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2021 (3) TMI 229 - AT - Income TaxTP adjustment only to the international transactions - dispute is for restricting the transfer pricing adjustment to the international transactions alone and not extending it to the entity level transactions - HELD THAT:- Section 92 is first section of the Chapter-X containing special provisions relating to avoidance of tax. Sub-section (1) of section 92 provides that: `Any income arising from an international transaction shall be computed having regard to the arm’s length price’. Thus it is graphically clear that the ALP and the consequential transfer pricing adjustment are contemplated only in respect of the international transactions (with AEs) and not the entity level transactions (which also include transactions with non-AEs). The TPO, in the instant case has computed transfer pricing adjustment in respect of entity level transactions, which cannot be countenanced. We, therefore, direct to restrict the transfer pricing adjustment only to the international transactions rather than the entity level transactions, of course, after giving due opportunity of hearing to the assessee. Calculation of PLI - What is essential to consider is the PLI computation of the comparable at the time of the passing of the original order by the TPO for ensuring that VRS expenses did not form part of the cost base as contended. The ld. AR did not readily have such a copy of the working of the PLI of the company by the TPO. We set-aside the impugned order and restore the matter to the file of AO/TPO with a direction to include VRS costs incurred by Veejay Laskshmi Engineering Works Ltd. in its operating cost base, if not already included, in the same manner as has been done in the case of the assessee and thereafter to compute the operating costs and the consequential operating profit. Needless to say, the assessee will be allowed a reasonable opportunity of hearing.
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