2015 (1) TMI 148 - AT - Income Tax

Transfer Pricing Adjustment u/s 92CA(4) of the Act Various expenses incurred Disallowance u/s 14A of the Act - Cost of funds utilized - Held that - Assessee made payment of the above amount on receipt of technical services pursuant to an Agreement dated 26.04.2006, a copy of which has been placed on page 196 of the paper book. Such payment was made in consideration of receipt of technical services in the preceding year as well, for which the TPO proposed and the AO made transfer pricing adjustment in the same manner in which it has been done for the instant year. The assessee preferred appeal against that order and the Tribunal vide its order 2014 (2) TMI 380 - ITAT DELHI has restored the matter for a fresh determination of ALP with certain directions. A copy of such Tribunal order is available on record. In the absence of any distinguishing factual or legal feature having been brought to our notice in the facts for the preceding year as well as for the instant year, respectfully following the precedent, we set aside the impugned order and remit the matter to the file of the AO/TPO for a fresh determination of ALP of this international transaction in accordance with law, after allowing a reasonable opportunity of being heard to the assessee. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
1. Transfer pricing adjustment for technical services received from Associated Enterprise.
2. Addition made under section 14A of the Income-tax Act.

Transfer Pricing Adjustment Issue Analysis:
The appeal was against the transfer pricing adjustment of Rs. 98,66,814 made by the Assessing Officer for technical services received from the Associated Enterprise (AE). The Transfer Pricing Officer determined the arm's length price at nil, stating that the services were not needed or received by the assessee. However, it was revealed that the payment was made pursuant to an Agreement dated 26.04.2006 for technical services received in the preceding year as well. The Tribunal's previous order in a similar case directed a fresh determination of the arm's length price. Following this precedent, the impugned order was set aside, and the matter was remitted to the AO/TPO for a fresh determination of the ALP in accordance with the law.

Addition under Section 14A Issue Analysis:
The second issue involved an addition of Rs. 60 lakh made by the AO under section 14A of the Act. A similar disallowance was made by the AO, and the Tribunal had previously sent back the matter for a fresh examination based on certain directions. As the facts were identical, the impugned order was set aside, and the issue was remitted to the AO for a fresh decision on the disallowance under section 14A after providing a reasonable opportunity for the assessee to be heard. The appeal was partly allowed for statistical purposes.

In conclusion, the judgment addressed two main issues related to transfer pricing adjustment for technical services and an addition made under section 14A of the Income-tax Act. The Tribunal set aside the impugned orders in both cases and remitted the matters to the respective authorities for fresh determinations in accordance with the law and based on previous precedents.