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TMI Blog2021 (9) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... d reject what is not. Therefore, the writ petition is to be rejected as not maintainable. In the present case, the application submitted by the petitioner has been took up for adjudication and the issues were adjudicated. Undoubtedly, the parties to the Settlement were co-operated and the Settlement Commission arrived a conclusion. Under the provisions of the Act, once the Settlement Commission passed an order, the same became final. As rightly pointed out, a decision of Settlement Commission could be interfered only on certain circumstances, if grave procedural defect such as violation of the mandatory procedural requirements are not followed and if there is no nexus or reasons given at the decision taken by the Settlement Commission. The petitioner cannot adjudicate in respect of the said issue and the issue was left open for further adjudication by the competent authority. If the entire order passed by the Settlement Commission is under challenge, then it is different. However, in the present case, the petitioner has challenged one issue, which was not decided in favour of the petitioner. This being the factum, this Court cannot consider the said issue on merits in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted markets comprises USA, UK, Europe, Japan, while all other countries could be clubbed together as the less-regulated markets. The petitioner company had entered into agreements. In order to verify the Arms Length Price of these transactions with the DPs(Distribution Partners), the first respondent had made reference to the fourth respondent through the second respondent. The petitioner has stated that they have furnished all the details fully and truly in the application submitted before the Settlement Commission and the Settlement Commission, in respect of the Transfer Pricing alone, on sales to Distribution Partners adjudicated in paras 2.2.1.3 to 2.2.4.1 dealt the issues improperly and the findings made in the above paragraphs are illegal and without jurisdiction. In fact, the petitioner company is to be treated as Associated Enterprises of the Distribution Partners as per Section 92(A) of the Act. Thus, the present writ petition is filed and restricted to the extent of Transfer Pricing alone on sales to Distribution Partners. 5. The learned counsel for the petitioner contended that the Present Writ Petition No.12109 of 2012 challenges the order of the Income Tax Settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applied independently. The legal fiction falling under various clauses under sub-Section (2) are only for the purpose of sub-Section (1) and not to replace or operate independent of sub-Section (1). Reliance is placed on the decision of the Hon'ble Karnataka High Court in the case of PCIT Vs. Page Industries Ltd in ITA 285 of 2017, which affirmed the order of the Banglore Tribunal, holding that in order to constitute relationship of an AE, parameters laid sown in both sub-Sections 1 and 2 of Section 92A should be fulfilled. The petitioner further relies on Mother India Refrigeration Industries Pvt. Ltd. 155 ITR 711 (SC), wherein it was held that legal fictions are created only for some definite purpose and these must be limited to that purpose and should not be extended beyond the legitimate field . 8. Even assuming that sub-Sections 1 and 2 of Section 90A are independent of each other, the First Respondent failed to note that in view of narrow meaning of Associated Enterprise as per the Double Taxation Avoidance Agreement ['DTAA'] between India and United States of America [which does not contain anything similar Section 90A(2)], the petitioner and its DPs ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had only applied 92A (2) (i) and concluded that the Petitioner and DPs are AEs. 10. The First Respondent had based its decision without considering the material evidences before it, which would clearly suggest that the DPs are not in a position to influence that the DPs being in free market, the prices are dependent on end customers. Further, the price charged is determined taking into consideration the cost of manufacture incurred by the Petitioner and cost of selling incurred by the DPs. The First Respondent failed to note the evidences like the price is determined in agreement with DP-implying that both parties are involved in determination of price, the CFO's sworn statement that selling price is determined by the DP based on market condition. The First Respondent also did not take into consideration the statement of the CFO that the DP provides for a floor and cap of the market price. Considering the petitioner and DPs as AEs without considering the material evidences before it shows that the order of the First Respondent is arbitrary and preserved. 11. The petitioner has rightly chosen CUP as MAM. In transfer pricing it is well settled proposition that pricing m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd DPs and accordingly even assuming purported PSM has to be applied, only 50% of the profits is attributable to the Petitioner. The First Respondent in absolute disregard of the material in the form of Transfer pricing study and the law regarding the profit-sharing ratio at 70:30 between Petitioner and DPs. 13(a). In support of the above contentions, the learned counsel relied upon the judgment in the case of N.Krishnan Vs. Settlement Commission, reported in (1989) 180 ITR 585 (Karnataka) , wherein the following observations are made: 14. Even so, as regards the first question is concerned, it should be remembered that the power of judicial review of administrative action including those of Courts and Tribunals conferred on the High Courts under Articles 226 and 227, constitutes one of the basic structures of the Constitution. Therefore, irrespective of the nature of an administrative Tribunal or the width of its power or a provision in the relevant provision of law that its decision is final and conclusive, the High Court's power of judicial review remains unaffected, though the scope of judicial review might vary. That power can be curtailed or varied only b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove judgment, the writ petition is maintainable. (c) In the case of Commissioner of Income Tax Vs. Anjum M.H.Ghaswala, reported in (2001) 252 ITR 1 (SC) , the Constitution Bench of the Hon'ble Supreme Court of India held as follows: 30. It is no doubt true that the terminology settlement has a very wide dictionary meaning and in the absence of a statutory definition generally the word settlement in sub-section (4) of Section 245-D would give the Commission sufficient power to arrive at a settlement which it deems fit, but when the statute