Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (2) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (2) TMI 114 - AT - Income TaxTransfer pricing adjustment - AO/TPO/DRP not appreciating the 50:50 revenue split business model between the appellant and its associated enterprises in relation to international transactions, i.e. provision and receipt of freight forwarding services, and, further making an upward adjustment alleging that such transactions were not at arm’s length - TNMM v/s CUP method? - whether the business model said to have been adopted by the assessee, in principle, meets the test of arm’s length price determination under rule 10BA as well? - Held that:- It may appear to be some kind of a dichotomy in the tax legislation but the well settled legal position is that when a legislation confers a benefit on the taxpayer by relaxing the rigour of pre-amendment law, and when such a benefit appears to have been the objective pursued by the legislature, it would a purposive interpretation giving it a retrospective effect but when a tax legislation imposes a liability or a burden, the effect of such a legislative provision can only be prospective. What logically follows from the law so settled by a constitutional bench of Hon’ble Supreme Court in the case of CIT Vs Vatika Townships Pvt Ltd [2014 (9) TMI 576 - SUPREME COURT], is that the operation of rule 10BA, which confers the benefit of an additional method of ascertaining arm’s length price and, inter alia, relaxes the rigour of CUP method, can only be retrospective in effect. In our considered view, therefore, rule 10BA is to be held as effective from 1st April 2002, i.e. the time when transfer pricing provisions were introduced in India. In view of the above discussions, the conclusion arrived at by the coordinate benches meets our considered approval not only because of our respect for the pioneering work done by the coordinate benches but also because of our analysis elsewhere in the order and the subsequent developments, in jurisprudence as also in legislative field, supporting the conclusions arrived at by the coordinate benches. The business model of 50:50, as was admittedly prevalent in the line of business activity of the assessee and as is followed by the assessee, thus indeed satisfies the test for determination of arm’s length price. The assessee’s contention to the effect that the arm’s length price of services rendered to, or received from, the associated enterprises, which was computed on the basis of the same 50:50 model as is the industry norm and as has been employed by the assessee for computing similar services to the independent enterprises, was at arm’s length. Accordingly, the impugned arm’s length price adjustment of ₹ 2,09,00,179 stands deleted. - Even as we admit the additional grounds of appeal, we are alive to the fact that all the related aspects of the matter have been examined at the assessment stage. We, therefore, consider it appropriate to remit the matter to the assessment stage for examination of the plea raised by way of the additional ground of appeal. Decided in favour of assessee for statistical purposes i.
|