9911796707
TMI Blog2024 (6) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee could not file all documents. Assessee has also filed additional evidences in terms of Rule 29 as noted above. Assessee has also reported in first para of the application filed under Rule 29 that the evidences now filed are critical and robust to substantiate the assessee s stand. DR has also submitted that he has no objection if the evidences are considered at appropriate level. During hearing, with the assistance of assessee we have seen that the evidences are substantial. Looking into the circumstances preventing the assessee from filing these evidences before TPO coupled with the fact that the present appeal before us is the first- appeal against assessment-order passed by AO, we are persuaded to admit these evidences. These evidences go to the root of the matter and require an in depth examination and analysis at lower level. If the lower authorities, based on evidences, take a view that the assessee had actually received services, there would be further necessity to determine the amount of ALP. Therefore, in the situation, we feel it most appropriate to refer this matter back to the file of AO/TPO who shall re-fix the case and give necessary opportunities to asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile were complied with by assessee. During assessment-proceeding, the AO found that the assessee had entered into international transactions with its Associated Enterprises [ AEs ] situated outside India. The AO made a reference to Transfer Pricing Officer [ TPO ] on 27.09.2019 to determine Arm s Length Price [ ALP ] of those transactions. Vide order dated 31.01.2021 passed u/s 92CA(3), the TPO reported that certain transactions undertaken by assessee were not at ALP, accordingly an upward adjustment of Rs. 7,77,89,935/- was required. Then, the AO served a draft-assessment order dated 31.03.2021 upon assessee proposing to make such upward adjustment. Against draft-assessment order, the assessee filed objection dated 28.04.2021 to Disputes Resolution Panel [ DRP ] whereupon the DRP passed order dated 30.12.2021 u/s 144C(5) whereby certain objections of assessee were allowed and others were rejected. Ultimately, the AO passed final assessment-order dated 19.01.2022 u/s 143(3) having regard to TPO s order u/s 92CA(3) and DRP s order u/s 144C(5), after making an addition of Rs. 7,36,56,010/- and thereby reducing the loss declared by assessee from Rs. 37,90,21,971/- to Rs. 30,53,65,961/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service, the benchmarking and determining ALP was not possible. The assessee had filed only invoices raised by AEs, Transfer Pricing Study Report [ TPSR ] of AEs and Copy of agreement. (ii) The TPSR dated 30.06.2015 submitted by assessee did not pertain to financial year 2016-17 relevant to AY 2017-18 under consideration. Further, in the TPSR , the benchmarking had been done by taking assessee s foreign AE as tested party and using foreign database, this is faulty. (iii) The assessee has not only failed to submit evidences of actual receipt of service but also failed to submit detailed working of cost allocation (Para 6.4 of TPO order). The allocation done by assessee is merely based on a formula decided by parent company and not based on actual facts and no third party would pay for such services in independent situation (Para 6.8 and 6.11 of TPO order). Accordingly, the TPO determined ALP at Rs. Nil. The assessee objected to the TPO s order before DRP. The DRP dealt assessee s objection in Para 6 of his order. The DRP noted at multiple places, particularly in sub-para 6.6.20, that the assessee has failed to demonstrate that it has received services or that it has benefited from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objection in Para 10 of his order. Finally, vide Para 10.3.1, the DRP approved TPO s action of determining ALP at Rs. Nil by stating that this issue was identical to the issue of intra-group services dealt by him in Para 6 of his order. In short, the DRP upheld TPO s action by accepting that the assessee has failed to demonstrate that it has received services or that it has benefited from such services as claimed and that the assessee has further failed to demonstrate the incurrence of cost by the AE as well as its allocation to assessee. Thereafter, the AO passed assessment-order taking ALP at Rs. Nil as reported in the orders of TPO/DRP. 9. During hearing before us, learned Representatives of both sides made vehement arguments against or in favour of the orders of TPO/DRP/AO. While arguing, Ld. AR for assessee submitted that the TPO issued show- cause notice dated 23.01.2021 to assessee and required the assessee to file details/documents by 28.01.2021 since the case was getting time-barred by 31.01.2021, copy of the notice is filed at Page No. 277 to 284 of Paper-Book. Thus, the AO allowed just a meagre period of 5 days. Furthermore, the impugned period was a time when entire na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise and determine ALP. Ld. AR for assessee also acknowledges that there was a short period of just 5 days allowed by TPO and moreover that period was a difficult time of Covid due to which the assessee could not file all documents. The assessee has also filed additional evidences in terms of Rule 29 as noted above. Further, the assessee has also reported in first para of the application filed under Rule 29 that the evidences now filed are critical and robust to substantiate the assessee s stand. Ld. DR has also submitted that he has no objection if the evidences are considered at appropriate level. During hearing, with the assistance of Ld. AR for assessee we have seen that the evidences are substantial. Looking into the circumstances preventing the assessee from filing these evidences before TPO coupled with the fact that the present appeal before us is the first- appeal against assessment-order passed by AO, we are persuaded to admit these evidences. However, these evidences go to the root of the matter and require an in depth examination and analysis at lower level. Further, if the lower authorities, based on evidences, take a view that the assessee had actually received se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only such that the DRP has directed the AO to apply mark-up of 7.75% and also allow benefit of mark- up of 5% actually charged in the invoices, if any. But, however, the DRP has not explicitly mentioned to give benefit of (+)/(-)3% tolerance band statutorily available in terms of Proviso to section 92C(2) which prescribes thus: Provided further that if the variation between the arm's length price so determined and price at which the international transaction or specified domestic transaction has actually been undertaken does not exceed such percentage not exceeding three per cent of the latter, as may be notified by the Central Government in the Official Gazette in this behalf, the price at which the international transaction or specified domestic transaction has actually been undertaken shall be deemed to be the arm's length price: Ld. AR prays that there should be a clear direction to AO/TPO to give benefit of this Proviso. We find that the above-noted Proviso to section 92C(4) is a statutory provision which cannot be ignored by AO/TPO. Accordingly, the AO/TPO is directed to consider the effect of this provision. Accordingly, this ground is allowed. 15. Resultantly, this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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