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2013 (11) TMI 667 - AT - Income TaxTransfer pricing adjustment - Nature of transaction - agreement was between the Indian PSU and the Indian subsidiary of two non resident companies, which become one company - Sale of the health imaging division - Domestic transaction or international transaction - Meaning and scope of Associated Enterprises (AE) - Held that:- to come within the purview of section 92(1), 92A(1) the transaction must go through the needle hole definition provided in section 92B(1). This, transaction, cannot be presumed to be international transaction, even when the revenue authorities have tried to include it as the deemed transactions, as the case made out by the TPO/AO in the instant case. - there was no international element involved in the sale of imaging segment by the assessee of its business to Carestream Health Ltd. and hold it was a purely a domestic transaction. - Decided in favour of assessee. Determination of arm's length price - Alien method - Purchase parity – Interpretation of Section 92C(1) - Held that:- It cannot be accepted that the word “any” has been used in section 92C(1), which could give leeway to the TPO to ascribe to a non specific method. Word “any”, is founded on the suffix, "of the following methods being the most appropriate method". Therefore, the ambit of the word “any” in section 92C(1) has been restricted within the precinct of the five specific methods. This gathers strength from the fact that even in the Rules, relevant Rule 10B provides with the similar wordings - issue cannot be restored to the TPO because the methods, as prescribed by the legislature are mandatory, not directory. When mandatory provision is either superseded or ignored, it straightaway affects the jurisdiction. It was a case of suo moto reference to the TPO and it is the case of the revenue authorities, to import the provisions of Chapter X. In this circumstance, since the TPO did not adhere to the prescribed methods consciously, another innings to rectify the mistake cannot be allowed, as the TPO infringed the relevant provision of the Income Tax Act and Rules - entire case both on legality and on facts, as developed by the AO/TPO/DRP were initiated on wrong footings and were void and without jurisdiction - Decided in favour of assessee. Disallowance u/s 14A - Application of Rule 8D - Held that:- Bald statement, made by the AO that he has referred to the accounts, does not give him an automatic jurisdiction to invoke the provisions of section 14A read with Rule 8D. Disallowance, made on such basis is not permissible. In order to give quietus to the impugned issue, where no expenditure has been attributed to wards the exempt income by the assessee, we, restore the issue of disallowance to the AO for computing the disallowance in accordance with the provisions of section 14A(2), if at all, by giving detailed reasoning and speaking order, needless to say that the AO shall give adequate and reasonable opportunity to the assessee to present its case - Decided in favour of assessee.
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