2023 (11) TMI 788 - AT - Income Tax

TP Adjustment - selection of tested party - CIT(A) did not allow the plea of foreign AE to be the tested party for the purposes of computing the arms length margin - HELD THAT - It is a settled principle in the transfer pricing provisions that the tested party should be the party in respect of which reliable data for comparison is easily and readily available. This view has been considered by Hon ble Delhi Tribunal in case of Ranbaxy Laboratories Ltd. vs. ACIT 2008 (1) TMI 445 - ITAT DELHI-H . As relying on assessee own case for A.Ys. 2010-11 to 2011-12 2021 (3) TMI 146 - ITAT BANGALORE we direct the Ld.AO/TPO to consider foreign AE as the tested party.

Summary

Issues Involved:
The judgment addresses the appeal filed by the assessee against the order passed by Ld.CIT(A) for A.Y. 2012-13, focusing on transfer pricing provisions and other tax-related adjustments.

Transfer Pricing Adjustment (Grounds 2.1 and 2.2):
The case involves the determination of the arms length price of transactions between the assessee and its associated enterprise (AE) under transfer pricing provisions. The Ld.TPO initially made a transfer pricing adjustment u/s 92CA, which was contested by the assessee. The key issue was the selection of the tested party, with the assessee challenging the Ld.TPO's decision to consider the assessee itself as the tested party. The Tribunal referred to a previous decision in the assessee's own case for A.Ys. 2010-11 and 2011-12, where the foreign AE was upheld as the tested party. Citing the principle that reliable data for comparison should be readily available, the Tribunal directed the Ld.AO/TPO to consider the foreign AE as the tested party, thereby allowing Ground 2.1 raised by the assessee.

Other Tax Adjustments and Appeals:
The Ld.CIT(A) had made various additions and disallowances in the assessment order, including disallowances u/s. 14A and interest on TDS. The assessee appealed against these decisions, and the Ld.CIT(A) partially upheld the disallowances while directing further verification on certain tax issues. The Tribunal noted that the Ld.CIT(A) had already ruled in favor of the assessee on another issue related to testing the international transaction within the range of +/- 5% variation. The remaining grounds and issues raised by the assessee were not pressed and were left open for future arguments in appropriate circumstances.

Conclusion:
The Tribunal partially allowed the appeal filed by the assessee, specifically addressing the transfer pricing adjustment related to the selection of the tested party and the international transaction testing variation. The Tribunal's decision provided clarity on the application of transfer pricing provisions and upheld the assessee's contentions in these specific aspects.