2018 (5) TMI 64 - HC - Income Tax

Deemed international transaction - sale of the STP unit of the Appellant at Bangalore - Global Transfer Agreement not considered - Held that - Global Transfer Agreement though produced before the DRP had not been considered by the DRP while disposing off the Appellant s application from the draft assessment order. Thus, in the above fact, the action of the Tribunal in restoring the issue to the DRP to consider the Appellant s claim in the context of examination of the Global Transfer Agreement cannot be said to be perverse or unwarranted. Thus, it appears that the Tribubal desired the benefit of DRP s view on the issues before deciding it in appeal. All the issues including the issue of jurisdiction is left open for consideration by the DRP. Needless to state, the DRP would independently apply its mind to the facts of the case and take a decision thereon.

Summary

Issues:
Appeal challenging order of Income Tax Appellate Tribunal regarding Assessment Year 2009-10.

Analysis:
1. The Appellant raised questions of law regarding the determination of whether the sale of the STP unit in Bangalore is a deemed international transaction and the justification of bringing capital gains to tax based on arm's length price.
2. The Tribunal remanded the issue for fresh examination by the Transfer Pricing Officer, directing the production of the Global Transfer Agreement. The Appellant argued that as the transaction was between domestic companies, transfer pricing provisions should not apply.
3. The Respondent filed a rectification application seeking to produce the Global Transfer Agreement, which was later rectified by the Tribunal to remand the issue to the Dispute Resolution Panel for fresh adjudication.
4. The Appellant contended that the Global Transfer Agreement was part of the record and should have been examined by the Tribunal before remanding the issue. They argued that transfer pricing provisions should not apply to domestic transactions.
5. The High Court found the Tribunal's decision to remand the issue to the Dispute Resolution Panel reasonable, considering the facts and the non-consideration of the Global Transfer Agreement by the DRP.
6. All issues, including jurisdiction, were left open for consideration by the Dispute Resolution Panel, emphasizing independent assessment by the DRP.
7. The High Court declined to entertain the appeal at that stage, as the questions raised were under consideration by the DRP, and did not give rise to substantial questions of law.
8. Consequently, the Appeal was dismissed without any order as to costs.