before seeking relief under Article 226 of the Constitution of India.

Conclusion:
The court dismissed the writ petition, stating that the petitioner had not established a violation of natural justice principles or an error apparent on record. The court highlighted the availability of statutory remedies and the need to exhaust them before seeking judicial intervention. The petitioner's challenge to the impugned order was deemed premature, and the court emphasized that the Tribunal's order for one assessment year does not bind subsequent years due to differences in transactions and payments.