9911796707
TMI Blog2016 (11) TMI 1756X X X X Extracts X X X X X X X X Extracts X X X X ..... osses, was determined at Rs. 28,32,96,698/-. Thereafter, on examination of the assessment records, the learned CIT on the basis of the proposal submitted by the Addl.CIT, noticed that while computing the "Arm's Length Price (ALP) no adjustment on account of "exist cost" of TBA-10 machines was made in the order by the AO. According to him, the adjustment on account of "exist cost" of TBA-10 filling machines while computing the "Arm's Length Price (ALP)" was not allowable and was also without any discussion. Apart from the aforesaid adjustment, he was of the view that claims made by the Assessee and that were allowed by the AO in respect of depreciation, amortization and impairment as per accounts, loss on sale of assets, etc., required verification and addition, if any on the issue. He was, therefore, of the view that the order dtd 10.12.2008 passed by A.O. u/s 143(3) of the Act was prejudicial to the interest of Revenue and therefore require revision under Sec. 263 of the Act. He accordingly issued notice to the assessee asking to show cause as to why appropriate order under Sec. 263 of the Act be not passed. 3. In response to notice u/s 263 of the Act, assessee inter alia submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no jurisdiction to revise the order passed by the TPO u/s 92CA(3). 5. The learned CIT failed to appreciate that the A.O. was bound to follow the order of the TPO u/s 92CA(3) while making the assessment u/s 143(3) and there was no error in the assessment order u/s 143(3) and therefore, the revision order u/s 263 is bad in law. 6. The assessee submits that the learned CIT has erred in revising the assessment order on the issue of determination of Arm's Length Price without appreciating that the said issue was being agitated by the assessee before the learned CIT (A) and hence, the learned CIT had no jurisdiction to pass revision order u/s 263. 7. The appeal craves leave to add, alter, amend or delete any of the above grounds of appeal. 8. Based on the facts of the case and in law, the learned Commissioner of Income tax (CIT) has erred in assuming the jurisdiction under Section 263 of the Act to revise the order passed by the learned Assessing Officer (AO) under section 143(3) r.w.s 92C(3)/(4) of the Act. Such order which is passed after considering the order passed by the learned Transfer Pricing Officer determining arms' length price cannot be considered erroneous and preju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upkeep of the existing of TBA-10 would not be available in the future and had the assessee not replaced the machines, there was a possibility that the assessee would have lost out on the sale of packaging material used by those customers on the TBA-10 filing machines. The assessee, therefore took decision to withdraw the said TBA-10 filing machines from the customers at some pre-determined value and replaced it with latest technology TBA-10 filing machines with higher production capacities by offering special discounts on the value of those on the new machines. This business decision was taken so that the assessee could continue to sell packaging material to those customers because only the packaging material sold by the assessee could be used on those machines. It was further submitted that if the assessee had not subsidized the cost of the latest technology filing machines, there was a risk of assessee losing out its packaging business from the customers as the customers would have shifted to alternative mediums of packaging provided by other suppliers and that in the long run it would have been detrimental to the business of the assessee. The cost for withdrawing the filling ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid decision. 10. Ld AR's next argument was that even if it is presumed (though not admitted) that there is any mistake in the order, the mistake is in the order of TPO. He submitted that the order of TPO has attained finality and has not been modified / amended. He further submitted that as per the instructions of CBDT, TPO has to pass order after obtaining approval from DIT(TP). He submitted that in the present case the order u/s 92CA(3) has been passed by the TPO after obtaining approval of DIT(TP). It thus would mean that, DIT(TP) had full knowledge of the contents of the orders passed by TPO. He submitted that for exercising revisional remedy u/s 263 of the Act, an order to be revised by Commissioner must be one which is made by the authority below the rank of Commissioner and since DIT(TP) under whose directions the TPO has passed the order, is of the same rank as of CIT, CIT has no jurisdiction for review of the order of TPO and for this proposition he relied on the decision in the case of R. Srinivas Vs. DCIT reported in (2014) 368 ITR 471 (Madras) and the decision of Pune Tribunal in the case of J.R. Agarwal Vs. ECIT reported in (2006) 7 TTJ 72 Pune. 11. As far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m in respect of depreciation, amortization and impairment, loss of sale on assets etc. needs verification and addition, if any. 17. In the present case, we find that the assessee had followed TNMM method and the Profit Level Indicator (PLI) was computed as operating profit to operating revenue at 1.82 %. TPO had show caused the Assessee and asked to justify its working. After considering the material before him and after taking into considerations the submissions of the Assessee, TPO reworked operating profit margin of 1.51% and thereafter determined the upward adjustment to the ALP of the international transactions at Rs 27,75,44,805/- in the order passed u/s 92CA(3). A.O. after considering the order passed by TPO u/Sec. 92CA(3) made addition of the amount that was directed by the TPO. Thus, on perusing the order of TPO and the submission made by the assessee before TPO, it is seen that the submission of Assessee with respect to "exist cost" was found acceptable to the TPO as no addition/adjustment on that account was made by TPO. At this moment we would like to refer the decision of the Hon'ble Apex Court in the case of Malabar Industrial Company Ltd., (2000) 243 ITR (SC) wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evisionary jurisdiction under Sec. 263 on the order passed under Sec. 92CA(3) by the TPO. It further held that once the Commissioner cannot exercise jurisdiction, then the order passed by the A.O., cannot be set aside as the order of the TPO under Sec. 92CA(4) is binding on the A.O. On the merits of the case of excluding "Exist cost" while computing the operational margin, being of an extra-ordinary and exceptional in nature, we find force in the argument of the learned A.R. for its exclusion in the light of the ratio of the decision of Hon'ble Delhi High Court in the case of Marubeni India Pvt. Ltd Vs DIT reported in (2013) 354 ITR 638 (Del), wherein the Hon'ble Delhi High Court has upheld the exclusion of payment of compensation for closure of Indian units by the associated enterprise by considering it to be an abnormal item of expenses and excluding it while computing operating profits. We are of the view that the ratio of the aforesaid decision is squarely applicable to the present case. 19. Before us, the Revenue has not placed any contrary binding decision nor has brought any material on record to demonstrate that the view taken by the A.O. was contrary to law or was an impe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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