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2024 (4) TMI 145 - DELHI HIGH COURTTP Adjustment - Addition of international transaction related to the demerger - whether the AO can proceed to make transfer pricing adjustment beyond the ALP determination by the TPO in light of the mandate of Section 92CA? - HELD THAT:- As in order to compute the ALP of the international transactions, the AO ‘may’ refer the matter to the office of the TPO, with prior permission of the Principal Commissioner of Income Tax [PCIT] or Commissioner of Income Tax [CIT]. Mandate of Section 92CA(4) of the Act would reflect that the AO shall calculate the total income of the assessee in conformity with the ALP determined by the TPO. We may usefully refer to the dictum laid down in the case of CIT v. S.G. Asia Holdings (India) (P) Ltd., [2019 (8) TMI 661 - SUPREME COURT] wherein, the Court settled the controversy around the word ‘may’ used in Section 92CA(1) and is no longer res integra. The Hon’ble Supreme Court also referred to CBDT instruction no. 3/2003 and ruled that it is mandatory for the AO to refer the matter to the TPO in order to determine the ALP of the international transactions if selected for scrutiny on the basis of transfer pricing risk parameters. It is abundantly clear that in cases, where certain international transactions may have a bearing on the computation of total income, the AO ought to refer the matter to the TPO in order to determine the ALP of the international transactions and the AO, while computing the total income of the assessee, shall proceed in conformity with the ALP determined by the TPO. It is trite position of law that if the legislative scheme prescribes an act to be done in a certain manner, it ought to be done in that manner, and that manner alone. As per the legislative mandate behind Section 92CA of the Act, the ALP determination of any international transactions falls in the domain of the TPO. Moreover, the dictum laid down in CIT v. S.G. Asia Holdings [Supra] noticeably elucidates that the AO is not clothed with the powers to ascertain the ALP of any international transaction that is selected on the transfer pricing risk parameters. Furthermore, Section 92CA(4) of the Act evidently mandates that the AO cannot deviate itself from the TPO order while computing the total income of the assessee. In the present case, the TPO order solely reflects the transfer pricing adjustment. However, the AO, without affording an opportunity of hearing to the assessee, proceeded to add an amount to the total income of the assessee, which addition was neither determined nor directed by the TPO, as the ALP of the international transaction related to the demerger of the business. The said course of action was not available to the AO and it is a clear case of excess. Therefore, we find ourselves unable to sustain the impugned order as it clearly breaches the legislative mandate of Section 92CA of the Act. WP allowed.
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