qualifies such expression like settlement with mandatory words like in accordance with the provisions of this Act the width of the term settlement becomes subject to the mandate found in that section, which would mean that while a Commission has sufficient elbow room in assessing the income of the applicant under Section 245-D(4) it cannot make any order with a term of the settlement which would be in conflict with the mandatory provisions of the section, like in the quantum and payment of tax and/or interest. In this view of the matter, we are of the opinion that assuming that there is any room for interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to, there was a Miscellaneous Petition, which was dismissed by the Settlement Commission. Even as against that, there was no Writ Petition or any proceedings taken, to challenge that order. Only when the second petition was taken up and an order had been passed, the present Writ Petition has been filed. Learned senior counsel appearing for the petitioner could not specifically point out to the provision under which such a petition is maintainable in law. In the absence of any specific provision even to maintain the first Miscellaneous Application, I do not find any ground to grant the relief sought for by the petitioner. In the circumstances, the Writ Petition stands dismissed. No costs. 14. Relying on the above judgments, the learned counsel for the petitioner reiterated that the writ petition is entertainable and in respect of the Transfer Pricing, the Commission has committed an error as detailed in the affidavit and therefore, the writ petition is to be considered. 15. The learned Senior Standing counsel appearing on behalf of the respondents disputed the contentions raised on behalf of the petitioner by stating that the writ petition itself is not maintainable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it petition is to be rejected as not maintainable. 19(a). In support of the said contentions, the learned Senior Standing counsel relied on the judgment in the case of N.Krishnan Vs. Settlement Commission, reported in (1989) 180 ITR 585 (Karnataka), wherein the Hon'ble Division Bench held as follows: 15. With reference to the second question arising for our consideration, as we have pointed out earlier, the provision for constitution of the Settlement Commission was not in existence earlier. This legislative step was taken on the recommendation of the Wanchoo Committee. As observed by us earlier, the Settlement Commission was to be constituted for settling the complicated claims of chronic tax evaders as an extraordinary measure, for giving an opportunity to such persons to make true confession and to have the matters settled once for all, and earn peace of mind. It is a Forum for self surrender and seeking relief and not a Forum for challenging the legality of assessment order or orders passed in any other proceedings. This is not only evident from the provision of the Act which prevents the application made, from being withdrawn as also the provision which m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place their grievances in the manner provided by the arbitration agreement. This Court reiterated in the said decision that it was now firmly established that an award was bad on the ground of error of law on the face of it, when in the award itself or in a document actually incorporated in it, there was found some legal proposition which was the basis of the award and which was erroneous. In our opinion, many of the grounds on which arbitration award could be set aside, would not be available in view of the nature and jurisdiction of the Settlement Commission. We are of the view that a decision of Settlement Commission could be interfered with only. (i) if grave procedural defect such as violation of the mandatory procedural requirements of the provisions in the Chapter XIX-A and/or violation of Rules of natural justice is made out; (ii) if it is found that there is no nexus between the reasons given and the decision taken by the Settlement Commission. (iii) this Court cannot interfere either with an error of fact or error of law, alleged to have been committed by the Settlement Commission. We answer the second question accordingly. (b) I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the portion of the order passed by the Settlement Commission and dispute correctness of the other portions of the order which in the opinion of the petitioner is not fully favourable. 20. In view of the legal precedents by various High Courts, the writ petition is to be rejected. 21. Considering the arguments as advanced by the respective learned counsels appeared for the parties to the lis on hand, this Court has to consider the spirit of the Settlement between the assessee and Income Tax Department under the provisions of the Income Tax Act. 22. Admittedly, the Settlement order impugned is challenged partly with reference to the limited issue. Question arises, whether such course can be adopted when the Settlement Commission adjudicated the issues and granted relief on several other issues except one issue, which is under challenge by the way of writ petition. 23. The learned counsel appearing for the second respondent made a submission that the Settlement Commission is empowered to adjudicate the complete facts and circumstances with reference to the various provisions of the Income Tax Act and even, empowered to make an assessment under the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is vested with the Assessing Authority . 25. The very concept of settlement is depending on the mutual consensus and in the absence of element of mutual consensus between the parties, the settlement by the Settlement Commission cannot be unilateral and in such an event, Settlement Commission is usurping the powers of the Assessing Officer under other provisions of the Act. In other words, every authority under the Income Tax Act, 1961 is expected to exercise the powers as contemplated. 26. In the present case, the application submitted by the petitioner has been took up for adjudication and the issues were adjudicated. Undoubtedly, the parties to the Settlement were co-operated and the Settlement Commission arrived a conclusion. Under the provisions of the Act, once the Settlement Commission passed an order, the same became final. As rightly pointed out, a decision of Settlement Commission could be interfered only on certain circumstances, if grave procedural defect such as violation of the mandatory procedural requirements are not followed and if there is no nexus or reasons given at the decision taken by the Settlement Commission. 27. In the present case, the Sett ..... X X X X Extracts X X X X X X X X Extracts X X X X
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