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2023 (4) TMI 284 - AT - Income TaxTP Adjustment - Price Penetration Adjustment carried out by the assessee itself in the TP accommodation - challenge to ad-hoc adjustment made by the TPO - TPO had accepted the methods and margin however, treated price penetration adjustment claimed by the assessee as income of the assessee - HELD THAT - As decided in judicial pronouncements it has been held that any ad-hoc determination of Arms Length Price by the TPO u/s 92 de-hors Section 92C(1) of the Act, hence, will be unsustainable in law. See Sun Pharmaceuticals Industries Ltd 2016 (8) TMI 815 - GUJARAT HIGH COURT , SI Group-India Ltd. 2019 (6) TMI 443 - BOMBAY HIGH COURT , Lever India Exports Limited, Johnson Johnson Ltd. 2017 (3) TMI 1520 - BOMBAY HIGH COURT DR neither disputed the above table submitted by the assessee demonstrating outcome of the bench marking with or without adjustment made by the assessee nor brought any material against the assessee to the notice of the Bench. Thus, it is clear that that margin of the assessee are at Arm s Length without the price penetration adjustment and ad-hoc adjustment made by the TPO on account of price penetration is without jurisdiction of the TPO as held in the above case laws. Assessee appeal allowed.
Issues involved:
The appeal concerns the final assessment order passed under sections 143(3)/144C(3) read with Section 92CA(3) of the Income Tax Act for the assessment year 2013-14 by the DCIT, Circle 16(2), New Delhi. General Grounds: The appellant contested the order passed by the Ld. IT (A) on the basis that it erred in confirming additions made by the Ld. AO/Ld. Transfer Pricing Officer to the appellant's income without proper appreciation of facts and law. The Ld. IT (A) confirmed the income of the appellant at Rs. 15,24,58,920/- by sustaining an addition of INR 17,10,15,208/-, stating that Mitsui Prime's international transactions did not satisfy the arm's length principle under the Act. Transfer Pricing Grounds: The appellant argued that the Ld. IT(A) erred in confirming the addition made by the Ld. TPO/AO to the appellant's income by INR 17,10,15,208/-, contending that the price penetration adjustment carried out by the appellant itself in the TP documentation had not been offered to tax. The appellant raised various sub-issues, including the failure to follow the provisions of section 92C(4) of the Act, not determining the arm's length price in accordance with relevant provisions, disregarding the appellant's determined arm's length price in the TP documentation, and other related issues. Other Grounds: The appellant challenged the initiation of penalty proceedings under section 271(1)(c) of the Act by the Ld. AO/TPO, claiming errors in fact and law. Summary of Judgment: The appellant's appeal was heard, and it was contended that there was no dispute regarding the method and margin adopted for benchmarking the international transactions. The main contention was the ad-hoc adjustment made by the TPO, treating the price penetration adjustment claimed by the appellant as income. The appellant provided a table demonstrating the outcome of benchmarking with and without the adjustment. The Tribunal noted that the margin of the appellant was at arm's length even without the price penetration adjustment. Citing relevant judicial pronouncements, it was held that the ad-hoc determination of the arm's length price by the TPO without jurisdiction is unsustainable in law. Consequently, the Tribunal allowed Ground No. 3 and its sub-grounds, deleting the addition made by the AO upheld by the CIT(A). As a result, the other grounds of the appellant became inconsequential, and the appeal was allowed.
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