TMI Blog2013 (10) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee's MA is reproduced hereinbelow for the sake of convenience: "2. The Hon.ITAT,'C' Bench, Ahmedabad pronounced order in above mentioned case for AY 2004-05 on 10-02-2012 for which the supporting material/briefing for arguments was provided by the Ld. DR. The issues decided by the Hon'ble ITAT inter-alia included disallowance of payment of royalty made by the assessee to its Associate Enterprise amounting to Rs.74,63,975/-. The addition made by the AO and confirmed by Ld CIT(A) was deleted by the Hon. Tribunal. The discussion on the issue is made in para 10-17 of the ITAT's order while the findings are contained in para -16-17. From perusal of para-17 of the order, it becomes clear that the Hon'ble Tribunal has delivered the judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g" 55.1 The increasing participation of multi- national groups in economic activities in the county has given rise to new and complex issues form transactions entered into between two or more enterprises carrying belonging to the same mum-national group. The profits derived by such enterprises carrying on business in India can be controlled by the multi-national group, by manipulating the prices charged and paid in such intra- group transactions, thereby, leading to erosion of tax revenues. 55.2 Under the existing section 92 of the Income-tax Act, which was the only section dealing specifically with cross border transactions, an adjustment could be made to the profits of a resident arising from a business carried on between the resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in expressions occurring in the said sections. " 3.1 From perusal of these paragraphs, it becomes absolutely clear that in order to overcome the difficulties posed by the erstwhile section 92, these new provision were introduced. Further from perusal of the judgment, it becomes absolutely clear that the Hon'ble Tribunal has incorrectly relied on the pre-amended provision of law to decide the issue of royalty payment, even though the relevant portions of circular discussed above were available in department paper book and this fact was mentioned in the order itself. 4. The Hon'ble Tribunal has also misunderstood the connection raised by the Ld D.R. wherein it was submitted that the royalty payment cannot be bench marked by clubbing the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E's who are 100 per cent subsidiaries. The assessee 's case is that it has actually not earned any interest and it was commercially expedient to extend these interest free loans. Now it is noted that this is not a case of ordinary business transaction. The question relate to scrutiny of international transaction to determine whether or not the same it as amt's length. The principle of transfer pricing aims at determining the pricing in the situations of cross border international transaction, where two enterprises which are subject to the same centre or direction or control (associated enterprise) maintain commercially or financially relation with other. In such a situation, the possibility exist that by way of intervention from the centre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The learned DR agued that section 92 of the I.T.Act. does not apply to the assessment year 2004-2005, and argued that Transfer Pricing provisions relating to the assessment year 2004- 2005 are contained in Chapter-X of the Income Tax Act. These very sections were substituted for section 92 by the Finance Act, 2001 w.e.f. 1.4.2002 and the explanatory memoranda for the same is available in para-55 of the circular no.14 of 2001. The learned DR argued that the ITAT in its order dated 10.2.2012 has incorrectly relied on the pre-amended provision of law to decide the issue of royalty payment, even though, the relevant portion of the circular discussed above, is available in the department's paper book. Therefore, the learned DR prayed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
