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TMI Blog2011 (6) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at Rs. 15,08,43,128 - The 5 per cent difference of arm's length price determined by the TPO comes to Rs. 75,42,156 and if the same is included in the revenue shown to be received by the assessee, the total will come to Rs. 15,08,75,869, which is in excess of arm's length price determined by the TPO - The 5 per cent difference of arm's length price determined by the TPO comes to Rs. 75,42,156 and if the same is included in the revenue shown to be received by the assessee, the total will come to Rs. 15,08,75,869, which is in excess of arm's length price determined by the TPO - Decided in the favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... d not exceed 5 per cent :-- Particulars As per the assessee As per the TPO Total cost of the assessee 130,442,000 130,442,000 Arm's length price @ margin of 15.64% (A) 150,843,128 150,843,128 5% of the ALP as determined (B) 7,542,156 ALP of the international transactions as per the proviso to section 92C(2) [(A)-(B)] 143,300,972 Revenue Shown 143,333,713 143,333,713 Difference (32741) 7,509,415 7. Referring to these facts, upon short issue, it was the case of ld. AR that even if one does not go into other aspects of this appeal i.e., challenging the arm's length price determined by the TPO regarding the rejection of various other comparables, etc., the appeal should be decided in favour of assessee as the difference in the arm's length price determined by the TPO and the revenue received by the assessee does not exceed the safe harbour of -/+ 5 per cent as per proviso to sub-section (2) of section 92C of the Act. 8. It was submitted by ld. AR that the benefit of proviso is available to the assessee according to the following decisions :-- (i) Development Consultants (P.) Ltd. v. Dy. CIT [2008] 115 TTJ 577/23 SOT 455 (Kol.) (ii) Philips Software Centre (P.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r after such date." 12. He, therefore, contended that the amended proviso should be construed retrospectively and, in this regard, ld. DR relied upon the following decisions :-- (i) K. Govindan & Sons v. CIT [2001] 247 ITR 192 (SC) (ii) Allied Motors (P.) Ltd. v. CIT [1997] 224 ITR 677/114 Taxman 94 (SC) (iii) CIT v. Soft Beverages (P.) Ltd. [2005] 272 ITR 270 (Mad.). 13. Thus, it was pleaded by ld. DR that the amendment being clarificatory in nature should be construed retrospectively. He also referred to the earlier decision of the Tribunal in the case of Dy. CIT v. Global Vantedge (P.) Ltd. v. Dy. CIT [2010] 37 SOT 1 (Delhi) to contend that wherever difference exceeds 5 per cent, the benefit of the poviso cannot be given to the assessee. 14.. In the rejoinder ld. AR submitted that 5 per cent safe harbour has to be computed on the arithmetical mean adopted by the TPO for computing arm's length price, hence, ld. DR is wrong in contending that assessee's case does not fall within the safe harbour of ±5 per cent. It was further submitted by ld. AR that the proviso is a substantive provision imposing liability on the assessee, hence, it cannot be construed retrospectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s follows :-- "However, this is a new legislation. In the initial years of its implementation, there may be room for different interpretations leading to uncertainties with regard to determination of arm's length price of an international transaction. While it would be necessary to protect our tax base, there is a need to ensure that the taxpayers are not put to avoidable hardship in the implementation of these regulations. In this background the Board have decided the following: (i) The Assessing Officer shall not make any adjustment to the arm's length price determined by the taxpayer, if such price is up to 5 per cent less or up to 5 per cent more than the price determined by the Assessing Officer. In such eases the price declared by the taxpayer may be accepted. (ii) The provisions of sections 92 and 92A to 92F come into force with effect from 1st April, 2002, and are accordingly applicable to the assessment year 2002-05 and subsequent years. The law requires the associated enterprises to maintain such documents and information relating to international transactions as may be prescribed. However, the necessary rules could be framed by the Board only after the Finance Bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be read; "the above amendment has been made applicable with effect from 1st October 2009 and shall accordingly apply in relation to all cases in which proceedings are pending before the Transfer Pricing Officer (TPO) on or after such date." (ii) in para 38.3, for the date "1st October, 2009", the following date shall be read: "1st April, 2009." 21. On the basis of the aforementioned development and corrigendum, it is the case of ld. DR that the date of order passed by the TPO is 8-10-2009 and the amended proviso had come into existence on 19th day of August, 2009 when Finance (No. 2) Act, 2009 had received the assent of the President, therefore, according to the corrigendum the amended proviso will be applicable in relation to the cases in which the proceedings were pending before the Transfer Pricing Officer (TPO) on or after such date. Thus, it was submitted by ld. DR that only amended proviso is applicable in the case of the assessee and the assessee's case should be decided in view of post amended proviso. This argument has been taken by ld. DR for the reason that if the amended proviso is taken into consideration, then, safe harbour of ±5 per cent will be rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tself that this amendment has been made applicable with effect from 1-10-2009 in place of 1-4-2009 mentioned in the earlier Circular. Now, it is a question that whether by way of corrigendum can it be said that the amended proviso will be applicable in relation to all cases in which the proceedings are pending before TPO on or after such date. This corrigendum has been issued on 30-9-2010. If it has to be decided only by the CBDT, then, it can be said that on the date when TPO passed his order, this corrigendum did not exist. Therefore, we find no force in the argument of ld. DR that the case of the assessee should be considered in the light of the post amended proviso, because of the reason that in the aforementioned corrigendum, it has been stated so. 24. Otherwise also as per well settled law, the first and foremost rule of construction of interpretation is that in the absence of anything in the enactment to show that it is to have retrospective operation and when amendment relates to a procedural provision resulting into creating a new disability or application and which imposes new duty in respect of transactions already completed, then, the said procedural provision also can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisos i.e., pre-amended and post amended. 27. A bare reading of the pre amended proviso will clearly reveal that in a case where more than one price is determined by the most appropriate method, the arm's length price shall be taken to be the arithmetical mean of such prices, or at the option of the assessee, a price which may vary from the arithmetical mean for an amount not exceeding 5 per cent of such arithmetical mean. The arithmetical mean in the present case is 15.64 per cent and by adopting the same, the arm's length price has been determined at Rs. 15,08,43,128. The arithmetical mean in the present case has been computed on the basis of three comparables, therefore, it is a case where more than one price is determined by the most appropriate method which is TNMM. If it is so, then, 5 per cent of a price which is determined by calculating the arithmetical mean is to be taken as the relevant difference for computing the benefit of safe harbour of ±5 per cent. In other words, the safe harbour has to be computed with reference to arm's length price determined by the TPO. The 5 per cent difference of arm's length price determined by the TPO comes to Rs. 75,42,156 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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