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2015 (11) TMI 1622 - AT - Income TaxPenalty levied under section 271(1)(c) - TPA adjustment - Held that:- The determination of reasonable arm’s length price is a matter of estimate. Merely because it is possible to arrive at two different estimates of arm’s length price, it cannot be held that the lower of the two estimates is based on inaccurate particulars, while higher one is accurate. We also find that with regards to penalty under section 271(1)(c) of the Act in respect of transfer pricing additions, only Explanation -7 to the section has to be considered. A perusal of the said Explanation shows that no penalty can be levied where the pricing is done in good faith and with due diligence. In the present case, the transfer pricing of the assessee is based on a study conducted by an independent expert, M/s.Price Waterhouse Coopers, Chartered Accountants. The assessee has obtained a transfer pricing study from an outside expert, and this transfer pricing study, objectivity of which is neither called into question or seems to be, upon perusal of this transfer pricing study, questionable to us anyway, approves TNMM method for determination of arm’s length price - a proposition which has not been specifically rejected by the Revenue authorities. On these facts, lack of due diligence in determining the arm’s length price is neither indicted nor can be inferred. In such a situation, it cannot be said that the assessee has not determined the arm’s length price in accordance with the scheme of section 92C in good faith and with due diligence. The conditions precedent for invoking Explanation-7 to section 271(1)(c) did not exist on the facts of this case. - Decided in favour of assessee.
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