9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (1) TMI 891 - AT - Income TaxError in determination of ALP Net profit margin on the entire turnover applied Held that - The decision in Phoenix Mecano (India) Ltd V/s DCIT 2011 (12) TMI 178 - ITAT MUMBAI followed - the final adjustment on account of transfer pricing has to be made only in respect of transactions with Associated Enterprises and not in respect of entire turnover of the assessee as made by the revenue authorities - the adjustment made to determine the ALP by considering the entire purchases of the assessee in the assessment years under consideration is not in accordance with law - the orders of the authorities below set aside and the matter restored to the AO with a direction that the adjustment, if any, is required to be made due to determine of ALP, it should be restricted only to the purchases made from Associated Enterprises and not to the entire turnover of the assessee-company Decided in favour of Assessee.
Issues:
Transfer Pricing Regulations - Reference to Transfer Pricing Officer (TPO) under section 92CA(1) of the Act. Application of Transfer Pricing Methods - Transactional Net Margin Method (TNMM) and net profit margin. Adjustment under section 92CA(3) of the Act - Determination of Arms Length Price (ALP). Condonation of delay in filing appeals before the Tribunal. Transfer Pricing Regulations - Reference to Transfer Pricing Officer (TPO) under section 92CA(1) of the Act: The appellant contended that the Assessing Officer should have objectively considered the facts before referring the case to the TPO. The appellant argued that the Assessing Officer failed to provide any material requiring recomputation of the ALP. The appellant further challenged the decision of the Commissioner of Income-tax (Appeals) regarding the necessity of TPO reference and the acceptance of price by customs authority. The Tribunal acknowledged the appellant's arguments but ultimately rejected Ground Nos. 1, 2, 3, and 5 based on the facts presented. Application of Transfer Pricing Methods - Transactional Net Margin Method (TNMM) and net profit margin: The Tribunal examined the application of the Transactional Net Margin Method (TNMM) and the net profit margin in determining the ALP. The appellant argued that the net profit margin should only apply to sales made from Associated Enterprises (AE), not the entire turnover. The Tribunal referenced previous decisions where adjustments were restricted to international transactions with Associated Enterprises. Ultimately, the Tribunal agreed with the appellant, setting aside the orders of the authorities below and directing the AO to make TP adjustments only in respect of purchases from Associated Enterprises. Adjustment under section 92CA(3) of the Act - Determination of Arms Length Price (ALP): The AO had made reference to the TPO for determining the ALP of transactions reported by the assessee. The TPO applied a net profit margin to calculate the ALP of purchases from Associated Enterprises, leading to specific adjustments. The appellant challenged this method, arguing for a more limited application of the net profit margin. The Tribunal, in line with previous decisions, directed the AO to restrict any necessary adjustments to purchases made from Associated Enterprises, not the entire turnover of the assessee. Condonation of delay in filing appeals before the Tribunal: The authorized signatory residing outside India caused a delay in filing the appeals due to travel commitments. The Tribunal, considering the reasons presented, condoned the delay, emphasizing the absence of deliberate intent and the interests of justice. The appeals were entertained on merits despite the delay, ensuring a fair hearing for the appellant. In conclusion, the Tribunal's judgment addressed various issues related to Transfer Pricing Regulations, application of Transfer Pricing Methods, adjustments under section 92CA(3) of the Act, and the condonation of delay in filing appeals. The Tribunal upheld certain decisions while overturning others, emphasizing the need for accurate determination of Arms Length Price and the application of TP adjustments only to relevant transactions with Associated Enterprises.
|
