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TMI Blog2016 (11) TMI 1756X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of Sec. 263. If one of them is absent if the order of ITO is erroneous but is not prejudicial to the interest of Revenue or if it is not erroneous but is prejudicial to the interest of Revenue - recourse cannot be had to Sec. 263(1). AO had passed order u/s 143(3) and with respect to the adjustments to the international transactions, addition was made as per the order of TPO s order that was passed u/s 92CA(3) of the Act. As per the provisions of Sec. 94CA(4) the order passed by TPO is binding on A.O. In the present case, thus it is seen that A.O. has followed the adjustments directed by TPO in the order dt. 30.09.2008 passed under Sec. 92CA(3) of the Act. There is nothing on record which points out that the order of TPO dt. 30.09.08 has been revised or the order was not in existence when AO passed the order u/s 143(3) of the Act. Therefore in the present case, since the A.O. has followed the order of TPO passed u/s 92CA(4), it cannot be said that there is any error in the order passed by the A.O., u/s 143(3) of the Act. 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 fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 submitted that the inference drawn by CIT on account of improper adjustment on Arm s Length Price and other issues was not correct and further the assessee had filed all the required details before TPO and AO and after considering the submissions the order was passed. Assessee also inter alia objected to the initiation of the proceedings under Sec. 263 of the Act and submitted that the initiation of the proceedings u/s 263 was bad in law. The submissions of the assessee was not found a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 prejudicial to interest of the revenue. 9. Further, the Commissioner of Income-tax IV, Pune erred in exercising the jurisdiction under section 263 of the Act over the learned Transfer Pricing Officer as administratively the learned Transfer Pricing Officer functions separately under the Director of International Tax (DIT). 5. The Ld. DR did not object to the filing of additional ground by the Assessee. After considering the submissions of the Ld AR, we admit the additional grounds. 6. Before us Ld.A.R. submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 machines that were sold and the replacement cost of new suitable machines amounting to Rs. 12,66,65,008/- was basically the discounts given to customers on the new machines and write off the machines on lease that were withdrawn in consonance with the agreements of the customers. He submitted that this expenditure was disclosed as an exceptional item in the Profit and Loss account and since it has not been incurred on a regular basis and it being of an extra ordinary nature, it was rightly excluded while computing the ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 as the other issues like depreciation, amortization etc is concerned, he submitted that on those issues no error requiring revision has been pointed out by Ld CIT. 12. Ld. A.R. therefore submitted that considering the facts of the case from any angle, the order passed by the Ld. CIT needs to be set aside both on the grounds of jurisdiction and even on merits. Ld. DR on the other hand supported the order of A.O. and CIT (A) and further submitted that the proposal for revision under Sec. 263 originated on the basis of proposal submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermined 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) wherein the Hon ble Apex Court has held that CIT has to be satisfied of twin conditions namely i) the order of the A.O. sought to be revised is erroneous ii) by virtue of being erroneous prejudice has been caused to the interests of the Revenue for invoking the provisions of Sec. 263. If one of them is absent if the order of ITO is erroneous but is not prejudicial to the interest of Revenue or if it is not erroneous but is prejudicial to the interest of Revenue - recourse cannot be had to Sec. 263(1). It has further held that the provision cannot be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 impermissible view or was upon application of wrong legal principles and therefore required initiating the exercise of revisionary powers under Sec. 263. In view of the aforesaid facts, we are of the view that in the present case the CIT was not justified in resorting to the revisionary powers under Sec. 263 of the Act. We, therefore, set aside the order of the CIT canceling the order dt. 10.12.2008 passed under Sec. 143(3) of the Act. Thus, the grounds of the assessee are allowed. 20. In the result, the appeal of assessee is partly allowed. Order pronounc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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