2011 (1) TMI 84 - AT - Income Tax

Arm s Length Price - documents were not available before the Transfer Pricing Officer (TPO) and the TPO had no opportunity to examine the annual report or data base of the aforesaid companies matter remanded to TPO in respect of the matters involved in this appeal to pass afresh order after considering all the comparables in the light of the various parameters laid down by the various courts from time to time - appeals filed by the revenue and the assessee treated to be allowed for statistical purposes

Summary

Issues:
Cross appeals filed by revenue and assessee against the CIT(A)'s order regarding transfer pricing adjustments for international transactions.

Analysis:
The case involves cross appeals by the revenue and the assessee against the CIT(A)'s order concerning transfer pricing adjustments for international transactions in the assessment year 2005-06. The assessee, a public limited company engaged in the education business with global operations, entered into international transactions with associated enterprises, including providing corporate/support services. The Transfer Pricing Officer (TPO) accepted most transactions as arm's length except for the corporate/support services. The TPO rejected some comparable companies used by the assessee, leading to an adjustment proposal. The CIT(A) reduced the adjustment amount, prompting both parties to appeal.

The assessee sought to submit additional evidence related to comparables and related party transactions under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963. The Tribunal admitted the additional evidence, considering its relevance in determining the arm's length price. The Tribunal directed a fresh assessment by the TPO, incorporating the new evidence and evaluating the comparables based on specific factors like related party transactions, profits, business restructuring, growth, turnover, inventory, and expenses.

The Tribunal ordered a fresh assessment by the TPO, considering all comparables and specific factors, after providing a reasonable opportunity to the assessee. The TPO was tasked with reevaluating the arm's length price based on the new evidence and relevant parameters. The appeals by both parties were treated as allowed for statistical purposes. The decision was pronounced on 7th January, 2011, in the Open Court.

This detailed analysis highlights the complexities of transfer pricing assessments, the importance of proper comparables, and the procedural aspects of admitting additional evidence for a fair determination of arm's length pricing in international transactions.