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TMI Blog2011 (5) TMI 669X X X X Extracts X X X X X X X X Extracts X X X X ..... and were therefore not covered under the Transfer Pricing Provisions, ignoring that: (i) The products sold to the assessee by the Non Resident Associate Enterprise were imported by it from its own head office in China besides from other related and unrelated parties. (ii) The business activities of the branch office of the non-resident Associate Enterprises in India cannot be said to be entirely independent of the policies, decisions and influences of its head office in China." 2. The assessee company is a domestic company having residential status as resident. It is one of the group companies of TIENS, a Chinese group of companies. It is in the business of trading/distribution of food supplements and health care equipment. The concerned products are manufactured abroad, in China, or at other places, by a group concern of the assessee, including Tianjin Tianshi Biological Development Company Ltd. ('TTBDC'). TTBDC has established a Permanent Establishment (PE) in India. 3. During the year, the assessee company made purchase transactions of Rs. 174972636 from the PE of TTBDC. The AO made a reference to the Transfer Pricing officer (TPO) for determination of Arm's Length P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It has been argued that in the present case, the PE is not a resident. It has been stressed that in view of these specific provisions of Transfer Pricing, the CIT(A) has erred in deleting the addition correctly made by the AO; that the transactions under consideration being international transactions between Associated Enterprises [S.92B(i)] they were required to be at ALP. It has been argued that the CIT(A) has erred on observing that the provisions of Chapter X of the I.T. Act are not applicable to the transactions involved herein, as the transactions involved are not cross border transactions since both, the seller as well as the purchaser are subjected to Indian tax jurisdiction; that remarkably, the CIT(A) has himself observed existence of an AE and a foreign company in the status of non-resident to be the basic conditions requisite to invoke the provisions of transfer pricing; that still, the addition has been deleted, despite the applicability of the above specific provisions; that the CIT(A) has erred in observing that the legislative intent behind the enactment of section 92B, which defines "international transaction", is to see "profit motive"; that this is erroneous, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iate Enterprise in India since these transactions have been subject to transfer pricing scrutiny for computation of arm's length price, the said purchase transactions have to be inferred to have been made at prices higher than arm's length prices; that the AE with which the purchase transactions have been made by the assessee, is the Indian branch office of TTBDC; that the said AE is a permanent establishment of TTBDC in India; that it is a full-fledged establishment functioning in India and maintaining separate books of account; that it is independently assessed to income tax in India, for profits attributable to its functioning in India; that it has a PAN and is assessed in the jurisdiction of the DDIT, International Taxation, Circle 2(2), New Delhi; that the AE imported goods from its head office at China and from various other AEs in China and in other countries, besides from certain other non related parties abroad; that these imports were regular commercial transactions, having proper commercial invoices raised in the name of the AE in India; that import duty payments with regard to such imports were made in India; that the delivery was made in the name of the AE in India; th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the head office of the AE at China; that the assessee has not been attributed with any motive to shift profits outside India or to evade taxes in India; and that in these facts and circumstances, there being no error whatsoever in the order of the CIT(A), the same be maintained by dismissing the appeal filed by the department. 9. We have heard the parties and have perused the material on record. The question here is as to whether CIT(A) has correctly held the provisions of Chapter X of the Income Tax Act, relating to transfer pricing, to be not applicable. Undisputedly, the facts are that the assessee is a domestic company, having status of "resident". It is one of the group companies of the China based TIENS group of companies. It trades/distributes food supplements and health care equipment manufactured in China and at other places, by group concerns. TTBDC, another group entity incorporated in China, has established a foreign branch office in India, having status of "non-resident". This is the Permanent Establishment of TTBDC in India. This PE of TTBDC, Associate Enterprise of the assessee company. The PE imports products from its head office in China and from other AEs in Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be provided to any one or more of such enterprises. 14. It is thus clear that an international transaction within the meaning of section 92B(1) involves two or more associated enterprises. Any or all of these associate enterprises need be non-resident. This is the primary condition attracting applicability of section 92B(1) of the Act. So, as in the present case, where a transaction is entered into by AEs being a resident and a non-resident, the transaction shall amount to an international transaction falling u/s 92B(1) of the Act. In other words, where either or both of the AEs are non-resident, would amount to an international transaction within the meaning of section 92B(1) of the Act. That being so, it does not matter that the transactions in question are not 'cross border transactions' as envisaged by CIT(A). The AE is a non-resident company. As such, the requirement of section 92B(1) is amply met and the transactions concerned are international transactions within the meaning of the said section. Therefore, the CIT(A) has erred in holding that Chapter X of the Act is not invokable. 15. The finding of the CIT(A) to the effect that no motive to shift the profits outside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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