2017 (8) TMI 38 - HC - Income Tax

ITAT ordering a de novo determination of the Arms Length Price by the Transfer Pricing Officer upon a fresh benchmarking - Held that - The question framed by this Court is answered in the affirmative by holding that the ITAT ought not have remanded the matter to the TPO for the de novo determination of the ALP of the international transactions in the various segments. This exercise should be performed by the ITAT itself. This is on the basis of the submission of the Assessee that all the details relevant for such determination are already available on record.

Summary

Issues:
1. Appeal against ITAT order under Section 260A of the Income Tax Act, 1961.
2. Determination of Arms Length Price by Transfer Pricing Officer.
3. Nature of services provided by the Assessee.
4. Adjustment made by Transfer Pricing Officer.
5. Directions issued by Dispute Review Panel.
6. Final assessment order passed by Assessing Officer.
7. Appeal before ITAT and its outcome.
8. Failure to adjudicate economic adjustment claim.
9. Examination of TPO, DRP, and ITAT approach.
10. Failure of ITAT to render findings on certain comparables.
11. Court's decision on remanding the matter to TPO.

Analysis:
1. The Assessee filed an appeal under Section 260A against the ITAT order regarding the determination of Arms Length Price by the Transfer Pricing Officer. The Assessee, a subsidiary of a US corporation, provided Engineering Design Support Services, IT Infrastructure Support Services, and Financial Accounting Support Services to its Associated Enterprises.

2. The Transfer Pricing Officer proposed adjustments to the Assessee's income, leading to a draft assessment order by the Assessing Officer. The Dispute Review Panel directed various adjustments, including re-characterizing the Assessee's functional profile and providing working capital adjustments.

3. The final assessment order added a significant sum to the Assessee's income based on the Transfer Pricing Officer's recommendations. The Assessee then appealed to the ITAT, which partially allowed the appeal, remanding certain issues back to the Transfer Pricing Officer for reconsideration.

4. The Assessee claimed that the ITAT failed to consider the economic adjustment claim based on risk profile differences. During the hearing, the Assessee presented a chart showing discrepancies in the ITAT's findings regarding certain comparables.

5. The Court held that the ITAT should have decided on the issues without remanding them to the Transfer Pricing Officer. The ITAT's order was set aside, and the Assessee's appeal was restored to the ITAT for further directions.

This comprehensive analysis covers the issues involved in the legal judgment, detailing the sequence of events and decisions made by the authorities involved in the case.