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TMI Blog2014 (1) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... R.S. SYAL AND VIJAY PAL RAO, JJ. For the Appellant : S.N. Inamdar. For the Respondent : Ajeet Kumar Jain. ORDER:- PER : R.S.Sya This appeal by the assessee is directed against the order dated 26.09.2011 passed by the Assessing Officer u/s 143(3) read with section 144C(13) of the Income-tax Act, 1961 (hereinafter called the Act) in relation to the assessment year 2007-2008. 2. Briefly stated the facts of the case are that the assessee is a part of Hamon D'Hondt Group, which is headquartered in Belgium with its original and core business of design, manufacture, supply, erection and servicing of Cooling Systems, Heat Exchangers and Air Pollution Control systems. The assessee-company is engaged in the business of manufacturing, designing, engineering and supply of cooling towers, spares and providing engineering services. The assessee filed its return declaring total income of Rs. 11,42,254. The assessee entered into six types of international transactions with its Associated Enterprises (AEs). Because of such international transactions, the Assessing Officer made reference u/s 92CA(1) to the Transfer Pricing Officer (TPO) for determination of Arm's Length Price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce as to whether any specified services were rendered; and if rendered, whether two independent parties would be willing to pay for such services; and if two independent parties would be willing to pay, what would be the basis and amount of such payment. The assessee was further directed to furnish details in respect of Management fees which the TPO had considered at 1.5% of the turnover as at the ALP. Since the TPO, in the opinion of the DRP, did not examine as to whether any R D services were rendered by the foreign AE for which a sum of Rs. 28.98 lakh was allowed, the DRP requested the assessee to furnish necessary details in this regard also. Similar direction was given qua the "Tender cost". The assessee filed a reply on 16.08.2011 which the DRP considered to be a simple reiteration of what was submitted before the TPO. In the absence of any additional information given by the assessee justifying these payments, the DRP held that no tangible and direct benefit was derived by such payment made by the assessee to its AE. As such, the DRP proposed an adjustment of Rs. 1,17,00,313 to the total income as against lower amount proposed by the TPO. The A.O. vide the impugned order pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforestated, then it becomes obligatory on the part of the DRP under sub-section (5) of section 144C to issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. What can be the ambit of the directions of the DRP has been more elaborately enshrined in sub-section (8), which provides that : 'The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order'. A close scrutiny of the mandate of this provision indicates that the DRP has been empowered not only to confirm or reduce the variation proposed in the draft order to the benefit of the assessee but also to enhance it to the prejudice of the assessee. This power of enhancement which was impliedly embedded in the matter of issuing directions, due to the use of expression 'as it thinks fit' in sub-section (5) has been expressly set out in sub-section (8) by categorically stating : '..or enhance the variations' in the draft order. Thus it is vivid that the power of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." 8. A cursory look at the language of the Explanation divulges that the power of enhancement of the DRP has been further widened to all the matters arising out of the assessment proceedings relating to draft order irrespective of the fact whether they were raised or not by the assessee. With this amplification of the scope of the power of the DRP, now even the matters not agitated by the assessee before the DRP can also be considered for the purposes of enhancement. In other words, the hitherto limited scope of enhancing the variations proposed in the draft order has been expanded to encompass any matter arising out of the assessment proceedings relating to the draft order irrespective of the fact whether or not such a matter was raised by the assessee. However, it is pertinent to note that the insertion of the Explanation has been made with retrospective effect from 01.04.2009. Since we are dealing with the A.Y. 2007-08, the question as to whether such Explanation would also be applicable to the A.Y. 2008-09 or earlier years is left open to be decided on a suitable occasion. 9. Be that as it may the facts prevailing in the extant case are fully covered by the mandate of sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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