Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2014 (5) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (5) TMI 475 - AT - Income TaxTransfer pricing adjustments - Determination of ALP - Lack of jurisdiction - Statutory onus not discharged – Held that:- The legislature has provided sufficient safeguards to protect the interest of the assessee in this regard - assessee gets two opportunities to put forth its point of view before the finalization of the assessment order - there is no need to device and introduce one more protection in terms of the recording of detailed satisfaction by the AO before making reference to the TPO that the price charged/paid in an international transaction is not at ALP - the value of the assessee’s international transactions standing at Rs.116 crore is far in excess of the threshold limit of Rs.5 crore given in the Instruction - which has been issued in the context of section 92CA - the case of the assessee is covered u/s 92CA and not section 92C. Relying upon SONY INDIA P. LTD. Versus CENTRAL BOARD OF DIRECT TAXES AND ANOTHER [2006 (10) TMI 88 - DELHI HIGH COURT] - the prescribed procedure is to be presumed as having been rightly complied with by the concerned authority unless it is specifically and explicitly shown otherwise - Scrutiny in this regard can be undertaken by the appellate authorities only when the assessee adduces some evidence to indicate that there was a failure on the part of the authority to adhere to the prescribed procedure - No material worth the name has been brought on record by the assessee to demonstrate that the AO failed to form a prima facie view at the time of making a reference to the TPO – Decided against Assessee. Rule of consistency – Determination of ALP – Held that:- The mere fact that no Transfer Pricing Adjustment was made in the preceding year would simply mean that the profit shown by the assessee from its international transactions is equal to or more than the benchmarked profit - If the assessee has shown profit at Arm’s Length Price in one year, which has been accepted as such, it does not necessarily mean that the assessee’s profit from international transaction in the succeeding year is also better than that of the comparables - It is axiomatic that if profit from the assessee’s international transactions in succeeding year is equal to or better than that of comparables after considering the cushion available, then there can be no question of making any transfer pricing adjustment notwithstanding the fact that the international transactions were scrutinized in terms of section 92 - there are several factors which affect the determination of the ALP, which may be present in one year but absent in the other year - It is too far to claim that the acceptance of international transaction at ALP in one year should preclude the authorities from the determination of ALP in a subsequent year – Decided against Assessee. Exclusion of Foreign exchange fluctuation gain/loss – Operating revenue/cost – Held that:- There was merit in the contention raised on behalf of the assessee about the inclusion of foreign exchange gain/loss in the operating revenue/costs of the assessee as well as that of the comparables - the nature of foreign exchange gain earned by the assessee is in relation to the revenue earned by the assessee from its AEs in connection with the provision of I.T Enabled data conversion services, which has been reported as international transaction. When the foreign exchange gain directly emanates from the consideration received for rendering of services to its A.E, it could not be appreciated as to how such foreign exchange gain fluctuation can be considered as an item of non-operating revenue - What is true for foreign exchange gain from the transactions of the revenue nature being considered as part of operating revenue is equally true for the foreign exchange loss being considered as part of operating costs from the transactions of the revenue nature - Relying upon SAP Labs India Pvt. Ltd. Vs ACIT [2010 (8) TMI 676 - ITAT, BANGALORE] - foreign exchange fluctuation gain is part of operating profit of the company and should be included in the operating revenue - the order is set aside and the matter is remitted back to the AO/TPO to re-compute the assessee’s margin as well as that of the comparables by considering foreign exchange gain/loss as an item of operating revenue/cost – Decided in favour of Assessee. Selection of comparables – Coral Hub Ltd. – Held that:- Nothing has been brought on record to demonstrate that the related party transactions of VITL for the current year exceed the threshold limit of 25% - simply because a case has been held to be incomparable for one year cannot per se be considered as incomparable for the succeeding year - the Tribunal in a preceding year of the same assessee has held this case to be not comparable on the strength of filter of percentage of employees cost to total cost and the assessee passes the test of this filter for the instant year as well – the exclusion of the company in the list of comparable is directed – Decided in favour of Assessee.
|