9911796707
TMI Blog2011 (11) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... incorporated on 26.07.1999 as a joint venture company between M/s Radha Bhatia and family and German Travel Services (GTS), Germany, in which the former holds 95% of its equity capital and the remaining share capital of 5% is held by the German company. The assessee is engaged in the business of providing data processing and related services to its associated enterprises. The assessee is responsible for providing software access to the subscribers of the Amadeus products and computer database within the Indian sub-continent which includes the territory of India, Bangladesh and Nepal. The prime activity of the assesse is to provide connectivity to the host system by their computer programmes online. During the previous year under consideration, the assessee entered into international transactions with associated enterprises, within the meaning of Section 92B of the said Act. The details of the said transactions were mentioned in Form 3CEB filed by the assessee in terms of Rule 10E of the Income Tax Rules, 1962 (hereinafter referred to as the said Rules) read with Section 92E of the said Act. The Assessing Officer had referred the case of the assessee to the Transfer Pricing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 3CEB which pertained to services provided and services received, as mentioned in paragraph 3 of the Transfer Pricing Officer's order. It was contended on behalf of the assessee that the Transfer Pricing Officer had exceeded his jurisdiction when he sought to consider the question whether AMP expenditure was in the nature of an international transaction and that the Transfer Pricing Officer fell in error in doing so. The fact that the Transfer Pricing Officer had embarked upon a consideration of the question as to whether AMP expenditure was in the nature of an international transaction, is apparent from paragraph 7.2 of the Transfer Pricing Officer's order dated 23.10.2009. In fact, the submission on behalf of the assessee was that the Transfer Pricing Officer had gone to the extent of even recommending penalty proceedings being initiated against the assessee, in view of the fact that the Transfer Pricing Officer had determined that AMP expenditure was in the nature of an international transaction which ought to have been mentioned in Form 3CEB. This is apparent from the discussion and conclusion arrived at in paragraph 12.4 of the Transfer Pricing Officer's order. 5. Before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered the rival contentions of the parties and embarked upon the interpretation of the relevant provisions and came to the conclusion that the role of the Transfer Pricing Officer has been restricted to only that transaction which has been referred to him by the Assessing Officer for computation of the arm's length price and that the Transfer Pricing Officer cannot take suo moto notice of any other transaction which has not been referred to him for the purposes of computing the arm's length price. The exact words used by the Tribunal are as under:- "10. On bare perusal of sub-section (1) of section 92CA it reveals certain conditions i.e. the assessee should have entered into an international transaction in any previous year. The Assessing Officer may consider it necessary and expedient to verify the arm's length price of the international transactions. The Assessing Officer would take previous approval from the Commissioner for referring the computation of the arm's length price in relation to the said international transaction. The expression "said international transaction" employed at the end of the sub-section would indicate that operative force of this expression related to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer feels that it would be necessary for a specialist such as a Transfer Pricing Officer to determine the arm's length price, he can refer the matter to the Transfer Pricing Officer by invoking the provisions of Section 92CA of the said Act, after following the due procedure, which includes the prior approval of the CIT. She submitted that once this is done, the Transfer Pricing Officer can look into the entire gamut of dealings between the assesse and the associated enterprise and thereafter determine the arm's length price. 10. Mr Syali, the learned senior counsel appearing on behalf of the assessee, on the other hand, submitted that the provisions of Section 92CA have been correctly interpreted by the Income Tax Appellate Tribunal. He submitted that the Transfer Pricing Officer has a very limited and restricted role to play and he cannot take upon himself the functions and duties of an Assessing Officer. It is for the Assessing Officer to determine as to whether a transaction is an international transaction or not. The Transfer Pricing Officer is not required to determine nor does he have the jurisdiction to determine the issue as to whether any transaction falls within the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court in Sony India P. Ltd v. Central Board of Direct Taxes and Another: (2007) 288 ITR 52 (Delhi) as also on the decision of the Gujarat High Court in M/s Veer Gems v. ACIT in Special Civil Application No.12648 of 2011 dated 19.10.2011. Mr Syali also referred to the amendment introduced by the Finance Act, 2011. By virtue of which sub-section (2A) was inserted in Section 92CA with effect from 01.06.2011. He submitted that upon a plain construction of the newly inserted sub-section (2A), it is apparent that Parliament intended to widen the jurisdiction of the Transfer Pricing Officer and any provision whereby the jurisdiction is affected, has to be prospective in nature. For this proposition, he placed reliance on the Supreme Court decisions in STO v. Oriental Coal Corporation: (1988) SCC Suppl. 308 and Bharat Singh v. Management of New Delhi Tuberculosis Centre and Others: (1986) 2 SCC 614. He also submitted that the insertion of sub-section (2A) is clear indication that there can be more than one international transaction between an assessee and an associated enterprise. Therefore, in the period prior to the insertion of subsection (2A), it is only that international transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or facility provided or to be provided to any one or more of such enterprises. (2) A transaction entered into by an enterprise with a person other than an associated enterprise shall, for the purposes of subsection (1), be deemed to be a transaction entered into between two associated enterprises, if there exists a prior agreement in relation to the relevant transaction between such other person and the associated enterprise, or the terms of the relevant transaction are determined in substance between such other person and the associated enterprise." 