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TMI Blog2018 (7) TMI 822X X X X Extracts X X X X X X X X Extracts X X X X ..... s passed u/s 143 (3) r/w 144 C of the IT Act for A. Y. 2007- 08 and 2008-09 respectively. Since identical grounds have been taken by the assessee in both the appeals, therefore, these were heard together and are being disposed of by this common order for the sake of convenience. ITA No. 4237/Del/2011 ( A. Y. 2007-08) 2. Facts of the case, in brief, are that the assessee company is a wholly owned subsidiary of Bucher Industries AG. The assessee company is engaged in Hydraulic and Control Systems. It filed its return of income on 06.11.2007 declaring loss of ₹ 97,93,643/-. Since the assessee company had entered into international transactions with its AE, the Assessing Officer referred the case to the TPO for determination of the ALP of the international transaction entered into by it u/s 92 CA (1) of the I. T. Act, 1961. Rejecting the various explanations given by the assessee, the TPO proposed upward adjustment of ₹ 55,42,782/- being the difference in the ALP of the international transaction. Thereafter the Assessing Officer made the addition of ₹ 55,42,782/- to the total income of the assessee on account of the ALP of the international transaction entered into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is a start-up in the financial year of business and therefore, selecting erroneously the PLI of operating profit/total sales as the appropriate PLI. d) The TPO as well as the DRP and consequently the AO has erred in law and on facts and in the circumstances of the case in erroneously rejecting the assessee's claim of adjustment on account of underutilization of installed capacity while analyzing and comparing the net margin of the assessee company with that of the comparables to eliminate material difference in consonance with the provisions of Rule 10B(3) of the Income-tax Rules. e) The TPO as well as the DRP and consequently the AO has erred in law and on facts and in the circumstances of the case in erroneously rejecting the assessee's claim of adjustment in the comparables on account of excise and custom duty while analyzing and comparing net margin of the assessee and that of the comparable companies to eliminate material difference in consonance with the provisions of Rule 10B(3) of the Income-tax Rules. f) The TPO as well as the DRP and consequently the AO has erred in law and on facts and in the circumstances of the case in erroneously holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for adjudication. 8. The Ld. Counsel for the assessee at the outset submitted that since the turnover of the assessee is ₹ 3 crores for the financial year 2006-07 and the AE transaction is of ₹ 1.90 crores which is below the limits set for referring the case to the TPO for TP audit, therefore, the reference by the Assessing Officer to the TPO is invalid as per CBDT instruction No.3/2003 which is binding on the Ld. AO. Consequently, the assessment order passed by the AO is barred by limitation since it should have been passed on or before 31st December, 2009. However, even the draft assessment order was passed on 29th October, 2010. Accordingly, he submitted that the orders of the Ld. AO and TPO should be quashed on this preliminary legal ground alone. 9. Referring to the decision of Delhi Bench of the Tribunal in case of Calance Software Pvt Ltd Vs. DCIT vide order dated 23.03.2018 for A. Y. 2006-07, he submitted that the Tribunal under identical circumstances has held that the reference to the TPO is not sustainable since the quantum of international transaction is below the monetary limit of ₹ 5 crores and the Assessing Officer should have passed the order wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the Tribunal read as under :- 13. We have heard both the parties and perused the material available on record. At the time of hearing the Ld. AR has taken a ground which is on legal point that as per the Instruction No. 3/2003 issued by the CBDT, the Assessing Officer should have decided the issue of international transaction himself instead of referring it to Transfer Pricing Officer as the quantum of International Transaction is below the monetary limit of ₹ 5 crore. Prima facie, it appears that the contention of the Ld. AR is supported by the Instruction No.3/2003. Therefore, we have to verify whether that Instruction has a binding force or it is just an administrative Instruction within the Departments day to day activities. The Circular has been considered by the Andhra Pradesh High Court in case of CIT Vs. Nayana P Dedhia 270 ITR 572 wherein it is held that the authorities responsible for administration of the Act shall observe and follow any such orders, instructions and directions of the board. This is actually reiterated from the decision of the Hon'ble Apex Court in case of UCO Bank Vs. CIT 237 ITR 889 = 2002-TIQL-697-SC-IT-LB . But at the same t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther grounds raised by the assessee become academic in nature and therefore are not being adjudicated. The appeal filed by the assessee is accordingly allowed. ITA No. 5690/Del/2012 (A. Y. 2008-09) 14. The grounds raised by the assessee are as under :- 1) That the learned Assessing Officer has erred in law and on facts in making an assessment of the assessee's loss at ₹ 51,87,140/- against the loss as returned by assessee at ₹ 1,44,16,476/- and thus making additions of Rs. ₹ 92,29,336/- on wholly illegal, erroneous and untenable grounds. 2) The order of assessment is bad in law. 3) That the learned AO has erred in law, on facts and in the circumstances of the case in making addition on account of arms' length price under section 92CA(3) of the Income-tax Act amounting to ₹ 92,29,339/- on wholly illegal, erroneous and untenable grounds. 4) The learned AO's order based on the findings of the learned Transfer Pricing Officer and the directions of the learned Dispute Resolution Panel U/S.144C(5) of the Income-tax, is erroneous, untenable in law and on facts for the various reasons and not limited to the following: - a) The TPO as well as the DRP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the other grounds raised herein. 15. The assessee has also raised the following additional ground of appeal :- "The reference to the Transfer Pricing Officer u/s 92 CA of the Income Tax Act, 1961 by the Assessing Officer was illegal contrary to (i) the binding Instruction No.3/2003, (ii) the provisions of Section 92CA and the binding decision of the Special Bench in the case of Aztec Software and Technology Services Ltd. [107 ITD 141 (Bang) (S B) / 2007 -TIOL-210-ITAT-BANG-Special Bench] 16. After hearing both the sides and following our observation in ITA No.4237/Del/2011, the additional ground raised by the assessee is allowed. 17. After hearing both the sides, we find the turnover of the assessee for the impugned assessment year is ₹ 4.77 crores and the AE transaction being ₹ 3.80 crores is below the limit of ₹ 5 crores prescribed for referring the case to the TPO. Therefore, following our finding in ITA No.4237/Del/2011, the assessment order passed by the Assessing Officer is held to be bad in law and barred by limitation. The additional ground is accordingly allowed. Since the assessee succeeds on this additional ground, the other grounds become acad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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