9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (11) TMI 49 - AT - Income TaxTP Adjustment - determination of arm s length price of specified domestic transaction ( SDT )involving purchase of raw materials by the assessee from its sister concern/AE - manner of application of CUP Method challenged - assessee has benchmarked the SDT with the arithmetical mean rate at which the related parties sold the same product to independent buyers and TPO has benchmarked it by taking the lowest/minimum rate at which the related parties sold the same product to independent buyers - HELD THAT - As taxing statute must be strictly construed and, therefore, save and except the words and phrase expressly used or employed by the legislature, nothing more can be taken into account while interpreting any provision. Casus Omissus is not permitted. At the same time, it has to be kept in mind that the judicial/quasi judicial authorities are also not permitted to ignore or overlook the expression or words expressly used. There is no scope for intendment while interpreting a deeming provision of a taxing provision, particularly when the words employed are of precise meaning. The proviso to Section 92C(2), as it stood during the relevant year, clearly states that where more than one price is determined by the most appropriate method, the arm s length price shall be taken to be the arithmetical mean of such prices. Hence, when the computation of arithmetical mean has been expressly set out in the said provision, this Tribunal is not permitted to ignore or overlook the said expression and read weighted average mean in its place. No force in the Ld. CIT, DR s contention for use of weighted average mean as against arithmetical mean computed by the assessee. Revenue s contention that when the assessee has accepted the draft assessment order, pursuant to the TPO s order making the T. P. adjustment, by not filing objections before the DRP, resulted in automatic acceptance of the T.P. adjustment - As in the statute that if the assessee is not agreeable to the T.P. Adjustment which has been incorporated in the draft assessment order pursuant to the TP order, then the assessee has two alternative appellate routes viz., (a) to object to the draft order inter alia including the T P Adjustment before the DRP or (b) post passing of the final assessment order, prefer an appeal against the action of the TPO before the Ld. CIT(A). In the facts of the present case, the assessee has availed the alternate remedy and chose to challenge the action of the TPO before the Ld. CIT(A). Such action of the assessee of choosing to file appeal before the CIT(A) rather than the DRP cannot be objected to by the AO/Revenue nor does it in any manner tantamount to acceptance of the draft assessment order by the assessee. Taxability of power subsidy and VAT subsidy received by the assessee under the State Industrial Policy by way of revenue receipt - The incentive in the form of sales tax/VAT subsidy and power subsidy have been granted for setting up new units in the States of West Bengal which lagged behind in industrial development for development of industries and generation of employment opportunities. The object of the assistance was not to enable the assessee to run the business more profitably but encourage them to set up a new unit or expand the existing unit for overall economic development of the State and so we concur/endorse this finding of Ld CIT(A) on this issue to the same effect. We find that this particular issue is now no longer res integra in light of the decision in the case of CIT Vs Chaphalkar Brothers 2017 (12) TMI 816 - SUPREME COURT wherein the Supreme Court after analysing the ratio laid down in their earlier judgments in the cases of CIT vs Rajaram Maize Products 2001 (8) TMI 13 - SC ORDER , M/s Sahney Steel Press Works Ltd. vs. CIT 1997 (9) TMI 3 - SUPREME COURT and CIT vs. Ponni Sugar Chemicals Ltd. 2008 (9) TMI 14 - SUPREME COURT held that the subsidies granted under the State Industrial Scheme to accelerate industrial development and generate employment in the State, is capital in nature - Decided in favour of assessee.
Issues Involved:
1. Methodology for Transfer Pricing Adjustment 2. Acceptance of Draft Assessment Order 3. Taxability of Power Subsidy 4. Taxability of VAT Subsidy Detailed Analysis: 1. Methodology for Transfer Pricing Adjustment: The Revenue contested the deletion of a ?2,65,75,525/- adjustment made by the Transfer Pricing Officer (TPO). The TPO had compared the prices at which the assessee purchased raw materials from related parties with the minimum price at which the same materials were sold to unrelated parties. The CIT(A) deleted this adjustment, arguing that the arithmetic mean of comparable prices should be used instead. The Tribunal upheld the CIT(A)'s decision, stating that the TPO's method was "prima facie perverse" and against the provisions of Section 92C(2) of the Income Tax Act, which mandates using the arithmetic mean when more than one comparable price is available. The Tribunal emphasized that judicial bodies cannot apply 'Casus Omissus' to interpret laws in a manner not explicitly stated by the legislature. 2. Acceptance of Draft Assessment Order: The Revenue argued that the assessee's failure to object to the draft assessment order before the Dispute Resolution Panel (DRP) indicated acceptance of the TPO's adjustment. The Tribunal dismissed this contention, clarifying that the assessee has the right to choose between appealing to the DRP or the CIT(A). The Tribunal noted that opting for an appeal before the CIT(A) does not equate to acceptance of the draft assessment order. 3. Taxability of Power Subsidy: The Revenue challenged the CIT(A)'s decision to treat power subsidy as a capital receipt. The Tribunal referred to the Industrial Policy Scheme of West Bengal, which aimed to promote industrialization and employment in backward areas. It held that the subsidy was granted for setting up or expanding industrial units, thus qualifying as a capital receipt. The Tribunal cited the Supreme Court's judgment in CIT vs. Ponni Sugar & Chemicals Ltd. and other relevant case law, emphasizing that the purpose of the subsidy, rather than its form or timing, determines its nature. 4. Taxability of VAT Subsidy: Similar to the power subsidy, the VAT subsidy received under the West Bengal Industrial Scheme was also contested by the Revenue. The Tribunal upheld the CIT(A)'s decision to treat the VAT subsidy as a capital receipt. It reiterated that the subsidy was intended to encourage industrial development and employment in backward areas, aligning with the purpose test established by the Supreme Court. The Tribunal also referenced its own prior decisions and those of the Calcutta High Court, which consistently treated such subsidies as capital receipts. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all contested issues. The methodology for transfer pricing adjustment must adhere to the arithmetic mean as per Section 92C(2). The assessee's choice of appellate route does not imply acceptance of the draft assessment order. Both power and VAT subsidies under the West Bengal Industrial Scheme were correctly treated as capital receipts, not liable to tax.
|