15. The computation of the arm's length price is provided for in Section 92C of the said Act. The relevant portions of the same read as under:- "92C. Computation of arm's length price. - (1) The arm's length price in relation to an international transaction shall be determined by any of the following methods, being the most appropriate method, having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribe, namely:- (a) comparable uncontrolled price method; (b) resale price method; (c) cost plus metho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by a specialist, a reference may be made to the Transfer Pricing Officer. This is provided in Section 92CA of the said Act which reads as under:- "92CA. Reference to Transfer Pricing Officer. - (1) Where any person, being the assessee, has entered into an international transaction in any previous year, and the Assessing Officer considers it necessary or expedient so to do, he may, with the previous approval of the Commissioner, refer the computation of the arm's length price in relation to the said international transaction under section 92C to the Transfer Pricing Officer. (2) Where a reference is made under sub-section (1), the Transfer Pricing Officer shall serve a notice on the assesse requiring him to produce or cause to be produced on a date to be specified therein, any evidence on which the assessee may rely in support of the computation made by him of the arm's length price in relation to the international transaction referred to in sub-section (1). (2A) Where any other international transaction [other than an international transaction referred under sub-section (1)], comes to the notice of the Transfer Pricing Officer during the course of the proceedings before him, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oval of the Commissioner and, thereafter, refer the computation of the arm's length price in respect of an international transaction to the Transfer Pricing Officer. This makes it clear that it is the Assessing Officer who has to determine, first of all, whether a transaction is an international transaction under Section 92B of the said Act. Secondly, if it is an international transaction in his view, he has to proceed to determine the arm's length price in terms of Section 92C of the said Act. However, if, for any reason, he feels that it is necessary or expedient so to do, he may seek the approval of the Commissioner and then refer the computation of the arm's length price in relation to the said international transaction to the Transfer Pricing Officer. The role of the Transfer Pricing Officer, as indicated in Section 92CA, is restricted to determining the arm's length price in relation to the international transaction which has been referred to him by the Assessing Officer and such computation of the arm's length price in relation to the said international transaction has to be done in terms of Section 92C of the said Act. On a plain reading, we are of the view that it is not w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the question whether a charge to tax can be imposed in one State or another is not a mere question of venue. It may have an impact on the rate of tax in certain cases and it also regulates the rights inter se of States to levy taxes on such inter-state sales. It is, therefore, difficult to accept the contention that the amendment should be treated as purely procedural and hence necessarily retrospective." 19. In Bharat Singh (supra), a similar view was expressed. One of the issues before the Supreme Court was whether Section 11A of the Industrial Disputes Act, 1947, by virtue of which the tribunals were conferred with a new jurisdiction, would operate retrospectively. The Supreme Court came to the conclusion that Section 11A conferred a jurisdiction on the Labour Court, Tribunal or National Tribunal to act in a particular manner which jurisdiction it did not have prior to the coming into force of Section 11A. The Supreme Court observed:- "16. ...The conferment of a new jurisdiction can take effect only prospectively except when a contrary intention appears on the face of the statute. Section 11A plainly indicates its prospective operation. ..." 20. Similarly, in the case befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instructions and the provisions together, it is apparent that it is the duty of the Assessing Officer to satisfy himself as to whether an international transaction has been entered into by the assessee with an associated enterprise. Only when the Assessing Officer is satisfied about the existence of an international transaction, can he, after obtaining approval of the Commissioner of Incometax, refer the matter to the Transfer Pricing Officer for computing the arm's length price. The question of determining whether a particular transaction is or is not an international transaction, has to be determined by the Assessing Officer and not by the Transfer Pricing Officer. We make it clear, once again, that this view of ours is based on the fact that in respect of the assessment year 2006-07, the provisions of sub-section (2A) would not be applicable inasmuch as the same was introduced much later, that is, with effect from 01.06.2011. 23. The observations of the Gujarat High Court in the case of M/s Veer Gems (supra) are also apposite. They are:- "10. It, thus, emerges that for the Assessing Officer to make a reference of computation of the arm's length price under subsection (1) of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternational transaction by the Assessing Officer. He cannot judge the validity of such a reference." 24. We do not agree with the submission made by the learned counsel for the revenue that when a reference is made by an Assessing Officer to the Transfer Pricing Officer, the reference includes the entire gamut of transactions between the assessee and its associated enterprise. The Assessing Officer is the person who has been entrusted with the duty to determine as to whether a transaction is an international transaction or not. Then, if it is an international transaction of the nature specified in Section 92B of the said Act, the Assessing Officer has to determine the income of the assessee having regard to the arm's length price by following the method prescribed in Section 92C. If, for some reason, the Assessing Officer feels that it is necessary or expedient so to do, he may refer the computation of the arm's length price of specific international transactions, after obtaining the prior approval of the Commissioner of Incometax, to the Transfer Pricing Officer. It is quite possible that in the case of a particular assessee, there may be several international transactions and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
