Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (1) TMI 1187 - AT - Income TaxTP Adjustment - method of benchmarking of international transaction - determination of arm's length price of royalty by resorting to estimation by the Transfer Pricing Officer - determining arms length price at nil - assessee submitted that the Transfer Pricing officer has determined the arms length price of the international transaction in this case to be nil, without applying any method whatsoever - assessee has submitted voluminous document showing the services however they have been summarily dismissed on the ground that the benefit accruing to the assessee has not been established - HELD THAT:- Admittedly the Transfer Pricing officer has exceeded his jurisdiction. Hence the TPO's proposition that the documents submitted by the assessee do not provide the benefit obtained by the assessee and hence they have to be rejected and arm's-length price is to be determined as nil is not at all sustainable. The learned departmental representative in this regard could not submit anything against the proposition that Transfer Pricing officer has erred in applying the benefit test. Authorities below have totally erred in rejecting the assessee's documents and submissions on the ground that they do not prove the benefit obtained by the assessee. That the services have been rendered is very much evident from the documents submitted to the authorities below. The assignment to the TPO was to benchmark the international transaction and compute the arm’s length price. Instead of performing his statutory duties the TPO sat into the shoes of the Assessing Officer and rejected the documents on the ground that they do not prove the benefit test. This action has been upheld by the DRP. This approach is not sustainable. Submission of learned Counsel of the assessee is also correct that the authorities below have summarily rejected the assessee’s claim without applying any method of benchmarking international transaction as specified in section 92C of the Act. Duty of the Transfer Pricing Officer is restricted only to the determination of arm's length price of an international transaction between two related parties by applying any of the methods prescribed under section 92C of the Act r/w rule 10B of the Rules. Thus, there is no provision under the Act empowering the Transfer Pricing Officer to determine the arm's length price on estimation basis (which in this case is nil), that too, by entertaining doubts with regard to the business expediency of the payment and in the process stepping into the shoes of the Assessing Officer for making disallowance under section 37(1) of the Act. This, in our considered opinion, is not in conformity with the statutory provision, hence, unacceptable. The Transfer Pricing Officer is duty bound to determine the arm's length price of the international transaction by adopting one of the method prescribed under the statute and cannot deviate from the restrictions/conditions imposed under the statute. As relying on M/S. JOHNSON & JOHNSON LTD. [2017 (3) TMI 1520 - BOMBAY HIGH COURT] transfer pricing adjustment at nil fails on both counts. Firstly on the account of benefit test which is not to be applied by the TPO and secondly none of the method of benchmarking the international transaction as specified in section 92C has been applied. - Decided in favour of the assessee.
|