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2016 (8) TMI 555 - AT - Income TaxSham transactions of the assessee with its AE’s - Held that:- Initially it was the TPO who analysed the transaction and gave a finding that the AEs have not rendered any services to the assessee and that the transactions are sham transactions. It is thereafter that the AO also went into the details of the services rendered by the AE and have come to the conclusions that the transactions are sham. Therefore, it is clear that the TPO has travelled beyond his jurisdiction as held by the Hon'ble Delhi High Court in the case of EKL Appliances (2012 (4) TMI 346 - DELHI HIGH COURT ). Further, applying the benefit test i.e. whether the payments made by the assessee are commensurate to the benefits acquired by it under the agreement, also fails, in view of the above decision. Therefore, in our opinion, the TPO as well as the AO are not correct in holding that the transactions between the assessee and its AEs are sham, particularly since the assessee was responsible for the designing Highway. The findings of the authorities below that the entire work has been executed by the sub contractor has already been found to be not correct. In view of the same, we hold that the assessee has received some services from its AEs. Whether the benefit received by the assessee is commensurate to the payment made by it, cannot be gone into in view of the above cited decisions and therefore, we set aside the orders of the AO and the CIT (A) on this issue. Coming to the computation of the ALP, we find that the Courts have repeatedly held that the TP adjustments can only be made by adopting the prescribed five methods. The TPO has not computed the ALP by holding the transactions as sham. Therefore, the matter needs reconsideration and recomputation of the ALP by the TPO. In view of the same we deem it fit and proper to set aside the orders of the AO and set aside the matter to the AO/TPO for re-determination of the ALP in accordance with the rules and the precedents on the issue.- Decided in favour of assessee for statistical purposes.
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